Let's Talk About Mining - Cryptocurrency Revisited
Astute readers of the site might remember the original story we did on Bitcoin mining in 2011, the good ole' days where the concept of the blockchain was new and exciting and mining Bitcoin on a GPU was still plenty viable.
However, that didn't last long, as the race for cash lead people to developing Application Specific Integrated Circuits (ASICs) dedicated solely to Bitcoin mining quickly while sipping power. Use of the expensive ASICs drove the difficulty of mining Bitcoin to the roof and killed any sort of chance of profitability from mere mortals mining cryptocurrency.
Cryptomining saw a resurgence in late 2013 with the popular adoption of alternate cryptocurrencies, specifically Litecoin which was based on the Scrypt algorithm instead of AES-256 like Bitcoin. This meant that the ASIC developed for mining Bitcoin were useless. This is also the period of time that many of you may remember as the "Dogecoin" era, my personal favorite cryptocurrency of all time.
Defenders of these new "altcoins" claimed that Scrypt was different enough that ASICs would never be developed for it, and GPU mining would remain viable for a larger portion of users. As it turns out, the promise of money always wins out, and we soon saw Scrypt ASICs. Once again, the market for GPU mining crashed.
That brings us to today, and what I am calling "Third-wave Cryptomining."
While the mass populous stopped caring about cryptocurrency as a whole, the dedicated group that was left continued to develop altcoins. These different currencies are based on various algorithms and other proofs of works (see technologies like Storj, which use the blockchain for a decentralized Dropbox-like service!).
As you may have predicted, for various reasons that might be difficult to historically quantify, there is another very popular cryptocurrency from this wave of development, Ethereum.
Ethereum is based on the Dagger-Hashimoto algorithm and has a whole host of different quirks that makes it different from other cryptocurrencies. We aren't here to get deep in the woods on the methods behind different blockchain implementations, but if you have some time check out the Ethereum White Paper. It's all very fascinating.
Ethereum's popularity combined with the recent extreme surge in the price of Bitcoin to $2500+ USD has made GPU mining more profitable than ever.
So why do we, and our readers, care about Ethereum? Well, the answer lies in unfortunate circumstances that will seem very familiar to anyone who has been following computer hardware in the past few years — GPU shortages.
Yes, just as we saw back in 2013 with the Hawaii-based R9 290 GPUs, it's once again practically impossible to buy certain AMD GPUs.
This time, due to AMD's current product stack, miners have gravitated towards Polaris-based GPUs such as the RX 580 and 570. These cards are impossible to find at retail outlets and are going for $350-$400 used on eBay — about double MSRP.
This sucks for gamers. The RX 580 is a great product at the price point for gaming and should be a viable option for gamers looking to build a new system. However, that's not quite how supply and demands works. AMD's aggressive pricing strategy combined with their OpenCL compute performance make Polaris a great GPU for mining cryptocurrencies.
On a side note, if you have a Polaris GPU there's never been a better time to list it on eBay and purchase a better GPU for no additional investment. Although much to AMD's chagrin that would likely be an NVIDIA GPU these days, as we await Vega.
Hey, I've got a GPU sitting here idle most of the time. How do I get in on this?
The choice of what cryptocurrency to mine is overwhelming at this point. New altcoins pop up daily, and the market swings dramatically in short periods of time. Regardless of what you do, you should spend some time looking at crypto mining and the fascinating uses of technology that is has spurred.
Ethereum seems like it would be the smart choice, and for the moment it might be. However, Ethereum is proposing a plan to switch to Proof of Stake, which would eliminate mining (from the best of my understanding.)
In doing some research on current mining techniques, I came across a service called NiceHash. What NiceHash does is connect buyers and sellers of compute power. Buyers pay (in Bitcoin) for a mining power dedicated towards the currency they want to whatever mining pool they would like.
Sellers download the NiceHash miner application and the NiceHash servers dole out the workload accordingly. For their compute power, Sellers are paid in Bitcoin on a specific schedule. Sellers must have a Bitcoin wallet to receive payments — I've used a service called Coinbase for this purpose for years and have been happy with it.
The NiceHash application will benchmark your GPUs to see what settings are optimal for each miner, and automatically switch from currency to currency, depending on the demand they are getting from buyers.
We've been running this application a bit around the office, and I'm impressed at how well it works. NiceHash does take about a 3% cut in the middle, and you aren't going to make the absolute maximum profit possible with your hardware but I think it's pretty close overall. For the convenience of just turning on the application (you can even set it to activate after detecting your PC idle for a certain amount of time), it seems to be worth it for me.
For some quick numbers, at current difficulties and the exchange rate of Bitcoin, we saw a profit of about $3.25/day for an RX 580, $5/day for an AMD R9 Fury X, and about $10/day for a GTX 1080 Ti. (Check out this convenient NiceHash Calculator for your own estimates.)
Power consumption and the cost of electricity was a big concern when we first took a look at Bitcoin mining. However, keep in mind that Bitcoin was only worth $14 when we did our initial analysis. Now that Bitcoin is worth so much more, power consumption for us in Kentucky was only totaling about 10% of our gross profit from mining. For some more information about power costs versus system power, you can check out our previous article.
For those of you naturally thinking about how many GPUs you can cram into a system, stay tuned for some future content from PCPer.
Please note: These rates are very subject to change. If you're thinking of buying a ton of extra hardware to mine, with the hope of paying it off and making a profit in a couple of months please be aware that the price of Bitcoin fluctuates and these numbers may not be sustainable.
Also keep in mind that, operating a GPU at 100% load constantly could shorten the lifespan of your hardware.
However, if you've been hearing about this mining stuff and want to give it a try I think that NiceHash is a nice way to learn about the process and get your feet wet before you move onto bigger and better things.