Bitcoin mining tutorial

Quick updates

02.02.2014

Datacenter connectivity issues have caused short drop in the hashrate. The problem has been resolved and all stratum servers are now reachable. This all happened when 900 Th/s was within a reach. We will get there again with your support and participation in mining ;-)

17.01.2014

We were having an extremely lucky yesterday's mining session. Unfortunately, around 1.30 AM UTC, we were experiencing stratum server issues that eventually spread across all our stratum servers. The problem has been resolved now and mining continues.

13.01.2014

The pool database backend has been successfully migrated to a new hardware. The website is now fully operational. The whole migration process has been accomplished without interrupting the actual mining.

13.01.2014

We are currently migrating pool database to a new machine. Mining will continue without interruption, only website will be down for 1-2 hours.

18.12.2013

Some recent payouts didn't go thru bitcoin network because of unsatisfied transaction fees. We're finding a soluton and all payouts will be processed soon

16.10.2013

In recent days we experienced some successful thefts of user's funds using compromised email accounts. We strongly encourage all users to change email passwords. There's no reason to think that pool security itself has been compromised.

08.07.2013

Getwork protocol support ended. Please be sure your miners support Stratum protocol. You can still use your old getwork miners with Stratum proxy installed on your mining rig.

21.05.2013

Bug in bitcoind caused many invalid blocks generated in recent hours. Thanks to cooperation with bitcoin developers, a bugfix has been deployed. Pool is now back in normal operation.

26.04.2013

Because the user database has been compromised in recent hack, please change password to your pool account!

25.04.2013

Pool is recovering to normal operation from previous attack. delayed payouts will be processed in the afternoon (UTC).

18.04.2013

Pool is recovering from DDoS attack.

14.04.2013

As announced in Getwork deprecation plan. the hashrate on Stratum is far above 90%, so workers which are still using the deprecated Getwork protocol are now charged by 10% fee. Please update your software and start using modern Stratum miners to reduce your fees back to 2%!

12.03.2013

Bitcoin network recently experienced global problems which caused some pool blocks to be invalid. Everything seems to be fixed now.

10.03.2013

Default mining URL for Stratum is stratum.bitcoin.cz:3333 . If you're still using api.bitcoin.cz, please fix your URL to prevent fallback to deprecated Getwork protocol.

08.03.2013

Stratum proxy version 1.5.2 has been released. This is bugfix release which add compatibility with some old miners (phoenix, Diablo).

03.03.2013

Stratum proxy version 1.5.0 has been released. All proxy users are encouraged to update .

13.02.2013

ASIC mining become a reality. Jeff Garzik (bitcoin core developer) is testing first shipped unit of Avalon ASIC miner on our pool.

30.01.2013

Native IPv6 address is now available. You can use ipv6.stratum.bitcoin.cz:3333 in your miner if your miners have IPv6 support! Please note that IPv6 works only for Stratum miners.

08.12.2012

If you're using old miners from early 2011 or you're mining on URL "mining.bitcoin.cz:8332", please update your miners and use "api.bitcoin.cz:8332" in your configuration instead. Mining on URL "mining.bitcoin.cz" is not working anymore.

27.11.2012

Only one day remains to halving block reward from 50 BTC to 25 BTC. Thanks to this change in Bitcoin world, mining income will be drastically reduced. As a countermeasure, pool is now paying block fees to miners. Everything you need to collect block fees is to use miner with Stratum support .

24.11.2012

Pool is now giving transaction fees to Stratum miners! Use miner with Stratum support (latest version of GUIminer, cgminer, bfgminer, poclbm) or use your favourite miner with Stratum proxy to improve your mining income!

19.11.2012

Guiminer with Stratum support has been released. Upgrade is highly recommended.

12.10.2012

All users are encouraged to install or update Stratum proxy to current stable version 1.1.1. Instructions are here .

12.10.2012

New version of cgminer has been released. Please update cgminer to version 2.8.3 . which fixes serious bugs introduced in previous versions.

10.10.2012

In effect from 01.11.2012, pool increases the lower limit for payouts ("send threshold") to 0.05 BTC (around $0.6) as a protection against high transaction fees for tiny payouts. If you have a balance of less than 0.05 BTC and want to withdraw them, please do so before November 1.

20.09.2012

New version of poclbm miner has been released. All poclbm users are encouraged to update their miner, latest version includes major optimization.

11.09.2012

I'm seeking for beta testers of new mining protocol called Stratum mining. If you want to join testing, please download the proxy and point your miners to it. Thank you!

