How much does it cost to produce one Bitcoin? (Market Value Comparison)

[bitone]

I just stumbled upon Satoshi's famous quote ...

"In the absence of a market to establish the price (of bitcoin, estimates) based on production cost is a good guess and a helpful service (thanks). The price of any commodity tends to gravitate toward the production cost. If the price is below cost, then production slows down. If the price is above cost, profit can be made by generating and selling more." Feb. 21, 2010 Satoshi Nakamoto

... and asked myself: What is the current cost of production of one Bitcoin?

I found the following figures:

"According to Blockchain, over the last 24 hours Bitcoin miners used an estimated 135,950.77 megawatt hours of electricity." That is round about $195.000 a day. Daily there are 5.000 new Bitcoins mined. So that would equal to $39 cost of electricity per Bitcoin. Far away from current market price. Sure, to "produce" a Bitcoin you need hardware.

So the cost of hardware is the big unknown to calculate the real cost of production. And here you - fellow Bitcoin Enthusiasts - come into play:

Do you know reliable cost figures for mining hardware like price, operating lifetime and so forth to calculate the cost to produce one Bitcoin (and therefore get comparison to the current market value of a Bitcoin)?


Thanks,

Bitone

[anu]

The price of any commodity tends to gravitate toward the production cost.

In Bitcoin, the difficulty provides a means to gravitate the production cost towards the price.

[Borbolon]

I found this Bitcoin mining profitability calculator: http://www.bitcoinx.com/profit/

Looks interesting although I don't have a clue if it's accurate.

[phelix]

http://blockchained.com/profit/
http://mining.thegenesisblock.com/

Difficult to say because by far the largest part is the hardware. The current price 800-1000$ is not too far off imho.

[yogi]

The price of any commodity tends to gravitate toward the production cost.

In Bitcoin, the difficulty provides a means to gravitate the production cost towards the price.

This.

[davidgdg]

I found this one much easier to use and understand: http://www.vnbitcoin.org/bitcoincalculator.php


I entered numbers for the BFL 50 GH/s Bitcoin Miner at $984. This is a stock item so there are no pre-order issues.

After playing around with the numbers, I get the following:

1. The break-even period is exquisitely sensitive to the % change in difficulty (which occurs roughly every 12 days).

2. For 15%, break-even is 150 days. For 17% it is never.

3. Average change in difficulty for each of the last 15 changes has in fact been 29% (raw data here: http://runeks.dk/bitcoin/diff.txt)

4. At that rate, total lifetime revenue is about half of capital cost. I.e. unprofitable.

Conclusion. Mining is a  guessing game because profitability depends upon future changes in difficulty which are unknowable even in the short time, let alone the long term. But at present rates of increase, it is not profitable. That said, it is hard to believe that difficulty can keep climbing at the rate it has been for the last few months. Eventually things must moderate to something more in line with Moore's law. But until then....

[O_Shovah]

Just to add my own thoughts regarding this matter.

I do not take into account the fact that most of the upcoming mining plattforms are
bound to run into deficits even if they arrive as scheduled by their developers.

The amount of money invested and payed for each bitcoin mined varys
between ~260$ and ~560$ but generally is growing as the future mining
hardware is incoming.

Almost all plattforms i have seen lately as i already said wont run significant returns
for their owners having a certain safty margin in mind.
The timeframes for running the machines profitably are very small as well.
Around 3 to 7 months are not uncommon.


I propose to hold back your investments.
The race down the fabrication with of the ASIC world is to come to a slow down
within the next few generationsas the Mining ASICs meet with the state of the industry
production fabrication withs between 20 and 14 nm.

At that point i expect a more level playfield for mining operations and more stable
envoirment reenabling mid and long term investments into the mining market.

[johnyj]

$984 BFL single 50GH provide 0.018 coins per day and 0.18 coins for the first 10 day period, at 20% difficulty increase, it will mine 5x coins of the first time period during its life time, which is 0.9 coins. Even excluding all the electricity cost, it will make average coin cost $1093

[Borbolon]

What's a reliable mining profit calculator?

