Sport & Auto
- About Future
- Digital Future
- Cookies Policy
- Terms & Conditions
- Investor Relations
- Contact Future
Bitcoin is a new kind of virtual currency that exists only in the mysterious world of the Internet. It sprang up after the financial crisis of 2008, when people fearing that the sky was falling began investing in gold bars and silver coins. Many geeks also feared the apocalypse was nigh, but they chose to invest not in old-world currencies, but in a new currency created from scratch and made up of digital bits. That currency is Bitcoin.
What’s really interesting about this brand-new currency is that it’s mined through good old-fashioned hard work—by your PC though, not you. You simply run a program on your computer and eventually a virtual coin will appear. The more powerful your setup, the faster the coins will arrive, theoretically at least. It’s very similar to the SETI@home and Folding@home programs, in that it uses spare computing cycles to help churn through complicated equations, but this time the equations result in a payday for the person willing to devote the resources necessary to acquire them. Of course, it’s not quite that simple, and there are pitfalls and caveats, as always, so follow along while we take you on a brief tour of this brave new frontier. And if you become a virtual millionaire down the road, we want a finder’s fee.
Bitcoin = system
bitcoin = unit of currency
Bitcoin is a decentralized virtual currency that exists solely online. You generate bitcoins with your computer, stuff bitcoins into a virtual wallet, trade them with others, and eventually cash out if you want. Since there is no central authority or government agency providing oversight, users are allowed to semi-anonymously transfer money to one another, making it similar to any other peer-to-peer transaction, except this time, instead of swapping torrents, you’re swapping virtual cash. This lack of oversight is one of the key benefits, and downsides, to Bitcoin at this time, making it the latest frontier in the battle over how much freedom should exist in the online world. This state of anarchy has also made Bitcoin quite intriguing for people who have a lot of spare GPU cycles, which is a wide swath of the Maximum PC readership. But before you fire up your GPUs and quit your day job, let’s examine the basics of Bitcoin so you can decide if it’s something you even want to bother with, because—spoiler alert—it’s not for everybody.
*Note: This article was originally featured in the October 2013 issue of the magazine.
Bitcoin currency consists of four denominations, with the largest being one bitcoin (BTC), followed by a milicoin with a value of 0.001 BTC. One step lower is a microcoin with a value of 0.000001 BTC, and the smallest denomination is a satoshi, with a value of 0.00000001 BTC. Since its inception in 2009, bitcoin value has varied widely: $1 could buy you one bitcoin at the beginning of 2011, but you'd need $230 to buy that same bitcoin in April 2013, making it a damned good investment for those who got in early. Bitcoin is a different kind of currency though, so naturally it works a bit differently than traditional currencies. While your local bank keeps a private ledger for deposits and withdrawals, Bitcoin’s ledger, called the block chain, is public, and everyone can download a copy. This allows anyone to effectively audit transactions sent over the network, which has elicited fears of a Panopticon of constant surveillance. This ease of monitoring has also caused many users to actively conceal their identities on the Bitcoin network, which is somewhat easy to do since bitcoins are sent to an alphanumeric address that is randomly generated by a virtual wallet (more on that in a moment). This structure helps keep users anonymous by allowing them to create a new address for each transaction, which also means others can’t see any previous transactions from a particular user.
While all transactions and wallet addresses are recorded in a public ledger, the keys needed to access funds are private, which ensures that only you have access to your bitcoins. Each transaction over Bitcoin is verified by a software program that generates an SHA-256 hash, which is sent to the public block chain. Once it’s in the block chain, it is confirmed that the money has been left at your address. Donating hours of CPU/GPU cycles and electricity to compute these hashes in order to maintain the public ledger isn't going to attract many sane people, so part of the genius of Bitcoin is that the person who computes the newest block of the public ledger, or block chain, is rewarded with bitcoins. The people who actually do this work with their PCs are called miners, and these power users carefully calculate the cost/benefit ratio of computer hardware and electricity costs against the bitcoin exchange rate. Miners make money by exchanging their bitcoins for local currency through exchanges. We know it sounds good, and you’re raring to compute some cash, so let’s take a look at what you need to do to acquire some bitcoin.
