ASICs, is it worth investing in buying boxes that make money?


For those who have just heard about the existence of magic boxes that make money by generating cryptocurrencies, and are already ready to run headlong to the bank for loans, I hasten to cool your ardor a bit and save your nerves and money in the future.

I’ll let you in on a terrible secret – any such devices sold are unprofitable 

…in the cryptocurrency they mine! This is a very important point, on the misunderstanding of which you are deceived by their sellers and producers, but about that later.

Once upon a time, four years ago, the first bitcoin mining ashik created by Avalon, by some fluke (their makers were just inexperienced and/or made a mistake with calculations) brought fabulous, ten times income to their buyers, and we are talking about the first bitcoin batch of September 2012, but all next ones were either loss-making or on the verge of it. The next producer, who allowed his customers to make a profit (about +30% over six months, moreover the price was repaid in the first months, and after that were mere pennies, which is not worth paying attention to) – it was bitfury.

And those were the only cases where the buyers of those devices received income from mining! At best, it was possible to recoup your investment and even make a small profit by selling this device as quickly as possible at an inflated price, but obviously not everyone was able to do that.

And how do manufacturers deceive us?

This is very simple, especially when it comes to the only hardware manufacturer for a particular cryptocurrency, or one whose production capacity is a significant part of the capacity of the entire network. The manufacturer knows how many devices they will produce and when they will be launched. It’s not hard if you make these plans yourself, and customers bring you money 3-5 months in advance, hoping to get to the very first batches first. Then, using simple high school math calculates how much and over what period of time all these released devices will generate cryptocurrency.

Some background information – at the moment absolutely all cryptocurrencies, bitcoins and altcoins, are mined approximately according to the following rule – number of mined coins is approximately constant, moreover, almost all of them have decreasing mining speed, in order to get fixed coin emission by the end of certain period. With bitcoin, for example, about every 4 years the number of mined coins is drastically halved. To achieve this, the complexity of the task performed by all miners is automatically adjusted, and as the total power of the miners increases, the complexity immediately increases. Thus, if the network mined an abstract 1000 boxes and mined 1000 coins per day, giving everyone one, then if you produce another 1000, then the amount mined each becomes 0.5 coins. This process is not discontinuous, smeared in time, where there is more growth rate, where there is less, to account for all will not work, it depends on the work of customs and delivery services, plus the manufacturers themselves do not instantly issue the device.

So, the manufacturer knows exactly how much the box they produce will generate coins at best, and puts a value in their store of exactly that much or more

… taking into account the cost of electricity, risks of breakage and maintenance costs. Let me remind you – the calculation is done in the cryptocurrency that this device produces. Of course, in the store you will see the amount in fiat currency, such as dollars. In fact, manufacturers are much smarter, they have a good experience. Since the producers are usually rich enough, there can be additional manipulations with the rate of this particular cryptocurrency at the time of placing lots for sale, you only need to hold a high value, or rather growth, for a few days, weeks at most. Or just wait for such growth, when some large exchange or market maker will steamroll it. It is also known that almost all significant altcoins grow one way or another with the growth of the main exchange – bitcoin, and fall with its fall, not immediately, but on average, when estimated for several months.

All depends on how a buyer behaves. Usually, when he sees the price of the device for mining – he goes to Google, and looks for the first available profit calculator (bitcoin profit|mining calculator), enters the parameters of the device, and gets a nice table – the income per day, week, month, year. He sees beautiful numbers, the device earns a profit for three months, and then brings a lot more, and with squeals of joy he runs and pays the money. Slightly smarter, they click several links, find a smarter calculator that takes into account the growth of rates and complexity, and it also turns out beautiful numbers, maybe a little less, but also green with a return on investment of 6 months. Even smarter ones, read the reviews of previous buyers, how they, overcoming all the difficulties and struggling with noise and dust and broken cooling system, got the income after the first 9 months – in rubles/dollars, and immediately throw the money they earned to buy another device. Of course, in the heads of these unfortunate investors is spinning – and where have you seen that the income was immediately – you need to work, and still bring and bring the money.

