[Progress thread] Building out a crypto mine, step-by-step - AMA

[GlobalWealth]

I wanted to drop an intro post about the crypto currency mine I am currently building out with my business partner.

I will go through steps on how we made decisions on where to build the facility, what other location options we chose, what type of coins we will mine, what hardware we will use, information about power infrastructure and capacity, and as time progresses the results.

If you have specific questions, feel free to post them here and I'll do my best to answer. If you are currently mining and have any best practices you can add, please do so.

 

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[GlobalWealth]

Step one:

Choosing a location.

We did a lot of research on power costs, power infrastructure, crypto regulations, ease of access, cost of real estate and more.

First of all, we have excluded the US as a viable option for any reasonable sized mining operation.

Regulations and the future of additional scrutiny are the main reasons. However, power cost was also a significant concern.

The average cost of power in the US is around $.105/kwh. While not the highest in the world, even a 10% reduction in power cost has a significant impact on the bottom line when you start discussing any amount of scale.

Of course if I'm just going to plug in 1-2 miners in my garage, it's not an issue. But we are planning to have 100-200 miners running within 6-9 months.

Of course there are low cost power options in the US, but typically that requires a HUGE upfront investment in infrastructure in order to control your own power source and get to a reasonable cost.

I've been to a few conferences over the past year or so and met guys getting .05-.07/kwh in the US, but that required signing contracts for 10mwh+ or buying their own hydro stations. I didn't have access to enough funds to get to that level.

Beyond power cost, heat management is a huge concern. We had an option to build a facility in Georgia (US) for a very low upfront cost, but the power cost was .113/kwh plus the heat in GA is so high, we would spend an enormous amount of money (and reducing our kwh capacity) for air conditioning to get to a reasonable operating temperature.

We have looked at several other options including Russia and Georgia (the central Asian country), but opted out of those for various reasons.

We are keeping Georgia (country) as an option since we have very good connections there.

Ultimately, we settled on building the facility in Estonia.

I will discuss this in further detail in a later post.

 

[eliquid]

I vote this most interesting thread of the month

 

[GlobalWealth]

Update.

Basically, our business plan is to take the profits from our initial machines and roll it forward to buy more hardware. I put together the attached spreadsheet for the numbers guys who want to follow this.

I had to standardize some numbers here for the sake of calculations. Of course I realize crypto prices move more erratically, but I had to create some numbers.

For now, we are going to mine either ZenCash or Zcash. With the Innosilicon A9, profitability is about $3000/month with Zcash and about $2700/month with ZenCash.

I used $2500/month profitability as a baseline.

I was also pretty conservative in our ramping up efforts. Right now we have 2 machines running. We will have another 2 within the next week or so.

I also just placed another order for 4 machines, 2 of which will show up in about 10 days.

But on the spreadsheet, I based the profitability on 4 machines running in the month of August. Then only 6 running in September.

Since delivery of machines can take a couple of weeks to a month, I used the profit from the 2 months prior for purchase of new hardware.

For example, November only has 15 machines, 3 more than October. Since the profit from 2 months earlier, September, was $15k, we could only buy 3 machines. Thus we skip a month and add 3 machines to the mine for the month of October.

But December adds 6 machines over November because of October's profit numbers.

Starting at month 4, we start taking out cash to repay our personal loans to the company.

Every couple of months we will take out more and more cash.

You can see in the lower section the profitability of the Bitmain Z9 minis. The profitability of these machines is about $600/month, but I lowered my estimates to $500/month. So 12 machines is about $6000/month.

We will use this cash to cover rent and other expenses and some cash out as necessary or desired.

With our current power capacity, we are limited to around 400 machines.

Once we reach this capacity we will need to decide if we want to build our own 2MW transformer, or just keep running at this capacity. We will see at that point.

There are also several other variables here. Mining difficulty will increase. Coin prices can go up or down. We could have hardware and infrastructure issues.

I anticipate all of these things going in the wrong direction therefore I have no expectation that our model will work as it is on the spreadsheet, but again, I needed a baseline.

If you have questions, please feel free to ask.

I will be posting pictures as soon as the construction of the facility is done.

 

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[GlobalWealth]

A few updates:

Earlier this week I visited the property where we are building out the mine. It seems the weather put a delay on the project.

