Coinmine One: Waste of Money or Bitcoin Mining Innovation?
A closer look at the market's first ready-to-go miner.
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We took apart a Coinmine One and talked to CEO Farbood Nivi to get an insider look at the mining gadget taking the cryptocurrency world by storm.
“The whole point of crypto is that there is no guaranteed money anywhere.” – Farbood Nivi
Coinmine is led by Farbood Nivi, CEO and founder, and is based out of Los Angeles. The company is backed by some of the most prominent companies in crypto, including Coinbase Ventures, Social Leverage Capital Fund, and Morgan Creek Digital (Anthony Pompliano’s fund).
The Coinmine One is a do-it-yourself home mining console, similar in size to an Xbox or a desktop computer. The device is designed for the average person to be able to participate in cryptocurrency mining with minimal technical know-how. All you need is the device, a smartphone, and a wi-fi connection. In an exclusive interview with Crypto Briefing, Nivi said of Coinmine:
“We think there are a lot of people who want to participate in crypto beyond just trading. The only semi user-friendly experience has been exchanges, such as Coinbase or Robinhood. We think that part of what has been holding back crypto — and participation in it — is simply the amount of time and difficulty in building crypto hardware.”
Coinmine User Experience
Receiving the Coinmine One was much like getting any new tech gadget. The designers clearly took a page from the playbooks of leading marketing gurus. In fact, the Coinmine One comes in two colors, black or white, and comes in Apple-esque white on black packaging.
The inscription on the cover reads “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.” This line refers to the text included in the code of the initial block (or genesis block ) on the Bitcoin blockchain. Clearly, Coinmine wants the user to experience the excitement and mystique surrounding Bitcoin, its creator Satoshi Nakamoto, and the potential for blockchain (and the average citizen ) to disrupt the established financial system.
Setup could not have been easier. The only thing included with the device is a power cord and an instruction card, which was actually unnecessary, as all that is needed is the ID number to power on and then (after having downloaded the app) press “mine.”
What Exactly Is Coinmine?
The Coinmine One touts itself as an “all-in-one crypto device” that is available to anyone, regardless of their technical ability or crypto knowledge. Nivi explained:
“The purpose of Coinmine is to take the hundreds of hours — literally hundreds of hours — to build and maintain your hardware, software, and wallets for the rest of your life, and make it zero hours. Coinmine is the lowest total cost of ownership by far out there because you have to take your time into calculation.”
The only requirements are a smartphone and Wi-Fi. The Coinmine mines a limited number of cryptocurrencies (for the time being) and stores it in your smartphone app wallet.
Since its launch in Nov. 2018, Coinmine has had a lot of support. A couple of examples are:
— Countergrind (@Countergrind) December 7, 2019
Just set up my new @coinmine & I was mining @grinMW within seconds. Pretty cool to be running a blockchain & participating in the decentralized economy (not just speculating on it ; ). Great work @farbood & team (lucky to be an investor)! pic.twitter.com/Hmsmauj7sQ
— Dustin Rosen (@du_ro) July 2, 2019
There is, however, a lot of negative feedback, especially concerning ROI. When we took on reviewing the Coinmine, much like many in the crypto and blockchain space, we were skeptical. From a break-even standpoint the Coinmine One, with increasing hash rate difficulty and rapidly improving mining technology, may never pay itself back when electricity is taken into account.
Futurism.com published an article stating, “[it might be beautifully-designed — but in practice, without a red-hot crypto market, the Coinmine One is an over-engineered space heater.”
This sentiment can be seen in social media as well:
Do the Math!
Mining 4000 satoshis (.28c) per day.
There's 100,000,000 Satoshis in 1BTC.
How many years would it take to get your $700USD back?
No thanks 😏 https://t.co/O9dzQQIStg
— #xrpcommunity (@xrpcommunity) December 2, 2019
And a little more critical:
But according to Nivi, people are looking at the equation the wrong way. When asked about the obvious concerns of making back the money spent on a Coinmine, Nivi said:
“It’s pretty simple if you want to look at things financially, let’s forget everything about crypto besides the ‘make me money part of it’ — and I’m totally fine with that. If you look at it that way, you have to calculate your time spent as money doing another mining set up.”
Those who are quick to criticize are simply looking at the proposition as money-making or not. The idea behind a Coinmine (or any small-scale mining operation) is the user experience and involvement in the act of mining. If you want to make money, invest in Bitcoin. If you want to “mine” money and aren’t interested in learning the technical skills to build your own mining rig, then maybe a product like Coinmine makes sense.
Making money from mining takes time, in any case. Nivi commented on cryptocurrency investment and the overall technology developing around us today:
“You shouldn’t be doing mining or [be] involved in crypto if you have a high time preference. Crypto and mining are low time preference activities, which means you should be willing to wait one to three years.”
As far as making money, it’s not a simple good vs. bad investment choice. It’s not a “put your money in Bitcoin, or put your money in mining Bitcoin” proposition. He added:
“People get stuck in this day by day profitability calculation… they’re thinking in terms of large mining operations… it’s just two completely different worlds when trying to compare them to each other. Someone who buys a $700 Coinmine — I hope they’re not spending their last $700 on a Coinmine.”
This is an interesting point: If you are only concerned with making a profit, then small scale mining is not for you. However, some of the numbers really are puzzling.
Under the Hood
To gain a better understanding of the device, we took a look inside. The Coinmine One looks like a typical single graphics card, or GPU, cryptocurrency miner.
