Bitcoin Forum

http://www.reddit.com/r/Bitcoin/comments/i0r4o/ready_for_a_little_casual_mining/

What a poor sap...judging by the time this was posted, this is likely a delivery to someone who went all-in and ordered everything when they saw BTC at $30.

Hopefully this isn't some dipshit with a wife and kid(s)...cause this fuck-face is in for a rude awakening in about 15 days, lol.

What a perfect illustration of the Tragedy of the Commons.

I'm sure he can make a profit. I'm jealous.

How?

If you haven't noticed all cards are 5770... Which you can get dirt cheap. Smart investment.

Saw the picture last night...

I'd hope he got everything on a discount.  I'll reserve my judgement until it's known what he paid for all of that.  with the priced of used 5770's, I would hope you'd be getting them @$60 or so each if you're buying quantity like that.

They are however decent hash / power consumption.

Nothing there appeared to be used goods.

In all likely-hood everything there, including the rented office space, was paid for on credit/loan(s). I have a hard time imagining anyone with that kind of disposable income (unless it's some bored rich young man) wasting it on such a speculative venture...

Even at the very lowest end that easily $10k worth of gear there, plus rent, plus electricity.  Everything here (yes, it's just a picture, but knowing what we do of bitcoining so far we can make pretty damn good assumptions) points to this being someone who supposes they can make a business out of this.

I just hope he doesn't have a family, or has a shitload of disposable income and a hell of a lot of otherwise worthless free time to kill.

In the long run, the profitability of mining doesn't depend on the price of BTC.  It depends on whether you can mine a Ghash cheaper than the competition.

and what's gonna happen in 15 days, oh prophet?  :)

$10k worth of gear is quite cheap lol

A new farmer to the commons not adding a couple of cows, but an entire herd of them. In two weeks the commons will be that much harder to utilize for everyone. It is advantageous for each miner to add as many video cards as possible, but in so doing they make the difficulty increase, thus causing diminishing returns on everybody's cards and requiring more cards to keep the same level of income, causing a higher difficulty, etc etc. Unless price moves substantially, in a couple of months the difficulty will be so high that many will be mining at a loss. But that is how the game goes.

With the current difficulty progression, at best I am going to make *maybe* 200 more bitcoins in the next 3 months...and I am pushing 6 GHash/s.

Why? Seriously. USD 10k worth of goods + some thousands operating costs is about my ticket for "lets try it out". Defined by not hurting me - the amount that makes me mad for wasting some money, but nothing that I remember after half a year.

Not everyone has a disposable income of a mcDonalds worker. There are those of us that would take 15000 USD from a credit card to finance something like that - and then pay out back next month totally from their post tax income. Seriously. It is not that much money. And it could be worth it.

That is again assuming that he got all that stuff at distributor pricing. If he paid retail it will be significantly more.

Hint: narrowly define "Commons".

This is economics, not a Tragedy.  The miners chase the Red Queen -- it's not like they don't know the game's rules beforehand.

I think the key for mining is making back your investment as fast as possible while the BTC is still trading at a fair price and the difficultly isn't too high. Once you make your hardware cost back, everything past that (assuming you aren't paying a ton for power) is just profit. And even if the market did crash and bitcoin had an epic fail, you'd still be sitting on a ton of used gear which you'd be able to sell for even more profit.

Synaptic, I've been following your posts and threads over the past few days and I've observed that (1) you've got some reasonable things to say, and (2) that you say them with astonishing douchebaggery.  Chill out.

And you care that someone might be wasting their money.... why?

Besides, he could likely resell all of that hardware for 75% of what he bought it for in the coming months.  As long as he can regain the 25% lost on depreciation in bitcoins (which should only take a matter of days), he won't be out any money if it all comes crashing down.

That's not a tragedy of the commons, it's called competition. The total bounty of (50 coins + fees)/block does not decrease, it's only spread thinner, so that the less competitive miners die out. If anything, more miners means a more stable network, more users, therefore more fees.

