All About Bitcoin Mining: Road To Riches Or Fool's Gold?

Financial Aspects: Costs

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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  • Darkman69
    Finally a proper write up on Mining Bitcoin with the good the bad and the reality.
  • esrever
    How does mining new coins make sense if there will ever only be 21 million? I am so confused by that point.
    Another thing is, with an economic system like this, a billionaire can easily manipulate market prices and make extremely large amount of money and still be completely fine due to this being in a grey area of the law. You can't pump and dump stocks legally but it seems pretty easy for something like this considering you can dump the bit coins off as currency in any country.
  • s3anister
    640096 said:
    How does mining new coins make sense if there will ever only be 21 million? I am so confused by that point.

    To quote the Bitcoin wiki page: "The last block that will generate coins will be block #6,929,999 which should be generated at or near the year 2140."

    So to directly answer your question, the whole reason for mining bitcoins is because you'll most definitely be dead before the last block chain is even completed.
  • smeezekitty
    Shitcoins definitely = fools gold!
    Huge waste computing power IMO
  • vmem
    919443 said:
    Shitcoins definitely = fools gold! Huge waste computing power IMO

    someone needs to rewrite the algorithm and somehow hook up block generation to folding@home or some similar constructive use of the computational power.
  • smeezekitty
    686747 said:
    919443 said:
    Shitcoins definitely = fools gold! Huge waste computing power IMO
    someone needs to rewrite the algorithm and somehow hook up block generation to folding@home or some similar constructive use of the computational power.

    That would be a great idea. Verifying a relatively small hash to screen out the cheaters then perform something useful like F@H.
  • dannyboy3210
    A very interesting read. I had been reading about Bitcoins (mainly because I just couldn't figure out what they were exactly), but this clears a lot of things up.
    Also, at the bottom of page 5, in the Comparison of FPGA and ASIC Chips table it says "Power Fraw".
  • slomo4sho
    Fiat currencies... I guess for some people the dollar wasn't worthless enough.
    It is amazing how you can lose your "wallet" and your funds permanently disappear from the pool.
  • toarranre
    Never heard of this and I'm quite confused by it. Use graphics cards to find units of a currency that from what I can tell must be extremely succeptable to artificial inflation or all out collapse.
  • dkcomputer
    I'm offensive and I find this capitalist
  • csf60
    In 2010 I started bitmining and reached 3 bitcoins in 2 months with a 5850. Each bitcoin was worth 3$ at that point so I just gave up and lost my wallet. If I only knew 3 years later they would change for 150$ each... :face palm:
  • choz
    Thanks for your calculations. I now have more things to laugh about here in Australia when I read about bitcoin "miners" setting up multi-gpu rigs when our power price is around the 25c per KWh mark and rising by 5% annually.
  • ET3D
    I've only skimmed the article, but I didn't see a good discussion of mining pool, trading and all the DDoS, phishing and hacking that goes with it.
    The technical aspects and financial calculations are one thing, but going bitcoins is somewhat of a hornets' nest, and it's really worth discussing this stuff.
    I haven't mined seriously, but the first time I tried (for two weeks, generated half a bitcoin), I left the bitcoins in the pool and one of the pool's founders embezzled and took what was there and left. I've seen other pools hacked, and there are regular DDoS attacks on them, changes in the terms, all kinds of things you really need to follow carefully if you want to mine effectively. Just leaving your miner running and hoping that you'll get the expected coins eventually doesn't cut it.
    I currently mine a little LTC for fun (partly because after installing Catalyst 13.4 I can't mine BTC and can only mine LTC with an old cgminer version I have installed). I'm not sure that it's worth it financially, and I'll probably shut down mining in the not too far future.
  • Madn3ss795
    I bought a few Radeon HD 7790 graphics cards

    7790 already out in June 2011 ? :lol:
  • immanuel_aj
    1 said:
    Or better yet, enjoy this crazy sideshow from the bleachers.

    Yup, that's exactly what I'll be doing! There's always something in the news about it every month these days. :)
  • uruquiora
    this is why i think TH is one of the best IT news website around nowadays... thanks for a very interesting article and for sharing the good and the bad with newbies like me on that subject.
  • somebodyspecial
    Maybe now we won't have to see this in benchmarks. It's over for gpus.
  • tlg
    I am also wondering how he got the HD7790 in June 2011, except if this is a typo because later on in the same page he talks about November 2012.
  • dalmvern
    Great article, I have been wondering what the fuss was all about. Now the only question I have is:
    What is all this processing power being used to do?
    As it was mentioned in an earlier comment, it would be great to use it for something like scientific research like F@H...but I have never seen anything explaining IF it is being used, and if it is, what it is being used to do.
  • MyNewRig
    Great news, since BTC mining with GPUs is now a lost cause, time to buy the nVidia GTX 780 card and enjoy its gaming performance instead of worrying about its OpenCL capabilities (or lack of :D) LOL

    EDIT: and yeah, that is such a waste of computational power and electricity, that is used to create really nothing at all, if this goes towards a good beneficial cause while mining it would be such a great project, like reCAPTCHA is used to digitize books while providing bot and SPAM protection!
  • smeezekitty
    515793 said:
    What is all this processing power being used to do?

    It is wasted cracking useless hashes while not doing anything useful.
  • ET3D
    By the way, I just saw a good article at PC World to read in addition to this:
  • godfather666
    Great article, thank you. It definitely doesn't seem like bitcoin mining is a worthwhile endeavor, unless you are predicting that its price will rise sharply over the next few years.
    But in that case, you can also simply just buy bitcoins.