How do I Make Serious Money Mining Crypto is taken from Issue #6 of 21 Cryptos Magazine
Part 3 of 3 of The Mining Series by NotSoFast (@notsofast)
Welcome to the third and final installment of this article series. If you were interested enough to read this far, then you’re aware that you won’t be handed a 1-2-3 set of instructions to extreme profits. If you’ve built your own mining rigs, you would know that the second when the learning grind stopped, the slow grind towards profitability began. Yes it’s a grind, but in grinding you have given yourself an experiential and informational advantage over a casual reader or someone skipping to the end—to those people, this article might be donkeysauce. To the mining grinders, this is the mindset that will allow you to recognize extremely profitable mining opportunities, and here are the tools you can use to exploit them. Remember, all this is a mere introduction, as anything further would be doing your work for you. I can lead you to the edge of the rabbit hole. From that point, it’s up to you to see how deep it goes.
Arm yourself with your search engine of choice because we’ll get into a few economics and game theory terms you might need to brush up on. Speculative or spec mining is not in the dictionary yet either, but maybe you and I can put it there!
If you’ve been mining and the first thing you did was to leave your rig pointed to one pool for a week, you will now have a fairly accurate idea of what daily earnings you can expect. This is your baseline. It’s valuable information because with it you can evaluate opportunities directly as they pertain to YOU and YOUR MINING. Bitcoin, Ethereum, and the almighty USD are marketing and trading benchmarks, but with mining, any kind of conversion can muddy your analysis. If your daily mining baseline profitability is X, then this is now your basis against which all opportunities are measured, therefore we are now working with opportunity cost. If you mine something and it earns you less than your baseline, that is an opportunity loss— you could have just stuck to your baseline and earned more as well as saving yourself the time.
“IF YOU MINE SOMETHING AND IT EARNS YOU LESS THAN YOUR BASELINE, THAT IS AN OPPORTUNITY LOSS“
Broadly (at time of writing) there are two general categories of spec mining: prospecting and launch mining. Prospector style spec mining is the easiest place to get started learning, as you have the time to hone your evaluation and decision making skills. It’s quite easy to sum up: you sift through all the Proof-of-Work mineable coins that have ever existed and look for undervalued coins to mine.
Fundamental analysis for prospecting will be a little different from what you’re used to. Something that would be a turnoff (such as no Github commits for two years) may be irrelevant to a prospector if the network has a healthy number of nodes, a stable nethash of committed miners, long term charts showing a stable bottom, and rich list addresses showing clear accumulation. You could grind out a fairly large bag for a fundamental comeback or an “everything pumps in a bull market” move up. The downside risk is that the nodes and miners could slowly drop away, or the only exchange it trades on could delist it. In prospecting, your greatest risk is the long number of days you’ve spent accumulating this bag when you could have at least been making baseline.
There is an additional edge to prospecting in examining the math behind the coin itself. Look at the block reward and spacing between blocks. How many total new coins are minted per day, and how many of those can you get with your rig? Look at the total network hashrate. If your rig were to join this network, what percentage of that nethash would belong to you? Look at the coin’s specific fundamentals. Are there any small positive changes that could have a big impact on the price in the marketplace? If so, how likely are those changes and how could they be influenced to come about? And finally, look at the timeline to profit. How many months of electricity bills are you willing to eat while you grind out a bag that may be a zero-or-moon situation?
Consider this reminder that I have led you only to the edge of the prospecting rabbit hole. All of the ideas above can be extended further in several directions. The larger the altcoin landscape becomes, the more prospecting opportunities exist deep behind the front page of CoinMarketCap. The most effective prospectors consider their prospecting as a side bet — a high-risk diversification away from all their rigs mining the same thing. They’ll take one “pet coin” they loved from 2014 and dedicate one rig to keeping the network healthy with stable hashrate, signaling to other would-be prospectors that the network is worth keeping alive and maybe there’s something to this coin they don’t know about.
“THERE ARE LAUNCH MINERS OUT THERE THAT MIGHT BE MAD AT ME FOR EVEN SHOWING YOU THAT MUCH“
Launch mining is the most challenging and exciting way to spec mine. It is 9D chess against some of the greatest players in the world—some of whom you may know from Twitter and even more who remain anonymous except for their suprnova.cc handles. If this part of the article seems a little disjointed, it’s because I am giving you a peek at the starting line of the race. There are launch miners out there that might be mad at me for even showing you that much. Launch mining starts with analysis similar to prospecting, but with less information available to you and almost zero time for you to analyze and act on that information.
Let’s assume that a new coin launches its network and you are looking at its brand new announcement post in the bitcointalk forum. You have the opportunity to start mining it immediately after the genesis block, at the starting difficulty when blocks are very easy to find and your rig might represent half of the entire network if it were mining RIGHT NOW. To optimize your chances of profit, you need to make a very quick breakdown of the block reward, spacing between blocks, emission curve, premine (if it exists), and total eventual coin float.
From that, you need to calculate your expected price per coin if you start mining it based on the opportunity cost of your daily baseline — which you should know COLD! You need this calculation dearly, as it allows you to set your own price for the coin via creation of a breakeven. The number of coins you mine in your first day, divided by your daily baseline is the literal cost of the coin. YOU have set YOUR PRICE for this coin, not the developers or sellers of an ICO! This new coin doesn’t currently trade on an exchange and it may never, so rather than sellers or the marketplace dictating the price to you, it is you who gets to dictate the price to the marketplace if and when it arises.