The cases when the first buyers get a small income, on the verge of errors in the calculations of the producers. This happens when there are several manufacturers and they could not normally agree with each other (the first companies are rumored to have agreed on the volume of production capacity, but then, as is logical, someone threw all the gop company, and now there is pure anarchy), and then if the estimate error was to the smaller side. This is normal – it is trivially easier for the manufacturer instead of spending time and effort to organize, build and maintain gigawatt data centers to house their devices, just sell them, even slightly less revenue, but it’s not a problem, then you can still release the next batch. More precisely, the manufacturers of mining equipment are the same miners, come to this market with plans to mine themselves, and some even keep some percentage of their capacity, because it is a support for their investment, literal – miners determine the future of cryptocurrency, decide whether to make changes in the protocol and standards or not. Reason simply wins – the risks need to be diversified, and transferred to others.

Cryptocurrency mining devices are never idle

And it is logical, it would be foolish to just keep these truly magical devices in stock. That is why the producers were mining before sending it to the buyers, the first of them were storing the timing of mining, specifying in the default settings the parameters of their accounts on the pools, where the performance statistics are public. Sometimes those timelines were so great that they showed how the manufacturer made more profit than the cost of the device they had already sold, just by delaying the shipment for a week or more. Be prudent, now manufacturers do exactly the same thing, they just hide their activities better.

Why it is important to consider the value in cryptocurrency or even bitcoin instead of dollars

Because there is another easy way to earn income in fiat currencies – speculative trading, with buying and saving cryptocurrency, and more often it is bitcoin for a long period of time – a year or more. If you want to get income from crypto-economy activities, you should compare them with this way. And since so far, bitcoin is continuously growing, it makes sense. So if you’re thinking of earning income from a rising rate, just buy this cryptocurrency and wait for its value to rise.

What other risks and costs are involved in mining?

First of all, there are delays in the time it takes to receive the device. In addition to unscrupulous manufacturers who hold on to their devices, there is also the delivery service and customs. They create the main problems for domestic miners. The latter may not pass the device, pointing to the lack of notification – almost all devices do not have it, and it does not matter, even then there was a manufacturer that spent time and potential income miners to obtain it for the Russian customs, it did not bring benefits to anyone.

Secondly, the costs, in addition to electricity, you also need to cool the room – and this is either a fairly expensive air conditioners, or a system of hot air extraction, and hence the supply of cold air from the street, with filtration from dust and insects. It is also the cost of the room itself, because you can’t keep very noisy and even dangerous for your body boxes at home next to your bed (very harmful dust that is chopped up by coolers of cooling system, it gets into your lungs, because it is very fine, when you have one computer it is not terrible, when you have dozen of them and you breathe it all the time…).

Third, it’s a maintenance cost. Cooling system coolers, depending on temperature conditions, fail and need to be replaced – it’s considered an expendable item. Power supplies also break, not often, but enough to pay attention to it in calculations. Broken and the boards themselves, which also may require a reaction from the owner, sometimes it is a disconnection of a failed board, sometimes fixing by replacing a burned element – this requires at least a specialist, whose time and knowledge is not free.

Fourth, you may not consider the problems associated with the cryptocurrency itself. For example, during one year you receive small payments to your wallet, and then, when the dollar amount becomes enough to consider that you have reached an income, you are going to transfer the whole amount to the exchanger and suddenly get a commission comparable to or greater than all your money in your account. You frantically start looking into the matter and it turns out that you have a lot of dust and your transaction weighs too much in bytes, and right now bitcoin is having big organizational problems and transactions are very expensive.

So why are there people who claim to be earning an income?

Because they count in fiat currencies, and the exchange rate just went up.

Because they ‘steal’ electricity and don’t pay rent for the room where they keep their asics.

Because they trade the mined cryptocurrency, apparently successfully, if they have an income.

Because they want to sell you this device and really end up making an income at your expense.