Beginners Guide to Bitcoin and Bitcoin Mining - Revision 2.pdf

Beginners Guide to Bitcoins and Bitcoin Mining A Hackforums guide by Doctor Blue

Contents Contents ............................................................................................................................................................ 1 Introduction ....................................................................................................................................................... 2 History ............................................................................................................................................................... 2 Bitcoins .............................................................................................................................................................. 2 What is a bitcoin? .......................................................................................................................................... 2 Get started with bitcoin trading ........................................................................................................................ 3 Getting a bitcoin wallet ................................................................................................................................. 3 Encrypting your wallet................................................................................................................................... 4 Find your bitcoin address (Receiving coins) .................................................................................................. 4 Sending coins ................................................................................................................................................. 4 Moving your wallet ........................................................................................................................................ 5 Exchanging money for bitcoins...................................................................................................................... 5 Bitcoin mining .................................................................................................................................................... 5 Explained in this chapter ............................................................................................................................... 5 What happens when I mine bitcoins? ........................................................................................................... 6 Why should I care? ........................................................................................................................................ 7 Which pool should I choose?......................................................................................................................... 7 Right, so how much will I earn on this? ......................................................................................................... 7 Thinking with slaves (No, not portals this time) ................................................................................................ 8 Explained in this chapter ............................................................................................................................... 8 What are these miners I see everywhere on HF? ......................................................................................... 8 What should I look for when finding a miner? .............................................................................................. 8 How much do I earn? .................................................................................................................................... 9 Requested miscellanea ...................................................................................................................................... 9 Which miner should I use? ............................................................................................................................ 9 Copyright ........................................................................................................................................................... 9

Introduction I have a hunch, that if I don't make a thread about bitcoin mining soon, I will die from typing in the same thing over and over and over. This is why I have decided to describe to you, the very basics of bitcoin mining! I am not going to cover the concepts of mining on your own computer. It is rather pointless unless you use specialized hardware (FPGAs are a must nowadays due to low power consumption). I will however tell you how you can mine using the GPU and CPU of the slaves in your botnet to turn an easy profit.

Bitcoins History The Bitcoin currency was initially created by an anonymous person or group (Not known) under the pseudonym “Satoshi Nakamoto”. The New Yorker and Fast Company have been investigating the real identity of Satoshi. A connection had been found between the domain bitcoin.org and a patent described somewhat similar to the paper published on The Cryptography Mailing List at metzdowd.com which described the first bitcoin protocol. The patent (#20100042841) describing the cryptography behind the bitcoin network had been filed by Neal King, Vladimir Oksman and Charles Bry on August 15, 2008. All of the three denied the identity.

What is a bitcoin? First off you need to know what the bitcoin is. The bitcoin is a digital currency (Currently priced at 42 USD for 1 BTC) which you can use in an encrypted peer-to-peer network. This has some general advantages and disadvantages

Advantages   

There is no company that controls the payments or transfer logs Your data is encrypted and can ONLY be read by you Your data is verified by thousands of computers before being processed

Disadvantages   

Payments take long to verify (6-24 hours usually) Data can be tampered (But the nature of bitcoins prevent this, more on that under bitcoin mining) Your wallet file can be stolen by virii. Use offline wallets to prevent it, such as Armory (Explained later)

You may have noticed things like "Donation wallet: 1CTgYxMTY5j6SLytKeMsBWA322c6yNfcAe" in some peoples signatures. These are their bitcoin wallets. You can simply pay bitcoins to these addresses without ever disclosing anything else than your own bitcoin address. A final noteworthy thing about bitcoin is, that absolutely no data is stored about you. Once you start the bitcoin wallet, you will be given an address on which you can receive and send bitcoins (If you have some of course). This makes it ideal for high-privacy payments on Hackforums. Additionally, since no one is controlling the transfers of bitcoins, you don't have to fear chargebacks from the buyer’s side. Does this sound like something for you? Then let me show you how to...

Get started with bitcoin trading Getting a bitcoin wallet First off, you would need to download the bitcoin application. It is compatible with most popular systems, including Ubuntu, Mac OS X and Windows. Now, I mention Ubuntu and not Linux because they only provide binaries for Ubuntu. You can still compile from source code if you are running any other Linux-based distribution. This is Bitcoin-qt which was the original wallet application. Since then, even more different applications have been developed, including one for smartphones. Find your favorite application here Please note, that I will be using Bitcoin-qt for Windows in my examples. I will try to help you as much as I can with the other clients, but I have no experience with them. (Send me a PM) Now, let’s fire up the bitcoin wallet. You will be greeted by something like this:

One of the first things you may notice, is that the wallet says "Synchronizing with network". In order to use the wallet, you need it to be fully synchronized. Please note that this can take a very long time, I left it running overnight, and I suppose it took around 16 hours or so for me.

The graphical interface is quite simple, really. On the left, you can see how many bitcoins you have on your account (All addresses joined together) both confirmed and unconfirmed. Like I mentioned earlier, your transactions have to be confirmed by a bitcoin miner. On the right you will find your 3 most recent transactions. I can show you an example from my mining wallet (This wallet is Danish).

