ASIC: $2M+ a year for a $30k investment? WAT?!

[lukestokes]

[ Non Newbie Category: Mining ]

Ultimately, my question is this: Should a newbie buy an ASIC?

I've been learning about BTC for a few weeks now (thank you, #bitcoin, you rock!). Based on those conversations and the few threads I've read, I figured the days of profitable mining were gone. Then I stumbled onto the 1,500GH/s rigs and this:

http://tpbitcalc.appspot.com/?difficulty=3651011.6307&hashrate=1500000.00&exchangerate=26.37&bitcoinsperblock=25.00&rigcost=30000.00&powerconsumption=1500.00&powercost=0.10&investmentperiod=355

WAT?

Now, convincing my wife to drop $30K on something like this is probably not going to happen, but being able to get your money back in 7 days? That's insanity.

I understand the difficulty is constantly going up and the block reward will half in 2016, but even $1M a year isn't bad. That also doesn't take into account what the future value of BTC could be (I, for one, am very optimistic).

I can understand if people are hesitant to share their real world stories on this (and that only a few people actually have ASICs running now), but I really would love to hear any insight you are willing to share. Is this for real? How will a change in difficulty adjust these returns? It seems like unless every single current miner upgrades to ASIC, the newbies have a chance to make some money.

I'm considering buying one of the 30GH/s models to see if I really can make my money back in 7 days.

I can understand not wanting to share details about this as increased difficulty and more people using ASICs decreases the average reward for everyone, but it also makes sense to me to spread things around (even the creators of the ASIC chips seem to agree to that). Seth Godin's post today loosely relates in that more people involved in bitcoin means more seed for future value: http://sethgodin.typepad.com/seths_blog/2013/02/planting-harvesting-and-your-fair-share.html

Side note: it would be cool if the calculator could include an "estimate increase in difficulty percentage" where it would recalculate each step for a more accurate estimate for the year. Maybe it could default to Moore's law or something as the current ASIC flood is probably confusing things a bit.

Thank you for your thoughts and time. Those are more valuable than most things.

[1714200831]

1714200831

[nobbynobbynoob]

If only!

It may have worked for a lucky so-and-so like Jeff Garzik, but the difficulty could increase tenfold easily when the first waves of ASICs are out in the wild and available. Even then, with current exchange rates it should be profitable, but nowhere near that profitable!

If the BTC price collapses to $10 per BTC again, it might be better just to buy up a load, to be fair. If the BTC price is high, investing in ASIC mining may still make a lot of sense, but having burned my fingers a little (thankfully not too much) with the bASIC débacle, I'm out of any "pre-order" shenanigans for good now.

[Puppet]

Difficulty is about to explode. No ones knows for sure how many asics have been ordered/are being assembled, but 500TH over the next 6 months seems like a low estimate to me. BFL alone should be in that ballpark, and they are only one of 3 or 4 players. That means  difficulty will likely be >20x higher than today by the time you get your mini rig.  And thats only when you start mining, its not like it will stop there, as you wont be the only one ordering and getting hardware late. In case you hadnt noticed, people have been ordering from BFL since august last year, and none have shipped today. So dont expect an order today to ship next week, or month.

In all likelyhood, if you order today, it will never repay itself (when both purchase and revenue are expressed in bitcoin), but if you feel like gambling, dont let me stop you.

[lukestokes]

If the BTC price collapses to $10 per BTC again, it might be better just to buy up a load, to be fair. If the BTC price is high, investing in ASIC mining may still make a lot of sense, but having burned my fingers a little (thankfully not too much) with the bASIC débacle, I'm out of any "pre-order" shenanigans for good now.

Yeah, ultimately everything depends on the BTC price. That said, some feel $30 is way under-priced... but who really knows anyway, right?

Difficulty is about to explode. No ones knows for sure how many asics have been ordered/are being assembled, but 500TH over the next 6 months seems like a low estimate to me. BFL alone should be in that ballpark, and they are only one of 3 or 4 players. That means  difficulty will likely be >20x higher than today by the time you get your mini rig.  And thats only when you start mining, its not like it will stop there, as you wont be the only one ordering and getting hardware late. In case you hadnt noticed, people have been ordering from BFL since august last year, and none have shipped today. So dont expect an order today to ship next week, or month.

In all likelyhood, if you order today, it will never repay itself (when both purchase and revenue are expressed in bitcoin), but if you feel like gambling, dont let me stop you.

Even with difficulty exploding... it should all balance out in the end, right?

