The ceiling of difficulty with 28nm technology

[cryptx]

The ceiling of difficulty depends on 4 things:

* BTC/USD price
* cost of hardware fully deployed
* power consumption / GH
* electricity costs


If you know these 4 things, calculating the maximum difficulty is easy.

* BTC/USD = 100$
* 28nm ASIC's production cost is about 1$ / GH including deployment (after NRE is completely funded)
* 0,6W / GH
* electricity costs all in 0,03$  (USA ideal situation)

The total revenue of 1 year of mining at a 100$ exchange rate is:
131,400,000$
(100*25*6*24*365)

1 year of electricity for 1 GH will be 0,158$
(0.6/1000*24*365*0.03)

If you want to have a ROI of 1 year the production cost of the hardware is 1$ /GH/year
If you want to have a ROI of 2 year the production cost of the hardware is 0,5$ /GH/year

So the revenue you have to make is:

ROI 1 year: 1$ + 0,158$ = 1,158$ /GH
ROI 2 year: 0,5$ + 0,158$ = 0,658$ /GH

The total revenue of the network is 131,400,000$ /year

Now we can calculate the maximum hashing rate of the network with a 28nm technology:

ROI 1 year : 113,000 TH  or 113 PH
ROI 2 years : 199,700 TH or 200 PH


This does not take into account any labour costs / hosting costs / tax / margin for profit

[Bitweasil]

If someone is mining at $0.15/kwh they are far from optimal.

There are places in the USA where you can get industrial power for $0.02-$0.03/kwh, and possibly less if you agree to interruptions (bitcoin mining is a perfect interruptible load).

That pushes the numbers much higher.

[cryptx]

If you are looking for the cheapest electricity costs you should keep in mind that this is just a percentage of the total cost per kwh. The other costs involved are often much bigger than the electricity itself.

If we look at the Belgian electricity cost, at first glance you could think it is cheap, around 5 to 8 € cents. If you dig a little deeper you will find out this is only about 35% of the total electricity bill. You have also distribution costs, transportation costs, green energy costs, taxes, fixed costs etc This will make the total cost of 1 kwh about 18 to 22 € cent, a world of difference.

So is the 2-3 cents the total cost of 1 kwh?

Power interruptions...big difference between (milli)seconds and hours... Can you explain a little more?

[Bitweasil]

Even with other fees, it's well under $0.05/kwh in certain areas.

As for power interruptions, high power consumption sites (industrial loads) can get substantially cheaper power in some areas if they agree to load shed a few times a year (typically for minutes to hours) and basically turn off the main power consumption items to reduce grid load.  You have to be sucking a LOT of power to do this, but in exchange for the power company being able to turn you off with little to no warning, you can get a much reduced power rate.  Bitcoin mining being interrupted doesn't affect it other than the loss of mining capacity during those times, so allowing it to be interrupted and restarted for a reduced power rate year round is likely to be a net win as well.

[cryptx]

Can you give me an example of such an area?

[totemITnow]

Even with other fees, it's well under $0.05/kwh in certain areas.

As for power interruptions, high power consumption sites (industrial loads) can get substantially cheaper power in some areas if they agree to load shed a few times a year (typically for minutes to hours) and basically turn off the main power consumption items to reduce grid load.  You have to be sucking a LOT of power to do this, but in exchange for the power company being able to turn you off with little to no warning, you can get a much reduced power rate.  Bitcoin mining being interrupted doesn't affect it other than the loss of mining capacity during those times, so allowing it to be interrupted and restarted for a reduced power rate year round is likely to be a net win as well.

Sounds good, but it is possible only for big minners like ASICminner

[Takeshi_Kovacs]

The ceiling of difficulty depends on 4 things:

* BTC/USD price
* cost of hardware fully deployed
* power consumption / GH
* electricity costs


If you know these 4 things, calculating the maximum difficulty is easy.

* BTC/USD = 100$
* 28nm ASIC's production cost is about 1$ / GH including deployment
* 0,6W / GH
* electricity costs all in 0,15$  (let's keep at minimum)

The total revenue of 1 year of mining at a 100$ exchange rate is:
131,400,000$
(100*25*6*24*365)

1 year of electricity for 1 GH will be 0,79$
(0.6/1000*24*365*0.15)

If you want to have a ROI of 1 year the production cost of the hardware is 1$ /GH/year
If you want to have a ROI of 2 year the production cost of the hardware is 0,5$ /GH/year

So the revenue you have to make is:

ROI 1 year: 1 + 0,79$ = 1,79$ /GH
ROI 2 year: 0,5 + 0,79 = 1,29$ /GH

The total revenue of the network is 131,400,000$ /year

Now we can calculate the maximum hashing rate of the network with a 28nm technology:

ROI 1 year : 73,400 TH  or 73 PH
ROI 2 years : 101,800 TH or 102 PH

There is one big assumption in all of this and if that assumption is wrong then the whole thing is devoid of any sense.

