Thursday, March 27, 2014

ASICs vs. GPUs, March 2014 Update

Last week I found what I felt was a reasonable deal on a Bitcoin ASIC, so I decided to give it a try and bought a couple Bitmain AntMiner S1 ASICs. Each is good for 180GH/s SHA256, or when overclocked around 400GH/s combined. At a price of about 1BTC each, I thought it was worth a shot. Now I'm thinking I may be lucky to break even. Let me run some numbers for you.

Lately, like since about March of 2013, Bitcoin has been pretty consistent about increasing in difficulty by 20% or so every 12 days. In fact, I can do one better and say that the average increase every 2016 blocks since last March is... wait for it... 23.73%. That's pretty massive when you think about it, and it's the reason why difficulty has gone from 6,695,826 on March 24, 2014 to a staggering 5,006,860,589 today. Put another way, the difficulty -- and thus the returns for mining -- have changed by a factor of nearly 750. And what's worse: there's no sign of slowing down just yet.

So let's take a closer look at the AntMiner S1. At a price of $600 (around 1 BTC), assuming you have spare power supplies and everything else you need, we can get a pretty good idea of your profit estimates using any number of online calculators. Personally, I think the calculator over at BitcoinWisdom is one of the best, and it's what I used. Since I now have my AntMiner S1 ASICs up and running, I know power, performance, etc. With the current difficulty and running at 400GH (overclocked) with a power draw of 850W, my two AntMiners are looking at the following scenarios:

1) 15% difficulty increase every 2016 blocks = 233 days before the power costs outweigh the income. I can make around $454 in that time off my ~$1200 investment. This is basically the "best case" scenario.
2) 20% difficulty increase every 2016 blocks = 177 days before it's no longer worth mining. I'll only earn about $70 off my investment.
3) 23% difficulty increase every 2016 blocks = 163 days before I should stop mining; I'll lose $82 based on current prices.

Now, obviously the price of BTC is the big wild card. If we see $1000+ again, and I think we will some time in the next 9 months, I easily earn back far more than the initial investment. If we take a nose dive on the other hand and don't recover, I stand to lose even more of my investment. So it's a risk, but a calculated one. And in another 10 days or so when the difficulty jumps up 20%, things start looking even worse. At $600 for an S1, you'd stand to lose $70 in the "reasonable" 20% increase scenario -- a swing of $140 in just 10 days (and the reason ASIC prices are tumbling).

If you're thinking, "Okay, but the AntMiner is a 55nm ASIC -- what you need to look at is a good 28nm ASIC," well, you're only partially correct. If you took a chance and pre-ordered a Terraminer IV a while back, you're rolling in the BTC right now. If you order one right now from the June batch however, let's be optimistic and say you get it in 60 days (before the end of May). With difficulty jumps of 20%, you'd end up losing half your investment! Even smaller 15% increases would still result in a loss of over $1000. That's a pretty sobering thought -- one of the fastest, most efficient BTC ASICs right now is looking like a terrible risk for future buyers; either price needs to come down or difficulty needs to stabilize. BTC prices basically need to double for you just to break even, and the rate of difficulty increases will likely slow down before then, but be careful.

What about the scrypt ASICs? Well, Alpha Technologies is now promising 90MH instead of 25MH, which is pretty great to hear. Depending on when the hardware arrives and the difficulty at that time, however, it's not looking so hot. Let's say it ships in just 60 days (which is very aggressive). At a moderate 5% increase in difficulty every LTC cycle that would mean mining LTC would never recover the initial investment cost. Even if we assume you can beat LTC returns by 50%, you'd still only make about $1850 on the $10,000 investment. I suspect those who pre-ordered the first batch will do pretty well, but the future (most likely) second and third batch orders are far more suspect.

The big problem with ASICs of course is that once it becomes unprofitable to mine with them, they're essentially useless. With a PC, you can at least use it to run Windows (or Linux or whatever if that's your thing), play games, do real work, etc. You might not need dozens of GPUs, but you can at least recover some of the initial investment. Perhaps you'll find some people willing to buy your outdated BTC ASICs as well, but I'd expect very low prices at best.

In short, ASICs are mostly going to make a lot of money for the people selling the ASICs, not for those buying the ASICs. It's the Gold Rush all over again, where the real winners are the people supplying the miners. It will certainly be interesting to see where pricing and difficulty stabilize over the coming months, but don't be surprised if a lot of the Scrypt ASICs turn out to be losing propositions. Unless of course we see a repeat of last November where prices shot up 20X on Litecoin in only a week or so, which is what we're all probably hoping to see. :-)

There's more available in the newsletter, as usual. Just let me know you'd like to start your subscription with the 3/26 email and I'll make sure you get it!

Monday, March 24, 2014

Subscription Instructions

I've been sending out a several-times-weekly newsletter for a few weeks now, and it's about time I put together a proper post that only covers the topic of how to subscribe. The short summary is that (for now), I am offering three payment options: $5 for two days (at least one issue), $10 for a week (at least three issues, but really however many I write in seven days), and $30 for the month of emails.

Since some people are still having difficulty finding my email address apparently, I'm going to just see how Google's spam filtering deals with this: email me if you have questions (and please include the subject "Subscriptions"). I'll even make you a deal: start at either the one day or one week subscription, and if you decide you want the full month I'll count your initial donation towards the $30 -- so $25 to go from two days to the full month, or $20 to go from one week to the full month.

