Bitcoin Forum

I'm a Bitcoin noob, and I was digging ebay auctions (mainly EU).
I don't understand why ASICs sell at a price well over profitability.
I used this calculator: http://bitcoinwisdom.com/bitcoin/calculator

Each bid price always escalate, with tens of bidders. People currently ends buying Red-Fury 2.5 GH/s at 80 Euro, Bi-Fury 5 GH/s at 160 Euro, and so on. For example:
http://www.ebay.it/itm/Bi-Fury-BiFury-USB-Bitcoin-ASIC-Miner-bis-wahnsinnigen-5-GH-s-Sofort-Lieferung-/251434458313

Assume having already in hand 5 GH/s. With difficulty increment step of only 30%, zero electricity cost, zero pool fee, it will never gain more than 40 Euro maintaining current BTC/EUR exchange rate.

IMHO:
1. ASIC buyers feel BTC will skyrocket to more than 10,000 USD.
2. ASIC buyers mine some weeks, and then resell the hardware, so they hope to end with a profit from sell+mining-buy.
3. Buyers are antique collectors  ;D

Or maybe there is something a noob can't understand.
Any hint?
Thanks,
Piero

Well ... you don't understand the "value" of a community work (to stay alive a tool).

It's like you buy a gamer PC to play at game.
A noob don't understand why because he has bid a TV with PS4 game plateform.

P2P file sharing is like bitcoin mining philosophy ... you stay alive 1To of files in a 24h/24 PC desktop for just a few guy like you.
It's a community work.

---

I have not bid a 12GH/s miner (462 USD) to win 0,01 BTC every 5 days ... i have bid this to support the network.

Meuh, I'm sure there are some sentimental people out there, but I don't think the majority of ASIC buyers are philanthropists.

It might be because many people don't know where to find information and are a bit gullible. Many don't understand how much hashes you need to generate even a decent amount. I'm not saying everyone is like that but if you buy on eBay some ASIC then you obviously didn't do any research. I think it is wrong to profit from such people but that my tuppence.

I bought my 5GH/s asic miner some time ago. It has already paid itself couple times. I would have made more money by just buying the coins though. I actually guessed this might be the case when buying the miner.

The main reasons I bought it were:

- I liked the bitcoin idea very much and I wanted to support the community. It was same thing for me when p2p filesharing started.
- I just love the idea that I have my own money making machine. Black box that makes money. It is almost like owning sampo http://en.wikipedia.org/wiki/Sampo (http://en.wikipedia.org/wiki/Sampo) :P


- Lastly this: "3. Buyers are antique collectors  Grin"

I want to be able to tell my kid someday that I was part of this movement. And to prove it I have my own miner :)

lol how many people do you really think are burning money for the sake of the community?

Media hype, good old fashioned ego, and likely some multiple-account bid-up schemes is my guess. I hope there aren't a lot of folks buying to "support the community" as those folks are just getting themselves fleeced and making bitcoin less attractive to new comers and reducing the size of the community. I have not bought significant bit coin nor mining hardware because the former is clearly very risky, and the later is only possible at a guaranteed 50-80% loss given stable prices. I've seen a few rigs out there at the higher price ranges that are more like 25% guaranteed loss given stable prices.

The maximum intrinsic value of a miner should be considered as total lifetime bitcoins calculated by the miner before it becomes more expensive to run than the bitcoins it generates given stable prices. Considering anything other than stable prices is market speculation, which is more efficiently done by buying coins directly. Even the stable price assumption might be a speculation given the trend in the last 1.5 months.

The only good reason to buy a miner is to make a profit, or for entertainment. Bad reasons might include laundering money, or for market speculation. Buying the miner for speculation is particularly bad because it ties up your money in a non-liquid form that takes days to recover (resell on ebay) or months to convert to bitcoins (mining).

