Bitcoin Forum

Looks like we miners are in for a serious difficulty adjustment, despite all the panic that's been going on this week.  It seems that with all the negative press regarding theft of bitcoins they've suddenly become that much more popular.

Calculations point to the next difficulty increase putting us over 1.4 million.  That's an increase of 60% - wow.  Now here's to hoping prices follow suit.

I think that its way more probable that difficulty stops going up so quick than the price going up.

The last events (for lack of better name) are not going to do good to the Bitcoin economy. Also, the rise in price atracted people that were interested just in earning money by mining and not in developing the Bitcoin economy, therefore this people want to cash out and wont let the price of bitcoins in dollars rise too much. Passing through this will take time and a lot of demand. Long term bitcoin is bullish, but short term not so much.

Right now we are in a critical moment for mining.

let me quote myself, as i've just made a post about difficulty increase


even with the current attention in the media, i think mining will decline (as in, grow slower) over time. of course peaks like a huge article in some major newspaper can happen, but i doubt it would increase the network speed too much. hopefully the media won't make people think it's still profitable to mine, because i think that hype is over. yes, you can still get even, but the risk of the price falling (see mtgox yesterday) is still present. it plays so much of a bigger role when you compare a say 500% profit with getting even. what we all know is we are going to the point where an invested kwh yields just a little bit more than what the big guys pay for their electricity, which is ~6-10c.

This is exactly my fear. The panic happened in the previous "cycle" and now people have learned that if they hold and let others stop it will be fine, like your post shows. So everybody is expecting the same result as previous cycles, so everybody keeps adding more capacity...

This is only one reason on why it could go in a different way as in the past. Previous gains dont guarantee future gains.

generally speaking the idea of making money running a free program on a computer is a pretty sexy concept compared to a hard to understand and very illiquid cryptocurrency.

Capacity is going to increase no matter what anyone says or does on this forum because there's always some new person who can click install on guiminer and run it for free in a computer lab somewhere

I wonder what % of people here have ever even used a bitcoin to transact anything.... I tried and it results in arguments over what a bitcoin is worth, referring to rapidly fluctuating prices on illiquid scammy markets, and basically end up asking for cash instead.

What shop operating at 10-20% typical retail margins is going to spend all day constantly updating/checking bitcoin prices when selling an item they just bought from a distributor at a hard fixed cost?

Agreed. People is going to keep adding capacity until there is a big crash in mining.


I have. Never have been scammed in bitcoins. I have been scammed in pounds and in euros.


This is not an issue. The websites actualize prices automatically. Its really only a couple of lines of php.

well, you could solve this with some effort in programming. you could check the price via a feed and let your website calculate the current value in btc of your goods. maybe they'll even go as far as automatically selling the bitcoins after each transaction. that would not be too much time spent.


what? no, this sounds wrong. of course it's going to increase (although i think the rate at which it increases will get lower, as it already has), but there's not gonna be a big crash in mining, i think. it's going to slowly reach the point at which it is no longer profitable for the casual miner (1-3 rigs at home, 15c/kwh etc), but this would not cause a crash (your statement sounds as if the difficulty would adjust dramatically at one point in time).

the only thing that can cause a crash in mining is a crash in bitcoins themselves, a pair trade betweek KWh/$ and Mhash/$ will exist from this point forth, enough participants for the market to be efficient now.

If mining becomes widespread, miners with bitcoins will probably start transacting amongst themselves, so it will be good for adoption in general.  It will be easier to just buy stuff with bitcoins than going thru the nightmare of mt. gox.

That's not really true. People are used to the growing exponential properties of bitcoin. What if mining became so unprofitable after a series of difficulty increases spurred on by a super cluster coming online for a brief period of time then shutting off? Say it was only 1/3rd of the network even, and suddenly we have a difficulty pointed at 1/3rd higher than the hashing rate? Transactions being to slow to a crawl, instead of a transaction being solved every 5-6 minutes, we have a transaction every 15 minutes, 6+ confirmations take 1.5+ hours, mining profitability drops to disgustingly low levels. People who are fed up with trying to earn coin and see their transactions taking forever start to drop out as well, hashing rate continues to decline, and the bear of it is that instead of lasting for two weeks, this lasts 3 weeks, then a month, escalating peoples impatience and causing more to drop out as they see their costs catching up to them without returns to show for it. Etc.

