There are numerous proof-of-work-based cryptocurrencies today that you can mine to make yourself a profitable source of income directly from your home. However, Bitcoin (BTC) has remained the most attractive digital currency for crypto miners because of its leading market position and high price. A single Bitcoin is worth more than 10 times the value of a single Ethereum (ETH) coin, even though ETH is the second most popular crypto on the market. Not to mention the much higher market cap of BTC compared to mineable altcoins such as Monero (XMR), Bitcoin Cash (BCH), and Litecoin (LTC).
The process of Bitcoin mining has evolved considerably since the launch of BTC in 2009 when there were barely any miners besides the original BTC developer Satoshi Nakamoto who mined the initial BTC genesis block. At the time of its launch, BTC was worth around 0.0008 USD and it wasn’t attractive at all for investors or miners.
Just a few years later, when the price of BTC started rising to a few US dollars and the crypto community started growing, the number of BTC miners increased. The BTC blockchain proved trustworthy and capable of facilitating transactions across the globe, which in turn resulted in a huge growth of Bitcoin investors and crypto exchange platforms. Soon enough, mining BTC also became more popular, and various developer teams started launching specialized BTC mining software.
Let’s take a look at how Bitcoin mining works, what sort of hardware do you need for it, and how to set up your mining operation with GUIMiner, one of the most popular software solutions for mining BTC.
Bitcoin Blockchain Basics
In order to understand how BTC mining works, it’s necessary to understand how the Bitcoin blockchain operates. Since BTC is the first cryptocurrency, it’s also the first case in which blockchain technology was successfully used to facilitate transactions of funds between people anywhere in the world. The key difference between blockchain technology and classic payment networks such as VISA or MasterCard is that blockchain doesn’t require any central authority to validate transactions and it isn’t tied to fiat currency banking systems.
The blockchain is a type of decentralized public ledger that facilitates BTC transactions between digital locations. Bitcoin can’t leave the blockchain and anyone can see the transactions on the blockchain with the use of a block explorer. As far as the form of the blockchain, it consists of blocks that house transaction data. Each block can house 1MB of data and all blocks are set in a chronological string from first to last. Once a block is processed through the network and approved by network nodes, it can never be altered. This mechanism is what makes the blockchain so secure since every transaction and data block needs to go through a rigorous verification process and after it gets verified, the Bitcoin programming code doesn’t allow anyone to alter the contents.
The transaction data within the blocks carries information about the sender address, receiver address, and exact amount of transferred BTC. Also, each transaction has its unique transaction ID (TXID) that makes it possible for users to track their transfers with a block explorer.
When you send some BTC to a third party as payment, your coins need to go through a complex verification process to make sure you aren’t pulling some sort of double-spending scam and that the transfer is legit. This is necessary because, unlike fiat money, BTC doesn’t exist physically. It just changes blockchain addresses and people use private keys to prove their ownership over a certain amount of coins on the blockchain.
The usual time it takes for a BTC transaction to get processed is around 10 minutes, but it can sometimes take more because of high network busyness. After you’ve initiated a transaction, you’re actually sending a cryptographic message through the blockchain. This message, which is your transaction, is then first sent to the mempool (memory pool) where it waits for a miner to select it for processing.
Miners select transactions based on their transaction fee and that’s why it’s important to always include at least an average transfer fee. If you’re really in a hurry to transfer your bitcoin, then you might even add an above-average fee to make the transaction more attractive to miners. In case your transaction stays unconfirmed for some time, you might consider reversing it.
When a miner selects your transaction, they start using their mining rig’s processing power to find the appropriate 64-digit hash for your transfer. This requires a lot of time and processing power, so miners pool together their hash rates in mining pools to make the process last an average of 10 minutes.
Once the miner finds the appropriate hash for your transaction, they send it out to the rest of the BTC network as proof of work. Multiple additional network nodes then check if the hash is really legit and only after these additional confirmations can your transaction be included in the next block of the blockchain. This is how the proof of work algorithm works. After the new block is created, the miners involved in the confirmation process get a block reward in the form of freshly mined BTC.
If you’re a single Bitcoin miner, it might take a lot of time before you manage to earn a block reward. That’s why crypto mining pools were invented. In mining pools, thousands of individual miners share their hash rate by connecting their rigs to the mining pool and sharing their computing power.
When a member of a BTC mining pool receives a block reward, those new bitcoins get divided between members of the mining pool in proportion to the hashing power of each miner. This way, mining pool members receive fractions of block rewards frequently. These fractions are much smaller than a single block reward, but they are regular and provide miners with a steady income of funds based on their hash rate. The higher the hash rate, the more BTC a miner can earn.
During the first years of BTC mining, it was possible to efficiently mine Bitcoin with the computing power of a CPU on your PC or laptop. However, crypto miners soon realized that GPUs have much more processing power that can be used to mine far more bitcoins. GPU mining proved far more profitable.
This is how mining rigs were created, as specialized computers that are usually operational 24/7 and are used exclusively for mining Bitcoin. The thing with mining rigs is that they are quite expensive because you need to use the best GPUs on the market to mine BTC. If you build a mining rig with low quality or outdated GPUs, you can’t expect to earn any serious profits, especially if you need to pay high electricity bills in the process, since mining rigs require a lot of power.
