Bitcoin Forum

hey guys, i have been mulling over whether or not to try my hand at some mining as an investment for the past 6 months. If anyone could correct anything I say or tell me how my assumptions are wrong (or better yet right) please do so.

If i were to have the following setup, how profitable would it be over say 12 months:

5 Antminers S3-B5- $1948.35 USD
expected speed - 441 GH/s * 5 = 2000 Gh/s or so
$Kw/hr = $0.00 (lets assume it is and will stay free)

Time Frame   BTC Coins   USD   Power Cost (in USD)   Pool Fees (in USD)   Profit (in USD)
Hourly   0.00246606            $1.43        $0.00   $0.00                                               $1.43
Daily       0.05918551    $34.22   $0.00   $0.00                                               $34.22
Weekly   0.41429855          $239.55   $0.00   $0.00                                               $239.55
Monthly   1.77556520          $1,026.63   $0.00   $0.00                                               $1,026.63
Annually   21.60270999     $12,490.69   $0.00   $0.00                                            $12,490.69

Now this is based on the exchange rate around $550, it could hover around or go higher so the numbers towards the end of the year would be slightly higher in profit. If we assume free electricity, what do you guys think of this, is it very possible? is this based on a solo scenario, or are profitability calculator found online all based on pooling?

Online calculators use the following formula to figure out your expected earnings per day.  So, if you had those S3s mining right now:

The numbers aren't based on whether or not you mine in a pool.  You also need to account for the changing difficulty - which I'm sure the numbers you've provided do not.  You've based your projections on a static difficulty rate, whereas the reality is the difficulty rate is anything but static.

You need to realize that the BTC network adjusts the difficulty every 2016 blocks to try and maintain a 10 minute block generation time.  If you look at the historical difficulty charts, you'll see that it is constantly rising... sometimes ridiculous amounts... others very little.  Most online calculators will assume a 20% increase every jump by default.  Personally, I think that's not sustainable, but that's a completely different discussion :)

Anyway, if I use the same numbers you've given - up front hardware costs, free power, etc.. and assume you will not get your miners until next Friday at the earliest... with a difficulty increase of 20% every 2016 blocks...

By December 18 of 2015 you will have made a 0.4755BTC return.

That's the doomsday scenario where every single difficulty increase between now and then is 20%.  If you change that number to a 10% increase...

By January 9 of 2016 you'll have made a 4.436BTC return.

As you can see, there is a significant difference.  So, what do you do with all of this?  Take it with a grain of salt and decide for yourself if you want to commit your cash to mining hardware :D

hey thanks for the response! as you can see im still pretty much new to all this, so bear with me. With the formula you used, the return is half a bitcoin in a year and change? Is that solo or mining pool? Does that factor in the % of getting supremely lucky and getting a block reward (25 coins)? 

and if you could simplify it even more, assuming free electricity, how is mining even worth it at all? How are the businesses which make specialized mining rigs sell things if its a losing proposition of say $1000 per $1500 spent?

Yes 0.5BTC if the difficulty goes up at a high rate.  4.5BTC if it goes up slowly.  This is assuming pool mining - solo mining would be bad with that limited hashrate as you will most likely end up with nothing.

Why are people mining?  Well companies are mining because they can make miners for 1/3 the price they charge us.  The just sell the units to us after a month after they took the majority of the profits - just the sad reality.  People buy the miners hoping to get rich.

thanks for the reply. can you break down in ranges what is limited, medium, high processing speeds? Also, sorry for asking the obvious whats the units to measure it as it starts Gh/s -> to whats next ->  and so on? if i were to buy a dedicated rig to mine for the next 6 months how much $$ would it take to setup to have a decent expectation of break even and profitability within say 6-12 months?

There is no low/med/high really since high to an individual is low to a company.  The network is about 150PH/s, that's 150 x 1000 TH/s or 150 x 1000 x 1000 GH/s.  You're a medium player to most if you have over 0.1% (150TH) of the network, and a big player if you have over 1% (1500TH/s).

Profitability doesn't really matter on how much you spend unless you spend over $1 million USD.  When you spend large amounts of money you can get custom miners or get special treatment from the manufacturer and get your miners a few weeks early to make a profit instead of a loss.

