Anti solo mining myths debunked

[bcpokey]

Really it seems simple to me, if you don't have a high enough hash rate to reasonably expect to generate a block before the next difficulty increase (you can look at the mining calculators to see your odds based on your hash rate), then you will lose solo mining, because if you don't mine a block before that difficulty increase your odds of generating a block will go down, and got nothing at that lower difficulty.  If however you have a high enough hash rate that you can reasonably expect to generate a block before the difficulty increase then you can save yourself the fees, etc. of a pool and comfortably mine solo, as the odds would be the same (you would just have to put up with the variance but over a period of a couple of weeks you would likely come out ahead solo in this case).  Am I right or am I missing something?

More or less a reasonable concept. I wish that googlebot were still around, would be interesting to see if he still felt the same way about a month later on his idea about economics of solo mining at ~1.75million difficulty on lower hash rate.

[1713961581]

1713961581

[1bitc0inplz]

Pools are the tax authorities, which levy tax on ignorance and lack of knowledge of elementary theory of probability. Kind of like weird reverse lotteries.

That is an odd statement coming from someone who owns a pool 

[Vladimir]

Pools are the tax authorities, which levy tax on ignorance and lack of knowledge of elementary theory of probability. Kind of like weird reverse lotteries.

That is an odd statement coming from someone who owns a pool  

If truthfulness is odd, than yes it is odd.

But I must also note that pools do provide reduced variance, which could be valuable.

[Meni Rosenfeld]

Really it seems simple to me, if you don't have a high enough hash rate to reasonably expect to generate a block before the next difficulty increase (you can look at the mining calculators to see your odds based on your hash rate), then you will lose solo mining, because if you don't mine a block before that difficulty increase your odds of generating a block will go down, and got nothing at that lower difficulty.  If however you have a high enough hash rate that you can reasonably expect to generate a block before the difficulty increase then you can save yourself the fees, etc. of a pool and comfortably mine solo, as the odds would be the same (you would just have to put up with the variance but over a period of a couple of weeks you would likely come out ahead solo in this case).  Am I right or am I missing something?

Not really. Difficulty increases have very little to do with it (though when making projections of whether you can take the variance you may want to consider that the variance will increase in the future). It is always the case that solo mining has the same expectation (without fees) and higher variance. And, if it takes a week to find a block, it will take years until your payouts will be anywhere near the statistical average.

[bansal]

Really it seems simple to me, if you don't have a high enough hash rate to reasonably expect to generate a block before the next difficulty increase (you can look at the mining calculators to see your odds based on your hash rate), then you will lose solo mining, because if you don't mine a block before that difficulty increase your odds of generating a block will go down, and got nothing at that lower difficulty.  If however you have a high enough hash rate that you can reasonably expect to generate a block before the difficulty increase then you can save yourself the fees, etc. of a pool and comfortably mine solo, as the odds would be the same (you would just have to put up with the variance but over a period of a couple of weeks you would likely come out ahead solo in this case).  Am I right or am I missing something?

Not really. Difficulty increases have very little to do with it (though when making projections of whether you can take the variance you may want to consider that the variance will increase in the future). It is always the case that solo mining has the same expectation (without fees) and higher variance. And, if it takes a week to find a block, it will take years until your payouts will be anywhere near the statistical average.

If you're mining at a higher difficulty then the odds of you finding a block at the same hash rate goes down, so I don't see how you can say difficulty has nothing to do with it.

[Meni Rosenfeld]

Really it seems simple to me, if you don't have a high enough hash rate to reasonably expect to generate a block before the next difficulty increase (you can look at the mining calculators to see your odds based on your hash rate), then you will lose solo mining, because if you don't mine a block before that difficulty increase your odds of generating a block will go down, and got nothing at that lower difficulty.  If however you have a high enough hash rate that you can reasonably expect to generate a block before the difficulty increase then you can save yourself the fees, etc. of a pool and comfortably mine solo, as the odds would be the same (you would just have to put up with the variance but over a period of a couple of weeks you would likely come out ahead solo in this case).  Am I right or am I missing something?

Not really. Difficulty increases have very little to do with it (though when making projections of whether you can take the variance you may want to consider that the variance will increase in the future). It is always the case that solo mining has the same expectation (without fees) and higher variance. And, if it takes a week to find a block, it will take years until your payouts will be anywhere near the statistical average.

If you're mining at a higher difficulty then the odds of you finding a block at the same hash rate goes down, so I don't see how you can say difficulty has nothing to do with it.

