Mining bitcoins is done by solving mathematical puzzles,

 

Mining bitcoins is done by solving mathematical puzzles, it isn't necessary to understand the details of those to mine them and most of us don't anyway, after all it's our computer solving them, not us. Whoever solves the puzzle first gets the block of coins (currently 25 per block), but so much work is needed to be done that you have no chance of being first on a home PC or even a medium sized ASIC so most people mine as a group effort in a mining pool. The pool sends out shares to all the miners, and then it's a case of whether that pool solves the block first or another, the winning pool gets the coins and shares them between the miners according to who did how much work. Originally bitcoin mining was done on PC processors, then it was worked out how to use a graphics card for the job, with a good card that's a lot faster. That was okay until ASICs were developed to do the job even faster, meaning that graphics cards can't compete any more, mining bitcoin with a processor or graphics card now costs more in electricity than it earns, plus you have to have bought that hardware. (ASIC - Application Specific Integrated Circuit - basically chips made specially for the job of mining and that's all they do). The Bitcoin blockchain adjusts the mining difficulty so that a block of coins is found every ten minutes, this means that as everyone starts using faster ways to mine it becomes more difficult. What this means now is that to mine any significant amount you need to spend thousands on mining equipment, some people are spending hundreds of thousands or more. What this means is that if you want to mine bitcoin with your computer then it's going to be a loss making waste of time, you'd be better off just spending the electricity money on buying the coins directly. However, there's other coins based on a different algorithm called Scrypt, bitcoin uses SHA256. Currently there are no ASICs for scrypt, but they are under development. This means that right now you can still make a little money with a home computer with a powerful graphics card or two by mining the scrypt coins, which you can exchange for bitcoin if you like on a market such as Cryptsy: https://www.cryptsy.com/ Your hashrate is the speed at which your hardware is mining, the faster the better. Here's a chart to see how fast you'll mine with SHA256 with your hardware: https://en.bitcoin.it/wiki/Mining_hardwa... And a hardware comparison chart for mining Scrypt: https://litecoin.info/Mining_hardware_co... Take the speed of your hardware for those two and put it into this comparison website to see how much your computer will earn you: http://www.coinwarz.com/cryptocurrency Your hashrate for SHA256 will be about 1000x that for Scrypt but you'll still earn more with scrypt mining. Pools: If you don't want to keep looking to see which is the best currency to mine at a particular time then you can mine at Multipool to mine the best from a range at that time, or Middlecoin which pays you in Bitcoin when they sell the coins everyone's mined. Alternatively you might want to choose a pool which just deals with the coin you've chosen to mine. To give you an idea how much you might earn, here's a link to the Coinwarz comparison page with the boxes filled out for my setup, which is an HD5870 running Reaper (miner software) and a GTX580 running Cudaminer: http://www.coinwarz.com/cryptocurrency/?... As you'll see, it's not a lot. Another alternative is to just buy some coins and speculate on the market with them like a Wall Street trader does, but that's obviously risky. If you decide to do that then only speculate with a tiny amount until you're sure of yourself, just keep the rest of what you have safe and don't touch it (buy and hold) One more thing, from experience I'd strongly suggest that if you decide to buy an ASIC machine then do not buy it from Butterfly Labs, you'll wait so long for it that it'll never pay for itself because the difficulty keeps rising, they mess people about, make excuses and refuse to refund anyone. For example they promised that their last lot of miners would be ready in about 2 months but made people wait for over a year and a half, even then a lot of their products just blew up when people plugged them in because they supplied cheap Chinese power supplies. That company probably has the world record number of angry customers. Other companies such as KnC Miner have much better reputations, not that I've dealt with them myself. Apparently all their last generation of ASICs were delivered on schedule or even ahead of it. Try googling 'butterfly labs scam' and you'll find plenty of things to back up what I say. Actually, here's a link to that search to save you the trouble: https://www.google.co.uk/search?q=butter...