The brutality of numbers: You need to make $5,000 a year to make it crypto-mining worthwhile.
We have been investigating the impact on the AIB market by cryptocurrency monitoring for a while and we’ve written about it often. The following is an excerpt from an updated and curated monograph collection of our writings to give a perspective to the phenomenon of the use of AIBs for mining.
We estimate that Crypto-currency mining accounts for $1.1 billion dollars in AIB revenue since Q1’15, and accounts for sales of 4.5 million AIBs.
| A cryptographic hash function is a hash function which takes an input (or “message”) and returns a fixed-size alphanumeric string. The string is called the “hash value”, “message digest”, “digital fingerprint”, “digest” or “checksum”). It is extremely easy to calculate a hash for any given data. |
However, it has been difficult to ascertain just how many AIBs were going to crypto currency mining and therefore not to gaming and other applications. We believe we have a good model using the hash rates of graphic boards expressed as MegaHashs/sec, expressed as MH/s.
Raw power
The AIB that does the most MH/s is the Nvidia GTX 1080Ti, as shown in the following.
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| Table 1: M hash per second scores for various AIBs |
Which AIB to buy is a function of price, power consumption, memory, and hashing power. CyptoMining24.net has been reporting the hash/sec scores of various popular consumer AIBs. Using that data and the current pricing, we have calculated the Pmark using Mhash/sec as the performance component and show it for popular AIBs in the following chart.
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| Figure 2: Pmark for various AIBs |
The AIB pricing used current prices found at Amazon.
As an exercise we added up the costs of building an eight-board system using Radeon RX 460, and the power costs for a month’s operation in various sites for a month.
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| Figure 3: Cost of a kilowatt hour in various places |
An eight RX460 AIB system, with an 800w power supply would cost about $2,900.
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| Table 1: M hash per second scores for various AIBs |
And would like something like the rig in the following photo.
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| Figure 4: Example of a mining rig with PCIe adapters |
Therefore, to make a profit on Ethereum mining, the ROI and operating costs, depending on where you lived, is shown in the following chart.
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| Figure 5: ROI needed to break even in one year |
There is an on-line, real-time profit calculator here, as well as a tutorial on how setup a mining rig. The calculator does not factor in capital equipment costs.
You can track Ethereum values here.
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| Figure 6: Snapshot of Ethereum prices |
The billion dollars of AIBs sold over the past three years for mining is but a portion of the investment and costs. Add to that the cost of the rigs to accommodate the AIBs, and the facilities to house them, and the whole sunk physical investment costs looks like it could be over two billion dollars.
There are some interesting profitability charts and advice at Neighborhood Pool Watch.
Consequences of crypto mining
Money for nothing never has, and never will exist. In addition to the cost of the AIBs, and the systems to accommodate them, add to the unrealistic demand that the crypto-mining gold rush places on AIB and GPU manufacturing (and the consequences of running those fabrication and assembly foundries), the demand for electrical power, and the impact on the environment.
According to Digiconomist, the Bitcoin network alone is now burning a horrific 240 kilowatt-hours of electricity per transaction, using as much energy as the entire nation of Serbia, and heralding an environmental disaster.
How many AIBs used in mining?
The overall attach rate of midrange and high-end AIBs has been going up as gamers refresh their AIBs more often than they refresh their PCs to be able to play performance-demanding games, and the influence of eSports. However, in addition to that rise in attach rate there has been a demand for AIBs from Crypto-currency miners. We think that demand will taper off during 2018, subject to the ROI based on the value of Ethereum and Bitcoins (see charts above).
The following chart shows what we think has happened to AIB shipments.
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| Figure 1: Crypto-mining’s share of AIB sales |
We arrived at this conclusion through a series of steps shown in the following tables (taken from raw data in Market Watch).
Methodology
The first step was to calculate the attach rate by segment. (AIBs of segment per DT PCs), which since Q4’14 has been an average of 42.5% and rising sharply in the last two quarters. Next, we calculated a running average, which we established as the base line. We then subtracted it from the raw quarter attach rate, by segment, which reveals the deviation from normal for AIB attach rate. We then took that percentage and applied it to unit shipments to arrive at our estimate for the number of AIBs that were bought for crypto mining. The total for 2015 to 2017 is 4.53 million AIBs (midrange and high-end). We then multiply each segment by the ASP for those AIBs, and arrived at the market value, which is $1.1 billion for the period of 2015 to 2017.
Antidotal epilog
The son of a client/friend of ours, living in San Mateo, CA, has a rig he built using seven Nvidia GTX 1070s. It cost him about $5,000 to put together. It costs $170 a month to run. Using it he has made about $1,000 a month. If he can continue to earn that much the system will break even in six months and then earn $775 in month seven and increment up whatever he can earn in six months and then earn $775 in month seven and increment up whatever he can earn thereafter. This model, which uses expensive AIBs, and not most powerful for hashing, being used in an expensive electricity area, proves the point that one could make money. And if it scales (i.e., seven AIBs = $1,000, therefore one AIB = $143) a gamer could pay for his or her AIB in a few months and make money thereafter — what’s not to like about that? And, it rationalizes the inflated price of today’s AIBs.