How and Why I Got Into Bitcoin Mining
I have been sharing my experience of mining on Twitter, and a few people have asked me how I got into it, so I put together this blog post to share my experience to date.
Disclaimer: I am a mining fraud. I am not technical enough to do the technical stuff. I am looking into trying GPU mining, but really, I am way out of my depth with this. The real experts and people who have helped me or I have spoken to are:
Why I got into mining
So there are three primary reason I got into mining:
Create passive incomes
Since moving into Crypto as a full-time career, my only income has come from trading. To be honest, I don't love the trading, I like creating content. Managing the blog, the podcast and the various other social media platforms take time and eat into my trading time. Trading and keeping on top of all my various investments also take a considerable amount of time. By having my mining rig, I have a passive income which reduces the pressures on the trading (I also have a ZNode to add to my passive income streams).
Diversify my portfolio
My crypto portfolio in itself is diverse, but I see mining as a nice hedge. My trading goal is to accumulate more BTC by trading ALTs, but with mining, I can accumulate Bitcoin even when the market isn't playing ball, as seen during the recent crash where I was making money mining Bitcoin while losing money in the markets.
Broaden my knowledge
I find the only way to truly learn about a subject is to get stuck into it, so for me investing in a mining rig is the best way to learn about it.
My mining investment
I have made four separate investments:
I bought 50 S9s, in December
I then bought a second batch of S9s, but was limited to just 20 because Bitmain, the supplier, restricted the volume and also doubled their price. They will be installed this month.
I also bought 90 Halong DragonMint’s to establish a mining co-op with members of my Facebook group, of which 20 are mine, delivery will be in April.
I bought an A3 to mine Siacoin; these were limited to a single miner per purchase.
A breakdown of my costs
S9’s batch one - $1,415
S9’s batch two - $2,750
A3 - £2,375
Halong DMs - £2,000
Each one needs a PSU which is $105
There is also a delivery charge per batch
Installation costs are dependent on what I am mining
The installation is relatively expensive, but I am paying my buddy Chad to do it as I would not have any clue how to myself.
The lifetime of the gear
From what I am starting to understand is the survival rates of the equipment and rig, all depends on three factors:
The price of Bitcoin
The current mining difficulty (how many other miners are competing and the hash rate of those machines)
The price you are paying for power
It is a game of economics. The first week of my S9's was pretty good, I was mining around $1k of Bitcoin a day but the recent drop in the price of Bitcoin and rise in difficulty knocked down the profitability of my rig.
As long as you are able to mine your Bitcoin at a price lower than your cost of operations, then the machines have life, though you can speculate if mining at a loss.
As newer, more powerful machines come online, they will knock down the profitability of my current machines. The reason I bought the DragonMint's is they are noted as being more powerful and profitable to mine than my S9's.
How I set it up
I am an investor, not someone with a tech background, so it was all thanks to my buddy Chad that I got into mining, and it was him who facilitated the whole thing.
Chad has a tech and IT background and owns an IT business, Profero, and I was introduced to him by my friend Rich Roll when I was in LA. Chad has already been mining for years, and I had been discussing it with him for many months before taking the plunge. He held my hand the whole way as I had so many questions.
In return, I was helping him with trading, so when I was worried about mining he was the calm voice of reason and I was the same for him when he was concerned about trading. Therefore, it made sense for my rigs to be with Chad’s rather than building something from scratch.
I went with the USA over Europe for two reasons. Firstly, Chad is in the US, and I am only providing the capital rather than setting up the tech. And secondly, power is much cheaper in there.
There is a slight ethical problem with the amount of energy that mining uses, so we are currently looking to get our own hydro damn, for cleaner and cheaper electricity. I have also found a new potential facility in Wisconsin which is more affordable and uses clean power.
Returns on investment
Initially, I was looking at a three-month ROI but as the price of BTC has fallen that ROI will undoubtedly be slower. Now I am looking at more like 5 to 6 months, that said I am holding to speculate, see below.
It took me ten days to mine my first Bitcoin and cost me £3,000 to mine, so it was profitable but this is also where the trading and mining crossover. Rather than sell the Bitcoin I have decided to hold them, speculating on an increase in the price of BTC. As such, when mining, you are also speculating and previous mining might be calculated as more profitable in the future.
The cost of mining v the cost of Bitcoin
What I am learning is that as the price of Bitcoin goes up, more people start mining. Thus the difficulty increases and the mining rewards decrease. Essentially over time, it gets more expensive and less profitable to mine, which means that it is essential for the price of Bitcoin to increase to keep it profitable. Price volatility isn't great, a significant drop in the price and increase in difficulty does put me at risk of being stuck with a power contract which the mined Bitcoin's do not cover. Hence, always looking for cheaper and more efficient facilities.
I expect the market to always balance out over the long term so even if there is a period where I am mining Bitcoin at a loss, I will do so speculating and holding Bitcoin for future value. A decision I will make at the time, depending on market conditions.
The market for mining hardware is also growing, Halong are looking to become a serious player in the space and Samsung have announced they will start making ASIC chips.
As you can tell from this article, I am pretty much a total amateur in this space. I was only able to do it because of my relationship with Chad. Don't let this put you off, if you have serious capital to invest, you can also contact Chad, and he will help you get online. There are also plenty of other resources available online to help you.
As you can see, apart from my Siacoin miner I am all in Bitcoin. I was tempted to mine Litecoin, but I couldn’t get any Litecoin miners, and due to the market crash, I have scared off investing anymore. Now the market is recovering I am looking at Litecoin mining again.
The mining co-op
I launched a mining co-op earlier this year which starts in April. I was asked by a bunch of people in my FB group how they too could get into it. I agreed that I would buy the equipment and Chad would manage the setup. This launches in April, and I am going to see how it goes and will report back. If it is successful, then I will open another more.