Is Bitcoin mining profitable ?

I thought I would go for a change and talk about some Bitcoin mining. There have been some big hype around it. Some large companies are making top dollar with it. One of them, CoinTerra, has gained a very serious reputation with a team of highly skilled people.

Their latest technology, the TerraMiner IV, offers an astonishing 2 TH/s for about 6k USD. If you go at the Bitcoin wisdom calculator and select it using default settings, it shows potential profit of about 10,000 USD in about 8 months, Awesome !

The catch ?

Why are they selling money-making machines ? Why don’t they run them themselves ? Well, the bulk of the profit is made in the first few weeks. Due to the increasing difficulty in mining, hardware quickly becomes less effective so they trick into pre-order 2-3 months before you will have your machine. That is pretty insane…

If you go at the the calculator and input real, plausible shipping dates, you will see you cannot make money.

The options

I did every calculations with 25% difficulty increase and 0.05 USD/kWh. This is optimistic, it is usually considered that the increase is more around 30-35 these days. This also excludes any taxes, shipping fees, customs, etc.

I selected those 4 because it covers a large variety of hardware people often point as the most cost-effective or appealing. I encourage you to try your own.

Profit is calculated until 2015-01-01 or end of lease.

Company	Gear	GHs	Price	Start	Profit
CoinTerra	TerraMiner IV	2,000	6,000 $	2014-05-15	-2,500 $
ButterflyLabs	Monarch	600	2,200 $	2014-03-01	-1,300 $
Black Arrow	Rent-Some-Minions 4 months	1000	2,600 $	2014-05-01	-800 $
Black Arrow	Rent-Some-Minions 6 months	100,000	260,000 $	2014-05-01	-70,000 $

For the infamous Monarch, the date is highly speculative due to their poor reputation. For it to be profitable, it would need to ship, at my door, within 12 days from today. When is the last time you received a ~40 lbs package by mail in less than 2 weeks ? Always excluding all taxes and shipping fees.

Need I say more ?

A huge hardware seller, TerraHash, has closed, upsetting a lot of customers and ButterflyLabs keeps getting bad press, I do not think they value their customers much.

The increase in difficulty

Not only is the difficulty increasing too quickly for casual miners to follow, the increase is itself increasing ! You have to factor the reduction of days between each change.

I compiled the data from bitcoinwisdom as % difficulty increase per day . Moore’s law dictates a linear increase in computing technology of 100% per 2 years or 0.14% per day, but we have here an increase of 2-6% per day and it seems like it is increasing. It is most probably due to the increase in miners. The computing power for mining has not followed Moore’s law so far, but this because new technologies were used, not discovered. 

https://docs.google.com/a/lavoie.sl/spreadsheet/ccc?key=0AqHgk2i0GEDFdHVic0dLYl8tT1ZDaGxuRzdmd2Q4VlE#gid=1

You can’t win, the amount of power required to follow is way more than the normal increase in technology.

Less expensive options, for fun

So you just want to have some fun ?

One of the most suggested hardware for beginners is the ASICMiner Block Erupter USB 300MH/s Sapphire. It is advertised you can get one for as low as 35 USD. Pretty cheap ? Well even at that price tag, you will never reclaim more than 2-3 dollars. More expensive options are similar.

Conclusion

If you are able to build awesome hardware or buy a lot and use it quickly, you can make 2-3 times your investment, but in probably 6 months, it will be worthless. It has been profitable in the past, but now it is just a crazy technological race. Maybe it will calm down and we will be able to mine a bit some time. In the mean time, grab yourself a starter kit and join the party !

More reading: http://www.reddit.com/r/BitcoinMining/