Bitcoin Forum

Here is my mining spreadsheet.

Assumptions: (PLEASE FEEL FREE TO CHALLENGE):

• Value of a BTC will always be related to the cost of power to produce it, since that's directly related to difficulty, which in turn is related to Bitcoin's popularity
• I am assuming today's BTC's are worth 57 cents, despite 0.85 at MtGox
• I am assuming difficulty will rise 30% every ten days
• I am assuming my two 5970's will always give me 1.2 GHash/sec
• I am assuming my mining rig cost me $2000, and my power is $0.095/kWh

If all these assumptions are even close, then by my calculation, mining should still be super profitable, even after paying for the equipment.

https://spreadsheets.google.com/pub?hl=en&hl=en&key=0AlC40w3H3dxKdFpJQWc3VlhyWUIzN1Y1UnpEaVlyOEE&output=html

Please feel free to suggest which assumptions I should adjust, if any.

EDIT: While these estimates show that one could buy 1227 BTC today and be further ahead, that depends on the difficulty rising by 30% every 10 days.  The point I am making is that mining should be reliably profitable, more so than buying BTC and stashing it away.  If it does not rise that fast (which is very possible), mining will yield more BTC that are worth less, but should still be just as profitable as I say it is.

EDIT 2: added a Sheet2 that assumes difficulty and value only rising 15% every 10 days, which is more likely as a long term average.

Yes, yes it is.

psssst!!! quietly! :-)

(You rised next difficulty to 50000 right now.)

># Value of a BTC will always be related to the cost of power to produce it, since that's directly related to difficulty, which in turn is related to Bitcoin's popularity

that is a very wrong assumption; just take a look at your numbers

The value will always be what the market decides. If everyone trading on the market was making mathematically optimal decisions, your first assumption would be valid.
This is the same reason as why salary is not equal to the amount of money needed to buy the exact amount of what you produced by working.

1. Bitcoin can fail anytime (see the thread about a google competitor) and electricity prices aren't the same worldwide.
2. I don't see how they can be worth 0.57USD when the market price is way above. Maybe I misunderstood something ?
3. I just can't estimate the growth in difficutly, there could be a jump-in or a jump-out of huge computation power anytime.
4. If you need the cards for other stuff than mining, you maybe do.

I don't get it where you get BTC value from. It's 0.57 cent in the beginning, but it get's unusually high over the time, even if your BTC count is not that high (~1200 BTC)

Very true.  But if someone steals Bitcoin and starts a new block chain, then I'm already equipped to take my mining there too.  And I will be there on the ground floor, instead of two years into it.


That's me being conservative.  I think BTC are overvalued in the short term.  0.57 comes from ignoring the huge recent hump in the overall growth chart.  If I am wrong, and BTC are really worth more, then mining is even MORE profitable.

I believe if anyone has a heap of $$$ to bring to the table, and they want a more reliable return, they will be reading this board first, and they'd be nuts not to throw it at MINING right now.  The ONLY thing that will make the value at MtGox rise, is someone bringing moneybags to MtGox, and nothing else.  By making posts and presenting evidence like this, I am very arguably preventing that from happening, singlehandedly.


You are absolutely right.  Mining controls for that though.  If there's a huge jump-out, mining will produce more BTC per miner.  Isn't that good?  That would make mining either the same profitability, or MORE profitable.


Maybe. but I have made the conservative assumption that I don't.  If I do, I'm profitable faster, since instead of a $2000 outlay in equipment, I am only paying its depreciation, which is MUCH less.  So, in other words, if I'm wrong, mining is even MORE profitable.

Wrong because it is other way round. Difficulty is related to profitability of mining but BTC price is supply and demand on the market. BTC can rise or can drop and difficulty can adjust accordingly.

Nobody knows what the price of BTC will be. Anybody who claims otherwise is either a fool, tries to pump the value of his holdings, or both.

the reason why I believe they are related, is because demand is directly related to the number of people who know about, and care, about Bitcoin.

And so is the number of miners.

If Bitcoin hits the 10 o'clock news, both will rise in step.

Actually, video cards for mining are becoming increasingly rare on the market, most places are sold out of the 5970, or want much more for it when it used to be $500 new.  You can hardly even buy it used on eBay for $500 anymore.  Lack of supply of GPU's will introduce an exception to the growth-in-lockstep assumption... one which would make mining MORE PROFITABLE

Like Raulo, I question your first assumption:


If someone decides to mine because it is profitable, then at some point they will want to collect their profit by closing their position.  Therefore, if they invested in mining equipment using USD or other traditional currency, then they will want to exchange BTC for USD or EUR or whatever once they generate.  This will create selling pressure and drive the value of bitcoin down.  Difficulty is closely related to mining popularity, but value is more closely related to investment and trading popularity.

