Principles of starting as a Miner

Introduction
So, the crypto markets are sky-rocketing again, every one is talking about it and you want to be part of it?

Let me tell you one thing: You are too late.

Think of a Wavesurfer on an Ocean. And there is this big wave where he wants to jump onto. It will not work out. He must carefully be prepared to get the wave at the right moment and right position/angle.
If you get into Mining balls deep now, you will probably pay balls deep extra. You might just start close to the peak. This is when most people get into crypto. When it’s already too late. Hardware prices are inflated as hell and the market will probably plummit soon. The right time to expand is the bear season. The next bull Time will come for sure.

So much for the intro, but hold on, this intro is made for the very time, most people will probably get into mining (of any currency). Fear not. You can start mining at any Cryptoseason.

Prerequirements
If you are beginning with crypto, you should first evaluate your situation. Id say there are some prerequirements for you to be successful:

  • You are a tech savy Person
  • You enjoy working with computers and tinkering around with them (possibly for hours)
  • You have some spare Money which you do not need for a living
  • You have decent internet connection (>5 mb’s with direct access to the router for lan)
  • You have low electricity prices
  • You are your captain. Even in the strom. You are not some straw of hey, which will fall by the slightest wind. You are not a nutshell on the ocean, which is beeing driven to all kinds of directions by the tide
  • You do not expect the quick rich sheme

Keep in mind that cryptomining is a project requiring a lot of thinkering and technical knowledge. I have had a few friends dropping out of frustration.

Get your first system
After you have evaluated your prerequirements and your goals, start out with your first system. Do not start to invest heavily right now. Id say this is the number one issue for hyped seedlings. For a few reasons:

  • You have less pressure building everything up and get it running. Your money is at risk.
  • You are not in the game yet and do not know what is apropriate, where to save money and where better not. I have had to rebuy hardware multiple times because I have missed a thing in the beginning and then not everything worked out.
  • Do not trust others on what is right and what is wrong. (especially youtube / influencer tutorials). Get your own opinion by starting slow and seek others for help / guidance.
  • Kryptomining is a complex topic. I have had multiple friends dropping out of technical frustration. They had one thing in common: They tried to start “Big” (as big as you can start as a seedling anyways :stuck_out_tongue: ). It is heck of a lot more complex to have 5-8 gpus rather than 1. Or having 20 Harddrives rather than one. Do not do this mistake! Start slow.

Best use an old/used/scrap computer for now. If you are into GPU mining, get a GPU. If you are into HDD mining, get an hdd. Install the required mining Software/Drivers, follow some Tutorial and get going. Do not attempt to understand everything for now, just start get going. You will gather experience and realize if this is a fun project or not for you.

Getting the basics of IT System Engineering
You basically have two choices:

  • Use an operating system of your choice
  • Use a Mining OS of your choice

Both have pros and cons. A mining OS is often an easier and perhaps a quicker way. On the other hand on a normal operating system you have full control and you will get deeper insights about how stuff works.

A mining OS will probably take a lot of configuration work from you.
You should get a basic understanding of:

  • Task management (how to start a process on system startup)
  • Bios configurations (power on after power loss, …)
  • Network (How to connect multiple computers in a network, Port forwarding, static ip assignment)
  • Control your operating system remotely (ssh, rdp, …)
  • Secure the access to your rig
  • PCIE expansion cards (Lanes/calculating lanes, USB risers, USB Splitters, PCIE-Sata/SAS/NVME adapters, …)
  • Power supply (Reading psu specifications - 12 power, 5v power, …)
  • How to stay electrically safe
  • how to deploy a system image/install programs with the shell because you will likely have to install the operating system multiple times in the beginning if you break stuff.

Expanding your Farm
If you figured that mining is a sufficient hobby for you (that will hopefully pay off), start expanding gradually. Buy a new psu, Buy an additional GPU/HDD. Upgrade your rig with an SSD, … Don’t overdo it. One step at a time. You will find certain “Walls of frustration” for example:

  • When both NVME/PCIE slots are in use, some sata ports or other ports might be disabled.
  • System power
  • Not enough ports to connect all devices
  • Cooling of parts
  • Space
  • Noise

Just to mention some. If you dive deep now, you will have all those issues at one go. Have fun with that.

