

How a total n00b mined $700 in bitcoins - sk2code
http://arstechnica.com/gadgets/2013/06/how-a-total-n00b-mined-700-in-bitcoins/

======
cupcake-unicorn
It is very unfortunate that BFL is getting publicity over this article -
they're a company with a terrible reputation and have treated their customers
horribly. I got bitten by the mining bug recently and was stupid enough to
almost buy one without doing proper research, until I ran into an issue with
checkout. They were ridiculously unprofessional and rude dealing with it, and
slow to get back to me, and that was a blessing, as I realized how worthless
it was in the end.

What it's probably not going to say in this article is: People have been
waiting to have one shipped to them for over a year. Use a calculator to find
out how much lost profit that is. If you buy one now, or even if one is
shipped to you in the next few months (unlikely, unless you ordered it 10
months ago), it will be basically worthless due to more and more ASIC hardware
coming out on the market.

If you must go into mining, check out some of the custom Klondike K16 Boards
that are being developed. These will be shipped much faster than anything BFL
ships out, but even then you're looking at a few months lead time, which could
be significant in terms of increasing difficult and return value.

------
xentronium
Could someone please explain why Butterfly Labs don't mine the coins
themselves, but sell their devices instead?

As far as I understand bitcoin (and please correct me if I'm wrong), bitcoin
output of the system is fixed, so if you produce (or buy) a lot of super-duper
fast ASICs, they will generate less bitcoins per unit. If it is correct, then
butterfly labs success inversely correlates with specific miner success, as in
the more ASIC-s they sell for a fixed dollar price, the less profit their
buyers receive. This seems somewhat conflicting to me.

~~~
LoganCale
In a gold rush, it's often better to be the one selling shovels.

~~~
marvin
People keep repeating this meme. But in this case, setting up a mining
business is trivial. If these devices will have a payback period of ~10 days
in the near future, it does not make sense at all to just sell them to end-
users.

What gives?

~~~
Tuna-Fish
I fully expect that they will start mining themselves as soon as they fulfill
all the existing orders.

A peculiar feature of the ASIC market is that unless you are making _really a
lot of_ chips, it's entirely reasonable to assume that the marginal cost of
creating one more chip is zero. If your production volume is below tens of
thousands, almost all of your costs are going to be masks and design. In that
way, selling an ASIC is like selling software -- at first you need pay huge
sums for development, and then you can duplicate your product at (almost) no
cost.

So what probably happened is that Butterfly labs realized a market
opportunity, but they didn't have the money to exploit it. So, the presold
some millions of dollars worth of hardware, used that money to design it and
make the masks, and then delivered the first few batches to fulfill those
orders. _And at the end of the day, they don 't just have whatever profit they
made on the miners, they still have the masks, and can now make more miners
for peanuts._

------
malloreon
Take note that as of a week ago BFL is shipping units that were ordered in
August of 2012, that perform worse and use more power than promised.

~~~
gigq
As someone who ordered back in August 2012 and received his 2 jalapenos a week
ago I can say I'm still very happy with my order. I wouldn't advise someone to
buy into it now as this article doesn't do enough to explain the geometric
rise in difficulty will most likely make it difficult to recoup costs on the
hardware by the time an order made today ships. BFL estimates they will clear
the backlog of orders by September of this year, but their estimates are
notoriously bad so take that with a grain of salt.

These units don't perform worse than what I originally ordered, in fact they
hash at a rate that is 24% higher than what I ordered (5.6GH/s vs 4.5GHs).
While it is true to say they use more power than promised as they were
originally going to use 5 watts and instead use 30 watts saying they perform
worse AND use more power is misleading.

~~~
cupcake-unicorn
I thought it was fairly sleazy of them to offer the hashing "upgrade" for 100
dollars when from what I can understand it's a firmware only thing, and should
have been done for free for forcing people to wait anyway.

Do you feel angry at all that you lost so many months of potential income?

~~~
gigq
Back when I bought my jalapenos they were only $150 and I chose not to do the
upgraded pricing to 7GH/s for $100. The speedup I was referring to was simply
a bump in the base model from the original 4.5GH/s specs to what the units I
received actually ran at.

Given that the units have almost paid for themselves in one week it's hard to
be upset about any lost income. On the other hand I still have only received
part of my order and am waiting on multiple 60GH/s units that are just now
starting to ship to people who ordered in June 2012. Depending on how long it
takes them to get to my order I may have some regrets I didn't just order all
jalapenos instead.

