Bitcoins are earned by solving increasingly complex algorithms, a process known as “mining.” Once relatively simple to solve on basic PCs, several years into the mining process, those algorithms have become so complicated that most regular computers are impractical for processing them. That has led to the development of equipment designed specifically to “mine” for bitcoins.
Bitcoin mining is essentially a race to see who can solve the current transaction blocks first and earn a bitcoin. The speed at which a machine can process the blocks is called a “hash rate”, and unless your system is faster than the competition, you will find yourself at the back of the pack. There are three basic types of mining hardware, each more complex and expensive than the next. Here are your options:
CPU/GPU Bitcoin Mining
This uses your own computer, but with a kick. Your standard CPU is too slow to compete at today’s hash rates, but by adding extra processing power to your graphics card(s), you can get back in the race. Graphics cards have graphical processing units (GPUs) designed to calculate the complex shapes needed in high-end video games. This makes them particularly good at the mathematics necessary to solve transaction blocks. If you use them, consider upgrading to a motherboard that can take multiple boards to save on running separate PSUs for different boards.
One benefit to GPUs is that they can be used with cryptocurrencies other than bitcoin. Litecoin, for example, uses a different proof of work algorithm to bitcoin, called Scrypt. Scrypt has been optimized to be friendly to CPUs and GPUs, making them a good option for GPU miners who want to switch between different currencies.
FPGA Bitcoin Mining
Field Programmable Gate Arrays are integrated circuits designed to be configured after being built. They can be customized by a hardware manufacturer for bitcoin mining before putting them into their equipment. They offer performance improvements over CPUs and GPUs with some single-chip FPGAs operating as fast as 750 Megahashes/sec. You can get even more horsepower from miners with multiple chips. But they also cost more.
ASIC Bitcoin Miners
A step up from reprogrammed FPGA chips are Application Specific Integrated Circuits (ASICs). They’re specifically designed to mine bitcoins at WARP-speed with relatively low power consumption. Because these chips are custom-designed and manufactured, they’re expensive and availability can be spotty. But units are advertised with speeds anywhere from 5-500 Gigahashes/sec, and some vendors are promising future speeds into the 2 Terahashes/sec range.
Like any capital investment, you need to take a hard look and the profitability of any mining hardware before you take the plunge. You can get a good look at the hardware and vendors out there in this article from CoinDesk. CoinDesk also has a guide for calculating mining profitability that might come in handy.