... And your payouts from the pool will also go down at the exact same time (assuming it is hopping-proof). So this has no bearing on your expected payouts solo vs. pool.

[bansal]

Really it seems simple to me, if you don't have a high enough hash rate to reasonably expect to generate a block before the next difficulty increase (you can look at the mining calculators to see your odds based on your hash rate), then you will lose solo mining, because if you don't mine a block before that difficulty increase your odds of generating a block will go down, and got nothing at that lower difficulty.  If however you have a high enough hash rate that you can reasonably expect to generate a block before the difficulty increase then you can save yourself the fees, etc. of a pool and comfortably mine solo, as the odds would be the same (you would just have to put up with the variance but over a period of a couple of weeks you would likely come out ahead solo in this case).  Am I right or am I missing something?

Not really. Difficulty increases have very little to do with it (though when making projections of whether you can take the variance you may want to consider that the variance will increase in the future). It is always the case that solo mining has the same expectation (without fees) and higher variance. And, if it takes a week to find a block, it will take years until your payouts will be anywhere near the statistical average.

If you're mining at a higher difficulty then the odds of you finding a block at the same hash rate goes down, so I don't see how you can say difficulty has nothing to do with it.

... And your payouts from the pool will also go down at the exact same time (assuming it is hopping-proof). So this has no bearing on your expected payouts solo vs. pool.

My point really is this...  Let's say you started mining with a 1GH/s rig today.  At that hash rate you will find a block on average once every 3 months and 3 days according to the mining calculators.  Your expected return per day would be 0.53 bitcoins.  If you mined solo the odds are that you will not get anything before difficulty goes up again.  If you mined in a pool during that period you would get your 0.53 bitcoins a day, less fees, etc.  If however your hash rate was high enough that you would find a block before difficulty went up then you could take advantage of that lower difficulty and your higher rate of return during that lower difficulty period and save yourself the costs of pooled mining.

[bansal]

Really it seems simple to me, if you don't have a high enough hash rate to reasonably expect to generate a block before the next difficulty increase (you can look at the mining calculators to see your odds based on your hash rate), then you will lose solo mining, because if you don't mine a block before that difficulty increase your odds of generating a block will go down, and got nothing at that lower difficulty.  If however you have a high enough hash rate that you can reasonably expect to generate a block before the difficulty increase then you can save yourself the fees, etc. of a pool and comfortably mine solo, as the odds would be the same (you would just have to put up with the variance but over a period of a couple of weeks you would likely come out ahead solo in this case).  Am I right or am I missing something?

Not really. Difficulty increases have very little to do with it (though when making projections of whether you can take the variance you may want to consider that the variance will increase in the future). It is always the case that solo mining has the same expectation (without fees) and higher variance. And, if it takes a week to find a block, it will take years until your payouts will be anywhere near the statistical average.

If you're mining at a higher difficulty then the odds of you finding a block at the same hash rate goes down, so I don't see how you can say difficulty has nothing to do with it.

... And your payouts from the pool will also go down at the exact same time (assuming it is hopping-proof). So this has no bearing on your expected payouts solo vs. pool.

Actually after thinking about it some more I guess I see your point.  From a purely mathematical point of view your expected value, starting today, would be the same.  However if you did go the two weeks or so before difficulty increased without finding a block you would lose, and the odds of that happening are high.  Your overall odds and expected value, starting today, are the same either way, given that there is a chance you could find a block before difficulty increases.  I guess it's just about managing your risk really.

[btcbaby]

The flaw in the solo mining arguments is that they don't take into account the fixed and variable cost that all start at t0.  If you aren't making a dent in the cost and operation of your rig between difficulty increases you need to join a pool.  If you are still unprofitable you shouldn't mine, your throwing money out the window.  Another easy way to figure this out in practical terms is to look at the hashrate of the top users in the top pools (Slush, Deepbit, and BTCGuild).  Look at how often they are solving blocks.  There is usually a sharp falloff in hashing power in the big pools.  The top 2-10% usually have way over 2GH/s.  These power players are pulling the weight in terms of blocks discovered.  The other 90% operate as insurance to further smooth out variance.  It's the reason why if you have respectable hashing you can earn a little more at BTCGuild because there is less competition, but more variance. 

At the end of the day you have to be able to cover your cost.  Cash out your initial stash of BTC to cover the fiat used to buy the machines.  As long as there is a chance that Bitcoin could go to zero miners should sell some percentage of their yield.  Commerce is the only sustainable future for Bitcoin.

-btcbaby