Most bitcoin miners have been living the good life as bitcoin’s price goes parabolic, but now with the launch of futures trading, their lives may have gotten even better. Unlike traditional miners, bitcoin miners aren’t digging through dirt. Instead, they’re running specialized hardware devices day in and day out in order to obtain small chunks of bitcoin over and over again.

Setting up a bitcoin mining operation requires a little technical know-how and a bit of money (competitive bitcoin mining devices retail for about $3,000, although the sudden spike in demand for them has pushed prices as high as and above $6,000 for a single mining device). However, once the devices are up and running they can operate 24/7 with just occasional maintenance, generating “free bitcoin” with the primary cost being the electricity it takes to run them.The more mining devices you have, the more electricity you’ll use, but the more bitcoin you’ll be able to mine.When bitcoin prices rise, the mining operation becomes more profitable.

Suppose a bitcoin miner wants to reduce his exposure to bitcoin and sells a futures contract to lock in profits. Considering how wildly the prices swing, locking in some profits early may not be a bad idea for many of these miners who have high electricity and equipment costs to consider. Just how high are these electricity costs, and what does the profitability look like for bitcoin mining operations? Below is a table illustrating an example setup for a small-scale bitcoin mining operation:

Mining Unit Antminer S9 Cost per unit ($) 3000.00 Total units 20 Watts per unit 1400 Electricity cost ($/kwh) 0.12 Total Antminer electricity use (Watts) 28000 Total Antminer cost ($) 60,000.00 Cooling fan cost ($) 550.00 Cooling fan electricity use (Watts) 598 Shelves ($) 200.00 Internet cost per month ($) 35.00 Video surveillance ($) 100.00 Network Equipment ($) 100.00 Maintenance costs ($/month) 100.00 Total 1 time cost ($) 60,950.00 Daily cost ($) 86.86