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Author Topic: What does ROI mean?  (Read 7325 times)
odolvlobo
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November 05, 2013, 09:29:59 PM
 #1

My guess is that many people don't know what ROI (or Return On Investment) means, so I'm going to explain it.

First, ROI isn't a verb. That is, mining equipment or cex.io shares don't ROI.
Second, every investment has an ROI. It can be positive, negative or zero. When a person says that "something doesn't ROI", or they say "it doesn't reach ROI", they really mean to say that the ROI is negative or zero.

Here is how to calculate ROI:

Return On Investment (ROI) = (Gain from Investment - Cost of Investment) / Cost of Investment

Here is how you compute ROI for mining through cex.io (mining equipment is similar, but there are additional costs):

ROI = (dividends - share cost) / share cost

For example,  cex.io shares now sell for the absurd price of 0.1 BTC per GH/s. The dividends for 1 GH/s are going to total only about 0.05 BTC. So the expected mining ROI of a cex.io share is:

ROI = (0.05 - 0.1) / 0.1 = -50%

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almonds99
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November 06, 2013, 03:47:49 AM
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Hey buddy,
I guess you like being pedantic.
Everyone here is using the term in the vernacular.
It's just the way people speak. Get over it.
We all know what it means.
beegatewood
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November 06, 2013, 05:38:22 AM
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My guess is that most people don't know what ROI (or Return On Investment) means, so I'm going to explain it.

First, ROI isn't a verb. That is, mining equipment or cex.io shares don't ROI.
Second, every investment has an ROI. It can be positive, negative or zero. When a newbie says that "something doesn't ROI", or they say "it doesn't reach ROI", they really mean to say that the ROI is negative or zero.

Here is how to calculate ROI:

Return On Investment (ROI) = (Gain from Investment - Cost of Investment) / Cost of Investment

Here is how you compute ROI for mining through cex.io (mining equipment is similar, but there are additional costs):

ROI = (dividends - share cost) / share cost

For example,  cex.io shares now sell for the absurd price of 0.1 BTC per GH/s. The dividends for 1 GH/s are going to total only about 0.05 BTC. So the expected mining ROI of a cex.io share is:

ROI = (0.05 - 0.1) / 0.1 = -50%

It doesn't need to be that complicated. Usually when people say you can't ROI. Means you won't break-even.... end of story...

odolvlobo
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November 06, 2013, 06:34:59 AM
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Hey buddy,
I guess you like being pedantic.
Everyone here is using the term in the vernacular.
It's just the way people speak. Get over it.
We all know what it means.

You know what it means, but others don't. I posted this in response to someone in another thread writing "there's a ratio of ROI to cost/GHS.".

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Anon136
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November 06, 2013, 07:08:19 AM
 #5

words are like living organisms. they are born and they die but also they evolve and change. btr to learn how to adapt yourself rather than try to fight this process.

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November 06, 2013, 08:40:06 AM
 #6

Quote
Second, every investment has an ROI. It can be positive, negative or zero. When a newbie says that "something doesn't ROI", or they say "it doesn't reach ROI", they really mean to say that the ROI is negative or zero.

Every purchase comes with a discount. It can be positive, negative or zero. So when a newbie says "I got a discount on my miner", they really meant "I got a positive, non zero discount". In the context its clear that when such qualifier is omitted, a positive, non zero value should be assumed. The same goes for things like growth: "bitcoin adoption is growing". No one assumes that to be zero growth or negative growth.

The same applies to ROI In the context of mining equipment. Yes, technically the assumption of it being positive is not embedded in the word, but its implied by its context and we all know what is meant by it, so get over it.
Henchman24
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November 06, 2013, 05:09:13 PM
 #7

Hey buddy,
I guess you like being pedantic.
Everyone here is using the term in the vernacular.
It's just the way people speak. Get over it.
We all know what it means.


lol  belligerent mouth-breather arguing for his right to be wrong.   Cheesy
k9quaint
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November 06, 2013, 10:33:51 PM
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Quote
Second, every investment has an ROI. It can be positive, negative or zero. When a newbie says that "something doesn't ROI", or they say "it doesn't reach ROI", they really mean to say that the ROI is negative or zero.

