It will produce much more heat than that. Most gasoline generators are 25-30% efficient, so the actual heat output will be 11 kW+.

I think the easiest, quickest fix is just for OP to lower power intensity on his machines.

The problem with repairing mining equipment is it's difficult to find enough electronic repair technicians who do it at a large scale. Repairing hashboards is probably a skill that takes months to learn, not accounting for the dozens of ASIC models on the market. BGA rework is expensive, so it's probably cheaper just to buy a new hashboard.

I do think there are opportunities for things like devfee removal, automatic shutoff when the electricity cost is too high (large farms usually have realtime energy prices) and even a web application for managing the customer relation stuff. The devfee part is very interesting because it could increase profit by 3-5%.

You're right that I don't need a large farm to do this kind of development. I can only afford a small warehouse with 50 ASICs / 200 GPUs (after ETH PoS) anyway. But I have no better investment to put the money into, and I think showing the medium-sized farm to potential customers will help sell the software and consulting. No other investment has the same tax benefits that mining does except maybe real estate.

This is true, but there are aspects of setting up even a medium farm that there are no 'professionals' for. The biggest problems are leasing a warehouse or leasing land, and asking the utility to install megawatts of power. This is really hard because there are so many utilities and every site is different. Sometimes you have to pay $30k upfront and the transformer takes 3 months to arrive, then it takes 1 month to install. Except for the mining containers, there is no guidebook to mining at scale!

Why not just simply dial down the power settings of your equipment for better efficiency? You can reduce power usage by 20% while only sacrificing 5-10% in hashrate.

Even with a natural gas generator, the power will cost at least 11¢/kWh. You're better off finding a small warehouse to rent. Find one with at least 400A 3 phase power for no more than $1500/month of rent. You will get a lower electric rate as well (between 6¢-11¢) for most small commercial service in the U.S. Just check the electric tariff and call the utility to confirm the rate you calculated.

The other problem is these generators aren't designed to run 24/7. You will need to deal with the exhaust. There could be zoning restrictions in your city that ban permanent generators.

Absolutely. It's not very complicated.

Sales tax on hardware: Get a reseller certificate. Avoid sales tax when buying the equipment as long as you sell the equipment by the end of the year, or the end of next year if it's already September/October. However, if your timing is off, you might owe sales tax eventually. But it's better than paying the tax upfront, because you've already bought more miners and hopefully made returns off them. The amount of that tax has been diluted by inflation anyway.

Sales tax on electricity: This is much harder and you need to be larger-scale, but some states (like Texas) have exemptions to the 6.25% sales tax for datacenters and other companies like that. Oklahoma has a similar bill coming up.

Federal income tax: Depreciate the equipment (ASICs, GPUs, electrical, ventilation, etc.) with Section 179 in the first year. If you sell equipment, roll the proceeds into new equipment before the end of the year. As long as you re-invest profit into capital equipment, you'll never owe income tax. Just be careful with the timing.

State income tax: Same as the above.

FICA: This is the worst one of all of them. File taxes as a 'Subchapter S' LLC, and pay yourself with distributions. You will save up to 15.3%. There are more details about this method on the web.

Bonus deductions: Set up your home address as the official business address. Now, every trip you make to/from the warehouse is deductible. Also, run a few miners in the garage and a bedroom, then deduct 20-30% of the rent as a business cost. Keep track of power usage so you can deduct that too. Finally, if you use personal credit cards to buy equipment, use 1-2 cards for just the equipment and deduct the interest (if any).

With mining, you don't need to cheat/lie/hide in order to pay zero in tax! What's the point of cheating if you pay 0 anyway.

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Thanks for the encouragement. I obtained wholesale prices and it looks like the best option is a used Bitmain S17 Pro, which has decent efficiency but isn't too expensive. I can get the 56T version for ~$2600 each (shipped from the US). They will still break even at my starting electric rate of 6.3-6.8¢ if BTC goes < $20k, and their value won't go down as much as the S9's.

The problem with hoping to mine ETC after ETH PoS is that the ETH ASICs (Bitmain E7, Innosilicon A10, etc.) are all going to mine ETC too. It will be more profitable to sell the video card, even at dirt cheap prices, than mine ETC (or any other GPU coins). GPU mining will go into a depression, just like 2019. But that's the perfect opportunity to buy thousands of them cheaply.

The coin trading markets are of course efficient, meaning it's impossible to time the market. But I don't think the mining equipment market is perfect. There are always plenty of suckers who buy video cards even when they know proof-of-stake is scheduled for July and has been going according to plan. I might regret purchasing the Antminer L3+'s in the end, even though they are at the cheapest price in the past year.

