Although the values of a number of cryptocurrencies are down by half or more from their peaks of just several months ago, people are still considering jumping into cryptocurrency mining.
But before you attempt to build your own graphics processing unit (GPU) mining rig or take the simpler approach of using existing computers for their CPU power, you should consider the following five key risks.
Consider the Payback Period
Those planning to spend roughly $3,500 on a basic GPU crypto mining rig need to consider how long it will take to make their money back, Dev Horn, CEO of Ether Mining Company, tells ThirtyK.
“There are all these environmental factors that affect our profitability, and most people don’t think through the payback period,” Horn says. If people think the value of cryptos is rising and they can make back their investment in one year, that’s one thing. But if they don’t think they can make back their investment in one year, they may want to reconsider buying a mining rig, he says.
The cryptocurrency market saw losses last week, with bitcoin (BTC) falling 37% to an intraday low of $7,386.63 on Friday from its Monday peak, according to CoinMarketCap. Ether (ETH) fell 25% to an intraday low of $648.11 on Friday from its Monday high, while litecoin (LTE) tumbled 25% to its Friday intraday low of $162.78 from Monday’s peak.
Hidden Cost of Heat
“People don’t realize that once their rigs get going, it produces a lot of heat and can quickly overwhelm your space,” Horn warns. He says a unit can cause the temperature of air blowing over it to rise from 70 degrees to 110 degrees. The heat generated from Horn’s first mining rigs prompted him to upgrade his air conditioning to the type found in professional kitchens. As he expanded his rigs, he moved them to an air-conditioned commercial facility.
High Electricity Bills
Crypto mining rigs and their cooling systems run 24/7, so it’s no surprise they cause electricity bills to rise. The cost of electricity alone is prompting professional crypto mining companies to flock to places like Iceland, where hydropower generates cheap electricity, reports The Washington Post.
Folks considering mining crypto from their homes may want to look at these country-by-country estimates of the cost of mining a single bitcoin, based on data from EliteFixtures.com.
[ Electricity Chart here] (Source: EliteFixtures.com
It costs a whopping $26,170 to mine a single bitcoin in South Korea, while the price is only $531 in Venezuela, where there is government-subsidized electricity. In the U.S., the cost is $4,758, according to EliteFixtures.com’s report.
GPU Demand Outstrips Supply
“In 2018, the biggest challenge for miners is the availability of GPUs,” Horn says. “In December and January when cryptocurrency prices were soaring, it wiped out GPU supplies and the prices skyrocketed. A card that cost $500 in the fall now goes for $800 to $900. And when you build a rig, you may have six GPUs in it, and that is the biggest cost of the rig.”
With demand going through the roof for crypto rigs, GPU makers like Advanced Micro Devices, Nvidia and others worked with their retail chain partners to put a limit on the number of GPU cards a person could purchase at a given time, in the hope of ensuring gamers would be able to continue getting access to the GPU cards, reports Bitcoin.com.
Crypto mining rigs rely on powerful GPUs to bolster their performance in running calculations to solve mathematical problems, or hashes. Each time a mathematical problem is solved, cryptocurrency is created and added to a block in the blockchain.
Avoid the Cheap and Illegal route
Users can also take the simple approach and use their existing computer to mine for cryptocurrencies. And some app developers and website operators may toy with the idea of harnessing the CPU power of their app customers or visitors to their websites.
Unless website operators and app developers receive explicit permission from users to piggyback on their computers’ processing power and electricity, however, they should avoid doing this, attorney John Wagster of Frost Brown Todd tells ThirtyK.
“Using someone else’s computer without knowledge would run afoul of the law,” says Wagster, who specializes in blockchain and digital currency at Frost Brown Todd. “Informed consent is required. They have to understand what they are consenting to.”