December 6, 2013
Yep There’s Gold In Them There Algorithms
Over the last year I have had countless people in the tech world ask about the mining of algorithmic currency. These last months the interest has reached a level that is quite amazing. In one of the last meetings of the algorithmic currency rocket scientists group ( a mastermind group), the dozens of people on the call brought in by two Silicon Valley VCs asked quite a number of questions about the details of algorithmic currency mining and the details of mining rigs. Most of the people on the call have seen specialized ASIC (Application Specific Integrated Circuits) Bitcoin Miners. However, few understood the way Litecoin was mined and what the miners look like.
At one point Bitcoin could be profitably mined on a computer’s CPU and later on using the Graphic’s card (GPU) on the computer but the specific way Bitcoin is mined tilted to the development of ASIC designed specifically for Bitcoin mining.
Litecoin was designed to limit the usefulness of ASICs. There are a few ways ASICs could increase the productivity of Litecoin mining but there are technical limits. The creators of Litecoin saw the Bitcoin mining community was in what is called the arms race to find faster and faster mining rigs. This has the prospect of overly centralizing mining and Bitcoin confirmations into a smaller group then the apparent intention of the Bitcoin creators. Thus Litecoin has tried to address this issue by making the mining of Litecoin profitable enough for smaller operators. I might add that Bitcoin has once again become very profitable to mine for a smaller operation with the right ASICs as the price reaches above the conversion into $1,000.
The Coins Are In The Scrypt
Litecoin is in the place that Bitcoin was about 14 months ago. Thus I am not surprised that during the last call with these VCs there was a tremendous amount of questions about exactly Litecoin is mined.
The import of the Litecoin Scrypt  to hash is rather simple in Python code:
import hashlib import ltc_scrypt # Packaged with litecoin p2pool - https://github.com/coblee/p2pool
hash[::-1].encode(‘hex_codec') # convert from big-endian to little-endian
scrypt = ltc_scrypt.getPoWHash(header_bin)
scrypt[::-1].encode('hex_codec') # convert from big-endian to little-endian
Once decoded this information is sent to the CPU or GPU to hash the block chain. Most miners work in groups called pools and share the hashing and share the resulting coins that are mined. It sounds far more complex then it is in practicality as the software and pooled mining sites do most of the work.
The mining programs are usually run as stand alone process on Linux, PCs and some Macs. The work that Litecoin Scrypt mining puts on the GPUs will result in heat and thus Laptop mining is not a great idea unless the laptop can be very cool and watched closely for the potential of thermal damage. For quite a few years I used an old Macbook for mining Bitcoin and never had any issues.
A serious mining operation should have serious equipment. In the case of the current state of the art in Litecoin mining this is the MSI and Gigabyte 7950, Sapphire Vapor-X video cards. These cards are tuned in the software to run as fast as possible without overheating. It is much like building a nitro hotrod. This of course generates a great deal of heat and the only practical way to work with this is to create an open case that quickly allows for thermal dissipation.
This makes Litecoin mining rigs look like a mixup of a computer parts truck hitting a milk truck. Many of us will use a Milk Crate to contain all of the parts and many have come to lovingly call these systems Hillbilly Mining rigs for their quite distinctive appearance. I get a pass using Hillbilly also as there is some fine Hillbilly linage in me by way of Newark, New Jersey.
Specimen of a Sapphire Vapor-X based Ubuntu operating system Hillbilly mining rig.
I tend to like the Cobalt Blue milk crates as they bring out the blue glows of the Sapphire X cards, a beautiful sight in a room with a view of the setting sun.
This rig can run at about 2000 KH/sec (Kilo Hashes) and will sound quite slow in comparison to ASIC Bitcoin miners that are reaching past 2 TH/sec. However this little guy can dig up about $40 per day (minus ~$1.03 in electric) at current rates of Litecoin to Bitcoin/US Dollars with pooled mining.
Thus a simple Hillbilly mining operation could yield a conservative $14,600 per year if little happens to the price of Litecoin and the difficulty changes follow the current path.
Mining is quite entertaining and a great way to learn the deep intricacies of electronics. Many of my friends in tech and many VCs know either how to code or have a reasonable good idea of the processes involved. These days it is not very common to find people that understand what is really going on in the hardware they code for. Mining for algorithmic currency makes you come face to face with the very essence of the hardware and it is quite liberating.
With all algorithmic currency, even after the last coin is mined, these mining rigs will still be needed to confirm transactions and income will be generated via transaction fees encoded into the blocks. Thus mining will be around as long as people want to trade algorithmic currency. And perhaps quite a number of miners will stay far longer then the Gold Rush of the 1800’s. Mining may become generational.
Like any gold rush, and this is about as close as our epoch has come to the classic 1890’s California gold rush, there are all sort of businesses and interesting people that have materialized. This creates a very colorful environment that is not unlike the old gold rush towns. Today’s stake claims are in the pre orders of ever more powerful ASIC mining rigs for Bitcoin. Bitcoin is quickly becoming very much like the corporate mining that took over the better mining operations in the late 1890s in California. With Litcoin there will always be a wildcat mining culture to some degree and pools of miners working to find the next nugget. These miners assemble from around the world, working a claim and working for their new American Dream.
The past is prologue.
Image of the alliance of miners working a claim in the late 1800’s.