Should You Mine Bitcoin with Everminer?

At MiningDisrupt this week, Bitcoin managed mining hosting provider Cyberian Mine launched a new service for those looking to break into Bitcoin mining. Founder and CEO Max Matrenitski cheekily billed the new service, dubbed Everminer, as “the first-ever zero-watt terahash Bitcoin miner”, and the service promises the neophyte “Bitcoin mining prepaid for life” starting with as little as 1 TH/s of capacity for a one-time payment of $89 USD. What sorcery is this? Is Everminer a good investment? Is it a good way to learn about Bitcoin mining? Below, we provide, you decide.

What Is Everminer?

When you buy an “Everhash” for $89, you get a contract that promises to supply 1 TH/s of hash, mining on F2Pool, with payouts to your F2Pool subaccount, forever. There’s no ongoing charge for hosting and electricity; no need to worry about downtime to repair faulty hardware; and no need to spend more to upgrade hardware over time. Want to scale up? Simply purchase more hash in increments of 1 TH/s. Had enough of the frenetic world of Bitcoin mining? Simply sell your Everhashes and cash out. (Everminer plans to offer a market for users to buy and sell Everhashes on the platform, but currently the only option is to sell your Everhashes back to Everminer for $81 each.)

Experienced miners will immediately spot one potential problem with purchasing a single Everhash: it would take a long time to accumulate enough earnings to make an on-chain payout feasible. As I write, you can expect to earn about 77 sats/TH from an FPPS pool like F2Pool. At that rate, you would have only 28,105 sats at the end of a year—a tiny UTXO that might be completely eaten up by fees were you to try to spend it on-chain. Since F2Pool doesn’t currently offer payouts via Lightning, it’s easy to imagine beginners trying out the service and then being disappointed to learn that their hard-earned sats are stuck in a custodial wallet. In my opinion, Evernote should do more to make this clear to its potential customers.

The good news is that there’s a way to work around this problem. Because both F2Pool and custodial wallet provider Cobo participate in Loop, payments from F2Pool to a Cobo wallet transfer off-chain, without fees. Since Cobo supports the Lightning network, Everminer customers could receive F2Pool payouts to their Cobo wallet and then avoid high on-chain fees by sending them elsewhere using Lightning. The bad news is that the Cobo wallet doesn’t support US users (at least when I tried the Android version), limiting the applicability of this potential solution.

Is Everminer a Scam?

The next question from anyone who has ever been burned by a “lifetime” service (and haven’t we all?) is probably, is Everminer too good to be true? You’re right to be wary, but I think the short answer is, probably not. My take on the offering is that it’s essentially an innovative way to package a bundle of services that beginning miners would need—buying mining hardware, managed hosting services, hardware repair, and scrapping and replacing obsolete hardware—while reducing complexity and risk.

For a pleb like me, the most cost-effective alternative to buying some Everhashes is to buy a relatively-new ASIC miner, like an Antminer S21 Pro, for somewhere around $23/TH, and then send it to a managed hosting provider, who will then charge me somewhere in the range of 7 to 8 cents per kilowatt-hour (kWh) for hosting one or a few miners. The merits of small-scale mining like this aside (it’s fun, but you might well be better off just hodling your bitcoin!), managed hosting is a well-established business that makes money essentially by buying electricity low (perhaps 3 to 4 cents per kWh) and selling it to small miners high (or to medium-size miners somewhere in between).

At root, this is the business that Everminer and Cyberian are in. Everminer can essentially take your $89, and spend $46 (or, likely, less) to buy 2 TH of hardware. Then, with the remaining $43 or so, they can power that 2 TH/s of hash at their relatively low cost, providing half to you and saving the other half for future expenses. Whether all this pencils out to a sustainable service depends, of course, on Everminer’s costs now and in the future. Bitcoin mining is a tough business, and larger, better-funded companies have failed! But, in principle, they aren’t promising something that’s impossible to deliver. Also, to their credit, Everminer does provide some transparency in the form of an on-chain address that holds their “buffer” for future expenses and a watcher link for their F2Pool account.

Will You Get Rich Fast with Everminer?

Probably not. You might not even get rich slowly. But it might not be worse than buying a T-bill or leaving your money in your savings account. And it’s probably better than trying to “beat the stock market”, which is a sure way for most people to get poor!

A natural way for someone like me (an economist who only dabbles in finance) to think about an Everhash is as a slightly-weird version of a consol, which is a bond that you pay for once up front in exchange for periodic payments that you receive forever—or for the life of the party who sold you the consol, whichever comes first. (If you’re very lucky, you may receive payments for hundreds of years.) Since an obvious alternative to getting involved with the dynamic world of Bitcoin mining would be to just hodl the bitcoin you would have spent, I would think about purchasing one Everhash as spending about 144,141 satoshis ($89 at the current bitcoin price of $61,745) to receive 1 TH/s of hashrate in perpetuity.

What is that hashrate worth? Well, as of right now, pools like F2Pool are paying out about 77 sats per day for 1 TH/s of hash. So, let’s assume that I will receive 28,105 sats per year by sending my 1 TH/s to F2Pool. This works out to an annual yield of approximately 28105 / 144141 or about 19.5%. Not bad! Remember, this is my return in terms of bitcoin, not dollars. I will receive this 19.5% on top of any increase in the bitcoin price that I would have received by simply hodling my original 144,141 sats. (Of course, if the price of bitcoin falls, I suffer a concomitant loss with this investment. I’ll assume that you’ve been through at least one bear cycle and already have diamond hands, though.) This is starting to sound like a deal I can’t afford not to take!

