How to more accurately estimate the payback period of Bitcoin mining machines
The mining of encrypted assets based on the PoW consensus mechanism is a technology that transforms electricity into "gold". And this tempting craft has also made many hopeful friends who invested in mining lose their money and leave the game tragically.
So, where is the problem? If mining is a naked lie, then why are so many people actually benefiting from it, and even continuing to invest?
From the initial barbaric growth of mining, it has gradually formed a 100 billion-level market with rich business formats and a clear division of labor. However, in the process of implementation, there are actually various "traps" that lead to lower returns than expected. Without reasonable risk aversion measures, it is indeed easy to cause losses.
Let's take Bitcoin mining as an example, and share a common marketing trap-"Mining machine return cycle". I hope readers will benefit from reading in the next ten minutes.
01 "Poisonous" marketing slogan
In the process of publicity and buying and selling of mining machines, there is a critical and tasteless parameter called the "payback period". If it is a more responsible business or channel business, it will indicate that this is a "static payback cycle".
This data is calculated with reference to the theoretical computing power and power consumption of the mining machine, the difficulty of mining at the time the data is released, block rewards, real-time currency prices, and a specific electricity price. Based on the above data, first calculate the net income of mining that day. Then divide the miner cost price by this net income to get a static payback period.
This value is generally not large. Most of the mining machines have a static return period of less than 300 days, and some of the performance far exceeds the current similar mining machines (such as the performance of the mining machine is increased by 2-4 times, or the FPGA mining machine that appears for the first time in a certain currency (Or ASIC mining machine), the static payback period can even reach within 150 days.
Such a fast return time is simply a huge profit for ordinary investors, just like a colorful poisonous apple attracting investors to devour it!
However, the actual situation will always be very different from expectations. With the large number of mining machines shipped, the income of each mining machine will be quickly diluted, because the output per unit time of most encrypted assets is fixed.
Imagine that a few months after you bought the mining machine, the computing power skyrocketed by 30% due to the large number of manufacturers shipped, and the electricity price was increased by 10% by the mine due to "various reasons", and the market turmoil caused the currency price to plummet. , The house leak happens to rain in the night, but at this time the block reward is halved, you will suddenly find that the static payback period of the mining machine at this time is infinite, because the mining income at this time is no longer worth the electricity expense. You can only look at the sky speechlessly, saying "Your uncle, I'll dig a woolen thread" in your heart.
02 Factors affecting mining revenue
The static payback period is a picture that cannot be used to satisfy hunger, but when we make investment decisions, we must also consider the issue of return on investment. How to evaluate the payback period of the mining machine to make it as close as possible What about the actual situation?
To solve this problem, we must first understand the factors that affect mining revenue, and why the static return cycle is not worthy of reference.
Take Bitcoin as an example. At present, most mining pools adopt PPS-based revenue models (such as PPS+, FPPS, etc.). According to the "calculation method of mining revenue", we can get:
The part in brackets is the theoretical income per day of computing power, which can also be obtained directly from third-party websites during calculation.
We found that the factors that actually affect Bitcoin mining revenue are as follows:
Mining machine computing power: Under normal market conditions, miners will not choose to over-clock the mining machine too early, which can be regarded as a fixed parameter;
Difficulty of mining: Judging from the development history of Bitcoin, Bitcoin mining continues to grow in terms of difficulty. The current difficulty of mining is twice that of the same period in 2019 and three times that of the same period in 2018, with dramatic changes;
- Block reward: Bitcoin's current block reward is 6.25 BTC. This value will remain for nearly 4 years (the next halving will be in May 2024), which can be regarded as a fixed parameter;
Transaction fee reward: In a longer period, the average transaction fee is stable in a fixed range. If the market does not fluctuate sharply (such as the big bull market at the end of 2017, which resulted in a large number of BTC transactions, which caused network congestion, and the transaction fee rewards were greatly increased), the change is small and can be regarded as a fixed parameter;
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The mining of encrypted assets based on the PoW consensus mechanism is a technology that transforms electricity into "gold". And this tempting craft has also made many hopeful friends who invested in mining lose their money and leave the game tragically.
So, where is the problem? If mining is a naked lie, then why are so many people actually benefiting from it, and even continuing to invest?
From the initial barbaric growth of mining, it has gradually formed a 100 billion-level market with rich business formats and a clear division of labor. However, in the process of implementation, there are actually various "traps" that lead to lower returns than expected. Without reasonable risk aversion measures, it is indeed easy to cause losses.
