Is bitcoin mining going to become unprofitable by the end of the year?

[oatmo]

I'm seeing predictions that the total network HASH capability might go as high as 1000TH by the end of the year (20x increase due to ASIC miner efficiency). It seems like nobody would be able to make their electricity input back at that complexity... Are there are threads which have already investigated this?

Oatmo

[ideit]

ASICs are becoming the new GPUs. CPU mining was profitable, then GPU mining made that not so. Now ASICs are replacing GPUs. It's very likely that GPU mining will not be profitable, but it's hard to say, exactly. This is why so many are switching over to LTC (or FC) mining, since they use scrypt algorithms they're not really susceptible to ASICs.

[bitchess]

I personally think that the total hash rate is correlated with the bitcoin/USD conversion rate.  As it goes up, more people will enter the mining business and v.v.

In the long run the profitability equation is probably a factor of the actual number of people that use bitcoins.  Right now probably still low by %.

[DannyHamilton]

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It seems like nobody would be able to make their electricity input back at that complexity...
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If that were true, then some people (those with high electricity costs) would stop mining and the hash rate would drop.  Assuming no new technologies are developed that allow faster hashing or reduced electricity consumption, the network eventually reaches an equilibrium where the remaining miners are able to generate a small profit.

[Rathjinx]

Right, and that equilibrium is determined by the cost (both hardware and electrical) of running whatever the widely available 'best' is.

[bitchess]

Right, and that equilibrium is determined by the cost (both hardware and electrical) of running whatever the widely available 'best' is.

Miners will find their way to places where electricity are free.  Eg. solar panels for mining.  In the long run the only factor impacting profitability is the trend in BTC value.

And economically speaking profitability is supposed to trend to zero in any type of competitive market.

[snowthunder]

I think each miner has a different cost structure. So some miners are still profitable, even though the whole industry may not be lucrative.

[DannyHamilton]

Right, and that equilibrium is determined by the cost (both hardware and electrical) of running whatever the widely available 'best' is.

Miners will find their way to places where electricity are free.  Eg. solar panels for mining.  In the long run the only factor impacting profitability is the trend in BTC value.

And economically speaking profitability is supposed to trend to zero in any type of competitive market.

Solar Panels are not free.  They have a capital cost and a life expectancy.  They require maintenance and upkeep.  They provide very little usable electricity in cloudy weather, and none at all at night.  These peaks and valleys can be smoothed out by generating more than needed and storing the excess to be used when output is low, but that process also has associated costs. They may be low cost in the long run, but they have a cost.

hash rate per joule will always be a factor in mining profitability.

[bitchess]

Right, and that equilibrium is determined by the cost (both hardware and electrical) of running whatever the widely available 'best' is.

Miners will find their way to places where electricity are free.  Eg. solar panels for mining.  In the long run the only factor impacting profitability is the trend in BTC value.

And economically speaking profitability is supposed to trend to zero in any type of competitive market.

Solar Panels are not free.  They have a capital cost and a life expectancy.  They require maintenance and upkeep.  They provide very little usable electricity in cloudy weather, and none at all at night.  These peaks and valleys can be smoothed out by generating more than needed and storing the excess to be used when output is low, but that process also has associated costs. They may be low cost in the long run, but they have a cost.

hash rate per joule will always be a factor in mining profitability.

good point, I agree

[oatmo]

For a big operations, the cheapest power will probably be one of these types of systems, depending on your gas distribution charges http://www.clearedgepower.com/purecell-model-5-system. The problem is that it generates 5kW continuously, so that's not going to work for small miners.

Oatmo

[philly_cop_41320]

Just like any free market, when it becomes unprofitable, new innovation will make it profitable again, that's the cycle that drives capitalism and growth for the smart.

[bit777]

If the price continues to jump throughout the year, more likely to become "more profitable" than "unprofitable"

[Rune]

the harder the mining become the more people value the bitcoins it seems

[DannyHamilton]

the harder the mining become the more people value the bitcoins it seems

I suspect you have that backwards.

The more people value the bitcoins, the harder mining becomes.

This would be because in increase in bitcoin value makes mining more profitable.  Since mining is more profitable, there is a financial incentive for more people to spend more money on mining equipment (which results in an increase in the mining difficulty).