ASIC mining -- is my math right?

[alexanderanon]

First time miner here, looking to get some BFL ASIC's soon and doing some calculations on expected returns.

Using: http://www.alcula.com/calculators/finance/bitcoin-mining/

Assuming: 5 BF SC Singles: ~$6k for 300 Gh/s
Power consumption: 1W/Gh @ 300Gh = 300W
Electricity cost: $0.10/kW

AND assuming price remains same (worst case scenario, as I'm pretty bullish), block halving, and 10x difficulty (again, extreme scenario):

Total Hash Rate:300000 MH/s
Average time to find one block: 4.75 days
Average daily revenue (pre-halving): 10.53539662 BTC ($130.98)
Average daily revenue (post-halving): ~5.26 BTC ($65.50)
Average daily commissions/donations: 0.00000000 BTC ($0.00)
Average daily electricity cost: $0.65 (0.05212355 BTC)

Average daily profit pre-halving: 10.48327307 BTC ($130.33)
Average daily profit post-halving: ~5.21 BTC ($64.85)

Are those electricity costs really that low? I always hear miners complaining about electricity costs but really these seem pretty negligible.

[Remember remember the 5th of November]

You forgot to factor in block halving pretty soon and at a minimum, double the difficulty.

[tbcoin]

These allows you to configure the reward:
https://bitclockers.com/calc
http://tpbitcalc.appspot.com/

[alexanderanon]

You forgot to factor in block halving pretty soon and at a minimum, double the difficulty.

I did factor in block halving and I increased difficulty ten fold.

[tacotime]

First time miner here, looking to get some BFL ASIC's soon and doing some calculations on expected returns.

Using: http://www.alcula.com/calculators/finance/bitcoin-mining/

Assuming: 5 BF SC Singles: ~$6k for 300 Gh/s
Power consumption: 1W/Gh @ 300Gh = 300W
Electricity cost: $0.10/kW

AND assuming price remains same (worst case scenario, as I'm pretty bullish), block halving, and 10x difficulty (again, extreme scenario):

Total Hash Rate:300000 MH/s
Average time to find one block: 4.75 days
Average daily revenue (pre-halving): 10.53539662 BTC ($130.98)
Average daily revenue (post-halving): ~5.26 BTC ($65.50)
Average daily commissions/donations: 0.00000000 BTC ($0.00)
Average daily electricity cost: $0.65 (0.05212355 BTC)

Average daily profit pre-halving: 10.48327307 BTC ($130.33)
Average daily profit post-halving: ~5.21 BTC ($64.85)

Are those electricity costs really that low? I always hear miners complaining about electricity costs but really these seem pretty negligible.

The efficiency is a couple orders of magnitudes greater with ASICs, not a single order of magnitude, so you should predict the network hash rate will increase 25- to 100-fold.

Hence average daily profit post-halving I would wager to be close to 0.521 to 2.084 BTC a day within a month of ASICs coming onto the scene.

[alexanderanon]

Hrmm. I thought I saw a couple of threads where people predicted 5-10x based on present statistics for ASIC preorders, even if their efficiency is 40x last generation. Slow transition perhaps.

[firefop]

You forgot to factor in block halving pretty soon and at a minimum, double the difficulty.

I did factor in block halving and I increased difficulty ten fold.

My most conservative estimates are 20x (and that's just based on BFL) it's looking more and more likely that by first quarter 2013, we'll see 40x difficulty - assuming that other producers ship on time.

[bitboyben]

IMHO

Yeah Hash power should be 5x-15x for the next few months but If I was to predict long term hash rates (1-2 years maybe that's the medium term) I'd look at the MHs/$ rate.

With GPU it was arguably 1.7(my own rate) the ASICs are about 50
50/1.7 = ~x30

I think people will buy hardware until it stabilizes at that rate... maybe block halfing will keep it closer to half that (x15), but BTC price increases may bring it up...

Dollars in to dollars out I think the ROI will settle in at 10 +/-2 months so long as there are no new quantum leaps in technology again.
40% mining margin is palatable given the speculative nature of bitcoins...

It's a bit sobering... as much as I would love to get a loan for $30,000 and make ~$20,000 in revenue every month...

[smoothie]

First time miner here, looking to get some BFL ASIC's soon and doing some calculations on expected returns.

Using: http://www.alcula.com/calculators/finance/bitcoin-mining/

Assuming: 5 BF SC Singles: ~$6k for 300 Gh/s
Power consumption: 1W/Gh @ 300Gh = 300W
Electricity cost: $0.10/kW

AND assuming price remains same (worst case scenario, as I'm pretty bullish), block halving, and 10x difficulty (again, extreme scenario):

Total Hash Rate:300000 MH/s
Average time to find one block: 4.75 days
Average daily revenue (pre-halving): 10.53539662 BTC ($130.98)
Average daily revenue (post-halving): ~5.26 BTC ($65.50)
Average daily commissions/donations: 0.00000000 BTC ($0.00)
Average daily electricity cost: $0.65 (0.05212355 BTC)

Average daily profit pre-halving: 10.48327307 BTC ($130.33)
Average daily profit post-halving: ~5.21 BTC ($64.85)

Are those electricity costs really that low? I always hear miners complaining about electricity costs but really these seem pretty negligible.

