New venture, lets talk profitability and ROI

[HopefulMiner]

Hello all, I recently joined and ended my bitcointalk surfing spree. Anyways, I was able to convince my father to mine crypto currencies. As an investment in mining hardware we need to find out if this will be worth our while. We have $30,000 USD to invest in the full setup (see post in hardware if you want to suggest types of mining bundles) and want to know what we can expect with a return on our investment and how profitable this could be.

I look forward to your help.
Alex

[railzand]

You didn't notice while surfing so many threads exactly like this, they all say to the new guy: DO NOT MINE.

Buy bitcoin, an old laptop and hold.

[jbrnt]

Small scale mining at home is just not profitable any more. Do more research and make a spreadsheet on expected return at different rates of difficulty. Then decide whether it is worth the risk.

[jonnybravo0311]

Hello all, I recently joined and ended my bitcointalk surfing spree. Anyways, I was able to convince my father to mine crypto currencies. As an investment in mining hardware we need to find out if this will be worth our while. We have $30,000 USD to invest in the full setup (see post in hardware if you want to suggest types of mining bundles) and want to know what we can expect with a return on our investment and how profitable this could be.

I look forward to your help.
Alex

What are the reasons you want to get into mining?  You said you convinced your father to mine.  Why?  What are you looking to get out of this venture?

[HopefulMiner]

Small scale mining at home is just not profitable any more. Do more research and make a spreadsheet on expected return at different rates of difficulty. Then decide whether it is worth the risk.

Have some sources you would recommend?

How large of scale would you suggest that it would have a worthwhile return?

[/quote]
What are the reasons you want to get into mining?  You said you convinced your father to mine.  Why?  What are you looking to get out of this venture?
[/quote]

I convinced him on crypto currencies. It didn't take much as I've been pushing it for the past year now. After he was sold on the innovation aspect of it, we wanted to look into exploiting opportunities.

[oceans]

As other have said, small scale mining is not worth it. You could get a few cheap USB miners and hope to find a block.
It would be like winning the lottery, but possible. You would be better off buying and holding.
Mining is not as simple as buying hardware and putting it online. You need to figure out when your will break even on the hardware, and how long after
you break even with the machine and still be profitable to run. I have looked into doing this and it would require upgrading hardware every 6-8 months to keep up with the
difficulty. There is a point where it costs more to run the machine than it will make in a day. Unless you can find a way to get free electricity.

[jonnybravo0311]

I convinced him on crypto currencies. It didn't take much as I've been pushing it for the past year now. After he was sold on the innovation aspect of it, we wanted to look into exploiting opportunities.

Interesting choice of phrases, "exploiting opportunities." This infers that you wish to get into mining for profit.  Understand that the markets are exceptionally volatile, and that there is no "get rich quick" scheme here... those days are long since over, and only a lucky few who jumped on the wagon early made out.

Mining is a very finicky business.  The hardware is just one of a dozen moving parts.  There's power and cooling.  There's difficulty increase.  There's fluctuation in coin value.  Alternative currencies come and go.

If this is a for-profit venture, you need to treat this like any other volatile market investment, with the added complexities of purchasing, managing, maintaining and reselling hardware.

[cech4204a]

I think most of people here are just wrong. They all asume price of Bitcoin will remain at 600$. Cmon we all know that is bullshit and there is a big bump coming really soon. If i were you, i'd invest 20k$ in mining hardware, and 10k$ in BTC, i'm sorry that i can't help you choose hardware, i'm not following that scene to be honest, but i'm really sure price of BTC will rocket till the end of 2014. Trust me, you will be sorry if you didn't buy at 600$.

[RoadStress]

I think most of people here are just wrong. They all asume price of Bitcoin will remain at 600$. Cmon we all know that is bullshit and there is a big bump coming really soon. If i were you, i'd invest 20k$ in mining hardware, and 10k$ in BTC, i'm sorry that i can't help you choose hardware, i'm not following that scene to be honest, but i'm really sure price of BTC will rocket till the end of 2014. Trust me, you will be sorry if you didn't buy at 600$.

I am following the mining hardware scene, but I would recommend you the same thing. 20k$ in hardware and 10k$ in BTC. Best bet!

[taipo]

New mining setups are not profitable for current mining setups.

