Projected Minimum Cost per BTC over the next year

[samsonn25]

While the ASM gen3 chips seem like a good deal, they are power hogs at 1.1 watts/gh

They will be outdated and unprofitable by November if the user has to pay anything over .10 electricity and other expenses.

[1714500937]

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[pennywise]

http://blogs.wsj.com/moneybeat/2014/09/19/bitbeat-more-pain-for-bitcoin-prices-are-chinese-miners-to-blame/

The China theory is one of the few that seems to makes sense of those competing trends.

The idea is that some Chinese citizens see bitcoin as a vehicle for bypassing capital controls, which limit them to foreign exchange purchases of more than $50,000 a year. With Chinese bitcoin exchanges scrutinized by officials and with banks barred from servicing them ever since a crackdown in April, yuan-funded investment in mining could be an easier, below-the-radar way to obtain bitcoins and sell them for dollars.

Is this happening? Well, we  know a lot of the new mining equipment is coming online in China, where a large number of new ASIC (application-specific integrated circuit) mining rigs are made. Sources have told us of large mining operations surreptitiously installed by employees of state-owned enterprises (SOEs) in factories that enjoy state-subsidized electricity. In some cases, these people say, the rigs are even charged to the company as “computing equipment.” If the state’s paying for both your equipment and your power bill, the price of bitcoin doesn’t matter so much.

Does anyone believe this? Could this be a possible explanation for insane difficulty growth for the past few month?

[samsonn25]

I think FREE or Little electricity cost is part of the reason difficulty has not dropped.

In addition there are still money stuck in the development phase from the last major investment phase (late 2013 early 2014). 

I expect a major shakeout of manufacturers by the end of year. Wont be many makers and suppliers in 2015 because there wont be any profit in making and selling them.

[AnonymousEconomist]

http://blogs.wsj.com/moneybeat/2014/09/19/bitbeat-more-pain-for-bitcoin-prices-are-chinese-miners-to-blame/

The China theory is one of the few that seems to makes sense of those competing trends.

The idea is that some Chinese citizens see bitcoin as a vehicle for bypassing capital controls, which limit them to foreign exchange purchases of more than $50,000 a year. With Chinese bitcoin exchanges scrutinized by officials and with banks barred from servicing them ever since a crackdown in April, yuan-funded investment in mining could be an easier, below-the-radar way to obtain bitcoins and sell them for dollars.

Is this happening? Well, we  know a lot of the new mining equipment is coming online in China, where a large number of new ASIC (application-specific integrated circuit) mining rigs are made. Sources have told us of large mining operations surreptitiously installed by employees of state-owned enterprises (SOEs) in factories that enjoy state-subsidized electricity. In some cases, these people say, the rigs are even charged to the company as “computing equipment.” If the state’s paying for both your equipment and your power bill, the price of bitcoin doesn’t matter so much.

Does anyone believe this? Could this be a possible explanation for insane difficulty growth for the past few month?

This is very interesting.

But i can't imagine this will remain true, as the cost nears extremely high numbers like August 2015's $10,000.

I could be wrong though. They may just still continue, but just make less profit.

[lyth0s]

I love what you have done here, but I think there should be some adjustments to the numbers. Use $0.08 per KWH and 0.68W/GH. The numbers won't look as optimistic for us, but they are probably more realistic for near future calculations.

Even the antminer S3 is already 0.78W/GH and the Antminer S4 gen will take it down to 0.68. As far as cost for electricity goes it can get pretty cheap in some parts of china where there is a lot of mining power and good contracts through the use of government officials. Even for a very urban area like LA, California the base fee is $0.08 for residents (which quickly scales up based on usage). Mid-west states can get a stable $0.08/KWH for agricultural purposes.

[podyx]

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

A damn fucking shame that hashrate declined...

[Adrian-x]

A damn fucking shame that hashrate declined...

Quite the opposite if you are in the business of propagating the network (i.e. mining)
It's also way too soon to call it declining, but I think it is inevitable when the product costs meet market price.

We're about to witness the start of Bitcoin is dead stage. - the part of the adoption cycle that generates Bitcoin proponents.  

[keystroke]

I think this is interesting to look at again as the hash rate is going up again. Just saw a 10% increase and we are going to see another ~7-8% increase soon.

