The All-MIghty Bitcoin (BTC)

I don’t want this blog entry to be about explaining Bitcoin (BTC), so I’ll point you folks looking for more information over to Wikipedia where they have a very in-depth article on the topic. What I will talk about in this post is a story of my involvement in the whole Bitcoin shenanigans that are happening on the net and where I think I’ll go with, or leave it.

In early June of this year I caught wind of Bitcoin really taking off through a friend who had started experimenting with solo mining using his CPU. At the time, I had thought nothing much of it and brushed it off as just another distributed project along the lines of SETI@Home or Folding@Home.

Over the course of a week or two, through bloggers and twitter feeds the whispers in the wind of Bitcoin had turned into a full on fog horn! Bitcoin was a modern day gold rush and if you weren’t in on it, you were missing out! The numbers at the time were ridiculous and it sounded like you’d be stupid not to get in on it. Earnings for miners being upwards of $2000 per month, people investing thousands of dollars in new hardware and obviously the news media coverage of the less glamorous use of Bitcoin… that of the drug trade through the Silk Road.

I didn’t want to be the last person to the party, so I jumped in.

Stranger in a strange land

I started off like most, running Bitcoin mining clients on any bit of hardware I could get my hands on. My home CPU (Intel Q6600, about 12Mhash/sec),  GPU (nVidia GTX295, 64Mhash/sec) and… other computers I had access to at the time. The most powerful being a 24-core Xeon 2.4Ghz (62Mhash/sec). I was on my way, spooling up the printing presses and waiting for the money to start rolling in.

Obviously as the days passed, I spent more time on the Bitcoin Forums (now bitcointalk.org) researching how I could squeeze more power out of my small cluster of machines. At the time, people were crazy with mining and were buying up applicable hardware left and right. I’ve been an nVidia owner for the better part of 15 years and spit nothing but hateful vitriol when talking about ATI (they really burned me with their shitty drivers for my ATI All-In-Wonder back when Windows 2000 came out). When I read that the REAL money is to made in GPU mining and the only cards that can do this right were ATI/AMD Radeon based cards… I was a bit taken aback. Was I really going to have to put my (albeit, probably dated and baseless) biases aside for the sake of getting on the internet bandwagon?

After a day or two of thorough research of topics such as OpenGL, CUDA, AMD APP Engine and the architectural differences between AMD/ATI based video cards and nVidia, I was able to sell myself on the technical merit for the requirement and made the investment. My first card was a Gigabyte 6870, which wasn’t the OPTIMAL mining card, but at the time, my plan was to replace my desktop card which would give me the ability to still game when I wanted to and mine with the spare cycles and downtime.

Within a couple days, I had generated my first Bitcoin!

…and a couple days later, something happened that I wasn’t ready for: The Epic Difficulty increase of 2011.

See, without getting too technical, the Bitcoin network has a way to adjust how frequently Bitcoins are generated. As the computing power of the network skyrocketed, it adjusted to keep the rate of generation steady (which is roughly 5.5-6 blocks per hour). The difficulty doubled, meaning that my earning rate was cut in half.  The difficulty continued to increase 40-50% per week as people kept joining up and throwing their computing power into the fray.

During all this, another notable event in Bitcoin history occurred: The bubble burst.

Bitcoin peaked at around $35 per BTC and within a matter of a couple days, came crashing down to almost half the previous price. Between the difficulty increases and the price crash, I had to come to reality that my get rich quick scheme wasn’t as full proof as I had thought.

I decided to go all in for the long haul and invested in additional hardware to setup a dedicated “mining rig” (computer dedicated to mining for Bitcoins). My final choice was to run two ATI 6870′s and overclock them, which gave me a total computational power of about 600 Mhash/sec. The decision to run two 6870′s wasn’t the smarted in terms of Bitcoining as the cost/performance ratio wasn’t the highest, but I already had one 6870 and at the time they were still readily available.

So it was at this point I settled in for the long haul an let the mining rig work day and night.

Understandig

A month passed and over that period, I spent a lot of time doing research on Bitcoin. Research on both the technical operation of mining for Bitcoins and the financial side of things (profitability and economics). I had amassed my first 10 BTC and was ready to cash in my first haul. After transaction fees, I was able to bring in a little over $200 from my first month. This more than paid off the first video card and put me on the path to paying off the second. Additionally though, it really brought me back down to earth as far as MY future with Bitcoin.

Due primarily to market instability, I decided to cash out every 1 BTC as I created them. My goal being that I needed to pay off the initial investment first and foremost before speculating. Over the next 30-45 days, I witnessed Bitcoin priced sliding slowly week over week from $20 to as low as $6.50 at points.

Mining is all about profitability, and keeping profitable means running efficiently. The primary drawback to mining is energy cost, being that you’re paying for the electricity that is being used to generate Bitcoins. Living in Texas, I have a flat rate of $0.091 per kw/h and at current difficulties, I could still turn a (albeit small) profit as long as exchange rates for Bitcoin stay above $3.50 per BTC. So being efficient meant no longer CPU mining and cutting back as much power usage from the mining rig as possible (minimal case fans, underclock the CPU and other energy saving measures).

