Beware of millions of ways to lose your Satoshis mining this bull market \ stacker news ~bitcoin

Beware of millions of ways to lose your Satoshis mining this bull market

7858 sats \ 59 comments \ @KaboomracksAlex 16 Mar bitcoin

I witnessed quite a few people losing good portions of their stack's last bull run because they fomoed into mining. Please do not do this to yourself because you deserve to be rich.

Why Mine?

Mining is a way to purchase Bitcoin for cheaper than the spot market. If you are mining profitably, you are purchasing Bitcoin from the Bitcoin network, with your costs being electricity and infrastructure to get setup. There are plenty of reasons to mine:

-If you want to heat your house -If you have low electricity rates -If you have excess electrical capacity -If you're a masochist -If you have too much money and are bored -You are a genius and want to launch a speculative attack on the dollar -if you need a tax write off and want to generate expenses (I'm not a tax expert so don't ask me about this) -stranded/waste energy -You believe strongly in sourcing ethical bitcoin and see mining as a financially viable option

People can find interesting reasons to mine but there needs to be the right circumstances and compelling reasons to do so. Mining is expensive and so you do need revenue to pay for the expenses especially as you scale up in size.

Why not to mine?

Buying Bitcoin is a lot easier than mining which is a pretty compelling reason to not mine. If the goal is to end up with more sats, there is far less execution risk in buying Bitcoin and transferring it to a wallet than buying miners and trying to set them up. There are millions of reasons not to mine:

-You live in a country that's impossible to import to -You have expensive electricity -Noise is an issue (miners are incredibly loud, like 90db loud) -You are unable to evaluate risk due to not understanding the market -You don't have time to bang your head into a wall troubleshooting cheap Chinese hardware -You have a low pain tolerance

What goes into mining? (Just a high level, I will not cover everything)

Mining is a really complicated activity involving a lot of moving pieces. The more you scale, the more complicated it becomes. When you buy miners, a reasonable expectation for failures on those miners within the first 3 months could be anywhere from 3-20%. If you buy used machines it could be higher. When you rush to buy a new model that was just released, there is zero information on how good of quality that model will be. Manufacturers have burned customers over and over through the years with horrible hardware. Some hardware might be good quality, but not be built to handle harsh environments, so understanding the landscape of hardware is super important.

Because of high failure rates, it's important to understand the repair ecosystem where you live and have plans on how to fix your hardware. The repair industry is incredibly vibrant in the US because the mining industry is so developed. Going into small countries in Europe/Africa/South America will not be the case. Often times you will have to send machines back to China in order to get them fixed which often won't make any financial sense.

Understanding mining economics is a huge one that gets people wrecked. Miner pricing is just as volatile as Bitcoin. People buy the top, then the price will crash, while difficultly still climbs making that miner a fraction of the value before. Profitability calculators that only show you todays pricing are useful for making people fomo, but not useful for calculating long term. Insights.braiins.com is one of my favorite places to look at mining economics. People get wrecked because they do not prepare for or anticipate quickly changing economics.

Mining is physical work and requires people to do things. If you are mining at home, sometimes you need an electrician in order to build out electrical infrastructure. Industrial scale ASIC miners do not run on 120v electricity that is in your typical American home. Counting on that electrician to do things right is not something you can take for granted. You as an individual are responsible for learning aspects of mining like the basics of electricity in order to oversee it's done correctly. Electric costs are constantly changing and generally trending upwards globally which is a whole different problem. If you think Bitcoin is a rabbit hole, wait until you try to learn how energy markets work.

To really simplify it because it would require a book to cover this, and by the time it would be published, there would be a million other things to add, you need

-Cheap power -Skilled labor -Stable power -Stable geopolitical conditions -ETC

A word about hosting

Hosting can be a great option. There are different strategies for everyone. One thing to take into consideration with hosting is that you are adding counterparty risk on top of execution risk it takes to mine. Operators fail and people choose hosting because it's a lot simpler. Most hosts choose to host instead of self mine because they get the hosting customers to pay the costs to deploy the infrastructure by charging deposits/setup fees and the margin on hosting fees. For many individuals, it might not be economical to mine at home, but will be economical to mine with a host because the host has cheaper fees than your local electricity provider. If you are not able to control you miner, you are placing trust in the operator. Vetting that host is important, but also understanding this industry is brutal and things can go sideways. Just know the risk you are getting into and read all the horror stories of what has happened to other people in order to try and avoid them yourself.

