History in the making: Bitcoin passes the $2000 mark

When the $1,500 barrier went down earlier this month, I figured $2,000 was only a matter of time. And like a stock going crazy on the exchange, Bitcoin rocketed up and hit its new all-time high just two weeks later.

The question on everyone's mind right now is: What happens next?

I could pull out a bunch of fancy charts and draw lines on them, but the truth is no one really knows. I suspect the instability of the US president isn't helping confidence in the US dollar, and plenty of other countries have reasons to look for some alternative investment.

Stick a bunch of money into Bitcoin, and yes, you might lose value. But suppose you had put $100,000 into Bitcoin back at the last surge in late 2013. 3.5 years later your investment is worth over $200,000. Of course that's after falling to a value of less than $30,000 for over a year, but Bitcoin has a habit of rebounding, and then some.

If you've ever looked at Microsoft, Apple, or Intel stock and thought, "Man, I wish I had the foresight to invest in those companies back in the mid-80s when they were still small..." just know this: Bitcoin has the potential to eclipse all of those stocks over the coming decades. Remember that above all, Bitcoin is the VERY FIRST CRYPTOCURRENCY. Lots of other coins have tried to do better than Bitcoin, most of them have failed catastrophically.

If you're looking for other options, Ethereum is doing amazingly well over the past year. It has features Bitcoin lacks, and maybe one day it will become the top coin. There's also Ripple, which has the distinction of being backed/supported by some banks, or Nem, Litecoin, or Dash. But if I were a betting man, I'd stick with Bitcoin and Ethereum.

See you in four more years, when we can all look back at today and think, "If only I had invested when Bitcoin was still only $2000...."

Bitcoin breaks the $1500 mark for the first time in its history

I've been around Bitcoin and cryptocurrencies for a long time. I missed the initial wave by a year or so, starting in June 2011, but I've been doing it ever since. Bitcoin first hit $30 back then, before quickly falling to around $20. A single HD 5870 card was able to generate about 2BTC per day, which might seem crazy in today's market, but at the time it was 'only' worth about $40.

There were naysayers and 'to the moon' people way then as well. You know what? I thought the naysayers were right. $20 per BTC when a single GPU could generate a couple per day was nuts! And the price crashed over the next six months until it hit $2 again. "Bitcoin is dead!"

But like a Phoenix rising from the ashes, Bitcoin came back, and it came back with a vengeance. I was there when Bitcoin broke $200 for the first time, and I sold every BTC I owned at the time. I don't feel too bad about it either, as it paid some bills and bought me some new mining PCs. I just didn't have the confidence to say Bitcoin was going to stay at $200, let alone get up four digits!

But this time I was smart enough to keep mining. I started holding onto my coins, other than selling some to pay for power bills and new hardware. When Bitcoin broke $1000 the first time in 2013, I again sold all my holding, but it was for a good cause: I put a down payment on a house. We've been living there quite happily every since.

For the next couple of years, Bitcoin stagnated in the sub-$500 range. All the people that got excited and bought in at $750 or even $1200 probably lost faith. Others managed to play the market, buying low and selling high, and making a lot of money in the process. But today, as Bitcoin continues to creep upward toward the $2000 mark, I'm not even remotely surprised. Happy? You bet! But not surprised.

At the current rate, my modest mining farm will help me pay off all of my debts -- student loans, a car, and a few other tidbits -- within the next year. And after that, I expect to finish paying for my house within the next 5-10 years. At that point, I'll be truly debt free. Do you know how awesome that will be, to only have expenses like utilities and taxes to worry about? And it's all thanks to Bitcoins and cryptocurrencies.

Basic 3-way budget miner:
Pentium G4560: $78
MSI Z270 SLI Plus motherboard: $136
8GB DDR4-2400 memory: $60
240GB SSD: $70 (don't get a hard drive, please!)
750W 80 Plus Platinum PSU: $130  (don't skimp here!)
PCIe Risers: $50 (for six -- you'll have extras!)
3x Radeon RX 570 4GB: $570 (the heart of your mining operation)
TOTAL INVESTMENT: $1094

If you've been afraid to get into the mining scene for whatever reason, now is a good time to put those fears behind you. Start small, with a single 3-way miner, and watch it pay for itself in the next year. Then kick yourself for not investing more heavily into multiple 6-way miners. But it's still 'early' relatively speaking. Most people still have no idea what Bitcoin is, but within the next decade, it's going to end up as ubiquitous as the Internet.

The above budget mining PC will generate about $6.90 per day in cryptocurrency, with a power cost of around $0.75. Let's be conservative and call it $6.00 per day in net income. That means in six months, it will pay for itself, but you'll see the pattern long before then. Get hopping, get mining, and get saving for the future of Bitcoin. If you're smart, you'll sell no more than half of the Bitcoins you mine, so that when Bitcoin eventually hits $10,000+ per BTC (AND IT WILL!), you'll be ready.

How to get the fastest GPU in the world and have it pay for itself in less than six months

I wrote last month about the GTX 1080 Ti Founders Edition, and showed initial mining performance. Things are constantly in flux in the world of cryptocurrency, so what was once a great idea may suddenly become a terrible plan. Or, as is the case here, a decent idea can suddenly turn into an awesome idea.

I've got a pair of GTX 1080 Ti cards, chugging happily away. I conservatively estimated income for each card at about $3 per day (minimum), but that's proving far too pessimistic. Right now, I'm seeing income of anywhere between $4.50 at a minimum to as much as $7.50 maximum. Now, the maximum isn't likely to last for days at a time, but on average you can probably count on $4.50-$5.00 per day of net profit.

I'm partial to the non-reference designs for a variety of reasons, and my second card is the MSI GTX 1080 Ti Gaming X 11G. This is a large, heavily factory overclocked 1080 Ti. Check this out:

These are two examples taken during the past day of how the 1080 Ti is doing. $5.25 to $5.90 per day would mean that you can buy for a $740 and have it pay for itself in 140 days at a moderate return, or it might do even better and earn that back in just 125 days. That's four months to earn back the cost, after which the card is purely profit. Power costs are a factor, though, which means subtract about $0.60 per day from the earnings. You're still looking at breaking even in less than six months, easy!

But why not go the other way, and buy four cards for a single system, a 1350W PSU, and you're still looking at ROI in six months or less. The difference is that with four cards cranking away, once you hit ROI you're looking at around $21 extra in income each day, every day. Could you use $600 a month in spending money? I know I could! How about $2,400 extra a month? Build four such mining rigs!

And it really is that easy. I'm not saying the 1080 Ti is the best mining card on the planet, but it's super fast and you can do four cards per PC instead of trying for six cards. That's a bit less management headache.

Just a final caveat: don't plan on running 20 or more of these systems in your home. Each one would use over 1000W of power, and on a typical 200A circuit you're limited to 24,000W on the entire circuit -- total! You still need to account for lights, appliances, etc. And if you're on a 150A or 100A circuit breaker, you'll have to get by with half of that. Also: fire hazard. Still, doing 5-10 systems is certainly possible.

Here's the quick math:
Basic PC setup: $870 (no case -- use a wire shelf)
Ryzen 5 1600: $230
Asus Prime-X370 Pro motherboard: $150
16GB DDR4-2667: $97
240GB SSD: $63 (boot faster, install updates faster)
1200W Titanium PSU: $280 (efficiency is really important!)
PCIe riser adapters: $50 (don't use the SATA to Molex power adapter, though!)

Four GTX 1080 Ti cards: starting at $680 each = $2,720
Total = $3,590, income of $20 per day = 180 days to ROI
Five PCs = $17,950, income of $100 per day. Still 180 days to ROI
Ten PCs = $35,900, income of $200 per day. Still 180 days to payoff!

More importantly, once the initial hardware has paid for itself, you're not earning $6,300 per month. Okay, maybe more, maybe less. It doesn't matter too much, as bottom line is you have a very nice salary that will continue to pay you with little to no additional effort.

If you're the enterprising type, maybe rent a warehouse with a couple of 200A circuits and plunk down $150K on forty crazy powerful PCs. Then earn $800 per day, 365 days per year, and you'd have the equivalent of a $292K salary. Ha. But I'd suggest starting smaller and working your way up to that level, rather than jumping in whole hog. And don't be surprised if the market shifts and you see profits drop by half!

BTC: Up, Up and Away!

It's interesting to see patterns start to emerge with Bitcoin, and right now after more or less stagnating for the past three or four months, Bitcoin looks to be rebounding. How high will it go this time? I have no idea, but it sure would be awesome if it could break the previous top from last December! I have been hoping something like this would happen, and right on schedule (two weeks before Thanksgiving) we're starting to pick up steam. So here's the question: do you buy BTC now and speculate, or just sit back and watch?

Thankfully, I'm in the position of having some BTC already, so I'm just hanging onto it and seeing where things go -- I'm in this for the long haul at this point. However, I'm also in no hurry to dump thousands of dollars into BTC in hopes that it goes even higher after the investment. Sadly, I just don't have that sort of disposable income hanging around. For those who do, however, I think if you can just dump a few thousand (or a few tens of thousands) into Bitcoin and then turn a blind eye for a couple years, this is about as good a time as any to take that chance -- actually, it was a better time last month when we were at $300 or so, but whatever.

