Price of mining the cheapest bitcoin

[CMMPro]

I quickly ran the numbers for supposedly the most efficient advertised hardware available (Spondoolies SP20 and the SP31).

Even if they are able to produce these for $100 per unit, by the time you take into consideration $485/BTC, pay for shipping and a power supply they are not profitable to run at the lowest energy costs in the country ($0.05/KW hr)  Not for one week....not for 6 months. It doesn't help to scale up, my calculation does not take into consideration commercial datacenter costs...so 1000 of these doesn't help, it makes the losses much worse.

I seriously doubt that ANY company producing hardware is able to produce 1.7 TH for $100.
(ASICMiner for example has a chip only cost is higher than that.)

There is no mining equipment produced today that can make profit, even at manufacturers prices.

You can trick yourself into believing there is a meager profit to be squeezed out if you manipulate the online mining calcultors...you are only fooling yourself.

(Not sure how the OP came to calculate what he/she did but they are clueless.)

[alexeft]

I quickly ran the numbers for supposedly the most efficient advertised hardware available (Spondoolies SP20 and the SP31).

Even if they are able to produce these for $100 per unit, by the time you take into consideration $485/BTC, pay for shipping and a power supply they are not profitable to run at the lowest energy costs in the country ($0.05/KW hr)  Not for one week....not for 6 months. It doesn't help to scale up, my calculation does not take into consideration commercial datacenter costs...so 1000 of these doesn't help, it makes the losses much worse.

I seriously doubt that ANY company producing hardware is able to produce 1.7 TH for $100.
(ASICMiner for example has a chip only cost is higher than that.)

There is no mining equipment produced today that can make profit, even at manufacturers prices.

You can trick yourself into believing there is a meager profit to be squeezed out if you manipulate the online mining calcultors...you are only fooling yourself.

(Not sure how the OP came to calculate what he/she did but they are clueless.)

^^^ This!!

[oda.krell]

...
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?

Yes, I left the delay part out because I wasn't sure if we had the same idea about this mechanism. So, agreed on your point. However (and correct me if I'm wrong), eventually, difficulty will need to decline (or at least rate of growth will) if mining is unprofitable - together with assumption of course that miners are, on average, ecomomically rational.

What I mean is: up to now, it is possible that we don't see the effects of unprofitable mining in difficulty because of the delay in the feedback loop, but the longer there is no effect on the difficulty, the less likely it becomes that mining is unprofitable (unless we assume a growing delay, which I don't find plausible.)

Correct?

[alexeft]

The rate of difficulty growth (and the rate of growth of mining power as well) has declined. It was +30% every difficulty correction. Now it's more like +20% or less.

[oda.krell]

I quickly ran the numbers for supposedly the most efficient advertised hardware available (Spondoolies SP20 and the SP31).

Even if they are able to produce these for $100 per unit, by the time you take into consideration $485/BTC, pay for shipping and a power supply they are not profitable to run at the lowest energy costs in the country ($0.05/KW hr)  Not for one week....not for 6 months. It doesn't help to scale up, my calculation does not take into consideration commercial datacenter costs...so 1000 of these doesn't help, it makes the losses much worse.

I seriously doubt that ANY company producing hardware is able to produce 1.7 TH for $100.
(ASICMiner for example has a chip only cost is higher than that.)

There is no mining equipment produced today that can make profit, even at manufacturers prices.

You can trick yourself into believing there is a meager profit to be squeezed out if you manipulate the online mining calcultors...you are only fooling yourself.

(Not sure how the OP came to calculate what he/she did but they are clueless.)

I don't know how you got your numbers. Let's base the calculation on Antminer's S3. Specs used for calculations as taken from their site, see here.

Let's assume difficulty increase of 15% per adjustment, and as energy cost: $0.05 per kWh.

If mining starts now, then after 198 days, the unit will stop mining at a profit based on ongoing energy costs (assuming $500 per BTC market price), and will have generated a total of 0.64 BTC during its (profitable) lifetime.