I tested a few but all give very different results. 

[htspringer]

$984 BFL single 50GH provide 0.018 coins per day and 0.18 coins for the first 10 day period, at 20% difficulty increase, it will mine 5x coins of the first time period during its life time, which is 0.9 coins. Even excluding all the electricity cost, it will make average coin cost $1093

If what you say is accurate, the bitcoins are undervalued presently.  I can't wait until about 18 months from now when the blockchain reward is halved.

[odolvlobo]

In theory, the average cost is just under 1 BTC to produce a bitcoin. That is because if it costs more than 1 BTC, then miners will stop mining, lowering the difficulty and the cost. If it costs less than 1 BTC, then more people will start mining, raising the difficulty and the cost.

In reality, it currently costs much more than 1 BTC to mine a bitcoin. It is reasonable to expect that 1 GH/s will mine no more than 0.018 BTC, yet people are paying double that for cex.io and most mining equipment.
 

[An amorous cow-herder]

In reality, it currently costs much more than 1 BTC to mine a bitcoin. It is reasonable to expect that 1 GH/s will mine no more than 0.018 BTC, yet people are paying double that for cex.io and most mining equipment.

And that part really buggers me. That basicly means the hardware business around bitcoin is actually bigger than the mining profit. And with 108k BTC mined per month that equates to like close to $100M per month (with BTC @ $900). How long can the bitcoin economy sustain such a large hardware business?

[keithers]

In theory, the average cost is just under 1 BTC to produce a bitcoin. That is because if it costs more than 1 BTC, then miners will stop mining, lowering the difficulty and the cost. If it costs less than 1 BTC, then more people will start mining, raising the difficulty and the cost.

In reality, it currently costs much more than 1 BTC to mine a bitcoin. It is reasonable to expect that 1 GH/s will mine no more than 0.018 BTC, yet people are paying double that for cex.io and most mining equipment.
 

I have wondered about this too...thanks for some clarification.   I have never mined, and don't plan to start, but I am intrigued by people that have done so, and done so successfully.

[Impaler]

And that part really buggers me. That basicly means the hardware business around bitcoin is actually bigger than the mining profit. And with 108k BTC mined per month that equates to like close to $100M per month (with BTC @ $900). How long can the bitcoin economy sustain such a large hardware business?

I've been saying for a year that ASICs have set off a kind of mining bubble, in which miners just pocket the BTC they produce as their profits which dries up the supply on the exchanges and inflates the price.  Eventually the system will break down when the marginal (electric) costs of mining don't even equal the profits and hash rates actually drop as a response to the overshoot.  When miners are right at the edge of profitability again they will operate like real mines, they will sell everything daily into the exchanges and this will drive down values as happened after the 2011 crash.  The market now can not absorb 5k coins per day being liquidated, that would drain all the USD off the exchanges in a week flat.  The present market is maintained by the bottling up of the newly mined coin stream by ASIC hoarders.

The actually sales volume of all the mining equipment would be a very interesting figure to know though, can you explain your steps to calculate it?

[johnyj]

In theory, the average cost is just under 1 BTC to produce a bitcoin. That is because if it costs more than 1 BTC, then miners will stop mining, lowering the difficulty and the cost. If it costs less than 1 BTC, then more people will start mining, raising the difficulty and the cost.

In reality, it currently costs much more than 1 BTC to mine a bitcoin. It is reasonable to expect that 1 GH/s will mine no more than 0.018 BTC, yet people are paying double that for cex.io and most mining equipment.
 

There are some uncertainties: Difficulty can rise and fall. The 1GH/s hash power can mine 0.04 BTC in 3 months if the difficulty seldom changes. The current higher bidding at CEX.IO might indicate that the difficulty rise will slow down for a while

[GigaCoin]

That's the question always lingering in many people's minds, is Mining Bitcoin really sustainable without constant major price rises ? for example if the price lingers around $1000-$1200 how long before mining collapses ?

[thaaanos]

The price of any commodity tends to gravitate toward the production cost.

In Bitcoin, the difficulty provides a means to gravitate the production cost towards the price.

