Yea, well, read this first.
http://www.ihavebitcoins.com/featured/sustainability-small-scale-bitcoin-mining/As of July 8th, 2014, not one bitcoin mining company can ship a machine that profitably mines bitcoin (even with free electricity). Overtime you could possibly make your money back; however, it is contingent upon the price of bitcoin going up.
Consequently, today’s rational decision from a financial standpoint is to buy bitcoin instead of mine.
KncMiner currently ships the most powerful ASIC miner on the market. Their $5,999 bitcoin miner claims to hash at a guaranteed 3 TH/s, consuming an average of 1,710 watts.
The graph above uses the bitcoin network mining reward formula. It incorporates the amount of hash power, current difficulty, and BTC rewarded per block. It will be recalculated in 2016 when the block reward amount changes.
The graph is approximate, not exact (+/- 1 BTC). However, I feel an average difficulty increase of 16% every 12 days is realistic; considering the most recent increase was 24.9%.
If you were to purchase a KncMiner, it would cost you a retail price of 9.675 BTC (at current prices). This means in order for mining to be profitable, you must mine at least 9.675 BTC. At the 16% average difficulty increase, 6.92 BTC is mined. Not enough…
After just three months, daily mining revenues are cut in half. At the end of 12 months, the miner won’t even produce enough bitcoin to cover your electric bill.
On the contrary, say you invest $5,999 in bitcoins. Today you will have 9.675 BTC, and after 12 months you will still have 9.675 BTC. If the price stayed the same after a year, you would still have $5,999 worth of bitcoin. If you bought the miner and the price was the same, you would end up with around $4,300 ($620*6.9 BTC).
Hmm…So why would anyone ever mine bitcoin as opposed to buying it?
As of today, anyone who understands the bitcoin network should realize mining at a small scale will never be profitable.
It seems as if the bitcoin network is moving faster than our latest ASIC technology. Three months ago, the majority of bitcoin miners on the market would generate attractive returns. Today, since the network continues to experience exponential growth, the required amount of hash power to cost-efficiently mine has reached a new plateau.
Innovation will drive a future company to supply the market with new “state-of-the-art” miners that hash at a whopping 10+ Th/s. Bitcoin enthusiasts will jump on this opportunity. However, the bitcoin ecosystem is designed to adapt to this type of innovation.
The first to get their hands on the miners will be making tons of bitcoin. Then, all of a sudden, Deja Vu…
History will repeat itself and we will be in the same position as we are today.
For individuals wanting to mine on a small scale, the bitcoin price must be contingent upon the cost of mining.
Never pay for a miner with more bitcoin than you predict it will generate. If it costs 9 BTC to buy a miner, and it will only mine around 6 BTC, don’t buy it!
The goal is to buy a miner with a small amount of bitcoin and turn it into a large amount. When this is achieved, you have essentially hedged you position in the bitcoin ecosystem.