A real tragedy of the commons is this: every guy brings more cows up to the point were there's overgrazing (http://en.wikipedia.org/wiki/Overgrazing), no time for grass to recover and grow, and the total utility of the grazing land goes down temporarily or permanently, even to zero in the event of desertification. So maximizing the individual utility has diminished or destroyed the global utility of the shared resource.

The reason it's not a tragedy of the commons is because it's good for Bitcoin.  The more network hashing power Bitcoin has, the more secure the network is, and thus the more viable and safe Bitcoin is.  It's only a "tragedy" if you look at it from the miners' perspective.  If you actually care about all of the other aspects to Bitcoin besides making a quick buck off mining, then the network growing in size is a great thing.

+1

I still have to go write up a response to his "logical" discussion of bitcoin.

Thanks for giving the textbook definition there.

Or a betting man.  Maybe he thinks the price of BTC is going up to $100 (or $1000 for that matter). 

Risk is all in the eyes of the beholder...

Not going to argue that observation.

Most of my posts are made quite far past the point of 20-24 hours sleep deprived, so it's not as though I can admit to wholly being about my full wits.

And, that I don't care about that fact, either.

I agree that is the dynamics of Bitcoin mining, but I fail to see how it is a Tragedy of the Common. That miners become more efficient is a desirable outcome.

Short of a hardware paradigm change like cheap asics or fpgas, miners cannot get much more efficient. Adding a lot of mining rigs to your setup does not mean you earn a greater percentage of bitcoins vs costs, only that you earn more bitcoins in total. In the next few months someone with a pair of 5870s will earn only ~1 bitcoin per week. Only those with larger operations will be able to pull in any appreciable amount of bitcoins for their efforts. Large scale corporations will jump in (or be formed) with the sole purpose of mining, making the difficulty go ever higher, and causing a significant barrier to entry for anybody without sufficiently deep pockets.

The network's hashing power is already consolidating into a few pools. As more and more smaller miners give up due to the skyrocketing difficulty level and are replaced by the larger conglomerates the pools will be replaced (or completely populated) by those who can afford very large operations (governments, corporations, some wealthy individuals). The decentralized, peer to peer currency will be refined down to a handful of specialized data centers controlled by the largest mining organizations.

And that, imho, is the tragedy. For anyone that not in the top few mining operations, the commons will effectively be destroyed. Every new worker we bring online accelerates us toward this end. It is the way this game is rigged. Myself, I'll play for as long as I can, but within 6 months I doubt I'll have enough Ghash/s to be competitive.

I forsee a lot of Distributed Denial of Service attacks in the future.

Consolidating pools is a pretty bad idea, but I suppose they will have to learn their lesson the hard way.

GPU miners can buy in bulk at discount prices. GPU miners can optimize their hardware for minimal price/Gh; think single industrial 12V power supply for all motherboards, no case/peripherals, centralized cooling etc. GPU miners can setup shop in jurisdictions with cheap electricity. GPU miners can learn OpenCL and optimize their client; if you have a 5770 shop you might learn 5770 internal hardware details and assembly for that critical extra 5% speedup. As in every business with low entry barrier, the margin is thin and only the most efficient survive.



As long as you don't hijack the well established term "tragedy of the commons", it might be a tragedy in some sense. The "tragedy" of the economy of scale where only large corporations can survive. It happens most everywhere these days, think Walmart, but it's also associated with progress and brings the prices down by mass production and standardization, improving access to industrial goods for the average man.
It remains to be seen if Bitcoin security model can survive a single corporate miner with cost optimized 45nm ASICs. A superficial game theoretical analysis suggests it can't, the most efficient miner will drive everybody else off the market because hashing is perfectly fungible and there's no way to compete on product differentiation, just on scale and efficiency.

