My Experiences With Bitcoin

Mining, gambling, losing it all, and somehow making a profit in the end.

I decided to open a bitcoin wallet in mid-2015, and I just recently closed it after about two years. After my interesting experience, I did end up making a profit, but definitely not in the way I first expected.

Mining

Bitmain Antminer U3

My initial plan was to open a Bitcoin wallet and buy a bitcoin miner. From there, I would make a profit in Bitcoin from the mining and fill up my Bitcoin wallet. I decided to buy the Bitmain Antminer U3, which is the miner in the image to the left. I paid about $60 for it, which was a reasonable price considering that it’s speed (60 GH/s) was reasonably fast at the time.

Of course if you are familiar with Bitcoin mining, you will know that with a speed of 60 GH/s, there would be no hope in making money if I were to mine bitcoin alone (at least not in 2015, when I started). Instead, I joined a mining pool, in which a large group of Bitcoin miners work together and split the profits.

I used my Raspberry Pi to run the bitcoin miner with the pool 24/7, and even then I was only making a laughable amount of bitcoin. My payments from the pool maxed out at about 0.0011 BTC every 10 days. In November of 2015, the value of Bitcoin was about $380, making my income about $1.29 per month. That is chump-change by any standard.

If you used a bitcoin mining profit calculator however, it would tell you that a 60 GH/s miner should make you significantly more than that per month (back then at least). In fact, I used those calculations to justify my purchase of the $60 miner, because it appeared that I could make my money back relatively quickly. Of course, once I was making only $1.29 a month, it seemed that making $60 was virtually impossible. This lower income was due to two factors:

  1. I was never able to sustain 60 GH/s, but instead I would get around 48 GH/s.
  2. After operating for a day or two, my rig would stop operating, requiring me to log into the raspberry pi and restart the miner. This seems to be the fault of the raspberry pi, but I was never able to figure out exactly what caused this issue.

Even still, I kept my mining rig running for long enough to make about 0.039 BTC, which was worth $17 at the time I shut down my rig in April 2016.

Gambling

Once I had the bitcoin in my wallet that I set out to earn through mining, I needed to decide what to do with it. In the world of cryptocurrencies, there are an unlimited number of ways to spend that money online, but I decided that a bitcoin gambling site would be worth a try, especially if I only spent $2 worth of bitcoin.

PrimeDice.com Automated Betting

I put some Bitcoin into a PrimeDice account (which was allowed at the time, but has since been disallowed in the U.S.) and got started right away. PrimeDice has automated betting, as seen to the left. As you can see, there are several settings to change, from bet amount to the “Roll Over” number to the loss and win increase percentages.

Of course I assumed that the house would always have an inherent advantage, as it clearly does in the initial settings where the win chance is 49.50% and the payout is only 2X. However, the user can change the payout and the win chance. For example, a 3X payout corresponds to a 33% win chance, as seen below.

This goes even further, allowing even more aggressive settings like seen here.

The question to me was then what the optimal settings are for automated betting. Of course this is a fantastic question for someone who enjoys programming, so I actually wrote a Python script to simulate millions of games with various settings and plot the results in graphs like this:

Simulation Result Graphs

The project was more for the purpose of learning than anything else, but I did discover that certain settings certainly did have a number of rolls where the median profit maxes out, indicating a possible best time to leave the game. (which you could also argue is before you start the game) However, the graph of the mean account balance after each roll always decreases, meaning that my original assumption was in fact correct; the house does always win in the end.

