Will expensive mining equipement have any worth in the future?

Question

With more and more people picking up advanced ASIC miners, the difficulty is going up while the remaining coins are going down. If miners continue joining at this or a faster rate, the limit might be reached much sooner than originally expected.

I worry about purchasing any mining equipment because I don't want to have a $2,000 investment that can not recoup its cost within say, 10 years - or at all.

So is it even worth buying newer mining equipment, or is it better to stick with whatever is around?

UPDATE: To clarify, I'm not asking about how an ASIC mining rig can be reused. I am well aware that it has a single purpose and cannot be reused. I'm asking if it is even worth spending a lot of money on such a thing.

Answer 1

TL;DR. Bitcoin profitability is about choosing between buying BTC outright (Coinbase, or Bitstamp) or buying hardware ASIC miners and paying the ongoing electrical fees.

Edit: To keep mining expenses low, you will need the cheapest form of electricity. This usually means coal in most regions. "Clean coal" doesn't exist.

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10 years from now is a long time, and you should expect additional transaction fees by then, plus many more (different) incentives to mine.

As of late summer 2013 the ASIC market is saturated in my opinion, and the difficulty spikes will continue to reach into 2014. That means the value of BTC must appreciate for most people on the network to get an ROI.

Either one or more of these things will happen:

1. People will mine coins, pay a lot for electricity, for years to come just to get a ROI

2. Sell the machine at a loss, invest in Bitcoin

3. People who buy Bitcoin will cause the price to increase, thus making mining profitable

4. Mining companies will go out of business (or sell a different product) and whatever ASICs are made now will be the only ones in the game for a while.

Example

Assume that the network hashrate (competition) is so high that in order to make a profit, miner #1 has to mine for 2 years and also wait for the BTC to be valued over 900 USD. (Note: BTC hit $1000 per coin on 11-27-13) After a lot of time and expense (not to mention heat, noise, and an angry wife) he cuts even.

Now assume that in the same time period, person 2 buys BTC at the current Mt Gox rate: $140. (Two thousand dollars worth of coins). The price of BTC only has to increase for him to make a profit.

So the question is

Why are people buying mining machines when buying Bitcoin outright is lower risk and a better reward?

The answer is so they can ride the next mining wave... more on this in a second

The Good News

If you already purchased the miner, you should be fine if the market figures out that buying Bitcoins is "safer" than mining, and has a better chance at making a profit.

Once buying BTC becomes as popular as mining is today, then the price will increase. If the price increases, demand for ASICs will increase as well.

Bitcoin is about riding the wave of either buying BTC outright or buying miners. Each action perpetuates the other, so I'll bet the mining storm of 2013 will cause BTC to rise and everything will be alright in the end.

Answer 2

ASICs will depreciate very quickly unless a mining cartel decides to lock out new ASIC development. To some extent, if more efficient ASICs start costing more than any single person can afford, then existing cartels already have a leg up.

If your ASIC didn't depreciate (Merlin magically updates it for free), they still are only worth buying if you have access to very cheap electricity.

If you assume that Bitcoins will stick around and also assume there might be a period of expensive electricity between reduced oil supply (anyone's guess) and when fusion reactors come online (roll some dice), then any Bitcoins mined before that period are worth more during that period - as Bitcoins are an indirect form of the Hydrogen Economy*.

_{* Unfortunately term 'Hydrogen Economy' has been clouded by the fact that such an energy currency can be put directly in a car's gas tank; and so the original futurology-driven term has been co-opted by people in the separate fossil fuel debate with a 20th century axe to grind. The Wikipedia article barely touches on the fundamentals of an energy currency.}

Answer 3

The ASIC chips are designed specifically for the work needed for Bitcoin mining (SHA256 midstate). There's no commercial need for this anywhere else. There's no secondary market for used ASIC mining hardware other than for re-use in Bitcoin mining.

Answer 4

Look at this graphic before you buy any ASIC:

http://bitcoindifficulty.com/

Currently it is very hard to make any forecast, especially for 10 years.

Hashspeed of bitcoin network now in the base of Singularity.

If you have no experience in bitcoin mining, I try to describe you this moment:

GPU mining brings from 100-200 bitcoins in 2011, in 2012 one GPU brings at least 30 bitcoins, in 2013 it is very hard to mine at least 3 bitcoin with ordinary GPU for the whole of year.

In 2014, one GPU would not mine even ONE Bitcoin!

The same picture you will meet with any current ASIC technology in 2014,2015,2016 respectively.

According to exponential function, this picture would be even worse for ASIC in the next three years, than it was for GPU in the previous three years.

Advice in this case may be such: "Keep you mining hardware up-to-date, and renew miners at least each 3-6 months". For your case, it means that you should for the whole of 10 years renew your hardware at minimum 20 tries.

My forecast(Updates):

month ~ My ~ real

8.13 ~ 0.3 PH/s

9.13 ~ 0.7 PH/s

10.13 ~ 1.4 PH/s

11.13 ~ 2 PH/s ~ real: 4PH/s !!!

12.13 ~ 3 PH/s

1.14 ~ 6 PH/s

2.14 ~ 12 PH/s

3.14 ~ 24 PH/s

4.14 ~ 48 PH/s

@Peter Micheal Lacey-Bordeaux, you may downvote as you wish, see, my forecast will become a reality after just a half year.

Answer 5

Whatever mining rig you buy, it will eventually grow obsolete. This is because the algorithm behind Bitcoin is growing increasingly complex. Now, as more people buy mining rigs and mining pools grow in size, the algorithm will only begin to increase in difficult at a faster rate.

In my opinion, mining is a high-risk, high-reward investment. If you buy the right rig at the right time, and prices for Bitcoin stay up, you can make a great deal of money. If Bitcoin prices drop, however, you will lose money. That's the nature of the game.

If you are thinking about buying a Bitcoin rig, you need to plot out how many Bitcoins you can expect to mine with that rig (you'd have to use current and projected hashrates to computate that). Then you'd have to project how much money these Bitcoins would be work at current prices, and also project how much you'd earn if prices jumped by certain amounts (10% 25% 50%, etc.) or dropped by certain amounts.