I started mining crypto-currencies. Thoughts and goals

Hi! You may have noticed, but the last few weeks I’ve been spending a little less time on my blog, but I had a good reason 🙂 As you know, I love to start new projects and so I decided to build a little mining RIG !

Roooo yet another article on how to set up a mining RIG? No thanks…

Hey you know me or what? My goal is not to make a tutorial on how to set up a mining RIG, but I will as usual, really explain my approach, how I thought about it, what are my goals for this project and make the link with the notion of return and passive income 🙂 Don’t forget that the purpose of this blog is to share personal experiences in order to present you investment ideas to generate passive income 🙂

Well… a what did you say?

A mining rig! In the wonderful world of crypto-currencies, you can either buy some, keep some, resell some, or you can earn some! A mining rig is mainly composed of graphic cards, called GPUs (Graphical Process Units), which will use their computing power to validate transactions on a blockchain. To thank me for this contribution, the network pays me in crypto-currency 🙂

Why invest in a RIG?

Indeed, if you have read some of my posts, I was not very keen on crypto investments, but after having read a lot and exchanged with passionate people in the domain, I let myself be convinced of the potential interesting return of such a project! To be honest, with a friend, we had already studied this type of investment about 1 year ago, but we had not taken the step, because the volatility of popular crypto like Bitcoin or Ethereum was important and the electricity costs were a bit scary… Anyway, maybe we should have started a year ago, because since then the price of GPUs has exploded, as has the value of the two mentioned crypto.

Which crypto-currency to mine?

Essential question! In fact, from my first discussions, the choice to mine Ethereum quickly took over. Indeed, it is one of the most used and mined crypto currently. In order to mine a crypto, it must be based on the Proof-Of-Work (PoW) consensus. Such a currency can be mined, as we will use the computing power of our GPUs to validate transactions on the blockchain. The “miner” is paid for his work. Of course, cryptos that are based on PoW are very power consuming and that’s why some of them use a consensus based on Proof-of-Stake (PoS), much less power consuming.

Ethereum is expected to change its consensus from PoW to PoS, but the final date of this change is not known and has already been pushed back many times… At the time of writing, it seems that this change is set for February 2022.

But then, why mine Ethereum?

It is indeed a potentially risky bet, as I have invested in graphics cards and other hardware to mine a currency that may not be minable anymore after 3 months. After thinking about it with some friends, we thought that it would still be interesting to mine this currency for different reasons:

  • Ethereum is growing quickly (+830% in 1 year)
  • Many crypto-currencies are based on Ethereum
  • After its passage in PoS, all that we will have mined will bring us money passively
  • We believe in the law of supply and demand; we hope that its rarification will increase its value

Of course, this is only a guess and it is possible that we are totally off the mark 🙂 I take the opportunity to share a video of a Crypto Youtuber that I follow regularly and who gives his opinion much more experienced than me on the future of Ethereum ?

I can only recommend you to subscribe to his Youtube channel and his twitter account.

Equipment and budget

Well, the first thing to do is to define a budget for this project and not to deviate too much from it 🙂 After some reflexions, for my part, I will allocate 5’000.00 CHF for this new project. I don’t count the electricity costs though, but only everything I need to be able to mine Ethereum. Here is my shopping list:

A motherboard, RAM, disk and CPU

To be able to connect graphics cards and run them, you need a motherboard with PCI-Express connectors. There are many models that are specialized for mining and have 4, 6, 8 or more PCI-Express connectors. For my part, I bought a second hand BTC-T37 card on Anibis for 180.00 CHF. For this amount, I had directly 4 GB of RAM and this model of card includes directly the CPU, a simple Intel Celeron Dual Core clocked at 1.8 GHz.

This model includes 8 PCI-Express 16x slots, which is more than enough for my project 🙂 Then I bought a 30 GB SSD in M.2 format for the modest amount of 25.30 CHF. I don’t need more space, because I’m not going to install Windows on this disk, but a linux distribution specialized for mining.

This first step cost me 205.30 CHF.

The power supply

Contrary to what one might think, this is an extremely important element that should not be underestimated. Indeed, the graphic cards will be particularly consuming and you need a stable power supply that also has enough connectors. For my part, I found a good deal at 250 CHF for a 2000 W, category 95 Plus Gold. It all depends on the cards you have and how you configure them, but even with small cards, you can quickly reach 100 W per card and it can go up to more than 300 W for the big ones. On top of that, you have to add about 150 W for the motherboard.

Some power supplies are even modular and allow you to choose what kind of cable you want to have. In my case, it is not, but it offers me many SATA connectors that will be used to power risers (I’ll tell you about it later), and 6 and 8 port PCI connectors to power GPUs.

The RIG frame

The frame is the equivalent of the case for your desktop PC, except that in our situation, we will favor an open structure to promote heat dissipation and fresh air intake. Your chassis should be big enough to accommodate the motherboard and the power supply. There are a lot of metal chassis on the internet for about 200.00 CHF, and in my case, I once again favored the second hand by buying a second hand model on Anibis for 100.00 CHF.

