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Author Topic: 6 blocks an hour my ass!  (Read 7249 times)
triforcelink (OP)
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June 22, 2011, 07:48:35 AM
 #1

I have yet to see anything at or below 6 blocks an hour... how is the network supposed to create 6 blocks an hour when it seems to average way above that.. did I miss something?

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Once a transaction has 6 confirmations, it is extremely unlikely that an attacker without at least 50% of the network's computation power would be able to reverse it.
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June 22, 2011, 07:55:00 AM
 #2

An average 6 blocks per hour is only when the network hashing capacity is at an equilibrium. If it is in a rapid upward trend it will be faster.

You could argue that it should have had a more sophisticated control algorithm that will approach the target average over time, but long term it doesn't matter much.

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June 22, 2011, 07:58:09 AM
 #3

fair enough. I keep hearing '6 blocks an hour' like that number is hard-coded into the system.

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June 22, 2011, 08:51:04 AM
 #4

fair enough. I keep hearing '6 blocks an hour' like that number is hard-coded into the system.

6 blocks an hour is how the network adjusts the difficulty level.  More than 6 blocks in an hour and the difficulty level will go up, less than 6 blocks and it will go down.

Currently we are at 10.88 blocks an hour average!  Get ready for a huge difficulty level increase to ~1.3M!
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June 22, 2011, 04:08:58 PM
 #5

Yeah, I've been harping on 50% difficulty increases for the next 6 increases (~2 months).

People getting in to mining think that the difficulty stays at 1 level for months at a time.

They don't realize the network is increasing difficulty by 50% every 9.5 days.

By September, the difficulty should be in the 7M range.  People should be using that as their difficulty calculation, not the 877k difficulty which expires in 2 days.

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June 22, 2011, 04:25:45 PM
 #6

A few days ago on here, someone was claiming to calculate the income of a 5830, and he calmly stated what a months' income would be -- based on 877K difficulty!

(Newsflash, bro: that difficulty level expires in LESS THAN TWO DAYS! Sorry to burst your bubble)

So you won't get more than 2 days income at this difficulty -- and then you can't count on 1.3M difficulty either, because that will only last 8 or 9 days...

Those monthly income projections are so stupid. That's why you have people wanting to sell/return their mining hardware -- when reality comes a-calling.
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June 22, 2011, 05:45:28 PM
 #7

By September, the difficulty should be in the 7M range.

assuming people are sane/aren't mining for free/price doesn't soar back up/electric rate doesn't go up or down/etc., people will start dropping out before then.

my 6870 will stop being profitable at about 5.6 million difficulty, assuming $15/BTC with my fairly cheap $0.09/KWhr electricity.
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June 22, 2011, 05:51:37 PM
 #8

I just did some calculations for the hell of it, assuming a 50% growth rate in computing power (we've seen this for the last 6 months on average).

In a month (6500 blocks roughly given 9 days per 2000 blocks) given the above assumption, your current rig will earn only 30% of what it is earning now in terms of BTC.

In two months, it'll earn 7% of what it is currently earning.

In three months, it's going to earn a measly 1.7% of what it's earning now.

So unless we see a MASSIVE increase in BTC valuation or computational power levels off for some reason, mining will become unprofitable for most people quite quickly.
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June 22, 2011, 05:52:00 PM
 #9

A few days ago on here, someone was claiming to calculate the income of a 5830, and he calmly stated what a months' income would be -- based on 877K difficulty!

(Newsflash, bro: that difficulty level expires in LESS THAN TWO DAYS! Sorry to burst your bubble)

So you won't get more than 2 days income at this difficulty -- and then you can't count on 1.3M difficulty either, because that will only last 8 or 9 days...

Those monthly income projections are so stupid. That's why you have people wanting to sell/return their mining hardware -- when reality comes a-calling.


Ok, bra...so whats different about the 5830, or any other card, troll? Now you show up here harping on the 5830.

Difficulty increases are across the board, whether the new miner with one 4650, or the super miner with 20 rigs of 4x 6990s. Everyone will be affected the same.

Mining for block generation is for the long haul, and correlates with both difficulty and price. Both can go up, and down, Captain Obvious.
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June 22, 2011, 05:56:27 PM
 #10

A few days ago on here, someone was claiming to calculate the income of a 5830, and he calmly stated what a months' income would be -- based on 877K difficulty!

(Newsflash, bro: that difficulty level expires in LESS THAN TWO DAYS! Sorry to burst your bubble)

So you won't get more than 2 days income at this difficulty -- and then you can't count on 1.3M difficulty either, because that will only last 8 or 9 days...

Those monthly income projections are so stupid. That's why you have people wanting to sell/return their mining hardware -- when reality comes a-calling.


Ok, bra...so whats different about the 5830, or any other card, troll? Now you show up here harping on the 5830.

Difficulty increases are across the board, whether the new miner with one 4650, or the super miner with 20 rigs of 4x 6990s. Everyone will be affected the same.

Mining for block generation is for the long haul, and correlates with both difficulty and price. Both can go up, and down, Captain Obvious.


Efficiency is going to be paramount. You need to have the most efficient hardware / cheap electricity or you will get squeezed out of the market as your rig's running costs will be greater than the BTC you earn.
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June 22, 2011, 06:01:45 PM
 #11

I just did some calculations for the hell of it, assuming a 50% growth rate in computing power (we've seen this for the last 6 months on average).

In a month (6500 blocks roughly given 9 days per 2000 blocks) given the above assumption, your current rig will earn only 30% of what it is earning now in terms of BTC.

In two months, it'll earn 7% of what it is currently earning.

In three months, it's going to earn a measly 1.7% of what it's earning now.