Of course, being a cryptocurrency newsletter it wouldn't make sense to pay me with fiat money. You can do the math to determine roughly how much $5/$10/$30 is, or go with the rates I list below for the following currencies (which I will update periodically as needed [last updated 7/01/2014]):

BTC: 153qS9Ze32hnV3fwirZLWNka4wBAowc21E (0.008/0.016/0.047 BTC)
BC: BSeFTYYKKa3kPLS359C2QqdJnpCUCPrSBu (40/70/210 BC)
CAIx: XhdRzmju2vQuR5RT73R7sbN42xaohdBcWa (30/60/190 CAIx)
DOGE: DD9iTWf8diPkvKdB8roPJepTyp6BGVQtct (20000/40000/120000 DOGE)
DRK: Xd3EaCJg6G8ZnGuKkpvwyRMwyHzbaRDnob (0.56/1.11/3.34 DRK)
LTC: LfCLyykrNFftzpdWejR73hf478ZtBzQ9jE (0.56/1.12/3.36 LTC)
VTC: VaNuRCj73JVAwR1YMnt8CXaqoiPgykiMTk (20/30/100 VTC)
XMR: 48JM22E3ZfPSoFCukcizpSR2hCsBnAExT4ACvrpYx5czFgEyR12LWwK9JpgYRZKjsRHp8ynDcQegbhCspvjHd7gaL8qbzYy (2/4/12 XMR)

As an added bonus, active subscribers now have access to a Google Spreadsheet that has pseudo-real-time data (usually less than two hours old) for the various coins I track -- and if you want any specific coin added to the list, just let me know and I'll be happy to accommodate!

Updated Information:

I've decided to offer a sample of the newsletter for anyone that's interested, one time, for free. Send me an email and I'll send out one of the subscriber emails of the past week. Note that this is different from the $5 subscription trial, in that I won't be sending you the absolute latest information from my newsletter, but it will be a complete email sample, including (potentially outdated) charts.

On a similar note, if you're not really interested in subscribing but would like me to update the site more frequently, what would really help is for you to use either my Amazon Affiliate links, or try one of the following programs for free (and cancel if you don't like it):

Join Amazon Prime - Free Two-Day Shipping and Prime Video/Music
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Mining with GPUs for GPUs?

Have you heard about GPUcoin (GPUC)? It's an interesting idea that could have been a killer and made GPUC mining something worth doing... except the whole alt-coin market is going soft, and with less profitability comes lower demand for GPUs, which leads to lower prices. In short, after peaking at prices of $420 for R9 280X, $550+ for R9 290, and $700+ for R9 290X, we're starting to see a return to sanity on GPU pricing. So let me start off with some quick GPU pricing links that might be of interest:

Radeon R7 240: Newegg starts at $65
Radeon R9 270: Amazon starts at $209; Newegg starts at $179
Radeon R9 270X: Amazon starts at $229; Newegg starts at $199
Radeon R9 280: (Can't find on Amazon); Newegg starts at $289
Radeon R9 280X: Amazon starts at $329; Newegg starts at $349
Radeon R9 290: Amazon starts at $439; Newegg starts at $459
Radeon R9 290X: Amazon starts at $569; Newegg starts at $579

The reason those prices are important is that we can now buy some of those GPUs using GPUC -- but how much does it end up saving...or costing!? Here are the current GPUC prices for the R7 240 (don't bother...), R9 270, and R9 280X. Yes, the R9 280X they have on offer is a nice Sapphire TOXIC, but performance won't be all that different from other R9 280X GPUs if you know what you're doing. Right now, you'll have to pay about 32 satoshis per GPUC in order to buy enough coins for a GPU (though that could obviously change). The good news is that you could now build a capable miner for about $1500 instead of $1900, though at the current rates you'd still be looking at four months or more to break even on the investment. But what about buying graphics cards with GPUC?

[Note: Prices and difficulty for GPUC are jumping around like jackrabbits, so take the following as a snapshot in time rather than a "this is the way it will always be" statement.]
  • R9 280X: 2,520,301 GPUC = $470. OOPS! The exact same GPU is in stock at Newegg for $399.
  • R9 270: 1,227,839 GPUC = $229. Oops again. Yeah, we're still talking pricing higher than Amazon/Newegg right now, by $20 to $50.
  • R7 240: 174,482 GPUC = $32.50, so that's a pretty good price.
My guess is the people at GPUcoin ordered right before prices on most AMD GPUs dropped. The faster GPUs end up costing more than you'll now pay at retail, while the R7 240 wasn't as desirable for mining so you can pay less than retail. Unfortunately, R7 240 will only hash at around 100KH, so while it would be $75 less for the GPUs than buying retail, you're maxing out your motherboards with only 600KH or so. Meanwhile, the minimum cost of a mobo, CPU, PSU, RAM, storage, and case is going to be around $350, so you're spending $550 total for 600KH where a complete $1500 rig might do 2100KH (i.e. better price/performance overall).

The only way this gets worked out and GPUC thrives is if they can go and purchase a bunch more GPUs at well below the MSRP (which would mean below $299 for the 280X). Then they can take a bit of a loss on the ones they already purchased and end up delivering GPUs at a reasonable price. It would actually be super cool to go buy new hardware with GPUC (or BTC), especially if the price was below normal online pricing, but that would take a lot of work and a big warehouse to store inventory I suspect.

I should note that the GPUcoin store also has an open market where users can sell items. This is getting closer to the ideas above, but it's more like eBay with additional risk -- you send your GPUC, then have to wait/hope you didn't get scammed. And if you don't receive the product you orders, TOO BAD! Mwahahaha.... Yeah, I'd be a little leery at the least. If you're curious about pricing, though, someone is offering a 2MH scrypt rig for 10M GPUC -- that works out to about $1850. Buying the same hardware online (5x R9 270, ASRock H81 mobo, 4GB RAM, Intel Celeron CPU, 1000W PSU, 5 x16 risers, and a power button) will set you back about $1500. So sadly, no, there are not good deals to be had there right now it seems. And if you actually want to buy 10 million or more GPUC fast, you'd probably pay at least 25% more than the price I've just quoted.

As an alternative, you can already go through Gyft.com and buy a $10-$2000 Amazon.com gift card with Bitcoins, and then you could buy GPUs that way -- or anything else you might want to buy at Amazon. (And you get 3 Gyft points back for paying with BTC, compared to 2 points with Paypal or 1 point with credit cards -- basically a 3% "cash" back reward.) See the problem with all these new coins claiming to improve on the existing options? Some will likely succeed, but there's a lot of "reinventing the wheel" going on.

