Put Bitcoin Mining Rig Heat Exhaust To Good UseRather than just…

Put Bitcoin Mining Rig Heat Exhaust To Good Use

Rather than just venting away the heat, this miner has a novel use for the byproduct of Bitcoin mining.  Bitcoin rigs make “excellent food dehydrators”, reportedly.

With a typical rig putting out tens of thousands of BTUs per day, creative miners are finding complementary uses for the exhaust heat.  Most of these uses, such as this home Bitcoin powered home water heater, are hobby projects though on a larger scale there is a busienss case where performing heat recapture is justified.

Mining Profitability – Back In BlackThanks to a steadily…

Mining Profitability – Back In Black

Thanks to a steadily declining mining difficulty level, mining profitability at around today’s $3 BTC/USD has returned to nearly the same level as when the BTC/USD was a little above $4 two months ago.

The details that go into how the points plotted in this new chart from BlockChain.info (realtime view) are not known yet but as explained in the site’s footnotes based on the rate of $0.15 per kWh.  The chart’s description reads “miners revenue minus estimated electricity and bandwidth costs”.  The chart corresponds with the claims by miners that when including the cost of electricity, mining was a money-losing effort for much of October and November.  While these levels aren’t terribly attractive they will help many miners to at least resume earning some profit — something those who took on debt to buy equipment were certainly looking forward to.

At the same time, the level of mining activity has stopped dropping and appears to be on the rise (as shown in photo), ever so slightly once again.  Because many miners simply powered off their rigs during the price collapse, spare capacity is just a flick of the power switch away.  As a result difficulty will adjust nearly in real-time, versus a several week to multi-month lag which was seen back when miners couldn’t buy hardware fast enough to catch up to the price ascent.

Also, a recent burst of media coverage of Bitcoin appears to have once again brought a wave of first-timers looking to try their hand at mining.  They will be competing against veteran miners who have been buying up some of the used hardware that others had been dumping as well as picking up deals such as NewEgg’s recent special price of $300 for ATI HD 5970s.

At current levels, a little over $20K worth of bitcoins is minted each day (7,200 BTC per day X $3 or so BTC/USD).  Informal surveys have found that a significant percentage of miners are dumping their mining proceeds nearly as soon they are received — to pay for the electricity consumed by mining, at a minimum.   As a result, the recent rise in demand isn’t finding a corresponding rise in supply from miners taking profits — as many miners simply have already sold nearly everything that they’ve produced and are producing.  Little can be concluded except that the price rise likely isn’t attributed to hoarding by miners but instead appears to currently be simply new investment inflows that bring demand significantly above the 7,200 BTC per-day supply.

If this keeps up, miners might — for the first time in months, have something to celebrate.

Genjix Descibes The “Work” That Bitcoin Mining…

A post by Amir Taaki (genjix) on Bitcoin Media (@BitcoinMedia) describes how and why bitcoin mining performs “work”.  Excerpts:

Another property of a good hash function is small changes in input lead to large changes in output. This makes it difficult (practically impossible) to reverse a hash function.

A bitcoin miner is constantly hashing a block to see if it passes the above check. If not then it slightly modifies the block and tries again. It keeps doing this until it finds a block that passes. A valid block has been found, and the miner will broadcast this block to the network.

A miner’s task is to make a block and keep modifying that block so that it produces a different hash, until that hash passes a [specific] test.

Creating a block is not easy. It takes computational processor cycles. Ergo it takes electricity. Ergo it costs money. Creating a block usually has miniscule profit or even negative expected value. As more people mine and create blocks, the network drives up the difficulty squeezing out all the profit.

Bitcoin Currency Inflation Rate Will Drop 50% Next Year

Every bitcoin in existance first passes through the hands of a Bitcoin Miner.

That is how the currency is issued.

Today the targeted rate that bitcoins are issued occurs at a level of about 7,200 new bitcoins per day — calculated using the 50 BTC per block and blocks solved about once every 10 minutes.

That level will be changing in about a year though when the block award drops in half from 50 to just 25 BTC per block.

