One comment which I haven't seen come up much is bitcoin mining doesn't actually have to be "profitable" to be useful. For example, if you live in a country that has restrictions to prevent capital flight (i.e. extra taxes on money transfers to foreign accounts, etc...), ignoring the potential criminality implications, mining bitcoins at a "forex loss" and transferring those bitcoins may still be a better net financial option than just transferring the money in whatever your native currency is.<p>I believe China used to have some pretty significant restrictions to prevent capital flight - I wonder if that has something to do with this mining operation.
So since this video was made, the price has gone down by approx 35% and the difficulty has gone up by approximately 17%, for a total adjustment in revenue of about 50%, unless they added more machines, or upgraded their current ones. That's pretty brutal.<p>Ultimately (and not long from now if these rates of adjustment continue), mining will be a commodity business with a very small profit margin. When you consider that there are uses for low grade heat (like home and office heating), once the ASICs catch up with Moore's law, it seems likely that the profitability will be slightly negative for someone trying to run this kind of business. (As another reason, there will probably be people who have access to basically free electricity that would have been wasted, and just need to amortize the cost of the ASICS).<p>However, because mining is a zero sum game, we can conclude that the profitability of mining was very high at the time of the making of this video, or else the margins wouldn't have been able to drop as much as they did. This says that a rational large investor would choose to put their money into mining rather than directly buying bitcoins, if they were interested in getting into this space. That's probably why the price has been falling since the peak early last year.
"the 400 bitcoin millionaires with at least BTC2,000 hold 40% of bitcoins" from <a href="https://bitcointalk.org/index.php?topic=316297.0" rel="nofollow">https://bitcointalk.org/index.php?topic=316297.0</a><p>This is the main reason I'm highly skeptical of bitcoin, not to mention wildly fluctuating value, little if any privacy gains (<a href="http://www.forbes.com/sites/timothylee/2011/07/14/how-private-are-bitcoin-transactions/" rel="nofollow">http://www.forbes.com/sites/timothylee/2011/07/14/how-privat...</a>), and a host of other problems.
According to Reddit, the mine in question has been shut down already:<p><a href="http://www.reddit.com/r/Bitcoin/comments/2v02n9/life_inside_a_chinese_bitcoin_mine/codps2q" rel="nofollow">http://www.reddit.com/r/Bitcoin/comments/2v02n9/life_inside_...</a>
Very misleading title. It's grossing $1.5M per month. You still need to subtract operating costs, which will be substantial in a bitcoin mine. I'm sure power/land/cooling/etc is cheaper in rural China than many other places in the world, but there's no way it's free.
Was making $1.5mm, in October of last year. There are some off the cuff calculations in the reddit thread [0] that indicate the same setup would currently be netting only about a tenth of that amount now.<p>0 - <a href="http://www.reddit.com/r/Bitcoin/comments/2v02n9/life_inside_a_chinese_bitcoin_mine/codf387" rel="nofollow">http://www.reddit.com/r/Bitcoin/comments/2v02n9/life_inside_...</a>
I wonder if they get new ASIC designs before they ship to consumers. I'm remembering buying mining ASIC and then actually getting shipped them much much later. We thought at the time that they were being held back and 'burned in' at a big mine run by the manufacturers mates. This would explain why they are so hush hush about where the devices come from...<p>If the ASICs already bought and shipped to consumers later, they would be effectively free!<p>Alternatively they might be using the low chips that failed QC and never shipped - they might burn out eventually but if you are running them yourself you can be prepared for that.
The thing that interested me the most about this video was when they interviewed him on his thoughts of the future of bitcoin.<p>He didn't seem all that enthusiastic about bitcoin's prospects.