[Progress thread] Building out a crypto mine, step-by-step - AMA

[Roli]

I vote this most interesting thread of the month

Seconded.

 

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[GlobalWealth]

That makes more sense than the billion percent returns it was forecasting.

So do you find the income amounts on this page to be accurate: Realtime mining hardware profitability | ASIC Miner Value
It projects ~$100 per day at current prices for the A9 ZMaster.

Those seem pretty accurate.

 

[GlobalWealth]

Great thread. I think I can already guess why you chose Estonia, I've been thinking of becoming an e-citizen of them for awhile now.

Honestly, e-residency is a waste of time. It's a great marketing gimmick with virtually zero value.

I've been an e-resident for many years (I was one of the first ones). They promote it as a cool, simple way to open a company and bank accounts.

What they don't tell you is that it is ridiculously complicated. Tax filings are virtually impossible if you don't read Estonian as most of the details of the process are only available in Estonian language.

Bank accounts cannot be opened without a personal visit and many banks won't even open accounts for e-residents.

They entire system is a complete joke. There are WAYYYY better options than Estonia for virtual companies.

 

[GlobalWealth]

So I wanted to give a few updates.

This past week has been a bit crazy. We received our first shipment of A9 miners in Estonia. However, they are still sitting in customs waiting for clearance.

First, we found out we needed a special registration number to import goods from abroad. So we went through the nearly impossible task of applying for that number.

Ironically, even my Estonian lawyer couldn't figure out how to apply for this number without calling the tax department directly. Only then was it sorted out and only because we had an Estonian lawyer who could talk to the tax department in Estonian (as noted above, if you think the Estonian e-residency is a good idea, think again...).

With that sorted, the information was sent to customs. The customs agent then informs us to send him the EU compliance certification.

Luckily, Innosilicon is very responsive to customer service inquiries and they sent it to me within the hour. I forwarded to the customs agent who then informs me that he was going on vacation the next day.

So today I called again and no one knows the status on our shipment being released from customs because the agent dealing with it went on vacation.....

LOL. Estonian efficiency my a$$.

Tomorrow I'm going to meet with the electrician and contractor at the building to finalize the details. Then the next day I'm going to the customs office in person and hopefully walking away with my miners.

 

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[GlobalWealth]

Our first batch of hardware is the Innosilicon A9 Zmaster.

You can see it here: Innosilicon Equihash A9 ZMaster

Initially we are planning to mine ZenCash. After extended conversations with the founder of ZenCash and his team, I determined this coin to fit our goals and long term strategy.

Using this profitability calculator here: ZEN - ZenCash Mining data and profit calculate - Mine the coin

You can see the A9 profits around $2500/mo (in USD terms).

As a backup, we can also mine Zcash using the same hardware. I like both coins, but ZenCash holds a slight advantage due to its features and my comfort level with the founding team that runs the project.

But in case we can no longer mine ZenCash, we can switch the hardware over Zcash. The profitability for Zcash is very similar.

Initially, we don't plan to mine BTC due to its low level of profitability.

 

[TKDTyler]

So pretend I'm a newbie here (not a stretch of the imagination at all).
I see this miner: ASICMiner 48Th/s, Silent Water Cooling, Built-in PSU | ASICminer Company.
The stats say it has a hash rate of 48TH/s, using 3900W
I go to this website mentioned earlier: Mining Calculator Bitcoin, Ethereum, Litecoin, Dash and Monero

If I plug in 48 TH/s, and the 3900W the miner says it takes, the calculator tells me I'll make roughly half a billion dollars a year.

What critical piece of information am I missing?

Hash rates are different for different algorithms. Many "coins" do not allow ASIC's to process their data based on how the algorithm is built (ETH being the one you looked at I presume).

ASIC's inherently have much faster hash rates due to being built specifically for an algorithm. BTC allows ASIC mining as well as many other coins. Increased hash rate on network = increased difficulty = less profits/hash rate. This is why GPU mining on BTC is inefficient as the rest of the network is powered by ASIC farms.

Non-ASIC algorithms typically rely on GPU processing power.

