Cryptomining 100 - What is it all about?
An explainer on cryptomining and why you might want to get into it.
TL;DR: I went and tried Cryptomining and now I have a coin making heater.
Welcome to the first edition!
As part of all my emails, you can expect many Too Long; Didn’t Read (TL;DRs) and sections to skim to. Where possible, I’ll incorporate diagrams. Enjoy the reading, and if you liked it, are entertained by it, or are curious it, let me know in the comments!
Okay now.
Let’s get to the hilarity. Toward the end of 2020 2021, I walked into a Microcenter (Bestbuy but on steroids) and walked out with a $1500 video card. I then tried very hard to justify the $1500 purchase, saying I would buy graphically demanding video games. But who am I kidding? I don’t play enough games. So I did the most sensible thing you would expect me to do: I learned Cryptomining. I basically backed into it.
Sections you can skim to:
WTF is Cryptomining? (What the fork.)
WHY is Cryptomining Necessary?
WHAT have I Learned?
SHOULD you get started?
TL;DR: Compute to contribute.
Cryptomining is using computer phone a toaster electronic hardware to compute (mine) algorithmic challenges on a blockchain network. There are many users contributing their hardware to make these computations on a blockchain network, with the reward for solving a block (the computational challenge) being crypto coins. Have to process the activity occurring in a blockchain network for the benefit of said network!
You compute to contribute. You get rewarded. You continue. Except it’s all passively done by your computer, not you.
TL;DR: Cryptomining contributes to the operations and trust of a blockchain network at a technological level in the given network. Cryptomining records transactions like an accountant, validates the truthfulness of a transaction like an auditor, all in real-time and for almost no cost.
Cementing trust in a given blockchain network.
In order for a blockchain network to be trustworthy, transactions using the network need to be recorded and validated and publicly visible. But instead of one institution (like a bank) responsible for the record keeping, or one supercomputer doing all the computations, cryptominers perform that function. (Note: This understanding applies to “Proof-of-Work Blockchains” like Bitcoin and current Ethereum)
Cryptomining records and validates transactional activity occurring on the network. You are playing the role of an accountant (recording) and also auditor (validating). Except the entire cryptomining is all peer-to-peer crowdsourced distributed to all contributors in the network regardless of institution or affiliation. No more reliance on a bank or central record keeping entity.
Those records that are being added? You can think of each transaction, or record, as a block, that is getting added to a public data-set that everyone has. That’s the blockchain. Blocks are consistently getting added to a chain, and thus the name Blockchain.
The diagram below that I slapped together in powerpoint can you give a big picture understanding of where cryptomining plays that key role.
Why does activity need to be recorded?
Blockchain technology powers the concept of a public general ledger. Everything that happens on the blockchain is recorded, known, and unanimously agreed-upon in this public general ledger. You can think of it as a “write-only” database where activity comes in and the record can’t be changed directly. Corrections would need to be added via amendments.
Contributors in a blockchain (this could be you, me, or anyone) record the activity on the blockchain network, and also validate the activity for authenticity. I won’t get into too much technical detail on how it does this at a technology level.
The entire process to process and validate is extremely fast and extremely cheap to do, relative to current banking processes. And, it requires no middle-man institution to facilitate. The blockchain network basically crowdsourced the cost of maintaining trust in real-time. To look up activity is also extremely cheap and instant, costing near nothing to observe activity.
You know, I’m just going to rip the bandaid off now. Blockchain is not glamorous, sexy, or flashy. It’s quite “boring” in the sense that it is specifically an upgrade to how financial transactions can be done. That’s it.
Note: Didn’t say anything about the numbers themselves being correct to a human. Still need the judgement of an auditor or analyst to determine the actual truthfulness of presented figures!
TL;DR: I have a money making heater, and I would consider a career in Crypto and Blockchain.
It took 15 minutes for me to setup, and 2 days to learn the nuisances of optimization and maximizing my hardware. Now? Well, now it’s a revenue generating heater I suppose. But unexpectedly, I would consider a career in the Crypto and Blockchain space.
Here’s what I learned
Operations Management
Energy Management
Heat Management
Crypto itself
I learned a lot about operations management.
There are browser-based dashboards and phone apps that allow you monitor your “Mining Operation”, even if it’s one piece of hardware you have. Sometimes there are errors, sometimes there are heating issues, and sometimes the price of the coin you are mining for dropped and you are pondering the question on if you should mine another coin. I get notification on system issues and performance drops, and I have no-code automations that will respond to each issue so I don’t have to. I use the Mining Operation software Minerstat to facilitate all of this (it’s a referral link!) which I will go in a lot greater lengths in the next newsletter.
Sometimes you’ll consider expanding your hardware and go through mental math for ROI and come to realize you may need a spreadsheet. Other times, new software releases that can increase the performance of your mining and you are figuring out if its both worth your time and the risk of instability (since it’s new, after all) to pursue it.
At the end of the day, you have an operation. An amateur operation, but an operation nonetheless.
Operations Management Dashboard using Minerstat
You can see estimated earnings in USD (based on the US price of the coin you are mining), the efficiency, and the historic performance. Also if you’re wondering why I have drops, it’s because I turn it off so I can play more intensive video games (depending on the game).
I learned a lot about energy management
I’m a non-house owning millennial, but I want solar energy panels on my future home. But I currently can’t do that, but exposure to cryptomining has unintentionally led me to learn about energy sourcing, energy hardware, costing, usage, and monitoring.
Most relevant to you is the cost of energy, which is absolutely dependent on where you geographically live. You may live in Los Angeles where your energy is priced by tiers (Tiered Rate Plan) and they charge you based on the total amount of energy consumed within a period of time. You may also live somewhere in Los Angeles where you are offered time-of-use plans (TOU) and it charges you by the kWh of when in the day you use energy
Check out Southern California Edison’s Time of Use or LADWP’s Residential Tiers Rates to get a sense of this. You can also elect to source clean energy through these providers. Check out Arcadia.
I Learned to Manage Heat
Oddly enough, I also learned about heat management. Heat is important. If you have a power intensive video card, or you have many of them, the room it occupies will be hotter than other rooms as the heat generated has to go somewhere.
There was a point where I was using a mining rig I created as a heater for the living room. It’s basically a money making heater. When I first started, I had one computer mining in a living room, and one in the bedroom, and between the two was heating for the household. I’ve sinced moved cities and now it is mostly in the garage running on racks.
I learned about Crypto in general
I do not begin to say I am a subject matter expert in crypto technology. I definitely was not when I started cryptomining, and I still am not now. But my exposure to cryptomining has taught me a lot about the foundations of Crypto and the underlying technology. And I’m excited to share these learnings with you as I go.
In fact, this entire experience has made a career in crypto a serious contender in things I want to do in the future.
Biased answer is YES. But more thoughtful answer is it depends.
It depends on what you would like to gain. I had a lot of fun and developed a few mindset of looking at things. At this time, getting into cryptomining has never been easier, and almost every hard challenge has been solved for. If you have a gaming PC, it will take 15 minutes to setup. If you don’t, it’ll take a little longer. But the initial time spent in the beginning only happens once, and you can let it mine on its own with very minimal oversight for the rest of its existence.
In my next newsletter, I’ll be covering more details on how I actually get started, as well as some key considerations in entering.
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