Trinket miners don't ever ROI

There are lots of products that are catered towards general consumers such as nifty space heaters, hashing nodes, and other small miners. They are generally very expensive as miners compared to the industrial computers you can purchase, but can be fun to run. Please do not look at these products as ways to make cash, and more as toys to have fun with and possibly learn about mining. You can always buy older equipment to run instead of paying lots of money for stuff that won't generate much Bitcoin in rewards.

Resist the fomo

If you read this far, hopefully you found something in this helpful. A lot of people got excited about mining last cycle and did not consider the risks. It's best to find experienced operators to learn from their experience before you spend a bunch of money deploying. Don't buy miners to have them sit around undeployed. Make sure you are ready to plug them in if you because they depreciate rapidly in value. Every second they are not hashing is lost potential revenue that you will never get the chance to get back. Difficult is always climbing, and we are always moving closer to the next halving.

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226 sats \ 2 replies \ @siggy47 16 Mar

Great article. I have recently been curious about mining. This article made me reevaluate the whole idea.

86 sats \ 0 replies \ @KaboomracksAlex OP 16 Mar

It's a lot easier not to mine

91 sats \ 0 replies \ @Undisciplined 16 Mar

Same here. I appreciate the perspective.

241 sats \ 16 replies \ @expatriotic 16 Mar

Thanks for this. I'm looking into mining via host (Wilsonmining.io) and they don't have space til late July/early August. Decided to go with 2 M50Ss... But yeah, I belabored the economics of this decision... I'll not be mining pre-halving. They asked me to buy now (only because they were looking at a batch order and of course miners might increase in cost if bought later (but so might the BTC I use to purchase it increase in value)...

Any advice would be appreciated... Hard to know when is the best/worst time to jump in.

31 sats \ 12 replies \ @KaboomracksAlex OP 16 Mar

It's really hard to time the market but I think when you get online, the market will be recovering from the halving crunch that's about to happen. You may be happy for your psychological health of not having your first experience turning on miners with a 12-24m hosting contract be running them at a loss.

I think a good rule of thumb is to buy miners on the way up in the bull market. You don't want to buy the top lol. Pinpointing the start of the bull is impossible but if you can do it, you're a genius. The bull has been raging for some time but I think it's still a good time to buy.

I like those Wilson Mining Guys, but make sure to buy your M50s from me next time :)

25 sats \ 1 reply \ @expatriotic 16 Mar

Do you anticipate M50Ss to be a lot more expensive in August? If the last bull is any indication prices for miners soar

0 sats \ 0 replies \ @KaboomracksAlex OP 16 Mar

Yeah miner prices are going to be bananas.

25 sats \ 2 replies \ @expatriotic 16 Mar

I get cheaper electricity for a year to buy through them. ;) Incentives are a bitch eh?

10 sats \ 0 replies \ @arealpeacemonger 16 Mar

What is your electricity cost after the first year?

0 sats \ 0 replies \ @KaboomracksAlex OP 16 Mar

Yeah that's a pretty good deal

15 sats \ 3 replies \ @expatriotic 18 Mar

Question: Theoretically. 👀 If you had the opportunity to lock in M60 miners for $3950 (inc hosting fee, shipping, import fee, taxes) at 6.9c for a year and 7.5c after that BUT! You had to pay April 1 and deploy Aug 1, would you?

Does the delay make it uneconomical? I know rule of thumb is usually buy and plug in.

31 sats \ 2 replies \ @KaboomracksAlex OP 18 Mar

I think it's best to avoid deploying machines unless you can plug them in right away. A lot of things could happen between now and August and the worst situation would be for you to buy the machine, wait to plug it in, then be unable to when the turn on time is supposed to be.

It is generally good to avoid buying these machines to hold onto to plug in at a later date. There are some situations where it makes sense from an equipment price standpoint, as it will likely be somewhat of a machine bull market after the halving.

It's just important to remember, 1 the machine devalues the second it ships off the assembly line as we approach the next halving, and as difficulty climbs. 2, every second it is not hashing means less Bitcoin that machine will be able to mine on a daily basis.

15 sats \ 1 reply \ @expatriotic 18 Mar

Is there not a price at which it becomes feasible? Especially when you consider the potential future value of an M60 if prices appreciate like they did last bull market?

If prices for miners are sideways now, isn't it okay to lock in a future price? Like a farmer buying futures on their crop?

