Projected Minimum Cost per BTC over the next year

[BurtW]

UPDATE!!!

This thread is just a quick attempt to project the minimum cost per BTC over the next year assuming the growth in the hash rate next year matches the growth in the hash rate over the last year.

tl;dr:  either the growth in the hash rate must slow down or the price of BTC must go up, a lot.

Using the following conversion factors, constants and assumptions:

Code:

GH/s per Diff   0.007158388055
Blocks/Period   2016          
BTC/Period      50400         
Watts per GH/s  1 (assumed constant for the next year - it may go down)             
USD/kWh         $0.10         

In other words assuming everyone in the network pays $0.10 per kWh and everyone has miners that burn 1 W per GH/s (1 J/GH) then we can calculate the average production cost for each BTC over the last year as follows:

Code:

                                          Hash Rate    Power      Energy        Cost    Cost
     Date      Difficulty   Delta Days         GH/s       kW         kWh    $/Period   $/BTC
---------  --------------  ------ ----  -----------  -------  ----------  ----------  ------
24-Aug-13      65,750,060                   470,664      471
04-Sep-13      86,933,018  32.22%   11      622,300      622     164,287     $16,429   $0.33
14-Sep-13     112,628,549  29.56%   10      806,239      806     193,497     $19,350   $0.38
25-Sep-13     148,819,200  32.13%   11    1,065,306    1,065     281,241     $28,124   $0.56
06-Oct-13     189,281,249  27.19%   11    1,354,949    1,355     357,706     $35,771   $0.71
16-Oct-13     267,731,249  41.45%   10    1,916,524    1,917     459,966     $45,997   $0.91
26-Oct-13     390,928,788  46.02%   10    2,798,420    2,798     671,621     $67,162   $1.33
05-Nov-13     510,929,738  30.70%   10    3,657,433    3,657     877,784     $87,778   $1.74
17-Nov-13     609,482,680  19.29%   12    4,362,914    4,363   1,256,519    $125,652   $2.49
29-Nov-13     707,408,283  16.07%   12    5,063,903    5,064   1,458,404    $145,840   $2.89
10-Dec-13     908,350,862  28.41%   11    6,502,328    6,502   1,716,615    $171,661   $3.41
21-Dec-13   1,180,923,195  30.01%   11    8,453,506    8,454   2,231,726    $223,173   $4.43
02-Jan-14   1,418,481,395  20.12%   12   10,154,040   10,154   2,924,364    $292,436   $5.80
13-Jan-14   1,789,546,951  26.16%   11   12,810,272   12,810   3,381,912    $338,191   $6.71
24-Jan-14   2,193,847,870  22.59%   11   15,704,414   15,704   4,145,965    $414,597   $8.23
05-Feb-14   2,621,404,453  19.49%   12   18,765,030   18,765   5,404,329    $540,433  $10.72
17-Feb-14   3,129,573,175  19.39%   12   22,402,699   22,403   6,451,977    $645,198  $12.80
28-Feb-14   3,815,723,799  21.92%   11   27,314,432   27,314   7,211,010    $721,101  $14.31
13-Mar-14   4,250,217,920  11.39%   13   30,424,709   30,425   9,492,509    $949,251  $18.83
24-Mar-14   5,006,860,589  17.80%   11   35,841,051   35,841   9,462,037    $946,204  $18.77
05-Apr-14   6,119,726,089  22.23%   12   43,807,374   43,807  12,616,524  $1,261,652  $25.03
17-Apr-14   6,978,842,650  14.04%   12   49,957,264   49,957  14,387,692  $1,438,769  $28.55
29-Apr-14   8,000,872,136  14.64%   12   57,273,348   57,273  16,494,724  $1,649,472  $32.73
12-May-14   8,853,416,309  10.66%   13   63,376,190   63,376  19,773,371  $1,977,337  $39.23
24-May-14  10,455,720,138  18.10%   12   74,846,102   74,846  21,555,677  $2,155,568  $42.77
05-Jun-14  11,756,551,917  12.44%   12   84,157,961   84,158  24,237,493  $2,423,749  $48.09
18-Jun-14  13,462,580,115  14.51%   13   96,370,373   96,370  30,067,556  $3,006,756  $59.66
29-Jun-14  16,818,461,371  24.93%   11  120,393,073  120,393  31,783,771  $3,178,377  $63.06
12-Jul-14  17,336,316,979   3.08%   13  124,100,084  124,100  38,719,226  $3,871,923  $76.82
25-Jul-14  18,736,441,558   8.08%   13  134,122,719  134,123  41,846,288  $4,184,629  $83.03
08-Aug-14  19,729,645,941   5.30%   14  141,232,462  141,232  47,454,107  $4,745,411  $94.15
19-Aug-14  23,844,670,039  20.86%   11  170,689,401  170,689  45,062,002  $4,506,200  $89.41
31-Aug-14  27,428,630,902  15.03%   12  196,344,784  196,345  56,547,298  $5,654,730 $112.20

Continued in next post...

