The complete guide to bitcoin mining, trading, and investing
Bitcoin mining and trading is a lucrative business, but it is not easy to make money in this space. The very best traders/miners are able to adapt to an ever-changing marketplace and act fast when the situation changes.
This guide will teach you everything you need to know about trading and mining Bitcoins, but the focus is on the latter. I will start by going over some basic concepts around Bitcoin mining and its value before going into how to mine them yourself.
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Trading vs Mining
Businesses in the real world have managers that oversee employees, budgets, etc. In this analogy, miners are the employees who work under a manager/pool owner.
Business management takes a cut of everything the company makes while employees get what’s leftover after business costs have been paid for.
Pools take a fee from their miners just like any other business would so they can continue running and expanding the pool with new features or more locations for equipment optimization.
Miners make money when the Bitcoin price is above the mining costs. If a miner has $100 worth of equipment and it makes $10 in a month but costs $15 to run then there is no profit and thus no incentive for that person to keep mining.
If the price goes up and they earn more than what it takes to buy electricity then you can see how this model would be very profitable.
Pre-Buying vs Mining
Let’s say you had $5,000 laying around and wanted to start making money with your computer. You could opt to just throw that money at something like Bitcoin by pre-purchasing them or setting up an account with Coinbase which would allow you to put some small fraction of your fiat into Bitcoins and leave them to sit.
You would hope that the price of BTC goes up over time and you end up with more fiat than what you started with. This is most likely how many people got into Bitcoin at first, but it is not the most profitable venture long term.
It may sound like a good way to get rich quickly or make some passive income, but there are much better options available if your goal is to make money.
Sure you need Internet access wherever you go, but it won’t cost anything after your initial equipment costs which we will get into later. Depending on the type of electricity costs where you reside, mining could be anywhere from $10 to $20 per month or more to break even and everything after that is pure profit.
You won’t learn how to mine bitcoins by reading this guide, but I will go over some basic concepts about buying and optimizing your equipment so you can start earning money as fast as possible with whatever capital you have available.
How to Mine Bitcoins (The Simplest Way)
There are many different ways to mine, but most people who want to do it themselves will go with the tried and true hardware route over things like cloud mining.
Mining requires a lot of electricity so you need cheap rates for your power or you’ll be at a loss when all is said and done. Although if that’s the case then buying Bitcoins would also put you at a loss unless their price increases significantly from where they are now.
With hardware mining, there are a few more variables that determine how well your equipment runs such as pool difficulty, miner difficulty, hash rate, etc…
If you have the right software though these factors shouldn’t matter too much though. First of all, you will need to get started with Bitcoin mining by setting up an account at one of the reputable pools online.
I would recommend Slush’s Pool or Eligius, but there are many more out there. After that, pick some ASICs (application-specific integrated circuit) hardware and connect them to your computer/device which you use for mining.