You are only looking at part of the equation. Price is also increasing. Last year it took 10,000 BTC to buy a pizza.
And when price is increasing, it is more profitable to purchase BTC than it is to purchase hardware for mining. If you have existing hardware, the decision comes down to whether or not the electricity cost is lower than the value earned mining. And if you have excess hardware, it might be more profitable to sell the excess hardware to purchase BTC. Sorry, let me restate that more clearly: "Price has also increased." So the ratio between price and difficulty really has not changed much since December and in fact is higher than average. Saying that it doesn't make sense to mine any more because the difficulty has gone up so much is wrong given that the price has gone up even more. This does not mean that you should (or should not) buy mining hardware. It also does not mean prices are (or are not) going to increase in the future.
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BitcoinPool was getting hit really hard with jumpers on long rounds a while back. They were seeing their hashrate get cut in half during long rounds.
Notice that this sucks for the pool even though some of these people aren't even doing it in order to game the system. They just feel like the pool isn't paying out very well so they want to try something else. People are going to hop from a pool with the unexploitable score system if the round is really long, but at least in that case it won't hurt the people who don't jump.
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At this rate, it's getting impossible for single card users to make more than a couple dozen bucks with 24/7 mining. I'm down to 0.8 btc or so a day with my 380mhash/s 6950. Which means I will just about make 10btc by the next difficulty increase - that's ~80$ IF the prices stay well above 8$ (which I doubt since they are peaking right now).
By the next difficulty increase, mining won't be profitable anymore with midrange cards, and will only make a little money with high end ones. If the difficulty increase keeps up, systems with 3-4 5870s won't make a btc a day by the end of the july.
You are only looking at part of the equation. Price is also increasing. Last year it took 10,000 BTC to buy a pizza. The BTC you can mine in a day are actually worth more $ than before, despite the difficulty increases. http://forum.bitcoin.org/index.php?topic=7427.0At some point there will be an issue of electricity costs, but we aren't there yet, and many people don't pay for electricity or have very low rates. If you are smart and efficient you can make as much money mining as almost any time since December. Note that money made by mining and then holding the BTC while their value increased does not count as mining profit.
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We've known for a while it works. My question is, who's responsibility is it to trying prevent this? Pool operators obviously don't have a big interest in keeping out computing power and I can't blame them. Though if it's just a matter of way the pool is being operated then, who else can? Soloing is an option, but not a great option for everyone. And lastly, is this really an issue that exist and can we detect this in any way with proof? The talks of it being possible has been around for a long time now.
You can probably detect it statistically from the distribution of block times for the pool. If there is pool hopping then there should be a longer tail. In the extreme case (which obviously doesn't happen) once a block takes too long everyone hops out and the block never finishes (infinite block time). I don't know for sure there is enough data to make a strong statistical inference on this, but I would guess there is. I would bet every BTC I own that there is pool hopping happening on at a fairly large scale, and people have automated it. And I agree that the way things are structured now the pools don't have a huge incentive to do anything about it. The best thing to do is avoid pools without good defenses.
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So, if the price is staying roughly even, then is it a safe assumption to say that $90,000 is being invested daily in bitcoins?
Right, either explicitly via exchanges or implicitly. People can implicitly invest in BTC by mining them and holding them or accepting them in trade and holding them. I would guess that mining and holding is by far the largest component of this, but I don't really know.
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Hence we might see the price of bitcoin falling below price of producing.
It is at least possible this never happens (or at least not for a long time) because there are ways of producing BTC at essentially zero cost, such as botnets.
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Want to trade 1 btc
Post or PM your namecoin address and send 1 BTC to 17KbCPJuvzfaXWctQ5VNyhJsywg5nF2WEX. Then I will send 450 namecoin to you.
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You say that other producers entering the marketplace will cause the price to go down. Either you mean it will decrease the demand or you mean it will increase the supply. But regardless of how many producers are in the marketplace, bitcoins will be created at the same rate. Adding more producers does not cause the supply to increase and price to lower!
