Cryptocoin Mining Crashes

ASIC Miners and Mining Rigs Go Dark as Crypto Markets and Cryptocoin Mining Crashes

One year ago, basements were being converted into mining farms as electricians and heating/cooling experts were brought in to upgrade electricity, install duct work and fans to power up and cool off mining farms.  Reddit and Facebook groups were loaded with pictures and videos of homebrew mining rigs as the price of graphics cards skyrocketed and became scarce.  Gamers complained.  Retailers began limiting order quantities. Cryptocoin mining crashes? Unthinkable at the time.

Bitcoin mining was worse.  ASIC mining manufacturers Bitmain and Canaan couldn’t make them fast enough. When a batch went on sale they were sold out in minutes and at top dollar.  Today, Bitcoin miners are readily available with more power and efficiency than ever at a fraction of price. Nvidia is facing pain from a sudden plunge in demand too.

The after-effects of cryptocoin mining crashes.

The laws of supply and demand are in full force.  With the recent crashes across all cryptocoin markets, existing mining operations are going dark and nobody is thinking about starting one or expanding.

Watch the stats on Slushpool and the story tells itself; hashpower is dropping on a daily basis as thousands of workers go dark after miners hit the OFF switch. Who can blame them? Run the numbers on any crypto mining calculator and see how much money you’ll lose mining crypto on an HOURLY basis.


cryptocoin mining crashes
Cryptocoin mining is crashing and burning.

We documented a cryptocurrency mining downturn back in August but could never dream that just three months later, the entire mining ecosystem would face collapse. This is worrisome for the entire cryptocurrency sector because miners keep everything moving; Bitcoin miners not only mine new Bitcoin; they process all of the transactions on the blockchain. This extends to all of the other digital currencies out there; without miners doing what they do, things can grind to a standstill.

While cryptocoin mining crashes do not bode well, it is too early for anyone to predict future market moves one way or the other.

Cisco Systems Granted Patent For Mining Cryptocoin

Cisco Systems Granted Patent For Mining Cryptocoin – Legendary Network Company Promises Legendary Cryptocoin Mining Solutions

I almost got too excited too fast when I discovered that Cisco Systems Granted Patent For Mining Cryptocoin.  As a “retired” CCNA (Cisco Certified Network Associate) I was popping out of my chair by the excitement of imaging legendary Cisco hardware powering cryptocoin mining.  I’ve configured and deployed citywide networks of Cisco networking gear and was almost giggling in glee at the prospect of CIsco’s military-grade networking hardware deployed on crypto mining.

Then I got some of the details and was a little less excited. Network colossus and IT stalwart  and networking company, Cisco, was granted a new patent a few days ago for a new cloud computing app which will be centered around crowdsourcing and can be applied to cryptomining.

When I think of Cisco I don’t think of cloud computing.  I think of EPIC routers like the 3640 or the legendary 7400 series.  Or an Armageddon-proof Catalyst switch that can handle the Internet traffic of a small town without breaking a sweat.

[ sigh ]

The patent was awarded to Cisco by the US Patent and Trademark Office on Tuesday, and it includes a system that enabling users to allocate their processing power to different tasks.  As a result, they will be able to make a new cloud application and use it for various purposes, one of which could be cryptocoin mining.

The company states that the processing power can be shared with ISPs (Internet Service Providers),  application publishers among others.

The patent filing states that the model they developed delivers capabilities for scaling processing power, speed, reliability and cost.

 

Let’s focus on the headline: Cisco Systems Granted Patent For Mining Cryptocoin

The company postulates their new cloud-based solution can be applied to mining cryptocurrencies.  The effectiveness of this remain to be seen as there is a never-ending “arms race” for ever faster mining rigs and ASICS that run at ever-increasing efficiency.  When I imagined the possibilities behind the news that Cisco Systems Granted Patent For Mining Cryptocoin I imagined a MASSIVE blue-green box that would run 24×7 for years on end minding Bitcoin or another cryptocoin.