You are right.  It will drive the value of Bitcoin down to what I think is its real value.  I don't think that the stable true value of Bitcoin can get much higher than the cost of producing new ones.  Why would anyone want to pay $10 for a BTC when it can be currently mined for 5 cents?

When Bitcoin is priced as a function of the goods and services and the productive capacity of the community surrounding it, as well as the cost to mine it, the value is more stable and real.

When Bitcoin's price shoots into the stratosphere after a $10k buy and plummets to the ground after a $10k sell - a consequence of a very few people hoarding it and making it artifically scarce because they expect it to be worth millions down the road - Bitcoin becomes highly volatile and makes it unattractive as a means of trade.  It makes it more likely that someone who wants to give Bitcoin any serious merit will look to dump the block chain (and all the "hoarders" with it), and start anew.

I would rather see 25 cent Bitcoins that stay that way, rather than 1 dollar bitcoins that pop when someone sells a few.  I feel that if I can encourage more people to mine, the day when 1 dollar bitcoins are real and don't pop at the slightest pressure will come sooner.

If Satoshi thought leaving the mining to a privileged few was a good thing, he would not have built the "Generate Coins" option into the client.

I like the way casascius is thinking.

Would it be correct to paraphrase: Mining difficulty is underlying drive for increase in value of bitcoins, not the other way around.
(although there is a certain amount of feedback)

Would be interesting to see a plot correlating network difficulty and bitcoin value (as based on a basket of commodities and currencies).

Only when we get some big cabinets full of racks will the value really head up and stay up. The mining hardware is the concrete under the floor of the BTC.

On that note, has anybody had a go at porting a miner code onto the Tilera chipset?
http://www.tilera.com/products/processors

Linux SMP and other lower-level data-planes are already ported and apparently, they have very good integer performance  ;) , i.e., for network security, QoS and DDoS, digital video.
I'm trying to get hold of an evaluation board but it seems they are held in tight supply unless you want to buy lots of 10,000  :o

That 5970 is going to be pretty hard to beat.

I looked at the hashing code for the 5970 at the assembly language level.  It does a pretty dang good job of parallelizing the workload.

The 5970 has 3,200 "stream processors" which each have 5 distinct ALU's, so that's a total of 16,000 ALU's.  In its most efficient configuration, each set of 5 ALU's is working on 2 hash attempts at a time.  The ALU's are what do the dirty work of hashing, and the OpenCL compiler does a pretty good job of parallelizing the workload to keep all the ALU's busy.

The gross number of ALU's in the 5970 come at the expense of them all being relatively "dumb".  General purpose computing (specifically, if-then-else branching) is very expensive for them.  But bitcoin mining needs negligible branching, so the 5970 favors it.

Without a similar number of available ALU's, I'm not sure what platform will really outshine the 5970.

If they are nothing more than 64 normal cores on steroids, and it can run Linux, then running a CPU miner should already work.

$75 million USD by next year? With 2 5970's?
You're assuming that people are going to pump billions of dollars into btc.

http://ragecomic.appspot.com/packs/laugh/images/Laughing.png

This was exactly my face when I read the spreadsheet.  The difficulty rises when the btc price makes it profitable to mine.  The btc/usd exchange rate does not necessarily rise with increased difficulty.

Actually, I'm smarter than that.  The only point I'm trying to make is that you'll quickly do better than breaking even by mining, not that you'll become a millionaire.  Construed literally, my spreadsheet could be read to say that if you buy 1227 BTC today, you'll become a millionaire.  Obviously not very likely.

The bazillions only appear as a result of how many rows I hit paste on.  Obviously BTC can't continue to grow at 15% or 30% every 2 weeks forever, with world population (and the world's budget for GPU's) as an obvious limiting factor.

I deleted the rows dated far into the future to settle that.

Yeah, I agree. Looks like the Tilera has only 1 ALU per processor, so 64 total or up to 100 on new chip ... not in the same league as the 5970.

I'm going to point out that since I started messing with Bitcoin last week, the estimated time it would take to find a block doubled. That seems less like 30% and more like 100%.

I moved from a daily average of 12 btc to a current daily reward of 8 btc in one month, due to the recent difficulty increase.
I've a an ati 5870, ~330khash/sec

I think 5970 is highly overpriced for mining.
Let's say your price of $2000 for double 5970's box is quite reasonable. And it's output is 1200 Mhash/s. But for $1200 I can assemble 3x5870 box with ~1000 Mhash/s output. In the first case you pay $1.66 for Mhash/sec and in the second case only $1.2 for Mhash/sec. So I think it's not that important how much Mhashes your system can get overall, more important is how much you pay for Mhash you get.

