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The Greenidge team told potential investors last month that the plant had mined 1,186 bitcoins at an average net cost of about $2,869 for the 12 months ending i

by caf 6y ago

The Greenidge team told potential investors last month that the plant had mined 1,186 bitcoins at an average net cost of about $2,869 for the 12 months ending in February. At this week’s Bitcoin price, that would translate into a profit margin of about $60,000 per mined coin. Surely this cannot last. This kind of outsize profit ought to be bringing online enough new mining capacity to increase the block difficulty until that margin erodes away - is it the worldwide chip shortage preventing that from happening?

askesisdev 6y ago
Yes, the chip shortage must be preventing the manufacture of enough ASICs. The same can be said for Ethereum. The shortage of GPUs is preventing the difficulty to raise fast enough. The profit margin has been like 5-10x the electricity cost for the last few months. If you bought a RTX 3080/3090 it would have paid itself and the electricity by now.
- jessaustin 6y ago
  Could mining itself be a cause of this chip shortage?
wmf 6y ago
Even in 2017 when AFAIK there wasn't a general chip shortage there was still a shortage of crypto ASICs because the lead time is months and Bitmain can't know how much demand there will be for mining. I doubt mining will ever reach an equilibrium.
vmception 6y ago
> is it the worldwide chip shortage preventing that from happening? yes, feel free to start a new fabrication line to arbitrage away the margin lol.
bb88 6y ago
That's at 19 megawatts burning natural gas. So that means they spend about 140MWh of energy for one BTC. I calculate that comes to around $20/MWh, which seems to be on the low side of energy production. Coal is $40 to $143 per MWh. Edited to add: That's roughly 60 tons of CO2 emissions per BTC mined. https://www.eia.gov/tools/faqs/faq.php?id=74&t=11 https://www.eia.gov/tools/faqs/faq.php?id=74&t=11 The other aspect here is let's say you're a speculator and you think the price of BTC can go up another 50x or roughly $1M/BTC. Then even spending any amount less than the BTC spot price now is a bargain.
- le-mark 6y ago
  This the correct calculation. The potential profit is much much higher than the current price levels. Until the mania ends, then it’s not.
bob1029 6y ago
Speculation in the value of cryptocurrency has forced the market into a regime of operation where neither the constraints of power & compute nor supply of semiconductors apply right now. The hierarchy of value constraints goes something like: Speculation > silicon constrained mining > power & capital constrained mining I believe the silicon constraints would instantly relax as soon as speculation falls into line based on how much hardware everyone has been stacking up on lately. At the end of they day, the cost of energy & your ability to keep the machines operational will be the final constraint. This is the one that the long investors should anticipate. I.e. "How do I mitigate power cost in a power-cost-constrained market". Right now at current market prices, owning an entire power plant to run your operation is folly. In a few more years when a delta of 2c/KWh is make-or-break on profitability, it makes perfect sense.

by caf 6y ago

askesisdev 6y ago

Yes, the chip shortage must be preventing the manufacture of enough ASICs. The same can be said for Ethereum. The shortage of GPUs is preventing the difficulty to raise fast enough. The profit margin has been like 5-10x the electricity cost for the last few months. If you bought a RTX 3080/3090 it would have paid itself and the electricity by now.

jessaustin 6y ago
Could mining itself be a cause of this chip shortage?

wmf 6y ago

Even in 2017 when AFAIK there wasn't a general chip shortage there was still a shortage of crypto ASICs because the lead time is months and Bitmain can't know how much demand there will be for mining. I doubt mining will ever reach an equilibrium.

vmception 6y ago

> is it the worldwide chip shortage preventing that from happening? yes, feel free to start a new fabrication line to arbitrage away the margin lol.

bb88 6y ago

That's at 19 megawatts burning natural gas. So that means they spend about 140MWh of energy for one BTC. I calculate that comes to around $20/MWh, which seems to be on the low side of energy production. Coal is $40 to $143 per MWh. Edited to add: That's roughly 60 tons of CO2 emissions per BTC mined. https://www.eia.gov/tools/faqs/faq.php?id=74&t=11 https://www.eia.gov/tools/faqs/faq.php?id=74&t=11 The other aspect here is let's say you're a speculator and you think the price of BTC can go up another 50x or roughly $1M/BTC. Then even spending any amount less than the BTC spot price now is a bargain.

le-mark 6y ago
This the correct calculation. The potential profit is much much higher than the current price levels. Until the mania ends, then it’s not.

bob1029 6y ago

Speculation in the value of cryptocurrency has forced the market into a regime of operation where neither the constraints of power & compute nor supply of semiconductors apply right now. The hierarchy of value constraints goes something like: Speculation > silicon constrained mining > power & capital constrained mining I believe the silicon constraints would instantly relax as soon as speculation falls into line based on how much hardware everyone has been stacking up on lately. At the end of they day, the cost of energy & your ability to keep the machines operational will be the final constraint. This is the one that the long investors should anticipate. I.e. "How do I mitigate power cost in a power-cost-constrained market". Right now at current market prices, owning an entire power plant to run your operation is folly. In a few more years when a delta of 2c/KWh is make-or-break on profitability, it makes perfect sense.