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Author Topic: are we being stupid?  (Read 4459 times)
Sjalq
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May 31, 2011, 07:25:23 PM
 #1

Hey guys,

I've requested the quote for the mining rig me and a friend are putting together and I'm real stoked.

I did however come across a post in the economy section that called us miners rubes for mining instead of just buying.

I don't have the exact figures but given the increases in difficulty and the decreases in bitcoins mined, even with the increasing price, isn't it better for us to just buy and hold than to build mining machines?

We're laying out about $2600 for the rig, its pretty cool imho and there are other benefits, but I keep thinking there might be a smarter way. Among the other benefits are that I don't have to go through the capital control / tax issues of my country if I mine.

What have been your experiences of this if you are a long term miner? (buy vs mine (?) )

Cheesy mine mine mine mine mine mine mine Cheesy
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Elios
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May 31, 2011, 07:29:11 PM
 #2

long haul vs. short term
mining is a long term investment it may take 2-3 months to pay off the rig but once you do its mostly profit
if you by then you have to sell or hope it doesnt tank be for you do
with mining your rig just takes longer to pay off
as long as your making for then it cost to run the rig your in the black
Atroxes
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May 31, 2011, 07:29:54 PM
 #3

First off, I'm not a long-term miner.

There's a rather simple answer though... It's fun, interesting and a learning experience, to put together a big mining rig. The custom casing, airflow modding, fine-tuning GPU clocks and tweaking software.

I don't know if a $2600 mining rig will earn itself back for you. I also don't know if you'll make a profit on buying $2600 dollars worth of Bitcoin.

If only one could peak into the future  Roll Eyes
Sukrim
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May 31, 2011, 07:38:34 PM
 #4

are we being stupid?

No, but hopefully aware that mining will return most probably less money than buying BTC directly, should the BTC <--> USD ratio go up further.

BUT:

Should the BTC <--> USD rate go down, you still have some value in hardware, you can use your hardware for something else and also it might be a free investment if you have your GPU in your PC anyways already.
Buying new mining hardware just for mining is however a, let call it "very optimistic" investment if you want to invest in BTC and could buy plain BTC instead too.

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fnord123
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May 31, 2011, 07:42:24 PM
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Wow, $2600 for a rig?  You do realize that just to break even, with no difficulty increases, it would take months?  And that if difficulty keeps going up at half the rate it has, you will easily be at least $1000 and more likely $2000 in the hole?
Braden
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May 31, 2011, 07:44:28 PM
 #6

Mining is a lower risk investment than speculation because you retain value in the equipment. Because of this, investors in mining are naturally going to see a lower rate of nominal return because they are taking on less risk.

In standard investment theory return on investment is a compensation for risk that cannot be diversified away.

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finnthecelt
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May 31, 2011, 07:50:49 PM
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The theory of "just buy coins" continues to crack me up. Where will they come from? I'm sure there's a dedicated group of miners who would just love people to "just buy coins from them" as you don't mine and go to work for cash to give to them.

Freakin-a man. Get to mining. If it doesn't work you have some gear and probably had fun and learned a lot.
Sukrim
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May 31, 2011, 07:55:14 PM
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The theory of "just buy coins" continues to crack me up. Where will they come from?
As long as difficulty is above 1, this means a new block is being generated ~every 10 minutes (for this you need far less than a singe GPU miner worldwide).
If there are more miners, the coins will not be generated faster but only in a more secure way, that's all. I doubt that ensuring the supply of new coins should be a reason for anyone to mine.

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xenon481
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May 31, 2011, 07:57:16 PM
 #9

Yes.

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SgtSpike
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May 31, 2011, 08:02:26 PM
 #10

See my spreadsheet, Invest or Mine? (link in sig).  That'll tell you whether it's a better choice to mine or buy, once you input all of the information properly.
fnord123
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May 31, 2011, 08:03:07 PM
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Freakin-a man. Get to mining. If it doesn't work you have some gear and probably had fun and learned a lot.
I will buy the "fun" angle, but the learning part seems like a stretch.  What do people learn from mining?

How to configure poclbm?  Wow, they learned to install a simple program and run it.
How to install latest ATI drivers? Woohoo!
How to stick PCIe cards in a box and connect a power supply?  Most computer-inclined kids learn to do this before they are eligible to drive.
How to look at a list of hardware, choose what to buy, and whip out the credit card and order it? Sorry, being a consumer isn't a unique skill.

Other than the few folks here who actually wrote some OpenCL C, verilog, or similar such work, I don't think there is much learning that comes from mining.
JJG
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May 31, 2011, 08:06:58 PM
 #12

I don't have the exact figures but given the increases in difficulty and the decreases in bitcoins mined, even with the increasing price, isn't it better for us to just buy and hold than to build mining machines?

We're laying out about $2600 for the rig, its pretty cool imho and there are other benefits, but I keep thinking there might be a smarter way. Among the other benefits are that I don't have to go through the capital control / tax issues of my country if I mine.