Now, given the raw numbers so far, we get:

(((0.58*480)+(198*0.43)))/0.64 ~= $568 production cost per 1 BTC.

Which is indeed higher than current market price, and suggests mining isn't profitable anymore.


However, keep in mind the point I've made several times by now: amateur mining is probably unprofitable. It's the professional, large scale mining that is interesting, under the assumption of reduced hardware and energy costs.

So, I'll make one more assumption: Let's say Antminer has a 25% profit margin on their hardware going for consumer prices, that a large miner (maybe Antminer running a farm themselves) is able to deduct.

You can reject this as pure conjecture, please feel free to do so. I however consider this to be a rather conservative estimate. In this case, we get:


(((0.58*0.75*480)+(198*0.43)))/0.64 ~= $459 per 1 BTC.


Now, to get back to the point I've been trying to make over and over again:

There are several unknown variables that apply to large scale mining, such as: cost of operation (manpower, rent, cooling, setup, organizational overhead), cost of acquisition of hardware, and finally: energy cost. For that reason, I don't make any claim that the above value (of $459) is "the correct" production cost per coin of a large mining operation.

My goal in the above calculation is simply to point out, that, given the relatively conservative assumption that a large mining farm can acquire S3s for 75% of the consumer price, and make use of electricity for $0.05 per kWh, the production cost (taking into account hardware cost and energy only) is below current market, i.o.w. mining would be profitable for such an operation.

[Wexlike]

Here i made a bad chart with paint( ) about it:

Puh, i made a chart, that shows the bitcoin creation price under best circumstances.

- Modern and efficient hardware (Antminer S3 - 440 GH/340W)
- very low electricity costs (0.05 cent/kwh)
- no other maintenance costs other than electricity
- I assume the miner is fully paid and the only costs are electricity
- difficulty correct till the current rise
- for the future i assumed a 10% difficulty rise per adjustment

Please don't criticize me too much, i made the chart with paint lol. The data is in the chart under the picture.



The data starts from the release of the miner.

Code:

diff	        btc/d	btc per cycle	creation cost for 1 bitcoin
13462580114,53	0,02	0,18		30,95
				
16818461371	0,01	0,18		31,91
				
17336316979	0,01	0,17		34,48
				
18736441558	0,01	0,16		36,31
				
19727645941	0,01	0,13		43,91
				
23844670039	0,01	0,11		50,51
				
27428630902	0,01	0,11		58,11
				
30171493992,2	0,01	0,1		61,13
				
33188643391,42	0,01	0,08		67,92
				
36507507730,56	0,01	0,08		74,71
				
40158258503,62	0,01	0,07		82,17
				
44174084353,98	0,01	0,06		90,4
				
48591492789,38	0	0,06		99,44
				
53450642068,32	0	0,05		109,37
				
58795706275,15	0	0,05		120,31
				
64675276902,66	0	0,04		132,36
				
71142804592,93	0	0,04		145,58
				
78257085052,22	0	0,04		160,13
				
86082793557,44	0	0,03		176,19
				
94691072913,19	0	0,03		193,82
				
104160180204,51	0	0,03		213,23
				
114576198224,96	0	0,02		234,52
				
126033818047,45	0	0,02		258,02
				
138637199852,2	0	0,02		283,87
				
152500919837,42	0	0,02		312,21
				
167751011821,16	0	0,02		343,43
				
184526113003,28	0	0,02		377,78
				
202978724303,6	0	0,01		415,52

Atleast i understand now, why the big mining operations are investing like crazy in new miners.  

[alexeft]

Nice job but it only reflects the cost in electricity. Why don't you redo it adding the cost of the miner! We would have the whole picture then!

