Last month, I shared the experience I’ve had mining Bitcoin alternatives, such as Litecoin and its various competitors, through a couple of custom computer systems that each have five graphics cards in them each. In early January, purchasing the two rigs at $4,900 each seemed liked a perfectly reasonable investment. I estimated that I would break-even on them in under six months, but I hadn’t anticipated a few critical factors that have effectively put an end to my crypto-currency mining endeavor.

The first issue I began to run up against last month was the weather. I had my two mining rigs in a storage room that connected to our garage. They received a steady stream of cool air from the Garage, but as soon as outside temperatures began to hit 40-50 degrees, it became much more difficult to keep the graphics cards running cool. The Radeon R290 graphics cards that powered the machines run extremely hot (85C or 180F), so it’s important to have really good airflow and relatively cool room temperatures. I had a semi-workable solution by putting the rigs in separate rooms, but that likely would have stopped working by the time summer hit.

The second issue I ran into was a hardware failure. It appears that a capacitor had blown in one of the rig’s power supplies. As a result, it was out of commission. Fortunately, the rig’s manufacturer stood behind it and offered to repair it for free. Since it likely wouldn’t have been sustainable to keep running the rig into the summer, I asked the manufacturer if he’d simply resell the rig for me on eBay after he had repaired it. I ended up taking about a $1,000 loss on the hardware in that rig, but it had made more than that in the time period I had run the rig, so it wasn’t that big of a deal.

The third issue that’s plaguing the other rig that I’m currently running is that the economics of mining alternative crypto-currencies has changed significantly. I wasn’t the only person that had the idea to build computer systems specifically designed for mining alternative crypto-currencies. In fact, AMD had an extremely difficult time keeping its R9 series graphics cards in stock for this reason. Because of the massive increase in hashing power being targeted at alternative crypto-currencies, the exchange rate between those currencies and Bitcoin have fallen significantly. Additionally, the price of Bitcoin is now down about 60% from its peak, as a result of international regulatory issues, supply and demand and a technical scare known as the transaction malleability bug. The profitability of mining alternative crypto-currencies is now about 25% of what it was during the month of January. Ouch.

I still have one rig running at about 4.5 MHs. Although, I can’t say that I’m entirely sure why. That rig is only on track to make somewhere between $200 and $250.00 this month. I’ll probably shut it down during the next few weeks and sell it or see if I can repurpose it to mine a crypto-currency based on the Scrypt-N or Scrypt-Jane algorithm. Coins based on those algorithms will be more resistant to the Scrypt ASICs that are coming on the market in the near future and may offer some hope of profitability for graphics cards-based mining rigs such as mine.

Here’s how the raw numbers have played out to this point:

Hardware Costs: $9,750

Power Costs: ~$700

USD Earned by Selling Bitcoin: ~$4,500

Sale of Mining Rig #1: $3,750

Current Net Loss: $2,200

Of course, I still have a rig with five R9 290 graphics cards in them that I could resell, so I’m probably at a net positive of about $1,000 or $1,500 when you would consider the value of that rig. Granted, this project has been pretty much a total failure when you consider the amount of time I’ve put into setting up these specialized mining systems, maintaining them, researching crypto-currencies, writing software to mine the most profitable coins, etc. It’s been a learning experience though, so, there’s that. You win some, you lose some.