SKZ - Episode 5 - Bitcoin Mining Handbook Review

Episode Date: May 10, 2023

In this episode I share my thoughts on the Bitcoin Mining Handbook by Daniel Frumkin and Braiins Insights. This short book is a really useful resource for understanding how mining works and/or planning out how to profitably mine for yourself. I describe each of the three chapters: Bitcoin Mining Basics, Mining Software, and Mining Business.

Hey everybody. My name is Joe. This is episode five of the SKZ podcast. Today I'm bringing you another book review. This is a more recent book from 2022. It's called Bitcoin Mining Handbook. It's by Daniel Frumkin. That's who wrote it. There's also several other contributors all part of Brains. B-R-A-I-I-N-S. And Brains is really big on pushing or promoting stratum v2, which is a new protocol they came up with. that basically it helps add some more decentralization to the mining process, where it takes power out of the mining pool operator and puts it in the hands of individual miners. Now, if you're not very familiar with Bitcoin mining, even that kind of explanation might not make a lot of sense, but that's why this is a really valuable book.

It helps get into kind of the mechanics of mining, the kind of the software side of things, and the business side of things and just how mining actually really works, right? Now, I had also, as we talked about last time, reviewed Andreas Antonopoulos's book, Mastering Bitcoin. I think that gives a really good overview of mining along with several other things. This is a book that's about 100 pages long, and it's just focused on mining, right? So it's really helpful if you want to take a deep dive on really understanding mining. There's a lot of helpful figures, charts and graphs, things like,

that to help kind of explain what's going on. And yeah, I would say the book is structured really well too. It has three sections, each are, you know, around 30 pages long. First is the Bitcoin mining basics. Now this is where it does a lot of kind of dispelling some of the basic fud things, right, and just giving you a basic explanation of how Bitcoin mining works, explaining how it's not this meme of like solving complex math problems that people always say it's really just doing trial and error to try to get below a certain number that's decided by the difficulty adjustment but really doing trial and error because there's no way to know what the output is from the input right so that's why there's these machines that are just doing input input input input input all over over and over

and over again that's what basically hashing is and yeah it kind of explains that process and just helps you understand what that process is, why proof of work or kind of that process is important versus other protocols like proof of stake, things like that. And explaining the difference between nodes and minors, kind of how it's important that those are distinct and that the verification is separate from the actual production of the blocks. And kind of dispelling some thought about like a 51% attack, just how infeasible it would be. you know, economically. So that's a really helpful chapter,

and I think that could be a good place to direct someone who is curious about some of these questions about mining, right, of what it even is, why do we need mining, why can we just do proof of stake, or someone who doesn't understand how Bitcoin is even produced, and, you know, I gave an example last time, it was like, my dad doesn't understand Bitcoin, he thinks like, okay, why can't I just copy and paste Bitcoin,

you know, if it's in my wallet or whatever, if it's digital. So just understanding mining at the basic level can help explain some of those things to people who are new to Bitcoin. And if you're someone who's more familiar with Bitcoin, I would say it's still helpful to read, of course, but probably won't be anything revolutionary for you in that first kind of section. The next section talks about mining software. And some of this is, I will say, okay, so second section is mining software. Third section is mining business. And both of these are really the types of things that I'm someone who is not a minor, I will admit.

I haven't really made that kind of capital investment, right? But I think that in the future I would like to get into mining just to, you know, add some more decentralization to the hash rate, get some non-KYC sats, things like that. There's a lot of benefits to mining. But I will say reading this book can help you kind of dip your toes. in, which is kind of what I was doing, right? Like I said, I'm not a minor. But just understand, like, what it would look like to start mining, to become a minor,

and kind of get rid of some of that fear that you might have of just the things that don't make sense about it. And, yeah, so talking about, like, the software, they do some, they talk about some specific things that people do to increase efficiency of their A6, like auto-tuning and overclocking. So it's a helpful section. And they also, just to talk about stratum v2 for kind of the second half of this chapter, they explain what hash rate robbery is and how that can happen and basically how stratum v2

would help prevent that, right? So it's really helpful to read that if you're interested in kind of what stratum v2 is, if you've heard about that and want to learn more. And just to get the full understanding of why it's important for, of course, you know, in Bitcoin, We always talk about decentralization and why it's important to further decentralize the mining process to take power out of the hands of people who are operating mining pools and actually put it back into the individual miners. And that's one thing that I found really interesting. I'm sure they kind of explain it in this book. Like I know they do because I read it.

But it was actually in a podcast before this book on Citadel Dispatch. Like I listened to an older episode talking about mining. And again, this goes back to what I said in the last book review, but don't be afraid to go back in time, read some old Bitcoin books, or listen to some Bitcoin podcasts from 2017, 2018, or earlier, right? There's no reason not to because Bitcoin is very consistent over time, right? There's obviously different things going on in the world, you know, different current events that often are related to Bitcoin tangentially or that people kind of link to Bitcoin. or explain Bitcoin fixes this problem with central banking, whatever it may be. But I think it's important to go back to the basics because, like, you know, Bitcoin doesn't change over time.

