Topic: bitcoin home mining opportunity cost! (Read 1019 times)

I grabbed 4 s9k. they still all work. but two of the four would over hear. simple solution was detach the center board. they are working as i type. since sept 2018.

I dca gear. ie 4000-7000 a month in buys every month.

it usually means 1 or 2 pieces a month.

depending if it is asic or gpu it could be 1 or 2 or 3 pieces a month.

In that case I guess a decent strategy is to never buy a miner that has just been released onto the market. Always buy a model that has been in production for at least 1 year, whether it's new or used. Avoid the new Whatsminer M50S, Bitmain S19 XP or

Imagine what would happen if a manufacturer like ASUS or EVGA or Sapphire had a heatsink or solder ball issue on even 5-10% of the units. There would be mass outrage among gamers and they would go bankrupt.

Looks like ASIC companies can get away with murder for whatever reason, while GPU companies build stuff that is meant to last...

The funny part is that I used to know a 'former drug dealer' who got into mining during the 2017-2018 gold rush, buying dozens of video cards because he thought ETH profit was so great. Then he quit after ETH crashed, then probably went back to selling drugs for a while. So you're probably not exaggerating.

The mining 'calculators' are complete garbage because the market constantly reacts to difficulty & price changes. No spreadsheet I can make is much better than that, because the best I can do is account for different costs and BTC price levels. Such spreadsheets are useless for the #1 most important factor for profit; which is the price and reliability of the equipment, which is the hardest one to predict.

I used to think the electricity rate was more important, until I did the math. I realized a 10 cent farm can easily beat a 3 cent farm if their timing is better by just 3-4 months. That's exactly what happened to me in the past. The rigs I built in late 2017 for $200/card did well, the rigs I built in early 2018 at $370/card were total losses, and the rig I built in early 2019 for $140/card returned 4x my money back. Of course, the 'all-knowing' mining Whattomine said early 2018 was the most profitable while early 2019 was a bad time to invest. That's when I figured out mining calculators were garbage.

After all this research, I have decided to stick to GPU mining for now. If I build a warehouse, it will be mostly for GPU rigs. Now I don't even need to move to Texas since saving 1-2 cents on power isn't important for GPU mining. I think it's a good time to build GPU rigs since video card prices are relatively low and PoS has been delayed (to Q3 at the earliest).

If you think many folks entering ASIC mining who just look at the calculator sites are useless... you don't want to know how stupid some of the GPU miners can be. The #1 biggest mistake is mining ETH on every single model of video card all the time, yet 90% of miners do that. These people don't harness the true power of GPUs, which is that they are Swiss army knives that can mine on 100 different algo's and switch in a few seconds.

IMO, the stupidest investment these days is to buy Ethereum ASICs. Why pay the same price per MH as GPUs when you have to deal with 20% failure rates instead of 1-2%, then take a huge risk with resale value? If something happens to ETH, you're screwed, since you can't even sell it to a gamer; let alone mine another algo. "Bbbuuuttt the Antminer E9 is 3x as efficient as an AMD RX 6800!" Power cost hardly matters for GPU mining, dummy! Yet I see so many used Antminer E3's and Innosilicon A10's being sold on feeBay. Those suckers will never get their $ back even if PoS takes 12 months and ETH is $5000.

It sure does, however, there is a downside to it which is the cost per hash,  an S9 will most likely last a lot longer running underclocked at 9.5th instead of the default 13 to 14.5th, but then assuming the miner costs $400 shipped, it becomes 28.5$ per th vs 42$ per th, you do save on power but the most often the lost hash rate surpasses all that.


Buying different batches might be a good idea, but not in the way you mentioned, batches come out in quantities of thousands, usually monthly, so buying from different people does not mean you will get a different batch, they could all have bought that one bad batch you were trying to avoid.

Usually, the first a few batches are the worst, when a few months have passed and the manufacturer starts getting a ton of warranty repair tickets,  they "might" fix what seems to be the issue, but then missing the first batch might also mean paying a lot more for the same miner, it's pretty hard to time this, luck is a major factor.


It's both, for an example antmine S9 are known to have a dead middle board due to a lack of airflow around the first a few chips facing the front side caused by the fan motor itself, so the longer it runs the likely to fail, so this gives you a linear curve more or less.

With something like 17 series where very often the issue is just one bad solder ball shorting the shit out of the board, it could be safer to buy a used miner which has been repaired, if your 17 series miner makes it through the first 6 months, it's more likely to survive another 6 months, but then again, different batches will have different results, the ones that later came from Malaysia were a lot better, it seems like the robots/people that did the soldering were doing it in a better way.

I also remember buying an early batch of S9k where I got miners without heatsinks attached, the heatsinks were sitting in the case doing nothing, it seems like they forgot to heat the thermal , on the other hand, I recall Phill got a different batch that arrived in good shape and worked for a while (not sure about the current status).