So Every week or so I check prices and someday when there are miners for sale at a price far enough below intrinsic value to account for the market risk and lack of liquidity I may buy one. I don't expect that to be soon, because there are still many fools out there who heard about it on CNN, and don't do the math, probably many of them are buying second or third miners at larger sizes convinced that the problem was they didn't "go big" enough...

I have noticed that usb miner prices are improving, the going rate for an ant miner worth 15 dollars is about 50, whereas a month ago a 333 usb miner was 60 and worth about $5-7 lifetime intrinsic value...

End analysis you are right, nobody buying miners is making money right now, only the people selling them. Folks who got on early pre-order probably made money, but with the present hype and no new round of (very risky) pre-orders for next gen tech, there's no money to be made, just entertainment to be had, which is why one of my spare computers is mining trivial amounts using it's graphics card at a loss... just for fun, at a small cost.

I agree with fsparv.
I think one can spend a couple of hundred bucks "as a game", or even for the sake of community, but who spend many thousands of dollars must see some profit in it.

I saw even more priced ebay bids than these:
http://www.ebay.it/itm/Bitcoin-Miner-Bitmain-Antminer-S1-180-GH-s-1-3-KnC-Jupiter-Standalone-ohne-USB-/251432818710
http://www.ebay.it/itm/Bitcoin-Miner-Bitmain-Antminer-S1-180-GH-s-1-3-KnC-Jupiter-Standalone-ohne-USB-/251432829377

Maybe they buy ASICs, mine some week, and then resell the items.
IMHO it's one of the many ways to make profit with BC.

Did you factor in that bitcoin isnt necessarily always the most profitable sha coin to mine, and there might be other sha coins that come out in the future like unobtanium?

Because they are eBayers.

People are bad at math. Like, really bad

Difficulty increment of "only 30%"? why would you assume that? it's impossible to perpetually increase difficulty by 30%, in fact we may see significantly lower difficulty increases soon.

1) Why is it impossible? At least for the next year or more, 30% is easily attainable and IMHO, very likely.
2) Where's the evidence to suggest lower difficulty increase "soon"?

We are already nearly at the maximum performance of the asic hardware development, 20nm is pretty cutting edge. There can be no more significant improvements after this point.

If we increase by 30% all year, at the end of the year, a 3000GH asic miner, will be making $20 a month at current BTC prices. It won't be enough to cover electricity.

Also, last 3 diff increases were:

Jan 24 2014    2,193,847,870    22.59%    15,704,175 GH/s
Jan 13 2014    1,789,546,951    26.16%    12,810,076 GH/s
Jan 02 2014    1,418,481,395    20.12%    10,153,885 GH/s

In fact, I think we may NEVER see a 30% diff increase again.

1) Lots of people don't pay electricity
2) Whilst faster machines *might* be more difficult to make in the future, and that's a very big *might*, people can always make lots more chips with current technology
3) Mining equipment is going to come out that is a lot more energy efficient than current gen.

If you learn one thing from technology, is that it never stands still. There are always innovations when there is money to be made and people competing for that money.

Simply put , it comes down to lack of knowledge and understanding.

If you have children or if you can remember back to your childhood I'm sure we've all experienced situations where a kid wants something thats "new and cool" and the parent accidently buys the wrong thing.  The intentions are right but they simply arent that educated on that topic or item.

I don't see why the same wouldn't apply to minning.... especially with all the mainstream press coverage it's gotten. It's quite easy to understand how someone can think simply buying a minning rig will make them profits without knowing to figure out the math behind it first.

Same reason why people buy a 10BTC Cassicus coin for 30+BTC


Because there crazy.

1. Somebody always pay electricity, it maybe included in your rent (ur still paying for it), or ur leeching off your parent/employer, but somebody always pays. There's no such thing as free electricity.

2. Yes you can make more chips, but who will buy them if the profit can not even cover electricity?

3. no, there will be equipment that is slightly more energy efficient than current gen, but not "a lot more". We are already at 22nm, there can be no more significant improvements, or do you think asic manufacturers will develop better manufacturing than Intel? because intel CPU from 3 years ago (for example i7-2600k, has nearly identical performance as current gen equivalent i7-4770k, ok 4770k is slightly better, by like 3%)

I don't think people care about the electricity bills of their boss or their university.
Yes, someone has to pay the bill, but as long as it is not the miner himself, he don't really care.

