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Author Topic: Bitcoin mining will never pay off with GPUs for dedicated miners.  (Read 11866 times)
Hook^
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June 19, 2011, 12:20:18 AM
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I have run some Excel spreadsheet simulations on ROI and want to warn people that buying hardware just to mine BitCoins won't pay off.

I just bought a dual 6970 system, but I bought it before I did the simulations.  I based my purchase on one of the bitcoin calculators.  The problem is that the network is growing at 4% per day in computing horsepower.  That means that your return is losing 4% per day because you essentialy have to compete with everyone else for a fixed rate of bitcoin production per day.  It isn't exactly like that on a day-to-day basis, because the difficulty doesn't adjust continuously.  But the difficulty function adjusts often enough to almost exactly approximate you having to compete directly against everyone else.

When you take the 4% growth into consideration, your break-even goes from 2 months to never.  In my case, I spent $1,000 to produce about 700 MH/S.  Everything else remaining the same, my total cumulative bitcoin production will amount to around $200 before it reaches the cost of electricity in about 60 days.  At that point I will just have to shut it off and sell the parts to my gamer friends for half off.

The only way mining makes sense is if you already have a gaming system and mine in your off times.  But you better do it while it is still worth more than the electricity.  As I said before, that breakeven point will be reached in about 64 days from now.

Some people might say that the exchange rate of bitcoins may go up to compensate.  That may or may not be true.  But if it is, it would make more economic sense to buy bitcoins now and take the gain, rather than buying hardware to generate them.  

I wish that you could paste images directly into the messages, because I have a chart that shows the return falling off a cliff right after purchasing your equipment.

There is a graph of the kind of computing horsepower you have to compete with here:
http://bitcoin.sipa.be/

Anyway, I want to warn people not to make the same mistake I made.  The only way to beat the system now is to come out with a custom ASIC for cheap enough per chip that you could dominate the entire network and grow your hardware fast enough to knock out any competitor before they could produce their own ASIC and make a profit.

The frustrating thing about this is that I first read about BitCoin around April of last year (tax season) when I was researching anonymous banking.  I was going to invest $1,000 just as a pure speculation.  I never got around to it though.  If I had followed through, I would have around $7 million now.
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phenom
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June 19, 2011, 12:24:49 AM
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I've had a good run, but I'll be selling my 3x5870's soon.

Hook^
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June 19, 2011, 12:27:28 AM
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I've had a good run, but I'll be selling my 3x5870's soon.
Smart move.  Although it won't be until about 60 days until it costs more in power than bitcoins (unless the exchange rate goes up, which it could).
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June 19, 2011, 12:28:33 AM
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Some people might say that the exchange rate of bitcoins may go up to compensate.  That may or may not be true.  But if it is, it would make more economic sense to buy bitcoins now and take the gain, rather than buying hardware to generate them.

The exchange rate of bitcoins will go up. The value of bitcoins is in the hands of the miners for the most part. If they have to raise the cost of bitcoins in order to make a profit after paying their hydro, then it will go up. Nobody in the right mind would sit here, watching how bitcoins has grown since one year ago and figure that it's a bad move to mine.

The same topics were probably mentioned by the first 100 or so people mining after 10000 more people jumped on board and brought up difficulty. Now those guys are the ones who don't have to work for a living.

Help Bitcoins by buying clothes, technology, books, etc. through people/stores that accept BTC. This will increase overall value of BTC as well as mitigate unnecessary bank transaction fees.

My address -
1EM9HGg1SEa5Bux1rVEPxGqGSfNTTc9EkC
Adam
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June 19, 2011, 12:37:10 AM
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They might pay off, they might not.  It depends on how you estimate future difficulty growth.  If everyone is rational about it then difficulty growth would slow to a crawl if new hardware is not profitable.  But if that shift happens it actually does become profitable again for all current and future miners, and so more people will jump on.  It's like a pendulum and it's tough to know where the equilibrium will end up.  Logically, difficulty should reach the point where it is just breakeven considering electricity and depreciation, but that's in an ideal world.

