Money from the socket: How to make money on bitcoins and ether

2024 Author: Seth Attwood | [email protected]. Last modified: 2023-12-16 15:55

An industrial miner spoke anonymously about how to turn electricity into money, about farms on the balcony and conflict with the law

Cryptocurrency rates are setting new records right now. Bitcoin, which was priced at $ 900 in January, has already surpassed its historic mark of 2,860. Its closest competitor, Ethereum (ether), is selling today at $ 250 per coin, which is 3,000% more expensive than at the beginning of the year. In addition to trading, you can also make money on the reward that the system gives to a person for processing random payments in cryptocurrency by his computer. This method is called "mining". The more powerful a special computer - a mining farm - the more often the miner receives a reward. To build a small farm at home, you don't need to have any knowledge - just watch videos on YouTube and buy the necessary electronics in a computer store. Investments in it will pay off in four months.

One of the largest Russian industrial miners anonymously spoke about the shortage of video cards in Russia, balconies clogged with farms, and why the train with ether had already left for beginners.

About industrial mining

Only schoolchildren and amateurs like to talk about their success in mining on YouTube. Professionals do not disclose details, we have a very narrow circle of contacts. Mining is booming right now - thousands of people think they've found an easy way to hit the loot button, drink beer and count the numbers. In fact, this is a difficult, exhausting and painstaking work. The difference between home mining on the balcony and my current scale is the difference between a grandma who knits wool socks and a knitting factory where packs fly off the assembly line every second.

I graduated from the Institute of Oil and Gas in Moscow a long time ago. Then he worked as a senior manager in an engineering company. Until 2016, I did not know anything about trading and cryptocurrencies at all. But once I set fire to employees who were mining bitcoins on our local network, right on work computers - the machines were terribly freezing and slowing down, all productivity was leaking somewhere. Of course, it is insanely beneficial when someone else's office pays for the energy consumption for mining, and not you yourself. The guys had to explain to me exactly what they were doing. It was then that I got involved.

I assembled my first farm using video instructions from Valera (ValeraTV) on YouTube. Valera is an Ufa citizen, an apologist for folk mining, who in his video blog shows how to assemble the installation at home. Best of all, video cards of ordinary personal computers cope with mining - those parts of the system unit that gamers pump over for better graphics in games. The simplest mining "rig" (a computer for mining. - Ed. Approx.) Consists of five Radeon RX480 video cards, a motherboard and a power supply unit designed to consume at least a thousand watts (1 kW / h - Ed. Approx.) Of electricity. All this is packed in a wooden cube without walls. I collected one for 100 thousand rubles. On the Internet, you can find many online calculators of mining profitability, you don't even need to be able to count in a column. On average, profit from one rig out of five video cards is 30-40 thousand rubles per month. I took it as entertainment. Problems arose when in an apartment designed to consume 8-10 kilowatts of electricity, the plugs were knocked out by a hairdryer turned on by my wife: all the rest of the energy was taken by the mining rig.

I seriously looked at mining only when I switched from bitcoin to another cryptocurrency - ether (Ethereum) - and figured out how to scale the farm, how much income it can bring. Then my investment project was born: partners are investing in the purchase of equipment, and I am assembling and setting up huge farms for round-the-clock work.

Friends became the first partners in the fall of 2016, then the information went through word of mouth. I quit the company, rented an industrial hangar with an area of one hundred square meters, set up ventilation, 22 thousand cubic meters of fresh air per hour - the farms get very hot. For the first investment, I assembled the same installation as at home, but with a high-quality heat sink. Then another farm, with more expensive video cards, then another and another. I cannot disclose income. Now the entire investor farm already consumes more than 200 kWh. For comparison: my home installation for 30 video cards consumes only 5 kW / h (its profitability is about 200 thousand rubles a month. - Ed.). This winter the landlord asked what we were doing. I explained. A month later, he also entered the share. My investors are very different people. They never give up their last money. There are a couple of people with super profits, but there are no oligarchs yet.

