My foray into cryptocurrencies

The other day I had skimmed  yet another article about Bitcoins when a buddy of mine sent me a message asking if I had ever done anything with them. I said I hadn't, but soon started to get interested. I was more interested in the technical aspects than looking at it as an investment. I definitely didn't want to buy any cryptocurrencies directly but was interested in mining. From what I've read, the basic gist of mining is that there are block chains that must be maintained for sustaining the currency. If you calculate the next block (a computationally complex task) you are rewarded with Bitcoins. This process is called  mining. Most of what I read indicated that, at least for Bitcoin, it isn't really worth getting into mining unless you are going to seriously invest in a large mining rig. If you are are just running some things on your own computer, it is likely that every block you calculate has already been calculated by someone else. In this instance, you are not rewarded the coins. Additionally, people have made great strides to create hardware specifically for the task of Bitcoin mining. This has made it even more difficult for casual miners to get involved. One alternative is to use pools. As the name indicates, a group of users "pool" their resources to try to calculate blocks. There are different ways pools distribute, but the basic idea is that everyone works to calculate a block, and when it is calculated, the resulting bitcoins are distributed to the pool.  Depending on the distribution system, this can be a handy way for someone to get into mining that doesn't have a lot of resources at hand. Another avenue is to mine alternative cryptocurrencies (altcoins). There are a large number of other currencies similar to Bitcoin that have been created and new ones are constantly being announced. Some are very similar to Bitcoin. Others use different algorithms to make it more difficult to use specific mining hardware that is popular for other coins. As I started perusing them, I noticed Rubycoin. How can I pass that up!? :-) I looked into solo mining, but decided to just start out with a pool. I can't remember how much I looked around, but dedicatedpool is a site that has pools for various altcoins so I went with their Rubycoin pool. As I was just starting to play around, I kind of alternated between CPU mining with CPUminer and GPU mining with either cgminer (on the machine with an AMD graphics card) or Cudaminer (on the machine with an Nvidia graphics card). As I explored different currencies, I had to find nuances (after 3.7.2, cgminer no longer did GPU mining, sometimes I got a specific build for my OS or for a specific coin, etc.) Anyway, back to Rubycoins, it didn't take me long before I was approaching 1000 Rubycoins. It might sound kind of impressive, but current market value says that is equal to about $1.43 haha. I've gone back and forth with this pool occasionally, but I still just thought it would be cool to have Rubycoins so I'll probably hold on to those. Next I tried out a Litecoin pool, but I got impatient (probably because Rubycoins are currently easier to generate so I saw results much sooner). Litecoin is one of the most difficult (though valuable) of the altcoins, but seeing my balance just sit at 0 for so long got a little frustrating so I started to look around a bit more. I went on a wallet downloading spree and was actually surprised that many of them wouldn't sync. If you recall the blockchain I mentioned earlier, you have to sync with the blockchain to know the status of the currency. If you don't know the status, you can't mine or make transactions. Numerous wallets I downloaded wouldn't even begin to sync (Windows seems most supported, followed by linux, then OSX is trailing), but I ended up with about 8-10 different wallets that did work. I haven't done anything with most of them, but figured I would keep them on hand for the time being. By this point, I had only been playing around with my CPU and GPU for mining, but thought it might be interested to check out an ASIC miner (used for Bitcoin and those that use the same algorithm). An ASIC miner is an example of the specialized hardware I mentioned earlier. As an example, I can typically calculate about 230 khash/s with my GPU. This ASIC miner calculates 2.4 Ghash/s, or about 10x as many while using much less power than a GPU. I was able to find one on Amazon, and since I had become sufficiently interested, decided to keep a little better track of how things went (once I was sure everything was up and running properly). Obviously, one little miner is not going to be enough to do solo mining so I decided on BTC Guild as my mining pool. Here's my first experiment. Bitcoin mining with 1 Antminter U2 ASIC miner

2014-04-17 11:45 starting balance : 0.00023823  2014-04-21 11:45 ending balance : 0.00087594  Total time: 4 days  Total BTC generated: 0.00063771  At time of completion, 1 BTC = $499.80  Total amount of US dollars generated: ~0.32 or 32 cents  US Dollars generated per day: ~0.08  Cost of ASIC miner: $22.87  Assuming uninterrupted usage and stable bitcoin value, time to recoup costs: ~286 days