The reason I want to go larger scale is not necessarily to profit from the equipment. Miners never get rich, in general, unless they're already rich or mine & HODL during a bear market then the coin booms. I already know that. What I want to do in the end is software development / consulting for large scale farms, which is probably far more profitable and scalable than the mining process itself. But in order to do that, I need to have my own farm to develop/test the software on.

But anyway, one absolutely can get more coins with mining than buying, because there is a tax deduction up front for the equipment (at least in the U.S.). It is guaranteed that they get 22-37% of their investment back in a few months through their tax refund. There's no such deduction when it comes to just purchasing the coin. And if the farm owner keeps rolling their profit into more equipment, they pay 0% tax perpetually. When it comes to selling coins, there is a 15-20% capital gain tax.

Good point, which is why I bought a dozen of these older ASICs to run in my own home garage to see how reliable they are. I know I have to expect a much higher failure rate for old ASICs than for GPUs.

The point of starting out with old ASICs isn't to make the highest profit. The goal is to get a high power demand so I can get lower electric rates (6.3-6.8¢), and to get a 24% tax write-off instantly. Then we'll shift to GPUs (after PoS) and newer ASICs like the Bitmain S/T17 series. If revenue goes down, we can increase efficiency to get some of it back.

For maintenance, I don't even think I will pay for repair. I would just remove the dead hashboard and sell it for a buck or two, then keep mining.

I have also lived through bear markets in mining. You're right that breaking even is very important. I know that a smaller operation like Coinfarm can't match the mega miners on cost, but we can offer benefits and services that big farms don't, along with proprietary tricks than can raise profit by 4-8% on ASICs and 10-20% on GPUs.

There won't be any employees. As a programmer, I'm confident I can automate operations by stitching together different services and even bypassing devfees. The most the monthly rent+insurance would cost is $2500, which is 2.3¢/kWh for only 150 kW. Of course, I'll try to find a 300+ kW warehouse, which is doable.

We will definitely open up to outside investors in May/June with hosted mining (never any contracts!) for investors outside the U.S. U.S. persons (citizens/residents) will be able to buy non-voting stock, for the greatest tax benefits and returns.

I sent you a PM.

I would also include the price of the equipment in the calculation. During a gold rush, not only does your equipment make more $$$, but the value of the equipment goes up. Let's say you own a few Antminer L3++'s and DOGE boomed, so you made a killing. The DOGE price is starting to fall. You can make even more profit by selling your equipment, then using all the funds to buy hardware for other algos that aren't overpriced.

Likewise, during a bear market, not only does your profit margin get squeezed; but your equipment falls in value too. It's better to try to sell if the price has went downhill for 1-2 months and the momentum has ended.

Stupid Zoo York 'lawmakers' (read: clowns) have no idea that mining farms STABILIZE the power grid by consuming RENEWABLE hydro energy that would otherwise be wasted. Even better, large mining farms can be switched off on command during peak power usage!

It's extremely expensive to transmit the cheap Niagara power 400 miles away to NYC/Long Island, so what else will NY do with it??. They have NO understanding of crypto mining.

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I read the fine print of the bill. It requires an investment of at least $50k, and even then, you only get 1% of the cost back as a tax credit. There are extra credits for hiring employees, but let's be honest, only really large farms can do that. The final benefit is sales tax exemption for all equipment involved in mining and on the electricity, which saves at least 4.5%. Overall, it looks like a 5.5% initial benefit and a 4.5% ongoing benefit to me.

It's probably better for me to set up shop in TX than OK considering the cheaper power and the fact that I can get nowhere near that big now. Miners can already defer sales tax for up to 1 year in most U.S. states with a reseller certificate anyway, according to my accountant.

Absolutely, I know that I'll have to pay more attention to the depreciation of the equipment and the revenue:electric ratio. An older miner with $3 revenue/$2 power is much more risky than a newer model with $6 revenue/$2 power. The more bullish I am on BTC price, the more the balance shifts toward older equipment.

I'll but ASICs on at least 3 algos in order to manage the risks of just 1 coin going down. If DOGE crashes, my Antminer L3's are worthless. If Zcash crashes, my A9 ZMasters are useless.

But a lot of GPU miners will be disappointed and wish they did ASIC mining instead if ETH PoS indeed comes this summer...


I totally agree. My strategy will be buy whatever is 'cheapest' at the moment; ASICs or GPUs.

The older ASICs will provide the 50 kW of startup demand I need to get index power rates. Since BTC/DOGE have underwent a small correction, I think ASIC prices are reasonable these days (although not great).