Industrial mining is a closed business. I'm the only person in the hangar. Equipment worth tens of millions of rubles is viewed by video cameras from all angles. I can't even hire a cleaning lady, because if she spills water or just wants to wipe the farms with a wet rag, it will be a disaster. An hour of equipment downtime is costing my investors dearly. All contracts with them are concluded in words - the law simply does not describe the services that I provide.

About the device of cryptocurrencies and "money from nothing"

The most common complaint that miners hear: "You make money out of thin air!" To understand why this is not true, you need to disassemble the simplest economic model. Let's imagine that I'm going to send a small amount to a friend, non-cash. The money allegedly goes from my debit card to his card. In reality, capital does not move anywhere. The money remains in the same place, only the numbers on the accounts have changed - the designation of how much the bank owes me. People shift responsibility to banks, trust them, but holes are regularly discovered in the banking system because people run it. In addition, the bank takes a commission even for transactions between individuals, even if it is small. If you manage the capital of a corporation, the commission of banks becomes simply enormous.

Cryptocurrencies eliminate these two problems at once - intermediation and a large commission. Bitcoin is the very first and most popular cryptocurrency, and it is convenient to use it as an example. The sender of Bitcoin (BTC) connects directly to the recipient, peer-to-peer, money is not transferred through third parties. But the transaction record is confirmed by the miner - or rather, his computer, or mining farm. There are hundreds of thousands of such farms all over the planet. That is, the system is decentralized. The only function that farms do is write new transactions to blocks, and blocks are added to a giant common base. The base is called "blockchain", and it contains traces of absolutely all chains of transactions that have ever occurred in bitcoins. All miners must have the same blockchain data - you cannot cheat the system, the transaction will not go through if from somewhere in the system a record of “extra” bitcoins that are not in the records of other miners suddenly appears. At the same time, the transfer commission is on average 0.001 BTC. That is, for $ 2 you can transfer from continent to continent both a million dollars and a thousand.

Unprofitable Bitcoin and Chinese Monopoly

Where, then, do new bitcoins come from in a monetary system where there is no central bank? A new coin appears in the miner's account automatically when his farm has added another block to the blockchain. The new bitcoins are like a reward for the computing power that the miner has provided to the system. Without the power of miners, the system will not be able to confirm and process payments. This mechanism is written in the program code itself, on which the cryptocurrency runs, and this code is also strictly identical for everyone. Once the release of new bitcoins will stop - this is called "limited emission". Everyone knows that 14 out of 21 million bitcoins have now been issued. At the same time, the reward for the miner for a new completed block decreases - that is, the complexity of mining increases.

There are many cryptocurrencies that use blockchain in their work, and the principles are similar everywhere. I've only used Bitcoin for analogy. In fact, no one has been mining bitcoin in Russia for a long time - it has become economically unprofitable. Now it is held by China, that is, more than half of all bitcoin transactions in the world go through three to four Chinese mining pools - several miners unite in a group in order to form and write blocks to the blockchain faster together.

Yes, the demand for the cue ball is huge, the capitalization is $ 47 billion. But the complexity of mining has grown tens of thousands of times, the reward has become scanty, and it will take a very long time to wait for it. The Chinese have very different conditions. Their factories mass-produce a device called an ASIC - a toaster-sized metal box with a bunch of chips and a fan. It is imprisoned exclusively for Bitcoin mining, and apart from its cryptographic operation, it does not know how. ASICs in China are used to load entire buildings and neighborhoods in cities, which are given over to mining farms, similar to giant server workshops. The last squeak is mining cars. Chips are immersed in sealed baths with a dielectric liquid, the baths are filled with classic containers. ASICs are freely supplied to Russia, but even if you buy 20 of them on AliExpress, you still cannot compete with the Chinese scale.

Don't ask me if it is cost effective. Just look at the courses. Everyone who started mining, like me, in the fall of last year, has already recouped their equipment several times. Dozens of blockchain-based cryptocurrencies like Ethereum (ether), ZCash, Lightcoin and many others have all skyrocketed in value, although electricity and mining costs have remained the same. In addition to Bitcoin, just forget about it: it is traded on the exchange and bought, but not mined.

