The Best Way to Get Started
Bitcoin miners add processing power to the largest distributed computer in the world and get paid to do so. This computer is spread out over the entire world and uses the internet to communicate. Nodes on this peer to peer network work to distribute the block chain which is essentially a public ledger of all the Bitcoin trades. Users encrypt an amount of Bitcoins from an address that they own and send them to another address. Once these are encrypted they are added to the current open block and verified by the network.
The network is throttled to allow a new block to be found every 10 minutes. This is managed by a difficulty setting that is recalculated every 2016 blocks or roughly every 14 days. Once 2016 blocks are found the network averages the total processing power of the network over the past 2016 blocks and recalculates the new difficulty. As a result the more computational power on the network the more difficult it is to find new blocks.
Mining is the process of find these new blocks and performing the required bundling of transactions in the newly found block. Since there is no central authority there had to be a method to encourage participation in the network. A Block reward is given each time a new block is found. In the beginning this was 50 Bitcoins (known as 50 BTC). Every 210,000 blocks this is scheduled to half. This works out to about every 4 years. The block reward recently halved last November 28th. it is currently 25 BTC. The idea is that as the value of BTC grow in relation to currency less of a reward would be required.
Given that there is 1 block found every 10 minutes that means there are 144 blocks found every day. This works out to 3,600 new BTC being added to the network. With BTC being around $100 / BTC this means that there is $360,000 a day up for grabs.
There are two ways to mine, one is in a pool and the other is to standalone mine. For more on Standalone mining check out my book. I’ll cover pool mining here.
Pool mining pays as you go. There are a number of different methods which each have their own benefits, I cover these in the book as well. I’ll assume for the moment that each pay the same over the course of time, which is not far from the truth. The network is measured in hash rate. A Hash is a computation which provided given inputs is easy to determine, but virtually impossible to reverse from the hash alone. This means the work has to be done in order to verify it is accurate, which is very time consuming.
A miner will receive a portion of the daily take based on a ratio, of there mining capability as a ratio to the total network has rate. So their take in USD is dependent on three things:
Currently the Total network hash rate varies between 150 TH and 190 TH. This is climbing fast with the release of new mining hardware. As a result I did some math to make it easy to perform ball park calculations. If we assume the worse case for the network hash rate at 2 PH or 2,000 TH we can do some simple math to back track to 1 TH, 500 TH and 250 TH.
What ever you might earn at 2 PH would be half of what you would earn at 1 TH and 1/4th of what you would earn at 500 TH and 1/8 of what you would earn at 250 Th.
If we use as a base 50 GH for the mining capability which one Single mining unit sold by Butterfly Labs we can multiply upward for additional mining capacity.
To gain the ratio we divide our mining hash rate 50 GH by the Network hash rate of 2 PH (2,000,000 GH) which is 0.000025.
If you multiply this by 3,600 (the number of BTC per day) we see that we can earn 0.09 BTC per day. It we assume a 30 day month we see that we can earn 2.7 BTC per month.
So for each 1 USD of BTC Value we can earn $2.70. So at $100 / BTC we can earn $270 per month.
So if the network hash rate was :
So a spreadsheet calculation would look something like this
=([Actual Mining Rig HR]/50) * [USD/BTC] * (2,000,000 / [Actual Network HR]) *2.7
So given $100 BTC the following Table can be constructed.
|50||$ 270.00||$ 360.00||$ 540.00||$ 720.00||$ 1,080.00||$ 2,160.00|
|100||$ 540.00||$ 720.00||$ 1,080.00||$ 1,440.00||$ 2,160.00||$ 4,320.00|
|150||$ 810.00||$ 1,080.00||$ 1,620.00||$ 2,160.00||$ 3,240.00||$ 6,480.00|
|200||$ 1,080.00||$ 1,440.00||$ 2,160.00||$ 2,880.00||$ 4,320.00||$ 8,640.00|
|250||$ 1,350.00||$ 1,800.00||$ 2,700.00||$ 3,600.00||$ 5,400.00||$ 10,800.00|
|300||$ 1,620.00||$ 2,160.00||$ 3,240.00||$ 4,320.00||$ 6,480.00||$ 12,960.00|
|350||$ 1,890.00||$ 2,520.00||$ 3,780.00||$ 5,040.00||$ 7,560.00||$ 15,120.00|
|400||$ 2,160.00||$ 2,880.00||$ 4,320.00||$ 5,760.00||$ 8,640.00||$ 17,280.00|
|450||$ 2,430.00||$ 3,240.00||$ 4,860.00||$ 6,480.00||$ 9,720.00||$ 19,440.00|
|500||$ 2,700.00||$ 3,600.00||$ 5,400.00||$ 7,200.00||$ 10,800.00||$ 21,600.00|
The columns represent the total network hash rate and the rows represent the Mining Rigs hash rate.
Here is the table again in simple BTC. to calculate your earnings in a currency, simply pull the number of BTC and multiply by the Currency / BTC