I really gotta stop coming here. This sounds like a community full of haters. Who gives a shit how much he spent on his investment? Why is he an idiot? Is it cause hes about to smoke half of your rigs? Really can't we just say "nice" and move along, instead of over analyzing his 10k investment (which is joke money to people who have it) and saying how stupid he is?

Y'know the $10k was an illustration that even if he got an INSANE deal on all that gear it's still a huge, huge gamble at this point.

He probably paid retail, there's a fucking newegg box there.

That means he probably actually paid closer to $25-30k, and that's just on the hardware.

He obviously rented office space, too.

Electricity.

Time.

wow, maybe you are jealous? or just a rude child? I can't tell which.

So, let's extrapolate that out - ASIC comes along and drinks the GPU milkshake...  He's getting block after block a day, how soon before that person(s) can start naming the price?  How long before that (as I understand it) million+ dollar investment gets paid back?

Am I missing something?  "Bad" for GPU miners, but not all that apocalyptic to the Bitcoin economy as a whole.

I realize you're not saying it'll be bad for bitcoin - just thinking it through out loud.

A little math: 50BTC*6/h*24h/day*20$/BTC*30day/month = 4.320.000$/month (dimensions check). This is the total size of the monthly mining pie until 2013, at current BTC prices.
Even if you don't earn much the first few months, just by merely increasing the difficulty up to the point where GPU can't compete, you are quickly putting them out of business. Especially if you are so effective they don't get to recoup electricity, and so have no chance of recovering the sunken hardware cost. If they are rational they will go offline and wait for better times, if not it will take some time to convince themselves they are wasting money.

Once you get a big chunk of the revenue stream and reinvest it in hardware, there's little chance for anyone to catch up. The only reason why investors are not doing this is the high volatility of the BTC price, there's no way to know you can recover the high fixed costs of designing an ASIC and the custom boards. Once that happens, it's bye bye GPU, the market will be dominated by a few (one) ASIC miners.

Assuming one entity does control more than half of the hashing speed, it's anyone guess what might happen. Common sense suggest it will not use it's new double spend capabilities for it will drive people off Bitcoin and endanger it's substantial mining revenue. In any case, the security model of Bitcoin will no longer work.

The first ASICs would probably be GPUs modeled after the 5970 with the unneeded modules stripped out and extra SPs packed into the freed up area. Also, going down to a 20 nm process would allow for more transistors and less power. I could see a small US-based startup company with 2-3 million USD funding, 2 chip designers, 1 board designer and a couple of lab techs. coming up with this optimized GPU/ASIC in about 9 months. You basically need to figure out how to do all the brain work yourself and outsource the fab and packaging as efficiently/cheaply as you can.

An end product with 4 times the hashing rate of a 5970 and consuming 25% the power is very conceivable. That would just be the first cut.

The barrier to entry is not so high so you would probably see more than one company do this.

If such a point does come along that it is actually profitable and reasonable for a company to do this, we'll all be so rich it wouldn't matter for us.

Why would the price stay stable?  If it does - why wouldn't more than one group be pursuing this at the same time?

I don't see that it follows that the security model would be broken.  A big stack of confirmations is still a big stack of confirmations...  Unless you're talking about this ASIC entity keeping a whole other blockchain in the wings to swap in at some point...

Perhaps I have an inordinate amount of free market in my eyes.

The amount of fail at math here is pretty awesome.  You guys can't even come up with a number resembling anything remotely close to what this gear actually cost, and you think you can predict future profitability for this guy?

Hint: newegg gives distributor pricing to large accounts.  Hell, 10 seconds of google and you'd figure this out.  You are not likely to get much better pricing unless you are buying in lot-sized quantities directly from AMD (which you can't, because you're a hater posting on the bitcoin forums ;)  Having made buys similar to this from both Newegg, their competitors, and directly from distributors like MALabs, Ingram, etc. I can say the discount off of most high-volume items is negligible at best.

