Bitcoin Forum

I've been lurking on these forums a lot, and I am fascinated with bitcoins.  I've been setting up some sample mining rigs, I started with a USB block erupter, then set up my PC to mine litecoins, and I'm looking to buy some more dedicated hardware, mostly for altcoin mining.

Reading the posts got me thinking about serious investment into equipment to mine bitcoins.  I found that's it's not unreasonable to get a 2th/s unit for around $6000/USD.  It's easy to get excited about that, because you go to a site like http://www.coinwarz.com/, use one of their mining calculators, and BAM!  Holy cow, 2th unit is going to make me RICH!

http://www.coinwarz.com/calculators/bitcoin-mining-calculator/?h=2000000&p=500.00&pc=0.19&pf=2&d=908350862.43702200&r=25.00000000&er=686.60000000&hc=0.00

Makes it look like in a year you will be making $271,000.00 USD with a simple $6000.00 investment!  How can it go wrong?  But as I started doing more research and reading on these forums, some of the more experienced people warned of the increasing difficulty, and offered advice to double the difficulty every month.  Well, I'm an analytical guy, so I had to put it all down on a spreadsheet.

https://docs.google.com/spreadsheet/ccc?key=0Arep9y4833VpdG4zNExxTENNZS1MbERWR1R1RV9STFE&usp=sharing

I started off by analyzing the increase rate of difficulty over 10 periods (approx. 110 days).  On average over those 10 periods the difficulty increased 30%.  That's very close to 2x a month (it's actually ~2.2x), so you could use it as a rule of thumb.  So then I started extrapolating what the difficulty will be over the next ~18 months.  Extrapolating the number of coins generated from coinwarz per day, I then calculate how many coins you can generate over a period for a given difficulty.  I also based it on an average bitcoin value of $600.  You can tweak the bitcoin value of course, up if you are an optimist, down if you are a pessimist.

So it's probably not likely that you can get your hands on hardware until February if you order it today.  So based on that assumption, the column on the bottom right show your capital cost recovery.

The result is this:  If you buy a 2th unit today for $6000, and plug it in on Feb. 14th, you will never recover your capital costs.  You will be in the hole by $60, and when you get to that point, just unplug it, because it's only costing you money after that point.  Also, you can increase the value of bitcoin, or increase the Hash rate (buy another unit), but because of exponential increasing difficulty, you have to increase those numbers exponentially to get any return.

True, difficulty rise is going to be awful. It's a question of who gets their miner first... the difficulty has been increasing from 1 to 4 percent daily for the past few months so your income will decrease quite rapidly. And when everyone get's ASICs the difficulty increase won't be small!

See the chart: https://docs.google.com/spreadsheet/ccc?key=0AiFMBvXvL2dtdEZkR2J4eU5rS3B4ei1iUmJxSWNlQ0E#gid=0