Topic: Price of mining the cheapest bitcoin - page 3. (Read 3511 times)

I don't know how you got your numbers. Let's base the calculation on Antminer's S3. Specs used for calculations as taken from their site, see here.

Let's assume difficulty increase of 15% per adjustment, and as energy cost: $0.05 per kWh.

If mining starts now, then after 198 days, the unit will stop mining at a profit based on ongoing energy costs (assuming $500 per BTC market price), and will have generated a total of 0.64 BTC during its (profitable) lifetime.


Now, given the raw numbers so far, we get:

(((0.58*480)+(198*0.43)))/0.64 ~= $568 production cost per 1 BTC.

Which is indeed higher than current market price, and suggests mining isn't profitable anymore.


However, keep in mind the point I've made several times by now: amateur mining is probably unprofitable. It's the professional, large scale mining that is interesting, under the assumption of reduced hardware and energy costs.

So, I'll make one more assumption: Let's say Antminer has a 25% profit margin on their hardware going for consumer prices, that a large miner (maybe Antminer running a farm themselves) is able to deduct.

You can reject this as pure conjecture, please feel free to do so. I however consider this to be a rather conservative estimate. In this case, we get:


(((0.58*0.75*480)+(198*0.43)))/0.64 ~= $459 per 1 BTC.


Now, to get back to the point I've been trying to make over and over again:

There are several unknown variables that apply to large scale mining, such as: cost of operation (manpower, rent, cooling, setup, organizational overhead), cost of acquisition of hardware, and finally: energy cost. For that reason, I don't make any claim that the above value (of $459) is "the correct" production cost per coin of a large mining operation.

My goal in the above calculation is simply to point out, that, given the relatively conservative assumption that a large mining farm can acquire S3s for 75% of the consumer price, and make use of electricity for $0.05 per kWh, the production cost (taking into account hardware cost and energy only) is below current market, i.o.w. mining would be profitable for such an operation.

The rate of difficulty growth (and the rate of growth of mining power as well) has declined. It was +30% every difficulty correction. Now it's more like +20% or less.

Yes, I left the delay part out because I wasn't sure if we had the same idea about this mechanism. So, agreed on your point. However (and correct me if I'm wrong), eventually, difficulty will need to decline (or at least rate of growth will) if mining is unprofitable - together with assumption of course that miners are, on average, ecomomically rational.

What I mean is: up to now, it is possible that we don't see the effects of unprofitable mining in difficulty because of the delay in the feedback loop, but the longer there is no effect on the difficulty, the less likely it becomes that mining is unprofitable (unless we assume a growing delay, which I don't find plausible.)

Correct?

^^^ This!!

I quickly ran the numbers for supposedly the most efficient advertised hardware available (Spondoolies SP20 and the SP31).

Even if they are able to produce these for $100 per unit, by the time you take into consideration $485/BTC, pay for shipping and a power supply they are not profitable to run at the lowest energy costs in the country ($0.05/KW hr)  Not for one week....not for 6 months. It doesn't help to scale up, my calculation does not take into consideration commercial datacenter costs...so 1000 of these doesn't help, it makes the losses much worse.

I seriously doubt that ANY company producing hardware is able to produce 1.7 TH for $100.
(ASICMiner for example has a chip only cost is higher than that.)

There is no mining equipment produced today that can make profit, even at manufacturers prices.

You can trick yourself into believing there is a meager profit to be squeezed out if you manipulate the online mining calcultors...you are only fooling yourself.

(Not sure how the OP came to calculate what he/she did but they are clueless.)

You are masterizer of the english language!!

My point is the price feedback loop is laggy--it has a time delay.
Introduce a time delay into any negative feedback loop (think typical op amp circuit, or a governor on a steam engine) and what you get is an oscillator (hunting or surging for mechanical stuff).  Depending on initial conditions, the oscillation will be sustained, damped, or terminal (things go poof!)

*The time constant was really out of hand when people were preordering ASICs and getting them a year later.  

And coffee is not working for me today

P.S:  Do you see what I mean by sloppy price feedback?

I used many calculators on the net and even used $0.02/kwh. If difficulty keeps increasing at the current rate (20% per adjustment), nobody is profitable one year from their purchase.