[Bitsaurus]

I think most of people here are just wrong. They all asume price of Bitcoin will remain at 600$. Cmon we all know that is bullshit and there is a big bump coming really soon. If i were you, i'd invest 20k$ in mining hardware, and 10k$ in BTC, i'm sorry that i can't help you choose hardware, i'm not following that scene to be honest, but i'm really sure price of BTC will rocket till the end of 2014. Trust me, you will be sorry if you didn't buy at 600$.

cech4204a, you have a different notion of ROI than what most miners envision.

Buying a miner for 10 BTC of fiat funds and mining 8BTC on it is a net loss - even if the coin goes to $1,000,000 per coin.

If you buy the miner for 10BTC and you mine 12BTC that is a +ROI, but very few miners did/do that.

Once the growth slows down for a sustained period, ie 3 consecutive jumps, then it will be easier to gauge which hardware might turn a true ROI.  Until then it's all just guesswork and hoping other people fail at getting their miners so that you can make a profit.  Mining is a zero sum game.

[jonnybravo0311]

I think most of people here are just wrong. They all asume price of Bitcoin will remain at 600$. Cmon we all know that is bullshit and there is a big bump coming really soon. If i were you, i'd invest 20k$ in mining hardware, and 10k$ in BTC, i'm sorry that i can't help you choose hardware, i'm not following that scene to be honest, but i'm really sure price of BTC will rocket till the end of 2014. Trust me, you will be sorry if you didn't buy at 600$.

cech4204a, you have a different notion of ROI than what most miners envision.

Buying a miner for 10 BTC of fiat funds and mining 8BTC on it is a net loss - even if the coin goes to $1,000,000 per coin.

If you buy the miner for 10BTC and you mine 12BTC that is a +ROI, but very few miners did/do that.

Once the growth slows down for a sustained period, ie 3 consecutive jumps, then it will be easier to gauge which hardware might turn a true ROI.  Until then it's all just guesswork and hoping other people fail at getting their miners so that you can make a profit.  Mining is a zero sum game.

My notion of ROI is dependent upon the currency I use to purchase the mining hardware.  I wholeheartedly agree with you that spending 10BTC on a miner to get 8BTC back is a negative ROI.  However, if I spend $3000USD on a miner and that nets me $10000USD from converting BTC to dollars, then I've made positive ROI.  Granted, I could have just bought the BTC straight out with my initial investment, but I didn't.

Now, do I think that there's a lot of hardware out there that will return more BTC than you could purchase for fiat?  Well, my S1s did.  My SP10 I purchased with fiat, so the BTC I get from mining with it I convert back to fiat until I recoup the initial cost.  Any more that I earn after that is positive ROI for me.  Would it have been better to buy and hold?  Yup.  Had I purchased BTC with my initial investment in the SP10 I would have spent about $510 per BTC.  So, I haven't made as much with my SP10 as I would have with a straight purchase - in terms of fiat ROI.

[cech4204a]

I think most of people here are just wrong. They all asume price of Bitcoin will remain at 600$. Cmon we all know that is bullshit and there is a big bump coming really soon. If i were you, i'd invest 20k$ in mining hardware, and 10k$ in BTC, i'm sorry that i can't help you choose hardware, i'm not following that scene to be honest, but i'm really sure price of BTC will rocket till the end of 2014. Trust me, you will be sorry if you didn't buy at 600$.

cech4204a, you have a different notion of ROI than what most miners envision.

Buying a miner for 10 BTC of fiat funds and mining 8BTC on it is a net loss - even if the coin goes to $1,000,000 per coin.

If you buy the miner for 10BTC and you mine 12BTC that is a +ROI, but very few miners did/do that.

Once the growth slows down for a sustained period, ie 3 consecutive jumps, then it will be easier to gauge which hardware might turn a true ROI.  Until then it's all just guesswork and hoping other people fail at getting their miners so that you can make a profit.  Mining is a zero sum game.

My notion of ROI is dependent upon the currency I use to purchase the mining hardware.  I wholeheartedly agree with you that spending 10BTC on a miner to get 8BTC back is a negative ROI.  However, if I spend $3000USD on a miner and that nets me $10000USD from converting BTC to dollars, then I've made positive ROI.  Granted, I could have just bought the BTC straight out with my initial investment, but I didn't.

