How To 'Mine' Bitcoins And Make Real Money

Bitcoin

Photo: flickr / Zach Copley

Bitcoins are a completely anonymous digital currency that can be converted into real cash.And most interestingly, you can use your computer to “mine” them.

It’s something akin to prospecting for gold, except now you’re hunting for 64-digit numbers. By having your computer repeatedly solve puzzles, you’re competing with other miners to generate the number that the Bitcoin network is looking for. If your computer generates it, you receive 25 Bitcoins.

At the time of this writing one Bitcoin is worth $42.98, so with correct computations currently worth $1,074.50 a pop there’s plenty of motivation to start crunching numbers.

Here’s the difficulty, however – the behind-the-scenes maths is set up to make Bitcoins increasingly difficult to produce. Once there are 21 million in existence, there can’t be any more.

Since it can take quite a while to successfully solve one of these puzzles by yourself and earn your thousand bucks, a number of Bitcoin “mining pools” have sprung up in which people distribute their computing power to find these magic combinations of 64 digits collaboratively. Once solved, the miners divide their winnings based on the amount of computing power each contributed to the calculation.

Since you’re one of a large number of people in this scenario, the payouts are quite small. The real money is in doing the work yourself, but it’s much more fun to see a steadier (yet less significant) trickle of Bitcoins flow into your wallet.

We’re going to show you two ways to get mining as part of a pool. The first is a no-frills get-started-right-away method. The second is slightly more involved and lets you take advantage of your computer’s graphics processing chip to mine alongside a network of others.

Here's the fastest possible way to start mining Bitcoins. The first thing you need is a Bitcoin wallet, so to instawallet.org to instantly generate one. You can (and should!) share your Bitcoin address, but DO NOT share the unique Instawallet URL.

Now go to bitcoinplus.com and create an account.

If you want to log in on multiple computers to mine more quickly, that's completely allowed.

Your account settings page keeps track of your most recent balance.

If you maintain your own website, you can even embed a Bitcoin generator on it to have visitors to your site mine for you.

If we want to throw more power into it, we can join a different kind of mining pool. One of the most popular pools is called Slush's Pool, located at mining.bitcoin.cz

Create an account to join in.

You can track your current balance (and pending balance) in account settings.

Take note of your automatically-generated worker login and password. We'll need them momentarily.

Now we need to download a dedicated Bitcoin miner. We went with DiabloMiner, available on GitHub.

Running DiabloMiner opens up Terminal and prompts you to log in. Type api.bitcoin.cz for hostname.

The port number is 8332.

Enter your worker username.

And the worker password.

Set it to run automatically upon startup if you want.

After it connects, it'll start crunching numbers.

And soon enough, you'll start completing blocks.

If we check back with our Bitcoin wallet, we see we've started earning (a very small amount of) money.

To calculate how much money your Bitcoins are worth at the current rate, head over to Preev.com and plug in your balance. This comes out to just over 3.2 cents that my computer made while I was doing other things.

Still unsure how Bitcoin works? Watch this video.

Since it's completely anonymous, you can buy some scandalous things with Bitcoin.

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