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How to calculate mining profitability






Obviously, the big money is going into costly bitcoin ASICs. If you arealready in that position, you probably know how the process works and are intending to mine bitcoin. However, those of you on a more moderate budget are probably looking at building a GPU miner for scrypt currencies, or a buying a small ASIC machine for bitcoin or other SHA-256 currencies. In that case, you have come to the right place.

The process of mining digital currencies involves solving complex cryptographic puzzles. By doing this, miners are providing ’proof of work’ that is rewarded with digital currency. Broadly speaking, there are two proof-of-work hashing algorithms in use today: SHA-256 and scrypt. Note that there are some lesser-used alternatives, which we will not be looking at in this guide (for example,Primecoin).

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What is a Bitcoin Mining Pool?






One of the first questions thatanyone interested in mining cryptocurrencies faces is whether to mine solo or join a ‘pool’. There are a multitude of reasons both for and against mining pools. However, if the hash rate distributionacross the bitcoin network is anything to go by (and it is) then most miners are opting to join a pool. Here’s what you need to know.

If you’re deciding whether to join a mining pool or not, it can be helpful to think of it like a lottery syndicate – the pros and cons are exactly the same. Going solo means you won’t have to share the reward, but your odds of getting a reward are significantly decreased. Although a pool has a much larger chance of solving a block and winning the reward, that reward will be split between all the pool members.

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How bitcoin mining works






When you hear about bitcoin “mining,” you envisage coins being dug out of the ground. But bitcoin isn’t physical, so why do we call it mining?

Because it’s similar to gold mining in that the bitcoins exist in the protocol’s design (just as the gold exists underground), but they haven’t been brought out into the light yet (just as the gold hasn’t yet been dug up). The bitcoin protocol stipulates that 21 million bitcoins will exist at some point. What “miners” do is bring them out into the light, a few at a time.

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How do bitcoin transactions work?






Simple version:

If I want to send some of my bitcoin to you, I publish my intention and the nodes scan the entire bitcoin network to validate that I 1) have the bitcoin that I want to send, and 2) haven’t already sent it to someone else. Once that information is confirmed, my transaction gets included in a “block” which gets attached to the previous block – hence the term “blockchain.” Transactions can’t be undone or tampered with, because it would mean re-doing all the blocks that came after.

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