Ever wanted to own a box that sits on your floor and makes you money? Now you can.
That is the basic premise behind every cryptocurrency mining machine.
Whether it’s an ASIC like the ones Bitmain makes, or a graphics card mining rig, most people’s goal is to have a box that sits on their floor and makes them money.
Is Bitmain a reliable company to get a mining machine from? Read on to find out…
Bitmain is the premier manufacturer of ASIC mining rigs.
What is an ASIC, you ask?
ASIC stands for Application Specific Integrated Circuit. It’s a machine designed with one purpose: mining cryptocurrency.
Here are several aspects that make ASICs different from a normal computer mining crypto:
This is in direct comparison to GPU mining. GPU mining is basically taking an ordinary computer, putting some fast graphics cards in it and mining away.
Long term, this is a much better/safer option for a number of reasons.
These reasons include the fact that you can mine whatever you want with a GPU mining rig, that you can sell the rig at any time and likely recoup most of your initial investment and that there’s no risk of punishment from the coin founders.
Short answer: A little, but they indulge in very shady business practices. Bitmain has a history of performing actions that damage the cryptos they offer miners for. There is strong evidence that they’ve secretly exceeded 50% of the hashrate on certain coins. They also hurt their own customers.
Theoretically, anyone who controls over 50% of the hashrate of a given crypto has control of that network. They could change the price at will, or alter any of the information on the network. They could then use their majority control of the network to verify the false data. This is very scary.
Beyond that, Bitmain has developed a reputation for treating their own customers poorly.
They’ve done things like promise to only supply one mining unit to one person, or limit the overall supply of miners so everyone gets a fair ROI.
Then, they go back on their word, send multiple miners to the same person and release batch after batch after batch of miners.
They do this to the point that even in ideal circumstances an ASIC miner will often generate only $1 in profit per day.
Sometimes, they even go negative – costing more in power to operate than they generate in revenue.
So the question “Is Bitmain legit?” is misleading. They’re legit in that yes, if you order an ASIC from them, you’ll get one.
However, whether that ASIC will be profitable is another problem entirely.
ASICs start off sounding amazing. $700 a day in profit on the first day. Who wouldn’t want that?
What people don’t factor in is just how fast the difficulty on the crypto network increases as more ASICs join in.
Here’s what ASIC profitability looks like:
The things have a crazy amount of decreasing returns. They’re designed to be used for a few months before being worthless unless you live in an area with very cheap electricity.
To be clear, it *is* possible to make money with them. You can mine enough in the first year to be profitable.
However, it’s key to understand that there are a lot of factors outside of your control that makes that a total risk.
Beyond the complaints of dismal ROI and risk that your ASIC will be worthless within a year, there are other problems.
Let’s say you spent years of your life working hard, making a cryptocurrency.
A manufacturer comes along and threatens to take control of your network. They will also greatly diminish the value of your coin by introducing a huge supply.
As the creator of the coin, do you think you’d be happy? Definitely not.
The teams behind cryptocurrencies have started to fight back against ASICs, announcing that if Bitmain ASICs join their network they’ll fork their coin.
What would happen if they do this? It would render that $2,000+ ASIC sitting on your floor unable to mine, worthless, within thirty seconds.
It’s also possible to patch a cryptocurrency to make it ASIC-resistant. Same result.
That’s not even factoring in my next three points:
You have to bear in mind that ASICs generate cryptocurrency.
Cryptocurrency is traded like a stock. Its price can go up and down. If you’re in a bearish market mining crypto, chances are it’ll be dragged down along with the rest of the market.
Additionally, the ASICs massively increase the supply of cryptocurrency available for a given coin. On a huge market cap coin like Bitcoin this won’t be a problem, but if it’s a smaller coin all this extra supply will make the price plummet.
Finally, there’s the cryptocurrency mining difficulty, the hidden risk nobody thinks of. Cryptocurrency networks react to the strength of the machines mining on them. As the power of the machines grows, so too does the mining difficulty.
Over time (a year or so) this means your ASIC generates less and less and less cryptocurrency to the point where it’s barely paying for its electricity anymore.
The question is, will you have made your money back and generated a profit before your ASIC is worthless?
Unfortunately, the answer is impossible to predict.
Overall, Bitmain does what they say they’re going to do. They supply you with an ASIC.
What they don’t do, and what I feel is irresponsible, is warn you of the countless risks involved that you have absolutely no control over before purchase.
For that reason, I feel that at most they’re 20% legitimate.
Their reputation in the crypto field is awful. Many hate them and by extension anyone using a Bitmain ASIC.
Consider the following:
Does that sound like the kind of company you want to make an investment with?
Will Salisbury is the co-founder of Blockchain Decrypted and full-time cryptocurrency trader. He also hosts the Blockchain Decrypted podcast, and when he's not talking or writing about blockchain technology and cryptos, he likes to play games and relax in his home state of Michigan.
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