Mining bitcoins alone is not the best idea that you could have. First, the time needed to gather 25 Bitcoins to claim your block is long even for the most performing computers, and second, you have chances for your block not to be validated.
Sometimes, when two blocks are finished at the same time, one of the blocks is validated over the other, and even if there are only small chances for your block to be the unlucky one, those chances exist. It happened only 100 times from the first 210 000 blocks created, but your despair would be bigger if you understand how unlucky you are. This is why pooled mining is the only way.
How to find a good pool
You will have to start on the specialized bitcoin forums, as there; you will find interested people that talk about the best mining methods. For example, you might find some pools formed with computers from your own country. Practically, the theory is simple: as many computers, as better, but when you have somebody to talk with, persons that can give you advices about the best mining techniques, and about the best hardware needed your work would be eased.
A “miner” is actually a computer, which can be a personal one, or a server, or even a hardware configuration designed for this job. When the miner is connected to the bitcoin network, though special programs, it starts to validate transactions, using some of the resources of the computer.
Pooled mining can be approached from many perspectives. With each block the difficulty of mining grows, which means that more computers should be put to work. The reward is split amongst the miners. This way, you will minimize the risks, reducing the time needed to mine a bitcoin. The worker has to prove the work done, and this is made by the specialized mining programs.
Pool Mining strategies
The Slush Approach – this method is based on scores, and the oldest workers on a block are rewarded more. This discourages users to switch from one pool to another.
The Pay Per Share Method – in this type of mining, a flat sum is offered for each part of the block that is completed. The sum is offered by the existing balance of the respective pool. The miner can withdraw the money instantly once a block is confirmed. This way, the risks are of the pool operator, and the possibility of miners switching is eliminated completely. This is a great method for new miners with less performing computers.
Luke Jr Method – this method is somewhat combined from the first two. Luke requests proofs of work from each miner, and the payout is made instantly after the generation of the block. This method has a unique characteristic, meaning that the lost money from a block that is not validated would be transferred to the next block. The miners are only paid if they reach 1BTC, so they are spared of commissions. If the miner is not active for a week, the pool will send the remaining balance, no matter what its size is.
Comparison between mining methods
Cooperative mining methods such as slush and Luke Jr use many resources of the pool’s server, as the submitted shares must be checked all the time. The difficulty level of those server can be adjusted automatically, and this way, it is validated the number of shares that can be sent by participants.
Luke Jr miners receive their coins shares immediately, while the slush miners have to wait for validation. Moreover, Luke Jr distributes even the smallest division of a bitcoin created by any worker, meaning that you can have bitcents in your wallet.
When a miner participates to the bitcoin network, and it become aware of the new transaction made in the system, it has to legitimate the transaction, and then to add it in a list of transactions. This list is called a blockchain. As the coins that are already spend are registered in the list, it is impossible to use it the second time for another payment.
Many users of the network ask why the creating system was made so difficult. First, the bitcoin network has to grow in time, while people start to understand it and to use it. Second, it is essential for the number of bitcoins generated to be connected with the number of transactions made with the currency. This way, the necessary of currency will be almost equal with the needs of the market, creating the closest thing to the principle of ideal market, elaborated by Smith almost three hundred years ago.
Each block has its own identifying number, which can’t be foreseen or calculated. This way, it is impossible to anticipate this number, which is called hash, with the purpose of falsifying the block.
Even if transactions in the world of Bitcoin are spectacular, breaking any pattern of economy, the base of the network remain the workers, which have the power, especially if they are gathered in communities. We wonder what would happen to them once the mining is over, in 2033, when they will have no “work” but many bitcoins in their virtual wallets!