Bitcoin Forum

All this talk I see of the difficulty going up to 100+ million and that ASIC's will bring GPU's daily reward down by many factors of 10/etc are really confusing me... Isn't it pretty safe to assume that due to the mass increase of $$$ put into "strengthing" (not speeding up, the difficulty adjust will maintain the same speed more or less) the network give us at least a somewhat linear change in BTC trade value? I don't expect it to level out overnight, surely as ASIC's come online the GPU $$$ daily reward will seem to go to shit, but 5-6 months down the road if BTC is at $500/coin (which is a prediction nobody can deny or confirm) will the GPU guys really have missed the boat?

Why do I think the price will rise? because the increase in hashrate will make BTC be that much more "scarce."


Flame suit: ON!

Bitcoin price has no correlation to mining difficulty whatsoever.

Bitcoin will not become more scarce. There still will be 3,600 coins mined a day for the next 3+ years until the block reward halves again.

Why then has the price been climbing pretty steadily? (ignoring the bubble from last month of course)

because of demand greater than the supply

And increating the hash rate doesn't increase the demand?

Increasing the Hashrate will increase the supply which normally lowers prices, but as bitcions are accepted at more places everyday, demand increases which has an upward effect on the price.

Not really, no. Sure it'll make bitcoin more secure against govt ASIC attacks, but that won't really translate to more demand, as it's a pretty unlikely scenario anyway. So no, price won't go up just because difficulty will.

No, I'm pretty sure the difficulty adjustment is to secure the supply at a fixed rate, it's built that way.

I still stand by my hypothesis that more hash rate means more demand because there are more hashes (depend) being put into each block found... thus making each bitcoin effectively more scarce... While the rate of generation is constant, the effort put into them is far greater.

Where block/hour remains fairly constant, hash per block goes up.

Difficulty 10,000,000.

~90Thash (pulling numbers out my ass) = the preferred 10 mins/block

where at difficulty 50,000,000

450 Thash = 10mins/block

When you break it down, each has nets you less of a bitcoin... irregardless of power usage/efficiencies. That alone I do believe (especially considering the numerous users who don't even mine, but just trade BTC) will drive the overall price of BTC up.

If you asked people a year ago if GPU mining would be dead in May 2013, most of them would probably have said yes. Of course, they had no way to know that a bitcoin would increase 10x to over $100 per coin.

Could the price of a single bitcoin go up over 10x to over $1000 per coin by May 2014? It's possible and may keep GPU mining viable, so without knowing the future price of bitcoin or future difficulty levels, it's a complete crapshoot, and your guess is as good as mine.

Personally, if I think I can make back my hardware investment in 3 months or less, I buy more hardware. If not, I wait.

ASICs are few and far between, and given the outrageous prices they are selling for and likely 6+ month ROI, I'm not buying.  

Even if bitcoin goes to $10k or more a coin, it doesn't mean GPU mining will be worthwhile if ASICs are readily available and much cheaper than GPUs.

ASICs hardware manufacturers have zero incentive to sell ASICs hardware for less then they think they can make from using the devices themselves.

Thus far, with the exception of Avalon batch 1, they haven't sold ASIC hardware for less then they think they can mine for themselves.

ASICMiner is abusing the heck out of the bitcoin community because they can (13 GHs blades are 50 BTC, and 300 MHs USB miners are 2 BTC) and have little to no competition at the moment.

I hope we'll see the day where ASICs are readily available for reasonable prices, but that day seems very far away at the moment...

Good I agree totally DONT BUY GPU's !!!!!

Is a done deal u will lose money !!!!!!!!!!!!!!!!!!!

Also I just bought 25x 7950's and are getting another 30 in about 2 weeks so I dont wont u drying up my supply .....lol

Why do you think effort put into mining a bitcoin has anything to do with it's price??

It's the other way around. Higher prices mean mining is more profitable so more people will mine. It's the other way around.

Plus bitcoins aren't more expensive to mine now. A 65 gh/s cost $1500, that is equivalent of a GPU that does maybe 4.5 gh/s. Mining has gotten cheaper, not more expensive.

Please show me where I can order a 65 GHs ASIC miner for $1500 that will ship immediately? In order to secure a 65 GHs ASIC miner at the moment, I think it will cost you 250 BTC (5 blades * 50 BTC each = 65 GHs for 250 BTC = $30,000 USD)!  :o

I have no doubts the ASIC miners will turn larger profits, but I don't think it will negate GPU mining at all..

The jump from CPU -> GPU in terms of hash rate (not effeciency) was almost literally 100 fold... the jump from GPU's to ASIC's is looking to be only about 10 fold.