The electricians dug the trench to bury the high voltage cable we are running from the transformer to the building, but then it rained for 3 days straight so they didn't fill in the trench. This of course meant that the contractor couldn't get into the building to deliver the materials....uggh.

So finally on Monday of this week, the contractor was able to get to the building and deliver the materials. I arrived as he was unloading pallets of block.

I'm planning another surprise visit next week to push and prod them a bit more. Now it seems we are looking at the first week of September before we can get into the building.

The sooner the better as both my business partner and I have mining hardware running at home which is quite loud and starting to push our S.O. relationship boundaries....lol

Also, my oldest son decided at the very last moment to come work for us. He was literally supposed to move into his dorm the next day and called me to say he deferred college admission and wanted to move to Estonia.

What a horrible situation for him. Eighteen years old, living in a college town in Estonia with the world's hottest girls, living in a very nice apartment in the center of the city, making more money than the dean of the university.... yeah, I'm a little jealous...

He is currently in KS right now training with the GPU mining operation and packing up our mining hardware to ship to Estonia....trial by fire...

This has been very challenging. We must package all the GPU's, motherboards, risers, PSU's, memory cards, etc. in static free packaging, put in huge gaylord boxes on pallets, and ship to Estonia via air freight.

He also must itemize every single item going into those boxes, create a bill of lading, an invoice, pack with EU certification documentation and manage shipping these items. All for an 18 year old kid fresh out of high school.

He'll get more education in 6 months than in 4 years of college.

Based on our shipping schedules, within 30 days maximum, we will have our facility up and running with 12 Innosilicon A9's, 12 Bitmain Z9 minis, 25 8-GPU mining rigs, and 19 12-GPU mining rigs.

We will mine ZenCash with the A9's, Zcash with the Z9's and will convert the GPU rigs to Monero.

Based on currently calculations, we would be around $30k/month run rate in profit (in USD terms) at the end of September at the latest.

 

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[GlobalWealth]

Update:

I haven't posted in awhile, but not because we aren't working.

We've been very busy with the mine project.

As I'm sure you are all aware, crypto prices have tanked over the past few months. Just like any other miner who pays his rent and power bill in fiat, it has affected us.

However, there have been some big positives as well.

We made some changes with our power company and our electricity cost per kwh is VERY, VERY low. In fact, probably the cheapest in the world.

This has given us the ability to continue to mine where others have needed to shut down.

And because of this, mining difficulty has decreased in the past couple of months meaning we are stacking "coin" much faster than 2 months ago.

Of course, in fiat terms, it is not a breakeven, but our coin production is up a lot since we started.

And since our rent and other hard costs are very low, we are able to continue to mine profitably.

As of today, I am negotiating a deal to buy out another mine that has 100 bitmain L3+'s.

At their cost per kwh, they are at a breakeven so they have shut down.

But for us, the net profit, even at today's current prices, is about $50/L3+/month after power.

The seller is asking $150/L3+ incl. PSU, but he has zero offers. I offered $100/L3+ incl. PSU, or 10k.

With the other additional costs for installing the equipment, my payoff on this investment will be about 2.5 months.

The lessons I've learned in this process are;

• Cost of electricity is critically important
• Firesale deals can be found in down markets if you have cash
• F*ck gpu mining (seriously, F*ck those machines)
• I am now a self-designated honorary electrician and network administrator
• Everything can be learned

Oh yeah, and F*ck gpu mining.

 

[GlobalWealth]

Just had a funny situation related to this business worth updating you guys about.

In May, my business partner and I registered our company in Estonia. He lives in Estonia and has residency, and I am an e-resident.

This allows us to register our company online.

Typically, this goes against my philosophy of geo-arbitrage, but there are some incentives to use a local Estonian company.

As I mentioned earlier, Estonia has clear rules for crypto taxation; profits are taxed when converted to fiat (EUR) in Estonia.

Since we don't plan to convert our coins to fiat except as necessary to cover costs of the operation, we would not have any taxable income in Estonia.

Estonia also adds VAT (value added tax) of 20% to all transactions. This would be added to rent, power bill, cable bill, hardware costs, etc.

However, in Estonia VAT is used as a credit to pay your income tax. And since we won't have any taxable income we can reclaim our VAT payments and get a refund every 30 days.

This is only possible with an Estonian registered company with a VAT certificate. Thus, we decided in order to save the cost on VAT, we needed a local company.

With an Estonian company, you must file a monthly income tax report, even if you earned eur0.

