Bitcoin Forum

1. If a miner was more profitable than the price payed, wouldn't the mining companies use them instead of selling them?

2. If a cloud miner was more profitable than the price payed, wouldn't the mining companies use them instead of renting them?

3. Isn't it less risky to buy the coins upfront and not compete with the rising hashrate and diminishing returns?

In my opinion, there is an influx of math-deficient kids and young adults spending money to buy miners in hopes of getting rich. This causes an influx of miners and less buying pressure on the actual market. In time, this influx should slow down as the general group will realize the futility of buying miners, and thus the price will begin to rise again.

Am I missing something as to the advantage of mining?

1. They make more money selling than mining, although they also mine.

2. They are passing the risk, the miner might not be profitable, plus they charge a fee for hosting the miner.

3. I agree.

Mining, its just another way of gambling ... trade or mine, pick ur poison.
In mining ur betting against diff.
In trading ur betting against price.
If you buy hashrate w/ fiat, ur betting against both price & diff.

But yes, in to many cases people dont know how to do basic math when comparing prices and possibility of ROI

Mining is only for those with huge warehouses or extremely efficient miners with free electricity. Normal people don't have miners going anymore and if they do it is just a hobby so calm down.

You're missing that mining hardware could last for years. Get a S3+ and use it for 2-3 years. You'll be more than profitable. Yes with difficulty increases every subsequent few months will be worth less than the prior, but it will still make money. If you break even after 8 months on hardware costs, and still maintain even the slightest revenue over power costs, then you're still in the green.

Then once it gets to the point where you're not maintaining profit to electric costs, sell it on eBay to somebody that has no clue and is just looking for mining hardware, and then buy a newer unit with that money you made from the sale.

mining for retail consumers is economically retarded, yes.

Competition forces mining difficulty to the point where the profit margins are very thin and mining becomes economically infeasible except for those with the lowest costs, such as big players and those who have direct access to core hardware components. 

I heat my home electrically so the energy cost is nothing during heating season. My old BFL miner paid for itself well over a year ago so as long as it keeps running I'll use it until next spring, shut it down for the summer, and start it up again in the autumn.

I think you were among the lucky ones who got fast enough delivery of your mining unit....many people lost money.

Is it economically "retarded"? No, there is a chance you can earn more money via mining.

As mentioned above, buying a miner is essentially betting that the difficulty will not rise faster then a certain rate (as well as that the price of bitcoin will generally rise - to offset the cost of running the miner)

more money is wasted mining coal
more money is wasted mining gas
more money is wasted mining oil

lets take coal for instance.
the coal industry mines 2billion tonnes a year at between $40-$60 dollars a tonne.
thats a $80-$120 billion industry.. PER YEAR and once the coal has been burned thats the end of that coal, its gone.

the costs of mining bitcoin is not even 2% of the coal industry and once mined, bitcoins dont just burn into nothing. they circulate and can be swapped and traded as much as they like forever.

extrapolate in future and it can easily eclipse all of those.. It is economically retarded I agree but its just a consensus algorithm.. In the end the blockchain is the takeaway to all of this.

I don't think the OP is talking about how "green" bitcoin mining is, I think he is referring to how much economical sense it is to buy a miner.

I thought so. That's why I stopped when I couldn't get a reasonable amount using video cards. The ASIC upgrade train seemed like a stupid ride to poverty. Buying btc is so easy compared to the hassle of maintaining equipment.

Yes.

I paid for a miner in November 2013 with delivery in February 2014. To this day I have not received a miner or a refund.


Yes.

I just got 23.5Gh/s on CEX.IO and after mining for about a day my balance is -0.00001348 BTC. CEX gets paid up front for the GHS/BTC, has kept all the mined BTC as maintenance fees and has virtually mined 1.3k Satoshis from my account. I now owe them additional BTC ontop of what they've mined with their hardware.

Cloud mining is icing on the cake.


No.

If you're mining and the fiat exchange rate goes up you make more fiat. If you're mining and the fiat exchange rate goes down you make less fiat.


Everybody is entitled to their own opinion.

Are you missing something? Well you seem to have a lot of questions, this is good. I should have asked more questions before my purchase. :(

@notbatman,

seems like you're contradicting yourself here.

You are losing money on cloud mining, you got
screwed basically ordering mining gear,
and yet you dont agree its less risky
to just buy Bitcoins?

You should have been around in 2010 or earlier when mining was even less profitable than it is now.

