[David Moon: Spelunkin is generally designed to appeal “outwards” towards the next group of cryptocurrency adopters and the economic, social, and cultural shift that rises around them as a result. However for added perspective, we will also sometimes look back into the origins of cryptocurrencies either by speaking with or, as in this case, allowing someone who was present in that scene to relate their story directly. Today we have an essay from Ho Lum Cheung, aka “thoughtcourier” on both bitcointalk and Reddit who recounts his days as a Bitcoin miner starting around 2011. I have added small comments within brackets and made minor text edits for clarity.]
“No Country for Old Miners” by Ho Lum Cheung
“Turn spare processing power and electricity into money!” That’s the pitch that sold Bitcoin to the miners in the early days. And even though it was still being broadcast when I joined the party in May of 2011, it was already obsolete. By that time, faster and more efficient Bitcoin mining, done by graphics cards [GPUs], was in full force, and the new pitch was “Pay off your sweet new AMD video card by mining Bitcoins!” And now that pitch is also but a passing memory. After some flirtation with FPGAs [customizable chips that mine faster than GPUs], the mining community has moved on to ASIC technologies, leaving those of us with 7970s and 5830s [high-end models of GPUs] behind. Today I want to tell you how I got started Bitcoin mining, and I will make every effort to enamor you with the thrill of a get-rich-quick narrative. However, I’m not writing to boast; mining has evolved into a serious and costly endeavor, and I hope that you will find some insight into the uncommon values we share.
First, a brief primer on Bitcoin mining: Bitcoin mining is the process by which we write transactions into the Bitcoin public ledger. Each set of transactions we write is a block, and we can only write a new block after computing a cryptographic (sha-256d) hash that matches a certain pattern (starts with at least a certain number of zeros). This requirement helps secure the validity of a block, but there is no intrinsic motivation to calculate it. Why anyone would compute a hash at all is a large part of Satoshi’s genius; the biggest protection afforded Bitcoin is the rational self-interest of its users. For Bitcoin mining, the protocol rewards the person who finds a qualifying hash the fastest with freshly minted Bitcoins (formerly 50, now 25), and they also receive the transaction fees for the transactions in that block.
By June 2011, with the price of Bitcoins skyrocketing [reaching nearly $35], I had read enough of the literature to know all this. I don’t know if it was personal preference or a stunning ineptness at using Google and forums, but I gleaned most of my information from the wiki. It’s still worth reading, even though, as a community, we’ve gotten much better at disseminating the information. Nowadays, the right answers are more or less at the top of google search and there are infographics aplenty. Another big difference in the dissemination of knowledge is that the Bitcoin Sub-Reddit was small, maybe around 4000 people. Bitcointalk was useless because everyone was just manic about the price bubble. Because Bitcoin was a side hobby for me, I neither read nor wrote consistently in either place. If I had been a little bit more enthusiastic, perhaps I would be a Bitcoin celebrity by now.
Instead, I focused my efforts on nabbing a few Bitcoins of my own. Back then, there were not that many ways to get Bitcoins at all. It was a point in time where the answer to the question, “How do I get Bitcoins?” could genuinely be answered with “mine them”. It was either that or patiently run around the faucets, risk buying your coins with some shady guys on #bitcoin-otc, or trust a Japanese startup (MTGOX) which, as we would find out when it got hacked, had some serious security issues.
So, like many others, I set up the Bitcoin-QT reference client to receive free faucet coins. Following a guide, I downloaded GUIMiner, registered with BTCMine (both still around today), and began mining. At the time I had a mish-mash of hardware in my machine (I still do). I can’t remember all the details, but most everything except the hard drives was handed down to me from my brother. The CPU was an i5 dual core. The motherboard was an old P5N-E, and the graphics card was a high-end NVIDIA from an older series. I also remember reinstalling SpeedFan and Afterburner because my hardware was being pushed to the limits. It took a lot of power to mine with a GPU. I didn’t have a Kill-A-Watt wattmeter at the time, but I would estimate that I was using 300 Watts to complete a hash. That’s about as hot as an electric heater. There were other minutiae too, but mostly I remember the excitement of creating value. I also do that at my day job, but it’s not as visceral as hearing the fans hum and watching the digits grow larger in my client.
Now, for the disappointing part; mining on both CPU and GPU, I recall the hashrate being about 30 MH/s which may have translated to a Bitcent a day, which was worth about a nickel then. This was obviously not a profit-oriented decision, and I only did this for about a week or two. I suspect that many miners started out this way, and some gave up afterward. I definitely stopped this first rig too, but I did not leave my curiosity about Bitcoin behind with it. While my machine was humming along and generating Bitcoins, I was educating myself about Bitcoin and the implications that it has for the world.
The issues and the people debating them were somewhat different back in the day but the themes may echo in the present. Regulation was an issue, but not that big of one. It wasn’t focused on the appropriate rules to follow to exchange of Bitcoin for fiat, but whether Bitcoin should be accepted at all. Similarly, there wasn’t really a question of how we should be taxed, but whether we should pay at all. At that time, most people agreed that taxation is theft (for the record: I do not at all).
All of this really is important to my story. I read about individuals being hacked and services that were revealed to be scams. I read complaints about how hard it was to buy Bitcoins and how lucky it was to be among the earliest adopters. I read nothing made me see that it was a bad idea to own Bitcoins. As an engineer, I saw that Bitcoin had few technical weaknesses, as a moralist, I saw that Bitcoin was not immoral, and as an amateur economist, I understood that the Bitcoin system was not a Ponzi. And that’s the key, because if I thought Bitcoin was doomed to failure, I would never have put together my first mining rig.
So in the middle of June, there I was with my 0.1 Bitcoins, ready to endorse Bitcoin by adding my hashes. Did I start right away? Actually, no, I did not. The thoughts I had in the previous paragraph hadn’t quite crystallized. Also, I am a cautious person and the profit motive is important. Warren Buffett once said that the first rule of investing is “don’t lose money” and I try hard to follow it. If Bitcoin mining wasn’t profitable, cost-benefit analysis dictates that I should support Bitcoin by buying them instead. I ended up calculating and shopping around for a few months before I put together my first rig. Maybe it was fortuitous that I waited, because many were burned when the exchange rate made its’ slow and unsteady descent to $2. “You never know what worse luck your bad luck has saved you from”.
This ends today’s story of my first, short-lived mining rig. The next few months would bring many exciting adventures into an amateur mining business. Among the most exciting stories were some twitter hacks for remote control and convincing my brother to join the team. Among the least exciting (but perhaps interesting to some) was the cost-benefit analysis I was doing in the last paragraph. I’ll leave those stories for another time. For now, I’d like you to consider going on a parallel adventure. The landscape has changed, but the values have not. Download GUIMiner and indulge your curiosity. And more importantly, take out your rock hammer and your lens and determine for yourself whether Bitcoin is digital gold or digital dust. It’s pointless to invest your time into reading my drivel or sink your money into building up a mining venture unless you believe that Bitcoin is an idea worth spending.
Ho Lum Cheung is a Bitcoin mining enthusiast living in Madison, Wisconsin. He graduated from Stanford University with a BS in Electrical Engineering (Hardware specialty) in June 2010. An amateur moralist and economist, he has a pretty accurate knowledge of the Bitcoin issues of the day, and enjoys explaining and debating them. If you would like to tip him directly, please use this address – 1HoLums6XSnBw4sD4Z1e8fDc99rMtwvNKE
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