So ya, it's just a mess, very hard to predict and it's part of the risk you have to take when you are looking at a business than can get you a 1-2 year ROI, I highly doubt that even drug dealers have such a short projected ROI, , this is why when you invest in mining, you can win big just in the same way you can lose big, it's a very risky business, especially for those who are just starting, I always tell the majority of people NOT to invest in mining, at least not before knowing the full story, because things look pretty damn good on paper, you go to an online calculator and think to yourself that you will get your money back in 6 months, reinvest and double your hashrate in 3 months, get that many PH worths of hashrate and start making 10k a month while doing nothing, it's exactly how things look like in an excel sheet like the one you made, but that couldn't be further from the truth.

Wow, that's a lot of good information. I think you made a good point about bad batches of ASICs, where one batch can have a 50% failure rate but other batches have hardly any issues. I would guess a way to mitigate this luck effect is to buy small amounts of miners at a time from different places (ex. feeBay, Reddit Minerswap, or this forum). But they'll probably be more expensive in smaller quantities.

I do have a question about the failure curve. Is it a 'bathtub curve', like with hard drives, where lots of miners die in the first 4-6 months, but after a year, the survivors last for years before they eventually die of old age? Or is the curve more linear, where a small number die consistently every month? The reason I'm asking is that if I bought T19 units that have been fully working for 1 year, are they going to have a lower failure rate than if I bought brand new T19's?

Yeah, GPUs can be extremely reliable after even 10 years of mining especially with the low-power algorithms after 2016. Even during the high power Bitcoin/Litecoin/Doge days, the failure rate was < 5%. Warranties are honored 90% of the time for free, and repair service is quick. The other rig components are almost as durable, as long as you don't buy some cheap knock-off mining MOBO from Chyyna. I prefer 'gaming' MOBOs because they have better resale value even if I can only attach 8-10 GPUs instead of 12.

The power supplies for GPU rigs, whether they're gaming ATX supplies or server ones, are built to last long as long as it's a mainstream brand. They have all kinds of safety protections. Efficiency is usually as good as the ASIC PSUs.

Its complex to full understand asic mining.

But asic builders are very much "fuck you blow me bitch" Sorry for being crude but it is very often the case.

Does running a bitmain  asic at a lower clock work. Yes to a large degree it does.

Especially for the psu's.

remember s15 s17 s19 and the variants all have bespoke custom psu's.

Running an s17 pro on turbo can drop the one chip heatsink that tends to fall off with too much heat. It can also blow the psu.

A dead hashboard = 33% hash drop
a dead psu = 100% hash drop.

so running at a lower speed can help
having extra psu's = bigly. A very important item to stock.

I killed 2 s17 psu's
I killed 1 s15 psu's

I had extra ones so down time = zero

Per year, keep in mind that the 20% I used accounts for many other things which will be hard to predict, the global average failure rate IMO is about 10% and double that for fixing your gears, for example, one of the members here offers one working 17 series board in exchange for 2 dead boards, so if you get say a total of 20% failure it means the final outcome would be 10%, but then there is a downtime, shipping cost and a few other things involved.

But keep in mind, not everyone will have that 10-20% failure rate, some people reported a 3-5% yearly failure rate, others reported up to 90%, if you get a bad batch that makes up 50% of your purchase, you will be in deep trouble, so the failure rate is really near impossible to predict, but based on my experience and what I hear from many other miners, I believe 20% should be used as a general rule of thumb.

Keep in mind that the size of your farm is also very important because even when the global failure rate is 2-3% x model, it could be 50% for you and of course vice versa, I think a few folks around here got lucky with the 17 series, I personally had close to 100% failure rate in the first few months, a large Chinese miner (at that time) reported 40-60% failure rate in the first 6 months (Bitmain's CEO himself confirmed that high failure rate).

If you are a large player who places orders in the tens of millions, that might not be a huge issue, I remember how Bitmain offered to send their technicians to those large players in China to have their 17 series fixed on the spot, and yet they screwed the majority of other clients by forcing them to send a whole miner to get 1 board fixed, and then some people had to wait forever to get the gears back, some got back broken miners, so it's different for everyone, you might be lucky, but when you are running the numbers for a business you should not count on luck and -- instead, you should use the worst-case scenario numbers.


GPUs are a different story, those companies have been building them for decades, those companies know they will be making those GPUs forever, they also operate in countries where the law protects the client to some degree, the warranty gets honored despite the small failure rate, on the other hand, with ASIC miners, you are dealing with Chinese companies that have poor quality control, only a couple of years of experience, demand to supply ratio is unbelievable, and of course, they know their business won't last forever.

Another factor is that ASIC makers are under severe pressure, they rush to make miners and sell them to the public before doing enough testing, a great example is the entire 17 series, 90% of failures were caused by bad solder/soldering, Issues like that appear in the first month or two of running, which means nearly zero testing was done on them.

Now you have the S19 series, the PSUs suck and have a high failure rate, another proof that it didn't undergo enough testing.

A bulk Chinese reseller whom I trust confirmed that the new Avalons PSUs have up to 80% failure rate, another proof that Canaan did close to nothing of testing.

MicroBT put out a new firmware that can't be reverted, and guess what? once you flash it the old PSU is no longer compatible, and thus you will have to either order a new PSU or a replacement hash board, which is out of stock most of the time, not sure if they did it intentionally or they were just careless, but the outcome remains the same for the poor folks who had to go through that trouble, and it gives you a good idea of how bad these companies manage their products.