So unless we see a MASSIVE increase in BTC valuation or computational power levels off for some reason, mining will become unprofitable for most people quite quickly.

Yes, there is a mathematical limit for the # of coins you can earn, too, based on a 50% increase of difficulty resulting in a 2/3 drop in coins per increase.  The formula is very straightforward, because 2/3^x becomes a geometric series.

It ends up being 3*N, where N is the # of coins you are mining per difficulty (9 days).  At 1.0Ghash, a miner got 9 coins.  So no matter what, if the difficulty goes up 50% forever, that miner can expect to mine 27 coins over the lifetime of his rig. Period.

Someone like me at 330mhash has an 'N' value of 3, since I will only pull 3 BTC out of this 877k difficulty.  So my maximum coins, ever is 9.  Provided continual 50% increases of difficulty.

The limit is so steep that by the 6th difficulty, I will have mined ~8 coins, so from then to infinity, I would get 1 more coin, which means 6 50% difficulties is the endgame.

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June 22, 2011, 06:05:06 PM
 #12

I just did some calculations for the hell of it, assuming a 50% growth rate in computing power (we've seen this for the last 6 months on average).

In a month (6500 blocks roughly given 9 days per 2000 blocks) given the above assumption, your current rig will earn only 30% of what it is earning now in terms of BTC.

In two months, it'll earn 7% of what it is currently earning.

In three months, it's going to earn a measly 1.7% of what it's earning now.

So unless we see a MASSIVE increase in BTC valuation or computational power levels off for some reason, mining will become unprofitable for most people quite quickly.

Must we all play so fast and loose with the truth? 6 months ago there was almost no growth in computing power, then 2 months ago an explosion of computing power. Averaging nearly nothing with something huge to get a middle number is just sloppy. Try going back and looking at the root of why such things would occur.
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June 22, 2011, 06:20:02 PM
 #13

Must we all play so fast and loose with the truth? 6 months ago there was almost no growth in computing power, then 2 months ago an explosion of computing power. Averaging nearly nothing with something huge to get a middle number is just sloppy. Try going back and looking at the root of why such things would occur.

Media exposure
Increased BTC value
Vast availability of unused GPU cycles
Increased availability of GPU mining programs

Those are the roots.  Sure you can look back 1.5 years, but there was no GPU mining. Now there is.

There are no forecasted awesome GPU advances in the next 3 months.  So 2 months of 50% increases is both possible, and it is what we've been experiencing the last few cycles with the influx of the above points.

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June 22, 2011, 07:00:24 PM
 #14

I just did some calculations for the hell of it, assuming a 50% growth rate in computing power (we've seen this for the last 6 months on average).

In a month (6500 blocks roughly given 9 days per 2000 blocks) given the above assumption, your current rig will earn only 30% of what it is earning now in terms of BTC.

In two months, it'll earn 7% of what it is currently earning.

In three months, it's going to earn a measly 1.7% of what it's earning now.

So unless we see a MASSIVE increase in BTC valuation or computational power levels off for some reason, mining will become unprofitable for most people quite quickly.

Must we all play so fast and loose with the truth? 6 months ago there was almost no growth in computing power, then 2 months ago an explosion of computing power. Averaging nearly nothing with something huge to get a middle number is just sloppy. Try going back and looking at the root of why such things would occur.

How about you go and look at the charts instead of spouting nonsense...

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June 22, 2011, 07:41:25 PM
 #15

A few days ago on here, someone was claiming to calculate the income of a 5830, and he calmly stated what a months' income would be -- based on 877K difficulty!

(Newsflash, bro: that difficulty level expires in LESS THAN TWO DAYS! Sorry to burst your bubble)

So you won't get more than 2 days income at this difficulty -- and then you can't count on 1.3M difficulty either, because that will only last 8 or 9 days...

Those monthly income projections are so stupid. That's why you have people wanting to sell/return their mining hardware -- when reality comes a-calling.


Ok, bra...so whats different about the 5830, or any other card, troll? Now you show up here harping on the 5830.

Difficulty increases are across the board, whether the new miner with one 4650, or the super miner with 20 rigs of 4x 6990s. Everyone will be affected the same.

Mining for block generation is for the long haul, and correlates with both difficulty and price. Both can go up, and down, Captain Obvious.


It's called efficiency.

You think every card has the same MH per watt?

Or that every rig uses the same number of watts to achieve a given MH? 

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June 22, 2011, 09:15:46 PM
 #16

A few days ago on here, someone was claiming to calculate the income of a 5830, and he calmly stated what a months' income would be -- based on 877K difficulty!

(Newsflash, bro: that difficulty level expires in LESS THAN TWO DAYS! Sorry to burst your bubble)

So you won't get more than 2 days income at this difficulty -- and then you can't count on 1.3M difficulty either, because that will only last 8 or 9 days...

Those monthly income projections are so stupid. That's why you have people wanting to sell/return their mining hardware -- when reality comes a-calling.


Ok, bra...so whats different about the 5830, or any other card, troll? Now you show up here harping on the 5830.

Difficulty increases are across the board, whether the new miner with one 4650, or the super miner with 20 rigs of 4x 6990s. Everyone will be affected the same.

Mining for block generation is for the long haul, and correlates with both difficulty and price. Both can go up, and down, Captain Obvious.


It's called efficiency.

You think every card has the same MH per watt?

Or that every rig uses the same number of watts to achieve a given MH? 



Have you? I didn't see anything in your original reply, nor any other troll-like replies you've submitted. Efficiency cracked in later replies (with some decent insight from others.) Besides, wasn't OP talking about block generation, not possible costs to get there or other inconsequential crap? I chimed in when I saw your troll-like behavior show up yet again and mention a 5830 card.

