Tips for noobies

[An amorous cow-herder]

Just a couple of quick questions and answers that might be most interesting for newbies.

First of all.
What mining equipment/contract should i get?
None. As of writing (13th Oct. 2013) no mining equipment has a realistic chance gaining more than the investment. That is, unfortunately, even true for seond generation Asics not available yet. Even that would barely break even if available today.

But, if prices rice?
Well, even if you would make a profit in that case, you would make a bigger profit just buying bitcoins at current rates. Simply put, no current mining hardware currently or soon available will generate more bitcoins than just buying them.

WTF is Bitcoin actually?
Thats a pretty amusing question actually. There are several views you can on bitcoin.
1.) Bitcoin is a currency.
Well, not really. Bitcoin is, by definition, limited in numbers. I would be deflationary by definition. Thats kinda weird for several reasons, but just do your own research. It is not a typical currency.
2.) It is a commodity.
Well, that is pretty much obvious. But aside from just "being", that doesnt solve pretty critical questions like what its worth or what its usefull for. The only definite criteria for this commodity is the limit of number of bitcoins around.
3.) A digital transaction medium.
This is pretty much the big point. It can be used to for transfers in a fairly secure fashion over the internet. Barring things like 51% attacks a secure transaction can be made within an hour. Personally i think this is the big "selling point" for Bitcoin, imho i think Bitcoin will/would be big if it is used as an intermediary transaction medium without being known to buyer and just replace current transaction modells.
4.) A share.
Yes, this sounds stupid at first glance. But basicly a Bitcoin is also similiar to share in a company. A share is basicly a mix of value and expectations in the future of a company. In this case the "company" is a decentralised network that is capable of performing secure transactions. At current perfomance the value is in an inflated bubble state. There simply are not enough transactions to even value a share at current prices.
The "main" market "silk road" for mostly illegitemate wares is gone and at current rates the network is not doing nearly enough transactions to be valued at a market close to 2.7B$.
That said, this is the big chance for an increase in "share" value as well. That market cap would be by far to low to perfom enough transactions if, e.g. a large retailer like Amazon would exclusivly or even just preferably do payments via bitcoin. Without a major uptake values are likely to decline though. This is a normal investor risk.

Is Bitcoin a ponzi scheme?
At current rates it is easy to contemplate this. The same is true for basicly every "future internet company".  The current state is simply, it could be usefull. But basicly no one knows what it will be used for. Thus, there is no definate answer to that question. The future has to decide on that.


Comments and corrections are welcome.

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[odolvlobo]

What mining equipment/contract should i get?

You should not get anything. Profitable mining requires a deep understanding of Bitcoin as well as the financial aspects of mining. As a newbie, and especially if you are reading this, you do not have the ability to mine profitably. If you want to mine for fun or for education, go for it. You will learn a lot, but it will cost you.

But, if prices rice?

Asking this question demonstrates that you do not have a sufficient understanding of mining to do it profitably.

WTF is Bitcoin actually?

Bitcoin is a decentralized payment system with its own currency. The currency is limited and that's what gives it value.

Is Bitcoin a ponzi scheme?

Bitcoin cannot be a Ponzi scheme. Bitcoin is 100% transparent and it is not run by anyone. If you think Bitcoin is (or could be) a Ponzi scheme, then you don't know what a Ponzi scheme is.

[An amorous cow-herder]

What mining equipment/contract should i get?

You should not get anything. Profitable mining requires a deep understanding of Bitcoin as well as the financial aspects of mining.

Sorry, i stopped reading there.
Anyone with the most basic understanding of math can calculate the ROI per GH/s. Heck, some mining pools, e.g. 50btc, even have a ROI calculator on the website for current difficulty rates.
Anyone who says something else is just plain stupid or trying to obfuscate the simple calculations.

[tspacepilot]

Enjoyed the OP, thanks.

[odolvlobo]

What mining equipment/contract should i get?

You should not get anything. Profitable mining requires a deep understanding of Bitcoin as well as the financial aspects of mining.

Sorry, i stopped reading there.
Anyone with the most basic understanding of math can calculate the ROI per GH/s. Heck, some mining pools, e.g. 50btc, even have a ROI calculator on the website for current difficulty rates.
Anyone who says something else is just plain stupid or trying to obfuscate the simple calculations.