A bit of a nightmare doomsday scenario to be sure, but one that is possible, and certainly a way that a crash could happen in mining before a crash to bitcoin itself (though that would likely result as well).

By a crash I mean that a lot of people are going to realize that their investment in computer hardware has not been profitable and that hey are never going to recover the money they invested in it.

It really validates what I've been saying -- that difficulty is going to keep going up in the short-term, and that you can KEEP DREAMING if you think it's going to go down anytime soon. (It only went down once or twice, before most of us here heard about Bitcoin)

The fact that we're solving over 10 blocks/hour now is incredible:  We had a major hack of Mt. Gox., closing of ALL Bitcoin exchanges for days (Mt. Gox, Tradehill, Virwox), a demonstration of the apparent instability of Bitcoins (watching their value go from 17.50 to .01 in minutes), etc.

If people are *still* going out and buying cards at a time like this, they'll always be buying cards! Whoever "they" is.

Nonsense. The bitcoin system is stable - only the exchange rates are unstable and driven by bid and ask. Mt. Gox and the others are only exchange platforms with serious security leaks.
Sorry for bad english (german).

The fact that you say "a demonstration of the apparent instability of Bitcoins" tells me that you have absolutely no knowledge of what actually transpired.

The artificial collapse of a trading market has no impact on the stability of the medium.  It was artificial.  The only thing it proves is that the Exchanges, going forward, will have to safeguard against this exact issue.  It could just as easily been due to a human error, typing and offer price when their cat stepped on the return key at 2, instead of 20.  The "real world" exchanges have these types of "volatility airbrakes".  You don't think if someone sold 1 million shares of Apple for $0.05 each that the NYSE would just allow that transaction and move on?  Absolutely not, they'd freeze trading of AAPL until they could figure out what went wrong.

The only failure is that Mt. Gox didn't have those type of controls present.  That's it.  Everyone thinks the market is going to crash when it opens this evening.  It won't.  It'll dip as panicked people sell off briefly, but guess what will happen, those of us that still believe will get a deal on BTC.  I for one will have my buy order sitting there at $10 waiting.  I kicked myself for not having bought two weeks ago when it dipped to $10, now I'll have my chance again.

All you're doing is explaining WHY Bitcoins are so unstable. The main exchange (let's face it, Mt. Gox is connected to Bitcoin for most people, even more so than "Bitcoin.org") had no controls in place, and ALLOWED the value of BTC to crash all the way down to .01 -- and the only solution was to REVERSE MANY TRADES which many people don't like. They also have to close the exchange for a couple days.

(BTW, I wasn't even there when the price crashed. I didn't buy any cheap BTC, so I'm not personally invested in them NOT reversing trades. But I can understand, objectively, how reversing a bunch of trades -- trying to cop a "do over" -- tends to make the whole thing look "mickey-mouse" to outsiders...)

When was the last time the DOW dropped to single digits? Could you imagine the DOW Jones Industrial Average dropping from the current 12,000 all the way to less than 1 -- in an hour or two? You'd never see it.

I'm not saying Bitcoins are flawed -- I'm saying that to many people, their "objective value" just took a big hit, since people WATCHED THEM DROP TO A PENNY WITHIN MINUTES. That's not a confidence-building exercise.

And while it's true that Mt. Gox is "just one business in the Bitcoin economy", it's also true that they're the MAIN exchange as far as activity, and it's a big deal when they go down or have problems. They might as well BE bitcoin for the majority of users.

Do you know what yesterday's incident taught me?

That Mt. Gox is too big for their britches -- that they are a bunch of computer nerds who might be skilled at writing code, but they have NO CLUE about things like running a business, currency exchanges, security, etc. They are very unprofessional. It's a bit unnerving.

They literally can't deal with the exponential growth they've experienced of late, and they can't handle all the issues they're having to deal with -- issues that are beyond them, for the most part (security, exchange regulations, etc.)

Their comfort zone is writing code. Period. Now they're being expected to run the NASDAQ. Not exactly in their field of competence.

Didn't Mt. Gox used to be a site for trading Magic: The Gathering cards?

