Has Bitcoin mining ever been so unprofitable?

[Bucc5207]

If you took the block rewards off blockchain.info, then it would include the value at time of production.  
 
Thanks for mining the data  

You're welcome!

I'm not sure what the first part means, so here's what I actually did.  First, I downloaded .csv data from this chart:  https://blockchain.info/charts/miners-revenue?timespan=all.  It incorporates block rewards, transaction fees, and difficulty (actual data for the entire network).  On a log scale, you can see the downward steps resulting from block reward halving.  Blockchain.info logged the data in USD based on the exchange rate each day (I don't know what kind of averaging they used for that).

Next, I downloaded .csv data from this chart:  https://blockchain.info/charts/hash-rate?timespan=all.  As I mentioned previously, this is an estimate based on block solution times. 

I divided the first data set by the second one in order to normalize the revenues to a constant mining hashrate and thereby get a result representing individual miners rather than the entire network.  Also as mentioned previously, it's standardized to 1 TH/s.  Any individual miner would see results on any particular day based on his own specific hashrate that day.  And of course, individual results vary because of randomness inherent in the system

That's all I did.  I used the data directly from blockchain.info, and added no assumptions about pools, utility costs, depreciation, etc.  The overall downward trend indicates that over long time periods, the exchange rate has failed to keep pace with increasing difficulty.  There have been many intervals when the opposite occurred (bumps in the curve), but the long-term trend is undeniable.  That's why it takes more and more computing power to make the same money year after year.  And it's only possible to profit from increased computing power because hardware energy efficiency has improved so much.  All of which ties in with Sandal_Hat's comparison to the shipping industry.

[lossol]

Lol, I remember when the oil shippers made tons of money and also when they went belly up and lost it all. Too much overcapacity is right. The comparison of shippers to miners is appropriate. And there's a lot more capacity coming online this year so profit will be declining in BTC mining as profit declined for the shippers! Anyone paying over 2k for a 13TH miner now will probably never break even!

[Sandal_Hat]

Do you know anybody with experience running a BTM business?  I'm exploring starting one in El Salvador.

I dont know any bitcoin miner in salvador. Are u sure it is worth it to use mineral oil? Mining profitability is horrible now.

Right now, if bitcoin price rise up suddenly to 20k, a huge flood of mining equipment orders will flood the asic manufacturers. In 3 weeks to 2 months, a ton of asics arrive and mining goes back to this bad profitability or close to it. Only bitcoin holders win. Thats the problem with overcapacity.


(Moderator's note: This post was edited by frodocooper to trim the quote from Sr.Urbanist.)

[Sandal_Hat]

Lol, I remember when the oil shippers made tons of money and also when they went belly up and lost it all. Too much overcapacity is right. The comparison of shippers to miners is appropriate. And there's a lot more capacity coming online this year so profit will be declining in BTC mining as profit declined for the shippers! Anyone paying over 2k for a 13TH miner now will probably never break even!

Yep, they did at first. The smart ones are those that sold out early but most sold out only after huge losses or near bankruptcy. Everyone expected to do better than their competitor. In shipowners case, everything from the shipowners to shipyards suffered. Tons of layoffs and some went bankrupt. Survivors lost alot of money.

Another thing shippers did back then when oil price was above 100 bucks was to spend more on more fuel efficient vessels since fuel cost are around 40-60% of operating costs. Unfortunately, everyone had the same idea to outmaneuver their competitors lol. That increased the tonnage overcapacity further as they competed more. I believe this will also be the case if btc price were to suddenly jump. Everyone will wanna buy an ASIC, news sources will trumpet it and mining difficulty will skyrocket to these bad numbers again.

[philipma1957]

It looks like it has a static price value for BTC, but that skews it because the electric bill is due monthly

No, it's gross mining revenue in USD.  Basically (block reward)x(market price)/difficulty at a constant hashrate, using published historical data.  Electric bill is not in it.  Did your OP involve utility or other costs at all?  It looked to me like you were simply lamenting low gross revenue.  Please clarify if I misread it.

I fully admit your chart is accurate .

I see a gross revenue chart that is being used in a misleading manner, since you left out the gross costs chart,
but if you want to say that gross revenue has dropped  per th okay yeah fine

      To not show that cost per th and power per th  has decreased enough to fully offset the revenue per th is a joke
  Once you do that net revenue shows up.

Frankly gross revenue means nothing to me
Now  the fact that net revenue which is what you are leaving out is clearly what matters to me.
Proper way is to show that  is gross revenue decreased  per th
and show that gross expenses decreased per Th.


 So I fully admit your chart is accurate
I don't bother most of the time but the accountant in me hate to see gross revenue  without gross expense and of course net profit.