This also is pocket change for many folks who run tech/R&D consulting groups - an interesting investment from the geek side, hire a couple high-schoolers to put it together for you, spend a night or two scripting your installs/pool/whatever and then let it run for a few months without ever having to touch it.  Pay said high-schoolers to come by once a day and swap out any dead gear.  

Free money, or not - but very little effort or work required to start a relatively risk-free investment.  It fails and you lose every single dollar you put into it (not likely)?  Guess what, you just reduced your tax base for 2011 with a nice sized write off.

Many folks also have blank lab space - just like this - to do projects a lot like these (I have one, but not quite this size).  Given some personal knowledge of this specific situation, I'd say this is some guy with disposable income who finds this sort of thing fun, and happened to have most of the infrastructure handy and unused so it was convenient.

Basically I'm saying more is spent on a fun weekend in Vegas quite regularly, and this has hell of a lot better chance of payback than that does!  Plus, it's a lot more fun to some people :)

Edit: spelling

Lol, yep.

Have to be trading steadily at $100+ prices for anyone to justify building and producing an ASIC.

And like someone else mentioned, IF an ASIC is ever created, you sure as fuck aren't going to get one, because it will ALWAYS be more profitable for the ASIC producer to simply mine with every ASIC they produce for EXACTLY as long as it would be profitable for you to buy one for mining.

Anyone thinking they're going to get an ASIC without directly investing in their development and production is fooling themselves. And 90% of us will never have enough $$$ to invest in ASIC in any meaningful amount that someone more serious would be willing to put up.

I don't understand what the big deal is...he has about 70 5770's that I can see and/or estimate, and even at pretty high overclocks he will be pushing around 16.8G/hash. You guys act like he is going to disrupt the whole network with his rigs coming online. Maybe I'm not seeing something here, but it doesn't look like those numbers are that crazy. And yes I know I can't see everything in the picture, but neither can any of you.

You're absolutely right about the fail math.

I really have no idea about the actual value.  I glanced at the pic and took a wildly inaccurate assumption at the lowest possible price for the pile of shit I saw.

Still doesn't invalidate the point I was trying to make. With the timing of this cutesy little "Just some casual mining" post, it's pretty safe to assume this was an impulse buy based on the astronomical $30 high.

I'd really like to be able to ask this guy how he feels about his purchase with Mt Gox going practically flaccid.  And it's not a bunch of insane trading driving the price down right now...it's people pulling out massive amounts of USD value from the market over the past 72 hours.

It looks like people are scared, and rightfully so.

The guy who bought this gear is probably pretty scared too. :)

Pretty sure you're reading waay too much into what you know. AFAIK that pic came off twitter and was reposted and titled on reddit by someone unrelated to the venture.

I don't know if what this guy is doing or not doing makes much sense. I do know that mining represents a form of the prisoner's dilemma and that game theory suggests that other miners should discourage this behavior. So I don't put too much stock in what people say about the practice on the Internet. Those that suggest it's a good idea either probably don't know enough about the economics or don't understand enough about their own position to know they should discourage it. And those that suggest it's a bad idea likely understand that they should say that whether or not it's true.

Right again. It's all just assumption on my part.

And you bring up a point that's right on target too; I was really just trying to discourage this behavior for people thinking of entering in at that level of commitment this late in the game.

Hell, that pic could potentially have been from months ago, I really have no idea.

Just a (somewhat tenuous, surely) platform to launch an argument from...

Even at $14, he'll still be INSANELY profitable.  At current difficulty levels, I'm profitable above $2.66/coin, and he'll probably even slightly better than that, as I don't have the most efficient setups.  At $14/coin, he's making more than 5 times his cost of electricity (assuming he doesn't live in someplace with insane energy prices, like California).

He has no reason to be scared.  Mining is, by far, the safest way to invest in Bitcoins.  If I had $10k available to me, I would be doing exactly what he is doing.

