Anti solo mining myths debunked

[googlebot1]

This means that variance is not just "psychological", there is a real economic cost to variance. These days you might get away with saying that if you're a Vulcan you're better off mining solo, but in the future when mining will be one in a million chance to get $100M even that much won't be true.

That's incorrect. Even at insane difficulties solo mining pays more on the bottom line. The chance to find a block solo decreases as much as the average payout of a pool, the relationship between both stays invariant.

[Meni Rosenfeld]

This means that variance is not just "psychological", there is a real economic cost to variance. These days you might get away with saying that if you're a Vulcan you're better off mining solo, but in the future when mining will be one in a million chance to get $100M even that much won't be true.

That's incorrect. Even at insane difficulties solo mining pays more on the bottom line. The chance to find a block solo decreases as much as the average payout of a pool, the relationship between both stays invariant.

Did you even read what I said? The expected money for solo mining is higher, but its variance is insanely higher and it's bad.

I think you need to read up on utility.

[Adam]

This means that variance is not just "psychological", there is a real economic cost to variance. These days you might get away with saying that if you're a Vulcan you're better off mining solo, but in the future when mining will be one in a million chance to get $100M even that much won't be true.

That's incorrect. Even at insane difficulties solo mining pays more on the bottom line. The chance to find a block solo decreases as much as the average payout of a pool, the relationship between both stays invariant.

They were just saying that the utility of money does not scale linearly.  To a dirt poor person $1,000 guaranteed is better than a 51% chance of $2,000, or a 25% chance of $5,000, or even a .1% chance of $2,000,000, while the math would tell you to just take the odds x the value to get your expected value.

I think that's still a little far fetched at the moment, since a block is only worth about $750 today, hardly life changing money to most.  

[googlebot1]

The logical extension of your mentality about this is that you shouldn't buy health insurance because you would pay more per month on health insurance than you would on average spend every month on paying for your own healthcare when you get badly injured.

The term you were looking for is "extrapolation" and it's still incorrect. I am a big fan of health insurance. The costs of keeping enough liquidity to be prepared for the worst cases covered by health insurance is higher than paying health insurance. The required liquidity for the latter is much lower, because there is enough inflow of money every month.

My point is, if you have multi-GH/s power you can afford solo mining with its better average returns without too much risk of never finding anything. If you have less hashing power, the return of pooled mining is too wimpy to be worth the hassle (if you aren't a kid) and possibly risk of investment (even tighter increases of difficulty or price drops). Mining solo is fun on the other hand. You either write it off after a while (0.5 BTC/day wouldn't have changed much) or you jump in circles over $750 in you wallet after waking up.

[Hawkix]

If the difficulty keeps going high at average 4% each day, there is, for smaller hashrates, a very good "chance" that you will NOT mine ANY block at all, regardless of how long you will try.

Like with 200 MHash GPU you will never get 50 BTC mined using the pool, there is a very high probability that this GPU will never find a block.

So, it is better to earn 10 BTC with 100% probability, than to earn 50 BTC block with 20% probability, hence 80% probability you will not get anything. I would not take the risk.

[googlebot1]

I think you need to read up on utility.

0.5 BTC a day doesn't have any utility for me compared to the effort.

Finding 50.0715 BTC in my wallet this morning had great utility in contrast.  


What about Myth 1, BTW?

Why is this nonsense still in the wiki?

[Meni Rosenfeld]

I think you need to read up on utility.

0.5 BTC a day doesn't have any utility for me compared to the effort.
Finding 50.0715 BTC in my wallet this morning had great utility in contrast.  

So 0.5 BTC is bad, but 1% chance of finding 50 BTC is good?

Then this isn't at all about pool fees decreasing your expected payout... It's just that you're among the few people that actually enjoy the rush of having high variance. Good for you. (And consider the lottery for satisfying your variance cravings.)

What about Myth 1, BTW?
Why is this nonsense still in the wiki?

I guess you're right about this one (though I don't know a lot about this myself). Wikipedia has a "be bold" policy which I guess applies here too, feel free to change this.

