What assumptions are people using to justify adding mining rigs?

[fnord123]

I put together my own Google spreadsheet to examine whether it makes sense to add to what I am currently using to mine, and the numbers keep looking bad.  E.g. for a triple 5830 system:

Days to next reset:5.0, based on http://blockexplorer.com/q/eta
Difficulty of next reset: 513600, based on http://blockexplorer.com/q/estimate
Days per difficulty increase after the next one: 8
Difficulty increase factor after the next one: 1.3 (30% average increase)
Watts: 550
$/KWh: 0.12
MHash/Sec: 840 (3 * 280 per 5830)
$/Bitcoin: 10

Running the above numbers, on August 18 the electric cost exceeds the generated bitcoin value. Total income at that point (assuming selling bitcoins at $10 apiece) is $492 - putting together a 3-way 5830 system for $492 is pretty tough (used parts maybe?)

Are other people using more optimistic numbers?

[1715019317]

1715019317

[1715019317]

1715019317

[Genrobo]

Nope, you're right on.
The only thing people are using to justify investing large amounts of money into this...
Is Bitcoin price speculation.

[Jack of Diamonds]

Your calculation only takes in account the current spot price, just as calculations a month ago were made assuming $4 or lower spot price, and 3 months ago a fraction of that.

I don't deny the profitability is volatile at best if you are starting out just now. I just don't see a likely scenario where the price will suddenly start plummeting or simply stagnating at $9-$10 when mining becomes harder & more users become aware of bitcoin every day.

I started nearly a year ago but I can perfectly see the rationale behind adding more rigs today. It still pays itself back relatively fast, and could even accelerate at an unknown pace.

[Genrobo]

Your calculation only takes in account the current spot price, just as calculations a month ago were made assuming $4 or lower spot price, and 3 months ago a fraction of that.

I don't deny the profitability is volatile at best if you are starting out just now. I just don't see a likely scenario where the price will suddenly start plummeting or simply stagnating at $9-$10 when mining becomes harder & more users become aware of bitcoin every day.

Not been into economics long, eh?

I've seen more bubbles burst than a kid chewing bubble gum.

[Sjalq]

Here are the assumptions I used.

BTC is still in its infancy. If successful it will most likely replace the entire world's currency supply. There is almost not believable way that doesn't sound arrogant or deluded to put the price into perspective once this happens. It might be akin to a land grab in the old west, but with the land values rising to their fair value in a matter of years.

Between now and then one of the following will happen to the price.

1.It will collapse for a while. This drives people out and pushes difficulty down, it has happened before and might very well again. Typical causes might be a negative court ruling in the US or some other jurisdiction. In the long run BTC will probably survive this since not every place on earth is likely to make it illegal and due to its nature, if not every place on earth has it illegal, it will have value everywhere.

So you mine easy for a while and hold the BTC and maybe conduct some of your own business in BTC. Waiting for the value increase to resume.

2. It will stabilize. If this happens only the rigs with high Mhash/Watt are worth investing in. This would have to persist for very long to be a concern. FPGA rigs might become very attractive here and become the norm. This is bad for me, as I'm investing in a GPU miner.

3. It will continue to rise in a relatively uninterrupted fashion and S curve to it's true value, which if it succeeds is a number difficult to wrap one's brain around when compared to $10. In this scenario miners keep piling in, increasing difficulty but are rewarded by increasing prices. This is equivalent to betting that if you can get some number of BTC in the future at the future price AND a machine that will give off bitcoins for some extended period after that point, it is worth more than simply converting all that cash into Bitcoins today.

[fnord123]

I just don't see a likely scenario where the price will suddenly start plummeting or simply stagnating at $9-$10 when mining becomes harder & more users become aware of bitcoin every day.

Here are some scenarios where this can happen:

• The Dwolla/MtGox BTC <--> $$$ link breaks, perhaps due to pressure from bank regulators in response to Paypal or VC/MC lobbyists.
• The speculators who are buying BTC run out of money/the bubble bursts, as Genrobo mentioned
• Someone hacks MtGox or some other key BitCoin participant to steal BTC balances
• Someone identifies a cryptographic fault with the Bitcoin scheme

All of these scenarios would cause a crash in BTC values.  I guess you can argue they are unlikely - at least the first two seen quite plausible to me.

