Jump to: , A quick and dirty mining rig Contents 1 2 3 4 Mining is the process of adding transaction records to Bitcoin's public ledger of past transactions.This ledger of past transactions is called the block chain as it is a chain of blocks.The block chain serves to confirm transactions to the rest of the network as having taken place.Bitcoin nodes use the block chain to distinguish legitimate Bitcoin transactions from attempts to re-spend coins that have already been spent elsewhere.Mining is intentionally designed to be resource-intensive and difficult so that the number of blocks found each day by miners remains steady.Individual blocks must contain a proof of work to be considered valid.This proof of work is verified by other Bitcoin nodes each time they receive a block.Bitcoin uses the hashcash proof-of-work function.The primary purpose of mining is to allow Bitcoin nodes to reach a secure, tamper-resistant consensus.Mining is also the mechanism used to introduce Bitcoins into the system: Miners are paid any transaction fees as well as a "subsidy" of newly created coins.

This both serves the purpose of disseminating new coins in a decentralized manner as well as motivating people to provide security for the system.bitcoin block genesisBitcoin mining is so called because it resembles the mining of other commodities: it requires exertion and it slowly makes new currency available at a rate that resembles the rate at which commodities like gold are mined from the ground.earn bitcoin by surfingMining a block is difficult because the SHA-256 hash of a block's header must be lower than or equal to the target in order for the block to be accepted by the network.redeem bitcoin for cashThis problem can be simplified for explanation purposes: The hash of a block must start with a certain number of zeros.china bitcoin restrictions

The probability of calculating a hash that starts with many zeros is very low, therefore many attempts must be made.bitcoin beginner guide pdfIn order to generate a new hash each round, a nonce is incremented.china bitcoin restrictionsSee Proof of work for more information.The difficulty is the measure of how difficult it is to find a new block compared to the easiest it can ever be.It is recalculated every 2016 blocks to a value such that the previous 2016 blocks would have been generated in exactly two weeks had everyone been mining at this difficulty.This will yield, on average, one block every ten minutes.As more miners join, the rate of block creation will go up.As the rate of block generation goes up, the difficulty rises to compensate which will push the rate of block creation back down.Any blocks released by malicious miners that do not meet the required difficulty target will simply be rejected by everyone on the network and thus will be worthless.

When a block is discovered, the discoverer may award themselves a certain number of bitcoins, which is agreed-upon by everyone in the network.Currently this bounty is 25 bitcoins; this value will halve every 210,000 blocks.See Controlled Currency Supply.Additionally, the miner is awarded the fees paid by users sending transactions.The fee is an incentive for the miner to include the transaction in their block.In the future, as the number of new bitcoins miners are allowed to create in each block dwindles, the fees will make up a much more important percentage of mining income.Users have used various types of hardware over time to mine blocks.Hardware specifications and performance statistics are detailed on the Mining Hardware Comparison page.Early Bitcoin client versions allowed users to use their CPUs to mine.The advent of GPU mining made CPU mining financially unwise as the hashrate of the network grew to such a degree that the amount of bitcoins produced by CPU mining became lower than the cost of power to operate a CPU.

The option was therefore removed from the core Bitcoin client's user interface.GPU Mining is drastically faster and more efficient than CPU mining.See the main article: Why a GPU mines faster than a CPU.A variety of popular mining rigs have been documented.FPGA mining is a very efficient and fast way to mine, comparable to GPU mining and drastically outperforming CPU mining.FPGAs typically consume very small amounts of power with relatively high hash ratings, making them more viable and efficient than GPU mining.See Mining Hardware Comparison for FPGA hardware specifications and statistics.An application-specific integrated circuit, or ASIC, is a microchip designed and manufactured for a very specific purpose.ASICs designed for Bitcoin mining were first released in 2013.For the amount of power they consume, they are vastly faster than all previous technologies and already have made GPU mining financially unwise in some countries and setups.Mining contractors provide mining services with performance specified by contract, often referred to as a "Mining Contract".