Bitcoin is more like a trading market where there is no fixed set of "suppliers" and "customers." There are buyers and sellers, and any given trader can move from one side to the other at various times without needing to build a factory or something. Cheap mining does not increase supply much in the traditional sense, but it does decrease demand, because would-be buyers can mine instead (substitution). Cheap mining does increase supply somewhat, because difficulty increases as mining increases. But difficulty is calculated in hindsight, so with increasing mining the block rate goes up. Of course there is a fixed total supply of BTC so any increase in the block rate now means a decrease in the block rate at some point in the future.
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* Should work with atleast a few different combinations of browsers-OSs-GPUs, with plans to work on as many as possible
I don't think it is possible to work with different browsers right now because only Firefox has a WebCL plugin.
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coined author not responding?
He may not know this thread is here. I'll post on his thread to let him know. EDIT: looks like Luke-Jr did that already.
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So is difficulty the only price driver or one of many drivers?
Most certainly not the only price driver. Deconstructively, what does difficulty represent?
How much computation is required (on average) to solve one block. Time to get a block, which is what? Electricity. What other price drivers are there? Demand for bitcoins. Which is based on what? Right now I think the demand is based on investment speculation/expectation. Am I missing anything?
Well you can't eat them so sure it's (almost) all investment. There is some trade going on too, and even a bit that is increasingly closed loop. There are people doing services for BTC and then using those BTC to buy stuff, etc. Of course this is still fairly small in absolute terms, but I would guess the rate of growth is really high. Some people are probably using it for near-costless money transfers instead of checks, bank transfers or cash, especially if the recipient wants BTC anyway. Over time international transfers should be big. Doing those with banks can be really inefficient.
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I'm trying to get at the underlying fundamentals of BTC, which nobody seems to want to approach b/c they feel it's an attack on BTC, which it is not, I think we can all benefit from fundamentals.
I don't think it's an attack on Bitcoin. I'm not sure I agree difficulty is going to increase by 100x in two months. I do think it's going to increase a lot though.
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Once the difficulty starts getting too crazy people will not mine as much
People are going to continue to mine at much higher difficulty levels, even if that means botnets. And as long as mining doesn't stop completely (a total stop to hashing will prevent a difficulty adjustment), the difficulty will adjust downwards to a level that the marginal miner is eking out a small profit. Right, but I'm saying that level is much higher.
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Once the difficulty starts getting too crazy people will not mine as much
People are going to continue to mine at much higher difficulty levels, even if that means botnets.
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Why is a bitcoin valued at the cost of production, while the dollar is valued at the exchange cost?
Production cost doesn't mean anything, but replacement cost does. You can't take a piece of paper and turn it into a dollar, but you can take electricity (and computers) and turn it into BTC. But even then, you can't do it right now (assuming you want BTC now) and you can't do it in unlimited quantity, so it's only an imperfect replacement.
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Ok, so what is a legitimate expectation of future value? I posited a reasonable expectation in 2 months to be about 25 bucks for cost. If the multiplier of 32 remains the same, this means in 2 months BTC will be 800 dollars? I don't think so. I mean, I'd love it to be. I'm long on BTC, but I just don't see it happening.
It depends what expectations are going to be in two months. I don't want to be too circular about it, but unless you base your analysis on value going all the way out, you can't really remove future expectations from the equation. Some have made the argument that there is a potentially long growth curve ahead for Bitcoin in terms of usefulness. If it captures even a small portion of funds transfers, or even just a good share of the underground economy that could be a lot of value compared to now when it's all pizzas and alpaca socks.
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bah i give up lol i know that heat rises and cold stays low lol give me a bit of a break He's right about deltaT though. It's going to be really hard to keep the room at a reasonable temperature when it's 35+ outside. One approach is to just plan for a bit of downtime when it gets too hot.
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A price at 32 times the cost is pure speculation pure and simple.
Well, sure. The price of any liquid asset is based on a speculative assessment of its future value. A less loaded word would be "expectations." It's a bit like looking at a stock in terms of book value. That's one measure of fundamental value. But future earnings (or dividends) are another measure, and the two often diverge.
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I guess I could add a #6, although it's somewhat included in #5.
6. Competing crypto-currencies are seen to fail. If it turns out that Bitcoin has too great of a first mover advantage (or less likely that it is indeed the ideal design for a crypto-currency) and other crypto-currencies are unable to compete successfully against it, then the threat of something replacing Bitcoin and making BTC worthless or near-worthless is reduced.
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