Then I can double down on GPUs after PoS. I'm much more confident about a GPU holding its gaming value after PoS than before PoS. A $500 RTX 3060 probably has $150 of gaming value, so it could crash to $150-200. Better to buy that card at $200-250 later than $500 today. The high rewards over the next 2-3 months aren't worth $300 of capital loss.

If BTC crashes to $20k later on, the strategy would shift to buying used S17/S19 miners at a discount. If the ASIC coin prices boom while GPU coins stay stagnant, then I'll buy GPUs.

Update:

I talked to an energy provider. They told me that it's possible to get real-time marginal energy prices in Texas on ERCOT if the load is at least 50 kW. That requires only 15 Antminer S19 units or 50 Antminer L3+ units or 300-350 RTX 3060 video cards.

I'll be opening up my mini warehouse in May/June with an index power contract. Looks like the total power cost (energy + dist. + premium) + tax will be 7.8¢ for 100% uptime, or 7.1¢ for 95% uptime (where the machines are powered down during peak load hours).

It is possible to buy older ASICs like the Avalon 821 and run them profitably overnight, when the rate is just 4.0¢. Uptime would be 60%. If the payback period on them is < 300 days, it might be worthwhile.

You're right, it hasn't been going very well. Right now the daily profit is $0.50 for me, meaning the payback time is 700 days. Profit dipped to near zero many times this month. Bad decision. I just bought a bunch of Antminer L3+'s for $600 each, and the payback time on those is 350-400 days. Well, the Goldshell was my first ASIC miner, so good thing I only paid $350 for it.

Can't you just buy a Goldshell LB-BOX ASIC miner? They only use 150w and they're very quiet. I bought mine for $350 or so 2 weeks ago.

You could buy some of the low-power Goldshell BOX used ASICs.

I have a similar plan. I am going to buy up old-gen ASIC miners like the Antminer L3/S9/S15 in order to demonstrate a decent power demand to the utility. Since they're At 7¢/kWh, I know I won't make much profit with those, but I can get an immediate tax write-off and get a small warehouse started up in May/June. The point is to try to draw in a few initial smaller investors with the hardware they're already familiar with: ASIC machines, as well as start building a customer base by offering GPU colocation to people who have even 1 rig.

I won't be able to compete with the 4/5¢ mega-miners on cost, but I can offer non-voting stock (not a mining contract) in a real company who's responsive to their needs and can give personal attention. Why stock shares? Because the tax benefits pass through to them, which is one way I'll differentiate my operation from the others. "Instead of being locked into a fixed contract with this mega farm who's 4000 miles away, why not go with this little guy who's more likely to act in my economic interest by reacting quicker to the market?"

By July/August, ETH PoS should've happened. Video card prices will crash. That's when I'll turn around to tell the investors, "hey, in 2019 you could've bought a video card for $135, made $600 of profit on it, and sold it for $300 in 2021. This is the perfect opportunity to diversify by venturing into GPU mining". Hopefully they will trust me by then, and I can raise enough $$ to buy hundreds of video cards. I should fill the warehouse to capacity by then.

Then I would expand the farm to a new location with metal sheds or containers, while alternating between GPU/ASIC based on which route I think is best at the time. That's when I can start offering mining contracts.

Yes; the day ahead pricing only applies to the energy generation, which is a competitive market. All energy still flows through the ONCOR lines. Here's an example during peak hours. If I can chop off just this 1 hour every day, it goes a long way. The S9's are obsolete anyway so I'm not worried about the risk of heating/cooling cycles.

There's a chance I can't get day-ahead pricing. In that case, the energy would be a fixed 5.8¢.

The only way to reduce the ONCOR charges is either higher uptime (higher load factor), or to not use ONCOR's transformers. I think it can go as low as 0.8¢ by taking power straight from the utility poles (5-20 kV), although I expect 1.8¢ in most small warehouses.

I 100% agree, of course GPU mining will live on, but right now isn't a good time to enter because of the threat of PoS. I definitely will get back into GPU mining when equipment is cheaper. My strategy is more long term.

The problem with the AI/rendering compute services is: (1) there are few customers (2) it requires reconfiguring the rig, which will cost 30% more in equipment + 30% more in power per card.

I was thinking that I could buy them in order to get to 100 kW as quickly as possible in order to secure lower per-kWh rates to prepare for the upcoming GPUs or newer ASICs, and especially to attract outside investors. I would sell the S9's for scrap after a year after they serve that purpose. I also think scaling to 100 kW will give me some experience with the construction/HVAC part.

Should I move up to a slightly higher tier, like the L3 series, Innosilicon ZMaster or T15?

I wanted to go with the day-ahead index, where I always know what the rate will be in 24h and it's not subject to instant spikes like the real-time LMP. I'm not worried about the spikes because I will write custom, automated software to cut off the Internet to the ASICs to power them down. Maybe other farms will want the software.