Now, do I think that there's a lot of hardware out there that will return more BTC than you could purchase for fiat?  Well, my S1s did.  My SP10 I purchased with fiat, so the BTC I get from mining with it I convert back to fiat until I recoup the initial cost.  Any more that I earn after that is positive ROI for me.  Would it have been better to buy and hold?  Yup.  Had I purchased BTC with my initial investment in the SP10 I would have spent about $510 per BTC.  So, I haven't made as much with my SP10 as I would have with a straight purchase - in terms of fiat ROI.

I guess you are both right, it is a risky business, both, mining and holding, but by mining you also have chance to see how things work in details. With luck you can get maybe a bit more, but nothing to be considered final. I'm sure there must be hardware out there that is having positive ROI, otherwise nobody would be minig these days. Maybe 20k$ as i suggested is not enough for a decent mining rig (as i said, i don't know much about hardware).

[jonnybravo0311]

I guess you are both right, it is a risky business, both, mining and holding, but by mining you also have chance to see how things work in details. With luck you can get maybe a bit more, but nothing to be considered final. I'm sure there must be hardware out there that is having positive ROI, otherwise nobody would be minig these days. Maybe 20k$ as i suggested is not enough for a decent mining rig (as i said, i don't know much about hardware).

It is indeed risky, which is kind of what I was leading to in my earlier post about mining being a finicky business.  By mining, you are seeing the process in detail, and also helping to support the Bitcoin network.  With $30,000 are you going to make a significant impact on the entire network's hash rate?  Not at all.  Even if you had 6 of those SP30s in hand right now you would be about 0.03% of the total power of the network.

If you look at the expected earnings, if you did indeed have that 36TH in hand right now, you would expect to crack a block every 24 days or so if you were solo mining.  Again, I'm making the assumption that you have it in hand right now and difficultly doesn't change.  Obviously an incorrect assumption, but for the sake of a simple discussion, it will do .  

Using a calculator, assuming a 20% difficulty increase and ridiculously low power costs of $.02/kwh, and also assuming you had that same 36TH in hand right now, you could expect a profit of about 24.57BTC before the costs to run the hardware were more than the coins it produced.  Realize, this is speculation, not reality.  Maybe the difficulty increases are greater than 20%... maybe electricity costs go up... etc.  For example, if I push the start date of that 36TH/s out 60 days (so mid-september), and keep everything else constant, you're negative ROI.

The biggest problem is actually laid out in my last sentence in the last paragraph "...keeping everything else constant..." because this whole crypto-currency thing is anything but constant.  This is what makes it so much fun .

[cech4204a]

I guess you are both right, it is a risky business, both, mining and holding, but by mining you also have chance to see how things work in details. With luck you can get maybe a bit more, but nothing to be considered final. I'm sure there must be hardware out there that is having positive ROI, otherwise nobody would be minig these days. Maybe 20k$ as i suggested is not enough for a decent mining rig (as i said, i don't know much about hardware).

It is indeed risky, which is kind of what I was leading to in my earlier post about mining being a finicky business.  By mining, you are seeing the process in detail, and also helping to support the Bitcoin network.  With $30,000 are you going to make a significant impact on the entire network's hash rate?  Not at all.  Even if you had 6 of those SP30s in hand right now you would be about 0.03% of the total power of the network.

If you look at the expected earnings, if you did indeed have that 36TH in hand right now, you would expect to crack a block every 24 days or so if you were solo mining.  Again, I'm making the assumption that you have it in hand right now and difficultly doesn't change.  Obviously an incorrect assumption, but for the sake of a simple discussion, it will do .  

Using a calculator, assuming a 20% difficulty increase and ridiculously low power costs of $.02/kwh, and also assuming you had that same 36TH in hand right now, you could expect a profit of about 24.57BTC before the costs to run the hardware were more than the coins it produced.  Realize, this is speculation, not reality.  Maybe the difficulty increases are greater than 20%... maybe electricity costs go up... etc.  For example, if I push the start date of that 36TH/s out 60 days (so mid-september), and keep everything else constant, you're negative ROI.

The biggest problem is actually laid out in my last sentence in the last paragraph "...keeping everything else constant..." because this whole crypto-currency thing is anything but constant.  This is what makes it so much fun .