The assumption:

The purchase and deployment of ASIC devices for Bitcoin mining is done on a rational basis.

Do you think that assumption is correct?

[Bitweasil]

Can you give me an example of such an area?

http://www.douglaspud.org/Service/2013RatesJanuary12013.aspx

[Dalkore]

If you are looking for the cheapest electricity costs you should keep in mind that this is just a percentage of the total cost per kwh. The other costs involved are often much bigger than the electricity itself.

If we look at the Belgian electricity cost, at first glance you could think it is cheap, around 5 to 8 € cents. If you dig a little deeper you will find out this is only about 35% of the total electricity bill. You have also distribution costs, transportation costs, green energy costs, taxes, fixed costs etc This will make the total cost of 1 kwh about 18 to 22 € cent, a world of difference.

So is the 2-3 cents the total cost of 1 kwh?

Power interruptions...big difference between (milli)seconds and hours... Can you explain a little more?

I only pay .02 Kwh.  It means everything.   Especially when we forget to add cooling required to hash at the optimal level for your hardware.

[Dalkore]

Even with other fees, it's well under $0.05/kwh in certain areas.

As for power interruptions, high power consumption sites (industrial loads) can get substantially cheaper power in some areas if they agree to load shed a few times a year (typically for minutes to hours) and basically turn off the main power consumption items to reduce grid load.  You have to be sucking a LOT of power to do this, but in exchange for the power company being able to turn you off with little to no warning, you can get a much reduced power rate.  Bitcoin mining being interrupted doesn't affect it other than the loss of mining capacity during those times, so allowing it to be interrupted and restarted for a reduced power rate year round is likely to be a net win as well.

When you have Hydro-electric power you don't deal with these interruptions. 

[DeathAndTaxes]

The assumption:
The purchase and deployment of ASIC devices for Bitcoin mining is done on a rational basis.
Do you think that assumption is correct?

To a certain extent there is a level of delusion but most of that comes from people
a) believing difficulty won't rise as fast as other people say (a miner may be a bad deal with 60% monthly difficulty growth and a great one with 30% monthly difficulty growth)
b) believing the often highly optimistic delivery timeframes

The feedback mechanism for new purchases is rising difficulty however pre-orders distort that.  What would the difficulty be today if all pre-orders had already been delivered. 1PH/s? 2PH/s?  Do you think sales would be as robust?

When difficulty is so high that even assuming NO difficulty growth your break even point is 3+ years out it takes a whole different level of delusion to buy more hardware.  This is why for example we didn't see 500 TH/s when everyone was using GPUs.  The feedback mechanism is currently "broken" but as pre-orders slowly get deployed reality will catch up and dispell a lot of the delusional thinking.

[DeathAndTaxes]

Even with other fees, it's well under $0.05/kwh in certain areas.

As for power interruptions, high power consumption sites (industrial loads) can get substantially cheaper power in some areas if they agree to load shed a few times a year (typically for minutes to hours) and basically turn off the main power consumption items to reduce grid load.  You have to be sucking a LOT of power to do this, but in exchange for the power company being able to turn you off with little to no warning, you can get a much reduced power rate.  Bitcoin mining being interrupted doesn't affect it other than the loss of mining capacity during those times, so allowing it to be interrupted and restarted for a reduced power rate year round is likely to be a net win as well.

When you have Hydro-electric power you don't deal with these interruptions. 

All power grids have to deal with DEMAND > CAPACITY.
You either
a) use very expensive (in terms of cost per KW/h) "peaking plants" normally natural gas turbines because they can rapidly adjust load
b) you offer your largest customers a deal where they have to idle/scale back (they often do this because b is cheaper than a)
c) you have brownouts and destroy electronic equipment on a masive scale
d) you have rolling blackouts

A hydro-electric dam has a max capacity.  No power grid runs ONLY on hydro-electric dams and even if they did if the total instantaneous demand is greater than the total power grid capacity then something has to give.  Power companies have found that contracting to lower the load on large users is often the cheapest solution.   If 99% of the time your customers consume <10 GW of power and the other 1% of the time it can spike to 11 GW why build out an extra 1GW of capacity which is only used 1% of the time.  The use of hydro electric power doesn't change that dynamic.

