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Financial Aspects: Costs

All About Bitcoin Mining: Road To Riches Or Fool's Gold?
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The Cost of Mining Hardware

Throughout 2011 and 2012, a rule of thumb was that a graphics card used for Bitcoin mining should cost less than $1 per MH/s. While a motherboard supporting four or five GPUs did not come cheap (the popular MSI 890FXA-GD70 cost about $200), a low-end CPU and 2 GB of RAM was sufficient for GPU-based mining. With PCIe extender cards, the GD70 board could support five graphics cards, but this cost savings was partly offset by a more expensive 1000 W power supply and the price of the PCIe extenders themselves.

When FPGA-based mining hardware became available in late 2011, one of the first ones, the single-FPGA, 210 MH/s ZTEX 1.15x from Germany, sold for about 400 Euros, or more than $500, plus shipping. Soon, several U.S. manufacturers popped up, many of them offering quad-FPGA miners for about $1000 each. While 800 or 850 MH/s for $1000 looked almost like a good deal, especially considering the lower costs for electricity and air conditioning, the real game changer was the $600, 830 MH/s FPGA-based Single from Butterfly Labs, which became available in early 2012.

As we've already mentioned, in June 2012, Butterfly Labs announced that its Bitcoin-mining ASICs were well under development and would start shipping in October or November of that year (though it didn't make that date). Original pricing was $1200 for a 60 GH/s SC Single and a whopping $29,600 for a 1500 GH/s SC miniRig, the Bitcoin-mining equivalent of a hydrogen bomb. In 2013, the SC miniRig was dropped from the product list due to power draw and cooling concerns, and the prices for the other ASIC-based miners were doubled.

The Cost of Electricity

The recurring costs of Bitcoin mining depend on where you live and whether you can obtain free or complimentary electricity. Unless you work in a power plant, your free electricity may not be free. Technically, using the electricity of your university or work place for your Bitcoin mining rigs could even be considered stealing. But your electricity may actually be complimentary. In the U.S., some office rentals are all-inclusive. If your lease includes utilities, mine away. But your landlord may notice excessive power draw and could decide not to renew your lease, or simply raise the rent come renewal time.

If you have to pay for electricity, rates vary dramatically around the world. Even within the United States, rates vary from state to state, from county to county, even from city to city. In California, you may be forced to pay about 18 or 19 cents per kWh, whereas the energy bill of a Bitcoin miner in Georgia may show only 7 cents per kWh. Lucky miners who happen to live in Douglas County, WA, pay only 2.33 cents per kWh, courtesy of a large number of underutilized hydroelectric power plants.

As we will explore in more detail on the next page, assuming your 230 W, 230 MH/s graphics card runs 24/7, it costs you about $1.05 per day to mine in California, but only 35 cents in Georgia and a mere 15 cents in Douglas County. At current difficulty, this GPU generates about 0.01 Bitcoins per day, or about $1.15 worth. If the Bitcoin exchange rate drops below $105, the miner in California would be well advised to turn off his GPU mining rig immediately. When difficulty rises to 10 times its current value, which is expected by fall, it would be prudent even for GPU-based Bitcoin miners in Douglas County, WA, to take off their hard hats and cease mining operations.

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