[Wexlike]

Here is a chart with the addition of the miner costs:

Code:

100$ miner	200$ miner	300$ miner	400$ miner	500$ miner
-0,02	-0,23	-0,43	-0,64	-0,85
				
0,16	-0,05	-0,25	-0,46	-0,67
				
0,32	0,12	-0,09	-0,3	-0,5
				
0,48	0,27	0,07	-0,14	-0,34
				
0,61	0,4	0,2	-0,01	-0,21
				
0,72	0,52	0,31	0,1	-0,1
				
0,83	0,62	0,41	0,21	0
				
0,92	0,71	0,51	0,3	0,1
				
1	0,8	0,59	0,39	0,18
				
1,08	0,87	0,67	0,46	0,26
				
1,15	0,94	0,74	0,53	0,33
				
1,21	1,01	0,8	0,59	0,39
				
1,27	1,06	0,86	0,65	0,45
				
1,32	1,12	0,91	0,7	0,5
				
1,37	1,16	0,96	0,75	0,55
				
1,41	1,21	1	0,79	0,59
				
1,45	1,25	1,04	0,83	0,63
				
1,49	1,28	1,08	0,87	0,66
				
1,52	1,31	1,11	0,9	0,7
				
1,55	1,34	1,14	0,93	0,73
				
1,58	1,37	1,16	0,96	0,75
				
1,6	1,4	1,19	0,98	0,78
				
1,62	1,42	1,21	1	0,8
				
1,64	1,44	1,23	1,02	0,82
				
1,66	1,46	1,25	1,04	0,84
				
1,68	1,47	1,27	1,06	0,85
				
1,69	1,49	1,28	1,08	0,87
				
1,71	1,5	1,29	1,09	0,88

In the chart you see the bitcoins that the miner creates over its profitable lifetime, if you would start from the beginning of the launch. The cost of the miner is calculated by $cost/485(<-current bitcoin price).

[ensurance982]

0.2W/GH/s seems to be quite low, that's a given. What needs to be considered as well is the initial price of the miner itself. Those miners don't grow on trees. But it shows how manufacturers can make quite a decent return if they're able to churn those miners out at a low price!

[alexeft]

A 453GH/s miner like antminer s3+ will produce 0.79983BTC over a year if difficulty adjusts by +15% every time. It costs 0.58BTC as per https://bitmaintech.com/productDetail.htm?pid=00020140813125800214NBU85kWt0672


It needs 355 watts of power which will cost $155.49 at $0.05 per kwh.
So, 0.79983BTC-0.58BTC leaves us with 0.21983BTC at $500 per BTC, it's $109.915, which is less than the electricity cost. Unprofitable!!

If we had a 25% discount from the hardware cost, we will make ~$28 by the end of the year.

All of this assumes no pool fees of any kind.

[minerpumpkin]

Are the Extolabs actually legit? They first came up in May if I remember correctly. The prices back then are just too high at the current levels of difficulty, though. You need to buy the miner first!

[An amorous cow-herder]

My goal in the above calculation is simply to point out, that, given the relatively conservative assumption that a large mining farm can acquire S3s for 75% of the consumer price, and make use of electricity for $0.05 per kWh, the production cost (taking into account hardware cost and energy only) is below current market, i.o.w. mining would be profitable for such an operation.

Nothing to argue there against.
It doesnt tell us anything about how much an Antminer actually costs to be built.
When announced the S3 used to cost 0.75BTC (and BTC was like $600 back then), so basicly the price has dropped from $450 in June/July to $280 now. In other words the price has already dropped nearly 40%.
Its fair to assume that the S3 definately costs less than $450 to build, otherwise one wouldnt consider building such a device. Is it still profitable to build at $280? Or is that already a clearance sale?
Probably still profitable, but unless some insider can tell us how much those companies pay for the wafers and how high the chip yield is we cant know for sure.

My guess would be the manufacturers operating their own pools are still turning a profit, but i doubt their margins are still healthy given risks involved.

