Price of mining the cheapest bitcoin

[spndr7]

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.

1 PH/s per kW . Is it real ? sources ?

I just wanted to know, what was the mining cost of cheapest bitcoin, mined at industrial scale. According to oda its 459 USD/BTC.

[oda.krell]

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.

1 PH/s per kW . Is it real ? sources ?

I just wanted to know, what was the mining cost of cheapest bitcoin, mined at industrial scale. According to oda its 459 USD/BTC.

Hm. Not too happy about the way my post was understood then. I probably should have phrased it more clearly...

Like I said in my calculation post, I don't want to claim this is the correct lowest production cost per coin.

What I intend it to be was a "model" calculation -  to show how, with a relatively conservative estimates on the discounts a large mining operator could get, mining could still be profitable assuming those rebates, even though mining for "amateurs" (who don't get those rebates) is probably not profitable at the moment.

As an example, say the large miners only can eek out a 10% discount for the hardware (vs. the 25% I assumed), and their overhead cost (facilities to run miners, cooling, etc) is higher than I think, in which case even the large miners don't mine profitable at the moment. That is the point CMMPro is making (correct me please if I'm wrong here, CMMPro).

My point is: I believe it is at the very least possible that large miners get substantial enough rebates on hardware, and are efficient enough in operating, that they can still turn a profit. Especially considering that large investments continue being made in mining farms.


To condense the point I tried to make even further...

Group 1: "Bitcoin mining is definitely NOT profitable at current prices!"

Group 2: "Bitcoin mining IS definitely profitable at current prices."

My position: "I can't say whether it's profitable for sure, because I don't know the discount factor of large farms, but large scale mining might be profitable, even at current prices, if those rebates are high enough."

[CMMPro]

My experience in designing niche market consumer electronics (for racing applications) is that the production costs for small runs is about 20% of retail price. So for a $500 transmission controller for a rally car, my costs would be in the neighbourhood of $100-120 per unit. (Parts, pc boards, assembly labour...and mostly done in China.)

I believe it would be difficult for them to get much more of a discount, since my productions numbers were maybe half what theirs are, and my parts count was lower as well but generally I think we can assume somewhere between 10-20% of retail price is what one of the mining hardware manufacturers are paying for their hardware.

So, we can estimate that for a 5.5TH miner that retails for $4000....they are paying minimum of about $400 per unit cost.
Add 3kW of power supply and maybe you are at I dunno maybe $700(?)

(Edit: Whoops was I wrong on the power supply cost...they can be $300 used and $2000 new.)
Good luck finding 500-1000 used 3KW power supplies too!

Add rent and property taxes on the building...difficult to determine.

Add infrastructure....large scale power transformers, electricians, lan cabling, lan distribution, internet bandwidth

Add power costs...$0.05/kw(?) Not sure when you are buying in megawatts per month.

^Double that for air conditioning and fans to cool the place.

Add a salary 24/7 to maintain it when units go down...

Budget for maybe 5% spares of mining hardware and power supplies when units break down.


I can't see it making money unless some of these costs are eliminated.

[Wexlike]

But, then again: what is the "real" price of a miner? All of them get 50% cheaper just 2-3 months later. So, is the real retail price 4000$? Or 2000$? Or even 500$? We just don't know without insider informations.

[institutionaltrader]

It is a really scary prospect. They day mining cost becomes unprofitable (soon), there will be a lot of dead mining companies thus an huge flash crash, thus killing even more miners. Also no one will lend money to this companies during theses times.

[dannyspk]

What if you get free electricity and pay nothing for it? There are some places where stealing power is no big deal. Like where I live.

[oda.krell]

My experience in designing niche market consumer electronics (for racing applications) is that the production costs for small runs is about 20% of retail price. So for a $500 transmission controller for a rally car, my costs would be in the neighbourhood of $100-120 per unit. (Parts, pc boards, assembly labour...and mostly done in China.)