[Jack of Diamonds]

Not been into economics long, eh?

I've seen more bubbles burst than a kid chewing bubble gum.

I'm not saying it will rise indefinitely into the hundreds of thousands or millions. In reality, I don't even care what makes up the price as long as it stays at that, drops lower or rises. I'm saying it still pays off to mine, even a year later. At 8ghps I'm still making way, way more than the cost of electricity and AC.

And that's going to be the same for anyone starting today. At worst, they lose out on the electricity costs and 10-20% resale value of the hardware if everything drops to zero tomorrow. At best, they pay off their initial investment in a month or less and gain profit after that.

Note that I didn't go into the specifics of what makes up BTC value. I'm merely answering OP's question about why some people still invest into new rigs. Of course Paypal/LR/ MTGOX raids etc. are possible. They just seem like a distant possibility at the moment.

[Sjalq]

• The Dwolla/MtGox BTC <--> $$$ link breaks, perhaps due to pressure from bank regulators in response to Paypal or VC/MC lobbyists.

All of these scenarios would cause a crash in BTC values.  I guess you can argue they are unlikely - at least the first two seen quite plausible to me.

True, but if this happens quadruple your mining equipment as fast as you can. Some other jurisdiction will pick it up.

[Jack of Diamonds]

Someone identifies a cryptographic fault with the Bitcoin scheme

Well, I'd actually argue that this one is the most likely, especially given a large enough botnet and financial interest (more profit in using the botnet to forge transactions than participating in block discovery).

Even Satoshi agrees that BTC is "practically" impossible to forge, but it's technically feasible by a large enough attacker. I don't know how well the creators have prepared for an attack of this scale.

Yes, real currency can be forged as well convincibly (some might argue much easier than bitcoins) but at least it's backed by brute force of the issuing state. The only consequence of dumping illegitimate cash into a market is small scale inflation. Dumping forged bitcoins into the market will ruin BTC's reputation.

[Sjalq]

Of what scale?

The bitcoin network now employs about 50% of the combined capacity of the TOP 500 supercomputers on earth?

[fnord123]

• The Dwolla/MtGox BTC <--> $$$ link breaks, perhaps due to pressure from bank regulators in response to Paypal or VC/MC lobbyists.

All of these scenarios would cause a crash in BTC values.  I guess you can argue they are unlikely - at least the first two seen quite plausible to me.

True, but if this happens quadruple your mining equipment as fast as you can. Some other jurisdiction will pick it up.

If it is no longer convenient to exchange bitcoins for USD you will see a major portion of the bitcoin economy go away. This is true until the bitcoin network becomes self sufficient (i.e. one can efficiently exchange bitcoins for a significant portion of the things one needs).  If a major chunk of the bitcoin economy goes away, the bitcoin economy shrinks and the bitcoins become worth less.

I'll bet you a bitcoin that if the Dwolla/MtGox link goes down, bitcoin exchange rates will drop in pretty much every other currency the following week.  If you don't like that bet, propose an alternative bet and put your money where your mouth is

[Sjalq]

• The Dwolla/MtGox BTC <--> $$$ link breaks, perhaps due to pressure from bank regulators in response to Paypal or VC/MC lobbyists.

All of these scenarios would cause a crash in BTC values.  I guess you can argue they are unlikely - at least the first two seen quite plausible to me.

True, but if this happens quadruple your mining equipment as fast as you can. Some other jurisdiction will pick it up.

If it is no longer convenient to exchange bitcoins for USD you will see a major portion of the bitcoin economy go away. This is true until the bitcoin network becomes self sufficient (i.e. one can efficiently exchange bitcoins for a significant portion of the things one needs).  If a major chunk of the bitcoin economy goes away, the bitcoin economy shrinks and the bitcoins become worth less.