Just busting your (and others) balls a little.  The trolling was pretty funny to me, especially when it's off by such a wide margin.

Perhaps, and I don't doubt there may be some here who have done this.  Or perhaps this is a "rich" geek with too much time on his hands that finds the project interesting from a long-term perspective, and happened to know someone who was able to get him a deal on all the remaining 5770 video card stock if he agreed to buy it all in one order?  Just rampant speculation of course ;)

I feel Bitcoin has a future, and hopefully this guy does too.   Mining gave me a way to both operate this as a business (aka get the creative juices flowing) and really learn how things function and what the community/market needs as a whole.  Now that my mining investment is relatively paid for and operates in a completely automated fashion, (assuming no $0 crashes within the next 4 weeks) I've been focusing on other things such as launching some services that accept bitcoin, or provide services to the bitcoin community.  

These take time to develop, much more time/expense than simply buying $10k (or $100k) of commodity readily available computing gear.  Paying good designers, developers, and taking the time to really lay out a solid business plan is *way* more effort and risk than this relatively tiny mining op you see here.  I have first hand knowledge of other mining ops that make this one look small in comparison, and I still wouldn't call them "large" to any degree when compared to scientific GPU clusters and other such short-term computational projects I've either been involved in, or heard about.

While I didn't buy this much gear (no cooling for it!), you can ask me I suppose, as I put my own money into dedicated mining gear about 2 months ago, and expanded it 3-4 weeks ago as well.  I will say the current (and last week's) market fluctuations do not worry me in the slightest.  I put one month's disposable income into my op, generate below 10Ghash/sec, and if I make exactly $0 on the BTC generation it will simply have been a sorely needed fun hobby/diversion from my real work.  Basically, in my opinion, it's already paid for itself simply in personal enjoyment.  It's been a long time since I've needed to pull out the dremel and soldering iron (to unlock the "unlockable" 6950's of course.).  Reconnecting with some really smart friends in various segments of the industry to hack on specific aspects (hardware, code, etc.) has also made this project more than worth it for me to boot!

If people spent more than they can afford to lay on black in Vegas, then I absolutely agree with you!  I think we likely have the same line of thought there, but you just don't really understand the scale of things quite yet :)

I will also point out that if all these "early adopters" had been putting their money directly back into their mining operations, they'd have operations that would absolutely dwarf this one - with almost no initial out of pocket USD (or other currency) investment.

Given the screwup that this picture was linked publicly without the shipping labels being obscured, I can say with almost absolute assurances than he is in no way scared whatsoever, and is likely reading this thread laughing a little bit :)  Heck, this thread probably already made the whole project worth it to him!

-Phil

There's absolutely no need to mimic the GPU, which is after all an array of generic cores. All you need to implement high speed SHA2 circuits are basic elements: logic functions, adders and registers. A 1 cycle/hash fully unrolled SHA2 design is in the hundreds of Kgates, so a 1GHz, 10 million gates chip can pull at the very least 20GHash/sec, possibly even 50-100. A single chip could be equivalent to all of "newly minted idiot's" hardware and a rackfull would rival the whole current Bitcoin network.


Once one group has a working design and grabs most of the mining revenue, the entry barrier for a second ASIC miner is much higher, if the first aren't too greedy and reinvest most of the revenue. I don't know why the price would stay stable, it's a working scenario.


In my company a mask iteration costs about 1 million $, to fix some silly mistake. With design and all, we're talking about an investment of a few million. At current prices the monthly mining market is a few millions $, so there's no need for $100+ prices, just a few months of $10+ to get big players interested.

Not attempting to hijack the term so much as explain why this situation looks like it fits to me. Apparently my (loose) interpretation of the metaphor did not seem to conform the commonly accepted one. To me, turning the commons into a private pasture effectively destroys them for all but one farmer. That's how my (tortured) logic works ;) I will concede that I probably misused the term since most people don't think that way.

