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 Bitcoins
 So you want to do some mining to see how it works
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James R. Davis
Male Administrator
17396 Posts
[Mentor]


Houston, TX
USA

Honda

GoldWing 1500

Posted - 03/15/2015 :  2:04 PM Follow poster on Twitter  Join poster on Facebook as Friend                        Like
Despite my earlier comments that argued that bitcoin mining only makes sense for large well capitalized organizations, it is possible to earn modestly doing it on your own. But it's not simple, and the returns are quite modest - though they exists.

For example, I elected to do some mining myself. I bought an Antmining S3+ rig along with a PSU (Power supply). The rig is rated to produce 450Gh/s (Giga hashes per second) and consumes about 400 watts of power while running.

New, that rig cost a couple of thousand dollars. I bought mine on eBay for $120 and the PSU for an additional $60 for a total cost of $180. Why would someone pay thousands for the rig only to sell it later for $120? Because they could no longer make any money (worth mentioning) with the rig and they wanted to buy a new, MUCH FASTER rig to stay in the game. (And the newer rigs are more efficient. Instead of producing 450GH/s with 400 watts, like mine, an Antmining S5 rig produces 1.15TH/s using 550 watts, for example.)

Besides the value of bitcoins being relatively low just now (about $290 per), the number of people who are mining rises at something like 10% per month. The bitcoin network self-regulates itself such that regardless of how much hash power is devoted to mining, a new block of 25 bitcoins will be found every 10 minutes. The way it does that is to increase the difficulty of the algorithm used to find a block. In effect, over time whatever mining power you have working for you becomes worth less and less.

Anyway, the mining rig is a computer with ASIC's (Application Specific Integrated Circuits). It must be powered with a PSU of adequate size. The rig has an internet cable connection into which you plug in a cable and which is used to connect to your router. Doing so results in your rig acquiring an IP address (it used your router to assign that number rather than having one built in.)

Using a browser on your computer, you connect to the rig's IP address and that brings up a configuration screen (after asking for your username and password - which is 'root' and 'root', unless you change it). The configuration screen allows you to specify where the rig will mine - that is, you are to enter the URL of a mining pool. You can enter as many as three different URLs so that if the first one, for example, quits working, the rig will automatically fallover to the second.

So, you need to have established an account on a bitcoin pool. There are MANY such pools. I happen to like the CKPool (kano.is) and Multipool (multipool.us).

The accounts that you setup on the pools is where you specify the wallet id of where you want you earned bitcoins to be sent.

In other words, you need a place to accept bitcoins (and convert them to USD) before you begin any of this. I like Circle (circle.com) best of all, but Coinbase (coinbase.com) is a very close second place.

Now all of that sounded like a lot of work just to get started, but you already missed something. You do NOT point your rig to the pools website URL. Instead, you must determine the right URL to use. Each URL has a port number associated with it. By default, websites use port 80, but none of the pools will accept a mining rig input on port 80.

Each pool provides a number of different port address you can chose from, and each one provides a different level of difficulty it uses as a threshold for accepting the shares that your rig produces. If your rig is quite fast (something like 20TH/s (Terra Hashes per second), you will want to select a port that requires a difficulty of something like 2,000. But if you are running a relatively slow rig, like mine, that produces about 450GH/s, you want a port that requires a much smaller difficulty (something like 256 or 512).

Why? Because probability is virtually predictability when dealing with huge sample sizes. With a difficulty of 512, my rig WILL produce a 'share' (meaning a 'solution' that is at least as difficult as 512) about 20 times a minute. The faster rigs will produce a share potentially hundreds of times more often. ANY share could be the one that discovers a new block. In other words, how fast your rig is makes no difference. But every time your rig reports a share takes computer cycles, so the pools, for sake of efficiency, want no more than about 20 per minute from each rig working the pool.

Let me say that again, let's say that in order to discover a new block your rig must come up with a solution that has a difficulty of, say, 44,000,000,000. Any one of its shares could be the one. Every share that it produces that exceeds the relatively trivial threshold difficulty required by the pool is provided to the pool - every one of them. The only thing that the threshold difficulty does is determine how frequently your shares are transmitted to the pool.

If you select a port that has a high difficulty, and your rig is relatively small, like mine, then it might take MINUTES for your rig to find one that exceeds the difficulty threshold. The pool's system will think that your rig has failed (or fallen asleep) sooner than that and will send it a 'wake up' (restart work) request. That's WASTED computer cycles for both the pool and your computer. So, better, select a difficulty appropriate for the speed of your rig and set your rig to use the port number on the pool's site that matches it.

Okay, once that is all done, you turn the power on to your rig's PSU. It boots up and begins doing bitcoin mining (solving the cryptographic puzzle). Shares are reported to the pool.

Over time, one of the rigs in the pool discovers a new block of bitcoins. ALL of the participants in the pool are sent their appropriate percentage of the new bitcoins based on their percentage of work done.

Perspective: My rig has been producing about $1.61 (I had one very unusually payment that brought my average up to over $3.50, but that was pure luck) per day in bitcoins. If the price of bitcoins goes up, it will produce more than $1.61 a day, and if that goes down, less.