The fact is, more and more businesses are starting to adopt Bitcoin, and I think some of them are going to start saying, "Hey, instead of cashing out 100% to guarantee our profits, we ought to hang on to at least a few percent and see where things go." Can you imagine what would happen if places like Newegg decided to hold just 3% of all Bitcoins they receive? I don't know what sort of BTC volume they're doing, but it's definitely more than zero, and over months they would likely end up sitting on thousands of Bitcoins. If more companies take that same approach -- a calculated risk, so to speak -- supply and demand dictates that there will be fewer Bitcoins in circulation, and thus price will trend up.

It's important at times like this to remember: there will only ever be 21 million Bitcoins. The same coins can be used again and again with no deterioration in quality, yes, but more importantly if big companies start using Bitcoins -- and this is already starting to happen -- then a place that does millions of dollars in business per day will certainly cause some ripples by supporting BTC. In another year, we could easily be looking at five digits for Bitcoin.

I've mined and sold a lot of BTC over the past few years, but I'm glad that I've finally reached the point where I don't need to sell BTC to cover expenses. That means I can join the ranks of the true believers and simply sock away everything I earn going forward. I won't be surprised if 20-30 years from now when I'm retired, most of my retirement savings consist of BTC that I can live off for the remainder of my days. Now if I can just get universities to accept BTC for tuition, I might have my kids' education paid for as well in the coming months.

Hash Profit: Free 200KH/s Test

So here's an interesting one for you: Hash Profit is claiming that through a variety of coin mining algorithms, they're able to pay a whopping 0.00698 BTC per 1000 KH per day. What's more, there's an option to get a free 200 KH/s for seven days as a trial. And since it's free, I figure why not give it a try?

There are a couple options. One is that they've misplaced a decimal point (which would be crazy, since this should be based on running some calculations and automatically generating a figure, not manually updating a field). The other is more likely: they're not talking about Scrypt MH/s or any number of other algorithms, so in fact their 0.00698 "MH/s" rate is some apparently arbitrary number that they've come up with.

I'll report back tomorrow with the actual daily returns. It looks like the free 200 KH for seven days will net you about 0.01 BTC by the end of the week at the current rates. So basically, for signing up you get a free $3.50 or so of Bitcoin; I suppose there are worse ways to spend your time. :-)

In the meantime, if you're wondering, the price for 1 MH/s (1000 KH/s) is currently 1.28457 BTC, which explains the apparently crazy returns per MH. See, if you're earning 0.00698 BTC per day off of a 1.28457 BTC investment, you're time to ROI is 184 days. Six months to hit ROI would be great on most investments, but in the world of cryptocurrencies there are far too many companies that don't last that long.

Still, if you're interested in something other than GAW or LTC Gear, you could give Hash Profit a shot.

Bitcoin Prices: Deja Vu All Over Again

Newcomers to the world of Bitcoin and cryptocurrencies might be wetting their pants right about now, depending on when they decided to get on the bus. We've gone from a high of around $660 in July to the current price of just over $400, with dips as low as $375 (give or take). The early hype stages of Bitcoin are now clearly over and it's time for things to slide into oblivion... or at least that's the pessimistic view of things. But you know what's interesting about pessimists? They've been predicting the demise of Bitcoin for well over three years now, and so far they've been wrong every time.

Yes, we've had ups and downs, some bigger than others, and there have been a variety of reasons for the spikes and valleys. Major accounts have been hacked and dumped, exchanges and other services have evaporated into thin air with large numbers of Bitcoin, China has jumped on -- and then been pushed off -- Bitcoin. But even without some of those events, Bitcoin like all markets is going to have upward and downward trends. And right now, we're clearly in a downward trend, but here's the question: how low will we go, and when the inevitable rebound occurs, how high will we climb?

2013 was, by all accounts, a very exciting year for Bitcoin. It took a while, but we finally eclipsed the previous high of June 2011... and kept on going! Around early April, Bitcoin reached a then unheard of high of around $260, at which point there was a major sell-off and some other stuff like the MtGox fiasco that caused a crash back to the $50 range. Then we went back to $170, down to $80, up to $130, and then there was a downward trend to about $66 again. The naysayers were out in full force, as you might guess, and then things started to pick up around August.

Bitcoin went up to $130 or so again, and basically hovered around that mark for a bit. There was a big dump to $85 in late September (I think that might have been an exchange getting hacked or something similar), and then we started to jump up in prices. The first plateau was back to $200, and I'll admit I cashed out of quite a few Bitcoins at that point. Over the next month I just had to shake my head as we repeatedly set new highs, eventually topping at over $1150.

After such a rapid climb, the fall-off was almost as dramatic, but it was far more seesaw in nature. Slowly but surely we've been heading down again, but we're still at more than three times the prices of last September.

Now, I'm not going to guarantee anything with Bitcoin right now, especially not on any short-term time frame, but what I will say is that this downward slump is nothing new. I suspect we'll even go as low as $300 or even $200, though that's a gamble if you're going to sell now and try to buy back in, but mark my words: Bitcoin is going to go back up again.

My take is that the holiday season is about to kick into full swing, and when people start buying lots of gifts and other products, companies start looking like they're doing well and stocks go up. Bitcoin most definitely isn't a stock, but there are many investors that play the stock market and they're now playing Bitcoin, so it's often treated like a stock. That being the case, the end of this year and the start of 2015 could be as exciting as last year, perhaps even more so.

Personally, I'm hanging onto all the Bitcoins I can get my grubby little hands on right now, and my Zen Hashlets are helping me accumulate more at a nice steady rate. Long-term, I think the next major spike in Bitcoin prices will eclipse $2000, and possibly go as high as $5000, and then we'll see the usual collapse again as prices consolidate around a new high that will very likely be over the $1000 mark. If you sell now, you might become yet another one of those "weak hands being shaken out", though as long as you're not selling at a loss I suppose that's fine. Just remember: the real winners are the people that successfully play the long ball.

Come talk to me again in 2015 and let's see how my prediction pans out. Again, no guarantees, but I think we're going to see a major upswing some time between now and January 2015. That's where I'd place my bets at least, if I were a betting man. And since Bitcoin is almost like gambling, maybe in this sense I am a betting man.

BitMain AntMiner S4 - 2TH Coming Soon, ROI Estimates

I mentioned this in the last post, so I suppose it's worth going into a bit more detail on the upcoming AntMiner S4 from BitMain. The long and short of it is that we really don't know much about the AntMiner S4, but it will apparently be on sale this week and will ship before the end of the month. That means the hardware must already be validated and running, so that's good to hear, but there are two major things we're still missing.

First, we need to know roughly how much power the AntMiner S4 will use. The previous generation AntMiner S3 is a 28nm chip, but it's only moderately efficient -- 441GH at 340W, or 0.77 W/GH. The AntMiner S4 might simply be the equivalent of five of S3 blades slapped into a single chassis, clocked lower and running at a lower voltage to improve efficiency. If that's the case, we might see 0.6 or even 0.5 W/GH.

The other item we don't know is the price, and given the above speculation I'd say it's likely we'll see the price in the neighborhood of $2000. Anything higher than that is obviously a bad investment -- you can buy a 10GH Hashlet Genesis for $8, basically, so that's the starting point I'm working off. Maybe BitMain will be kind to their customers and drop the price as low as $1500, but that's about the minimum I'd expect to see. We also need to know if it includes a power supply or if you need to provide your own, but the image at least suggests it will be a fully "plug and play" affair.

ROI Estimates and Early Forecasts

Considering we have a reasonable idea of the hardware and price, I can at least do a quick estimate of ROI potential. Let's start with the worst-case estimate: you pay $2000, it uses 1000W, and BTC difficulty increases an average of 20% every two weeks; power cost will be a reasonable $0.10 per kWh. We'll guess that you get the hardware in 14 days and start mining immediately. If this "worst-case" happens to be anywhere close to reality, you'd basically spend $2000 and your new ASIC would be too power hungry to keep running in about a third of a year (115 days, give or take). Assuming BTC price stays where it's at, the forecast would be pretty bleak: you'd lose around $1550 (with free shipping no less)!

Okay, that's too grim a proposal, as I think 20% difficulty increase is way too high. But if we take the same core values for price, power draw, and start date we can figure out what the average rate of increase needs to be for you to break even... and it's no less grim! If BTC difficulty only goes up 5.29% each cycle, a 2000GH ASIC for $2000 starting mining in two weeks will basically break even, but that won't happen until early 2016.

I don't think anyone would be willing to buy the S4 at that price, so let's try again and be more optimistic. Let's guess that they can get power draw down to 750W instead of 1000W, and the price is only $1500. Using our more than generous estimates from above (5.29% difficulty increase) you would hit ROI in about six months. A less optimistic forecast of difficulty going up 7.9% on average would leave you with a break even investment in one year.

That's still not looking very good, so let's try once more. What if the AntMiner S4 only costs $1000 and uses 500W? Now we're talking: at 5.29% you'd make ROI in just three months (~95 days), and long-term you could end up earning $1665 off of your $1000, though it would still take the better part of two years. 60% (or more) annual interest would be pretty awesome, so at these (nearly fantasy land) estimates the S4 would be worth buying. Of course a more likely 10% average increase in Bitcoin difficulty would drop you to hitting ROI in four months (~130 days) and after a year your total profit would only be $343.