Difficulty has been increasing 30% every 10 days. Does your basic understanding of math or your ROI calculator account for that? Do you know how to estimate how much bitcoin you will be mining in 6 months? Do you know how much it costs you to mine? I know that most people can't answer these questions because I look at what they are paying for mining equipment and mining contracts, and it is clear that they will lose money.

[An amorous cow-herder]

Difficulty has been increasing 30% every 10 days. Does your basic understanding of math or your ROI calculator account for that? Do you know how to estimate how much bitcoin you will be mining in 6 months? Do you know how much it costs you to mine? I know that most people can't answer these questions because I look at what they are paying for mining equipment and mining contracts, and it is clear that they will lose money.

Yes with a basic understanding of math i calculate the income for current difficulty. Assuming a stable 30% decrease the calculation isnt significantly more difficult. Assuming a current daily income of x BTC now the income for a year will simply be sum over (10*x*0,77^n) for n from zero to 35. Ok that will be "only" for 360 days, but it clearly shows that there is no profit to be made from mining anymore. And thats exactly what the first question on the top was for.

Edit: For clarification, an increase in difficulty of 30% means the income will be 1/(1+0,3)=0,77 of what it was at the previous difficulty, so the factor above is 0,77 and not 0,7.

[honky1492]

Is Bitcoin a ponzi scheme?
At current rates it is easy to contemplate this. The same is true for basicly every "future internet company".  The current state is simply, it could be usefull. But basicly no one knows what it will be used for. Thus, there is no definate answer to that question. The future has to decide on that.


Comments and corrections are welcome.

I like this one. It looks sometimes like ponzi because many suggest buying BTC as a sure way to get profits after some time - you may get profits but you may loose as well 

[Birdy]

Is Bitcoin a ponzi scheme?
At current rates it is easy to contemplate this. The same is true for basicly every "future internet company".  The current state is simply, it could be usefull. But basicly no one knows what it will be used for. Thus, there is no definate answer to that question. The future has to decide on that.


Comments and corrections are welcome.

This question can clearly be answered. It's not a ponzi.
It would be a ponzi if Satoshi would sell his Bitcoins and promise everyone that he will buy them back for double the money in a week.
Then he pays back the first ones by using the money of new participients, allowing the system to be alive a bit longer.
In a ponzi a collpase is unavoidable if the number of participients doesn't grow by a good chunk.

Bitcoin could be alive if the number of users would be stable for a longer time, therefore it's no ponzi.

[An amorous cow-herder]

Is Bitcoin a ponzi scheme?

This question can clearly be answered. It's not a ponzi.
It would be a ponzi if Satoshi would sell his Bitcoins and promise everyone that he will buy them back for double the money in a week.
Then he pays back the first ones by using the money of new participients, allowing the system to be alive a bit longer.
In a ponzi a collpase is unavoidable if the number of participients doesn't grow by a good chunk.

Bitcoin could be alive if the number of users would be stable for a longer time, therefore it's no ponzi.

Well, technically the better comparison would be with a pyramid scheme, not ponzi, but since the names are often used interchangably i opted for that one.
People wo bought BTC for 1 cent made a profit selling for 10 cents, those made a profit selling for 1 dollar, which in turn made a profit selling for 10 dollars and those again selling at a 100 dollars.
Do you really expect this trend to continue unless BTC is going to have a real world value as a transaction medium?

[Birdy]

Well, technically the better comparison would be with a pyramid scheme, not ponzi, but since the names are often used interchangably i opted for that one.
People wo bought BTC for 1 cent made a profit selling for 10 cents, those made a profit selling for 1 dollar, which in turn made a profit selling for 10 dollars and those again selling at a 100 dollars.
Do you really expect this trend to continue unless BTC is going to have a real world value as a transaction medium?

The way you describe it everything with a rising price would be a pyramid scheme.
Also Bitcoin already has some real world value due to it's utility, we don't know how much, but it certainly is not zero.

[DodoB]

some other tips:

1.dont trust anyone
2.gambling will make you lose
3.you can rent your singature for some easy little bitcoins

[An amorous cow-herder]

The way you describe it everything with a rising price would be a pyramid scheme.
Also Bitcoin already has some real world value due to it's utility, we don't know how much, but it certainly is not zero.

Yes, it obviously has some value. As a transaction medium. I personally consider the BTC network as a whole similiar to a service such as PayPal. The value directly scales with the amount money changing hands (PayPal takes a transaction fee, and so do miners for signing transactions). The value directly scales with adoption as a payment method by business, mainly online retailers. The current value of BTC seems to reflect expectation more than real world usage.