[1714502930]

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[1714502930]

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[BurtW]

When calculated in the OP over the time period from March 14, 2013 to March 13, 2014 the average increase in the difficulty and hash rate was 23.92% per adjustment period and the average length of each adjustment period was 11.38 days.

Recalculated over the period June 29, 2013 to June 29, 2014 it was 23.45% and 11.41 days.

Now, recalculating over the period August 24, 2013 to August 31, 2014 it is 21.12% and 11.63 days.

Assuming the network growth rate over the next year is the same as it was this last year we get:

Code:

                                Hash Rate   Power      Energy            Cost        Cost
     Date          Difficulty        TH/s      MW         MWh        $/Period       $/BTC
---------  ------------------  ----------  ------  ----------  --------------  ----------
11-Sep-14      33,220,936,877     237,808     238      66,349      $6,634,853     $131.64
23-Sep-14      40,236,446,759     288,028     288      80,360      $8,035,984     $159.44
04-Oct-14      48,733,473,526     348,853     349      97,330      $9,733,002     $193.12
16-Oct-14      59,024,880,009     422,523     423     117,884     $11,788,392     $233.90
28-Oct-14      71,489,598,585     511,750     512     142,778     $14,277,833     $283.29
08-Nov-14      86,586,583,575     619,820     620     172,930     $17,292,988     $343.11
20-Nov-14     104,871,710,060     750,712     751     209,449     $20,944,876     $415.57
02-Dec-14     127,018,241,359     909,246     909     253,680     $25,367,960     $503.33
13-Dec-14     153,841,618,762   1,101,258   1,101     307,251     $30,725,098     $609.62
25-Dec-14     186,329,486,300   1,333,819   1,334     372,135     $37,213,544     $738.36
05-Jan-15     225,678,056,071   1,615,491   1,615     450,722     $45,072,202     $894.29
17-Jan-15     273,336,153,086   1,956,646   1,957     545,904     $54,590,430   $1,083.14
29-Jan-15     331,058,561,407   2,369,846   2,370     661,187     $66,118,694   $1,311.88
09-Feb-15     400,970,635,767   2,870,303   2,870     800,815     $80,081,465   $1,588.92
21-Feb-15     485,646,557,708   3,476,447   3,476     969,929     $96,992,858   $1,924.46
05-Mar-15     588,204,117,648   4,210,593   4,211   1,174,756    $117,475,554   $2,330.86
16-Mar-15     712,419,512,763   5,099,775   5,100   1,422,837    $142,283,732   $2,823.09
28-Mar-15     862,866,387,600   6,176,732   6,177   1,723,308    $172,330,835   $3,419.26
08-Apr-15   1,045,084,236,901   7,481,119   7,481   2,087,232    $208,723,207   $4,141.33
20-Apr-15   1,265,782,371,309   9,060,961   9,061   2,528,008    $252,800,823   $5,015.89
02-May-15   1,533,086,956,002  10,974,431  10,974   3,061,866    $306,186,635   $6,075.13
13-May-15   1,856,840,218,301  13,291,983  13,292   3,708,463    $370,846,321   $7,358.06
25-May-15   2,248,962,841,151  16,098,949  16,099   4,491,607    $449,160,670   $8,911.92
06-Jun-15   2,723,892,885,897  19,498,682  19,499   5,440,132    $544,013,236  $10,793.91
17-Jun-15   3,299,117,405,623  23,616,363  23,616   6,588,965    $658,896,517  $13,073.34
29-Jun-15   3,995,816,323,188  28,603,604  28,604   7,980,405    $798,040,547  $15,834.14
10-Jul-15   4,839,642,281,734  34,644,038  34,644   9,665,686    $966,568,646  $19,177.95
22-Jul-15   5,861,665,181,962  41,960,074  41,960  11,706,861  $1,170,686,065  $23,227.90
03-Aug-15   7,099,516,184,307  50,821,092  50,821  14,179,085  $1,417,908,463  $28,133.10
14-Aug-15   8,598,773,298,472  61,553,356  61,553  17,173,386  $1,717,338,634  $34,074.18
26-Aug-15  10,414,639,578,109  74,552,032  74,552  20,800,017  $2,080,001,680  $41,269.87
07-Sep-15  12,613,975,712,232  90,295,733  90,296  25,192,510  $2,519,250,952  $49,985.14

In other words something has got to give by the end of the year, or actually before December 1

[philipma1957]

Don't see the updates but diff is slowing from june 29 to now it is around 10% and the current predication from www.bitcoincharts.com is under 1%.