If you can't tell, we're getting awfully close to the end of the road for Bitcoin ASIC mining investments. If you have one already and it's still profitable, you keep running it, but buying new hardware is looking sketchy at best. The days of purchasing a $500 GPU and having it pay for itself in just a month or so of mining are long past, so short of a major spike in BTC prices we're likely hitting a BTC difficulty plateau that will last a long time and only inch upward slowly as new process technology is developed.

Piggycoin 2.0: How Far Can a Good Wallet Take You?

I'm not going to do a full deep dive on Piggycoin right now, but Piggycoin has so many similarities to other coins that I felt it was worht a discussion at least. You see, recently the original PIG was converted into PIGGY (at 1:1 trading), switching from Scrypt PoW to X11 with Proof of Stake. CAI/CAIx basically pioneered this sort of "bait and switch", and it worked... well, it more or less worked, but CAIx isn't exactly the hottest cryptocurrency right now. (DRK or XMR on the other hand...but those are topics I cover in my newsletter so I won't spoil them here.) Anyway, here are the quick specs for the two versions of Piggycoin, starting with the initial release:

Piggycoin 1.0 Specifications (6/19/2014)
Symbol	PIG
Launch Date	2014-02-25
Proof of Work	Scrypt
Starting Difficulty	0.000244 (ugh)
Block Time	2 minutes
Block Reward	4,000
Premine	1% (21 million)
IPO	No
Difficulty Adjustment	Every 120 blocks initially KGW from block 2000
Reward Adjustment	Never? (Changed to 62500 at some point)
Max Coins	2.1 billion at ~729 days
Forum Threads	Bitcointalk (Old Thread!)
Block Explorer	Yes (Alternate)

Note that the block explorers for PIG may shut down in the future. Also, the block reward was changed at one point, but then it appears it changed back, as blocks 62500 through 62827 have a reward of 0. My guess is there's a group of users that want to stay on the original PIG, but I don't see it going anywhere as all of the exchanges have converted to PIGGY. Anyway, the original design seemed a bit...lacking, and the code was changed a few times in the early going, so when it was altered most felt it was for the best. Here's the new version.

Piggycoin 2.0 Specifications (6/19/2014)
Symbol	PIGGY
Launch Date	2014-06-10
Proof of Work	X11
Starting Difficulty	0.00024414
Block Time	1 minute
Block Reward	23,700 for PoW 15% for PoS
Proof of Stake	8 hours minimum staking age Unlimited maximum stake age
Premine	1% (265,353,096 added to previous 21M in block 3)
IPO	No
Difficulty Adjustment	Every block
Reward Adjustment	10,000 PoW blocks before PoS
Max Coins	500 million at ~7 days +75 million per year indefinitely
Forum Threads	Bitcointalk
Block Explorer	Official

Honestly, there's still not a whole lot that would make me look at PIGGY and say, "Wow! There's a coin that's going places!" But here's the thing: they've done a decent amount of work on the GUI wallet to make it more useful, and they also have an Android wallet app, as an added bonus. So how much is that worth? I have no idea really, but right now the price of around 30 satoshi seems rather low. I mean, DOGE doesn't have much going for it these days and there are already 83+ billion DOGE, each worth twice as much as a PIGGY.

And let's not forget the cute piggy bank. Will this coin really teach children anything about investing? Probably not, but I figure I can keep my PIGGY and earn 15% per year -- as long as the network keeps going. When my two year old enters college in 16 years, I will have about ten times as many PIGGY as I do right now. Which means if I currently have the equivalent of about 0.066 BTC of PIGGY, the $40 I "save" today could be worth a whopping $400 in sixteen years. Good luck finding a college that costs less than that! There's also the Piggycoin Foundation, which is undertaking charitable goals. Right now they're gathering PIGGY to buy bikes, but what that usually means is they take PIGGY, convert it to BTC, then convert that to fiat, and then donate the fiat.

Let's just hope that the price doesn't collapse -- and perhaps even goes up. And let's hope the network keeps going. And let's also hope the exchanges keep accepting PIGGY and don't forget about it as hundreds of new coins flood the network. Need I go on?

In truth, my outlook for PIGGY isn't too promising. Other than the improved wallet (see above), there's little to differentiate it from all the other PoW->PoS coins. 15% is at least a decent interest rate, but there's a very real chance the price of PIGGY will fall more than 15% per year. Restarting as a new coin also doesn't lend me confidence in the developers -- will Piggycoin 3.0 switch to a new PoW algorithm in a few more months? Let's hope not!

What I'd like to see from PIGGY right now is a better integrated ABE-styble block explorer, that shows difficulty, block reward, value, transactions, etc. instead of just some raw hashes. And if you really want to take things to the next level, integrate a way for users to trade PIGGY for BTC directly in the wallet -- have an internal exchange that runs on top of the network and doesn't require any intermediaries! That would be sweet, though I'm not sure how you tie that in to BTC exactly, and more likely than not you'd have hackers compromise the network at least a few times before everything worked properly.

Anyway, good luck my little PIGGY -- I expect big things of you, and we'll see if my children are actually able to use you when they hit college in 15 or so years. And if you'd like to donate to their PIGGY college fund, I promise I won't move the coins anywhere: pWf3PEfPuxRwed5dNtutrWndUZckXYdP8r


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Proof of Stake (PoS) - Examining NXT and MINT

"Proof of Stake" mining, or "Piece of [Bleep]" mining? This is probably a subject to tackle in more depth, but the key tenets of PoS mining are that you secure the network (those with a "stake" are less likely to compromise the network security and fork the block chain) and you don't have to "waste" lots of power. Many coins have tried this (NXT, MINT, THOR, ZEIT, BC... probably a bunch of others as well), and really the only major success story I can think of -- and I'm using that term loosely -- is NXT. Let's talk about a couple of them, specifically NXT and MINT.

The initial IPO to distribute all NXT coins was around 21 BTC, so at the highest price of BTC that would be roughly $25,000. Now there are 1 billion NXT (initially distributed among the IPO holders) worth approximately 61090 BTC. Seriously? Yes. And that's why every new coin these days seems to be trying an IPO. "Golly -- look at how well NXT did! From the IPO price to the current price is an increase of 2900+!" Who wouldn't like turning $1 into $2900 overnight -- or $1000 into $2.9 million? That's the "success" side of the story, but now that NXT exists, what are people doing with it?

I don't know how many of the initial NXT coins have been given away -- I received 3 NXT from a faucet at one point, which is basically worthless -- and frankly the whole Java-based "forging" client thing is terrible. With the source code now released, hopefully we'll see some better clients. Then again, why build a better client if something isn't really worthwhile? That's the difficulty I'm having. So let's get back to Proof of Stake mining/forging/minting/whatever.

With NXT, your chance of "forging" a block is based on how many coins you have that are "active" (1440+ confirmations since they were last transferred between NXT wallets), along with how many wallets/coins are active on the NXT network. Let me pause for a second to say that I admire the tongue-in-cheek quality of calling the creation of money "forging"; I'm not sure if it's supposed to be humorous or serious, but I choose to view it as the former. Anyway, let's assume that only about 10% of the NXT coins are active as an example. That means 100,000,000 NXT are actively "forging" and your chance to forge a block is the number of NXT you have divided by the active number of coins, times 1440 (the number of blocks per day).

You can find out how much of the NXT network is active by looking at the "target" icon next to new blocks in the NXT client, which lately is ranging from as low as 400% to as high as 7000% for the blocks I'm seeing. Divide 100% by that number -- so we're looking at 0.25 to 0.0143 -- and we get a range of 1.43% to 25% of NXT coins actively forging. That means somewhere between 14,300,000 NXT and 250,000,000 NXT are online right now. Let's just go with 10% being active, though. If you happen to be holding one BTC's worth of NXT (around 16000 NXT), then you should forge roughly one NXT block every four days (using the 10% active estimate).

So what would that actually earn? Well, that's where NXT gets a bit difficult: you only get paid the transaction fees for the block you forge, and quite a few (most even!) blocks are empty. Basically, you could earn as many as 255 NXT for a block (if all 255 transaction slots were filled), or as little as 0 NXT for a block (far more common). If 10% of blocks have one transaction (which is at least a reasonable estimate), and if you have 16K NXT and forge a block every four days on average, that means in one year you would forge 91 blocks and earn... 9 NXT. That's an interest rate of approximately 0.05% -- about what most rip-off bank savings accounts give, which is hardly worth the effort involved. Having more NXT doesn't help either -- if you have 160K NXT and forge 910 blocks in a year, you'd earn around 90 NXT, which is still only 0.5%. Yuck!

Perhaps NXT is a bad example, though, as you only get paid transaction fees, and those are quite small (1 NXT). Let's take a more popular coin: MINT. The Proof of Stake payout for MINT is 20% the first year, 15% the second year, 10% the third year, and then 5% for the fourth year and beyond. Currently, after the initial PoW (Proof of Work) scrypt mining phase, there are 18.737 billion MINT in existence. Hold MINT in your wallet for at least 20 days and they become eligible for generating PoS blocks. It's not quite clear how frequently you'll generate a PoS block on MINT (at least to me), but for the first year you are paid on the "coin age" with a target of a 20% annual increase. A 20% savings account would be awesome, right? So what's the catch?

