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Mining. From an amateur to a connoisseur
All the described below will not teach you how to minute. He will not make a miner in general, but will give a guideline how to make a more or less sane business out of mining from mining. With their models, risk management and t.D. Why? It turned out that even in 2022, many mined at random and think that everyone knows. And then the BTC falls by 50% and all knowledge disappears. Strange, but the fact.
For 3-4 approaches, let’s try to make out the experience of 2009-2012, 2012-2022 (2012-2016 & 2016-2022). regarding mining, turning the scheme higher into a set of simple formulas and understandable phrases. Go?
“… mining is not just a“ waste of electricity ”, but, coupled with the mathematical beauty of the simplicity of the interaction of the“ hashrate – complexity ”one of the grounds for the minimum fiatly pronounced price:“ And nevertheless, despite all the listed flaws, Bitcoin has Two important pluses: 1. Mining, which leads us to wealthy funds, and not the candy of AKA dollar; 2. Open code and P2P schema of work “. Cm. Previous study ..
There are many myths about mining. The main one is allegedly not about the environmental friendliness of this process. Many were dispelled by many, including me: here is the main link and now – additional . But! There are other myths.
One of them that mining must be profitable. No, this is not so: when he began to study his essence (2011) and when he began to minute for the first time (2012), in most cases they talked about whether there would be mining at least someday (!) work to zero, paying for electricity. It turned out – what, yes.
But even today, when the BTC has long been broken by the previously impossible record of $ 20,000, as “analysts” from Soha, giving above $ 69,000, and there are many risks remain. And therefore – below I would like to talk about one model, which I had to recall recently at the requests of workers.
And prepare (speak) we will in portions.
What you need to know?
The first thing in different systems is the approach to mining: somewhere there are rewards for UNCLE blocks (as on air), somewhere-no; Somewhere a consensus based on mining (POW) is combined with other consensus (dash is a characteristic example, but, say, decred); There are other differences. Therefore, I will take for the example of Bitcoin as the very first and very indicative example, and also impose its own nuances in each system, that is, to supplement the model, not a problem.
Second, it is important to understand what:
- Difficulty ( D ifficulty);
- Big Data.
Third: I’m not going to protect anything and to protect anyone, but this model has successfully worked and helped me from 2012 to 2013. both in GPUS and in 2014-2018. on ASICS.
Fourth: Salt of the model – to find the optimal number of hedging tools for each vector, namely: 1) the choice of equipment; 2) the choice of the premises; 3) the choice of staff; 4) the choice of strategy for the distribution of prayed coins; 4) the choice of the legal framework and t.D. Therefore, the final set of articles depends on you, the readers are respected: the more views and reactions – the greater the likelihood of the birth of each subsequent part.
Model. And explanations on it
ROI = Income/Expense – Start definitely worth it from this primitive.
So, we take the simplest calculation of returned investments and see: we need to find out what affects mining yield. There are several such factors:
- Hashrate (or rather the opposite indicator – complexity);
- BTC exchange rate on the market (or rather – median max/min on the SP, dexs, CEXS);
- ASIC model (or rather – its performance to the hashrate of the network, adjusted by complexity);
And for expenses? Usually:
- Electricity cost;
- The initial price of equipment;
- Other costs (for example, for protection, for repairs, t.P.).
Let’s go in steps.
You can take complexity indicators anywhere, for example:
Without excess lyrics, I will add the following:
- Since BTC is limited in issue (
- Respectively, medium and especially- long-term complexity Takes up growth, including in exposure: see. the schedule is higher;
- Finally, for the same reason, as well as because the effectiveness each new generation of ASICS (hash/kW/h) is growing, electricity remains a basic asset for the internal price of BTC;
- Unfortunately, such a factor as the average operating time of ASIC -extremely complex, empirical, indicator: for example, S9 are reliable and then so popular, and S17 flew in parties to ⅓ (I speak for their experience and 3 more miners of colleagues), which extremely reduced the profitability in the sum of the devices: add to this and add to this and add to this and add to this and add to this and add to this The constant struggle of manufacturers – starting with Bitfury to the transfer of the flag of leadership from China to the United States (albeit conditionally: for now), therefore the model is accepted with the calculation of either 1 year or at 2 years;
- From here, another parameter arises-the price of ASIC : it depends on so many factors and in a good way, at least ⅓ ⅓ ½ is better to be considered in BTC during purchase, but this is a separate and long story;
- At the same time, you work in strictly specified halving : every 210,000 blocks the award is posted (50, 25, 12.5, 6.25, etc.) and therefore it is necessary to correlate the payback time with this factor.