As a seasoned Bitcoin miner overseeing ASIC miners 24×7 I don’t see ANY cloud solution beating the basics of cryptocoin mining; run your own hardware on your own network.  Time will tell.

 

Cryptocoin Mining Meltdown

Cryptocoin Mining Meltdown – ASIC Bitcoin Miner Prices Plunge as Other Cryptocoin Miners Pull the Plug

Canaan’s Avalon 841 Bitcoin miner went on sale 24 hours ago at $2299. Earlier today there was a price drop to $1999.  There’s proof right there of a cryptocoin mining meltdown.  Rewind to six months ago and brand new ASIC Bitcoin miners were selling out at full price in a matter of minutes.  I know.  I was there.  I saw it myself.  One of my orders was canceled because they couldn’t meet the demand.  Now the supply of Bitcoin miners outweighs demand; the Avalon 821 NEVER sold out as resellers began issuing hefty discount coupons anywhere from $100 to $400.  Heck, in some cases they have been GIVING AWAY Avalon 821 miners if you bought enough 841s. What’s really startling is the long-awaited Avalon 841 is still in inventory a full day after going on sale AND with a 15% price drop.

What’s going on? Well, Bitcoin prices are low while the difficulty rate remains high.  Then we have this new round of FUD from CNBC on the bleak outlook of Bitcoin mining profits AND reports out of Plttsburgh, New York of the first-ever Bitcoin mining ban.  Mix all of these ingredients together and bake them under the heat of FUD and you end up with a cryptocoin mining meltdown.

Cryptocoin miners of every stripe are feeling the pain.  Cruise various Internet discussions and you’ll learn of miners shutting down their rigs to wait this out as the current price of altcoins makes mining such coins pointless.  Other miners are already listing their cryptocoin mining hardware on eBay and other places.  Oh yeah, there’s a cryptocoin mining meltdown well underway.  New cryptocoin miners who just finished remodeling their basement turning it into a mining farm are wondering what to do with an “OH FUCK” moment in light of the current cryptocoin mining meltdown.

Until just until recently cryptocoin miners dreamed of moons and lambos as they plowed thousands of dollars into hardware and high electric bills.  The future is uncertain in light of the cryptocoin mining meltdown underway.  For any sort of inspiration and guidance through this storm turn to Jihan Wu, co-founder of Bitmain.  He has made billions on cryptocoin mining and stands to make billions more.  In my opinion he is the de-facto leader of crypto mining.  No one has more motivation than him to figure this out. In the short term, do your research and do your own math to see if cryptocoin mining in the short term makes economic sense.

 

Should You Buy Used Mining Rigs?

Should You Buy Used Mining Rigs? Yes. Well maybe…. And perhaps no.

The option to buy used mining rigs is a tempting one. With the madness surrounding crypto mining and alt-coins, many people are going to look into building their own mining rigs.  While this isn’t a huge undertaking for those who are quite computer savvy, what about those who aren’t?  Building a mining rig yourself can be quite daunting if you don’t understand the basics of building a computer from the ground up.  This would lead many to look towards eBay and Craigslist to shop for used mining rigs that other miners are trying to sell.  But is it worth it?

Arguments In Favor to Buy Used Mining Rigs

Difficult to Source

Sourcing hardware for a mining rig build can be somewhat difficult.  The main issue that one would encounter in acquiring the hardware for a mining rig is limitations on GPU quantities you can purchase.  Many retailers, such as NewEgg.com, will have a limit of one per customer per purchase.  Getting the bulk of your GPUs may be difficult, so buying a rig with all the parts sourced may be an attractive option to some.

 

Assembly is Complicated

Building a mining rig is also quite an undertaking in and of itself.  It requires more than a working knowledge of assembling a normal desktop PC, as you’ll be required to run PCI-E USB riser cards and possibly need to daisy-chain power supplies in order to get the entire rig up and running.  Buying used mining rigs with all of the assembly, troubleshooting, and OS installation and configuration done for you may be an attractive prospect.

