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Getting Started With Bitcoins And Bitcoin Mining – A Walkthrough For Beginners (April 2013)

Bitcoin Logo You are new to Bitcoins and wonder if it’s a good investment or if Bitcoin mining is still profitable? Then read this quick guide that will answer a few beginner questions

This article was originally published in April 2013 and maybe a little dated but the general ideas still pertain

Contents Of This Article

Bitcoins: Is It A Bubble Or The Real Deal?

So, you are new to the world of Bitcoins? Then you and me are in the same boat. I first heard about Bitcoins back in 2009 when I first started this site, but never thought it would really take off and become a serious online currency. I couldn’t have been more wrong! Again, if you don’t share a vision, it doesn’t mean it won’t happen if someone is convinced of the idea and can inspire others to take action. I am not overreaching here if I say that Bitcoin is the gold rush of the geeks.

Let’s take a quick look at the worth of a single Bitcoin back in April 2012 and then later in April 2013:

Bitcoin Currency Worth In Us Dollars April 2012 April 2013.Jpg

Yes, that’s right the value of the digital currency is exploding and ten-folded in one year! More and more people see Bitcoins as a safe haven for their money, but many ignore the fact that this is a highly volatile, very experimental currency that will see lots of ups and downs. Be VERY cautious!

What Software Do You Need For Bitcoin Transactions

First you will need the “wallet” software that will give you your own Bitcoin address – make sure to back it up and encrypt it or hackers can easily steal your virtual money.

Bitcoin Wallet Software.png

Click on “Receive coins” and you will see your Bitcoin address – you can also add new addresses. It makes sense to give people different addresses so you can identify them, because else Bitcoin is a 100% anonymous transcaction system: No names, no fingerprints, one of the biggest strength and weakness of the system.

I Heard About Bitcoin Mining – What Is It?

You can mine so called Bitcoin blocks, in simple words you let your computer solve some algorithms that get more difficult over time and as a reward you can earn Bitcoins (it gets a little more technical than that, but I want to keep this short).

  • Warning: Before you start investing time and money into Bitcoin mining, here’s a warning: During the goldrush the people who sold equipment made the most money.

There are many companies who professionally mine Bitcoins. When Bitcoins where new, mining Bitcoins was possible with a CPU, but now you need a strong GPU or preferably multiple GPU’s (graphic cards) to mine them. The value of Bitcoins increased dramatically, making this a very lucrative business for some people. However, you need to spend thousands of dollars on mining rigs first or you won’t get anywhere.

Butterflylabs and other companies sell highly specialized rigs, so called ASICS, that can be used to mine very efficiently, but those rigs cost from $1000 to $30,000.

We’ve previously took a good look at building a cheap supercomputer . One of the things you probably could do with it is Bitcoin mining, but keep in mind that GPU’s are better for mining than CPU’s

I want to join the Bitcoin Mining craze – is there a profit calculator?

As you can imagine, you have to pay for electricity and the rig, so breaking even is difficult without proper calculations.

Bitcoin Mining Profitability Calculator.png

Here is a good calculator: http://bitclockers.com/miningcalculator

Bitcoin FAQ: Are Bitcoins A Smart Investment? Warren Buffet Would Probably Disagree

I successfully predicated a correction in the value of Bitcoin back in 2013. Now it’s the end of 2014 and I believe we’re in for a correction yet again. It’s possible that a corrections to the upside is coming because the mining profitably drops so much. However, I believe due to a strong bull stock market we won’t see this rally until mid 2015, late 2015.

Looming correction? As with every market out there, markets tend to exaggerate. Right now the stock market is reaching new highs and if historic performance is any clue, then it’s possible that DOW, DAX, Nikkei and Co will rise for some time, thanks to inflationary, growing bull markets. However, at one point there will be a correction. Same goes for Bitcoins.

High volatility: The Bitcoin currency is highly volatile and only people who have vast experience with it should consider betting on it. As of right now, if you are new to Bitcoins it’s a bit like playing the lottery, so expect to lose any money you put into your digital wallet.

Warren Buffet for example always stays away from trends and “hot tech” companies like LinkedIn, Groupon or even solid players like Google. One might argue that Buffet is of old age and doesn’t understand the concept of most internet companies and that is exactly the point. Don’t invest into something you don’t fully understand.

Consider this: If you put 10,000 hours into something you can call yourself an expert and only then you might want to heavily invest into something.

Important Bitcoin Sites

Disclosure: We do not own any Bitcoins and we do not recommend to invest into Bitcoins

Common Questions

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Published: Monday, November 3rd, 2014 Last Modified: November 3, 2014

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