I can go on forever, but I think I need not, it's plain simple, GPUs are more reliable than ASICs by an order of magnitude, nobody in their right mind should assume that the quality of both is similar in any way, shape or form.

Do you mean 20% per year or 20% over the useful lifespan of the miner? If it's 20% per year, that really sucks in comparison to GPUs. I have had a farm with 200 video cards where only 2 of them failed in a 9-month period. I sent these cards to MSI warranty repair and they returned working ones within 1-2 weeks. This is why I have MSI brand loyalty.

Lesson learned for me, then. If I want to buy used MicroBT M20S's or Avalon 1146's, I should price in a 20% failure rate for the unrepairable problems + the money/downtime cost of fixing the fixable ones.

Do you know if failure rates can be lowered by downclocking or running at lower power usage?

I do have to admit I cherry-picked the ideal scenario. If one doesn't have unrealized capital gain equal to $1m, they should depreciate the miners over 2-3 years instead of in 1 year with Section 179.

The impression I had at first when looking at mining during recessions was power & rent rates were important in order to be able to pay the bills while profit was low. But the more research I do, the more I feel like the residual value of the equipment is more important.

Mining farm A: pays 8 cent power, buys a M30S for $6000, then it's worth $5000 by the end of the year (including repairs). Profit = $2600

Mining farm B: pays 4 cent power, buys a M30S for $8000, then it's worth $5000 by the end of the year (including repairs). Profit = $1730

It looks like buying reliable equipment for a reasonable price is the #1 most important factor, as long as you can keep the doors open if BTC price were to fall by half.

Here's a new spreadsheet with more realistic assumptions. I assumed BTC price will slowly rise by 60% over the period, diff will rise by 25%, and the resale value of each working miner will stay the same at the end.



Unfortunately, HODLing still wins by a hair even when price growth is zero.



I tried many more price increases/declines, and in every single case, HODLing won by a small margin over mining.

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However, as a bright spot, the GPU spreadsheets are a hell of a lot better. Mining almost always beats HODLing Ethereum. So long as you can sell the cards before PoS, the very high reliability & profit margin at even 7 cent power trounces ASIC mining at free power.

The best part in my view is, since GPU mining is light on power, a normal U.S. house with a 200 amp panel can hold 200 RTX 3060 cards. No need to rent a separate warehouse if power is already 9 cents.

you are right about the quality recent miners of Bitmain (only Bitmain) has improved compared to the previous 17 series, but other companies like Avalon are now making worse gears, I did not pull the 20% out of no where, people have reported 80% failure rate on new Avalon gears, 25% on S19's PSUs, 10% on MicroBT 20-30 series, it's nothing but wishful thinking if you run the numbers with the assumption that failure rate would be below 10%.

The reason why I said 20% was to account for

1-The downtime
2-Repair Cost
3-Shippment fees

If you want to use 10% or even 8% then you need to take those factors into account as well, you need to consider that waiting for 6 months to get your miners back isn't something unusual, or sending a whole miner that has only 1 dead hash board and then having to wait for a month or two to get it back, many things can go wrong and using anything below 10%+ the three points above is honestly being unrealistic. 



Not sure why you think that keeping a hardware wallet safe without anyone knowing you have it is harder than maintaining a mining farm that's worth a few million and sucking thousands of amps of the grid.



This is a valid point but it's a bit of cherry-picking IMO, so this model of "using tax to your advantage" isn't fit for everyone, if I don't have unrealized tax gains that are worth 32% of whatever I am willing to spend on mining -- it's no longer 32% is it? it could be 5% or even 1%? please elaborate more on this subject without assuming that everyone who enters mining has some sort of massive unrealized tax gains.


He deserves them, a very detailed explanation of how the tax stuff works in the U.S.



the miner's lifespan is more important than the power rate, I have free power but I have hundreds of dead hash boards  S9ks, S9, S9se, D3s, S17 pro, S17,S17 +, T17, L3s and you name the rest, recently I fired up 40 Avalon 841 miners which run like shit, glad I didn't buy more.

That's a lot of merit!

I have spreadsheets that are more detailed than that, but they get really complicated.

Wow, it's great that you bought in at the perfect time, after the great downturn of 2018. It's excellent that you didn't have to beg outside investors for money.

I did exactly the opposite, which is why my ETH farm went bankrupt. It deserved to go bankrupt, especially because I wasted $$ on 4K monitors, gigabit internet and bought cards at the top of the market. On top of that, most of my investors were the 'get rich quick' type who bailed when the market crashed, and weren't interested in coming back even when GPUs were dirt cheap. I was a dumb college kid at the time who was desperate with FOMO to not let my dream of owning a mining warehouse go while investors were still interested. The only good decision I made was getting a 6 month lease.

Thank god I spent a few days digging through this forum and learning from the veterans. I think I've come to the conclusion that I should not build an ASIC farm until/if BTC plummets to $25k while I already have a GPU farm running.