Every purchase comes with a discount. It can be positive, negative or zero. So when a newbie says "I got a discount on my miner", they really meant "I got a positive, non zero discount". In the context its clear that when such qualifier is omitted, a positive, non zero value should be assumed. The same goes for things like growth: "bitcoin adoption is growing". No one assumes that to be zero growth or negative growth.

The same applies to ROI In the context of mining equipment. Yes, technically the assumption of it being positive is not embedded in the word, but its implied by its context and we all know what is meant by it, so get over it.

ROI has a fixed definition in the form of math, so it's definition should not evolve over time as other words do.
The vernacular uses of ROI do include an assumed positive, but not everyone is fluent in the vernacular so it helps to know the canonical form.
A lot of people have conflated getting 50% of their money back with getting a 50% "return", however they are all Americans. L2Math 'Merica IMO.  Grin

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November 06, 2013, 10:39:42 PM
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Return of the Iron Man. Cool

Puppet
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November 06, 2013, 10:40:46 PM
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A lot of people have conflated getting 50% of their money back with getting a 50% "return"

Agreed, Im just arguing that getting "a return" implies a non zero positive number, which in the case of (a) ROI means a profit.
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November 08, 2013, 09:44:15 PM
 #11

My guess is that many people don't know what ROI (or Return On Investment) means

You gave the common definition.  There is a special definition for Bitcoin mining.  it is called "Rate of Imagination."  This is where people sit around imagining how much they would make if they actually had the equipment.

Haha, this just cracked me up. "Rate of Imagination" cause we all like to be millionaires.
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November 11, 2013, 08:27:26 AM
 #12

ROI =/= breakeven as most seem to use it around here.

ROI means you made any positive gain from your investment and does not relate to breaking even with your original investment, though breaking even and entering net positive returns is obviously the desirable scenario.

Every miner bought that generates even a single satoshi is producing ROI at that point. Whether the returns can outpace difficulty is the question to break even on that hardware and produce a net positive return in a reasonable amount of time.

In the grand scale of things this difference isn't really that important I suppose, but if you mean breakeven, just say breakeven. Your miners ROI from the first accepted hash.


Viperbass
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November 12, 2013, 02:08:38 PM
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Lots of people buying HW ASIC miners from ebay and expensive ones that ship 2 months late are going to learn the meaning NEGATIVE ROI.
TheDragonSlayer
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November 12, 2013, 02:43:14 PM
 #14

ROI means profit....

Biomech
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November 17, 2013, 07:10:19 PM
 #15

ROI means profit....

Profit is a more slippery word than ROI, but in financial jargon (which ROI is), it does not equate to profit. POSITIVE ROI is profit. ROI is just a measurement of Return On Investment. See the OP, he explained it simply but perfectly. This has been driving me nuts since I first started reading this forum.

If y'all used the correct term, breakeven, you wouldn't cause people like me (and presumably any other person with even a hint of finance or money management experience) to have a rise in blood pressure every time they see "my miner won't make ROI".

There are truly only two scenarios where a mining machine will not make ROI, both rectifiable.

The first is a personal problem. Due to your fears or apathy, you don't plug the damn thing in. It will certainly not make any returns on investment in that case.

The second is a dead unit, easily rectifiable even if you built it yourself. You fix it, or you get it replaced or repaired. Then it will make a ROI.

Now, if you had instead said "My miner won't break even", you at least have a basis for rational argument. The "words evolve" argument is simply sloppy. ROI is an abbreviation of a VERY SPECIFIC term within a very rigid discipline. It is not vernacular, and you won't find it used the way it is here anywhere else. For the first couple of weeks, I found it confusing as hell before I realised that non financial people were bandying around a term they either misconstrued or did not understand. In any particular discipline, words have very specific meanings, and not knowing those meanings is something that sows confusion and doubt, often deliberately. For a good example, watch how creationists will constantly state that evolution is "just a theory" as if theory had the meaning of a postulate in the sciences, instead of it's actual, specific meaning. That case, at least, could arise from a "vernacular" use, in which a theory is actually just speculation (though even in it's vernacular theory implies the scientific definition e.g. the best explanation for the available facts). In the case of ROI, even that excuse don't hold water. It's a very specific term with a very specific meaning.

To the OP, thanks. This is something that twists my brain, and I'm glad it has a thread to point to, because I keep getting jumped when I point out what should be obvious.

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