[Opnsrc]

I love what you have done here, but I think there should be some adjustments to the numbers. Use $0.08 per KWH and 0.68W/GH. The numbers won't look as optimistic for us, but they are probably more realistic for near future calculations.

Even the antminer S3 is already 0.78W/GH and the Antminer S4 gen will take it down to 0.68. As far as cost for electricity goes it can get pretty cheap in some parts of china where there is a lot of mining power and good contracts through the use of government officials. Even for a very urban area like LA, California the base fee is $0.08 for residents (which quickly scales up based on usage). Mid-west states can get a stable $0.08/KWH for agricultural purposes.

I had to shut down all my physical miners the other day. Here in Massachusetts they just increased the winter power rates by 37%, went from $0.16 to $0.22 overnight =(((

[keystroke]

I love what you have done here, but I think there should be some adjustments to the numbers. Use $0.08 per KWH and 0.68W/GH. The numbers won't look as optimistic for us, but they are probably more realistic for near future calculations.

Even the antminer S3 is already 0.78W/GH and the Antminer S4 gen will take it down to 0.68. As far as cost for electricity goes it can get pretty cheap in some parts of china where there is a lot of mining power and good contracts through the use of government officials. Even for a very urban area like LA, California the base fee is $0.08 for residents (which quickly scales up based on usage). Mid-west states can get a stable $0.08/KWH for agricultural purposes.

I had to shut down all my physical miners the other day. Here in Massachusetts they just increased the winter power rates by 37%, went from $0.16 to $0.22 overnight =(((

I think you deserve a government bailout. TBTNM - To Big To Not Mine

Don't save the banks. Save the miners! Energy subsidy for all mining operations. Secure the network.

(I promise this has nothing to do with keeping coin price high )

[Adrian-x]

I love what you have done here, but I think there should be some adjustments to the numbers. Use $0.08 per KWH and 0.68W/GH. The numbers won't look as optimistic for us, but they are probably more realistic for near future calculations.

Even the antminer S3 is already 0.78W/GH and the Antminer S4 gen will take it down to 0.68. As far as cost for electricity goes it can get pretty cheap in some parts of china where there is a lot of mining power and good contracts through the use of government officials. Even for a very urban area like LA, California the base fee is $0.08 for residents (which quickly scales up based on usage). Mid-west states can get a stable $0.08/KWH for agricultural purposes.

I had to shut down all my physical miners the other day. Here in Massachusetts they just increased the winter power rates by 37%, went from $0.16 to $0.22 overnight =(((

I think you deserve a government bailout. TBTNM - To Big To Not Mine

Don't save the banks. Save the miners! Energy subsidy for all mining operations. Secure the network.

(I promise this has nothing to do with keeping coin price high )

Actually the miners in BC Canada are unduly submitted with low energy costs i propose a export tax on goods to BC, to fix the imbalance and subsidize local mining with the income (and make up any shortfall with printed fiat)

[samsonn25]

I love what you have done here, but I think there should be some adjustments to the numbers. Use $0.08 per KWH and 0.68W/GH. The numbers won't look as optimistic for us, but they are probably more realistic for near future calculations.

Even the antminer S3 is already 0.78W/GH and the Antminer S4 gen will take it down to 0.68. As far as cost for electricity goes it can get pretty cheap in some parts of china where there is a lot of mining power and good contracts through the use of government officials. Even for a very urban area like LA, California the base fee is $0.08 for residents (which quickly scales up based on usage). Mid-west states can get a stable $0.08/KWH for agricultural purposes.

I had to shut down all my physical miners the other day. Here in Massachusetts they just increased the winter power rates by 37%, went from $0.16 to $0.22 overnight =(((

I think you deserve a government bailout. TBTNM - To Big To Not Mine

Don't save the banks. Save the miners! Energy subsidy for all mining operations. Secure the network.

(I promise this has nothing to do with keeping coin price high )

Actually the miners in BC Canada are unduly submitted with low energy costs i propose a export tax on goods to BC, to fix the imbalance and subsidize local mining with the income (and make up any shortfall with printed fiat)

Here in PA electricity  is .09 base rate. After  delivery and service final cost is .16

[Adrian-x]

I love what you have done here, but I think there should be some adjustments to the numbers. Use $0.08 per KWH and 0.68W/GH. The numbers won't look as optimistic for us, but they are probably more realistic for near future calculations.

