Mining for the little guy isn't dead

[Xyver]

I've been hearing talks about people saying "Oh, you need thousands and thousands of dollars to get into mining".

But that's not true, and I'll lay it out here.  I'm going on some assumptions, I'll explain why I made those, but here we go.

Say back in the graphics card days, you wanted to start Bitcoin mining.  Say you started from scratch, and wanted a decent miner.  Ok, you buy a computer for as cheap as possible, then throw in a really nice graphics card (say a 7970.)  That will run you about 1000$.  Say 300 for the comp, 700 for graphics card.  That will get you ~650 Mhash/sec.

Back when graphics cards were used, the difficulty was a million. (ish).  So, that gets you 0.23 BTC per day.  Back then, BTC was also less then 100$.

Now, we're having trouble getting hardware now, which is why it's hard for a little guy to get in.  So, let's fast forwards to April, that's when most companies should have shipped.  Difficulty is estimated to be ~3.5 billion then, based on hardware incoming, but let's overshoot and say 5 billion.

In April, say you have 1000$ again.  With that, you could buy 2 Black Black arrows miners, 100 gigahash each.  Maybe even 3, the price on them seems to be dropping.  So, 200-300 gigahash at 5 billion nets you 0.02-0.03 per day.  You get 10x less BTC (ish), but BTC is worth 10x more.  So you're still just as well off as you were back in graphics card days...

TL,DR  Mining isn't "dead", not even close.  We're just in a transition period to new technology.  Hold on to your pants, be careful with your money, wait for the market to stabilise before you invest too much into miners.

EDIT:: Fixed spelling

[pkmoney]

I agree with you. thats why I'm mining and buying BTC. 

[caminilegroup]

I only mine, got 4 v2 blades going now, and 2 x-1 black arrows on order.

For me it is another hobby, another expensive hobby, I'm a ham so yeah either way I will spend money doing something.

So far the proceeds pays the electric bill, which is nice.

[Xyver]

I only mine, got 4 v2 blades going now, and 2 x-1 black arrows on order.

For me it is another hobby, another expensive hobby, I'm a ham so yeah either way I will spend money doing something.

So far the proceeds pays the electric bill, which is nice.

That's a perfect way to look at it.  It's a hobby, that spits money at you .  People spend thousands of dollars on other hobbys, so it can be OK to spend 1000's of dollars into mining, even if you don't make your money back.

Though, mining as an investment can work too.  You just have to be careful

[ibrahim11]

I only mine, got 4 v2 blades going now, and 2 x-1 black arrows on order.

For me it is another hobby, another expensive hobby, I'm a ham so yeah either way I will spend money doing something.

So far the proceeds pays the electric bill, which is nice.

Where did you get the 2 x-1's pre-orders? Black arrow minimum quantity is ten.

[caminilegroup]

I only mine, got 4 v2 blades going now, and 2 x-1 black arrows on order.

For me it is another hobby, another expensive hobby, I'm a ham so yeah either way I will spend money doing something.

So far the proceeds pays the electric bill, which is nice.

Where did you get the 2 x-1's pre-orders? Black arrow minimum quantity is ten.

minersource.net

[miners78]

I totally agree, but having thousands and thousands of dollars probably will make the process faster and easier.

Litecoin mining is still great with GPUs.

[timk225]

But when the price of BTC settles back down to ~$100, your theory is totally screwed, OP.

[Waramp22]

But when the price of BTC settles back down to ~$100, your theory is totally screwed, OP.

This would take something catastrophic. Such as a virus, or a flaw in the code that locks everything up. Its not like a penny stock anymore, Chinas government is even talking about it so somethings brewing. If it does drop all the way txo $100, ill be cashing out my RRSPs and selling my toys to buy everything I can.

[Operatr]

Bitcoin mining is tough to jump into with scarce gear commanding a high price tag, but there are 100 alternative blockchains that are right behind it that could use your mining support    Even those old GPU rigs still have life there.

[dsattler]

Have you read this:

http://qz.com/156479

The price of a single bitcoin, now sitting at $899, is derived from many mysterious sources: supply and demand, potential future business value, animal spirits. One factor is less widely understood: The price of bitcoin depends on the price of electricity. Bitcoin are produced by “mining,” having computers solve code-breaking problems that, when completed, yield […]

[Amph]

better to mine scrypt with gpu

[dspiel]

great points, I'd like to also add if you time it correctly, you can sell your mining hardware for more than you paid for it.

[skizzneena]

Im really glad someone finally posted this in clear, objective terms. I would even argue mining isn't dead for the littler-er guy, ie. less than $1k. I started mining in October with 2 bit erupter 333/mhs and bought a blue fury not long after. Feeling kind of discouraged lately, Im getting the feel it was the same way back in the day for GPU miners.