Price is  at 470-490.

 At a .8 watt s-3  480 usd and 10 cents a kwatt   it does not pay power at a diff of

114,000   we are at 27,428. So if we get 10% jumps in diff no miners turns a profit around April 1st 2015

At 15% diff jumps miners end it around Jan 21st 2015

Lastly at 20% the party is over on Dec 23 2014.

So the next 5 months will be very interesting.
I may do more coin holding then any other move.

[BurtW]

So the next 5 months will be very interesting.
I may do more coin holding then any other move.

Yes indeed.

[Cablez]

It will be very interesting to see if the institutional miners will learn what the small miners have known for a while, mining more quickly than imagined becomes a very marginal game and a money sink if you are not careful.

I wonder also if the institutional miners will act rationally with prices being such.  The desire to break even on initial investment I would think could lead them to sell even for a loss initially.  I don't smell many holders in the big guys as they seem to be non-believers.  Fiat still rules bitcoin.

[RoadStress]

I wonder also if the institutional miners will act rationally with prices being such.  The desire to break even on initial investment I would think could lead them to sell even for a loss initially.  I don't smell many holders in the big guys as they seem to be non-believers.  Fiat still rules bitcoin.

Luckly we have one big miner that is holding most or all of the coins and that is Bitfury. I suspect that the rest are holding less than 50% of what they mine. KnC stated that they aren't holding any. Damn tards!

[philipma1957]

I wonder also if the institutional miners will act rationally with prices being such.  The desire to break even on initial investment I would think could lead them to sell even for a loss initially.  I don't smell many holders in the big guys as they seem to be non-believers.  Fiat still rules bitcoin.

Luckly we have one big miner that is holding most or all of the coins and that is Bitfury. I suspect that the rest are holding less than 50% of what they mine. KnC stated that they aren't holding any. Damn tards!

Well something else we agree on.  

   Actually with the 3  big builders ;  bitmaintech,bitfury,knc  there must be over 100ph self mining. Why should they do anything but mine.
I think the top ten builders could own 160 of the 210ph mining right now.  All they need to do  is  limit  growth under 4-6% and mine.

I make that statement with the following in mind :  power at 4-8 cents a kwatt  , gear at .6-1watt a gh and btc at 480usd.

[BurtW]

I find the following numbers most interesting.  It shows a statistically significant, small, slowdown in build rate:

Code:

                       Average     Average
      Period Covered      Per  Adjustment
     From         To   Adjust      Length
---------  ---------  -------  ----------
14-Mar-13  13-Mar-14   23.92%  11.38 days
29-Jun-13  29-Jun-14   23.45%  11.41 days
24-Aug-13  31-Aug-14   21.12%  11.63 days

[samsonn25]

Can they build at $20-25 GH though?

[samsonn25]

I find the following numbers most interesting.  It shows a statistically significant, small, slowdown in build rate:

Code:

                       Average     Average
      Period Covered      Per  Adjustment
     From         To   Adjust      Length
---------  ---------  -------  ----------
14-Mar-13  13-Mar-14   23.92%  11.38 days
29-Jun-13  29-Jun-14   23.45%  11.41 days
24-Aug-13  31-Aug-14   21.12%  11.63 days

Because it is becoming less profitable to mine.  Or sell unprofitable machines to the public.

[dropt]

I find the following numbers most interesting.  It shows a statistically significant, small, slowdown in build rate:

Code:

                       Average     Average
      Period Covered      Per  Adjustment
     From         To   Adjust      Length
---------  ---------  -------  ----------
14-Mar-13  13-Mar-14   23.92%  11.38 days
29-Jun-13  29-Jun-14   23.45%  11.41 days
24-Aug-13  31-Aug-14   21.12%  11.63 days

Because it is becoming less profitable to mine.  Or sell unprofitable machines to the public.

Or each additional machine added signifies a smaller and smaller increase overall.

[BurtW]

Or each additional machine added signifies a smaller and smaller increase overall.

Very good point.

