Mining Race

[BitBuster]

Hello all,

Really interested and have been reading all night. Especially interesting to see the MtGox scandal unfold!

I'm drawn towards getting into mining. I've been interested in computing efficiency for a while and such a efficiency-critical operation seems like a perfect experiment.

From reading as much as I can, it appears to me that mining for profit becomes exponentially impossible?

I may have gotten this wrong, but with the growth of computing resources mining for BTC, the time/difficulty of mining BTC also increases therefore maintaining some sort of ratio between scarcity and demand.

I buy a rig now that will generate "n" BTC over a month. By the end of this month my ability to generate BTC is reduced by "x" because of increasing network computing power/difficulty, this then repeats until the rig has so little "computational market share" that it runs at a loss.

Therefore the only way to maintain profitability is to add more rigs, but they cost cash and additional overheads which reduce profit? It seems like a constant game of "catch up" with a constantly moving target?

The next thing you know, over half of the computational market share is owned by a few rig runners who have built datacentres the size of Switzerland!?


As I say, I may have my wires crossed on this so would appreciate your replies!

Cheers,

BB

[fascistmuffin]

I don't know how the market is going to be in the next few days since the whole security fiasco, but lets assume the current price sticks for this post.

It usually takes a few months to fully pay off for a rig, unless you have already have the hardware (like you built a gaming rig and it happened to have a good mining card). It is true that it will get harder to generate bitcoins as time goes by, but after you pay off your rig, the only cost is electricity. When the cost of electricity is more than what you're pushing out of your rig, then mining is unprofitable.

A lot of people who are adding rigs have most likely paid off previous rigs, or who are running a larger risk than others who make a $600 rig with 5830s. I guess to a new person who has just recently came into mining it can feel like a never ending catch-up since the network has grown a lot in the last few weeks.

And your last statements about the large, single-owned datacenters, it's unlikely. At this time, you can still make profit (depending on electricity costs) from 500mh/s.

[chippy]

Yup, you are right. It's like that.
The first time I came across bitcoin minig ( that was not mor than 10 days ago, I did calculate 1500 USD per month for a 500 euros rig. Now it is not even close to that.

The key factor here is the difficulty number, which goes up (and in theory can go down). The problem is that the difficulty goes up faster when more people mine, because it is needed to have some steady stream of 1 block per 10 minutes. At least that is tried at this point.

I have mined a couple of hours for one of the pools, then I looked at my statistics, and my shares. The pool i used also published all other ppls shares. so I extrapolated. There are some people stinng aroung having the compute power equivalent to 30 pieces of 6990 in just that one pool. That is simply crazy. I guess thats some admin of a college computer lab full of ati/amd cards.

At this point people are racing against eachother to get more compute power, to get more btc. It's like trying to get out of a tarpit by moving faster, it actually won't help.

The system is build for a fixed rate of 1 block every 10 minutes, for each block the payout is 50 btc, that makes something around 7200 btc every day, fixed ! ( or almost fixed I know) So your share from that is your share in the part of the total compute power.

The total compute power right now is   8.873 Thash/s ( ~9PHs/s) yo can maybe with a 1000 dollars investment get two 6990 ? (optimistically) that would be 2x 750 = 1500 MHs/s.

Calculate your rate as of today (because everything changes, difficulty, amount of people joining, total compute power, bla, everyting...) You are one sixmillionth of the whole, so you'll get to an approx of one sixmillionth of that 7200 btc. That is even below 1 btc / day.

Maybe I have a flaw in my logi, newbie here too... If so please tell.
Please also calculate yourself, don't trust me.
Also do not trust the online calculation tools. They are all flawed too !

[Oldminer]

Bottom line: Depends on the value of Bitcoin

[BitBuster]

Isn't difficulty independent of value though? Or do you mean that BTC reduces in value to the point that people give up mining?

BB.

[libertyzeal]

Isn't difficulty independent of value though? Or do you mean that BTC reduces in value to the point that people give up mining?

BB.

Mining will *always* be marginally profitable. The question is on what scale will you have to operate to be profitable. Right now a low-budget solo operator can earn some bitcoin and be profitable with off the shelf GPU's.  In the future it might take a large farm of custom built FPGA mining rigs, and off-the-shelf GPU mining becomes the same thing has CPU mining is now.

[tallen]

If you're optimistic about BTC's future, there's no need to mine -- you simply need to buy and hold BTC.

[OneMINER]

BTC mined per day  X  Value of BTC  <  Cost  =  FAIL
BTC mined per day  X  Value of BTC  >  Cost  =  WIN

At the point where cost is greater than profit, it wont matter how many cards you have. If your first rig is not profitable your second will have the same problem (assuming identical hardware).

If you can make 1 BTC/day and sell it for $20 its the same as being able to make 20 BTC/day for $1. So you cant look at difficulty and ignore price or vice versa.

Think of it this way. What matters is the price at the time of sale. It makes no difference if the price is $1 or $100 today if you sell at $50 tomorrow.

[BitBuster]

With deepbit et al each owning nearly a third of the computational market share, won't they just become the driving force of BTC and thus BTC becomes dependent on them?

OK so the BTC value would go up if one of these guys stopped running, but they could throttle their output for a month and significantly affect the value of BTC? Also knocking smaller guys to the side.

I'm not bitching at the big miner pools, just trying to understand my potential investment! 


BB.

[dan_a]

OK so the BTC value would go up if one of these guys stopped running, but they could throttle their output for a month and significantly affect the value of BTC? Also knocking smaller guys to the side.

As I understand it, if they throttle their output then the difficulty would decrease meaning that everyone else's output would increase.

[bitcola]

If you're optimistic about BTC's future, there's no need to mine -- you simply need to buy and hold BTC.

I've yet to hear of anyone doing that.

[OneMINER]

Its less about deepbit and the other big boys than total hashing power. If every miner in the world was on deepbit it wouldn't be different from every miner in the world mining solo. Total hashes preformed stay the same. Furthermore pool operators don't have control over how you use your GPU. So that means that only you could throttle your card. If they tried to affect the networks performance by disconnecting some users, those dropped miners would probably just move to another pool.

But lets say they do this, what will happen? First off, nothing. Difficulty will not change immediately so all other pools and solo miners continue as if nothing happened. Then after the next difficulty change everybody will be on the same playing field again. So in the end whomever has tried to influence the difficulty by lowering their hash rate has simply lowered their own income for the time that they were doing less work.

Also I'm not convinced that any amount of "throttling" will change the price much. I'm no expert but I think it would be a little more complex than that.

I hope that's clear.