One thing is worth understanding at once: no one is really able to predict the movement of the crypto market, Therefore, the purpose of the model is not to completely calculate all the risks, but to show what waiting period I need one or another scenario: negative, averaged and positive. Simply put: if you want to invest all the savings in mining, you will have to do this not only professionally, but also to be able to manage borrowed means to manage. However, as elsewhere.
Even easier: this model will show when and who wants you … to deceive. Meanwhile, her Primitations are quite accurate. Suppose:
I will note two more points:
- Online calculators use either the experience of the sites (Nicehash, for example), or the average market indicator, that is, they look at the time now and say-how it may be in the future, if the conditions are repeated, remain the parameters close to the current (reached ). But this destroys the model, because both the e/e, and complexity and the course are parameters Dynamic . Here is a disclaim from Nicehash: “Please note that these values are only approximate and based on past performance – real values can be lower or higher”.
- The second approach is to take more parameters, but again – without extrapolation for periods in the future. Better, but still not that.
Take the same S19 Pro, since 110 Th is a fairly understandable number. And we can round it even to 100 Th, that is, reduce, although in practice the correct overclocking allows the parameter to increase. And generally speaking: The model is built on the constant negative of the parameters , That is, take the worst indicators of the possible (dusty room, small service life, frequent shutdowns, unstable operation of the pool and other factors – taken into account a priori). Consumption – 3.250W.
If you compare the S19 and/or its analogues in previous and subsequent generations (S7, S9, S17, S19 Pro+ Hyd, etc.) You can note the most important correlation: The hashReit is becoming more and more energy -efficient every year. A short example:
- S7 : four.73 Th/S for 1210 W/H
- S9 : 14 Th/S for 1450 W/H
- S17 : 53 Th/S for 2094
- S19 (Pro+ HYD): 198 Th/S for 5445 W/H
And this is not only that Mining is more and more environmentally friendly, but also directly about the topic of today’s study: energy efficiency allows each new generation increase profitability by a separate unit mining, which with a growing hash and increasing complexity is https://gagarin.news/ extremely important.
But this is far from all.
Dynamic parameters. What to consider?
So, first of all, the dollar exchange rate. I had to work several times with different jurisdictions and meet strange approaches to taxes and other things related to ASICS/GPUS, but in general, accounting in dollars is standard, although I repeat in the right approach, most likely to take a mining unit (BTC, ETH).
For the crisis of 2018-2022, I took into account the following: 75-100-125 (proof by link). Actually, for a positive scenario – you can take 100 ((75+100+125)/3); for averaged – 75; for negative – 60. Why? Because the cost in e/e dollars is:
Price USD = Price Rub / Exchange Rate
Next – should be taken into account Changing the price for e/e. Usually this issue is resolved at the legislative level, therefore, with the right approach, it is best to study the NPA (regulatory legal acts) and average tariffs for 3-5 years. From this it will be clear that the growth of more than 2 times for tariffs is nonsense: the permissible, taking into account the energy crisis today, but nonsense, because the incomes of the population do not grow in proportion in most cases. From here – take it Median value for 3-5 years and this will be a positive scenario, multiply it by 2.5 – this will be a negative scenario, and the arithmetic mean between them is an average scenario.
