I have been reading for so long time about why people should never get into mining that I thought to open a different thread for expressing my opinion, a completely opposite opinion.
SummaryMining this 2014 will be profitable. The mining game will change, because the mining environment is changing.
In 2013, mining profits went from huge to very little in just few months. With ROI reached in weeks (if you bought your miner before october) or in 1 month (if you bought your miner last december).
In 2014, mining profits will go from low to lower and stay like that during years. ROI will be reached within 6-12 months, and profitability will be about 2x the electricity costs of running your hardware.
If you buy a KNC Neptune (
see here a review), for which you pay $500 in electricity per month, when difficulty stabilizes, you will be getting a profit of about $1000 per month (after paying electricity).
The logic of the Plateau phaseIt is true the main argument of naysayers: Difficulty has been increasing 20% every 2 weeks. Every time it gets harder to reach ROI. Conglomerates have mining farms of thousands of Terahashes. Etc.
However, there is a HUGE flaw in the logic of people thinking that mining will not be profitable because difficulty will increase so much that it will eventually become more expensive to mine than to shut down your miners (because electricity costs will be higher than the income in BTC from mining). WRONG WRONG WRONG!!!!!!!!
Today (20.02.2014) there is around 27 PH mining bitcoins. That is 27 000 000 GH hashing power. That equipment is built out of 28nm - 150nm ASICs, with electricity consumption from 1 - 6 Watts/GH. People mining on their homes, or in a conglomerate's mining farm, all are using the same ASICs, with the same power consumption.
If difficulty increases 20 times from right now, then electricity costs would be higher than the BTC you can get by mining. That means that all those 27 PH in the network will be shut down, as people want to make money, not to burn it.
Even if you have a free miner, if you need to pay $100 electricity for mining and get $80 in mined bitcoins, you are better off turning your mining gear off and using those $100 per month for buying BTC.
If miners are shut down, network difficulty lowers, making your miners profitable again. Then you turn on your miner again (because it is now profitable again), until a stability phase is reached.
A plateau period that will last for years, where mining is still barely profitable.Business Case for purchasing mining equipment in 2014Small miners have an advantage that mining farms (conglomerates) dont have. If you mine from home, you pay electricity and that is your only cost. If you mine in a datacenter, you pay electricity, cooling, personnel (upgrading firmware, configurations, etc.), rent for the space, taxes, etc.
Companies that mine, have costs that are 2x-3x the electricity costs.
On top of that, buying new hardware is a business decision, which is approved or rejected by the investors according to the expected profits. A conglomerate will put millions in hardware only if ROI is reached within 6-12 months, and expected profits are good enough that investors will risk their money for the hardware. Then the limit for network difficulty is given by the minimum return that conglomerates expect from their investment. Income - Costs (electricity + other costs + hardware depreciation) > Minimum Profit.
That points to when we will reach the Plateau phase. Now here goes the only speculation (intelligent guess): The Plateau phase will be reached when the income in BTC equals 3x the electricity costs.
X for electricity and 2X that pays for all other costs, and minimum profit expected by owners of mining farms.
If you buy a KNC Neptune (see my signature below), for which you pay X ($500) in electricity per month, when difficulty stabilizes, you will be getting a profit of about 2X ($1000) per month (after paying electricity).
Bitcoin Mining Calculators are uselessBitcoin mining calculators only assume that difficulty will keep increasing indefinitely. PAST EVENTS NOT ALWAYS REPEAT IN THE FUTURE. And in this case, basic logic tells that it is simply impossible for difficulty to keep increasing indefinitely.
Currently (I mine with few 28nm KNC Jupiters ), I get in BTC the equivalent of 10X-15X what I pay for electricity. That number still leaves so much profit, that big money is still flowing into mining gear.
We still have space for more than 10 (5 months) increases of 20% until the Plateau phase, when Business Plans reach their lowest limit of profitability.
Most likely we will see the difficulty to keep this same pace until May, and then slowly stabilize by the end of 2014.
Which mining calculator keeps that into account? None. Then dont use them. Those are good only for seing the next 3 months and no futher than that. Buying Mining Gear is not a 3 months decision. Calculators will not be of any help.
Guidelines for a future proof Mining Gear - If you decide to get into mining, dont jump into any second hand mining gear (unless those have 28nm asics and price is no more than 60X the return of 1 day at current difficulty).
- Dont preorder from unknown vendors.
- Get a miner that consumes no more than 1.2 Watts / GH.
Personally, I have ordered few KNC Neptune (see my signature below if you want further details), which to my understanding, are the most future proof. The reason is that Neptunes are 20nm asics, which is the current state of the art of asic technology. There is no next generation asics (14nm) for at least 2 more years.
Another common argument marketed a lot in internet (which newbies accept without reasoning), is that some 40nm, 55nm, 130nm ASICs can be specced so that they are more efficient in electricity than 28nm ASICS, then 20nm, 28nm, 40nm, 55nm, 100nm, 150nm are useless. Those are merely tricks. If you underclock an asic 4 times, you consume 6 times less electricity. Then you can make your old tech asics to perform better in electricity consumption than a 28nm asic. Then the volume starts playing a role. Because right now mining bitcoins is over 10X electricity costs, to downclock an ASIC is crazy, and it is only done as a marketing tool (the efficiency thing). Once electricity costs is 2X-3X the bitcoin income, all asics will be used with the clock speeds that hits the point of maximum efficiency (ratio btc income - electricity costs).
And to finalize this post, if you are planning to order a KNC Neptune (KNC is selling those right now , probably until beginning of March), take a look at my signature. Besides mining myself, because I have been mining with KNC gear for so long time, I give small rebates to fellow bitcoin miners. All details in my signature link.
Cheers and happy mining!
Libitum
