Bitcoin Forum

I have run some Excel spreadsheet simulations on ROI and want to warn people that buying hardware just to mine BitCoins won't pay off.

I just bought a dual 6970 system, but I bought it before I did the simulations.  I based my purchase on one of the bitcoin calculators.  The problem is that the network is growing at 4% per day in computing horsepower.  That means that your return is losing 4% per day because you essentialy have to compete with everyone else for a fixed rate of bitcoin production per day.  It isn't exactly like that on a day-to-day basis, because the difficulty doesn't adjust continuously.  But the difficulty function adjusts often enough to almost exactly approximate you having to compete directly against everyone else.

When you take the 4% growth into consideration, your break-even goes from 2 months to never.  In my case, I spent $1,000 to produce about 700 MH/S.  Everything else remaining the same, my total cumulative bitcoin production will amount to around $200 before it reaches the cost of electricity in about 60 days.  At that point I will just have to shut it off and sell the parts to my gamer friends for half off.

The only way mining makes sense is if you already have a gaming system and mine in your off times.  But you better do it while it is still worth more than the electricity.  As I said before, that breakeven point will be reached in about 64 days from now.

Some people might say that the exchange rate of bitcoins may go up to compensate.  That may or may not be true.  But if it is, it would make more economic sense to buy bitcoins now and take the gain, rather than buying hardware to generate them.  

I wish that you could paste images directly into the messages, because I have a chart that shows the return falling off a cliff right after purchasing your equipment.

There is a graph of the kind of computing horsepower you have to compete with here:
http://bitcoin.sipa.be/

Anyway, I want to warn people not to make the same mistake I made.  The only way to beat the system now is to come out with a custom ASIC for cheap enough per chip that you could dominate the entire network and grow your hardware fast enough to knock out any competitor before they could produce their own ASIC and make a profit.

The frustrating thing about this is that I first read about BitCoin around April of last year (tax season) when I was researching anonymous banking.  I was going to invest $1,000 just as a pure speculation.  I never got around to it though.  If I had followed through, I would have around $7 million now.

I've had a good run, but I'll be selling my 3x5870's soon.

Smart move.  Although it won't be until about 60 days until it costs more in power than bitcoins (unless the exchange rate goes up, which it could).

The exchange rate of bitcoins will go up. The value of bitcoins is in the hands of the miners for the most part. If they have to raise the cost of bitcoins in order to make a profit after paying their hydro, then it will go up. Nobody in the right mind would sit here, watching how bitcoins has grown since one year ago and figure that it's a bad move to mine.

The same topics were probably mentioned by the first 100 or so people mining after 10000 more people jumped on board and brought up difficulty. Now those guys are the ones who don't have to work for a living.

They might pay off, they might not.  It depends on how you estimate future difficulty growth.  If everyone is rational about it then difficulty growth would slow to a crawl if new hardware is not profitable.  But if that shift happens it actually does become profitable again for all current and future miners, and so more people will jump on.  It's like a pendulum and it's tough to know where the equilibrium will end up.  Logically, difficulty should reach the point where it is just breakeven considering electricity and depreciation, but that's in an ideal world.

Not sure how many fallacies were in that short snippet. The value of bitcoins is in no group's hands. It is an open market, affected by tens of thousands of participants each valuing a bitcoin slightly different, with different outlooks, goals, and assumptions. Bitcoin's value is determined by supply and demand. Difficult could triple tomorrow, and the price of Bitcoins could fall at the same time.

The cost of mining is but one of many inputs to the price of Bitcoin, and easily overshadowed by a simple coalition of the other inputs.

Let me know when you wish to sell, I might be interested in a discounted set.  I'm looking to build a miner/heater for my garage this fall.

Wow...starting multiple threads stating the same crap now.

Everyone, read all posts related to this troll before forming opinions.

It could go up, but then you would make more money buying the coins and making a profit.  The problem is that the growth of the network is a higher rate than what will allow a breakeven on investment.  In other words, it isn't rational right now.  Probably because most of the joiners already have the equipment and it doesn't matter to them.  They are ok making a couple hundred bucks on the side.

But you will never break even buying a machine soley for mining.

We'll just have to wait and see.

Yes please do, because I am pretty sure I am correct.  I am sorry about your hostility.

There is no hostility...just having fun tracking trolls. LOL

I don't understand why people seem so keen to continually make this same thread over and over. In the beginners guide stickied at the top of this forum there is a link to a thread 2 months ago that says the same thing, and another one like a month ago with a "spreadsheet that is legit showing mining will never pay off". There have been have been a few in between then that I haven't kept track of as well, all with "spreadsheets". Why is spreadsheet some magical word to people that lends their predictions based on nothing some validity?


Will bitcoin never pay off? Who knows, it's getting increasing difficult, and if you build a < 1.2Mhash/$ rig like most people are, yeah it's unlikely you're going to do very well in the current market as people are still jumping on board with you. Things can change though, summer heat and prices may cause people to drop out, casuals will be annoyed with paltry returns, people "making spreadsheets" may up and sell off their rigs, bitcoin price may rise again, who knows.

