Don’t Idealize Your Mining Profitability and Get Trapped in Bitcoin Mining
Note: Li, author of this article is a Beijing-based bitcoiner who started holding bitcoin in 2013. Here is his story with mining at home.
Attention, please! I am talking about bitcoin mining, not Bitcoin! Bitcoin is the future, but if you want to make money through mining bitcoin, I suggest you give up now.
As a Bitcoin lover, I have strong faith in Bitcoin and see it as a chance for a common person to do something big. After doing some serious thinking, I bought 25 Antminer this January. And now six months have passed, I haven’t even earned one fourth of my investment. As bitcoin mining is getting more difficult, obviously, my investment in miners is going to be disastrous.
I am writing this story to warn those who want to get rich and put all of their money into bitcoin mining.
Don’t idealize your mining profitability
I did my calculation and analysis when I decided to purchase miners. The problem is that all my calculation is purely theoretical. But it is nearly impossible to reach an ideal state in reality.
How much does it cost for bitcoin mining?
The cost of bitcoin mining is much more than you had expected. Speaking from my personal experience, the money I used to buy miners only accounted for 60 percent of the total expenses. I have to rent a place to host them, to pay electricity prices and that’s a loooot! Besides, I need to build transmission lines, buy wires, routers and server racks. In a word, bitcoin mining will leech away every penny of you.
How many bitcoins can you mine per day?
You may have dreamed of bitcoin raining down on you. I don’t be such a downer, but you will never be able to mine as many bitcoins as you had imagined. You have to deal with various problems from network connection issues to miner malfunction. Even if nothing goes wrong and you operate at an ideal environment, it doesn’t take long for you to realize that miners never reach the ideal hash rate most of the time. And don’t forget that mining pools charge 3 to 4 percent for server costs and of course for making some profit. Actually, I believe they charge more than they claimed based on my math.
Anyway, the actual bitcoin mining income is much less than you had imagined.
Increasing mining difficulty
Why Would I even think of mining a profitable business at the first place? That’s because we tend to compare the bitcoin we mined with the cost of miners. We all know that it’s getting harder to mine bitcoin as time progresses, but that’s only a blurry concept. Let me break it down for you. You will mine 15 percent less bitcoins every week and sometimes even 30 percent. In other words, a miner will become good-for-nothing in two months.
How energy-consuming can miners be?
I even used a power consumption meter to test the power consumption of an Antminer. It’s 392W to 400W per miner and the total consumption would be 25 multiply 400W at large. Again, I was too idealistic. The actual consumption is about 25 percent more than my original calculation as a result of line loss. I used an independent meter to monitor all the miners so that I can easily see how much they consumed. If you connect miners with other home appliances, you can’t even know how much they consumed.
On some annoying fallacies
Mining at home with one bitcoin miner
This is the most illusive part about bitcoin mining. You find it so fascinating that you can start mining simply with one miner. You tend to ignore factors like electricity price and maintenance fee.
Long-term potential of bitcoin price
A lot of my friends console me by saying words like one bitcoin, one house, or one bitcoin, one Lamborghini. This is the biggest fallacy ever! If you have strong faith in Bitcoin, why not simply buy Bitcoin?
The truth about bitcoin mining
If bitcoin mining is not a profitable business, then where does the money go? I think about it a lot and I realized that miner manufacturers are the only winners in the mining ecosystem. This is what I mean by calling mining a horrible trap. If you search bitcoin mining on Baidu, you’ll be intrigued to see so many news about how bitcoin mining can make easy money.
“Three days to get a 100% return on your investment”
“A poor graduate student got dumped and later became rich through bitcoin mining”
I did some rough calculation and found that the hidden secret of bitcoin mining is that:
You buy a miner and start mining until the miner is outdated. If bitcoin price drops during the process, then you’ll lose. If bitcoin price remains stable, then it’s a tie, either you make or lose any money. So it’s like you work in vain. If bitcoin price rises, then you can make some money. But bear it in mind that the money you make is because of bitcoin and it has nothing to do with mining. Go buy bitcoin if you want to make money!
At last, I want to share something I heard from others. Personally I am not 100% with it, just want to share it with you, so you could come up with some of your own thoughts.
“Bitcoin miner has become the center of the bitcoin ecosystem. And Bitcoin price on exchanges is manipulated to stimulate the sale of bitcoin miners.”