They're "a bunch of kids".

Scenario 1: Once the ROI is low enough, because of the raising difficulty, people will stop buying new mining equipment (bad news for newegg). Some may stop mining, but most of them will continue.
=> no more increase of total mining power
=> slower increase of difficulty

Scenario 2: Once the power costs are more expensive than the mined coins can be sold for, people will stop mining immediately, as long as they need to pay for the energy.
=> massive decrease of total mining power
=> no more increase of difficulty

Guess you missed my point.  The DOW *cannot* drop from from 12,000 to less than 1 in an hour or two.  They have controls that would freeze trading before that happened.  We've seen it before.

That is precisely my point. The DOW is a professional marketplace, run by mature businessmen who wear suits.  Mt. Gox is a mickey-mouse operation run by geeky computer programmers in shorts and jeans. There's a big difference.

Why do you keep panicking on the forums week after week?

The value didn't "go from 17.50 to 0.01". Someone simply filled all the sell orders open on the market. Google flash crash; It's happened on the stock markets as well.
Those "placeholder bids" aren't supposed to be filled, but if someone actually buys them at that price, the system doesn't discriminate.

http://en.wikipedia.org/wiki/2010_Flash_Crash


Who and where?
Dow Jones crash and spike, "mature businessmen in suits", billions of dollars.

AngelusWebDesign calm down for god sake.

These type of events have happened in the stock market and in other dollar denominated platform and the answer has always been to undo them. It was not a client doing them, which would have been fine, but some hacker. This has happened in other markets and it was not such a big deal. Calm down.

If it actually happened in the professional stock markets before, I stand corrected. I'm man enough to admit when I'm wrong about something.

STILL, the fact that they had circuit breakers in place puts them far above Mt. Gox.

And I bet you didn't have people on forums, "You can't rollback my Proctor & Gamble BUY orders @ .01!  I'm gonna sue you!"

In other words, the above-mentioned DOW market shutdown & fix was much more timely than the one at Mt. Gox. The guys at Mt. Gox were probably playing video games or something when the crash happened. Or they were sleeping. Either way, they simply don't have enough manpower OR know-how to run a professional, secure currency exchange. That's the point I'm trying to make.

Mt. Gox aren't some guys in a basement.
They have a massive office in Cerulean Tower which is one of the most expensive areas in Tokyo. They are a registered company that pays taxes in Japan.

You can even visit them or check the place on google maps.
I think you are discounting the fact that their turnover is often nearly a million dollars per day.

Is Sony just a mickey mouse operation because all their data was stolen?
No, it's one of the oldest technology companies in the world.

p.s. People, companies and stock market officials have been sued after real life flash crashes.
There are countless cases where a computer error executed a sell order in a wrong sequence (i.e. 60,000 stocks at $1 instead if 1 stock at $60,000).

"Kids" can afford an expensive office when they do a million dollars a day in trades. The fact that they have money has no bearing on their professionalism or competence. BTW, the fact that a bunch of kids are running an exchange that does $1 million per day is EXACTLY MY POINT. They are too big for their britches. They are in way over their heads. They haven't a clue.

Mark Zuckerberg was a "kid" barely in his 20s when he created Facebook. It was also riddled with problems after it started expanding.

He's now 27 and owns one of the most valuable companies in the world employing 1000+ people and is a billionaire. Point?

The current economic crisis was started by bankers in their 50's and 60's taking astronomical risks and speculating on garbage loans in the US housing market. Age doesn't mean anything.

If you're "man enough", why don't you just admit that perhaps, maybe, you were wrong to go off the deep end.  You have NO IDEA of the credentials MtGox's operators have, and probably didn't bother to find out.  You just assumed that since they were dealing in Bitcoins, they were "some kid".

You stand corrected, admit it, and move on.

"Hey, I know! Let's just give our entire database to our 'financial adviser. Should be safe as all fuck with him!"

"Yeah, good idea! We're totally mature and ready for the responsibility of multiple millions of dollars worth of hundreds of thousands of people's assets. WE HAVE TEH CREDENTIALS."

"YAY."

+1

...and then the mods just delete any serious criticism of MtGox and everyone continues on as blind as ever...

Move along folks, we've got serious business to take care of here.