Reality is, crap tons of people got on the bandwagon, and they may or may not stay on it when it fords and flips in the Mighty Missip'. You trying to divinate that moment is fool-based theorycrafting.

Block generation will level out with the scope it's designed to, will decrease with reduction in computing power, and will accelerate with network growth. Second-order type variance will always screw with simple parameters.

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June 22, 2011, 11:08:02 PM
 #17

has anyone tried to calculate the point at which we will reach the 21 million btc limit with current rates of network growth?

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June 23, 2011, 12:10:10 AM
 #18

There are a lot of people here crying about the difficulty increases, but at the same time all the difficulty increases before haven't hurt profitability. The reason why is because they have been large enough to drive the price up.

Look at this post to get an understanding of the relationship between price, cost of mining equipment, and difficulty. The fact is that if the difficulty keeps rising, and the price does not go up, then people will stop buying rigs and bringing them online and the difficulty will level. But right now it makes too much sense to invest so people will keep doing so until it no longer makes sense.

Look at what happened on Black Sunday, people who bought rigs shit the bed and started dumping them. If they came upon the price of btc in the 5-10 range, they probably wouldn't have paid money to get in.

The people with rigs already with some portion paid for will have a window in which it makes sense to continue to mine. If demand really does fall out, then you can always sell your cards. This also presents a second wave of arbitrage as you can take the money from sold cards and buy btc with them (if you still want to transact).

Or maybe I should just kvetch and try to turn off new miners. I'm not sure what the protocol here is.
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June 23, 2011, 12:44:04 AM
 #19

A few days ago on here, someone was claiming to calculate the income of a 5830, and he calmly stated what a months' income would be -- based on 877K difficulty!

(Newsflash, bro: that difficulty level expires in LESS THAN TWO DAYS! Sorry to burst your bubble)

So you won't get more than 2 days income at this difficulty -- and then you can't count on 1.3M difficulty either, because that will only last 8 or 9 days...

Those monthly income projections are so stupid. That's why you have people wanting to sell/return their mining hardware -- when reality comes a-calling.


Ok, bra...so whats different about the 5830, or any other card, troll? Now you show up here harping on the 5830.

Difficulty increases are across the board, whether the new miner with one 4650, or the super miner with 20 rigs of 4x 6990s. Everyone will be affected the same.

Mining for block generation is for the long haul, and correlates with both difficulty and price. Both can go up, and down, Captain Obvious.


Wow, fuck off, you troll. He wasn't even harping on the 5830. Did you read his post?


Quote

I chimed in when I saw your troll-like behavior show up yet again and mention a 5830 card.


He was posting facts and using the 5830(A POPULAR MINING CARD) as an example. His post was also related to the conversation going on.

You are trolling. Ban pls.
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June 23, 2011, 01:17:05 AM
 #20

I sure did. Seems like you didn't read either, nor did you look into the context of my claims.

And I don't have to curse to cross-examine...

Besides, what does your expert criticism say about OP...ohh yeah...it doesn't.
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June 23, 2011, 01:32:24 AM
 #21

I disagree that Angelus is trolling.  

Although we have all heard it 1000 times, I believe this to be useful information.  But apparently some people need to hear it again.

If you don't like it, your probably mad for other reasons

Those monthly income projections are so stupid. That's why you have people wanting to sell/return their mining hardware -- when reality comes a-calling.

disagree.
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June 23, 2011, 01:37:58 AM
 #22

I disagree that Angelus is trolling.  

Although we have all heard it 1000 times, I believe this to be useful information.  But apparently some people need to hear it again.

If you don't like it, your probably mad for other reasons

Those monthly income projections are so stupid. That's why you have people wanting to sell/return their mining hardware -- when reality comes a-calling.

I disagree. If you put in .25 (or better yet, a number that would equal the remainder of the difficulty period) in the month field.
Tongue

Then you have approximately what you can expect for the remainder of the difficulty period (BTC earned, not USD value)
Big Difference.

Then adjust difficulty to next anticipated level and calculate again for 8 or 9 days worth.  Then sum it up.  I feel that is the only way they can be used.  and its only for the amount of USD created, not the value.
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June 23, 2011, 04:15:56 AM
Last edit: June 23, 2011, 04:30:30 AM by Departure
 #23

when you start counting pennies as profit you know its time to rethink and leave the mining to the tight asses that spend weeks to gain that extra 1 cent profit(or mining farms where a single cent can make a difference)...

people with there crazy calculation are forgetting the real basics... supply and demand is what drives the value of bitcoin.. and because supply never gets any lower, it is always there X amount of bitcoins on the net.. it is NOT a consumable,and there for needs to become more popular to reduce the supply, even if complete mining halted there is still the bit coins in circulation and wouldn't effect that price at all if there was no demand.. Demand came from the media, now that fase is over the demand reduces but supply continues... hence the bitcoin will lower in value..
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June 23, 2011, 06:26:56 AM
 #24

I wonder... when people start dropping out of the race with their rigs, but yet media coverage results in more new people who instead use their existing single video card, I wonder how close difficulty will level off compared to electricity costs. We are all just hoping many rigs get turned off by their owners, but how many more thousands of new people will mine with what they have when they hear about bitcoin.
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June 23, 2011, 09:44:39 AM
 #25

Difficulty increases are across the board, whether the new miner with one 4650, or the super miner with 20 rigs of 4x 6990s. Everyone will be affected the same.

No it doesn't. Assuming conservative price rises in the future per BTC, there is a difference between your earnings dropping from $20 per month to $1 per month, or from $19,500 to $975 per month.