If you hold 1 BTC worth of MINT right now (5.9 million MINT), in one year with no additional mining you should have 7.1 MINT. Neat! Except, the price of MINT is questionable to me even at 16 satoshi; with 70 billion coins planned, why shouldn't we see eventual prices of less than 1 satoshi? THOR only has a target of 15 billion and it's at less than 1 satoshi (though still in the mining phase), so it's not too crazy to think this way. ZEIT is likewise trading in the 1-2 satoshi range (and ZEIT is basically just a total rip-off of MINT, if you're wondering). But even if MINT only drops to 10 satoshi, it would take more than four years of Proof of Stake mining to make up for that drop.

So there's the question: why is Proof of Stake better than Proof of Work? It basically incentivizes people to hoard coins, and if no one uses coins in trading, buying, etc. the only people holding coins are those that already invested in the cryptocurrency. What that usually leads to is a bunch of early adopters spouting off about the "one true coin" and how everyone should by ZEIT, MINT, NXT, whatever and then hold it so they too can starting minting/forging/foraging/whatever. Those who actually benefit are unfortunately the usual suspects: the developers that take a 1% (or 2% or even 3%) share of the total number of coins ever and then dump those at the first opportunity and disappear with a large pile of profits.

TL;DR (that's "Too Long; Didn't Read): I don't get why Proof of Stake minting/forging/whatever are actually going to be worthwhile long-term. The early miners, developers, and IPO share holders will dump at the first chance they get (assuming they can first successfully pump the coin, of course), while the hoarders wait for PoS to kick in. But by the time PoS is really doing much the value of any newly created coins will be in the toilet.

Is anyone out there not holding a PoS coin that actually thinks this is a better solution than PoW coins? Part of the real draw of Bitcoin I think is the massive amount of hashing power it requires I think -- it's using the most power, and it has the highest value. What am I missing here that makes PoS coins "special"?

The only bright point is that minting/forging doesn't require a lot of electricity, but even "low power" coins like MINT and ZEIT still use CPU processor power and require your system to be on. Oh, sure, transparent forging would allow you to only power up on occasion, but that's just more work. "Oh crap, I didn't power on my system and missed my block, and now I got penalized! I guess I'll just run the system and software 24/7." On a typical desktop, I'm seeing a pretty consistent 5% CPU use out of the MINT and ZEIT wallets. That means if my system uses 35W and I leave it running 24/7 "just to be safe", rather than turning it off half the time, I'd be using 175 kWh per year extra.

That's only $17.50 or so for a year of minting, but the potential earnings from MINT are only $0.0000768 per MINT right now (and dropping). That means to at least break even on power and earn $17.50 in a year (at 20% interest and 16 satoshi), I'd only need about 1 million MINT (not much really), and in four years when we're at 5% interest I'd still only need 4 million MINT. But my bet is that we'll see coins like MINT continue a downward spiral, because no one is really going to support 20% interest rates per year, or even 5%. If the price drops to 1 satoshi (and actually stays there), you have to hold 18 million MINT to break even.

Can you think of better things to do with 3 BTC? I sure can... like just sit on it and wait for the next time the price hits $1000 and you've doubled your money. That seems a far safer bet than investing in MINT or some other PoS coin and hoping for 20% annually. Or put another way: I wouldn't bother with minting/forging unless you happen to already have a significant number of coins.

Quick GPU Price/Performance Update

If you're still chasing the dream of building rigs with R9 290X or even R9 290, you might want to reconsider as the pricing right now is way out of line with the performance being offered. Here's the short rundown of the currently shipping AMD GPUs, their prices, and their expected performance. All of these are linked via my Amazon Affiliate account, so if you're shopping there I'd appreciate you sticking with my links! I know they're not always the least expensive option, but if you have Amazon Prime you can potentially get free shipping as a bonus (if you can find an appropriate GPU in stock, that is).

GPU	Price	Performance	KH/$
R9 290X	$799	900KH/s	1.126
R9 290	$640	800KH/s	1.25
R9 280X	$430	700KH/s	1.628
HD 7970	$450	700KH/s	1.556
HD 7950	$444	600KH/s	1.351
R9 270X	$250	440KH/s	1.76
HD 7870	$220	425KH/s	1.932
HD 7850	$196	380KH/s	1.939
R9 270	$236	400KH/s	1.695

Now hopefully it's clear that those performance estimates are a rough ballpark of what you can expect, so don't complain if you only get 850KH out of an R9 290X -- and I've seen a few people pulling close to 1000KH with a 290X, though I'm not quite sure why/how (they were MSI cards, if that helps). In some cases, you can expect to slightly beat a few of the figures. The main point is that in terms of performance per dollar, right now the best options appear to be the old (basically discontinued) HD 7850 and HD 7870 cards, and if you can't find those in stock than the R9 270X and R9 270 are the next best choice, with the R9 280X coming in fifth overall. The R9 290 and 290X are so overpriced right now that they're not even remotely worth considering in my book.

Of course you have to factor in the cost of the rest of the system -- if I just copy an old post from last month,  with a bit of tweaking, here's what you'd need -- and keep in mind that with these lower power/performance GPUs, I'm not as hesitant to try going with five or even six GPUs in a rig (though the risers do get expensive). Get two PSUs, six GPUs, and six risers if you want six GPUs, or stick with a single PSU and three risers to keep it simple:

Component	Description	Price
Motherboard	Gigabyte GA-990FXA-UD3/UD5 AM3+	$137-$175
Processor	AMD FX-8320 Vishera	$159
Memory	Crucial Ballistix Sport 4GBx2 DDR3-1600	$80
Power Supply	Rosewill Capstone 750W 80 Plus Gold	$100 each
Storage	2.5" 60GB Kingston V3 SSD	$50
Risers	x16 to x16 and/or x1 to x16 powered	$20 each
Case?	Build it out of wood or PVC pipes!	$40
Total Cost		$626-$824

It's still by no means an inexpensive system, but total cost we're looking at roughly $1286 for a system built with HD 7870 GPUs that would do 1275KH -- and that CPU is still available to mine something like Darkcoin. Bumping up to a six-way rig would increase the price to $2144 (plus tax and shipping as appropriate), for around 2550KH. If you were to try for similar performance with R9 290X, three GPUs would cost $2400 just on their own! It might be more efficient in terms of space to go with R9 290/290X, but for price/performance it's better to take a step or two down from the top dogs.

Taking the DOGE for a Walk

A couple of things have happened in the past few days. First, in anticipation of the block reward halving, the price of DOGE shot up quite a bit -- from around 0.0000016 BTC/Doge to a current 0.0000025 BTC/DOGE (and a high of as much as 0.0000029 or so). If you were mining and holding DOGE for the past month or two, right now you're sitting on a pretty healthy balance and you could trade it all in for some good BTC gains. But now that the block reward has been cut in half and the price didn't double, the result is that mining DOGE is no longer looking so attractive -- especially when you look at other scrypt-based coins.

Right now the difficulty and exchange rate of LTC (2674, 0.0252) means mining LTC will net you about 0.0095 BTC per day, whereas mining DOGE will net you around 0.0105 BC per day. So yes, DOGE is still beating LTC, but only barely. Looking at scrypt coins in general, the top contenders right now for your hashing power are (depending on the time of day) Noblecoin, Lottocoin, Smartcoin, Anoncoin, and Klondikecoin. Others occasionally show up as well at the top of the profitability charts, but looking at the 14-day averages at Coinwarz, I'd recommend sticking with coins that are clearly above LTC during that time span (so 110% or more). Of course, if you're looking to trade for BTC, you shouldn't be mining any of those scrypt coins!

I keep mentioning alternative Proof of Work coins simply because right now, they make the most sense for GPU mining. There's really no other way to put it. The best scrypt-based coins are still profitable, but coins using something other than SHA-256 or vanilla scrypt seem to be the better option. It's not that these coins are inherently better, mind you, but that they're at least different enough to create some buzz, which in turn creates value. And if the buzz fades, so does the value, perhaps with some large coin holders sticking around to prop up the value of their millions of coins. If I were holding millions of DOGE right now, I'd probably be singing a different tune, but I've never viewed DOGE as more than a one-trick-pony and so I've moved on to greener pastures. Maybe I'll be back, but not just yet.

The other interesting thing to happen is that BTC has continued its rollercoaster performance since the start of the downward trend that apparently was sparked buy Russia declaring Bitcoins illegal (or something like that). What's truly awesome is that Russia declared Bitcoins illegal apparently because "it could finance terrorism." Maybe the US and all of the Middle East should do the same? "Ain't nobody gonna finance these here terrorists unless they do it with hard currency, dadgummit!" Anyway, if you're trying to day-trade BTC, the past few days were likely either great or terrible -- depending on whether you managed to properly "buy low, sell high" or if you ended up playing the fool and using the "buy high, sell low" strategy.

I'm bad at predicting where BTC values will go -- or any stock or cryptocurrency for that matter -- so I'm sticking with mining as best as I can! Good luck to you all. I've got a separate post to put together as well as to "what to mine", but before that I want to get into a separate topic. Stay tuned....

What Makes a Good Cryptocurrency, Part 1: Slow and Steady

I’ve discussed some of these thoughts before, but I wanted to get into this a bit more. Vertcoin is a great example of how to make a useful new cryptocurrency, and the reasons for its current success are due in a large part to the design. Fundamentally, I think any good cryptocurrency needs to have the following:

1. It needs to do something new relative to what is already out there.
2. It needs to launch in a “fair” manner.
3. Difficulty adjustments should happen sooner rather than later.
4. It needs to be designed with the future in mind.