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June 19, 2011, 12:38:06 AM
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The exchange rate of bitcoins will go up. The value of bitcoins is in the hands of the miners for the most part. If they have to raise the cost of bitcoins in order to make a profit after paying their hydro, then it will go up.

Not sure how many fallacies were in that short snippet. The value of bitcoins is in no group's hands. It is an open market, affected by tens of thousands of participants each valuing a bitcoin slightly different, with different outlooks, goals, and assumptions. Bitcoin's value is determined by supply and demand. Difficult could triple tomorrow, and the price of Bitcoins could fall at the same time.

The cost of mining is but one of many inputs to the price of Bitcoin, and easily overshadowed by a simple coalition of the other inputs.
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June 19, 2011, 12:38:54 AM
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I've had a good run, but I'll be selling my 3x5870's soon.

Let me know when you wish to sell, I might be interested in a discounted set.  I'm looking to build a miner/heater for my garage this fall.

"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."

- Carroll Quigley, CFR member, mentor to Bill Clinton, from 'Tragedy And Hope'
Swishercutter
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June 19, 2011, 12:43:30 AM
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Wow...starting multiple threads stating the same crap now.

Everyone, read all posts related to this troll before forming opinions.
Hook^
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June 19, 2011, 12:44:27 AM
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Some people might say that the exchange rate of bitcoins may go up to compensate.  That may or may not be true.  But if it is, it would make more economic sense to buy bitcoins now and take the gain, rather than buying hardware to generate them.

The exchange rate of bitcoins will go up. The value of bitcoins is in the hands of the miners for the most part. If they have to raise the cost of bitcoins in order to make a profit after paying their hydro, then it will go up. Nobody in the right mind would sit here, watching how bitcoins has grown since one year ago and figure that it's a bad move to mine.

The same topics were probably mentioned by the first 100 or so people mining after 10000 more people jumped on board and brought up difficulty. Now those guys are the ones who don't have to work for a living.

It could go up, but then you would make more money buying the coins and making a profit.  The problem is that the growth of the network is a higher rate than what will allow a breakeven on investment.  In other words, it isn't rational right now.  Probably because most of the joiners already have the equipment and it doesn't matter to them.  They are ok making a couple hundred bucks on the side.

But you will never break even buying a machine soley for mining.
SmokeAndMirrors
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June 19, 2011, 12:47:21 AM
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We'll just have to wait and see.

Help Bitcoins by buying clothes, technology, books, etc. through people/stores that accept BTC. This will increase overall value of BTC as well as mitigate unnecessary bank transaction fees.

My address -
1EM9HGg1SEa5Bux1rVEPxGqGSfNTTc9EkC
Hook^
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June 19, 2011, 12:47:30 AM
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Wow...starting multiple threads stating the same crap now.

Everyone, read all posts related to this troll before forming opinions.
Yes please do, because I am pretty sure I am correct.  I am sorry about your hostility.
Swishercutter
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June 19, 2011, 12:48:46 AM
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Wow...starting multiple threads stating the same crap now.

Everyone, read all posts related to this troll before forming opinions.
Yes please do, because I am pretty sure I am correct.  I am sorry about your hostility.


There is no hostility...just having fun tracking trolls. LOL
bcpokey
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June 19, 2011, 12:55:43 AM
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I don't understand why people seem so keen to continually make this same thread over and over. In the beginners guide stickied at the top of this forum there is a link to a thread 2 months ago that says the same thing, and another one like a month ago with a "spreadsheet that is legit showing mining will never pay off". There have been have been a few in between then that I haven't kept track of as well, all with "spreadsheets". Why is spreadsheet some magical word to people that lends their predictions based on nothing some validity?


Will bitcoin never pay off? Who knows, it's getting increasing difficult, and if you build a < 1.2Mhash/$ rig like most people are, yeah it's unlikely you're going to do very well in the current market as people are still jumping on board with you. Things can change though, summer heat and prices may cause people to drop out, casuals will be annoyed with paltry returns, people "making spreadsheets" may up and sell off their rigs, bitcoin price may rise again, who knows.

