Topic: Experienced GPU miner thinking about starting an ASIC farm; what should I know? (Read 405 times)

I'm a few hours north of Dallas in Oklahoma. My rate here is 4.3c per Kwh. Power is sourced hydro and wind so it's ESG friendly.  I'm literally looking over the damn/lake from my living room as I type this. I have about .5 Mw of capacity and can add more. I was going to do it and asics almost tripled in price and was no longer interested. I want to start a hotel of miners, I can go hands on if needed. lmk

I've been GPU mining since early 2013 on and off, starting with a single Radeon HD 7850 video card, then multiple R9 270's during the Dogecoin boom, then with 200 GPUs (RX 570's and GTX 1060's) during the 2017-2018 ETH gold rush with help from outside investors. My business went bankrupt in late 2018 because a big investor pulled out after ETH started falling, we only got 200 cards instead of 1000+ so we defaulted on the lease, and I scaled back down to a single rig in 2019-2021.

But now, with my regular job (software development) allowing me to work fully remote, I'm really interested in moving to somewhere with cheap-ish power and opening a small warehouse again. Since I'm currently in NJ, I thought about upstate NY first, but I don't like the BitLicense crap and state income tax, plus it's the middle of nowhere. I also considered NH/MT because they have no sales tax, but I'm interested in having a real life outside mining. OR/WA have cheap power but are too far away timezone-wise, as my job is located in EST.

My primary destination would be the Dallas TX area, unless one of you can recommend a better state. It seems to be an up-and-coming destination for mining farms and Bitcoin people (should be easier to find investors), plus the regulators are nice. The heat could be a problem, but at least the climate is dry. The best power cost I can get on ONCOR seems to be 7.0¢ in total (5.2¢ energy, 1.8¢ demand). I'm hoping to get day-ahead pricing and lower the cost to 6.0-6.5¢ by shutting down during price spikes.

My initial budget is $60k: $50k for the equipment and $10k for the lease deposit/construction costs. I want to add $6k of equipment per month, for a total of $100k invested by EOY. Warehouse rent will cost $1400-$2000/month and I think I can get a 3PH 600A 240v supply for 200 kW of capacity (600 x 240 x 1.73 x 80%). I have the financial stuff, like how to avoid income tax & sales tax, under control thanks to my accountant.

However, with the uncertainty about ETH PoS, I don't want to buy GPU rigs again. I'm thinking of starting out with ASICs. I did some research and I think I can start out with 100 Antminer S9's for $380 each. With custom firmware, I could run them at 13.5 Th @ 1100w. Mining calculators are telling me each one could make $1.40/day of profit, which is a ~270 day payback period. Of course, BTC difficulty will keep growing and that margin will be squeezed and that doesn't account for other costs.

But I'm new to ASIC mining, so I'm worried about the following stuff:

• 1: What would the failure rate be on these old S9's? I heard that ASICs die quicker than GPUs.
• 2: Is 7¢ too high of a rate to get into ASIC mining, especially with Antminer S9s? If BTC price falls below $30k, the profit margin looks like it will be so low it will be unviable for me.
• 3: How can I get insurance for this business that has the highest chance of paying out if there's a fire?
• 4: Can I get away with installing 240v 6-20R outlets then plugging the PSUs directly into them to avoid the cost of PDUs? I used to have 30A L6-30R outlets.
• 5: Is it worth mining with ASICBoost? Why isn't everybody doing it?
• 6: Should I go with the Antminer L3 series instead? It seems they're selling for 1-year low prices and less of the revenue is spent on power.

Once ETH goes PoS, and I locked in a cheap power rate due to demonstrating that 100 kW of demand to the suppliers thanks to the Antminers, I would stop investing in new ASICs and start buying up cheap GPUs. I think that could be a great time to get into large scale GPU mining with older cards like the GTX 1000's / RX 500's, which should crash the most in price after the n00b GPU miners panic. At 6-7¢/kWh, it's probably a better long-term choice than ASIC mining.

Any recommendations from the seasoned ASIC operators? Should I just wait for PoS and stick to GPU mining because it's what I know best?

I'm no mining expert by any measure of the scale, but I wouldn't splash the cash on ASICs if you don't know how to operate them on a large scale. It's way too easy to mess up some configuration and many of your ASICs get disabled/crippled for some time which negatively impacts rent installments.

On the other hand, I'd make sure wherever you are hosting those GPUs has a backup power supply - it's just as deadly to high-wattage GPUs as it is to ASICs (for some reason the mobile "chip" GPUs don't seem to get worn out by power failures though).

antminer s9 380$ per unit?This is too expensive!

This one in particular is interesting, I have noticed it before, I believe the exemptions is for manufacturing business and was not sure if mining could fit in that category. As far as the "larger-scale" requirement, I do not remember seeing anywhere a size / scale requirement, any more info on that or what exactly constitutes large enough to get that exemption?

Dont get me wrong you can still make good money but not coin, mining BTC with asic's.
90% of BTC is mined whereas retail investors are getting penciled out, and the rest are fighting for the last 10% while difficulty is all time high.
Thes best bet right now is to simply buy the coin, by time the next price movement happens difficulty will no doubt increase making it all the much more difficult to obtain.

Sales tax on electricity: This is much harder and you need to be larger-scale, but some states (like Texas) have exemptions to the 6.25% sales tax for datacenters and other companies like that. Oklahoma has a similar bill coming up.

by the way, mind sharing how to avoid those US taxes?

the electricity price in Texas is completely acceptable for mining. As for the S9 is a very stable machine, the failure rate is not high, but $380 is definitely second-hand,The failure rate will be much higher. So I suggest you buy a refurbished S9j 14.5t, it will be much more stable, about $500 a piece.If you are worried about the price of BTC falling, then I suggest you to buy the Ant S19 series. With Texas electricity costs, you'll always be profitable.

... I have the financial stuff, like how to avoid income tax & sales tax, under control thanks to my accountant.

Let's assume this is your profit from 1 ASIC
https://minerstat.com/hardware/antminer-s9
I didn't see in your business plan the cost of a few good engineers to maintain this junk.
At the end of 2019, my profit was almost zero at a price of 4 cents/kwt. You have rental premises and employees. Your competitors will buy new equipment and increase the network hashrate.

a shame that you didnt live in europe, I would potentially partner with you, I have £250,000 GBP capital ready for similar idea to what you speak of.

Personally, I think GPU miners will be a bit disappointed moving into ASIC mining, but if you pick the right entry and exit points, it can be massively profitable.

I would think that an experienced GPU miner might be a little turned off to ASIC mining for a few reasons.  ASICs tend to devalue faster than GPUs in my opinion, so while their volatile prices might give you more opportunities for profit scenarios, you have to be quick to act because you can be left holding worthless bricks in the end if you aren't nimble.  There is also more dependency on a single currency, whereas GPU mining gives you added flexibility if one coin's price dips or something.  You're also left with less usability for your equipment, so if regulation or market conditions causes ASICs to become worthless, GPUs will still have buyers in gamers and graphic artists.  Personally, I think GPU miners will be a bit disappointed moving into ASIC mining, but if you pick the right entry and exit points, it can be massively profitable.

This day-ahead index is a specific agreement with the energy seller, not oncor, right?