I believe it would be difficult for them to get much more of a discount, since my productions numbers were maybe half what theirs are, and my parts count was lower as well but generally I think we can assume somewhere between 10-20% of retail price is what one of the mining hardware manufacturers are paying for their hardware.

So, we can estimate that for a 5.5TH miner that retails for $4000....they are paying minimum of about $400 per unit cost.
Add 3kW of power supply and maybe you are at I dunno maybe $700(?)

(Edit: Whoops was I wrong on the power supply cost...they can be $300 used and $2000 new.)
Good luck finding 500-1000 used 3KW power supplies too!

Add rent and property taxes on the building...difficult to determine.

Add infrastructure....large scale power transformers, electricians, lan cabling, lan distribution, internet bandwidth

Add power costs...$0.05/kw(?) Not sure when you are buying in megawatts per month.

^Double that for air conditioning and fans to cool the place.

Add a salary 24/7 to maintain it when units go down...

Budget for maybe 5% spares of mining hardware and power supplies when units break down.


I can't see it making money unless some of these costs are eliminated.

Just a quick remark re: operating costs.

What do you think the wage is these guys get paid?



living in here when they're on duty



from this article: http://www.thecoinsman.com/2014/08/bitcoin/inside-chinese-bitcoin-mine/


I get the feeling to accurately estimate the lowest cost to produce coins, we need to get prices found in the US/Europe out of our head, and instead look at the Chinese market instead.

[NotLambchop]

It is a really scary prospect. They day mining cost becomes unprofitable (soon), there will be a lot of dead mining companies thus an huge flash crash, thus killing even more miners. Also no one will lend money to this companies during theses times.

Nah.  Many mining companies have been running in the red (if you include the cost of gear) for quite a while.  Look at stuff like PETA, SCRYPT, HMF, Labrat.  These are all for-profit "professional" mines.  They will continue operating even when electrical costs surpass the exchange price of the coin they mine.

--But how is that possible, Mr. Peabody?  It just don't make sense!
--You see, Sherman, the operators of these "mines" don't make their profits from the coin they mine.  The real money comes from their "investors."  

[institutionaltrader]

It is bad news when BC future depends on investors being robbed of their hard earned money instead of the underlying technology working as intended...

[NotLambchop]

It is bad news when BC future depends on investors being robbed of their hard earned money instead of the underlying technology working as intended...

It's working as intended.
--Dad, what's that white stuff in birdshit?
--Son, that's birdshit too.

[Johanna]

What if you get free electricity and pay nothing for it? There are some places where stealing power is no big deal. Like where I live.

Where do you live?

[piramida]

So if it is already unprofitable to mine bitcoins, why is the hashrate growing at the constant rate? VCs burning money rushing to increase their network share, but for what reason? Also, if that is the case for some unknown consideration, would not they keep mined bitcoins off the market, does not make any sense to sell at a loss?

[CMMPro]

Simple overshoot...these devices coming online right now were designed 6 months ago, produced last month....and as soon as they hit the mine they are non-profit. The operators have no choice but to keep going forward...they sunk their costs 6 months ago in the past when the current hashrate was unthinkable.

The reason retail devices are 50% cheaper 2-3 months later is that the mining manufacturers are targeting approximately a 90 day breakeven for their customers. They back calculate that product delivered on such and such a date has a potential in 90 days to produce X bitcoins. So they set the price based on a 90 day break even. If the difficulty is too great, no one makes money (except the manufacturers who sold them 90 days ago).

@Oda, I agree..those two guys are inconsequential in terms of costs, but a wage of some kind has to be on the list of possible expenses. 
The other costs still apply...electricity alone is hundreds of thousands of dollars per month.
Electricity in China is not much cheaper than here in Canada (0.05-0.10 per KW) and energy supply and reliability is a problem in many areas.
Rent may be cheaper....air conditioning may not be needed so badly if the place doesn't have walls. (I've seen that in pics of mines in China.)

[dannyspk]

What if you get free electricity and pay nothing for it? There are some places where stealing power is no big deal. Like where I live.

