Bitcoin mining is very competitive and it is the process of creating new bitcoin by solving a computational puzzle. Bitcoin mining is necessary to maintain the ledger of transactions upon which bitcoin is based. It’s not ideal for the average person to mine since China’s cheap electricity has allowed it to dominate the mining market. If you want bitcoins then you are better off buying bitcoins.
What is an ASIC Bitcoin Miner?
Since it’s now impossible to profitably mine Bitcoin with your computer, you’ll need specialized hardware called ASICs.
Here’s what an ASIC miner looks like up close:
Originally, Bitcoin’s creator intended for Bitcoin to be mined on CPUs (your laptop or desktop computer). However, Bitcoin miners discovered they could get more hashing power from graphic cards. Graphic cards were then surpassed by ASICs (Application Specific Integrated Circuits).
Think of a Bitcoin ASIC as specialized Bitcoin mining computers, Bitcoin mining machines, or “bitcoin generators”.
Nowadays all serious Bitcoin mining is performed on dedicated Bitcoin mining hardware ASICs, usually in thermally-regulated data-centers with low-cost electricity.
Bitcoin Mining Hardware
There is Bitcoin mining hardware, which mines bitcoins.
Mining Bitcoin is NOT the best way to get bitcoins. Buying Bitcoin is.
The Bitcoin Price
Bitcoin mining is a booming industry, but the Bitcoin price increasing can help make up some of these losses.
The Bitcoin price is increasing at an average of 0.3403% per day over the past year. Try messing with the calculator using different prices.
Know your Competition in Bitcoin Mining
It may seem easy to just spin up a miner.
But you NEED to take a look at just how serious mining is.
The video below offers an inside look at one of China’s largest mines.
How to Find the Best Bitcoin Mining Hardware
There are some important factors to look at when determining which Bitcoin mining ASIC to buy:
Hash rate – How many hashes per second can the Bitcoin miner make? More hashes cost more, which is why efficiency is crucial.
Efficiency – You’ll want to buy the most efficient bitcoin mining hardware possible. Right now, this is the Halong Mining Dragonmint T1. Since miners use a large amount of electricity, you want to buy one that converts the most amount of electricity into bitcoins.
Price – How much does the bitcoin miner cost? Cheap mining hardware will mine less bitcoins, which is why efficiency and electricity usage are important. The fastest and more efficient mining hardware is going to cost more.
Don’t try to buy a miner based on only price or only hash rate. The best ASIC miner is the most efficient bitcoin miner. Aim for value.
Bitcoin Mining Hardware for Sale on Amazon
Other bundled equipment may be included with your purchase depending on the seller.
Bitcoin Mining Hardware Profitability
You can use a bitcoin mining profitability calculator to determine your estimated cost of return on your mining hardware.
Be sure to take electricity costs into account. Most mining hardware appears profitable until electricity costs are accounted for.
The best way to determine actual profitability is to figure out your electricity cost per hash. That is really what will make or break your operation.
Most Efficient Bitcoin Miners
Good Bitcoin mining hardware needs to have a high hash rate. But, efficiency is just as important.
An efficient Bitcoin miner means that you pay less in electricity costs per hash.
To improve your efficiency, there are also companies that will let you order hardware to their warehouse and run the miners for you.
You could also cloud mine bitcoins. But both options are a lot less fun than running your hardware!
Bitcoin Mining Hardware Companies
Bitmain – Bitmain makes the Antminer line of Bitcoin miners. Bitmain is based in China and also operates a mining pool.
BitFury – BitFury is one of the largest producers of Bitcoin mining hardware and chips. Its hardware is not available for purchase.
Bitcoin Mining Equipment
In addition to a Bitcoin mining ASIC, you’ll need some other Bitcoin mining equipment:
Power Supply – Bitcoin rigs need special power supplies to funnel and use electricity efficiently.
Cooling Fans – Bitcoin hardware can easily overheat and stop working. Buy a sufficient amount of cooling fans to keep your hardware working.