08.07.2012

Do you have some bitcoins from the mining and do you want to sell them for cheap? Add your offer to localbitcoins.com and find a buyer in your neighborhood!

11.06.2012

Follow pool's page for recent updates and news!

05.02.2012

poclbm/GUI miner is affected by serious bug. If your miner is crashing on 'unexpected error' message, please follow miner forums for the newest versions.

26.01.2012

Pool is now supporting BIP 16 protocol extension, as described here. It is just internal change on the Bitcoin network, miners don't need to update anything.

08.11.2011

Implemented prioritization of long polling. Fast miners should expect lower stale ratio.

10.10.2011

Merged mining for Namecoins added. Please fill NMC address on your profile to start collecting Namecoins! Accounting isn't finished yet, but will come very soon.

03.10.2011

Bitcoin.cz is official sponsor of European Bitcoin conference 2011. See you on 25.-27. November in Prague!

26.03.2011

Second server added

Total hashrate at 60Ghash/s

19.01.2011

We're over 20 Ghash/s

easy Bitcoin mining tutorial (how to mine Bitcoins in 3 minutes) GPU, not ASIC

20.12.2010

Technical Background more »

During mining, your computer runs a cryptographic hashing function (two rounds of SHA256) on what is called a block header . For each new hash, the mining software will use a different number as the random element of the block header, this number is called the nonce . Depending on the nonce and what else is in the block the hashing function will yield a hash which looks like this:

You can look at this hash as a really long number. (It's a hexadecimal number, meaning the letters A-F are the digits 10-15.) Now to make mining difficult, there is what's called a difficulty target . To create a valid block your miner has to find a hash that is below the difficulty target. So if for example the difficulty target is 1000000000000000000000000000000000000000000000000000000000000000, any number that starts with a zero would be below the target, e.g.:

If we lower the target to 0100000000000000000000000000000000000000000000000000000000000000, we now need two zeros in the beginning to be under it:

Because the target is such an unwieldy number with tons of digits, people generally use a simpler number to express the current target. This number is called the mining difficulty . The mining difficulty expresses how much harder the current block is to generate compared to the first block. So a difficulty of 70000 means to generate the current block you have to do 70000 times more work than Satoshi had to do generating the first block. Though be fair though, back then mining was a lot slower and less optimized.

The difficulty changes every 2016 blocks. The network tries to change it such that 2016 blocks at the current global network processing power take about 14 days. That's why, when the network power rises, the difficulty rises as well.

Bitcoin Mining Hardware

CPU's: In the beginning, mining with a CPU was the only way to mine bitcoins. Mining this way via the original Satoshi client is how the bitcoin network started. This method is no longer viable now that the network difficulty level is so high. You might mine for years and years without earning a single coin.

GPU's: Soon it was discovered that high end graphics cards were much more efficient at bitcoin mining and the landscape changed. CPU bitcoin mining gave way to the GPU (Graphical Processing Unit). The massively parallel nature of some GPUs allowed for a 50x to 100x increase in bitcoin mining power while using far less power per unit of work. While any modern GPU can be used to mine, the AMD line of GPU architecture turned out to be far superior to the nVidia architecture for mining bitcoins and the ATI Radeon HD 5870 turned out to be the most cost effective choice at the time.

FPGA's: As with the CPU to GPU transition, the bitcoin mining world progressed up the technology food chain to the Field Programmable Gate Array. With the successful launch of the Butterfly Labs FPGA ‘Single', the bitcoin mining hardware landscape gave way to specially manufactured hardware dedicated to mining bitcoins. While the FPGAs didn't enjoy a 50x - 100x increase in mining speed as was seen with the transition from CPUs to GPUs, they provided a benefit through power efficiency and ease of use. A typical 600 MH/s graphics card consumed upwards of 400w of power, whereas a typical FPGA mining device would provide a hashrate of 826 MH/s at 80w of power. That 5x improvement allowed the first large bitcoin mining farms to be constructed at an operational profit. The bitcoin mining industry was born.

ASIC's: The bitcoin mining world is now solidly in the Application Specific Integrated Circuit (ASIC) era. An ASIC is a chip designed specifically to do one thing and one thing only. Unlike FPGA's, an ASIC cannot be repurposed to perform other tasks. An ASIC designed to mine bitcoins can only mine bitcoins and will only ever mine bitcoins. The inflexibility of an ASIC is offset by the fact that it offers a 100x increase in hashing power while reducing power consumption compared to all the previous technologies. For example, a good bitcoin miner like the Monarch from Butterfly Labs provides 600 GH/s (1 Gigahash is 1000 Megahash. 1 GH/s = 1000 MH/s) while consuming 350w of power. Compared to the GPU era, this is an increase in hashrate and power savings of nearly 300x. (Calculate the earnings of any bitcoin mining hardware device using this bitcoin mining calculator ).