I’m sure there are other things that I could put on the list, but I'm going to focus on point number four right now. There's an old saying: "slow and steady wins the race", which we're all familiar with from the story of the tortoise and the hare. While the latest meme cryptocurrencies may catch fire for a short time, I don’t think they’re a strong basis for a lasting currency. And DOGE, I hate to call you out like that, but long-term I don’t think your prospects are all that bright (similar to your silly Doge face – such wow and all that). A primary reason is that the coins get paid out in a short amount of time and we reach the point where the block rewards largely disappear.

Of course, "short" is all relative, but to me a coin should be designed such that it will still have a reason for mining (i.e. securing the network) in five, ten, twenty, etc. years. If as an example you have a new currency with one million total coins and they'll all be mined in six months, what will keep miners going with securing the network past that point? If transaction fees of 0.1 coins per transaction were mandatory, and if there are on average 10 transactions every block, that would mean even if you're doing a block every 30 seconds, you're still only giving out 2880 coins per day. So the people that mined the initial 1 million coins of this hypothetical currency did so at let's just say a steady rate of 5555 coins per day, and if you had a minimum guaranteed transaction fee of one coin, it perhaps wouldn't be so bad...but that's not really what we have on most coins.

The reality is that transaction fees are far, far lower than 1 coin on most of the major cryptocurrencies. Take Bitcoin as an example -- it's one of the most heavily used coins, and yet looking at the past 20 or so blocks, the biggest block I could find was this one. That has 826 transactions and only 0.21444776 BTC in total fees. If we were depending wholly on transaction fees, all of the power going into the Bitcoin network would only amount to on average something like 0.05 BTC every ten minutes, paid for by those conducting transactions.

Right now, the 25 BTC block reward means there's a bounty of around $20,000 that will go to some lucky miner (or pool) on average every ten minutes. The total network hash rate of Bitcoin has now reached a pretty staggering 19,720,113 GHash/sec. Let's assume for a second that every system participating in Bitcoin hashing is as efficient as the latest and greatest 28nm ASICs. That would mean world-wide, Bitcoin is sucking down around 11,503,400 Watts of power. At a relatively inexpensive $0.10 per kWh, that means in a day Bitcoin consumes $27608.16 worth of power -- not too bad, as the current block reward will pay that in just over 10 minutes. (Realistically, most ASICs are far less efficient so the power cost is probably twice that -- so 30 minutes to pay for all the power use of BTC.)

But what happens in the future, like say in 2030 when the block reward of Bitcoin will probably be at the 0.78125 BTC mark? Most likely we'll be seeing a lot more transactions on the Bitcoin network, so instead of 0.05 in average fees per block, maybe we get to the point where the average transaction fees per block amount to 0.5 BTC (which is probably a bit of a stretch). At that point, we're looking at perhaps 1.25 BTC every ten minutes, and the power use of the BTC network may not actually drop much (and more likely it will increase). What happens then?

1.25 BTC per block right now is still more than enough to cover the cost of power -- in fact, 11.5 MW of power costs something like $200 per block, so at current prices we would only need 0.25 BTC per block for those securing the network to break even. If BTC is worth ten times as much in twenty years (which is either optimistic or horribly pessimistic), an average block reward of 1 BTC with transaction fees will be enough to power a while lot of hashing, so the network stays secure and BTC can continue to succeed. It was designed with this sort of scenario in mind, which is why things should continue to function well. But that's for Bitcoin; what about other cryptocurrencies? Time to pick on DOGE for a minute.

The total number of blocks before the block reward drops to 10K + transaction fees is around 756,250 blocks -- or in just 525 days from the time DOGE first started. Looking at the past day of blocks, here's one of the largest; with a total of 617 transactions, there were just over 575 DOGE paid in transaction fees. Right now the total network hash rate of DOGE is around 86 GHash, but it's happening almost entirely with GPUs. Assuming everyone is using the most efficient GPU possible, so an R9 290X hashing at 900KHash and drawing 350W, that means the DOGE network is drawing about 34,000,000W (and in reality it might be 50-100% more than that due to less efficient GPUs). With an average of 500,000 DOGE produced every minute, that's 720 million DOGE per day, with a value of roughly $1,000,000. Meanwhile, the power cost for the DOGE network is around $81,600 per day, so clearly DOGE is more than paying for the power use. But what happens when the block reward drops to 10K + transaction fees?

With the largest block of the past few hours generating 575 DOGE, it's probably a safe bet that best-case we're looking at 1000 DOGE or less per block in transaction fees. That means 15,840,000 DOGE per day, so to break even on power costs of $81,600 per day DOGE will need to be worth at least $0.0052 per DOGE, or in BTC terms it would need to trade at around 0.0000064 BTC per DOGE. That's only about four times as much as the current value of DOGE, so we can certainly hit that level, but again that's just to break even. If other coins are generating a substantial profit, why would people stick with DOGE just to break even on their power costs? I'd say bare minimum it would need to consistently generate twice as much revenue for those mining (securing the network) as it costs in power, and perhaps 2-3 times the return would be better. Will we see DOGE trading at 0.0000192 BTC/DOGE? Possibly, but more likely a new meme will supplant DOGE before then.

Put another way: if you believe DOGE will manage to maintain current hash rates for the next two years, you'd be a fool to sell any of your DOGE at the current prices. All the "DOGE millionaires" (currently around $1300 worth of DOGE) would be looking at the equivalent of $10,000 or more if that happens. A nearly 10-fold return on your investment in under two years is "pie in the sky" sort of thinking in terms of investments, but yet cryptocurrencies are all beating that mark -- often by a large margin.

As usual, this is a bit long, but when you start thinking in terms like this it should help you to start seeing why coins that pay out most/all of their block rewards in a short amount of time are a bad idea. They start out looking pretty interesting and might garner some headlines and make waves, but a couple years from now I expect Litecoin will still be chugging along -- the little engine that could -- while most/all of the meme coins are going to end up fading away. And really, it's better that way in my book, as if I'm talking to friends or investors and trying to get them to understand that cryptocurrencies can succeed, the "success" of a joke coin like DOGE doesn't help at all.

Now if you'll pardon me, I'm going to go create the All Your Base Are Belong To Us (AYBABTU) coin. Does that sound old and stupid to you? Well, that's what today's memes will be in another decade. All memes die, and the meme currencies will die with them.

Getting back to the main topic, what I'm saying is that you need to build a cryptocurrency that will pay out block rewards long enough to reach the point where the transaction fees can actually sustain the network. Or you can be like DOGE and go with a deflationary approach and always have 10K DOGE per block minimums, forever. But that's what got us into the mess we're in with fiat right now, isn't it? As far as a long-term payout, there are plenty of ways to do that -- Bitcoin, Litecoin, and Vertcoin cut the block reward in half every 4 years or so while other coins might drop linearly over time. Coins that pay out too quickly on the other hand (DOGE, QRK, FZ, etc.) are very likely to reach the point where there's no profit in mining/securing the network. If that happens, the coin(s) will die. You've been warned -- don't get caught holding the bag for a poorly designed cryptocurrency.

EDIT: Note that I missed the fact that DOGE has a 10K minimum reward, apparently forever. I don't really like that as a solution either, if you can't tell. I've updated the text to reflect this with new calculations. Thanks to several readers for pointing out my errors!

An Alternative to Mining: Leasing

This continues from where I left off yesterday, where I mentioned there are potentially ways to make far more than 0.015 BTC per MHash on scrypt coins. Or, if you find a hot new coin and you want to throw everything you have and then some at it, you can do that as well! The service is called LeaseRig.net, and in the past two days I've played both sides, leasing my rigs to others as well as paying rent to get more hashing power.

Before I get into the details, let me be frank: paying 0.03 BTC per MHash to rent somebody's rig seems awfully crazy to me. I rented roughly 50 MHash of power yesterday to try and grab a whole bunch of LEAF coins, and while I definitely ended up with a lot of LEAF, at the current value it was a losing gamble -- I could have spent 2 BTC and purchased 10 million LEAF, whereas with leasing and mining I only earned about 70% of that target.

On the other hand, I actually learned about LEAF through the leasing program, as several of my rigs were rented and ended up mining LEAF. "What's so hot about this new coin?" I wondered, so I went and checked it out and found that the previous day, people were earning nearly a million LEAF per MHash, and at an exchange rate of 0.00000015 BTC per LEAF that worked out to 0.15 BTC per MHash. Naturally, that brought in a whole bunch of miners and difficulty quickly ramped up, but even now LEAF is generating pretty decent returns. Other coins I've seen being mined: Coino, PXLcoin, Tittiecoin, Potcoin, and Swagcoin -- but I'm not going to explicitly recommend any of those and in particular the launch of SWAG was a joke.

Long story short, you can play both sides of the LeaseRig "game" -- actually paying others for the use of their rigs is a bit more risky, whereas if you want to be conservative but still generate a higher-than-normal rate of return, it's not unusual to get upwards of 0.02 BTC per MHash, and if there's a popular new coin you could get 0.03 or higher lease prices. The great part is that when your rig isn't being leased, it can go back to mining for you, and you can even manage the pools remotely through LeaseRig. The bad news is that at present the interface only allows you to list up to two default pools -- I'd like at least three or four.