I wrote code to analyze historical index prices on ERCOT, and it looks like I can go from 5.3¢ --> 4.5¢ for energy while only losing 5% uptime. That will barely affect the demand charge.

That's a very good point. This is the hard part. I need to find a place with heavy power at a reasonable rent. Thanks for reminding me I can't just expect more power and I always have to keep a reserve of capacity. I would rather spend that $40k on replacing the S9's with more efficient ASICs than on ONCOR, which is a waste if I leave that location.

I've definitely seen warehouses that have their own transformers, and they tend to have much heavier capacity. The rates are cheaper too. I need to look for those in particular. I think I also have to find buildings that are wider rather than longer, so that hot air exits right out the back.

The point is to demonstrate a working, profitable farm to investors before going bigger. At that point, I would try to lease land and install metal sheds with my own transformer equipment.

I've been GPU mining since early 2013 on and off, starting with a single Radeon HD 7850 video card, then multiple R9 270's during the Dogecoin boom, then with 200 GPUs (RX 570's and GTX 1060's) during the 2017-2018 ETH gold rush with help from outside investors. My business went bankrupt in late 2018 because a big investor pulled out after ETH started falling, we only got 200 cards instead of 1000+ so we defaulted on the lease, and I scaled back down to a single rig in 2019-2021.

But now, with my regular job (software development) allowing me to work fully remote, I'm really interested in moving to somewhere with cheap-ish power and opening a small warehouse again. Since I'm currently in NJ, I thought about upstate NY first, but I don't like the BitLicense crap and state income tax, plus it's the middle of nowhere. I also considered NH/MT because they have no sales tax, but I'm interested in having a real life outside mining. OR/WA have cheap power but are too far away timezone-wise, as my job is located in EST.

My primary destination would be the Dallas TX area, unless one of you can recommend a better state. It seems to be an up-and-coming destination for mining farms and Bitcoin people (should be easier to find investors), plus the regulators are nice. The heat could be a problem, but at least the climate is dry. The best power cost I can get on ONCOR seems to be 7.0¢ in total (5.2¢ energy, 1.8¢ demand). I'm hoping to get day-ahead pricing and lower the cost to 6.0-6.5¢ by shutting down during price spikes.

My initial budget is $60k: $50k for the equipment and $10k for the lease deposit/construction costs. I want to add $6k of equipment per month, for a total of $100k invested by EOY. Warehouse rent will cost $1400-$2000/month and I think I can get a 3PH 600A 240v supply for 200 kW of capacity (600 x 240 x 1.73 x 80%). I have the financial stuff, like how to avoid income tax & sales tax, under control thanks to my accountant.

However, with the uncertainty about ETH PoS, I don't want to buy GPU rigs again. I'm thinking of starting out with ASICs. I did some research and I think I can start out with 100 Antminer S9's for $380 each. With custom firmware, I could run them at 13.5 Th @ 1100w. Mining calculators are telling me each one could make $1.40/day of profit, which is a ~270 day payback period. Of course, BTC difficulty will keep growing and that margin will be squeezed and that doesn't account for other costs.

But I'm new to ASIC mining, so I'm worried about the following stuff:

• 1: What would the failure rate be on these old S9's? I heard that ASICs die quicker than GPUs.
• 2: Is 7¢ too high of a rate to get into ASIC mining, especially with Antminer S9s? If BTC price falls below $30k, the profit margin looks like it will be so low it will be unviable for me.
• 3: How can I get insurance for this business that has the highest chance of paying out if there's a fire?
• 4: Can I get away with installing 240v 6-20R outlets then plugging the PSUs directly into them to avoid the cost of PDUs? I used to have 30A L6-30R outlets.
• 5: Is it worth mining with ASICBoost? Why isn't everybody doing it?
• 6: Should I go with the Antminer L3 series instead? It seems they're selling for 1-year low prices and less of the revenue is spent on power.

Once ETH goes PoS, and I locked in a cheap power rate due to demonstrating that 100 kW of demand to the suppliers thanks to the Antminers, I would stop investing in new ASICs and start buying up cheap GPUs. I think that could be a great time to get into large scale GPU mining with older cards like the GTX 1000's / RX 500's, which should crash the most in price after the n00b GPU miners panic. At 6-7¢/kWh, it's probably a better long-term choice than ASIC mining.

Any recommendations from the seasoned ASIC operators? Should I just wait for PoS and stick to GPU mining because it's what I know best?

You know that you could've mined the most profitable coin, sold that coin, then used the funds to buy ZIL... you would've gotten even more ZIL as a result. Unless difficulty was very low on ZIL and you really believed in the coin.