An efficient rig can have anywhere between 2 and 8 strong GPUs, and it requires a strong cooling system to maintain optimal temperature. If you build a top-quality rig but forget about the cooling system, you’ll soon have your rig malfunction and go broke because of high temperatures. The fact that your rig is operational non-stop means that it also requires constant cooling.
It’s possible to earn a lot of cash from BTC mining but you need to carefully plan your mining operation, select your mining hardware, and calculate the potential profitability. You should check out a mining profitability calculator site such as NiceHash just to be sure how much money you can actually make before you start to mine cryptocurrency.
It’s worth noting that ASIC miner machines are much stronger than GPU rigs but they are also far more expensive and out of reach of beginners. These machines are usually used at Bitcoin mining farms.
Slush Pool is the first BTC mining pool in the world. It was launched back in 2010 and has mined more than 1.2 million bitcoins thus far. Apart from being the oldest BTC mining pool, it’s also one of the largest pools on the market. When choosing a BTC mining pool, you should always choose a well-established, trusted pool like Slush Pool, because the fact that it’s so popular and has been around for so long is a great guarantee that the mining pool is really legit.
Also, because it’s so popular, Slush Pool has an enormous hash rate, which results in frequent distribution of block rewards among pool members.
Calculating your BTC mining profitability and putting together a powerful mining rig are the first two essential steps in setting up your crypto mining operation. The third key step is installing and optimizing the best Bitcoin mining software so that you can finally start mining. There are many types of mining software on the market such as Cuda, CGMiner, Poclbm, and GUIMiner. GUIMiner is one of the most popular BTC mining solutions when it comes to software because it’s very simple to set up and use. There’s a simple graphical interface and you just need to set up a few parameters before you start mining.
GUIMiner is a Bitcoin miner that’s based on OpenCL technology that enables it to facilitate mining operations through a connection with GPUs. The software is compatible with graphics cards from the two main manufacturers of GPUs adequate for mining, NVIDIA, and AMD. You can also mine Bitcoin with your CPU while using GUIMiner, but CPU mining is outdated and you’ll hardly earn any considerable profits this way.
Miners can track all the parameters of their mining operation through GUIMiner, such as statistics regarding the number of mined coins, the hash rate, and the market price of BTC on top crypto exchange platforms. It’s really a great way to have an overview of all of the key information about your mining rig.
OpenCL, Slush Pool, and GUIMiner Setup Tutorials
The first thing you need to do is make sure your graphics cards are OpenCL-compatible. OpenCL technology enables the GPUs in your mining rig to begin hashing. When a mining rig is hashing BTC, it’s actually trying out huge amounts of 64-digit hash combinations to find the appropriate hash for a selected transaction. This requires a lot of processing power and your GPUs need to be OpenCL enabled and updated to prevent any unnecessary malfunction.
For AMD GPUs, you need to download the AMD Accelerated Parallel Processing SDK and install it on your computer. This piece of software is free to download and the installation process is really fast. In case you’re using NVIDIA GPUs in your mining rig, all you need to do is update your GPU drivers to the latest version. You can do this on NVIDIA’s website by selecting your GPU model, product series, operating system, and download type.
Slush Pool Account Creation
Once you’ve enabled your GPUs for OpenCL processing, you should create an account on Slush Pool, unless you want to be a solo miner who isn’t a member of any BTC mining pool, but it’s far better to be in a good mining pool than to engage in solo mining.
- The account creation process on Slush Pool is really fast and straightforward. You just need to provide an email, username, and password.
- When you’re done with the account registration, you should create a new miner through the Register new worker feature in your My account section.
- Once you’ve registered a new worker, go to the New Worker section and choose a Login Suffix for your worker. This suffix will be added to your username and it will be required for you to log into your worker. For example, if your username is bitcoinminer and your login suffix is test, then your new worker username will be bitcoinminer.test. It’s that simple, but you should write it down on a piece of paper just in case.
- Now you’ll need to create a password for your new worker. Always use a different password than the one for your Slush Pool account, because it’s not a good idea to use the same password in case of a cyber attack.
GUIMiner Installation and Optimisation on Windows or Linux
Now you can finally download and install GUIMiner on your rig. Once you’ve installed GUIMiner, follow these steps:
- Initiate GUIMiner and go to the Server section. There will be a lot of different options. Select Slush Pool.
- In the Username section enter your Slush Pool worker username with your Slush Pool account username as a prefix.
- Under Password enter your Slush Pool worker password.
- Under the Device section, you need to select your GPU.
- Once you’ve set up these few simple parameters you can click the Start button and start mining.
- You should check the GUIMiner status bar located at the bottom of your GUIMiner window to check if you’re really mining. If everything is fine you should see the number of accepted mining shares and your hashing power. It’s this simple.
- Don’t forget to connect a wallet address to automatically send your freshly mined BTC to it.
A Few Final Words…
Setting up a GUIMiner is fairly simple. The hard part is putting together a strong mining rig and finding the right components, however, if you’re done with that part, follow the instructions from this guide and you’ll set up your BTC mining operation in no time.