That is why I said your chart is a joke. < and that is not what I should have said although I did say I did it as a shock value statement. To get attention
Below is what I could have said:

I stand corrected your perfectly accurate chart on gross revenue  was used in a manner that is a joke. Since you left out the charts showing cost and net revenue many people without a background in accounting  will be mislead and not realize net profits have not dropped.

That is a more  accurate  description on my part. But it lacks the shock value of my first statement.

Hopefully people read this post and realize what I am talking about.

[ccgllc]

Indeed.  I've been looking at mineral oil, but it has a lot of up front expenses. If done right, and at scale, it could provide an edge by consuming about half the electricity.  Though I see the next big area of profit being a big jump in hashpower.  If somebody would make a 50 TH/s miner, that'd surely be profitable for a while.  However, I'm not sure I see that playing out due to high up front costs.

How in the world would mineral oil cut your power consumption by half?!?!?  Its a heat transfer mechanism, not a power usage mechanism - except perhaps if your were, excuse me, but stupid enough to air condition your waste heat and recirculate the air.  The vast majority of farms just expel that waste heat.  Even if you recirculated, your air conditioning power usage would not be equal to your miner input power... and you would still need large fans to blow air through the oil radiator.  One way or another, that heat (equal to the power used by the miner) gets rejected to the outside environment.

That aside - from a macro economics perspective, profitability is VERY easy to predict:  Competition will drive it down until only the most efficient survive.  My single person 100+ mining farm has 3 costs to consider:  1) the cost of the building and land that it is on  2)  The cost of the equipment, and 3)  The cost of operating the equipment - which is just electricity since I don't draw a salary.  The first 2 are sunk cost, shy any expansion, which would just be a scaling issue.  Other operations have other issues (like rental of buildings, staff cost, etc.) to add to their electrical cost.  It is my hope that my average electrical cost will balance against their lower electrical cost plus their operating cost, at least for awhile.  Eventually it will not, and it won't matter if I have 100 or 1000 miners - once that balance tips, I'm out of business.  Good news for my competitors.  Others will likely fail before me, which is good news for me.  However note that difficulty just continues to increase, so people are not failing in sufficient numbers yet.

[QuintLeo]

Right now, if bitcoin price rise up suddenly to 20k, a huge flood of mining equipment orders will flood the asic manufacturers. In 3 weeks to 2 months, a ton of asics arrive and mining goes back to this bad profitability or close to it. Only bitcoin holders win. Thats the problem with overcapacity.

The problem with that concept is that there is NO OVERCAPACITY in Bitcoin mining gear - total network hashrate STILL has not caught up with the price rise from the lows back when it was pushing $200 AND WAS PROFITABLE AT THE TIME if you had low-enough cost electric.

They're still selling every miner they can get out the door, as they can't get enough CHIPS due to lack of FOUNDRY CAPACITY available.

I suspect that's the primary reason eBang moved to Samsung (and it's why Nvidia put the 1050/1050ti on Samsung) - TSMC and GF can't keep up with demand while Samsung had SOME slack (which has largely gotten eaten now, though not entirely).

[QuintLeo]

Indeed.  I've been looking at mineral oil, but it has a lot of up front expenses. If done right, and at scale, it could provide an edge by consuming about half the electricity.  Though I see the next big area of profit being a big jump in hashpower.  If somebody would make a 50 TH/s miner, that'd surely be profitable for a while.  However, I'm not sure I see that playing out due to high up front costs.

How in the world would mineral oil cut your power consumption by half?!?!? 

El Salvador - TROPICAL climate.
Wouldn't drop the actual miner consumption much - but might drop the AIR CONDITIONING requirement a ton - which is what I think they were claiming.

[ccgllc]

El Salvador - TROPICAL climate.
Wouldn't drop the actual miner consumption much - but might drop the AIR CONDITIONING requirement a ton - which is what I think they were claiming.

If your spending that much money to cool your equipment, your not going to be competitive on the global marketplace.   Yes, you could use geo-thermal cooling, but you still should only do that for your intake air, not your exhaust.  If your cooling cost are anything like miner power cost, even 0.5 to 1, that is REALLY going to hurt you.

[Sandal_Hat]

The problem with that concept is that there is NO OVERCAPACITY in Bitcoin mining gear...

There clearly is overcapacity. That is why these miners are not selling. Breakeven used to be less than half the time dude and profitability was far higher. U now have to mine above the warranty period to break even. I have a friend mining in china and there are other cost such as building, maintenance, staff and reliability of electricity. It isnt just low electricity. It is also harder for them to find low electricity rates these days.

Dude, bitcoin difficulty has increased alot more than bitcoin price and there are tons of unsold asics unlike the past where it is out of stock. U can now get miners in 2 weeks and not 3 months....wat u mean by they cant get enough capacity? If people wanted more capacity, they can easily buy and push the delivery date 1-2 months out. That happened in the past, not now.