10 sats \ 0 replies \ @KaboomracksAlex OP 18 Mar

Yeah, what makes mining hard is it's really hard to project future profits.

It's important to think in sats as your unit of account instead of Fiat which creates a different view of pricing.

You can play games with equipment prices. It's always great to buy miners before the hardware bull really takes off. It's generally terrible to buy when the hardware bull really gets going.

So many people get wrecked because they make decisions with expectations of timelines that do not work out. The simpler you keep it, the more likely you are to be successful

15 sats \ 2 replies \ @expatriotic 16 Mar

From Wilson "Ask him if his miners come with 6.9c no MOQ slots. Cause ours do" 😂😎

21 sats \ 0 replies \ @KaboomracksAlex OP 16 Mar

lol

0 sats \ 0 replies \ @KaboomracksAlex OP 16 Mar

deleted by author

0 sats \ 2 replies \ @Bell_curve 16 Mar

Does Wilson sell hash rate?

10 sats \ 1 reply \ @expatriotic 16 Mar

Not sure. You can ask 'em

wilsonmining.io

As far as I know they just provide a hosting service. So you send 'em a miner or buy one through them and then they charge you for the electricity you spend. 6.9c the first year if you buy miners through them

0 sats \ 0 replies \ @Bell_curve 16 Mar

Thanks, will do.

Should I mention you as a referral?

I looked into mining hosted by River but they were ludicrous expensive

130 sats \ 4 replies \ @OT 16 Mar

Don't you think Plebs should have at least 1 rig like an S9 at home just as a last resort counter to a US gov shut down of the large mining farms there? They are only ~$200 and could be either unplugged or under clocked solo mining.

101 sats \ 1 reply \ @KaboomracksAlex OP 16 Mar

No S9s are so insignificant that's not a good defense against a situation like that from a hashrate standpoint. Though it would be interesting from a legal standpoint as mass noncompliance like that would make enforcement at a larger scale more difficult. It would also mean more people willing to sue the feds.

The best defense against a state actor messing with miners is geographic distribution of hashrate. Fortunately it's growing more distributed and will continue to do so.

15 sats \ 0 replies \ @OT 16 Mar

I guess I'll just continue stacking sats

25 sats \ 1 reply \ @arealpeacemonger 16 Mar

I think plebs can mine at home if they're also taking advantage of the heat produced by the miners. Any instances where space or water heat are produced by electricity are opportunities to produce that heat with a miner and stack a little corn on the side. This only works for folks who are willing to get their hands dirty.

30 sats \ 0 replies \ @KaboomracksAlex OP 16 Mar

Heat definitely changes the economics

114 sats \ 4 replies \ @kr 16 Mar

great content, excited to read more of your writing on SN!

23 sats \ 3 replies \ @KaboomracksAlex OP 16 Mar

Thanks. I have a plan to convince a bunch of miners to start using this platform and using my ref link

36 sats \ 2 replies \ @kr 16 Mar

love it, the SN ref link is a really underappreciated tool for stacking extra sats

23 sats \ 1 reply \ @KaboomracksAlex OP 16 Mar

I want this site to be a serious forum for discussing mining related content

15 sats \ 0 replies \ @kr 16 Mar

that would be awesome

41 sats \ 2 replies \ @evanbaer 16 Mar

Buying hashrate is also a low-cost way into mining (NiceHash, Rigly)

10 sats \ 0 replies \ @KaboomracksAlex OP 16 Mar

Yeah I haven't looked to closely into the economics of doing that but I know there's a big market for it.

15 sats \ 0 replies \ @Bell_curve 16 Mar

This is a great idea.

Have you heard of Blockstream mining note?

25 sats \ 1 reply \ @BlokchainB 16 Mar

Wish this was posted in 2021. Would have saved my self a lot of stress and fiat.

But hindsight is always 20/20. If 2021 was truly the super cycle it would of been magnificent

110 sats \ 0 replies \ @KaboomracksAlex OP 16 Mar

Yeah definitely. Though even if I posted this, a lot of people would not have listened anyways

25 sats \ 3 replies \ @BitcoinIsTheFuture 16 Mar

Thanks for sharing! I wanted to do a heatbit (heater, miner, air purifier) last fall, but couldn’t make the math work. Approximately 6 years for the break even. Was shot the amount of Bitcoin they kept from you.

