My Article on Mining Profitability

[furuknap]

Whether mining makes sense depends on several factors that make predictions almost impossible.

I wrote an article a few days ago discussing these factors and would love your feedback and comments.

http://coin.furuknap.net/litecoin-mining-profitability-guide/

Thanks in advance.

.b

[1715243493]

1715243493

[wildbud]

Whether mining makes sense depends on several factors that make predictions almost impossible.

I wrote an article a few days ago discussing these factors and would love your feedback and comments.

http://coin.furuknap.net/litecoin-mining-profitability-guide/

Thanks in advance.

.b

Oooooo a litecoin article 

[furuknap]

Oooooo a litecoin article 

I actually wrote it as a response to the /r/litecoinmining sub-reddit, but the factors mostly apply to other currencies as well, perhaps more to Scrypt-based coins than SHA, but applicable regardless.

.b

[Stealth]

That was a good read, especially to someone like me who is considering buying some ASIC equipment.

It's a tricky decision.  Do I invest some BTC into mining hardware, or just buy/sell BTC to reach some profitability targets?  For me, your last point hits what will likely sway my decision.  I'm more interested in tinkering with the hardware than trading on Mt Gox or some other exchange.

[furuknap]

That was a good read, especially to someone like me who is considering buying some ASIC equipment.

It's a tricky decision.  Do I invest some BTC into mining hardware, or just buy/sell BTC to reach some profitability targets?  For me, your last point hits what will likely sway my decision.  I'm more interested in tinkering with the hardware than trading on Mt Gox or some other exchange.

Thanks, I appreciate the feedback.

Remember that unlike GPU mining, ASIC miners will have very little remaining value after you have completed your operation. You could always sell your GPUs or keep using your equipment for regular work or play, but an ASIC is basically worthless beyond the collectible value after their profitability has reached 0.

.b

[Schrankwand]

That was a good read, especially to someone like me who is considering buying some ASIC equipment.

It's a tricky decision.  Do I invest some BTC into mining hardware, or just buy/sell BTC to reach some profitability targets?  For me, your last point hits what will likely sway my decision.  I'm more interested in tinkering with the hardware than trading on Mt Gox or some other exchange.

Thanks, I appreciate the feedback.

Remember that unlike GPU mining, ASIC miners will have very little remaining value after you have completed your operation. You could always sell your GPUs or keep using your equipment for regular work or play, but an ASIC is basically worthless beyond the collectible value after their profitability has reached 0.

.b

But it should be okay. Even if we hit 40-50 million until august, the rigs will pay themselves off in 30-40 days.

I am currently developing theory on the correlation between difficulty and price. Do you have good numbers on this?

If I had a weekly datapoint, or daily datapoint for the last years, that would be enough.

[Viceroy]

Difficulty is going to 1 billion (check my sig).

[Signus]

That was a good read, especially to someone like me who is considering buying some ASIC equipment.

It's a tricky decision.  Do I invest some BTC into mining hardware, or just buy/sell BTC to reach some profitability targets?  For me, your last point hits what will likely sway my decision.  I'm more interested in tinkering with the hardware than trading on Mt Gox or some other exchange.

Thanks, I appreciate the feedback.

Remember that unlike GPU mining, ASIC miners will have very little remaining value after you have completed your operation. You could always sell your GPUs or keep using your equipment for regular work or play, but an ASIC is basically worthless beyond the collectible value after their profitability has reached 0.

.b

But it should be okay. Even if we hit 40-50 million until august, the rigs will pay themselves off in 30-40 days.

I am currently developing theory on the correlation between difficulty and price. Do you have good numbers on this?

If I had a weekly datapoint, or daily datapoint for the last years, that would be enough.

For the large investments yes. If you bought a 5GH/s rig from BFL it would still take ~50 days to pay off, whereas the larger rigs would pay themselves off in nearly the same amount of time based off of the difficulty and fast they are. Granted profitability will decline for large machines unless the trading cost from BTC to USD jumps up significantly.

[Schrankwand]

Difficulty is going to 1 billion (check my sig).

1 billion? I checked the sig, found it interesting and actually decided that even with that difficulty, I would invest, thanks to you.

I have the guess that decreased availability is going to strike the markt price hard. I am betting on human greed, which means that once it gets harder to mine bitcoin, the price will go up hard. mBTC and so on will become more prominent by then, also LTC will likely show what role it has to play. (Not sure about that yet.)

Considering we have a 25GH miner and it comes end of July. Your calculation nets me a 0.009 BTC profit per GH/s a day. Makes 6,75 BTC in 30 days. Let us assume that we are around something of today's price. 130$. That would be 877,50 in USD at $130 a month. I mean, yes, this is not 1 million dollars in a month, but it is still a very, very good investment.

Yes, people are being screwed over considering the time to market factor, but let us look at your stats here:


A 25gH miner at 1249 will, if it comes into play at difficulty you marked at the end of  July, need about 2 months to get to break even. Whatever comes next, is pure profit. I know people love the gold rush, but this is STILL incredibly profitable. And if we take into account, that the network increase might lure more people, more money, more vendors, more bigger companies accepting bitcoin, more merchant tools... then the USD/BTC price is still quite low.

The rest ist of course an arms race. The reality in Bitcoin is, if you want to keep your profitability, you need to keep your hashrate proportional with the growth of the network. Which is simply an arms race.

[furuknap]

I am betting on human greed, which means that once it gets harder to mine bitcoin, the price will go up hard.

You didn't read my article, did you?

If that is the case, investing in mining is the worst decision you can make. Investing in equipment is a bet that the price will go down, not up. If the price goes up, you'll have a lot more profit from simply buying coins and holding on to them.