With a cost of $180, it will take about 112 days to recover that cost and to begin making a profit. EXCEPT, it costs about $0.80 a day for electricity to run the rig. So it will not start making a profit, if everything stays the same, for 222 days.

But you can do things to make your rig work harder. You can overclock it, for example. I can cause my rig to produce 500GH/s instead of the 450GH/s it does by default. But that increases the electricity cost a bit, and it can potentially burn out the rig prematurely.

Or, you can lower the cost of the rig, after the fact. For example, you can rent out your rig for any number of hours you wish and receive the rental income immediately. So, for example, I've rented my rig out for about $1.50 a day, many times this past week. I elect to think of those $1.50 bits of income as reducing the cost of my rig (while forgoing the earned bitcoins during those days). This strategy has lowered my cost of the rig by about $8.00. Thus, when it's mining for me, it will take less time before it begins making a profit.

And, for every hour that my rig is not being rented, it is working for me - automatically. There is no time lost.

And now you see how the economics of bitcoin mining works. Hope you felt the learning process was worth it.

Edit: Corrected the income amount. JRD

gymnast
Moderator
4260 Posts
[Mentor]


Meridian, Idaho
USA

Harley-Davidson

Sportster Sport

Posted - 03/15/2015 :  2:56 PM
Interesting! Locally, if you don't mind standing in cold water, the locals swear by panning. Cheap to start up and, I am told, it pays better than picking up aluminum cans. You might find this link interesting or at least amusing. http://www.idahogold.net/category/i...county-gold/
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James R. Davis
Male Administrator
17396 Posts
[Mentor]


Houston, TX
USA

Honda

GoldWing 1500

Posted - 03/15/2015 :  3:22 PM Follow poster on Twitter  Join poster on Facebook as Friend  
LOL

Again, for perspective ...

Once you set it up, you have to do nothing! As long as power is being provided to the rig, you simply earn money. No maintenance, no boss, to travel, no hours ... you just earn money. [More properly, you are CREATING MONEY.]

$1.61 a day is tiny, I know, but it's $588 a year.

So put 20 rigs to work and earn $11,750 a year.

Some people can live on that amount of income.

Put the rigs in your garage! That way, you don't have to add the cost of air conditioning.

edit: Corrected the income assumption. JRD
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gymnast
Moderator
4260 Posts
[Mentor]


Meridian, Idaho
USA

Harley-Davidson

Sportster Sport

Posted - 03/15/2015 :  4:03 PM
I see your point Jim, I have never been partial to standing in cold water. The real pro's around here use a portable sluice set up.

This place is a nice off road ride from Boise though last time I was there I rode the Sportster up with the wife on back. http://www.historicsilvercityidaho.com/

Idaho city, to the North about 50, miles is part of a regular ride known locally as the "Lowman Loop". More gold was taken out of Idaho City than Virginia City, Nevada. At one time it was the largest city between Salt Lake and Portland. This is a sample of the ride.

http://www.youtube.com/watch?v=7nWGG-4HOas

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James R. Davis
Male Administrator
17396 Posts
[Mentor]


Houston, TX
USA

Honda

GoldWing 1500

Posted - 03/15/2015 :  4:13 PM Follow poster on Twitter  Join poster on Facebook as Friend  
Our motorcycle trips open lots of new worlds for us. You talked about sluicing for gold. Cash and I took a trip on the bikes and found a place to mine for diamonds.

It was hilarious - us wearing boots down in the mud pits essentially sluicing for diamonds.

Nope, not a 'profession' I would be interested in, but another 'world' explored.
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James R. Davis
Male Administrator
17396 Posts
[Mentor]


Houston, TX
USA

Honda

GoldWing 1500

Posted - 03/15/2015 :  5:47 PM Follow poster on Twitter  Join poster on Facebook as Friend  
Some of you may have wondered what I meant by saying that probability becomes virtual predictability given large enough sample sizes.

This will make it clear. (Now that I corrected my numbers in my earlier posts.)

There is at present 327 Ph/s (Peta Hashes per second, or 327,000 Th/s) mining for bitcoins. Since the bitcoin network self-regulates such that a new block of bitcoins is 'discovered' every ten minutes, that means that 196,200 Peta hashes must be computed before one of them happens to result in a hash score that is sufficiently large to become the winner. (327 Ph/s * 600)

Surely you would agree that 196,200,000,000,000,000 is a large sample size?

So, if your mining rig produced .5 Th/s, it would produce 300 Tera hashes in ten minutes. That's about 0.000153% of all the mining going on in the world. That means that you have about a 0.000153% chance of winning (finding) a new block with your rig for every block found.

Said differently, you could reasonably EXPECT to find a new block of 25 bitcoins every 12.44 YEARS. That's a long time to wait.

So if you placed your rig into a pool of rigs that produced a total of, say, 4,000 Th/s, that pool has reasonable odds of finding a new block of bitcoins 8,000 times as often as you could mining solo, or once every 13.6 HOURS. Of course instead of being paid 25 bitcoins if you were mining solo, you would expect to receive about 0.055 bitcoins per day, which works out to be about $1.60 per day.

And that is almost exactly what I'm earning from my rig, and that explains why renting rigs like mine costs about $1.50 per day.
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