 

[CareCPA]

Hash rates are different for different algorithms. Many "coins" do not allow ASIC's to process their data based on how the algorithm is built (ETH being the one you looked at I presume).

ASIC's inherently have much faster hash rates due to being built specifically for an algorithm. BTC allows ASIC mining as well as many other coins. Increased hash rate on network = increased difficulty = less profits/hash rate. This is why GPU mining on BTC is inefficient as the rest of the network is powered by ASIC farms.

Non-ASIC algorithms typically rely on GPU processing power.

This is excellent information.
Is there maybe a "Mining for Dummies" thread somewhere so I don't ask simple questions and clutter up this thread?

 

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[GlobalWealth]

Just had a funny situation related to this business worth updating you guys about.

In May, my business partner and I registered our company in Estonia. He lives in Estonia and has residency, and I am an e-resident.

This allows us to register our company online.

Typically, this goes against my philosophy of geo-arbitrage, but there are some incentives to use a local Estonian company.

As I mentioned earlier, Estonia has clear rules for crypto taxation; profits are taxed when converted to fiat (EUR) in Estonia.

Since we don't plan to convert our coins to fiat except as necessary to cover costs of the operation, we would not have any taxable income in Estonia.

Estonia also adds VAT (value added tax) of 20% to all transactions. This would be added to rent, power bill, cable bill, hardware costs, etc.

However, in Estonia VAT is used as a credit to pay your income tax. And since we won't have any taxable income we can reclaim our VAT payments and get a refund every 30 days.

This is only possible with an Estonian registered company with a VAT certificate. Thus, we decided in order to save the cost on VAT, we needed a local company.

With an Estonian company, you must file a monthly income tax report, even if you earned eur0.

Since we registered in May, we needed to file our May report on or before June 20. For our June report, we needed to file on or before July 20.

We forgot to file in June.

We had no profits, or even any income since we are still in process of setting everything up so we just didn't think about it.

We got a notice from the tax department telling us we failed to file and needed to get it done.

About a week ago, we filed our May and June report (all zeros). We filed on June 18th. The tax department did not assess any penalty since we called them and told them what was the deal.

On June 19th, one of the financial publications ran an article on their front page (online publication, not print) about how our company failed to file our tax report and how we were taking advantage of the Estonian e-residency program.

What makes it bad is they named both me and my business partner personally in the article and went further to suggest that anyone doing business with us should demand payment upfront since according to the author of the article, we are not credit worthy.

My business partner completely freaked out because he has serious privacy concerns.

He immediately contacted our lawyer who drafted a cease and desist order and sent it to them yesterday. In the order we are demanding a eur10,000 payment, removal of the article, and a public apology.

I imagine we will not get the money or the apology, but they will take the article down.

The point is, starting a new business is always full of unforeseen circumstances. Be prepared for the unexpected.

 

[MTF]

On June 19th, one of the financial publications ran an article on their front page (online publication, not print) about how our company failed to file our tax report and how we were taking advantage of the Estonian e-residency program.

What makes it bad is they named both me and my business partner personally in the article and went further to suggest that anyone doing business with us should demand payment upfront since according to the author of the article, we are not credit worthy.

This is f***** up. "Journalism" at its worst. How did they get access to this data? Is this publicly available?

 

[GlobalWealth]

This is f***** up. "Journalism" at its worst. How did they get access to this data? Is this publicly available?

In Estonia, all company information is publicly available.

This publication intentionally trolls public data for items just to write articles. They clearly have an agenda.

The irony is that using my and my business partner's names in a publication is against EU privacy laws.

This is why we made the demand including a eur10,000 payment. Our lawyer quoted case law and statutes where the EU will award the eur10,000. It is a fixed award for this violation.

We are giving them the option to pay it and avoid the additional court fees.

As I said, I doubt we will see the money, but they needed a stern warning. They intentionally did this believing we would not see the article.

 

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[GlobalWealth]

In Estonia, all company information is publicly available.

BTW, reason 12,365 the Estonian e-residency program is complete bullshit.

Absolutely zero privacy.

 

[MTF]

As I said, I doubt we will see the money, but they needed a stern warning. They intentionally did this believing we would not see the article.

