Price of mining the cheapest bitcoin

[spndr7]

Most efficient bitcoin miner - Extolabs EX1/ Wolfblood-XE  - 1 GH/s for 0.19 watt

                                                                                             5263 GH/ for 1 kilowatt

Cheapest Electricity in USA/Europe/Russia/China (avg)     - 0.08 USD/kWh


Estimated time to generate 1 BTC                                    - 10.36 days (with the current difficulty)

Energy cost = 10.36 X 24 X 0.08 = 19.9 USD !!!

[Miz4r]

Most efficient bitcoin miner - Extolabs EX1/ Wolfblood-XE  - 1 GH/s for 0.19 watt

                                                                                             5263 GH/ for 1 kilowatt

Cheapest Electricity in USA/Europe/Russia/China (avg)     - 0.08 USD/kWh


Estimated time to generate 1 BTC                                    - 259 days (with the current difficulty)

Energy cost = 259 X 24 X 0.08 = 497.28 USD !!!


Which is freaking close to current price levels !!

Your math is wrong. It takes 259 days on average to mine a whole block of 25 BTC, so energy cost per BTC for this miner is only 19.89 USD @ 0.08 USD/kWH. We have some ways to go before those become unprofitable.

[lyth0s]

Eh...I pay $0.08/KW in the US and I live in a highly populated area that is NOT cheap. I have a buddy in the Mid west that pays $0.04/KWH (has agriculture line) and I've heard rumors that some big centers in china can get $0.02/KWh.

[Miz4r]

I'm paying $0.26 USD/kWH here where I live, I feel scammed.

[spndr7]

Most efficient bitcoin miner - Extolabs EX1/ Wolfblood-XE  - 1 GH/s for 0.19 watt

                                                                                             5263 GH/ for 1 kilowatt

Cheapest Electricity in USA/Europe/Russia/China (avg)     - 0.08 USD/kWh


Estimated time to generate 1 BTC                                    - 10.36 days (with the current difficulty)

Energy cost = 10.36 X 24 X 0.08 = 19.9 USD !!!


Which is freaking close to current price levels !!

Your math is wrong. It takes 259 days on average to mine a whole block of 25 BTC, so energy cost per BTC for this miner is only 19.89 USD @ 0.08 USD/kWH. We have some ways to go before those become unprofitable.

At the current times 25x profitability in mining, that's huge

[Wexlike]

Yes, nethash has to rise a lot to create again a reasonable price equilibrium. Mining is a gold laying chicken for the professionals.

[falllling]

Most efficient bitcoin miner - Extolabs EX1/ Wolfblood-XE  - 1 GH/s for 0.19 watt

                                                                                             5263 GH/ for 1 kilowatt

Cheapest Electricity in USA/Europe/Russia/China (avg)     - 0.08 USD/kWh


Estimated time to generate 1 BTC                                    - 10.36 days (with the current difficulty)

Energy cost = 10.36 X 24 X 0.08 = 19.9 USD !!!

you see bitcoin is going to nowhere but down,bitcoin is too much over-price !

[seleme]

That would be good if miner was free

You have to take cost of the miner and how much it could produce in certain time frame, add electricity costs to that, and then you'll get mining profitability.

I seriously can't understand why anyone beside some huge entity that could get a good mining hardware deal or produce it's own, would buy a miner now.

[oda.krell]

+1 for seleme's point.

Let's do the calculation right:

Hardware cost + total energy cost over entire life time of (energy profitable) mining of hardware, divided by coins mined during that time = price per coin. Note that this calculation has to include an estimate of difficulty growth, to get a realistic value for 'life time of energy profitable mining'.

Two further remarks:

- I did my own calculations about 2 months ago and got a value around $470, assuming low consumer energy costs and low consumer hardware costs. However, there was and is a big unknown element in calculations like this: We don't know the factor by which large, professional mining farms can get hardware and energy at a discount.

- For energy, about $0.05/kWh seems a low, but attainable estimate.

[NotLambchop]

oda.krell:
Interesting bit re. rationality of miners/tx fees (from http://www.coindesk.com/faster-bitcoin-network-keep-fees-low )

...small miners face a higher marginal cost than the minimum transaction fee 0.0001 BTC (5 cents at the time of publication). Acting rationally, they should not include any transactions in their blocks. In order to incentivise them to include transactions, fees would have to roughly quadruple to 0.0004 BTC (20 cents).

Another tangent re. "Hardware cost + total energy cost over entire life time of (energy profitable) mining of hardware, divided by coins mined during that time = price per coin":

That is the point at which a rational player would start mining.
Once the mining gear is bought, he will continue mining until Hardware cost + energy_cost_to_mine_coin > price_per_coin.

[oda.krell]

oda.krell:
Interesting bit re. rationality of miners/tx fees (from http://www.coindesk.com/faster-bitcoin-network-keep-fees-low )

...small miners face a higher marginal cost than the minimum transaction fee 0.0001 BTC (5 cents at the time of publication). Acting rationally, they should not include any transactions in their blocks. In order to incentivise them to include transactions, fees would have to roughly quadruple to 0.0004 BTC (20 cents).

Another tangent re. "Hardware cost + total energy cost over entire life time of (energy profitable) mining of hardware, divided by coins mined during that time = price per coin":

That is the point at which a rational player would start mining.
Once the mining gear is bought, he will continue mining until Hardware cost + energy_cost_to_mine_coin > price_per_coin.