For the guy with a 4650, he is just wasting his time in September. The guy with 20x 6990 is still earning way above the cost of electricity so it pays off to keep going for at least a month or two, maybe more.

Quote from: Departure
because supply never gets any lower, it is always there X amount of bitcoins on the net.. it is NOT a consumable

Have you ever heard of transaction fees?
There is only a limited amount of bitcoins that will ever exist (21m) yet transaction fees slowly eat them up as well. Which means there will be less and less of it to pass around as the years roll.

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June 23, 2011, 09:55:37 AM
 #26

Have you ever heard of transaction fees?
There is only a limited amount of bitcoins that will ever exist (21m) yet transaction fees slowly eat them up as well. Which means there will be less and less of it to pass around as the years roll.
Transaction fees don't eat anything up. They're paid to the miners who then do with them whatever they want.

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June 23, 2011, 12:37:53 PM
 #27

^^ exactly

doesn't matter what the bitcoin is spent on(transaction fee's ect..) it still is in circulation ... Hence the reason it is not a consumable, that transaction fee is still on the net and my point is there is more supply than demand right now, saying that the supply will never change it will always grow(upto 21000000) but the demand is only based on popularity, So can we now agree that the cost of mining has no effect on the price of the bitcoin?? getting this into your head as a fact will make everything else clear as mud...
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June 23, 2011, 12:45:14 PM
 #28


well, I dont know home many blocks per hour has been found today,  but BTCGuild has NOT found one for almost 8 hours now... 

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June 23, 2011, 12:49:22 PM
 #29

well, I dont know home many blocks per hour has been found today,  but BTCGuild has NOT found one for almost 8 hours now... 

It's just a stats display error. The stats fail to update. I hope it will be fixed soon. Smiley

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June 23, 2011, 01:56:15 PM
Last edit: June 23, 2011, 02:10:58 PM by supermine
 #30

This discussion is very interesting, however falls short to taking into account the most important factor: Greed and the capitalist system. Almost all westerners were socialized in the context of capitalism, hence we think money is the only -true- thing that can make you rich. Familiy, Tradition, Christianity (if you're an atheist: putting others before you), all these things are important to us, but I think we can all agree that money is a tad more important to the most of us.

I remember the pre-Yahoo! days, when onliners used a mouse mover plugin for NetScape to generate ad views, earning below 20 bucks a month out of it. For many of us, BitCoin Mining is no different - we perceive it as a money generator. So, as long as there is even 1 cent/h to be made out of BitCoin mining, miners will keep coming in, until it is unprofitable for all of us. This day will come very soon - my feelings tell me in 4-8 months.

In my opinion the single group of people that will keep mining then are people who see the true value behind BitCoin Mining: Ensuring a safe, federalised, pro-privacy currency, that will be another small wheel to make the world a better place. Just my 2 cents.

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June 23, 2011, 02:16:57 PM
 #31

There are a lot of people here crying about the difficulty increases, but at the same time all the difficulty increases before haven't hurt profitability. The reason why is because they have been large enough to drive the price up.

Difficulty has no effect on price. A high price will induce people to come into the market, but a high difficulty will have no effect on price.

The only thing that drives price is demand, since supply is essentially fixed at 6.something million coins right now.
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June 23, 2011, 02:50:02 PM
 #32

There are a lot of people here crying about the difficulty increases, but at the same time all the difficulty increases before haven't hurt profitability. The reason why is because they have been large enough to drive the price up.

Difficulty has no effect on price. A high price will induce people to come into the market, but a high difficulty will have no effect on price.

The only thing that drives price is demand, since supply is essentially fixed at 6.something million coins right now.

Not exactly "fixed". 7200 new BTC are generated every day. So every 9 days 1% of 6.somethng million coins are added to the supply. Miners are still somewhat a part of the game as they are dropping a relatively large amount of coin to market all the time (whereas the bigboys holding a majority of the coin are sitting on them, like mr. 500,000 bitcoins to be stolen and sold off on mtgox)
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June 23, 2011, 03:07:05 PM
 #33

There are a lot of people here crying about the difficulty increases, but at the same time all the difficulty increases before haven't hurt profitability. The reason why is because they have been large enough to drive the price up.

Difficulty has no effect on price. A high price will induce people to come into the market, but a high difficulty will have no effect on price.

The only thing that drives price is demand, since supply is essentially fixed at 6.something million coins right now.

Not exactly "fixed". 7200 new BTC are generated every day. So every 9 days 1% of 6.somethng million coins are added to the supply. Miners are still somewhat a part of the game as they are dropping a relatively large amount of coin to market all the time (whereas the bigboys holding a majority of the coin are sitting on them, like mr. 500,000 bitcoins to be stolen and sold off on mtgox)

It's 0.17% of current outstanding amount generated per day right now (about 12k per day currently since we're moving at ~10 blocks an hour). That's why I said essentially fixed - the supply is not shifting at any appreciable rate to cause any kind of effect on price. And in a few hundred blocks difficulty will ramp up dramatically.
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June 23, 2011, 05:57:46 PM
 #34

Interestingly, if you average the total number of blocks since the genesis block to now it comes out to about 6.14 blocks/hour.

Bitcoin Fact: the price of bitcoin will not be greater than $70k for more than 25 consecutive days at any point in the rest of recorded human history.
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June 23, 2011, 07:55:38 PM
 #35

Thats what the difficulty adjustment is meant to do. The inflation rate is kept constant. And thus further proves the point that difficulty has got nothing to do with exchange rates. The supply unrolls in a fixed expected rate. What was meant by 'fixed'. However the exchange rate is driven by demand.

