Bitcoin Forum

Why the hell are people still buying hardware?

I was simulating purchasing an sp31 for 1500 shipped (which seems to be the going price nowadays) and hosting it for 6 months @ 60usd/kw/mo (which is a pretty damned low price) and came to realize: there is no realistic chance of ever making my money back. Hell, even at 1% difficulty increments, I will only hit ~75% of my money back after 6 months. At 5% or higher, the picture gets pretty freaking dim.

Calculator link (includes hosting cost into miner cost):

http://btcinvest.net/en/bitcoin-mining-profit-calculator.php?diff=47427554951&dcosts=2724&diff_mincrease=1&blpbtc=25&dhsmhs=4900000&diff_mincreasedecrease=0.1&btcusd=274.87&dpowcon=3400&btcusd_mincrease=0&pcost=0&calcweeks=13&dleadtime=0&action=calc (http://btcinvest.net/en/bitcoin-mining-profit-calculator.php?diff=47427554951&dcosts=2724&diff_mincrease=1&blpbtc=25&dhsmhs=4900000&diff_mincreasedecrease=0.1&btcusd=274.87&dpowcon=3400&btcusd_mincrease=0&pcost=0&calcweeks=13&dleadtime=0&action=calc)

So, my question for my fellow miners out there: How are you planning to break even? Free power?  :)

I'm paying about 0.03$/kw for my electricity which is really low. I live in an apartment with two other guys and we split the electricity bill (they have no idea I have few ants running on my balcony :P)

That's a pretty assholish thing to do. Imagine what they will do when they find out you are taking advantage of them.

Propably yea although running two S3's with one 750W PSU doesn't use much power : )
If I'll expand the mine more I'll have a discussion with them : )

i think people are still buying despite the non-profit, because mining it's simply fun, also many newbie want to discover it

it's a bit like gaming

Maybe because people aren't doing the right analysis and risk calculation before putting in the money.
And its on;y the rich, who can currently go about purchasing the expensive rigs
 

It depends on your price predictions. If you see bitcoin hitting $500 this year, you may be better off mining, as your "profit" per month would improve significantly with the price. Difficulty will trail price by several months, there just isn't the capacity to host that many more miners. So you'd mine almost as many as in the $275 scenario, but get to keep more each month.

Right now, your margin is only about 50%. At $500, it would be 70%. (Although difficulty would pick up to eat away at that.)

But there are a lot of factors to consider. If the $500 rise comes in the last two weeks of the 12 month year, then no, it won't have made sense. If it comes earlier in the year, then yes it would have.

If the price drops to $100, you own a very expensive paper weight.

It isn't as simple as "buy and hold" BTC, but honestly, until the price is above $300, I would say "Buy and hold" is the safer strategy.

If the price stays steady here, then no, it is hard to justify.

Your factors are:

1) Current Price
2) Future price
3) Rate of change towards future price
4) Difficulty (from the perspective of technological innovation)
5) Rate of change of difficulty to react to future price (demand for new miners)
6) Hosting costs
7) Cost of equipment
8) Rate of change of hosting and equipment with future price (When profits were through the roof in late 2013, hosting was 25 cents/kwh due to lack of space and heavy demand)

Also, a big factor is whether you consider hosting a "sunk cost" upfront or a reoccurring monthly cost, that will affect your numbers as well.

Hey asswipe,

Price actually does matter a lot. Can't pay for your electricity in BTC fixed prices. You pay in currency.

You're welcome,

Someone who runs a data centre

Do people who buy miners and have free electricity can still have a Positive ROI after investing into mining gear in the current time ?

If you have free electricity, then yes, you could still buy gear and ROI. - But check on your electricity. A dorm room won't support an SP31, they just don't run enough power to your room. Same with a lot of small apartments. Check your electrical panel before buying a miner.

I got free electricity and I would NEVER pay retail for a miner, so I just got some used S3's and got ROI after a month.

I can tell you're poor and angry. I'm sorry for that. I agree now is not the time to be paying retail, but there were plenty of times int he last 18 months where you did better by buying miners rather than buying BTC.

But many large operations do pay their electricity monthly from their BTC mining, like KNC, Bitfury and Bitmain, and I don't think they're "dumb as fuck".

There's no market for the hobbyist miner anymore, only big operations in places with really cheap electricity and direct source for hardware purchase can make a profit out of mining.

If miners think the price of btc will go up they will buy hardware and use it to amass bitcoin in hopes of future profits when the price is higher.

It seems to me that if you are the kind of person that calculates ROI only in terms of Bitcoin, it makes no sense to just buy and hold Bitcoin. No matter how much, or how little, you pay to purchase N Bitcoins, that's exactly what you'll have 1 year from now (i.e. N Bitcoins). In that case your return on investment is actually zero, since you neither gained or lost anything (as measured in Bitcoins). You strictly "broke even" as measured in Bitcoins.

Nothing has changed in the last few months regarding ROI.

If you believe in bitcoin you are better to buy and hold at the moment rather than invest in equipment unless you get it at a good price and have free or dirt cheap electricity.

Actually, your return on investment will be 1, since BTC in = BTC out.

Also, if you really believe in bitcoin you'll buy and then spend. The exchange rate may grow if supply exceeds demand because people are hoarding coins, but the economy as a whole will not because overall utility decreases. A healthy economy will have plenty of purchases of goods and services in bitcoin, and as that process becomes more mainstream and more vendors accept bitcoin in exchange for their various wares, everyone benefits. This doesn't really happen if all we do is hoard.

Buy in bulk and it will reduce costs considerably.

Do not buy 1-3 SP31, order 20-40 then the pricing makes it so you can make profit.

