Bitcoin Forum

I was just wondering with the increasing difficulty why the demand is still there for some seemingly high priced (though somewhat readily available) miners that don't seem like they can break even.

(AnonBitcoinBuyer posted this on a group buy thread and it seems reasonable.) Can anyone with a better understanding of the difficulty, calculate something more detailed and farther out?

So, an erupter USB stick at .5 BTC (333Mh) or so is probably not going to pay for itself with the difficulty going up as it is. And, a blade costing 10.5 BTC (10-13Gh) or so might not as well.

The reasons why people are so game to get in, might be:
Support the network (me)
It is a hobby, if you break even all the merrier. (me)
A more anonymous way of getting your hands on BTC's.
Expecting a much higher BTC price (but even then, buy them now).
Want to take part in the largest social experiment (outside of money itself) of all time. (me)
???

Personally, I got into a group buy for a 400Gh machine with an October delivery. That probably will be profitable if it arrives in October.
My Jalapeno that was ordered at the beginning of June probably won't break even if it comes later than late September.
My chips ordered through a GB and placed though Yifu, might never come.
A wash?

Lots of chances...
IAS

well, USB miner is so effective, it's profitable even with difficulty around 2 billion (electricity costs at 0.15USD/kWh, 1 BTC at 100 USD), which is 44 times tomorrow's difficulty. You will certainly make your money back (also, they cost 0.32 BTC, not 0.5)

If you buy an asicminer and the price per unit drops, you can buy additional units at a deep enough discounts to make your average purchase price match the new price.

Short term profits can be better than buying a business or stocks. Long term, hope for the difficulty to slow its climb.

I agree, if you can wait these will pay back

Because emotion and greed appear to overpower rational thought and impair basic math skills.

I was sort of leaning towards the combination of greed and excitement. (Can't discount the latter). And throw some hope in there.

But guys, regarding the Erupter's being profitable, how can you say that? (And then that would apply moreso to the blades as they are a better deal.)
After the difficulty goes high enough, they will be just like CPU's were a few months ago?
Let's see some numbers please.

Thx,
IAS

2 BEs@5watt give roughly the same amount of hashpower as an overclocked 7970 @ 250 watt. It's all about how much power you consume vs how much you can hash. For me it's just an intermediate reinvestment moving from GPU, while waiting for a Saturn (which migh not or might be late, whereas those BEs are already hasing). Oh, and my power cost is $0.065 / Kwh  ;D

It's possible, but even if they do this could take a very long time.  Not great from an investment perspective.

This site is interesting for calculating profit with an increasing difficulty. http://www.coinish.com/calc/# (http://www.coinish.com/calc/#)

I just ran it for an erupter and at todays difficulty, increasing at 1.3% per day, with a cost of $50 (average from ebay and GB's) we are looking at around 4 months. So, not actually that bad.
A blade will pay for itself in roughly 3 months.

I'm surprised at the results. Curious if anyone else has run numbers.

IAS

I think you need to run these numbers again and read the "considering reduction" line items in the table.

For me, it is the Hobby aspect...  and an addiction to seeing my hashrate constantly increase. :P

Excuse my ignorance and I did look at the table, but I don't understand how to apply that value in the table. It does describe it when I hover above it.
Break even is at 156 days W/ (power cost at .3), 333Mh, investment 50. Difficulty at 50 mill, which I think is temporary - KNC Miner testing?
Thanks for mentioning it as I see the value for "considering reduction considering the reduction in mining results" is set to never. (It is set to days as you know. Setting recommendation?)

Trongersoll - Yes, there is a huge hobby factor, agreed. But the costs should be lower, we should be profiting, not just "hobbying" so to speak.

IAS

Yeah, the 0% return for 1/2 a decade isn't very hot?

my blade is still at 1btc per 4 days so im happy :)

This. 

I'm spending a few BTC replacing my GPUs with USB Erupters. 

4 USB sticks using 10W are doing 1.2GH/s - they're plugged in to a USB hub that sits on top of my workstation (an i3-3220T machine) - the PC AND the USB sticks are using less than 90W in total.  They're not deafeningly loud, and aren't adding a bucket load of heat to the house.  They're replacing 2x7950 and a 6970.  90W vs nearly 1kW. 

The BEs are cooled with a single 120mm fan (salvaged from a dead PSU) blowing past them, which is running off an old Netgear router PSU, all stuck to an old Moduvent from a Fractal Design case (plastic with foam backing).

I'll be selling the 7950 cards soon, and going by my previous GPU sales, I'm not going to lose any money on them as they were bought used off eBay.  The 6970 I just sold not only mined me about £300 worth of BTC in it's life, but it sold for £10 more than I paid for it.  The 7950 should break even, so again the BTC they produced have paid for the BEs, and anything the BEs make is pure profit from now on. 

