[ExI] TechCrunch: How to Mine Bitcoins

James Clement clementlawyer at gmail.com
Tue Apr 9 15:43:13 UTC 2013

For those who have been discussing Bitcoin mining, the following article
came out in TechCrunch yesterday.

How To Mine Bitcoins
JOHN BIGGS <http://techcrunch.com/2013/04/08/how-to-mine-bitcoins/#>
posted yesterday
[image: 7dwarfs]

Mining bitcoins – a process that helps manage bitcoin transactions as well
as create new “wealth” – are 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
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 <https://twitter.com/tprinty> explained how to set up a pooled
mining account so I thought it would be interesting to share the

1. *Get a wallet.* You can either store your wallet locally or store it
online. Coinbase.com <http://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<http://bitcoin.org/en/choose-your-wallet> 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.

[image: Screen Shot 2013-04-08 at 9.17.19

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
You can also try guilds like BTC Guild <http://www.btcguild.com/> 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.
[image: Screen Shot 2013-04-08 at 3.05.25

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 at 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 <http://guiminer.org/> is the simplest solution for Windows users
as it allows you to create miners using almost all standard graphics cards.
You can download it
. 50Miner <http://50miner.org/> 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
An excellent guide to installing a miner on Ubuntu isavailable

OS X users can use DiabloMiner <https://github.com/Diablo-D3/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,
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

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

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<http://www.bitcoinx.com/profit/> 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
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