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Author Topic: Block Reward Halving + BFL Equipment = What for Mining / Price In Your Opinion?  (Read 3258 times)
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October 17, 2012, 03:55:30 PM
 #1

The combination of the reward being split in two and the hash rate skyrocketing is going to have effects on mining operations and market price.
What do you think the outcome will be.
Chronological answers encouraged, such as -
Day 1- So and so....
Day 5- .....
Day 10 - .....
Etc.


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October 17, 2012, 04:09:54 PM
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Something is for sure going to explode. Cannot really say what, as it is individually.
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October 17, 2012, 05:09:15 PM
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Firstly, this post belongs in either Speculation or Mining Speculation,  [Edit: I see that has happened already.]

The combination of the reward being split in two and the hash rate skyrocketing is going to have effects on mining operations and market price.
What do you think the outcome will be.

This is a prediction, and predictions are hard -- especially about the future.  Nobody knows, but I'll take a stab at it.

Day 0 is expected roughly around November 30th, plus or minus a week:

Day T-10: Four of the five ASIC manufacturers claim to be finalizing the design / optimizing / trying to resolve some nagging power issue / whatever, yet not a single person that pre-paid for an ASIC has one in-hand.
Day T-8: Difficulty of 3.5 million and exchange rate of $15 mean profitability is still acceptable for GPU miners paying average electric rates or less.
Day T-5: A lot more "N Ghash/s for sale" listings will start to appear [Edit: as-in total liquidation of N GHash/s of capacity]
Day T-4: Difficulty for Litecoin rises as miners experiment, causing there to be no chance of profit from Litecoin mining either.
Day T-3: Block 209,664 -- last difficulty adjustment before the block subsidy reward drops (fact, not a prediction)
Day T-1: Last day that anywhere near 7,200 BTC is produced (fact, not a prediction)
Day 0: Block 210,000 hits and only about 3,600 are produced (fact, not a prediction)
Day 1: Blocks slow to about 11 minutes as some GPU miners realize basic math and power down.
Day 2: Exchange rate volatile, both up and down, but returns to previous levels -- about $15.
Day 3: Anger and vitriol from GPU miners who are still "underwater" on their GPUs purchased in 2012.
Day 4: Anger and vitriol from FPGA miners who somehow didn't realize that "much more efficient" doesn't protect against a revenue drop of 50%
Day 5: Blocks slow to about 12 minutes as more GPU miners realize the payouts are dismal and begin to proceed past "denial", the first step in the grieving process,
Day 6: ASIC hardware developers see an even greater number of prepayments for hardware.  Much gnashing of teeth on the forums.
Day 7: Hashing on CoinLab's GPU network grows tremendously as miners cash in their built-up loyalty credits.
Day 8: Nearly all NVidia GPUs that were used for mining are now either computing with CoinLab or have been decommissioned.
Day 9: Gamers elated over some really good AMD and NVidia graphics cards available "really, really cheap" on eBay.
Day 10: Blocks slow to about 13 minutes, as not only did the block reward subsidy drop but so did the frequency of blocks -- making mining in aggregate bring in even less revenue each day.
Day 11: Speculators hoping for the "doubling" of the exchange rate realize it didn't happen (or perhaps already happened, from $5-ish, over the summer), and sell off a little  Exchange rate drops to $12-ish.
Day 12: ASIC manfuacturers claim to be finalizing the design / optimizing / trying to resolve some nagging power issue / whatever, yet not a single person that pre-paid for an ASIC has one in-hand.
Day 13: Block 211,680 - difficulty adjusts.  Drops 15%.  Back to one block every ten minutes.
Day 14: Mining operators are still seeing electric bills from the previous month's consumption.  Even more anger, vitriol and gnashing of teeth.
Day 15: Christmas-related activities overtake bitcoin as being the event more important to many mining operators.
Day 25: The daily "average price" remains in a range between $12 and $15.
Day 26: Many "slightly used" GPU cards land in wrapped boxes under trees.  Others, particularly those who had a larger investment in their GPU rigs, are using the phrase "bah, humbug" more than they had in any prior holiday season.
Day 27: Difficult adjusts, dropping another 5%.  Yawn.
Day 30: ASIC manufacturers claim to be finalizing the design / optimizing / trying to resolve some nagging power issue / whatever, yet not a single person that pre-paid for an ASIC has one in-hand.