I should probably spend the next 6-8 months keeping track of the mining market, saving up $, while trying other business ideas first (like software). By then, I will have enough funds to buy at least 250 of my own GPUs if PoS happens. If PoS doesn't happen but BTC is $25k, at least I can buy ASICs cheaper than today's prices. If my software ideas succeeds, then there's no point in building a farm in the first place.

Miner life span is critical this is why I have a ton of gpu's they last 3-4 years. They have warranties that get honored.

And the eth mined goes to cash/gear

the btc mined can be hodled if I chose. Yes the btc will be partly taxed. hodl or sell.

 Ie a paid for s17 makes 0.0002155 btc a day. my structure for power and hosting is 50% of that so I get 0.0010775 btc a day for that machine that is $4.31 usd a day if I choose to hodled it or sell it. . I will owe tax on the $4.31 so say $1500 in a year would be taxed. at regular income. maybe 450 tax so it clears $ 1050 .  Note the assumption is made on flat daily numbers.

so Every s17 I own nets me 1050 a year after tax. My 17 S17's net just about 17850 a year. after tax if I sell it daily
My other btc gear is a bit more so it nets me around 22000 a year after tax if I sell it daily, so btc alone is 39850 after tax net.

all the eth
all the ltc
all the doge

get rolled into new gear. We are heat and cooling capped right now. Not power capped. I can do 45kwatts  more in gpus I do 25kwatts now. Have to figure cooling out. we have limits to fans in the gpu room. we may add a chiller or 2 they would solve overheating in the summer.

Gave you 20 merits you are now at 50. Very detailed info.

And it can be more complex.  I am sitting at a desk typing and looking at 35 books of us tax code while I write this.

I can only say the laws are very complex but if you understand the Model Amazon did to build its business up a USA miner can do the same.

Our Clifton operation started in Dec 2018 with 4 s9's

We now have

2ph in BTC asics
10gh in Gpus
30gh in LTC asics.

No debt. And very little tax paid. All legal.

I disagree because it looks like manufacturers these days want to make their equipment more reliable, because they know that the die shrink to 3/4nm will take a long time and customers will want the miners to last longer.

In this spreadsheet, the coins are always sold instantly in order to get cash. The risk of losing coins from a hack is practically zero; you can only lose a day of profit. As for the network, the firewall/switch should be configured so none of the machines can talk to each other. Only a few outbound IP addresses, such as the pools, should be whitelisted. This isn't hard to set up.

On the other hand, hacking might not be the biggest problem HODLing coins. What if you lose the HW wallet?

Assuming no loss in value for the equipment, these are the final positions:

Reinvesting for 12mo: $1.39m + $662k = $2.052m

Always withdrawing: $723k + $646k = $1.369m

Buying BTC: $723k * (1.938 ^ 2) - 20% tax rate = $2.314m

I think the spreadsheet lines up perfectly with your price growth figure. If BTC went up by 93% in a year, the equipment would likely be worth the same price and the revenue would still be $500/day per miner.

So yes, HODLing wins by about 13% in the end in the average year after these U.S. tax considerations.

However, if you expected BTC price growth to be flat or only increase to $50-60k in 12 months, mining would be the way to go. HODLing profit would be near zero.

Most people who have enough money to start a mining farm at this scale are people who earn $250k+/year (engineers, doctors, lawyers, executives) and have saved up that 1 million over the past 10-20 years or so. Their marginal tax rate is about 32%. They typically have other investments with unrealized tax gains like stock shares or real estate. Why not take this opportunity to sell those assets and deduct the $1m in miners against that profit? $250k of gains from their regular job, $350k from their vacation house, then $400k from Tesla stock they bought long ago.

The reason I deducted the 32% upfront is as long as they start the farm before December, they can get their tax refund by February, so it's practically instant. I can edit the spreadsheet, but the difference will be tiny.

If the farm is owned by a public company (ex. Riot Blockchain), they already face hefty tax rates of 21% + 20%, and there are plenty of other crypto companies that can benefit from buying the mining company and deducting the initial losses against their insane profit.

U.S tax law gets much more complicated than this, but rest assured I have spent hours talking to my accountant to understand these numbers.

I appreciate it. I have been digging through old posts/threads in order to understand ASIC mining during different market conditions. So far, it seems like a bad idea, unless I can start with GPUs while I wait 5 months for the electric company to install a 400 kW or 600 kW transformer. There are other business ideas I can spend my time on that cost nothing and are more scalable. IMO, the worst part is I only have enough $$ to pay for buildout, but not to fill the place with equipment.  That means I will have to waste time chasing investors and customers and doing what they want, instead of planning for the future.

8% is being over-optimistic IMO, it would be more realistic to run the number with 20% with the assumption that you won't pay for fixing using cash but rather in hashrate, so no extra cost added for repair, also to take into account that downtime and whatnot.

Also, the lost wallet or hacks isn't something to take into consideration here, unless you apply that to mining as well, bad security practices will cost you a lot whether you mine or hodl, someone got a virus in their farms that disabled the bootloader and had to replace over 600 control boards, with the downtime and labor that was a deadly cost, besides, taking care of one hardware wallet is a lot easier than safely maintaining a larger mining farm, a thousand MORE things can go wrong while mining as opposed to silently holding bitcoin, so really, it makes more sense to use this argument against mining.



