I included capital cost in that calculation with straight-line depreciation, assuming the average Whatsminer M30S or Antminer S19 will last for 4 years. That is why production cost per coin is higher than power cost. Unless the farm is earning enough daily profit to pay off their equipment in 4 years, they're losing $$.

Sales tax/use tax absolutely is important because it means getting 5% to 9% less equipment for the same price. Same with import tariff or VAT. There are strategies to defer sales tax for up to a year, but it needs to be paid eventually. That's why it's worth considering zero sales tax states like MT/NH/OR as long as the power is cheap enough. If you're selling hashrate to customers in the U.S., that can be considered a taxable service in some states like Texas, while other states like Pennsylvania don't tax it.

As you know, the evil, ugly IRS considers mining revenue 'income' the moment it arrives in our wallets. However, I found a trick to roll the crypto into a retirement plan and therefore get a tax benefit.

Step 1: Incorporate your mining operation as an LLC, if you didn't do so already
Step 2: You must earn a net profit after power cost & depreciation!
Step 3: Open a Solo 401(k) retirement plan for the company. There are services that make this very simple. They will register a trust fund entity on your behalf and appoint you as the trustee & plan custodian.
Step 4: Open a new corporate exchange account on Kraken/Gemini/Coinbase Pro in the name of the trust.
Step 5: Send your mined crypto to the exchange. Sell the crypto for cash, transfer the cash to the trust bank account, then transfer the cash to the exchange.
Step 5.5: Buy whatever crypto you want on the exchange.
Step 6: You just made a 401(k) contribution which is either on a pre-tax or Roth basis! If you chose pre-tax, it's like buying 20-30% more coins. If you chose Roth, you'll never owe any future tax on withdrawals.
Step 7 (optional): Send the coins on the exchange to your own hardware wallet.

Solo 401(k) accounts allow you to invest in almost any asset. The other benefit of this type of account is a high $60k contribution limit, the ability to borrow up to 50% or $50k at zero interest, and rolling over existing retirement accounts into buying tax-advantaged Bitcoins while the price is still low.

Of course, please consult with an accountant or attorney to make sure you're doing this correctly. Mistakes will be expensive. The maintenance / transaction fees can be $1000/year or so as well.

I have just started this experiment today. The process should be complete this month.

Don't start a mining farm in 'Noo Yawk'. If you make a profit, they have a ridiculous income tax. They charge a ridiculous sales tax too. The power rate is much higher than 3-4 cents unless you sign a deal directly with a power plant. The publicly available rate at 1 MW is probably 5-6 cents in the west/central load zone. The state as a whole is unfriendly to the crypto industry. The only advantage will be the low temperature.

I recommend finding a state which isn't a stereotypical mining state like WA/TX/NY, browsing through the utility tariff documents, and hopefully finding a place that offers ~5 cents without having too much competition from other miners. Don't choose a location which is too hot, like southern/west TX, AZ or NM. I've heard of a large farm located in NJ moving to OH this month, so you might want to consider that state as the weather is cooler.

I can also give you a list of states where you can't find power for < 6 cents anywhere in the state: CA, NJ, FL, CT, MA, RI, PA, DE, MD, VA. Disregard these states entirely.

I think a tophat, cane and monocle are better investments if one makes money from crypto

I can't sell my mining rigs anyway, because (#1) it's dumb to not mine during a bear market, (#2) I'll incur depreciation recapture under IRS Section 179, forcing me to pay $10k of additional income tax.

That's great! When I posted this comment, it wasn't unlocked. But I still won't buy any GDDR6X video card from NGreedia because of VRAM thermal defects. I would rather buy RTX 3060 Ti's, RTX 3060's or RTX 2080 Super cards because they do great on non-ETH coins.

Better to wait until after the ETH PoS crash or if the bear market continues. GPU prices could be half, meaning you could buy twice as many cards if you're patient.

Right now is a horrible time to build a rig, because the recent dip in crypto price hasn't been reflected in used video card markets yet. A RTX 3060L still costs $400+ on feeBay. It should really be $370 or lower.