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June 23, 2011, 08:39:41 PM
 #36

Interestingly, if you average the total number of blocks since the genesis block to now it comes out to about 6.14 blocks/hour.
The initial difficulty was originally chosen so that the expected block rate was well under 6 per hour, because there was no need to generate a lot of blocks until there were a reasonable number of transactions.

You really need to exclude all of the "difficulty=1" blocks from any calculation of average blocks per hour.
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June 23, 2011, 09:51:05 PM
Last edit: June 23, 2011, 10:29:51 PM by Fjordbit
 #37

Thats what the difficulty adjustment is meant to do. The inflation rate is kept constant. And thus further proves the point that difficulty has got nothing to do with exchange rates. The supply unrolls in a fixed expected rate. What was meant by 'fixed'. However the exchange rate is driven by demand.

So your thesis is that the fact that it takes $8.6M worth of computer equipment running maybe around 5.4MW to generate 300 btc in an hour has no bearing on the price than if it were just a $100 computer with a $56 card running at 60W. Sounds logical to me!

Or maybe, just maybe, it's all related.

(numbers based on 9603.45 GH/s, $900/GH, .56 KW/GH)
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June 23, 2011, 10:18:06 PM
 #38

Thats what the difficulty adjustment is meant to do. The inflation rate is kept constant. And thus further proves the point that difficulty has got nothing to do with exchange rates. The supply unrolls in a fixed expected rate. What was meant by 'fixed'. However the exchange rate is driven by demand.

So your thesis is that the fact that it takes $8.6M worth of computer equipment running maybe around 5.4MW to generate 6 btc in an hour has no bearing on the price than if it were just a $100 computer with a $56 card running at 60W. Sounds logical to me!

Or maybe, just maybe, it's all related.

Let's get causality the right way here.

Why is the price of a coin what it is currently (around $15)? Because someone wants to buy the coin for that amount of money, and someone is willing to sell for that amount of money. That is THE ONLY reason the price is what it is. It is the intersection of the supply and demand curves that gives you this price level.

Supply is not moving (well, it's ever so slowly increasing) so the ONLY thing that can affect price is demand. If no one is willing to buy at $15, the price of a BTC is not going to be $15, it's going to be something less.

The reason that we see difficulty being correlated (note, not CAUSING) with price is that as the price goes up, there is an incentive to enter the market to make money. The cost of the computer equipment necessary to create a bitcoin does not have any impact on the value of a bitcoin - the causality works only the other way around (price determines amount of computer equipment). Or rather, I should say that the expected price of bitcoins is the determining factor, since future price is not fixed.
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June 23, 2011, 10:40:04 PM
Last edit: June 23, 2011, 11:14:37 PM by Fjordbit
 #39

Let's get causality the right way here.

Why is the price of a coin what it is currently (around $15)? Because someone wants to buy the coin for that amount of money, and someone is willing to sell for that amount of money. That is THE ONLY reason the price is what it is.

The reason that we see difficulty being correlated (note, not CAUSING) with price is that as the price goes up, there is an incentive to enter the market to make money. The cost of the computer equipment necessary to create a bitcoin does not have any impact on the value of a bitcoin - the causality works only the other way around (price determines amount of computer equipment). Or rather, I should say that the expected price of bitcoins is the determining factor, since future price is not fixed.

Sorry, but no. It's an equilibrium that sits on those three things (cost for a GH/s of mining power, price of btc in $, difficulty). What we have seen recently is price driving difficulty, but difficulty rising above a certain threshold (determined by a ratio of price and cost of GH/s) can cause rising price to cause an alignment to the ratio (because nothing in the market is making cost of GH/s lower in that ratio). This has happened clear twice as far as I've seen, and is probably happening again with the 50% increase soon.

It is the intersection of the supply and demand curves that gives you this price level.

Supply is not moving (well, it's ever so slowly increasing) so the ONLY thing that can affect price is demand. If no one is willing to buy at $15, the price of a BTC is not going to be $15, it's going to be something less.

I'm just going to quote from another post of mine where I was talking about the exchange price at $200/btc and $5/btc.

"Something to note is that there is a bit of a difference in demand in these two scenarios. People don't have a demand for btc, they have a demand for the transaction. Let's say they want to use btc to buy a spot troy oz of silver ($36.25). In the first case they need .18 btc, in the second case they need 7.25 btc. Even though the real demand is the same, the nominal demand for btc is higher when the price is lower."

People keep confusing nominal demand for real demand, and I don't get why.

And another thing, an increase in difficulty represents a relative increase in cost to the miner (in both operational and opportunity costs). An increase in costs to the supplier translates into a rightward shifting supply curve. Remember supply is btc as a function of dollars, so higher doller costs means lower btc supply.
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June 23, 2011, 11:22:17 PM
 #40

I have yet to see anything at or below 6 blocks an hour... how is the network supposed to create 6 blocks an hour when it seems to average way above that.. did I miss something?

The rate is always subject to the total hashing power of the network; the 6 blocks an hour is only a guideline for the system, to slow down inflation. If the 6 blocks/hr didn't exist, we'd have either mined all the bitcoins possible already (initial difficulty = 1), or not have mined them for a very long time (initial difficulty = very high). How many come out per hour doesn't really matter, as long as they're evenly distributed to a large population (one person isn't getting all of them).
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June 23, 2011, 11:25:30 PM
 #41

Remember supply is btc as a function of dollars, so higher doller costs means lower btc supply.

I don't get this one.

We still generate Bitcoins at 50 BTC/Block, which means 300 BTC/hour at the average 6 Blocks/hour.

So how is the BTC supply now connected to the dollar? (non-rethorical question, I'm serious)
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June 23, 2011, 11:45:05 PM
 #42

Remember supply is btc as a function of dollars, so higher doller costs means lower btc supply.