Not so fast. So far we’ve made two heroic assumptions:

1. Today’s hashprice of 77 sats/TH will last forever.

2. Everminer will last forever.

Not to be a Debbie Downer, but we might want to consider what happens if those assumptions don’t hold.

What will the hashprice be for the rest of forever? Well, if I had that information, I’d be trading on it! But we can get an idea how reasonable the assumption that it will stay constant is by looking at its history as tracked by the Luxor Hashrate Index. Sadly, as you can see, the long-run trend as measured in BTC is steeply down. (The trend in terms of dollars is not as clear or as steep. But, remember, I’m looking at the rate of return in terms of bitcoin, because we want to know whether we’ll do better putting our hard-stacked bitcoin at risk than we’d do by just hodling it.) Over time, ASICs get more efficient, the hashrate of the Bitcoin network grows, and block rewards get smaller, so each TH/s earns less bitcoin. Looking at the past four years, we can see that the hashprice has fallen by more than 90% (from 820 sats/TH to 79 sats/TH). If that trend continues, our annual yield will rapidly approach zero! Still, we can see that the hashprice spikes up during bull markets (or ordinals mania). So, if you believe that a bull market is right around the corner, and that it will drive hashprice up significantly for the short run, that could put this investment back in the money. Or you might believe that improvements in ASIC efficiency will level off and on-chain fees will increase, easing the downward pressure on hashprice. In short, do your own research.

What about the second assumption? Will Everminer be around forever? With all due respect to Mr. Matrenitski and his staff, that, too, seems overly-optimistic. Even assuming that Cyberian Mine, which has been in the hosting business since 2018, avoids the kind of management errors that have done in other mining companies, there are at least two risks that could create a crisis for them.

First, Cyberian’s web site informs us that they operate “operate multiple mining facilities located in Siberia”. While this is probably great news for their cost of operations, Russia is not known as a paragon of the rule of law. While Cyberian is a German company, that won’t necessarily do them much good if the Russian government decides to tax, outlaw, or expropriate their mining hardware completely. Even in a scenario where, like many Chinese miners in 2021, they are able to relocate their miners to another jurisdiction, both the interruption to their business and the loss of what is likely a favorable hosting arrangement might make it hard to honor their contracts. (Those of us who live in the land of Elizabeth Warren can imagine similar scenarios that might apply to American mining companies. The main point, though, is that Cyberian has all of their eggs in one basket.)

Second, Everminer’s current setup seems to be tightly integrated with, and seems to rely exclusively on, F2Pool. At the very least, an end to that relationship would probably be disruptive for Everminer, and especially for any customers who were patiently stacking sats that were then left stranded in their F2Pool account. F2Pool does support relatively low on-chain payouts of 0.005 BTC, but reaching that threshold would still take a very long time for customers who purchase only a few Everhashes.

While we could model these risks formally, it might make more sense to simply ask yourself, how many years do I expect to receive my hashrate? Combining that with your guess about the hashprice over those years will tell you whether you can expect to increase the size of your bitcoin stack by the time the music stops.

Is Everminer a Good Way to Learn About Bitcoin Mining?

I’ll be the first to admit that many of my Bitcoin-related activities—like pleb mining and running a Lightning node—don’t pencil out as a way to get rich. I spend time and money on them mainly to learn and to support my fellow Bitcoiners. So, what if you just want to spend a few bucks on an Everhash for educational purposes? Will that pay off?

I do think someone absolutely new to Bitcoin would learn a lot by buying a few Everhashes and watching the sats trickle into their wallet. (Hopefully, they wouldn’t learn about getting rugged. Still, at $89, that might be a lesson worth the price.) But I also think there are better ways to get a mining education. For only a little more, you can buy a Bitaxe and have actual mining hardware sitting on your desk, running at 14 watts and delivering about 70% of the hashrate you’d receive with an Everhash. For most of us, that won’t be profitable, but it will be far more educational. You can experiment with using different mining pools, and even try your hand at lottery mining. You might even grow your fleet of mining hardware to include an Apollo II that runs your own mining pool, or heat your house using the ancient but affordable and reliable Antminer S9. If you’re brave, you can even get out your soldering iron and build a Bitaxe yourself! In addition to its educational value, this approach would also do more for Bitcoin decentralization than pointing more hash at F2Pool.

Conclusion

In summary, Everminer might be a reasonable way to dip your toe into the Bitcoin mining waters (especially if you’re able to use Cobo Wallet), and you could even break even or come out ahead on your investment if you’re very lucky. The service could be especially attractive to the “crypto”-inclined who are interested in F2Pool because of its support for merged mining, and I will be especially interested to see how the planned resale market for Everhashes develops. So, I congratulate Mr. Matrenitski and company on putting together an interesting offering, and I wish them luck. But I would urge my fellow Bitcoiners to view this service as, at most, a stepping stone along their path deeper down the proverbial rabbit hole.

Full Disclosure: The author holds bitcoin as a significant share of their portfolio and earns income from Bitcoin mining. The author also received an Everhash as part of a launch promotion for the product. Not investment advice. DYOR.