Good Morning everyone,
Again I'm under some time constraints today so I wont have time to fully explore the implcations of what I started in my post yesterday.
I do see that my new best friend Mr Gage has again been busy, seem he can't quite make us him mind as to who he wants to accuse us of being or doing. He really doesn't seem to grasp the concept of limited company structure - just because you've got a business address in an area doesn't mean to say that any of your directors or employees live there, so to make wild leaps of logic that someone who shares a name with a convicted criminal in that area must be that person are absurd. Can't wait to see his next claim, what will it be? That we started the Second World War, shot JFK or perhaps were solely responsible for the 18th century slave trade?
So the return to the real world, yesterday I showed how to calculate what a mining rig will earn on a daily or monthly basis, and what that means for how much you should pay for it. There seems to be a lot of opinions that very soon it might not be possible for people to mine at home or independently due to the growth in the network hash rate. Certainly 'small time' miner face challenges, but htey're not impossible to overcome.
In earlier posts, Mr. Canary said that Asicminer have 60PH of capacity in the process of being built, and I've no reason to doubt him. Whether that's on their own account or simply guessing it from chip sales he didn't say. it's a fair old lump of capacity, that's for sure but I doubt that it could be deployed in a period of less than two months. Canary also said there is a lot more to come, namely 1500PH in the next year. To fund that amount based on rough calculations we've done about the likely system costs you would need approximately $600,000,000, and thats not including the costs of actually getting the capcity inot a data centre, setting it up and paying for the rental and so on. That's an awful lot of cash. You might argue that they'll be earning tons of Btc from the earlier capacity they put in, but as difficulty goes up earnings go down and so it takes longer and longer to pay for you initial purchase.
And of course Asicminer aren't the only show in town. So let's assume that come September the network grows by 60PH a month, starting at 185PH. The full chart hasn't been shown so it can fit in and be legible, but it assumes continuous growth at 60 PH/month.
What you can see is that all starts well, a 4TH rig installed in September with a J/Gh rating of 0.7 will earn $6409 in it's first year - fantastic! It will cost $1600 to manufacture, about $350 to ship and install. the Electricity cost has already been accounted for at $0.04/kWh. However, it's share of the maintenance and operations costs of the data centre will come out at about $80 per month, and someone has to pay for the initial setup and configuration of the data centre, so take another $250 per system out of that. So the total costs per system in the first year are: $1600+12x$80 + $350 + $250 per system, ie $3160. Subtract that from the $6409 and you get $3249. Not bad at all.
However, for machines installed in October the net yearly earnings drop to $2095, and by December to $795. Still a profit, but you can see where this is going, and the network rate is 'only' at 385PH. A machine installed in April 2015 will barely break even. Yes, it will continue to make money in it's second year, but the return on investment is looking decidedly shaky.
Of course, BTC might go up in value. It might also fall, who really knows.
The point to all this is that sometimes people are afraid of the demons others conjure up to scare them. Unless you do a comprehensive analysis of their facts and figures, which for many is difficult because they don't have access to the necessary information, then you get stuck in a situation where fear rules the day.
I'm short of time again today, so tomorrow I'll look at how individual miners might cope with the situation I've described.