[J_Dubbs]

On flaw here is identifying "electricity" as the driving factor. Fundamental economics principle of supply/demand theory would identify it as the cost of "inputs". Yes, electricity is an input, but only one sub-category. Along with that is equipment costs and anything else that essentially is needed to produce the output. Increasing inputs shifts the supply curve left, creating a shortage, which then leads to buyers bidding up to obtain the available supply. The hardware IS more expensive, but right along with all that we have appreciation in the value of BTC, always measured in relative terms: Money.

[traiz]

    Ok, please help me understand something.
    Unlike gold/silver which can be used in making microcontrollers and jewelry, what inherent use does bitcoin have?
    Unlike fiat which is backed by law and must be accepted for all debts, what else does bitcoin do?

    The ease of sending "cash" over great distances instantaneously and relatively anonymously (unless you make yourself known)?
    The fact that its decentralized so no one country has control over it?
    A store of value because other people are willing to accept it?

    It can't be because one of its input is electricity, otherwise having a currency redeemable by the delivery of x_kwhr at location_a would be worth more...

[thelectronicnub]

   Ok, please help me understand something.
    Unlike gold/silver which can be used in making microcontrollers and jewelry, what inherent use does bitcoin have?
    Unlike fiat which is backed by law and must be accepted for all debts, what else does bitcoin do?

    The ease of sending "cash" over great distances instantaneously and relatively anonymously (unless you make yourself known)?
    The fact that its decentralized so no one country has control over it?
    A store of value because other people are willing to accept it?

    It can't be because one of its input is electricity, otherwise having a currency redeemable by the delivery of x_kwhr at location_a would be worth more...

Why is paper that has money symbols worth anything? Bitcoin follows the laws of supply and demand. When people want something, they trade for it. Let's say I have a new GS4. I want .8 BTC for it. You want to buy it, but you only have .7BTC, so, you go to a bitcoin exchange site. You buy .1BTC with fiat money. That is why bitcoin is worth something, and why people will pay for stuff to make bitcoins. If people want to use it as a currency, they will.

[traiz]

Why is paper that has money symbols worth anything? Bitcoin follows the laws of supply and demand. When people want something, they trade for it. Let's say I have a new GS4. I want .8 BTC for it. You want to buy it, but you only have .7BTC, so, you go to a bitcoin exchange site. You buy .1BTC with fiat money. That is why bitcoin is worth something, and why people will pay for stuff to make bitcoins. If people want to use it as a currency, they will.

Paper that has money symbols are worth something because the government has the power to tax.
And they have the force of law to make you accept it..

Weak money always chases out strong money. When paper money was first introduced, people started hording gold and using paper (since they rather keep gold)

Google "money as debt"

_____________________________

My question was on the inherent value of bitcoin.
Does it have value due to the lack of centralization? What happens when the difficulty goes through the roof so only wealthy people can mine?
Is it value due to the fact that you can send money instantly with no chance of chargebacks?

So if that's the case, isn't bitcoin just a better alternative to prepaid credit cards?

[goggles1200]

In the last 2 weeks, my BTC/block has gone down from 0.0011 to 0.0005 due to bigger rigs joining the hashing and difficulty going up. I'm hoping that I can get ride of my BFL miners to some sap and get some erupter blocks until I can pony up for a bigger rig.

[Xyver]

Too many people to reply to anyone specifically, so I'll address a few points:

If BTC crashes to 100$, and my point is null and void, then we have the same problem with "what if BTC crashed to a dollar" back in GPU days.

Yes, electricity is a fixed cost.  Nothing can change the power that your rig requires.  So, as BTC becomes more valuable, people will be able to mine with less efficient machines.  Right now, the issue isn't $/gigahash, or BTC/gigahash, what you should be looking at is watts/gigahash.

The most power efficient miners will be able to last the longest, regardless if you have a 1 terahash unit sucking 1000 watts, or a 1 gigahash unit sucking 1 watt.  Both of those players will have to exit the game at the same time.  Except in this case, the big player will have to leave first.  Let's make up some more numbers here, say that the guy with 1000 gigahashes uses 1000 watts, and makes 1000$ a day.  Yet, he has to pay 900$ a day in power (yes, the numbers are massive, I'm trying to make a point.  No power cost is that high).  The same little guy, being 1000x smaller, only makes 1$ a day, and has to pay 90 cents in power.

Now, say the price of coins drop, and now they're only making 800$ a day, with a 900$ power bill.  The big guy won't want to lose 100$ a day, he'll have to shut down right away.  Whereas the little guy, he's making 80 cents a day, only paying 90 cents a day in power.  He can afford to mine at a 10 cent loss, and when coins go back up he'll be good.

So, being bigger can be a downside as well.  You have to be profitable, 100% of the time, else you lose lots of money.  The little guy can suck up some small losses, and keep mining for longer.