I don't get this one.

We still generate Bitcoins at 50 BTC/Block, which means 300 BTC/hour at the average 6 Blocks/hour.

So how is the BTC supply now connected to the dollar? (non-rethorical question, I'm serious)

I believe he was referring to the creation of BTC being linked to the cost of equipment/electricity in $$. The more expensive it is to mine, the fewer BTCs will be around...although for that to really be correct it can only apply to a particular 2016 block cycle, what with difficultly adjustments and all.
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June 24, 2011, 12:51:42 AM
 #43

I believe he was referring to the creation of BTC being linked to the cost of equipment/electricity in $$. The more expensive it is to mine, the fewer BTCs will be around...although for that to really be correct it can only apply to a particular 2016 block cycle, what with difficultly adjustments and all.

So he thinks that a spike in electricity costs would result in an instantaneous shut-down of the not-yet-paid hardware of miners, even before the difficulty-adjustment comes after 15 days (max)?

That does not sound reasonable at all.
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June 24, 2011, 05:52:28 AM
 #44


Sorry, but no. It's an equilibrium that sits on those three things (cost for a GH/s of mining power, price of btc in $, difficulty). What we have seen recently is price driving difficulty, but difficulty rising above a certain threshold (determined by a ratio of price and cost of GH/s) can cause rising price to cause an alignment to the ratio (because nothing in the market is making cost of GH/s lower in that ratio). This has happened clear twice as far as I've seen, and is probably happening again with the 50% increase soon.


Explain to me the mechanism behind difficulty having an effect on price. Because I cannot come up with any explanation for it since the same amount of BTC are produced regardless of difficulty. The supply is completely independent of the expense of mining. Just because it's more expensive to mine now doesn't mean that you can get more $ for BTC...


I'm just going to quote from another post of mine where I was talking about the exchange price at $200/btc and $5/btc.

"Something to note is that there is a bit of a difference in demand in these two scenarios. People don't have a demand for btc, they have a demand for the transaction. Let's say they want to use btc to buy a spot troy oz of silver ($36.25). In the first case they need .18 btc, in the second case they need 7.25 btc. Even though the real demand is the same, the nominal demand for btc is higher when the price is lower."

People keep confusing nominal demand for real demand, and I don't get why.

And another thing, an increase in difficulty represents a relative increase in cost to the miner (in both operational and opportunity costs). An increase in costs to the supplier translates into a rightward shifting supply curve. Remember supply is btc as a function of dollars, so higher doller costs means lower btc supply.

You don't seem to understand where prices come from in the aggregate market.

I have to first tackle the last part of your post, or what follows won't make sense. BTC supply is not affected by anything - it is fixed at ~6.7 million BTC in the short term and the rate of increase is fixed at ~2000 blocks per 2 weeks (given steady network hash power). The only thing that changes is the QUANTITY supplied, which is a function of price. The supply curve itself does not move (well, moves to the right at 2000 blocks per 2 weeks).

The demand for BTC is derived from the demand of doing transactions with it and from speculating (it's not really investing at this point, too risky). There most certainly is a demand for BTC. Any good or service (currency included) has a demand and a supply. Even if people only value the transaction, BTC is needed for the transaction, and thus there is a derivative demand for BTC.

Like I said before, price is determined by the intersection of supply and demand. The equilibrium price is the one that clears the market - everyone who wants to buy for more than that $ amount has been satisfied, and everyone who is willing to sell for less is also satisfied. For the price to reach $200/BTC, there has to be a LOT of demand because he supply is fixed.

To give an analogy, let's say there is an island that has 100 rocks, which the islanders use as currency. If there are 100 islanders, each one can have a rock on average. If there are 200 islanders, each one can only have 1/2 of a rock. The real value of a rock has increased DUE TO increased demand. This is the exact mechanism behind BTC dollar price in the long run (short run there's all kinds of speculation etc).

In your example, the real demand for BTC cannot be the same on an aggregate level. There can be only one price that clears the market (law of one price) for any given levels of supply and demand.  Since the supply is fixed, demand must be different in your example.

Here's my visual for this, courtesy of MS paint:



Notice that the quantity of BTC traded for dollars depends on the demand for BTC. A move from low demand (D1) to high demand (D2) increases both the quantity sold of BTC and the dollar price of BTC. Difficulty or whatever else variable you want to throw in does not have any bearing on the dollar value of a bitcoin. Everything depends on how much people want to have bitcoins vs. how much people want to have dollars.
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June 24, 2011, 06:04:15 AM
 #45


Sorry, but no. It's an equilibrium that sits on those three things (cost for a GH/s of mining power, price of btc in $, difficulty). What we have seen recently is price driving difficulty, but difficulty rising above a certain threshold (determined by a ratio of price and cost of GH/s) can cause rising price to cause an alignment to the ratio (because nothing in the market is making cost of GH/s lower in that ratio). This has happened clear twice as far as I've seen, and is probably happening again with the 50% increase soon.


Explain to me the mechanism behind difficulty having an effect on price. Because I cannot come up with any explanation for it since the same amount of BTC are produced regardless of difficulty. The supply is completely independent of the expense of mining. Just because it's more expensive to mine now doesn't mean that you can get more $ for BTC...


I'm just going to quote from another post of mine where I was talking about the exchange price at $200/btc and $5/btc.

"Something to note is that there is a bit of a difference in demand in these two scenarios. People don't have a demand for btc, they have a demand for the transaction. Let's say they want to use btc to buy a spot troy oz of silver ($36.25). In the first case they need .18 btc, in the second case they need 7.25 btc. Even though the real demand is the same, the nominal demand for btc is higher when the price is lower."

