How to generate Bitcoin - Bitcoin mining

What is Bitcoin Mining

Bitcoin mining is the process of making computer hardware do mathematical calculations for the Bitcoin network to confirm transactions and increase security. As a reward for their services, Bitcoin miners can collect transaction fees for the transactions they confirm, along with newly created bitcoins. Mining is a specialized and competitive market where the rewards are divided up according to how much calculation is done. Not all Bitcoin users do Bitcoin mining, and it is not an easy way to make money.

Mining is a distributed consensus system that is used to confirm waiting transactions by including them in the block chain. It enforces a chronological order in the block chain, protects the neutrality of the network, and allows different computers to agree on the state of the system. To be confirmed, transactions must be packed in a block that fits very strict cryptographic rules that will be verified by the network. These rules prevent previous blocks from being modified because doing so would invalidate all following blocks. Mining also creates the equivalent of a competitive lottery that prevents any individual from easily adding new blocks consecutively in the block chain. This way, no individuals can control what is included in the block chain or replace parts of the block chain to roll back their own spends.

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Is it worth mining at Home PC

Let's say you try and mine a block of bitcoins with just one home PC. This is a bad idea: the electricity costs will be higher than the money you make from any mined bitcoins and you may have to wait months - or longer - before you get any return. 
By joining a pool, you should get smaller payments more regularly. However, you could still end up out of pocket even if you join a pool such as Slush’s Bitcoin pool – one of the most popular ones. When a block is completed, you get a share based on the number of other ‘workers’ who helped mine the block. A fee – around 2 percent – will be deducted from this, and you could well earn only half the amount you’ve spent in electricity costs.

Of course, if you’re able to run the mining software on a computer for which you don’t pay the electricity bill.

STEPS involved in Bitcoin Mining

• You’ll need a ‘wallet’ to start with. This is a bit like a PayPal account where your bitcoins can be stored. You can store this wallet online, or locally on your PC. You’ll need to download a large ‘blockchain file’ to use a wallet. For an online wallet, you might like to try coinbase.com. With a coinbase account, you can buy, use and accept Bitcoin currency.
• Join a pool, such as Slush’s Bitcoin pool. There’s always a danger that the pool owner might keep all 25 bitcoins when a block is mined, since the whole 25 coins are paid to one person: the pool owner.
• Install a Bitcoin ‘miner’ on your PC. There are two types: CPU and GPU. For beginners, Kiv's GUI miner is recommended. You can find out more about how to use Kiv's GUI miner here.
• Log into your Bitcoin pool account, and enter your wallet address. You will be able to get this by checking your wallet account which you created in step 1.
• Register your workers. Each worker is a sub-account within your Bitcoin pool account. You can have more than one worker running on each computer.
• Enter your worker credentials into your Bitcoin mining software, and then enter the main pool URL so your workers can start mining.