Bitcoin Forum

Difficulty has just jumped 5%, some 14/16nm chips are being turned on?

Previous two bubbles in bitcoin are mostly caused by the several magnitudes of efficiency raise of mining: Because mining usually is the lowest possible cost to get coin, when mining technology shifts, majority of miners will lose the ability to get enough coin through mining, and decided to go to market and purchase, that made the exchange rate skyrocket

After technology shift is over and new generation mining rigs can be deployed at large scale, the cost of mining will again become the lowest cost to get coins, so coin's exchange rate will eventually get close to the cost of mining due to arbitraging

During the bubble, many people paid their fiat money to get mining rigs or bitcoin, directly or indirectly supported the miners to upgrade infrastructure. And after the upgrading, the whole network commands much higher hash rate and becomes much more secure. Because many of those infrastructure projects have been ROIed, they can be easily relocated to places with cheap electricity and maintain same hash rate as before

This means, the network hash rate will never go down long term wise, due to more and more mining rigs will be ROIed over time. At the same time the barrier of entry will become higher and higher: There is a cost for each mining rig, unless you can make rigs of magnitudes higher efficiency, it might never ROI. Even if you have much more efficient miner, it would still take quite some time to ROI because of the heavy investment in chips

So, bitcoin's value is not only guaranteed by the mathematics in the protocol, but also driven by the continuous increase in the hashing power. When the barrier of entry getting higher and higher, anyone who want to invest in bitcoin mining would have to throw in a fortune to get some meaningful return

This is quite different than gold. Depleting a gold mine will not increase the difficulty of future gold mining too much, you would have similar cost when a new gold mine is found. But in bitcoin, all the investment are accumulative, makes it more and more difficult worldwide to get bitcoin over time, even the supply is constant in a 4 years period

That's the reason after each bubble, the bitcoin exchange rate will stabilize at much higher level than last bottom, due to higher barrier of entry in mining. This barrier drives small investors to exchanges and raise the exchange rate

i quit mining. pointless to pay income taxes on it when the price is this low. buy and hold, pay the taxes on the difference later. paying income taxes on mined coins pretty much makes mining pointless. great for the irs though since they tax you twice on your coins if they worth more when u spend them.

Where exactly u got the data of 5% difficulty jump ? Last difficulty update took place on May 31, 2015. Next is within 3 days and according to https://alloscomp.com/bitcoin/calculator it wil go down 2.3%.

I used to mine pretty heavily when difficulty was around 8 Billion - will say that even then it was cheaper to BUY coins. Not sure mining will ever prove to be the cheaper alternative UNTIL the price of a single Bitcoin sky rockets. But then so many people will become miners that it will always find balance

How do you pay the difference later if you don't know the difference? I forgot were I got some of my coins, I think some come from Mintpal which is a defunct exchange. I've seen a lot of people commenting on the same. Getting your Bitcoins properly taxed seems like a big nightmare.

https://bitcoinwisdom.com/bitcoin/difficulty

Yes

Mining bitcoins for profit has just becoming increasingly difficult and the price of most of the hardware is silly. I'm an optimist but this is a bit much.

There was a brief spike in mid May where the hashing power jumped to 419,739,370 (https://blockchain.info/charts/hash-rate?timespan=60days&showDataPoints=false&daysAverageString=1&show_header=true&scale=0&address=) for a few hours then dropped.

Maybe the OP is refferening to that.
It is actually the highest in the last 60 days.

Ive been noticing strange patterns with the difficulty and the price, its like the big miners are also involved with the big traders.   The difficulty can shoot right up and then the price seems to crash and visa versa.  Kinda the opposite of what you think might happen.

it's knc, apoparently they are the first that are running this, expect a wave of those new machine from chinese, soon, some of them might be already operative as a test, i don't know about their eficiency, but they should rise the diff to a whole new standard

not that it matter at this point, mining is already out of the question for casual miners anyway

Any idea what caused spike like that? To achieve hashing power of this magnitude some serious hardware is needed. And now it seems like some big farm started do mine and then close soon after?
I don't get it.

Yes, PoW mining s slowly becoming extremely competitive and it requires a lot of funding and constant reinvestment.

This is why I strongly recommend people to go PoS. There are several nice PoS coins, DMD Diamond, Tek, Net, etc. where you can make money without the need to constantly manage and upgrade your hardware. Dont be stupid, choose easier and more profitable way.

