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Author Topic: Why You Haven't Seen Miners Leave in Hordes.....  (Read 7446 times)
mikethebodacious
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September 21, 2011, 12:38:13 AM
 #1

The reason miners haven't left in hordes is because even at $5.00/BTC mining is STILL profitable.  I am not saying it's great profit but it's profit nonetheless and I guess if you have an unstable rig which you have to constantly coddle then it's not worth the hassle.  I will give examples of my rigs, which are very common rigs (nothing special), and my electrical rate is middle of the road ($.12/KWh) for United States:

Rig # 1 (Antec Lanboy Air w/ 2 x Radeon 6950s & 7 high-speed 120mm fans for cooling)

   - 730 MH/sec. with current difficulty 1,755,425 = .40 BTC/day => $6.10 current price = $2.44/day
   - 455 Watts = .455 KWh @ $.12/KWh = $1.31/day
   - Net Profit = $1.13/day for 28 days = $31.64/month

Rig # 2 (Open rig w/ Radeon 5970, 2 x Radeon 5830s, 2 high-speed 120mm fans & one Honeywell Table Fan for cooling)

   - 1350 MH/sec. with current difficulty 1,755,425 = .72 BTC/day => $6.10 current price = $4.39/day
   - 736 Watts = .736 @ $.12/KWh = $2.12/day
   - Net Profit = $2.27/day for 28 days = $63.56/month

So as you can see nearly $100/month for just keeping an eye on two rigs is easy money (if you plan on selling BTC at this low of a price).  This is imo the lowest point Bitcoin will go, so any rise in value will make your profitability go up significantly.  For everyone complaining about electricity rates just go get a Kill-A-Watt EZ and measure your energy consumption.  736 watts for 3 power-hungry cards is pretty damn good, granted the PSU is a Cougar 1050W GX which has 80 Plus Gold energy efficiency but any long-term miner should invest in some solid PSUs.  Enermax, Cougar, and Lepa make some very affordable 80-plus Gold PSUs not to mention others if you can catch rebates/sales on Newegg.  For fun here are some other appliances around the house I measured:

Hairdryer on High
   - 1,520 Watts  Shocked
Toaster
   - 850 Watts Undecided
Fridge
   - 11 Watts closed, 47 Watts with fridge open - 660 Watts Starting
Lasko Blower Fan
   - Speed 1 = 77 Watts, .64 Amps => $0.22/day
   - Speed 2 = 86 Watts, .71 Amps => $0.24/day
   - Speed 3 = 102 Watts, .88 Amps => $0.29/day
Honeywell Table Fan
   - Speed 1 = 26 Watts, .17 Amps => $0.07/day
   - Speed 2 = 29 Watts, .22 Amps => $0.08/day
   - Speed 3 = 34 Watts, .3 Amps => $0.10/day
TV, Cable Box, Wii Idle
   88 Watts => $0.25/day

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DeathAndTaxes
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September 21, 2011, 02:42:48 AM
 #2

Also the previous ROI% were simply unsustainable.

Mining has no barrier to entry and there is minimal advantage when it comes to economies of scale.
Somewhat unusual the highest ROI is for people doing it "part time" reusing existing hardware.  For example a gamer who already owns and uses a high end gaming rig that discovers bitcoin and mines for some beer money (or the hope/chance to get rich).  His hardware has an effective cost of $0 because it is a sunk cost.  He already bought it and would buy it again even if bitcoin didn't exist.

High ROI situations only exist when there is some competitive advantage or barrier to entry.  Also anyone using open-source mining software and off the shelf hardware has no competitive advantage (that can be exploited for higher ROI%) over other miners.   There is no market in the world that has no barrier to entry where one can earn 5000% annual ROI.  Free markets don't work that way.  High ROI attacts competition unless the ROI is crushed.

Eventually the "mining market" will stabilize on a low but sustainable ROI.  Something in the 5% to 20% annually range based on how risky mining is perceived to be.  Ironically the thing that people want the most will result in even LOWER profits for miners.  If bitcoin takes off and becomes very mainstream and daily volatility falls then the risk in mining decreases and economic theory tells us the margin (profit) will decline also.

Now granted if your write a customer miner (and keep it a secret) that gets 10% higher hashes than public miners then you have a competitive advantage.  If you discover a FPGA breakthrough and build a massive FPGA cluster lowering your operating expense then you also have a competitive advantage.  However so far everything about bitcoin is rather open.  People share miners, kernels, fixes, enhancements.  There is an open source FPGA project, etc. 
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September 21, 2011, 09:26:35 AM
 #3

Ironically the thing that people want the most will result in even LOWER profits for miners.  If bitcoin takes off and becomes very mainstream and daily volatility falls then the risk in mining decreases and economic theory tells us the margin (profit) will decline also.
This isn't entirely correct. In long term I agree it will make mining less attractive but any coins mined and saved before this will make profits even greater. I'll give an example and before I do I want to point out that I don't think this is realistic any time in the near future its just an example.