.b

[Bandini]

(i'm french so sorry for the english)
I have a question looking at your article : http://coin.furuknap.net/understanding-bitcoin-mining-difficulty/

However, the transaction will still be unconfirmed, it has simply been added to the blocks that miners will try to solve.

What i understand from this is :

Transaction depend of mining.
The more powerful the miner are in quality and quantity the quicker the confirmation of a transaction is done.

So from this point :

--If difficulty to solve a block increase, confirmation is slower.  But it don't work this way because the power of computer increase too (moore law)

-But if the 21 millions of bitcoin have been mining (i know it's not suppose to happen until 2140) how the confirmation will be done if there is no more interest to mining (and so no miner)? (from everything i write, it's the question i'm interest in)

Now with the ASIC hashing power are we not moving to quickly?
I mean, the bitcoin community want to have a worldwide recognition, which mean being able to shop with bitcoin.
Know, there is the possibility that with the ASIC miners at some point, difficulty of block resolution and computational power don't grow in proportion  (for this i take into account the DIY asic mining, which certainly mean that at some point we will be able to create huge (in term of capacity) ASIC miner).

Which would mean, that there is a big difficulty, that ASIC miner can't quickly resolve anymore. Therefore the transaction are becoming really slower. Which would be a pain in the ass for shop manager. (or is this thesis wrong because difficulty adjust if there is not a lot of miner?)

[Schrankwand]

I am betting on human greed, which means that once it gets harder to mine bitcoin, the price will go up hard.

You didn't read my article, did you?

If that is the case, investing in mining is the worst decision you can make. Investing in equipment is a bet that the price will go down, not up. If the price goes up, you'll have a lot more profit from simply buying coins and holding on to them.

.b

Yeah, I actually do that too. I could of course only go "buy/sell"

However mining is a new pastime. I think it is interesting as hell.


In the end, I think we both agree that whatever we do, we are still more profitable than investing in ETFs

[furuknap]

(i'm french so sorry for the english)
I have a question looking at your article : http://coin.furuknap.net/understanding-bitcoin-mining-difficulty/

However, the transaction will still be unconfirmed, it has simply been added to the blocks that miners will try to solve.

What i understand from this is :

Transaction depend of mining.
The more powerful the miner are in quality and quantity the quicker the confirmation of a transaction is done.

No, a block gets solved every 10 minutes on average regardless of how much power the network has. This is one of the beautiful aspects of Bitcoin; it adjusts automatically to future generations of computers.

So from this point :

--If difficulty to solve a block increase, confirmation is slower.  But it don't work this way because the power of computer increase too (moore law)

It's actually the reverse; the difficulty increases because of computer power increase. This is a correlation, though, not a causuality. What determines the difficulty is the speed at which blocks are solved. If that time is lower than 10 minutes, indicating more hashing power is available, then difficulty increases. If the time is longer than 10 minutes, indicating hashing power is less than previously, the difficulty lowers.

-But if the 21 millions of bitcoin have been mining (i know it's not suppose to happen until 2140) how the confirmation will be done if there is no more interest to mining (and so no miner)? (from everything i write, it's the question i'm interest in)

At that point, transaction fees will be much higher than they are today, and miners will still earn from solving blocks.

I actually wrote another article that explains this.

http://coin.furuknap.net/understanding-bitcoin-mining-difficulty/

.b

[bcpokey]

I am betting on human greed, which means that once it gets harder to mine bitcoin, the price will go up hard.

You didn't read my article, did you?

If that is the case, investing in mining is the worst decision you can make. Investing in equipment is a bet that the price will go down, not up. If the price goes up, you'll have a lot more profit from simply buying coins and holding on to them.

.b

Disclaimer I did not read the article (working, will skim later) but I will address this response, because I've grown weary of seeing it. It is not wrong per se, but it is overly limited.

Investing in hardware is a bet that price will go down. Or stay flat, or go up a little bit, or a look at a timeline where you generate more coins than you could have bought for the same price, in which case it is always better regardless of direction.

Mining is a risk averse decision, it has a larger spread of options where it is superior, and less risk of ending up holding a bag of nothing (though ASIC is closer to that). Buying/selling is a liquid, high risk high reward strategy.

They are different, and dependent on individuals predilections. One would only be better if one could see the future.

[Schrankwand]

I am betting on human greed, which means that once it gets harder to mine bitcoin, the price will go up hard.

You didn't read my article, did you?

If that is the case, investing in mining is the worst decision you can make. Investing in equipment is a bet that the price will go down, not up. If the price goes up, you'll have a lot more profit from simply buying coins and holding on to them.

.b

Disclaimer I did not read the article (working, will skim later) but I will address this response, because I've grown weary of seeing it. It is not wrong per se, but it is overly limited.

Investing in hardware is a bet that price will go down. Or stay flat, or go up a little bit, or a look at a timeline where you generate more coins than you could have bought for the same price, in which case it is always better regardless of direction.

Mining is a risk averse decision, it has a larger spread of options where it is superior, and less risk of ending up holding a bag of nothing (though ASIC is closer to that). Buying/selling is a liquid, high risk high reward strategy.

They are different, and dependent on individuals predilections. One would only be better if one could see the future.

And it takes into account that not everyone is a great trader.

Take a look at BTC-e : If you are not market smart, you are totally going to get ripped. Cryptocoins work at the volatility level of penny stocks at the moment. And believe me, the average person would get crushed by this. Bear and bull traps, the heart attacks when it goes up and down... not for most people. Mining ahead, having a stable supply one can calculate against almost stable electricity costs: Works