If you're struggling to find good coins to mine, my newsletter is always available -- and a quick side note to subscribers is that if you haven't received today's full newsletter, send me a note and I'll make sure you get it (or potentially let you know your subscription is expired). Another alternative is putting your rigs up for rental on LeaseRig where often there are people willing to pay a bit more than what you might mine normally to borrow your rig and chase some new coin (or boost hashing power for their new pool, etc.)

There was plenty more information that only went out to subscribers, along with the above commentary; want to see what you're missing? Start with a 2-day $5 trial, and if you upgrade to a week ($10) or month ($30) I'll count your initial payment towards the total! Let me sweeten the pot for all subscribers as well with this offer: when I hit 100 active subscriptions (I have fewer than 50 right now), I'll start sending out a daily newsletter with current charts to all active subscribers. I'm also looking into other ways to provide data in a real-time fashion (i.e. sharing a Google Spreadsheet). In short, the more people subscribe, the more it becomes worthwhile for me to spend time on the newsletters.

Thursday, March 20, 2014

What Not to Mine? (aka How to Spot a Shady Cryptocurrency)

For those that are curious, here's the sort of thing I write about in my newsletter. There are charts showing current profitability and other recommendations as well, but I also provide some thoughts on the market as a whole. Rather than only emailing this to my subscribers, however, I'm going to post this on the blog. If you like this sort of thinking and analysis, please subscribe -- I'm still only asking the equivalent of $5 for two days, $10 for a week, and $30 for a month. Details are in this post. And with that said, let's talk about what not to mine right now...yes, it could be a big list, but I'll just pick on a couple options.

It shouldn't be too surprising that there are a lot of "scam" coins going around. The latest two I want to discuss are PANDA and 10-5 (with 10-5 having some of the same core developers as PANDA). With PANDA, "wolong" has apparently disappeared after trading in his 2.5% premine of PANDA at higher prices -- after promising to stop that sort of manipulation -- and the devs "learned their lesson" and are making the coin they really wanted to make this round. PANDA smelled fishy from the start, but I still mined some (and they're now basically worthless). Fine.

Here's the problem with TenFive/10-5: like PANDA, this is a premined coin. It's only 1% premine this time, but there's more to it than that. The block rewards of 10-5 are small, so the 105,000 premined coins would actually take a bit of time to mine, according to the original specifications -- around five days before the end of the initial month after launch. But now, the specifications changed after the coin launched! The original specs called for the following reward structure:
The "Flat" Reward Scheme designed to reward pi (really!?) for the majority duration:
  • First 1050 blocks: Payout of 1.57079632679 per block
  • Next 3150 blocks: Payout of 3.14159265359 per block
  • Next 6300 blocks: Payout of 9.8596 per block
  • Next 9450 blocks: Payout of 19.7192 per block
  • Next 18900 blocks: Payout of 25 per block
  • Next 37800 blocks: Payout of 50 per block
  • Next 75600 blocks: Payout of 25 per block
  • Next 151200 blocks: Payout of 19.7192 per block
  • Remaining blocks: Payout of 9.8596
Now, there are reasons to change from that reward structure -- for instance, at that rate of mining, pi isn't really the reward much at all, and the coin would be mined out in about three years (give or take). But there's a less benevolent reason to change the rewards to the following:
The "Flat" Reward Scheme designed to reward pi for the majority duration:
  • First 1050 blocks: Payout of 1.57079632679 per block
  • Next 3150 blocks: Payout of 3.14159265359 per block
  • Next 4000 blocks: Payout of 9.42477796077 per block
  • Next 5150 blocks: Payout of 3.14159265359 per block
  • Final value of 3.14159265359 per block for the remaining blocks
First, they estimate 2150 as the year when the coins would all be mined right now. Well, I can do math better than that! A block of Pi coins every 1.5 minutes means people will mine ~3015 coins per day, 84446 coins every four weeks, and 1101568 coins per year. At that rate, it would take 9.53 years to mine out TenFive. So if they want to mine until 2150, they need to up the supply to around 150,000,000 coins (oh, but that's not "10-5" so that would be bad... maybe 105,000,000 then?) The bigger issue however is this clause regarding the premine:
Stipulation: 4-week mandatory share lockdown. After lockdown period only a % based on quarterly performance reports will be paid out.
Have you figured things out yet? By changing the rewards structure to pay out fewer coins, in the first month before they dump their 105K coins on any willing suckers, they have reduced the supply from roughly 400K coins plus the premine to just 84K mined coins plus the premine. Fewer coins in circulation for the first 28 days may promote higher exchange prices, and then BOOM! "Hey, who just dumped 105,000 coins on the exchanges!?" Also worth noting is that we're now on blocks in the 6000+ range, and the reward is still at pi, so we didn't even get the 4000 blocks worth ~3X pi.

I'm becoming increasingly convinced that premines are a clear sign that a coin is going to go nowhere but down over time. I don't care whether the coins are for the "hard working developers" (that had to take someone else's code, change a few variables, and recompile -- oh my! Five hours for a good developer could accomplish that!), "marketing efforts" (e.g. get it listed on an exchange, get other suckers to jump on, etc.), or bounties for people to make pools and such; the end result is the same: a big dump of coins early in the life of the cryptocurrency that will plunge the price down to places where it may not recover.

Someone asked me recently if I had ever tried any of the cryptocurrency IPOs. The answer is "no", and the more I think about it, the more I'm convinced I never will. There's just too much chance for abuse, and I don't want a part of it. And just to be clear, there are developers who really put in some time and effort. I think the Darkcoin guys have done a lot of good work, for example, and even things like Heavycoin and Fuguecoin at least require them to do something other than clone a github repository. But if you're not adding something truly new and complex, it's really not that much work to get a cryptocurrency started.

