Bitcoin is in the news again, so I thought I’d revisit if investing in some Bitcoin mining boxes is worth it. I investigated this a few months ago and came to the conclusion that unless your electricity is free, it’s not worth the time. But the price of Bitcoins has increased significantly since then, so I’m looking into it again.
I don’t know much about Bitcoin or how it works as a currency and it’s impacts on the economy, or the political or social aspects of it. But to be fair, I don’t know how the conventional currency systems really work either. At the end of the day, the piece of yellow plastic in my wallet that says 50 on it is only worth $50 because a shop or person will take that and give me what they think is $50 of stuff or time. So this blog post isn’t really about Bitcoin, but rather, how I can make money off Bitcoin, because I don’t like working for the man. Plus, I kinda like the idea of a bunch of computers in my house, doing stuff. That’s always been cool to me!
If you don’t know what the fuck is up with Bitcoin, this is my interpretation of it. You run a program on your computer called a miner, this does all sorts of math and at the end of that math, you’re given a little credit (Bitcoins) in your Bitcoin wallet, which over time, the more math you do, the more credits you get. You can swap those credits for “real” money at an exchange, like Mt. Gox.
The faster you can make those little credits, the faster you can convert them into AUD and buy things like Big Macs or Nike shoes. Or, you can hold on to those Bitcoins, kinda like shares, and convert them to AUD when they’re worth more. For example, if I had 5 Bitcoins back in Jan 2013, they were worth about $75. Today however, they’re worth $400. Of course, it could have gone the other way, and those 5 BTC could be worth USD$1. Check out this chart to see the rapid increase in BTC-AUD price. I don’t know what happened in the past month or so, but damn, that’s a major increase in value since October/November, when I last looked into this.
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This could be a sign of a bubble, like what happens in “real” markets – where everyone gets really excited, but realises what they have isn’t worth shit and the value plummets. But all I know, is that right now, if I can earn one single Bitcoin, I can sell that Bitcoin for at least, AU$100, probably AU$120, and maybe even AU$140.
So how do you make lots of Bitcoins, really fast? You build mining rigs! Like these delightful ghetto setups:
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I’ve spent hours going through this thread on bitcointalk.org, gawking at the ingenious ways people set up dozens of barebones PCs stuffed with graphics cards to mine Bitcoin. If you’ve ever gone into Folding@Home a bit deep, it’s pretty much the same as that, but instead of goodwill curing cancer and Alzheimer’s, you’re trying to make money.
You can also buy dedicated Bitcoin mining computers, that use either FCPGA or ASIC chips to crunch numbers really fast. The processors are designed pretty much for Bitcoin only, so when Bitcoin processing gets more difficult, the ASIC and FCPGA devices will be rendered useless when it costs more to power them, than what you’d get back in Bitcoin mining. At least with the PCs, you can sell them off or use them for gaming, folding@home, etc. The ASIC & FCPGA devices look like this:
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That’s all it is. It’s a computer, just, the CPUs are uniquely designed to do Bitcoin calculations. A similar approach is taken for password cracking too. Someone might come up with a way to use these chips for something else, but probably not. So spending the money on one is pretty much an investment in Bitcoin mining, unlike a general PC.
There’s not actually many ASIC devices out there right now. They’ve been planned and pre-sold and pimped for almost a year, but you can’t buy one at the moment. There are a handful of people who have them, but all the companies claiming to have made an ASIC device are not shipping them. Plus there’s pre-order queues going for months. Avalon seems to be the only company selling ASIC based mining boxes right now. Apparently, some people think this pre-order process is just to fund the manufacture of these ASIC devices, that the manufacturer then mines with, then when they’re done, move on to the customers who pre-ordered. The idea of paying up front, for something that hasn’t been delivered is pretty shitty. They shouldn’t be charging people’s cards or taking money until the devices have actually shipped! Lotsssss of threads about this on Bitcoin forums. At the moment though, ASICs are still rare and GPU mining is the way to go.
Whatever platform you choose to mine on, hashes are what’s being computed, and the more hashes per second, the more Bitcoin you’re gonna get. To try and be profitable Bitcoin mining, you need to weigh up how many hashes per second you can get out of a device, versus the initial purchase price, together with the amount of electricity it consumes.
With that bit of background out of the way, I’ll post again in in the next few days with a cost analysis to see if I can make a living off mining bitcoin here in Australia, with our high electricity prices compared to the USA (USA has around 10c-15c/kWh, here in Melbourne, it’s around 25c-28ckWh). If you want to investigate this stuff yourself, this Bitcoin wiki is a great start, and hanging around the Bitcoin forum is worth it. That’s how I gleaned most of this info. Feel free to email me as well: aagius@icloud.com – I’m not much help, but I like to learn by answering other people’s questions. Check back soon for a follow up post with lots of numbers!
