The day I became an Ethereum miner

Much has been written about cryptocurrencies and Blockchain, the technology behind them. For the purpose of this blog, I will assume that the readers have educated themselves on the related terminology. I decided to dive into an area that has piqued my interest lately, which is Ethereum. A born skeptic, I was completely dubious of the Ethereum concept, and that’s because I never really understood it. I thought it was just another cryptocurrency in the high-tech wild west, full of gunslingers and no real potential for enterprise software applications. But after investing some time and doing my research in this area, I AM HOOKED!

There are basically two layers to Ethereum (please forgive me for simplifying this subject). First is the initial attempt to create one global distributed computing system. Similar to the Internet, which is a global distributed communication platform (and do we really know who hosts it?), Ethereum uses the power of potentially millions of computers around the world that help increase computing and processing power, which might end the need for your own server and data center … and this could be huge! Second, Ethereum has created a pricing system, if you will, manifested by tokens that assign a value to different functions. This token system provides compensation for helping to increase processing power or a token can be given as an award for preforming various tasks. As a result, this allows any process or product to create its own value. For example, a service provider on the network that delivers simple DNS services could issue a token, and if that service does well and becomes more popular, its token could go up in value. Basically, a P2P IPO.

Another, albeit more far-reaching example that may be a relevant one day, is that of an artist who wants to issue his own token. If the sale prices of his paintings continue to rise or the artist becomes more popular, the value of his token would also rise (a personal IPO, if you will). These are extreme cases but so far, services created and issued on the Ethereum network have gained value and raised billions of dollars collectively.

There have been many debates about private and public Blockchains, and I believe Ethereum, as the public version, should stay that way. I have worked in the financial industry for more than 25 years and know that my fellow bankers would disagree, but time and time again, the public model has prevailed in the long run. I don’t believe any bank would use a public Blockchain platform, but I think they should, considering that this technology has the ability to provide a wide range of privacy and security layers to satisfy all users. Certain applications should be completely public when designed in a distributed manner and other applications initially should not. However, I do believe that in approximately 20 years, all applications will be inclined to the public model.

Now, let’s get back to reality. What I found interesting about Ethereum is the potential to deploy my application on a distributed computer. After much research and time spent programming, I came to the conclusion that Ethereum is not ready for enterprise application deployment for many reasons. It’s too early and there are many issues around scalability and security. However, I do see the future in distributed applications and computing.

I wanted to understand what Ethereum was and how I can stay engaged and understand the path of the future for this concept, so I decided to become and Ethereum miner. To do this, I recruited the assistance of an IT expert – my 15-year-old son 🙂 – and yes, there was a bribe involved to employ his help. We began the journey to build an Ethereum mining machine. The specs were fairly clear, as there are many websites available with helpful instructions and information. But when we tried to purchase the necessary components, such as a quality motherboard with the ability to extend for multiple GPUs, the right processing chip, and most important, the right GPU units, many of these items were sold out (this is probably why the NVIDIA stock is rising so fast). The current problem with Ethereum is that its protocol is heavy and uses something called a proof of work protocol rather than a proof of state protocol, which is lighter. A few weeks and a few thousand dollars later – yes, this is an expensive project to undertake – we were finished building our mining rig. We downloaded the correct wallet, used the right browser plugins, and were on our way to becoming Ethereum miners.

A week later … nothing. We could not process one block. Why not? Our miner was not strong enough. So, back to the drawing board to expand our processing power and the ability to mine for tokens. After another thousand-dollar investment in hardware and some software tweaks, we hoped to be able to mine our first token … but no. Finally, after joining a “mining pool,” our machine started to mine for tokens. We have received several tokens since then BUT … have you seen the fluctuation in the price of Ether (the Ethereum currency)? As an ex-trader, I can tell you that volatility is king, but the past few weeks have been crazy in the cryptocurrency market. There are also issues around the perceived notion that big processing powers could draw more tokens because they have an advantage over the 15-year-old boy in the basement of my house. Although Vitalik Buterin has explained how this is prevented on Ethereum, I don’t fully believe him yet.

Distributed applications, communications, and computing are an exciting area to get acquainted with, but if you are building an enterprise application, unfortunately, the ground is still a bit wobbly underneath the foundation needed to support this environment. That being said, I am still a believer in this concept, and it’s great to be part of the revolution.

Before joining truePTS as CEO, Zohar Hod was Global Head of Technology and Data Sales for Intercontinental Exchange (ICE) Data Services following an illustrious 20-year career in the industry which also includes senior positions at IBM, BearingPoint, and SuperDerivatives.