MINING IS MARGINALLY PROFITABLE

[Steve]

I've enjoyed the profitable vs non-profitable threads (especially the non-profitable one).  Here's my take...mining is marginally profitable.  Based on my calculations, without spending a lot of time doing research to get the absolute maximum value for your penny spent on hardware, if you are assuming difficulty doesn't rise dramatically and the price of bitcoins remains about where it is, you're probably looking at 4-6 months to recover your hardware costs.  But, difficult *is* going to rise...and bitcoins *could* fall in value.  Where I live, I can recover my incremental monthly electricity costs in a little over 1 day, but I live in an area lucky to have relatively cheap electricity rates.  So, you are taking a bit of risk that these variables don't materially change during the time you're trying to recover your hardware costs.  And, you can expect to spend quite a bit of time doing the research, getting setup, and learning all you need to learn to get a high performing mining rig.

Personally, I've enjoyed getting into mining, however now that the novelty has worn off, I wonder if it would have been better to simply buy the dips in bitcoin prices to accumulate...and have spent that time working on offering some kind of service to earn bitcoins or spend the time working on bitcoin related software.

[1715106972]

1715106972

[S3052]

that makes sense

if bitcoin value does not increase mining will soon be in the red

[Cryptoman]

I was fortunate to have started mining in December, with further investments in equipment made in January and February.  I just broke even this week.  I would not start mining today.  Summer is around the corner, so in addition to the electricity consumption of the machines themselves, the air conditioner will have to work overtime removing the heat.  The uncertainty in the future value of Bitcoins and the change in difficulty make mining a risky investment currently.

Like you, I had fun setting up and operating a mining cluster.  However, it has distracted me from establishing several Bitcoin businesses, which would likely have been the better investment of time.

[hazek]

I think you folks with good mining rigs shouldn't worry too much. All you have to do is wait out the rest of the miners once mining becomes unprofitable until they quit, then the difficulty will drop and you can main profitably again.

[true]

I think you folks with good mining rigs shouldn't worry too much. All you have to do is wait out the rest of the miners once mining becomes unprofitable until they quit, then the difficulty will drop and you can main profitably again.

Except everyone will do that, then...

Barring external influences (popularity, etc) once BTC generally becomes cost prohibitive to produce, I don't think it'll fall below that line, or if it does, it won't for very long.

[MDKing]

I agree mining is marginally profitable based on my own loose calculations. With that in mind and the difficulty increase coming in the next few days my break even point is roughly 4 months away.

Lets face it, if an individual could break even within a month there wouldn't be discussion about if mining was profitable, everyone would just be purchasing and investing in new rigs. I think we're at the point where, provided there isn't a massive technological breakthrough in hashing power, an individual can expect marginal returns over time from their mining rigs provided its hashing power is energy efficient. Ultimately miners will have to think and invest long term.

[hazek]

I think you folks with good mining rigs shouldn't worry too much. All you have to do is wait out the rest of the miners once mining becomes unprofitable until they quit, then the difficulty will drop and you can main profitably again.

Except everyone will do that, then...

No they wont. People are different. Some have a high pain thresholds and will be willing to wait longer and some have a lower pain thresholds and will give up quicker. Eventually it will even out so that it'll be just enough profit for just enough people. As soon as profitability declines the difficulty will fall. It's supply and demand..

[xenon481]

I think you folks with good mining rigs shouldn't worry too much. All you have to do is wait out the rest of the miners once mining becomes unprofitable until they quit, then the difficulty will drop and you can main profitably again.

Except everyone will do that, then...

No they wont. People are different. Some have a high pain thresholds and will be willing to wait longer and some have a lower pain thresholds and will give up quicker. Eventually it will even out so that it'll be just enough profit for just enough people. As soon as profitability declines the difficulty will fall. It's supply and demand..

You are incorrect.

As profitability declines, so will the acceleration of difficulty, not the velocity of difficulty. If profitability turns negative, then so should the acceleration of difficulty, thus only then should difficulty decline.

[hazek]

I think you folks with good mining rigs shouldn't worry too much. All you have to do is wait out the rest of the miners once mining becomes unprofitable until they quit, then the difficulty will drop and you can main profitably again.

Except everyone will do that, then...

No they wont. People are different. Some have a high pain thresholds and will be willing to wait longer and some have a lower pain thresholds and will give up quicker. Eventually it will even out so that it'll be just enough profit for just enough people. As soon as profitability declines the difficulty will fall. It's supply and demand..

You are incorrect.

As profitability declines, so will the acceleration of difficulty, not the velocity of difficulty. If profitability turns negative, then so should the acceleration of difficulty, thus only then should difficulty decline.

Yeah you are right but my main point still stands.

[BitterTea]

How long before there are BTC derivative contracts? That would open up profit streams for those that understand the ballistic nature of the evolving market.

What are the benefits of derivative contracts?

[FooDSt4mP]

How long before there are BTC derivative contracts? That would open up profit streams for those that understand the ballistic nature of the evolving market.

What are the benefits of derivative contracts?

I assume he means futures.  The contract is for X bitcoins on Y date.  Two people buy each contract, one as the BTC seller, one as the BTC buyer.  So, the prices are set at what investors think X BTC will be worth on the date Y.  As the date approaches, the price will be reconciled with the current market price.  This is the proper place for speculation, as well as hedging. I believe it would greatly smooth out the colatility of bitcoin, and if I wan't so busy with other things, I would seriously consider setting up such a market.

[iya]

Where markets get into trouble with derivatives is with naked positions. We see this today in over-leveraged markets where speculators are allowed to enter these contracts without actually holding a position in the underlying commodity. The result is that this kind of trading actually contributes to market volatility instead of mitigating it.

There's nothing wrong with naked shorting. You can see this if you drop the distinction of commodity and currency, i.e. just turn the chart around. If you're over-leveraged, you can get a margin call whether you're long or short. All successful (profitable) speculation will decrease volatility and all losses will increase volatility – it doesn't depend on the instrument as long as you know what you're doing.

Back on topic; I've found that undervolting is almost never mentioned. The performance per watt seems to be the most important metric, even before the initial investment in hardware. Comparisons are usually topped by mid-range cards, but that's because the high-end cards run at higher stock voltages and frequencies. You can easily double the FLOPS/W by undervolting and underclocking, e.g. with ATI Tray Tools.

[[Tycho]]

Back on topic; I've found that undervolting is almost never mentioned. The performance per watt seems to be the most important metric, even before the initial investment in hardware. Comparisons are usually topped by mid-range cards, but that's because the high-end cards run at higher stock voltages and frequencies. You can easily double the FLOPS/W by undervolting and underclocking, e.g. with ATI Tray Tools.

Actually overclocking without overvolting can increase MH/W.
But undervolting may be more effective.

[Steve]

There's nothing wrong with naked shorting.

I could be convinced of this position based on an argument that as long as market participants understand this is possible and understand the consequences (which is basically the momentary creation of fictitious shares in the market).  However, it's no good if the market participants operate under an assumption that people actually posses what it is they are offering for sale.  Also, it's worth mentioning that in current markets, naked shorting isn't something that is readily accessible to most market participants.