Then there's the boxes of fans, the piles of big PC tower cases, the 1kW PSU....all that will be going on eBay, hopefully again making back what I paid.

Nice story, but what about guys without that story and just buying erupters or blades, etc? I really think the miners need to be sold with some resemblance of a profit in mind. (The larger ones are but outside of GB's are prohibitively expensive for your average Joe.) With a high BTC price, yes they will be very profitable for a short while as then you can be sure more miners will suddenly be made.

I'm still wondering about what networksgeek24 said above. Anyone with an understanding?

Thanks for the replies,
Its about sharing

also it's been proven regular people have difficulty with large numbers and exponential growth concepts.  They also value the setup labor and their time poorly.  They look at a USB and think oh wow 25% per month return holy moly get me a dozen.

I bought 2 ASICMINER sticks just to have them while I wait for my 'bigger' hardware orders - I like the blinking lights and the hashing graph...

Thanks to networkgeek24 for his reply to my PM, regarding this Mining Calculator http://www.coinish.com/calc/# (http://www.coinish.com/calc/#). Here is a great description regarding the depreciation field I asked about above.


So, when you look at what people are saying regarding difficulty increasing, getting into mining (outside of maybe large group buys delivered ON TIME), will rarely return the initial value.
Next level here (60 million) http://blockexplorer.com/q/estimate (http://blockexplorer.com/q/estimate) or here (67 million) http://dot-bit.org/tools/difficulty_bitcoin.txt (http://dot-bit.org/tools/difficulty_bitcoin.txt)

Some nice links on calculated difficulty predictions, and it seems like most predictions are between 200 & 500 million for December:

Google Spreadsheet (200-300 million difficulty). https://docs.google.com/spreadsheet/ccc?key=0Auya3iRE6az1dG9fRkpXdFJtT1dNX0VCU1F0VFFUX3c#gid=8 (https://docs.google.com/spreadsheet/ccc?key=0Auya3iRE6az1dG9fRkpXdFJtT1dNX0VCU1F0VFFUX3c#gid=8)
Google Spreadsheet thread (400-500 million difficulty) - https://bitcointalk.org/index.php?topic=236050.0 (https://bitcointalk.org/index.php?topic=236050.0)
BFL Forum https://forums.butterflylabs.com/bitcoin-discussion/3964-tracking-bitcoin-difficulty-changes.html (https://forums.butterflylabs.com/bitcoin-discussion/3964-tracking-bitcoin-difficulty-changes.html)

IAS

I paid cash for a BFL 60 gh/s unit at a pretty heavy markup in USD. While I don't think the unit will ever generate the number of bitcoins I could have bought by investing that money directly in bitcoins instead of the unit, I do expect the USD value of my BTC will eventually exceed what I paid.

So you will lose funds.  You could have bought BTC instead.

If you buy a miner (a device which produces BTC) it doesn't matter what currency you spend it has an equivelent price in BTC.

If the price if 1 BTC and over the life of the miner (becomes becoming obsolete and going dark) it produces 0.99 BTC net (after electrical cost) then you lost.   You could have instead just held or bought 1 BTC and had 1 BTC.  The future exchange rate can't improve your return.

Simple version:
you always have the option of simply buying Bitcoins so for a miner to be more profitable it has to return MORE bitcoins than it purchase price.

Correct. It was not the most optimal decision for the best ROI. I'm chalking up the difference in returns to the value of the fun of having the unit, tinkering with it and it being a conversational piece. There's definitely a luxury non-investment component to my decision.

It's sort of like people who raise their own coop of chickens for eggs. They'll never be able to produce eggs as cheaply as efficient factory-farms or even big cage-free organic farms, but they do it anyway because it's kind of fun to make your own.

If everyone stop mining and start buying BTC instead of investing in mining, price will skyrocket. Maybe this is one of the reasons for the late spike.

If everyone stops mining, the network will collapse and the price will plummet.

Sadly, behind the veil of greed, people forget that the primary function of mining is transaction processing and securing of the network.

This.

But also, say Moebius327 just mean "lots of people" and not literally everyone. It doesn't matter whether the network hashrate is cut to 10% or skyrockets to 100x what it is now. Either way the same number of Bitcoin get created. Sure, he's saying more people would be buying so I suppose demand increases some, but I'm not sure I'd call that a skyrocket.

Personally, I think the block eruptors are going to make great stocking stuffers this year. I just wish there were green ones to go with the red ones.