I'll bet you a bitcoin that if the Dwolla/MtGox link goes down, bitcoin exchange rates will drop in pretty much every other currency the following week.  If you don't like that bet, propose an alternative bet and put your money where your mouth is

Almost everyone who owns Bitcoins today, will still own them if the US declares it illegal or closes MtGox. They will not want their investment to become worthless, even if they are in the US. They will now effectively have a secret offshore bank account. There will be massive incentive to set up a functional exchange someplace more free, like Switzerland, Lichtenstein, Hong Kong, Singapore, Chile, you name it. Amir Taaki is involved in setting up opensource exchanges to make it easy for countries to get going changing local currency for BTC.

I agree that for a while (a short while) you will not be able to price BTC. After that business will resume, perhaps with the initial exclusion of new clients from the US, but at the same exponential rate as it is now.

Specify the bet a bit more and I'll consider it

[fnord123]

Specify the bet a bit more and I'll consider it

Ok, how about this:

• On some date X, the MtGox/Dwolla BTC <--> USD link may go down
• If on that date X, there is no other equivalent link that allows BTC to be efficiently converted to a USD bank account (i.e. ACH transfer), and
• Exactly one month from that date (X+1M), there is still no such link, and
• As of (X+1M), the BTC : $ exchange rate has gone down on Mt.Gox or whatever other BTC exchange is most prominent, then
  
• Sjalq will send Fnord123 1.0 bitcoins at address 1qTmELHiwZ8M5HXnQU5bbZ4z7Qva57ZwD, otherwise
• If the exchange rate has gone up, Fnord123 will send one bitcoin to Sjalq at address (you fill it in)
• Within 24 hours of agreeing on the best, each of Fnord123 and Sjalq will place 1.0 bitcoin in the address they post and leave it the bet conditions are met or until we cancel the bet
  
• Either can cancel it until the first event (Mtg Gox/Dwolla link goes down) by posting here. No cancelling after that.

How's that for specifying it a bit more?

Only caveat I would add is that it has to be legal to do so in both our jurisdictions (I am in the USA) - if the USA (or where you live, if elsewhere) makes it illegal to pay/receive bitcoins, the bet is off.

[Sjalq]

The replacement exchange will need to some time to recover from the loss of the US market.

Can I modify? If the price on whatever the prominent exchange is, is not prominently trending up within 2 months of losing the USD link then I lose. I do however win if it falls to 0 first but recovers to a readable, upwards trending price within the 2month period.
Can we define upwards trend as higher than 2 weeks before the end of the 2 months?

On payment, are you suggesting that because you are law abiding or because you fear you will get caught?

[Sjalq]

PS to my knowledge wagers are only legal in Arizona in the USA. So you are already breaking the law by betting aren't you?

[Hawkix]

Currently, there are about 5-6 pools who mine around 75% of the whole Bitcoins. If you target those pools with DDoS attacks, you can make them unstable, failing, etc. The result would be 4 times slower Bitcoin network.

Sure, new pools may show up. It will take some time, though. And they can be targeted, too.

Actually, I think that the above is already being performed by SOMEONE.

[xenon481]

I just don't see a likely scenario where the price will suddenly start plummeting or simply stagnating at $9-$10 when mining becomes harder & more users become aware of bitcoin every day.

Here are some scenarios where this can happen:

• The Dwolla/MtGox BTC <--> $$$ link breaks, perhaps due to pressure from bank regulators in response to Paypal or VC/MC lobbyists.
• The speculators who are buying BTC run out of money/the bubble bursts, as Genrobo mentioned
• Someone hacks MtGox or some other key BitCoin participant to steal BTC balances
• Someone identifies a cryptographic fault with the Bitcoin scheme

All of these scenarios would cause a crash in BTC values.  I guess you can argue they are unlikely - at least the first two seen quite plausible to me.

I think the absolutely most probable situation is that somebody writes some malware that spreads easily and steals wallet.dat files.

There have been a small number of cases of this so far, but none of them have spread. But the reward for such a thing goes up exponentially as Bitcoin is more widely used.

[Sjalq]

Currently, there are about 5-6 pools who mine around 75% of the whole Bitcoins. If you target those pools with DDoS attacks, you can make them unstable, failing, etc. The result would be 4 times slower Bitcoin network.