Backup generators – You may want generators as a backup in case your main source of electricity goes down.
You can find Bitcoin mining equipment for sale on Amazon.
Bitcoin Mining Without Hardware?
It’s still technically possible to mine bitcoins without dedicated mining hardware.
However, you’ll earn less than one penny per month. Mining bitcoins on your computer will do more damage to your computer and won’t earn a profit.
So, it’s not worth it unless you’re just interested to see how the mining process works. Your best bet is to buy dedicated hardware like the Antminer S9.
ASICs’ Impact on Cryptocurrency
Bitcoin is based on blockchain technology, a decentralized platform which takes power away from a central authority and gives it to the average person. Sensitive information is stored on the blockchain rather than large data centers, and is cryptographically secured. A vast amount of people, known as miners, all work together to validate the network, instead of just one person or government.
In the beginning, CPUs were used to solve cryptographic hash functions, until miners discovered that GPUs were far better equipped for mining. As block difficulty increased, miners turned primarily to GPUs.
Some GPUs were made solely for mining Bitcoin, as you can see demonstrated in the video below:
Eventually, technology was developed solely for mining, known as ASICs, or Application Specific Integrated Circuits. Their hashrates are significantly higher than anything GPUs are capable of.
With stellar performance comes a high price tag – the best ASIC chips will run you a few thousand dollars each. Upon creation, Bitcoin blocks were confirmed by the average person using their desktop – once ASICs hit the market, things changed.
ASICs rendered GPUs useless. ASIC developers, including Bitmain, granted early access to large mining cartels rather than the average person. Nowadays, a large majority of Bitcoin mining takes place in China where electricity is cheap.
Thousands of ASICs all mine simultaneously in a mining farm (large warehouse). Evidently, most people can’t afford just one or two of ASICs, not to mention thousands of them.
When ASICs hit the market, the blockchain’s validation process became more centralized as more and more hashing power was consolidated into a handful of mining companies, rather than being spread out amongst many miners. Unfortunately, Bitcoin is no longer as decentralized as it was once intended to be.
Antminer S9 Detailed Review
AntMiner S9: Game Changer for Hobbyist Miners?
Bitcoin’s Difficulty has recorded several strong and often consecutive monthly increases since its creation, and especially from late November 2015.
Difficulty has nearly tripled since then, climbing from 520,569,941GH/s to the current record high of 1,426,731,353 GH/s.
This peak was reached on May 24th 2016. Such tremendous growth has been spurred by major investment into Bitcoin mining technology and operations.
While such growth is impressive, making Bitcoin the world’s most powerful computing network by far, one unintended consequence of such rapid growth has been increased centralization.
Profits have accumulated where mining is most profitable (China), with the result that several competing operations (eg. KNC) have been forced out of the industry.
We have tried to calculate the amount of money that the Chinese have invested in mining, we estimate it to be in the hundreds of millions of dollars. Even with free electricity we cannot see how they will ever get this money back. Either they don’t know what they are doing, but that is not very likely at this scale or they have some secret advantage that we don’t know about. – Sam Cole, KNC CEO
The same Chinese competitive advantage has been doubly effective at squeezing the profit-dependent hobbyist miner from the market.
At this stage, most home or office miners aren’t hashing to earn money but rather to support the network, aid decentralization and possibly even to heat space.
With the block reward halving looming, the profitability of all but the most efficient operations will likely be challenged.
Given that profits derived from the current generation of mining hardware are dwindling and will likely reach negative returns post-halving:
Can the new S9 change the game for smaller and hobby miners and restore their lost profitability?
Note: Before you buy an Antminer S9 make sure you already have Bitcoin mining software and a Bitcoin mining pool.
The first batch of S9s will be available for order directly from Bitmain from the 12th of June.
At Amazon, the S9 is very cheap. However, the lower your electricity costs, the better your odds of the miner paying for itself within a reasonable timeframe.