25 sats \ 2 replies \ @arealpeacemonger 16 Mar

Did you also calculate the value of the heat you would receive? If you're running a space heater anyway, using a miner as that heater is a way to get a rebate on some of your electricity costs.

15 sats \ 1 reply \ @BitcoinIsTheFuture 16 Mar

I already have a space heater that works fine. So I don’t need a space heater, but wanted an extra one to mine. The cost was near $200 for the heatbit and they were only going to give me 25% of the mined sats. Business model seemed weird and like I said the ROI would have taken forever

30 sats \ 0 replies \ @KaboomracksAlex OP 16 Mar

Anything that is consumer based is going to be expensive. My first entrance into this was a $700 computer called a Coinmine that Pomp was shilling back in the way.

S9's are the way to go for $100 from us or less from other people. Repurposing industrial miners to produce heat and keeping 100% of the sats is a good move. When you get a heatbit, you are paying for something that looks nice, has a nice UI and is easier to setup. S9s aren't that hard but they're not pretty and take a little bit of learning to get setup

25 sats \ 2 replies \ @DiedOnTitan 16 Mar

Thanks for the sobering perspective. This supports my observation that hashrate mining has largely become a game for large well-financed companies that can support capital intensive upfront and operational costs in order to achieve economies of scale. Public companies benefit immensely by issuing shares in exchange for cash valued at a multiple of their earnings: RIOT, MARA, HUT, BTBT, HIVE, CLSK, etc. Private miners do not enjoy this leverage.

Now we see Blackrock investing heavily into these miners, setting up ETFs, acquiring massive amounts of Bitcoin with other people's money and essentially buying their way into every aspect of the Bitcoin infrastructure that they can.

Will not surprise me, at all, to see hashrate increase to the point that it becomes unprofitable to mine Bitcoin even with free electricity. Blackrock can fund this eventuality and force all weaker hands to close shop and ultimately control 51% of hashrate. Not sure what they would do with that power because of the well tuned incentives, but it seems to be moving in this direction.

26 sats \ 1 reply \ @KaboomracksAlex OP 16 Mar

Yeah I think hashrate will grow substantially but at the end of the, the winners will be the ones that can do it economically. There are many different large players operating internationally that can compete with groups like Black Rock.

It's really going to be interesting to watch it play out. I think there's going to be room for a lot of small and medium sized miners for at least another cycle. It's really difficult, capital intensive, and labor intensive for anyone to deploy miners.

There's a lot of competition for electrical infrastructure between AI computing and Bitcoin mining. This is a growing trend and will likely be more apparent after the halving when things take off.

One big limitation for Black Rock also is the hardware side of things which is centered in China.

It will always be profitable to mine Bitcoin a free power, unless the price goes to $0.

25 sats \ 0 replies \ @DiedOnTitan 16 Mar

It will always be profitable to mine Bitcoin a free power, unless the price goes to $0.

Miners age like fish. Not fine wine. The moment they come off the assembly line, their value is decaying rapidly. With hashrate going up forever (Laura), miners might have a shelf life of ~3 years (making this # up). If the cost and maintenance of the miner does not recover enough sats to cover itself, then even with free electricity it will be unprofitable.

It is a well-understood business tactic to operate at a loss long enough to force your competition out of business.

15 sats \ 1 reply \ @kdnolan 16 Mar

Contribution to Hashrate/Security of the network is #1 reason imo

11 sats \ 0 replies \ @KaboomracksAlex OP 16 Mar

Yeah I think using Bitcoin by default without the KYC implications is a way better way to secure not only the network but the general value of the Bitcoin. There needs to be a big market of P2P users to counteract all the money coming from the suits in Wall Street. A market means that a pool or pools will be incentivized down the line to mine certain transactions even if there's some sort of restrictions from governments.

The hashrate of a small miner is just so insignificant. There is a potential that some sort of consumer product comes out that is cost effective and makes sense for home miners to use, which would change things, but the way things are trending is that scale is the most cost effective way to mine, therefore the most effective way.

Geographical distribution of hash is really important and I think it's getting better the more Bitcoin purchasing price goes up. I just hate seeing small guys buy miners when they can buy Bitcoin, based on the idea of securing the network. The incentives of Bitcoin matter and are currently working

15 sats \ 3 replies \ @Coinsreporter 16 Mar

Bingo! You covered a lot of things precisely and concisely. I think there's no debate left while considering to mine. For me mining had never been a thing that I could even understand. I'm not a techie, neither I am living in a part where mining can be easily done. One thing that I really want is that mining shouldn't be too much centralized.