People keep confusing nominal demand for real demand, and I don't get why.

And another thing, an increase in difficulty represents a relative increase in cost to the miner (in both operational and opportunity costs). An increase in costs to the supplier translates into a rightward shifting supply curve. Remember supply is btc as a function of dollars, so higher doller costs means lower btc supply.

You don't seem to understand where prices come from in the aggregate market.

I have to first tackle the last part of your post, or what follows won't make sense. BTC supply is not affected by anything - it is fixed at ~6.7 million BTC in the short term and the rate of increase is fixed at ~2000 blocks per 2 weeks (given steady network hash power). The only thing that changes is the QUANTITY supplied, which is a function of price. The supply curve itself does not move (well, moves to the right at 2000 blocks per 2 weeks).

The demand for BTC is derived from the demand of doing transactions with it and from speculating (it's not really investing at this point, too risky). There most certainly is a demand for BTC. Any good or service (currency included) has a demand and a supply. Even if people only value the transaction, BTC is needed for the transaction, and thus there is a derivative demand for BTC.

Like I said before, price is determined by the intersection of supply and demand. The equilibrium price is the one that clears the market - everyone who wants to buy for more than that $ amount has been satisfied, and everyone who is willing to sell for less is also satisfied. For the price to reach $200/BTC, there has to be a LOT of demand because he supply is fixed.

To give an analogy, let's say there is an island that has 100 rocks, which the islanders use as currency. If there are 100 islanders, each one can have a rock on average. If there are 200 islanders, each one can only have 1/2 of a rock. The real value of a rock has increased DUE TO increased demand. This is the exact mechanism behind BTC dollar price in the long run (short run there's all kinds of speculation etc).

In your example, the real demand for BTC cannot be the same on an aggregate level. There can be only one price that clears the market (law of one price) for any given levels of supply and demand.  Since the supply is fixed, demand must be different in your example.

Here's my visual for this, courtesy of MS paint:



Notice that the quantity of BTC traded for dollars depends on the demand for BTC. A move from low demand (D1) to high demand (D2) increases both the quantity sold of BTC and the dollar price of BTC. Difficulty or whatever else variable you want to throw in does not have any bearing on the dollar value of a bitcoin. Everything depends on how much people want to have bitcoins vs. how much people want to have dollars.

Some good points, however i will point out that there is some simplification going on, for example:

"Supply is fixed @ 6.7mil" Well, sorta... but also not really. if all 6.7mil were made available the market would crash like black friday. Fortunately most of the bitcoin supply is actually tied up under the wing of early adopters, who are nicely sitting on it for us. Thanks guys! Next 2000 blocks is actually 100,000 btc, not as small a number as seemed before. Every 2 weeks 100,000 new btc (1.5% of 6.7mil even) are collected and a good chunk of it by people who are looking to SELL SELL SELL, that tends to be what most of the market sees, mined coins by miners who want to pay off their real costing crap.

Aside from that i dont want to quibble with much of your points because my i key isnt working and TOO MANY GODDAMN WORDS HAVE THE LETTER i in THEM.
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June 24, 2011, 06:58:37 AM
 #46

Some good points, however i will point out that there is some simplification going on, for example:

"Supply is fixed @ 6.7mil" Well, sorta... but also not really. if all 6.7mil were made available the market would crash like black friday. Fortunately most of the bitcoin supply is actually tied up under the wing of early adopters, who are nicely sitting on it for us. Thanks guys! Next 2000 blocks is actually 100,000 btc, not as small a number as seemed before. Every 2 weeks 100,000 new btc (1.5% of 6.7mil even) are collected and a good chunk of it by people who are looking to SELL SELL SELL, that tends to be what most of the market sees, mined coins by miners who want to pay off their real costing crap.

Aside from that i dont want to quibble with much of your points because my i key isnt working and TOO MANY GODDAMN WORDS HAVE THE LETTER i in THEM.

I think you're confusing quantity supplied and aggregate supply. There are 6.7 million coins out there for the taking - the price determines what quantity of those coins will be sold at any given time. Granted, I haven't put in any psychological factors that may actually shift the supply curve since I'm keeping it very clean, basic economics (which means there are a lot of assumptions built into the model which may or may not hold). I'm also not even going to start building a dynamic model that takes time into account.

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June 27, 2011, 06:45:58 AM
 #47

I don't get this one.

We still generate Bitcoins at 50 BTC/Block, which means 300 BTC/hour at the average 6 Blocks/hour.

So how is the BTC supply now connected to the dollar? (non-rethorical question, I'm serious)

I believe he was referring to the creation of BTC being linked to the cost of equipment/electricity in $$. The more expensive it is to mine, the fewer BTCs will be around...although for that to really be correct it can only apply to a particular 2016 block cycle, what with difficultly adjustments and all.

No, I was referring to the textbook definition of supply, which is the function of units offered at a given price. As the price goes up more units are offered.

People also keep thinking that the mined coins are the only supply and that they all go onto an exchange immediately and that they sell regardless of the price. All of these things aren't true. Before Mt. Gox went down, the daily volume was 8 times the mining rate, we all know that miners hoard their btc, and if the market rate goes down, a lot less people would sell. Similarly, if the cost to mine goes up, then the supply curve will move. This is very basic economics.
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June 27, 2011, 11:03:05 AM
 #48

Explain to me the mechanism behind difficulty having an effect on price. Because I cannot come up with any explanation for it since the same amount of BTC are produced regardless of difficulty. The supply is completely independent of the expense of mining. Just because it's more expensive to mine now doesn't mean that you can get more $ for BTC...