It costs more than that to mine a Bitcoin after including the capital cost of hardware. It costs $15k-$20k to mine a Bitcoin at today's ASIC prices assuming they last for 4 years, depending on the electricity price.

Many (stupid) n00b miners who were expecting to get rich quick will panic, shut down, then sell their rig. That's what I did in 2018, except I sold 10 rigs for pennies on the dollar to 2 lucky buyers who probably made 500% ROI by now. I remember packing three boxes with 20 GTX 1060's each, then sending them off for just $140 per card.

Agreed. I would never start a farm outside of my home country even if electricity is free. Screw the federal government. But they simply have more hoops to jump through in order to seize a private citizen's business or crypto or mining farm compared to Russia/China/Venezuela. They probably have to go through at least 1 court trial unless the business is obviously criminal. These courts are decentralized (district court, circuit court then Supreme Court) so there are opportunities to appeal.

Yes, we saw what happened in Canada with the truck drivers, but they were targeted because they were as loud and in the public eye as possible. If Washington wants to confiscate assets, they will go after Coinbase/Kraken first before thinking about some random mining farm in the middle of nowhere.

Probably political safety as well as tax deductions from depreciation (like Section 179). The disadvantage can be higher power cost in some areas or import tariffs.

I would buy the RTX 3080 12GB since NBMiner just unlocked them to 90% of full hashrate. The thermal pad issue may have been solved with them.

No, if they don't have GPUs inside, you can't even mine Monero profitably. The power cost will most likely be higher than the Monero revenue. The CPUs are old enough that they probably don't have a lot of L3 cache, so the Monero hashrate will be low.

I don't think it's a good time to start right now because BTC price just crashed, while it hasn't been reflected in video card prices yet. Once GPUs go to MSRP I will consider it. Even then, I will leave half the warehouse empty; leaving room to hopefully buy cards at even cheaper prices later on.

Buying GPUs cheaper definitely means more hashrate, but that only works if revenue > operating cost.

Same here. I should've saved up half the Ethers I mined in 2016, when diff was extremely low. I should've built more rigs in early 2019.

My journey started in the good old days where you could make $2/day of profit mining BTC on a Radeon HD 7870 card... until difficulty doubled in just 1 week thanks to the new Butterfly / Avalon ASICs.

The biggest issue of all is depreciation recapture under U.S. tax law. If the owner wrote off the ASIC and they sell it for more than they deducted, they owe income tax.

I did start a warehouse with 200 cards back in early 2018, but it went bankrupt when a big investor quit and we only received 200 cards instead of 1200 cards. The warehouse had enough power capacity to hold 3000 GPUs while the rent was $3500/month. Total hashrate was 5 Gh/s. This would equal 10 Gh today, as video cards were half as powerful back then.

I learned many lessons from that failure, so I will keep trying. I did find a few people who want to invest in an operation that size, but we need to wait until the right time to do it. $400 for an RTX 3060 is still too expensive. It needs to be MSRP or lower before we think about getting the warehouse.

No, the power cost would be 6-7 cents while the effective rent per kWh would be 2-3 cents. Let's say the warehouse has 125 kW of capacity, which is 90000 kWh per month. $2000 rent / 90000 = 2.2¢ per kWh. So the total operating cost is 8.2-9.2¢. Obviously, the more power the site can handle, the more cards we can fit, so the lower the operating cost/kWh.

What I said was that 100-200 video cards is the maximum most people in the U.S. can run in a residential house with a 200A 240v electric panel. Anything more requires a warehouse. Datacenter colocation isn't possible because it costs at least 13¢/kWh.

Because that's the only way to operate more than 100-200 video cards. The warehouse would hold 1000+ cards.

I can speak to GPU mining in particular. Used video card prices react very quickly to profit changes. Sellers lower their asking prices within 3-5 days. New video cards take 1-2 weeks to adjust to the new profit reality.