Report from the Mineshaft - DOGEing Bullets (during a Chinese Fire Drill)

Once again it’s been a tumultuous 24 hours in crypto-land (which is roughly equivalent to perhaps a week of ‘normal’ time). With various unsubstantiated rumors of all Chinese Bitcoin exchanges to be closed by state mandate by Chinese New Year, the markets have responded by taking a tumble, as of now hovering around the $700 mark.

abovethelaw.com_wp-content_uploads_2011_07_chinese-man-angry.jpeg “What the @#$!? Windows 8?”

Of course when Big Boy Bitcoin takes a hit, all of the altcoins feel it, too, their trade value being thoroughly linked. Those recently buying steeply marked up $500 Radeon 7950s on eBay may be feeling the pinch, with ROI rates skewing into unhappy territory, especially for new miners.

But there can and will be exceptions. Sometimes an altcoin value takes off even as Bitcoin is being dumped, often for no easily discernible reason- and if you are somehow able to predict such things, you are making a tidy profit as a trader. But down here in the Mineshaft, the only thing we’re trading are jokes about the last time we saw daylight, and horror stories about power bills. We don’t like to mess around too much with the nitty gritty of the refining and exchange process after we get these cryptos out of the ground. Enter the auto-switching profit pools.

Profit-switching scrypt pools

The first auto-switching profit pool to my knowledge was either Multipool or Middlecoin. Hashcows came online a fair bit later, with Alternatepool bringing up the rear. There are also other pools I have not had any first hand experience with: Switchercoin, Cryptologik, and Tompool. The concept behind all of them is simple to describe and difficult to execute well: calculate the most profitable scrypt-based coin of the moment, switch the pooled mining power to that blockchain, and mine it until another coin proves more profitable. There are quite a number of variables to consider here: difficulty, block time, variance, exchange rate, exchange volume & depth, exchange stability, stale and rejected percentages, pool luck, and a few other sneaky ones that require a keen eye but can generally be classified as “actual return after everything seen and unseen is accounted for”.

Therefore it is something of an art to run a successful pool of this type. And some artists are more successful than others.


So this story ends up being about Middlecoin, which does everything automatically and pays out in pure BTC, and about dogecoin. Middlecoin has been the leader in hashrate out of all these pools for quite some time, recently ramping up to over 4 GH/s- the last doubling in hash power occurring in the past week. In case that doesn’t hit home for you Bitcoin-only miners who are saying “Pft, 4 GH/s? That’s nothing”: Scrypt rates are slower by a factor of one-thousand (-x1000) versus SHA-256. 4 GH/s in scrypt is equivalent to about 5,925 overclocked, undervolted, top-shelf 7950s running at 675 kh/s each, which is a reasonable number for a *stable*non-fire-hazard configuration. Let’s assume each card pulls about 200 watts, that is a lowball figure, and the overall average power cost is somewhere around .11 per kilowatt hour. The pool therefore collectively pulls down a minimum of about $3,128.40 in electricity per 24 hours for the GPUs alone; that is about $94,000 per month. This is a considerable amount of hashpower, not to mention heat. At least the mineshaft is warm, if a bit dark.

(Screengrab of chart created by coinGeek for Middlecoin)

And where does the Middlecoin pool operator point this considerable army of hash? Over the past three days, according to forum reports, apparently to dogecoin. I honestly had no clue what dogecoin was, but it turns out to be hilarious. It’s a coin based on the internet meme of the same name, in truth, pretty much a joke for the sake of the joke. Apparently a meme big enough to spawn a Google easter egg deserves it’s own cryptocurrency! Sure, why not? Dogecoin will produce 100 billion total coins, clearly a ridiculous number. (Wow, such coin.)

Pool hedge fund

The pool operator of Middlecoin, h2odysee, or h2o for short, does not make public his trading strategy, nor what coins the pool hashpower is presently (or even possibly) mining, so the inferences made as to what is actually going on are based on the difficulty numbers that each miner can plainly see and compare with known chains. Someone has suggested that this makes him a sort of “pool fund manager”, probably the first of his kind. This is an interesting concept. Though non-transparent, his performance has been admirable as of late. Just take a look at the chart on The pool generated over one-hundred-fifty (150) bitcoin, and the more amazing part: actually paid almost all of them out. How this was achieved is a bit of a mystery; as was pointed out by someone else, that amount of dogecoin would rather completely tank the market at least according to publically available exchange figures, such as coinedup.

No matter, this operator has delivered, and we look to be on course for another healthy day of profit today, though perhaps not as plump as yesterday, which goes down in my book as the single most profitable day of scrypt mining thus far, given the actual exchange rate of BTC on that day. As someone said: “Straight Epic.” This guy deserves all three of his percent.

Remember also, as I started this article by saying, that this all occurred on the day of the Chinese Fire Drill as regards the exchange price of BTC. Some speculation may be in order here: are the Chinese jumping into dogecoin from the now uncertain Bitcoin? (Such questions. Wow.)

No matter the answer, or the reason behind the meteoric profit rise of dogecoin, the Middlecoining miners are happy. We can afford a steak from the company store, tonight.

Further reports from the Mineshaft

This is the second in a series of reports from the world of Cryptocurrency mining, including ASIC, GPU, FPGA, and Cloud mining. Any coin or development in this realm will be fair game, whether SHA256, Scrypt, Scrypt-Jane, or some algo I haven't even heard of yet. Stay tuned, it's an exciting time to be cracking blocks!

First report: Applecoin

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