So you can listen to something from a long time ago. And it's basically the same principles from a long time ago. There might be new A6, new machines, things like that. But there's no reason not to go back. Listen to the old stuff. But anyways, bring it back to the book review. Yeah, I think this was something that I learned from a podcast, but it's also something you'll learn from the book that really the way mining works.

is there's of course people like riot and different you know publicly traded miners that have these huge mining rigs that are you know in these huge warehouses watching um on what bitcoin does channel peter recormack's recent uh documentary on mining is actually really helpful kind of see how some of this infrastructure looks and how it works um but at the same time and you can also see this in that documentary there is a lot there are a lot of people who just do home mining, right? The documentary shows someone who uses mining just to heat their pool, which I think is really cool. I'd love to do that in the future. Or people that are just doing it in their garage, you know, different things like that. And a lot of mining is just home miners. And that's great, right, because that is decentralized. If the government wants to shut down riot blockchain, then they could probably, I mean, I still don't think it would be easy or whatever. There would be a lot of pushback, but it would be a lot easier to do that because it's kind of a central point of failure versus all these different home miners, right, across the world.

Like, then if there's all these home miners, there's no way for governments to really shut down every single thing, just like it's really hard to shut down every single node. Now, of course, the investment to become a minor is a lot more than a node. A node you just had to download the node software and, you know, do the initial block download from the beginning of the blockchain, and it takes, you know, a day or whatever. maybe 48 hours. Miner, it's a big investment, right? But people who are getting more into Bitcoin,

maybe you've made some money off Bitcoin, right? Might want to invest in mining just for the decentralization. And also eventually, if you're, this is where he gets into the third chapter, right, of the mining business, eventually it should pay itself off if you are, you know, mining in a way where it's efficient and if you have access to cheap electricity, right? that's not going to be true for everyone it might never be super profitable but it's the type

of thing where it's it is a long-term investment right you're not going to buy a miner for however many thousand dollars and get it paid back in a year or whatever right it's something where you're really doing it because you're all in on bitcoin and you just see the value of that decentralization of the hash rate see the value of the fact that when you get sats from mining then uh those are non-KYC you don't have to buy it on Coinbase or whatever, right? And there's other ways to get non-KYC, but there's benefits to mining that are outside of it just being purely profitable. But there are, of course, I mean, people wouldn't do it if there weren't ways for it to be profitable. But yeah, they, I talked about the software chapter. The third chapter,

like I just introduced, really gets into how to calculate mining profitability, what different kind of profiles are of different miners, right? There is, they talk about the investor, the entrepreneur, the prospector. So these are different almost like levels of, if you're really just trying to get the profit, or if you're someone who's like, hey, I really like Bitcoin and are an enthusiast and want to do it, but still want to do it the right way, right? So kind of explaining some of those different categories are helpful just to consider where you're at if you're interested in mining. and yeah just thinking about the different ways to make mining more profitable like how to use the heat for other productive sources things like that so yeah that's the last chapter in the book and i would say all three chapters goes from mining basics kind of dispelling some of that basic thud explaining mining software and explaining the mining business

all those are really helpful in their own right and it's a really short read right so last time i talked about i use reader to read and you can put a basically like PDF or probably other documents in there and it and it's free right there's paid versions that have like better voices and stuff like that but you can do a free version of natural reader and it's just that you know a browser extension or you can probably get an app things like that and it'll just read the PDF for you and if you do it on three-time speed which you can work yourself up to it even if you're not someone who typically does that but if you're interested in just learning something quick it's really you know if you want to start reading faster you can go up to 2 go to 2.5 build build your way up to 3 maybe

even more with different apps I don't know but yeah anyways go to three times speed you can read this in under an hour that's what I did and it's if you're able to do that like I've said with doing these book reviews right it's actually really easy to read a lot about Bitcoin or about any topic that you're interested in right? I've actually been doing it. One of my earlier episodes was about Dune. I'm currently on the fifth Dune book. And what I do is I check the book out of the library, get the audio book of it, listen to it on three times speed, and follow along in the book. And sure, you know, I'm not like deeply processing every single line. But if you think about it, like if you go, if you are reading a

book and you think, okay, what did this person say like 10 pages ago? You don't really remember exactly what they said, right? So you're trying to get the gist of what. what's going on. So maybe I can give you the most detailed analysis of something that I'm reading at three times speed. But you can really learn a lot that way and learn quickly. Or just, you know, learn a new story, right? Dune isn't something I'm like learning about a certain topic that's going to be really

profitable for me or whatever. But like, it's just interesting to read. So anyways, that's a little advertisement, quote unquote, not really, not sponsored. But for a natural reader, this free app that's really helpful. helpful and just encouraging you to read more books. This one's a newer one, but like I said, it's really helpful to go back to older podcasts, older books, things like that because you know, a lot of these principles of Bitcoin stay consistent over time and mining is one of those.

There's new machines that come out and things like that, but the basic kind of premise of how to calculate profitability, things like that, like that's not really going to change over time. So I think this book will be helpful for, you know, decades to come. And I love stuff like that. I love that about this space that we're in. So, yeah, as always, hope that you enjoyed this episode. And if you're listening on Fountain, feel free to stream me some stats,

send me some stats. There's no requirement to do that. But it's just, you know, a really cool thing that you can give that value for value to podcasters, things like that. And I hope you get some value out of this. I mean, if there's any other books you want me to review, I'd love to read more books about Bitcoin or anything, you know, really into psychology, philosophy, video games, fiction now. You know, I'm reading Dune, like I said.

So there's just a lot of things that you can learn out there in the world. And I think books are a great way to do that. And ever since I've started reading things on three times beat, it's just like fun to be able to finish something pretty quickly that in the, in the, in the, the, past would have felt daunting, right? This is something I've started doing in 23, so before that I didn't read quite as often. But yeah, I'm looking forward to learning more and looking forward to just sharing what I learned with whoever's listening. So thanks so much for listening and have a great rest of your day.