Unlike all the previous generations of hardware preceding ASIC, ASIC is the "end of the line" when it comes to disruptive technology. CPUs were replaced by GPUs which were in turn replaced by FPGAs which were replaced by ASICs. There is nothing to replace ASICs now or even in the immediate future. There will be stepwise refinement of the ASIC products and increases in efficiency, but nothing will offer the 50x - 100x increase in hashing power or 7x reduction in power usage that moves from previous technologies offered. This makes power consumption on an ASIC device the single most important factor of any ASIC product, as the expected useful lifetime of an ASIC mining device is longer than the entire history of bitcoin mining. It is conceivable that an ASIC device purchased today would still be mining in two years if the device is power efficient enough and the cost of electricity does not exceed it's output. Mining profitability is also dictated by the exchange rate, but under all circumstances the more power effecient the mining device, the more profitable it is.

Software

There are two basic ways to mine: On your own or as part of a pool. Almost all miners choose to mine on a pool because it takes the luck out of the process. Before you join a pool, make sure you have a bitcoin wallet so you have a place to store your bitcoins. Next you need to join a mining pool like Eclipse. Eligius or BTC Guild. With pool mining, the profit from any block a member generates is divided up among the members of the pool. This gives the pool members a more frequent, steady payout (this is called reducing your variance), but your payout(s) will be less unless you use a zero fee pool like Eclipse. Solo mining will give you large, infrequent payouts and pooled mining will give you small, frequent payouts, but both add up to the same amount if you're using a zero fee pool.

Once you have your client set up or you have registered with a pool, the next step is to set up the actual mining software. The most popular GPU/FPGA/ASIC miner at the moment is BFGminer or CGminer. For a full GUI experience, try EasyMiner .

If you want a quick taste of mining without installing any software, try Bitcoin Plus. a browser-based CPU Bitcoin miner. As a CPU miner it's not cost-efficient for serious mining, but it does illustrate the principle of pooled mining very well.

Thanks to:

Blitzboom and the guys from #bitcoin-dev for their help with writing the guide!

Getting Started

What is Bitcoin ?

Bitcoin is В aВ В crypto-currency, its creation and transfer is based on an open source cryptographic protocol and is not managed by any central authority, simply put Bitcoin is a decentralized digital currency .

Bitcoin uses a PTP (peer-to-peer) technology to operate, Bitcoins can be transferred Worldwide instantly with very low fees since there is no intermediary and the coins are transferred from person to person, all transaction are final and don’t require your PC to be online when you receive them.

How to create new Bitcoins ?

New bitcoins are created by individuals within the network through “ mining “, the process where the computer is given a complex mathematical problem to solve, the goal is a 64 digit number. Mining nodes on the network are awarded bitcoins each time they find the solution (and thereby create a new block), the reward for solving a block is automatically adjusted, it started as 50 BTC in 2009 and the reward per block halves every 4 years, ensuring a finite supply of 21 million coins.

How to get Bitcoins?

There are several ways you can get Bitcoins, you can receive them as payment from offering goods or services as a merchant, business or trader, you can buy them with regular currency, mine them or earn them online by completing offers, viewing videos, affiliate programs or completely free from bitcoin “Faucets”.

How to get started ?

You can start by creating a Wallet. but first there are a few things you should know:

All bitcoin transactions are final, irreversible, В only trade with people or websites you trust.

Keep your wallet secured, you can read more about that on Wallet page.

Bitcoin is still an experimental currency and its price is volatile .

All Bitcoin transactions are stored publicly and permanently on the network, which means anyone can see the balance and transactions of any Bitcoin address. However, the identity of the owner cannot be associated with their Bitcoin address until personal information is revealed by the owner during an exchange. This is why it is recommended for Bitcoin owners to use many different Bitcoin addresses; in fact, you should create a new one each time you receive money.

How To Mine Bitcoins

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Mining bitcoins – a process that helps manage bitcoin transactions as well as create new “wealth” – is the new Beanie Babies. Luckily for us, however, bitcoins seem to be going up in value and should maintain their value over time, unlike your mint condition Tiny the stuffed Chihuahua.

