How to mine Cryptocurrency, a quick and dirty guide for the noobs.

 

When we discuss “mining” cryptocurrency we are saying that we will run a special program to process online transactions. We are converting electricity into money with our computers or cellphones, or literally anything that can perform a computation.

 

First, a word of caution.

You should already be practicing strong security methods. I don’t have time to go into what you should be doing BUT suffice it to say that cryptocurrency is a little like the Wild West of the digital landscape. There are programs out there designed to steal passwords and bitcoin addresses so: 1. Please mine on a clean computer. 2. Be very careful about the links you click on or programs you install. A good rule of thumb is to type the address in instead of clicking it. Also this is a great time to learn about cryptographic CHECKSUMs.

As an added layer of confusion, windows in default mode will block many mining applications because they are flagged as viruses. Yes, hackers have designed viruses to mine bitcoins on your computer.

SO,

You need a clean computer but you might also need to disable your virus protection for this. Some programs are deleted automatically by windows the second you download them.

Also, do not attempt to do this at a school or work computer. Mining on company equipment is viewed as theft of resources by HR so unless it’s part of your job title, don’t do it.

Please allow some time to check your settings and make sure your computer stays safe. At the end of the day you are running experimental software on your computer that was developed by someone you probably don’t know. Developers, for all their passion, are  capable of making buggy software that might crash your computer, this is one of the growing pains of the industry and it’s come a long way. I’ve never gotten a virus or destroyed a computer by mining BUT I’m also very cautious and thorough in my research. I HAVE accidentally wiped my ASIC firmware but most people will never get that far into this hobby and it was my own fault.

 

So now you must be asking yourself; Why? Why would I want to do this?

 

It can be fun, addictive, and at times frustrating but ultimately rewarding and educational.

There are a few thousand cryptocurrencies in the world (yes, like Bitcoin) and they all need computing power to operate properly and process transactions. It’s literally the same thing as making a payment with your credit card, only Visa doesn’t have a website where you can monitor every transaction that goes through their network. Visa is a private company. Digital or “crypto” currencies are open source and available to the general public (except Ripple). You can work to improve upon the code, test the payment network, or even help run an entire network

using your computer. The latter is called mining and it’s super simple to make extra money and learn a few new skills.

If you choose to run one of these programs and help support the network, you will receive a bounty for your efforts in the form of whatever cryptocurrency you choose to help with. This is how the coins are made and distributed. When you buy a bitcoin or any other digital asset, you are buying it from someone that “mined” it. So why not mine your own for free?*

*It’s free if you have access to free electricity, if not then you are paying through the difference in electricity you consume.

I’m sold!! Get me mining as fast as possible!!

 

1. Go to XXXX and make a paper wallet. Write down the Public and Private Keys/Addresses on a piece of paper (never save on your computer). Select and copy the “Public key to your clipboard”.
2. Go to block explorer.com and paste your Public address into the search bar, this will bring up your wallet in a way you can safely view it online.
3. Download Nicehash miner v2. Paste your public address in the address bar and click start.
4. Now you are mining.

You can literally leave this program on while you go about your daily life and in the background, your computer will be making bitcoin for you.

Ok, it says I’m making $0.21 worth of Bitcoin a day, what did I just do? How does this work?

The program you just installed, rents your computing power to other people to use for mining. It pays you in Bitcoin.

What are people using my computer for? I thought I was mining?

You are mining, just for someone else – like a paid contractor. They take your power and figure out what coin, not Bitcoin, to use it on. They can then mine as much of XCoin as they want. When the price rises they can sell it for a profit.

Why can’t I do that?

You can. It just takes a little more work but I’m going to walk you through it.

By installing your own mining programs and software, you can directly mine all sorts of coins but first, you need to understand the terminology.

 

Different mining styles:

 

Proof of work, POW: In order to mine this you have to perform a computation with mining software.

Proof of Stake, POS: In order to mine this you need to have it. You earn dividends at a fixed rate depending on how much you have in your wallet.

