Qarnot QC1: An IoT heater that mines for cryptocurrency. Hot idea?
Qarnot QC1: mining and heating in the corner of your living room.

Qarnot QC1: An IoT heater that mines for cryptocurrency. Hot idea?

The cryptocurrency market is now so popular that you can heat your house while mining for bitcoins. Chris Middleton explores whether a new product is really the hot idea it appears to be.

The Internet of Things is not only crunching our data, but also heating your house, thanks to a new device from French startup, Qarnot. The QC1 is an electric heater that’s also a computer, the first dedicated computer/heater designed for the domestic market.

But the QC1 has a hidden purpose. Qarnot says that this attractive device, which can be controlled from a smartphone, is “the first heater actually generating crypto money”. In other words, it’s a cryptocurrency mining rig, and as the market heats up, so does your home.

So what’s behind this simple, clever, idea? And do the figures add up, or are the claims just a load of hot air? Internet of Business has done the maths so you don’t have to.

The hot air problem

Computers generate heat. The harder they work, the more heat they give off, which is why data centres need expensive cooling.

Crypto-mining rigs – assembled from high-end GPUs made by vendors like NVIDIA and AMD – give off more heat than most. This is why stories have been circulating about students huddled for warmth around repurposed gaming hardware, mining for Litecoin or Monero in their college rooms.

Qarnot QC1

The QC1 is a stylish radiator that would complement any loft apartment, but instead of an element to generate heat, it contains two AMD GPUs – but no fans or moving parts.

Simply plug in the heater, add your crypto wallet to the mobile app, and as the heater warms up you’ll start receiving the Ether currency, says Qarnot. The QC1 is a Linux server, so you can tell it to mine for another currency instead, such as Litecoin or Monero.

Banking on heat

According to TechCrunch, Qarnot has form in the edge computing/heating space, which is where this idea gets smarter.

The company has previously sold computer-heaters to construction companies. As sales grew, this created an expanding, distributed data centre, which Qarnot rented out to the French financial sector, among other clients.

This meant that banking transactions were literally keeping labourers warm on building sites: proof that banks can give something back to the workers after all.

And because Qarnot still runs those businesses, this may mean it can farm out crypto processing to its decentralised data centres in the hot summer months, so QC1 owners aren’t melting in their homes. A great cashflow idea for Qarnot.

So on the face of it, the QC1 mines for currency, heats your home, and virtual money just turns up in your virtual wallet…

But is it really that simple?

Internet of Business says

Make no mistake, this is a brilliant idea in many ways. After all, why waste the heat that computers give off when it can be turned to good use? And why clutter your living room with ugly mining rigs when you can leave a stylish device running in the corner?

But as our in-depth analysis of the challenges of cryptocurrency explains, virtual money has an associated cost in the physical world – i.e. it costs money to generate bitcoins. One cost is in emissions, processing time, and energy consumption, which Qarnot has been clever enough to turn to its own advantage.

But another is more troublesome: money, the old-fashioned kind. As more and more people mine cryptocurrencies and invest in the hardware to do it, the real-world cost of GPUs is going through the roof – along with all that heat. And as we will see, that directly affects the price of the QC1.

More mining = more heat. So should you turn it up?

Lots of complex, high-end processing tasks demand GPUs; entire industries and data centres run on them. And those costs are being pushed skywards. It’s the reason NVIDIA’s share price has tracked the growth curve of bitcoin market capitalisation over the past four years, as our recent report revealed.

Which brings us to the cost of the QC1 itself. At present, the retail price of a single appliance is $3,600. That’s a lot of real money for a heater, and a lot to shell out for a computer too. (Qarnot will accept payment in bitcoins. It could hardly not.)

So how much money can owners make from running it? This is where the concept starts to fall apart.

At the current real-world value of Ether, Qarnot claims that owners can expect to mine the equivalent of $120 a month using the device.