All these points brought Bitcoin mining down from the altars of genius money making schemes to almost QuickBook like accounting of business operation and profitability. It sucked the fun out of it, but the number still didn’t lie: I was making money.

Looking Forward

So here I am two moths (to the day) after I first started down this rabbit hole that is Bitcoin and Bitcoin mining. I’ve learned a couple important lessons from reading about other users and also my own personal experience:

1. Bitcoin Mining will not make you rich – It just won’t. Your goal for Bitcoin mining should be to recover you initial investment and just enjoy anything after that. Because of the network adjustments for difficulty, your hardware value depreciates over time. When I first started, at sky high values and low difficulties, it would take WEEKS to pay off the cost of a mining rig. These days, you could expect two to three months to pay off a mid-sized rig and even then, you’re at the mercy of how many people are in the pool.
2. Don’t go all in – I’ve read many threads about people who’ve spent -thousands- of dollars in hardware to mine for Bitcoins. The days of being able to make your money back on hardware investments like that is long, long gone. Barring a doubling in market price, it’s just not something I would invest large amounts of money in, as it could take YEARS to see returns (now THAT’S speculating).
3. The volatility of the market place wreaks havoc on mining profits, but is the speculative traders wet dream – Literally, the opportunity exists almost daily for traders to make a 30-40% profit based on price swings. A buy/sell order of 200,000BTC can swing the market literally by a couple dollars, meaning those sitting on fiat currency have an opportunity DAILY to buy low sell high.

Where am I at? Well, to date I’ve made back the money I invested on the video cards. So I’ll consider myself lucky on that front.

I’ve decided from this point in, I’m going to just sit on my Bitcoins as they’re generated to see what happens. My risk from this would be possibly missing out on current prices ($9.50/BTC at the time of writing this), but at the same time I also gamble on the reward of Bitcoins eventually going up in value. So risking a possible “loss” of $0 since I’m already paid off (well, less energy cost which is negligible) for a potential profit of more than $0. I’ll take them odds.

So, I’m glad I got in when I did because I think if I had got in any later, I would be writing a much more frustrated post on the topic. My wife would probably be chiming in as well Do I wish I got in earlier? Of course! But that’s the story on investments, isn’t it? SHOULD HAVE DONE XYZ WHEN I HAD THE CHANCE!

Do I think people should get in/out? That’s a decision that needs to be made on a person to person basis due to the number of variables that are involved (start-up cost, energy costs, market conditions, etc., etc). I will say that I think it’s a much higher risk these days due to the continued slide in price paired with the high difficulties.

Personally, I hope more people throw in the towel. Bigger piece of the pie for me

Cheers!

I’m currently running the CUDA client on two machines that have video cards that support the CUDA API. My home GeForce 8800GTX and my work Quadro FX 4600. From what I’ve read in specs and reviews, they’re basically the same card. So although this issue isn’t TECHNICALLY apples to apples, there might be a connection.

I noticed after a month or so of running the CUDA client on my home GeForce 8800GTX, my Vista machine started to become unstable. Blue Screening (BSOD) or rebooting randomly. It struck me as odd because I had not changed anything and for the most part, the system had just been sitting idle crunching work units.

Your GPU running SETI@home CUDA Client

After some basic trouble shooting I was able to determine that the instability was due to my video card overheating! This struck me as strange, because I know nVidia uses variable speed fans on the 8800GTX, so you’d think that if the system was reaching an unsafe operating level, that the fan would kick on, right? Wrong.

I ended up downloading RivaTuner which allows you to access low level functions (such as overclocking, and FAN CONTROL). Using RivaTuner, I manually setting my GPU fan to 100%. This keeps the average temp of my 8800GTX around 67-70C.

Which brings us to today when my work machine started showing the same symptoms. When I booted my machine, within 5 minutes of being on (with SETI@home running), it gave me a BSOD (with dxgkrnl.sys as the culprit). The system wouldn’t boot for a few minutes (returning BIOS beep codes) until the Quadro FX 4600 cooled down and the system booted again.

This time I disabled SETI@home as soon as I logged in and the system appeared stable. I installed SpeedFan to double check I was seeing the same issue. Low and behold, I start SETI@home and my GPU temp almost gets to 80 degrees Celsius before my system blue screens and reboots.

Repeating the same steps as with my home system, I use RivaTuner to force the Quadro FX 4600 to always keep the fan speed at 100% and this seems to fix the issue. My GPU temp currently sits at 67 degrees Celsius and my system appears to be stable (for the time being )

I’m curious if anyone else out there has had the same heat related issues when running CUDA applications on nVidia video cards. It seems that their automatic fan controls have logic issues when not running a 3D game (because when running one of those, it’ll hit leaf blower speeds).

It would seem to me that although the video cards had no issue keeping up with cooling over a short period of time, but over an extended period of time with the GPU being used 24-hours a day, the cooling solutions appears to fall behind. Is this caused by a physical change due to the constant heat/stress? Who knows!

Cheers!

My BOINC Stats