Once you reached a certain point, for example a rig with 40 HDDs/5 gpus you might consider your rig complete. This is totally up to you when this is the case.
You might now find a lot of optimisations or even want to build your own Frame. You might want to start a second rig, where you apply these optimisations or fix your first one beforehands (It can be frustrating to rebuild the rig mutiple times)

Now you have a “Preset” which you can apply to future rigs. You will probably now want to learn how to manage multiple rigs properly. How to implement them into your network, maybe get a firewall and so on.
It is now time to think about the Power / Heat capabilities of your Location.

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I think you wrote unnecessary garbage.

@ KryptoMine Very nice. Thanks.

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if you can quote one thing in his “tutorial” you didn’t know before I’ll retract my earlier statement

Someone took the trouble of writing (or even copy/pasting) some checks and tips for people considering to take up crypto-mining. “Starting as a miner”.
I see no harm there and I appreciate people taking trouble to add something to the community.

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@efIN6FN2UM can you state a specific aspect you dont like?
This is an Article. Some Principles. No tutorial per see. It is to show potential miners in the future what they are getting themselves into. Not an actual guide for mining.

I have seen plenty of hyped up friends investing Thousands into what was after all nothing for them. Hence my first guidance is to start slow and build up gradually.
It is what I can give and what im willing to give. There are plenty of technical guidelines and resources out there. Feel free to write something better. Or add your salt on why I am wrong with my opinion to start slow and build a knowledge before you try to scale.

If I had a little guide like this when I first started Chia, I wouldn’t have made many mistakes.

You should add that there could be a price drop forever. (like chia)
And miners should not stake. (like me)
Sell your winnings immediately.

@hoca05 I would say this greatly depends on your situation and already leans into investment advice.

I personally am not a big fan of staking (eg ethereum) as it opposes the fact of decentralisation and turns a given currency into a centralized currency owned by Banks.

Anyhow, I do not believe in an indefinite price drop. If this were the case it basically means the given currency is doomed and should be avoided at all. As we are currently seeing, the price drop is slowing down.

Your argument of selling earnings right away largely is an individual opinion.
Pros are that it grants safety.
Holding on is speculative.

As I am also active in the stock market. I do not see anything wrong holding on to a currency for speculative reasons. My (chia) earnings with 170 Tib are too little for me to say it makes sense to sell right away.
In a bearish (falling) market it makes sense to sell right away. But in a Bullish (rising) market, one might want to hold on to the coins.

Nice post. :+1:

I would add pointers about the business aspect : depreciation period and resell value of hardware, dollar cost averaging of buying and mining, timeframes, differences with asic/gpu mining (opex, capex). I see plenty of farmers on this forum who don’t understand that it’s a business first and an investment second, and who sadly end up taking bad decisions because of it.

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@aurelius I absolutely agree.
To most extend I would call a business an investment. Wether its investment or business, you should try to best allocate your Money. I think what you are referring to is all those youtubers who buy the sickest plotters and then people following along. (i have seen plenty of posts here “I bought this sick plotter for 5k$”.

And then the follow up question is: How many Pibs do you want to fill with that? → 100 tib. My normal mining rigs are doing the plotting and storing of the Plots. I did not have any additional cost to that as the Rigs already exist. I just made some harddisk frames to fit in. The hardware is very mediocre but even two rigs plot faster than I can add new Harddrives (financially and Space / Electricity wise)

I cannot say much about asic farming as I do not have asic miners. What I can tell is that the Electric capacity of my Mine is fully utilized. With 3 rigs and 15 GPU’s (~3 kw). No chance to upgrade electricity there. So I need to look for a new location with 400v electricity.

Chia is a very welcomed crypto for me as It uses a lot more space and less electricity in return. So I can much better use the space and electricity of a potential location.
For asic miners in contrast, lets say 1.5 kw,
a) it makes hell of a noise
b) I could only install 2 units in my office
c) the whole office space would basically be empty (rent for space goes to waste)

Maybe im totally wrong with my assumptions in this regard. As I said, I never mined with asics. I feel the electricity competition is way too high there. I pay 16c/kwh. given large enough hdd’s (4 tb is barely profitable) there is plenty of headroom profit/energy wise with hard drives.

Yes that’s a big mistake, it comes from the big players who tried to fill as many plots as possible in the early days (the opportunity cost of hdd downtime was high) and continues up to this day.