I bought into some of the 333 mh/z cards to learn.  I knew I wasn't going to make money off them, but its been a worth while learning experience.

Then there are some that only see dollar signs without doing the math.

That's too naïve. Don't be fooled that people/institutions will never notice the unusual increase in their bills, it's only a matter of time until such mining hardware is banned from these "free" places.

But if its not the miner that is paying, the miner doesn't care about the cost, and so doesn't have to factor it into his price calculations. Basic economics. If you aren't paying for something, its free to you.

I think it is just fascinating. Even if the antminer I just bought only mined 0.001 bitcoins its whole life, its just cool that it is actually mining. Ya, I could have used that gift card to buy a shitty pair of Beats headphones all the kids are wearing but I would rather get a USB mining device and learn about mining bitcoin.

Man those ebay scammers...

again, not everyone is good with calculation and bitcoin difficulty, if you tell them they are going to earn blablabla bitcoin they will believe...

I imagine the category of hardware people buy for fun is mostly limited to the under $100 USB sticks. I bought one of the original block eruptor USBs awhile back while waiting for my KnC machine just to play around- I knew it wouldn't be profitable. But the market was flooded with them and the cost was below $20, so it was worth it to me. I think the AntMiner U1s are the same thing for this generation of the network.

I think the higher dollar stuff on eBay is really split 3 ways:

1. People who believe the value will rise astronomically. If they make 2 BTC and the price shoots to $5,000/BTC or more, not only will the BTCs be worth 10k but their old hardware will be resalable too.
2. People who believe they profit from another angle, such as mining a lesser coin or leasing out their box by the day or hour.
3. The ignorant, or willfully ignorant- people with gold fever.

I have to say, I sympathize with group 3 more then I ever thought I would. I was very fortunate to be able to get in with a second batch KnC Saturn, but its easy to get that panic feeling that your losing your place in the race and you gotta keep up. Just a few more GH/S! Even if you do the math and it comes out wrong (like I did with the KnC Neptune) you start trying to make it work, trying to convince yourself that if you put yourself in debt to gain the most amount of GH/s now, you'll be able to recover on the other side when bitcoin takes off. And of course, its quite possible your right. But, in the short term at least, its very possible that it won't. If you can't live with that, then you shouldn't buy in, but its hard to get past that sometimes.

I have gained a new respect for the poor folks who lost their shirts in the gold rush.

Don't tell them, I'm still trying to sell some HD5850s.....  ;D

Currently I'm mining litecoin with just one card.
I extensively did my homework (I don't have money to lose) and it came as a high risk, uncertain reward investment.

But I end up checking the pool and RDP to my mining computer every hour or so. It's addictive. I know I'm not making breakeven until 5-6 months form now, presuming the diff will only increase 3% per interval, which is hugely understating it.
But it makes me feel involved and active.

I had a similar feeling playing ogame and checking every hour to make sure no one crashes my fleet.

If I am to add up the cost of time and expertise to that of hardware, I'm afraid mining is a net losing proposition at my scale and resources.

So, I'm guessing the buyers might also be former GPU miners trying to feel they are still in the game. The price, 40-50$ will be written off as entertainment expenses.

There is so much fucking FUD out there that there is a whole legion of newcomers out there that scared to death of buying hardware.

E-bay provides a safe alternative.  For Example:

I recently sold a Mining Rig on Ebay: http://www.ebay.com/itm/100GH-s-ASIC-MINER-Block-Erupter-Blade-Mining-Rig-with-Backplane-and-PSU-/261371727365 (http://www.ebay.com/itm/100GH-s-ASIC-MINER-Block-Erupter-Blade-Mining-Rig-with-Backplane-and-PSU-/261371727365) for around 1952USD shipping in while around that time you could damn near get an Antminer for the same price which has double the hashing power.