Even the antminer S3 is already 0.78W/GH and the Antminer S4 gen will take it down to 0.68. As far as cost for electricity goes it can get pretty cheap in some parts of china where there is a lot of mining power and good contracts through the use of government officials. Even for a very urban area like LA, California the base fee is $0.08 for residents (which quickly scales up based on usage). Mid-west states can get a stable $0.08/KWH for agricultural purposes.

I had to shut down all my physical miners the other day. Here in Massachusetts they just increased the winter power rates by 37%, went from $0.16 to $0.22 overnight =(((

I think you deserve a government bailout. TBTNM - To Big To Not Mine

Don't save the banks. Save the miners! Energy subsidy for all mining operations. Secure the network.

(I promise this has nothing to do with keeping coin price high )

Actually the miners in BC Canada are unduly submitted with low energy costs i propose a export tax on goods to BC, to fix the imbalance and subsidize local mining with the income (and make up any shortfall with printed fiat)

Here in PA electricity  is .09 base rate. After  delivery and service final cost is .16

Here fixer upper house sets you back $1,000,000 but we pay $0.0752 /kWh and soon we'll have increased capacity by an additional 1,100 MW hydroelectric dam so some industries will have much needed cheaper electricity.

If you're using more than 1,350 kWh's you pay $0.1127 and need to move to an industrial area to keep the competitive rate.
Just realised if I was mining at home I'd be paying a higher rate for 1/3 of my consumption  

[keystroke]

Estimated Next Difficulty:   40,355,658,265 (+1.90%)
Adjust time:   After 10 Blocks, About 1.6 hours

Things are slowing down.

[samsonn25]

The problem is:  at this point in time they cant even make any asic equipment that doesnt lose at least 70% of its value in capital expenditure and running costs over its useful lifetime.

[Finksy]

I think it's become quite clear that you can't predict things like hashrate and the mining network.  There are too many factors that will influence it.  Hardware advancements in efficiency will, however, slow down in the near future and along with them the depreciation of mining equipment. The question is, when old miners stop leaving the network due to inefficiency and the playing field is more level, will the price in BTC rise to accommodate the cost of mining at higher difficulty, or will more people simply pull the plug on mining altogether.

[Adrian-x]

at the current difficulty, it costs about $200 CAD in electricity in Canada to mine a Bitcoin using Gen 3 asic hardware (market value around $280) - the latest hardware will do it at half the cost.

so given the new efficiencies of new hardware I think the cost to mine Bitcoin will increase moderately at the current BTC price until gen 3 hardware becomes obsolete over the next 2 -3 years, but then again market demand for the limited supply is a random wild card.  

a sudden increase in price will see large scale deployment of new hardware, and wild volatile pricing or low profit margins will tend to distribute mining hardware as hardware providers sell mining rigs to avoid risk.  

[samsonn25]

at the current difficulty, it costs about $200 CAD in electricity in Canada to mine a Bitcoin using Gen 3 asic hardware (market value around $280) - the latest hardware will do it at half the cost.  

But hardware is not free,  a  gen3 3 asic machine cost $280 in your example and electricity to mine 1 btc $200 = $480 for the first coin.  Buying a $232 coin is easier.

A gen 4 asic will cost much more than $280 even though it offsets the electricity by 30-40%.


Examples:

BTC at $232 price:

1TH machine at 1.0 watt/gh efficiency will yield .013 btc at .10 kw/hr and loss at .16  with 3% diff jumps  (machine value $3 max)

1TH machine at  .7 watt/gh  efficiency will yield .37 btc at .10 kw/hr and loss at .16  with 3% diff jumps   (machine value $86 max)

Gen 3 machines are obsolete already not in 2-3 years.  Gen 4 machines are lucky to last 4-5 months.

[Korbman]

Examples:

BTC at $232 price:

1TH machine at 1.0 watt/gh efficiency will yield .013 btc at .10 kw/hr and loss at .16  with 3% diff jumps  (machine value $3 max)

1TH machine at  .7 watt/gh  efficiency will yield .37 btc at .10 kw/hr and loss at .16  with 3% diff jumps   (machine value $86 max)

Calculating at the current difficulty, you may want to check your math here...

[jamesg]

Calculating at the current difficulty, you may want to check your math here...

https://bitcoinwisdom.com/bitcoin/difficulty

Usually helps in a pinch...