About the shortage of video cards, the life of miners and the cunning of Ukrainians

Now, in June 2017, you simply cannot find standard video cards for 12-15 thousand rubles and power supplies per kilowatt - miners have bought all the profitable components for farms on a wholesale scale. Moreover, even suppliers from China, which all professionals know by sight, do not have good cards. The demand for vidyushki for miners exceeds the demand from gamers tenfold. Chinese factories are so loaded with orders in the domestic market that they have officially held back exports.

For the last month I have been sleeping three to four hours a day. When you need to combine and coordinate the work of 1,500 video cards, you have to write the programs yourself. Home mining software is free to download though. I spent a lot of time to establish remote control over the equipment - from a phone or tablet, through "team viewers", but I still go to the hangar every day. It is hot and very noisy; it is impossible to spend more than four hours indoors. Parts of the farm now and then fall off, they need to be replaced with new ones, constantly increasing the total power. I guarantee my investors stable profitability only for the next two to three years.

The main parameter of the farm is its hash rate, that is, how many times per second the installation performs calculations of the cryptographic algorithm to verify a new transaction. One good graphics card should average 25 to 28 Mh / s (megahash per second) or $ 5 per day if you are mining a popular cryptocurrency. For home miners, all the creativity lies in what cards to choose, how to balance at acceptable power and profitability, how to calculate the payback of the rig, which room to put the farm in for better cooling. Mining as a hobby quickly develops into an occupation, then into a lifestyle.

I do not know of a single miner who, after four months of payback, has not invested even more money in new farms. Some perverts force the entire balcony in a Khrushchev building, a garage or a separate room in a high-rise building with rigs for 15–20 cards - they overload the outlet, heat the air in the room to 60 degrees. I would not like to have such neighbors.

My industrial farm is in a large international pool, where we are in the top 10 in terms of capacity. In Russia, you can count a maximum of 200 such farms - most of them are located by businessmen in the Far East, where electricity is traditionally cheap. In Moscow and the region - no more than fifty. By the way, China is building entire hydroelectric power plants for its industrial farms. Russia is in seventh-eighth place in terms of mining capacity, but our gap to Brazilian or European capacities is huge.

Ukraine has gone even further, where mining is a real epidemic among young guys. Many Ukrainian miners do not pay for electricity at all, they just pull the cable to the transformer or street wires. Video cards are smuggled from Poland or directly from China. We monitor the consumption and voltage in the network more closely, although arrogant and cunning miners still try to rent premises in the region, in villages where you can connect illegally.

Key market players

Until April, everyone was trying to figure out which cryptocurrency was the most technologically advanced, that is, in which not people, but large companies and corporations would want to invest. From the jump in the Ethereum (ether) currency in May, it became clear that its creator - programmer Vitalik Buterin - had arrived in Silicon Valley. Microsoft, IBM and even the legendary American bank JPMorgan Chase have already officially entered into cooperation with Buterin. In Russia, German Gref is considered the main lobbyist for cryptocurrencies. Sberbank also recently announced its integration with the ether. This cryptocurrency is called the second generation bitcoin. In addition to the fact that the encryption protocols of the ether are better and more reliable, it allows the use of the blockchain principle in almost any area of business. The script itself allows system participants to conclude contracts and distribute dividends without the participation of a third, controlling person - this is called "smart contracts". At Headhunter, the smart contract programmer is a piece of work with great potential. There may be ten of them in the whole of Russia, for a vacancy they offer about 150-300 thousand rubles.

The miner market is designed in such a way that the more competitors you have within one currency, the less your share of the capacity, that is, the less the system's reward for each completed block. We managed to jump on the outgoing train of ether, everyone who will be after us is already in question. Therefore, I would not talk about crypto technologies, in the mining of which you can still effectively invest. YouTube is full of videos of people who put together their home farm, then took out a loan and collected a few more, continue to invest their last money in farms, borrow and re-borrow - why? Due to the shortage of video cards, the price tag for them is updated every three days. If you didn’t succeed earlier, you will not be able to build the farm capacity fast enough now to stay ahead of the growing difficulty of mining. I would like to tell the newcomers directly: guys, do not meddle, you are already late, for you it is not profitable.