But I'm quite a noob in mining may be there are another reasons in getting 5970s.

If you go the 5870 route, you will need more cpus and other parts of the computer to run them, which add nothing to mining. 5970s allow you to spend less on the useless things (cpu, ram, hard disks) and spend more on acquiring more 5970s. :D

If you know what you are doing and can source the parts a dual 5970 can be built for under 1400.

What, using a bunch of used parts off ebay? 5970s are too expensive and hard to get to build a dual-rig for under 1400 using new parts.

Thats the main reason the difficulty will slow down. They no longer manufacture 5970's either.

ATI is going to wonder one day why the 5970 sold like hot cakes.

When the gamers start unloading 5970's when the next greatest Nvidia comes out then miners will be scooping them up ... there are refurbished sources around if you can find them.

The 6990 is coming - at some point....

I think, it will be quite expencive

If the value of bitcoin falls below the cost of mining, difficulty will fall as mining slows down. As long as there is mining to do, the market will find a difficulty level to make sure it's profitable for someone to do it. (If difficulty falls to 1, someone could just switch on their miner and claim the 50 BTC with no cost at all.)

I agree with casascius that the value creation of the bitcoin economy will back the price of bitcoin. In the long run that's what will drive demand and mining will become less important.


Agreed.

The problem is that you didn't read PDF. Every 4  years it will get less of an award. And as the computational power goes up(competition), you will make less and less. Towards the end of the cycle it would become useless to mine. The "Rush" is within the first 4 years. This makes sense, to give legitimacy and value to the system. But in 2012 cut your numbers in Half. In 2016, cut them in half again. And to make it a more realistic sheet tie the BitCoins to an intrinsic value (i.e. Gold) to properly gage value. Allow the fluctuation of the value in the cells. (don't know if Google allows an OLE function but that would be cool).

Basically your sheet does not show diminishing returns, so you will not know when to stop.  Keep a EI:EO ratio.  Energy In:Energy Out. When you reach >1.0 Stop because you will be loosing money. If the Market changes and the EI:EO ration falls below <1.0 start again.  Because BitCoins is a finite resource (fictional that it be) you will be able to time the market pretty closely because it is Math and not actual digging. Jump in and out at the best probable times.

Check out Hubbert's Peak Oil formulas, they would apply here. (BTW, we have passed it on a world scale for Oil Production, the US was in 1972)
--> Shell tried to keep it secret, didn't want to scare anyone.

Also the true count in Black Jack could be applied to know when to place your bets (Start your mining Ops).

It's bull shit. Value of BTC is a term of trust. Nothing more. Mining is a waste of time and cost.
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It's bullshit. I got a 5750 back in December for $100, right now I have mined 450BTC. Already had the most of the rig, though.

And now, the cost from the powerstation, please :)

That is interesting. I think you have something. But shouldn't it be stated that the minimum value of the BTC will be the cost in power to produce it. But that will be declining over time sense production will become less and less. Then the minimum value will be the cost to transfer them from the wallet.dat file.

But that is not unusual, the minimum value of a coin, or paper is its intrinsic value for the user, or its intrinsic value plus cost of production for the producer.  BTW all pennies <1982 are worth 2¢ in copper. Good way to double your money.

You can charge a 10000$ for a making a hole of a 10mx10mx10m. It has costs. But any value.

Funny you should mention that, I was watching a show about the Garbage Industry.

They charge your for digging the hole, they charge your for bring stuff to the hole, they charge you for putting stuff in the whole, and they charge you for covering the hole. Then they do it all over again.

It has a lot of value to them. No wonder the mafia runs the biz

and why they still sell for a good price on ebay ?

ill just leave this here
http://bitcoin.sipa.be/

well dont tell anybody jeez  ;)

What are we really seeing here? This is the first time I've seen this graph, but is it projecting difficulty will be going down, or am I reading things totally wrong?

Yes, the difficulty was artifically pulled up by Mystery Miner operation, so when he disconnected his botnet, it is going back down. Also probably many users decided to not buy another rigs during previous difficulty window, because hashrate started to rise exponentially.

Hmm, how does this correlate to the difficulty shown in the Bitcoin Generation Calculator?
I'm asking as I check daily and I saw it stick at the current 76,193. Does this mean that the difficulty will go down from here, or, it was about to be inflated further and that effect was negated?
Thanks, just trying to make sense of the data.

If things remain as they are it means that it is better to switch off your miner and start it again next week sometime (after difficulty drops) .... unless mystery miner come backs to stick the knife in again just before the next jump.