Arguments Against Used Mining Rigs

Buyer Beware

As with any used PC, you can never be fully certain how old all the parts are or how long they will last.  Additionally, people selling their mining rigs are looking to get out of the mining business altogether, so their rigs will be sold as-is.  So a warranty will most often be off the table when dealing in used mining rigs.  Once you drive off with it, it’s yours. When you buy used mining rigs you are taking on no small amount of risk.

Used rigs could also contain dated or aging hardware.  Dated hardware means the GPUs are from previous generations, and thus offer less hashing power.    Aging hardware could mean your used rig won’t mine for a long enough period of time to recoup your investment, much less turn a profit.  A key talking point when speaking with the seller would be to ask how long the rig has been mining.  If it’s been up and running for longer than a year, it’s probably best to not buy it – you’re on borrowed time.  And if the hardware is dated, avoid it altogether.  Dated hardware isn’t able to keep up with the mining difficulty to produce viable hashing power.  This means it will take far longer to recoup your initial investment, if you recoup it at all.

Inflated Pricing

Price is also a major consideration for buying mining rigs.  Due to the nature of cryptocurrency mining, GPU prices are overly inflated, even on the used market.  This was covered more in-depth in my previous article.  This will lead to mining rigs being sold at above retail price for new equipment, as even used GPUs are being sold for more than MSRP.  And you can bet your bottom dollar that any miner looking to get out of the cryptocurrency mining game will look to fully recoup all the money they spent on their rig, so they will sell it for the highest price that people will pay.  Given the hype around crypto mining, this means seeing used mining rigs going for north of $4,000 will be the norm.

The main thing one should always do when looking to buy used is to research the price of the individual components before contacting the seller.  Purchasing etiquette dictates that one should do all their research regarding pricing before they arrange to meet the seller.  This will allow you room to haggle if you know what you’re buying.  Plus, it’s considered rude to meet with a seller and begin research while you’re on their time.

buy used mining rigs

Typical Craigslist Ads for Used Mining Rigs

My Opinion: Should You Buy Used Mining Rigs?

With the main pros and cons laid out, my professional opinion is that it can be reasonable to buy used mining rigs.  If, and I stress IF, you can find a good deal where the sum of the parts is at or below MSRP, it may be worthwhile for you to buy a used rig.  Since the rig will come assembled, you should expect to pay a little extra for that luxury.  How much extra you find reasonable is completely subjective.

Now for my conditions:

  • Condition 1: You must be comfortable replacing parts if/when they go out.  I would highly recommend you only buy a used rig if you have a friend or loved one with the knowledge necessary.  That, or you’ll need to be willing to spend hours pouring over how-to’s and in-depth guides on the web to figure out how to troubleshoot and replace any issues that arise with your rig.
  • Condition 2: One should be able to comfortably absorb the cost of the mining rig if the entire enterprise goes belly-up.  Buying used mining rigs will almost never come with a warranty or guarantee.
  • Condition 3: Understand the hashing power of the rig you’re buying.  It will be essential to understand just how much cryptocurrency you should expect to mine with your rig so you can plan your ROI.  If the rig won’t pay for itself within a year, don’t buy it.

Disclaimer

Given the volatility of the cryptocurrency market and the inherent dangers of investing in cryptocurrency, I must add the following disclaimer: the above article was written as my opinion, and should be taken as such.  We (myself and CryptoCapers.com) are not responsible for any losses incurred by any reader investing in the cryptocurrency market, mining rigs, or ASIC mining equipment, using any advice we have published as guidance in buying used mining rigs or any other mining hardware.  The cryptocurrency market is extremely risky and volatile, and our advice should only be used as part of one’s research into any crypto mining or investing.  If you are in doubt, or if high risk isn’t for you, then don’t pull the trigger.  But if you’re eager to take a risk in hopes of making real money in the future, then by all means, join us and the rest of the crypto pioneers and invest in mining your own cryptocurrency.