So it's 661k + extra 92 miners vs 646 + no extra miners?


Now, let's compare these two against buying bitcoin instead, bitcoin has an average of 275% gain every year, and if we want to ignore anything before 2018 the mean annual gain is 93.8%.

There is also something I don't understand here, why do you use $723,520 instead of $1,064,000, why do you deduct the 32% tax upfront, I am confused here, who will give you the 32%, how and when?

Your initial investment should be $1,064,000 and the tax you pay on income later will be reduced, isn't that how it works? please elaborate.


Great post by the way, gave you some merit for the detailed info.

You are right. Selling equipment that you deducted = considered income, so taxable. Receiving coins without spending them on equipment/power/rent = considered income, so taxable. Selling coins for a price > than the production cost = taxable income.

Yes, the tax does need to be paid at some point in the future. But the point is to delay it for 2-3 years in order to reap the advantages of scaling up. If you can postpone income + sales tax, that means you can buy 30-45% more equipment.

For example, in Texas, the more transformers I buy and the more kW I cram into the warehouse, the cheaper the operating cost is. Let's say rent is $2500/month. At 100 kW, power costs 7¢ and rent is 3.5¢ ($2500/72000 kWh). But at 1MW, power will cost just 5.2¢ and rent is just 0.34¢. By scaling from 100 kW --> 1MW, the total operating cost goes from 10.5¢ to 5.54¢. It's probably 4.5-5¢ at 10MW+ (diminishing returns).

Thus it absolutely makes sense to build up as many miners as possible (preferably during a downturn) in order to get to the megawatt scale. It even could make sense to buy cheaper, older, inefficient ones at first in order to reach that load. After that, one can take profit out of the business (especially during a bull run) and start paying the income tax. That is the best time to break out of the 'infinite loop'.



P.S.: For various reasons, it makes no sense to hide from the U.S. tax authorities and not report the income. Then I can't get all these sweet tax breaks in the first 1-2 years.

I did take a failure rate of 8%/year into account in the spreadsheets. I assumed 8% is the total loss after repairing the miners that can be economically fixed.

Likewise, the HODL scenario accounts for a 1% chance of lost wallet keys or hacks.


I created a new spreadsheet. I changed some of your numbers in order to be more realistic:

1: Reinvesting profit for 12mo, then withdrawing profit for 12mo



2: Withdrawing profit from the beginning



With this simple spreadsheet, reinvesting is a little better than always withdrawing profit.

Of course, it's better to take profit during a gold rush and reinvest during a recession instead of sticking to a single strategy all the time. The depreciation rate, failure rate, S19 price, and revenue will constantly change.

Here's an interesting resource. They've gone 10x deeper than I have, with a complete Monte Carlo analysis:
https://www.aniccaresearch.tech/blog/the-intelligent-bitcoin-miner-part-i

The only shortcoming of their models is U.S. taxes aren't included.

late and very tired I will attempt to answer in the morning.

Ok that makes sense, but you can't have an infinite loop, you will have to stop at one point, or else, everyone in the U.S would be mining bitcoin and you all would have been rich.

Also, a few key points are missing here, the most important being the lifespan of the miners you invest in, and that could be the physical status of the miner (dead before ROI) or it gets to the point where the power bill is a lot greater than it's projected income.

Also if I understand correctly, selling your mining gears later on for whatever reason is a taxable event, no? as well as selling your bitcoin to pay the power bill or to buy a new transformer or anything like that, even your received reward from the pool are taxable as income.

Phill's example above is a good one but there are a few things I don't get


So just to be clear here, and let's assume your business model isn't 50/50, and that you had to pay $$ every month for the power bills, that means, you would have to sell some coins (a taxable event) no?

The second question, your example also assumes that for all these years you did not spend a single dime and re-invested all of it in buying more miners, true?

furthermore, you now (according to the example) own 386k worth of mining gears, what happens when you sell them? you will pay a lump sum of tax?

and lastly, if you decided to stop expanding (which you will get to at one point), all the profit you make will be taxable even if you don't sell your bitcoin, and then if you sell it later on for higher a price that will be a capital gains tax, true?

Not that I could use any of these U.S tax tips, but it's an interesting topic, I would love for someone to give me a perfectly detailed example of all the tax involved with numbers.


Let's say today, You buy S19 for $10,000, for the next 12 months, it makes you $500 worth of coins monthly, every month you sell 100$ to pay the power bill, and use $100 to improve your mining farm to be able to add more capacity and $300 reinvested in mining gears, how much tax do you pay in total for the total mining profit you made per month?

Here's why I disagree. Tax laws in some countries give miners an advantage over buying the coin.

Here in the U.S., a farm owner can deduct 100% of the equipment cost in the first year. This is a huge tax advantage worth up to 37%. The owner can keep re-investing all profit back into more miners, then deduct those. At the end of the day, the effective tax rate can be zero. Also if the electric rate is 6¢ while the owner's income tax rate is 24%, the real cost of power is 4.5¢.

