This article is nothing more than a contribution to the Bitcoin mining community.
I am not a mathematician.
I am not a statistician or a certified economist.
I’m just a bitcoin miner, builder, and free thinker who loves spreadsheets and algebra, and for the past four years I’ve been trying to find a way to properly value bitcoin ASICs anytime, anywhere. under general market conditions.
What follows is the advanced calculation I used to determine whether or not I should pull the trigger and buy an ASIC – or rather, it’s a calculation that helps me get overzealous and pay too much for it. equipment. I was inspired to share this by the phenomenal folks at DBF.
It kept me from making mistakes, hope you find it helpful.
Denver derivative explained
Some terms to define:
- Watts / Th = the total wattage of an ASIC divided by its nominal value in Th / s.
- $ / Th = The total cost of an ASIC divided by its face value Th / s.
- WattDollar = The product of the watts / Th of an ASIC multiplied by $ / Th.
- Hash price = USD value of 1 Th / s over 24 hours.
- Extended hash price = USD value of 1 Th / s over 50,000 blocks.
Denver Derivative (DD) = WattDollar / Elongated Hash Price =
- > 50 = If your wattage is less than ~ $ 0.035 OR you will be using ASIC for more than five years.
Below is a screenshot of some current bitcoin ASIC models, their respective specifications and their DD Rating:
Keep in mind that these calculations were based on the current hash price of $ 0.275 and, therefore, a extended hash price of $ 95.48 As of this writing by the Slush Pool / Braiins dashboard:
The problem today is that the price of ASICs is based more on the market price of bitcoin than on the profitability of ASICs.
While it might sound the same and, yes, the price of bitcoin certainly does play a role in whether an ASIC is profitable or not – but it’s not the alone variable – full network competition must also be taken into account. This is why the hash price is important – the hash price takes into consideration the value of a single Th / s over the course of 24 hours – this represents the total competition / difficulty on the network. Therefore, ASICs should be priced according to the hash rate, but instead, their price is apparently only based on the market price of bitcoin and the sentiment around that market price.
A quick example of how this creates an imbalance in hardware markets:
Let’s say that today an Antminer S19 costs $ 10,000 even and the market price of bitcoin is $ 50,000 even. In today’s market, what we are seeing is that if the market price of bitcoin rises to $ 55,000 (a 10% increase), we will often see a comparable relative increase in ASIC prices, and that $ 10,000 ASIC is now $ 11,000 delivered. But this ASIC may not be 10% more profitable denominated in USD. Here’s why: If, as the price of bitcoin rose from $ 50,000 to $ 55,000, the total competition on the network could have increased from 160 Eh / s to 168 Eh / s (5% increase). So yes, the bitcoin that the same ASIC earns is now worth 10% more, yet, he also earns 5% less bitcoin than before, so really that ASIC is maybe only 5% more cost effective, but now it’s 10% more expensive. I wanted to quantify this alpha to try to avoid paying too much for hardware, while still being able to take advantage of price drops in hardware cost versus profitability (a rare event).
This is why the incorporation of thextended hash price The variable was important: it allowed me to associate the price and efficiency of ASICs with the reality of the profitability of bitcoin mining “in general” (or the value of a Th / s, in general) at some point.
This reality is indicative of an immature market ripe for disruption, innovation and commodification. I hope to see maturation in the next nine years, but in the short term I will rely on this derivative to see if my ASIC price is on par with historical prices or not.
The reason I personally find this calculation useful is that it takes into consideration the three most important variables when purchasing an ASIC:
- Thermodynamic / computational efficiency of ASIC – with Th
- The capital efficiency / cost of asic – $ / Th
- The overall health of the hash energy market – hash price stretched
This way I could tell if I was getting a good price over time.
This way I could help those who want to mine at home using Upstream Data’s BlackBox.
Hope you find it useful and welcome any criticism.
May you find great success in all of your hashing endeavors.
– Adam ortolf
This is a guest article by Adam Ortolf. The opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.