After the auction was over I gave some advise to one of the losers to come to this forum for the best deals on hardware via a group buy. his response was "Thanks for the tip but I only trust E-bay"

This is probably only one of the many reasons why people use E-bay.

BitcoinWisdom calculator can really show how un-profitable buying mining hardware can be. But there are variables that makes a huge difference on the outcome.  These are variables that can't be known.  IE.. actual difficulty increase 20,25,30% .. BTC Price. 10 - 10000?  No idea which way the wind will blow, but a bunch are probably hoping the price will rise to break even or ahead. 

Dunno, it's just something about making your own currency that seems to hold value or grow.  Feels like you have more control.  Unlike, holding fiat that is sitting in a bank vanishing threw inflation every day. 

because people getting into it for the first time don't care about profits as much as they do learning. they will pay extra to gain some experience. I "over paid" for my first miner but I don't regret it at all - it taught me so much and now I mine profitably on a much larger scale because of what I learned (market timing, reputable companies, etc).

Bullshit. The rush of new miners is motivated 99% by dreams of profit and getting in on the ground floor (even though that day has long since passed).

Of course dreams of profit are always there but to learn something new, something big and interesting is a fine motivation as well.
Bitcoin is a first cryptocurrency in the world, there was none before isn't it fascinating? 

It's a fine motivation, but it's not what draws most miners to cryptocurrency.

One thing I think people always leave out of this question is whether the buyer will be able to sell the hardware some time in the future.  When I first got into mining, I bought 10 USB block erupters for $8.00 each.  The price of a bitcoin at that time was less than $200.00.  I realized I would be lucky to break even at the current price, but I was looking for something to do with my Raspberry Pi and I had faith in bitcoin and thought it would likely go up.  When I bought them, everyone told me I was crazy.

A few weeks later I was hooked and snagged two BFL 30 gh/s Little Singles for about $650.00 each (I actually only bought the second one because I thought the first guy had ripped me off and wouldn't send it).  Again, everyone said I was crazy.  A few days later, the price of bitcoin sky-rocketed.  When it hit it's peak I sold the block erupters for $60.00 EACH!  I made over $500 just on that hardware.  I also sold the Little Singles about two weeks ago for $750 each, which means I mined with them for almost three months, made a few bitcoins and sold for a profit again. 

I realize I could have just bought bitcoins with my initial hardware investment, but I wasn't really looking to invest $1,200.00 all at once.  By buying and basically flipping hardware, I was able to do it incrementally. 

The bottom line is no one can say whether hardware is a good buy unless they know how much bicoins will be worth in future.  The BFL units I bought were purchased for less than asking price because the sellers were desperate to get rid of them at the time.  Those same units were selling for 3x what I paid for them less than a month later.  It all depends on where the price of bitcoin goes.

Kevin

I think most people just lazy and just don't do the math.

There are some though that will pay more to have a miner in hand now, gambling on mining a profit, rather than wait 6 months on a pre-order list.

I am in the 1% then...

Ok fine...so miners are a bunch of idiotic scumbags looking to make a profit...so how does that make us any different than speculators again?

No one in this game we call Bitcoin is any better than the other.  We are all gambling on something.

Now if you claim that you have some sure thing that will guarantee will make you a profit then I will return the favor and call bullshit on you.

Why not quit bugging us miners and go back to the speculator sub-forum....cant you see we are working here?

The original question -- the title of this thread -- seeks clarity on the subject of why people buy unprofitable hardware. Nobody said miners are a bunch of idiotic scumbags (well, I didn't, anyway). My statement was related to what drew miners into the game in the first place -- not to learn, but by the promise of profits. I stand by that statement.


Better? No. But clearly, some are quite a bit stupider than others.


Nice strawman attack! Nowhere did I ever suggest that I had a foolproof profit generator.