In the U.S., there is no upfront deduction for buying a coin. The best case scenario is a capital gain later on, which will be taxed at either 15% or 20%. You may think this isn't so bad, because no tax is owed upfront. But with mining, tax can be deducted upfront, which is much better.

My own spreadsheets say that mining returns are equal to HODLing returns if coin price goes down by 50% or doubles. But when BTC price goes sideways, that's when mining has a big advantage over HODLing. HODLing returns are zero while mining return is 50%+.

Phill I do understand the tax plays a factor in all this, but then your business model isn't standard, it's very special, if anyone asks me whether they should run a mining business like you do I would probably say yes, but again your case is very special and here is why.

You don't have a power bill to pay, you buy the gear, get half the profit and the host guy gets the other half, so your only challenge is time, it's either you hit ROI in 1 year or 2 years, it's most often a matter of when for you and me as well, but to someone who has to pay x amount of money for every KhW, it's a lot more complicated, they are in a race against difficulty and price, there could come a period whereby they have to shut down their mining gears for months if the price falls, you don't have to undergo that.

To someone who has a way below average power cost or someone like you that has a good deal with the solar guy, the math is simple, if your gear doesn't die on you half you, you will eventually hit ROI in both fiat and BTC and thus mining vs holding is an easy to guess winner, but if you were paying 10 cents per KhW would you expand as much as you did in the past 2 years or so? probably not!

I get this question very often "Do you think I should mine bitcoin?", it's hard to say "no" when I myself keep buying mining gear almost every week lol, but I know everybody's case is different, and so the simplest answer I usually give them is that if they can afford an 80% price drop or a 100% difficulty increase without going into negative numbers, go for it, but if all that has to happen is a 50% drop in profitability and your miners become unprofitable -- you are likely better off just holding bitcoin or invest in something else.

To me, risk assessment is everything, simply because I don't have so much money I can gamble with, and I probably don't have much time left to make up for any potential loss, if BTC drops to 20k next week, I will still be mining at a profit regardless of how the difficulty looks like, so is mining good for me? of course it is.

However, if I had to watch the chart every single hour and be worried that if BTC price drops to 30k and stay under it for 6 months then my whole mining business is going to collapse, I won't be touching the mining business with a barge-pole.

But remember as we have talked before your country has a completely different set of tax rules regarding bitcoin than the USA.

Okay Lets pretend the warehouse guy could do 2 megawatts for us.

Lets say the five year contract was paid for the  power and the customer as lost so he would get zero $$ vs ½ the coins he gets from us.

Lets say all we did from 2018 dec was plow our ½  coins back into more gear.

In the USA every profit we made would be non taxable and growing from 4 s9's to

1.9ph  in btc gear and 40gh in ltc/doge gear and 8gh in eth gear  would be 100% non taxable business expansion.

So sitting here that gear is worth 386k

and we do not owe any tax. that is how proper handling of expansion with usa tax laws works.

now that 386k in gear cost us ½ the coins it mines the other ½ comes to me and my 1 partners

so I get the coins earned by 95000 in gear at zero cost for the gear and power but this e coins will be taxable.

Next year maybe 125K for me alone.

Your business model is different as tax laws are different in your country.

I mine I buy gear I sell gear I repair gear = a business and active business but that is usa law.

now pretend I purchased 900 usd in coin in dec 2018 what coin grew to 95000 value  and earns more every day

hmm maybe doge.

900 in doge at 0.002 usd is 450,000 doge  and if it was all held perfectly until  it hit 50 cents you would have 225,000 but owe tax on it.

So yeah I guess if I have invested in 900 usd worth of doge in dec 2018 and sold it when it hit 50 cents it would  be better.

I know damn full well I would not have held it that long.

I merited your post because it does contain some very valid points of which I disagree with some, you turn your miners off once your power bill is higher than your profit in fiat, or else, if you pay 100$ to mine 50$ worth of bitcoin it really makes no sense.

While I do agree that mining IS indeed a form of business, it isn't exactly similar to running a shop or anything like that, mining depends entirely on the price of bitcoin in respect to the mining difficulty, there is exactly nothing you can do about it when it isn't profitable, you can market your goods, you can't spend money on ads in hope to generate more profit, you can't hire a better employee to increase your sales or anything you can potentially do with any traditional business.

The other point missing here is that running a business has a long term potential, even while operating at a loss you are building yourself a name/brand, experience, securing good employees, making loyal clients, it's okay to operate at a loss for as long as you can afford it because it could very well pay off in the long run, mining is more like a hit-and-run if you may, you are limited by the short lifespan of your mining gears and how long they can remain profitable, once you have to run them at a loss it's simply a game over.

I don't entirely disagree with you and phill here, but the idea is that investing in mining and investing in bitcoin can't be separated. so if you invest in BTC mining then you are betting on its value to increase, anyone who is certain that the value of bitcoin is going down will not touch mining with a wooden pile, and since both buying BTC and mining BTC depend on the evaluation of BTC the two things are closely related and IF the money you spend on mining gears doesn't give you back more BTC than you could buy, it's certainly a losing business.

of course if the op had asked can I mine well enough to use the profits to hodl coins he wold have shown full understanding to the following statement:

If I dedicate myself into spectacular world class pussy eating of my girlfriend will she in turn become a great
cock-sucker.