Now if you're interested, I'm not going to spend a ton of time explaining how to get things working with LeaseRig, as there's a How To Guide already. The process involves PM'ing the operator of the site, djeZo, on the Bitcointalk.org forums, potentially making a security deposit with him (if you're new), and then you need to set up an account with some place like NoIP. From there, you also need to configure your router via Port Forwarding, and edit your cgminer.conf settings to allow his server to talk to your rig. Let me also suggest that you back up your current cgminer.conf file (or if you're using some other file name, copy that to cgminer.conf and use that instead). You can still use CGWatcher or other utilities in most cases, and if you know enough to figure all of this stuff out, you're probably ready to get listed on LeaseRig.

If you'd like to try the service out as a renter rather than leaser, feel free to try one of my systems (trogdorjw73) -- I've kept them reasonably priced right now, at roughly 0.025 BTC per MH. And as usual, let me end by saying at that rate, a $2000 rig like the one I listed yesterday that does 2000KHash could generate 0.05 BTC per day and 1.5 BTC per month. If you can consistently get that sort of ROI, you'll pay for the rig in under two months!

BTC: 1GGJUb1gFpydygpeKzd6oFoShLRUSyThV7
LTC: LfCLyykrNFftzpdWejR73hf478ZtBzQ9jE

Mining for Profit and Learning

I'm always on the lookout for new ways to make my mining rigs generate money. I know, that's sort of bass-ackwards -- we're supposed to be promoting cryptocurrencies, not mining cryptocurrencies so we can exchange them for fiat, right? RIGHT!? Well, maybe that's true for some of you, but for me I have bills (and debts) to pay, so I've definitely exchanged plenty of BTC/LTC/alt-coins for cold, hard USD, and I suspect the same holds true for many of you. Unless you have enough money that going out and buying thousands of dollars of mining hardware isn't a problem, then investing money into cryptocurrencies is at best a risky business. Which brings me to the point of this post.

Hypothetically, just to keep things simple let's say that you have 10,000 KHash of scrypt mining hardware at your disposal. Hopefully all of you are familiar by now with Coinwarz.com, Coinchoose,com, or some similar site -- and if you're not, you should be! I like Coinwarz as it let's you compare profitability to LTC, which is far more useful than looking at profitability vs. BTC mining since no one (smart) does that with GPUs anymore. Coinchoose does have a Litecoin comparison page, but for reasons I can't fathom it omits many/most of the scrypt coins and still includes several SHA256 coins. Seriously, what? Anyway, let's run some quick figures on Coinwarz with our 10,000 KHash:

Okay, that's a huge image and I apologize that I needed something like that. Obviously the exchange rates and mining difficulty are all in constant flux, so you can't base your choice of what to mine off of the above. But looking at this snapshot in time, we can see that there are some coins that look really profitable right now, but over the past fourteen days they're actually not that great -- PHS, ALF, FRK, and CAP are all in this category. On the other hand, we have coins that are currently not as profitable as their two-week average -- RPC, DOGE, and LOT fall into this group. So what do you mine?

So if you're mining alt-coins, at the current difficulty/exchange rate you could mine coins and then trade for BTC at the following rates (which are different from the above image), and I'll include LTC as the baseline since it's the one we have to beat in my book:

Coin Name (Symbol)	Rate in BTC per MHash	Monthly Earnings from 10 MHash/sec
Litecoin (LTC)	0.00918 BTC	~$2203 USD
RonPaulCoin (RPC)	0.01057 BTC	~$2537 USD
Lottocoin (LOT)	0.01225 BTC	~$2940 USD
Worldcoin (WDC)	0.01300 BTC	~$3120 USD
Dogecoin (DOGE)	0.0133 BTC	~$3192 USD
Fastcoin (FST)	0.01437 BTC	~$3449 USD
Neocoin (NEC)	0.01502 BTC	~$3605 USD

We've been over this before, but the basic idea is that you could build five systems capable of doing 10MHash+ total for roughly $10,000. If that's your investment, most of you would be pretty pleased to recover your money and begin making profit in three or four months, right? But what if I told you there are ways where you could double the best return on that list, on a fairly consistent basis? Yes, we're talking about 0.03 BTC per MHash of scrypt mining, so at $800 per BTC (an estimate given current prices), you would pay off a $10,000 investment in about 42 days! And what if the difficulty/exchange rate of the various alt-coins wasn't really a consideration?

I've caught your interest I hope, but I'm going to stop here for now -- I'll reveal why tomorrow. But let's just say that first, there are coins not yet listed on Coinwarz, and sometimes not even an any exchanges, and mining these early can reap huge benefits (albeit with some risk). That's one option, but for the other let me ask a question: Who made the most money on average during the Gold Rush of the 1800s? The answer to that leads into the answer of what to mine and how to do it...tomorrow. For now, here's my current pick of hardware for a $10,000 investment:

Component	Description	Price
Motherboard	Gigabyte GA-990FXA-UD3/UD5/UD7 AM3+	$145-$234 USD
Processor	AMD FX-8320 Vishera	$156 USD
Memory	Crucial Ballistix Sport 4GBx2 DDR3-1600	$73 USD
GPUs	3 x Radeon R9 280X 3GB	$1200 USD
Power Supply	2 x Rosewill Capstone 750W 80 Plus Gold	$200 USD
Storage	2.5" 60GB Kingston V3 SSD	$63 USD
Case?	Build it out of wood or PVC pipes!	$40 USD
Total Cost		$1877-$1966

The biggest change here is a move to an Extended ATX motherboard (the Gigabyte GA-990FXA-UD7), which comes with six x16 slots and will allow you to do one of two things: either run up to six GPUs with risers (note that you'll need more and/or beefier power supplies!), or short-term you could actually run it with three GPUs without risers and still get two slots between each pair of GPUs. $234 is a lot of money to spend on a motherboard, but with x16 risers now going for $20 each that's $60 for three GPUs that you save, and you still have room to expand in the future. The UD3 and UD5 are less expensive alternatives, with the UD3 being standard ATX and it comes with four x16 slots, while the UD5 is also an ATX board but it comes with five x16 slots.

The other change is the recommendation to build your own case using either wood or PVC pipes, both of which are relatively inexpensive and easy to procure. My next case I've decided to go with wood -- I'll take pictures when it's done. It may not look as classy as an aluminum frame cage, but almost everyone has easy access to wood, a circular saw, a hammer, and nails -- and since wood doesn't conduct there's less risk of shorting out your motherboard if you're not careful with the mounting. Just make sure you have adequate airflow so nothing catches fire. :-)

Vertcoin: About to Go Vertical?

I mentioned Vertcoin a few days back, but at the time I was busy and didn't really give the coin a real chance. I like that it uses the same basic payout structure as Litecoin (50 coin blocks, dropping approximately every four years, with a total of 84 million VTC eventually). I also like the idea of trying to be ASIC resistant. So what don't I like? Well, mostly I don't like having to play with conf files to get all of my rigs properly mining VTC, I don't like that my miners tend to get SICK GPUs more often, and I don't like that most of the VTC pools are somewhat unstable right now -- it's not uncommon for several of the mining pools to be slow/down at once!

If that's the bad, what's the good? For one, given the reward structure and the fact that there's no pre-mine, Vertcoin could end up looking a lot like Litecoin. Right now that means over $20 per VTC is a reasonable target, but it could take a while to get there. But make no mistake, Vertcoin is picking up steam! When I first discussed VTC just four days ago, the difficulty was at 2.097. Given that VTC is similar to LTC, you can divide your KHash rate by the difficulty to get a reasonable estimate of the number of VTC you can mine in a day, so with 1800KHash/sec you would have mined around 850 VTC in a single day. Well, a day later VTC hit the next 2016 block milestone and difficulty jumped to 5.652 -- and not surprisingly, the trading price of VTC had increased as well.

In the meantime, DOGE has been going crazy, so I even switched some miners from Hashco.ws and Middlecoin over to straight DOGE mining, and it's been doing pretty well -- and so have the multi-coin pools, really. But then yesterday, I looked at VTC again and did some quick math. Even at 40% of the hash rate of mining scrypt coins (the adaptive N-Factor algorithm used in VTC makes mining more difficult), at the current exchange rates mining VTC might actually be more profitable than mining DOGE or any of the other scrypt alt-coins. Here's the math:

DOGE @ 4500 KHash/sec and a difficulty (right now) of 1264.47 will generate around 36000 DOGE per day. (Note: DOGE block reward is set to halve in the next few weeks.) At the current exchange rate (which has jumped of late), that works out to 0.08 BTC per day after trading.

VTC @ 1800 KHash/sec (40% of the regular scrypt hashing rate due to higher N-Factor) and the current difficulty of 7.953 (yes, difficulty just jumped by over 50% yesterday) will generate around 225 VTC per day, and at the current exchange rate (which is a bit volatile) that works out to 0.115 BTC per day.

Wow. DOGE is flying high right now, no doubt, and profits on Middlecoin are up thanks to this fact. However, at present VTC is outperforming DOGE by over 40%. And what about Litecoin, which has had a recent drop in difficulty from nearly 4000 to 3130, with the next difficulty projection being under 2600? Mining LTC directly at present with 8000 KHash would net you 0.065 BTC per day after trading, so VTC is almost twice as profitable as LTC right now. That means if you were to go out and buy a system with three R9 280X GPUs for around $2000, you could recover your initial investment in under two months.