Basically no one knows the future as I've said at least a dozen times. Be PRUDENT like you should with any investment. Do not get into a gold rush mindset, that's what kills people. A very few people strike it big by making quick decisions, but most people that do well do it slowly, carefully and intelligently.
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June 19, 2011, 12:57:49 AM
 #14

Oh look, it's this thread again.

Mousepotato
rograz
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June 19, 2011, 12:59:33 AM
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Yes please do, because I am pretty sure I am correct.  I am sorry about your hostility.

With your logic buying mining hardware would never have been able to pay itself off, is it more risky buying mining hardware today than it was a month ago or a year ago? perhaps, but then again mining was never a guaranteed return and neither was buying bitcoins directly either. There is no risk free way of getting into the bitcoin economy and as everyone else keeps saying never put money into hardware or BTC you cant afford to lose.
Hook^
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June 19, 2011, 01:00:33 AM
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Oh look, it's this thread again.
Well, I guess others have already made this point before, so I don't need to bother.  I just don't want to see people lose money based on a decision from a bitcoin calculator that doesn't take bitcoin difficulty growth into consideration.
Swishercutter
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June 19, 2011, 01:01:45 AM
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Oh look, it's this thread again.
Well, I guess others have already made this point before, so I don't need to bother.  I just don't want to see people lose money based on a decision from a bitcoin calculator that doesn't take bitcoin difficulty growth into consideration.


Obvious troll is obvious troll, you made a new thread because we proved you were a troll in the last thread that stated the same garbage. 
Hook^
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June 19, 2011, 01:05:55 AM
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Yes please do, because I am pretty sure I am correct.  I am sorry about your hostility.

With your logic buying mining hardware would never have been able to pay itself off, is it more risky buying mining hardware today than it was a month ago or a year ago? perhaps, but then again mining was never a guaranteed return and neither was buying bitcoins directly either. There is no risk free way of getting into the bitcoin economy and as everyone else keeps saying never put money into hardware or BTC you cant afford to lose.
What I am saying is that you will get a better return just buying right now.  Unless you already have a gaming machine, or are going to buy a machine for gaming as well.  Then it is just free money until the power costs more than the bitcoins.

The growth rate of difficulty has been 4% a day for the last year, so yes, mining rigs have been less profitable than just buying bitcoins for the last year.  If the network growth slows down to ~2.5% a year, then it starts making sense.  The first year of bitcoin, the growth rate was almost flat, so you could make more money mining than buying bitcoins.

Keep in mind this is only about dedicated mining rigs.  If you already have the equipment, there is nothing to lose by mining.  At least for another 60 days when it reaches electricity costs.
Swishercutter
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June 19, 2011, 01:12:36 AM
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Oh look, it's this thread again.
Well, I guess others have already made this point before, so I don't need to bother.  I just don't want to see people lose money based on a decision from a bitcoin calculator that doesn't take bitcoin difficulty growth into consideration.


I think he literally meant this thread again as in the identical thread started by you...not that others had stated it...that you stated it.
Hook^
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June 19, 2011, 01:13:30 AM
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Yes please do, because I am pretty sure I am correct.  I am sorry about your hostility.

With your logic buying mining hardware would never have been able to pay itself off, is it more risky buying mining hardware today than it was a month ago or a year ago? perhaps, but then again mining was never a guaranteed return and neither was buying bitcoins directly either. There is no risk free way of getting into the bitcoin economy and as everyone else keeps saying never put money into hardware or BTC you cant afford to lose.
What I am saying is that you will get a better return just buying right now.  Unless you already have a gaming machine, or are going to buy a machine for gaming as well.  Then it is just free money until the power costs more than the bitcoins.

The growth rate of difficulty has been 4% a day for the last year, so yes, mining rigs have been less profitable than just buying bitcoins for the last year.  If the network growth slows down to ~2.5% a year, then it starts making sense.  The first year of bitcoin, the growth rate was almost flat, so you could make more money mining than buying bitcoins.

Keep in mind this is only about dedicated mining rigs.  If you already have the equipment, there is nothing to lose by mining.  At least for another 60 days when it reaches electricity costs.

Sorry, I meant 2.5% per day or less
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