Bitcoin Forum

I've been from time to time following the discussions here but never registered on the forum. But after getting more and more irritated by clearly people trying to actively discourage others from mining i couldn't resist and had to register to get this out.

I suspect that JJG and one or two others are just puppets created by Vladimir. If you follow their posts and anything which has to do about starting your own mining operation they'll jump on it and try to push it to the ground. It's possible that JJG and other puppets are all and the same person which might be Vladimir himself. It is an INSULT to the community to keep up this theatre and believe that the community is stupid enough not to see your games. Perhaps business is going bad for Vladimir aka JJG aka .. so they resort to these low tactics and discourage as many people as possible.

But it is disgusting to see always the same puppets jump on threads whenever some one has an initiative to mining or setting up shop. Especially newbies with a few posts showing up with the same tactics and at some point Vladimir popsup to add his two "bits".

Anyway, that's my opinion, and i hope others can see the pieces of the puzzle they're playing and draw their own conclusions.

I think we need to thank him if hes doing that because mining with inneficient hardware pushes up the difficulty for the miners who have optimised hardware.

Maybe a calculator on the front page of bitcoin.org showing it will take you 10 years to mine a block with a cpu would perform the same function.

Doesn't matter how many people are mining. If the difficulty goes up, the price goes up as well negating the impact of difficulty increase. Only thing bad is more pollution to Earth.

Sure, mining can be expensive and might not bring the rewards one expects depending on a shitload of factors. Yet the system is balanced, so even if difficulty increases it'll not mean that mining is pointless, cause if it did the whole bitcoin idea is flawed and is just another hype only reachable for those with huge "factories" to throw at it.

But all that infomation is already known and can be found anywhere. The only thing which is disgusting is people like Vladimir aka JJG and other puppets belonging to him or people who fear their expensive business might suffer (or already suffering!) jump on everyone who even thinks of mining. Probably to protect their overpriced or suffering commercial business spreading more negative information about bitcoin mining than the good. Always mentioning the "moms cellar/basement/attic" and always "going belly up" etc ... it's a bit of an insult to many people who are making bitcoin survive. Without them bitcoin can't survive.

Whoa. You've jumped from "Vladimir might be JJG" to "Vladimir aka JJG". Any chance of giving them a chance to respond before stating it as a foregone conclusion?

I can't personally see any resemblance in their posting styles, but regardless of my opinion - or your opinion - giving people the chance to defend themselves against allegations is the decent and honourable thing to do.

It doesn't matter what they or he says, it's just my opinion and i feel i need to share it with those who might see something in it. Just like anyone else can give his opinion here i'll respect that too.

Fine. Then present it as opinion. I have no problem with your first post, my problem was with your second post - as you jumped from "my opinion is that Vladimir may also be JJG" to "Vladimir aka JJG": without allowing Vladimir of JJG the chance to respond, you jumped from opinion to a statement.

Unlike you I do feel it matters what Vladimir and JJG say, just as I feel it matters what you say. Opinion needs to be clearly identified as such, not least because otherwise you're potentially libelling two individuals. Easy to forget that online, but there are individuals behind online personas.

I suppose even if they are not the same person, they still preach the same thing. I see what biggie is going at here. The fact that they discourage newbies from mining. We dont know why they do it for sure, but we do know that they do do it. I just hope that there are more people that support newbies mining than not. I guess now its not a big issue, but if it ever comes to a point where they STOP helping newbies, or give false information, then something is wrong there. but as long as there are people who are willing to help others, then thats why this forum is here. I hope vladimir and/or JJG still want to help people with mining issues and setups, not just discourage them.

If you guys plan to only discourage people, then the real honorable thing to do is to leave the forum.

as far as i can see though is that they both discourage and help people so all is good.

It's a tough call. Personally, I tend to help where I can but I can't in good conscience recommend people get into mining without carefully considering the risks involved. I don't think my position is that unusual, and it's not that dissimilar to Vladimir's (I'm not really familiar with JJG), nor it is dissimilar to many other people here. That, coupled with the lack of any obvious similarity between Vladimir's and JJG's writing styles, makes me highly sceptical that Vladimir and JJG are the same person.