  Obviously, that doesn't exactly sound like a major profit generator. Assuming all things remain equal, I  could recoup costs in about 9 months. Afterwards, I would be making about 29 dollars a year. Due to the nature of how mining works, there isn't a linear increase in output if you have more miners. If you think about the most extreme case, I could set up a bunch of mining rigs such that my computer power was 10x greater than what exists now. In that case, I would be much more likely to get a great majority of all the blocks. Likewise, if I have very little computing power, it is likely that every calculation I finish has already been done and I could never earn anything. Because of this, I decided to try out adding a couple more miners and see if my computer power is still so small that it appears linear or if I could actually see an appreciable difference in gains. I ran into a couple of issues during testing of the additional miners, so I decided not to do a full test. I'll still have them running so I may do a recap, but for now I'm not going to spend time on it. As I've mentioned, mining has varied degrees of difficulty. Right as I was trying to test using multiple miners, it appeared the difficulty either increased or the number of people in my pool increased causing my mining to be less productive. Obviously a long term test would be needed to really iron out some of these results. I also had some weird issues with running them on OSX. I can't really overclock them, they run hotter than normal, and after a while they just cut out (could be related to the overheating). Hopefully, I didn't damage them in the process of testing, but it is obvious that there is room for improvement when it comes to using these miners on OSX. While I was doing these experiments, the same buddy I had talked to earlier mentioned a pool called Middlecoin. This pool does what is called "hopping." Basically, the manager of the pool looks at what altcoin is most profitable to mine and diverts resources to it. When that coin becomes difficult, the resources are then diverted to a less difficult currency. People who are really into mining a specific currency kind of frown on this, but from a profitability standpoint, it does make sense. So the Middlecoin pool operator manages which currency is being mined, then converts it all to bitcoins. The only downside so far is that there isn't much feedback. Since it doesn't require registration, it doesn't keep track of your different "workers" like many pools do. I have found this kind of handy, especially because I have been in and out of mining with Middlecoin, and since I haven't kept track very well, it is hard for me to give an estimate about how much I am earning vs. the resources I am expending. While I usually have multiple things working with Middlecoin, I figured I would isolate a worker and use them for the profitability study later. I also was interested in seeing if there were any altcoins that might be worth mining solo. While it may not be as profitable, it seemed like a logical extension of my exploration. I referenced CoinWarz many times throughout this process, and I used it to find a coin that had a low difficulty.  I ended up deciding on GPUcoin. While they aren't worth much, the difficulty was low enough that I figured I would at least have a decent chance of actually mining some coins. For this I used my primary graphics card, a GTX 760 which maintained a hash rate of approximately 117 khash/s (the algorithm used for GPUcoin makes this number about half of what you would expect if you were mining a scrypt-based altcoin, which most of them are). My block finding went as follows. GPUcoin mining locally with GTX 760

2014-04-22 22:37 - Started mining  2014-04-23 2:42  - 4:05 hours of mining  2014-04-23 12:26 - 9:44 hours of mining  2014-04-23 19:36 - 7:10 hours of mining  2014-04-24 2:34 - 6:58 hours of mining  2014-04-24 3:27 - 0:53 hours of mining

I'm glad I left it running as long as I did because the last block I completed was a great example of how there really is an element of luck, along with varying difficulty levels, in the mining process. Obviously, this variance makes it a little difficult to calculate profitability, but here's what I have (excluding power consumption)

Total mining time: 35 hours  Total coins generated: 120,000  Approximate GPUcoin value: $0.00000511  Total amount of US Dollars generated: $0.61  US Dollars generated per day: $0.42  Annual generation: $153.49

  So that actually doesn't sound too bad. It still assumes a non-fluctuating market value and a coarse estimate of rate generation. To actually know how that translates to the real world, I'd have to get some power consumption values. Additionally, there doesn't seem to be good data on how pushing your hardware this hard can affect its life. Obviously, having something run full throttle makes it very hot and wears out the components faster, but I haven't seen much about hard numbers. Annual generation is kind of silly to calculate if running the card that hard will likely make it die in 6 months. Also, it really doesn't make sense to calculate profitability without incorporating electricity costs. If I decide to get into it further, I'll do more rigorous testing, but since I just picked up a Kill-a-watt to measure energy usage, why not run a few numbers? I didn't really want to spend a long time testing (and for the peak running I didn't want to stress my computer too much) so I just did some short tests.

Computer running mostly idle (avg over 13 hours)  0.1294 kwh  Running both GPUs for one hour  0.37 - 0.1294 = 0.2406 kwh over idle  Running all 8 CPU cores for one hour  0.22 - 0.1294 = 0.0906 kwh over idle

  Now to calculate costs fully, I would have to contact the City of Tallahassee. The rate listed on their site is $0.06682 per kwh, but if I back calculate from last month's bill I get $0.1247 per kwh.  Since I don't really know the reason for the discrepancy, I'll look at both. I'll also look at the difference over idle to see the effect of mining with my current computer vs. building a dedicated mining rig. Since it is a rough calculation, I'll just assume 30 days per month.

Full usage  CoT rate  GPU: $17.80  CPU: $10.58  My calculated rate  GPU: $33.22  CPU: $19.75    

Over idle usage  CoT rate  GPU: $11.58  CPU: $4.36  My calculated rate  GPU: $21.60  CPU: $8.13

  Definitely enough of a difference that I would really want to ensure my rate before I knew what I was getting into.  So if I take these numbers along with the GPUcoin and middlecoin numbers, I can do a rough profitability calculation. Now I only used my primary GPU for generating GPUcoin, so the monetary generation is actually a little low, but the primary GPU accounts for 77% of the khash/s so I can adjust it accordingly.