Home home users you just buy the cheapest hash/$.

Right now only the S3 looks like a possibly profitable venture.

Some people buy the miners with delusions of grandeur.  They think, "I'm gonna make a fortune in magic money!" figuring if they buy some overpriced crap on flea-bay and plug it in, they'll be flying their own private jet to their vacation island.

Mining BTC is not a get-rich-quick scheme, plain and simple.  Can mining be profitable?  Sure it can... just like any investment has the potential to be profitable.  Do your research and make your decision.

cool, thanks for the response. so all the profitability calculators are way the f**k off? mine pooling would be better off, and if the difficulty doesnt increase so drastically in the short run, assuming a $550 coin or higher, would i break even at say 1 or 2 month like the calculators say or not?

The units are hashes per second.
KH/s - kilohashes per second - 1,000 h/s
MH/s - megahashes per second - 1,000,000 h/s
GH/s - gigahashes per second - 1,000,000,000 h/s
TH/s - terrahashes per second - 1,000,000,000,000 h/s
PH/s - petahashes per second - 1,000,000,000,000,000 h/s
... and so on.

Your average PC's CPU will measure speeds in KH/s
Your average PC's GPU will measure speeds in MH/s
You average ASIC will measure speeds in GH/s - TH/s

Your last question is just another variation on your first post in this thread, "What rig will make me profit?" If we all knew what machines would guarantee profit, I'm pretty sure we'd all have bought the manufacturer out of them by now :)

All the online calculators make assumptions and use static values where dynamic ones are needed.  Another thing to consider is how you're looking at ROI.  If you purchase hardware in BTC, you need to think of ROI in terms of BTC.  If you purchase hardware in fiat (like USD), then you can think of ROI in terms of fiat.  Do not intermix the two.  Examples:

1 - You purchase Joe Miner's new rig for 3BTC.  If that miner gives you back more than 3BTC before you unplug it, you've made a positive ROI
2 - You purchase Joe Miner's new rig for $1800.  If that miner mines enough BTC that you could convert to USD to cover your investment, you've made a positive ROI.

Example of how NOT to think of things:

1 - You purchase 3BTC from an exchange for $1800.  You then use those coins to purchase Joe Miner's new rig for 3BTC.  After 6 months, the miner has mined 2BTC and you pull the plug.  In 6 months the price of BTC has gone to $1000.  You sell your 2BTC for $2000.  You DID NOT make a positive ROI.  You ended up with less BTC than you started with.

And why should we assume that your electricity is free and will stay that way? What magic do you possess that us mere mortals do not?

Someone has to pay the bill. If it's included in your rent, I can guarantee that your landlord will be knocking on your door after the first 30 days.

I also hope you have your cooling needs taken care of.

Pool mining is the same idea as buying a lottery ticket repeatedly with 50 million other people.  You will win every week but only a small amount.  Mining solo is like buying 1 lotto ticket - most likely you will loose.  Mining calculators are merely stated the expected return at a pool.  Unless you have millions of dollars, assume you will be pool mining.

The calculators simply use the numbers we plug in.  If you think everybody else on Earth is enthusiastic to mine then assume 20% increase every difficulty.  If you think some people have their heads on straight or are very pessimistic you can assume 5% growth.  The reality is somewhere in the middle and will bounce from period to period - sometimes 30%, sometimes 3%.

Lol, that's the same scam that put Sonny Vleisides and his cohorts in prison a few years back. Of course they were just spending the money people sent them and didn't actually buy lottery tickets.

Wait I don't think pool mining is like buying a lottery ticket, in fact I think it's the opposite.  If you solo mine, then YES that's like a lottery ticket but in a pool you'll get a steady return as long as the pool is big enough.  The lottery aspect comes in because the difficulty is unknowable and if it goes up big then you're screwed.

You've misunderstood DrG. He/she (I assume DrG is female because of the avatar, forgive me if wrong) said that pools are like buying lottery tickets with millions of other lottery players... you're going to win often but you'll have to split the winnings millions of ways.