I have no opinion on the motives of anyone else, but I discourage newbies from buying hardware for mining because I wish I hadn't. Overall I expect to have spent about $1000 on hardware and electricity by the time I'm finished, which doesn't seem like much compared to others here---but if I'd taken that $1000 and just bought bitcoins directly with it, I could cash it out now and have a profit of about 500-600 BTC---much more than I've generated so far, and with far less work. If you built a rig last month and you're paying attention to prices, you ought to be regretting it.

I think biggie is aka slush, he just made a new user to hide it. He wants more small miners to his pool so he can get more fees. It doesn't matter to him that it makes no financial sense for the miners.

I wish I was important enough to have an alter ego.  ;D

This thread is great. I wish I had bought MORE hardware for what it's worth.

I am not associated with Vladimir in any way.

But I suspect I'd have to release my birth certificate and school transcripts to make you happy.  ;D

I registered and posted my short analysis after I saw someone post about spending $3000 on hardware and $150 on electricity every month just to mine bitcoins, without having taken rising difficulty into account. I make a quick financial model that factored in rising difficulty and realized he'd never come close to breaking even unless the BTC exchange rate skyrocketed. Even then, he'd be better off just buying bitcoins.

This mining mentality and the simple profitability calculators floating around the internet have blinded everyone to the fact that difficulty is rising rapidly.

The estimated next difficulty is 16% higher than the current difficulty. And that's after only TWO WEEKS. Let's just assume that it will only rise 10% (1.1 multiplier) for every future block, which is unlikely with Bitcoin gaining in popularity and so many people blindly jumping into mining without running the numbers.

Current difficulty: 92348
In 2 weeks: 92348 * 1.1 = 101582
In 4 weeks: 92348 * 1.1 * 1.1 = 111741
In 6 weeks: 92348 * 1.1 * 1.1 * 1.1 = 122915
In 8 weeks: 92348 * 1.1 * 1.1 * 1.1 * 1.1 = 92348 * 1.1 ^ (8/2) = 135207
In 6 months / 26 weeks: 92348 * 1.1 ^ (26/2) = 318,810 (3.45 times current difficulty)
In 12 months / 52 weeks: 92348 * 1.1 ^ (52/2) = 13,117,380

It's easy to see that if difficulty climbs at 10%, whatever mining hardware you buy will only produce 1/3.45 = 29% as many BTC in just 6 months. If it rises at 15% (like it has lately) then it will produce even less. For people buying expensive, brand new, dedicated hardware, this means you will never recover your investment.

The only way to make this work long-term is to assume that the exchange rate will go up. If you truly believe that, then forget about buying hardware; Just buy BTC directly and let them appreciate rather than letting your computer hardware sit and depreciate.

Not trying to scam anyone, just trying to share some simple math.

I seriously doubt difficulty will continue to rise at 10% every two weeks for the next year.

As for vladimir, I got the impression he's well educated and generally speaks a lot of sense.

But why? What's your reasoning? If the exchange rate rises and popularity continues on an upswing (someone is speaking in front of the CIA soon, Time is covering Bitcoin, etc.) then it's hard to imagine difficulty increases leveling off any time soon.

The increases don't have to continue for a whole year. 15% (current trend) for a few months is enough to end profitability for anyone hoping to purchase new mining hardware.

In the other thread I even ran the trend assuming only 5% starting now (wholly unreasonable) and the guy who dropped $3000 + $151/month on his mining rig still wouldn't break even.

hes talking about me! yeahh!


=P im included here

btw im finally getting my hardware today. I know setting it up will be a bitch, but ill let you know JJG if im doing as i hoped

That's exactly what you would say if you were the same person.

But wait! That is exactly what I would say if I were also Vladmir!

are you... confessing?

I pitty the f00l who buys new hardware to mine :P I don't think it's worth it now to go all out and built yourself a huge mining farm with NEW hardware. If you can find a really really good deal on used hardware (as cheap as possible) then yeah go for it. But even then there are many factors to take into consideration; each one of them will affect your profitability in a different way than it might the other guy.

I personally don't give a damn if new miners join the game. If they wish to run at a loss that's their personal choice and their right. I do think that the majority of them will leave the mining game once they see that the $80 extra on their power bill has earned them only a meager 5 BTC.

No. There is no linear nor consistent correlation between price and difficulty. One new miner joining doesn't guaranty one new buyer on Gox.

Once spending $80/month on electricity isn't profitable, I'll spend $80/month on bitcoins instead!

