The State of Mining: Optimization Strategies from an Expert Amid Rising Costs

The State of Mining: Rising Costs and Optimization Strategies from an Expert

Earlier this fall, I had the chance to catch up with Orest Byskosh, Head of Research at Ausum Ventures and a Bitcoin miner himself. Byskosh shared a number of pain points in his mining experiences, citing the rising costs of mining hardware as the major mining headache. Byskosh also helped elucidate the individual block rewards a miner may expect to receive when participating in conventional mining pools.

More Spice: Bitcoin White Paper Webcomic by Comics Legend Scott McCloud

Mining Today

Today, there exists misconception that crypto miners can become millionaires, but how far from reality is that? In a recent Youtube video titled “How to mine $1,000,000 of Bitcoin using just a laptop,” DigitalTrends’ resident Bitcoin expert Jake Rossman facetiously explores how anyone could accomplish such a feat — by waiting approximately 3,600 years.

The State of Mining: Rising Costs and Optimization Strategies from an Expert

Furthermore, Rossman calculated that the average daily reward for miners would total a whopping 8 cents a day. By comparison, investing $10 in a passive index fund would result in an astronomically larger profit (about ~6.04*10^100 times larger). This past year dealt an enormous blow to Bitcoin’s total market capitalization — from almost $300 billion in early January to under $70 billion by late December.

This crypto panic inevitably took a toll on the crypto mining ecosystem. As the price steadily dropped, the mining rewards itself struggled to keep up with its respective costs (e.g., electricity, hardware, etc.), subsequently rendering this venture less attractive altogether.

Challenges

Consider the following quick-hitter facts that perfectly encapsulate the mining ecosystem: Miners saw $4.7 billion in revenue this year. Not bad, without any context…
However, since earlier this November, Bitcoin’s difficulty declined by over 30%. Simply put, miners are leaving the network, and likely won’t come back until the price of Bitcoin rises again.

The State of Mining: Rising Costs and Optimization Strategies from an Expert

At face value, crypto mining today doesn’t sound like the finest investment of time or money (at the individual level). In fact, miners are facing more challenges than those that meet the eye.

Reliance on Mining Pools to Viable Monetization: Today, the hash power remains concentrated among a handful of mining pools. While the block reward is divided among hundreds, if not thousands of miners, the probability of winning the block reward alone is approximately ~3,360 times less likely than get struck by lightning in your lifetime. This industry headwind has affected individual miners most, leaving them with a simple decision — whether to abandon mining in general or join the pool itself.

Orest Byskosh Interview

Rising Mining Component Costs: With the advent of increasingly powerful compute resources, miners have been fighting to keep up with the rising capabilities and price tags of these machines.

The State of Mining: Rising Costs and Optimization Strategies from an Expert

In fact, the rising cost of mining hardware has become an increasingly frustrating pain point for miners today. In our interview with Orest, he stressed the rising component costs as a great concern for the mining community moving forward. Furthermore, he shared with us his optimization strategies to build and get rewarded ahead of the curve.

Robert Belson (bloXroute): I was wondering if you could walking me through how the mining process works, and what tandem of hardware and software components did you choose and why?

Orest Byskosh (Ausum Ventures): I really just bought a few ANT miners and just linked them up through a computer to the internet [and] you connect them directly to a router. I recommend building a computer with really good GPUs…. [which] have motherboards now with 20+ slots. You can just hook up a bunch of GPUs through that, and then it’s just like you’re connecting a computer to the internet.

Antpool

Did you join a mining pool?

I’m pretty sure it was Antpool, one of the largest [mining pools] run by Bitmain. It’s really just an online portal that you do everything through just to connect your hash power to the pool. As for the software you use, it’s just out of the terminal. It’s pretty simple connecting to the network and getting the right data so that the network recognizes the [Ant]miners are yours.

What made you decide on Antpool? I know there are several large mining pools out there.

I’m pretty sure Antpool is just the largest and with Bitcoin, the idea is that only one party gets rewarded per block, so you want to be with the largest party to increase your odds of being rewarded.

The State of Mining: Rising Costs and Optimization Strategies from an Expert

Did you have a separate laptop for everyday use as well as this mining computer? Was it always running?

I had a laptop always running that I would channel the internet through but you don’t necessarily need it. Antminers have Raspberry Pis inside so you can plug them in and go per se. Although, you buy a new Antminer you might be able to hack the Raspberry Pi.

Advice

To clarify, most of the time you spend mining is the setup — the rest is super easy, right?

If you’re pretty good, it’ll be under an hour.

For Byskosh, his participation in a mining pool increased his profits considerably from the 8 cent estimate that DigitalTrends reported. But we wanted to find out if he could provide us any advice on how to grow that figure further.

In terms of these rewards, how much money did you make from mining? Are there alternatives other than mining Bitcoin itself?

You could probably estimate $50–60 per month. There is a long time before you get your money back [from purchasing the hardware], but if you do it the route with GPUs on a motherboard, you’ll probably make a lot more. Right now, you’re [also] probably better off participating in staking. You won’t need as much hardware, and you just have to vote in certain systems and understand how to do it, which you look up videos on how to do that, and that should be a pretty profitable thing to do, more so than mining Bitcoin… Bitcoin Green has some pretty incredible rewards from staking [for example].

The State of Mining: Rising Costs and Optimization Strategies from an Expert

In collecting his $50–60 monthly paycheck, Byskosh attempted to optimize his expected return in two key ways — through his compute resources (i.e., Antminers) and mining pool association (i.e., Antpool). However, Byskosh noted that there may be more to the mining process than just Bitcoin itself.

Optimistic

Beyond SPV mining, are there any other big problems in the mining community that you can think of that are bottlenecks?

GPU prices keep going up; even with the new RTXs, which I haven’t heard anyone mining from yet, they’re starting at like $800. Before Bitcoin was around, they were considerably cheaper for the top-end cards.

While Byskosh recognized existing problems across the mining community, he was optimistic about the future trajectory in this space and remains active in research at Ausum Ventures.

Reprinted from “To Be Or Not to Be (A Miner): Exploring Crypto Miner Pain-Points,” by Robert Belson. He’s a triple degree student at Northwestern pursuing degrees in Computer Science (BA/MS) and Guitar Performance (BM). In his free time, he’s a passionate networks and distributed systems researcher at AquaLab, focusing on network performance bottlenecks in challenging environments. Recently, he joined bloXroute Labs, an Evanston, Il (USA) based team solving the scalability problem for all blockchains. For the past few months, he’s been researching the crypto mining space, focusing specifically on pool network topologies and incentive economics, among other topics.

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