Since we registered in May, we needed to file our May report on or before June 20. For our June report, we needed to file on or before July 20.

We forgot to file in June.

We had no profits, or even any income since we are still in process of setting everything up so we just didn't think about it.

We got a notice from the tax department telling us we failed to file and needed to get it done.

About a week ago, we filed our May and June report (all zeros). We filed on June 18th. The tax department did not assess any penalty since we called them and told them what was the deal.

On June 19th, one of the financial publications ran an article on their front page (online publication, not print) about how our company failed to file our tax report and how we were taking advantage of the Estonian e-residency program.

What makes it bad is they named both me and my business partner personally in the article and went further to suggest that anyone doing business with us should demand payment upfront since according to the author of the article, we are not credit worthy.

My business partner completely freaked out because he has serious privacy concerns.

He immediately contacted our lawyer who drafted a cease and desist order and sent it to them yesterday. In the order we are demanding a eur10,000 payment, removal of the article, and a public apology.

I imagine we will not get the money or the apology, but they will take the article down.

The point is, starting a new business is always full of unforeseen circumstances. Be prepared for the unexpected.

 

[GlobalWealth]

I will discuss this in further detail in a later post.

As noted above, we chose Estonia for our mining operation. My partner and I spent a lot of time and energy researching Georgia (country) due to their crypto friendly regulations and low power costs, however we opted for Estonia for a few reasons.

#1- I live in Latvia which is just a few hours away and my business partner lives in Estonia.
#2- The power cost in Estonia is between $.06-.08/kwh. While this is not the best in the world, it is still quite good.
#3- Estonia has very clear regulations on recognition of crypto profits. In the US it is very complicated and vague. In Estonia, you realize crypto profits when you convert to fiat (EUR, USD, etc) in Estonia. For us, that means our company has zero profits since will will never convert to fiat in Estonia. We are long term investors in crypto so most likely we will only convert to fiat to pay business expenses.
#4- Estonia has a 20% VAT, however, VAT can be used as an income tax credit. So for our power bill, property expenses, internet bill, miner purchases, etc, those funds will go into our company's VAT account that can be used for paying income tax.....but....since we will not have any income, we get that VAT back as a refund every 30 days. Voila, we are VAT and income tax free.
#4- In the part of the country where we are building our mine, real estate prices are quite low. We are renting a space in a huge warehouse for eur2.5/m2. That is very, very cheap. However we are having to pay around eur16k to build out the facility to our specs, plus another eur23k to run the power into our part of the building. The 23k gets us a direct connection to the transformer and between 500-700 amps.

Based on these specifications, we will have approximately 260-370kwh.

This gives us enough capacity to run up to around 400 asic miners (depending on which type of miners we are using).

On the low end, if we use bitmain s9's, we can get 200-280 machines. On the high end, using innosilicon a9 zmasters, we can get between 400-600 miners.

We plan to mine multiple coins thus a mix of hardware.

The other reason we chose this specific location in Estonia is the property itself. It is 1.8km from the main power station and it has pipes down the road only 200m away. So if/when we want to upgrade our power with a new transformer, it won't be overly costly (it's still damn expensive) to build the transformer.

 

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[GlobalWealth]

Update.

It's been awhile since I updated this thread and thought it was time. As many of you are aware, crypto has been on a wild ride for the past 18 months.

With BTC going up to $19k, down to $3k, now back up to $8k, it's not a business for the weak stomach.

From the last update, I said we bought 80 Bitmain L3+'s. Actually we ended up buying 100.

Now are are running the following hardware:

• 106 Bitmain L3+'s (mines LTC)
• 12 Bitmain Z9 minis (mines ZEN)
• 14 Innosilicon A9's (mines ZEN)
• 2 GPU rigs with 12 gpu's per machine (mining XMR)

In addition to that, we are using the accumulated ZEN to build out Supernodes - we have 8 right now (probably building out #9 later this week).

Buying those 100 L3+'s turned out to be epic timing. We paid about $100 per unti, incl the psu and shipping, import duties, etc.

When we bought them, LTC was around $30 and mining operations where shutting down L3+'s since profitability was marginal or non-existent. That gave us firesale prices.

We've had the L3+'s running now for just over 2 months and they've already paid themselves off.

We are now taking profits from the mine personally with a monthly dividend paid in crypto.

From the perspective of the ASIC hardware, we are at or very near breakeven after 9 months.