Finally, it is extremely important to take into account the cost of acquisition. There are three tips:
- Earlier than a quarter-half-year after exit, do not buy Asic/GPU in principle: marriage in S17 beat all records and investments not only brought a direct loss, but also indirect: it was necessary to wait for the ASIK return from the repair. (In general, this principle works in my life: I do not buy new models of phones, bicycles and anything else at once). Description of approaches when choosing equipment – can be found on FORKLOG;
- It is ideal to find a supplier for the unit that you are going to minute . There may be a whole range of problems: starting with reported documents, if required when importing (do not forget about notification and customs), ending with a queue of expectation, when a exchange rate fiat binding can change 3-5, or even 7-10 times. But this is exactly until you create your own accounting system with binding per mining: yes, you will still have to pay for the e/e in fiat, but it will always be % of the created units, which means that you can calculate the efficiency: equipment is created A unit of registration – the range of payment for the e/e;
- And most importantly – try to create your own system internal hedge: it can be dubbing, diversification of format 4/25 and t.P. (1/4 – ICO/IDO/ETC., 1/4- currency of mining, 1/4- cache, 1/4- updating equipment), but if only in the end there was a response to most of the questions at: 1) shutdown of the equipment (brief, medium and long-term: briefly- line accident e/p; medium – a breakdown of equipment; for a long time – the expectation of parties of the goods, a change of premises, etc.P.); 2) switching to the pools; 3) efficiency of energy consumption and t.P.
But all these issues are far from the only one: there are much deeper.
The first of them: which is better – buy coins or equipment? In most cases, the answer will be … coins. This was especially well worked until 2017, when the BTC cost “some reasonable money”, as the client once told me. But even now, profitability, costs (especially temporary) and payback indicate that Hodl is more reliable. Therefore, mining is beneficial in some cases. I will list some:
- You want to get a printing press, Because you have a business based on cash, cryptocurrencies and/or other assets: this business became especially relevant in 2022 – after the imposition of sanctions;
- The turnover is generally more important to you than profit: say, if there is a seasonal production and the room is idle with a large input capacity; or decided to diversify the business and t.P.;
- You are an amateur miner And all these troubles about 100-1000-100,000 ASIKs do not need anything, for they are alive with the formula: “How much I will get-I will get so much”. Also quite an option.
The next aspect is important – the entrance point. P (SUM) = P1 + P2 + P3 … + PX.
That is, the entry point is the sum of the entrance points in different parameters: equipment, cryptocurrency rate, electricity cost, season (relevant for the summer of Siberia, say, for “big water” in China), etc.P. And here everything is simple: the more terms – the more precisely the value of the amount. For the minimum model you can take the following table:
Finally, you can always write off the complexity of the calculations on … “The complexity of calculations” and “market unpredictability”. But is it honest? In my opinion – no:
- The more your business, the more parameters should be taken into account . Suppose: for 1 ASIC – the price of equipment; 10 – price plus hedge in currency; for 100 – a model for the currency itself (complexity/price), hedge to it, min model according to e/e and t.D.;
- Empirical data show that lay less than 1-2 years of payback for other people’s money-you can’t : Better 2-3 years. In the latter case, you will have to take into account the cycle two or more times, because you can get to the downtrend and “catch losses”, as they say not experienced traders, or even default;
- Finally, you should immediately highlight that Mining For you?
It is clear that you can always just beat off the e/e through rent, but this is not a customer -oriented approach, which, by the way, did not give scale for many farms in the Russian Federation.
I can advise the next difference difference:
- Mining as an investment;
- Mining as a main business;
- Mining as an additional business;
- Mining as a hobby;
- Mining as an effective addition (heating and so on) to something.
It is clear that n. 5 or p. 4 are less risky than p. 2 and even more so p. 1, but also less profitable, as well as have a smaller arsenal for hedge, which can be: 1) borrowed products; 2) customer funds (prepayment, payment, post -payment); 3) a superprofit and t.P.
It is important not what the model gives in the end, but how to learn to take into account the dynamic parameters and build a risk management model: say, from 2012 to 2016. It was possible to reach a semi-industrial scale from home mining, and from 2016 to 2017-to industrial (over 10 MW), and from 2018 go to the audit of farms with a total capacity of more than 75 MW. At the same time, every time I heard the same thing: “Why is it necessary? Why complicate so much?”, And the like, but in every bear market the model justified itself, and critics, as a rule, went broke or turned off the equipment, or at all ..
At the same time, it was also that I happened to engage in the purchase of a batch of equipment, which was sold at very expensive prices (conditionally: 420,000 rubles. for s9), but after a while desperate miners who decided to take nothing to take into account, sold everything for nothing (30-15 and even less than thousand. rub.). And I bought almost the same party: I put it according to the old acquaintances. And after-I sold it again for 3-4 prices. And not because my approach is perfect, but because the strategy was built on the fact that In the crisis of 2018-2022. There will be a lot of fluctuations, but cryptoactives will become a hedge for fiat baskets and therefore remained only not to panic.