Fuck off. If you don't want to be bothered, then don't read the fucking thread. Twatwaffle.

Yes, someone may expect the difficulty increase to slow down to something like 15%, but still you will not be able to get profit with a lot of the hardware, especially for those on eBay. :P

And, if the profitability comes from the expected uprising btc price, it would be better and easier to just buy bitcoin directly.

Newbies get excited and wet there pants at making $20 a day from plugging a machine into a wall, they don't do proper research and think that's $20 a day for the rest of their life or however long they think... and wallah you just made a net profit by selling your unprofitable ASIC. 

right. Personaly, I think 3 things came into account:
- there is hype and stories, and miners are scarce. If they are scarce, in people minds it means that there is something to get.
- the math are hard to get. Sorry but explain how works a decrease in value overtime is not linear but exponential :-), some people don't catch it really. I had to take 10 minutes to explain that to a colleague.
- and when you type "bitcoin calculator" on google, you arrived for example on a BFL sponsored page that fools you (http://www.bitcoinx.com/profit/): sure there is a profitability decline per year on their calculator, but check the value. If (for example) you enter the price of the cointerra and its hashate, the site let you imagine you will make a profit.

Personaly until I used the "expert mode" with http://www.coinish.com/calc/ I didn't know where to get a good simple calculator.

So people are guided on wrong information and (a bit) greed and hype.

Except your premise is wrong, same mistake as the OP. You are assuming difficulty will increase by something like 30% perpetually, which simply is false and impossible. The increase in difficulty will also slow down exponentially. We will probably NEVER see a 30% increase again. We are seeing mostly 20% increases nowadays, and soon even 20% will be history. So your "expert mode" calculator will also paint the wrong picture for you, because it assumes difficulty increase perpetually, which is simply UNTRUE, we've had many many difficulty DECREASES in the history of Bitcoin. We will probably see this phenomenon again within 6 months or so (as long as the price stays at $500 level).

+1

Difficulty will be forced to level out due to technological limitations.

The best projected watts per gigahash is 1W/Gh.

So unless someone comes up with some revolutionary technology soon difficulty will be forced to level out.

As more and more people chase mining for bitcoins difficulty will keep increasing.

I agree that it is impossible for the difficulty to increase 30% each period forever. HOWEVER, it doesn't have to do it forever, it only has to maintain that rate for a few months to have almost the same result.

For example, a miner that currently mines 1 BTC per 2016 blocks will mine about 4.3 BTC total if the difficulty increases 30% each period forever. On the other hand, if the difficulty increases 30% each period for 6 months and then 7% after that forever, the miner will mine about 4.4 BTC. The second case is much more realistic, but it has nearly the same result.

Thank you for pointing that out.  Everybody who states that it's silly to estimate that network growth rate will be exponential until the end of time hasn't bothered to check to see what the difference is from a hypothetical of just 4 or 6 months.  It's like a petri dish that was just seeded.  Yes sooner or later it will saturate, but we just go incubated  :D

Very nice thesis.

not everyone is good with calculation..

I think you missed the part where I said we will probably never see a 30% increase again, last six diff changes:


Feb 28 2014    3,815,723,799    21.92%    27,314,015 GH/s
Feb 17 2014    3,129,573,175    19.39%    22,402,357 GH/s
Feb 05 2014    2,621,404,453    19.49%    18,764,744 GH/s
Jan 24 2014    2,193,847,870    22.59%    15,704,175 GH/s
Jan 13 2014    1,789,546,951    26.16%    12,810,076 GH/s
Jan 02 2014    1,418,481,395    20.12%    10,153,885 GH/s

Even 19-22% every 10-11 days is 70+% every month. 

Hardware cannot keep up this pace.

The price of BTC cannot rise that fast either.

End Game.

True.


False. 
 


Maybe.

Quote from: samsonn25 on Today at 03:40:57 PM
The price of BTC cannot rise that fast either.

False. 