Totally agree with you and one more interesting thing here: when miners will start cutting off power for their miners, there will be less BTC available, so the price of it will go up, what will cause more miners to start mining and there goes the cycle. I'd love to see chart of BTC price related to mining ROI compared over last 2 years, so it will be clear for everyone that price of BTC now is very low based on difficulty of mining.

[jonnybravo0311]

I guess you are both right, it is a risky business, both, mining and holding, but by mining you also have chance to see how things work in details. With luck you can get maybe a bit more, but nothing to be considered final. I'm sure there must be hardware out there that is having positive ROI, otherwise nobody would be minig these days. Maybe 20k$ as i suggested is not enough for a decent mining rig (as i said, i don't know much about hardware).

It is indeed risky, which is kind of what I was leading to in my earlier post about mining being a finicky business.  By mining, you are seeing the process in detail, and also helping to support the Bitcoin network.  With $30,000 are you going to make a significant impact on the entire network's hash rate?  Not at all.  Even if you had 6 of those SP30s in hand right now you would be about 0.03% of the total power of the network.

If you look at the expected earnings, if you did indeed have that 36TH in hand right now, you would expect to crack a block every 24 days or so if you were solo mining.  Again, I'm making the assumption that you have it in hand right now and difficultly doesn't change.  Obviously an incorrect assumption, but for the sake of a simple discussion, it will do .  

Using a calculator, assuming a 20% difficulty increase and ridiculously low power costs of $.02/kwh, and also assuming you had that same 36TH in hand right now, you could expect a profit of about 24.57BTC before the costs to run the hardware were more than the coins it produced.  Realize, this is speculation, not reality.  Maybe the difficulty increases are greater than 20%... maybe electricity costs go up... etc.  For example, if I push the start date of that 36TH/s out 60 days (so mid-september), and keep everything else constant, you're negative ROI.

The biggest problem is actually laid out in my last sentence in the last paragraph "...keeping everything else constant..." because this whole crypto-currency thing is anything but constant.  This is what makes it so much fun .

Totally agree with you and one more interesting thing here: when miners will start cutting off power for their miners, there will be less BTC available, so the price of it will go up, what will cause more miners to start mining and there goes the cycle. I'd love to see chart of BTC price related to mining ROI compared over last 2 years, so it will be clear for everyone that price of BTC now is very low based on difficulty of mining.

Yet another aspect of the whole speculation.  Also, don't forget that block rewards diminish as time goes on.  The next halving from 25 to 12.5 should occur some time in 2016.  There are so many variables...

[Bitsaurus]

I think most of people here are just wrong. They all asume price of Bitcoin will remain at 600$. Cmon we all know that is bullshit and there is a big bump coming really soon. If i were you, i'd invest 20k$ in mining hardware, and 10k$ in BTC, i'm sorry that i can't help you choose hardware, i'm not following that scene to be honest, but i'm really sure price of BTC will rocket till the end of 2014. Trust me, you will be sorry if you didn't buy at 600$.

cech4204a, you have a different notion of ROI than what most miners envision.

Buying a miner for 10 BTC of fiat funds and mining 8BTC on it is a net loss - even if the coin goes to $1,000,000 per coin.

If you buy the miner for 10BTC and you mine 12BTC that is a +ROI, but very few miners did/do that.

Once the growth slows down for a sustained period, ie 3 consecutive jumps, then it will be easier to gauge which hardware might turn a true ROI.  Until then it's all just guesswork and hoping other people fail at getting their miners so that you can make a profit.  Mining is a zero sum game.

My notion of ROI is dependent upon the currency I use to purchase the mining hardware.  I wholeheartedly agree with you that spending 10BTC on a miner to get 8BTC back is a negative ROI.  However, if I spend $3000USD on a miner and that nets me $10000USD from converting BTC to dollars, then I've made positive ROI.  Granted, I could have just bought the BTC straight out with my initial investment, but I didn't.

Now, do I think that there's a lot of hardware out there that will return more BTC than you could purchase for fiat?  Well, my S1s did.  My SP10 I purchased with fiat, so the BTC I get from mining with it I convert back to fiat until I recoup the initial cost.  Any more that I earn after that is positive ROI for me.  Would it have been better to buy and hold?  Yup.  Had I purchased BTC with my initial investment in the SP10 I would have spent about $510 per BTC.  So, I haven't made as much with my SP10 as I would have with a straight purchase - in terms of fiat ROI.