But how do you get bitcoins? You can begin by buying them outright, but the market is currently wild. At $188 per coin, the direction of the bitcoin is anyone’s guess right now and, unlike equities, these things don’t split. In short, you should probably mine. But what is bitcoin mining?

Think of it as work done by groups of people to find large prime numbers or trying keys to decrypt a file. You can read a lot more about it here but just understand that for every block mined you get 25 coins or, at current rates, $4,722.25. Currently a single bitcoin is valued at $188, an alarming result that is probably caused by money movements related to Cyprus and a general bubble-like excitement over the platform in general. In fact, many wager that the DDOS attacks on many bitcoin-related services are direct action by hackers to inject instability in order to reduce the price.

As it stands, mining solo is very nearly deprecated. The process of finding blocks is now so popular and the difficulty of finding a block so high that it could take over three years to generate any coins. While you could simply set a machine aside and have it run the algorithms endlessly, the energy cost and equipment deprecation will eventually cost more than the actual bitcoins are worth.

Pooled mining, however, is far more lucrative. Using a service like “Slush’s pool” (more on that later) you can split the work among a ground of people. Using this equation:

(25 BTC + block fees – 2% fee) * (shares found by user’s workers) / (total shares in current round)

While this is simplified, it is basically how the system works. You work for shares in a block and when complete you get a percentage of the block based on the number of workers alongside you, less fees. Using this method, I have been able to raise about $1.50 over the weekend by running a dormant PC. The astute among you will note that I probably used twice that amount of electricity.

Being a neophile, I’m surprised it took me so long to start mining. My buddy Tom explained how to set up a pooled mining account so I thought it would be interesting to share the instructions.

1. Get a wallet. You can either store your wallet locally or store it online. Coinbase.com is an online wallet that is surprisingly simple to set up. Wallets require you to use or download a fairly large blockchain file – about 6GB – so downloading and updating a local wallet may be a non-starter. Like all wealth storage mediums, keeping your bitcoins “local” is probably a better idea than trusting a web service, but that’s a matter of private preference. There is no preferred wallet type and there are obvious trade-offs to both. Privacy advocates would probably say a local wallet is best.

You can download a local wallet here but make sure you keep a copy of your data backed up.

Once you’ve created a wallet, you get an address like this: 1BEkUGADFbrEShQb9Xr4pKPtM8jAyiNQsJ. This, without the period, is a direct way to send bitcoins to your wallet. Make a note of your address. In Coinbase, the wallet address found under linked accounts.

2. Join a pool. To mine in a pool you have to work with a group of other miners on available blocks. The most popular is Slush’s Pool found here. You can also try guilds like BTC Guild as well as a number of other options. Each of the pools is characterized mostly by the fees they charge per block – 2% for Slush’s pool, for example – and the number of users. Pools with fewer users could also have a slower discovery time but pools with many users usually result in smaller payments.

How can you be sure the pool owner doesn’t steal all your bitcoins? You can’t. However, as one pool owner, Slush, notes:

In theory, as the Bitcoin pool operator, I could keep the 25 BTC from a block found by the pool for myself. I’m not going to do this, but I completely accept that people do not trust the pool operator. It is their freedom of choice, and Bitcoin is about freedom.

For simplicity’s sake, I’m using Slush’s Pool and have created three workers. First, create a pool login. Then add workers. The workers are sub-accounts with their own passwords and are usually identified by [yourlogin].[workername]. I have three workers running, currently – one on my iMac and two on my old PC.

You must create workers to mine. The instructions are very straightforward for most services so don’t become overwhelmed. Like any online club, you can dig deeply into the subculture surround bitcoin as you gain experience. I like to think of it as a financial MMORPG.

Also be sure to enter your wallet address into the pool information. This will ensure you get your bitcoins.

3. Get a miner. There are a number of mining options for multiple platforms although OSX users may find themselves in a bit of a pickle. Miners use spare GPU cycles to power the mining operation, much like services like SETI@Home uses spare cycles for finding intelligent life. Miners, on the other hand, use these cycles to help handle peer-to-peer processes associated with bitcoins. Thus by doing “work” you are maintaining the network as well.

GUIMiner is the simplest solution for Windows users as it allows you to create miners using almost all standard graphics cards. You can download it here. 50Miner is also a popular solution. Both require you to enter your worker info and pool and they’ll start mining.

Linux users can run miners like CGMiner. An excellent guide to installing a miner on Ubuntu is available here .