Honestly the answer is if you pick the right pussy to eat you will get great paybacks from the owner of that pussy.

Much like if you properly understand mining for the tool that it is to gain great profits for your self.. In coin and in fiat

But I digress and obviously I am in a holiday mood with very good results in mining for all of 2021 and being married happily for over 30 years.

I can say 2021 has been the best of both worlds.

but if you pick some other years not so good.

Nothing in this post is a financial / tax advice and I am not a financial / tax adviser. That being said,

I agree with phillipma here that we are trying to compare 2 activities that are not comparable to begin with.

Bitcoin mining and buying and holding bitcoin are not the same thing. One is a business the other is just investment.

Just like

1. Gold mining and investing in holding gold are 2 different activities.
2. Being an apartment owner yourself/ through your company and buying stock in REIT and holding real estate expecting it to increase in value are 3 different things. Although REIT passes on nearly all of its cash flow it is still not same as actively being involved in apartment business.

Bitcoin mining is a business. The business is to mine and sell bitcoin, pay for the expenses and earn profit if possible. If bitcoin is retained after mining then that is an investment decision made by the business. Why are you expecting accounting profit from this business every day? Did gold miners make accounting profit everyday in their existence? How about iron ore miners? Do all companies generating income produce accounting profit? Do you have any small business? Do your other businesses always make profit every month and year? Why are you stopping mining the moment the mining is not profitable? If your rental property is vacant or earning lower rent than expenses or in repair for few months do you sell it? If prices go down after you bought bitcoin from exchange will you immediately sell it? This whole comparison makes no sense to me.

Investment gains / loss / financing/ taxes and business gains / loss / financing/ taxes are 2 completely different things and are treated differently by the regulatory authorities as well.

Should I eat my girlfriends pussy or pay a whore to get my cock sucked?

WTF am I talking about?

Simple you can't really compare the two actions in my statement.

And you can't really compare the two actions in your statement.

"Nuff said". 


btw op tell me the source of that quote "nuff said" if you can please.

I would go on both numbers in different directions, since I'm spending quite a lot of time reading topics outside the mining area that still bring the mining into the discussion when it comes to ways of acquiring bitcoins I've seen an overwhelming majority being against mining as a source of income and labeling it more like a high cost high risky business. But at the same time, I would think that the number of "rational" miners would be far lower, especially if we cut the part of mining that relies on investor money and big guys who have a totally different cost structure than the average Joe. And I highly doubt too many of them would still fit the description of "home miners".


Probably, I'm completely biased sometimes, I put my personal experience upfront and then start from there, I'm way less connected to the mining gear market and prices so again, I might get fewer balls in the net than him but that doesn't make it a rule for every gear and every period and every electricity costs. If you have a parabolic price that goes x5 in a year it's pretty hard to compete with but those times won't repeat themselves over and over while mining will still be profitable, for some.

While the sample size could be cherry-picked, if you were to compete with him on cherry-picking samples, you would run out of data long before he does.

While I don't maintain a similar excel sheet as OP does, I follow the mining gear prices every day, I did many "backtests" and I did run the numbers a dozen times before and it was almost ALWAYS a failure for miners as long as your base unit of profit/loss is BTC NOT fiat.

If it's just pure fiat calculation then for the most part mining is more profitable because in general betting on BTC against fiat has always been profitable given that the duration of the sample is long enough.

So really, it's rather personal to some degree, but what most people fail to understand when investing in mining is that they have the wrong mindset about what mining actually is, on paper, it does seem like a great way to extract BTC forever, so instead of buying x amount of BTC, why not buy a miner that keeps "printing" BTC forever, people view mining as a less risky or even risk-free investment, they also think of it as a passive income.

If you ask any random person if they wanted passive income + low/risk or risk-free business, most of them will sign up, the majority of people "mistakenly" view mining as low risk and passive income whereby in reality it really isn't, I think if 50% of miners were rational about their investments - total hashrate as of today would have been cut by half, but most people just invest in things they don't understand, or as you once said, "they gamble with investors money".

Thanks I used simple formula to get the daily reward https://moneyqanda.com/bitcoin-mining-profitability/

All in all, what i feel is miners are very costly right now and it makes sense to buy BTC instead of investing a miner as in all likelihood you'll not be able to recover the ROI in BTC, you might very well recover you ROI in USD but if the risk associated is same in both options you could just buy bitcoins and sit back and relax 

I'm looking at your excel, but what am i seeing here?
I don't see the difficulty being brought into your equation to begin with (and inserting this is a no-brainer....). I see a column "BTC / Mean Hash Rate" in your DailyBTCdataFrom09Jan2009 tab, and this column is appearing in your other tabs aswell... But the number fluctuates each and every day whilst the difficulty is adjusted every 14 days...