------
maaku
Watch that $20/week become $14/week, then $10/week, then $7/week in the span
of a month. Still a good investment then?

~~~
corin_
It would have to go down further to be not worth doing, since he covered the
cost in ten days, and the electricity cost is less than $2/week. At $7/week
for example he would roughly break even over a year even factoring in the cost
of the device.

~~~
maaku
Yes, but (a) the decline / rise of difficiulty will continue, and (b) there's
a year long waitlist.

~~~
zanny
You can make more money playing the ups / downs of btc (for example, right
now, there is a down explicitly because gtx halted US dollar transfers so
everyone is panic transferring BTC out and selling it off). Than trying to
invest in a btc mining rig and playing a literal lottery with computing
hashes, or joining a mining guild and making very little very consistently.

------
fnordfnordfnord
Sigh, more ARS blatantly advertising for BFL. If anyone is inclined to try
this, buyer beware. Do some research on BFL before you spend money with them.

------
ryhanson
Total BitCoin mining n00b here. How much could you mine per week without a
device like this? A few dollars?

~~~
citricsquid
Depending on your graphics card, a few dollars a week sounds about right. A
mid-range graphics card (eg: a 2GB 6970, $300) has a MH/s of about 400, as far
as I know the top range consumer graphics cards (about $1000) top out at
around 1200MH/s, which is 1/4th of what the Jalapeno has. A 6970 would
probably generate about $8/week at present, but the power costs will dwarf
that so it's not really worth it, unless you're not paying the power bill.

The major problem is right now mining profitability is dropping fast and is
going to drop even faster as all these custom built miners ship, you might be
able to make a few dollars a week at the moment with your graphics card but
once all these custom built miners start to ship (and there's tens of
thousands of pre-orders) it'll become pennies. You've missed the boat on
mining profitability with consumer hardware and anyone looking at custom built
miners is going to be losing money too unless the value of Bitcoin sky
rockets.

~~~
AJ007
I've been watching blockchain.info the past few weeks, and the estimated ROI
has dropped from -30% to -50% in the course of about 2 weeks. A few months ago
it was positive.

I'm assuming blockchain's estimates are based on standard hardware.

------
joejohnson
For everyone wondering how much you'd need to mine to pay for the equipment,
here is a handy calculator:
[http://www.bitcoinx.com/profit/](http://www.bitcoinx.com/profit/)

The BFL Jalapeño (5GH/s) is $274 and where I live electricity costs $0.19/kWh.
From the article, the device "pulled 50 watts of power when actively hashing".
So, this will pay off in 3 days, and will generate 9321.64 USD over 3 months
(given 0.61 profitability decline per year).

~~~
notaddicted
The timing of when you get the device is crucial, check out how fast the total
power of the mining network is going up:
[http://bitcoin.sipa.be/](http://bitcoin.sipa.be/) (it is the 1st graph).

------
bugsbunny4341
How ethical and sustainable is it to earn money that you did not toil for?

~~~
vertex-four
They are toiling for this money. Specifically, the mining system exists in
order to verify transactions, put them together into a block, and distribute
that block to be added to every client's copy of the blockchain. The reward
for performing this very important task is a certain number of Bitcoins
"generated" at present, along with transaction fees that the miner can collect
from any transaction which includes them.

The reason for centralising the Bitcoin network on the miners (and for each
block, one particular miner) this way is simple - consensus. It's of paramount
importance that every client on the network has exactly the same copy of the
blockchain, otherwise double-spending can occur - causing one half of the
network to believe that some Bitcoins were transferred to one address, and the
other half to believe they were transferred to another.

The easiest way to do this is to build the network in such a way that one node
holds an authoritative copy of the blockchain, and distributes that out to
everyone else. But that goes against the concept of a decentralised network.
So instead, what Bitcoin has done is built a system where every mining node
races to solve a computationally hard problem, that they can prove they found
the answer to, in order to become authoritative in order to add a single block
to the blockchain. The incentive to do so is the "mined" Bitcoins, along with
the transaction fees for every transaction included in that block.

Without this system, Bitcoin could not exist.

For the record - even though the miner is authoritative in adding a block to
the blockchain, it cannot forge transactions. It can however refuse to add a
transaction to the block, which sometimes happens if the offered transaction
fee is too low. The transaction might be added to future blocks if other
miners are OK with the transaction fee.