[oda.krell]

A 453GH/s miner like antminer s3+ will produce 0.79983BTC over a year if difficulty adjusts by +15% every time. It costs 0.58BTC as per https://bitmaintech.com/productDetail.htm?pid=00020140813125800214NBU85kWt0672


It needs 355 watts of power which will cost $155.49 at $0.05 per kwh.
So, 0.79983BTC-0.58BTC leaves us with 0.21983BTC at $500 per BTC, it's $109.915, which is less than the electricity cost. Unprofitable!!

If we had a 25% discount from the hardware cost, we will make ~$28 by the end of the year.

All of this assumes no pool fees of any kind.

You're re-doing my calculation from above, but you let the hypothetical S3 run past its profitable range wrt energy.

My cutoff was ~200 days, in which case the total cost to produce 1 BTC with a 25% off S3 is $459 (this is the price per 1 BTC - so you will need more than 1 S3 running to get 1 full BTC after 199 days, to be clear).

Tell me again how this is unprofitable?

[oda.krell]

My goal in the above calculation is simply to point out, that, given the relatively conservative assumption that a large mining farm can acquire S3s for 75% of the consumer price, and make use of electricity for $0.05 per kWh, the production cost (taking into account hardware cost and energy only) is below current market, i.o.w. mining would be profitable for such an operation.

Nothing to argue there against.
It doesnt tell us anything about how much an Antminer actually costs to be built.
When announced the S3 used to cost 0.75BTC (and BTC was like $600 back then), so basicly the price has dropped from $450 in June/July to $280 now. In other words the price has already dropped nearly 40%.
Its fair to assume that the S3 definately costs less than $450 to build, otherwise one wouldnt consider building such a device. Is it still profitable to build at $280? Or is that already a clearance sale?
Probably still profitable, but unless some insider can tell us how much those companies pay for the wafers and how high the chip yield is we cant know for sure.

My guess would be the manufacturers operating their own pools are still turning a profit, but i doubt their margins are still healthy given risks involved.

Now we're talking. I don't think the margins are as good as they used to be for the big operators (that part is obvious, given lower price and higher difficulty), and are maybe even getting close to a net zero.

I have the suspicion (that I can't prove) that we are currently pretty close to the cost of a coin mined by a large farm. I don't think it is coincidence that the mid to high 400s are revisited so often and persistently. But it's nothing more than a suspicion, I admit. Maybe post hoc reasoning to explain why price keeps coming back to where we are now.

[alexeft]

A 453GH/s miner like antminer s3+ will produce 0.79983BTC over a year if difficulty adjusts by +15% every time. It costs 0.58BTC as per https://bitmaintech.com/productDetail.htm?pid=00020140813125800214NBU85kWt0672


It needs 355 watts of power which will cost $155.49 at $0.05 per kwh.
So, 0.79983BTC-0.58BTC leaves us with 0.21983BTC at $500 per BTC, it's $109.915, which is less than the electricity cost. Unprofitable!!

If we had a 25% discount from the hardware cost, we will make ~$28 by the end of the year.

All of this assumes no pool fees of any kind.

You're re-doing my calculation from above, but you let the hypothetical S3 run past its profitable range wrt energy.

My cutoff was ~200 days, in which case the total cost to produce 1 BTC with a 25% off S3 is $459 (this is the price per 1 BTC - so you will need more than 1 S3 running to get 1 full BTC after 199 days, to be clear).

Tell me again how this is unprofitable?

I'm saying that with 25% off the hardware cost, there is a tiny profit to be made. Pool fees excluded of course!!!!!

[oda.krell]

A 453GH/s miner like antminer s3+ will produce 0.79983BTC over a year if difficulty adjusts by +15% every time. It costs 0.58BTC as per https://bitmaintech.com/productDetail.htm?pid=00020140813125800214NBU85kWt0672


It needs 355 watts of power which will cost $155.49 at $0.05 per kwh.
So, 0.79983BTC-0.58BTC leaves us with 0.21983BTC at $500 per BTC, it's $109.915, which is less than the electricity cost. Unprofitable!!