10,000 is too low for such scumbaggery. Hope they pay up and shut up.

I'm an e-resident, too (joined when they launched it), and I consider it BS as well. I expected it would actually help you accomplish something (like open a bank account remotely), but not really. Great for Estonia's PR, though.

 

[SquatchMan]

So today I called again and no one knows the status on our shipment being released from customs because the agent dealing with it went on vacation.....

LOL. Estonian efficiency my a$$.

Tomorrow I'm going to meet with the electrician and contractor at the building to finalize the details. Then the next day I'm going to the customs office in person and hopefully walking away with my miners.

Is this just a ruse to get a bribe? (I know this is illegal for American business owners to do while abroad)

In Vietnam they pull this crap all the time. Nothing involving the government gets done quickly without some tea money. Not sure how corrupt Estonia currently is, but I do know it was part of the USSR.

 

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[GlobalWealth]

Is this just a ruse to get a bribe? (I know this is illegal for American business owners to do while abroad)

In Vietnam they pull this crap all the time. Nothing involving the government gets done quickly without some tea money. Not sure how corrupt Estonia currently is, but I do know it was part of the USSR.

No. You don't bribe in Estonia. They are rule followers to a T.


Sent from my VTR-L29 using Tapatalk

 

[GlobalWealth]

Update.

We got our first machines running 2 days ago.

Right now we only have 2 Innosilcon A9's running.

We are mining Zencash at this point and profitability is about $2500 per machine, per month.

We have 6 more of these machines on order right now.

2 should arrive in the next week or so. 2 in about 2-3 weeks. 2 in about 4-5 weeks.

Of course this profitability is based on current price on zen and mining difficulty level.

In about 3-4 weeks we will get 12 Bitmain Antminer Z9 minis.

These machines current profitability are about $600 per month per machine.



Sent from my VTR-L29 using Tapatalk

 

[GlobalWealth]

Update.

Basically, our business plan is to take the profits from our initial machines and roll it forward to buy more hardware. I put together the attached spreadsheet for the numbers guys who want to follow this.

I had to standardize some numbers here for the sake of calculations. Of course I realize crypto prices move more erratically, but I had to create some numbers.

For now, we are going to mine either ZenCash or Zcash. With the Innosilicon A9, profitability is about $3000/month with Zcash and about $2700/month with ZenCash.

I used $2500/month profitability as a baseline.

I was also pretty conservative in our ramping up efforts. Right now we have 2 machines running. We will have another 2 within the next week or so.

I also just placed another order for 4 machines, 2 of which will show up in about 10 days.

But on the spreadsheet, I based the profitability on 4 machines running in the month of August. Then only 6 running in September.

Since delivery of machines can take a couple of weeks to a month, I used the profit from the 2 months prior for purchase of new hardware.

For example, November only has 15 machines, 3 more than October. Since the profit from 2 months earlier, September, was $15k, we could only buy 3 machines. Thus we skip a month and add 3 machines to the mine for the month of October.

But December adds 6 machines over November because of October's profit numbers.

Starting at month 4, we start taking out cash to repay our personal loans to the company.

Every couple of months we will take out more and more cash.

You can see in the lower section the profitability of the Bitmain Z9 minis. The profitability of these machines is about $600/month, but I lowered my estimates to $500/month. So 12 machines is about $6000/month.

We will use this cash to cover rent and other expenses and some cash out as necessary or desired.

With our current power capacity, we are limited to around 400 machines.

Once we reach this capacity we will need to decide if we want to build our own 2MW transformer, or just keep running at this capacity. We will see at that point.

There are also several other variables here. Mining difficulty will increase. Coin prices can go up or down. We could have hardware and infrastructure issues.

I anticipate all of these things going in the wrong direction therefore I have no expectation that our model will work as it is on the spreadsheet, but again, I needed a baseline.

If you have questions, please feel free to ask.

I will be posting pictures as soon as the construction of the facility is done.

 

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[million$$$smile]

Great thread @GlobalWealth

So I have considering pulling the trigger on a couple of A9 ZMasters for the past couple of weeks and have tried to DD as much as possible.

A couple of questions.