The figures reveal the real-world problem lurking beneath the cryptocurrency market: that’s not $120 of profit a month; it equates to 30 months of constant heating before the device pays for itself – which in the real world will take longer, unless you live somewhere very cold.

And that doesn’t include the cost of running it. Internet of Business put that to an accountant, along with the spec of the machine. He said: “Rounded up, my own electricity is 15p (21c) per kW, so the cost of the actual electricity to run the heater would be £54 ($75) for a 30-day month. If we depreciate the heater over, say, three years, that’s £99 ($137) per month, plus £54 a month for the electricity.

So with Ether at current rates, we’d be losing about £33 ($45) per month by my calculations. No wonder so much mining is being done through hacking or stolen electricity!

The cost of number crunching in time, MIPs, and energy is precisely why hackers have designed botnets to steal processing power from other people’s devices. (Perhaps they’ll hack your QC1: how would you know?)

Other problems arise with this apparently simple idea. Three years is an eternity in computer hardware terms, and most households don’t replace their central heating every time they need a faster processor. Meanwhile, the price of energy is increasing.

Granted, the QC1 may create a saving in normal household heating bills over time; but it would be marginal unless your home is full of QC1s. At $3,600 a throw, that’s unlikely.

And granted, the Ether market could go through the roof – higher than the price of GPUs. However, the problem currently is that if Ether’s or another crypto’s value soars, then so does the retail cost of the hardware needed to process it. If that fatal embrace can be pulled apart, then you could be onto a winner.

But as Einstein observed, mass and energy are equivalent. And the gamblers who want to prove that wrong sure ain’t Einstein.

As ever with crypto, two core questions remain. First, what’s the cost per watt of mining? Without that figure, it’s impossible to calculate a fair value for any cryptocurrency. The maths from the Qarnot QC1 show some of the workings, and the results aren’t good – unless there’s another boom (and no bust).

And second, what is any cryptocurrency backed by, other than hope and depreciating computer hardware? And there are yet more costs associated with that hardware. For example, machines need to shipped across the globe by fuel-guzzling freighters and aeroplanes: that’s an environmental cost.

And of course, those computers need to be manufactured first. In some countries, human labour is still cheaper than robots, so that’s a human cost to add to the list.

So where’s the gold?

In traditional finance, the banking sector absorbed such processing and technology costs on behalf of customers who had free accounts, but was then bailed out by the same customers to the tune of trillions of dollars. The point is, these costs can’t be magicked away, and the virtual world will always be rooted in the physical one.

Cryptocurrencies’ advocates get hot under the collar when faced with logic-based analyses such as this, and tend to say things like “People said that about the internet – and look where we are today!” Well, there’s a lot of truth in that, although where we are today is “radiators that print money” as much as enterprise cloud services and mobility. And again, cloud services are really about hardware built on land under local data laws, and not some imaginary fog of code in the sky.

For the record, Internet of Business strongly supports cryptocurrencies as an idea, but believes the argument needs to be more sophisticated than gamblers’ belief in making a quick buck. Virtual or not, cryptocurrencies are rooted in physics.

One thing is certain. As the Internet of Things spreads, blockchain or hashgraph enabled processes are spreading too, and these are already transforming supply chains, manufacturing, data-sharing, and yes, even banking.

So in a blockchain powered world, the long-term answer may be utopian in its simplicity: cryptocurrencies may be the natural currency of the IoT, backed by our data gold and our consent – citizen-backed CSR, seamless location-based payments, and so on.

But the fact that this is a fuzzy, utopian, evangelical answer suggests that the reality will be messier and more complex than that. Until then, maybe a better answer will simply turn up in your Ethereum wallet and you can retire on the winnings.

But at least you won’t have to put 50p in the meter to keep the heating on; it’ll cost you a lot more than that.

With thanks to Derek GC White and Tom Hughes – CM.

For more on these issues, read our in-depth report on cryptocurrencies, in response to the governor of the Bank of England’s recent speech.