Naturally, much depends on the Difficulty and Bitcoin price.
As smaller manufacturing processes become standard across the industry and as other manufacturers release competing hardware, the S9’s price can be expected to fall appreciably over the coming months.
Bi Wang launched its 14nm chips in the winter of 2016 and BitFury’s own 16nm architecture hardware, promising fantastic power efficiency at 0.06 J/GH, also came around that time.
Judging value in this space is a complicated exercise, although it would appear that nothing vastly technologically-superior to the S9 is likely to be released in the near future.
The release cycle of a new generation of mining hardware every few months is likely to decelerate from this point on, as manufacturers have transitioned to cutting-edge 16 and 14nm designs.
The S9’s 16 Nanometer Technological Advantage
The on-going miniaturization of semiconductors allows ever greater computing power and electrical efficiency, but the process cannot continue forever with the current technology.
Many have remarked that Moore’s law no longer holds true, as the rate of computing speed advancement has slowed as it reaches the physical limitations of silicon semiconductor technology.
The 16 nm fabrication process used in the manufacture of the S9 is a major improvement upon the 28 nm design common to other modern mining devices.
Although a 10nm process is on the horizon for 2017, further increases beyond that remain theoretical.
Further, the design and manufacture of any 10nm Bitcoin mining hardware is likely to take at least a year.
Bitcoins / Month (Profitability)
The S9 has more hashing power than any previous device crammed into its silicon; a massive 14 TH/s (TeraHash per second).
A total of 189 chips, spread over 3 circuit boards, are combined to achieve this phenomenal hashrate.
Excluding a 15 brief TH/s spike which occurred late 2011, a single S9 unit boasts a hashrate equivalent to the peak capacity of the entire Bitcoin network from its bootstrapping until mid-2012!
Let’s calculate the projected profits from all that hashpower via Bitcoin mining calculator :
Note that Power Cost will be specific to your location and that Difficulty changes every 2 weeks, usually to the upside…
Although keep in mind that post-halving, it’s entirely possible that a lot of marginal miners will be forced to either upgrade to better hardware or shut down.
Your Pool Fees will be determined by your mining pool; although the S9 is plenty powerful, a single unit is highly unlikely to find any blocks when solo-mining.
Finally, the Bitcoin to Dollar (USD) price is notorious for its constant state of flux.
According to the above inputs, the S9 will produce** 0.285 BTC / $159 per month** and 3.36 BTC / $1939 per year.
These puts Return on Investment (ROI) slightly above one year!
Of course, such impressive results assume all factors stay constant which is hugely improbable in the ever-changing world of Bitcoin!
The cutting-edge manufacturing process is what makes the S9 the most electrically-efficient mining device to date.
It uses a mere 0.1 Joules per Gigahash, making it roughly 2.5 times more efficient than the Antminer S7.
The total power consumption of the device works out to around 1350 watts, although this figure is subject to about 7% of variance. The S9 consumes about 300W more than the S7.
Apart from the power supply, the S9 is a self-contained unit. It requires no connection to another computer to interface with other Bitcoin nodes.
Its onboard web management portal allows for a simplified setup and maintenance process.
The S9 is air-cooled and its sturdy design is fairly easy to maintain and service.
The S9 performs reliably in any well-ventilated space, whether a single or several unit(s) kept in a spare room or hundreds to thousands of units in a large mining center.
Verdict: Does Hobby Mining with an S9 make Business Sense?
Based on the data and results calculated above, yes.
But! as major miners upgrade to S9s and other advanced hardware, the resultant Difficulty increases are likely to erode future profitability.
On the other hand, the halving could bring about a higher Bitcoin price and reduced competition, increasing profitability.
Ultimately, the S9 is a great piece of hardware although currently rather expensive.
It is likely to remain profitable for far longer than previous generations of ASIC miner, although ROI cannot be guaranteed given the inherent unpredictability of Bitcoin mining.