Yes, but impact of energy cost only  mining decreases over time, as the hashrate share of total hashrate declines . Exponentially, in fact.

There's really no way around it: cost per coin is based on total coins produced and total cost during production. The latter includes hardware cost.

Edit : to clarify. Because of the hashrate increase, for any given fixed hashrate miner, a finite amount of coins is generated by that miner. (or, more accurately  I suppose : that number of coins is approached asymptotically

[An amorous cow-herder]

Ah, speculation, the brain damaged section of bitcointalk.

0.19W/GH sounds pretty nice. Especially considering the currently best models require ~0.5W/GH. Just looking in the mining sections provides the following information about Extolabs. The web page also doesnt exist anymore.

Calculating current costs using the efficiency of a scam product. Very good. And, as others have mentioned, you need to checkthe "whole package" to calculate profitability (up front cost, electricity cost over whole timeframe, maximum btc earned).

[NotLambchop]

oda.krell:

What I'm trying to say is there are scenarios (not just hypothetical) in which a rational miner is forced to continue mining even though overall, the operation is unprofitable.
Having a hard time putting it into words, maybe an example might be clearer:

1.  I spend $1k on hardware.  At current difficulty and [predicted] difficulty increase rate, I calculate that ((hardware cost) + (hosting cost)) < (price of coins mined over lifetime).  Profit.

2.  Other rational miners do same, difficulty skyrockets. <=="turn on" calculations, using your formula, all made sense.  Rational.

3.  Now my original calculation is no longer true.  I will lose money, but wat do?  My options are as follows: <=="turn off" condition
   3a.  Shut down as soon as my original calculation, (1), is no longer valid, losing my original 1k investment.
   3b.  Keep mining while (hosting cost to mine one coin) remains < (price I could get for that coin).  <==obviously the rational choice, my loss will not be total, but I won't break even either.
   3c.

Is this any clearer? (it's morning )

[oda.krell]

oda.krell:

What I'm trying to say is there are scenarios (not just hypothetical) in which a rational miner is forced to continue mining even though overall, the operation is unprofitable.
Having a hard time putting it into words, maybe an example might be clearer:

1.  I spend $1k on hardware.  At current difficulty and [predicted] difficulty increase rate, I calculate that ((hardware cost) + (hosting cost)) < (price of coins mined over lifetime).  Profit.

2.  Other rational miners do same, difficulty skyrockets.

3.  Now my original calculation is no longer true.  I will lose money, but wat do?  My options are as follows:
   3a.  Shut down, losing my original 1k investment.
   3b.  Keep mining while (hosting cost to mine one coin) remains < (price I could get for that coin).  <==obviously the rational choice, my loss will not be total, but I won't break even either.
   3c.

Is this any clearer? (it's morning )

Yes

But you're calculating now (average)  profit of miners, while I talked about _cost_ per coin.

I never said price (market price, that is) can never fall below production cost, which is what you have in mind maybe. That said, I believe production cost is a price attractor, and we won't fall below it unless extremely strong momentum brings us there. If price would fall below production cost for a longer period, we would certainly see the effect of that in hashrate / difficulty, but we don't (yet).

[alexeft]

No matter how cheap one's electricity is, if the hardware cost is taken into account, one always loses money by mining!!!! Sorry!

[btcpokerface]

Where I live the electricity costs are about 0,30 USD/kWh, I wish I would live in China and own a big bitcoin farm...

[oda.krell]

No matter how cheap one's electricity is, if the hardware cost is taken into account, one always loses money by mining!!!! Sorry!

Probably true for the majority of amateur miners.

Almost certainly not true for the professional mining farms.

[alexeft]

No matter how cheap one's electricity is, if the hardware cost is taken into account, one always loses money by mining!!!! Sorry!

Probably true for the majority of amateur miners.

Almost certainly not true for the professional mining farms.

I used many calculators on the net and even used $0.02/kwh. If difficulty keeps increasing at the current rate (20% per adjustment), nobody is profitable one year from their purchase.

[NotLambchop]

...
But you're calculating now (average)  profit of miners, while I talked about _cost_ per coin.

I never said price (market price, that is) can never fall below production cost, which is what you have in mind maybe. That said, I believe production cost is a price attractor, and we won't fall below it unless extremely strong momentum brings us there. If price would fall below production cost for a longer period, we would certainly see the effect of that in hashrate / difficulty, but we don't (yet).

My point is the price feedback loop is laggy--it has a time delay.
Introduce a time delay into any negative feedback loop (think typical op amp circuit, or a governor on a steam engine) and what you get is an oscillator (hunting or surging for mechanical stuff).  Depending on initial conditions, the oscillation will be sustained, damped, or terminal (things go poof!)

*The time constant was really out of hand when people were preordering ASICs and getting them a year later.  

And coffee is not working for me today

P.S:  Do you see what I mean by sloppy price feedback?

[CoinRocka]

Most efficient bitcoin miner - Extolabs EX1/ Wolfblood-XE  - 1 GH/s for 0.19 watt

                                                                                             5263 GH/ for 1 kilowatt

Cheapest Electricity in USA/Europe/Russia/China (avg)     - 0.08 USD/kWh


Estimated time to generate 1 BTC                                    - 10.36 days (with the current difficulty)

Energy cost = 10.36 X 24 X 0.08 = 19.9 USD !!!

you see bitcoin is going to nowhere but down,bitcoin is too much over-price !

You are masterizer of the english language!!