With the GPU hardware.....well.....F*ck them.

Here are some pics for those interested in the visuals.

 

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[GlobalWealth]

I too have been interested in mining and am excited for this thread, thanks for sharing!

Things like hash rate, power draw and $/kWh seem pretty straight forward to me. You can easily calculate what your short term profit/loss might be, but how do you manage future projections given massive fluctuations in coin prices and increasing mining difficulty?

I would love to say we have some magic formula on this. But alas no.

Correct, calculating profitability is fairly straightforward. You just input the $/kwh, hashrate, W usage, and cost of infrastructure. Easy peasy.

Unfortunately crypto doesn't follow any rational model for predictions.

One negative news piece and the market can tumble double digits. One big company decides to invest in blockchain tech and you get a double digit gain.

Imagine if the S&P500 had regular double digit ups and downs. Wall Street would need trapeze nets around their buildings.

For a crypto investor, it's commonplace.

So I research a lot, subscribe to a couple of newsletters, attend conferences and talk to some INSIDERS. This has given me confidence in the long term viability of blockchain tech and crypto in general.

Beyond that, I am only mining coins that have a lot of support and a real utility.

I personally believe at least 90% of the cryptocurrencies in existence are fraudulent. But that doesn't diminish the long term viability of the technology.

But ultimately, like any investment it's a calculated risk and I could lose my a$$.

 

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[GlobalWealth]

Update.

We got our first machines running 2 days ago.

Right now we only have 2 Innosilcon A9's running.

We are mining Zencash at this point and profitability is about $2500 per machine, per month.

We have 6 more of these machines on order right now.

2 should arrive in the next week or so. 2 in about 2-3 weeks. 2 in about 4-5 weeks.

Of course this profitability is based on current price on zen and mining difficulty level.

In about 3-4 weeks we will get 12 Bitmain Antminer Z9 minis.

These machines current profitability are about $600 per month per machine.



Sent from my VTR-L29 using Tapatalk

 

[million$$$smile]

Great thread @GlobalWealth

So I have considering pulling the trigger on a couple of A9 ZMasters for the past couple of weeks and have tried to DD as much as possible.

A couple of questions.

For the first two machines you have up and running, are you actually getting near consistent 50Ksol/s as advertised?
I only ask because what I've read, some of the miners are reporting much lower hashrates than that. 30-35, some lower.

Also, do you have a preferred mining pool for these machines?

It really seems like Innosilicon has been trying to flood the market as quickly as possible, thus offering a 2 for 1 buy-in which case it would seem that within a few months, the ability to profit would be considerably lower. This is my biggest concern as I just don't know how long this can be sustained re: profit calculations with more hands in the fire after Sept shipments.

Do you think that Zencash or Zcash might 'hard fork' thus causing the A9's to become obsolete overnite, like a few others?
These ASIC's seem like the way to go, but I'm just wondering if it is too late for a solo miner to profit or just break even.

I really am trying to understand as much as possible prior to buying, if and when I do.

Your thoughts would be appreciated...

 

[GlobalWealth]

I forgot to post the pic of what it all looks like.

If you are so inclined to provide advice on my wire placement....don't...lol. Yes, that means you @LightHouse ...

Seriously though, the wiring pushes my OCD through the roof, but due to the nature of how this works it would not make any sense to ziptie the wires up only to need to cut the wires a day later. This is a project in process. Eventually once all the details are sorted I will try to figure something out with these damn wires though.

On the left section are all the A9's. In the middle section are the Z9 minis. On the right are the L3's. You will notice on the top right shelf are 4 miners no plugged in.

Those are Bitmain A3's that mine Siacoin. I bought those used from someone who was desperate for cash. I paid the same for them as I would have paid for just a PSU, and they came with the PSU. Since I needed extra PSU's, it was like getting a miner for free anyway. For now, I am not plugging them in since they are unprofitable to run. If/when Sia price recovers over $.01 - then I will put them to work.

Currently I have the power to duplicate this exact setup 5 more times. As we reinvest into more hardware we will determine the best coins to mine and thus the best hardware to purchase.

You will also notice a laptop on the middle shelf. This is connected to the network and I'm using TeamViewer to remote access this laptop so I can work on the machines without physically being there.

We are looking into software solutions to automate some of this process, but for the time being, I am able to access the network from my laptop or my phone for updating firmware, rebooting machines, and making adjustments.