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October 17, 2012, 06:30:26 PM
 #4

I'm expecting both BFL and Cablepair to ship their ASICs at the same time: late November. I can't even estimate whether the Reward Half will hit first, or the ASICs, since the timeline is so close. Within 2 weeks, we're looking at a 200TH/s network (8-10x difficulty), and 1/2 block rewards.

Once both of these hit at the same time, I think the price per BTC will drop to ~ 1/2 of what it is today, due to the instability brought out by large transition. Uncertainty breeds panic, and panic causes people to sell.

After the initial drop, I expect the price to increase, however. Look at the current price - it's already loosely based on how long it takes current hardware to break even, which is directly tied to difficulty.

What I mean by that is this: the higher the difficulty, the fewer bitcoins you earn, and the slower you earn back your initial investment. Pretty simple right?

An ideal situations would be a 6 month break-even point. This is already somewhat true for both GPUs and FPGAs. It fluctuates, but I think this is what people are looking for.

The only way regulate this 6 month time frame is to A) Lower the initial investment, B) Increase the BTC earned (hashrate), or C) increase the $/BTC price.

 Manufacturers control A), and we're at the mercy of B). The only one we (as miners) can regulate is C).

Once things start to level out (Q2 '13), I think we'll be looking at a 45million difficulty. Go to http://bitcoinx.com/profit/index.php and enter the variables I just said, and recalculate the price to try at get a 180 day break even point.

45million difficulty, 25 block reward, 60000MH/s, 0.12USD/kWH, 60W, 6 months, cost of 1300USD. It brings the price up to 12.4USD. Using the bASIC (54000MH/s, 120W(a guess), and cost of 1100USD), it's about 12.1USD.

That's my best guess. The only way the price/BTC would go upwards of 20$/BTC was if the difficulty rose to 75 million.

Just my 2 satoshis

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October 17, 2012, 08:17:43 PM
 #5

Firstly, this post belongs in either Speculation or Mining Speculation,  [Edit: I see that has happened already.]

The combination of the reward being split in two and the hash rate skyrocketing is going to have effects on mining operations and market price.
What do you think the outcome will be.

This is a prediction, and predictions are hard -- especially about the future.  Nobody knows, but I'll take a stab at it.

Day 0 is expected roughly around November 30th, plus or minus a week:

Day T-10: Four of the five ASIC manufacturers claim to be finalizing the design / optimizing / trying to resolve some nagging power issue / whatever, yet not a single person that pre-paid for an ASIC has one in-hand.
Day T-8: Difficulty of 3.5 million and exchange rate of $15 mean profitability is still acceptable for GPU miners paying average electric rates or less.
Day T-5: A lot more "N Ghash/s for sale" listings will start to appear
Day T-4: Difficulty for Litecoin rises as miners experiment, causing there to be no chance of profit from Litecoin mining either.
Day T-3: Block 209,664 -- last difficulty adjustment before the block subsidy reward drops (fact, not a prediction)
Day T-1: Last day that anywhere near 7,200 BTC is produced (fact, not a prediction)
Day 0: Block 210,000 hits and only about 3,600 are produced (fact, not a prediction)
Day 1: Blocks slow to about 11 minutes as some GPU miners realize basic math and power down.
Day 2: Exchange rate volatile, both up and down, but returns to previous levels -- about $15.
Day 3: Anger and vitriol from GPU miners who are still "underwater" on their GPUs purchased in 2012.
Day 4: Anger and vitriol from FPGA miners who somehow didn't realize that "much more efficient" doesn't protect against a revenue drop of 50%
Day 5: Blocks slow to about 12 minutes as more GPU miners realize the payouts are dismal and begin to proceed past "denial", the first step in the grieving process,
Day 6: ASIC hardware developers see an even greater number of prepayments for hardware.  Much gnashing of teeth on the forums.
Day 7: Hashing on CoinLab's GPU network grows tremendously as miners cash in their built-up loyalty credits.
Day 8: Nearly all NVidia GPUs that were used for mining are now either computing with CoinLab or have been decommissioned.
Day 9: Gamers elated over some really good AMD and NVidia graphics cards available "really, really cheap" on eBay.
Day 10: Blocks slow to about 13 minutes, as not only did the block reward subsidy drop but so did the frequency of blocks -- making mining bring in even less revenue each day.
Day 11: Speculators hoping for the "doubling" of the exchange rate realize it didn't happen (or perhaps already happened, from $5-ish, over the summer), and sell off a little  Exchange rate drops to $12-ish.
Day 12: ASIC manfuacturers claim to be finalizing the design / optimizing / trying to resolve some nagging power issue / whatever, yet not a single person that pre-paid for an ASIC has one in-hand.
Day 13: Block 211,680 - difficulty adjusts.  Drops 15%.  Back to one block every ten minutes.
Day 14: Mining operators are still seeing electric bills from the previous month's consumption.  Even more anger, vitriol and gnashing of teeth.
Day 15: Christmas-related activities overtake bitcoin as being the event more important to many mining operators.
Day 25: The daily "average price" remains in a range between $12 and $15.
Day 26: Many "slightly used" GPU cards land in wrapped boxes under trees.  Others, particularly those who had a larger investment in their GPU rigs, are using the phrase "bah, humbug" more than they had in any prior holiday season.
Day 27: Difficult adjusts, dropping another 5%.  Yawn.
Day 30: ASIC manufacturers claim to be finalizing the design / optimizing / trying to resolve some nagging power issue / whatever, yet not a single person that pre-paid for an ASIC has one in-hand.

Amazing, thank you for taking the time to post this. I would put money on this being just about perfect.
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October 17, 2012, 08:33:26 PM
 #6

Quote from: CornedBeefHash
They eventually fail and give up in frustration harboring a lifelong deep seated resentment for all cryptocurrency because of their basic lack of understanding about the reason behind cryptocurrency and their shallow desire to be a part of a “money for nothing” scheme.


lmao I love it
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October 18, 2012, 05:30:00 AM
 #7

Dammit, I love a good argument. Someone disagree with me!

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October 18, 2012, 07:28:35 AM
 #8

Firstly, this post belongs in either Speculation or Mining Speculation,  [Edit: I see that has happened already.]

The combination of the reward being split in two and the hash rate skyrocketing is going to have effects on mining operations and market price.
What do you think the outcome will be.

This is a prediction, and predictions are hard -- especially about the future.  Nobody knows, but I'll take a stab at it.

Day 0 is expected roughly around November 30th, plus or minus a week:

Day T-10: Four of the five ASIC manufacturers claim to be finalizing the design / optimizing / trying to resolve some nagging power issue / whatever, yet not a single person that pre-paid for an ASIC has one in-hand.
Day T-8: Difficulty of 3.5 million and exchange rate of $15 mean profitability is still acceptable for GPU miners paying average electric rates or less.
Day T-5: A lot more "N Ghash/s for sale" listings will start to appear
Day T-4: Difficulty for Litecoin rises as miners experiment, causing there to be no chance of profit from Litecoin mining either.
Day T-3: Block 209,664 -- last difficulty adjustment before the block subsidy reward drops (fact, not a prediction)
Day T-1: Last day that anywhere near 7,200 BTC is produced (fact, not a prediction)
Day 0: Block 210,000 hits and only about 3,600 are produced (fact, not a prediction)
Day 1: Blocks slow to about 11 minutes as some GPU miners realize basic math and power down.
Day 2: Exchange rate volatile, both up and down, but returns to previous levels -- about $15.
Day 3: Anger and vitriol from GPU miners who are still "underwater" on their GPUs purchased in 2012.
Day 4: Anger and vitriol from FPGA miners who somehow didn't realize that "much more efficient" doesn't protect against a revenue drop of 50%
Day 5: Blocks slow to about 12 minutes as more GPU miners realize the payouts are dismal and begin to proceed past "denial", the first step in the grieving process,
Day 6: ASIC hardware developers see an even greater number of prepayments for hardware.  Much gnashing of teeth on the forums.
Day 7: Hashing on CoinLab's GPU network grows tremendously as miners cash in their built-up loyalty credits.
Day 8: Nearly all NVidia GPUs that were used for mining are now either computing with CoinLab or have been decommissioned.
Day 9: Gamers elated over some really good AMD and NVidia graphics cards available "really, really cheap" on eBay.
Day 10: Blocks slow to about 13 minutes, as not only did the block reward subsidy drop but so did the frequency of blocks -- making mining bring in even less revenue each day.
Day 11: Speculators hoping for the "doubling" of the exchange rate realize it didn't happen (or perhaps already happened, from $5-ish, over the summer), and sell off a little  Exchange rate drops to $12-ish.
Day 12: ASIC manfuacturers claim to be finalizing the design / optimizing / trying to resolve some nagging power issue / whatever, yet not a single person that pre-paid for an ASIC has one in-hand.
Day 13: Block 211,680 - difficulty adjusts.  Drops 15%.  Back to one block every ten minutes.
Day 14: Mining operators are still seeing electric bills from the previous month's consumption.  Even more anger, vitriol and gnashing of teeth.
Day 15: Christmas-related activities overtake bitcoin as being the event more important to many mining operators.
Day 25: The daily "average price" remains in a range between $12 and $15.
Day 26: Many "slightly used" GPU cards land in wrapped boxes under trees.  Others, particularly those who had a larger investment in their GPU rigs, are using the phrase "bah, humbug" more than they had in any prior holiday season.
Day 27: Difficult adjusts, dropping another 5%.  Yawn.
Day 30: ASIC manufacturers claim to be finalizing the design / optimizing / trying to resolve some nagging power issue / whatever, yet not a single person that pre-paid for an ASIC has one in-hand.



I would agree with everything you said with one minor change somewhere between day 2 and day 10.

Day X:  GPU miners still "underwater" on their GPUs learn about Litecoin and attempt to keep mining for a possible payoff using the Litecoin system.

They eventually fail and give up in frustration harboring a lifelong deep seated resentment for all cryptocurrency because of their basic lack of understanding about the reason behind cryptocurrency and their shallow desire to be a part of a “money for nothing” scheme.


Disagree with money for nothing, miners are providing service and security for the network, including vetting even better technology like ASIC.

Looking to review Bitcoin / Crypto mining Hardware.
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October 18, 2012, 10:55:26 AM
 #9

seems like everybody thinks GPU miners will stop when ASIC arrive or what Huh Huh
No they just buy 10x the amount of ASICs devices and mine on... Cheesy


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October 18, 2012, 11:38:46 AM
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Speculations

Couldn't have thought it better myself, nice writeup.

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October 18, 2012, 03:42:55 PM
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I feel like most GPU miners will mine on in hopes that the scraps they start making will one day be worth much more. Mining is an addictions to most people and they won't like seeing their earnings stop going up on whatever pool they are using.
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October 18, 2012, 05:12:00 PM
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I feel like most GPU miners will mine on in hopes that the scraps they start making will one day be worth much more. Mining is an addictions to most people and they won't like seeing their earnings stop going up on whatever pool they are using.

Perhaps a plurality of miners will be those with a GPU or two and who will continue to mine away even at a loss, but those that mine mainly for economic benefit (a common property is that they sell all the coins that they produce) will realize that paying $100 to the electric company to get $75 worth with bitcoins is more costly than sending $75 to an exchange to buy about $75 worth of bitcoins.


seems like everybody thinks GPU miners will stop when ASIC arrive or what Huh Huh
No they just buy 10x the amount of ASICs devices and mine on... Cheesy

As crazyates pointed out, the options available depend on the exchange rate.  If the exchange rate does actually rocket up to say, $20, then most GPU miners can still mine profitably for a little while longer.   Or perhaps that rise justifies the investment in ASIC mining.   But if the exchange rate stays the same, or drops perhaps then there may be such low returns for ASICs that further investment just can't be justified.

