I let my trust in Ethereum slip temporarily, and it cost me $100k

It was spring 2016 when I met for a beer with a colleague from work. We discussed the world of mining cryptocurrencies —a whole new world that would consume the majority of my free time. This friend had been running a dozen GPUs mining Ethereum and other alt coins. The idea of passive income intrigued me immediately and I became obsessed.

For those who are unfamiliar with PoW (Proof of Work) mining, I will try to sum it up in a few quick points.

• Specially built computers have several graphics cards, (or GPUs) which work to solve cryptographic puzzles based on a hash algorithm.
• If a computer is able to solve the puzzle before the others on the network, and the solution hash matches that of the current target, then they publish this ‘block’ to the network.
• Other nodes on the network will validate against this block and add it to their own copy of the blockchain.
• The miner that solved the puzzle and published this block to the network will receive a reward in the form of cryptocurrency. (Which cryptocurrency depends on what they are mining)

This is a very simplified explanation of PoW mining, but I feel like it is sufficient enough for this post.

After a couple months of research into the space, hundreds of hours of reading blog posts from other miners, and continuous internal debate whether or not to pursue this venture — I decided I was going to dive in head first.

Initially I purchased 6 GPUs and the associated parts to build my first mining rig. The process of building it was quite fun, although frustrating at times, I learned a lot. When it was all said and done, I had my first mining rig up and running, and I was mining Ethereum. This is what that rig looked like — I named it Winterberry.

After the successful build of rig #1, I purchased 18 more GPUs and the associated parts to build a total of 4 mining rigs. With an all in price tag of $10k this was a considerable investment, so I needed to get to work to ensure my ROI in a timely matter.

After a couple weeks of picking away, I had all 4 mining rigs set up and running. Attempting to run 6 GPUs per computer lead to a whirlwind of issues that would cause the computers to crash quite frequently.

Restarting and tweaking these computers every other day was not the idea I had in mind when I embarked on this journey. The passive income, was not so passive.

There was no simple fix for this. Not to mention, by this time I was just as knowledgable, if not more knowledgeable, than the one or two other people that I knew in the crypto mining scene. So I turned to online forums and trial and error. After dozens of late nights and hundreds of hours, I had stabilized all of the mining rigs. They would run all day, every day. If issues arose the computers would restart and pick back up where they left off. Aside from the significant temperature increase in my condo, things were going well.

I was eager to get rich quick. From time to time I would switch the computers to mine other up and coming alt coins, such as ZCash. Eventually I settled on Ethereum as the one I would stick with.

Things were going well. The miners were stable and I was mining 1 ETH every couple of days.

Fast forward 3 months. Obviously running supercomputers 24/7 was going to lead to a significant increase in my power bill, but due to the lack of smart metering technology it was up to us to submit our power meter read every month. Something I had not been doing. Whoops. So you can imagine how wide my eyes opened when I got hit with my first $830 power bill. Ouch.

At this time I was just finishing my first year at a full time job coming out of university. I was making real money, and spending said money just as quick. I had just purchased a new downtown warehouse condo and I was going out on weekends living it up as a young single in the booming metropolis of Regina, Saskatchewan.

By now you’ve probably guessed where this is going. Since the computers were the reason that I had this beast of a power bill, I figured I would sell some of the crypto that I had been mining to cover the costs. The price of ETH hadn’t been doing anything crazy exciting since I had got involved, so I didn’t think much of selling some off to straighten out my financial situation.

I sold a total of 104 ETH for an average price of $15.25

This was the first time I cashed in from my crypto mining adventures. The $1,600 I made went towards my power bill, as well as paying off some other debts I had from travelling and being a young, dumb kid throughout the summer. At the current time of writing this ETH is trading at $970 CAD.

In today’s dollars, that power bill cost me $100,880

Since realizing how much this rash decision ended up costing me, I have considered all the other ways I could have covered the small amount of debt I had accumulated at the time. I could have…

• Put the debt on my credit card and carried it for a month or two
• Utilized my line of credit
• Sold a couple of my 7 bluetooth speakers that I have acquired over the years of Christmas gift exchanges
• Stayed in for a couple weekends and saved up the cash that would have been otherwise been spent foolishly.

But no, instead I sold my precious ETH because I lost touch of the true underlying value and potential that the tech held. Since I first became interested in Ethereum the price never deviated far from the range of $5.00 — $20.00. As a result I was impatient and I made a decision that down the road I would regret. A lot.

Looking back, that decision paid for my power bill and helped cover some of the costs for a trip to Pemberton music festival. Was it worth it? No. But I did learn two very important lessons…

1. Investing in my future financial security is far more important that eating out, getting drunk, and spending my discretionary income foolishly.
2. New tech, no matter how groundbreaking it may be, is slow to adopt and one needs to practice patience!

I have finally accepted the fact that there was no way for me to predict just how much the crypto market would explode, and like we’ve been told by our parents time and time again, hindsight is always 20/20. The most important lesson that I will take from this experience is that if you wholeheartedly believe in something — stick with it until the end. Don’t let short term activity (or inactivity) cloud your vision and lead you to making rash, illogical decisions. Good things take time.

Currently, I am waiting to board my flight to Hawaii for a well deserved getaway, so things could definitely be worse. 🤙🏼

Andrew