The cryptocurrency movement is taking the world by storm and I figured I needed a part of the action, so I bought an Ethereum mining machine.
My wife heard the news while she was away in Tibet this summer that a Bitcoin mining operation got busted near where she was staying, so naturally, we looked up what Bitcoin mining was all about and decided that we needed in on the action.
If you are not familiar with Ethereum and cryptocurrency, in general, it is a new form of monetary exchange that is entirely electronic. There is no and will be no hard currency for the cryptocurrency. You may have heard of its meteoric rise this year with Bitcoin starting the year at around $1,000 and is now valued as of Oct 31 at $6,500. That is a growth of 550% in 2017 alone. I wish I would have thought to buy some of this before all the cryptocurrencies started to skyrocket in March.
But enough of my wishing I had done something about it sooner. I am in now, so let’s go through what Ethereum is, how I plan to mine it for profit, and how you can too.
What Is Ethereum?
Ethereum is a cryptocurrency that is based on blockchain technology like Bitcoin. However, as Bitcoin was developed as a peer-to-peer electronic currency for paying anyone, Ethereum is a platform built on the blockchain that creates the Ethereum Virtual Machine. The Ethereum Virtual Machine allows developers the ability to build new applications that leverage the blockchain without having to reinvent the wheel.
If you have ever delved into developing programs and software you will have inevitably dealt with virtual machines as they make it easier to develop cross-platform programs and to do testing to make sure they work wherever you distribute your new program.
The Ethereum Virtual Machine will allow developers to more quickly bring to market blockchain applications for testing and general use. But I am getting ahead of myself. We need to discuss first:
What is the Blockchain?
Much like torrents, the blockchain is a peer-to-peer network. This means that software is loaded on machines around the world that are networked together either via the internet or via internal networks and it creates a distributed computing platform.
Imagine for a moment a supercomputer like the NSA uses to break encryptions during their surveillance operations. This computer costs billions of US Dollars and can do computations at a speed of 93 petaflops. Basically, it is super crazy fast and can run computations like the modeling of the human brain, crunch the numbers on global weather patterns to get accurate weather reports and any number of other applications.
The blockchain allows you to connect computers together around the world to create a program that can run similar to these supercomputers. With thousands or millions of computers working together on the same problem set, you can create quite a fast ecosystem. Blockchain technology is exploding with more than 1,000 cryptocurrencies available today (not all are blockchain, but most of them are) among other applications.
Back to Ethereum
Ether is the currency that is used on the Ethereum network. Whenever a transfer is done it has a transaction cost that is paid in Ether. Whenever a new developer is using the Ethereum Virtual Machine they are paying transaction fees or rental fees to the network. Essentially it is the currency that allows you to rent out computing power on the blockchain network.
For far more information on Ethereum, check out this post on Block Geeks.
Mining Ethereum
By mining Ethereum, what I am doing is renting out the computing power of my machine to the Ethereum blockchain. In order to do this, you have to load some special software onto your computer that allows you to communicate with the network and rent out your machine. The downside to mining Ethereum or renting out your machine is that it really is all or nothing. Once your machine is mining for the network you really can’t use it to do anything else.
Because mining essentially locks you out of your machine and for profit you really want to buy a dedicated machine if you are going to pursue mining.
Computer Basics
Inside your computer, you actually have multiple processors that work on different things using different technologies. The CPU (central processing unit) works to do the main number crunching that allows programs to work and calculations to be done, however, you also have a GPU (graphical processing unit) that crunches all the numbers to display your graphics. With the adoption of 4K technology for displays and with games that display better with a 60 frame per second frame rate, these GPUs have gotten incredibly fast.
Ethereum Miner
The Ethereum mining machine performs the blockchain calculations on either the CPU or the GPU, but for the calculations that it is performing, the GPU is much much faster. Due to this, the mining rigs are not anything like your standard computer. Take a look:
I bought this all as one unit. It has 6 GPUs on it that are all tied together and powered by a beast of a power supply. Check out the specs in the table below:
| Part | Quantity |
|---|---|
| AMD RX470 4G GPU | 6 |
| ASUS EX-B250-V7 motherboard | 1 |
| Powered risers for GPUs | 6 |
| GPU power cables | 3 |
| 60G SSD | 1 |
| 1600W power supply | 1 |
I bought this rig used off of my favored Taobao in China for 10,800 CNY or ~$1,600. I almost didn’t buy it because I thought they were too expensive for the ones that had RX470 GPUs. The full price was ~$2400, but when I came across this one used, I snatched it up quickly. To be sure, this is very expensive for a computer that you cannot actually use. However, I view it as an investment. I set it up, leave it alone, and it should just crank out money for me on a consistent basis.
It was not nearly as easy as I just made it sound though. I bought it and it was quite the exercise just to put it together. I had never built a computer before, so I got to learn how everything goes together and in the process of debugging it I also got to learn what matters and what does not.
Mining Rig Setup
The miner originally came with Windows 10 in Chinese with the miner already setup mining to an address in China. Needless to say, I had to change that. Who knew you can’t just change the language on Windows, they require you to buy a new license if you want to change it to English!!! That was not too big of a deal since I didn’t really want to run it on Windows anyway. I started my configuration by following a tutorial on Cryptobadger for setting up one running Ubuntu Linux since it is generally more stable.