Exchanging for USD

It doesn’t end there though, because after I had my fun with gambling, I decided I wanted to exchange my Bitcoin for actual dollars. I wanted to do this for a few reasons:

  1. Proof of concept: Many of the people that I talked to about Bitcoin discredited it because they thought it couldn’t be exchanged for “actual money.” I therefore wanted to prove to them the real value of Bitcoin.
  2. Lock in my gains: Bitcoin had risen to about $2,550 per coin, making the bitcoin in my wallet worth around $100. (recall that it was around $17 when I finished mining) After you get a 900% increase, I think its reasonable to sell and lock in the profit.
  3. Say goodbye to Bitcoin: Ultimately, I wanted to get rid of my Bitcoin. I had had my fun, and I wanted move on from the sketchy world of cryptocurrencies (which is the world of Bitcoin in 2017 quite frankly). That isn’t to say that I don’t believe in the future of cryptocurrencies; I certainly see the tremendous potential. I just don’t want to mess with it for the time being.
OnestPay.com

In order to exchange the Bitcoin to USD, I had to find a means of doing so, and the best way I could find was to use a site called OnestPay. This site accepts bitcoin and pays your PayPal in USD after taking a 0.5% commission.

It know it seems sketchy, but the reviews I found many positive reviews online, so I decided to trust it.

Losing It All

Here’s the part that I hate to admit.

I sent them my entire wallet worth of Bitcoin and waited for the email confirmation and the money in my PayPal. Neither came.

I emailed them three times asking for a clarification and they never replied.

It didn’t take me long to realize that I lost my $100 worth of Bitcoin into the abyss of the cryptocurrency web, never to be retrieved.

It isn’t the money that bothers me the most, but the fact that: a. I was scammed and b. I was wrong about Bitcoin.

My whole justification of Bitcoin was the fact that it was easily exchangeable for other currencies, and was thus a legitimate currency itself. While I still fundamentally believe that, my one shot to prove it was blown.

To be fair, I do see the possibility that the unsuccessful exchange was my fault. While OnestPay told me to send an exact amount of Bitcoin to their address, I did send a little bit more than that amount because of a complication with the transfer fee. I’m talking about a 0.01% difference in the amount sent, which I assumed would be fine because:

  1. I was giving them more money than they were requesting
  2. The difference was negligible

Still, they said “exact,” and I was not exact. In this case, I want to take the blame because I still want to believe in Bitcoin and its legitimacy. Still though, its hard not to say I was scammed in that situation.

A Better Way

Whoever’s fault it was, I do now see a much safer and less risky way to exchange Bitcoin for USD, which I wish I saw earlier. I will write about that method in a later post, but just know that using a site like OnestPay is not the way to go.

Step 2: ???

Step 3: Profit

It might not sound possible after losing all of my money to a sketchy website, but I did in fact still make a profit through Bitcoin. How?

Recall that I initially bought a miner for $60.

Even though the speed of that miner (60 GH/s) is now far too slow to be profitable for me, people are still going crazy to buy cryptocurrency miners. The miner that I bought is presently sold out on Amazon, and just a few days ago one sold on Ebay for more than $170.

I decided to auction mine as well, which I assume will sell for a similar price, given that it is halfway through the auction and already at a price of $110, almost double what I paid for the miner initially.

After losing all of my Bitcoin by sending it to sketchy website, I am more than glad to see my miner go. Not only does selling my miner allow me to redeem myself from that loss of money, but it also allows me to be entirely free from the complex, sketchy world of Bitcoin that I came to know, where transparency and accountability was entirely non-existent.

What I Gained

While I did make a profit on selling my miner, the profit was not the ultimate goal of my Bitcoin adventure. If I just wanted profit, I would have bought some Bitcoin back when it was $380, and sold it now at $2,500 per coin, which would make much more profit then what I made from the miner.

Ultimately, I gained a wide range of experiences, teaching me how to set up a bitcoin miner and keep it running, how to store and send Bitcoin, how to write useful simulators, how to sell items online, and even how to get scammed online.

But most importantly, I became familiar with the world of cryptocurrency.

I still truly believe that cryptocurrencies are the future. In fact, with the money I get from selling my bitcoin miner, I plan to buy other emerging cryptocurrencies, such as Ether and LiteCoin.

Losing my Bitcoin once certainly didn’t scare me away from cryptocurrencies entirely. What it did do however was teach me how not to lose it again.


Top image credit of Michael Wuensch from pixabay.com