If anyone has questions, feel free to ask.

 

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[GPM]

Hah! A word of warning to anyone looking at this.

I started with 1 gpu out of curiosity, and now have 30

*edit: Make that 31...

 

[GlobalWealth]

Just musing here..

With all the hype around crypto right now, would making a mine startup company be a viable option?

Essentially, do what you’re doing now. Set up a warehouse, get 200 rigs going, show profitability in 6 months, then sell it off for a higher multiple.

Rinse and repeat.

Instead of having to manage these long term, worry about rig burn out, you can flip these every 6 months.

Not a bad idea. I tried to buy a mine in Georgia (country) a few months ago. Unfortunately the owners bought all of their hardware (around 200 rigs) in December...lol.

The literally bought at the peak of the market and the hardware companies always adjust pricing based on coin prices.

So these guys wanted to recoup their investment, but I could have replicated their operation at just a bit more than half what they invested.

They weren't interested in taking such a big hit so we parted ways.

But if you wanted to go about doing this, I'd buy hardware today. It is the cheapest I've seen hardware in a long time.

Get a mine running and when the coins rebound in price, but it up for sale at a discount to replacement cost, which should be higher than your investment.

 

[GlobalWealth]

Our first batch of hardware is the Innosilicon A9 Zmaster.

You can see it here: Innosilicon Equihash A9 ZMaster

Initially we are planning to mine ZenCash. After extended conversations with the founder of ZenCash and his team, I determined this coin to fit our goals and long term strategy.

Using this profitability calculator here: ZEN - ZenCash Mining data and profit calculate - Mine the coin

You can see the A9 profits around $2500/mo (in USD terms).

As a backup, we can also mine Zcash using the same hardware. I like both coins, but ZenCash holds a slight advantage due to its features and my comfort level with the founding team that runs the project.

But in case we can no longer mine ZenCash, we can switch the hardware over Zcash. The profitability for Zcash is very similar.

Initially, we don't plan to mine BTC due to its low level of profitability.

 

[GlobalWealth]

This is f***** up. "Journalism" at its worst. How did they get access to this data? Is this publicly available?

In Estonia, all company information is publicly available.

This publication intentionally trolls public data for items just to write articles. They clearly have an agenda.

The irony is that using my and my business partner's names in a publication is against EU privacy laws.

This is why we made the demand including a eur10,000 payment. Our lawyer quoted case law and statutes where the EU will award the eur10,000. It is a fixed award for this violation.

We are giving them the option to pay it and avoid the additional court fees.

As I said, I doubt we will see the money, but they needed a stern warning. They intentionally did this believing we would not see the article.

 

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[GlobalWealth]

Quick update.

We finalized all details with contractor and electricians.

The work on the space is underway and we should be ready to plug in miners in the facility by the end of August at the latest.

We also ordered 4 more A9's. This means by end of August or early September we should have 12 A9's and 12 Z9 minis running.

Based on this, we are planning to have around 50-70 miners running by January.

Sent from my VTR-L29 using Tapatalk

 

[GlobalWealth]

Last update today:

Our new building does not have internet cable there yet. We knew this when we took the space, but chose it for other reasons despite this negative.

Our options for internet were a satellite or 4g.

Considering how the weather can be in Estonia in the winter months, I didn't want to risk satellite a they can be prone to weather related issues.

So this week, we tested using 4g routers.

From my research into mining, the biggest issue is latency. Any gamer knows how important this is. For miners, it's even more important as it makes a huge difference in mining efficiency.

So I've run a ton of tests and with 4g our ping speed is between 8-22ms, which is really quite good. I compared it to the ping speed connected to a cable, its it the same.

The great thing about Estonia is their internet infrastructure is built from the ground up for mobile. They have some of the fastest and most reliable internet in the world and the speeds are fantastic, even on 4g.

We may consider having the internet company run a hard cable out to the facility in the next couple of months, but for now we will be running 4g routers.

 

[GlobalWealth]

Are going to be going the route of ASIC mining or GPU mining? If it is the latter, how are you planning on sourcing 200 rigs cost-effectively?

We already to gpu mining at our other facility. I have absolutely zero interest in investing anymore resources into gpu mining at this point.

GPU rigs are much more finicky to keep humming and require more intensive labor. They are also much less profitable and take up more physical space.