Where do you live?

Pakistan.

[NotLambchop]

So if it is already unprofitable to mine bitcoins, why is the hashrate growing at the constant rate? VCs burning money rushing to increase their network share, but for what reason? Also, if that is the case for some unknown consideration, would not they keep mined bitcoins off the market, does not make any sense to sell at a loss?

The hashrate is growing because ASIC manufacturers have to unload their miners, which have been in the pipeline for quite a while--since they began designing the chips, which translates to ~8 months on the average.
If you are an ASIC manufacturer, you have two options:

  1.  Eat NRE, pay someone to grind up your stock of chips and haul it away. <==Not smart.
  2.  Sell chips at a loss, partially recoup your investment. <==Pick this if you're smart.
  
If you are a miner, and ordered shit from an ASIC manufacturer months ago, you have two options:

  1.  Sign for the package, walk to the nearest trash can, throw it away. <==Not smart.
  2.  Fire up your miner, and keep mining until it costs more in electricity to mine one coin than the coin's worth.  You won't "ROI," but you'll lose less than with (1). <==Pick this if you're smart.

Re. "keeping mined bitcoin off the market":  Mined bitcoin is no different from any other bitcoin because fungibility.  It makes no more sense to keep mined bitcoin off the market than keeping hoarded bitcoin off the market.

Any of this help?

Edit:

Simple overshoot...these devices coming online right now were designed 6 months ago, produced last month....and as soon as they hit the mine they are non-profit. The operators have no choice but to keep going forward...they sunk their costs 6 months ago in the past when the current hashrate was unthinkable.
...

This.

[Pruden]

So if it is already unprofitable to mine bitcoins, why is the hashrate growing at the constant rate? VCs burning money rushing to increase their network share, but for what reason? Also, if that is the case for some unknown consideration, would not they keep mined bitcoins off the market, does not make any sense to sell at a loss?

What if all that capital is being put to the wrong use and we have a typical example of tragic malinvestment to be followed by a crash when reality fails to satisfy expectations? This would be the one Bitcoin Bubble deserving of that name.

Nobody said keeping 4000BTC/day off the market would stop the downtrend, the same way new houses kept by the builder can't prevent a housing bubble from busting...

[NotLambchop]

What if you get free electricity and pay nothing for it? There are some places where stealing power is no big deal. Like where I live.

There is always a way to make money through theft.  This is not a Bitcoin phenomenon.

[institutionaltrader]

What if you get free electricity and pay nothing for it? There are some places where stealing power is no big deal. Like where I live.

There is always a way to make money through theft.  This is not a Bitcoin phenomenon.

Yes but this can only last for so long. Basic economic principles must apply for the technology to prosper otherwise it crashes towards the real underlying value; in that case minus zero.

[seriouscoin]

Some of you  need to understand, to get lowest operating cost (electrical rate) you need large capital. Add that with getting miner at cost, manufactures are only winners in this game.

Ofcourse they're happy to sell their miners to the public..... WHILE using capital to secure a large farm. They know damn well they will push their customers into red and thus those SOLD MINERS will be off the mining network in short term. Hence, whos winning?

The manufactures only compete with themselves.

[painlord2k]

I made a chart showing the inflation rate between real BTC inflation and standard BTC inflation (25 BTC/10 minutes).
The ratio is an indicator of the hash rate increase. R=1 no increase, R<1 decrease and R>1 increase.

https://docs.google.com/spreadsheets/d/17Jjhd_nnfRJ9EyYuOM1ACPMwRod3hhPqRk4YQp7FIZE/pubhtml# (last tab)

From November to July, the hash rate decelerate and after start showing signs of acceleration.
The same happened during 2012, after a deceleration until July it started accelerating until november 2013.
At the time the price trend was not so happy. But someone invested in new equipment months earlier to have it online in time to profit from the second big wave.
What they know or think to know we don't know?

And PayPal is teasing about integrating Bitcoin (latest news).