Bitcoin mining is a method of turning electricity into money. That aphorism percolated around my mind for some time until it dawned that I don’t currently pay the full cost of electricity. Unfortunately, while that situation has existed nearly a year, it will end in a month. Cursing my sloth, I decided to experiment with mining Bitcoins on my PC, and see how much profit can be made from spare electricity.
Bitcoin is the most popular and valuable form of crypto digital currencies. That is, a form of money that exists only in digital form and is “created” through the solving of cryptographic problems (known as “mining”). There is no government or bank backing Bitcoin - so if there is a problem it is largely down to the community to look after itself. However, the problems solved by “mining” are actually checks on Bitcoin transactions, thus it is quite hard to hack the currency itself (hacking banks that hold Bitcoin balances is another issue entirely). From its origin in 2009 Bitcoin has continually grown in presence and value - at the time of writing it is US$228 to the Bitcoin.
So I put my ageing desktop to work. Three years ago it was a top end gaming box, now it is middle of the road. Especially the Nvidia graphics card which is utilised heavily in mining calculations. After downloading a mining program and joining a mining pool (which combines members’ efforts and shares the proceeds), my PC was dedicated to its task. After 72 hours of continuous mining I accumulated 0.0004 Bitcoins - just under 8 US cents. It was actually worse than that as the pool only pays out in units of 0.01 Bitcoins, so it would have taken mining 72 more days before receiving anything. Not really worthwhile.
The pool’s combined computing power increased 10% over just the 4 days I was watching, and apparently this is consistent with growth in total power devoted to Bitcoin mining. Thus the amount earnt by a miner with fixed power (like my PC) should decrease at the same rate (over 10%/week) - a rapid decline. Bitcoin mining is increasing exponentially and as the supply is released at a fixed rate, only more powerful mining rigs now earn back their costs. The most powerful miners are special built ASIC machines, normal PCs can’t compete. It may be after electricity and purchase costs even the new purpose built equipment can’t compete either! It seems only the manufacturers are profiting - just like the gold rushes of old.
Bitcoin is not the only cryptocurrency, just the most well known and developed. There are many others (a list of some is here). Some use a different type of calculation for different purposes, for example adding inflation or making it harder to use specially built miners. I did the same experiment (same machine, same time period) with two lesser known and less liquid currencies: Litecoin and Feathercoin.
If I mined continuously for 100 days at late October 2013 difficulty and market prices, the result would be:
All of which are probably less than the cost of electricity used. I doubt anyone is going to get rich unless they buy high end machines or specialist equipment - and take some large risks.
The experiment is now over.