How are Bitcoin miners, specifically ASICs, priced?
It’s a complex subject, but I’m here to break it down for you as simply as possible.
Understanding ASICs
Application-Specific Integrated Circuits (ASICs) are specialized hardware devices optimized for a specific computing task.
When it comes to Bitcoin, these circuits are optimized to execute the cryptographic hashing algorithm used in Bitcoin’s proof-of-work consensus mechanism.
This specialization is why they are preferred over general-purpose hardware like GPUs for Bitcoin mining.
Hashrate and Energy Efficiency
ASICs come in various models, but their differences boil down to two main factors: hashrate and energy efficiency.
Hashrate is the measuring unit that captures the processing power of the Bitcoin network.
A higher hashrate translates to more calculations a miner can make per second, thus increasing the chance of finding a new block.
Energy efficiency, on the other hand, is a measure of how much electrical power the miner consumes for each unit of work done. A more energy-efficient machine ensures that your electricity bills don’t eat up all your mining profits.
Think of hashrate as the horsepower of a car, and energy efficiency as the miles per gallon.
Hashrate determines how much BTC a machine can produce in a given time.
Energy Efficiency determines the cost to earn that BTC.
Revenue is also influenced by market factors.
Apart from the device’s intrinsic characteristics, external factors such as the Bitcoin block reward, transaction fees, and Bitcoin’s market price play a pivotal role in determining mining profitability.
Imagine if the fastest cars also had the best MPG. Generally, newer ASICs have better energy efficiency and higher hashrate.
For example:
2021’s S19j Pro
- Hashrate: 100 terahash/second
- Power Consumption: 3050 watts
- Efficiency = 30.5 Watts/terahash
- Yearly profit with 7 cent electricity : ~$500USD(Aug 2023)
2022’s S19 XP
- Hashrate: 141 terahash/second
- Power consumption : 3010 watts
- Efficiency = 21.5 Watts/terahash
- Yearly profit with 7 cent electricity : ~$1400 USD(Aug 2023)
Bitcoin Miners as Dividend-Paying Assets
Bitcoin mining devices can be perceived as “cash flow assets” and can be compared to dividend-paying assets like Apple stock or real estate investments.
The initial capital outlay for the machine is analogous to the principal investment in a dividend stock or a real estate property. The periodic Bitcoin rewards from mining are similar to dividends or rental income, respectively.
If one asset pays a higher dividend, investors logically pay more for it.
This explains why ASICs’ prices correlate with Bitcoin’s spot price.
When the dividend value rises, people spend more on the machine.
Like you see above, the first machine pays roughly ~$500/year and the second one ~$1400/year.
A 100Th S19j Pro was around $13,000 in November 2021, but today it’s approximately $1,600.
Machine Pricing and Efficiency
The dollars per terahash ($/T) metric acts as a simplified way to evaluate a machine’s value proposition and can be understood through dollars per terahash ($/T), showing how much people pay for one unit of “hashpower.”.
But remember, a lower $/T doesn’t always mean a better deal. Other factors like durability, repair service availability, and brand reputation can influence the decision.
Machine pricing
If the $/T value is higher, the energy efficiency is likely higher too.
S19j Pro (100Th): $16/Th
S19 XP (141Th): $34.75/Th
The XP is about 180% more profitable and 117% more expensive than the jPro.
Choosing the Right Machine
While many are tempted to buy the cheapest machines, remember that there’s a reason why they are cheap.
It’s not always about the numbers. Other factors to consider include:
- Durability: How long the machine is expected to last.
- Noise Level: Some ASICs can be exceptionally loud, which might not be suitable for home operations.
- Heat Production: Efficient heat dissipation can extend the machine’s life and improve its performance.
- Vendor Reputation: Some vendors are notorious for late deliveries or poor customer service.
Spending a bit more on hardware can yield greater profits over the long term.
Conclusion
While metrics such as hashrate, energy efficiency, and $/T provide a quantitative way to evaluate mining machines, the qualitative factors like brand reputation, machine durability, and post-sales support play an equally crucial role.
The key is to strike a balance between performance metrics and these qualitative factors for a well-rounded decision.
I hope this guide has shed light on this fascinating subject.
Feel free to reach out with any questions or comments.