Probably true for the majority of amateur miners.

Almost certainly not true for the professional mining farms.

Where I live the electricity costs are about 0,30 USD/kWh, I wish I would live in China and own a big bitcoin farm...

No matter how cheap one's electricity is, if the hardware cost is taken into account, one always loses money by mining!!!! Sorry!

Yes

But you're calculating now (average)  profit of miners, while I talked about _cost_ per coin.

I never said price (market price, that is) can never fall below production cost, which is what you have in mind maybe. That said, I believe production cost is a price attractor, and we won't fall below it unless extremely strong momentum brings us there. If price would fall below production cost for a longer period, we would certainly see the effect of that in hashrate / difficulty, but we don't (yet).

oda.krell:

What I'm trying to say is there are scenarios (not just hypothetical) in which a rational miner is forced to continue mining even though overall, the operation is unprofitable.
Having a hard time putting it into words, maybe an example might be clearer:

1.  I spend $1k on hardware.  At current difficulty and [predicted] difficulty increase rate, I calculate that ((hardware cost) + (hosting cost)) < (price of coins mined over lifetime).  Profit.

2.  Other rational miners do same, difficulty skyrockets. <=="turn on" calculations, using your formula, all made sense.  Rational.

3.  Now my original calculation is no longer true.  I will lose money, but wat do?  My options are as follows: <=="turn off" condition
   3a.  Shut down as soon as my original calculation, (1), is no longer valid, losing my original 1k investment.
   3b.  Keep mining while (hosting cost to mine one coin) remains < (price I could get for that coin).  <==obviously the rational choice, my loss will not be total, but I won't break even either.
   3c.

Is this any clearer? (it's morning )

Ah, speculation, the brain damaged section of bitcointalk.

0.19W/GH sounds pretty nice. Especially considering the currently best models require ~0.5W/GH. Just looking in the mining sections provides the following information about Extolabs. The web page also doesnt exist anymore.

Calculating current costs using the efficiency of a scam product. Very good. And, as others have mentioned, you need to checkthe "whole package" to calculate profitability (up front cost, electricity cost over whole timeframe, maximum btc earned).

Yes, but impact of energy cost only  mining decreases over time, as the hashrate share of total hashrate declines . Exponentially, in fact.

There's really no way around it: cost per coin is based on total coins produced and total cost during production. The latter includes hardware cost.

Edit : to clarify. Because of the hashrate increase, for any given fixed hashrate miner, a finite amount of coins is generated by that miner. (or, more accurately  I suppose : that number of coins is approached asymptotically

oda.krell:
Interesting bit re. rationality of miners/tx fees (from http://www.coindesk.com/faster-bitcoin-network-keep-fees-low )


Another tangent re. "Hardware cost + total energy cost over entire life time of (energy profitable) mining of hardware, divided by coins mined during that time = price per coin":

That is the point at which a rational player would start mining.
Once the mining gear is bought, he will continue mining until Hardware cost + energy_cost_to_mine_coin > price_per_coin.

+1 for seleme's point.

Let's do the calculation right:

Hardware cost + total energy cost over entire life time of (energy profitable) mining of hardware, divided by coins mined during that time = price per coin. Note that this calculation has to include an estimate of difficulty growth, to get a realistic value for 'life time of energy profitable mining'.

Two further remarks:

- I did my own calculations about 2 months ago and got a value around $470, assuming low consumer energy costs and low consumer hardware costs. However, there was and is a big unknown element in calculations like this: We don't know the factor by which large, professional mining farms can get hardware and energy at a discount.

- For energy, about $0.05/kWh seems a low, but attainable estimate.

That would be good if miner was free

You have to take cost of the miner and how much it could produce in certain time frame, add electricity costs to that, and then you'll get mining profitability.

I seriously can't understand why anyone beside some huge entity that could get a good mining hardware deal or produce it's own, would buy a miner now.

you see bitcoin is going to nowhere but down,bitcoin is too much over-price !

Yes, nethash has to rise a lot to create again a reasonable price equilibrium. Mining is a gold laying chicken for the professionals.