Sure, new pools may show up. It will take some time, though. And they can be targeted, too.

Actually, I think that the above is already being performed by SOMEONE.

So how does that affect the safety or security of BTC?

[xenon481]

Currently, there are about 5-6 pools who mine around 75% of the whole Bitcoins. If you target those pools with DDoS attacks, you can make them unstable, failing, etc. The result would be 4 times slower Bitcoin network.

Sure, new pools may show up. It will take some time, though. And they can be targeted, too.

Actually, I think that the above is already being performed by SOMEONE.

So how does that affect the safety or security of BTC?

During the time that 75% of the network hashing power isn't processing, a malicious group only needs to overcome the remaining hashing power to double-spend.

[Sjalq]

Well we would know who they are, they are already on this list http://www.top500.org/

Sorry to sound sarcastic but even if they knock down the 2 biggest groups they would not practically be able to overcome the remainder of the network.

[xenon481]

Well we would know who they are, they are already on this list http://www.top500.org/

Sorry to sound sarcastic but even if they knock down the 2 biggest groups they would not practically be able to overcome the remainder of the network.

Overcoming the entire network right now is easily within reach of any large or governmental organization.  The last calculations that I remember seeing about this recently said that it would take less than $2,000,000USD worth of hardware.

[gigabytecoin]

Nope, you're right on.
The only thing people are using to justify investing large amounts of money into this...
Is Bitcoin price speculation.

I justify my miner purchases knowing that I will be able to sell them for at least 50% of what I paid within the year.

[fnord123]

Well we would know who they are, they are already on this list http://www.top500.org/

Sorry to sound sarcastic but even if they knock down the 2 biggest groups they would not practically be able to overcome the remainder of the network.

If any significant botnet owner decided to they could DDOS pretty much all the major pools. Most (all?) of the pool servers are run by small time operators who don't have the infrastructure needed to survive a big DDOS attack.  Ditto hacking wise - one guy setting up a server and typing yum update now and then does not make a robust system.  Once all the mining pools are offline the size of the problem is a lot smaller.

[fnord123]

The replacement exchange will need to some time to recover from the loss of the US market.

Can I modify? If the price on whatever the prominent exchange is, is not prominently trending up within 2 months of losing the USD link then I lose. I do however win if it falls to 0 first but recovers to a readable, upwards trending price within the 2month period.
Can we define upwards trend as higher than 2 weeks before the end of the 2 months?

On payment, are you suggesting that because you are law abiding or because you fear you will get caught?

If I understand your suggestion correctly, if Dwolla goes away tomorrow and BTC drops to $0.01, then two weeks later is worth $0.02, I would lose the bet.  I don't want to make that bet.  

In terms of bet legality - I meant if laws were passed (or regulations issued, court precedents set, etc.) that specifically apply to bitcoin transactions, mostly because I don't like breaking the law.  In terms of getting caught, we could easily get caught - any competent investigator could subpoena the operator of this forum to determine our IP addresses, get our home/business/whatever location from our ISP, get a warrant for our computers, and find the wallet file used to generate the address.  Once they show that our wallet has the private key associated with the address receiving payment, I'd be willing to bet that would be sufficient evidence for a prosecutor to convince a jury that I (or you) was the one who received the coins.

[Sjalq]

LOL, I meant BETTING is illegal.

Let's make it something like falls to x and recovers to 5x within 4 weeks then? Where x is something real darn small.

Where I live the investigators are mostly concerned with violent crime.

Again, is your regard for the law based on moral concerns or repercussion concerns?

[fnord123]

LOL, I meant BETTING is illegal.

Let's make it something like falls to x and recovers to 5x within 4 weeks then? Where x is something real darn small.

Where I live the investigators are mostly concerned with violent crime.

Again, is your regard for the law based on moral concerns or repercussion concerns?