[Dalkore]

Even with other fees, it's well under $0.05/kwh in certain areas.

As for power interruptions, high power consumption sites (industrial loads) can get substantially cheaper power in some areas if they agree to load shed a few times a year (typically for minutes to hours) and basically turn off the main power consumption items to reduce grid load.  You have to be sucking a LOT of power to do this, but in exchange for the power company being able to turn you off with little to no warning, you can get a much reduced power rate.  Bitcoin mining being interrupted doesn't affect it other than the loss of mining capacity during those times, so allowing it to be interrupted and restarted for a reduced power rate year round is likely to be a net win as well.

When you have Hydro-electric power you don't deal with these interruptions. 

All power grids have to deal with DEMAND > CAPACITY.
You either
a) use very expensive (in terms of cost per KW/h) "peaking plants" normally natural gas turbines because they can rapidly adjust load
b) you offer your largest customers a deal where they have to idle/scale back (they often do this because b is cheaper than a)
c) you have brownouts and destroy electronic equipment on a masive scale
d) you have rolling blackouts

A hydro-electric dam has a max capacity.  No power grid runs ONLY on hydro-electric dams and even if they did if the total instantaneous demand is greater than the total power grid capacity then something has to give.  Power companies have found that contracting to lower the load on large users is often the cheapest solution.   If 99% of the time your customers consume <10 GW of power and the other 1% of the time it can spike to 11 GW why build out an extra 1GW of capacity which is only used 1% of the time.  The use of hydro electric power doesn't change that dynamic.

Yes, you are correct.  I should of been more clear.  My utility has an agreement so local customers get guaranteed access for local power consumption. 

[Takeshi_Kovacs]

Even with other fees, it's well under $0.05/kwh in certain areas.

As for power interruptions, high power consumption sites (industrial loads) can get substantially cheaper power in some areas if they agree to load shed a few times a year (typically for minutes to hours) and basically turn off the main power consumption items to reduce grid load.  You have to be sucking a LOT of power to do this, but in exchange for the power company being able to turn you off with little to no warning, you can get a much reduced power rate.  Bitcoin mining being interrupted doesn't affect it other than the loss of mining capacity during those times, so allowing it to be interrupted and restarted for a reduced power rate year round is likely to be a net win as well.

When you have Hydro-electric power you don't deal with these interruptions. 

What does hydro have to do with it? The interruptions come at times of unusually high load. Typically in mid winter when there will be high loads for heating and lighting then, during the morning peak demand (cooking breakfast and heating water for coffee and showers) or in the early evening peak (cooking dinner or the whole country turning on the kettle when there is an ad break on TV) the network may simply not have the capacity to deliver the full demand and so the high consumption customers who have agreed to interruption at such periods will be turned off. In hotter places, the peak demand will come on summer afternoons as all the air-con systems work flat out.

I have worked in the electricity supply industry in countries that have hydro power and they have contracts that allow power companies to interrupt the supply to large users.

[DeathAndTaxes]

Yes, you are correct.  I should of been more clear.  My utility has an agreement so local customers get guaranteed access for local power consumption. 

I see the confusing, he was referring to an OPTIONAL contract not the power company just cutting people off.  There are likely customers in your area who do the same thing.  Just using some made up number (large power delivery if often more complex then a fixed kWh rate).  A big power user (think aluminum smelter) might be offered a guaranteed delivery rate of $0.05 per kWh OR they could agree to no more than 1% annual outage and get $0.035 per kWh.  The customer chooses (isn't forced) to accept a possibility of up to 1% downtime in return for a 30% reduction in electrical rates.  For a business like aluminum smelting where you production cost is mostly electricity this is a beneficial arrangement for BOTH the customer and the power company.

[Dalkore]

Even with other fees, it's well under $0.05/kwh in certain areas.

As for power interruptions, high power consumption sites (industrial loads) can get substantially cheaper power in some areas if they agree to load shed a few times a year (typically for minutes to hours) and basically turn off the main power consumption items to reduce grid load.  You have to be sucking a LOT of power to do this, but in exchange for the power company being able to turn you off with little to no warning, you can get a much reduced power rate.  Bitcoin mining being interrupted doesn't affect it other than the loss of mining capacity during those times, so allowing it to be interrupted and restarted for a reduced power rate year round is likely to be a net win as well.

When you have Hydro-electric power you don't deal with these interruptions. 