26 sats \ 2 replies \ @KaboomracksAlex OP 16 Mar

Yeah mining centralization is constantly a battle. It's not a fun conversation but an important one.

it's funny because a lot of people that get into mining are not that technical. I wasn't and mining makes more sense to me than Bitcoin development or software development in general. I find orange pilling people by explaining how they can make money with mining is easier than trying to explain the philosophical/economic reasons why Bitcoin is important.

15 sats \ 1 reply \ @DiedOnTitan 16 Mar

I find orange pilling people by explaining how they can make money with mining is easier than trying to explain the philosophical/economic reasons why Bitcoin is important.

This is a fascinating insight. It helps explain my abysmal success rate orange-pilling people, even close family.

16 sats \ 0 replies \ @KaboomracksAlex OP 16 Mar

Yeah someone was telling me about a topic I had no idea about and didn't care about the other day, and I thought, "This is what it must be like for most people to listen to me about Bitcoin."

15 sats \ 2 replies \ @thebullishbitcoiner 16 Mar

Wow you really came out guns blazing with the mining content! I hope to see more posts going into detail on some of this stuff (i.e. maybe some math). I sometimes wonder if there’s a price to be put on non-KYC sats.

For example, I just figure if I have enough good factors on my side (e.g. buying miners during the bear and using it to heat the house) that it would make sense on a long enough timeline vs buying.

Would love to hear what you think. Let’s say you have a few S9s, at what point do you think it’s a better idea to just buy?

31 sats \ 1 reply \ @KaboomracksAlex OP 16 Mar

Okay so mining pools are just adding lightning support which means that it makes sense to buy S9s pretty much forever because of how low payout thresholds will be with lightning withdrawals.

Electric heating tends to be more expensive than gas heating but a lot of people only have electric heaters. I don't have heat in my house so I use S9s in the winter to heat it. Some people even heat their houses with new miners, but it gets complicated versus just underclocking S9s and plugging them into 120v outlets.

But it costs the same amount of money to run a S9 as it does a 1300w space heater. Every watt consumed on a S9 produces the same amount of heat as a space heater. Even if you have a central electric heater, that heater will not work as hard as the S9 will offset the work needed to be performed by that central unit. That electric heater/space heater is not hashing and giving you sats though.

15 sats \ 0 replies \ @thebullishbitcoiner 16 Mar

Sounds good. I’m pretty excited about the Lightning payouts coming to pools, especially Braiins. S9s over legacy space heaters for sure, but it’s starting to get warmer where I’m at. I’m thinking I’ll just reduce the power from 900 to 600 watts and see how that goes.

15 sats \ 2 replies \ @kepford 16 Mar

Another valid reason to mine is privacy. To obtain no KYC sats, but all the issues you raise still apply.

25 sats \ 0 replies \ @DiedOnTitan 16 Mar

An interesting move might be to invest KYC sats into mining capacity and over time convert to no KYC sats. Call it, I don't know, "6102 Mining"?

0 sats \ 0 replies \ @KaboomracksAlex OP 16 Mar

I like to call it ethical sats

0 sats \ 0 replies \ @k00b 16 Mar

Nice job! Consider using markdown on your next one.

0 sats \ 0 replies \ @muteness11 16 Mar

I work in the mining space and I deal with many people I'd say the majority of people who mine are:

FOMOing into mining without understanding even basics on ASICs, hashrate, difficulty etc...
they are triggered by 2 things: NGU (thinking they will print BTC) and predatorial type of marketing companies do to hook them up

at least 90% lose in BTC terms or $ terms .... u better buy BTC instead Note: this IS financial advice

0 sats \ 0 replies \ @cleaningup12 16 Mar

On any other forum with a variety of disciplines, these exact conversations take place...

Take truck drivers for instance, I guarantee there are guys asking 'should I buy my own rig and go it alone'

While all the owner drivers internally groan, then say, go for it, it's not gonna be easy, then explain all the sleepless nights, strain on family etc.

0 sats \ 1 reply \ @NoIdols 16 Mar

Thanks for the great content! Any suggestions for reliable mining shops/services for the EU market?

0 sats \ 0 replies \ @muteness11 16 Mar

maybe finland... but its uneconomical to mine in the EU .... KWH price is way too high