Last year I built my own cryptocurrency factory – in my bedroom. When the soaring price of Bitcoin started to be discussed on television and among my friends in 2017, understanding cryptocurrencies became a social necessity.
Everyone was talking about it, so I was forced to investigate just to be able to participate in the conversations.
The more I read, the more intrigued I became: I saw that digital currencies were a platform for innovation – not just a way to make money but a possible replacement for existing currencies worldwide. As a 17-year-old at the time, I found the idea hugely exciting.
How I got started as crypto miner
I spent a month last summer getting to grips with the different types of cryptocurrency, such as Bitcoin, Ethereum and Ripple, and learning the technical terms.
At the beginning I saw myself as a potential investor and buying, like many others, into the currencies in the hope of making huge, quick profits as the price continued to soar. I could even see my Bitcoin profits funding my university course, which is due to begin this autumn.
So I was excited to get straight into the buying and selling of the currency – until I realised that a single Bitcoin already cost $4,000 (£2,980), which was well out of my reach. As I could not afford to invest other than in a tiny fraction of the currency, which seemed unappealing, I turned my attention to “mining”: making my own.
I already possessed the makings of a crypto factory in the form of my own personal computer. I discovered that, when I wasn’t using it for gaming, my very efficient computer was perfectly capable of mining digital currency.
However, I decided to invest in upgrading the PC with a faster graphics card, which would allow it to produce cryptocurrency more quickly. I spent £355 on one of the best graphics cards for mining on the market.
I then found out that mining Bitcoin involved consuming extremely large amounts of power, so I decided to investigate other cryptocurrencies that I might be able to produce more efficiently.
Browsing online, I found a video about an alternative cryptocurrency called Zcash. It seemed to have all the potential of Bitcoin – advanced “blockchain” technology and security – but was much cheaper to produce. I found some free software online for mining Zcash and was ready to go.
How the numbers stacked up
The biggest cost for a crypto miner is electricity. You need to leave your computer running non-stop if you want to make maximum use of it, but this involves not only the cost of the mining itself but also the cost of keeping the computer cool.
Fortunately, at that time I was living in Trinidad, which according to my research had the second-cheapest electricity in the world at just five US cents (3.7p) per kWh, compared with a typical cost of 17.2p per kWh in Britain.
As a result, in Trinidad the electricity needed to make one Bitcoin would cost about $1,190 (for comparison, the market price of Bitcoin this week was $7,800). To make a unit of Zcash, by contrast, costs only $208.60, compared with a market price this week of $235.
After a year of mining, my computer had produced 2.1 units of Zcash, worth about $500 at the time. However, the electricity needed to produce those units had cost $438. The headline profit of $62 at that point was not enough to recoup the outlay on the graphics card.
However, my computer is still in constant use, mining Zcash around the clock, so I continue to make a passive income. Perhaps one day I will have amassed a serious sum, especially if cryptocurrency prices recover. If I had spent more and built a more powerful mining station, I could have made much more money. The lesson I learnt was that it takes money to make crypto money.
What is cryptocurrency mining?
The “blockchain” technology used by the likes of Bitcoin involves a digital “ledger”. Rather than one central organization, such as a bank, verifying transactions and keeping a record of them, this ledger is spread among market participants. Transactions require verifying before they can added.
Many cryptocurrencies use a so-called “proof of work” system. This involves “miners” dedicating computing power to solving complex mathematical problems to verify transactions.
Systems vary between cryptocurrencies – of which there are more than 1,500 – but typically miners are rewarded with cryptocurrency for completing these tasks and keeping the system running. They make money if this reward exceeds the cost of mining.
Mining operations range from people using their home PC to huge, purpose-built facilities occupying warehouses. Bitcoin mining alone is estimated to consume more electricity than all of Ireland.