[CS198.2x Week 6] People’s Pick: Cryptocurrency Mining

Throughout our offerings of both courses in
the Blockchain Fundamentals program, we’ve received many questions about mining bitcoin
in real life. This section aims to share our experience
doing so, and some do’s and don’ts for the curious. So here we have it: Real-life cryptocurrency
mining! Mining cryptocurrency at first may sound like
printing money, or money growing from digital trees, but there are some things that need
to be considered. First of all one ought to choose profitable
hardware; the older stuff won’t cut it. Out-of-date hardware will often consume more
electricity than would be profitable to mine with. Second, mining software differs depending
on the intent of the miner. Do they only want to mine one specific currency? Or is he or she willing to switch to whatever
is most profitable at a given time? Does the miner want to mine in a pool, or
solo? These are all software side decisions to be
making. Monitoring miners is another concern, especially
for those just starting out. Uptime, temperature, and profitability need
constant vigilance, especially with changing markets and changing seasons. If not careful, mining rigs can be fire hazards. Conversion between fiat and crypto is another
point to consider. Whereas power bills will be paid in fiat,
you will be earning your payouts in some cryptocurrencies, and sometimes this may be tricky to spend. Please do your due diligence before deciding
to both mine or invest in cryptocurrencies. Optimizing hardware costs==The goal of the average cryptocurrency miner
is similar to that of a traditional business man: to minimize time to break even, and maximize
return on investment. One of the ways to do this is to optimize
hardware costs on the assets that maximize rewards; for mining, this consists of GPUs,
PSUs, and fans or cooling. Graphics processing units, also referred to
as graphics cards were all the rage in cryptocurrency mining, especially prior to the release of
ASICs. They hash at a rate significantly faster than
CPUs and thus are essential components in a mining rig. Because hashing rate directly determines your
mining payout, one would want to spend the big bucks on the GPUs. PSUs, power supply units are equally important,
as they are needed to power the mining rig. Higher end PSUs are more efficient, and waste
less power. Whereas a bronze-rated PSU may waste up to
10% of power being provided to your rig, a platinum-rated PSU may lose only around 1%;
because this directly affects your profitability, you definitely do not want to pinch your purse
here. Fans and cooling are also a significant component
of your rig. Overheated components perform poorly, and
pose as risks as fire hazards. Hence, it’s crucial to keep your cards cool. The non-essentials of a mining rig are all
the components that are not keeping you safe, nor bringing in the money. CPUs are largely inferior to GPUs in terms
of hashing power for most algorithms, with the notable exception being CryptoNight. Thus most miners would prefer to purchase
a cheap CPU and use the savings to purchase an additional GPU instead. Memory is also a non-essential, generally
lower end RAM will suffice; just make sure it is compatible with your other hardware. Disk falls into a similarly unimportant role,
with less than 50GB of hard disk being more than plenty for SPV or pool mining. This should cost $30 or less. Other external components and even a computer
case are unnecessary for a mining rig as well. It doesn’t need to look pretty, it just
needs to get you paid. Now onto software====
In terms of software for mining, some common options are Nicehash and MultiPoolMiner. Nicehash is the most beginner friendly, sporting
a clean graphical user interface, automatic switching to most profitable mining algorithm,
and conversion to dollar amounts for easy understanding of your payouts. They do, however, charge larger fees– taking
a larger percentage of your miner payouts as commission. MultiPoolMiner is a less beginner friendly
tool, which also allows automatic switching to most profitable cryptocurrencies and their
corresponding algorithms. They take less of a cut compared to Nicehash,
but are a little less friendly to operate. Solo mining as a full node for a specific
currency is also an option. We would not recommend for anyone new to the
game. Return on Investment==
As we alluded to earlier, break even time is generally a good metric to measuring successful
cryptocurrency mining. Ideally, every business endeavor wants to
minimize the time until break-even, and maximize the profit multiplier of their investment. To do this in cryptocurrency mining, the two
main factors are cost of electricity, and cost of hardware. Depending on one’s location, the cost of
a kilowatt-hour ranges drastically, a huge point of consideration for everyone thinking
about mining. As an example: California’s cost per kilowatt-hour
is more than double that of Louisiana. The formulas for time to break even, and return
on investment are provided below. That does it for our intro to building a cryptocurrency
miner. This is by far the most frequently asked question. Please feel free to continue engaging in the
discussion board; if we find another frequently asked question, we’ll make another FAQ video
to answer it.

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