Intro
I’ve been a member of the bitcoin community since a couple of years, and every couple of weeks a “newbie” comes along who thinks he can turn his PC into a magic money printing machine.
From time to time, this “newbie” already realises he has to buy an ASIC to “make money”, but it’s very rare to find a newbie that actually realises it’s pretty hard to make a living running a bitcoin mine.
This article is written as a future reference to show new users the pitfalls and dangers of bitcoin mining, so they can at least figure out if they could potentially have a shot at mining.
Do realise that this article is written on the 16th of may 2017. Everything told in this article is true at this point in time, but the total network hashrate fluctuates, because of this, the difficulty gets adjusted every ~2 weeks (actually, it’s every 2016 blocks, but this should average out to ~2 weeks). Because the difficulty changes, and the fluctuating price, this article might be obsolete in a couple of weeks/months, but i truely believe that the basic concepts will stay exactly the same.
I’m not going to get into detail why mining is important for the bitcoin network, i’m not even going to explain what mining exactly does… Do realise that mining is important, and even if you cannot make a profit while mining, buying an old ASIC and mining at a loss might be a great way to learn about the bitcoin protocol AND help to decentralise the network… Just don’t expect a positive profit at the end of the day š
In detail
There are 3 different questions that pop up regularly (in many variations):
- How to CPU mine
- How to mine using a GPU
- How to mine with an ASIC
1 – How to cpu mine
Short answer: Don’t!!!
Why? A Xeon E5-2690 (dual) hashes at 66 Mh/s [1] (Megahash per second) while consuming 270 Watt. The fastest process in the current benchmarks is theĀ Xeon Phi 5100 which hashes at 140 Mh/s[1] (unknown power consumption). Altough this processor is already a couple years old, i highly doubt your desktop processor will perform better than this 60 core beast[2].
As a matter of fact, an i7 hashes atĀ 23.9 Mh/s [1] (unknown power consumption).
When we use a mining calculator, not accounting for any power costs, nor for a pool fee, the Xeon Phi 5100 will mineĀ 0.00002295 BTC/year at current difficulty level[3]…Ā So, if you don’t have to pay for your power, don’t have to pay for a server equipped with a Xeon Phi 5100, mine on a 0% fee pool 24/7 for a full year, you’ll make a whopping 4 cents (at current difficulty and BTC price).
If you mine with your i7, and you DO have to pay for hardware and power, you can clearly understand that your profit will be negative…
I actually did the math: an optimal setup with an i7, paying 1 cent/Kwu on a 0.5% fee pool, not paying for hardware and not accounting for the power consumed by the rest of your hardware, CPU mining will give you a negative profit of $11/year[4]. In reality, you’ll have to pay for your hardware, you’ll pay more than 1 cent/Kwu, you won’t find a 0.5% pool,… So you’ll lose even more money each second your CPU mine.
2 – How to miner using a GPU
Same answer as how to CPU mine: Don’t
Your losses won’t be as dramatic as mining on a CPU, however, at current difficulty, it’s not really possible to make a net profit.
The “best” single GPU seems to be the AMD ATIĀ 6990[1]. It is benchmarked atĀ 865 Mh/s while consuming 860 Watt.
If you don’t take any power costs or hardware costs into account, mining on a 0% fee pool at current diff and btc price, such a setup can potentially net you a whoppingĀ 0.00014178 BTC/year… That’s right, a whopping 25 cents…[5].
Offcourse, as soon as you need to pay for hardware, or power, or if you need to pay a fee, this “profit” turns negative in the blink of an eye…
3 –Ā How to mine with an ASIC
Asic mining is the only real option you currently have if you want to mine profitably.
In order to know if a certain ASIC can be mined profitably at this point in time, you need to find an asic you’d like to buy… Look up it’s specs onĀ https://en.bitcoin.it/wiki/List_of_Bitcoin_mining_ASICs
Once you have the hashrate and power consumption notted down, visit a mining calculator likeĀ http://www.coinwarz.com/calculators/bitcoin-mining-calculator/ and enter those details, as well as the price you’ll have to pay for your hardware, the power price you’ll have to pay and at least 1% pool fee. The calculator will then tell you How long it’ll take you to break even at current difficulty and bitcoin price.
Don’t let this number fool you… The difficulty is constantly rising, the price fluctuates, and it’s very well possible you won’t be able to run 24/7 without any downtime… Personally, i wouldn’t start mining if i wouldn’t break even in 4-5 months (offcourse, if you’re a risktaker, you can be happy with a much longer break even point).
Some extra info about the ASIC’s price… Don’t be fooled, the price is much higher than the amount of money you’ll pay the ASIC’s seller… The total price is the sum of:
- The purchase cost (the price you’ll pay your seller)
- The extra hidden cost when buying something (paypal fee, visa fee, bitcoin’s miner fee,…)
- The shipping and handling
- The insurance
- The customs charge (don’t forget about this one!!!)
- extra cabling (ASIC’s draw a lot of electricity, you might need to check your wiring and circuit breakersĀ out with a certified electrician)
- networking (your ASIC will need to be able to connect to an online pool)
- maybe a controller (for example, most avalon miners need a seperate controller, you might also need your own node if you want to solo mine)
- shelving
- cooling (1Kw of mining equipment will produce 1Kw of heat… You need to keep your mining room cool… Either natural cooling, or by installing power hungry A/C equipment)
Last but not least, you need to realise the biggest manufacturer of ASIC machines, bitmain (makes the antminer product line) has a horrible record of customer service.
A lot of bitcoin-related fora are filled with horror stories of people receiving refurbished or already-used ASIC’s when buying new equipment. There are stories of DOA’s that don’t get replaced, there is a standard 3 month guarantee,…
It’s a chinese company, and it seems they have a different warrantee standards as the ones most European and American residents are used to…
Conclusion
Mining is fun, it teaches you about the bitcoin protocol, it’s a great hobby, it helps to decentralise the network… BUT, it can only be done using an ASIC.
Even worse, if you want to make money with mining, you need to buy a latest gen ASIC AND have a super cheap electricity rate… Do all your calculations before even thinking about mining, it will save you from a big hangover afterwards!
References:
[1]Ā https://en.bitcoin.it/wiki/Non-specialized_hardware_comparison
[2]http://ark.intel.com/products/71992/Intel-Xeon-Phi-Coprocessor-5110P-8GB-1_053-GHz-60-core
[3]http://www.coinwarz.com/calculators/bitcoin-mining-calculator/?h=0.14&p=0&pc=0&pf=0.00&d=559970892890.83800000&r=12.50000000&er=1780.43200000&hc=0.00
[4]http://www.coinwarz.com/calculators/bitcoin-mining-calculator/?h=0.02&p=130&pc=0.01&pf=0.5&d=559970892890.83800000&r=12.50000000&er=1780.43200000&hc=0.00
[5]http://www.coinwarz.com/calculators/bitcoin-mining-calculator/?h=0.865&p=860&pc=0.00&pf=0&d=559970892890.83800000&r=12.50000000&er=1780.43200000&hc=0.00