For the first two machines you have up and running, are you actually getting near consistent 50Ksol/s as advertised?
I only ask because what I've read, some of the miners are reporting much lower hashrates than that. 30-35, some lower.

Also, do you have a preferred mining pool for these machines?

It really seems like Innosilicon has been trying to flood the market as quickly as possible, thus offering a 2 for 1 buy-in which case it would seem that within a few months, the ability to profit would be considerably lower. This is my biggest concern as I just don't know how long this can be sustained re: profit calculations with more hands in the fire after Sept shipments.

Do you think that Zencash or Zcash might 'hard fork' thus causing the A9's to become obsolete overnite, like a few others?
These ASIC's seem like the way to go, but I'm just wondering if it is too late for a solo miner to profit or just break even.

I really am trying to understand as much as possible prior to buying, if and when I do.

Your thoughts would be appreciated...

 

[garyfritz]

That spreadsheet looks mighty attractive. $6000 / mo out within a few months!? Wow. That's with 12 Z9's, so you'd have an initial outlay of $24k plus any additional infrastructure.

I'm half tempted to set up a few miners in my basement. It's cool down there. During the summer I could vent the excess heat to the outside; during the winter the power wouldn't cost me much of anything, because the miners' heat would reduce my heating bill. The miner profitability calculators say you net over $400 / Z9 / month, given $0.12/kWh for my local power. That pays for the miner in about 5 months. If you could set one of those up and just let it churn out money, that would be awesome.

But the thing that's always stopped me is... don't these miners have a very limited lifespan? Doesn't the problem difficulty increase so fast that a miner is basically obsolete within a few months? How much of a productive lifespan do you get before the miner chews up more power than it's worth? I got the impression the miner value tended to go to zero just about the time it paid itself off, so you're always on a hamster-wheel of trying to squeeze out profits before the miner loses its punch.

But I don't see any ongoing miner-upgrade costs in your spreadsheet. So you're planning to run the miners for months, producing a more or less constant income??

 

[GlobalWealth]

For the first two machines you have up and running, are you actually getting near consistent 50Ksol/s as advertised?
I only ask because what I've read, some of the miners are reporting much lower hashrates than that. 30-35, some lower.

Great question and one of my biggest fears as well. They are averaging around 45k right now. Of course they've only been running a few days, but that is very consistent so far.

We've not done anything with them though. Right now they are just sitting on a table with the exhaust pointed out a window. We have not optimized anything yet. Once the construction is finished on the space, I imagine we will be able to run them a bit cooler and hopefully get a better hashrate.

It really seems like Innosilicon has been trying to flood the market as quickly as possible, thus offering a 2 for 1 buy-in which case it would seem that within a few months, the ability to profit would be considerably lower. This is my biggest concern as I just don't know how long this can be sustained re: profit calculations with more hands in the fire after Sept shipments.

Personally, I think this is a marketing gimmick and a way to just sell more equipment. The Inno A9 advertises a 50k hashrate and costs about 5k (after perpetual promo). The Bitmain Z9 (not the mini) advertises a 40k hashrate and costs about 3500. So the cost/hash is quite close (Bitmain is winning by a small margin, but the Inno model uses less power).

And of course they are selling a lot of them. You can go to their twitter feed and see the numbers they are selling (I don't recall right now). And yes, more machines will mean more competition. It can also mean more users and more growth also.

No one said this is the safest investment in the world....lol

Do you think that Zencash or Zcash might 'hard fork' thus causing the A9's to become obsolete overnite, like a few others?
These ASIC's seem like the way to go, but I'm just wondering if it is too late for a solo miner to profit or just break even.

I'm friends with one of the founders of ZenCash. I know that he has no issue with ASIC. The biggest issues with ASIC mining primarily comes from the GPU mining community. More of a sour grapes issue IMO.

He told me that they could do some upgrades to Zen that would require higher memory and could possibly brick some hardware that didn't come with enough memory to deal with the upgrades. But he has no agenda to brick ASIC like the Monero guys do.

With Zcash, the founder has publicly stated he has no plans to introduce any updates to their system that would make ASIC mining impossible. It is on the Zcash blog (google it).