I would say that is not an extreme scenario IF JUST BFL ONLY meet their target speeds of 1.5 TH/s in the SC mini rig. More like 50 to 100x difficulty could happen before things calm down.

Keep in mind you can't be certain WHEN you will receive your order so that could dampen your profitability time frame.

[ercolinux]

I would say that is not an extreme scenario IF JUST BFL ONLY meet their target speeds of 1.5 TH/s in the SC mini rig. More like 50 to 100x difficulty could happen before things calm down.

Keep in mind you can't be certain WHEN you will receive your order so that could dampen your profitability time frame.

A 50x in difficulty means that network power will be of 1000THash, so more than 600 SC Rig. But all the preorders of BFL and Avalon are only in the 80THash range. Even if they sell 5 times that power in mini rig in few months we arrive at 20x in difficulty (and other 8 milion of $ invested in rigs). To reach your 100x with the SC mini rig we need an investment from miners of 40 milion of dollars. Even considering an halving of the prices we still need 20 milion $ (near 2$ for every bitcoin currently circulating).
I think that a 50x in difficulty is not probable before at least 8-10 months after the delivery of the first batch of ASIC.

[Puppet]

I think that a 50x in difficulty is not probable before at least 8-10 months after the delivery of the first batch of ASIC.

I will take bets on that.
Its rather simple, if we are over estimating the amount of ASICs preordered, then these devices will be insanely profitable when they do arrive, which will spur more sales until they no longer are. Once sales dry up, what do you think BFL will do? They will lower their prices and it starts all over. And again, and again.  IN the end asic's will be priced close to marginal cost, which at least for the chip itself, is negligible (literally a few dollar per chip). It will take a while to get there, mostly due to manufacturing delay, but if you are counting on that to guarantee your profitability, it seems like a very dangerous gamble. BFL is no longer a tiny startup, IIRC they are employing 22 people now and they have the funds to outsource anything they want. They would be crazy not to buy external manufacturing capability for a device with an initial marginal profit of something like 100000%.

Also keep in mind BFL isnt the only player, by early next year there will most likely be 5 asic vendors competing (BFL, bASIC, asicminer, Nzhang, Deepbit...).

Buying an asic seems like an excellent bet if you know you will get yours early so  you can recover your cost in at most a few months. Anything beyond that will look like a bloodbath IMO.

[ercolinux]

I think that a 50x in difficulty is not probable before at least 8-10 months after the delivery of the first batch of ASIC.

I will take bets on that.

Sorry I never bet unless I'm sure to win 

Its rather simple, if we are over estimating the amount of ASICs preordered, then these devices will be insanely profitable when they do arrive, which will spur more sales until they no longer are. Once sales dry up, what do you think BFL will do? They will lower their prices and it starts all over. And again, and again.  IN the end asic's will be priced close to marginal cost, which at least for the chip itself, is negligible (literally a few dollar per chip). It will take a while to get there, mostly due to manufacturing delay, but if you are counting on that to guarantee your profitability, it seems like a very dangerous gamble. BFL is no longer a tiny startup, IIRC they are employing 22 people now and they have the funds to outsource anything they want. They would be crazy not to buy external manufacturing capability for a device with an initial marginal profit of something like 100000%.

Building an ASIC is really cheap, but the cost of the project is high (I actually know some people doing that kind of work and I've asked for a custom ASIC: too many hours of project are need to obtain something so is not profitable enough).
Selling them at the price you see around is not a 100000% margin, but probably something in the 20-25% if they sold hundereds of ASICs. Using and external fab is not so simple: logistic, cababilities of the farm and so on can reduce you profit to near 0 unless you sold 1000s of ASIC.

Also keep in mind BFL isnt the only player, by early next year there will most likely be 5 asic vendors competing (BFL, bASIC, asicminer, Nzhang, Deepbit...).

Buying an asic seems like an excellent bet if you know you will get yours early so  you can recover your cost in at most a few months. Anything beyond that will look like a bloodbath IMO.

I know that there is 5 or 6 competitors in the arena and maybe another couple can add before the end of Q2, and I agree that is important to buy the ASIC now if you want to mine with them, but still remain on my own opinion that before the last Q of 2013 we don't reach a 50x in difficulty: the point is that a 20X the sc RIG has an hardware break even point of 228D (halving the reward and at change of 12.5$/Bitcoin). At 50x there is no convenience in buy it, more than 2 year only to repay the hardware (and no warranty on how long can  run an ASIC before fail) unless the price drops well below 10.000$ and/or bitcoin jumps over 35$  (still more than 6 month to repay the HW) and both the events have a low probability: the market is not so deep to sustain a 35$ bitcoin, and IMHO the price of the ASIC can halves but not more than this.

