ASIC Mining Profits Will Be Gone By Summer
March 24, 2013 4 Comments
In January of this year the total hashrate of the Bitcoin network was less than 25 THash/s. In less than 3 months that figure has ballooned to more than 55 THash/s. The sharp increase is the result of newly available ASIC Bitcoin mining hardware that is poised to revolutionize the way Bitcoins are mined.
For those considering purchasing new ASIC mining hardware, there is no question that the equipment is currently very profitable. With the price of Bitcoin hovering around $70, a Butterfly Labs 60 GHash/s mining rig would pay itself off in as little as 3 days, and generate revenue in excess of $400/day. Of course things can change very quickly in the Bitcoin economy, and free lunches like this do not last for long. Indeed, the question on most peoples minds at the moment is whether ASIC mining will remain profitable, and if so for how long.
Currently there are three companies that are developing ASIC mining equipment. Using some reasonable estimates for delivery times and order sizes we can get a sense of how quickly the network hashrate will grow over the next few months, as well as how mining profitability will become almost non-existent by the beginning of summer.
Avalon was the first company to begin shipping ASIC mining hardware. They released 2 units in January of 2013 and are currently delivering the remainder of their batch 1 orders. They have also completely sold out a second batch of units with delivery expected sometime in the next month. They will begin accepting orders for a third batch any day now, although it is unclear how large that batch will be. A reasonable assumption is that it will be twice the size of the second batch. This third batch will likely begin shipping by the end of April. All in, Avalon’s contribution to the network over the next few months is likely to look something like this.
- Batch #1, 19.5 THash/s mining by the end of March
- Batch #2, 39 THash/s mining by the end of April
- Batch #3, 78 THash/s mining by the end of May
Butterfly Labs has been accepting pre-orders for their mining rigs for over 6 months now, and still have not delivered a single unit. The website says that shipping is set to begin in the last half of March 2013, and that delivery may take 2 months or more. The current length of the queue is estimated to be about 30,000 orders long. If each order was for one 60 GHash/s unit, the queue would represent 1,800 THash/s. Based on the sheer logistics of the situation the best case scenario for Butterfly Labs is for them to fill half of the 30,000 orders by the end of the year. To do that they would need to ship about 100 THash/s per month, making their best case contribution to the Bitcoin network approximately 220 THash/s by the end of May.
- 220 THash/s mining by the end of May
ASICMiner is not selling their mining hardware, but instead are opting to hold onto these valuable assets in order to mine their own coins, a strategy that has paid off when you consider the enormous increase in price that Bitcoin has seen since January. The majority of the network hashrate increase over the last 3 months can be attributed to ASICMiner bringing more of their own product online. The rate that they have been doing this is approximately 800 GHash/s per day. If this continues their contribution to the network would total approximately 55 THash/s by the end of May.
- 800 GHash/s per day, 55 THash/s by the end of May
With all of this equipment coming online, the network hashrate will quickly grow from the current 55 THash/s to just under 500 THash/s in only 3 short months.
This would cause the network difficulty to adjust to over 65,000,000 in the same time frame. At this difficulty, the economics of ASIC mining become much less attractive than they are today. If today’s exchange rate holds, the best a 60 GHash/s miner can hope for come June is a daily revenue of $32, a far cry from the $400 that you could earn today.
Of course a lot of what happens over the next few months depends heavily on the rate at which Avalon, Butterfly Labs, and ASICMiner can manufacture and distribute their product. None the less, barring any significant delays in manufacturing new ASIC units, or significant exchange rate increases, it would appear that the next Bitcoin gold rush will come to an end as soon as it began, with a few early adopters making huge profits and the majority being left to fight over the scraps. Such is the insanity of this fast paced internet phenomenon.
- A Guide to Bitcoin Mining: Why Someone Bought a $1,500 Bitcoin Miner on eBay for $20,600 (motherboard.vice.com)
- The Insane Bitcoin ASIC Race – And The Winner is… (zorinaq.com)
- Bitcoin grows up, gets its own hardware (freedom-to-tinker.com)