Hello, bitcoins!

Bitcoins! The currency of the internet. I first heard about bitcoin about 2 years ago and I really wish I had hopped on the bandwagon back then because a) it’s kind of fun and b) there’s a bit of money to be made by buying, selling, and “mining” them as the current going rate for one single bitcoin is $73.00 according to MtGox.com (UPDATE: As of 11/25/13 they are now trading for $800.00. UPDATE 2: As of 2/12/15 they are trading for $222.00). Of note, they were trading for $2 in 2009.

Only 21 million bitcoins will ever exist and the only way to obtain one (other than buying one directly from someone else) is by “mining” it.

First, some facts:

  1. 25 bitcoins are distributed every 10 minutes via the bitcoin peer-to-peer network. In 4 years that number will be halved to 12.5 and so forth until all 21 million coins are distributed.
  2. In order to receive those 25 bitcoins you must be the first person to solve a mathematical equation or block using your computers hardware. You simply download a program and run it in the background.
  3. The chances that you will be the first person to solve a block is roughly 1 in 5 million. It’s akin to playing the lottery, which is why “mining pools” were created.
  4. When you join a mining pool you work together with a couple hundred other people to solve the blocks, which means you’ll solve them more often and as a group collect the 25 bitcoin reward more often. The mining pool will then distribute the 25 bitcoins to all the members because you are allowed to send, for example, 0.003482 bitcoins to someone.
  5. You can sell those bitcoins you earn from mining in a pool on the MtGox exchange for USD or keep them for a rainy day.

Here’s my beginners walkthrough on how to “mine” a bitcoin:

  1. Download the official bitcoin wallet. It keeps your bitcoins safe and sound on your computer. You’re given a unique address others can use to send you bitcoins and keeps track of all your transactions, etc. 
  2. Register an account at bitminter.com. After registering, you’ll be prompted to enter in your bitcoin wallet address so they can send you your bitcoins you earn from mining.
  3. Click the green ENGINE START button on the website to download a java program that you’ll use to mine for bitcoins.

That’s it. You’re done. As long as the java program is running you’ll be earning bitcoins slowly but surely. Based on your computers GPU (your graphics or video card) you can earn anywhere from 0.02 to 0.05 bitcoins a day. At todays exchange rate, that’s roughly $3.50 a day per computer, or about $1,200 a year if you left the miner running 24/7. (UPDATE: As of 11/25/13 you earn about 0.002 btc a day, which is ~$8 every 5 days or $584 a year).

Sure, you won’t be retiring by joining a bitcoin mining pool, but it is a great way to pay for the new Humble Bundles that are released every few weeks…

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