What does hydro have to do with it? The interruptions come at times of unusually high load. Typically in mid winter when there will be high loads for heating and lighting then, during the morning peak demand (cooking breakfast and heating water for coffee and showers) or in the early evening peak (cooking dinner or the whole country turning on the kettle when there is an ad break on TV) the network may simply not have the capacity to deliver the full demand and so the high consumption customers who have agreed to interruption at such periods will be turned off. In hotter places, the peak demand will come on summer afternoons as all the air-con systems work flat out.

I have worked in the electricity supply industry in countries that have hydro power and they have contracts that allow power companies to interrupt the supply to large users.

I am not sure how other areas or countries handle it.  We have public owned hydro electric dams in Eastern Washington.   With that ownership, it has some benefits for local power customers.  If you use over 1MW per month you need to purchase power contracts, there may be clauses in there but with the amount of data-centers located out here, I would guess that it is not just because of the cheap power but also because of the priority access they can have to power.   I talked with my utility quite extensively about this and they told me that there was no issue about peak demand and furloughing customers. I too am still learning about this industry.

[Dalkore]

Yes, you are correct.  I should of been more clear.  My utility has an agreement so local customers get guaranteed access for local power consumption. 

I see the confusing, he was referring to an OPTIONAL contract not the power company just cutting people off.  There are likely customers in your area who do the same thing.  Just using some made up number (large power delivery if often more complex then a fixed kWh rate).  A big power user (think aluminum smelter) might be offered a guaranteed delivery rate of $0.05 per kWh OR they could agree to no more than 1% annual outage and get $0.035 per kWh.  The customer chooses (isn't forced) to accept a possibility of up to 1% downtime in return for a 30% reduction in electrical rates.  For a business like aluminum smelting where you production cost is mostly electricity this is a beneficial arrangement for BOTH the customer and the power company.

Yep, there is an aluminum smelter in the area.   Thanks for the info, I did read through some of the power contract information and some of the items you mention are listed. 

[DeathAndTaxes]

Yep, there is an aluminum smelter in the area.   Thanks for the info, I did read through some of the power contract information and some of the items you mention are listed. 

Now imagine you were building a massive hashing farm.  Would you be willing to trade (hypothetically) up to 1% annual outage for 30% lower power rate?  Like the aluminum smelter it doesn't matter if you are producing Bitcoins in any given second just how much you can produce in a year and at what cost.

I would love a contract like that on a smaller scale but power companies generally only make contracts like that with the largest of users because if they need to cut 1% of demand it is 1% of demand not necessarily 1% of customers.  If they need to shed 1MW of demand it is easier to disconnect (under contract) one 1 MW customer then it is to disconnect one hundred 10KW customers.

[Dalkore]

Yep, there is an aluminum smelter in the area.   Thanks for the info, I did read through some of the power contract information and some of the items you mention are listed. 

Now imagine you were building a massive hashing farm.  Would you be willing to trade (hypothetically) up to 1% annual outage for 30% lower power rate?  Like the aluminum smelter it doesn't matter if you are producing Bitcoins in any given second just how much you can produce in a year and at what cost.

I would love a contract like that on a smaller scale but power companies generally only make contracts like that with the largest of users because if they need to cut 1% of demand it is 1% of demand not necessarily 1% of customers.  If they need to shed 1MW of demand it is easier to disconnect (under contract) one 1 MW customer then it is to disconnect one hundred 10KW customers.

My strategy is to build a few separate locations to keep under the cap. 

[DeathAndTaxes]

Yep, there is an aluminum smelter in the area.   Thanks for the info, I did read through some of the power contract information and some of the items you mention are listed. 

Now imagine you were building a massive hashing farm.  Would you be willing to trade (hypothetically) up to 1% annual outage for 30% lower power rate?  Like the aluminum smelter it doesn't matter if you are producing Bitcoins in any given second just how much you can produce in a year and at what cost.

I would love a contract like that on a smaller scale but power companies generally only make contracts like that with the largest of users because if they need to cut 1% of demand it is 1% of demand not necessarily 1% of customers.  If they need to shed 1MW of demand it is easier to disconnect (under contract) one 1 MW customer then it is to disconnect one hundred 10KW customers.

My strategy is to build a few separate locations to keep under the cap. 

I think you are still misunderstanding. You wouldn't want to be under the cap.  Would you be upset to have cheaper power? 
This is something companies contact for BECAUSE they want very cheap power rates.  Cheaper than the rates offered to customers under non-interruptable contracts.