First-time mining questions - advice would be nice

[LotLP]

Alright so I just started this while bitcoin mining thing, and I'd like some of the more experienced miners here, or people with more experience than me anyway (which is everyone), to go over the things I'm going to say in the following sentences and correct me.

The first thing I did was download GUIMiner. I made a worker using my GPU, and it's telling me that it's getting around 366 Mhash/s. As the server, I'm using BTC Guild (The Netherlands). Which I chose because it said The Netherlands. Yes, I'm like that. I live there, so it just made sense. (inb4 I made a terrible, terrible mistake)

Now what I see in the payments screen on BTC guild is my earnings. Where it says "reward", it says 25 BTC. I'm going to assume this means 25 bitcoins, plain and simple. In earnings this says "0.03morenumbers" When that number hits 1.0, that means I get 25 bitcoins? And these are the full on bitcoins that are worth eeh let's say more than 150 dollars a piece? (yes, I'm new, and I need old fashioned money to help explain this currency thing to me)

I'm currently using my GPU to mine using GUIMiner, like I said. My CPU is idling because it's not worth taxing my 3570K for the 9 extra Mhashes.

Mostly I'm having a hard time wrapping my head around how exactly this payment system works, and how I get paid, and how much. I'm also not sure what PPS Rate means, what PPLNS stats or whatever means, and what the fee means. (I guess they take 5% everytime they send the payments to my wallet? That's fine)

[LotLP]

Also, I noticed some products of butterfly labs which seem to have INSANE gh/s for the dollar. Is this stuff legit? o_0 I mean I can't afford anything crazy right now but that 25 gh/s miner, or that 5 gh/s miner would make a nice addition to what is now merely one 7870

[b!z]

Also, I noticed some products of butterfly labs which seem to have INSANE gh/s for the dollar. Is this stuff legit? o_0 I mean I can't afford anything crazy right now but that 25 gh/s miner, or that 5 gh/s miner would make a nice addition to what is now merely one 7870

Butterfly Labs has not even shown proof of a working prototype, many people believe they are a scam.

However, ASICs do exist and some companies such as Avalon have developed working machines that would print you thousands of dollars.

When you mine in a pool, you don't get the entire 25 BTC reward. The whole pool works together to solve the block, and you receive a % of the 25 BTC based on how much work you've done. So if you're mining at 100 GH/s, you'd get a larger percent than someone mining at 1 GH/s.

If you want to try and score a 25 BTC block for yourself, you'd have to "solo-mine", which is mining by yourself. You would be racing against thousands of GH/s, so it's very unlikely that you'd succeed by yourself.

[LotLP]

When you mine in a pool, you don't get the entire 25 BTC reward. The whole pool works together to solve the block, and you receive a % of the 25 BTC based on how much work you've done. So if you're mining at 100 GH/s, you'd get a larger percent than someone mining at 1 GH/s.

If you want to try and score a 25 BTC block for yourself, you'd have to "solo-mine", which is mining by yourself. You would be racing against thousands of GH/s, so it's very unlikely that you'd succeed by yourself.

Ah, I see. So when it says "0.04516127" in the Earnings area, that basically means I have earned 0.045numbers bitcoins?

[jase]

yeah that's right.

When you mine in a pool, you don't get the entire 25 BTC reward. The whole pool works together to solve the block, and you receive a % of the 25 BTC based on how much work you've done. So if you're mining at 100 GH/s, you'd get a larger percent than someone mining at 1 GH/s.

If you want to try and score a 25 BTC block for yourself, you'd have to "solo-mine", which is mining by yourself. You would be racing against thousands of GH/s, so it's very unlikely that you'd succeed by yourself.

Ah, I see. So when it says "0.04516127" in the Earnings area, that basically means I have earned 0.045numbers bitcoins?

[wheatstone]

 To expand on b!z's reply...

It helps to know a few fundamentals about mining. What every miner is trying to do is to find a hash of a valid next block. The first to do so gets a reward--currently 25 btc.

A hash is a function that takes (typically) a large input and calculates a small output. Bitcoin uses a cryptographic hash known as SHA-256. The large input is the "block", that is a list of transactions on the bitcoin network. Cryptographic hashes have the property that even minute changes of the input create a completely different output (i.e. the hash of "bitcoinisgreat" would be completely different from the hash of "zitcoinisgreat").

The goal is to try and find a hash with certain properties, specifically a hash with a large number of leading zeroes. Different hashes are created for the same block by changing a value in it.The more zeroes required, the harder it is to find such a hash. This is referred to as "difficulty". The bitcoin network regularly adjusts the difficulty to match the processing power of the miners such that (on average) a new block is created every 10 minutes.

When you mine in a pool, the operator of the pool typically sets a much, much lower difficulty. That is, the pool accepts hashes that have fewer leading zeroes than would be required by the network. Each of these that you get accepted is called a "share" and constitutes proof that you are trying to find a valid hash.

In reality, you aren't really "contributing" to a solution. The one user who finds a hash with enough leading zeroes to get the block accepted by the network isn't building on your work (or that of anyone else). The "shares" mentioned before are simply there to prove that you are TRYING (and how hard you are trying).

The reward of 25 btc is then split in some manner, with payout typically proportional to the number shares (i.e. how hard you were trying, even though you didn't actually find anything).

If we disregard the (small) fees charged by the pool operator, you would get the same amount of bitcoins out of mining alone as in a pool in the REALLY LONG run; that is, your reward would be the full 25btc once in a blue moon if you mined alone, whereas you get a tiny portion of that at much more frequent intervals if you mine in a pool.