In my opinion I don't think it is, it's more of technical opportunity for the facilitated people.

The question of risk was with regards to competition, the rising hashrate and diminishing returns. The risk in mining is from criminals and scam companies.

There's financial risk, then there's the risk some motherfucker is waiting around the corner for you with a sawed-off shotgun ready to decapitate you for the 20 in your pocket.

1. If the miner cost them $600 to make and they can sell it for $1,200 immediately, they mostly would rather make the immediate profit instead of taking a risk, although many of them also mine.
2. If you have to remember immediate profit vs risk of increasing difficulties
3. Usually, yes. There are many exceptions though. Such as an early BFL jalapeno was super profitable, same with an early Antminer S1 (especially overclocked) and a few other miners (Neptune? I don't remember) were super profitable for a long time.\

I personally stopped buying miner and I now just buy BTC directly due to hashrates increasing too fast and not getting a > 100% ROI

1. If a miner was more profitable than the price payed, wouldn't the mining companies use them instead of selling them?
Mining *has* to be profitable or nobody would mine. You still need to covert to fiat to cover operation cost like paying for electricity where they only accept fiat. When the miner needs to eat food, not all eateries or restaurants accept bitcoin. The portion that he keeps will be betting on future price increase.

2. If a cloud miner was more profitable than the price payed, wouldn't the mining companies use them instead of renting them?
Ok now for this, it depends on how you look at it. selling cloud mining actually works more like betting on the future of bitcoin and take your gamble against difficulty changes and other scenario like for example mining yields getting higher due to other pools of miner exiting.

it is an oscillating cycle. Miners are really profitable then miners go through a "winter" phase. Rinse and repeat.

I;ve stopped minig a while ago. I'm also done with altcoins. And stopped trading. Now i just using bitcoins and dogecoins as money. Everithing alse i've dumped. Recommend you do the same.

As a thought experiment what would happen if world of war-craft gold was chosen to be the global currency? Would human labor be a better backing for money than sha256?

Many people are still caught in their investment/return/profit loops.
They simply can't see beyond that, while they are at it.

The concept of mining in the long run is very simple.
It is an arms race for control of a first-of-a-kind global money system on the planet.

Large geo-political players will be competing with advances in technology and resources to dominate the mining space in the future. Think of it as expenses on army to protect your share of land. You don't normally get returns on investment in security, you get security as the end product.

EDIT:

Currently mining can be compared to hunting/fishing. Some people prefer to buy their food in stores, others like to spend their time and resources to find food on their own, while also mastering their skills. The food found in the wild, while more expensive, is often healthier than that in the stores, as it is free from taint of various E-additives. Sometimes it's not the goal of the game that is so precious but the game itself. You will see that in sports (and life).

What would happen? I think mining would move from places with 2 cent electricity to countries where people earn $2 a day on average.

And to answer the OP's question, as a whole mining is not economically retarded as long as it is still profitable for some people (which may not include the average Joe).

Stopped mining about a year ago, also gave up chasing the latest alt-currencies due to the crazy number of clones being released every week. Thinks it's great as a hobby but for anything more it's easier just to buy btc from an exchange.

ok so i talked about the nature of POW mining but now ill talk about individual peoples mining in regards to return of investment

hobby mining is not really cost effective.(owners of only a few rigs)

people that buy single rigs do not get bulk discount and have to pay full delivery charge and are usually left to the 2nd or third batch after the main mining farms get their hands on units.

but if your a serious investor there are ways to cut the price of the units (bulk buy discount) cut the price of electric (business rate) and the delivery costs are split across multiple units. aswel as normally being front of the queue to start mining before difficulty changes too much

but even when not effective to mine in bulk. some large whale investors find it easier to buy X rigs and mine for 3 months rather than find exchanges with a low 'spot'(spread) price that allows multiple thousands of dollars purchase without affecting the price to much.

EG
just buying 200 coins can make the price of bitcoin move alot. so imagine if you wanted to buy 200,000

for instance if i wanted to buy 200k coins today. i would cause coinbase's price to go from $360~ all the way above $1000. meaning if i had lets say $72million, you would think that equates to 200k coins at $360.. but no,,, as soon as i start buying some the price rises thus by the time i have bought 2000 coins the price could be in the $400 price range. by the time i get to 4000 coins it could be in the $500 price range.. and thus with 196k coins to go, its becoming more and more expensive to just buy the amount of coins i like.

however by mining them i can grab coins and never need to touch an exchange, thus getting closer to the 200k coin figure i want, than i would have simply buying them.