Also there is no reason to believe that multiple companies will not be simultaneously developing solutions, and 1st to produce may or may not be the winner. Given the apparent time it takes to develop and make something like this, I would not doubt that we will see a few different companies coming online with their solutions within a couple of months of each other. If Company A comes online in October, and Company B is only 1 or 2 months away from finishing their product, I doubt Company B is going to throw away all their work without trying.

If even 2 companies like that compete then imagine what will happen to the difficulty level. Now imagine a half dozen or so competing.

P2P networks work because everybody participating in the network gets benefits. They get copies of the music, movies, pr0n, whatever files they are moving. Bitcoin works because the miners get paid. Make the payment a pittance and not worth their trouble, and a majority of the miners quit. When the mining network gets consolidated down to a few (or one), the p2p aspect goes away. It also becomes very easy for a government to kill bitcoin at that point.

Also, companies that engage in this endeavor never really need expose themselves, well not until they hold a majority of the hashing power at least. Due to the nature of bitcoin, a private company can develop and implement ASIC mining in total secrecy, even cashing out on MtG without anyone knowing who they are. The rest of us will see the effects of their work, but we won't know who they are unless they choose to reveal themselves.

If a mining monopoly should develop (and the economics suggest that it will happen, ASICs or not) then that company can pretty much not only control the market price, but also dictate things such as transaction fees. They can simply refuse to process any transactions that don't include a .5, or .75,or whatever arbitrary fee they decide to impose.

http://www.reddit.com/r/Bitcoin/comments/i2jby/my_company_is_building_a_bitcoin_mining_chip_asic/

Yeah, reddit is known for their circle jerking, and altruism to a point of stupidity...

So this LargeCoin business either:

A) Doesn't think BTC itself has any investment potential

or:

B) Is planning some gimped by product chip that they can hawk to miners that's better than a GPU but doesn't threaten their own REAL ASIC's mining share.

Because otherwise, this is a lie, or a company run by fucking idiots who know nothing about maximizing profit because if they did, and they believed in the viability of BTC, they would simple just employ EVERY unit they created to mining for themselves.

I call bullshit.

It seems likely to me it's a pipe dream scam or troll to me as well, but...

For the sake of argument we'll assume it's legit. It's pretty easy to imagine a set of circumstances where an entrepreneur believed in the future of what was being mined, yet choses to focus on selling the picks and shovels instead. It's pretty easy to believe that designing, debugging and fabbing an ASIC could require capital in excess of what someone would have on hand. The likelyhood of getting a bank loan or angel financing for a venture where you'd do all that only to use it yourself to do "proprietary mining" is essentially zero. However, the likelyhood of being able to get some investment or perhaps a loan to do all of that and sell it to an existing committed list of customers is far greater. The profit involved in making 1,000 picks quickly and selling them to miners might easily outstrip the profit involved in making 10 picks slowly and then using them to mine yourself.

Still, I don't see anyone that's in a position to design, test and commercially fab an asic for this purpose deciding that posting a google docs signup form on reddit is the road to success.

That's a rather subjective comment.

It's an excellent way for them to outsource much of the risk (by reselling boards, to regain most if not all of their initial investment) and then use excess for themself.

Or he could be like me and just happen to already have a space for his other businesses before he found out about bitcoin...the 3phase industrial power became more important when I started buying rigs...especially in price/kwh.

https://i.imgur.com/sLpKc.jpg (https://i.imgur.com/sLpKc.jpg)
=
http://www.flickr.com/photos/64331187@N04/5858492956/in/photostream#/ (http://www.flickr.com/photos/64331187@N04/5858492956/in/photostream#/)
?

Bet it is. Timing's right.

Except he's not selling 5770's.  He's selling everything BUT 5770's.

I'm not saying it's impossible, just unlikely.  All I see in the flickr photo is 5770's, and all the other guy is selling is other cards.

Good point, I had missed that.