These are some of the reasons we are initially focusing on ZenCash and Zcash. We do plan to mine other coins as we roll out the mine though.

 

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[GlobalWealth]

That spreadsheet looks mighty attractive. $6000 / mo out within a few months!? Wow. That's with 12 Z9's, so you'd have an initial outlay of $24k plus any additional infrastructure.

The key word here is additional infrastructure.

Between construction costs and electrical infrastructure, I have invested about eur42,000.

This is the problem with small/midsize mining. The infrastructure costs require that you do a reasonable size operation to overcome those costs.

So basically, you can plug in a couple of machines in your basement and hope your wiring doesn't fry and catch your house on fire (actually a real risk), or invest several hundred thousand or more. There's no middle ground.

But the thing that's always stopped me is... don't these miners have a very limited lifespan? Doesn't the problem difficulty increase so fast that a miner is basically obsolete within a few months? How much of a productive lifespan do you get before the miner chews up more power than it's worth? I got the impression the miner value tended to go to zero just about the time it paid itself off, so you're always on a hamster-wheel of trying to squeeze out profits before the miner loses its punch.

For sure there is a limited lifespan with miners. Based on everything I've read, that's about 2 years. The difficulty does increase and new hardware comes out that is much faster making your old slugs obsolete.

We are anticipating this for sure. We know a certain amount of profits will need to be rolled forward to keep the lights on with new hardware. No doubt.

But I don't see any ongoing miner-upgrade costs in your spreadsheet. So you're planning to run the miners for months, producing a more or less constant income??

This spreadsheet is only until the end of 2019. I intentionally did it like this because that is about how long it will take us to reach capacity with our existing power limitations.

At some point, my business partner and I will need to decide if we are going to build a 2MW transformer, or just keep slowly upgrading hardware to maintain the current state.

I don't know what we are going to do at that point yet.

But I can tell you this. I am 44 years old, my business partner is 50. If we get anywhere close to our model of profitability, I may find out I am too lazy to grow the mine any larger.

Or maybe I get really greedy....lol

 

[GlobalWealth]

Also, do you have a preferred mining pool for these machines?

Sorry, I missed this question earlier.

I'm using zen.zhash.pro. This was the pool recommended to me by the ZenCash guys.

 

[nitrousflame]

So as many have already mentioned in this thread, one of the biggest sticking points to getting involved in mining is the increasing network difficulty. As more people start mining, the difficulty increases, and your profits decrease (assuming all other variables constant). As @GlobalWealth mentioned, predicting the future in this regard is just that -- a prediction. Because of this, lots of people online will tell you that you're better off just investing your mining hardware capital into the coins themselves. I've been seeking a better understanding of this so as to draw my own conclusions.

Well I think I might have found some charts to help put this into perspective. I'm going to use ZEC for example.

The first chart is just the difficulty over the past year. As expected, it has been increasing.

The next chart is the profitability per KH/s over time. Also as expected, it has been going down, except during the boom in Dec/Jan.

A big part of what I've been looking for can be found in the second chart. I was surprised to see that given the relatively recent release of ASICs for equihash this year, combined with the drop in crypto prices, the overall profitability did not tank nearly as much as I would have thought.

The missing piece to the full story here, in my opinion, is how this all ties into the $/ZEC data, which can be seen in the next chart.

Okay, the price looks a lot like the profitability, which I think leads a lot of people to the conclusion that you might as well just invest in the coin and skip the whole mining thing altogether. But after reviewing the above charts, I think that might be an oversimplification. The biggest eye opener for me is that the profitability chart is not simply an inverse of the difficulty chart.

 

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[million$$$smile]

@nitrousflame, thanks for compiling the charts. As the Innosilicon A9 was only released in June and Bitmains Antminer Z9 being released in July, the data is quite young for the new miners, with many orders still in the preorder stage. Not playing devil's advocate here, but I think Aug/Sept will show a marked surge in difficulty and hash rates drop somewhat proportionally.

Unless the crypto market gains strength to offset the additional hardware being added to mine ZEN or ZeCash, it will be interesting how long those figures stated can be sustained.