If BTC price increased 70% a month till end of year it would be $1,000,000.00

The only way that difficulty can continue to increase is in one of 2 ways:
1. Someone invents a way to get getter than 1 Watt per Giga-hash
2. Bitcoin value continues to increase

Not being able to do #1 will force difficulty to level out due to energy costs.

It has already been shown time and time again that #2 is not going to happen which will again force difficulty to level out due to less miners.

I predict that Bitcoin difficulty will level out before the end of the year.

if you are spending dollars to obtain the hardware then your investment return will be measured in terms of the future exchange rate of BTC/USD (or whatever currency you used to purchase). My crystal ball is in the repair shop right now, otherwise I'd ask what the future value of BTC will be so we could figure out an answer for you. With something this speculative the further out on the time horizon that you try to forecast the less accurate you will be, and calculating a lagging measure such as ROI does not make sense when forecasting based on present-day values.

The other situation is if you make the purchase with BTC, this is uniquely different because then yes, the medium of exchange is the same as the measure of profitability. So if you spend .5 on a miner, it needs to mine back more than .5 to have a positive return on the sunk costs, and then it needs to cover it's ongoing hidden costs (power use, value of space that it occupies is an opportunity cost measured against the next best use for that space, somewhat subjective to measure that though). The thing is, usually if you are buying equipment with BTC it would be through a group buy on the forums, and in my opinion those are usually priced in a way that most deals will eventually mine back more BTC than they cost, exception probably being the USB sticks.

I'm digressing, my point is if your medium of exchange in relative terms is cash, maybe you bought a miner with USD and you keep your books in USD so you will either exchange your BTC for a realized gain/loss, or you will run a conversion to measure profitability. Thing is, anything other than exchanging doesn't make sense, because your measure can change by 50% tomorrow, nobody knows where BTC is headed, and the level of speculation and risk/reward is why it's exciting enough for us to all rally around it. So this idea that hardware bought with cash will never be profitable is flawed, you cannot base that on present-day value alone, and more than likely BTC will not trade flat for the next 12 months based on clearly identifiable trends. If it was flat like USD/USD then sure go ahead and forecast but BTC/USD is too volatile to reliably declare what is and is not profitable in the future after some time mining. And yes, there are other ways to do it, you can buy BTC on Coinbase then purchase in a group buy, yada yada blah blah- the different methods of acquisition for mining gear are no different than the raw materials acquisition strategy in any industry. The most successful miners identify the gap in the market to acquire gear cheapest, and thus their production setup is more profitable than the novice cash buyer on Ebay. Identifying the gap in the market, and filling it, is the mark of a successful entrepreneur and increased profits are the reward for success.

A better way to think about it is to consider that you could buy a miner that will generate a certain amount of BTC over a period of time, or you could just buy BTC immediately. Pick the option that gives you the most BTC for the price of the miner.

Mostly because there are noobs and people who don't understand that does this, later they'll just regret that they've wasted their money but would still want to get something out of the machine and mine a little which in turn is great for the community

Yes, but that ability to identify the gap, where you can leverage better buying power through buying BTC first and then using it to buy a discounted miner is local knowledge to people with some skin in the game; most newbies don't realize this until after they purchase their first miner. But you nailed it, the ability to pick the best option, generally speaking for any business, is the path of least cost or highest efficiency beyond the competition and profit level is the measure/reward for performance, which is essentially the ability to identify and act upon gaps in the market. I believe Lugwid Von Mises outlined all this in Profit & Loss...



Almost there but still too elementary. I'll put it this way: If BTC is exchanging for $100k in 6 months then NOBODY who paid hard cash yesterday for mining gear will be pissed, at all. Will it be worth that much? Well, probably not, I used a very extreme example. My point is nobody knows where BTC is headed and the volatility keeps the door open for future profits almost regardless of where the purchase price may be at. Basically, if BTC goes through the roof exponentially on some future unknown date, which we cannot accurately predict, then the variance levels on sunk costs for equipment will not matter much at all- at least when using a measure in relative terms, such as USD.