As always, mining remains a form of speculation.  It is speculation on the combination of the future exchange rate versus the future difficulty level.   We've already had the situation where difficulty jumped an order of magnitude over a period fo weeks (with the first wave of GPUs, late 2010), but that happened during a time when many people were just discovering bitcoin for the first time and the exchange rate rose correspondingly.   This will possibly be the first time difficulty jumps an order of magnitude and the exchange rate barely budges.

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October 23, 2012, 07:32:34 AM
 #13

Firstly, this post belongs in either Speculation or Mining Speculation,  [Edit: I see that has happened already.]

The combination of the reward being split in two and the hash rate skyrocketing is going to have effects on mining operations and market price.
What do you think the outcome will be.

This is a prediction, and predictions are hard -- especially about the future.  Nobody knows, but I'll take a stab at it.

Day 0 is expected roughly around November 30th, plus or minus a week:

Day T-10: Four of the five ASIC manufacturers claim to be finalizing the design / optimizing / trying to resolve some nagging power issue / whatever, yet not a single person that pre-paid for an ASIC has one in-hand.
Day T-8: Difficulty of 3.5 million and exchange rate of $15 mean profitability is still acceptable for GPU miners paying average electric rates or less.
Day T-5: A lot more "N Ghash/s for sale" listings will start to appear [Edit: as-in total liquidation of N GHash/s of capacity]
Day T-4: Difficulty for Litecoin rises as miners experiment, causing there to be no chance of profit from Litecoin mining either.
Day T-3: Block 209,664 -- last difficulty adjustment before the block subsidy reward drops (fact, not a prediction)
Day T-1: Last day that anywhere near 7,200 BTC is produced (fact, not a prediction)
Day 0: Block 210,000 hits and only about 3,600 are produced (fact, not a prediction)
Day 1: Blocks slow to about 11 minutes as some GPU miners realize basic math and power down.
Day 2: Exchange rate volatile, both up and down, but returns to previous levels -- about $15.
Day 3: Anger and vitriol from GPU miners who are still "underwater" on their GPUs purchased in 2012.
Day 4: Anger and vitriol from FPGA miners who somehow didn't realize that "much more efficient" doesn't protect against a revenue drop of 50%
Day 5: Blocks slow to about 12 minutes as more GPU miners realize the payouts are dismal and begin to proceed past "denial", the first step in the grieving process,
Day 6: ASIC hardware developers see an even greater number of prepayments for hardware.  Much gnashing of teeth on the forums.
Day 7: Hashing on CoinLab's GPU network grows tremendously as miners cash in their built-up loyalty credits.
Day 8: Nearly all NVidia GPUs that were used for mining are now either computing with CoinLab or have been decommissioned.
Day 9: Gamers elated over some really good AMD and NVidia graphics cards available "really, really cheap" on eBay.
Day 10: Blocks slow to about 13 minutes, as not only did the block reward subsidy drop but so did the frequency of blocks -- making mining bring in even less revenue each day.
Day 11: Speculators hoping for the "doubling" of the exchange rate realize it didn't happen (or perhaps already happened, from $5-ish, over the summer), and sell off a little  Exchange rate drops to $12-ish.
Day 12: ASIC manfuacturers claim to be finalizing the design / optimizing / trying to resolve some nagging power issue / whatever, yet not a single person that pre-paid for an ASIC has one in-hand.
Day 13: Block 211,680 - difficulty adjusts.  Drops 15%.  Back to one block every ten minutes.
Day 14: Mining operators are still seeing electric bills from the previous month's consumption.  Even more anger, vitriol and gnashing of teeth.
Day 15: Christmas-related activities overtake bitcoin as being the event more important to many mining operators.
Day 25: The daily "average price" remains in a range between $12 and $15.
Day 26: Many "slightly used" GPU cards land in wrapped boxes under trees.  Others, particularly those who had a larger investment in their GPU rigs, are using the phrase "bah, humbug" more than they had in any prior holiday season.
Day 27: Difficult adjusts, dropping another 5%.  Yawn.
Day 30: ASIC manufacturers claim to be finalizing the design / optimizing / trying to resolve some nagging power issue / whatever, yet not a single person that pre-paid for an ASIC has one in-hand.