My regard for the law is partially moral and partially repercussion-based.  Morally, I don't like to break laws unless I think they are really stupid.  Betting laws I think are really stupid. Laws against other currencies I am not yet sure are really stupid.  In terms of repercussions, the USA has put people in jail for alternative currencies before.

x/5x doesn't work for me - if BTC is $10 today, $0.01 tomorrow, and $0.05 in 4 weeks, I would lose the bet. Given in such a scenario I would be right that it would be a bad investment to buy mining equipment, I've no interest in the bet.  My feeling is the bitcoin market would never recover (e.g. hit $10/BTC again) if no alternate BTC <--> $ ACH capable link was established. 

[Sjalq]

We've stumbled upon something far more interesting than a bet. Why on earth would you entertain the validity of forbidding alternative currency as a 'non-stupid' law?

How about making the bet that BTC is worth it's prebreak price six months after a dollar break? So of its illegal tomorrow it's worth $10 dollars again by Jan 2012, as calculated converting from BTC to trading currency to USD.

[inh]

Welp, this thread was interesting, up until the end of the last page 

[fnord123]

We've stumbled upon something far more interesting than a bet. Why on earth would you entertain the validity of forbidding alternative currency as a 'non-stupid' law?

There are cases in my mind where giving governments the ability to freeze assets makes sense to me. For instance, freezing all of Ghaddafi's assets.  This wouldn't be possible with Bitcoins I believe. I am certainly aware there are benefits to have a means of exchange that isn't controlled by governments, but I'm not 100% convinced yet.

How about making the bet that BTC is worth it's prebreak price six months after a dollar break? So of its illegal tomorrow it's worth $10 dollars again by Jan 2012, as calculated converting from BTC to trading currency to USD.

I will take that bet if it includes that there is still no Dwolla/MtGox-like ACH way re-established within the 6 month period.

[no_alone]

I think that to survive the option of a DDOS attack the next version of the minner should have the option that if there is no connection to the server to try and connect to another pool ...
and finally if there is no connection to try and do solo minning.. I can build a guiminer that will do it but I see no point in rebuilding everything from scratch ..
I think this is very important!!

[BitLex]

who can say 'no' to free hardware?
my excuse is, that the hardware will probably pay off for itself sooner or later (may it be 1month, or 6),
after that point, i can do with that practically free hardware, whatever i want, give it to family-members or friends for free (or for a favor), sell it for profit, or just let it keep mining for even more profit.

There are cases in my mind where giving governments the ability to freeze assets makes sense to me. For instance, freezing all of Ghaddafi's assets.

and why should the government be able to freeze Ghaddafi's assets?
why only his, why not yours too? do you have different rights than he has?

[jme621]

Getting my next rig for free/close to free

its my bday soon and sent all the people who give me gifts a recommendation item to get me hehe, and i know half of them did already

[Lars]

I justify my miner purchases knowing that I will be able to sell them for at least 50% of what I paid within the year.

This.. The OP is (wrongly imho) assuming a full depreciation of his equipment after only 3 months. The GPUs should be easy to sell for at least 50% of what you paid for them, even after a full year.

[Ulysses]

Overcoming the entire network right now is easily within reach of any large or governmental organization.  The last calculations that I remember seeing about this recently said that it would take less than $2,000,000USD worth of hardware.

The problem with this calculation, is that by the time they got through bureaucracy & installation, they need 10 times this amount

[Meatball]

Here's the key assumption you need to go in with.

Imagine whatever you spend you'll never get back and don't spend any more money than you can afford to live without.  If you make back your original investment down the road, great, if even more, that's gravy.

Whatever you do, don't go out and max your credit cards out expecting you'll get the cash to pay it back in a month or two.

Don't get me wrong, I'm not trying to dissuade anyone from mining or BTC's.  I'd highly suggest you get into mining however you can because it's a blast and you'll learn a lot.  But just go in with the assumption that you'll never get your money back and have fun with it.

[minerX]

Currently, there are about 5-6 pools who mine around 75% of the whole Bitcoins. If you target those pools with DDoS attacks, you can make them unstable, failing, etc. The result would be 4 times slower Bitcoin network.

Sure, new pools may show up. It will take some time, though. And they can be targeted, too.

Actually, I think that the above is already being performed by SOMEONE.

