Some details of large scale mining in China based on failed IPO

[mwizard]

An Australian company, Bitcoin Group, recently tried to list on the ASX.  The IPO has stalled but the "Independent Expert Report" relating to the listing is interesting as it gives a glimpse into the problems facing large scale miners without access to 14/16nm machines.

The Bitcoin Group ran about 6 Petahash until March 2016, mainly in China.  It appears at least half of this is now being turned off as it was under agreements expiring in March 2016.

The Bitcoin Group aimed to use the money raised in the IPO to buy 3,252 Antminer S7s, partly to replace older hardware.  This would have given the Bitcoin Group about 15 Petahash.

Details of the the "Independent Expert Report" are at  http://www.asx.com.au/asxpdf/20160307/pdf/435nf0ck82zfbz.pdf

Interesting points are:

1) The Chinese electricity price from the mining hosting company was 0.41 CNY/kWh.  This is 6 cents USD per kWh.  This probably included all hosting costs as hosting costs are not mentioned elsewhere.  

2) The installed price for 3,252 S7s was $1,208 AUD per unit, or around $890 USD.  This seems high, even assuming it includes the cost of a power supply and initial setup.  There are obviously no big discounts, even for orders of that size.

3) Pool fee cost is 2.5% of revenue

4) The independent expert reported that the Antiminer S7 would lose money, and show a net negative return, under the examined scenarios.

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[notlist3d]

I think a large reason of failing would be in part 1.  The electricity price is not that great for china operations, most are speculated to be much lower.   So I think they made it hard to get a profit now day's where electricity price can make/break your roi.

Interesting to see one fail though.  Thanks for sharing.

[philipma1957]

this shows why a large guy can fail at 6 cent power.

they get 0 benefit from the heat.  the heat actually costs them more money.

A smaller guy at 6 cent power can make money if they can use the heat.

Also a miner is 665 a psu is 165 = 830 so they used older prices to come to conclusion they would lose.

Given the current numbers a could get 2 s-7s for 1400 with shipping and I have psu's along with cheap power . I may be able to turn 2 or 3 or 4 pieces into a profit but when I scale to 100 pieces things get much harder to do.

[mkc]

Maybe they should push into rural part of china, where hydra power can be cheaper.

[antirack]

Maybe they should push into rural part of china, where hydra power can be cheaper.

Not only this, but well connected people willing to share some of the income or hashrate with their "friends" are known to get much better deals.

In China even "no cost" deals are not unheard of (i.e. they run a few MW of hardware in the unused electricity portion of "private" power generators, often in remote areas).

[leowonderful]

Maybe they should push into rural part of china, where hydra power can be cheaper.

Not only this, but well connected people willing to share some of the income or hashrate with their "friends" are known to get much better deals.

In China even "no cost" deals are not unheard of (i.e. they run a few MW of hardware in the unused electricity portion of "private" power generators, often in remote areas).

There have been mining operations apparently piggybacking on this "free" electricity as well, they run tons of Antminer S7s for "free," but some do get busted. I saw a story about this online but I forgot where. It's true, some people will share hashrate with another person or factory and use their electricity at a reduced price. All this to make some money... Once Bitfury 16nm chips come out, antminer s7 prices will take a nosedive as people replace their old s7s and avalons for the newest thing. Watch out, and sell your miners early for you don't want to lose your investment!

[antirack]

Maybe they should push into rural part of china, where hydra power can be cheaper.

Not only this, but well connected people willing to share some of the income or hashrate with their "friends" are known to get much better deals.

In China even "no cost" deals are not unheard of (i.e. they run a few MW of hardware in the unused electricity portion of "private" power generators, often in remote areas).

There have been mining operations apparently piggybacking on this "free" electricity as well, they run tons of Antminer S7s for "free," but some do get busted. I saw a story about this online but I forgot where. It's true, some people will share hashrate with another person or factory and use their electricity at a reduced price. All this to make some money... Once Bitfury 16nm chips come out, antminer s7 prices will take a nosedive as people replace their old s7s and avalons for the newest thing. Watch out, and sell your miners early for you don't want to lose your investment!

If your electricity is free and your S7 has paid itself back a while ago, you don't mind keeping it running for a little longer, no matter there are 16nm or even 10nm chips around the corner. There are people running much older stuff than S7 in China.

If I am not wrong the failed IPO was run by Chinese people, but I am not sure if it bodes well on a public listed company to aim for these locations I mentioned or if it is easily accessible to foreigners in general.

In reality there are often a few layers of people between the paying party and the party providing the power. The better connected and longer in this "business", the less layers there are.

[leowonderful]

Maybe they should push into rural part of china, where hydra power can be cheaper.

Not only this, but well connected people willing to share some of the income or hashrate with their "friends" are known to get much better deals.

In China even "no cost" deals are not unheard of (i.e. they run a few MW of hardware in the unused electricity portion of "private" power generators, often in remote areas).

There have been mining operations apparently piggybacking on this "free" electricity as well, they run tons of Antminer S7s for "free," but some do get busted. I saw a story about this online but I forgot where. It's true, some people will share hashrate with another person or factory and use their electricity at a reduced price. All this to make some money... Once Bitfury 16nm chips come out, antminer s7 prices will take a nosedive as people replace their old s7s and avalons for the newest thing. Watch out, and sell your miners early for you don't want to lose your investment!

If your electricity is free and your S7 has paid itself back a while ago, you don't mind keeping it running for a little longer, no matter there are 16nm or even 10nm chips around the corner. There are people running much older stuff than S7 in China.

If I am not wrong the failed IPO was run by Chinese people, but I am not sure if it bodes well on a public listed company to aim for these locations I mentioned or if it is easily accessible to foreigners in general.

In reality there are often a few layers of people between the paying party and the party providing the power. The better connected and longer in this "business", the less layers there are.

If you really were trying to keep something like this secret, you'd replace your rigs with less power-consuming rigs to not show a huge spike of power consumption whenever a new miner comes out. Ofc assuming most people don't care about secrecy, I bet there are people running antminer s1s for 3 years straight now, having made maybe 7x profit.. ;-; I wish I still lived in china.

[talks_cheep]

You have to be stupid, crazy or from abroad to pay $0.06/Kw for electricity in China. No other Chinese mining farm pay such high electricity. Fact is, many China mining farms pay zero electricity fees, all they have to do is bribe an official and they get FREE electricity.

[notlist3d]

You have to be stupid, crazy or from abroad to pay $0.06/Kw for electricity in China. No other Chinese mining farm pay such high electricity. Fact is, many China mining farms pay zero electricity fees, all they have to do is bribe an official and they get FREE electricity.

I don't think it is quite that way, they are not getting zero electricity fees.  That is just not happening it's low electricity prices but not free.   We can speculate but it really depends on lots of factors.

Also bribing of an "official" I'm not sure on that.  That makes it sound like government bribing.  If they pay a bribe I would guess it would be more twords someone at electricity plant that handles contracts.  But again no proof or do we know it's all speculation.

So free electricity.... no not large scale at least.  But cheap yes most likely very much so on the mega mines.