This should sound powerful—it is. It’s what you get in exchange for the risk you took. There are ways to minimize risk. You can make a quick breakdown of fundamentals just as you would analyze an ICO before buying it. Weigh the time it takes you to make an analysis with which you’re comfortable against the opportunity cost of not jumping on the network right away no matter how it turns out.
“SO HOW DO YOU FIND THESE OPPORTUNITIES AT THE MOMENT THAT THEY ARE BORN INTO EXISTENCE?“
There are barriers. Your mining rig(s) might not even be set up to mine a coin with this particular Proof-of-Work algorithm. There may not be any mining pools for this coin right away. Also, there might not even be wallets released for your operating system yet. You can prepare to hurdle these barriers if you have set up your rig with quickly configurable batch files and mining software, a solo mining or self-built stratum pool configuration, and even a compile environment to create your own wallet from the provided open source.
If there is no open source, RUN SCREAMING! There are even bigger risks. The entire launch may be a ploy to get seasoned miners (who are known to keep crypto wallets) to download this coin’s wallet which contains an untraceable RAT (remote access tool) trojan that allows them to take over a computer and steal all the crypto that exists on it. There could be a premine hidden in the coin’s source, as there famously was with NinjaCoin $NJA. There could even be an extremely sneaky pool share faking exploit that amounts to hidden fake hashrate, as there famously was with Pharma $XPH. Also, you could have misjudged the opportunity and the coin’s blockchain turns out to not work properly at all, or it could work well for awhile until the dev dumps his premine, never to be seen again.
The upsides to these risks are worth it. Imagine you got the chance to be the first buyer of an ICO and were allowed to set the price for as low as you could possibly set it for the very first coins you buy. Then imagine this coin turned out to be a massive, legitimate project and you got in on the ground floor! This is the optimal case for speculative launch mining. So how do you find these opportunities at the moment that they are born into existence?
It’s a nonsensical hangover from the early days of Bitcoin, but at the time of writing, nearly every new Proof-of-Work coin worth mining is launched by its developer posting in the Alternate Cryptocurrencies > Announcements (Altcoins) section of the bitcointalk.org forum. Some coins are posted to two smaller forums: cryptocointalk and bitcoingarden, conjunctively or alternatively. Currently, the Twitter bot @Ubiqannbot live tweets whenever a new [ANN] post is made at bitcointalk. There are plenty of ignorable ICOs and plenty more obvious scams that will alert you and consume your attention, but nobody said this would be easy! You may be able to automate something better for yourself.
“YOU CAN RENT OTHER RIGS.”
There’s one final, important aspect to taking maximum advantage of a good launch mining opportunity. This is similar to leverage trading BTC USD, where taking on additional risk allows you to add a multiplier to your profit or loss. Similarly, even if you could make a 100x on a day’s worth of mining with your own rigs, that still may not amount to very much. So how can you leverage mining beyond your own rig?
You can rent other rigs. Two services exist to let you do this. One of them is MiningRigRentals. If you’re interested in practicing renting a rig, this is where I suggest you start. It’s straightforward and you can rent any rig that mines almost any Proof-of-Work algorithm that exists. First, you load your account with bitcoin, litecoin, or ether. After that, you just pick the rig and the time for which you want to rent it, enter your mining pool information, and you’ll be up and running. This is the simple way to do it. Once you get comfortable, you can create a mining profile and rent a whole batch of rigs at the same time if you feel speed of deployment is of the essence.
The other service is Nicehash. Good old NH has made more profit for spec miners over the years than any ICO discount has made anybody ever, I’ll bet. Nicehash is more complex and thereby much more powerful. Instead of renting discrete rigs, you specify an amount of hashrate in aggregate that you want to rent. Nicehash allocates rigs to your rental order, sending that hashrate to your chosen mining pool. Instead of paying a set price for the rigs, you bid for price-per-hash in a dynamic auction.
Nicehash’s internal algorithm is constantly reallocating its hashrate to orders as they outbid each other. It is a centralized service which freely buys up its own hashrate in order to prevent stink rental bids, so the owners of mining rigs who are selling their hashrate to Nicehash won’t underperform their baselines and leave for greener pastures. The first time you look at Nicehash, it will be donkeysauce to you. Their documentation is thorough (even if the second-language English isn’t perfect), so persevere and be prepared to pay some tuition via losses during experimentation.
If throwing perfectly good bitcoin at rented mining rigs to gain little-known amounts of brand new coins that may be scams or never end up being traded anywhere sounds extremely risky to you, that’s good, your head is screwed on straight. Over time, as you become more confident with the lightning-quick evaluation of new launch mining opportunities, your experience will decrease this risk to the point where opportunity outweighs it. Above all else, recognize that it is up to you to Do Your Own Research! This is where I leave you to do that. Thank you for your interest in mining. Good luck. Maybe we’ll cross paths again in our spec mining efforts. NSF out.
To read more articles on crypto security subscribe to 21 Cryptos Magazine below. You can also see our other articles here.