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Portrait of a Bitcoin miner: How one man made $192K in virtual currency

Leah Yamshon | July 11, 2013
Who, exactly, has the pioneering spirit to "mine" the virtual currency, converting CPU and GPU cycles into something of real-world value?

In order to buy, trade, or use Bitcoins, the units of currency have to first be introduced to the market. And that's where miners come in. Bitcoins themselves are algorithm-based mathematical constructs, created by a developer with the pseudonym Satoshi Nakamoto. Bitcoin mining software runs the Nakamoto algorithm, searching for a specific chain of code. When that code is found, a block of Bitcoins is rewarded to whoever found it. Current blocks contain 25 Bitcoins, but the block size goes down by half every four years, making mining harder and less profitable as time goes on.


One of the rig's many workhorses.

Bitcoin miners run specialized computer setups that constantly run the mining algorithm in hopes that a block of coins will be found. Currently, there are roughly 11.4 million Bitcoins in circulation--that number will cap at 21 million in 2140, according to the algorithm's limitations.

Eric first got involved with Bitcoin in December 2010. He was interested in learning more about electronic currency, when he stumbled across Bitcoin in an online forum and was immediately intrigued.

"Understanding how Bitcoin worked gave me a lot of confidence in it," Eric said. Instead of starting out slowly by buying a couple of coins--which were roughly $0.30 per Bitcoin at the time--Eric decided to jump right in and dabble with mining. But first, he had to get the right gear.

Back in 2010, when Bitcoin was in its infancy, miners relied on CPUs to get the job done--so basically, your home PC could handle mining with the right software. Eric started with his home desktop setup. Shortly thereafter, miners discovered that it was more efficient to mine using the GPUs on graphics cards. They're about 50 to 100 times faster and more powerful than CPUs for the workload Bitcoin mining requires. So Eric invested in two ATI Radeon dual-GPU cards, and watched the coins start flowing.

The more Eric made, the more he expanded his rig. Since 2010, Eric estimates that he's invested about $50,000 in graphics cards, CPUs, circuit boards, and memory. He's also employed water-cooling technology--pumps, tubing, radiators, and other parts--to run his mining operation at maximum efficiency. All this gear costs money, not counting his electric bill, of course.


It takes a lot of components to keep a rig up and running.

Heavy GPU mining poses two major problems: power consumption and heat generation. GPU mining is a major power-suck--miners collectively gobble up about 3,176 megawatt hours of electricity per day. Eric worked his way around an insanely high energy bill by applying for a commercial license to power his home.

 

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