[Puppet]

Building an ASIC is really cheap, but the cost of the project is high (I actually know some people doing that kind of work and I've asked for a custom ASIC: too many hours of project are need to obtain something so is not profitable enough).
Selling them at the price you see around is not a 100000% margin, but probably something in the 20-25% if they sold hundereds of ASICs. Using and external fab is not so simple: logistic, cababilities of the farm and so on can reduce you profit to near 0 unless you sold 1000s of ASIC.

I said marginal profit:
marginal profit is the term used to refer to the difference between the marginal cost and the marginal revenue for producing one additional unit of production.

The development cost of the asic is a sunk cost.Yes its big, even if Im pretty sure the preorders alone will have paid for it, but its irrelevant. If BFL no longer sells any volume because these rigs are no longer profitable to miners (ie, difficulty is too high) or because their competitors undercut them significantly,  they, as well as other ASIC suppliers will lower price as long as price is well above marginal cost. And its orders of magnitude above marginal cost right now. That they may or may not recover their sunk costs doesnt matter here. Deepbit will probably be the last to join, perhaps they will not recover their investments, but that doesnt mean they will keep prices where they are now. Its better to sell something at a "loss" as long as its well above marginal costs,  than sell almost nothing at all.

[alexanderanon]

I think that a 50x in difficulty is not probable before at least 8-10 months after the delivery of the first batch of ASIC.

I will take bets on that.
Its rather simple, if we are over estimating the amount of ASICs preordered, then these devices will be insanely profitable when they do arrive, which will spur more sales until they no longer are. Once sales dry up, what do you think BFL will do? They will lower their prices and it starts all over. And again, and again.  IN the end asic's will be priced close to marginal cost, which at least for the chip itself, is negligible (literally a few dollar per chip). It will take a while to get there, mostly due to manufacturing delay, but if you are counting on that to guarantee your profitability, it seems like a very dangerous gamble. BFL is no longer a tiny startup, IIRC they are employing 22 people now and they have the funds to outsource anything they want. They would be crazy not to buy external manufacturing capability for a device with an initial marginal profit of something like 100000%.

Also keep in mind BFL isnt the only player, by early next year there will most likely be 5 asic vendors competing (BFL, bASIC, asicminer, Nzhang, Deepbit...).

Buying an asic seems like an excellent bet if you know you will get yours early so  you can recover your cost in at most a few months. Anything beyond that will look like a bloodbath IMO.

As we can see from the mining factor charts on bitcoinx.com/charts , the factor has stabilized at around 0.45 for the last year. That's 5-6 months ROI if you plug in the stats for a BFL single, at about $100-120/month mining profits each. Certainly this factor will drop off dramatically once the ASICs arrive. But despite this, I think we can safely say that this extremely consistent mining factor indicates a level of risk the mining community is willing to accept when purchasing new equipment, such that 5-6 month ROI's will remain constant even if some think this is still "insanely profitable". Miners aren't negligent of the fact that usd/btc has been rising, and will temper their mining purchases with btc holdings, waiting for the price to rise to another plateau (and with it, the mining factor), and THEN will buy more equipment, pushing the mining factor back down to equilibrium. The new ASICs are about 40x as efficient as last generation fpga's, so perhaps the new mining factor equilibrium will be 0.45/40=0.01125.

In short, I think pre-ordering ASICs was a bad move due to the usd/btc price runup, and that buying in the next month or so is best when shipping times are confirmed along with potentially faster shipping times from competitors.

[Meatball]

Are those electricity costs really that low? I always hear miners complaining about electricity costs but really these seem pretty negligible.

The reason why people complain about electricity costs is because prior to these numbers from ASIC's being realized, electricity costs to run GPU's are pretty high.  A single GPU can suck up 300 Watts of power, and when you add in the other equipment it adds up quickly.  For example, with a 5850/6950, you're lucky to get around 400 MH for about 180-200 watts draw.  A 7970 is probably closer to about 250 watts for about 700 MH. 

Let's run with the 7970.  You'd need 42 of them to get the 30 GH in your ASIC example, or a power draw of 10500 watts.  At .10 a kWh, you're looking at about $25 a day in power costs compared to your 65 cents with the ASIC's.  And that's not counting all the extraneous power consumption you'd need for 7-8 mining PC's and cooling costs.

Still profitable?  Yes, but GPU power consumption can add up.

[occulta]

In short, I think pre-ordering ASICs was a bad move due to the usd/btc price runup,

Why does that matter if you purchased with $?