Profitability for solo mining GPUcoin full cost  Calculated revenue per day: $0.545   Calculated revenue per month: $16.36   GPU + CoT rate profitability: -$1.44   GPU + MyCalc rate profitability: -$16.86

Profitability for solo mining GPUcoin over idle  Calculated revenue per day: $0.545   Calculated revenue per month: $16.36   GPU + CoT rate profitability: $ 4.78  GPU + MyCalc rate profitability: -$5.24    Middlecoin estimates  Time from start to first payout: 10 days  Average hash rate: ~250 khash/s  Payout: 0.01080921 BTC = $5.00  Calculated revenue per month: $15.00  GPU + CoT rate profitability: -$2.80 (full) or $3.42 (over idle)   GPU + MyCalc rate profitability: -$6.60 (full) or $6.87 (over idle)

  Now we see why the electric rates in your area should really be incorporated if you are looking to get into any kind of mining. Obviously, this ignores the possibility of the coin increasing (or decreasing) in value. I was pretty surprised with the middlecoin numbers. I'm sure that there is the same disadvantage since I do not have a powerful miner, but I would have expected that hopping from coin to coin would have been more profitable that a single coin, especially when the single coin was done with solo mining. No matter what, even the most profitable prospect was pretty minor. While it isn't profitable now, it may eek across the line depending on how much the usage would increase if I would to upgrade my second GPU to something more powerful. Also, there is the possibility that it turns into an investment (albeit a risky one) since the value of any of the cryptocurrencies can change quite a bit.  It also doesn't look too good for a dedicated rig. Even if I could increase revenue around 5 fold and bring in $75 a month, it would be a pretty large initial investment that would take about a year to recoup and that's without factoring in the additional power costs. No matter what, it doesn't look like I'll be mining myself into a millionaire just yet. ;-) Currently, I'm getting my BTC Guild account high enough to request a payout, then I will probably focus on Multipool. It was apparently one of the first hopping pools and seems interesting to try out. One of the main things I like is that it accepts scrypt (altcoin algorithm better for things like CPUs and GPUs) as well as SHA256 (algorithm for coin like bitcoin, used by ASIC miners). So I can have one site to check to see how any miners I have are doing. I don't know if it will be the most profitable, but I like the cohesiveness of the experience. I may still occasionally solo mine some GPUcoin or mine some more Rubycoin, but we'll see how Multipool goes for the time being. It has been an intriguing exploration thus far. The ASIC miners don't really have much of a purpose other than mining, so I will definitely keep them going. It is interesting to be sure, but I don't think I have confidence in the cryptocurrency market enough to really invest much money into pursuing it. One that I will definitely keep an eye on is Gridcoin. What sets them apart is that they are incorporating the BOINC protocol into their mining. BOINC is used for large distributed computing projects like Folding@home, a project to study protein folding. Instead of a researcher investing in computing hardware, they create a BOINC project. Then any user can install the interface on their computer and contribute to the calculations (often having it run whenever the screensaver is running or something like that). It is a kind of cool way to contribute to large, complex computational problems. I really like the idea of incorporating that into the cyrptocurrency, but they are just getting started. Currently, they don't even have native wallets for anything but Windows and using wine (the program they recommend) I can get it running but can't update the block chain (rendering it pretty much useless). I'll definitely be keeping an eye on them as they progress, but until then it will likely stay a pretty small little side project. I have also been surprised at the number of places that claim to give away cryptocoins. The main one I'm keeping my eye on is Qoinpro. They claim to "deposit" a very small amount of bitcoin (and other coins) into your account daily. Then referring people is supposed to give you a multiplier. I haven't received anything yet, but I haven't found a reason not to try things like this yet. If you want to give it a try, use my referrral! :-) And if anyone is already into cryptocurrencies and wants to reward my oh-so-thorough write-up, below are all the currencies I have wallets for if you want to send some cryptocoins my way.

Bitcoin (BTC) - 1LiA2hkQ7aUuQHuGE9VtnpcGqf1ee1BwjF  Rubycoin (RBY) - Rs8TtxCyfS1QoYrdExPGP3Mc9akuUCJDx6  Digitalcoin (DCG) - DL13tcpiuP7Tx8Hes87FypGJgXVZsfFVT3  Quark (QRK) - QQQtNiLdSviVKXhVi8V8VBGSqHxumhNxaz  GPUcoin (GPUC) - GPSY2dDVRC3XkZTApHAUuQWAMxusKZ1Lyn  Peercoin (PPC) - PEcopdSQVSy547hQZXXzN8TntkoNFHT958  Fedoracoin (TiPS) - ER2nLBEcEDjqLNWRBJ5wnXqHND2jjJb4E5  Litecoin (LTC) - LgP8o7uic7bwgw6HcoFi6PhZFY95Sa6sMy  Betacoin (BET) - B73kCkoawsowwZhf1yoq16kBF7QduyEfDv  Teslacoin (TES) - 5jprXpFPQ81zFxHVvU6DhzMm4YJgcVERtd