This used to be true before cloud mining. Not sure if it still is. But the thing about hardware is that you get the full price of 3 months mining at the current difficutly TODAY, for every unit you sell. So if you sell 500 preorders, thats a lot of money that you would never get mining.

If you buy one of those machines and it arrives within a few days and you mine with it for several months, you do get profit. But the variables are just impossible to gamble with.

You will never make any profit with cloud mining. Not by any calculation I've made.

I really wish I could mine again. But that ship has sailed. Instead I buy BTC instead of buying hardware. Usually its close to the amount of BTC that the logical life of the machine will produce, but you get it today. Also it is guaranteed, not dependent on the difficutly increase. When the value goes up, you're golden.

Another advantage to mining is getting clean fresh coins that the money systems of banks and credit cards don't know you have.
That is priceless.

yes, but don't you see the connection? The fact that you never got your miner is typical for this industry. People don't get their gear on time precisely because it is a very competitive market.  It is rare to actually order some mining gear, get it quickly, and make a positive ROI on it. 

That's very good point, franky!

This separates PoW from other systems, where all money are assigned to a group of participants and the most of it might simply be "not for sale". Mining allows to get as much of it as there is still under the digital crust and after that still get what is available in the flow of transactions.

So it's unreasonable for me to expect paid for computer hardware to be delivered because of the fact there's a competitive market due to the machines being profitable?

The WoW Gold analogy is dumb. WoW Gold does NOT, in any way shape or form, reflect human labor - it is, rather, a CENTRALIZED fiat currency minted by one mid-size US company in any quantity Blizzard chooses.

In the case of GPU mining you always can sell the hardware if the operation is non proffitable. You probably would get around 50% at least in return. In the case of ASICs this may not be true (i.e. BFL).

And yes, mining is economically retarded, DPoS rocks.

http://letstalkbitcoin.com/blog/post/lets-talk-bitcoin-155-beyond-bitcoin
http://wiki.bitshares.org/index.php/Main_Page

Well, whether its "reasonable" or not depends on how you look at it.

But if you look at what's actually happened in the retail consumer
mining gear market, there's always been tons of delays and the whole
"game" is how fast can you get your hands on the gear.  Historically,
a lot of people have lost money because by the time they got the
gear, it was outdated.  That's a natural consequence of the arms-race
nature of mining.  And, it makes sense that it would be that way
because why would a company sell you a piece of gear at a price
that would give you an easy profit, when they can run the machine
themselves?  That doesn't make sense business-wise.  The reason
they sell it to you is because there is no easy profit.  By the time
you get it, its no longer efficient.  There is a conflict of interest
and I think is part of what the OP is alluding to.  

Mining is a highly competitive, serious business,
and is completely commoditized (your hashes
are just as good as mine).  Only the most
efficient lowest cost miners will win, and that generally doesn't
include your retail consumers.  Some people have goten lucky
and gotten their machines early, or bought just before the price
went up, but that is back to the point of why not just buy Bitcoin?
It is much less risky to do that than get into the mining business.

So you're saying this is an arms race and I need to get myself a shotgun and a hacksaw because this is serious business?

This is war for freedom, son!
Things are a bit rough here before they settle.

You might do it on your own, or join a star alliance 8)

Mining exists to secure the blockchain, it was never intended to be a money hose for industrial scale hardware junkies. And since BTC mining is so heavily centralised thanks to a few huge operations and a few big pools, it isn't even much use any more for its intended purpose. BTC hasn't been credibly 'decentralised' for years.

The only PoW coin that has actually useful -ie, distributed- mining is Spreadcoin, the block structure excludes pools, it's solo only. It isn't perfect, it doesn't preclude large solo farms, but it's a big step in a very necessary direction. Every other PoW coin is a complete joke from a security POV.

Thanks for not engaging in thought experiments because that's not the point. OK, let's make it a hypothetical. Pretend that someone created a decentralized world of warcraft. Updates were created on github and game players grinding away voted on the updates. So now it is DECENTRALIZED.

Better yet lets forget WoW. Chess instead. Play chess, beat the previous champ and win a block. You have the option of using a human player or computer. The game would be timed so transactions are validated every ten minutes. Would this be an acceptable PoW?