I think that pretty much boils down to semantics.  Generally, when people speak of a return on investment they are speaking of the difference between what they put in and what they get out - just like you state.  However, when people put 10BTC into something and get the same 10BTC out at the end of the investment, the usual response is an ROI of 0, not 1 - i.e. they made 0% on their investment.

Anyway, if we're speaking strictly of BTC ROI, then you need only consider how many coins a miner will mine during its existence.  All other factors (electricity, hosting, whatever) are irrelevant to the equation.  Will that hardware produce more coins than it cost to purchase it?  If yes, you've made positive ROI.  

Of course, it's naive to speak strictly in terms of BTC simply because there are indeed costs associated with the production of the coins by the miner - most notable among them is the electricity required to run the miner.  Because, at least to my knowledge, there are no utility companies that currently accept payment in BTC, you must consider conversion of BTC to USD (or CAD, or GBP, or YEN, or whatever).  This is where it becomes murky because you're effectively gambling.  If you think that your hardware will produce more coins than it cost to purchase, inclusive of all associated fees to run the hardware, then you make the purchase.  You're betting that the network difficulty won't rise too much and the value of BTC to fiat will increase.  If you don't believe it will, but you do believe the value of the coin will increase, you buy and hold.

Correct! Mind you, lots of small-medium miners (like me!) use miner colocation services like SEG, allinvain's colo, or ASICSPACE.
These colocation services do accept BTC for hosting.

For such a facility, is the hosting cost a fixed amount of Bitcoins per month? Or does it vary each month, presumably with the price of Bitcoin?

In the bitcoin world, just almost every time the term "ROI" is used it's supposed to be "positive ROI" or "breakeven". I'm one of those guys that gets steadily more and more annoyed when incorrectness is perpetuated. An ROI is just that - a return on an investment. If you plug in your miner and mine for one hour and get one payout from your pool, you've gotten some return on your investment. So yeah, if you look at absolute returns then breakeven happens at ROI=100%, but if you're talking positive/negative relative returns then breakeven happens at ROI=0.


My hosting facility has a fixed power cost, so the BTC billing changes based on the exchange rate. Some others do this, and some charge a flat BTC per month for certain machines, and some charge a flat USD per month. There's a lot of ways to do it.

If you're looking strictly to profit from an exchange and not utilization, you buy and hold. If you're looking to grow the bitcoin economy as an independent economy instead of growing it as a subset of your local currency, you buy and hold.

No.  You can no longer make your money back on hardware.

Most of the people running miners today, like me, bought them last year.  Now that I have them, and they are running, I lose more money by shutting them off and selling the hardware than I do by keeping them running.  I will not make my money back unless the price of bitcoin goes back to at LEAST $700.  But a small revenue stream is better than nothing at all.

That and also many people just do it as a hobby and for the fun of it. Even if they aren't making any money.

As said many times before; ROI is possible if electricity cost is low.

From what I learned in economics class as long as you earn more than the electricity is costing you than you should keep mining.

You are doing something wrong.  Myself and many people make BTC when buying hardware from manufacturers.

Wrong could cover living in a place with electricity is too high, Not buying the right equipment, Needing to build out your house to support more power, etc etc etc.

Eh, for the most part you're right, the future exchange rate of bitcoin should not play a role in deciding whether to purchase mining equipment. But it does have a marginal effect in two ways.

The first is the cost of electricity, which is priced in a different currency. Using USD as an example and a $0.10/Kwh rate of electricity, a 1 KW miner costs about BTC0.008 per day to run at an exchange rate of $300. If that miner is current-gen and running at 2Ths (0.5 w/gh - using easy-to-math numbers), it makes about BTC0.02 per day, for an operating profit of BTC0.012 per day. Skip ahead to when difficulty doubles, and that profit is down to a mere BTC0.002 per day. A couple more difficulty increases, and it costs more than it makes, and its bitcoin earning days are over.

Unless the exchange rate changes, and bitcoins increase against the dollar. At an exchange rate of $600, all things equal the cost of electricity per day is now BTC0.004, which means the same miner is earning a profit of BTC0.006 per day. The difficulty would have to rise much more for the miner's operating profit to disappear, which means that it will earn more bitcoins overall.

The second is that exchange rate affects difficulty, though to what extent is unclear. This should be obvious from the first point, as the hypothetical miner discussed there would turn off shortly after difficulty doubled if price were stable, but keep running if the price increased. This counters the first effect, though. However, I'd expect (but this is speculation) that difficulty increases would lag price increases to some extent, as some of the difficulty increase would come from new hardware, and that takes time to manufacture. This is particularly true if the price increases after a long decrease or a period of stagnation (kind of like now).

So based on the above, right now, if you think the price will increase, it may not be a bad idea to grab some inexpensive used hardware. Actually, about a month ago would have been the best time to do that, as there isn't much of that on the market right now.

I imagine some miners are hedging in the futures markets. That's what futures were originally created for--to protect against future price fluctuations of commodities.

I reached a point like this as of right now I have 4 miners in china at lees place = 4.6th


https://bitcointalk.org/index.php?topic=934581.0


I have 2  sp20e's and 1 sp20 in house                                                         = 3.9th

and I have 3 avalon 4.1's in house                                                              = 2.8th

total                                                                                                       = 11.3th

My winter power = 13 cents but the heat is worth 3 cents so 10 cents

My summer power = 16 cents add 2 cents for cooling =         18 cents

So my 6.7th in house will be reduced  no later then June 15th when rates go up.

Unless we jump a lot in price.

Most likely I will be selling another sp20e on ebay.  Most buyers here want low prices for a sale of an sp20e

Mining forces you to save in BTC as you have to maintain your equipement and you are pushed to buy more equipement. You could profit if the difficulty doesn't raise much.