[philipma1957]

I find the following numbers most interesting.  It shows a statistically significant, small, slowdown in build rate:

Code:

                       Average     Average
      Period Covered      Per  Adjustment
     From         To   Adjust      Length
---------  ---------  -------  ----------
14-Mar-13  13-Mar-14   23.92%  11.38 days
29-Jun-13  29-Jun-14   23.45%  11.41 days
24-Aug-13  31-Aug-14   21.12%  11.63 days

Because it is becoming less profitable to mine.  Or sell unprofitable machines to the public.

Or each additional machine added signifies a smaller and smaller increase overall.

yes  going from 2ph to 4ph is  no where close to 200ph to 202ph.  one is 100 % diff the other is 1 % diff yet both are a 2ph in gear jump.

Also you need cheap power a 1 watt machine means 20 mega-watts for 20 ph.

So for the network to jump from 200ph to 220ph you need a new powerplant  small one but a power plant none the less.

so to do a 20ph jump the plant below needs to be built  (in the metaphorical sense for an analogy )

http://www.power-eng.com/articles/print/volume-111/issue-11/departments/managing-the-plant/repowering-a-small-coal-fired-power-plant.html
 

So down the road when and if we get to 400ph 10 percent is  40ph and means 2 of the above plants would need construction. If BTC does not crash and burn growth will slow.  Or should I say power availability  cannot keep up with the asic builders ability to build asics. What does it mean for BTC>  wish I knew.  But I am buying coins more then gear.

[mwizard]

I find the following numbers most interesting.  It shows a statistically significant, small, slowdown in build rate:

Code:

                       Average     Average
      Period Covered      Per  Adjustment
     From         To   Adjust      Length
---------  ---------  -------  ----------
14-Mar-13  13-Mar-14   23.92%  11.38 days
29-Jun-13  29-Jun-14   23.45%  11.41 days
24-Aug-13  31-Aug-14   21.12%  11.63 days

Because it is becoming less profitable to mine.  Or sell unprofitable machines to the public.

Or each additional machine added signifies a smaller and smaller increase overall.

yes  going from 2ph to 4ph is  no where close to 200ph to 202ph.  one is 100 % diff the other is 1 % diff yet both are a 2ph in gear jump.

Also you need cheap power a 1 watt machine means 20 mega-watts for 20 ph.

So for the network to jump from 200ph to 220ph you need a new powerplant  small one but a power plant none the less.

so to do a 20ph jump the plant below needs to be built  (in the metaphorical sense for an analogy )

http://www.power-eng.com/articles/print/volume-111/issue-11/departments/managing-the-plant/repowering-a-small-coal-fired-power-plant.html
 

So down the road when and if we get to 400ph 10 percent is  40ph and means 2 of the above plants would need construction. If BTC does not crash and burn growth will slow.  Or should I say power availability  cannot keep up with the asic builders ability to build asics. What does it mean for BTC>  wish I knew.  But I am buying coins more then gear.

The total electricity used for Bitcoin mining is trivial when compared to worldwide power generation.

The total worldwide Bitcoin network only needs about 220 Megawatts for mining.  A single typical large generator puts out 600 to 750 Megawatts and a typical power station would have several generators.  

So I would not worry about electricity producers not being able to provide power for ASIC miners.

For example the Three Gorges dam complex in China has 32 generators each of 700 Megawatts.  So the total worldwide Bitcoin mining network is equal to about 1% of the output of that one generating complex.  Admittedly the Three Georges dam is a larger than average generating plant.  

As you know China is the world's leading generator of electricity and has the most generating capacity (1,200,000 Megawatts - CIA fact sheet).

A comment on the link to the 20 megawatt plant referenced above.  This is a very small plant and appears to have been mothballed since the above 2007 article.  http://www.arpapower.org/lamar-repowering-project-plant-studies-2/

[BurtW]

This is all true at the current Bitcoin price.  However, power consumption is a function of price.  As the price of Bitcoins goes up then network can "afford" to spend more on power.

Note that power consumption is a function of price not mining efficiency.

Mining efficiency only affects hash rate and difficultly - not power consumption.

For example, we cannot/do not want to get to $500,000 per BTC any time soon.  Here is the math behind it:

https://bitcointalk.org/index.php?topic=694401.0

If BTC were to go to $500,000 in this era it would cause a catastrophic mining bubble:

   $500,000 x 25 = $12,500,000 per block = $75,000,000 per hour

   $75 million per hour would drive the mining to attempt to use 675 GW.  This is about 30% of all the power generated on the planet.

So, in order to keep our power consumption under about 2% of world wide power production, we cannot/do not want the price to get to $500,000 before era 6, which is about 2033 or so.