I think he is forgetting the fact that with PoW you generally need to invest in a lot of very expensive equipment in order to "buy" bitcoin via mining. Also any bitcoin that you "buy" will not be "delivered" instantly like it will on an exchange, but will be "earned" over several months

They are believers. They know Bitcoin will go up this decade because they aren't retarded, and they can afford the mining due being on a good position to not be fried with electricity bills etc. Its a sum of opportunities that put you on a good spot to be an efficient miner.

But this is really costly way to earn clean fresh coins. Why no go to localbitcoin.com and do the trading face by face without going through any third party?

Bitcoin demand can be fulfilled by either mining or purchasing, when one of the option is cheaper, more capital will flow to that direction. So mining cost always adjust itself to be close to the exchange rate

The interesting thing is: If you dramatically improve the mining efficiency, you can scale your production and take a much larger market share, thus drive other miners to unprofitable, and extend the life time of your equipment. And this will also bring centralization. To counter this effect, the rest of the community will try to achieve more and more efficient mining all over the globe, thus raise the difficulty during the process, that is a fight for keeping the system decentralized, not for the profitability, so it will eventually send the mining cost higher than exchange rate

Because by definition you will not be getting fresh clean coins. You will be getting coins with a history.

No - it seems rather boneheaded.

To get 200K coins, you would need to spend nearly two months as being the only miner in existence. (3600 coins/day * 60 days ~= 200Kcoins). As if anyone could be 100% of all mining. You really think it would be harder to buy 200K on exchanges over two months?

1. I bet before a miner sold, they were use it to mine bitcoin & when it was sold, they got profit from mining & sold the miner. Double profit
2. As same as with number 1, they got more profit & they pass the risk to the user.
3. I agree too

And i think mining can't raise up bitcoin price too much :
First, the person/company have to sold their bitcoin to cover up mining tools & maintenance fee
Second, some miner just want to get profit in fiat, so they always sell the bitcoin & bitcoin price went down
Last, Miner only mine if they can get profit

Well it's less retarded than mining uneconomically :S

The cost of mining is why bitcoin will fail. Miner producers are the only ones that win this game.

The only way this mining system works is if the price of BTC rises. It's like a ponzi.

Difficulty just went down for the first time in 2 years which shows mining is tapped out. If the price of BTC goes up, the hashrate will increase and everything works. BUT if the price of BTC falls, here's what happens.

Say it falls to $100 over the next year and a half. The hashrate will drop to 30% of what it is now. THEN ADD IN THE REWARD HALVE AT THAT TIME, the hashrate will drop another 50% on top of that. So we will be sitting at 15% hashrate of what we are at now which would seem fine and dandy because the network worked when it was only 15% of the size it is now. The problem is back then, there wasn't an available supply of power to attack the network. The miners didn't exist yet.

If we went to 15% now, there are loads of farms who had shutdown miners who could flip a switch and turn them back on and attack the network with ease. Why would they do this? Maybe they invest heavily in the "next" coin and make more money on that when they crush BTC and everybody moves to something else. They could make way more money doing that then having a warehouse full of worthless doorstops.


What is also stupid with mining is with every increase in BTC there is severe overhead pressure because miners dump coins on the market to buy more miners. Any spike in BTC will then be capped until mining is made unprofitable again.

You will be attacked in 5 - 4 - 3 - 2........

You're saying miners will drop out because they can't compete, but
they'll somehow be able to jump in later (when other miners drop out)
and successfully attack the network?   Yeah right.  Even if  they
turn back on, they will make more money mining than attacking.
Attacking Bitcoin so another coin can rise?  Never gonna happen.


This doesn't make sense either.  Miners are ALWAYS dumping
coins on the market.  So what?

Not true. The cost of mining is directly tied to how many people are trying to mine. If the overall cost is too much then less equipment will be used to mine which will cause the cost to go down via lower difficulty.

Although mining manufacturers have profited handsomely in the past the reason they were able to do so is because they were early entrants into the ASIC market which was literally non-existant.

Bitcoin is already 60% or so off its highs. We've had only one drop in difficulty and, so far, no miners have appeared en-masse to attack the network. Not going to happen.

I've been trolled haven't I, lol.

You can only use ATHs for specific analysis. In statistics (IIRC) this is called variance and is mitigated by standard deviation to find degrees of freedom. I might have that backwards, but that's not really important to the point. The average price over the last year has not dropped nearly so dramatically. What people are discovering is that Bitcoin isn't going away and they will find new interest in its adoption.
Sorry, not meaning to attack your point. I just get tired of seeing the ATH stuff.

