In “Mining Cryptocurrencies” I wrote briefly about ASIC Mining. I have purchased some of these units, so I have more than just a cursory understanding of the technology and the considerations to make in such an investment.
In my previous post, when I wrote, “Cryptocurrency ASIC manufacturers are largely new companies without any reputation or large amounts of R&D funds, and in many cases, no support whatsoever.” there are some implications I alluded to. I will go through those now.
Here are some basic concepts. Cryptocurrencies and blockchains are still relative young technologies. Your typical lending institutions, like Banks, aren’t interested in making big investments in something that still hasn’t been proven to work as a replacement for fiat. Companies developing these technologies or technology that is related to blockchain tech are also young.
In established industries startups, can usually find traditional sources for income. Cryptocurrency focused companies must find alternative means of financing. If they’re lucky they might catch the eye of venture capitalists. In the case of ASIC manufacturers, most turned to pre-orders. These companies would publish specifications (Hash Rates and power consumption) on proposed devices that had only been designed or perhaps prototyped, hoping eager miners would pre-order enough units to actually pay for the manufacturing and testing ahead of beginning production. I think the potential for abuse or lost investment is obvious here. Equally great, was the potential for acquiring new mining systems that would for some time put early purchasers ahead of the rest of the miners and earning more of the rewards.
Both scenarios played out. Some companies took the money and ran. Some tried very hard to deliver on their promises but due to component suppliers or unexpected costs could not. Refunds were given, companies were sued… And in some cases, ingenious devices were delivered, extras were sold out immediately, and the company could not produce fast enough. The success of the first generation of these devices funded additional generations and the advances kept coming. Surprisingly, at least to those of us who reside in the US, many of the failures were domestic while one of the greatest successes came from China. I invite you to review the various threads on consumers of these products experiences https://bitcointalk.org/index.php.
I never pre-ordered any hardware. I just didn’t feel like I had enough money to gamble. In my desire to be safe I waited for other people to receive their orders and write about the experiences at the forum above. How’d that turn out? I was never disappointed with the products I did purchase, however I had a dickens of a time purchasing them. With my approach, I was left either completing with other purchasing left over pre-order stock, or waiting until someone decided to list theirs used (usually at a significant markup) on eBay. My hesitation also lead to shorter profitability for my devices. I have touched on the fact that the more miners on the network, the more difficult the math must become, to keep the coin generation stable. When a batch of ASIC hardware was delivered the network Hash Rate would jump, and so would the “Difficulty”. So I was always increasing my personal Hash Rate after the early adopters had drove up the “Difficulty”, thus reducing my rate of generating rewards.
Another aspect to consider is the conversion price of a given Cryptocurrency. At the time I was running my Bitcoin mining farm at its peak, I was using around $500 of electricity every month. When the “Difficulty” was low and the Price was high, I was making a nice profit, basically double my electric bill every month. The price of Bitcoin didn’t stay high. Eventually, my mining was no longer covering my electric bill, or I was only making $30 profit. That’s why this site I’ve linked several times is so important http://www.coinwarz.com/cryptocurrency. This site allows you to plug in your Hash Rate, the amount of power it takes to support that rate, the price of your power, and the price of currencies to determine which one is the most profitable for you to mine. At the time of writing this, Bitcoin is over $1100 and I could make a little over $1.00 a day mining it. $30 a month, not worth the amount of heat the devices give off I’d have to offset with running the A/C.
All my hardware investments paid for themselves, it was a great experience learning about this new technology, and sparked a lot of interest for my oldest son. I hope that some very smart people out there come up with some other purpose for these devices that I could again make money from running them or selling them.
I have not investigated any new advancements in ASIC hardware, I know there are some now available for Atlcoins. It could very well be that even more advancements have been made and there is a new ASIC bitcoin miner that is profitable.
Up next a detailed guide into mining software.
Wikipedia – Bitcoin
Bitcoin Forum – The most popular place to discuss all Cryptocurrencies
Cryptocurrency Trading Charts
Most Profitable Mining Calculations