However, they are free to act in their own way and consider that data from an online calculator, which indicated a payback of 3-6 months., They are a sufficient basis for the entrance: just remember that “an idiot with a plan can always defeat a genius without a plan”. I’m talking about it.
The first results
If your model shows the payback in less than 1-2 years, then something is clearly wrong with it: No, you can pay off in a month (it happened 2 times in my miner story), but it is about the model. And yes, the equipment that has been working for 2 years can already work at the limit: we’ll talk about this, but the salt in another is that the model requires to lay at least 2 periods in the cycle.
If mining is for you – investment/business, even if not the main one, then must be sure to have cache for covering expenses: Of course, who risks – can get a lot more, but such businesses burn more often. My maximum risk level is 7 out of 10, and for mining is 6/10 at all, so I always made a calculation for hedge, using the 4/25 model,.
So, factors that Exactly It is worth considering:
- Cost of equipment;
- Electricity cost;
- Salary or similar expenses (security alarm and t.P.);
- Hedging cost (additional equipment when disconnected, additional communication network, etc.P.);
- Period (period) of delivery;
- The term (period) of customs: this is relevant with repeated sales is also the transportation of large parties;
- Term (period) of possible repair;
- Risks of short -term shutdown of equipment;
- Risks of long -term shutdown of equipment;
- Risks of currency oscillations;
- The risks of the main currency network that mines.
And yes, this, of course, is only a number of primitives from a complete set. And no, everything described is not suitable for experts/professionals, but they need to those who want to go from a “semi-propront” from an amateur, because in 99% of cases, the self-taught miners tolerate the habits that formed for the first period, when “everything gets away with”, on the second and often – risking the money of third parties, and this leads to very deplorable consequences.
Here is an example of the BTC price from $ 7.5k to $ 20K (7.5-10-15-20) and the cost of entering equipment from $ 7,142.86 to $ 21,428.57 at the median value of the USD 1/70 rate and the calculation price of E/E from 1 rub. (optimistic scenario for amateur mining in Siberia) up to 10 rubles. (Pessimistic scenario for professional mining in an extreme scenario of the energy crisis) and profitability – Max BTC 0.00044 and Min BTC 0.00022:
At the same time, anyone can object that such models “have little to do with reality”, but in practice many people refused crazy investments in mining and limited themselves to quite reasonable, which saved them, in particular, from the situation of the present, when the complexity is growing and Price – falls.
Hedge at the internal value in this case becomes an important condition. Here is an example from Hotmine:
- For January 2021:
- 1 Bitcoin = 1 Bitcoin;
- 1 Bitcoin = 310 000 kW*hour (if mined on S9; 100 watts per 1 bed/s);
- 1 Bitcoin = 104,000 kW*hour (if mined on S19; 25 watts per 1 bed/s);
- The power of the Bitcoin network is 140,000 000 Thheh/S;
- Bitcoin emission 6*24*30*6.25 = 27 000 Bitcoin per month;
- January 2014:
- 1 Bitcoin = 1 Bitcoin;
- 1 Bitcoin = 24 kW*hour (if mined on equipment of 1000 watts per 1thash/s);
- The capacity of the entire Bitcoin network is 700 Thhash/S;
- Bitcoin emission 6*24*30*25 = 108 000 Bitcoin per month.
From here it arises primitive next: energy consumption – created again BTC. “Pay attention to how easy it is to transport electric energy through Blockchain: for this you do not need to build electrical networks between continents. It is enough to introduce the concept of digital energy and recall the law of conservation of energy “. But we’ll talk about this, but for now – I’ll refer to one of my previous works: https: // hub.Forklog.COM/Web-3-0-Kilovatt-Chas-Token-100-Chast-I-Matritsa-Energii/.
You can learn to try to take into account the parameters of the equipment (they are easy to pick up several dozen: such a project was in my practice – it was based in the Akademgorodok g. Novosibirsk); You can learn passive and optimize active cooling and t.D. Perfection has no limit, but, as they say, this is a completely different story, so –
P.S. Share your opinion in the comments, spread the article and then – see you in the next part ..