Investing to minng is better than buying BTC if you believe the Bitcoin will be very successfull project, because if you just buy BTC, you dont increasing difficulty, and increased difficulty means more secure system thus very successfull longterm project

Something that I've added elsewhere that warrants a mention here:

I have the feeling, and it makes sense, that companies and large money getting into or already into mining, are going to (or have already started) rolling money in purchasing BTC's. They are supporting their mining investment. They may then hold coins that are mined and "invest" in BTC's via purchasing them outright. It is a very small market, all considered, so they can theoretically prop it up and start some buying. Greed takes place when the price starts moving away. They only need get it started, here an there.

So, they are supporting a new business in a similar way that many businesses do. E.g. - Amazon sold books at no profit to even a loss, in building up their business.

Same number of Bitcoin will ultimately get created true. However, it's the amount of time that its going to take to create that finite amount of bitcoin that is going to be seriously reduced by exponentially increasing network hashrate. I too would agree that the money seems to be starting to flow into actual BTC value now that large mining players have already dumped large amounts of cash into 1st and 2nd gen ASIC pre-orders.

And what happens as bigger and bigger money gets into mining and doesn't need to sell coins? And what happens when they re-invest into purchasing actual BTC's.
Seems like the future market could actually get cornered. In other words, lots of the remaining coins to be mined, might, NOT be sold for a while (till the price is where they want it).

Over 60% of all coins have already been mined.
Daily minting rate is down to 0.03% of total supply (and falling).
The amount of coins traded daily is a magnitude more than minting.

Simply put newly minted coins are a small and shrinking portion of the total supply.

Let's just be clear about this. (With a little room for error of course) over any given month exactly the same amount of Bitcoin will be created. Not "ultimately" as in over the life of the coin, but "ultimately" over any given day (there will be variance here), week (less variance), or month (even less). The only time that more or less Bitcoin is created is before or after the block reward is halved. This will be just as true if the network is running 50 hashes per second or 50 exahashes per second.

The only thing that is different is how long it takes a given individual to get some of that, if that individual is not increasing his or her own hashrates proportionately to the sum of everyone else's hashrates.

That might be exactly what you meant, but what you said about "the amount of time that it's going to take to create that finite amount of Bitcoin […] is going to be seriously reduced" made it sound very much like you're working on a misconception. If I was wrong about that I apologize.

roughly 1800 coins are mined at a day. At a current cost o $120 we are talking $216,000 per day or $1,512,000 per week or $6,552,000 per month. That is a pretty damn big number and think about when BTC hits higher values. Those few coins become more valuable, if BTC is becoming more valuable. What will be cheaper, mining a coin or buying one? Gamble? Etc.

So, if we are talking a finite supply, we can see how the value of those coins might come at a premium - at some point in time. Sort of like gold mining.
When, or rather if, the price of BTC's are exceedingly high, then mining even fewer BTC's will still hold lots of value. Perhaps a fraction will hold much more value than whole BTC today.

great value. Really, if BTC is successful, it is just a matter or time. This year, next year, etc?

I get the feeling we have lots of growth in store for us...

We are still in the early adoption phase...

I believe it has something to do with impatient and sometimes irracional nature of humans

IM with you here. Also having the machine mining the coins over time gives me less incentive to spend them.

Double all your numbers... ~3600 coins are minted per day.
25 coins per block found * (6 blocks found per hour) * (24 hours per day) = 3600 BTC

Bingo and now collectively we will see what happens and pay that price.  I will repeat it again, we are in a zero-sum game inside of an ASIC arms-race.

Well, nothing wrong with breaking even if you are helping the network, not to mention doing a hobby. For a lot of guys this is a hobby. Outside of metal detecting, I don't see many hobbies that can pay for themselves. And for many, I bet they can write off the miners and such as expenses.

Not saying it still isn't a risky game to play, I agree. There are scams out there to boot.

A lot of people go back and forth on ROI but the way I look at is, all I need to do is break even mining BTC with my block erupters. Nobody is going to make it rich with them but even as the difficulty skyrockets and bitcoin becomes unminable, I will still have the hardware in hand, which I can turn toward any alt sha256 coin. Nobody is considering in their ROI calculations that the physical miner itself has value. You can either sell it for cash or bet on its long term value for mining alt coins.

Erupters will give 0.005, right now. How long will it take to you get ROI back?

I have a few of them, I pay $75 on each... and its not looking good.

Sometime early next spring at the latest I expect to have my investment back, assuming the price of bitocin does not change. But I plan to move them off of bitcoin mining before that. Alternate coins are more profitable for mining unless you have a lot of mining power at your disposal

For the time being, no SHA-256 altcoin is more profitable:
http://www.coinchoose.com/

PPC and FRC might be right at the point when BTC difficulty changes, but that is quickly mitigated by their price change.
And TRC was insecure as hell until the latest patch, which everyone hopes will hold.

For the time being...which is why mine are mining BTC right now ;)  But a few weeks ago TRC and PPC were both more profitable than BTC. The recent price surge on Gox has put Bitcoin back on top though.