If u are referring to gpu, yes, there is a shortage but not asics. Holding bitcoin makes a lot more than buying.


(Moderator's note: This post was edited by frodocooper to trim the quote from QuintLeo.)

[Druiz287]

It is my hope that my average electrical cost will balance against their lower electrical cost plus their operating cost, at least for awhile.  Eventually it will not, and it won't matter if I have 100 or 1000 miners - once that balance tips, I'm out of business.  Good news for my competitors.  Others will likely fail before me, which is good news for me.  However note that difficulty just continues to increase, so people are not failing in sufficient numbers yet.

Staying out of the red is key and I want to emphasize what you say here because when others drop out, difficulty drops right behind them which eventually buys you more time in the green.  To me, the name of the game here is EFFICIENCY, because as long as Revenues > Expenses, I keep mining.  When the market is saturated, and everyone has the most efficient miners, and no one makes a profit, there will be a demand for more efficient miners, and that will be the way to remain profitable.

[philipma1957]

The problem with that concept is that there is NO OVERCAPACITY in Bitcoin mining gear...

There clearly is overcapacity. That is why these miners are not selling. Breakeven used to be less than half the time dude and profitability was far higher. U now have to mine above the warranty period to break even. I have a friend mining in china and there are other cost such as building, maintenance, staff and reliability of electricity. It isnt just low electricity. It is also harder for them to find low electricity rates these days.

Dude, bitcoin difficulty has increased alot more than bitcoin price and there are tons of unsold asics unlike the past where it is out of stock. U can now get miners in 2 weeks and not 3 months....wat u mean by they cant get enough capacity? If people wanted more capacity, they can easily buy and push the delivery date 1-2 months out. That happened in the past, not now.

If u are referring to gpu, yes, there is a shortage but not asics. Holding bitcoin makes a lot more than buying.


(Moderator's note: This post was edited by frodocooper to trim the quote from QuintLeo.)

All depends on when you track from.

from a year ago today  diff has jumped about 15-20% less then price.

So if you are based on march 17 2017 to march 18 2018  you are better off today.


but if you count from dec 2017 to now you are worse off.

I can tell you the months of nov and dec 2017  were god like and basing your profits on that set of numbers is really not realistic at all.

but I am sure when I say that you are better off today then anytime from Jan 1 2017 to April 1 2017 I fall on deaf ears.

[QuintLeo]

Why are there so many stupid posts like this on this forum?

Ignorant people that jumped into this during the most inflated profitability cycle the industry has ever seen are now crying and whining that they arent overnight millionaires....

I'd say "one OF the most inflated cycles", not "the most".
But the point is still valid.

[QuintLeo]

The problem with that concept is that there is NO OVERCAPACITY in Bitcoin mining gear...

There clearly is overcapacity. That is why these miners are not selling.

Odd, I don't see S9 in stock on Bitmain on a consistent all the time basis, which WOULD indicate overcapacity.
They're STILL selling out every one they can make.

The ONLY units they're not selling out on are those old "relabled S7" things that are UNPROFITABLE for most folks because of their low efficiency by current standards.

[philipma1957]

Why are there so many stupid posts like this on this forum?

Ignorant people that jumped into this during the most inflated profitability cycle the industry has ever seen are now crying and whining that they arent overnight millionaires....

I'd say "one OF the most inflated cycles", not "the most".
But the point is still valid.

If you scale by dollar it was the biggest jump ever.

900 in jan 2017 to 19000 in dec 2017 + 1500 for dch

900 to 20500 is a 22.77 x 1 increase   but a 19600 dollar increase

I have seen 6 to 240 that is a 40 to 1 jump. but only 234 dollars

[Sandal_Hat]

All depends on when you track from...

Depends on which point taken really.
Jan 2016 = 0.15T difficulty
March 2017 = 3.2T Difficulty

3.2 / 0.15 = 21.3 times difficulty increase

Jan 2016 price = 1000 USD
March 2017 now price = 7700 USD

7700 /1000= 7.7 times price increase.


Thus, From Jan 2016 to March 2017 , difficulty has increased 21 times but price only 7.7 times.
-------------------------------------
Following your calculation:

(new btc price) 7700/1050 =  7.33 to 1


if you look at diff  for march 17 2017  475,705,205,061
if you look at diff for march 5 2018     3,290,605,988,754

so 3,290,605,988,754/475,705,205,061= 6.92 to 1

Well, it is still marginally better.


Anyways, right now, no doubt, difficulty is rising alot more than price and there are alot of asics that can be sold by asic manufacturers to easily push it higher. Stronger asics may appear also. I hope it doesnt.

Just my 2cents.


(Moderator's note: This post was edited by frodocooper to trim the quote from philipma1957.)

