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In the Bitcoin mining profitability calculator at bitcoinx.com/profit, there is a field with the description "Profitability decline per year". What does this field mean in regard to the calculation?
At a guess, I'd say, if it's set to 0.01 the projected income for a year from now will be 1% of today's projected income.
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I agree that it isn't worded very well. It seems to be a number r such that the revenue n years from now will be r^n times the revenue today, so basically what you said.
To empirically verify this, set electricity and hardware cost to 0 (so that profits equal revenue), time frame in months to 12 (for a full year), and profitability decline to 1. You should get $1,366 or so. If you change it to 24 months, you get $2,732 - exactly double the previous. On the other hand, with a profitability decline of 0.2, you get $679 in 12 months and $814 in 24 months, which is $135 (or 20%) more.
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it's because of increasing difficulty (which is apparently projected out for a year on bitcoinx).
"Difficulty" gets higher over time as the Bitcoin network matures and more mining hardware is connected to it.
This means that with the same amount of electricity and hardware cost chances of finding a block of bitcoins are getting lower. This phenomenon is displayed as "Profitablilty decline per year".
