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Should I mine Bitcoin?

Should I mine Bitcoin?

So you're just getting into Bitcoin, and you're thinking you'd like to print money. How does mining work, and what does it take to make money burning electricity? Unfortunately, it's a difficult undertaking, and not an easy endeavor to begin without substantial amounts of technical expertise and equipment. In this video, shot in West Pompano I discuss this question and all things Bitcoin.

Transcription

What's up, party people? Chris DeRose here, Community Director of the Counterparty Foundation. Today's question that I wanted to answer is, "Should I mine Bitcoin?" So let's get started. This question, I get it all the time. I think a lot of people are cluing into the Bitcoin phenomenon and are really excited. They want to know where to get started, and the first place it seems to occur to people is in mining. I get that.

There was a time when mining was profitable for individuals. We really like to joke a lot about the pimply-faced teenagers that would show up at some of the conventions, and the early meetings and they just minted themselves a cool million dollars or something. That did happen. There were those people. Unfortunately those days are long gone, and you will not be one of those people quite probably, so the easy answer is probably no, you shouldn't start mining. If you don't like that answer, you could progress to, "Okay well, what does it take to start mining?" Right now, there's a lot of ASIC equipment that they will sell you at various online sales, at the conventions and stuff like that.

Typically, you will be lucky to make your money back with those investments. If you spend $1,000 on the ASIC and $500 the electricity, you'll probably make about $1,400 worth of Bitcoin, maybe a little bit less. That's often what I see. And by the way, your house will get hot, and your girlfriend or your wife will be angry, and on and on and on. It will be uncomfortable to sit there and get typing done because it's actually 10 degrees hotter in your room, all these things. You got to consider that Bitcoin has value for a lot of reasons but because it is a very finely tuned economic function, if you believe in the efficiency of deep markets, what you are saying then is you can come into this environment with very little training, very little insider information, very little institutional knowledge and outperform people that have been doing this for a while.

Bitcoin has value. You see that it does because you've asked a question, how do I get some? To come into a market without that experience it's a lot of hubris. There's a whole science here, there's a lot of math here, and then there's a whole lot of investment and finance here. For people that haven't quite acclimated themselves for all the numbers, they need to. You are going to probably find that in almost every single currency you thought of getting into mining, you would be better off just buying the Bitcoin outright. More efficient providers have been doing this longer than you with more expertise.

The way to make money with mining right now is to have an ASIC designer on staff, is to have the millions of dollars that you need in order to have the energy contracts and the mining locations that are going to be conducive for your own proprietary designs. I don't know where the mining industry is going to go. We have heard a lot of talk about mining centralization. I think these are good things. I think that we will probably or certainly see a consolidation in the number of miners. I don't think that it will be centralized to the point of being inefficiency.

I think that if there is an optimal number of miners, then we will be hitting in the Bitcoin movement, and that certainly is boren to be true thus far. We will see how things shake out over time. I wouldn't be surprised if we start seeing a return to maybe some ASIC designs being licensed. Maybe people who want to start a mine who have the right mentality to do so and the right capital to do so. Maybe licensing designs and then having them printed by various companies or maybe they will get them pre-printed. They would have specialties that are just on the energy consumption side, and specialties on the ASIC manufacturing side.

What is probably more certain is that individuals are going to be priced out of the market as more efficiencies come to bear, and we improve as a Bitcoin sort of society in our actual production of Bitcoin. So that's the jest of it. A lot of people may or may not agree with that. Some people are really into the Altcoin mining, and maybe that's subject of another video. Typically even in the Altcoin mining, what you are doing is you are mining an Altcoin for the sake of buying a Bitcoin yourself. Which begs the question of who the greater fool is in that equation? Might be you.

So we shall see but, again, if you have some questions or you have an opinion, leave a comment below or tweet me on Twitter @DeRoseTech. I love giving you answers and look forward to hearing more of your questions, and subscribe to the channel if you have more. Later, party people. Male: I know you're sitting there farting. Chris: No, I didn't fart that time. Male: Did you fart? Chris: No I didn't fart that time.

I didn't. I felt that was okay. Male: That was great actually. Chris: It was good? Okay. Male: Yeah.