 Welcome to the Daily Decrypt, where I don't need to tell you that it's all about currency competition. I'm your host, Amanda, and today's episode is brought to you by Bank to the Future. There is an undoubted mystique around anybody who can set a computer, a robot, to work mining magic internet money for them while they sleep. And there's even more mystique around someone who's something of a mining boss. Someone who has incentivized other miners to pool their resources to maximize profitability. To find out more about what it means to be a mining boss, we reached out to Steven Sokolowski, who runs with his brother the mining pool ProHashing. We run an altcoin mining pool that switches between the most profitable coins and script mining. We don't actually mine bitcoins, we mine altcoins. So we find about 160 or so script coins and switch between them. And what it did all the way up until November was that we always had an overwhelming number of people who requested payouts and bitcoins, but around that time it started to change and it went from about 90% payouts and bitcoins down to now bitcoins are actually a minority of payouts. So I think that at last lands yesterday it was somewhere around like 48% or so, it might have gone up or down since then, we allowed any coins. So the proportion of bitcoins payouts has gone down. So your proportion of bitcoins payouts to your clients went from 90% in late 2015 to today's 48%, that just happened in like five months? Yes, about that amount of time. Wow. So now tell me about, I'm thinking to myself, what is like a day in the life of a script mining pool operator? Like when did you start ProHashing? We started on December 23rd of 2013 and a day in the life I guess is that my brother is the day-to-day operations, his name is Chris. He'll spend a good portion of his day responding to customer service issues and complaints like payouts didn't execute in a certain coin or things like that. He'll monitor the website, add and remove coins, fix issues that might have happened with some of the servers and then a good portion of this is also adding new features since we allow payouts and new coins and then we have to add exchanges, we have to add those new coins, some of which are different APIs like Ethereum functions quite differently than Bitcoin does, so it took a lot of time to add that. We have a variety of servers that need to be up capped, I can get into that if you're interested in hearing about the architecture of the system. At this point in the interview, I asked Steve how many mining farms he and his brother Chris run and I'll spare you my moment of embarrassment in which Steve explained to me that that's not what a mining pool does. ProHashing doesn't own mining hardware themselves but rather acts as a single aggregation point for miners who would like to pool their resources together. They just point their miners towards the site, they can use to mine a specific coin and if so then they take the penalty because it's not going to be the most profitable or they can choose to mine the most profitable coin in which case we look at the price of that coin at various exchanges after we sold all the blocks that we're waiting on the cell, we look at the difficulty of the coin, we look at other factors like how much hash power is currently directed at the coin, what the orphan rate has been of that coin historically and we come up with a number and then that's how we can determine what the ordering of coins we should assign people is. And it generally comes out to be five or six at any given time that make it into the most profitable category that everyone is mining on? Right now it has been, there's been times when certain coins have become extremely profitable, lower coins for a little while took over most of our mining almost 75% just because I guess nobody else was mining them or their price went up and so sometimes that happens but a lot of the time we're mining a selection of very easy networks and then a difficult network at the bottom for everybody else is like a base coin and that's actually what we call it there's a base coin where a lot of miners are assigned to and at the very lowest that's going to be litecoin because it's the most difficult and then most of our money is made when we see coins that are extremely profitable litecoin right now it's about 2.6 cents I think per mega hash per second sometimes the network will appear that'll be like 80 cents for a minute so we'll sign a lot of miners to that network and then return to mining the lower profitability networks right after that and the vast majority of our money is made during those times of high profitability on those coins we spend most of our time just waiting for that to happen what gave you the idea you and your brother to even start a mining pool like had you heard that it was something that people do or were you like hey what if we can what if we can like pool together the hashing power of other people and then they choose to pay us because we do them the service of selecting the most profitable coins at any given time how did it come about well what happened is that we are in I think mid 2013 or so we bought some GPUs and started mining bitcoins and then bitcoins were no longer mineable with GPUs so we started mining script coins we found this pool called the middle coin pool which is now defunct and the middle coin pool made we estimated millions of dollars because there was a time in I think November or 13 or so when the profitability of light coins was up to the point where we with our GPUs were making $100 a day in in this house alone we made $2,000 just in the course of a month and we thought well if we could make a pool that that could do this we see that the middle point pool made a million dollars then maybe we could make some money too it won't be a million because there's probably going to be a crash but it'll be something and we started our development and one of the main things that we wanted to do that the middle coin pool did not do was to provide more uh more visibility into what our miners were mining so that they were confident they were actually getting paid what they were submitting their shares for because the middle coin pool just told people at the end of the day that you earned a certain amount which could have been construed to some people as dishonest I don't know you know whether they were uh that they were dishonest I'm not making that accusation but there's always in bitcoin these accusations going around that people are scams or dishonest and we thought that there was a market where we could provide a lot of information and that's why on our charts page we provide tons of charts uh to and position ourselves as being the honest pool and hopefully we've managed to accomplish that in some regards and now what kind of capital outlay on your part was required to go from