Is Bitcoin still profitable with ASIC miners?


Is Bitcoin still profitable with ASIC miners?

Is Bitcoin still profitable with ASIC miners?

Posted on Jul 12, 2013 by Paul White

When I first heard about the crypto currency.  My first thought was biggest ponzi scheme ever.  But after some research I have a better understanding of how it works.  I even have started mining for bitcoin.  But the biggest question you have to ask  yourself.  Can you really make money mining for Bitcoin.

How do you mine for Bitcoin?

Its simple. You join a mining Pool, then download a Bitcoin miner ( piece of software ).  Then configure the miner with your account and pool settings, and start mining.  Other than that it doesn't take anything to mine.  You just let the miner run on your computer 24/7 and watch the bitcoin ( or I should say fractions of bitcoin ) pile up.

How hard is it to mine for bitcoin?

In the beginning (2009) a powerful CPU could easily mine for bitcoin.  But with time as more people started mining and the processing power of the mining pool increased it became harder to mine for bitcoin.  You see there is not an unlimited amout of bitcoin.  Bitcoin is setup to release 1 block every 10 minutes.  There is an additional difficulty level that is adjusted depending on the hashing volume for the previous block.  As a result your ability to mine for bitcoins is directly dependent on what percentage you represent of the total hashing power of the network.

Today people don't use their CPU to mine, they use their GPU, or even an ASIC miner ( specialized hashing hardware ).  The arms race to have the most powerful mining rig has caused the total hashing power of the network to skyrocket.  As a result that GPU mining setup you built a few months ago that once was king is now barely able to generate enough bitcoin to pay for the electricity it uses.  

Many people like myself tried mining for bitcoin just to see how it works.  Then when you do the math, you figure out its a loosing battle.

My Bitcoin Mining Setup

In my experience the easiest way to start mining bitcoin is to join bitminter.com  They have their own mining client that will run on your computer and give you complete control over which devices ( CPU, GPU, ASIC miners ) are used to min for coin.  
Bitminter v1.40 CPU GPU Mining client
In the photo above you can see I have started mining on my CPU, and 2 GPUs.  As you can see the GPUs blow away my CPU at mining.  For that reason I usually disable mining with my CPU.  It just wastes electricity.  If I left my computer on and my Bitminter client running 24/7 I would yield .0029 Bitcoins per day.  And taking into account today's market value of bitcoin ( 1 BTC = $88 USD ), I would effectively make 25 cents.  Leave it running for a month and I make about $7.65.  

Electricty cost on GPU miners is High

Power Consumption is the biggest problem with mining.  My computer when mining uses about 780 watts.  Part of this is due to my 5 monitor setup which represent about 250 watts of consumption. The rest is my tower which has many fans, and hard drive spindles.  I determined that just my Geforce GTX 560 Ti uses about 180 watts when mining for Bitcoin.  Still if I was to leave my computer on 24/7 this would eat 16.8 KWH or 504 KHW per month.  At my currently utility rates ( 10 cents per KWH ), this would cost me about $50 / month.  

The goal of miners is to generate the most bitcoin while using as little electricity as possible.  This brings us to the ASIC miners that have recently been dominating the scene.

What is an ASIC miner?

Rather than a computer that was built for multipurpose processing, ASIC miners were built to do one thing.  Mine for bitcoin.  As a result they can Mine for bitcoin much faster than any GPU based system while using only a fraction of the power.  There are only a few companies manufacturing these miners.  Avalon and Butterfly Labs are the best known.  

Butterfly Labs 5 Ghps miner

This little box can mine for coin at 5 Ghps.  At today's rates this would generate Bitcoin at .097 Bitcoins per day or about $8.60 USD.  So this little box will make you about $258 per month.  It also only uses 30 watts. and cost $274.  If you are on a budget this unit is the way to go.
Butterfly Labs ASIC Miner
But the problem still remains.  With time difficulty of mining will increase making even this little 5 Ghps box obsolete.
In introduce the next generation of miner

Butterfly Labs 500 Ghps miner

Take the smaller box times 100.  This monster will make you about $25,000 per month.  Power usage is unknown, but even if it uses 1000 watts it doesn't matter.  The unit practically pays for itself in 1 month.  
Butterfly Labs ASIC Miner Monster

The future of mining

The biggest problem with mining is the growing power of the network to mine for coin.  Early adopters of monster ASIC mining rigs will win, while everyone else will loose.  Butterfly labs and other companies producing ASIC miners have been flooded with thousands of orders, and have not been able to keep up with demand.  As a result there are people who have been waiting for over 6 months for their order to fullfilled.  It would seem to me that manufacturers are preferring to run their own rigs and min for coin rather than fill the orders.  After all once these machines get into the hands of thousands of customers, its all over for anyone with a GPU based mining rig, plus the yield on even these big ASIC machines will rapidly drop.  

Bitcoin could ignite a potential Cyberwar

DDOS attacks on mining pools is already a problem.  Considering there are only a few dozen mining pools, and the amount of bitcoin you are able to mine is directly related to what percentage of the network you represent, there is a big incentive to take out competeing pools.  For this reason as Bitcoin continues to rise in value, and mining pools continue to grow, there will be a greater financial incentive to eliminate the competition.

Should I start mining?

The fact that Buttefly Labs and Avalon are having trouble filling their customers orders, to me is a red flag.  I suspect the delay in delivering miners to all the customers who prepaid is intentional.  After all why should butterfly labs delivery miners to its customers when they can just mine for bitcoin themselves.

Unless you were able to get your hands on a high throughput ASIC miner today.  And I am talking about something that does 50 Ghps +.  I don't think you should get into mining.  Even with the USB block erupters, the cost to keep your computer running 24/7 is too high when considering the 50 cents per day they will make you.  If you already have a nano computer that runs on just a few watts, then maybe the USB based ASIC miners would be worth it.
USB ASIC 333 Mhps miner

That is the delima I am stuck in.  Should I buy 10 USB ASIC miners giving me about 3.3 Ghps, and a small nano computer for about $1500?  It would take me a year to make back the initial investment.  And this assumes the value of bitcoin was still at $88 USD ( no gaurantees ) and the hashing power of the network didn't increase ( which of course it will ).  If I had millions laying around I would buy 2 or 3 of the 500 Ghps miners, and then just run them forever.  But this is assuming I was the only guy able to get them. If everyone had access to those miners it will cancel out any benefit.
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