People Are Slinging Overpriced Ethereum Rigs on Craigslist

People Are Slinging Overpriced Ethereum Rigs on Craigslist

Written by Daniel Oberhaus / Courtesy of Vice

Like selling pickaxes during a gold rush.

During the California gold rush in the late 19th century, some of the most successful prospectors were not the miners actually hunting for gold, but the businessmen selling mining tools. Most people wouldn’t think that hocking canvas pants is the path to millions when there’s gold to be found, but I doubt that Levi Strauss would care what you think.

Today there is a new mining boom underway, but these 21st century miners are searching for computer code, not gold. Just like its 19th century predecessor, the cryptocurrency rush also has its fair share of pickaxe merchants looking to cash in on the boom by selling would-be miners the supplies they need to start extracting cryptocurrency from a network. This is most obvious on sites like Craigslist or Ebay, where people are making bank by selling computer mining rigs for several thousand dollars above retail value.

Like selling pickaxes during a gold rush.

“We can’t build the rigs fast enough. I get more calls then we can handle right now.”

Once upon a time, anyone could’ve used their personal PC to mine for bitcoin, a process that involves finding solutions to cryptographic hashing problems. But bitcoin quickly succumbed to economies of scale and now it’s basically only possible to profitably mine bitcoin using expensive, special-made hardware in giant Chinese bitcoin mines. But newer cryptocurrencies—sometimes called altcoins—like Ethereum, Litecoin, or Zcash can all be profitably mined using off-the-shelf gaming hardware and free open-source software. All you need is a handful of graphics processing units (GPUs), a working motherboard and a little bit of PC-building knowhow.

The problem is that the great cryptocurrency rush of 2017 has made the crucial ingredient for Ethereum mining—GPUs—incredibly hard to find. This has prompted a number of seasoned cryptominers to start selling ready-made rigs online, often for thousands of dollars above the market value of their constituent hardware. But according to Scott McCarthy, the CEO of SMS IT Group, a Los Angeles-based IT consultancy that also sells mining rigs on the side, the price doesn’t seem to be a deterrent.

“We can’t build the rigs fast enough,” McCarthy told me. “I get more calls then we can handle right now. We will take a deposit but tell the customers they have to wait up to three weeks before we can deliver. I got over 20 calls this past weekend from people looking to buy a rig or take training classes.”

The six-GPU rigs sold by McCarthy cost $3,755 and use Radeon RX 580 graphics cards. Before the cryptorush, these GPUs cost about $250 a pop and a six-GPU rig could’ve easily been built for under $2000. While $3,755 might seem high for a mining rig considering its components, McCarthy’s actually offering one of the better rig deals on the web. It’s not uncommon to see used mining rigs selling for $4000 or above.

A $6,999 mining rig on Ebay. Image: Ebay

A $6,999 mining rig on Ebay. Image: Ebay

One seller on Craigslist—a man named John from a suburb just outside of Washington DC—said he has previously sold one of his rigs for around $4000 and is currently listing another for the same price. He said he’s received a lot of interest, but most people want to talk his price down.

“Due to the shortage of AMD GPUs, the rise in price in Ethereum and the desire to get in on it from a lot of people with very little technical know-how, the amount people would pay for a pre-assembled mining system has skyrocketed,” John told me in an email.

The question is why aren’t these buyers just collecting the parts for a mining rig and building one themselves? This could potentially save them thousands of dollars over a readymade rig and John was the first to admit that it’s “very easy” to build a rig. Aside from the hardware shortage, John thinks that most people are simply intimidated by the idea of building a PC from the ground up. It’s not the hardest thing in the world by any means, but some people are babies about it.

“I think most people are capable of building their own rig, they just don’t want to spend the time to learn how or have a fear about breaking something,” John said.

But McCarthy isn’t so sure. Although he’s sold hundreds of bitcoin and Ethereum mining rigs and has 15 years professional experience in IT, he said it took him a year before he could properly build a rig.

“It’s almost impossible for someone without PC experience to build one,” McCarthy said. “The challenge is not only knowing the components to use and all the terminology, you have to know what is going to work properly with which components.”

As someone with zero PC-building experience who recently built his own Ethereum mining rig, I can tell you that it is possible, but that, as McCarthy said, the process did involve several hours of research and trial and error before getting it right. Most second-hand mining rig vendors are banking on people not wanting to invest that amount of time in learning about mining.

So for now, if you build it and list it on Craigslist, they will come.

Correction: Originally the headline for this article was “People Are Getting Rich Slinging Overpriced Ethereum Rigs on Craigslist.” According to one of the sellers we talked to, Scott McCarthy, that isn’t a fair portrayal of what’s happening. McCarthy said that he makes about $200 per hour building Ethereum mining rigs, assuming each rig takes about five hours to build, and that he can make slightly more money on the high end of his consulting business. He also said he doubts anyone is getting rich building Ethereum mining rigs. We have updated the headline to reflect this. Motherboard regrets the error.

Continue reading the original article over at Vice.