Somebody asked a question about HashFlare, which is a website that promises to mine Bitcoin for you, for a small fee. I took the time and worked out some of the economics of Bitcoin mining. I think it will be very instructive:
Q. How much money do I need to invest if I want to make 3 bitcoins a day by investing in a cloud mining platform like Hash Flare?
A. Uh. You can’t afford it.
In January 2016, 1TH/s would get you 0.004 BTC per day.
If you wanted 3.0 BTC / day you would need 750 TH/s of compute power.
The Antminer S9 costs $2000 each and delivers 14 TH/s of performance. Therefore you would need a rack of 54 of them. Each Antminer S9 draws 1600W of power. So at 10cents per KWh, each Antminer S9 is going to cost $3.84 per day x 54 = $207.36 of electricity per day.
So if I’m HashFlare and I’m leasing the ability to mine 3.0 BTC/day my capital cost is 54 x 2000 = 108,000. But let’s say I get a discount and can get a bulk order of Antminers S9s at 10% off. (Fat chance, but let’s assume it.)
97,200 financed at 5% interest over 3 years works out to about 2915.00 per month. Plus electricity cost of about 6225.00 per month. That’s a 3 year cost of approximately 329,040. Let’s round that out to be $330,000 bucks.
So if I’m HashFlare, I’m going to mark that up a whole lot to cover my costs. Let’s see how much.
So let’s look at the SHA-256 Plan.
That plan says $1.50 per month gets you 10 GH/s. So $150 per month will get you 1 TH/s and therefore $2100 per month will get you one month of 1 Antminer S9 performance, and you don’t pay for electricity. Still, you need 54 of those to mine 3 BTC per day. Therefore you’d have to pay $113,400 per month to Hash Flare. That sounds about right.
Now 3 BTC/day at a steady $4000 per Bitcoin gets you $12,000 per day. In a month that’s $360,000. That would give you a net profit of almost a quarter million dollars per month. Here’s the problem. HashFlare is not going to give you that price unless you lock it in for a year. Which means you have to promise them a 1.36 million dollar contract per year.
See the problem here? If you can afford to spend $1.36 million per year to pay Hash Flare, why wouldn’t you just buy the hardware and electricity yourself for $330,000 over three years?
Well of course you wouldn’t. You’d be in the same business as HashFlare making 4.08 million over 3 years on costs of $330,000. And guess what? That’s a bigger profit than you’d make mining BTC. HashFlare would make 12x investment on you no matter what the price of BTC is. You would make 3x profit depending on the price of BTC. Meaning HashFlare only needs your business for 1 month to cover their investment. Oh but wait, you’ve signed up for a year. Quit early and I bet you pay a fee.
Now the big curve ball is that now you see it’s a much better business model to be in the HashFlare business than to mine BTC yourself. But then you’d have to compete with HashFlare. And the more people who get into the HashFlare business (and the pure mining business) the more the demand for Antiminer S9s goes, and the the more net hashing power there is in the world to mine BTC. So the cost of Antminer S9s goes up, and the net ability for 14 TH/s to actually mine 0.004BTC goes down.
Recent Comments