Those ATH may have been based on Mt Gox price manipulation, and there were a lot of bag holders suffering as a result.

today is only for people who had already a positive ROI and a large amount of miners
and even in that case,there is not a large economical profit

Because Bitcoin will not fail. Bitcoin can always adapt and evolve. He deserves to be attacked due to such statements.

The issue is that mining bitcoin is still profitable for the miners on an operating basis. This results in the miners not leaving in masse.

It is generally accepted that the difficulty, over the long term, will be determined by both the price of bitcoin and the price of electricity

You can buy 200k bitcoins. Just wait for the auctions and bid. (You know, the ones from Silk Road, etc,, that the FBI, US Marshalls or other US goverment has.)

They may have a history, but since you bought it from a government auction, they are considered "clean".

Now, of course, everyone will know (or the gov will) how much you have, but if you're smart, you can slowly tumble it all around with different exchanges. Or you can just HODL for 10 years and cash out then, pay the proper taxes, and still make a lot of fiat.

Yes. As mining is a massive waste of electricity.

The entire bitcoin network could be maintained using a single server. :P

No. Banks, and credit card processing companies (visa, mastercard and amex) all use similar amounts of electricity on a per transaction and a per dollar sent basis.
Also not true. This would create a central authority that would control the blockchain, which is not what bitcoin is about

Doyou understand the meaning of ROI and the time it takes to get that? If you spend 100,000 dollars on a  restaurant will you make 100,000 dollars the first day you are opened? No its called ROI. But if you spend 100,000 dollars on a restaurant and run your business well please your customers will you make 100,000 dollars profit in a year? Maybe. Mining Bitcoins is no different, except we dont have to please any customers to secure our business, we just have to buy a couple more machines every 2 weeks to compensate for the rise in the difficulty.
Again ROI brother ROI
I dont know ask a few of the idiots who bought into the hype when the coins were 1100 dollars a coin, where do you think they are sitting right now? Pretty far from profitable huh?


In my opinion, there is an influx of math-deficient, lack of business economics, lack of the bitcoin protocol and how it works, lack of currency trading logic and ROI understanding in your whole post. I think you need some more research on a few things before you start criticizing others on what you "think" is right and wrong :)

Sorry to be so blunt, Im Just saying

As more and more bitcoin miners enter the frame, the electricity used in mining would increase, without any corresponding increase in the capacity of the network. So in that sense, the amount of electricity used per transaction can increase.
I am not sure if the amount of electricity used by banks is comparable on a per transaction basis to bitcoin. Even if it is, I don't think it varies as much as the electricity used by the bitcoin network.

The point is that the network is spending 25 x 144 x 365 = 1.314.000 BTC/y. in securing the network and sustaining a wasteful business which is now not really decentralized as the economies of scale rules the mining.

This 500 MUSD could be spent in something that add ups really value to the network. At the beginning it was a good way for the initial bitcoin distribution and was really decentralized but now I strongly think that we should came with something better.

So, obviously something like public sewers and water supply are only justifiable on a public health basis until the population is generally healthy, at which point it should be turned off and cheaper method of health preservation should be sought?

@OP:

That's why proof of stake was invented.

You might not like it, but most of those PoS coins are actually working...

Currently I'm forging Nxt on a rasperry pi, using 2-3 Watt. It does not make me much money, but the entire system is using a tiny tiny fraction of BTC electricity, and it works.
Have been doing PoS transactions for a year now, and I sleep better with the noiseless raspi beside my bed than with the miners I had :)

mining is used to make sure the network is stable

i was thinking to start cloud mining but after these posts im not going to do that

Yeah, I'm inclined to agree with the OP.  Mining seems pretty bad from an economic standpoint unless you happened to be one of the lucky ones who found out about Bitcoin in 2009 and did a bunch of CPU mining when that was still possible.  I'm more concerned about the environmental issues with mining than the economic ones personally though, considering how much energy miners use, although I do think that if we ever get to the point where bitcoin takes over fiat (highly unlikely, but we can hope), the energy miners use would likely be less than all the energy banks & the Federal Reserve uses.

Mining is much more competitive now then it was when GPU/CPU was profitable. Today you need to have access to cheap electricity and be able to buy enough mining equipment to command a discount from the manufacturers.