I think you're right, I've only met one person called Vladimir in person and he was Russian. Therefore I think this Vladimir may also be Russian. The only Russian government agency I can think of is the KGB. That means Vladimir is a KGB agent. You know it makes sense :D.

Yep, that would be the smart thing to do then..and when difficulty falls, turn your mining rigs back on! :P

I just worry that bitcoin will be a speculators' currency...I'd really like to see it succeed as a vibrant and viable REAL currency so I can buy all kinds of junk with it. The day I will be able to pick up a kick ass Sandy Bridge gaming laptop with bitcoins is the day I will have a massive grin face :)

He'll make soup out of your fingers, for the muddaland!

lool..watch out guys...Vladimir's mining cluster will be the birthplace of Skynet...all your bitcoinz are belong to him!?

Exactly the same reasoning as you, but I just can't see total power tripling in the next year. I hope I'm wrong though.


I agree, buying expensive hardware specifically for bitcoin mining is a bit ridiculous.

Really?  In a whole year?  I have a proposal for you...

I've got 10BTC says the network is at or above triple today's hashrate (712.08 Gh/s) at Bitcoin Watch, by April 27, 2012.

Bet?


I agree, buying expensive hardware specifically for bitcoin mining is a bit ridiculous.
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Perhaps.  It just depends on what you believe the exchange rate will be in the future.

No. This is still gambling, and I don't gamble :)

Trippling current hashrate would barely cover electricity cost where I live (and electricity is quite cheap over here), and at this point I think growth will stop. This is my reasoning.

edit:
I still think mining should be encouraged, as it makes bitcoin more secure.

neither do i.  ;)

Think of it as "investing" or "managing your economy" rather than gambling.

I think the difficulty level will be well above 3 times today's level by 27 April 2012.

if that's the case, I will make a thread and publicly announce my stupidity. Fair enough? :)

Anyway, all this is a bit beside the point. I believe people are not stupid and will regularly check if mining is profitable for them, this should result in fairly brief moments of mining unprofitability.

I'd agree for the most part, but it's troublesome to see people buying expensive hardware based on current difficulty ratings and expecting to pay it off in a few months. Meanwhile, the next difficulty increase occurs in 2 days and is over 16%!

I totally agree with you on this one.

The current ask price on mtgox is up to $2.50.
if my math is correct (and it usually isn't) thats a 25% increase in the last hour and a much larger % over the day.

The incentive to enter the market just skyrocketed. Anyone thinking of selling their old mining rigs?  ;D

I don't think anyone is saying that in such case it isn't profitable, but price is based on speculation and throwing out several thousand dollars based on that is a bit absurd.

And my point is made again. In about the time it would take someone to source a GPU, buy it, hook it up, and wrestle with drivers, the valuation of a bitcoin has nearly doubled. By just buying the coins you could have made a 100% profit in a few days instead of a year.

Thats actually pretty good. i hadn't thought of it that way.

So if i kept one bitcoin, at $1, and assumed a doubling rate of 10 days (a "few days" to be sure), then in about a year it should double 36 times. the coin would be worth 68 billion dollars.

and i didn't even have to fill my room with noise, heat, waste electricity and pollute the environment.

if we stopped mining completely. then the current 6 million coins alone would eventually be worth around ~4x10^17 dollars. We could buy out the united states with kinda money.... ofcourse there will be more coins generated so the amount is even greater.

(btw i'm just kidding about buying a country).

I think we should devote our time to making the client divide out smaller units of the coins easily. 68 billion dollars per coin already taxes the 8 decimal limit on transactions.

i'll stop mining when i get home. i have enough coins already to ensure i'll have trillions of dollars worth of value in a year or two. i can probably mine a lot more but i'm content with a few trillion dollars.  And my rig is very inefficient is puts out a lot of heat.

You guys can keep mining if you want.

The thing is that bitcoins are unstable, the value could double today, or halve by tomorrow.
a hd 6990 used is a good $600 to $650 for the next two years.
i bought the whole setup for 3 grand
I can sell my three 6990s for around $2000 if bitcoins do fail me, or if i so please for the next two years. after two years it might drop to 1.5k to 1.8k for all three
If I had bought 3 grand worth of coins, the next day they may be worth 6grand, or the next day they may be worth 1.5 grand.
who knows what the bitcoin will be worth in two years. i can tell you that the videocard will still be worth more than $500

its riskier with the coins than physical hardware. I can rely on the hardware to retain it's worth, because they have other uses than for mining.

bitcoins on the other hand so far have limited use.