Basically no one knows the future as I've said at least a dozen times. Be PRUDENT like you should with any investment. Do not get into a gold rush mindset, that's what kills people. A very few people strike it big by making quick decisions, but most people that do well do it slowly, carefully and intelligently.

Oh look, it's this thread again.

With your logic buying mining hardware would never have been able to pay itself off, is it more risky buying mining hardware today than it was a month ago or a year ago? perhaps, but then again mining was never a guaranteed return and neither was buying bitcoins directly either. There is no risk free way of getting into the bitcoin economy and as everyone else keeps saying never put money into hardware or BTC you cant afford to lose.

Well, I guess others have already made this point before, so I don't need to bother.  I just don't want to see people lose money based on a decision from a bitcoin calculator that doesn't take bitcoin difficulty growth into consideration.

Obvious troll is obvious troll, you made a new thread because we proved you were a troll in the last thread that stated the same garbage. 

What I am saying is that you will get a better return just buying right now.  Unless you already have a gaming machine, or are going to buy a machine for gaming as well.  Then it is just free money until the power costs more than the bitcoins.

The growth rate of difficulty has been 4% a day for the last year, so yes, mining rigs have been less profitable than just buying bitcoins for the last year.  If the network growth slows down to ~2.5% a year, then it starts making sense.  The first year of bitcoin, the growth rate was almost flat, so you could make more money mining than buying bitcoins.

Keep in mind this is only about dedicated mining rigs.  If you already have the equipment, there is nothing to lose by mining.  At least for another 60 days when it reaches electricity costs.

I think he literally meant this thread again as in the identical thread started by you...not that others had stated it...that you stated it.

Sorry, I meant 2.5% per day or less

Obviously, higher risks generally means greater chance at making it big but you also pose the risk of losing more, anything else would be silly. But just because I was willing to sink 2k$ into hardware doesn't mean I would ever have spent that much directly into BTC at the stage when I entered into mining so the 2 are never directly comparable unless we start talking about a larger scale of investment.

That is true.  In the end even if bitcoins go to $0, you will still have some hardware you can sell on ebay.  So it is better to say that if the price of bitcoins goes down, buying hardware has a greater return (less loss) than buying bitcoins themselves.  But if bitcoins go up, they are a better investment as long as the network growth is above 2.5% a day.

So you are encouraging people to buy bitcoin and discouraging mining...so my guess is you are a miner trying to get the difficulty to drop or an investor trying to get the value to go up (or both), either way...good luck.  It can only improve my position at this point.

Well, I doubt I am going to make enough difference in a forum to change the price of anything either way.  I'm certainly not going to change the 4% per day of network growth.

I'm not discouraging mining either.  If you already have a gaming machine, you would be a fool not to mine, since it would be free money.  I'm just saying to not buy a new machine only for mining that you will never use for anything else.

Again, if the network growth goes down to 2% or so, it will make sense to buy hardware again.

Unless you think bitcoins are likely to seriously drop, in which case, you should buy mining hardware as a hedge.

As a rule of thumb, compare the amount of bitcoins you could buy with the money for your hardware with the number of bitcoins you will be able to mine considering increasing difficulty. Whatever is higher is better. (Note: this does not include the price of electricity).

That is the central problem.  The difficulty doubles every 18 days.  Which means your output halves every 18 days.  Until that gets more reasonable, you can't make a profit.

See http://bitcoin.sipa.be/ to see the increase curves.

no one really knows, as you can't predict the future.
Just remember, when there is profit to be made, there will always be risk associated.

Happy to say that in about 1.5 months, I've more than paid off my $1000 hardware costs.  I've earned about $500 an top of the $1000 hardware investment.

I do agree though bitcoin mining is not nearly as profitable as a few weeks ago when coins were worth $30+ and difficulty level was 500K.

I notice on here that people voicing non-majority opinions are now all 'trolls'

No...restating the obvious that has been posted in the sticky for months multiple times in multiple threads...that defines troll...making only negative comments without any new information...that defines troll.

Having a 5 day account and only posting things that discredit bitcoin/mtgox/client software...that points to obvious troll.

There is a pattern.  BTW, beeph you sold that hardware yet...people are offering right?

so am I a troll now? for selling mining hardware on a mining forum? lol
get a life dude.. most people just got into this when they read the recent news blitz, thats why the accoutns are new, because they're NEWBIES.  its not because they live to destroy bitcoins or whatever fantasies u've cooked up.  And 90% of people (especially 35+) dont read all the articles and crap.. if people are repeating the same threads it might be, i dont know.. cuz its happening to lots of people and maybe its TRUE?  i mean where there's smoke...

Most people on the bitcoin forums are FANS of bitcoins, and if they're griping about mining like I am, its because the calculators were misleading and they got in over their head.  It's a complicated system, to say the least.

You seem to not listen. I have already explained this umpteen times, but I will try again:

I have never discredited bitcoin.  I think it is a great investment.  I only discredit dedicated mining for now.
Mt. Gox has a simple incompatability with IE 8, which I explained.  Other than that, I have had no problem with Mt. Gox.
The client software, I have no idea about.

