<p>I pretty much dove headfirst into the world of cryptocurrency by building a few mining rigs. It was an expensive way to learn about the crypto economy, and it's perhaps not the most glamorous way to spend my evenings, but I've found it to be a rewarding experience. About 3 months into my mining project, I now have 3 mostly completed rigs churning out ETH in my basement. I've experienced a few personal victories and made several stupid mistakes. I'm reasonably certain they'll pay for themselves in a few months and might find some use after Ethereum goes Proof of Stake, but I'm certainly not going to be buying a private island anytime soon.</p>
<p>Overall, here's some things I learned about cryptocurrency mining.</p>
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<h1><strong>Mining Isn't A Get-Rich-Quick Scheme</strong></h1>
<p>I'm not saying that you can't make money as a miner... and I'm not saying that you'll immediately lose your ass. I'm just saying that mining is not, as a whole, either a scam or a golden goose. It's a remarkably risky way to create something of monetary value with a profit potential that is more or less commensurate to the risk. </p>
<p>Mining is a real thing. Miners use somewhat specialized equipment (generally expensive equipment) to produce something which has an actual monetary value. It's besides the point whether the thing they make is actual money... tomatoes aren't actual money yet their cultivation is the source of significant economic activity. It doesn't matter whether the product is actually useful, truly beneficial to society, or destined to have a real impact on human civilization. There are entire industries dedicated to products that don't meet any of those criteria. </p>
<p>There may be scams that involve mining, mining equipment, mining contracts, and so forth... but there are also scams involving skin creams and church bonds and hungry kids in countries that don't really exist.</p>
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<h1>Mining Can Be A Profitable Business </h1>
<p>It might not be easy to make money as a miner, but the same can be said about a lot of businesses. When you choose one of the healthier coins, design your production and disposition processes well, and apply a good bit of discipline, you can create a business that will make some reasonable level of profit... probably. Luck is a huge factor in mining, as is the case with any industry with so many risk factors.</p>
<p>If mining wasn't profitable, for somebody under some conditions, it wouldn't be happening. Proof of Work coins wouldn't be moving about and, therefore, wouldn't have any value. It might be hard to get into mining, it might be best done at significant scale, and it might be dominated by existing players in overseas markets... but that's the case with a lot of businesses. </p>
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<h1>Miners Should Expect Terrifying Volatility</h1>
<p>There is no "status quo" in cryptocurrency. It's a new technology powering an economy that is growing and changing at an unfathomable rate. There are no stable prices, no standard equipment, no traditional participants. There is no real regulation (which is NOT a good thing for real business purposes) and no industry groups worth the name. Most importantly, there are no unassailable assumptions.</p>
<p>The recent hardfork in ethereum, or perhaps the staggering number of people who didn't realize it could happen, proved that last point.</p>
<p>Business models have to assume tremendous variance in the value of a target cryptocurrency, not to mention shifting difficulty levels and the associated rate of production provided by their equipment. They have to consider the potential for the introduction of paradigm changing equipment, decisions by the community to change the operating parameters of a particular coin, disruption of key portions of their production process by regulation or market action, and the potential for extinction level events caused by security breaches.</p>
<p>Even a simple hobbyist needs to consider some of these issues, as it's possible to purchase equipment "just for fun" only to have it become useless when a coin disappears or changes algorithm.</p>
<h1>Mining Requires Only Moderate Knowledge</h1>
<p>There is a tremendous pool of genius in the cryptocurrency community, but potential miners don't need to worry if they aren't surfing atop it. Mining isn't all that difficult, there is a reasonable amount of information available for popular coins, and you don;t really need to understand why your miner works to coax it to make coins. </p>
<p>Sort of like being a tomato farmer.</p>
<p>Miners need to be comfortable with both the software and hardware aspects of PCs. They don't need to be network engineers or programmers, but having a background of tinkering and comfort using a search engine is more important than a formal education. There isn't any sort of higher degree program for this stuff anyway... or even a vocational school for that matter. I read a lot of forums, started by using packaged miners like NiceHash, and used a lot of trial and error to get things working. I built on what I knew, creating solid business plans with tight budgets, and left the bits I was uncomfortable with alone. I still haven't fiddled with overclocking any of my hardware, for instance. If I can successfully mine coins, you probably can too.</p>
<h1>Mining Requires Lots Of Care</h1>
<p>Mining might not require uncommon brilliance, but it does require an unusual level of diligence. There are a LOT of ways to screw up, lose money, waste time, ruin hardware, and maybe if you are particularly careless actually for real die. Mining can be profitable in part because you don't have to watch it all the time, which means that something could be going wrong for quite a while before it gets noticed. This could include stalled miners, hacks, fires, and so forth. </p>
<p>Mining rigs, particularly GPU rigs, tend to be built out of parts that are designed to be protected in a nice safe case... but instead are left hanging out in the open. Dropping screws or liquid on exposed boards can short them out. Dropping components on each other, for instance when hanging GPUs above the motherboard, can physically break them. Tripping over the rats' nest of network and power cables connecting these rigs can be devastating, especially given how unprotected the rigs are compared to those in a traditional PC case.</p>
<p>Worst of all, these things use ridiculous amounts of power. Mining rigs might as well be electric space heaters... like the sort that are notorious for burning houses down. Of course, they tend to use even more power than the average heater, have less physical structure to keep them safe, and are operated in a way that was never tested in a safety lab. One wouldn't pile a bunch of space heaters in a corner and leave them on all year without expecting a fire... but that's exactly what people do with mining rigs.</p>
<h1>Miners Should Talk To Their Accountants</h1>
<p>On the scale that involves building dedicated rigs, mining isn't like growing a few tomatoes in your backyard. Exchanging your coins, or outright making purchases with them, isn't like bartering fresh produce from your garden for finished pies from the lady next door. Even on a small scale, you are making something outright called "currency" with equipment rightfully considered a capital expenditure. You can trade the stuff for cars and houses... and more expensive GPUs for your miners.</p>
<p>Mining isn't an activity that stays in your basement, or is only visible to your close neighbors. Miners are adding transactions to public ledgers visible to the entire world... possibly forever. Miners who seek to automate or reach scale are likely going to use services that involve storing credentials or sharing "Know Your Customer" data. Just like herpes, these records stick around even after a weekend in Vegas. </p>
<p>You should at least talk to your accountant about how to reflect your mining activity on your taxes. They won't have any real idea how to handle the activity, but at the very least it'll be amusing to try explaining it to them. </p>
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