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Apr 05

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make money with bitcoins

Bitcoins have been in the news a lot recently.  Bitcoin mining, shorting bitcoins, and speculation on bitcoin value.  Whether you think that bitcoins are the answer to all the world’s financial problems or a terrible idea and doomed to crash, here are some ideas for profiting on the cryptocurrency

Notice

I’m not saying any of the following are a good idea, but the concept is fascinating.

bitcoin-5ghs-asic-miner1) buy and sell mining rigs

Avalon and Butterfly Labs are the two main providers of dedicated bitcoin mining appliances.  Go ahead and search ebay to see the mark up on preorders.  These machines are application-specific integrated circuits (ASIC) and can calculate in the gigahashes per second (GH/s) instead of the megahashes per second (MH/s) that GPU (or CPU) mining delivers.  Additionally, they require less power.  You can use an online bitcoin calculator to project profitability.  There are two options here.  Buy and use the rig … or buy the preorder and try to sell it before it even arrives.

2) sell the coins for cash

bitcoin-cashOne of the draws to this alternative currency system is anonymity.  There have been several articles published on purchasing illegal goods with bitcoin.  While not endorsing this use, there certainly is a niche for selling your bitcoins for cash locally (usually in a public place) and these currency exchangers often are able to charge a “convenience” fee on top of the going rate for bitcoins.

3) create live cd/usb for mining with pretty interface for mining

bitcoin-usbIf you are a linux person, installing cgminer is a breeze.  Many miners feel trapped by the less efficient GUI miner for Windows.  There is probably a small market for CPU/GPU mining on a usb-bootable mining distribution.

4) set up mining rig and sell shares/contracts

If you’re trying to offset the cost of an expensive ASIC rig, run the hardware and sell shares of it to your friends just like a public company would.  Some people may also be willing to commit to buying a certain number of bitcoins each month at a predefined price.  Airlines do this with jet fuel to decrease the variability of their costs.

5) build a mining machine

There are many ways to do this, but the main ones are as follows

CPU – This is the least likely scenario to become profitable unless you already have access to a very large array of machines and are not paying for the increased power usage.  If the aforementioned is true, you likely do not have the authority to use the machines in this way (ie: you run your university’s computer labs).

bitcoin-dual-7990GPU – Graphics cards are faster than CPUs as the operations are relatively simple.  ATI/AMD cards tend to be more cost efficient.  For now, most start or stay here.  If the price of bitcoins drops, it may become more expensive to keep the cards powered on than your mining income.  If bitcoins fail, you’ll likely be able to see these high end graphics cards to gamers so there is at least some residual value.

ASIC – The computations are so simple that dedicated, low wattage, integrated circuits created in large numbers to perform the specialized task of mining bitcoins.  If the price of bitcoins drops, there will be likely be fewer GPU miners so there is some inherent protection there.  If someone comes up with a more efficient system or if bitcoins fail, there may be no alternative use for these machines.

6) create a bitcoin marketplace

If you sell a product or service, offer to allow customers to pay you in bitcoin.  You’ll reach an audience that might have been overlooked before.  If you have an especially techy following to begin with, see if your readers are interested in donating coins to you in support.

7) buy and sell ATI/AMD video cards

bitcoin-many-gpuAs the perceived valve of bitcoins increases, more people will be interested in creating low cost mining rigs.  Right now while ASIC are more efficient, GPU mining has a smaller barrier to entry.  Prices of efficient mining graphics cards has gone up on ebay but you can often buy them locally and then sell them to a wider audience online.

8) trade AMD

If you believe that GPU mining still has legs, the high-end graphics cards are made almost exclusively by Advanced Micro Devices (AMD) which is a publicly traded company.  There are even options contracts available.

9) short bitcoins

Do you think this is similar to the sub-prime mortgage bubble and want to be on the other side of the trade (betting they will go down in valve)?  No worries, you can short bitcoins either through a (quite small) derivatives market.

10) create a mining pool

Bitcoin mining pools decrease the variability of payout by splitting the work and reward between many miners.  Most pools keep a small percentage for themselves.  If you can create a better pool and gain a following, there is certainly money to be made.  Here is a comparison of current mining pools.

11) create alternate use for ASIC mining machines

Eventually around 21 million bitcoins will be in circulation.  At that point there may be hundreds or thousands of ASIC machines that are very good at hashing but have no other purpose.  If you can create a purpose for them, you’ll be well compensated for recycling since their value will otherwise be zero.

bitcoin bfl 1500ghs12) create a better ASIC

You know THE rule about money right?  She who has the money makes the rules.  If you can get the capital together and have the engineering know-how to create a better ASIC miner, you can sell it online, even preorder, for crazy amounts.

13) spend bitcoins

This one is counter intuitive.  In 2011, many people in the US purchased one dollar coins from the US treasury on their credit cards only to cash them in at face value upon arrival.  Shipping was free so you could use your favorite cash back card and keep the difference.  The downside is that the coins never got into circulation.  If you want to make money off bitcoins, they need to be an accepted currency – which means that a few efficient miners cannot horde them all.  They need to be used in transactions.

If you want to see (or hear) transactions happening, check out listentobitcoin.com.

Conclusion

I’ll get back to gentoo in the next post and will have an upcoming article on installing and using cgminer on gentoo (really easy).  As usual, thanks for reading and leave me a comment below.


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  • JasonD

    ASICs have a purpose after year 2140 (Which is when the “last coin” will be mined.) As if the hardware will still be running at that time…
    You ALSO get paid for “each transaction”, not just for mining coins. Mining is simply a bonus to the process, which was to jump-start the initial launch. Which it has done perfectly. They once earned 50BTC per discovery, now they only earn 25BTC in the next four years, and following that, only 12.5BTC for the next four years…
    However, transactions constantly grow. (flow of money = more payments) This is why GPU mining will NOT die, and ASICs will NOT smother anything. ASICs will just spend more time “down”, not processing anything, because everything will be processed by the thousands and thousands of GPU’s already in place. Even if they are faster, they will do nothing, ten times faster than the GPUs. It is “quantity” of machines, not speed, that makes the money. CPUs just didn’t have speed or volume, so they lost. ASICs have speed, but no volume. (Not for now. They will eventually replace GPUs, but only at a rate that is equivalent to the replacement values. If they DID enter the market fast, they would kill their own future upon release. They would know that if they had an actual economic advisor, which they don’t. SO ASICs will be going out of business or breaking even, in the end.)

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