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How Bitcoin mining works, and how to start

Bitcoin Mining how to begin

Bitcoin mining can be quite lucrative, however, most experts would say that it can be challenging, expensive, but definitely rewarding if done properly. For that reason, a lot of investors have been attracted in cryptocurrency. This may be because a lot of entrepreneurs see mining as pennies sent from heaven, and those who are technologically inclined can benefit from it. Well, for starters, before you invest the time and equipment, it’s very important to familiarize yourself with the basics first and we’re here to help.

How Bitcoin Mining Works

As we talk about bitcoin mining, those who are not familiar with the term would imagine digging coins out of the ground– since it’s called “mining.” It’s actually far from that; for one, bitcoin isn’t something physical.

This brings us to the next question– then why is it called mining? The answer is quite simple. It’s quite similar to gold mining in a sense that bitcoins exist in the protocol’s design, similar to the fact that gold exists underground and they aren’t available above the surface just yet– they have to be dug up. Aside from that, the bitcoin protocol assumes that there will be around 21 million bitcoins that would come into existence at some point, and “miners” are tasked to bring them out to the surface. This process is described as “creating blocks” of validated transactions, making them a part of the blockchain.

How to Start

Step 1: Find the Perfect Bitcoin Mining Hardware

Everything starts with finding a mining hardware that already contains bitcoins. The good thing is that these hardware are available online, and in some of the leading online marketplace, such Amazon. Checking the bitcoin charts can also help you along the process.

Back in the days, miners simply use their computer or high speed video card to mine. Unfortunately, this isn’t enough anymore, but there are custom-made bitcoin ASIC chips that offer better performance than older systems– these are the ones that are slowly dominating the bitcoin mining.

The importance of finding the perfect bitcoin mining hardware is that it will allow you to effectively maximize electricity usage, and earn generously. There are a lot of companies that offer remarkable systems specifically made for bitcoin mining.

The Use of Bitcoin Cloud Mining Services

You can consider purchasing Bitcoin cloud mining contracts that make the process simpler, but it also increases the potential risks, as you wouldn’t be able to handle the actual physical hardware.

Step 2: Download a Free Bitcoin Mining Software

After getting a bitcoin mining hardware, the next step would be to obtain a specific program for bitcoin mining. There are a lot of programs out there that could be used for this purpose, but the most popular ones are the command line programs. For those who prefer the ease of use that can be enjoyed with GUI, then a click and go windows/Android/Linux program works best.

Step 3: Join a Bitcoin Mining Pool

Once you become fully ready to mine bitcoins, then it’s highly recommended to join a bitcoin mining pool where you’ll be able to work with a group of miners to solve a block and share the rewards with each other. Without a Bitcoin mining pool, it might take awhile before you can mine bitcoins– sometimes it can take over a year, and some don’t even earn any. That’s why it’s more convenient to work with other miners and just split the rewards later on.

You can consider using a fully decentralized pool, and the p2pool is perfect for this.

This is also perfect for those who are testing the waters and are not yet fully ready. You’ll be in a group of miners who are probably in the same situation and lack the resources essential for mining. The computer of a lot of users create a formidable resource capable of solving mathematical puzzles that the bitcoin blockchain has. Once this puzzle has been solved, then you can get your reward.

Step 4: Have a Bitcoin Wallet

You should also have a bitcoin wallet, or you can use an existing bitcoin wallet where you can put the bitcoins you mine. Bitcoins are delivered to a Bitcoin wallet through the use of a unique address that only belongs to you. The most crucial part in setting up your wallet is to secure it from any potential threats and this can be done by enabling the two-factor authentication.

Stay Up to Date

Lastly, staying up to date will help you maximize your profits as you’ll know when will be the right time to act and what to avoid.

How to buy and sell bitcoin

Many people have heard of Bitcoins as an alternative currency, but they barely use it. And yet you can pay more and more goods and services with Bitcoins, and in times of uncertain economy you could think of Bitcoins as an investment.

Buy bitcoins

The cryptocurrency you buy from other users in the marketplace at Coinbase. You can see with each seller how many Bitcoins he offers and at what price. You can buy in any denomination. Check that the seller is fully registered and verified at Coinbase. For other providers, you should not buy Bitcoins.

You transfer the purchase price for the bitcoins to the bank account of the seller. The data is displayed during the transaction, similar to Ebay. Make sure to write all data for the purchase including the ID in the transfer. Once the money has been received by the seller, the bitcoins will be credited to your Coinbase account. The fees for the purchase carry buyers and sellers in each case in half.

Alternatively, you can earn Bitcoins through mining operations, this will take a bit more time and you’ll need specific equipment. However, it’s also possible to join a mining pool and start mining together with other people. I’ll write more about that in the future.

Sell ​​bitcoins

As a seller, you must deposit Bitcoins into your user account at Coinbase. These bitcoins are blocked as credit and can not be used for further sales – this prevents double sales and slows down fraudsters.

You can also transfer Bitcoins to a vault. These bitcoins can not then be used to buy products. A supplier of bitcoin vaults is for example Xapo . Xapo also offers a credit card – so you can use Bitcoins to pay with a credit card – as well as matching apps for iPhones and Android smartphones.

Use and manage bitcoins

You can manage purchased bitcoins in a so-called wallet, a virtual purse. This is the same for all providers. If you have bought Bitcoins on multiple portals, you can all combine them into one bitcoin wallet. Or you can use smartphone or desktop apps like the “Bither” app, which is available for Windows , iPhone and Android .

More wallets can be found on the website . Once you’ve decided on a wallet, you can quickly and easily transfer your bitcoins to your new wallet and pay later with this wallet.

Alternatives to Coinbase

Of course you can also buy bitcoins from other providers than at Coinbase. However, most companies are not based in US. An alternative is AnyCoin Direct . The advantage lies in the quick and easy registration and the various payment options. You can purchase the first bitcoins within an hour of signing in – but with some restrictions: until the account is verified, you can only buy small amounts. Relatively fast from the beginning you can work with instant bank transfer and Giropay.

The search for a suitable platform

Meanwhile, there are not countless, but many providers, where you can buy Bitcoins. They differ from each other in many ways.

Some providers require their own wallet on the platform, while others can transfer the money to their own wallet. With exchange offices ( overview ) one buys its Bitcoins directly with a offerer, on market places ( overview ) one buys with other users. Depending on the provider, different exchange rates and fees are called.

Another important difference is the question of whether to exchange his bitcoins on the basis of live courses or fixed courses. Live courses are constantly changing, while fixed exchange rates change less frequently. Of course, it also matters whether a platform has many users, ie high supply and demand.

Of course, the payment methods differ . In addition to cash and bank transfer, some providers allow Bitcoin purchases via credit cards or gift certificates. For US users, the question of where to get bitcoins for dollars is certainly crucial. Bitcoin Charts offers a practical, but not quite complete overview .


After all the hardships with the Blockchain, the Mining or the first Wallet it is comparatively easy to buy and sell Bitcoins. In addition, the presented platforms make a fairly safe impression. In any case, you can transfer your newly acquired Bitcoins always uncomplicated from the appropriate platforms on his own wallet.

If you like it anonymously, it’s probably best to make a personal purchase for cash. The other platforms sometimes require a lot of personal information. Coinbase goes there for my taste a good middle ground, which allows me as a beginner to get started quickly, without having to identify too expensive.

Nevertheless, you have to take a few days to buy your first bitcoin. This is not only because of the complex registration, but also because it takes a few days to get its bitcoins on almost all platforms.