After the original video received 10,000 views, the miner narrating felt it was was time for a follow up.
In February, instead of buying ten thousand bitcoins the miner bought $8,000 USD worth of mining equipment. Three months later, the equipment returned 5,000 BTC so he’s still at this point down 5,000 versus the amount held had he bought bitcoins outright.
With the difficulty at current levels and rising he’s not likely to get anywhere near seeing a positive ROI in terms of BTCs generated. On a U.S. dollar basis, however, the bitcoins generated mean that he has made back (many times over) his investment in the mining rigs. The labor involved was not factored into these ROI estimates however.
By mining, the risk of loss is lessened versus buying bitcoins outright because the mining rigs and their graphics cards still have value for purposes other than for mining. These assets do depreciate significantly, however, and should there be another technology shift similar to the one that made CPU mining unprofitable, the risks to an investment in mining equipment are not insignificant.
Even with the return of 40% level difficulty increases, the BTC/USD exchange rate has been rising even more rapidly thus mining profitability is once again is drawing significant amounts of new capacity to Bitcoin.
The operator of the mining rigs in the video continues to mine solo and has felt the swings due to variance. Some days no blocks were found at all. That risk will likely be the easiest risk to mitigate – by switching to a pool when the time comes.
Written on 13 May 2011.