Topic: Finally, a correct (endgame) difficulty calculator - page 3. (Read 12399 times)

That could be a factor if one entity had a majority part of the hashrate with no competition and it would somehow manage to hang on to that.
But Ive lost count of the number of ASIC vendors that are, or soon will be on the market. There is no way you could get them all in a cartel to "cooperate".  All it takes is one defector.

Miners dont even enter the picture. If someone sells mining rigs at a price appears profitable, someone somewhere will buy it, no matter what existing miners decide.

Your assumption overlooks the fact that actors can make rational decisions that are not in their interest due to the action of others. Consider the Prisoner's dilemma and how it applies to miners choosing to purchase or not purchase hardware in aggregate:

http://en.wikipedia.org/wiki/Prisoner%27s_dilemma

In the case of mining hardware purchases, the choice is cooperate (don't purchase hardware) or defect (purchase hardware).

If a miner purchases new hardware and most other miners do not, the miner can potentially profit.

If a miner purchases new hardware and most other miners do as well, difficulty goes up to the point that mining is unprofitable for all participants by the time the hardware arrives.

This is the game we are playing and will continue to play until difficulty levels off and profitability for the majority of miners returns.

BTW, googling for electricity prices, wikipedia shows rates in russia can be as low as 2.4 cents per KWH. That gives this result:



In kuwait its only 1 cent, that would allow the network to reach 1 exahash (1000 PH) if you can solve the cooling problem
Free electricity would bottom out around 1.7 EH.

Forget all these history based linear/exponential extrapolations. Now you can actually calculate where bitcoin difficulty is headed.

To be able to calculate that, you need two simple assumptions:
- overall miners are rational and will only keep buying hardware until they reach the point of marginal profitability within a given period (investment horizon).
- Likewise, ASIC vendors will keep producing and selling chips as long as  its profitable, ie, as long as miners are wiling to pay a price above their marginal costs.

To be able to calculate the point where these two cross over, you need to have an idea what the chips cost to produce (and a minimum operational profit margin), and a clear view of costs of the miner.

Fill out your own assumptions by downloading this spreadsheet:
https://docs.google.com/spreadsheet/ccc?key=0ApaVTTCEb_oudGFsUnNuQUVNUGc2Z3VUVmF3ZVBuV2c&usp=sharing

Here are mine, using Hashfasts published numbers:



(updated)

Feel free to add the cost of casing/PSU/shipping/handling etc in the "per chip" field, Im assuming in the long run these things will be sold bare bones without fancy enclosures and the costs of PCB is negligible and miners already have PSUs or wont factor in that cost given they have decent resale value. Feel free to alter those assumptions.

Also note the investment horizon should NOT be compared to today, when difficulty is growing explosively. This spreadsheet calculates the "end game" where difficulty remains fiarly stable, or at least is only really influenced by BTC exchange rate and perhaps mining fees. In such environment, an investment horizon of a few years is entirely reasonable.

Finally, I did make a shortcut in the formula to calculate the cost of these chips. To accurately calculate that based on die size and wafer size, you need a special tool:
http://www.silicon-edge.co.uk/j/index.php?option=com_content&view=article&id=68

My formula uses the correct numbers for hashfasts chip size (177 candidates for a 18mmx18mm chip), but I simply extrapolate linearly for bigger or smaller chips. IN reality smaller chips will generally yield a number of chip candidates per wafers thats slightly more than proportionally to its size (up to a point), and larger chips will yield less than proportional. If you want more exact numbers, just use that calculator and redo the cost per die math yourself, but all the other assumptions are likely a much bigger variable.

In a chart:



edit: corrected yield calculations and per chip costs.