We have already placed one order for a few Innosilicon A9 Zmasters (they just arrived yesterday actually) and a few Bitmain Z9 minis that arrive early September.

 

[GlobalWealth]

Are you doing anything fancy for your cooling on this, or do you just route all the air in channels in and then out of your mining areas?

Once the buildout is done, I will post some photos. Until then...

Estonia is a cooler country. We don't need ac. On one wall, we will have big vents to push out the heat. The racks that hold the miners will sit about 1.5m away from the wall with the vents. On the back of the racks will be insulation board and holes cut out for each miner. The space between the insulation board and the wall with the vents will be about 1.5m (as noted above) and about 3m tall, full inclosed.

This basically creates a really damn hot and small space behind the insulation wall (also higher pressure) and the heat will escape out the vents. Since asic miners are basically fan tubes, they push their own air.

Eventually (probably 3-4 months) we will build a small room from frame and drywall in the front side of the mining racks and install 42" fans to push air.

I hope this was relatively clear, but I will post pics once we get it all built out.

Are you also worried about security at all on all these fragile machines?

The industrial site where the building is located has security, plus the building is a block building. Internally, we are building block walls with iron security bars in the block. We will also have a heavy security door as the only way in/out. We will add security cameras and monitored alarm system as well.

You say you have investors on this project correct? How does that look like, are you cashing out any coins to pay them back at all, or is everyone on board with holding until target prices are reached?

We have investors in the gpu mine operation. Actually, it's mostly investor money. Basically the investors buy the hardware and we have a coin share on the back end.

With the new mine, I 'MAY' take investors, but not right now. And 'IF' I take investors, I am only taking money in larger sums. I am not interested in having a lot of small investors.

 

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[GlobalWealth]

Great thread. I think I can already guess why you chose Estonia, I've been thinking of becoming an e-citizen of them for awhile now.

Honestly, e-residency is a waste of time. It's a great marketing gimmick with virtually zero value.

I've been an e-resident for many years (I was one of the first ones). They promote it as a cool, simple way to open a company and bank accounts.

What they don't tell you is that it is ridiculously complicated. Tax filings are virtually impossible if you don't read Estonian as most of the details of the process are only available in Estonian language.

Bank accounts cannot be opened without a personal visit and many banks won't even open accounts for e-residents.

They entire system is a complete joke. There are WAYYYY better options than Estonia for virtual companies.

 

[GlobalWealth]

Does anybody see a flaw in this logic? If I'm right, it really seems to tilt the risk/reward calculation in a less-attractive direction. I'm not sure the modest reward is worth the risk of hard forks or other things totally out of your control.

You are not wrong on calculating the difficulty increase. It is definitely an consideration.

The one point you are missing is increase in coin prices.

Of course I realize an increase in coin prices is just as likely as a decrease. But it's good to make calculations with a floor, but also consider the upside.

For example, Zcash is around $180 today. A few months ago it peaked at about $900.

If you do your calculations at Zcash bottoming at around $150, but a potential upside of $300, your numbers start to look much better.

In other words, you have a 10% risk and potential 100% upside (just using these numbers as a hypothetical example).

Crypto is a strange market. The difficulty increase definitely affects the investment return, but no one would invest in crypto with the hopes the prices stay flat.

It is a relatively risky investment, but with a potentially huge upside.

@MJ DeMarco discussed the idea behind expected value at the last annual meetup.

Simplified, if you invest 10% of your money in an investment with a 1000% potential and a 10% probability, you get a better return than investing 50% of your money in an investment with a 10% potential and a 80% probability. For example:

• $100k (10% of $1mm) x 1000% return = $1mm x 10% probability = $100k
• $500k (50% of $1mm) x 10% return = $50k x 80% probability = $40k

Of course this was a very simplified example, but the point is you will never hit the homerun without taking some risk.

I would not advocate investing 100% of your nest egg in crypto. That would be nuts (of course I know many people who have done that and are very happy).

I also would not advocate investing in crypto unless you understand what you are doing and the risks involved. Do your homework.

I've spent nearly a year researching building a mine, including visiting dozens of mining operations, talking to operators and investors, countless hours researching the various hardware manufacturers, running various financial models, etc.

Just like any business, it takes work.

 

[GlobalWealth]

So I wanted to give a few updates.

This past week has been a bit crazy. We received our first shipment of A9 miners in Estonia. However, they are still sitting in customs waiting for clearance.