For the bitcoin currency itself, that drop has been known since its inception and would already be priced into the exchange rates.  To miners, however, that drop will be felt suddenly.  One day the income that each Ghash/s earns will be at one level, and the next day that revenue will drop 50%.

There are some miners who plan to shut down and some will liquidate even once the block reward drop occurs once block 210,000 is reached — an event that will occur perhaps as early as November or possibly as late as January 2013.

The difficulty level will adjust shortly after miners drop out but with the equipment representing an investment in time as well as money, many miners generally need to feel the pain in the form of electric bills exceeding revenues before they capitulate.  At the same time, there will always be a chance that the exchange rate will climb enough to compensate for the decline in the supply of new coins.

Attempting to predict Bitcoin twelve months out is particularly difficult as this is the first block reward drop — something that will occur just once about every four years.

Anyone evaluating whether or not to buy a mining rig or to add capacity to an existing mining operation today should be keeping this block reward drop in mind in the decision process.

Bitcoin Mining A $16.7m Industry In 2011

Mined during 2011 were blocks 100410 through 160036 with each being awarded 50 BTC.  As a result, about 2.98 million BTC were issued. With the average daily price (exchange rate) of $5.60, that means Bitcoin mining is roughly a $16.7 million industry when considering just the value of the coins as they were mined.  Transaction fees add to that total, but are irrelevant yet and represented only a small fraction of one percent of the total value of the currency issued for the year.

 

That $16.7m amount coincidentally, is about the same cost level estimated in order to procure all the hardware necessary to mine at the higher levels that existed back when Bitcoin was breaking hashing records earlier in the year.

 

Total investment in mining hardware over the year likely was a multiple of that $16.7m number as early rigs were mining using substantially less powerful equipment including rigs that were only mining with CPUs.  Also contributing to the total hardware estimate was that some rigs were operational for only part of the year and then either repurposed or sold while other miners would upgrade to more efficient hardware.  All the while there was also a continuous stream of new miners that would continue arriving into the mining business.

 

Most miners were, at the end of the year, enjoying healthy margins as the miner’s operating margin estimate is once again back up near 50%.   That estimate is based on the cost of electricity at $0.15 USD per kWh and hardware costs of $1K per gigahash every two years and a small allowance for bandwidth use as well, according to BlockChain.info — the service that calculates that estimate.  If history repeats itself, idled capacity will return or new hardware will be brought online and difficulty will rise once again.  Margins will likely revert back towards a mean level that lags the prevailing Bitcoin exchange rate.

 

Even when mining was believed to be yielding lucrative profits, mining may not have been an activity truly as fruitful as was first imagined — particularly when tax consequences are considered.  This topic was raised again with varying opinions as to how mining proceeds should be treated when preparing tax returns.

 

When miners convert their bitcoins at a centralized currency exchange, a bank transfer is often the result.  So for all the discussion over Bitcoin and anonymity, mining proceeds are still likely on the radar of government through monitoring that occurs within the banking systems.

 

Now that Bitcoin mining is an industry of its own, miners are learning that issues like tax compliance are making this little hobby of theirs to become much less fun.

 

Hack A Day – FPGA bitcoin miningA post on Hack A Day features…

Hack A Day – FPGA bitcoin mining

A post on Hack A Day features the first commercially available FGPA Bitcoin mining hardware.  Excerpts:

The board requires only 6.8 watts for 100 Mhashes/second, but [li_gangyi]‘s blog says the team expects to hit 150-200 Mhashes with some improvements.

Only four of these boards were built and the supply has already sold out.  Deposits are being accepted at Cablesaurus towards pre-orders for the second generation model.  The second generation units are priced at $420 (single FGPA) to $620 (dual FPGA) but those prices will likely be lowered before purchase due to volume discounts.  The number of boards produced will be determined by how many deposits (paid in either bitcoins or USDs) are made.

This board differs from the modular FPGA hardware project but runs the same open source FGPA miner that was released in May.