They may, for example, rent out a specific level of mining capacity for a set price for a specific duration.As more and more miners competed for the limited supply of blocks, individuals found that they were working for months without finding a block and receiving any reward for their mining efforts.This made mining something of a gamble.To address the variance in their income miners started organizing themselves into pools so that they could share rewards more evenly.See Pooled mining and Comparison of mining pools.Bitcoin's public ledger (the 'block chain') was started on January 3rd, 2009 at 18:15 UTC presumably by Satoshi Nakamoto.The first block is known as the genesis block.The first transaction recorded in the first block was a single transaction paying the reward of 50 new bitcoins to its creator.There have been a few get-rich-quick stories among the Bitcoin “miners,” who use stacks of powerful computers to solve complex math problems used to create the virtual currency.The trouble is, crunching those numbers takes a tremendous amount of energy.

Fred Trotter, a co-founder of data journal and software company Not Only Dev, estimates that in the five years Bitcoins have existed, machines dedicated to mining them have consumed 150,000 megawatt-hours of electricity—enough to keep the Eiffel Tower lit for more than two and a half centuries.To ensure they can turn a profit, Bitcoin miners are scouring the globe for the cheapest power, from sleepy rural towns in America’s Pacific Northwest to the shadows of volcanoes in Iceland, where a few enthusiasts have built one of the world’s largest Bitcoin mining collectives using low-cost geothermal energy.When power costs are high, it becomes a lot tougher to justify mining Bitcoins, says Alex Wilhelm, a miner and software engineer living in Tokyo.“If the electricity price goes up, the math stops working,” he says.Wilhelm doesn’t keep his modest 30-server mining operation, which he estimates will earn $12,500 this year, in Japan.Instead it’s sitting halfway around the world in the tiny Austrian village of Tattendorf, where Wilhelm grew up.

He gets electricity there free from his father’s power plant, a water-driven turbine housed in a two-century-old brick building that has been in the family for at least six generations and once powered the entire village.From Tokyo, Wilhelm manages his Austrian server farm over the Internet, with video cameras that give him a look at the rows of circuit boards hanging like bats from metal racks inside the cavernous stone room where he used to play.In his Tokyo apartment, Wilhelm pulls up the Bitcoin calculator on the website CoinWarz to show why his server farm isn’t located at home.The setup burns 10 kilowatts, and electricity in Tokyo costs about 25¢ per kilowatt-hour, among the most expensive rates in the world.He estimates that he’d lose about $13 per day on Bitcoin mining there, after the $70 in daily power charges.It’s also nice not to have to deal with the noise: The fans that cool his Bitcoin servers run so loudly that when he switches on his audio feed, the noise from the speakers is a little like standing under a waterfall.

“You can imagine if you have something like this at home, your wife won’t be very happy,” Wilhelm says.“It’s just loud, and it’s hot, and it’s expensive.” Not everyone has a power plant in the family. that hosts other people’s mining gear in an old Portland (Ore.)server farm, is comparison shopping.He and partner Damir Kalinkin aren’t satisfied with paying 5 cents per kilowatt-hour there, even though it’s about half the U.S.Van Kirk says they’re planning to move to Moses Lake, Wash., a quiet town with more cows than people and the second-lowest electricity rates in the U.S., after Minot, N.D.Each kilowatt-hour there costs 1.7¢, making Moses Lake a destination for Bitcoin miners.“I called a real estate agent, and I told them we need a location with a lot of electricity,” Van Kirk says.“He said to me, ‘Oh, are you guys involved in Bitcoin?’ ” Bitcoin’s biggest problem lately has been stability.The February disappearance of more than $500 million worth of Bitcoins from Tokyo-based Mount Gox, one of the biggest exchanges, has given the virtual currency a black eye.

But power consumption has always been a primary issue, says cryptographer Philipp Gühring, who co-authored a 2011 paper on energy’s role in virtual mining.“Yes, you need the hardware, and you need the software, but electricity is the core thing that drives Bitcoin,” he says.Even some of the technology’s supporters say the focus on bigger, better, power-hungrier mining equipment has become a wasteful arms race.“The network would operate just fine with only 1 percent of the current computing muscle devoted to it,” Trotter says.“It’s consuming resources that should be allocated differently.” Wilhelm is betting his low-cost mining will pay off.He says he and his father worry they’ll have to close the Tattendorf power plant when energy subsidies run out in 2016.They may be able to keep it open, he says, with a successful Bitcoin operation—if the virtual currency repeats its performance from last year, when it shot from $13 apiece to around $1,100.(As of April 23, the price was hovering around $487.)