This completely wrong.  I'm tired of people spouting off this nonsense.   If all the pools dropped, people would mine solo.

If you look at deepbit, when it was hit by DDOS, everyone switched.  There was no "loss" of pooling.   

Or are you assuming all of us mining are NOT greedy bastards and would flounder around saying "AHHH POOLS ARE DOWN NO MORE MINING!?"  If anything we are greedy and would start mining like mad thinking that deepbit is down and therefore 1/4 the total pool.  (Completely wrong.)

No, there's no worry about DDOS and then someone taking over the network that way.

[rezin777]

If you look at deepbit, when it was hit by DDOS, everyone switched.  There was no "loss" of pooling.   

There was indeed a noticeable effect when deepbit first went down to the DDOS.

In the hour after the attack the network only solved 2 blocks. It improved from that point on, but it still wasn't great. That certainly isn't desirable or what I would call healthy.

127555    2201f7d916...    2011-05-29 22:41:30    43    1472.65095723    21.143
127554    15fa32c760...    2011-05-29 22:13:38    37    877.09812426    23.145
127553    1de06a4a0a...    2011-05-29 21:46:22    47    2052.27689526    17.552

Miners are slow to notice, slow to react, and I suspect some didn't bother switching at all.

I wonder how many miners would even bother (or are capable) to set up back-up solo mining if a coordinated attack was able to shut down 4-5 major pools.

[Hawkix]

This completely wrong.  I'm tired of people spouting off this nonsense.   If all the pools dropped, people would mine solo.

If you look at deepbit, when it was hit by DDOS, everyone switched.  There was no "loss" of pooling.   

Or are you assuming all of us mining are NOT greedy bastards and would flounder around saying "AHHH POOLS ARE DOWN NO MORE MINING!?"  If anything we are greedy and would start mining like mad thinking that deepbit is down and therefore 1/4 the total pool.  (Completely wrong.)

No, there's no worry about DDOS and then someone taking over the network that way.

Yeah, one pool down means everybody switches. But, when all pools have problems?

I am not sure, but a lot of people with < 1GH/s would not go solo. Waiting a month for single block on average requires a lot of patience and good nerves to not loose faith.

If the pools would not be invented last year, I guess the network would be 1/10 or less than it is today.

Plus, the attacker can "prepare" his own new pool while attacking all remaining. All would switch to his pool, and he would easily gain >50% of network. You would not know at all, he can "fake" his pool stats. Then, he rules the network.

[Sjalq]

That's disturbing, all the hashing power inuse today can be
bought for only 2 to 8 million and a fake pool could have us all working for the attacker? So how can we secure the pools? Maybe open-source pooling software of some sort?

[mwally]

I want Bitcoins and I want to help secure and process Bitcoin transactions. I assume others will exchange Bitcoins with me in the future. I justify this with the fact that I don't like other people to control my currency and I assume there are others like me.

Bingo.  The goal here is to participate in the revolution.

Shall I drop $4k into a top-of-the-line tri-GPU monster, without any guarantees of return?  You sure-as-hell bet I will!

With WikiLeaks busy leaking, DarkNets in production, and NameCoin/BitCoin all working together to revolutionize and free the world's communications and monetary systems, a couple of high-end gaming computers is the *least* I can contribute.

Oh, and, there's still a chance for profit, too!  Win/Win.

[Sjalq]

I want Bitcoins and I want to help secure and process Bitcoin transactions. I assume others will exchange Bitcoins with me in the future. I justify this with the fact that I don't like other people to control my currency and I assume there are others like me.

Bingo.  The goal here is to participate in the revolution.

Shall I drop $4k into a top-of-the-line tri-GPU monster, without any guarantees of return?  You sure-as-hell bet I will!

With WikiLeaks busy leaking, DarkNets in production, and NameCoin/BitCoin all working together to revolutionize and free the world's communications and monetary systems, a couple of high-end gaming computers is the *least* I can contribute.

Oh, and, there's still a chance for profit, too!  Win/Win.

Amandla!

[Litt]

I for one is ok with the Russians ddosing pools reaching 50%. Some thing has to be done.