In that a ~$300 cpu would get you ~5mhash OC'd to the max, a ~$300 video card would get you ~500mhash OC'd to the max, and these new ~$300 ASIC miners will only get you 5000mhash. In terms from the step up from CPU's it almost seems like a rip off... BTC's price saw a steady jump with the advent of GPU mining as it became more difficult and more $ was invested per btc turned out, in spite of the fact that BTC was still churned out at the same rate.... I think we will see the same with ASIC's.

You can't buy it because you missed out. When Avalon ships batch 3, there will be 100 TH/s of Avalon machines out there.

Or you can buy discrete Avalon chips for about $9.50 for 282 Mh/s. That is $2200 per 65 GH/s. Even taking into account cost of the PCB and power supply, that is still in the same range.

Or you could have ordered BFL for about $1300 / 60GHs.

ASICMiner is more expensive, but it's only for the people who have missed out. Their prices will come down when the Avalon chips ship and you see DIY Avalon machines anywhere.

They do indeed have incentive to sell -- particularly, to pre-sell. Designing and fabricating ASIC hardware costs months and millions, and Bitcoin is a pretty tiny market. I think it's an "avg" block mining duration of 20m, right? 25BTC*3=75BTC/hr*24=1800BTC/day. Multiply by current BTC price ($120-ish), and you get $216k/day. It's a pretty small market, and not too many people are going to want to make multi-million thrive-or-die bets on producing a boat-load of ASICs -- certainly not hardware manufacturers. Allowing pre-orders (whether the hardware or allowing would-be consumers to purchase equity in the company) is one of a small handfuls of way these designers/manufacturers have any shot in Hell of being able to produce these devices.

Consumers basically get a discount for extending a loan to the company, and we've seen how that is good, and most prominently in BFL's case, how that can be very bad. In the near future, if manufacturers can just snap their fingers and have 100TH/s of ASICs within a week without needing third-party financing, then they'd have no incentive to sell for a rate that's profitable both for manufacturer and consumer.

Bullshit.

Avalon batch 3 isn't shipping yet, and they cost 75 BTC (~$9000). Given that batch 2 is just now shipping, it looks like batch 3 owners still have to wait a few weeks.

It is a big jump from buying discrete Avalon chips to getting a working ASIC miner. Has anyone actually done this yet besides Avalon? I think not.

BFL has yet to ship a 60 GHs machine to anyone. As far as I know, all they have done is shipped a handful of 5 GHs machines.

It's not as hard as you think to make an ASIC miner with Avalon chips. And a lot of people are working on it.

Once Avalon batch 3 ships and BFL begins to ship in quantities, and ASICMiner deploys the 200TH/s worth of mining equipment they have, you'll see ASIC prices come way down because it won't be profitable anymore. GPU mining will be long dead by then. As dead as CPU mining has been for a while now.

GPU's will be good for a while still. New GPUs can still be paid for in 4-8 months.

After that, it will depend on your utility prices and the BTC exchange rate.

Contrary to what was said earlier, there is (currently) a very good correlation between difficulty and BTC exchange rate. That means that, even though GPU's will mine a lot less BTC, the BTC will be worth more in fiat terms and this will probably offset the dip in BTC mined (so you can still pay your bills and keep your GPUs running).

This is of course an educated guess, as everything is in flux...

A lot of people purchased Avalon chips hoping that they'd be able to do something with them when they arrive.

I suspect a lot of these folks are going to be disappointed to learn that there are very few legitimate options to turn their chips into a mining machine, and the ones that do exist will either be very expensive or have a huge backlog.

Designing and manufacturing circuit boards is not a walk in the park, and requires some serious technical know-how combined with very expensive machinery.

We'll see...

Yes, it requires some knowledge, but Avalon is basically providing the circuit specs, it's just the layout that needs to be done. There are plenty of companies that will run your board design to whatever quantity of boards you want (the more, the cheaper). That's definitely a non-issue. I'm certain there will be at least two competing designs ready in time for the chips. Populating the boards might a bit more problematic--SMT parts are not exactly DIY-friendly.

New gpus can be paid for in 6 months at CURRENT difficulty, which will not last. Contrary to your contrary there is no correlation between price and difficulty, there is a correlation between difficulty and price ( in this case order matters ). This means that if difficulty goes up price doesn't change.  GPU will be run out by ASIC. The only question is how long til then.

I think this derailed the conversation.  It looked like he was arguing that GPU's would still be quite valid in the future as the price of a BTC rises.  If we were still at last years prices with today's difficulty GPU's wouldn't be worth it.  We never would have gotten this many people putting their processing power in without the rise in BTC, and couldn't have gotten to this difficulty.  The price has a lot to do with total network hashrate.  As ASIC's come in, the future of the GPU will be determined by the price of a bitcoin, like he said in the first post.  There are a lot of people with a lot of bitcoin who want it to succeed, the price will rise.  GPU's future look fairly rosy.  :)

You are confused. The word you are looking for is "causation". You want to say that correlation does not imply causation. In other words, the fact that A and B are correlated does not imply that A causes B or that B causes A.