Pool mining is a lottery.  Just sit there on Ghash, BTCGuild, Eligius, Bitminter or any other pool and hope one of the guys in your pot gets lucky and finds the winning ticket.  Ghash is buying 43K tickets, BTCGuild is buying 10K tickets, etc.  It's just the lottery winnings are so reliable and diluted across many users.  Instead of calling it a lottery - we ascribe the term variance to it - but it all comes down to luck if you will.

If pool mining was steady return, then why is everybody upset at the 2nd largest public pool (BTCGuild) not returning a steady return?  Because they haven't been winning the luck lottery for 3 months is why (besides the withholding attack).

Hehe, I'm a dude.  I used that pic because my kid wanted to see mommy when her mom was out of town.

Ok, got it, but even with the difficulty set at 20% on some calcs, i would be maybe breaking even if i were to get 5 s3 today up and running at around 2.5-3 month break. anything after that like you guys said, would be much slower etc. it just seems that the market itself would die very quickly if it were not possible at all to be making breakeven/profit. considering i do have unlimited free power, ive got no cost to at all to just set it up and let the machines run themselves 24/7 right?

and all this is if the coins stay at the same price, and the difficulty goes up at full 20%.

Care to comment?

sure, imagine my family owned a powerplant and within that powerplant i had an outlet and no one cared about power consumption. I still havent received a concise answer as  to why my plan  would/wouldnt work assuming free power. like i said before im a total newb at this and would like help.

Perhaps you're not understanding what we mean by 20%.  We mean consecutively each increase goes up 20%.  So first 11 days difficulty is x, then 1.2x, then (1.2x1.2) or 1.44x, then (1.2x1.2x1.2) - geometric growth approaching logarithmic scale.  That's why the difficulty is 20X what it was 7 months ago - 20X is 2000%!

To understand why your plan may or may not work requires you to understand the role of difficulty in your expected ROI.  Difficulty is a means by which the Bitcoin network adjusts itself to try and maintain a 10 minute block generation time.  As more and more hashing power is added to the network, blocks are solved faster and faster (typically).  Every 2016 blocks, the network looks at the average generation time and adjusts the difficulty to bring it back in line.

In a nutshell, as difficulty goes up, and your hashing power remains constant, you earn less BTC.  Here's a quick breakdown.  Your 5 S3s will hash at about 2.2TH/s.  Let's see how that would have manifested over the past few difficulties in expected earnings per day:

On 6/18, the difficulty was 13,462,580,115.  2.2TH/s expected to earn 0.08218BTC a day
On 6/29, the difficulty was 16,818,461,371.  2.2TH/s expected to earn 0.06579BTC a day
On 7/12, the difficulty was 17,336,316,979.  2.2TH/s expected to earn 0.06382BTC a day
On 7/25, the difficulty was 18,736,441,558.  2.2TH/s expected to earn 0.05905BTC a day

As you can plainly see, as the difficulty goes up, your expected earnings goes down, and how much the difficulty goes up directly corresponds to how much your expected earnings go down.  Just for fun, let's see what that same 2.2TH/s would have expected to earn in December of last year:

On 12/21/2013, the difficulty was 1,180,923,195.  2.2TH/s expected to earn 0.9369BTC a day.

So, in 7 months, that same hashing power went from earning you close to 1BTC a day to now making about 0.06BTC a day, because the difficulty went from 1.1 billion to the current 18.7 billion.  If you project that every single difficulty adjustment will be an increase of 20%, let's take a look at what that same 2.2TH/s would be earning you:

After 10 difficulty adjustments of 20% each, the difficulty would be about 116,000,000,000.  2.2TH/s expects to earn 0.009538BTC a day.  10 difficulty jumps should be right around the end of November this year.  So, at the end of a year's hashing, your gear would be earning just about 100 times less.  In fact, the decreased earnings EXACTLY corresponds to the increased difficulty.  Here's the actual formula for calculating expected earnings:


So... now you need to speculate.  What do YOU believe the difficulty will do?

OP I know it sounds nuts but I was mining and making what I thought was a decent like .01 BTC a day like a year ago and now it's to the point that it's not even worth my time to mine, even with free electricity!  The difficulty just goes up SO frickin fast sometimes it's just really depressing unless you want to keep investing in more and more expensive equipment.  So I'd just recommend starting small.