First Mining Payout

Success! 

After 2 months, I've finally reached the 0.50 BTC mining threshold for my first payout! Cloudhashing was prompt with the deposit to my Blockchain wallet where I was then able to transfer most of it to my Coinbase wallet and then convert it into $308 USD.

Here are a few screenshots:

Cloudhashing deposited the mined 0.50 BTC into my Blockchain wallet.

I transferred the Cloudhashing mined Bitcoins from Blockchain to my Coinbase wallet, where I converted it into USD and then deposited it into my personal bank account. 

So there you go, $308.67 - a little over 60% of my initial $500 investment returned in just 2 months!

I'm keeping the other 0.07 BTC, roughly $50 at the time of posting, in my Blockchain wallet to experiment a little with using Bitcoin as currency for Internet purchases. So far, it seems that my options for using them seem somewhat limited as many of the retailers I typically use (eBay, Amazon) do not operate directly in Bitcoin. However, there is a workaround; Gyft does allow payments in Bitcoin to be converted directly into gift cards for many major retailers. eBay is still out of the option, but you can buy Amazon gift cards through Gyft for future purchases. 

This is all still very new to me, so I'm continually looking for more ways to use Bitcoins. If you readers know of any, feel free to post them in the comments section below.

Thoughts and Considerations About Mining

After two months and a successful payout, I have to say that I'm feeling pretty good! I did not expect to recoup so much in so little time, and I'm certainly thankful that the timing worked out so well in my favor.

The Bitcoin movement is indeed exciting, but also frightening. I like to compare it to standing at the ledge of a steep cliff. It's thrilling to be so close and see the spectacular view, but one small slip or one shift of the ground could end up in disaster. Right now, it's a bit like the Internet version of the California Gold Rush.

Complexity

That said, at least in the Gold Rush your stake would pretty much stay the same size. That's simply not true of Bitcoin mining. With Bitcoins, there is only a specific amount that is allowed to be mined over two weeks. The difficulty of the encrypted blocks change in order to maintain this steady quota. 

This is analogous to using your pickaxe against soft clay at first, but as you continue deeper into the mine it turns from soft clay to rock, until you finally strike a wall of solid granite. Worse, all the while, more miners are jumping in, encroaching on your stake, and they have automated drills and high explosives!

I found this out the hard way. At the beginning, I was mining roughly about 0.10 BTC per week. That rapidly slowed down and now I'm lucky if I mine 0.02 BTC per week. That's a five-fold drop in productivity!

If this rate continues, my little 8Gh/s pickaxe will produce nearly zilch (0.0002) by the end of the year. Hopefully the rate of new equipment coming online will slow down, but I'm not counting on it. For now, I'm pretty much reliant on the price of Bitcoins staying near $800 if I'm to receive any sort of profit from my investment. That or play the reinvestment game, buying more and more bandwidth, but at some point, even that won't be able to compete with the major leaguers. 

Hidden Costs

There's also a concern that the electrical cost of mining a Bitcoin will eventually outpace the value of a Bitcoin - This has happened before back in 2011. While individuals mining in the cloud do not see this cost upfront as they would if they had their own hardware, it's a going concern for the businesses that host the hardware. 

The environmental damage related to producing those Bitcoins can also be unpalatable for us environmentally friendly folks. It now takes $15 million USD of electricity to mine a day's worth of Bitcoins. At some point, mining Internet money just doesn't seem so economical anymore. In fact, many people are skipping mining altogether and just purchasing Bitcoins directly.

Miner's Remorse?

That said, do I have buyer's remorse? No, not yet. I've treated this as an experiment and a speculative investment. I had no expectations when I put up the $500. I've learned a lot about the whole process and continue to be wowed by the growth of this little Internet currency. 

Nevertheless, for those looking to walk onto that ledge now, I hope this post reaches you and gives you pause. It's easy to get caught up in the hype and buy on impulse, but you need to be sure that you are willing to possibly lose most or all of your investment. Please weigh in all of the considerations before you purchase a mining contract.

Good luck.