I guess you are both right, it is a risky business, both, mining and holding, but by mining you also have chance to see how things work in details. With luck you can get maybe a bit more, but nothing to be considered final. I'm sure there must be hardware out there that is having positive ROI, otherwise nobody would be minig these days. Maybe 20k$ as i suggested is not enough for a decent mining rig (as i said, i don't know much about hardware).

There's lots of mining going on as evidenced by the difficulties increasing.  It's just a fewer and fewer number of end users.  In 2011 I actually had a sizable part of the network (think percentage range).  I would have been better off if I bought buying BTC at the $2 dip in 2012 or even dollar cost averaging back then as opposed to buying GPUs and FPGAs.  A 7970 in 2012 could have bought almost 300 BTC when it came out 

The problem is that the money going into mining these days is probably from private investors and cloud hashers.  They sell you hash at $1 that cost them $0.10 and for every unit you buy they just make their farm that much bigger.

[goose20]

I think most of people here are just wrong. They all asume price of Bitcoin will remain at 600$. Cmon we all know that is bullshit and there is a big bump coming really soon. If i were you, i'd invest 20k$ in mining hardware, and 10k$ in BTC, i'm sorry that i can't help you choose hardware, i'm not following that scene to be honest, but i'm really sure price of BTC will rocket till the end of 2014. Trust me, you will be sorry if you didn't buy at 600$.

cech4204a, you have a different notion of ROI than what most miners envision.

Buying a miner for 10 BTC of fiat funds and mining 8BTC on it is a net loss - even if the coin goes to $1,000,000 per coin.

If you buy the miner for 10BTC and you mine 12BTC that is a +ROI, but very few miners did/do that.

Once the growth slows down for a sustained period, ie 3 consecutive jumps, then it will be easier to gauge which hardware might turn a true ROI.  Until then it's all just guesswork and hoping other people fail at getting their miners so that you can make a profit.  Mining is a zero sum game.

My notion of ROI is dependent upon the currency I use to purchase the mining hardware.  I wholeheartedly agree with you that spending 10BTC on a miner to get 8BTC back is a negative ROI.  However, if I spend $3000USD on a miner and that nets me $10000USD from converting BTC to dollars, then I've made positive ROI.  Granted, I could have just bought the BTC straight out with my initial investment, but I didn't.

Now, do I think that there's a lot of hardware out there that will return more BTC than you could purchase for fiat?  Well, my S1s did.  My SP10 I purchased with fiat, so the BTC I get from mining with it I convert back to fiat until I recoup the initial cost.  Any more that I earn after that is positive ROI for me.  Would it have been better to buy and hold?  Yup.  Had I purchased BTC with my initial investment in the SP10 I would have spent about $510 per BTC.  So, I haven't made as much with my SP10 as I would have with a straight purchase - in terms of fiat ROI.

I guess you are both right, it is a risky business, both, mining and holding, but by mining you also have chance to see how things work in details. With luck you can get maybe a bit more, but nothing to be considered final. I'm sure there must be hardware out there that is having positive ROI, otherwise nobody would be minig these days. Maybe 20k$ as i suggested is not enough for a decent mining rig (as i said, i don't know much about hardware).

There's lots of mining going on as evidenced by the difficulties increasing.  It's just a fewer and fewer number of end users.  In 2011 I actually had a sizable part of the network (think percentage range).  I would have been better off if I bought buying BTC at the $2 dip in 2012 or even dollar cost averaging back then as opposed to buying GPUs and FPGAs.  A 7970 in 2012 could have bought almost 300 BTC when it out 

The problem is that the money going into mining these days is probably from private investors and cloud hashers.  They sell you hash at $1 that cost them $0.10 and for every unit you buy they just make their farm that much bigger.

Oh man the pain. I bought a rig with 2x7970s. So many btc's I could have had instead.

Oh well - who would a known lol

[jjc326]

Seems like with cryptocurrency it's really hard to "predict" your ROI.  There are too many variables like price and difficulty increases.  I think you would be way better off starting with a small amount, like 10% of the $30,000, and see how the ROI is.  I can't believe the amounts of money some people are willing to spend on mining with all the evidence out there that there is a questionable ROI...