Now if you'll pardon me, I'm off to create my own cryptocurrency. I'll only do a 0.5% premine for my efforts -- 1 billion coin total supply, so I'll just take 500K. The first month of blocks will be to help set the difficulty, with low block rewards. Then the rewards will start to ramp up -- just in time for my huge dump! I'll borrow ideas from several other popular coins, we can all mine it for a month, and then when things are starting to look up I'll cash in and retire...or go create my next cryptocurrency. Sound familiar?

But everyone is doing these premines, and the developers really do need to be paid, right? Well, no, not really they don't -- not like this. It's no wonder the alt-coin market is tanking, as hundreds of new clones have come out and very few of them have any real worth -- other than for early pump and dumps. We even have websites that will adjust scrypt for you and help you create your own coin -- for a fee, of course. Which coins will actually survive the test of time? Besides BTC and LTC, well, it's a bit difficult to say for certain! I have my bets, and some will certainly be wrong. So bet it. If you want to know more, just send me a subscription request.

Good luck to you all as we mine our hearts out.

Tuesday, March 18, 2014

More Thoughts on Scrypt-Jane

I talked about scrypt-jane a few weeks back, discussing the basic idea and providing some charts talking about the N-Factor adjustments. (Those charts have now been ganked by all the scrypt-jane coin threads, apparently -- thanks for at least giving me credit guys...um...guys? Really, just a link to my blog post would have been nice. FYI, those tables listing the N-Factor change times didn't exist in the original threads until my post went up, and the Ultracoin thread at least took the time values verbatim from my blog. Sheesh....) One of the things I didn't really get into which I wanted to at least quickly discuss was the problem with the early stages of scrypt-jane, as well as the expected hash rates.

I'm going to use the Radeon HD 7970/R9 280X as my primary example here, as I have access to those GPUs and they actually work so far on all of the N-Factors...provided you have the right settings. Let's go over those here, just for fun.

Approximate Settings for Scrypt-Jane Mining
N-Factor Settings R9 280X R9 280
4 -I 18 -thread-concurrency 20480 -g 1 6.1MH 4.8MH
5 -I 18 -thread-concurrency 20480 -g 1 4.5MH 3.7MH
6 -I 18 -thread-concurrency 16384 -g 1 3.3MH 2.5MH
7 -I 18 -thread-concurrency 16384 -g 1 1.8MH 1.5MH
8 -I 18 -thread-concurrency 8192 -g 1 1.0MH 850KH
9 -I 18 -thread-concurrency 8192 -g 1 550KH 470KH
10 -I 18 -thread-concurrency 8192 -g 1 330KH 270KH
11 -I 12 -thread-concurrency 8192 -g 2 133KH 100KH
12 ? (I missed this stage of YAC/YBC) ~70KH 55KH

Starting at the initial N-Factor of 4, you can expect pretty amazing hash rates -- about 6.1MHash/s from the 280X, with TC at 8192 and intensity 18-20. Six days later you switch to NF 5 and your hash rate will drop to around 4.1MH, still with more or less the same settings. At NF 6 you'll drop to maybe 3.3MH, then NF 7 is going to be around 1.8MH, NF 8 drops yet again to 1.0MH, and so on. Along the way, however, you'll start to find that the settings that worked well for lower N-Factors no longer run without hardware errors at higher N-Factors -- and never mind what happens after about NF 12, where hash rates seem to drop far more than the 30-50% of earlier changes.

You'll need to tune the above settings a bit in most cases to get accepted shares and no HW errors -- in particular, I had a lot of problems not getting HW errors on the R9 290X at lower N-Factors. I also know that HD 5800 and HD 6900 hardware basically suck at scypt-jane (scrypt-chacha) for reasons I don't quite understand. Probably it's just the OpenCL code isn't really tuned for those older cards, or maybe the older hardware just lacks certain features, and that's fine. Still, it's interesting to look at how performance at the different N-Factors compares. As far as I know, scrypt-jane with NF-9 is basically regular scrypt, but hash rates are lower by around 20% compared to vanilla scrypt. At NF-10, again hash rates are lower than Scrypt-N by 15% or so.

One of the things I wanted to mention in all of this is that the initial stages of scrypt-jane are basically a headache for larger mining operations. Depending on how similar your hardware is, you could be looking at a few hours to perhaps a day or two of tuning and tweaking settings to get things running "properly" at each N-Factor adjustment. And if you're not paying close attention to all your rigs, you might come back from a weekend to find that all your PCs basically accomplished nothing after the latest N-Factor adjustment -- been there, done that, and didn't particularly care for the hassle, thanks! At least the rate of NF change slows down a lot at NF-14, but then at that point you're looking at rather low hash rates and there may be better coins to mine.

It's not too surprising then that most new "clone" coins that are moving away from vanilla scrypt are going with Scrypt-N (Adaptive-N-Factor Scrypt, as defined initially by Vertcoin). Sadly, VTC doesn't seem to be getting as much credit as it deserves, at least in terms of trade value, but then part of that might be due to the somewhat lackluster name and logo. There are at present at least seven cryptocurrencies I can name off the top of my head that use Scrypt-N, compared to six scrypt-jane options (though I'm probably missing some from both sides). The first scrypt-jane coins are already at NF-14, and frankly they've struggled since NF-13 with GPU mining; in a few months we'll see NF-15 and then three months later we'll hit NF-16. They might become predominantly CPU-mined coins at that point, which may or may not be a bad thing.

In short, Scrypt-N makes more sense to me from many perspectives. It skips the early (and somewhat chaotic) low N-Factor stages, it defines a more systematic progression from one N-Factor to the next, and in my experience at least it runs better on several generations of hardware. That doesn't mean it will necessarily succeed (see Betamax vs. VHS), but as more and more scrypt ASICs arrive and GPU miners look for greener pastures, I suspect the majority will end up with Scrypt-N (or something new). What will that be? I'm not quite sure, but as always I'm keeping an eye on things. If you'd like to subscribe to my email newsletter for more information on what I'm mining, you can find the instructions on this page.