If bitcoins could be used to purchase items like ipods or phones or laptops, then everything changes.
I really do hope that would happen soon. although i sadly doubt it.

im not really a bettin kinda guy and i seem to suck at trading but thats just me.

If I'm a prophet, sure.

But if I don't know if BTC price will rise or fall, and only know that a fall in BTC price will cause difficulty rise to slow down, so difficulty divided by price will not change much, and that at current difficulty/price buying a dedicated mining rig is insanely profitable... I choose the rig. (Plus it's satisfying and a positive externality).

I've been hearing about how mining was about to become unprofitable ever since I joined Bitcoin, but so far it didn't happen.

You can't assume that it will maintain this pace.  Bitcoin muddles along for long periods, then has massive rallies when new articles are printed.

I wouldn't bet on that. 5970s were selling for $699 not too long ago, and you can now pick them up for a bit over $400. When the AMD 7000 series is released (soon, according to rumors), you can count on your 6990's value to drop significantly.

6990s are ~$700 new. That's $2100 brand new for all three. You can't realistically expect them to only lose $50 to $100 each over the next two years.

Hardware depreciates fast. High-end gaming hardware depreciates faster.

How about bitcoins? how fast do they depreciate? can you give me a definite answer like you gave about video cards?
See what i mean? can you guarantee me that the bitcoins will depreciate fast like you guaranteed me the video cards would?
if you cant then you just proved that you can indeed rely on hardware to hold a certain price, but you cant on bitcoins, hence buying a rig rather than trading is less risky.

You can't argue risk without bringing reward into the equation.

If your $3000 + $151/month rig can churn out 2100MH/sec, Bitcoins remain at 2.3:1, and difficulty increases slow down (unlikely) to 10%/period, then my model has you breaking even on your original purchase at month 8.5, after which your $151/month electricity bill overwhelms your income. Add hardware depreciation costs to that, and you never break even. Use 15% difficulty increases (following the latest trend) and you never come close. If BTC:USD falls below the current 2.3:1, you're completely out of luck.

Since I find it unlikely that difficulty will only increase at 10%/period, especially in the short term, your only hope is that the BTC:USD goes way up.

That's the same bet you would have made if you just bought BTC.

You are correct that your downside is limited in the extreme case (BTC:USD falls to 0, Bitcoin disappears, etc.) but you'd still be out the $1000 minimum you're going to lose on your hardware + $151/month for as long as you run your system.

If things stay neutral, then you might pay your hardware depreciation, electricity, and cooling bills with income.

If BTC:USD goes up, then your mining rig will briefly bring in more than electricity + depreciation are costing you, but that will fall as difficulty rises.

So you already bet on BTC:USD going up, but in this case you've severely limited your upside and locked in the downside.

The difficulty seems to follow the 6 week moving average of the price very closely, so as the value of the bitcoin rises the difficulty increases with a lag.  If this holds true, your predictions about the rise of difficulty is irrelevent.

This makes no sense; you write-off the cost of the miner completely right off the bat ($3000)....and then say "Add hardware depreciation costs to that".  Uhhh, what is that $3000 exactly?

Difficulty does not drive price, price drives difficulty.  Right now bitcoins are going up in price because more people are using them.  If interest continues price will continue to rise.  When price is steady, difficulty will rise until it nears a place where mining is only marginally or not at all profitable for people with average electricity. 

Depreciation is the declining value of your hardware over time. If you buy a $700 video card and the going price on eBay or craigslist or gaming forums is $500, then you have a 'cost' of $200 that you need to account for. This cost goes up over time.

Unless you're already buying the hardware for other purposes (e.g. gaming) then these costs are very real and can't be ignored.

If you count depreciation, you can't also count the original cost of purchasing the hardware.

You guys are missing the point. You can look at your 'balance' like this:

Initial hardware cost - electricity cost + resale value + (mining income - withdrawal fees)

OR

(Mining income - withdrawal fees) - depreciation - electricity cost


I'm not trying to double-count depreciation and the hardware cost. However you setup your equation, the outcome is the same.

In retrospect, instead of buying mining rig in January for 700€ and putting 200€ power into it so far, I would've been better off investing in coins right from the start (which my calculations showed, but I wanted to mine for other reasons, too (it's cool and secures bitcoin)).

