We all have them – old relics from the by-gone days of computing just collecting dust in the garage or closet. Until recently such clunky old computers had little chance of ever seeing the light of day again (besides a possible reassignment as a Linux-driven server of sorts). Since the recent surge in the popularity of bitcoin, the owners of outdated computers are asking, “How do I set up my old computer to mine bitcoin or some other cryptocurrency?” This brief article will attempt to provide an answer to that question.
UPDATE: Check out my full cryptocurrency mining rig parts list and calculations in this PDF document: Custom Build Cryptocurrency Mining Rig
NOTE: Before reading this article, if you’re new to cryptocurrencies or you would like to get a deeper understanding of what they are and how they work, check out my full analysis and explanation here: Intro to Digital Assets
Don’t bother – just don’t.
Yes, bitcoin is valuable (about $1,100 per bitcoin at the time of the writing of this article) but there is one facet of bitcoin mining that many new comers often overlook: Proof of Work and Difficulty Level
The process of mining cryptocurrency involves what is called a “proof of work” which is essentially a method for each miner to prove their computing power contributed to the blockchain “mining” process. Below are some key points about this topic, as presented by BitcoinMining.com:
What is Proof of Work?
A proof of work is a piece of data which was difficult (costly, time-consuming) to produce so as to satisfy certain requirements. It must be trivial to check whether data satisfies said requirements.
Producing a proof of work can be a random process with low probability, so that a lot of trial and error is required on average before a valid proof of work is generated. Bitcoin uses the Hashcash proof of work.
What is Bitcoin Mining Difficulty?
The Computationally-Difficult Problem
Bitcoin mining a block is difficult because the SHA-256 hash of a block’s header must be lower than or equal to the target in order for the block to be accepted by the network.
This problem can be simplified for explanation purposes: The hash of a block must start with a certain number of zeros. The probability of calculating a hash that starts with many zeros is very low, therefore many attempts must be made. In order to generate a new hash each round, a nonce is incremented.
The Bitcoin Network Difficulty Metric
The Bitcoin mining network difficulty is the measure of how difficult it is to find a new block compared to the easiest it can ever be. It is recalculated every 2016 blocks to a value such that the previous 2016 blocks would have been generated in exactly two weeks had everyone been mining at this difficulty. This will yield, on average, one block every ten minutes.
As more miners join, the rate of block creation will go up. As the rate of block generation goes up, the difficulty rises to compensate which will push the rate of block creation back down. Any blocks released by malicious miners that do not meet the required difficulty target will simply be rejected by everyone on the network and thus will be worthless.
The Block Reward
When a block is discovered, the discoverer may award themselves a certain number of bitcoins, which is agreed-upon by everyone in the network. Currently this bounty is 12 bitcoins; this value will halve every 210,000 blocks.
Additionally, the miner is awarded the fees paid by users sending transactions. The fee is an incentive for the miner to include the transaction in their block. In the future, as the number of new bitcoins miners are allowed to create in each block dwindles, the fees will make up a much more important percentage of mining income.
Below is a graph which shows a historical snapshot of the computing power used in mining bitcoin:
Image Source: http://bitcoin.sipa.be/speed-lin-ever.png
As you can see on the graph above (in the label on the far right side of the graph) the computing power used to mine bitcoin varies directly with the level of Difficulty. So to conclude this thought; as time continues, more commercial ventures and wealthy individuals are investing in massive warehouse-sized mining operations, which directly reduces the rewards which one can achieve by also contributing to the mining process.
See also this article by Business Insider: The 21 Companies That Control Bitcoin
See also this Bitcoin Mining Calculator
So unless you are a wealthy venture capitalist, getting involved in the process of mining bitcoin is essentially pointless (the cost of electricity would far outweigh the rewards gained from mining). But there still remains a few very viable alternatives…
What are ‘alt-coins’?
