I'm new the BitCoin scene. I read some of the beginners guide but admittedly not all. It's hard for me to wrap my head around this whole thing so I have a lot of questions, but this thread is for mining right now. I'm not a computer geek but I'm not computer illiterate.
I'm interested in Solo mining.
The BitCoin lingo is hard for me to understand. When I read about hear a lot about hardware. I hear something about the difficulty of mining blocks goes up every 2 weeks. So for me to be a solo miner, I have to have good hardware. I imagine this means a good computer. What is good hardware? Is this in regards to processing power?
Say I go out and buy a server, and I earn me a few bitcoins. Then the difficulty goes up, and it gets harder for me to mine a block. Does this mean I will have to purchase a new server to be able to continue mining solo?
In regards to pool mining, is this something like Folding@Home where each user in the pool lends his/her computers processing power to one computer and then they split the earned bitcoins evenly amongst everyone in the pool? Would this not mean that the more people in a pool the less btc's I get?
I'm sure these questions have been asked before, and I will ask more newbie questions. In the meantime, I thank you all in advance for your assistance.
To answer one of your questions, ATI brand graphics cards, particularly the 5xxx, 6xxx, and the new 7xxx series are generally considered the best for mining. Many people also choose to make barebones "mining rigs." Some of these mining rigs don't even have monitors! This is because there is an electrical cost to run a Bitcoin miner for months on end and these people want to make their mining rigs as electrically efficient as possible.
But, to be quite honest, unless you're willing to spend literally thousands upon thousands of dollars on new computer hardware, it won't be worth it to try solo mining.
Consider this: I have been Bitcoin mining with a $400 graphics card, an ATI Radeon 6970. Now, while it is not the most efficient Bitcoin mining hardware, it still has pretty good Bitcoin mining power. I have been using this card for almost 6 months non-stop every day for Bitcoin mining, and I have never solved a block once. In other words, it could be months to years before you ever solve a block mining solo.
The best thing to do if you have a decent graphics card (or a few of them) is to join a 'mining pool.' The largest one is at www.deepbit.com
but there are some other very good ones. All of the miners in the pool essentially combine their processing power to solve a block. If they succeed in solving a block, each miner will receive a payout of the 50 BTC prize that is proportional to their share of the work (i.e. more powerful machines do more work and thus get more reward than weaker machines).
Mining in general works like this (others on this forum have a better understanding than I do):
When any Bitcoin transaction is made anywhere, it is broadcast to every "node" or computer in the network and is encoded in a 'block' to be solved by the network. In other words, blocks contain records of the Bitcoin's transaction history. Solving blocks is an important step in verifying transactions in the network to eliminate things like fraud.
So, in extremely general terms, the nodes basically say, "Ok! I need to solve this block/problem so I can help verify the transactions inside it!" As soon as any node solves the block, it says, "Hey other nodes, I got the answer!" And so it sends the answer off to all the other nodes. The other nodes look at the answer and say, "That's correct! All of the transactions in this block look good to me!" This is how transactions are confirmed by the network.
This is also why you may hear the term "blockchain." The blockchain is a history of all transactions in the network. Solving blocks adds a new block to the end of the blockchain.
The difficulty adjusts to the amount of processing power in the network every 2 weeks. So, the difficulty will only get harder when there is consistently more processing power in the network, and will get easier when there is less processing power. If there is no change in processing power, there will be no change in difficulty. This is to help make the rate of Bitcoin generation predictable over time. Every 2 weeks, the difficulty will adjust such that blocks will be solved on average
every 10 minutes.