Crypto Mining Explained: A Step-By-Step Firsthand Account

Perhaps the coolest thing I did in the summer of 2017 was build a machine that “printed” money.

To be precise, two of my friends and I have built an Ethereum mining rig. We thought it would be a fun project, and we hope to make some money too.

Captain was our unofficial leader and the host of our project meetings. Our mining rig came to life in its man cave alongside generous portions of beer and fries. The player was our spark of energy, regularly bringing new ideas and nudging us when we were busy with other things.

We unofficially closed the project last week. I have so many great memories, so I thought I would share our story.

What is crypto mining again?

The concept of crypto mining confuses people like no other. So I will try to explain in the simplest way possible.

Think of mining as “renting” your computer to people on the Internet who use cryptocurrency.

Why do all these people need your computing power? TO to treat their crypto transactions (i.e. sending and receiving crypto) in a secure manner.

This is because crypto transactions do not depend on traditional businesses (eg a bank) or governments to process them. Instead, it is the miners who do the transformation work. In return, they get paid for their cryptocurrency services.

For example, if I send 1 bitcoin to my friend in London, it is not Visa or Standard Chartered Bank that makes this transfer. Rather, it’s all Bitcoin miners around the world working together.

Perhaps the coolest thing: technically anyone can be a minor. Just like anyone can post a blog post on the internet – no need to ask authorisation – all you need to do is install some crypto mining software and get started.

FAQ: Could you use your laptop to mine cryptocurrency?

Yes you could, but you probably wouldn’t be profitable. Because your laptop is a general purpose computer – not specifically designed for mining cryptocurrency – you would spend more on utility bills than you earn. Your laptop would wear out pretty quickly too.

In summary, this is what mining looks like:

  1. Buy mining equipment (specialized IT).
  2. Set up the equipment.
  3. Install the software and connect to the crypto network (eg Bitcoin, Ethereum) via the Internet.
  4. Earn cryptocurrency.
  5. Don’t forget to pay for the electricity.

I’ll share a photo of our mining rig later.

Why mine crypto?

The concept of “creating” money fascinated me. By this point, I had already invested some money in Bitcoin and Ethereum, and had a basic understanding of mining. But knowledge and experience are different things – I wanted to try it for myself.

It still seems a bit absurd to me. A random group of guys in a small room, building a machine to generate money that can be used anywhere on the internet. I might have a bit of an inferiority complex, but the thought of doing something from Malaysia that has an impact on the world has always been a dream. Help create money for the world? Yeah, I’m in it.

(Just to be clear, I’m not talking about money issued by banks. I mean money in a broad sense – something that you can use to pay people. It couldn’t be. – being unclear in September 2017 that crypto would be successful, but it’s much clearer now.)

I suspect Captain and Gamer had similar motivations. Yes, we knew these things were technically possible, but would we be able to do them ourselves?

It’s time to put it to the test.

Build our mining platform

We started with an extremely basic mining rig. A mining machine may be a special type of computer, but it’s still a computer – with a processor, motherboard, and hard drive. So like any computer geek, we went shopping in Lower Yat Square for components.

Everything we bought was cost-optimized: the cheapest component that we thought was still usable and reliable. Things like the monitor, keyboard, and mouse don’t matter to mining performance, so we bought some cheap second-hand ones to use. No need for a proper case either – we just modified a plastic shoe rack that I got for RM 30 ($ 1 = RM 0.24) from Giant Hypermarket.

Except for one thing: graphics cards. Since most of the crypto mining happens in graphics cards, we bought 2x of the best graphics cards available: the Nvidia GeForce GTX 1070, which costs> 3x the price of all other components combined. If cryptocurrency mining can teach you a lesson for life, here it is: The bottom line for most things is fine: Focus your resources on your main mission.

Our initial investment was RM2,300 each.

We spent a lovely Sunday afternoon assembling the hardware and a few more evenings learning about the mining software. Everything was available (legally) online for free, including guides and FAQs when we were stuck.

Then we turned it on:

crypto mining platform

Our plan was to test for a while, see if we’re making any money, and then add more graphics cards to earn more. Online mining profitability calculators estimated that it would take us a year to break even, if prices remained stable.

However, crypto prices collapsed in 2018 (Ethereum didn’t recover until early 2021), so we didn’t invest anymore. We just let it go – two graphics cards running silently in one room, making magic money on the internet.

Three years later…

At some point in 2020 – after mining for over two years – we decided to shut down our mining rig for good. Electricity costs versus mining profits at that time meant we weren’t breaking even.

Crypto mining has grown into a billion dollar industry. There are several publicly traded crypto mining companies today, which operate huge mining farms – think entire factories filled with thousands of mining machines. This means that amateur miners like us are no longer competitive. Higher electricity costs in Malaysia also mean it’s harder to make a profit here.

(At the industrial level, I think there is a huge opportunity for ‘wasted’ energy that can be converted into digital assets. If you are in the energy industry and want to discuss how the crypto mining can help optimize resources and increase profits, please feel free to contact me.)

For individuals, if you are interested in crypto, buying Bitcoin / Ethereum directly on an exchange is the best way to start.

Either way, the wisest decision we made was to store all of our mining profits in Ethereum. We paid our utility bills in cash, never touching the Ethereum in our wallet. I am proud to say that we were convinced of the future of crypto, especially during the crypto winter years of 2018-2019.

How much did we actually earn?

Four years later, most things have changed. The three of us worked together in a social enterprise, which I will always remember as one of my most meaningful jobs.

Captain remains in this space, but is now focusing on digital learning. Gamer went freelance, working on human resources projects. I went full time into crypto in 2018, helping set up Malaysia’s first and largest digital asset exchange.

From seeing each other every day, we probably see each other once a year on Zoom now. If you’ve ever left a company, you’ll understand that most coworkers are “situation friends”. When the situation changes, if someone quits, you realize you don’t have much in common. But for the three of us, we still had our WhatsApp group. Supposedly to discuss mining, but it also kept us in touch.

At current Ethereum prices (~ $ 3,100), we have almost quadrupled our initial investments: turning around 3,000 RM (including electricity bills) each into> 11,300 RM. No complaints in the world of crypto where people can earn 60 times more overnight. Also, if we had just bought Ethereum directly instead of building a mining machine, we would have multiplied our money by 10 times.

As for building cool things with good friends – whether they make money or not – that will never have a price.

Aaron Tang is the founder of mr-stingy.com. He writes about making the most of time, money and relationships – to get the most out of life.

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