FPGA hardware is more expensive for mining Bitcoin than the hashing equivalent when GPU graphics cards are used but power consumption for FPGA mining can be nearly an order of magnitude less.  At current exchange rates and difficulty levels, the dual-FGPA board will produce just under 0.12 BTC per day, which is worth about $1.22 USD.  Calculated using the typical U.S. residential rate the cost of electricity to run the two FPGAs for a day is under $0.04 USD, or about 3% of revenue.  For comparison, when GPU graphics cards are used for mining in regions where electric rates are high the cost of electricity can exceed half the miner’s revenue.

Though mining profitabilty is near all-time lows, these levels are still high enough that FGPAs are not yet price competitive due to the higher hardware costs involved.  At the same time, this board just brought FPGA mining one step closer to becoming a significant competitor to GPU mining.  Those likely to be the early adopters will be those hitting total power consumption limits, those running out of space and those unable to sufficiently remove the heat produced when mining with GPUs.

Miner Charts – Pool Luck, Pool Hash Growth, and Trade…

Miner Charts – Pool Luck, Pool Hash Growth, and Trade Data

BitcionTalk forum member topheroly provides an excellent set of charts.  The “pool luck” chart (above) shows how lucky certain mining pools have been over the past 5 days.  Additional pool luck charts are available for longer periods.

Further charts are provided relating to Pool Hash Growth and also Trade Data from the exchanges.

There is a forum post containing the announcement for these charts and for discussion.

All Things IT: Why the idea of FPGA Bitcoin Mining is stupid

An argument is made as to why the higher cost of FPGA hardware should not be an acceptable alternative for Bitcoin mining.  Excerpts:

General processors have lower startup costs (dedicated ATI GPU’s for example) and higher operational costs due to power consumption, FPGA’s have a higher startup cost (~$60-$100 per chip currently at 100 Mhash/sec) with a lower operational cost.

6990 Break Even Point: 1 Year, 1 Month
FPGA Break Even Point: 2 Years, 7 Months

There’s a revelation at the end of the article that isn’t shared here as to not be a spoiler.

What wasn’t considered were the indirect costs — heat removal systems, repair or replacement of failing graphics card hardware and the constant, high-pitched noise.

Any one of those might lessen the sting from an FPGA’s higher cost, but add all of them together and the two options become overall much more equal.  If the mining profitability continues to deteriorate the break even levels can cause FPGA to tip the scale even — though GPU miners are likely to drop off before that happens.

Video – 5 GHash/s Custom ConfigurationLearn 2 Bitcoin has added…

Video – 5 GHash/s Custom Configuration

Learn 2 Bitcoin has added capacity to their rig, bringing the total inside this custom multi-rig chassis to GHash/s.

The graphics cards are mounted in a way that a single box fan helps to remove the heat generated — a novel approach.

The Miner Botnet: Bitcoin Mining Goes Peer-To-PeerTillmann…

The Miner Botnet: Bitcoin Mining Goes Peer-To-Peer

Tillmann Werner, security expert for antivirus software vendor Kapersky Lab posted his research and analysis of a Bitcoin mining botnet that has become a “highly interconnected network”.

Botnets deploy and control malware — software that runs on computer systems and, in most instances, were installed without permission from the computer’s owner. The purpose of the malicious software installed through this particular botnet steals computing resources and electricity that performs the mining computations that reward the botnet operator.

This particular botnet operates peer-to-peer meaning infected nodes communicate between each other and not just to the botnet’s command and control servers.

Mr. Werner’s analysis found, in less than a day’s worth of probing, “a total of almost 38.000 different public IP addresses” participating.  He continues: “taking into account that most machines are behind network address translation or some gateway nowadays, the real number of infected machines can easily be magnitudes bigger”.

Those whose machines are compromised by the botnet may not even realize that something is wrong.  The symptoms of an infected computer might include high CPU utilization, skipped frames when game playing or additional network traffic.  This software does not appear to inflict general malicious harm to the user and it will likely be most profitable to the botnet operator if the computer user never suspects that the system has been infected.

The protections available are to follow secure computing recommendations which can include running anti-virus software such as Kaspersky Lab’s offerings.