This.

this.

until Intel or AMD comes to play

[dieselmeister]

I just stumbled upon Satoshi's famous quote ...

"In the absence of a market to establish the price (of bitcoin, estimates) based on production cost is a good guess and a helpful service (thanks). The price of any commodity tends to gravitate toward the production cost. If the price is below cost, then production slows down. If the price is above cost, profit can be made by generating and selling more." Feb. 21, 2010 Satoshi Nakamoto

... and asked myself: What is the current cost of production of one Bitcoin?

I found the following figures:

"According to Blockchain, over the last 24 hours Bitcoin miners used an estimated 135,950.77 megawatt hours of electricity." That is round about $195.000 a day. Daily there are 5.000 new Bitcoins mined. So that would equal to $39 cost of electricity per Bitcoin. Far away from current market price. Sure, to "produce" a Bitcoin you need hardware.

So the cost of hardware is the big unknown to calculate the real cost of production. And here you - fellow Bitcoin Enthusiasts - come into play:

Do you know reliable cost figures for mining hardware like price, operating lifetime and so forth to calculate the cost to produce one Bitcoin (and therefore get comparison to the current market value of a Bitcoin)?


Thanks,

Bitone

WTF?

Here in germany 1 kilowatt hour costs 0.28 €

135,950,770 kWh x 0.28 € = 38,066,215.50 €

38 Million Euros

This means, that 1 BTC costs in Germany 7613.24 €

Did you pay only 0.002 $ per kWh???

[Zotia]

I found the following figures:

"According to Blockchain, over the last 24 hours Bitcoin miners used an estimated 135,950.77 megawatt hours of electricity." That is round about $195.000 a day. Daily there are 5.000 new Bitcoins mined. So that would equal to $39 cost of electricity per Bitcoin. Far away from current market price. Sure, to "produce" a Bitcoin you need hardware.

How did you get the $195,000 number?  That's 0.143 cents per kilowatt hour, which is about 100 times cheaper than average price of electricity in the US.

[Rival]

The actual answer is here:

October 24, 2013: 553Gh/s gets 1 BTC/day @ a cost of $12,366 (9.25 BFL singles from ebay) ($22.36/Gh/s)
October 26, 2013: 778Gh/s gets 1 BTC/day @ a cost of $16,900 (13 BFL singles from ebay) ($21.72/Gh/s)
November 05 2013: 1016Gh/s gets 1 BTC/day @ a cost of $22,013 (17 BFL singles from ebay) ($21.66/Gh/s)
November 17, 2013: 1212Gh/s gets 1 BTC/day @ a cost of $42,420 (20.2 BFL singles from ebay) ($35/Gh/s)
November 30, 2013: 1420Gh/s gets 1 BTC/day @ a cost of $82,833 (24 BFL singles from ebay)  ($58/Gh/s)
December 11,2013: 1800Gh/s gets 1 BTC/Day @ a cost of $75,000 (30 BFL singles from ebay) ($41/Gh/s)
December 21, 2013: 2350Gh/s gets 1 BTC/Day @ a cost of $86166 (39 BFL singles from ebay) ($36/Gh/s)

Today:

January 08, 2014: 2821Gh/s gets 1 BTC/Day@ a cost of $58500 (78 AsicMiner Cubes from ebay) ($21/Gh/s)

The tumble in asic miner unit prices over the last few weeks has made it much cheaper to get bitcoins. Since the are now several dozen cubes available I have moved over to them for the calculations, and they are fairly cheap compared to BFL units offered. Unfortunately, to run these miners you need some power supplies. In this case, add an additional 39 power supplies (corsair TX850) at a cost of $4875 and that gets you up to right at $63,000 to arm up for one BTC per day with the ASICminer cubes. That's pretty close to what you would need to spend on little singles from BFL, so it's really a wash. If the antminers become more widely available I may consider using them for pricing the next round as they are slightly cheaper currently per Gh/s. It BTC can climb back over $1000 and sustain it for a while, we could see the unit prices increase as they did before, so keep your seatbelt on, it's one big wild ride!