Monday, March 10, 2014

Standard Miner Profitability, One Crazy Weekend, Subscriptions

I've just sent out the latest copy of my newsletter, which covers the aftermath of this rather crazy weekend for cryptocurrencies. What happened and who were the winners and losers? Subscribe and find out! $5 for one issue, $10 for a week (typically three issues, but really however many I write in seven days), and $30 for the month of posts. Email me if you have questions (jarred.walton at gmail dot com). I'll even make you a deal: start at either the one day or one week subscription, and if you decide you want the full month I'll count your initial donation towards the $30 -- so $25 to go from one letter to the full month, or $20 to go from one week to the full month.

I've been working on a more formalized posting of how to subscribe, and at some point I need to get a link to it put in a prominent position on the blog, but for now donations of one of these coins should suffice. You can do the math to determine roughly how much $5/$10/$30 is, or go with the rates I list below (which might end up being too cheap/expensive if the prices change much):

BTC: 153qS9Ze32hnV3fwirZLWNka4wBAowc21E (0.01/0.02/0.05 BTC)
DOGE: DD9iTWf8diPkvKdB8roPJepTyp6BGVQtct (6500/12900/38500 DOGE)
DRK: Xd3EaCJg6G8ZnGuKkpvwyRMwyHzbaRDnob (7/13/39 DRK)
LTC: LfCLyykrNFftzpdWejR73hf478ZtBzQ9jE (0.32/0.64/1.9 LTC)
MAX: mf5DXTLiZFCnJC2x13MXSyigyUjmBnrwjG (27/53/158 MAX)
MRC: 1Ctnz6cHcMYiF9fz2pyd6orFuo1mDhKdWj (810000/1620000/4840000 MRC)
VTC: VaNuRCj73JVAwR1YMnt8CXaqoiPgykiMTk (4/8/22 VTC)

Moving on, I've listed roughly the same PC quite a few times on my blog, but I'm going to go ahead and call this my "baseline mining PC" for now. It consists of the following parts:

Baseline Mining System
GPUs 3 x Radeon R9 280X 3GB $1,200
Motherboard Gigabyte GA-990FXA-UD3/UD5 AM3+ $137-$166
Processor AMD FX-8320 Vishera $154
Memory 2x4GB DDR3-1600 (desktop) $77
Power Supply 2 x Rosewill Capstone 750W 80 Plus Gold (Two) $200
Storage 2.5" 60GB Kingston V3 SSD $59
Risers 3 x x16 to x16 and/or x1 to x16 powered  (Three) $13/$9 each
Case Build it out of wood or PVC pipes ~$40
Total (price range) $1906-$1935

My recommendations for mining are based off of that particular build, and the goal has mostly been to try and choose coins that can pay that off in four months or less. Note that it's possible to add a fourth GPU quite easily, and the two 750W PSUs have enough power to do that, so technically you could spend about $2320 for a system that's 33% faster than the above and it would end up being ab it more efficient. Anyway, right now, the market is in a bit of a slump, so the best I can do as around $13-$15 per day. That means it will take more like 4-5 months to break even, provided prices don't drop -- but prices could also jump up again.

Consider LTC; Litecoin launched and went up to around $4.50 per LTC last April, then it quickly fell to the $2-$3 range and stayed there for much of the year, with a drop down to as low as $1.11 at one point. Many were proclaiming the end of LTC...and then November happened and LTC shot up to $48. Those who had strong hands and held until the bubble came out with some amazing profits; even if you sold at $20-$25 (which is what I did with the LTC I still had), it's hard to complain. Well, we're now repeating that with most cryptocurrencies. Sure, prices are higher on LTC and other coins, but so is the difficulty, meaning for every dollar spent on a GPU you're looking at three months to earn it back. Save the coins, though, and I suspect in another year many people will be looking back thinking, "I wish I had kept all my VTC until it hit $50!"

Anyway, if you want to join in the fun, at least some of the prices for hardware have come down. The same system as above last month cost around $2020, so $100 less now. GPU prices are still way over MSRP (by 30% or more), which oddly enough appears to be more of a US phenomenon. I have friends in Europe that are able to get GPUs for less than what I have to pay, where normally it's the exact opposite. Their power costs are still a lot higher, so I suppose that's a small consolation.

Thursday, March 6, 2014

Email #2 Preview, Subscription Pricing, Poloniex Hack, and Auroracoin Insanity

Below is a (rather heavily edited) preview of the first portion of my subscription newsletter, which went out late yesterday -- or really early today if you prefer. In the interest of keeping the blog regularly updated I'm going to post portions of each newsletter here. As far as pricing goes, I think the current structure is good for now: roughly $5 for one email (and I might occasionally send two), $10 for a week of emails (typically three per week), or $30 for a month. But we're dealing in cryptocurrencies, so really it's "send me the equivalent in a -- preferably moderately stable -- cryptocurrency and then email me (jarred.walton at gmail -- again, note the two R's) and I'll get you on the list. If you come up a bit under $5 (or $30 for the month) after conversion, I'm not going to lose any sleep over it; and if you want to pay a bit more than $5, be my guest. And if you think you should have received the email but didn't, send me a note (and check your spam folder)!

So not a whole lot has changed since Monday, and rather than repeat things I'm going to talk about a few other topics that have come up lately, specifically where and how to mine any particular cryptocurrency. If you've done this much at all, you are probably familiar with the "please don't mine at the biggest pools" comments on new coins, and even on the pools themselves. The reason is basically to distribute the network hash and keep any one pool from compromising the security of a coin. To my knowledge, no one in recent time has even attempted to do this -- after all, if you make a coin like BTC worthless by compromising the security of the network, then any coins you might steal in the process likewise become worthless. I suppose the idea would be to do a "51% attack" and not get caught, but that seems a stretch at best.

In fact, a far bigger risk it seems is for either the pool you mine at or an exchange you use to get hacked. Last week it was Coinmarket.io and C-CEX.com, and this week it appears Poloniex had 12.3% of their BTC (around 97 BTC) stolen. Thankfully, Poloniex is being very forthcoming about what happened and what they're doing to refund users, but make no mistake about it: leaving tons of coins on an exchange is a big risk.