The block chain tallies all transactions, and features a ticker showing the latest payouts.
The most popular method of acquiring bitcoins is to mine them by crunching algorithms on a PC, but the fastest way to get them is the old-fashioned way. No, not stealing them, but buying them. If you’re looking to anonymously exchange cash for bitcoins, BitInstant (www.bitinstant.com) offers a network of retail locations that let you do just that. If you're willing to sacrifice some anonymity, you can use a service such as Coinbase (www.coinbase.com), which allows you to add funds through PayPal. If you’re a smooth talker and have friends in the Bitcoin community, you can always solicit them to send funds to your address, but be warned: There is no way to reverse a bitcoin transaction!
The more interesting way to acquire some coin, at least for our audience, is to use your PC to mine them. To get started, you register online to either join a mining pool or start mining solo. There are dozens of popular pools, with some reaching over 30,000 users, and they are always accepting new members. You just need to find a pool and register, then download a mining program that will start crunching numbers for your pool. GUIMiner is one of the most popular mining programs for new users because it's one of the few applications with a graphical user interface, so it keeps users away from the command line and will have you mining in only a few clicks. If you had to register for your pool, select your pool from the server box, insert your username and password in the appropriate boxes, then click “Start mining.” If your mining pool is not listed, select Other and insert your mining pool's URL and port number.
A lightweight client that can be used with any mining pool, GUIMiner is a good way to start your bitcoin mining career.
Before 2010, people were crunching numbers using their CPU; then the GPU was introduced to bitcoin mining and drastically changed the game. With its fleet of specialized compute units, GPUs crunch bitcoin many factors faster than even an Intel Core i7 CPU. As an example, a Radeon HD 7970 can reach over 700Mhash/s, whereas a GTX 680 can crunch a little more than 110Mhas/s, and an Intel Core i7 4770k can only achieve a paltry 8Mhash/s! Keep in mind, though, that one Radeon HD 7970 would take over a year to chew through a Bitcoin block, so you'll need some major firepower to increase the speed at which the transactions occur. One more problem: As more users compete to mine bitcoins, the difficultly is automatically adjusted, making it harder to mine, ensuring bitcoins are constantly mined at approximately one block every 10 minutes.
To use your GPU to mine bitcoins, you need to install OpenCL or CUDA, which are included in the latest driver packages from AMD or Nvidia, and then select your GPU in the GUIMiner device box. GUIMiner’s Extra Flags box allows you to specify the GPU load you want and even the fan speed to keep things frosty. For best performance on AMD cards, we generally found “–v –w128 –f0” to be the optimal settings, and “–f0 –w128” on Nvidia cards.
An application-specific integrated circuit, or ASIC, bitcoin miner is a microchip specifically designed to run the Bitcoin calculation. These chips' physical circuits are built only to mine bitcoins, really fast. While an Asus Ares II Radeon HD 7990 can mine bitcoins at a blistering 1,420Mhash/s, a similarly priced ASIC miner can hash 25,000Mhash/s! Almost 20 times faster at the same power rating, making ASIC miners the go-to hardware for those trying to get rich mining bitcoins. There are a variety of companies designing these bitcoin mining integrated circuits, but sadly most are still vaporware, even after taking pre-orders. Butterfly Labs, Avalon ASIC, and ASICminer have managed to ship their products in limited quantities, starting at around $100 for a plug-and-mine USB model that can mine at about 300Mhash/s and going as high as $1,250 for a 25,000Mhash/s miner. But with the difficultly of bitcoin mining increasing and the high price of really powerful ASIC miners, many people are doubtful that serous money can be made, even with these specialized devices.
Butter Fly Lab’s 5,000Mhash/s Jalapeno ASIC miner costs $275 and mines bitcoins 10 times faster than a similarly priced GPU.
Click the next page to learn how to manage your Bitcoin.