Let's say, for argument's sake, there are currently 10,000 GPU miners trucking along today. Due to the cost of power, they are basically breaking even (from what little I understand and hear on #bitcoin). If 50% of them switch over to ASIC and another 25% enter the market, that still leaves a gap when things "settle down" in difficulty (we'll always see the same number of coins mined, regardless of difficulty) which would mean it would (at least) be more profitable to mine then than it is now. Any logic there even though I'm pulling numbers out of my arse?

And yes, it does seem a lot like gambling. I'm not much of a random chance gambler, though I do love me some Texas Hold'em

[marra]

BFL guys posted their calculation on profit after ASICs hit the market. Think it'll be $350 per month with 60 GH/s unit...

[nobbynobbynoob]

If Bitcoin lifts off long-term, $30 must by definition be underpriced, maybe by a factor of 100 if not 1000. Short-term, however, I'm a bit bearish, I think, because the price has rocketed so quickly. What goes up...

Let's say BFL (or a good competitor) produces a 60+ GH/s ASIC miner for general sale but the difficulty level at that point is 75 million. However, at that time, let's say BTC1=US$75. This is equivalent to mining at a difficulty of 10 million with $10 bitcoins! Sadly, I don't have many BTC stashed away, but my strategy is to watch proceedings for now. I will definitely be ordering mining equipment in the hypothetical scenario just mentioned.

[Akka]

Well, just imagine in a community some guy shows up, offering to give 10,000 USD away every day. He will split this amount through everyone in this community that burns wood, depending on the amount of wood one burns.

What will happen? Everyone is going to buy more and more wood each day to burn it and get the biggest share of the 10,000 USD until closely to 10,000 USD worth of wood are burned each day. Hell the wood bought will probably even spice over 10,000 for a short time.

Mining is exactly the same.

It's an arms race where the limiting factor is the cost of equipment / electricity and always develops towards a zero sum.

It is currently different due to the high price and nobody investing in available mining equipment thanks to the ASIC uncertainty. But this will change as soon as they are available.

[novusordo]

That initial $30k investment is also a huge risk. There's the risk that the ASICs won't perform up to their advertised specs, the risk that the company will never ship their product, the risk that difficulty will be too high by the time one receives their ASIC, etc...

On top of those risks, one's profits also depend on the Bitcoin network being a long-term success.

[Puppet]

Let's say, for argument's sake, there are currently 10,000 GPU miners trucking along today. Due to the cost of power, they are basically breaking even (from what little I understand and hear on #bitcoin). If 50% of them switch over to ASIC and another 25% enter the market, that still leaves a gap when things "settle down" in difficulty (we'll always see the same number of coins mined, regardless of difficulty) which would mean it would (at least) be more profitable to mine then than it is now. Any logic there even though I'm pulling numbers out of my arse?

I cant say I see any logic there. The number of miners is irrelevant, its their aggregate hashrate. Its only aggregate hashrate that determines difficulty. GPU miners quitting will be like a drop on a hot plate, it wont really change a thing

And yes, it does seem a lot like gambling. I'm not much of a random chance gambler, though I do love me some Texas Hold'em

Problem is that this isnt a skill game, unless you can find out how many asics will be delivered and installed in the next 6 months and when you will receive yours if you order today. No one knows the answer to either question. However, consider there at least 2 known asic miners entering the market now but that not selling their gear, Goliath and ASICminer.  ASICs are expensive to develop, but cost almost nothing to produce, so you should expect at the very least those two companies  to ramp up their production (and therefore increase difficulty) for as long as its profitable for them. If its no longer profitable for them with ~$5 chips, just imagine how unprofitable it will be for you when paying >$100 per chip from BFL.

If you want to gamble, buy some more bitcoins. Probably a far safer bet.

[lukestokes]

Problem is that this isnt a skill game, unless you can find out how many asics will be delivered and installed in the next 6 months and when you will receive yours if you order today. No one knows the answer to either question. However, consider there at least 2 known asic miners entering the market now but that not selling their gear, Goliath and ASICminer.  ASICs are expensive to develop, but cost almost nothing to produce, so you should expect at the very least those two companies  to ramp up their production (and therefore increase difficulty) for as long as its profitable for them. If its no longer profitable for them with ~$5 chips, just imagine how unprofitable it will be for you when paying >$100 per chip from BFL.

If you want to gamble, buy some more bitcoins. Probably a far safer bet.

Huh, good to know. Makes sense there would be other people out there hording their own golden egg laying geese.

Mining is exactly the same.

Great analogy, thank you.

my strategy is to watch proceedings for now.

Sounds like a good strategy. If anything changes so quickly that waiting is a bad idea (with difficulty going up, tons of ASICs chugging away, etc), then any medium or long term ROI calculations would be out the window already.

Thanks all.