Topic: The Best Mining Rigs Are Now Barely Profitable -- Now What? - page 3. (Read 5878 times)

I like the chart, but I cant agree with your assumptions. IN particular electricity costs. Average electricity costs are irrelevant, what matters is lowest electricity cost (where mining is feasible). Because that is where mining will relocate, and places where electricity price is substantially higher, miners will have to shut down. Here is a read for you:

http://www.spokesman.com/stories/2014/apr/26/northwests-cheap-power-drawing-bitcoin-miners/

A map comparing energy rates led them to Central Washington, where hydroelectric dams churn out electricity that costs industrial customers less than 2 cents per kilowatt.

You are assuming 10x that price.

Secondly you are incorrectly factoring in asic "improvments". THere are two factors that matter, price per GH and watt per GH. The first one doesnt need Moore's law to improve dramatically from where we are today. ALl thats needed is difficulty going up further, and prices will come down proportionally. We are no where near asic manufacturing costs yet, in fact today marginal production cost of these chips is so low, that its irrelevant, they might as well cost nothing. Asic alone, I estimated HF golden nonce elsewhere at $0.04/GH in wafer production and packaging cost (assuming they can hit 800GH with their rev).

As for watt/GH; also there we do not need Moore's law to get a doubling in 2 years. THe very same asics being sold today almost certainly have the possibility to be downclocked and downvolted to achieve that doubling (or more), be it at the expense of performance per chip. ALmost all miners sold today are being run and sold at the top end of the voltage/clock shmoo plot, which is evidenced by the fact that they typically barely overclock at all. To see what changing of voltage and clock can do, look at Bitmain S2, which is the exact same chip as in the S1, but is twice as power efficient. Im willing to bet KnC, HF, CT, etc can easily double their power efficiency too on their existing designs, once that trade off becomes worthwhile. But since electricity cost is only a tiny fraction of most miners cost, and pricing of hardware is far more dependant on hashrate than power efficiency, it doesnt make sense for 28nm designs today. Doesnt mean they cant.

I'm not sure if we'll see an overshoot as such but I think we will see people turning off older mining hardware sooner than they'd expected as the operating costs become larger than what they generate. Newer hardware is much more capable though so we'll probably not see any actual drop. A new ASIC might be 10x higher performance (or more) for the same input power than the ones being dropped off though so we may not really notice.

As an example, in the last 2 months the new capacity is almost the same as all of the previously-existing capacity. It makes no sense to switch any of the mining hardware if it's generating more than it costs to run. The hardware may never ROI but the only sane thing to do is ignore the sunk cost, unless a buyer can be found. It makes no sense for that buyer to switch it off though as long as it generates more than it costs to run.

The single-purpose nature of the mining ASICs really does suggest that things will have to be different to when people decided to switch off GPU mining hardware that could be "repurposed" to rendering graphics :-)

Well done, davejh!

This is a pretty close match to what I'm expecting, except that I agree with rocks, in that we should expect an overshoot and then a correction in hash rate.  Don’t know how to model that realistically, though...

Difficulty will have to plateau at some point unless everyone is just mining based on future price.  Here's my historical analysis http://www.cryptocoinstats.com/difficultytracker.php

we need new good SHA-2 coin
 

Nice chart

You are assuming that miners as a whole are rational people by pricing in a 1-year break even requirement.

For my calculations I took the assumption that miners are irrational people and will continue to buy equipment up until the time the utility company's monthly bill is larger than the BTC generated. This happens when electricity cost equals revenue generated. At this point miners start to shutdown, not because they want to but because they have to since they are going broke.

If you look at the GPU era, this is exactly what happened in 2011. The hash rate overshot break even, and then started a downward slide before leveling out. At the rate people are still buying equipment today we are well on our way to doing this yet again.

Only this time there won't be a very large existing second hand GPU market for gaming to take the supply of equipment that will pop up on ebay. That's when we hit fire sale time this time around.

I work for a power utility and have a pretty good idea about what types of electrical services are available and what it takes to upgrade an electrical service.

With this in mind, I don't understand how miners are going to be able to keep plugging in increasingly more miners without paying for costly upgrades to their electrical service.

Just by running some simple difficulty growth projections I predict that miners will cease to be able to make a profit off a typical 200A residential electrical service.

Basically, the infrastructure is not in place for distributed mining.

On another note, Bitcoin mining is not the only thing challenging power commissions...grow ops and electric cars are 2 others that come to mind

I couldn’t agree more about the evils of centralization.

But we have already determined that a large number of small miners can operate more cost-effectively than a small number of large miners.  So hitting the wall of difficulty should hurt the large miners harder than the small ones.

This should actually lead to decreased centralization.

Unless I am missing something?


Yes.  And this, combined with inefficient miners going out of business, should drive the difficulty back down to the point where it makes sense for the most efficient miners to continue or resume operating...

And then there is the wild card introduced by the price of BTC, which the large players have more control over than the small ones.

So can we expect some kind of "BTC business cycle"?

How is this likely to play out?

I am this thinking that it will be like any other example of centralization.

Bad for most...good for a few and generally devastating for the economy involved.

ASICs will not be usable by anyone without a commercial or industrial service which will drive the price down.

This will in turn decimate consumer demand which is actually a massive segment of the bit coin economy.

Sit back and watch the fireworks 4th of july.

If I understand Puppet's graph correctly, each curve assumes a different cost per terrahash of mining rigs.

I do agree that even the players who make their own rigs based on their own ASICs are going to feel the crunch soon.

And that's why I ask... what now?

Something has to break.  But what?  And in what direction?

I agree there are retail miners. Commercial. And manufacturers.  I know of 1 big maker selling the farms now to exit by xmas.

ROFL. You really think those asics are made from pure gold dont you.

So...... I guess we can expect the big players to hold the price of BTC down until they're ready to liquidate their operations, then?

Thanks for the link to that other thread, Puppet!  There's lots of good information there.

In rough numbers, I agree with your calculations.

I did the excel sheet ages ago and the results are obviously not quite that simple, unless you assume free hardware (or an eternal break even time expectation).

Create an excel spread sheet that calculates the break even hash rate for a given BTC price, ASIC efficiency and cost of electricity.

Adjust each assumption up and down, you'll see the break even hash rate adjusts as described above.