Agreed, some people can't see this because they have spent money on hardware and they are trying to convince them self's they haven't made a mistake, So at the end of the day it wont matter what you tell these people because they will always make up excuses to why mining effects prices to get them self's through the tough times... But you have it 100% correct and that's the harsh truth....
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June 28, 2011, 02:28:53 PM
 #49

Explain to me the mechanism behind difficulty having an effect on price. Because I cannot come up with any explanation for it since the same amount of BTC are produced regardless of difficulty. The supply is completely independent of the expense of mining. Just because it's more expensive to mine now doesn't mean that you can get more $ for BTC...

Agreed, some people can't see this because they have spent money on hardware and they are trying to convince them self's they haven't made a mistake, So at the end of the day it wont matter what you tell these people because they will always make up excuses to why mining effects prices to get them self's through the tough times... But you have it 100% correct and that's the harsh truth....

But if the same amount of daily BTC will be spread on a higher amount of mining people.. every single miner should think that their BTC worth more $ per BTC - so they won't sell, thus won't supply the market with new BTC?
Though I don't know if the impact of stockpiling new BTC is big enough on the market to influence the price.
(Sorry if that thought was already discussed, haven't read the whole topic.)

Btw.: Network total   10.001 Thash/s
        Blocks/hour      6.08 / 592 s
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June 28, 2011, 05:00:34 PM
 #50

it seems like the hashing power of the entire network is going down.
Yesterday it was 11THash, now down to 10.4Thash
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June 28, 2011, 05:15:27 PM
 #51

it seems like the hashing power of the entire network is going down.
Yesterday it was 11THash, now down to 10.4Thash

it is more likely that the hashing power is remaining more or less constant and variance is wagging up and down.
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June 28, 2011, 05:19:47 PM
 #52

it seems like the hashing power of the entire network is going down.
Yesterday it was 11THash, now down to 10.4Thash

people with inefficient rigs and/or pricey electricity may be shutting them off.

at $0.11/kw-hr (average US residential rate), anything less than 0.215 mhash/J is losing money at current exchange rate.

if you're in new england, you need at least 0.330 to get ahead.

for hawaii, you need at least 0.6.
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June 28, 2011, 06:02:49 PM
 #53

No, I was referring to the textbook definition of supply, which is the function of units offered at a given price. As the price goes up more units are offered.
No, that is quantity supplied.  Supply = total BTC available.  Money supply (M0) is ~6.7million currently.  At any given price there is a different amount of quantity demanded and quantity supplied.  At $0.01 quantity demanded is very high and at $10,000 per BTC quantity supplied would be very high.  When talking about 'Supply' we're not talking at a specified price, we're talking about total available to be supplied in the market.

People also keep thinking that the mined coins are the only supply and that they all go onto an exchange immediately and that they sell regardless of the price. All of these things aren't true. Before Mt. Gox went down, the daily volume was 8 times the mining rate, we all know that miners hoard their btc, and if the market rate goes down, a lot less people would sell. Similarly, if the cost to mine goes up, then the supply curve will move. This is very basic economics.

No, if the cost of mining goes up the supply curve will not move.  You are confusing terms and concepts.  If people suddenly start paying $100 to mine 1BTC that won't suddenly move the market to meet that price - it just makes those people incredibly stupid.  A shift of the supply curve to increase price would mean that supply would be decrease (cost of mining does not change the amount of bitcoins entering the market!). 
We all know that miners hoard their btc?  How do we know that?  Miners aren't some weird exception to the market.  Every bitcoin owner/buyer has preferences and acts somewhat rationally (to a varying degree).  Everyone wants to buy low and sell high.  Nothing about the increased cost of mining would cause people to suddenly be willing the pay a greater amount for the same amount of BTC (a shift in the demand curve). 

Hey TeKillaSunRise, check it out

-qwe2323
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June 28, 2011, 06:05:11 PM
 #54

Also, MtGox and Tradehill are not 'the market'
There is a barrier to trade in the bitcoin market, but that doesn't mean that every bitcoin doesn't have its price.

Hey TeKillaSunRise, check it out

-qwe2323
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June 28, 2011, 06:59:24 PM
 #55

Also, MtGox and Tradehill are not 'the market'
There is a barrier to trade in the bitcoin market, but that doesn't mean that every bitcoin doesn't have its price.

Yes they are, at least when it comes to pricing and fiat exchanges.

TH and Mt. Gox get more volume in a week than the other exchanges combined get in a year.

Other exchanges are practically meaningless with volumes ranging from 10 to 200 BTC per day, something that is crossed within seconds on Mt. Gox.

1f3gHNoBodYw1LLs3ndY0UanYB1tC0lnsBec4USeYoU9AREaCH34PBeGgAR67fx
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June 28, 2011, 10:37:26 PM
 #56

Also, MtGox and Tradehill are not 'the market'
There is a barrier to trade in the bitcoin market, but that doesn't mean that every bitcoin doesn't have its price.

Yes they are, at least when it comes to pricing and fiat exchanges.

TH and Mt. Gox get more volume in a week than the other exchanges combined get in a year.

Other exchanges are practically meaningless with volumes ranging from 10 to 200 BTC per day, something that is crossed within seconds on Mt. Gox.

Currency exchange is not the only valuation of bitcoin and is only part of the market.  I would imaging SilkRoad and such has been a larger piece of the pie lately since MtGox went down.

Hey TeKillaSunRise, check it out

-qwe2323
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June 28, 2011, 10:40:43 PM
 #57

plus MtGox and Tradehill's volume for today accounts for only about 0.4% of all bitcoins in existence. 

Hey TeKillaSunRise, check it out

-qwe2323
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