Encrypting your wallet One of the first things you should do, is to encrypt your newlystarted wallet. To do this, head into Settings -> Encrypt wallet. Enter a passphrase, as long as possible, and one you can remember. The longer the passphrase, the better the encryption. You only need this password when opening the wallet on another computer, so you might want to save the password somewhere such as LastPass or KeePass.

Find your bitcoin address (Receiving coins) Now, all you need to do is to fetch your bitcoin address, and begin taking payments. This is extremely simple as well. First off, click the "Recieve coins" tab, then right click the address and click edit. Now you can assign a label (i.e. a name) for the addess so you know what you use each address for.

It may seem pointless to give a name to a single address, but you can have multiple addresses that you can give out. Why would you do this again? Well for instance you can have an address for mining, and an address for payments on HF. This way you can easily see whether the payment is from a miner or a customer. Additionally, if people were to google one of your addresses, they will not see that you also have addresses for Hackforums and for mining, only the one you use for their kind of payments.

Sending coins When you buy something, you would of course need to send them some coins. To do so, you must head to the "Send coins" tab, and enter the destination address and amount. You can also enter a label/name to save the address for later payments. Once you’re done, just hit send, and that's it!

Moving your wallet At some point in time, you might end up having to move your wallet. This could be because you are reinstalling your operating system or getting a new computer. 1. 2. 3. 4. 5. 6. 7.

Using bitcoin-qt, this is fairly simple to do. Close the wallet application Go to %APPDATA%\Bitcoin\ and copy wallet.dat on the old computer Put it in the same folder on the new computer Right click the bitcoin shortcut in the start menu and click properties In the field named "Target", add -rescan to the end of the line Start bitcoin from the shortcut you just edited

Remember to remove -rescan from the shortcut after doing this. Now your wallet has been moved!

Exchanging money for bitcoins You may not be taking payments for anything at all, which in turn means that your wallet is empty. Don't worry, you can buy bitcoins using Paypal, Liberty Reserve and bank transfer. Head to MtGox, and begin trading bitcoins for dollars or pounds or whatever currency you want. https://mtgox.com/ There are other sites which you are free to use. Just go ahead, but I never used these services, so don't ask me about them.

Bitcoin mining Explained in this chapter Finally! The chapter you were looking for... No, I don't think it is. Now I am going answer the following questions: 

What happens when I mine bitcoins?

  

Is it profitable? How much do I earn? Why should I care?

What happens when I mine bitcoins? Like I told you from the very beginning, mining bitcoins is a way of verifying payments.

First is public key cryptography. Each coin is associated with its current owner's public ECDSA key. When you send some bitcoins to someone, you create a message (transaction), attaching the new owner's public key to this amount of coins, and sign it with your private key. When this transaction is broadcast to the bitcoin network, this lets everyone know that the new owner of these coins is the owner of the new key. Your signature on the message verifies for everyone that the message is authentic. The complete history of transactions is kept by everyone, so anyone can verify who is the current owner of any particular group of coins. This complete record of transactions is kept in the block chain, which is a sequence of records called blocks. All computers in the network have a copy of the block chain, which they keep updated by passing along new blocks to each other. Each block contains a group of transactions that have been sent since the previous block. In order to preserve the integrity of the block chain, each block in the chain confirms the integrity of the previous one, all the way back to the first one, the genesis block. Record insertion is costly because each block must meet certain requirements that make it difficult to generate a valid block. This way, no party can overwrite previous records by just forking the chain. Both the chaining, and the difficulty, are achieved via the SHA256 cryptographic hash function. The hash function essentially takes a block of data, and transforms it, in an effectively-impossible to reverse or to predict way, into a large integer. Making the slightest change to a block of data changes its hash unpredictably, so nobody can create a different block of data that gives exactly the same hash. Therefore, by being given a short hash, you can confirm that it matches only a particular long block of data. This way, Bitcoin blocks don't have to contain serial numbers, as blocks can be identified by their hash, which serves the dual purpose of identification as well as integrity verification. The difficulty factor is achieved by requiring that this integer is below a certain threshold - the data in the block is perturbed by a nonce value, until the data in the block hashes to produce an integer below the threshold - which takes a lot of processing power. This low hash value for the block serves as an easily-verifiable proof of work - every node on the network can instantly verify that the block meets the required criteria.

With this framework, we are able to achieve the essential functions of the Bitcoin system. We have verifiable ownership of bitcoins, and a distributed database of all transactions, which prevents double spending.[/quote]

This might not make a lot of sense to you (And I don't know how to explain it in plain English), but simply put, the bitcoin miners do calculations necessary to solve the blocks. Once enough miners have solved the block (120), all the transactions within the block will be verified.

