Bitcoin mining – everything you need to know in one place – November 2013

A great deal of research went into the design of my system for Bitcoin mining.

I have a 21 inch Mac from mid-2010.

Attached to the Mac is a D-Link  DUB-H7 USB Hub.

I spent my money for Bitcoin mining ASIC supercomputers with Butterfly Labs.

All of the Bitcomin Miners plug into the USB hub.

 

I selected the Bitcoin miner  company, Butterfly Labs, versus all the others because they offer a lifetime warranty and are American made.

I power the entire system with a APC back-UPS 1500 – 115 Volt AC Uninterruptible Power Supply Battery Backup.

On the software end, MacMiner controls the FPGA/ASIC BFGMiner instance, which controls the USB-attached hardware ASIC Bitcoin miners from Butterfly Labs.

I went into this Bitcoin mining knowing that whatever I invested in hardware would be “gone” forever.

I feel sorry for the “funds” that are “invested” in data centers full of bitcoin mining equipment,

as the more bitcoin miners that come online, the more difficult (less profitable)  mining becomes for them and everyone else, immediately.

I plan to mine Bitcoin long term, as an experiment.

By owning the hardware outright and the hardware being under warranty for lifetime,

I certainly plan to participate in Bitcoin mining as long as it is a going concern.

Bitcoin is much misunderstood, which is perplexing considering the simplicity of the concept.

Bitcoin is an electronic means to transfer payments, securely, on a peer to peer network with no central controlling authority, conceived in 2009.

Bitcoins are held in a wallet accessible only to the owner.

Bitcoins can be obtained in only two ways:

Someone can be transferred existing bitcoins from someone else,

or,

someone can mine bitcoins,

the result of which will be rewards in the form of newly minted Bitcoins being deposited to the miner’s wallet.

A Bitcoin miner participates in a network that keeps a ledger of every Bitcoin transaction.

The Bitcoin ledger ensures that Bitcoins aren’t double-spent (counterfeited).

The actual work of the miner is totally automated and details are unimportant to the miner owner.

The most effective way to mine Bitcoin is to join a pool, the most desirable being a pool with no  fees.

Bitcoin earnings from mining can’t be predicted – (there are too many variables ):

– new miners coming online

– value of Bitcoin

– transaction fees

– transaction volume on Bitcoin network

Bitcoin has now issued 50 % of its currency to miners, with the remainder, 11 million additional coins, to be doled out over the next 150 year or so.

Bitcoin is clearly explained in an easy to read paper by the “conceiver” – where even the theoretical risks to the system are outlined.

At first, in 2009, computers ran the Bitcoin mining software – later, video cards (GPUs) were slaved with the mining tasks.

In 2012, FPGA units were tasked with mining Bitcoins.  In 2013, ASIC (application specific integrated circuits) Bitcoin miners were delivered to the market.

It is unlikely there will be an advance beyond ASICs with regard to power consumption vs. performance in the foreseeable future.

I expect that the people who get burned investing in data centers full of mining equipment will be after their brokers with pitchforks.

My Butterfly Labs Bitcoin Miners have been running faithfully for a few weeks now.

Should you invest in Bitcoin? I can’t tell you. I think exchanging cash for Bitcoin is an unacceptably risky strategy, as an investment vehicle.

Bitcoin mining is extremely high risk, but it is a controllable one-time risk.

Using Bitcoin to transfer a payment is quick, secure and simple. That means Bitcoin has a future.

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