Price and difficulty are highly correlated. Just look at the graphs. It is pretty obvious. Keep in mind that totally unrelated things can be correlated (that's called a coincidence).

Anyway, it is easy to make the case that price influences difficulty: If the price goes up, more people mine and the difficulty goes up. If the price goes down, less people mine, and difficulty goes down.

It is not so easy to make the case that difficulty influences price, though you could make this case: difficulty and price are both influenced by interest in bitcoin.

Now, for the future of GPU mining...

The point was made that even though GPUs will be able to mine fewer and fewer bitcoins, the rise in the price of bitcoins will continue to enable profitable GPU mining. Unfortunately, that is probably not true because of the economics of the mining market. The mining market is (will be) nearly perfectly competitive (http://en.wikipedia.org/wiki/Perfect_competition). That means that operating margins will be very small. As a result, only the most cost-efficient mining will be able to compete, and GPU mining is much less cost efficient than ASIC mining. I could do the math, but I think it is pretty clear, and I am lazy.

On the other hand, GPU mining will remain feasible where electricity is cheap or free. Also, people might continue to mine with GPUs for fun or for some other reason even if they are losing money.

Unless BTC keeps rising.  An investment in mining this year that doesn't cover electricity cost could make a very good return in a couple years.  At some point we could be looking back wishing we were doing processor mining up to the point ASIC (https://bitcointalk.org/index.php?topic=209750)'s came out, much less GPU's.

Simply buying the bitcoins instead of mining them would give you a better return in this case.

Erg ya got me!

True, but I can't find anyone to buy from :)  damn regulators..  was just about to gox some money to bits

Can you list any other coincidences that have been going on for 4+ years with predictable results?


I'm not trying to say that network hashrate specifically dictates BTC trade price (last month's bubble is an obvious example) but to say they aren't related is just bogus.

difficulty follows price and not the other way around. people will start mining because of the price increase, afterwards difficulty will adjust.

same way if the price decrease--> people will stop mining--> difficulty goes down

I think you stopped reading when I mentioned that unrelated correlation is the definition of the word "coincidence".

 I also think it is possible that hash rate and price influence each other (in other words, the causal relationship goes both ways), but I haven't seen a good case made for hash rate influencing price.

I believe they are correlated, perhaps even to the point of codependent.... a bit of the chicken/egg conundrum... price is affected by difficulty, and difficulty is affected by price. Discerning difficulty from hash rate is just ignorant, difficulty is defined by hash rate, I just took the extra step out of the equation in the OP.

As for them being a coincidence, no I do not think so.. Coincidences are things that happen to occur simultaneously whilst having no codependency or correlation.


EDIT:

I realize that systematically, that price and hash rate have no relation... a price is not explicitly set by how much power is on the network.. that's obviously implied

Price, as with any market, is determined by supply and demand at the combined market venues. I cannot support the argument that demand is increased based on increases in hashrate. It's not like people would look at the hashrate chart and say "Wow, hashrate has gone up! I need to buy some coins!" It's much more likely that buyers and sellers watch price and react to news, price movements, etc.--exactly the same forces that move stock prices every day. There is herd behavior, buying and selling panics, etc., just like any other speculative market.

Miners are not really a market force--they react to the profitability and turn on miners when profitable and turn them off when not. There is some feedback here; turning miners off and on influences hash rate and difficulty directly. As far as the coins mined...some miners hold, some sell...some mine AND even buy more (like me). So they are part of the market...or not, depending on their goals.

I just can't buy the argument that difficulty increases cause price to rise. Look at May 1 to now. Price has gone up and down post-bubble; difficulty went from <10,000,000 to over 18,000,000 (in a few days), an 80% gain. Price has essentially stayed unchanged--not reacting at all to 1.5% average daily increases in difficulty for 6 weeks.

ASICs will be profitable at nearly any price for a long time; there will be NO stagnation or decline in difficulty for the next year or so--it will simply keep rising, barring BTC price dropping under $10 or so. I can't see how that is going to influence price. On the contrary--all of the ASIC vendors accepting bitcoin for payment will be cashing them out (yes, buyers will be buying BTC to pay for hardware--but I'm betting that many ASIC buyers are putting existing BTC to use), which is downward pressure on price.

Supply and demand...that determines price, like any other market.

The big thing with Avalon chips is your in the ASIC game for $150ish per 4.5GH/s you don't have to put down a ton of money.