Bitcoin Mining for Beginners – Episode 5: ASIC Miners

Buying an ASIC Miner

I decided that, after two months of mining with repurposed PCs, it was time to try buying a dedicated ASIC miner for Bitcoin.  But just what is an ASIC miner, and why did I want one?

Well, I suppose we should start with just with a simple description of just what an ASIC is.  ASIC stands for “application-specific integrated circuit,” and it’s basically a device designed for one function.  In my case, this ASIC was used specifically for Bitcoin mining.  ASICs are limited to one particular application, and in the case of cryptocurrency mining, one specific protocol.

If you haven’t seen my previous episode in this series, please go check it out here.

 

Why ASIC Over GPU?

In the world of Bitcoin mining, miners have many options on how they want to mine.  A miner can use their CPU, an array of GPUs, or they can opt for an ASIC.  Every option has pros and cons, but typically Bitcoin miners opt for ASICs due to their efficiency and hashing power.  Some cryptocurrencies, such as Ethereum and Monero, cannot use ASIC devices due to the simple fact that ASICs don’t exist for their protocols.  The difference between ASIC, CPU, and GPU mining is broad enough of a topic to deserve its own write-up, so today we’re simply going to focus on my experiences with buying and deploying my first ASIC device.

 

Where to Buy?

After several days of research, I decided that I was going to opt into using an ASIC.  But that was only the first step.  I now needed to source a device from a reputable supplier, and I needed to put a good amount of money up front in order to make my purchase.

The concept of putting a lot of money into something I’ve never even heard of was a scary prospect, I must admit.  I believe in the blockchain, but I wasn’t willing to drop the roughly one thousand dollars I needed to spend to get my feet wet in the world of ASIC mining.  So I decided to look into an older generation miner for far less money to give myself an introduction to buying, configuring, and maintaining an ASIC miner.

What I’m about to tell you comes with a heavy disclaimer: do NOT spend more than you’re comfortable losing!  The world of cryptocurrency is rife with risks, shady sellers, and sight-unseen purchases.  As with any investment into cryptocurrency, one should always do their research, find the best source possible, and be ready to be patient.  Buying hardware for mining Bitcoin comes with many, many risks, and one should be as informed as possible.  One should also not spend more than they are able to lose.  I cannot stress this enough!

With the heavy disclaimer out of the way, let us soldier on.

After weeks of research, peer consultation, and shopping around, I decided to buy my first ASIC miner from eBay.  I settled on a Bitmain Antminer S3+ 450 GH/s ASIC device for $200 as my first investment.  Sure, its hash rate isn’t great, and it won’t make me amazing amounts of Bitcoin, but I was far more comfortable plunking down $200 on eBay than I was plunking down nearly a grand to prepay for a latest-gen ASIC from a distributor I’d never heard of.

 

ASIC by Bitmain

Bitmain Antminer S3+

Miner Has Arrived

Weeks later, after my order was placed and my item arrived, I began the process of configuring my ASIC.  It was fairly easy for me to configure, as I am an IT professional by trade.  However, user experiences may vary.

I was required to provide a power supply for my ASIC, as it didn’t come with one, and I decided on a Thermaltake 750 watt power supply that I sourced from my local Fry’s Electronics.  I also purchased some handy power supply manual switches from a seller on eBay because I didn’t like the idea of running a power supply 24/7 using a paperclip as a jumper.

ASIC Power Supply Switch

Power Supply Switch

With ASIC and power supply in-hand, I set about the process of configuration.  It was very straightforward – connect the power leads to the miner, connect the network cable, and power the device on.  I then had to use an IP scanner to locate the device on my network, as resetting the device to factor defaults reverts the network configuration to DHCP.

I thought I was ready to continue, but a slew of challenges still awaited me.

 

To Be Continued

As I found out, configuring used mining equipment not such an easy prospect.  My challenges were many.  Too many, as it turned out, for a single episode.  As such, we will pick back up next time.  We will continue diving into the world of buying second-hand mining equipment.  I will also share the trials and tribulations that come with the territory.

Look to this space for more adventures in Bitcoin!

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