great one, but i think they will deliver sooner, but the overall process will be similiar Smiley

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October 23, 2012, 12:58:36 PM
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I'm not going to quote Steven's post as most have - but I believe it. In fact I shall make an 'advent' calendar of it and tick the days off Tongue

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October 23, 2012, 04:18:49 PM
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Still trying to comprehend all the factors but it seems to me like there's a bit of a bubble in the whole ASIC thing. This will cause the profitability to drop off quickly as the first orders come in and are put online. This will cause the some of the asic producing companies to go out of business. Several will dump asics for cheap. ASIC mining will continue barely profitably (since ASIC production is determined solely by desire to mine bitcoins, unlike GPU production), some of us will continue to GPU mine at a marginal loss.

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October 23, 2012, 06:24:14 PM
 #16

Firstly, this post belongs in either Speculation or Mining Speculation,  [Edit: I see that has happened already.]

Day 7: Hashing on CoinLab's GPU network grows tremendously as miners cash in their built-up loyalty credits.

No.
Agreed on the rest.

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October 23, 2012, 07:40:53 PM
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I believe we'll see ASICs in miner's hands before Christmas. Pretty reasonable predictions...interesting times ahead.

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October 23, 2012, 07:58:56 PM
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Still trying to comprehend all the factors but it seems to me like there's a bit of a bubble in the whole ASIC thing. This will cause the profitability to drop off quickly as the first orders come in and are put online. This will cause the some of the asic producing companies to go out of business. Several will dump asics for cheap. ASIC mining will continue barely profitably (since ASIC production is determined solely by desire to mine bitcoins, unlike GPU production), some of us will continue to GPU mine at a marginal loss.

Have you done the math? How are you going to mine "at marginal loss" with a GPU at difficulty well over 100 million (which should easily be the case if "several will dump asics for cheap")?

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October 23, 2012, 09:01:03 PM
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Still trying to comprehend all the factors but it seems to me like there's a bit of a bubble in the whole ASIC thing. This will cause the profitability to drop off quickly as the first orders come in and are put online. This will cause the some of the asic producing companies to go out of business. Several will dump asics for cheap. ASIC mining will continue barely profitably (since ASIC production is determined solely by desire to mine bitcoins, unlike GPU production), some of us will continue to GPU mine at a marginal loss.

Have you done the math? How are you going to mine "at marginal loss" with a GPU at difficulty well over 100 million (which should easily be the case if "several will dump asics for cheap")?

No, I haven't done the numbers. So take it for what it is, a musing about the economics of mining. ASIC sales may stall as difficulty climbs (possibly quite steeply), possibly leading to not all that many on the market operating at slim profits. Without sales, there will be no more ASICs to keep pushing the difficulty incredibly higher, it will level out at being slightly profitable. GPUs are just a guess. For me, the loss would be marginal as I'm simply not using much electricity that I wouldn't be anyway and my video card is a sunk cost. I don't imagine anyone would be insane enough to keep GPU mining at a huge loss.

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October 24, 2012, 06:11:07 PM
 #20

Day 365: No more GPUs or FPGAs hashing. Bitcoin network hashing rate: 1250 TH/s.

How did I work out the final network hash rate?

Assuming we are currently hashing at 25 TH/s (ref. 2), with current equipment generally providing 20 (MH/s)/W (ref. 1), that means that mining is currently consuming 1250,000 W of power. BFL will provide 1 (GH/s)/W (ref. 3), so if the power consumption stays constant, we should see the network hash rate rise to 1250 TH/s.

(However, many miners might just leave the game. However, many miners might join the game.)

References:
(1) https://en.bitcoin.it/wiki/Mining_hardware_comparison
(2) http://blockchain.info/stats
(3) https://bitcointalk.org/index.php?topic=114292.0
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