First, we found out we needed a special registration number to import goods from abroad. So we went through the nearly impossible task of applying for that number.

Ironically, even my Estonian lawyer couldn't figure out how to apply for this number without calling the tax department directly. Only then was it sorted out and only because we had an Estonian lawyer who could talk to the tax department in Estonian (as noted above, if you think the Estonian e-residency is a good idea, think again...).

With that sorted, the information was sent to customs. The customs agent then informs us to send him the EU compliance certification.

Luckily, Innosilicon is very responsive to customer service inquiries and they sent it to me within the hour. I forwarded to the customs agent who then informs me that he was going on vacation the next day.

So today I called again and no one knows the status on our shipment being released from customs because the agent dealing with it went on vacation.....

LOL. Estonian efficiency my a$$.

Tomorrow I'm going to meet with the electrician and contractor at the building to finalize the details. Then the next day I'm going to the customs office in person and hopefully walking away with my miners.

 

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[MTF]

As I said, I doubt we will see the money, but they needed a stern warning. They intentionally did this believing we would not see the article.

10,000 is too low for such scumbaggery. Hope they pay up and shut up.

I'm an e-resident, too (joined when they launched it), and I consider it BS as well. I expected it would actually help you accomplish something (like open a bank account remotely), but not really. Great for Estonia's PR, though.

 

[nitrousflame]

So as many have already mentioned in this thread, one of the biggest sticking points to getting involved in mining is the increasing network difficulty. As more people start mining, the difficulty increases, and your profits decrease (assuming all other variables constant). As @GlobalWealth mentioned, predicting the future in this regard is just that -- a prediction. Because of this, lots of people online will tell you that you're better off just investing your mining hardware capital into the coins themselves. I've been seeking a better understanding of this so as to draw my own conclusions.

Well I think I might have found some charts to help put this into perspective. I'm going to use ZEC for example.

The first chart is just the difficulty over the past year. As expected, it has been increasing.

The next chart is the profitability per KH/s over time. Also as expected, it has been going down, except during the boom in Dec/Jan.

A big part of what I've been looking for can be found in the second chart. I was surprised to see that given the relatively recent release of ASICs for equihash this year, combined with the drop in crypto prices, the overall profitability did not tank nearly as much as I would have thought.

The missing piece to the full story here, in my opinion, is how this all ties into the $/ZEC data, which can be seen in the next chart.

Okay, the price looks a lot like the profitability, which I think leads a lot of people to the conclusion that you might as well just invest in the coin and skip the whole mining thing altogether. But after reviewing the above charts, I think that might be an oversimplification. The biggest eye opener for me is that the profitability chart is not simply an inverse of the difficulty chart.

 

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[ZCP]

This thread alone is worth the price of an INSIDERS subscription. Big thank you to everyone!

@MJ DeMarco do we have a 'damn interesting' tag?

 

[million$$$smile]

Similar to Moore's Law, hash rate is multiplying faster than we can currently quantify. One of the main reasons is the number of miners and hardware can't be calculated accurately.

That coupled with new and more powerful machines being introduced incrementally will only take mining to another level.

Check this out:
ASICminer Zeon 180K profitability | ASIC Miner Value

180 ksols/s with 2200w. Price point is high, and haven't checked out the company, but it just goes to show you how quickly things are changing.

I really am beginning to think the 'picks and shovels' analogy is where the real money is at.

Create a 'faster' mining rig - implement it into your own mining farm prior to 'pre-sell' - recoup R&D, build investment after selling to solo miners.

Now that's the business that I find REALLY interesting....

 

[GPM]

Similar to Moore's Law, hash rate is multiplying faster than we can currently quantify. One of the main reasons is the number of miners and hardware can't be calculated accurately.

Says the guy who claimed he couldn't work a computer at the meetup this year!

That's what the big smile was for the whole time. You continue to have us eating out of your palm with every word!

 

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[GlobalWealth]

I thought this may interest those of you interested in the numbers with a visual reference. I took this screenshot a few minutes ago from the pool dashboard. Right now we are running 4 Inno A9's mining Zencash. As you can see Zencash is around $20 so profitability has fallen in USD terms, but our coin production has not dropped at all. If anything, it has gone up. I suspect this is due to people switching their miners over to other coins like Zcash.

I only just turned on the next 2 machines yesterday so the total coin production does not reflect 4 miners.

We are just getting started too....

 

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