Bitcoin Mining: ( My definition) Getting paid for helping to validate digital currency transactions
First – Just Do It! It’s the only way to get an real understanding of Bitcoin mining. You can read and read, but experience is the best teacher. I’ve learned a lot in the first thirty days. This by no means makes me an expert, but I certainly have a better understanding of the technology because I just jumped in and learned. I’m glad I did.
Learning what Bitcoin is seems to be a lot more complex than it really is. The problem is that there are so many variables and options that it is simply overwhelming for the Noob (myself included). What wallet do I use? Do I buy mining hardware or use a mining service? How much is a Bitcoin worth. What are all of these other Alt-coins? and the list goes on…
At the risk of doing something stupid, I’m going to share with you how I got started. There is even a spreadsheet (ODS format – I use LibreOffice) I designed. It can help you get a handle on converting to cash and how to reinvest to maximize your return. It’s not perfect and makes a lot of assumptions, simply because we are trying to do the impossible, predict the future.
You will have to make an investment. Money up front to either purchase the hardware or the mining services. Hardware mining requires you to make a large up front investment to build a mining rig. A mining rig is simply a computer modified for this purpose, usually adding multiple GPU’s (Video Cards). Then you need to select software and invest a lot of time, effort and electricity for maintenance. Mining services are much simpler to configure, cost less up front and require very little effort on your part. The trade off is that you will pay fees to the mining company so they can do the maintenance for you.
I chose to use a mining service, finally settling on Genesis Mining because they are simple to use, have a great payout program and their fees aren’t ridiculous. I also like the fact that they have located their data centers in Iceland, taking advantage of the colder weather to help reduce their costs.
Get out your wallet…
You will need a wallet, which is nothing more than software to track your money. This is where your mining services (or hardware mining) will send your earned Bitcoin to. Bitcoin.org has a great tool to help you choose a wallet. I chose Electrum, because it does not require the download of the entire blockchain, seems more secure because it is hosted completely on my own computer(s) and is simple to learn.
That’s the how, now the why…
I first heard of Bitcoin 10 years ago. It’s just too bad it took that long for me to finally grasp the concept that can be an investment. Even better, you can earn it by simply investing a little time an effort into learning. Using tools like CoinDesk and this mining calculator, I was able to build a spreadsheet that helped me see just how much I could earn. I found is that the returns are still fairly high and that as long as the price of Bitcoin stays around $1000, I can count on excellent returns.
About the spreadsheet:
- I created this in LibreOffice Calc.
- It works perfectly in Excel 2013 as authored.
- You should only edit the fields highlighted in green, everything else is either calculated or dependent on something that would break otherwise.
- I make some pretty bold assumptions like, the monthly average price of Bitcoin staying above $1000 and the difficulty growth rate of 5%. These numbers are adjustable for each month with the intention that as time goes on, you will be able to get a performance history by updating these numbers.
- The line highlighted in yellow is the amount you need to reinvest if you follow my plan.
- To help you see what happens if you limit the monthly investment,there is a value for a re-investment cap at the bottom left of the sheet.
- This sheet is provided for educational purposes only. I make no guarantees of accuracy or usability.