The main components of the Coinmine One, with respective price estimates based on eBay and Amazon pricing, are as follows:
- AMD RX 580 – $150
- Intel Celeron N series processor – $50
- 8 GB RAM, DDR3 – $50
- 400-watt power supply – $30
- Standard motherboard – $150
In total, the core components without the enclosure and other accessories cost about $430. For the motivated tech-savvy person, it is possible to assemble and learn everything to start mining in under 20 hours, with the added benefit of learning to build a computer.
Plug and Play Speculation
“It’s a plug and play form of speculating on new networks.”
There is another point to consider. Many coins are not immediately available. Nivi said of speculative mining:
“So the day Grin launched which was in January this year, you could start mining Grin on your Coinmine… and when a network is new, you don’t need as powerful a computer to earn the crypto. So [for example] I’ve made like 30-40 Grin on my Coinmine. Now granted, Grin is like a buck something. But at one point it was worth 6 bucks. I’m very bullish on Grin so I think it could be worth a hundred bucks. So if I end up being right in a year from now, I’m going to have about a hundred Grin. And if it’s worth a hundred bucks, I made ten thousand dollars.”
Yet another point to consider is not all cryptocurrency is intended as “money.” From stores of value, like Bitcoin, to on-ramps for exchange, such as Tether, it’s easy to view all projects as a form of currency. When talking about the different crypto categories, Nivi said: “You guys put these things into different buckets. Stop comparing them.” This points out the fact that the nascent technology has yet to be defined.
“Tokens and cryptocurrencies are not super straight forward. People use them both as a fundraising mechanism and then potentially as a utility, or not, so there are a lot of weird permutations,” Nivi said.
The tokenized economy is powering blockchain innovation, especially on platforms like Ethereum. One new project on the horizon is Handshake. In the future, Coinmine will be able to mine Handshake tokens before they are listed on any exchange. When asked about Handshake, Nivi said:
“Handshake is not trying to be a type of money. Nobody thinks you’re ever going to buy a coffee with Handshake.”
But this is where the speculation comes in. Not only is the process of mining a form of active involvement with crypto in general, support for legitimate projects with useful applications can also be encouraged.
“Handshake wants to be a token-operated network. It wants to be like a parallel system for the domain name system that all the websites in the world run on. So it doesn’t want to replace DNS, it wants to have sort of a parallel DNS that can’t be stopped by anybody. It’s decentralized, so you’ll essentially use Handshake tokens to buy and sell Handshake URLs. So you have these token-operated networks where the token is there for the sake of network operation. It’s also there for the sake of the project getting funded.” Nivi said.
The goal in this example is a belief in the usefulness of a project, speculation on the value of the project, and possibly earning an eventual profit.
“It’s really just pure speculation. Like, ‘hey I think Handshake could become popular, it could be one of the de facto ways that the internet runs, I’d like to have some handshake tokens because I think they’re going to increase in value,’” Nivi said.
Our Take on the Numbers
To conclude, the actual hardware is beautifully designed, with neat, futuristic sounds and a sleek, modern appearance. The app itself couldn’t be easier to use, and the interface is clean and straightforward. Customer service was quick to respond and got us through a couple of initial hiccups.
However, after twelve days of continuous mining, we are up to around 40,000 Sats, or about $3 at today’s prices. This is below the minimum 48,000 Sats that should have been mined based on Coinmine’s low range for Bitcoin. When taking into account electricity at a normal residential electricity rate of $0.12 kWh, we barely broke even.
When it comes to trying to make a profit, buying a Coinmine doesn’t make much sense. The Coinmine doesn’t actually mine Bitcoin directly given its inner hardware, even though the product advertises “4,000-5,000” Satoshis per day (0.00004-0.0005 BTC).
The Coinmine instead mines an altcoin, like Ethereum, and then converts it to Bitcoin to generate the rates they advertise. So not only is the user charged a 5% fee, it’s also probable they lose 1-2% in exchange fees as it’s converted. There will be 6.5% interest on coins kept in the Coinmine wallet, starting next year to offset some of this fee.
For the price of three Coinmines, it’s possible to purchase a top of the line Antminer S17, which can easily mine more than 30 times the Bitcoin of a Coinmine One, though it is a tad harder to set up and doesn’t include readily accessible customer support.
You may not care about customer support, however, when you could earn $8 in Bitcoin in a single day, compared to pennies from a Coinmine. If you’re at all profit-motivated, then maybe it’ll give you a reason to figure out the complicated world of cryptocurrency mining and try it out for yourself.
For $700, it’s almost possible to assemble the equivalent of two Coinmine Ones yourself with a little hard work, while dodging the high fees. (This hardware can also be converted to a formidable gaming computer if you get tired of mining.)
An Easy Way to Join the Revolution?
If you are looking to make a quick buck, the Coinmine One is probably not for you. But if you’d like to try your hand at mining on your own, not only will you make more, you’ll also be rewarded with valuable technical know-how.
That said, the return on investment proposition is not really what the Coinmine is about. If you are interested in joining the revolution, learning about mining, and supporting and speculating on projects that you think will be useful, then the Coinmine One is an affordable, no-fuss gadget. You will be able to immediately begin “stacking Sats” and potentially get in on new projects, like Handshake, before they are offered on an exchange. Our test demonstrated that it’s possible to simply power on and start mining (with minimal time spent on setup) and have access to your newly-mined currency in your smartphone app.
Disclaimer: Crypto Briefing received a free Coinmine One for our honest take on the project. Mitchell Moos contributed reporting.