About Bitcoin & Other Crypto Currencies
Bitcoin is the first of a group of “decentralized ledger” currencies also known as Cryptocurrencies and is also currently the predominant Cryptocurrency.
Bitcoin was developed based on a white paper written by Satoshi Nakamoto in 2008.
Unlike currencies such as the U.S. Dollar, commonly referred to as “fiat currencies”, Bitcoin is not produced by a government and is not controlled by banks. Instead, it is a peer-to-peer virtual payment method that can be used in any country where its use has not been prohibited. Unlike cash, Bitcoin have no physical existence but instead consist of a long series of characters, numbers, and symbols.
Bitcoin’s value is derived from the fact that it takes computer work to “mine” a block of coins and therefore hardware and power costs.
Many full length books have been written about Bitcoin. This brief introduction only focuses on the basic terminology and concepts required to mine Bitcoin.
Bitcoin mining equipment has evolved as the desire for faster computing increases. Currently, almost all mining equipment in use is classified as ASIC or Application Specific Integrated Circuit machinery.
As the term implies ASIC miners have specific uses and don’t perform normal computer functions such as word processing or web browsing.
ASIC computers used to mine Bitcoin can also be used to mine several other Cryptocurrencies that are generated by the same method as bitcoin referred to as “SHA-256d”. SHA is short for Secure Hashing Algorithm, a protocol designed by the U.S. National Security Administration.
Basically, the more computational power or hash rate a computer is capable of, the more Bitcoin in will mine. The two miners most commonly bought at the time of this writing have hash rates between 3.5 and 5 terra-hashes per second (TH/s).
Once the hash rate of a miner is known, there are several online calculators that will estimate the value in U.S. Dollars and Bitcoin that will be mined in any given time period.
In the example below, based on actual input on May 11, 2016, a miner running at 5 TH/s will generate approximately $175 per month in Bitcoin value. Reducing that amount by the hosting or electricity cost will result in a projected net profit per month.
The USD value of Bitcoin mined varies depending on the difficulty of discovering a block of Bitcoin and the current Bitcoin to USD conversion rate.