[Puppet]

As we can see from the mining factor charts on bitcoinx.com/charts , the factor has stabilized at around 0.45 for the last year. That's 5-6 months ROI if you plug in the stats for a BFL single, at about $100-120/month mining profits each. Certainly this factor will drop off dramatically once the ASICs arrive. But despite this, I think we can safely say that this extremely consistent mining factor indicates a level of risk the mining community is willing to accept when purchasing new equipment, such that 5-6 month ROI's will remain constant even if some think this is still "insanely profitable".

And what happens if BFL reduces its price by a factor 2x in December? They already increased the GH/$ by 50% without even shipping anything.

Miners aren't negligent of the fact that usd/btc has been rising, and will temper their mining purchases with btc holdings, waiting for the price to rise to another plateau (and with it, the mining factor), and THEN will buy more equipment, pushing the mining factor back down to equilibrium.

You seem to ignore or forget that when BFL and  other vendors reduce their price per GH, it directly affects your mining factor. And you can bet they will reduce the price every time  an equilibrium is approached, because an equilibrium would mean their sales are drying up.

With GPU's or FPGA's you cant keep dropping prices because these chips are expensive and there isnt much you can do about it unless you are AMD or Altera. These custom asics are a completely different kettle of fish; their marginal cost is close to zero, but their market value is extremely high (for now), and  determined solely by your mining factor; there is no demand for this chips besides mining, which isnt exactly true for FPGAs. And the price of these asics will determine the mining factor. Which will determine their market value.. see the loop? Its a race to the bottom, and it will only end once we approach marginal costs of these chips, or electricity cost becomes the determining cost of mining again. We are a very very long way from that today.

[bitboyben]

As we can see from the mining factor charts on bitcoinx.com/charts , the factor has stabilized at around 0.45 for the last year. That's 5-6 months ROI if you plug in the stats for a BFL single, at about $100-120/month mining profits each. Certainly this factor will drop off dramatically once the ASICs arrive. But despite this, I think we can safely say that this extremely consistent mining factor indicates a level of risk the mining community is willing to accept when purchasing new equipment, such that 5-6 month ROI's will remain constant even if some think this is still "insanely profitable".

And what happens if BFL reduces its price by a factor 2x in December? They already increased the GH/$ by 50% without even shipping anything.

Miners aren't negligent of the fact that usd/btc has been rising, and will temper their mining purchases with btc holdings, waiting for the price to rise to another plateau (and with it, the mining factor), and THEN will buy more equipment, pushing the mining factor back down to equilibrium.

You seem to ignore or forget that when BFL and  other vendors reduce their price per GH, it directly affects your mining factor. And you can bet they will reduce the price every time  an equilibrium is approached, because an equilibrium would mean their sales are drying up.

With GPU's or FPGA's you cant keep dropping prices because these chips are expensive and there isnt much you can do about it unless you are AMD or Altera. These custom asics are a completely different kettle of fish; their marginal cost is close to zero, but their market value is extremely high (for now), and  determined solely by your mining factor; there is no demand for this chips besides mining, which isnt exactly true for FPGAs. And the price of these asics will determine the mining factor. Which will determine their market value.. see the loop? Its a race to the bottom, and it will only end once we approach marginal costs of these chips, or electricity cost becomes the determining cost of mining again. We are a very very long way from that today.

I have read about the guarantees to not increase the price on the hardware but I have not read any guarantees to not LOWER the price either...
This and the talk of future improved versions cause me some concern. I don't wanna get trapped in a cycle of endless upgrading such as I am with my smart phone...

[firefop]

I have read about the guarantees to not increase the price on the hardware but I have not read any guarantees to not LOWER the price either...
This and the talk of future improved versions cause me some concern. I don't wanna get trapped in a cycle of endless upgrading such as I am with my smart phone...

Granted it's a concern (endless upgrades) but as long as they keep the 100% trade-in policy. . . I'm not seeing a problem with it... at some point it will advance to the point where it can't continue per upgrade cost vs current state of the art.

 

[kjj]

I have read about the guarantees to not increase the price on the hardware but I have not read any guarantees to not LOWER the price either...
This and the talk of future improved versions cause me some concern. I don't wanna get trapped in a cycle of endless upgrading such as I am with my smart phone...

Granted it's a concern (endless upgrades) but as long as they keep the 100% trade-in policy. . . I'm not seeing a problem with it... at some point it will advance to the point where it can't continue per upgrade cost vs current state of the art.

I haven't heard of a trade in on the ASICs.  On the FPGA boards, the most expensive part is the FPGA chip itself, and that can be reused for different things.  Even if the board isn't useful, the chip can be removed and reballed.  An ASIC, however, can't be reused since it is only good for doing the one task, at best it could be resold to someone else interested in using it for bitcoin mining.