About terrorism and "pyramids"

For dollars, euros and rubles every year they buy so many weapons, cocaine, heroin and the services of prostitutes that the share of cryptocurrencies on this black market is microscopic. The volumes in which terrorism is paid in dollars are millions of times larger than those that go through bitcoin. All the rest are fairy tales for the townsfolk. My grandmother can be convinced that ISIS is funding with bitcoin, and I know that no one will sell you a batch of 500 Kalashnikovs for bitcoins. In addition, the Bitcoin algorithm allows the police to effectively fight drug trafficking - in order to track the network of dealers, you just need to catch the addict, take his mobile phone with an open wallet and track the transfers. This way you will find dealers' wallets, you don't even need to make any inquiries to banks or label cash. Yes, the authorities have to work further to identify and catch all these people.

The second thing you hear from the layman is that if it is not terrorists who are behind bitcoin, then certainly "the pyramid and Mavrodi". It is useless to argue with this if a person does not know how stock and currency exchanges work. The price of any currency is determined by the demand for it and nothing else. Only people with a large share of capital in it relative to the total amount of invested funds are able to move sharply the rate of a particular currency. The first time the Bitcoin rate was made liquid by an American who paid with cryptocurrency for two boxes of pizza. This was the first transaction in history in which electronic currency was exchanged for real goods. Now May 22 is the professional holiday of all miners (Bitcoin Pizza Day).

Now MMMschikov need to own a total of at least 5-10 billion dollars in order to strongly influence the bitcoin rate. I think this is just ridiculous. Only Chinese miners and American speculators now have such influence on Bitcoin. And they are constantly pouring their income from the growth of the exchange rate into dollars - then we see a correction, as now, after the $ 2,800 mark for 1 BTC. Another correction will be in the fall. Vitalik himself owns really large reserves of ether. I do not know, perhaps the fact that Forbes does not yet count assets in cryptocurrency is the only reason why Buterin is not yet ranked on a par with the oligarchs.

About mining and the law

The state resists cryptocurrencies not because of security, but because it destroys the sources of replenishment of the budget. As long as the government needs taxes, it will put its hand in your pocket through the banks. And national security has nothing to do with it.

The attitude of the authorities towards mining has changed in just three months. At the beginning of winter, they were going to give 8 years in prison for mining and illegal entrepreneurship. Now blockchain is the main topic of the St. Petersburg International Economic Forum, and the head of the Bank of Russia Elvira Nabiullina promises to create a national cryptocurrency. Lobbyist groups are fighting among themselves for this initiative. Two weeks ago, I would not have talked to the press, fearing for my freedom.

In our legal system, there is not even a suitable terminology for mining - this method of issuing any currency is simply not described in the legislation, which means that the income from it cannot be legal. But if a policeman comes to me and asks about all these thousands of flashing lights, I will say that the cars are just busy with calculations. What - it does not concern him.

About personal motives

I'm not mining for the money. I get a kick out of being a part of the future before others. Six months ago, NFC or Apple Pay technology was a curiosity. Now you can pay with a smartphone, contactless, at any gas station. In the United States, you can buy a donut or an apartment for Bitcoin. I am sure that Russia will come to this too. Now I have more virtual accounts than debit accounts, and I don't remember the last time I picked up cash.

Less and less often I explain to my friends what I do. I chew all the nuances only for my new investors. My family already uses cryptocurrencies. My wife left work, sometimes she helps me to press buttons. The eldest son is trading a little on the crypto exchange. This has an excellent effect on his perception of labor - he sees how much effort needs to be spent in order to acquire capital and build his production.

My business model is universal for any country. But who said that in conditional Germany someone will need me, that there the miners' shares of the capacities are not already allocated? Who guarantees that I can find suppliers of hard-to-find equipment? I'm not ready to go through this again. I had a hard time setting up the remote control of my production. I have a narrow circle of friends in Russia who understand me. After all, life is not determined by hashrate.