If that's not enough to get you thinking VTC is taking off, consider a few other tidbits. First, the exchange rates on VTC have bumped from 0.00016 BTC per VTC four days ago to 3-4 times that much (currently 0.00051), and I don't expect them to fall back any time soon. The people mining VTC right now tend to be seasoned veterans, as it takes more work to get up and running compared to all the scypt-based coins -- more on that in a moment -- so they're not inclined to sell. I know I'm not selling my VTC for example, because when the exchange rate has more than tripled in just four days you hold and wait for things to level off. Second point: there's no multi-coin pool mining of VTC right now, since it uses it's own customized Proof of Work algorithm, which means you don't see big dumps of coins throughout the day from Middlecoin, Hashco.ws, etc. And last but not least, I'm writing about Vertcoin and there are at least a few hundred people reading this, which means more people mining VTC and holding, which means I expect a small bump just because of this post.

There are other things I could probably get into as well, but suffice it to say that right now, I think Vertcoin is about to take off -- or rather, it's already taking off, and my one big regret today is that I didn't shift my four main mining rigs over to VTC four days ago! Had I done so, I would currently be sitting on something like 2200 VTC after four or so days of mining, which would currently be worth over 1 BTC. Instead, I stayed with Middlecoin during that time and made a reasonable 0.25 BTC (give or take).

So you've read all of this and now you're wondering: how do I get up and running on mining Vertcoin? It's pretty similar to other coins, and Vertcoin.com has most of the needed information, but there are a couple of items of note. First, you need to download the custom version of CGminer, which has been tweaked to work with the scrypt adaptive-N-Factor algorithm. Second, I can pretty much guarantee that if you run the VTC cgminer with your current scrypt settings, one of several things will happen: either it won't work at all, your system will crash (or at least be unstable), you'll get lots of hardware errors and no accepted shares, or you'll actually successfully mine VTC but not at anything near the expected rate. Here's my input on what to do to get things to work, based on my experience with mining on HD 7950 and HD 6970 cards.

First, you need to lower your thread concurrency. I haven't found an "ideal" setting yet, but I can tell you that on my 7950 cards I dropped from 21584 to 14712, and that seems to work "okay" -- I'm getting roughly 250KHash per 7950. On my 6970 cards, I likewise dropped from TC of 8000 to 6000, and they're also getting around 250KHash -- so yeah, my old Cayman GPUs are doing a good job of keeping up with Tahiti! Not bad for a $350 investment last month off of Craigslist! :-) The second thing you'll probably need to do is to adjust your GPU and RAM clocks down a notch. If you were able to run at 1025/1575 on a 7950 with scrypt, you may find that decent stability with VTC only comes at 975/1500.

And what about R9 290/R9 290X? Well, I'm still trying to get those working well. Some are reporting rates of around 400KHash with 290X and 350KHash with 290, but as usual every system is different. Also, the cgminer BSOD on exit glitch is back with the customized VTC-cgminer, so that makes things a bit of a pain in the butt. I've been able to get all of my 7950 GPUs and 6970 GPUs running VTC without too much difficulty, but R9 290X isn't going as well. Hopefully I can fix that today, and if so I'll post back.

Something else to mention is that setting up failover pools with cgminer is a really good idea, especially since the VTC pools seem to be less stable than many of the scrypt pools I've used. I created accounts at four of the pools, but one of the pools (Kilovolt) doesn't appear to be accepting additional users right now, since they have over 33% of the current VTC hashing power -- which is very responsible of them. That leaves the other big pools as vertcoin.org, bitcrush.info, and vertco.in, or you could spread things out to some of the smaller pools. I actually started on pool.pm, but have since pushed them down my list of pools as their pool was unstable and the hashing rate dropped quite a bit, resulting in fewer found blocks and somewhat poor results. Anyway, I suspect we'll see many more VTC pools start coming online in the coming months.

Last but not least, you can still use the custom version of cgminer with utilities like CGWatcher. I've found cgminer-vertcoin takes a bit longer to start mining sometimes, but otherwise it works about the same as before. I did configure CGWatcher to reboot my computer(s) if any of the GPUs gets "SICK", which has been happening far more often than when I was mining scrypt coins -- in fact, I was at the point where my GPUs almost never got SICK, but now some of my rigs seem to get sick and reboot every hour or two! But even with the rebooting taking the mining rig offline for a minute or two, VTC is still resulting in better ROI than Middlecoin, so I'm sticking with it.

As a final comment, based on some discussions on the VTC thread, there's a question of the length of time between difficulty adjustments. This has killed (at least temporarily) a few coins, RonPaulCoin being a prime example. One of the reason other alt-coins are having huge problems with hashrate spikes is because of the multi-coin pools (e.g. Hashco.ws, Middlecoin, etc.) They'll hop on a profitable alt-coin for 10, 15, 60, whatever minutes and then move away when the difficulty vs. price is no longer favorable. RPC has a current network hash rate of 228MHash, so when Hashco.ws jumps on with 1GHash, it's a huge problem. (RPC has introduced a fix that will occur in the next day or two where the time between difficulty adjustments will be much lower.) To a lesser degree, this can also happen with individual users jumping on a profitable coin en masse until difficulty adjustment makes it unprofitable, leaving the coin in the hands of the few stalwarts to plug through the slow blocks left behind.

Anyway, right now there's no potential for multi-coin pools to mine VTC because you need to run a custom version of cgminer that targets the different PoW algorithm. Of course, if a bunch of copycat coins start using the same PoW algo (Scrypt-Adaptive-N-Factor or whatever we're calling it) or the necessary support gets rolled into a single cgminer executable, then VTC may have problems. Anyway, I certainly don't mind the idea of shorter rounds and/or faster confirmations. 2016 blocks between adjustments was a figure chosen because two weeks sounded like a good idea back in 2008 or whatever. Now, I'd agree that block adjustment times have no need of being measured in days let alone weeks. With 2.5 minute average block times, I wouldn't be opposed to VTC being modified to adjust difficulty every 24 or 48 blocks (around one or two hours).

Update: The VTC devs are running a couple polls regarding the N-Factor adjustment schedule and their implementation of Kimoto's Gravity Well. If you have strong feelings on either one, go vote. My personal take: implement KGW as soon as possible and be done with it! For N-Factor, any of the options are fine.

If you find all of this information useful, I'm always happy to accept donations. (If you want to donate something else, send me a message and I can list other coin addresses as well!) Thanks!

BTC: 1GGJUb1gFpydygpeKzd6oFoShLRUSyThV7
LTC: LfCLyykrNFftzpdWejR73hf478ZtBzQ9jE
VTC: VaYNYUUi3amUTKQAQSs9EM4xJyNRyqnoUG

Bitcoin ASIC ROI

Going along with my earlier post, someone asked me about Bitcoin ASICs and their current ROI. I'm going to give my thoughts on the subject, but know in advance that there's one real killer: all of the worthwhile Bitcoin ASICs are pre-orders, which means you have to fork over a large sum of money in the hope of future profits. It's a huge risk, with quite a few companies failing to ship at anything close to their originally promised dates -- Butterfly Labs being the easy scapegoat. But let's just start with a few of the ASICs that are currently promised.

The Block Erupter was the original ASIC, used by ASICminer back when no other companies weren't yet shipping. They are now readily available, but difficulty has skyrocketed and the prices on Block Erupter haven't kept pace. At present, a single Block Erupter USB ASIC will cost around $80 new, $45 used. Why would anyone sell one of these awesome miners for half price if they're so great? Simple: they're not great -- at least not now. At the current BTC difficulty, a single USB Block Erupter will earn less than $3 per month. Difficulty is increasing pretty consistently at 15% every two weeks (thirteen days), so you'll likely never earn back your investment.

A 10GHash Block Erupter Blade is marginally better; you pay $489 new ($387 used) and generate roughly $85 per month. Note that you need to add a power supply and some other parts to the mix, so $489 doesn't just get you up and running. If you're ready to try that route, you could go with a Block Erupter Cube with three blades, for 30GHash, priced at around $1200. Add a PSU for $100 or so and you'll generate about $325 per month in profits at the current price/difficulty ratio -- so you could potentially match the break-even time for GPU scrypt mining of Litecoin.

Difficulty is of course still going to curtail those earnings, which means in reality it's more like $150 in the first two weeks if you have the 30 GHash rig right now. The next two weeks you drop down to $127, then $108, $92, $78, $66, $56.... That's assuming a constant rate of increase, but what you end up with after one year is that you will actually be past the point where the Block Erupter Blade or Cube earns money, and you'll never actually recoup your initial investment. Add in some of the faster upcoming ASICs that will likely spike difficulty and it looks even worse. So Block Erupter is out.

Let's take one of the hot new ASICs, the KNC Jupiter. It was offered for $5000 for 550GHash, which at present means if you ordered one and now have it up and running you're making around $175 per day and you'll hit the break-even point in just over a month. But they're sold out... so if you want one, you can buy this used one for "only" $20,000. A year from now, instead of rolling in the dough, difficulty increases will mean you'll have earned about $16,000 back from your initial investment and the miner is no longer profitable. I suspect difficulty increases might slow down somewhat, so you could at least break even in a year, but it's still a dicey proposition.