Solving blocks is normally done using the graphical processing unit (GPU), since they are a lot faster for repetitive tasks than the central processing unit (CPU). No reason to reinvent the wheel, read the article on bitcoin.in: Why a GPU mines faster than a CPU Later on FPGA mining will probably get cheaper (And they are definitely faster than GPUs at extremely low power usage (500 MH/s at around 17 watts, my GPU runs 650 MH/s at approx. 350 watts)

Why should I care? Since these blocks are extremely difficult to solve, it requires a lot of computers to verify these payments. These computers are the miners. The miners are awarded 50 bitcoins for each block solved (25 from December 2012) by the other peers on the network. Hey, here's your opportunity to get rich!

Which pool should I choose? Right now you may be thinking something like "What the fuck dude? You never said anything about pools?" Well, pools are simply groups in which you can mine for bitcoins together and then share them between all the members of the group. This way you will be paid a lot more often than you would if you mine alone. Check with the miner which pools are supported, and then find one that suits you from the list of pools on bitcoin.in: Comparison of bitcoin pools Click a pool to see the instructions on how to use it.

Right, so how much will I earn on this? Don't be shocked, but somewhere under $1 per day if you mine using your own computer. It really depends on your hardware. If you are the NVIDIA kind of guy, forget about mining on your own rig. Not because I’m trying to tell you AMD is so much better, because I’m no fan boy of neither corporation. Based on rough evidence AMD’s Radeon HD series is better by far, simply because it has more ALUs than NVIDIA cards do. This is not because NVIDIA is retarded, but because their ALUs are more advanced, commonly known as CUDA cores. They fit fewer ALUs on the card because they are physically bigger, and it would be impossible to squeeze the same amount of them onto such a small die. If you don’t think you’ll earn anything, don't quit just yet though, because now we're going to talk about the best idea ever...

Thinking with slaves (No, not portals this time) Explained in this chapter This is the chapter most of you have been looking for! Finally the word "slave" is appropriate for your bots. They will do all the work for you and they don't have a choice. In this chapter, I will answer the following questions:    

What are these miners I see on HF? What should I look for in a miner? How do I do this? How much will I earn?

What are these miners I see everywhere on HF? Well my dear friend, you should have guessed that by now. These miners are stealth binaries, which you can download and execute on your slaves. All you need to do, is to build a miner using the builder tool (or send it to the seller depending on whether he is selling builder or bins) where you type in which pool to mine in, and where the bitcoins should be sent. If you have a lot of bots (5000+) you may even want to start your own pool, to make sure you don't get banned from it. You won't earn much if your botnet is small because you need to compete with the other pools.

What should I look for when finding a miner? There are different qualities about a miner which you should pay attention to: Is GPU mining supported? Using the GPU of your slaves, the hash rate of your botnet will be drastically increased. Don't enable GPU mining unless you can limit the GPU utilization (People usually notice your miner if their GPU is running hot 24/7) Can I limit CPU/GPU utilization? Like I mentioned before, it is important that you don't use 100% of the CPU or GPU, since your slaves will notice. Which pools are supported? Some mining pools require you to run a sub-pool on your own computer, such as P2Pool does. Some pools also have an abstract way of dealing with the bitcoins. Make sure your favorite pool is supported.

Is it a builder or a bin? Since you may eventually get banned from a pool, you will have to build a new miner bin for the new pool information. This is a good idea to take into consideration when buying a miner for botnets mining in public pools. Is it a downloader? Some of the programs claiming to be miners are actually just downloaders that enable you to install a miner on the computer, please be aware of that.

Can I crypt it/is it FUD? Miners running in the background are usually seen as virii, so it has to be undetected. Make sure it is supported by your crypter.

How much do I earn? You can't say for sure. The miner will be running on a variety of computers, and in the end it depends on the CPU and GPU in your slaves along with the amount of slaves running and how much of the day they are online. I've seen people with 1000 bots claiming to earn around $60/week, however I think that is an over exaggeration (Because they say they run at 1500 MH/s combined, and my PC alone is running 650 earning $5/week). I like to say 100 MH/s ~= $1 per week. With a huge botnet you will earn loads of cash, don't you worry.

Requested miscellanea Which miner should I use? The short answer is I don't know. I explained to you earlier which qualities and issues you should keep an eye on when buying a miner, and I stand by them. Thank my limited experience for that. I don't mine with a botnet, I haven't been any further than considering it. I have tried one single miner on one single computer, and that miner is not even for sale anymore. Instead I will compile a list of the bitcoin miners I know of. Tell me if you found one I haven't listed, whether it's good or bad. I don't want any suggestions for regular miners. There's lots and lots again of those, and most of them suck. The most popular are CGMiner and BFGMiner by far. UFASoft is open source and a nice one to browse through if you're the reverse engineering kind of person.

Regular mining clients (For personal mining)    

CGMiner BFGMiner DiabloMiner UFASoft

Stealth mining clients (For botnet mining) 

Chrome Miner

Copyright This work has been licensed under the Creative Commons 3.0 BY-NC-ND license. Basically this means you can copy the work, but you may not modify it or use it commercially. Any license restrictions can be waived by asking the original author (Doctor Blue).