Let's take Bitcoin mining as an example, and share a common marketing trap-"Mining machine return cycle". I hope readers will benefit from reading in the next ten minutes.
01 "Poisonous" marketing slogan In the process of publicity and buying and selling of mining machines, there is a critical and tasteless parameter called the "payback period". If it is a more responsible business or channel business, it will indicate that this is a "static payback cycle".
This data is calculated with reference to the theoretical computing power and power consumption of the mining machine, the difficulty of mining at the time the data is released, block rewards, real-time currency prices, and a specific electricity price. Based on the above data, first calculate the net income of mining that day. Then divide the miner cost price by this net income to get a static payback period.
This value is generally not large. Most of the mining machines have a static return period of less than 300 days, and some of the performance far exceeds the current similar mining machines (such as the performance of the mining machine is increased by 2-4 times, or the FPGA mining machine that appears for the first time in a certain currency (Or ASIC mining machine), the static payback period can even reach within 150 days.
Such a fast return time is simply a huge profit for ordinary investors, just like a colorful poisonous apple attracting investors to devour it!
However, the actual situation will always be very different from expectations. With the large number of mining machines shipped, the income of each mining machine will be quickly diluted, because the output per unit time of most encrypted assets is fixed.
Imagine that a few months after you bought the mining machine, the computing power skyrocketed by 30% due to the large number of manufacturers shipped, and the electricity price was increased by 10% by the mine due to "various reasons", and the market turmoil caused the currency price to plummet. , The house leak happens to rain in the night, but at this time the block reward is halved, you will suddenly find that the static payback period of the mining machine at this time is infinite, because the mining income at this time is no longer worth the electricity expense. You can only look at the sky speechlessly, saying "Your uncle, I'll dig a woolen thread" in your heart.
02 Factors affecting mining revenue The static payback period is a picture that cannot be used to satisfy hunger, but when we make investment decisions, we must also consider the issue of return on investment. How to evaluate the payback period of the mining machine to make it as close as possible What about the actual situation?
To solve this problem, we must first understand the factors that affect mining revenue, and why the static return cycle is not worthy of reference.
Take Bitcoin as an example. At present, most mining pools adopt PPS-based revenue models (such as PPS+, FPPS, etc.). According to the "calculation method of mining revenue", we can get:
The part in brackets is the theoretical income per day of computing power, which can also be obtained directly from third-party websites during calculation.
We found that the factors that actually affect Bitcoin mining revenue are as follows:
Mining machine computing power: Under normal market conditions, miners will not choose to over-clock the mining machine too early, which can be regarded as a fixed parameter;
Difficulty of mining: Judging from the development history of Bitcoin, Bitcoin mining continues to grow in terms of difficulty. The current difficulty of mining is twice that of the same period in 2019 and three times that of the same period in 2018, with dramatic changes;
Transaction fee reward: In a longer period, the average transaction fee is stable in a fixed range. If the market does not fluctuate sharply (such as the big bull market at the end of 2017, which resulted in a large number of BTC transactions, which caused network congestion, and the transaction fee rewards were greatly increased), the change is small and can be regarded as a fixed parameter;
Figure 2 Changes in the proportion of Bitcoin transaction fee rewards in mining revenue
Currency price: If the currency price when the mining income is converted into cash is different, the mining income will also be very different. However, in actual operation, the mining income can be locked in the expected currency price in advance through financial means such as hedging. In order to minimize variables, the currency price can be regarded as a fixed parameter when calculating mining revenue.
In addition, the impact of electricity price on mining is also relatively direct. The price of electricity affects the cost of mining. The higher the price of electricity, the lower the profit from mining. Under normal circumstances, reliable mines do not frequently modify electricity prices, and electricity cost can be regarded as a fixed parameter. In summary, the violent fluctuation of mining difficulty is the main reason for the huge difference between the static mining payback period and the actual mining payback period. Therefore, if you want to predict the mining return to the current cycle more accurately, you need to take the changes in mining difficulty into account.
Therefore, in the process of calculating the return on investment, we must consider our own situation comprehensively. Here are a few other possible situations for reference:
。 On the whole, as the audience of encrypted assets increases and the mining industry is gradually compliant, mining profits will inevitably return from huge profits to small profits. The risks of mining investment will also increase. In the future, it is necessary to integrate high-quality resources and use Necessary financial means to avoid risks and lock in returns.
Source: Mr. Hu, the miner
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