When you run a miner, it will mean that you are mining POW coins. When it’s POS, you will only need a wallet and some coins. Traditionally POS will be safer to leave unattended.

 

Broad Terms:

Wallet: A program that holds your coin. These can range from fancy Graphic User Interfaces, GUI, to a simple paper wallet with a private and public key. (designed to be printed on paper – with a DUMB printer – one that’s NOT hooked up to the internet)

Exchange: A website where you can trade cryptocurrency like stocks. This is where people make most of their money.

ASIC – Application Specific Integrated Circuit. These are powerful computers designed to do ONE thing, Hash a certain type of algorithm. Typically the fastest.

ALGO – Algorithm. The rules or system structure that a coin operates on. Bitcoin used SHA-256, whereas Dogecoin uses Scrypt. Usually, this means nothing unless you need an ASIC to mine your coin. There are dozens of these.

Hash, Hashing: The process of computing and converting data of an algorithm. The miners will handle this for you.

Different mining machines:

ASIC – Application Specific Integrated Circuit. These are powerful computers designed to do ONE thing, Hash a certain type of algorithm. Typically the fastest.

GPU – Graphic processing unit, your video card. The medium level speed, most profitable without ASIC technology.

CPU – Central Processing unit, the core of your computer. The slowest method of processing hashes.

 

Starting from scratch, these are the terms you should know if you want to do this as a hobby or more.

Now since most beginners can’t/won’t/ or shouldn’t purchase an ASIC, we’re going to focus on POS, POW, CPU, and GPU mining. Keep in mind that the process is similar for all with just a few tweaks.

When you run a miner, it will mean that you are mining POW coins. When it’s proof of stake, you will only need a wallet and some coins. First, let’s do some research into what you can actually do.

1. What to mine (GPU) This is a system that can take the equipment you have and calculate the most profitable coin for you to mine. This is a great place to start but as you will learn you can go really deep into strategy about what and why something might be profitable. Since prices are determined by exchanges, one coin could be more profitable than others at different times.
2. Pick a coin, wallet, and miner. Once you’ve picked a coin, download its wallet (or create a paper wallet), and choose a miner for it.
3. Pick a pool.
4. Set up the miner and validate your work through the pool.

 

CPU Coins. It might seem silly to mine on a CPU when it’s the slowest method but there are coins out there that only allow CPU mining to curb people who run warehouses full of equipment from dominating the market.

1. Find a CPU coin.

2. When you run a miner, it will mean that you are mining POW coins. When it’s proof of stake, you will only need a wallet and some coins.

 

With a little bit of research and forward thinking, you can actually make a lot of money mining coins. In 2014 you could but an ASIC machine on eBay that would make you 0.01 Bitcoin a day. In 2014 that would be about $10/day. In 2018 that amount would be roughly $60 a day.

I tell people not to focus on the USD price. Things change. A coin that is worth $0.01 today could easily be worth $1.00 a few months later. Suddenly the $0.21 a day you were making is worth $21 a day. Conversely, you could lose money too. This is where valuation comes into play.

Different coins do different things, have different protocols, technology. As you get familiar with these coins you will be able to tell what has a real-world functionality and what doesn’t.

Strategizing to mine undervalued coins before they become valuable is how people make their money but it’s not all about money.

By mining, you are helping a tech industry gain footing and contributing to one of the largest open-source experiments in the history of humankind. This technology gives everyone a chance to participate in a new type of payments, messages, digital contracts, digital assets and marketplace without borders, nationality, corporate, or government oversight.

And if you can contribute AND make money then I think that’s a win-win.

Wait a minute? Why do you want me to use a printer not connected to the internet? Modern printers will actually make a copy of a file in their cache before they print, they are also notorious for having low security. If you were to have a copy of your wallet saved to the printer cache, there is nothing to keep a hacker from stealing it if your printer is comprised. It’s more common than you think.