However, stability was non-existent when I was setting this up with Ubuntu. I was only getting runtimes of 2-4 hours before it would crash. It hung up for all kinds of reasons, but most of the time it disappeared from my internal network, so I couldn’t remotely manage it. It also managed to crash my router multiple times. I received the miner 4 days before leaving for Italy, so I got a chance to build the machine and then start to do configuration. The last night before leaving, I wiped Windows off of the SSD, installed Ubuntu fresh again, and crossed my fingers that it would run for the 2 weeks I was gone. This final time I got 4 days of successful mining before it crashed while I was gone and there was nothing I could do about it.
After arriving home, I looked into option number 3 and decided it was worth it. Option number 3 is EthOS, a modified version of Ubuntu for sale on Gpushack. This operating system is designed solely around mining Ethereum and other similar cryptocurrencies and made the process so much easier. It did cost $40, but that money has already been recouped from increased uptime. EthOS comes with all the different mining software already installed along with all the drivers for common GPUs and motherboards. The only configuration that has to be done once you get it installed and up is writing the remote or local config file that tells it which miner to use and all the various settings, the details of which are best left for another post.
For now, here is what the miner output looks like while it is running. Usually, miners are run headless (no monitor or keyboard) so you have to read it through the network. However, I have had a monitor plugged in for a couple weeks for monitoring and troubleshooting.
Mining Profitability
Profitability is very important when it comes to mining. It really does not make sense to buy a whole new computer or build one if you are not going to turn a profit. Since it is performing so many calculations it uses a lot of electricity and creates a lot of heat. Check out the below plot of temperature over a few days last week.
This electricity draw is significant and the cost is easily calculable if you know your power usage (~1200W). If you pick up a power meter, you can actually measure your power consumption and know for a fact that you are turning a profit with your new machine. You also will have to pay some amount for the additional heat load on your AC unit to keep the miner cool, but this one is a little harder to account for. 1.2 kW for 24 hours per day for 30 days per month equals to 864 kWh of electricity each month. A normal electricity cost of $0.11/kWh would yield an electricity cost of $95.
It pays to look into calculators that show probable profits before going out and purchasing a miner. You input the MH rate that you expect, the power draw, and your local electricity cost and you can get expected profits.
Various GPUs have different efficiencies, so you are looking for a balance between the one that makes the most money and consumes the least amount of electricity. GPUs made by AMD and Nvidia are both used for mining. Only the top end GPUs from both companies with the fastest processors and 4GB or more of RAM are used due to the need to perform so many calculations quickly. 4GB is currently the lower limit on GPU memory, but that will go up over time as the DAG file grows. This file is loaded into memory on each GPU and is the transaction database that it is checking against. These GPUs are the primary cost of my new mining rig, weighing in at $200+ each.
Mining Pools
In order to be profitable, you need to mine into pools which are exactly what they sound like. It is a sub-network of the Ethereum network that allows you to pool your resources together with other miners to solve the problems that are presented to the network. If you are not part of a pool, then the probability of correctly solving one of the problems before anyone else is very low, so pools make the most sense for the solo miner.
Now if you had your own mining farm with 100s or 1000s of miners, then you could mine for yourself and save the ~1% fee that the pool charges for the service.
Possible pools include:
There are other pools out there, but these have been very good for me so far. I have been primarily using Nanopool.
Why I Bought An Ethereum Miner And You Should Too
I bought my new Ethereum miner because I am interested in technology and wanted to start more streams of passive side income. Side income is the quickest answer to retiring early. In the end, I discussed with Mrs. Atypical before purchase that I was 90+% sure that we would at least make our money back on the machine before leaving China. At the current rates, we are projected to make about $1500 profit before my contract is up.
While in China it makes the most sense to have one because it will be the most profitable while we do not have to pay for electricity. If it turns out a bust, at least we are trying new things in the pursuit of financial independence and we can always sell the parts and recoup most of the initial investment.
Should We Buy Another One?
This one has become stable and is cranking out about $200-220/mo with minimal work. I have been monitoring it just to prove to myself that it is still working, but it has had no issue since the install of EthOS. Nanopool will also send you a notification email if your machine goes down, so you really don’t have to actively monitor it.
If I wanted to pursue this as the only means of financial independence, I would need 15 machines to crank out ~$3,000/mo and then an additional 1 or 2 just to pay for the electricity. You would need to add additional network switches, dedicated power supplies in your house to supply all the required power, and then have spare parts on hand for when things break. You have added many layers of complexity when you start networking 15+ computers together to mine cryptocurrency. This disobeys the keep it simple principle, so I will not be pursuing it.
At that point, I would not have diversified income streams whatsoever. It would be like placing your whole retirement nest egg with Enron. We all know how that ended up.
Nevertheless, I think that investing in an Ethereum miner is an interesting way to make money and it is indeed making Ether as I rent out my machine to the Ethereum network. I am looking into buying another machine to bring our monthly income from Ethereum mining up to ~$500.
Would I recommend this as an investment for the layman? No!
However, if you are interested in technology and are willing to learn about computers and cryptocurrency tech then I would definitely recommend an Ethereum miner as a supplement to your passive income portfolio.
Have you looked into cryptocurrencies and cryptocurrency mining? What do you think of non-governmental currency? Let me know in the comments.
Original article and pictures take atypicallife.org site
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