Bitmain Z9 if purchased today states shipment Sept 1-10. The Z9 mini, last of Aug. from Bitmain's website.
Shoulda-woulda-coulda

 

[mtnman]

Very interesting thread. So without foreign tax benefits, and avg price per kilowatt in the US, this would essentially be a waste of time in the contiguous?

Not being cynical here, just ran some preliminary numbers and they don't back out like yours. I should also note, that I know nothing about mining anything other than gold.

I'm surprised no one is making earth sheltered greenhouses and lining these things up with geothermal cooling. It seems like it would be hard to control temperatures as a mining operation increases exponentially, without eating into the profits. Could get interesting though if you're able to harness the earth's constant temperature for free, independent of outside climate.

 

[Niptuck MD]

With the new mine, I 'MAY' take investors, but not right now. And 'IF' I take investors, I am only taking money in larger sums. I am not interested in having a lot of small investors.

Let me know brother

 

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[garyfritz]

Very interesting thread. So without foreign tax benefits, and avg price per kilowatt in the US, this would essentially be a waste of time in the contiguous?

That's what I'd like to understand too. Honestly I've never understood the emphasis on power. It makes a difference, yes, but it's a relatively small factor. Definitely smaller than major infrastructure investments. One Z9 would make something around $400+/mo with my $0.12 power. If I had completely FREE power it would only add about 6% to the net, about $425. Which is good, but it doesn't look like a make-or-break difference. If I was looking at "mini-mine in my basement at $0.12 vs. setting up a facility next to a hydro dam for $0.04" or something like that, the setup costs would be much worse than the pricier power at home unless you go REAL big.

So basically, you can plug in a couple of machines in your basement and hope your wiring doesn't fry and catch your house on fire (actually a real risk), or invest several hundred thousand or more. There's no middle ground.

One Z9 mini consumes 300W. That's just 3 100W light bulbs. It would be about 300W/110V = 2.7 amps, so you could very comfortably run the 12 Z9's in your spreadsheet on two ordinary (US) household 110V/20A circuits, or presumably two 220V/10A Euro circuits. (And you'd have a 3600W heater in the basement.) I have some 30A runs in my basement, and I could very easily run 220V down there, so I'm not concerned about that.

And like I said, in the winter the power becomes nearly free. The Z9's become space heaters and just crank out profits as a bonus.

But I can tell you this. I am 44 years old, my business partner is 50. If we get anywhere close to our model of profitability, I may find out I am too lazy to grow the mine any larger.

Dude. I'm 61. I hit the "too lazy" point a long time ago. LOL But I would love to have a farm of these little beasties spitting out coins.

Okay, the price looks a lot like the profitability, which I think leads a lot of people to the conclusion that you might as well just invest in the coin and skip the whole mining thing altogether. But after reviewing the above charts, I think that might be an oversimplification. The biggest eye opener for me is that the profitability chart is not simply an inverse of the difficulty chart.

Great charts! Where did you find these?

Actually the profitability chart IS the inverse of the difficulty chart -- IF you also factor in the price.

Over the last year the price has not had a trend move. In late July 2017 it was $200, and a year later it's still $200. So over that July-to-July period, the price doesn't contribute any net move.

The profitability chart looks just like the price chart -- except the profitability DOES trend. A year ago it was 6, now it's 2. (So profits dropped 3-fold in a year, ouch.)

And that 3-fold change is explained by the difficulty chart. A year ago it was 4M, now it's 12M. The job got 3x harder, the price stayed the same, and the profits are 1/3x.

It looks to me like, roughly, Profitability = Fudge * Price / Difficulty, where Fudge is about 0.12 and Difficulty is 2-12, not 2M-12M.

A bigger question, I think, is the ZCash viability / profitability. In the past year while ZCash went from $200 to $200, Bitcoin went from $2800 to $8100. Bitcoin is the Big Dog and tends to drag the other cryptos along with it, but BTC went up 2.9x while ZEC went nowhere. Might be fine to mine, not so great to hold?

 

[garyfritz]

The major thing that has scared me away from mining is the way increasing network difficulty decreases profitability. I didn't have a good feel for how much of a problem that was, but @nitrousflame's charts give us some solid data to look at.

