At this point in history, a lot of people already know the basics of cryptocurrencies: bitcoin, Ethereum, existence of other coins, the importance of the blockchain, but generally it does not go much further than that.
Again, what is mining?
Many also heard about the concept of “mining”. Mining is the term used for the process of auditing the transactions that were reported on a cryptocurrency network. If the majority of “auditors” agree that since the last audit (each audit happens rather frequently – from seconds to every 10 minutes), a certain person A transferred X amount of a cryptocurrency to person B, then that transaction gets registered in the blockchain and becomes a reality forever.
But how does one become a “miner” or an auditor? All it takes is to download the necessary software into a computer that will do the job and the system (or “mining rig”, as it is called) will do it by itself. So, no, you do not get to sit through thousands of accounting entries to check if they are good or bad. The software does that without much of your interference or knowledge of what is going on.
The software is the same used by thousands of other miners and the idea is that a largely scattered group of auditors will end up creating a trusted network of verification that will make it difficult or too costly for an individual to try to defraud the blockchain.
Some people are familiar with the SETI program that went on for years. This was a NASA sponsored program that at a certain point suggested that everyone that had a computer with internet connection could donate their computer’s idle time / performance to the purpose of analyzing data – from a distance – towards the goal of finding extraterrestrial activity. Many people made their resources available just for the fun of it, or because they found it a noble cause.
This was somewhat the way cryptocurrency mining started. At the time, a few people around the world started dedicating their processing idle time to crypto mining activities – bitcoin, ether, etc., especially since there is a reward attached to it – in the beginning, the reward’s value was not significant, but over time, with the appreciation of the value of tokens like bitcoin or ether, it became a profitable activity. Miners get a reward when they successfully mine a block.
In any case, because the likelihood if getting the reward is directly related to each computer’s performance, mining became a serious business in the last few years, and is currently highly competitive. As competitiveness rises, margins are reduced and all attention goes to cost – cost of electricity devoted to mining (a big component), cost of equipment, maintenance, etc.
And… why is it worth getting into it?
Well, for me, just for the educational aspect. As a hobby, it might be interesting. From a business point of view, nowadays, it is probably not worth it.
In addition to the risks that are faced by every business, the crypto mining business is also specifically affected by:
(i) the number of participants in the industry – there is no barrier to enter and every entrant shares in the limited amount of reward, leading to a tragedy of the commons problem;
(ii) new technologies coming into play – because mining depends on very specific equipment, every threat of a new equipment getting into the market shakes the world of miners, who are usually heavily invested in their current equipment and depending on current outcomes to achieve their expected returns;
(iii) fluctuations in cryptocurrencies, directly impacting the rewards because equipment, energy and still everything else is priced in fiat currency (US dollar, Euro, etc), while the rewards from mining activities are provided in units of the cryptocurrency itself. Therefore, a sudden drop in the cryptocurrency prices (as we are experiencing in these last weeks) makes a huge dent on the business plan of a cryptocurrency mining business;
(iv) regulation; in a still very much unregulated area like the world of cryptocurrency, impending regulation keeps miners awake at night.
In any case, without minding if the venture will be profitable or not, after arming myself with the courage to buy 15 different items from Amazon, I was set for an adventure into a completely new realm of unknown features.
As much as I have a passion for technology, I have no IT or tech professional background. The process of building a mining rig actually involves building a computer, that is, buying a motherboard, a CPU, connections, fans, graphic cards (or GPUs), power supply, RAM memory card, etc. There are tons of videos on youtube related to how to build it. I spent quite some time in this learning process.
Just like with a cake recipe, one may have to adapt with what is available – in the absence of white sugar, can I use brown sugar? Or honey? Can I use wheat flour instead or regular flour? How will these small things affect the final outcome? Adapting with computer parts may be more troubling and risky.
I had to adapt a little bit, as the items in the shopping list I got from the youtube lessons were not always available. It worked for the most part, but I had to later replace one item or two, and return another that ended up being unnecessary.
This first mining rig took me a couple of days to build. I am sure that a second (if I ever get to it) would be much easier since I am now more comfortable with the sequence of events, connections, etc., but building it is just the first step.
When it is finally ready to be powered, I found out that the software part was even more complicated than the hardware. Even the “easy” solutions are in fact not so easy if you are not an IT expert.
What I found to be doable was to use simplemining.net. I am not sure it is the easiest but since it is widely adopted, there are plenty of videos and reports on how to use the site and how to deal with the different options.
And specifically, the wide variety of options are horrible to deal with. If you do not know what they mean, how can you choose? Should I overclock the memory, or the core, or… what does that mean anyway?
So, I had a lot of trial and error until I got it right. And by the end of the second day, I finally saw a message on the screen indicating that the rig was, after all, mining!
My goal is only educational. I set this rig in order to actually experience this learning curve to become more comfortable with the concepts I still did not understand. I’m getting there. It will still be a while until I fully comprehend the whole process.
If you would like a little more information on the subject, check Mining the Future of Money: Building a GPU Mining Rig by Oscar Lafarga published at CoinCentral.com,