I also saw that some people make them themselves with wood and it is really cheaper. For 25 CHF, you can make a great wooden frame. If I had to do a project like that again, I would go for the home-made wooden version to minimize my costs.

The risers

Risers are essential components for anyone who wants to build a RIG with multiple cards. Indeed, even if the motherboard has 8 PCI-Express slots, they are much too close to each other to be able to place 8 graphic cards. The risers will allow you to deport the graphics card. This is how it looks like:

New risers are available for about 10 CHF per unit. I have read several times that risers should be seen as consumables… In other words, it’s possible that they break, so you might as well have a little reserve. For my project, I ordered 10 pieces for 120 CHF.

Note: Risers are shipped with a SATA / PCI power cable. You have to be careful when feeding a riser with a SATA cable, depending on the card you are placing.

The graphic cards (GPU)

That’s where the war started! Indeed, GPUs are the heart of this project and they are the ones who will work (do the mining) and bring you tokens. How do I choose my cards? Well, it’s all a question of price / mining performance ratio. You have to know that each card will have different mining performances and this performance will also vary according to the crypto you want to mine.

In my case, I knew the following variables:

  • My budget : 5’000.- CHF
  • My crypto : Ethereum (ETH)
  • My power capacity : 2000 W
  • My RIG frame capacity : 8 GPUs

Starting from my 5’000.- CHF, after having bought all the basic stuff, I estimated that I would have 4’000.- CHF left for 8 cards, that is 500.- CHF per card. With 500.- CHF per card, I assure you that you are not being crazy these days, because the price of GPUs has exploded this last year. In short, I had an order of price size and I knew that it was useless to look at the last generation cards at 2’500.- CHF.

After several researches and discussions, I also noticed that it would be easier to manage a rig composed of 8 similar cards, rather than having a mix. After spending 7 minutes on Digitec, Microspot and so on, I quickly realized that I would have to turn to the second hand market.

How do I know if I am paying a good price for a GPU?

Nice question huh? Well, this is where I looked at the ratio between price and performance of the card. By going to the excellent site Whattomine.com, you find a certain list of GPUs and the site gives you in return their power or performance depending on what you want to mine. Here is an example for Ethereum and an AMD 6700XT.

The performance of the GPU is measured in Mh/s (Mega Hash per second). In this case, you can expect to get 48.00 Mh/s with such a card. If you go on Digitec and you look for this model, you will find a GPU that costs almost 1’200 CHF. The ratio is therefore 25, or 1’200/48. This means that you pay 25 CHF per Mh.

I did the test with a lot of models and new prices, and we are always around 25 – 32 CHF per Mh… I also found a lot of people on classified ads selling complete rigs or GPUs and I did the same calculation directly. After searching a bit, I realized, that a ratio of maximum 15 would be my limit for second hand.

With a budget of 500 CHF/card and a desired ratio of 15 CHF per Mh, I should buy cards that can generate about 33.3 Mh/s (on Ethereum). So I started my research with this ratio in mind:

  • 500 CHF => at least 33.3 Mh/s

Purists would say that the consumption of the card should also be taken into consideration. Indeed, this is the second variable that should be taken into account in the equation. In my case, since I knew I had to target the second hand market and if possible have similar models, I was not going to take this parameter into account yet.

After much research and hours of comparison shopping, I decided to use AMD RX580 model with at least 8 GB of RAM.

Pay attention to the memory of the card!

Indeed, depending on what you want to mine, you need to take cards with enough memory. To mine Ethereum, a card with 4 GB of RAM will not be able to mine this token. This is due to the fact that the DAG size for Ethereum is more than 4 GB.

A dagger? What’s this about again?

Not a dagger, but a DAG! DAG stands for “Directed Acyclic Graph“. In the crypto world, a DAG is a structure that has only direct links between its nodes, and therefore no cycle. To put it simply, if you imagine being able to navigate from node to node, it is not possible to fall back on the same node.

If you mine Ethereum, the mining algorithm used will be Ethash (or Ethash Dagger-Hashimoto) and it uses DAGs to create a complex data structure that can currently reach over 4.5 GB. This structure contains the mining base for the Ethash algorithm to work. Beware, the size of this DAG increases over time 🙂 So one day, I may not be able to mine Ethereum with 8 GB of RAM.