[Sandal_Hat]

Odd, I don't see S9 in stock on Bitmain on a consistent all the time basis, which WOULD indicate overcapacity.
They're STILL selling out every one they can make.

The ONLY units they're not selling out on are those old "relabled S7" things that are UNPROFITABLE for most folks because of their low efficiency by current standards.

Dude, it used to be that it takes 3 months to receive an antminer S9. They have not been able to sell for the last 2 months, that is why u can now order and received them in 2 weeks. It is very much in stock. Out of stock means u cannot even place an order. In the past, any new batch of S9s get announced on twitter and are sold out in 10 mins.
They are also selling the V9 which are new S7s, for cheap. Apparently some ppl can make some profit with them.

https://bitcointalk.org/index.php?topic=3077083.0   -Take a look. Even big mining farms with 5000 antminers S9s in canada which has cheap electricity are trying to cash out out.

U can find users selling used miners as low as 0.06 btc and some selling new S9s at 1000 USD at marketplace https://bitcointalk.org/index.php?board=75.0  ...among other things.

If btc suddenly rise to 20k right now, the bitcoin holders make 150% profit. Bitcoin difficulty will rise very quickly since new miners can be bought and be received in 2 weeks now. Even if u mine to hold, one 14TH S9 mines only 0.0305 btc right now per month. And it gets lower as difficulty rises.


(Moderator's note: This post was edited by frodocooper to remove multiple nested quotes.)

[QuintLeo]

Odd, I don't see S9 in stock on Bitmain on a consistent all the time basis, which WOULD indicate overcapacity.
They're STILL selling out every one they can make.

The ONLY units they're not selling out on are those old "relabled S7" things that are UNPROFITABLE for most folks because of their low efficiency by current standards.

Dude, it used to be that it takes 3 months to receive an antminer S9.

Which STILL is not "overcapacity", it is "demand dropping to CLOSE to capacity".
NOT the same thing.

If current Bitcoin price trend continues, they MIGHT actually hit overcapacity in the next 2-3 months - but they're not there YET.

Also, you might want to pay attention to the fact that the length of time for them to sell a batch increased a LOT when they moved to the "require payment in BCH", even though Bitcoin price was still rising at the time and demand was still INCREASING.
Instead of "sold out in a few minutes with massive website clog delaying the sales" they went to "needed a few days, then needed weeks" to sell out a batch over the next 2-3 batches after that - DESPITE a still huge demand level.

They've also had more competition appear in that timeframe, AND new models from existing competition that were comparable on performance to the S9.

There are a LOT of factors behind why S9 pricing has dropped the last month and change.

[ccgllc]

Also, you might want to pay attention to the fact that the length of time for them to sell a batch increased a LOT when they moved to the "require payment in BCH", even though Bitcoin price was still rising at the time and demand was still INCREASING.
Instead of "sold out in a few minutes with massive website clog delaying the sales" they went to "needed a few days, then needed weeks" to sell out a batch over the next 2-3 batches after that - DESPITE a still huge demand level.

Not quite true.  I bought my 14TH units on 9/27/17 and believe they were the last of the BTC accepted orders.  Within days of me placing that order they had switched to BCH.  So all of the 2 minute sell-out actions that happened in December and January were under the BCH flag.

I know it has cost them a few sales... I was about to buy (12) more a couple of weeks ago when I found myself 0.25 BCH short.  By the time ShapeShift converted some BTC for me, my order had timed out.  By the time, a few days later, when I got the associated coupon situation under control, BCH had dropped so far it didn't make sense to buy.

[Sandal_Hat]

Which STILL is not "overcapacity", it is "demand dropping to CLOSE to capacity".
NOT the same thing.

[...]

Dude, this is the definition of overcapacity "the situation in which an industry or factory cannot sell as much as its plant is designed to produce.

They have not been able to sell what they can produce. That is why delivery-date/lead-time which was 3 months ahead is now 2 weeks. This is the same for any other industry. If they could sell as fast as they could produce, the lead time would be maintained at 3 months now.

So, when they changed to BCH only payment, it took longer to sell for abit due to currency issues. That has nothing to do with demand/supply. Not everyone had access to an exchange like poloniex that had BCH back then and exchanges take many days to verify. So, customers take time to sign up and verify at exchanges before being able to get BCH. Coinbase didnt have BCH yet back then. Shortly after those issues, the website was using BCH only payment and miner stocks were once again out of stock quickly and with 2-3 months delivery lead time. Now, it is just overcapacity unfortunately.

Looking at the rate of difficulty increase, any rise in BTC price can easily be accompanied by a quick and sharp rise in difficulty because new units can be plugged in, in just 2 weeks. It used to have a 2 month lag time, so, that gives older miners some time to mine at that lower difficulty and sell at good btc price but that wont be the case from now onwards.


(Moderator's note: This post was edited by frodocooper to trim the quote from QuintLeo.)