OS X users can use DiabloMiner. a two-year old command-line program that will mine using OpenCL. Sadly, it uses deprecated calls to Bitcoin and is quite a bit slower. As a result, you need to run your own proxy, Stratum. that allows Diablo to connect with services like Slush’s pool. Both of these programs usually run without issue on OS X although you may need to install OpenCL for OSX .

To mine I’ve created a script that I run in Terminal that simply runs the proxy in the background and then connects Diablo. Note the last two arguments are necessary for Mountain Lion.

/stratum-mining-proxy-master/mining_proxy.py &

/DiabloMiner-OSX.sh -u WORKERNAME -p WORKERPASSWORD -o localhost -r 8332 -w 64 -na

RPCMiner is far easier to run – you simply click an icon and enter some data – and both have very rudimentary, text-based interfaces. Running Diablo on my iMac has not had much effect on application performance under OS X although it does slow down my Windows 8 machine considerably.

4. Keep your mind on your money. Bitcoins are baffling in that they are wildly simple to use and mine. Speculators, then, would probably be able to throw hundreds of machines at the problem and gather bitcoins like raindrops, right? Wrong. As more bitcoins are found, they become more difficult to find. This profitability calculator will help you understand what you’re up against but understand that this isn’t a sure thing. I’ve run my systems for a weekend and seen a mere $1.50 – enough for a coke – but other users may have improved hardware and methods to succeed. In short, if it costs more to run your hardware than you gain in bitcoins, you’re probably doing something wrong.

Good luck in your journey and enjoy your first foray into this wild and wooly world.

Beginners Guide to Mining Bitcoins

One of the biggest problems I ran into when I was looking to start mining Bitcoin for investment and profit was most of the sites were written for the advanced user. I am not a professional coder, I have no experience with Ubuntu, Linux and minimal experience with Mac. So, this is for the individual or group that wants to get started the easy way.

First thing you need to do is get a “Bitcoin Wallet”. Because Bitcoin is an internet based currency, you need a place to keep your Bitcoins. Got to http://www.bitcoin.org and download the Bitcoin client for your Operating System. Install it the client will begin to download the blockchain. Downloading the blockchain can take a long time and will be over 6GB of data. If you have data caps, I would recommend ordering a copy of the blockchain on DVD to keep from going over as it is growing exponentially. Click to order the bitcoin blockchain by mail. Once the client is up to date, click “New” to get your wallet address. It will be a long sequence of letters and numbers. One of most important things you can do is make sure you have a copy of the wallet.dat file on a thumb drive and print a copy out and keep it in a safe location. You can view a tutorial on how to create a secure wallet by clicking the link on the top of the page. The reason is that if you computer crashes and you do not have a copy of your wallet.dat file, you will lose all of your Bitcoins. They won’t go to someone else, they will disappear forever. It is like burning cash.

Now that you have a wallet and the client, you are probably roaring to go, but if you actually want to make Bitcoin (money), you probably need to join a pool. A pool is a group that combines their computing power to make more Bitcoins. The reason you shouldn’t go it alone is that Bitcoins are awarded in blocks, usually 50 at a time, and unless you get extremely lucky, you will not be getting any of those coins. In a pool, you are given smaller and easier algorithms to solve and all of your combined work will make you more likely to solve the bigger algorithm and earn Bitcoins that are spread out throughout the pool based on your contribution. Basically, you will make a more consistent amount of Bitcoins and will be more likely to receive a good return on your investment.

The pool that I’m involved in is called Slush’s Pool so I will be giving instructions on how to join there but feel free to look at other options. Follow the link to go to their site and click the “Sign up here” link at the top of their site and follow their step by step instructions. After you have your account set up, you will need to add a “Worker”. Basically, for every miner that you have running, you will need to have a worker ID so the pool can keep track of your contributions.

If you are mining with an ASIC, please go to our Mining with ASICs page. The following will only pertain to GPU miners.

Most of the mining programs out there are pretty complicated to setup and will frustrate your average user. Recently a great program has come out to get the most basic of users started. The program is called GUIMiner. Click the link and download the program (Be careful, some of the ads are set up to look like the file download). Install and run the program and add in your information from Slush’s Pool. Remember that the user name is actually the worker name. The worker name will be your user name, dot, worker ID (username.worker ID) and the password from that worker ID.

Mac users should look into using Astroid

Now that you are set up, you can start mining. If you feel like you want to make more Bitcoins, you might want to invest in mining hardware.

To see how much your current hardware will earn mining Bitcoins, head over to the Bitcoin Profitability Calculator .

If you found this information helpful, please donate to 1G1ehppEgjiFTUSHFz2xs9KLSQuWLPYF2o