Altcoins derive their name from a combination of the words “alternative bitcoin”. Such coins are, like bitcoin, considered to be “cryptocurrencies” in that they are based upon the same or similarly derived protocols of a blockchain. Most of them function in similar ways with wallet software, online vendors who accept them as payment, relative anonymity features (some with even better anonymity than bitcoin), and yet these coins differ from bitcoin in one key element: Exponentially less competition and less difficulty in mining.
How does it work?
Thanks to the many innovative contributions to the cryptocurrency ecosystem, there have been many useful tools and software resources released that greatly simplify the process of altcoin mining. Here is some basic info that will get your old computer mining within a matter of minutes (If you are looking to run a custom built GPU mining rig, the following information may not be of much use to you):
- If you are using a Linux powered computer, install multi-altcoin mining software cpuminer-multi (A full step-by-step tutorial on setting up cpuminer-multi can be found here). Set up an account in a mining pool such as Minergate and then begin mining by running the mining software.
- If you are using a Windows or a Mac computer (this can also work on Linux), then a simple, free, easy to use piece of mining software can be installed from Minergate. If you are going to use the Minergate software to mine altcoins you can skip the additional step of joining a mining pool, as the Minergate software is produced by a mining pool – so you just run the software and that’s it. You’re now mining cryptocurrency!
So let’s say that you now have some of these altcoins and you want to convert them into bitcoin. What’s the best way to do that? The process is a rather simple one. Just set up an account on a cryptocurrency exchange which provides currency pairs that include the altcoin you are looking to sell. Withdrawal your newly acquired altcoins from your mining pool (or Minergate) and send them to the exchange. Then trade them for bitcoin – Done!
The following exchanges have multiple listings of many different altcoins:
Mining cost-to-benefit analysis
With the exception of Ethereum and Ethereum Classic, almost any altcoin can produce profitable returns after deducting the cost of electricity (a little more on this in a bit). Many people can care less how the numbers come out because, at the end of the day, they are happy to contribute to the sustaining of the global decentralization of money. However, for those who wish to do a full analysis, you can use the following tools to assist in making your calculations:
One final issue that I wish to address is the complaint that I’ve heard from several people:
“With prices fluctuating so wildly, and with the mining profitability often fluctuating from being profitable to being unprofitable, how do you know what to mine? Why do you even bother with mining at all, for that matter?”
The answer to this lies within the question itself: Price Fluctuations. Let me explain:
I’ve been mining Monero for over a year now. I started by using just a simple laptop computer and have since scaled up to five different computers/systems that mine around the clock every single day. During this time I’ve seen many different changes in the value of Monero. Below is a chart which may help illustrate this fact a little:
Additional charts and trading resources are located here: Trading Resources
As you can see in the chart above, somewhere around the middle of 2016 there was a moment when the XMR/BTC price of Monero grew by over 900% in value. It bounced around since then and now rests at over 400% the value it was when I first began to mine that cryptocurrency with my humble little laptop. So my point is simple: Be careful not to base your cost-to-benefit analysis solely upon the current value of a digital asset. Instead, look at the big picture – the long term trend.
Once again, looking at the chart above, the general Monero trend is upward. This is due to many different factors such as the addition of Monero to the currency pair listings at several major exchanges, the spreading knowledge about the superior anonymity provided by this currency, and the rapid transfer times as compared to bitcoin (Bitcoin transactions typically take around EIGHT TIMES LONGER than Monero transactions.) While every altcoin does not have as many exciting events and developments surrounding them, be sure to do your research all the same, and for heaven’s sake, please don’t make the mistake of only factoring in the present value of altcoins in your cost-to-benefit analysis!
THOUGHTS IN CLOSING
I’ve been mining various cryptocurrencies for over a year now. Sometimes I’ve thought about shutting down shop and saving a few bucks on the electricity bill but the constant increase in the trading value of all of the top altcoins has dissuaded me from doing so. Honestly, it’s turned out to be quite a rewarding adventure.
Are you thinking about building your own mining rig? Here’s a PDF document that I wrote which details a full parts list of what you need to build a pretty powerful cryptocurrency mining rig: Custom Build Cryptocurrency Mining Rig