If you want the real number, what you should do is use the formula
BTC earned per day = Block Reward / (Difficulty * 2**32 / hash rate / seconds in a day) (source: https://bitcointalksearch.org/topic/m.8233023)

So, you'll have to do this calculation for each and every day, then convert the BTC earned per day into USD (or EUR, or Yen, or ....) and substract the electricity price.
You'll have to repeat this for every single day:

• the block reward costsists of the coinbase reward plus the sum of the transaction fees of every transaction in this block... you can take the average per day
• the difficulty stays the same every 2016 blocks, but then it is readjusted
• your hashrate stays the same
• the number of seconds in a day stays the same
• the exchange rates changes constantly... you can take the average exchange rate for that day

Let's make an example entry for an S17 on the 1st of januari 2020:
BTC earned per day = Block Reward / (Difficulty * 2**32 / hash rate / seconds in a day)

• On this day, the coinbase reward was 12,5 BTC/block . When we look at blocks like https://www.blockchain.com/btc/block/610700 and look at some earyer and some later blocks, we see an average fee of ~0.2 BTC/block (guesstimation, not actually calculated). This brings the block reward to 12.7 BTC/block.
• On this day, the difficulty was 13,691,480,038,694 (https://btc.com/stats/diff)
• An S17 hash a hashrate of 56 Th/s while drawing 2200 Watts (that's 56.000.000.000.000 hashes/s)
• A day has 86400 seconds

BTC earned with a S17 on the 1st of januari 2020 (on average) = 12.7/(13,691,480,038,694 * 2^32 / 56.000.000.000.000 / 86400)
BTC earned with a S17 on the 1st of januari 2020 (on average) = 12.7/12153.7
BTC earned with a S17 on the 1st of januari 2020 (on average) = 0,00104495

https://coinmarketcap.com/historical/20200101/ says Bitcoin's price on the first of januari 2020 was $7200/BTC
This means your gross income was $7200*0,00104495 = $7.5

Your machine is drawing 2200 Watts 24 hours per day, that's 52.8 KWh (let's round it to 53).
You pay 7 cents/Kwh... 0.07 * 53 = $3.71.

Your net income for the 1st of januari 2020 would have been $7.5 - $3.71 = $3.79.
That's about 20 cents more than you calculated... Not much, but still significant, especially when you're doing this calculation for 818 days (818 * 0.2 = >$160).

What i also mis is the resell value of the hardware... I'd personally rather sell off my ASIC than turn it off for many months on end...

Let's pick a random date, a single miner, and a random electricity price and draw conclusions for everything

How about we start with the situation at the time you described, difficulty was 1/4 reward was double per block price was 1/15.
Revenue would have been around $2.80, electricity costs 2.30$ so net profit would have been 0.50 cents per day looking at a 400 day ROI, not even mentioning that just after the ROI period the halving would happen, and besides, the gear was already 2 years old.
So, three years later you've arrived at the conclusion anyone could tell you from the start if BTC skyrockets in price it would be better to buy coins that mine in these conditions.

From this to generalize about everything it's a long way.


And the water might be wet ....yet everyone still takes a bath (mines).
I applaud the effort for the calculations but that doesn't mean I agree with the conclusion.

Here's the detailed calculation i've done for S9, S17 and S19 Pro 110

https://docs.google.com/spreadsheets/d/e/2PACX-1vRHvpRQHtRPXLy9jQcp4lQnIyknfbU4K0I5Tli8eLYzvscYkduXz_QlqepEEccK0pDX4lVtTRCOhbwO/pub?output=xlsx

For all miners I have taken the price from the first listing on the Telegram Hardware market place https://t.me/Hardwaremarketchannel

I did not redo your calculations so i cannot comment to these exact numbers (you didn't post your exact calculations, so there's no way to verify), but the general idear behind your post might be more or less correct, eventough those 0.041 BTC sound very low to me. In 2018, was this ASIC the price/quality best asic around, or were you looking for the cheapest device? Cause, normally, @7 cents/Kwh, i always believed you should have recuperated your investment if you picked the right asic from the right vendor at the right time and you had an average amount of luck. But once again: it's not impossible that your numbers are correct... You just posted the end result of your calculation, but not the steps and reasoning in between.

I've read, and discussed with, several people claiming it's a good idea to keep mining at a loss because bitcoin's value generally rises over the years... My opinion is that you are correct: you should turn off your equipment if mining at a loss... There is no good reason behind mining at a loss to begin with... Just turn off your equipment and buy BTC from an exchange with the money you would have spent on electricity for as long as it takes untill mining becomes profitable again. You'll end up with more BTC in your wallet this way than if you'd had continued mining.

And that's exactly the answer to your last point: yup, you would be in the profit $600+, but if you'd invested the money for buying your ASIC and the money you'd invested into electricity into buying BTC directly, what would the end result have been?

Would be glad to be proved wrong but unless you can recover your investment in short span of time you may never earn back the amount of bitcoins you could have bought with the initial investment in the miner…

Eg S9 was available for usd 195 (0.058 btc) in December 2018… from that date to till date if you had mined bitcoin for everyday when it was profitable and shut it down when it wasn’t profitable to mine you would only have earned back 0.041 btc @ 7 cents kWh.

Btw in USD terms you would in profit of 600+

I used historical btc data from coin metrics.io and miner price from kaboomracks market place on telegram