I hope all you know what PoS and mining is. In case anyone needs any help, just drop me a PM, always glad to help out. 

In my theory, if mining difficulty jump, many miners will turn their ASICs off because they won't get ROI. I think difficulty will go down when they turn off their ASICs and it's back to normal. This thing will happen again and again. Whenever many miner use the new chips to mine, the difficulty will jump and go down again. That's my opinion ;)

i'm sure at some point the new chips will surpass the current miners and that will take the difficulty up to new unseen levels.

at least you still optimist, im not, i learn long time agoo that mining btc is useless for me since my electricity bill is more expensive than i get from minning and im not counting how many cost to me the hw, the ROI is imposible.

only 5%, lets see whats happend when all those chinesse farm renew his hw with those some 14/16nm chips ;)

Its your responsibility to keep the documentation. If you are unaware of how much you paid, to be safe with the IRS, your cost basis will just have to be $0, and you'll have to pay capital gains on the full price when you sell.

Lol, the words of a slave.

it's getting harder and harder to mine and its only going to get harder. i actually think it's amazing that the creator of bitcoin set it up like this,  reward those who got in early and helped btc grow and make it harder as time goes on to mine coins when btc has gotten more popular

While I am NOT a Bitcoin expert by any means, I think the whole point was was have the "Bitcoin currency supply" expand at a predictable and defined rate. The difficulty mechanism works hard at, and is pretty effective at, having 144 blocks per day added to the supply.

It's probably a poor choice to call it mining, rather than minting. It's supposed to be a currency after all, and not extraction of money from somewhere. No other kind of modern currency has private individuals producing they own coins (or paper).

Long term folks will not obtain Bitcoins via mining, just like folks today don't mint their own coins, or print their own bills.

I agree calling it mining is not accurate. For example if the bitcoin price rises the amount of bitcoin mined worldwide does not rise.

I prefer to think of it as a lottery for 144 daily prizes.  Each time you calculate a hash you buy a ticket in the lottery.

So perhaps a better description than mining is that every day 144 blocks of 25 bitcoin are minted, and then distributed by lottery.

Agree. It was always expected by Satoshi that this would occur.

From Satoshi on Development & Technical Discussion > Post reply ( Re: Scalability and transaction rate )
Quote from: satoshi on July 29, 2010, 02:00:38 AM

"The current system where every user is a network node is not the intended configuration for large scale.  That would be like every Usenet user runs their own NNTP server.  The design supports letting users just be users.  The more burden it is to run a node, the fewer nodes there will be.  Those few nodes will be big server farms.  The rest will be client nodes that only do transactions and don't generate."

Don't underestimate the size of the daily or weekly variation in hash rate due to statistical noise.  The hash rate regularly varies by 10% to 20% from day to day solely due to statistical variance.  It is only over a week or longer that actual changes in the hash rate become clear.

You can expect the hash rate difficulty changes every two weeks to fluctuate within a range of about plus and minus 2-4% solely due to statistical noise even if there is no change to the total actual network hash rate.  

It is only over months that long term trends are clearer.

The mathematical details.

There is a 10 minute block average solve time with a 10 minute variance (poisson distribution).  So the standard deviation percentage error in solve time is 100 / sqrt(number blocks). Most of the time the difficulty change will be within 2 standard deviations.  

There are 2016 blocks found on average between each difficulty change so for each change the standard deviation is 100 / sqrt(2016) or about 2%.  Two deviations are 4%.  So hash difficulty changes may be frequently in error by 2% and possibly as high as 5%.  So don't be surprised by a 5% change.  It may simple be due to the previous fortnight being 2% or so under and the next 2% over.

Majority will agree, mining btc directly is not worth it unless you have some serious hardware money.

Mining was the past. Right now anything about mining i think isn't profitable. Cloud mining full of ponzi, individual mining can't get ROI, pool mining full of scam. So now, mining isn't a trend.

the whole mining, is dead, at least for casual miners, and with bitcoin(unless you have plenty of money to invest in some serious farm, but even then it will be probably, not worth it, a bit risky if you ask me), if you still want to mine something there is only the altcoin section

I think altcoin price is unstale right now. Also there are many pre-mined coins and scam coins. This mean altcoin mining is risky too. Mining is too hard right now.