Using my previously derived formula for the power consumption:

P = (6(50/2^e) + f)(x)(1 - g)/c [kW]

where:

x = exchange rate [USD/BTC]
e = era [0..32] (we are currently in era 1)
f = average fees per hour [BTC/hour]
c = cost of energy [USD/kWh]
g = average gross profit margin [unitless ratio]

we can look at the power consumption in each era assuming a price of $500,000 per BTC.

In order to make it simple I will make the following assumptions:

x = $500,000 per BTC
f = fees per hour will keep the coinbase above 6 BTC/hour (1 BTC/block) in all eras
c = $0.10 per kWh
g = 0.1 miner gross profit margin

Code:

     Original target      Subsidy    Est Fees  Power  % of total world
Era    starting year    BTC/block    BTC/hour     GW  power production
---  ---------------  -----------  ----------  -----  ----------------
  0             2009  50.00000000  0.00000000  1,350            58.41%
  1             2013  25.00000000  0.00000000    675            29.20%
  2             2017  12.50000000  0.00000000    337            14.60%
  3             2021   6.25000000  0.00000000    169             7.30%
  4             2025   3.12500000  0.00000000     84             3.65%
  5             2029   1.56250000  0.00000000     42             1.83%
  6             2033   0.78125000  1.31250000     27             1.17%
  7             2037   0.39062500  3.65625000     27             1.17%
  8             2041   0.19531250  4.82812500     27             1.17%
  9             2045   0.09765625  5.41406250     27             1.17%

[Nagle]

This is all true at the current Bitcoin price.  However, power consumption is a function of price. 

There seems to be very little relationship between Bitcoin mining difficulty and price. In the last six months, difficulty has increased by a factor of 7, while price has declined a little. The cost of mining does not drive price. Price drives the level of mining activity.

[BurtW]

This is all true at the current Bitcoin price.  However, power consumption is a function of price.  

There seems to be very little relationship between Bitcoin mining difficulty and price. In the last six months, difficulty has increased by a factor of 7, while price has declined a little. The cost of mining does not drive price. Price drives the level of mining activity.

Kind of.

Total network power consumption is a function of price.

Mining difficulty and hash rate are a function of mining efficiency.

[mskryxz]

This is all true at the current Bitcoin price.  However, power consumption is a function of price.  As the price of Bitcoins goes up then network can "afford" to spend more on power.

Note that power consumption is a function of price not mining efficiency.

Mining efficiency only affects hash rate and difficultly - not power consumption.

For example, we cannot/do not want to get to $500,000 per BTC any time soon.  Here is the math behind it:

https://bitcointalk.org/index.php?topic=694401.0

If BTC were to go to $500,000 in this era it would cause a catastrophic mining bubble:

   $500,000 x 25 = $12,500,000 per block = $75,000,000 per hour

   $75 million per hour would drive the mining to attempt to use 675 GW.  This is about 30% of all the power generated on the planet.

So, in order to keep our power consumption under about 2% of world wide power production, we cannot/do not want the price to get to $500,000 before era 6, which is about 2033 or so.

Using my previously derived formula for the power consumption:

P = (6(50/2^e) + f)(x)(1 - g)/c [kW]

where:

x = exchange rate [USD/BTC]
e = era [0..32] (we are currently in era 1)
f = average fees per hour [BTC/hour]
c = cost of energy [USD/kWh]
g = average gross profit margin [unitless ratio]

we can look at the power consumption in each era assuming a price of $500,000 per BTC.

In order to make it simple I will make the following assumptions:

x = $500,000 per BTC
f = fees per hour will keep the coinbase above 6 BTC/hour (1 BTC/block) in all eras
c = $0.10 per kWh
g = 0.1 miner gross profit margin

Code:

     Original target      Subsidy    Est Fees  Power  % of total world
Era    starting year    BTC/block    BTC/hour     GW  power production
---  ---------------  -----------  ----------  -----  ----------------
  0             2009  50.00000000  0.00000000  1,350            58.41%
  1             2013  25.00000000  0.00000000    675            29.20%
  2             2017  12.50000000  0.00000000    337            14.60%
  3             2021   6.25000000  0.00000000    169             7.30%
  4             2025   3.12500000  0.00000000     84             3.65%
  5             2029   1.56250000  0.00000000     42             1.83%
  6             2033   0.78125000  1.31250000     27             1.17%
  7             2037   0.39062500  3.65625000     27             1.17%
  8             2041   0.19531250  4.82812500     27             1.17%
  9             2045   0.09765625  5.41406250     27             1.17%

Great info!

[Wexlike]

I love this thread and all this number crunching. Awesome work !

[chriswilmer]

Wow, your latest calculation about the price within different era's is really insightful!