GPU and asics mining is mostly the same, except for the difficulty to procure asics which is way higher than for GPUs.

Let’s talk depreciation period.

In USA tax rules, you are allowed to deduct entire amount all at once, if the cost of each unit of equipment is less than $2.5k. Or you can choose to deduct 20% of the original cost every year (over 5 year period).

What do you think is better option for a Chia farmer? Coincidentally, HDD warranty is 5 years as well. I heard that hyperscalers liquidate their HDDs before the warranty period ends ~ after 3 years of service.

Most small farmers aren’t incorporating, also the rules change per country (eg. in France it’s €.5k and not 2.5k). I was talking about the general concept of depreciation and amortization. There are many concepts like those that pertain more to the business side of farming.

To answer your question, it might be worth it to deduct the entire amount if you liquidate your stock of chia in order to buy new drives, but usually you have to keep your accounting consistent so it locks you into a growth strategy. If you’re doing it more as a casual endeavor and want to get paid regularly, it can be worth it to amortize over 5 years like regular IT equipment. But it’s very dependent on your personal goal and situation.

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Im in switzerland here. The situation is a little different. I dont know fully yet as I started My company last year only and its still quite small.
I tend to deduct 20% of the original cost per year. One thing I do not understand is why you would liquidate your hdds after 3 years of service.

The only reasons that jump to my mind are:

  • New harddrives have way larger capacity
  • Business is server related and you want to skip downtime at all cost.

I personally intend to use my hdds either until they break or until the profitability is getting whack. Whatever comes first.

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I think the business who sells cloud space, they know at a large scale life expectancy of HDD hardware and how susceptible they are to bit rot and similar random failures.

In this business, the clients’ data integrity must be paramount. So they use statistics and economics of scale to make decision when it is optimal to replace HDD. Even if can work 10 more years no problem.

For us, Chia farmers, the tolerance to HDD failure is much bigger. As OP mentioned, if you are serious about it and perceive farming as a business, you would have a plotter ready to replot a HDD in a short period of time.

And as mentioned above, it is all about efficiency. Finding a good balance between $/TB and TB/volume, for an optimal TCO. So if you can find a good deal on old rust, it may be worthwhile.

Yeah I tend to think that amortization of 20% per year is a smarter choice. A bit more tedious in accounting, but it makes a smoother growth curve, and is less likely to produce audit red flags.

Good point about selling versus long-term holding, and how they correlate with one’s preference for tax liability.

Under intensive use it’s justifiably amortized over 3 years, smaller revenues for smaller taxes. Space is expensive in a datacenter, so density must be very important. Factor in the electricity use too, per tb + for cooling, etc. Cost of maintenance gets higher with age (even more so in high labor cost countries). You increase risk of dataloss. Etc. Many different reasons to optimize this way, we can only guess from the outside.

Chia farmers, just like gpu/asic miners, have different priorities : that’s why you don’t see bitcoin mines blowing AC but locating in high/cold places for fresh outside air for example, or close to dams in remote regions even if internet is crap there.

Oh man, those were the most fun days of crypto mining honestly, expanding your technical knowledge and then tinkering every few days optimizing your rig. Ofcourse its best to reach the sweet spot at the end of the journey and just watch your rig mining away without touching it, but still lots of fun at the start.

Thanks for the detailed ‘intro to crypto mining’, would definitely be helpful to those considering jumping in.

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I’m not sure if it ever stops. I guess it never stops. It gets harder and harder though :smiley:

I try to do everything my own. Right now im reaching cap of my psu. I already designed my own rig with cost of ~400-500 housing up to 100 drives + 8 GPU. But yeah. Didnt think that I would run out of 5v at the psu side :sweat_smile:. So next is finding a good way to power my Drives with a DC converter. Super clean would be to have a pcb mounted to my disk carriers where each holds 10 HDDs.

I could spend a lot again for testing. But I’ve learned my lesson as well… Just as stated in my original post… Get some connectors for a couple of cents, try around with a spare drive, then try to build a proper prototype which can actually power 10 disks (apparently easier said then done with dc/dc converters). And then when the prototype is set, order some 20-40 of these pcbs.

I can recommend this thread with a lot of information : Scalable DIY SATA JBOD - Will store over 250 Disks!

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