Back then price was 0.4USD, 1 USD was around 0.7 USD, so my 900 EUR where (900/0.70)/0.4 = 3,214 BTC, which would now be roughly 3,214 * 2.5 = 8,035 USD = 5,880 EUR. Minus the investment I would've made 4,980 EUR by now.
I only mined 1,500 BTC (2,512 EUR) so by buying brand-new mining rig, I actually made a profit of "only" 1,612 EUR, 32% of what I would've made by buying bitcoin.

In short: I think entering mining biz with brand-new HW is still profitable nowadays, but simply buying bitcoin might be 3 times as profitable.

molecular: +1

Difficulty just jumped 19% 12 hours ago, and the projected difficulty jump for the next round on Bitcoin Charts (not sure if it's stabilized yet or not) is 33% in 1937 blocks.

At the current block rate, the next difficulty jump will come in only 10.3 days. As people join in, production will speed up more and that will push the next difficulty jump even closer.

For miners, this means that if the 33% difficulty jump predicted by Bitcoin charts holds true, then 10 days from now your BTC output will be 63% of what it was a couple days ago.

Take a look at how popular the Bitcoin thread was on overclock.net in the 2 days before it got closed. People who were lusting after 6990s ran some quick calculations and used those to justify their purchase. Many of those people bragged about how they don't pay for electricity, so they can justify mining no matter how little BTC it brings in. These guys are the future of mining.

Many people keep arguing that you can count on the exchange rate to keep going up with difficulty. While I strongly doubt that for many reasons, if you truly believe that then you shouldn't be buying hardware anyway. You should be buying bitcoins.

Yeah, I wish I wouldn't just bought bitcoin when I decided to set out mining.  It was 1.18USD/BTC at the time, but the whole project was too new to me and I wasn't as confident in it as I am now.  Plus, the nerd factor of setting up a dedicated mining rig really pulled me in too.

If you make a profit from trading bitcoins your earning are still taxable - should you choose to report them. Bitcoin trading is much the same as forex trading (something I'm deeply into) so for me I treat it the same from a "paying taxes" point of view.

I'd assume that selling bitcoins for more US dollars than they're bought for is subject to capital gains tax. But then, selling them for less than they're bought for is subject to a tax credit for capital loss. Mining would probably be treated as self-employment. You could declare it if you like, but be sure to write off your mining rig as well.

Disclaimer: I'm just some guy on the internet, don't listen to anything I say.

Hmm, well mining yes it would be classified as self-employment because you are deploying capital (mining rigs) for the purpose of producing income.

I plan to treat the income as plain regular income from non employment sources. If bitcoins were classified as securities I'd have to pay a capital gains tax too. Bear in mind I'm not in the United States. But for US Citizens this bit of info may prove useful:

"some forex transactions are categorized under Section 1256 contracts while others are treated under the Section 988 – the Treatment of Certain Currency Transactions.

Section 1256 provides a 60/40 tax treatment which is lower compared to its counterpart. By default, all forex contracts are subject to the ordinary gain or loss treatment. Traders need to “opt-out” of Section 988 and into capital gain or loss treatment, which is under Section 1256."

In retrospect, I should've put the winning numbers on the lottery instead of all the others.

Noting beats the buzz you get when you see the message "Generated 50 Bitcoins" in your client!

That is a complete joke.  You put 2 5970 cards in a computer.  That is a 1.3 Gh/s system.  The electricity to run that at $0.10 per kw-hr  (600W x 24 x 30 x .1) = $43.20 per month electricity.       You will be generating presently 11 BTC every day.  You will pay the electricity off in 2 days!

It is a great time to upgrade to a new computer system, if your computer is less than 2 gz, why not upgrade to a new computer and have an income of $15 a day that is far more than the payments.

It wasn't like that. ("which my calculations showed"). So I knew (or rather assumed) mining would be less profitable. I consciously decided to go for mining instead of buying because "it's cool and secures bitcoin".

Also: I said "I would've been better off" and not "I should've".

Sorry for nitpicking ;)

Hmmm, a buzzer. Maybe a cop-style flashing light. You just gave me an idea...
/me whips out soldering iron with fat grin

The power consumed at the socket for a dual 2x5970 system will be more than 600W.

make that € 0.20 ($0.3) / kWh where I live and maybe a lot more when we power off our nuclear plants... well, I see mining rigs shipped to other parts of the world.

Your point is still valid, even at $0.30/kWh.