Bitcoin Forum

When AM's percentage of the network hashrate fell to near 0, solo-mining was pretty much a waste of time resulting in no dividends. So how would you prefer AM's mine to operate?

that depends on the total hashing power

It all comes down to how much time you are willing to accept between paydays and how much variance.  Remember bitcoin mining is a poisson distribution ( http://stattrek.com/online-calculator/poisson.aspx ).  Lets assume you are not willing to go one difficulty period without finding a block.

If you have 1/2016th (0.05%) of the network you should find on average 1 block per difficulty period.
Expected = 1 block
Probability of 0 blocks = 36.7%
Probability of 1 bock =  26.4%
Probability of 2+ blocks = 36.7%

You have a ~1 in 3 chance of doubling (or more) your return but also a ~1 in 3 chance of earning nothing. That is probably more risk than most miners are willing to take.

If you have 2/2016th of the network (~0.1%) you should find on average 2 blocks per difficulty period.
Expected = 2 blocks
Probability of 0 blocks = 13.5%
Probability of 1 block = 27.1%
Probability of 2+ blocks = 59.4%

Looking better but lets look at 5 times as much hashrate, 10/2016th of the network (0.25%).

If you have 10/2016th of the network (~0.5%) you should find on average 10 blocks per difficulty period.
Probability of 0 blocks = ~0% (1 in 22,026)
Probability of 1 to 5 blocks = 6.7%
Probability of 6 to 9 blocks = 39.1%
Probability of 10+ blocks = 54.2%

So less than a 7% chance of earning less than half of expected.  How about a nice even 1% of the network.

If you have 20/2016th of the network (~1%) you should find on average 20 blocks per difficulty period.
Probability of <6 blocks = ~0% (1 in 13,906)
Probability of 7 to 13 blocks = 6.6%
Probability of 14 to 19 blocks = 45.9%
Probability of 20+ blocks = 52.9%

Now we are looking good.  Only 7% chance of earning less than 70% of expected.  Of course your risk tolerance will vary but the same distribution can be done at any percentage of the network.  As the difficulty growth goes down you may not necessarily care about how many blocks in each difficulty period but rather how many blocks per month since the powerbill is due each month.  There are ~4,320 blocks per month which means the probability of extremely bad or good luck over that longer period of time decreases (quite a bit).

Lets not make the same mistakes ghash.io and others made. I hope AM can be a good steward for Bitcoin and use P2Pool.

DeathAndTaxes released a nice comparison/calculation today at which percentage of the total hash rate it is starting to make sense to solo-mine:

I think we don't have to worry about AM achieving even near 50% of the total hash rate right now. We can be more than pleased if we achieve 10% right now. But yeah, if they decide to use a pool, looking into P2Pool would be nice.

If they move to P2Pool it will be great because P2Pools variance would lower massively, allowing others to move there too.

If they move to P2Pool it will be great because P2Pools variance would lower massively, allowing others to move there too.

This. AM and PETA should transition to p2pool, should be a strong catalyst in pushing smaller operations and independent miners towards a more decentralised mining ecosystem -- the publicity alone should start off a slight snowball effect.

If anyone is familiar with P2Pool, could then give an overview of the pros and cons?

Protip:  If you would like to keep Bitcoin mining decentralized, don't invest in mining companies.

I have to agree with Lambchop here.

That being said, if two mining companies at 10 + 1% respectively are mining on P2Pool, and then a large chunk of the network joins in... that would be good.

What I think is missing that the moment though is a proxy into P2Pool, so instead of a simple node that pays out directly to your address, one that accepts the payment itself and breaks up PoW to its users so that smaller miners can enjoy P2Pool, without waiting a month for a single share.

So you're basically saying we need p2pool-pools in order to successfully mine there? This this some fractal-stuff or recursion right there! Cue the Dawg memes...

I have to agree with Lambchop here.

Lambchop is saying that people shouldn't invest in AM. Do you really agree with that or did you just not understand what he was saying?

I agree that if you want mining to be fully decentralized you shouldn't, however I think that if their hashrate is 10% or less there is no real risk. So its a mixture.

Lambchop is basically saying that ASIC miners should not exist, regardless of whether they're used by individuals in a P2Pool or by a corporation solo-mining with 40% on the network hash rate.

Lambchop is basically saying that ASIC miners should not exist, regardless of whether they're used by individuals in a P2Pool or by a corporation solo-mining with 40% on the network hash rate.

No, hes saying that:

if you would like to keep Bitcoin mining decentralized, then you should not invest in mining companies.

He didn't say Asic's shouldn't exist. He's saying you shouldn't help towards their development if you want to keep mining decentralized. Some people don't want to keep mining decentralized, they value their own profits first.

AM isn't just building a huge mining operation, well at least they didn't want to. Now it seems they might as well just do exactly that. But effectively, they're producing chips that other mining operations use. So as a chip manufacturer it totally doesn't affect a decentralized system.

Back to self mining. I see, no one is actually fond of joining an already existing pool. If we had to join a pool, and there was no other way: Which pool should we join in your opinion?

Whatever isn't ghash and has the best financial incentives. I wouldn't really be bothered.

Back to self mining. I see, no one is actually fond of joining an already existing pool. If we had to join a pool, and there was no other way: Which pool should we join in your opinion?

P2Pool would be the best and safest bet for the network, but maybe not for their earnings. As a small shareholder I wouldn't mind to lose some profits to see the network strenghtened by a legit company, but I'd understand otherwise. As already mentioned anyway the total hashing power is the first thing we should know before discussing the matter.