If we had a 25% discount from the hardware cost, we will make ~$28 by the end of the year.

All of this assumes no pool fees of any kind.

You're re-doing my calculation from above, but you let the hypothetical S3 run past its profitable range wrt energy.

My cutoff was ~200 days, in which case the total cost to produce 1 BTC with a 25% off S3 is $459 (this is the price per 1 BTC - so you will need more than 1 S3 running to get 1 full BTC after 199 days, to be clear).

Tell me again how this is unprofitable?

I'm saying that with 25% off the hardware cost, there is a tiny profit to be made. Pool fees excluded of course!!!!!

I agreed with that (the reduced margins) in my reply to cow-herder. Just as an aside, a sufficiently large farm won't need a pool, so not necessarily needs to pay a pool fee.

Anyway, in reality, I'm sure the large operators' calculations are a lot more complex (since they presumably replace outdated hardware on the go, and need to take into account how much of their coins they can sell without depressing price too much)

But my point remains that, assuming you will be able to sell over the next 200 days for a price of around $500 per coin, investing $459 doesn't seem such a bad deal to me.  This would be a ~9% profit, that's hardly "tiny". (EDIT: at $500 per coin, that is. Profit would have been a lot higher at previous prices. Point is that, even now, there'd be 9% profit)

[CMMPro]

Oda...I respect your calculation...but it is simplistic and lacking several important variables as you mentioned yourself.

There is a transition from amateur miner to commercial miner that occurs around 2400w of draw.
No one is pulling that much current from a single household circuit unless you have modified a dryer plug or something illegal.
If you burn your house down mining 0.1 btc per month...well good for you, great job.

Amateur miners may be able to eek out a few dollars of profit in 6 months of mining with the most efficient mining equipment on the market....I'm still not sure of that...most of these "mining rigs" require the amateur users to buy the power supply separately, and you have to pay duty and import taxes. This can double the hardware investment price before it ever reaches the wall socket. (For my KNC unit last year the power supply was $192, and the shipping, duty and taxes was almost $450.)

However, the biggest variable cost though occurs once you go beyond 2400w of power requirements....now the miner's have to move the mining units out of their mom's basement and go to a commercial installation.

Air conditioning alone almost doubles the electrical cost, not to mention...rent, electricians to install and sign off on wiring panels, networking demands that go beyond a few 8 port routers tied together, internet bandwidth charges that are more than your usual household data plans....the costs are exponentially higher than someone running up to 5TH in their basement.

The upside? If they can get the hardware or manufacture the hardware at cost (<20% of retail), they can reduce some of the depreciation costs.



I still put forth the thesis that there currently is NO mining hardware that is profitable being produced today, not at any scale.
If anything, the large commercial mines are running at bigger losses than the little guys like me.

Once we admit that, we can begin to think about what problems and possibly opportunities that brings.
The reason the difficulty keeps increasing is not because it is profitable, it is because of the lengthy feedback loop and the fact that we are engaged in a silent war of attrition.

I believe the feedback loop is 2-3 months...the time it takes to get new hardware off the drawing board and into the mines.

[Wilhelm]

Another point.

With all mining you need to be the first to have the miner to get good profits.
This means you need to preorder possible scam products and hope they produce it and deliver it on time for it to be worth while.

In essence there is also risk in mining upping the price aswell.

[madken7777]

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 !!!

Hardware depreciation cost is a large factor on why so many amateurs miners lost a great deal of money on mining.

If they use the same amount of money to buy coin directly, risk is about same but they get more benefit from rising value of btc.

[seriouscoin]

is this thread for idiots?

OP must have been extremely retarded. Why not use Unicorn OP? I have  one that hash at 5PH/s and only use 5kw. PM me dumbass.