The problem is, while statistically everything is supposed to more or less average out over time, in reality it's only work that gets completed that counts, and every time a block is found everyone has to restart their work. So let's say it takes your mining rig on average 40 seconds to complete a typical piece of work for a coin XYZ, but the block time is only 30 seconds. If you were to try and solo mine, nearly every attempted block solution would be old/stale/worthless before you could even finish! Which is why someone created stratum servers that send a message to the connected clients saying in essence, "stop what you're doing and start on a new piece of work" -- you at least don't continue trying to find a block solution for another minute only to find that the network has moved on. This is all basically Cryptocurrency Mining 101, but sometimes it's good to get back to the basics. The goal then is to find pools that are a decent sized chunk of the network hash rate, but not too much (i.e. less than 30% but more than 15% would be good), which is sometimes easier said than done.

And last thing before I sleep, let's talk about AUR. Seriously, what is up with Auroracoin? It's such a silly idea -- "Save Iceland!" ("save the whales", "save the trees", etc.) -- but apparently the marketing is working. Even if they do properly destroy any excess AUR that isn't claimed by the Icelanders, we're still looking at 42 million AUR that was premined for this publicity stunt; otherwise this is just LTC cloned and premined with a message of helping out poor Iceland. How anyone got duped into mining AUR is something I don't get, but perhaps even crazier is that if you actually took the chance early and mined, you're sitting on some good profits.

My advice: cash out while you can! I can't see this being sustainable, and if you look at the market depth I don't think there are nearly enough buy orders to prop up the current prices (and they've fallen quite a bit from an insane high of roughly 0.08 BTC). Put another way, AUR is currently valued at more than LTC and basically every other alternative cryptocurrency, and apparently Iceland is going to get a huge dump of AUR to any citizen that's interested starting in a few weeks. If you could get a free 31.8 AUR that's worth about 1.5 BTC (around $1000) for doing nothing, and everyone else in your country can get the same...would you sit on it hoping it will go up in value, or would you cash out for BTC as a safer bet? Well, I'd do the latter, so take that as you will.

Also, the chance for abuse of this "airdrop" is absolutely huge -- I mean, there are potentially 330K payments of 31.8 AUR going out to basically anonymous AUR addresses. If you were sending out these payments and "accidentally" sent 100 such transactions to your own accounts over a few months, would anyone be able to tell? I doubt it, and I can't help but think that some of those involved with this coin might earn an extra few hundred thousand dollars this coming year. Like I said, it feels like a publicity stunt that's working well so far, but don't get caught holding the bag! Then again, DOGE was a joke that caught fire and actually surpassed LTC in terms of hash rate for a while, and even now it's still a bit more profitable to mine DOGE than LTC (though not by much).

I couldn't have called the DOGE phenomenon in the first two weeks, so I certainly can't hope to tell you what will happen with AUR. I really do hope for the sake of human decency and all that it works out and no one gets scammed, but it's an awfully big temptation. Even so, I wouldn't count on a copy of AUR managing a repeat performance, which is what some people are trying to do with Ekrona. That's sounding like pure pump and dump, so whether or not the creator intended it as such, I'd be careful of any long-term plans there.

And with that, I'm off to bed, having finally finished my Dell XPS 15 review. Whew! Happy mining everyone, and if you want the rest of this newsletter, just kick a few coins my way.

Monday, March 3, 2014

Email Subscriptions - Sample and Introduction

I mentioned in the previous post that I was considering trying out an email subscription model for some of my content. I got some takers on the idea -- thanks to all of you! -- and so I composed and sent out my first email today. To give you an idea of what would go into the email subscriptions, I am going to post the majority of that email here -- minus the specific mention of coins as well as my "What to Mine" table showing the calculations and the analysis. If you'd like the full email, just drop me a note and a donation ($5 or equivalent in any of the major cryptocurrencies for now will do -- if needed, I can get you an address for any other coins you might want to donate).

Welcome to my first official subscriber email on what to mine. Disclaimer: this first email might be (okay, *is*) a bit longer, and I'm trying to decide on a good subscription rate. I said "donate $5 or more and I'll tell you what I'm mining", but I'd like to hear your thoughts on this. Should I have individual, weekly, and monthly rates? (I don't want to do yearly, as I can't guarantee I'll be doing this consistently for that long!) If so, how often should I update, and what should the rate be? I'm sort of thinking three updates per week might be a good start -- Monday, Wednesday, and Friday. I could do $5 for a single update, $10 for the week, or $30 for the month. Does that sound like a reasonable structure, or should I charge more/less? If you would, please email me back with your thoughts. Also, there's a lot of other "stuff" to discuss as I kick things off; I'll add some of this to the blog, minus the "what to mine" table and lists of specific coins. And with that out of the way....

I already emailed a few people earlier this past weekend, but of course prices, difficulty, etc. change regularly. The short summary is that right now, the most profitable coins tend to be those that are not using standard scrypt. This is hardly surprising, considering there are well over 100 "major" (i.e. on an exchange) scrypt coins now. The trick is figuring out which of the alt-coins are going to be worth something in the long run. My thoughts are that for a coin to truly succeed, it needs to be something different/new/useful. LTC is the first scrypt coin, and it's still doing okay (though clearly having trouble of late). VTC, MAX, DRK, XPM, QRK, etc. were all really great to mine early and hold. Sadly, I'm not even sure which coin was the very first scrypt-jane offering (YAC?), but hopefully you get the point. Don't underestimate the power of marketing either -- a "dumb" coin with the right marketing hook can take off in a big way; it might die out just as quickly, but the momentum of belief can be slow to change (DOGE, AUR, and other coins fall into this category).

