This post is incredibly long, the end goal is to say "Yes, there is hope that bitcoin mining profitability is not dead yet." Bear with me here.
To all of our friends who are saying profitability is dead....
Not yet. Maybe "insanely quick profitability" is dead, but not profitability. some quick figures:
it costs about $300.00 to purchase a fully functional K16. Steamboat has said that the chips should be able to punch out 325 MH/s each.... a single miner then comes out to 5200 MH/s.
Now for some conjecture:
Difficulty adjusts every 2016 blocks.
as of lately, blocks have been about 8 minutes long. (a result of a 20% increase in hashing power each set of 2016 blocks; the last 6 difficulty changes have averaged out to about 20.79%; the last 17 have been 15.89%)
It takes then, about 10.9 days for 1 difficulty adjustment to go through.
if the % increase remains constant at 20%, there will be 33.5 difficulty adjustments in a year
that means that a machine which could get 1 bitcoin in the first difficulty set would be able to get only 1/(1.2^33.5) bitcoins at the end of the year, or about 0.00223 bitcoins. In other words, difficulty increases to 449x what it was at the beginning of the year.
our January 8, 2013 difficulty was 3,249,550.
449 * 3,249,550 = 1,459,047,950 Projected difficulty on Jan 8, 2014 if current growth had been sustained from the beginning to the end of the year.
Ok, we are off-target for hitting 1.46 billion this year. if growth increases at 20% per difficulty adjustment for the rest of the year, we would hit about 500,000,000 difficulty. (This would require $99,149,202 worth of network chip hashing power to be in-place and running by the end of the year. [more info on how I came up with that figure below])
all the calculations below are done with avalon chips and avalon chip equivalents. This is done because an assumption is made that chips by other companies will be approximately the same in a chip's Mh to cost ratio.
theoretically, if a 20% change had been sustained through this whole year (it has not been, see 3 paragraphs above), the below 1.46 billion difficulty would be hit. For this example, let's say it has been and will be sustained through the end of the year.
I would be very surprised if the difficulty continued to increase up to 1.46 billion by Jan 2014, this is why:
Based on historic data, 7.15 TH is enough to increase difficulty by 1 million... (equivalent avalon asic chip cost of $198,298 not including boards)
Thus far, Avalon has received about 331.9 TH worth of chip orders, worth $7,577,980. The current difficulty of 37,508,353 represents approximately that same amount of cost ($7,510,356).
so, a 1.46 billion difficulty would require 10,439 TH to be achieved... (equivalent avalon asic chip cost of $288,722,476 not including boards)
I doubt another $280,700,000 will be invested into buying chips by Jan 2014 to create the 1.46 billion difficulty that would result.
In short, this current rate of growth is not sustainable without either an increase in bitcoin's per unit worth, or an increase in MH/unit cost for chips. I think it is pretty likely that the current growth rate is not here to stay, look for it slowing down within the next 6 or 7 difficulty adjustments. (7 more adjustments at 20% would result in a difficulty of 134,399,210 for an approximate network cost of $19,000,000 in chips alone.) People already seem to be slowing down in how fast they are snatching up more available hashing power, and how fast they are snatching up hashing power that will be available in the future.
Here are some ROI calculations:
assume your electricity costs $0.15 per kWh and assuming a single miner uses 50 watts per hour to run.
assume a very steep .1 profitability decline per year e.g. difficulty increased to 10x the original difficulty after 1 year.
At difficulty 37.4 million:
over 12 months of running you would earn 692.67$. It will take about 1.64 months to pay for your miner, the rest is income.
At difficulty 100.4 million:
over 12 months of running you would earn 18.91$. It will take about 7.5 months to pay for your miner, the rest is income.
That may only be a 6% ROI, but it is still profitable.
Some figures for when to pull the plug and chuck for scrap. ROI calculations are much more difficult, and were covered above. Also note, this table below does not take into account the cost for cooling. This table compares electricity costs and difficulty.
The question: "Should I keep mining with my K16?"
| Difficulty | $.25 per kWh | $.20 per kWh | $.15 per kWh | $.10 per kWh |
| 2.25 Billion | no | no | no | no |
| 2.2 Billion | no | no | no | yes |
| 2.1 Billion | no | no | no | yes |
| 2.0 Billion | no | no | no | yes |
| 1.9 Billion | no | no | no | yes |
| 1.8 Billion | no | no | no | yes |
| 1.7 Billion | no | no | no | yes |
| 1.6 Billion | no | no | no | yes |
| 1.5 Billion | no | no | yes | yes |
| 1.4 Billion | no | no | yes | yes |
| 1.3 Billion | no | no | yes | yes |
| 1.2 Billion | no | no | yes | yes |
| 1.1 Billion | no | yes | yes | yes |
| 1.0 Billion | no | yes | yes | yes |
| 0.9 Billion | yes | yes | yes | yes |
| 0.8 Billion | yes | yes | yes | yes |
| 0.7 Billion | yes | yes | yes | yes |
| 0.6 Billion | yes | yes | yes | yes |
| 0.5 Billion | yes | yes | yes | yes |
| 0.4 Billion | yes | yes | yes | yes |
| 0.3 Billion | yes | yes | yes | yes |
| 0.2 Billion | yes | yes | yes | yes |
| 0.1 Billion | yes | yes | yes | yes |