Click on your account tab...you are aware we can read all of your posts right?  Tell me which one of your posts was helpful or new to the community.  I couldn't find one.

so you read ALL his posts? jesus dude.. GET A LIFE.

There wasn't very many when I started...and since more than one thread was started for the same thing in the same day it seems odd.

As does some noob who supposedly dumps 10k into mining only to decide that he was stupid.

Actually 12,000$.... and it WAS STUPID.

Saying that I have contributed nothing of value is a different argument than saying that I have discredited bitcoin/mtgox, etc.  Try to refute the original post.

As far as value, I belive if I help people understand the problem with the network growth halving their profits every 18 days, they can make a better decision on buying dedicated miners.

Also, I have commented on how bitcoins are much better than fiat currency issued by central bankers that can be inflated at will.  That is the best part of bitcoin.  Plus real banking secrecy.

If I offered you $6K for your entire cluster, would you sell?

He only has 72 posts, you can skim through them all fairly quickly with a high reading rate. Or take a stastical sampling, for example, I'll take 1 at random off every page of his profile:






Yadda yadda. Obviously this is a poor sampling, but I'm just using it to show you can get a flavor for someones posts quickly and easily while still having "a life".

Again, you are not saying anything new...no need for a new discussion...this has all been well documented for months and most believe it to be inaccurate.

I actually just copied this bitcoin mining thread from the newbies section, since I couldn't post in the mining section earlier.  I haven't created any other threads since.  This swisher guy really likes following me around.  ;D

Everyone needs a hobby...keeps me away from refreshing mtgox and miner status.

*cough* VIRGIN *cough*

Hey, if Swisher is a girl, you may like that.

Actually, every time I see SwisherCutter, I think of someone taking a urinal cake (Swisher Co.) and chopping it up with a razor blade.

Lol

Hmmm...interesting.  Somehow I really doubt you are the hookup.

It depends on the demand for bitcoins as well. If the demand is weak, the price wont go up no matter what the miners do.

That is the ultimate arbiter of prices, demand for bitcoins.

I just wish I had enough $$$ to be the first with the ASIC.  You could have every bitcoin made for the next year with that.

The only people rolling in cash are those that started mining in 2009 or 2010.  People keep repeating the mantra that increased difficulty will lead to increased BTC/USD exchange rates, but recently we saw that trend broken.  Difficulty is up 100% yet the price remains the same.  Speculators and those very few people actually using bitcoin don't care how much hardware costs, or the price of electricity.  They never had to pay those costs.  If no one ever created another bitcoin from here on in the market would still be very well supplied.

But he is USEFUL - the less people will get into mining, the better for those that will.

Now, another thing to think about - different locations on Earth have different electricity costs. Mine is about 1/2 of the US right now.

Then think about solar and wind power. Yes, if we were not all enslaved by the Govts., then we could just sell the electricity in the open market, but with millions of regulations and high entry cost - it's not as easy as Bitcoin mining way to convert electricity into some personal power (a.k.a. money).

Third point - it's just FUN. People are playing on the stock market in a WAY more hostile environment, geared to cheat and rid small players of their money. Bitcoin scene is very refreshing after THAT. And, yes, investing $15,000 you don't have is probably not a good idea, but investing $1000 certainly is (just think about all these loosing tens of thousands of USD on futures and Forex).

But's are't reasonable miners constantly cashing out while they grow their mining farm?

Not necessarily. I will not cash out below $20. Sure, mining AND investing is an even higher gamble, but it also makes it more phun(tm)!

I have to admit that all of this was just an excuse for me to build a new gaming PC. :)

I spent about 1500 USD for a system with a Trifire of 6970's and there's just no way I'll ever break even on it since I only started mining like a week ago and I have like 6 BTC to show for it so far. If I were to sell it on the exchange, I'd get like 90 USD for that, lol. Almost covers the Blu-Ray burner I picked out.

I'll let it grind through the whole summer but I do not expect to pull out more than 50 BTC when all's said and done before the difficulty gets cranked so high that it becomes weeks between BTCs even with pooled mining. Maybe someday they'll trade for 40 USD and I'll break even on the system if I choose to cash in but they can just as easily go to 0 USD, too.

Finally a person who has a pretty clear perspective of his own situation without clouding it with self reassuring lies. Right now at current exchange rate there is no possible way to recover your cost or even expect to mine more btc than you would if you purchased instead. If you are one of those people that keep telling yourself that this isn't the case because you are a miner, you will most certainly be in the loss in the coming months in you decided to jump in now. Just consider it more of a discounted gaming machine if you will at best. I wouldn't expect to recover cost at this junction.

Price increase, as much as people like to believe, is not in any way directly related to difficulty increase. One does not raise to lower the other simply because of it's changing values. It has moved in sync somewhat in the recent past to mask or make it appear so, but our recent 100% jump in diff didn't do a thing to price. In fact it dropped considerably after the speculative initial news reporting of Bitcoin from major media channels caused a major hike in price. None of this was in any way done by the difficulty increase and it won't matter in the future if general speculations of bitcoin will influence price in similar fashion and it will.