What have been your experiences of this if you are a long term miner? (buy vs mine (?) )

Put together a simple model with increasing difficulty, or use SgtSpike's pre-built spreadsheet. How long until you plan to break even?

Rising difficulty is really, really going to diminish your profits in short order. The only way around this is if the exchange rate goes up. Once you're banking on the exchange rate going up significantly, it might not make as much sense to invest in mining hardware rather than BTC.

For the record, I don't expect the exchange rate to keep going up.
bcpokey
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May 31, 2011, 08:10:11 PM
 #13

God do we really need to have another one of these discussions?

They're both fine options, and every argument either way presumes some sort of knowledge of the future that the arguer does not actually have.

If you expect bitcoin to blow up exponentially in the next few days/weeks then obviously buy coins, if you expect bitcoin to remain stable(ish) then buy mining stuff. If you expect bitcoin to die a horrendous death, maybe you shouldn't be here.

Buying coins is easier, building mining rigs is more interesting for enthusiast/hobbyists. Find your passion.


EDIT: Thanks JJG for demonstrating my point. For the record you've been saying the same thing for a couple months now, and while you might be right in the future, you've been wrong up til now.

One interesting thing to note, last difficulty spike was painful, very very painful. And as a natural result, it has discouraged a lot of people. Last difficulty bump ~70%, next difficulty bump, ~17%. Things are not arbitrary.
SgtSpike
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May 31, 2011, 08:21:47 PM
 #14

If you expect bitcoin to blow up exponentially in the next few days/weeks then obviously buy coins, if you expect bitcoin to remain stable(ish) then buy mining stuff. If you expect bitcoin to die a horrendous death, maybe you shouldn't be here.
Someone needs to sig that. 
Sukrim
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May 31, 2011, 08:24:48 PM
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EDIT: Thanks JJG for demonstrating my point. For the record you've been saying the same thing for a couple months now, and while you might be right in the future, you've been wrong up til now.
Tell me one point in time where it made more sense to buy a 2600USD mining rig (which has costs to operate too!) than to buy 2600 USD worth of bitcoins!

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finnthecelt
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May 31, 2011, 08:57:20 PM
 #16

The theory of "just buy coins" continues to crack me up. Where will they come from?
As long as difficulty is above 1, this means a new block is being generated ~every 10 minutes (for this you need far less than a singe GPU miner worldwide).

What do you mean by that exactly? Are you saying it doesn't matter how many miners or gpu's you have cranking?
JJG
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May 31, 2011, 09:01:41 PM
 #17

EDIT: Thanks JJG for demonstrating my point. For the record you've been saying the same thing for a couple months now, and while you might be right in the future, you've been wrong up til now.
Tell me one point in time where it made more sense to buy a 2600USD mining rig (which has costs to operate too!) than to buy 2600 USD worth of bitcoins!

Well said.
Sukrim
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May 31, 2011, 09:02:53 PM
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The theory of "just buy coins" continues to crack me up. Where will they come from?
As long as difficulty is above 1, this means a new block is being generated ~every 10 minutes (for this you need far less than a singe GPU miner worldwide).
What do you mean by that exactly? Are you saying it doesn't matter how many miners or gpu's you have cranking?
It won't make the network generate fewer bitcoins if there are fewer miners. It won't make the network generate more bitcoins if there are more miners. (both statements within some limits, as difficulty is increased/decreased only every 2016 blocks)

Your personal outcome is determined by the ratio between your hashing rate vs. the global hashing rate, so it matters how much hashing rate you have in the sense of how many of the globally available bitcoins you'll get. It won't affect the generation rate though, so you can not (or nearly not) influence how fast (or if) bitcoins are being generated, as a single GPU is enough to keep the system running in stable minimal mode.

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JJG
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May 31, 2011, 09:04:41 PM
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The theory of "just buy coins" continues to crack me up. Where will they come from?
As long as difficulty is above 1, this means a new block is being generated ~every 10 minutes (for this you need far less than a singe GPU miner worldwide).

What do you mean by that exactly? Are you saying it doesn't matter how many miners or gpu's you have cranking?

The rate of block generation across the network as a whole will remain [very] roughly constant.

If half of the miners turned their hardware off tomorrow, then a few weeks from now the difficulty will drop and block generation will remain the same.

When you turn your miner on, you're not generating additional BTC on top of what already comes out of the network (technically you are until the next difficulty update, but that's beside the point), you're just claiming a fraction of the BTC that is going to be generated no matter what.

The more miners rush in, the smaller your fraction gets, but the same number (again, very roughly) of BTC will be generated.
gat3way
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May 31, 2011, 09:05:15 PM
 #20

So what if that one lone miner decides to keep his 50 BTC for himself instead of selling them? Well I guess that would lead to withdrawal of people selling/buying bitcoins but then there will always be some poor idiot to buy them finally once the value surges enough. I wish him luck trying to profit on it the same way the lone miner did, eheh.
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