Now, as I see it there are a couple ways of going about mining. One is to look for the truly special coins and hop on those and hold for a while -- it's what I've done with VTC, DRK, and to a lesser extent MRC. Truth be told, I don't particularly care for the rewards structure of MRC, but so far it's doing okay; the coming month will or so will be telling as the rewards will start to decline in a few days, and price will either stay where it is and/or stagnate, or the "decreasing value" of mining will start to increase the price. It really can't go much lower, as it's currently trading at 3-4 satoshi, but we'll see. If it goes down, I "lose" potentially half to three quarters of my MRC value, but if it goes up to 10-20 satoshi (which is my hope!) I could realize some nice profits. The other option is to simply try to mine any new coin, hold a chunk of them for a while to see if price goes up, and you'll get some winners and a lot of losers -- or you could try to cash out as fast as possible if the coin is listed on an exchange, and potentially make some decent returns. This requires a lot more time and dedication, so most of us don't go that route I think.

I suppose I should quickly put in here that a "satoshi" is termed as 0.00000001 coins. The code for Bitcoin originally defined that as the minimum value you could trade, and if BTC prices go up into the tens of thousands or more perhaps they will one day update the client to allow for smaller transactions, but for now that's where we are. All of the other coins have stayed with the same core code structure in this area, so the smallest amount you can buy/sell of any coin is one satoshi.

Going with the above, that means any currency traded against BTC has a minimum value of 1 satoshi BTC (around $0.0007). That's not much, but with coins like DOGE, MRC, FLAP, etc. issuing billions of coins, and mining bringing in millions of coins per day, that quickly adds up. I have to admit that I'm still shocked that DOGE ever reached 50 satoshi, let alone 280 (or the current 170 or so satoshi). If any of the "billions minted" coins I'm holding hit even 50 satoshi, I'm looking at potential gains of 20X or more. But I think DOGE is a bit of an anomaly, so I wouldn't count on a repeat performance from most clones. If you're interested in trying "day trading" of cryptocurrencies, you could also try to do the old buy low/sell high approach on some of these low-value coins -- if you can buy at one satoshi and sell at two, you double your coins every time the buy/sell cycle repeats. However, the exchanges fill bids/asks in a first come, first filled basis, so as an example if there are already bids for a billion CAGE at 1 satoshi and another billion asks for CAGE at 2 satoshi, you could be waiting a long time for your orders to get filled. (And of course some coins trade against LTC or DOGE as a way to overcome the 1 satoshi minimum issue.) And if a coin ever reaches the point where no one is interested in paying even 1 satoshi per coin, you're left holding the bag.

With all of the above out of the way, let me note that I'm only one guy, and I already have a full-time job, so I can't hope to track everything. I've wondered if perhaps I could build a large enough readership/subscriber base that I could actually make this a full-time job and perhaps invest more time/effort into some programming and such to automate pulling data for more coins, but that's a big pile of work to tackle right now. In short, I'm going to tell you what coins I *have* tracked in a second, but there's a very real (and even very likely) chance that I've missed something good. If you know of something better and want to give me a heads up, that would be great, and if if I agree I'll even give you a free week of email updates, but if you want to keep your "trade secrets" I won't blame you. :-)

So what am I tracking (and in some cases, mining)? Basically I have a bunch of coins where I've downloaded the wallets, synced up, and can reasonably easily check difficulty and pricing. That in turn let's me determine profitability. It's like Coinwarz, except I track most things manually -- and I can also track the newest coins. It is a bit of a pain, and actually mining on any of the coins requires registering on a new pool (unless solo mining is viable, which is typically only in the first hours of a coin's life), creating workers, editing your miner configuration files, etc. Again, it's a pain, so I usually only switch what I mine daily, and there are quite a few coins where I downloaded the client and perhaps even registered with a pool and did some mining before I decided, "Nope -- this coin is going nowhere." Here's the current list, with exchange prices, difficulty, and reward values current as of (around) 11:00AM PST, March 3...

[SNIP!]

The missing content includes a table of the coins I'm tracking (and felt were worth including) along with several more paragraphs of analysis. And as a final comment, if you're buying any hardware and Amazon has prices that you like (and you're in the US), shop there via my Amazon Affiliate Links and let me know what you ordered (and when) via email. For every $100 ordered via Amazon, I'll credit you with the equivalent of $5 towards these email updates -- so $200 ordered gets you a week at my current pricing, $600 would get you a month, etc. You can also shop via my Newegg Affiliate Link, but the commission there is so low (1%) that I can only give $5 credit per $400 ordered. Then again, that's just one R9 280X so it can't hurt. :-)

Rest assured, the email updates won't replace me writing on this blog. There are still many other topics I want to tackle, when I get the time. Hopefully that will be later this week....

Saturday, March 1, 2014

Stay Secure: Welcome to the Post-Gox Era of Cryptocoins

In what probably shouldn't come as much of a surprise to anyone following my blog, I think the demise (or at least full shutdown for the time being) of MtGox is probably all for the best -- not just for Bitcoins, but for cryptocurrencies in general. It always struck me as a bit odd that the first major Bitcoin exchange managed to deal in numerous fiat currencies but never even made an attempt to branch out into other cryptocurrencies. Oh sure, there were talks on and off about supporting Litecoin, but if you can't properly run an exchange dealing with just one cryptocurrency, how would you support two, five, ten, etc. cryptocurrencies? So, farewell MtGox; you had your day in the sun, now it's time to move on.

Of course, the shutdown of MtGox does have some really odd aspects to consider. There was difficulty with getting fiat out of MtGox for close to a year now, and the result was that the price of Bitcoins on the exchange tended to be about 10% higher than on other exchanges. Just prior to the halting of BTC withdrawals, MtGox was trading at closer to $900 while places like BTC-e were closer to $800. I think that led to a lot of users putting BTC into MtGox and trading it for virtual fiat, in the hopes of then buying back in at a lower rate. When MtGox halted all BTC withdrawals, the reverse happened -- everyone that hadn't already converted their BTC to a fiat currency now panicked. The result was that prior to the closing of the web interface, MtGox was trading at closer to $100 where most other exchanges bottomed out in the $400-$500 range.