For my part, after a few weeks on Ricardo and Anibis, I was able to find the following cards:

ModelPurschase priceHashrateRatio
RX 580, 8 GB, Sapphire Pulse, Micron memory457.- CHF32.2 Mh/s14.19
RX 580, 8 GB, Sapphire Pulse, Hynix memory 444.- CHF32.2 Mh/s13.79
RX 580, 8 GB, Gigabyte, Samsung memory 447.- CHF30.6 Mh/s14.60
RX 580, 8 GB, ASRock, Samsung memory 420.- CHF31.5 Mh/s13.33
RX 580, 8 GB, MSI, Micron memory 447.- CHF32.3 Mh/s13.84
RX 480, 8 GB, PowerColor, Samsung memory 406.- CHF30.7 Mh/s13.22
Average & total2’621.- CHF189.5 Mh/s13.83

So that’ s it for the basic calculations 🙂 As you can see, I’m always below 15 ratio and I even succeed to have an average of 13.83 for the moment which is very good for used cards. I’m currently looking for two more cards to complete my RIG, so if you have something, come and write me 🙂

So, as you can see, the choice of cards takes time and is really the most important element for such a project.

The various accessories

Finally, I needed to buy a few small add-ons.

  • Digital consumption meter: 28.90 CHF
  • 5 fans 120 mm : 35.80 CHF
  • 3 conversion cables 3 pins to 4 pins : 19.70 CHF

A total of 84.40 CHF for these small accessories.

Pictures of the rig

After my blabla, here is a picture of the beast 🙂

Rig with 6 cards for the moment

Final calculation

In the end, the current bill is 3’338.46 CHF for a power of 189.5 Mh/s, which means a total ratio of 17.6 which is quite good when you see on the Internet that the majority of miners who sell their RIG do so with a ratio of 25 to 35!

Taking into account that I will add two more cards at 430 CHF average and that I will get 32 Mh/s per card, I can extrapolate the following totals:

  • Total cost : 3’338.46 CHF + 2x 430.- CHF = 4198.46 CHF
  • Total hashrate : 189.5 + 2x 32 = 253.5 Mh/s
  • Total ratio: 4198.46 / 253.5 = 16.56

This ratio of 16.56 is quite acceptable! If I wanted to sell my RIG on the internet based on a ratio of 25 like most sellers, I could ask for 6’337.50 CHF, which means a potential benefit of 2’139.04 CHF 🙂

Profitability calculation

Well, all these calculations are nice, but in the end, what you would like to know is how much it will potentially bring me and after how long, I will have amortized my investment (Break Event, BE).

The variables to be considered for this calculation are:

  • Investment cost => 4’198.46 CHF (for 8 cards)
  • Electricity cost => smoothed at 0.16 ct/kWh
  • Electricity consumption of your rig => 1250 Watts (I know this thanks to my meter at 28.90 CHF)
  • Value of Ethereum

For the cost of electricity, you have to look at your subscription in detail and note the differences between the day and night rate. After some calculations, I’ll allow myself to do a daily smoothing at 0.16 ct/kWh. As my RIG consumes 1250 watts and will run 24 hours a day and 365 days a year, the calculation is as follows:

  • (1250 watts x 24 hours x 365 days) / 1000 = 10’950 kWh.

10’950 kWh per year is equivalent to a bill of 1’752.- CHF per year or 4.80 CHF per day.

The second question to answer is how much Ethereum I can mine per day with a power of 253.5 Mh/s. As this depends mainly on the Ethereum price, but also on the global Hashrate of the Ethereum blockchain, the easiest way is to go to the CryptoCompare.com website, which will show the profit per day, week, month and year depending on my configuration. Here is what it gives in my case at the time I write this post:

We notice that my manual calculations are not wrong for electricity. Indeed, $5.19 is approximately equal to 4.80 CHF.

In short, in the end, my configuration brings me a profit, today, of about $323 (298 CHF) per month, after deducting the electricity costs. It will therefore take me 14 months (4198.46 CHF / 298 CHF) to amortize my investment.

It may sound like a lot when you say it like that, but it is still very short. If you compare it to real estate investment, reaching your Break Event in 14 months is very short. I redo this calculation every month or so, because the price of Ethereum varies quite a bit. It’s important to keep in mind that these 14 months could eventually be decreased according to the following projections:

  • I keep my Ethereum on a wallet that gives me an annual interest rate of 5.35% (APY, Annual Percentage Yield)
  • I believe in the fact that Ethereum will continue its growth
    • + 830 % since 1 year
    • + 83 % since 6 months
    • + 26 % since 3 months
  • I am on a project that should allow me to run my RIG at an industrial electricity rate (0.11 ct/kWh)

In short, this is why I think it can be interesting to mine cryptocurrency when looking to diversify those investments. I’m not saying it’s easy, on the contrary, but it’s still a very interesting opportunity.

Conclusion

I hope you liked this post and that I was brief and clear enough in my explanations. As mentioned at the beginning of this article, the goal was not to make a tutorial on how to set up a RIG or to start mining, but rather to focus the content on the reasons of my choice, and how I analyzed and evaluated this investment vector. Getting into mining takes a lot of time, but it’s worth it and apart from the profitability side, I find this world exciting and it allowed me to discover and learn a lot of new things.

I will be very interested to receive your comments or questions and I will be interested to know if this kind of crypto oriented article interests you or not.

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