If you want to take a gamble on a not-yet-shipping ASIC, Cointerra is asking $6000 for a 2THash (2000GHash) TerraMiner IV that will show up around April. If they hit their ship date, you break even in about a month, and even if they're a month late you still break even in about 60 days. And realistically, I think difficulty increases will slow down for a bit, as the TerraMiner IV is one of the most efficient ASICs and it's only available in limited supply, which means five months from now you recoup your investment and you actually break even just three weeks after you start mining.

It sounds great on the one hand, but considering you could potentially take the same $6000 and build four perfectly capable scrypt-mining rigs today, it's still a gamble. You could have four rigs with three R9 280X cards each pulling a total of around 9000 KHash/sec up and running within the week. Six weeks to eight weeks and you could be free and clear on your initial investment, while those betting on CoinTerra are still two or three months away from getting their TerraMiner IV.

But I'm just staring at my crazy little crystal ball, so don't take this as anything set in stone. More likely than any of the above scenarios of course is that prices take a dive, at least for the short-term, which means your $6000 investment in hardware is going to make a bunch of noise and look like a money loser for months or even a year, until we get the next big bubble and you're sitting on $100K or more of LTC/BTC/whatever. And if you're an entrepreneur and can play the long game, why not diversify and buy $12000 worth of hardware (one TerraMiner IV and the rest into GPU rigs for scrypt)? One of them is bound to give at least a 2X ROI, paying for both, and the rest is just gravy.

Mining Litecoin and Alternative Cryptocurrencies - Estimated ROI

My last post on the ROI for mining Litecoin with the new R9 290/290X GPUs is still more or less on target -- difficulty is stabilizing for now, with an expected return of around 2 LTC per week per R9 GPU. That works out to around $45 per week, or $180 per month, so you'll have paid for your R9 290/290X in three months, give or take. But what about switching to some alternative cryptocurrency?

In roughly one week of mining, I mined about 1 BTC with 7000 KHash of GPUs. That works out to over $700 per week for hardware that you could match with seven or eight R9 290X GPUs, eight or nine R9 290 GPUs, or ten R9 280X GPUs. Now if you do the math, at present that means best case you would need $4600 worth of R9 290X cards, $4000 or R9 290 cards, or just $3500 worth of R9 280X (HD 7970) cards. Until prices are closer to MSRP, it looks like the 280X is the one to get.

Now, if current alternative cryptocurrency mining remains even close to where it's been, we're looking at roughly $2800 per month, so you'd pay off the GPUs in less than two months, and realistically all of the hardware could be paid for within two months. That's pretty darn appealing if you ask me! And you don't have to go out and buy dozens of cards in one fell swoop either -- just start with a single rig and if you go with 3-way R9 280X you could have the whole system for around $1500, and it would be paid for in about six weeks.

The problem is Hashco.ws is still in a state of disarray following the hack, so I've moved to Middlecoin for now. I switched about 5000 KHash of PCs to Middlecoin six hours ago, and at present it looks like my BTC balance is 0.0135 BTC. For a full day of mining that works out to 0.054 BTC, which would yield roughly $40 per day, $1200 per month -- not quite so rosy. I'll update tomorrow when I've seen just how many BTC I get through Middlecoin after a full day of mining, as it could still be ramping up my payouts; I'm hoping to get about twice that (0.1 BTC per day), which is closer to my previous rate with Hashco.ws.

Update: I've switched most of my systems back to Hashco.ws as the primary pool, with Middlecoin as the secondary pool. Hashco.ws is still a bit of a pain, as you can't log in to create new workers, and if you don't have an account already you're out of luck until they get the front end to their site working again. However, I'm getting payouts of around 0.075 BTC per day from Hashco.ws, and Middlecoin is typically providing another 0.015 BTC per day. So around 7000KHash/sec is generating 0.09 BTC daily, or close to $70 per day in income. Power costs are around $400 per month for my systems, but modern R9 builds should be more like $200-$250. Net income per month thus works out to $1500-$2250.

Bitcoin and Litecoin Bubble, November 2013

If you've been following Bitcoin and Litecoin at all, you'll have noticed a massive spike in pricing over the past couple of weeks. I wish I could say that I had called this one, but honestly: it's all just speculation. Plenty of people are patting themselves on the back for buying in at $150 or even $250 on Bitcoin, but if you read around you'll probably find the same people talking about how even $800 was a "great price" -- right before we dropped $200 to $300.

There's still a ton of turmoil in the prices, driven almost entirely by the rampant speculation. People are trying to guess if we're just pausing before another meteoric rise to $2000+, or if we're about ready to take another plunge into the <$200 range. My take: either is possible, short-term. Long-term, though, I'd be far more likely to bet on the increase in price of Bitcoin, and as the top Scrypt-based cryptocurrency, Litecoin as well. Here's why.

First, China has been going crazy, and there are a bunch of real businesses beginning to accept Bitcoin as legal payment. But the reasons for China and other places going crazy might have as much to do with the US government shutdown as anything, as the shutdown illustrated just how fragile our governments can be. If the US goes through hyper-inflation, Bitcoins could skyrocket in value relative to the USD -- and if the USD has serious issues, let me tell you, the rest of the world's currencies aren't going to be far behind, as most of them are at least significantly linked to the USD (in the short- to medium-term).

There are other factors at play as well. Silk Road, a site dealing with the trading of illegal goods (mostly drugs) was closed by the FBI earlier this year in a sting operation that seized a good chunk of BTC (potentially 500K). That caused a short-term panic, but overall the closing of an illegal business has established BTC as a tool with many legal uses.

We've also seen ASICs (Application Specific Integrated Circuits) start shipping in quantity, which has basically driven the difficulty of mining BTC up 200X or more just in 2013. That has killed off the potential for mining BTC with GPUs (all of my computers and GPUs would currently 0.125 BTC per month, with a power cost of $325 or so), but the ASIC pricing has dropped tremendously. The ASICMiner Block Erupter USB sticks for instance were priced at $300 early this year when they first showed up. Last month before this bubble they were even down below the $20 mark, and now with the price increase they're back at $40. Those little USB sticks can do around 330MHash/sec, while drawing less than 5W, leading to a net profit of $5 per month or so. At $20, I should have bought 50; at $40, I'm not so sure, but if the price does go up to into the five digit range and I just sat on all the coins, it would be a guaranteed win.

Let's go back to China for a moment, now that I've mentioned ASICs. With pricing of $40 for a USB stick in the US, it probably costs less than $5 to build one of those over in China. Imagine a bunch of people using ASIC miners in China to get BTC to pay for their Internet service and whatever else, which is very likely already happening. How many Bitcoins does China need to support such services? There are 1.4 billion Chinese, so if each of them happened to hold $100 worth of Bitcoin for purchases, Bitcoin would need at a minimum a market capitalization of $140 billion.

For those that aren't familiar with Bitcoin, there will only be 21 million BTC ever created -- it's part of the design of the currency. Right now, there are roughly 12 million BTC in existence, so a bit more than half of the total. If BTC needed to have a market capital of $12 billion, then each coin would need to be worth $1000; for the capital to reach the $140 billion above, right now we'd need to have coins worth roughly $12,000 each!

Pie in the sky? I thought so too a while back. If I had been a bit more daring, I wouldn't have sold most of the coins I mined prior to the start of 2013 (around 1000BTC). My total costs for mining all of those coins, including power and computer hardware, are around $8000, and I've more than covered that now. But, could you imagine if I had saved them all? I'd have over half a million -- enough to pay for my house and another just like it, plus plenty of other items as well. Of course, if BTC tanked and disappeared, I'd have $8000 in additional debt (expenses) to deal with.

We've now been through this bubble mania three times. The first bubble in May/June 2011 peaked at just over $30, and it was followed by BTC dipping all the way to just under $2. At one point, I had computers that were mining over 5 BTC per day, but my power costs were roughly equal to the value in BTC and I covered those in the interest of being "better safe than sorry". Then in the buildup to April of this year, when we hit $266 or so, we had a crash back to $60. Now we've spiked as high as $900 and have fallen back as low as $450. Perhaps we'll continue down until we're in the $200 range, but there's still an upward trend.

The LTC side has been a bit less chaotic, but it's still interesting. There was a massive bubble in May 2013 where LTC hit roughly $6 before falling into the $2 range, with a dip even into the $1.25 range (when Silk Road was shut down). Last week it spiked up to nearly $10 and it's now down in the $7 range. How many Litecoin have I mined, just since April or so? Over 1600, which if I had kept them all would now be worth over $11,000. I could have purchased four mining rigs in April for around $6000 and already have double my "investment" -- but again, I got a bit scared with those $1.50 coins and panicked.

Now, after several hard lessons, I think I might be seeing the way forward with more clarity. It's time to stop selling coins when we look to the long-term. Short-term is still a guess, but if you're willing to take a chance, I wouldn't be surprised if right now is merely a short-term pull-back before we see another substantial jump in value. In fact, I'd bet heavily that before the end of the year we'll see $1000 BTC, if only for a few of the big investors to say, "I told you so." Litecoin usually stabilizes around 0.012-0.025 BTC, so if that holds we might see LTC go as high as $25 before 2014 rolls around. I sure hope it does, because when I'm sitting on a few hundred LTC in 2014 I suspect I'm going to be looking pretty darn smart.