So here's where things get a bit interesting. No one could withdraw BTC from MtGox, and suddenly people were dumping BTC at crazy-low prices in order to recover any potential money. Who would want to buy BTC on a failing exchange that wasn't allowing anyone to withdraw? I have at least one good answer: MtGox. Just sit in the background, buy up chunks of BTC at prices 75% lower than the rest of the BTC world, and when the dust settles and everything has cleared up, even after losing 8000+ BTC due to their negligence (i.e. zero confirmation approved transfers that became subject to transaction malleability) MtGox ought to have a whole ton of BTC sitting in cold storage somewhere. Refund all of the people that didn't sell and weren't able to withdraw, so that you didn't "steal" anything, and MtGox still has a big pile of BTC they can either hold or trade on other exchanges.

Conspiracy theory? Perhaps, but in this wild west world of little to no government oversight or regulations, it's entirely possible. And while we're on the subject of exchanges, there are other goings-on of the past week that are worth noticing. For one, Coinmarket.io went down because their system is basically designed to shut down if something unexpected happens -- which isn't really a bad idea as it should hopefully prevent anyone from withdrawing a ton of coins via some hack. The site remains offline after several days, and they're apparently "rewriting" (more likely debugging) the back-end for the site; we'll see if/when they return.

Another exchange with some woes: C-CEX.com, who I have used quite a bit for trading DRK in the past couple of weeks. Apparently some buggy code got deployed and one user, lojack, somehow ended up with a few hundred BTC in his account. Since it wasn't "real" BTC -- it was a glitch in the C-CEX system -- he decided to buy up a different cryptocurrency and withdraw that. That currency was DRK, and he caused the price to spike from around 0.002 BTC to 0.008 BTC. Then he transferred the DRK to Poloniex and dumped it, causing a price crash there, and shortly thereafter mayhem ensued. Feeling some remorse after the fact, lojack/Nathan has tried to return the coins, and at least personally I got my 2400 or so DRK back (but lost my 6.6 BTC in the process). Others are apparently still waiting, and I've personally pulled all my coins out of C-CEX for the time being.

But wait, there's more! If you're starting to think that maybe the current selection of exchanges may not be entirely secure and that you should avoid storing a large balance of coins on any of them, give yourself a pat on the back. Both Poloniex.com and CryptoRush.in have had some issues in the past few days as well, with the sites both being down on occasion. Other exchanges continue to experience rather erratic performance -- Cryptsy and CoinedUp for instance go from being very fast to suddenly taking 30+ seconds to refresh -- and CryCurex (who? Yeah, exactly) continues to operate in manual mode for withdrawals and deposits. I have about $12 worth of coins I initially transferred there as a test that I haven't yet withdrawn, and I probably won't ever send anything more to the exchange unless something pretty dramatic occurs. I'd encourage anyone that doesn't already follow such practices to start now -- only leave coins on an exchange than you can "afford" to lose.

And for that matter, the same goes for mining pools; withdraw your balance regularly -- I generally have my auto-payouts set to run at least a couple times per day based on my pool hash rate, so if I generate 500K of some new coin in a day, I'll set my auto-payout to 100K. And whatever you do, don't have a pool pay directly to an exchange in this fashion, or you run the risk of losing all the coins should something go wrong.

Getting back to the topic of staying secure, one of the cool things about cryptocurrencies is that you can send pseudo-anonymous payments to pretty much anyone in the world and without hours at most they're able to use the coins or convert them to some other currency. Some people say, "Okay, neat -- but who wants to wait for six confirmations?" That leads to some adopting a policy of allowing coins to be used after only a few confirmations, or maybe even zero confirmations. "Hey, it's a pending order on the blockchain; I trust Bitcoin so we'll just release the funds right now." This is more or less what MtGox was doing, and it came back to bite them in the butt in a big way. They then pointed the finger at Bitcoin and tried to blame transaction malleability as a flaw, but really this was a known issue for more than a year (more like two) and "best practices" were to require six confirmations so that transaction malleability wouldn't affect you. Whose fault is it that MtGox decided to go their own way? And who ends up paying for their arrogance?

Another important consideration is that there are also no roll-backs or returns with cryptocoins, so if you steal a pile of BTC there's not much others can do to stop you from using them. If you offer to trade coins with a person -- either on a forum or via email or whatever -- and you decide to trust them and send coins directly to them, you're opening the door to be scammed.

In short, whether you're dealing with an exchange, a pool, or an individual, think about things in this way: what would you do if you were using hard currency? When you buy something online, you don't mail them an envelop with a wad of cash and hope for the best. Considering cryptocurrencies are about as easy to recover as hard currency if you happen to lose/misplace them, the best advice I can give is to be more circumspect. Don't be rash or impulsive (unless you just like taking risks?) because the end result will eventually catch up to you.

And if you really don't care about your coins, then send them to me -- I'll be happy to keep a safe watch on them for you. Or as an alternative, if you want to know what I'm currently mining, send me a small donation (at least worth a couple dollars after conversion) and an email message (jarred.walton [at] gmail -- and please pay attention to the spelling of the first name; Jared Walton is probably tired of getting my messages) with a note of the donation, and I'll be happy to tell you what I'm up to and why. Basically, I'm debating on whether there's any use in a sort of "subscription" service for that kind of advice. I might talk about some things publicly, but sometimes I wonder if it might just be best to shut my big yapper on occasion. Hahaha -- fat chance of that happening. Happy mining and trading!

BTC: 153qS9Ze32hnV3fwirZLWNka4wBAowc21E
DOGE: DD9iTWf8diPkvKdB8roPJepTyp6BGVQtct
DRK: Xd3EaCJg6G8ZnGuKkpvwyRMwyHzbaRDnob
LTC: LfCLyykrNFftzpdWejR73hf478ZtBzQ9jE
MAX: mf5DXTLiZFCnJC2x13MXSyigyUjmBnrwjG
MRC: 1Ctnz6cHcMYiF9fz2pyd6orFuo1mDhKdWj
VTC: VaNuRCj73JVAwR1YMnt8CXaqoiPgykiMTk