In the last year, difficulty has increased 3x. If we assume that trend continues, and the difficulty grows roughly steadily, that would say that difficulty increases -- and profits decrease -- by about 9% per month.

Here's a quick calculation assuming you buy one Z9 mini tomorrow (8/1) and net $400 / month after all power / fees / etc. The bottom line is the running profit.



So by risking $2000 plus whatever, it takes 7 months to break even, and after a year you have netted $870. Which is a 43% return and nothing to throw rocks at -- but it's not the $500 per month we were talking about. If you run the miners for another year, you net another $1000 or so, and by then the Z9 is only generating $50 per month.

If it turns out the difficulty increases 15% per month -- maybe due to the surge in difficulty that @million$$$smile predicted -- then after a year you clear a whopping $221 per Z9.

Does anybody see a flaw in this logic? If I'm right, it really seems to tilt the risk/reward calculation in a less-attractive direction. I'm not sure the modest reward is worth the risk of hard forks or other things totally out of your control.

 

[nitrousflame]

Thank you @garyfritz, that 9% depreciation figure is essentially what I've been after myself but I couldn't connect the dots. Would you mind elaborating a little more on how you got to 9% exactly? I assume it's based on the average (3x) trend?

The charts are from Bitcoin, Litecoin, Namecoin, Dogecoin, Peercoin, Ethereum stats but as far as I can tell, you can't download any of the data. After a whole bunch of googling, I found this: Data downloads - Coin Metrics where you can download a spreadsheet of the data. Ultimately, I'd like to make my own mining profitability depreciation over time chart.

 

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[garyfritz]

Thank you @garyfritz, that 9% depreciation figure is essentially what I've been after myself but I couldn't connect the dots. Would you mind elaborating a little more on how you got to 9% exactly? I assume it's based on the average (3x) trend?

Yes. Monthly increases/decreases don't add up -- they multiply. That's how you figure compound interest, for example. So e.g. 4 months of a 10%/month increase would be (10% increase)^4 or (1+0.10)^4 = 1.464 = 46.4% increase. If you have a 20% increase in 3 months, that's 1.20^(1/3) = 1.0627 = 6.27% increase per month. 1.0627^3 = 1.0627 * 1.0627 * 1.0627 = 1.20 = 20% increase. (X^Y is X to the Yth power, e.g. X^3 is X cubed. X^(1/Y) is the Yth root of X.)

So 3x increase in 12 months means 3^(1/12) = 1.096 = 9.6% increase in difficulty per month.
9.6% increase per month = 1.096^12 totals up to the 3x increase at the end of the year.

Conversely, 1/3x the profitability after 12 months means you have (1/3)^(1/12) = 0.913 = 91.3% left at the end of one month. 1 - 0.913 = 0.0875 = 8.75% loss per month.

Those two numbers (9.6% increase vs. 8.75% decrease) aren't quite the same because they're inverses of each other. For example, if you lose 20% on a stock (you have 0.80x left), it has to grow 25% to get back to the original value. 0.80 and 1.25 are inverses of each other (0.80 * 1.25 = 1.0), and so are 1.096 and 0.913.

But the exact numbers are not really important. We're looking at very approximate estimates here so calling them both 9% per month is close enough.

 

[GlobalWealth]

Very interesting thread. So without foreign tax benefits, and avg price per kilowatt in the US, this would essentially be a waste of time in the contiguous?

Not being cynical here, just ran some preliminary numbers and they don't back out like yours. I should also note, that I know nothing about mining anything other than gold.

I'm surprised no one is making earth sheltered greenhouses and lining these things up with geothermal cooling. It seems like it would be hard to control temperatures as a mining operation increases exponentially, without eating into the profits. Could get interesting though if you're able to harness the earth's constant temperature for free, independent of outside climate.

In my opinion, mining crypto in the US is not really viable.

Of course there can be exceptions. For example if you have access to very cheap, off grid power and a facility with the infrastructure.

For me the regularity issues and cost made it unattractive.

Temperature is definitely an enemy. This is another reason we chose Estonia.

But we will still need to manage the heat transfer with insulation walls.

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