And as for people using assumptions to justify mining rigs... well it's mostly ignorance I bet. Because speculating for higher btc price means buying will still yield higher again compared to mining as it's been since the rise of btc pricing this year. The times of mining for profit for long time at .70 cent per btc is over. The cat is out of the bag if you didn't notice. The difficulty will keep climing at high rates now and it won't slow down like people hope. The opposite is more likely to happen and speed up even faster.

At current uptrend on pricing, sure mining looks to be safe, but investing has proven much better with prices going up anyways. If you are still buying instead of investing now.. you are simply ignorant imo and haven't done the math. Free hardware can be bought with or without mining..  As for me I'm putting money where my mouth is and stopping reinvesting in mining equip and buying instead. My profits speak for themselves and I won't need anyone here to agree with me. I just hope people will finally realize and make even more money with me. I mine and invest both and making money from holding btc is infinitely easier than monitoring and running miners at home with noise and heat.

[fnord123]

Plus, the attacker can "prepare" his own new pool while attacking all remaining. All would switch to his pool, and he would easily gain >50% of network. You would not know at all, he can "fake" his pool stats. Then, he rules the network.

A smart attacker would create his pool ahead of time - e.g. one of the current pools could actually be the attacker.  They would have two versions of the mining pool SW - version #1 is the "honest" one, they would run this for a while, likely with low-to-no fees, to get a reasonable user base and reputation.  Then, when they feel they are ready, they would DDOS enough other pools to make people flock to theirs. Once they hit 50%, they would activate version #2 of their mining pool SW, the one that steals coins/double spends/whatever.  Since they own more than half the hashing power at that point, they win.  People will eventually figure it out, but when they do, confidence in BTC will be crushed and you would see a crash in values.

[Sjalq]

Is this actively being discussed in the security related parts of the forum?

[Ulysses]

A smart attacker would create his pool ahead of time - e.g. one of the current pools could actually be the attacker.  They would have two versions of the mining pool SW - version #1 is the "honest" one, they would run this for a while, likely with low-to-no fees, to get a reasonable user base and reputation.  Then, when they feel they are ready, they would DDOS enough other pools to make people flock to theirs. Once they hit 50%, they would activate version #2 of their mining pool SW, the one that steals coins/double spends/whatever.  Since they own more than half the hashing power at that point, they win.  People will eventually figure it out, but when they do, confidence in BTC will be crushed and you would see a crash in values.

You miss the quote from Satoshi's paper:

The incentive may help encourage nodes to stay honest.  If a greedy attacker is able to
assemble more CPU power than all the honest nodes, he would have to choose between using it
to defraud people by stealing back his payments, or using it to generate new coins.  He ought to
find it more profitable to play by the rules, such rules that favour him with more new coins than
everyone else combined, than to undermine the system and the validity of his own wealth.


Of course there are sociopaths, who don't want make money. But usually they can't raise capital. And the notion of state (who doesn't need to be for profit and have capital) running >50% of network power to double spend seems to be absurd to me (though i can be wrong).

[jfourmo]

I put together my own Google spreadsheet to examine whether it makes sense to add to what I am currently using to mine, and the numbers keep looking bad.  E.g. for a triple 5830 system:

Days to next reset:5.0, based on http://blockexplorer.com/q/eta
Difficulty of next reset: 513600, based on http://blockexplorer.com/q/estimate
Days per difficulty increase after the next one: 8
Difficulty increase factor after the next one: 1.3 (30% average increase)
Watts: 550
$/KWh: 0.12
MHash/Sec: 840 (3 * 280 per 5830)
$/Bitcoin: 10

Running the above numbers, on August 18 the electric cost exceeds the generated bitcoin value. Total income at that point (assuming selling bitcoins at $10 apiece) is $492 - putting together a 3-way 5830 system for $492 is pretty tough (used parts maybe?)

Are other people using more optimistic numbers?

How about this, at no time in the last year has bitcoin cost more than 1/4 of its exchange value to generate based on electricity. It's currently at about 1/17th the value to generate (this fluctuates over time and just left an all time high). People have been doing calculations like you have for months saying the same thing you have