Comment by 1053r | Hacker News Reader

Comment by 1053r | Hacker News Reader

So since this video was made, the price has gone down by approx 35% and the difficulty has gone up by approximately 17%, for a total adjustment in revenue of about 50%, unless they added more machines, or upgraded their current ones. That's pretty brutal.

Ultimately (and not long from now if these rates of adjustment continue), mining will be a commodity business with a very small profit margin. When you consider that there are uses for low grade heat (like home and office heating), once the ASICs catch up with Moore's law, it seems likely that the profitability will be slightly negative for someone trying to run this kind of business. (As another reason, there will probably be people who have access to basically free electricity that would have been wasted, and just need to amortize the cost of the ASICS).

However, because mining is a zero sum game, we can conclude that the profitability of mining was very high at the time of the making of this video, or else the margins wouldn't have been able to drop as much as they did. This says that a rational large investor would choose to put their money into mining rather than directly buying bitcoins, if they were interested in getting into this space. That's probably why the price has been falling since the peak early last year.

> there will probably be people who have access to basically free electricity that would have been wasted, and just need to amortize the cost of the ASICS

That's a really interesting point. I wonder if we'll see utility companies get into bitcoin mining as a way of profiting from their excess capacity during non-peak times.

I don't quite see ConEd getting into Bitcoin mining :) However, it's possible for an entrepreneur to get discount off electricity during non-peak times.

High frequency traders have colocated their machines directly inside stock exchanges to take advantage of the low time latency. I wonder if there's any potential to be had in power stations offering colocation services for customers with very specific uses for either "low latency" excess power or much cheaper power (since it hasn't had to be transported anywhere or had any losses).

I've heard that spot electric prices can occasionally go negative if demand dips faster than power plants can ramp down. I don't know if that's worth exploiting with Bitcoin, since it's difficult enough for ASICs to pay for themselves even when running continuously.

For calculating if ASICs are worth it, you should probably consider that energy to be free, as you can invest a relativly trivial amount of money into electicity wasting devices.

Microsoft ran heaters at Quincy to avoid a contractual obligation. They could run ASICs.

http://www.nytimes.com/2012/09/24/technology/data-centers-in...

Then came a showdown late last year between the utility and Microsoft, whose hardball tactics shocked some local officials.

In an attempt to erase a $210,000 penalty the utility said the company owed for overestimating its power use, Microsoft proceeded to simply waste millions of watts of electricity, records show.

Use quotes, please. Those aren't your own words.

And, the utility put Microsoft in the position of wasting $70,000 of power or paying a $210,000 fine.

Exactly what did they EXPECT was going to happen?

As much as I like to slag Microsoft, any rational human being is going to react that way when presented with those incentives.

That article is pretty damning of the power company, not Microsoft. They issued a fine for not using as much electricity as they estimated, what's the logic there? And then the "utility commissioner" (unclear if he works for the utility itself or not) has the gall to blast them for "not being green"? Plus they are trying to paint the narrative as a "megacorp vs aw-shucks local farmers" that just rings hollow in light of the company's exorbitant fine.

The reason why this is done is because major industrial customers (e.g. data centers) often require upgrades to utility-owned infrastructure when they set up shop. Utilities will typically require what they call a 3rd party capital contribution (i.e. upfront cash payment) for some portion of the total cost, with the remainder to be recovered via their margin on the additional electricity consumed over the lifetime of the facility. You would also have the option of paying the full cost and making no commitment as to whether you'd actually use it.

If a customer moves in and says "oh yeah, I'm gonna need an average of 100 MW 24/7 for the next 20 years" and then turns out to only use half that, the utility is now short a bunch of a money that it spent upgrading its distribution infrastructure for that customer's supposed needs.

Yeah, that's fine if you had a contract committing to a certain minimum, but any ideas how they are justifying asking for 3x the difference though?

I don't think mining was ever that profitable once it reached industrial scale (it was always a bet on the future, in which case having actual bitcoins is significantly more fungible).

There is a reason cex.io / ghash.io (the biggest mining pool) contracted out their hash power to other suckers (err I mean buyers) instead of mining themselves.

I used to know a fairly small miner, ~$2,000 a month turnover, who managed to rig his ASIC up to his heat pump in such a way that is heated his house and cooled the card. He lived in a fairly big house and it was always toasty even in the middle of winter.

It might still make sense for some people even when the margins are small

Oh I'm sure it might make sense even for a big operation, if there are special conditions or clever tricks that allow for cheap electricity and/or tax breaks. All I was saying is that in and of-itself mining was not a profitable strategy once it became large-scale.

So he was successfully mining several bitcoins a month with 1 ASIC? What year was this?

It was last year, to be honest I'm not too sure of his setup. All I know is he set up the exhaust to heat his house

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