[Yeti]

You, sir, like to gamble. And might I say, congratulations on mining a block solo on your 5870!
I have the same card and I wonder how long it took you. If I'd only get a Bitcent from pool mining on a single card I might just as well keep it running for a couple more days to find the "jackpot".

I see your point about myth 1, though. Stale shares and pool outages is what really gets on my nerves. Not only does the yield decrease dramatically each and every week, I also have to combat connection problems, hardware errors on my part (freezes), hardware errors on a pool server, invalid pool blocks after 12 hours of work... This oughta be much better when you can poll the network yourself.

[Adam]

Getting a little OT here, but for people solo mining how are you checking if you have any downtime?  

The thing I like most about pools is I'm able to see instantly if any of my computers are down without any extra software.  I just have one worker per computer and can see whether or not it completed any shares in the past two minutes, and if not I know exactly what computer has the problem.  For me, this utility itself is worth more than the 3% fee charged by the pool.

[Yeti]

That should be as simple as setting up another Nagios task from a remote server. Of course, if you do not already have such a setup, it might be more convenient.

[JoelKatz]

The logical extension of your mentality about this is that you shouldn't buy health insurance because you would pay more per month on health insurance than you would on average spend every month on paying for your own healthcare when you get badly injured.

There are only two reasons we need health insurance and neither of them apply to pooled mining. If not for those two reasons, health insurance would be a bad deal because you would pay more for insurance than you'd pay for care. Those reasons are the small risk that we will unexpectedly incur major health care expenses that we cannot afford and desperately need and the fact that insurance companies can use their market leverage to extract lower prices from providers. Because neither of those things apply to, for example, pet health insurance, it is pretty silly to buy pet health insurance. It's like a lottery in reverse where the odds are still against you.

[googlebot1]

(And consider the lottery for satisfying your variance cravings.)

A regular lottery within a regulated environment returns about 50% of its players' investment on average. Playing that is idiotic. The Bitcoin lottery returns more than 100% of my investment on average on the current conditions (basically only 240 watts of electricity). The chance is there, that I could never find a block (which luckily didn't happen), but if I find a block, its return is high enough to justify buying the ticket (on average more than 100%). So playing the Bitcoin lottery has both good returns, moderate risk, and it is fun. Beats Las Vegas in 2/3 aspects. Pooled mining would also return more than 100% right now, but with zero fun and much time wasted for a wimpy return (or considerable risk if you scale).

PS Does anyone know, how I can find out which block my miner has exactly found? The Bitcoin client only shows time, amount, and pending confirmations.

[Synaesthesia]

Well done. You got lucky today. I will stick to pooled mining. Only a 2% penalty - really not a big deal.

[googlebot1]

That should be as simple as setting up another Nagios task from a remote server. Of course, if you do not already have such a setup, it might be more convenient.

The poclbm console output still logs RPC errors and "client not connected" messages for solo mining.

Well done. You got lucky today. I will stick to pooled mining. Only a 2% penalty - really not a big deal.

I agree, 2% really isn't a big deal. But the wiki and many forum posts suggest the opposite: that solo mining is less profitable on average, which isn't true IMHO.

[bcpokey]

Solo mining is undoubtedly better mathematically, but you could mine for years without ever finding a block and I just can't see that sitting well with most people.

The alternative is heating and noising up your house for a wimpy 0.72 BTC a day on the same assumptions. That's really not worth the hassle.

On the other hand, I have switched 1 week ago from pooled to solo mining, after earning 3 BTC in total, the hard way. Today I have 53 BTC in my account, that's really worth the effort. The big profits make you smile. IMHO, a trickle profit of <1 BTC really isn't much more satisfying than 0 payback and the chance for big cash. That might be interesting for kids converting their parents' electricity to cash, but not for me.

So you ignore the equally as likely case (more likely based on available anecdotal evidence) as "myth" because you personally found a block? i suppose that's easier than debating it.

Anyway, kudos to you for enjoying high risk activities, regardless of whether or not they will truly yield better results, might also look into las vegas and play some games of chance, as well as a lady of the evening (a different game of chance).