not having a mining pool to hey we are pro hashing the mining pool it wasn't a significant amount of that way I think about $10,000 or so it was all our own money the this is one of the reasons why I've commented on many forms that projects like my kerns lighthouse are may not have been as successful as they could have been because to get involved in a programming company the most important thing is just to start with the talent the servers are pretty inexpensive you know what was my kerns lighthouse precisely it was a crowdfunding system where using bitcoin where you could support new projects and and other things I'm not an expert in all of its features but the but you don't really need a lot of money to get started in something like this you just need to sit down at a computer and start programming and we've probably we have a time sheet we've put in somewhere around I think 9,000 hours or so so the 9,000 hours is significantly more than the $10,000 that we put in in the beginning and so pro hashing is the the full-time venture of you and your brother it's not or is this like a five hours a week kind of maintenance thing oh no it's not five hours a week I well I work at another position right now because the business does not have enough minors yet to be able to support both of us Chris works full-time on this but you know between my two jobs I usually work 70 hours a week and I would say that he probably works 50 or 60 hours so we're not talking about five it's more like 130 or so and so is does it seem feasible to you that with more time and development that pro hashing will be able to support both of you I would hope so I mean it's you know it's hard to make projections but we're certainly aiming towards that and now the the capital outlay in the beginning when y'all started up which was about $10,000 worth you said what what precisely did that go into I mean I guess I mean I guess you need to run a node a full node at least one full node for each of the coins that you mine and and what else did you need to have yes so I can actually send you an image if you're interested to see some of the servers that we have definitely we right now have four servers and there was there's two that are dedicated entirely to daemons we found that the best use of of our money is not to go and buy expensive hardware from Dell and places like that instead to just go and buy used components from from a cheap store like Micro Center which is a computer store that's known for selling very cheap equipment put together standard computers that you could buy as a desktop and then just install daemons on many of these because we have about 160 as I said daemons installed they're split across many of these machines and the daemons are very parallelizable so we can all we need to do to put more daemons on is we could just buy more CPU cores and more memory and and more resources and and so that means if we ever wanted to support more networks that's a very easy thing it doesn't require any more code we just buy more computers and throw money at it will you um will you tell me like what a daemon is uh a daemon is a is a program that connects to a coin network in each coin network will provide its own code like the the bitcoin core daemon is a type of daemon there's a light coin daemon a a nova coin daemon and any number of other daemons and they all do the same basic thing which is to relay blocks lally to mind blocks and so on all right so so so tapping the wisdom of steve if someone were thinking hey that's hella cool what steve does i want to start a mining pool of some kind what would you say would be like the three most valuable things that you have learned or the three most valuable pieces of advice you could have for how to be like steve and chris uh okay three things i would say that well first of all you need to have a lot of time and you can't expect that you're just going to set something up in a few hours and start making a ton of money there's a lot of free pool software out there but the free software is not going to be sufficient it's not programmed well enough to to be able to you know is to scale to that level and to provide the features that would compete with a lot of the other pools that are out there i would say that the money is probably not that much of an issue you don't need to spend the amount of money that we did the that most of that money came after we had already earned some money so it's not like you just have to to come up with a large amount of money and and just start out with with that and the third thing is you need to provide something that is unique to uh to pools we thought that our uniqueness lie lie in being more honest they're trying to be as honest as possible to to provide a lot of data and to be as profitable as possible there's other pools that they try to rely on simplicity or maybe they try to do one coin but if you don't have anything unique about your pool and you just install off-the-shelf software you might make a few bucks but it's going to take a lot more time than it's worth excellent well steve thanks so much for your time so your pro hashing.com and then you blog occasionally is it forum or forums dot pro hashing.com form that pro hashing.com i try to make a post every week or so the next post i'm going to make is about ethereum and what makes it different than bitcoin and why people are so enthused about it and i hope that you'll come and take a look at it excellent excellent well thanks for your time steve and you have yourself a good day thank you you too today's episode is brought to you by bank to the future the online investment platform that invests in the future of finance one of bank to the future's investments was indian payments company unocoin and below you can find a video link that explains the impact they've had with bitcoin in india more information can be found at bank to the future dot com and my a m a my ask me anything is tomorrow or today or last year really depending on when you watch this march the 26th at reddit.com slash r slash the daily decrypt i'm going to tell you not only what three things i traded for three bitcoins in december 2013 and not only what three crypto outlets i wrote for before starting the daily decrypt but also i will tell you how i first heard of bitcoin and who it was who called me up and asked me if i had heard the good word of currency competition all of that awaits you tomorrow march 26th drop by at any time see you then pool mining or contract mining is when you pay somebody else to run and maintain cryptocurrency mining hardware on your behalf to tell us more about how to navigate the exciting seas of contract mining and avoid the scams at the same time i've reached out to charlie who is a researcher and writer at crypto compare you can go and buy a share in their mining operations and hopefully earn a little bit of a profit