Bitcoin, cryptocurrencies & mining
In the last years we’ve rarely gone through a day without hearing about Bitcoin, cryptocurrencies, mining or the blockchain.
Like many others, you may smile and nod at the subject thinking you actually have an idea about what it is and how it works.
Well, I think it’s time to make sure you do, so next time you hear about it - at least Bitcoin and mining - you’ll actually have a clue on the subject and key challenges.
Bitcoin fundamentals (cryptocurrencies)
In a few words, Bitcoin is a digital currency - I think this part is very clear for everyone.
But instead of "money", you exchange tokens that have a certain value depending on the moment.
For example, as I’m writing this article, a single Bitcoin is worth around 8300CAN or 6300US.
With this in mind, Bitcoin (and other similar digital currencies or cryptocurrencies) is a system for transferring tokens of value between users on the web.
One of the key ideas behind Bitcoin is that there is no central agency or central bank if you like. Instead, Bitcoin is based on what we call a blockchain.
Essentially, a blockchain is distributed ledger that records all transactions in blocks that are checked and authenticated by participants.
Participants are called miners. And to do this work, miners earn bitcoins for their effort. Similar to other cryptocurrencies.
I hope these few lines are clear enough to give you an idea of the basics... but let’s go a bit deeper for a moment.
Mining Bitcoins or other cryptocurrencies
To make money mining bitcoins, you need to become a miner.
This means that you have to become a participant in the distributed ledger - the blockchain - and start verifying transactions or blocks.
To do this you need to have a computer with a very decent graphic card; also called a GPU (graphics processing unit).
Essentially, a GPU is a graphics card that enables you to play games on your computer.
Surprisingly for some, GPU’s are the best tool to mine for cryptocurrencies. As I said earlier in the article, for the Bitcoin system to work, miners need to be there to verify who pays whom.
So let’s understand what is mining! To keep things simple, we’ll imagine the following for the moment:
You have one computer
You have one video card (GPU)
You have connection to the Internet to exchange blocks or transactions
You live in the province of Quebec (electricity cost base)
You will be running the computer 24/7 for fun
High level Power & Cost
To simplify our article, keep in mind that most components you have in your computer aren’t really that important, except for the GPU!
As you can imagine, the more powerful the GPU, the more you can mine; it makes sense. So the more you verify transactions/blocks (blockchain) the more money you make.
But at the same time, the more powerful the GPU, the more electricity it will consume and that’s where things can become less interesting when mining…
Simply, if the cost of your electricity is very high, by the time you buy a computer equipped for mining and pay for the electricity, things may become less interesting; essentially, it will cost you money - but then again, as the value of Bitcoin changes, things can become interesting in time...
But let’s look at some numbers...
In Quebec the cost of electricity is low compared to other territories. To round things up and keep things simple, it costs around 7 cents per kilowatt/hour.
If our computer consumes around 375 watts per hour and we run it 24 hours a day for 30 days mining Bitcoins (375 X 24 X 30 / 1000) this means that we use around 270kW/h to run our rig for a month.
At around 7 cents a kW/h in Quebec (270 X 0.07), this means that our electricity cost is around 19CAN per month or about 5CAN per week, so a bit less than a dollar a day.
But with current prices and using a single GPU, mining for Bitcoins will bring in a bit less than a dollars a day… So let’s say the proposition isn’t so interesting.
You can see some stats in the following link.
Value vs Mining
As the value of Bitcoin goes up, this can become a valued proposition, but when the value goes too low, it suddenly becomes less interesting to mine... but!
Remember that Bitcoin value may change rapidly, so for a certain period you may mine for Bitcoins and literally pay for them, but a few months later, as the value goes up, you may find some cool profits; and that’s the real game.
When mining for Bitcoins or any other cryptocurrencies, you have to play the long game. Some moments you’ll hit lows and other moments you hit highs, at that’s the strategy.
In the long run, I have friends that made very decent profits and it’s absolutely possible for you to do the same.
What’s also important to remember is that there’s not only Bitcoin.
Other cryptocurrencies exist and the money you can make from mining for each of them is different, so choose the one you like and try to see if you can make money with them.
Where do I start
I could go on and on here, but essentially, if you’re interested by mining, get a friend that knows about it! They’ll help you with the rig for fun and possibly profits. You can also go on YouTube and see what others are doing; it can be a fun project for you and the kids if you’re interested.
But if you think you already have a decent computer and GPU, why not try? My favorite GPU currently is the Asus ROG STRIX-GTX1070-O8G-GAMING.
And to start mining for fun, it's very simple.
Just head over to sites similar to www.nicehash.com, install the mining application and you'll get an idea about the power of your rig and see if you can make money while you're at the gym.
Have fun! Cheers.