Myself though i'm not living at home sucking off mommies teat, and so the cost of running a miner is real, and i need to make a showing for doing so, not just sit at the slots and pull the lever until a little bit of change falls out and makes a big noise.

Just a note, the "average" time to find a block with a single 5870 at the current difficulty is now 152 days, 8 hours, 40 minutes. in that time there will be between 11 and 22 difficulty changes, almost all of them upwards, the ones in the near future will be large. You think that statistically speaking you are really likely to find another "big fat payout" in that time? Does .5 BTC per day seem less appealing than 50 btc per who knows how much time (likely a year)?

Anyway, it's good to see soloers, that's what the system was all about, but don't pretend that pools are just for lazy ignorant masses, they're for people who don't get off on rolling the dice because often the dice don't come up well.

[googlebot1]

So you ignore the equally as likely case (more likely based on available anecdotal evidence) as "myth" because you personally found a block? i suppose that's easier than debating it.

I haven't referred to that as an argrument once. I have also opened the thread before I knew of the block.

Myself though i'm not living at home sucking off mommies teat, and so the cost of running a miner is real, and i need to make a showing for doing so, not just sit at the slots and pull the lever until a little bit of change falls out and makes a big noise.

Why do you need to make a showing for a business no one is forcing you to undertake?

Just a note, the "average" time to find a block with a single 5870 at the current difficulty is now 152 days, 8 hours, 40 minutes. in that time there will be between 11 and 22 difficulty changes, almost all of them upwards, the ones in the near future will be large. You think that statistically speaking you are really likely to find another "big fat payout" in that time? Does .5 BTC per day seem less appealing than 50 btc per who knows how much time (likely a year)?

What many of you guys seem to forget, when using projections like this, is that the payout of pooled mining is also going to sink into a bottomless pit with these figures and won't be the "sure .5 BTC alternative" but rather something like the "wimpy .000005 BTC alternative". Is that going to be worth your time? Speculating that BTC/US will skyrocket until then, just because difficulty has increased is wishful thinking and and a large risk in itself.

but don't pretend that pools are just for lazy ignorant masses

I don't and just try to correct the incorrect representation that pooled mining is statistically more profitable. If at all, it is the opposite. I concurred with the "less variance" fact in my first post. I don't neglect, that there might be a need for that for some people.

[bcpokey]

Statistically if you had enough hashing power to more or less assure yourself a solved block before difficulty change then you could potentially come out even or ahead. Otherwise in an accelerating difficulty frame solo mining will fall behind pooled mining for most people. Luck is, of course, luck.

[JoelKatz]

Statistically if you had enough hashing power to more or less assure yourself a solved block before difficulty change then you could potentially come out even or ahead. Otherwise in an accelerating difficulty frame solo mining will fall behind pooled mining for most people. Luck is, of course, luck.

This is a bogus argument.

Consider: You give me a dollar. I roll a six-sided die. If it comes up '1', I give you $1,000. You only get to play once.

Is this a good deal? By your reasoning, it's not. Most people who take the deal will come out behind $1.

[bcpokey]

Statistically if you had enough hashing power to more or less assure yourself a solved block before difficulty change then you could potentially come out even or ahead. Otherwise in an accelerating difficulty frame solo mining will fall behind pooled mining for most people. Luck is, of course, luck.

This is a bogus argument.

Consider: You give me a dollar. I roll a six-sided die. If it comes up '1', I give you $1,000. You only get to play once.

Is this a good deal? By your reasoning, it's not. Most people who take the deal will come out behind $1.

That's a stupid comparison as it is completely unrelated and has nothing to do with my reasoning.

[Seraphim401]

LOL!!!!!!!!!!!!!!!!

After my last post my lonely HD5870 (940/300) has just generated a block! Can't see, which one it is, yet. It includes 0.0715 BTC fees and has only 23 confirmations so far.



Compare that to a measily 0.4 BTC a day, is that really worth your time? All or nothing!  

Congrats!