Build a Cheap Bitcoin Mine

Or, How I Learned to Stop Worrying About Virtual Currency and Love Free Computers

You've seen the headlines everywhere for this 'bitcoin' stuff. It's been called the most disruptive, secure and sound currency ever created, but it exists in a weird world of very complicated mathematics and poor public perception. Most people just want to know what's the catch?

Without getting into mechanics of these principles, understand that bitcoins are abstract representations of energy used to create it, and that they have absolutely no realworld purpose.Collecting bitcoins is in many ways, a lot like collecting stamps. The only difference between a bitcoin and a stamp is that a bitcoin is divisible. I can take part of my virtual stamp and create a currency 'backed' by the amount of energy it takes to solve part of a very large, unimportant, math problem. So, solve a math problem and presto - you've got bitcoins.

Since 'mining' Bitcoins really means just doing maths, we can estimate how long its going to take to solve a portion of the problem, and use that knowledge to efficiently purchase infrastructure to further solve the problem. Those coins can be sold on electronic markets for other currencies (including VISA gift cards, cash, etc), which can then in turn be used to purchase more equipment to manufacturer more bitcoins.

All you need is a modest computer and a very high end video card. Video cards are designed to do lots of little math calculations at the same time, which makes them very useful for running the bitcoin problem. If we forecast the right video card depending on market conditions, we run a very high likelihood of recouping the entire purchase cost within a few weeks.

Step 0. Find some computer that has a PCIe slot in it. Just about any one made in the last 4 years or so will do, but make sure it has a lot of clearance to put a big graphics card in it. If you do not know how to plug a graphics card into a computer, go to a site like AnandTech or Hardware Secrets to learn how.

Step 1. Plug one of the video cards in the list below into the computer. Make sure it is the right kind of slot or you will fry it and not be able to make any money.

Step 2. Install Linux on the computer, and run one of the Radeon-optimized Bitcoin miners. If you do not know how to run Linux, try reading a website like Slashdot or Google.

Step 3. Let the computer run a Radeon-optimized miner for a few weeks.

Step 4. Sell the Bitcoins on an exchange. If anything, you should be able to break-even and appreciate your new video card (which you can either sell, or use to play cool games). With careful planning, you should be able to even create steady cash-flow from selling BTC.

First, recognize that using any processor other than an AMD GPU is a complete waste of time and money. Bitcoin mining is a very GPGPU-friendly application and you're really just doing vector math so you do not need a very deep architecture. For whatever reason, AMD's implementation is considerably better for BTC mining and there's upwards of a 5x difference between AMD and NVIDIA GPUs as of May 2011. The rest of your hardware pretty much doesn't matter. You might want to have additional PCIe slots to plug more graphics cards in later on.

There are three factors that make BTC mining hard.

• The cost to mine a single BTC varies wildly per day. This has to do with the way the blocks are calculated. Some days the difficulty is higher than other days. Today's current difficulty is: 1307728
• The price of computer hardware fluctuates often, with the newest generation out-performing last year's best at lower cost
• The 'value' of a Bitcoin varies wildly per day. I am using the value of $5.54 to 1 BTC, a market average found on bitcoinwatch.com

Rather than doing all of the math to calculate my own break-even point, I decided to write a few scripts that will lookup all of the Radeon GPUs on the Bitcoin.it Wiki, along with their approximate M-hash/s. I then cross-referenced each Radeon GPU against a database I created at work that keeps track of computer hardware prices to the minute. The system makes no distinction between memory sizes or brands.

The price of electricty in the U.S. is important, so I've assumed a fixed rate of $0.15 USD per kWh. The price of electricty in your area is probably lower, but its better to assume a higher electrical cost as I have completely ignored the electrical costs to power the rest of the computer.

Last rendered Sun Jan 29 12:00:14 2012 CST

There you have it. With some simple maths I calculate that if I bought a top of the line Radeon GPU, stuck it in a PC in my closet for 429.44 days while mining for BTC, I'd have a break-even on my investment.

Some additional thoughts

These calculations are only estimates, and only reflect averages over long periods of time (multiple months).

NVIDIA