Say you started mining in june and by october you have saved up 300 bitcoins. The price of bitcoins is hovering around 8 dollars making that worth $2,400. Then out of know where newegg and amazon decide they want to start accepting bitcoins. The price skyrockets to $30 because of all the news bitcoins is getting now. That 2,400 in bitcoins is now worth 9,000.

So the early investors (us) get a pretty damn big payday. I don't plan to get rich off bitcoins but anything like that would make me extremely happy and I'm sure I'm not the only one in this boat. That's why people want wide spread adoption.
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September 21, 2011, 09:40:53 AM
 #4

Calculating ROI by speculating on future BTC value is fallacious.  If you want to speculate, you can just buy BTCs with dollars. The same dollars you need to buy hardware and electricity cost, so they compete.

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September 21, 2011, 09:46:32 AM
 #5

Calculating ROI by speculating on future BTC value is fallacious.  If you want to speculate, you can just buy BTCs with dollars. The same dollars you need to buy hardware and electricity cost, so they compete.
Thank you captain obvious. I was just pointing out the reasoning of why people who are mining would want wide spread adoption. Also mining is better long term because eventually you pay the rig off and generate bitcoins only for the cost of electricity.
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September 21, 2011, 09:48:12 AM
 #6

Nope. Either you pay off the rig, or you accumulate bitcoins, not both. Again you ignore that the money you spend on electricity (and hardware) could be spent buying bitcoins.

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September 21, 2011, 09:57:57 AM
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Nope. Either you pay off the rig, or you accumulate bitcoins, not both. Again you ignore that the money you spend on electricity (and hardware) could be spent buying bitcoins.
I'm not giving people advice here you do realize that right? I'm giving examples of what people can do. Also unless you are day trading mining is better long term because eventually you will have generated enough bitcoins to cover the initial investment and all the electricity. After that point anything generated is more then what you could have received from investing one big lump sum in coins alone.
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September 21, 2011, 10:08:31 AM
 #8

DeathAndTaxes analysis was spot on. Unless I misunderstood you, your claims that mining is more profitable than what he says is based on a fallacy that earning BTC is somehow better than earning $. Mining generates bitcoins or cash if you sell them, or a ratio of them, but not both. Any profits from an increase in BTC value applies equally to BTC you mine or buy with cash.

Now I agree mining is  better than not mining as its currently still (marginally) profitable for most. But only because it generates more $ than it costs;  not because it generates bitcoins, $ can generate those too. The day electricity costs are higher than revenue from mining, you should turn your rig off. And possibly buy bitcoins if you think they will increase in value, but not mine them.

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September 21, 2011, 04:16:51 PM
 #9

Nope. Either you pay off the rig, or you accumulate bitcoins, not both. Again you ignore that the money you spend on electricity (and hardware) could be spent buying bitcoins.

Also keep in mind that the elec and hardware are business expenses that can be written off..

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September 21, 2011, 04:56:38 PM
 #10

Which only helps those who currently run a business. The average person can't deduct anything like that from their taxes.
And as soon as you're filing taxes for a business, H&R Block charges you $350, not $35.
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September 21, 2011, 05:09:49 PM
 #11

Also keep in mind that the elec and hardware are business expenses that can be written off..

You nailed it jjiimm_64. If I had a company and I could write off the cost of electricity and hardware my mining rig farm would look like this




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September 21, 2011, 05:36:52 PM
 #12

I think a lot of miners have left as the network hash rate is hovering around 12 Th/s now.... it was around 12.7 or more before.

Also noticed deepbit is lingering around 4.8 Th/s where as it was more like 5.4.

Think about the figures, a lot of people have stopped, thing is were talking very big numbers all round here.



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AngelusWebDesign
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September 21, 2011, 05:56:45 PM
 #13

Also keep in mind that the elec and hardware are business expenses that can be written off..

You nailed it jjiimm_64. If I had a company and I could write off the cost of electricity and hardware my mining rig farm would look like this



For those unfamiliar with "writing things off" as a business expense, I'd also like to point out:
If you "write off" $1000 in expenses, you save whatever taxes you would have paid on that amount -- not the full $1000.

How it DOESN'T work: You owe $2000 in taxes, but you spent $900 on equipment, so now you owe $1100.
No, you only save the % in self-employment tax (15%) plus whatever tax bracket you're in (10%, 15%, etc.) which varies by how much you make per year.

Deducting things from your taxes basically means you get to spend your pre-tax income on them, that's all. You're lowering your total tax burden, but you *are* spending money that would otherwise be yours as well. Namely, that other 75%.

So if I buy $1000 in PC equipment, I spent $750 of my own money, plus $250 that would have gone to the government anyway. Attractive, yes, but it would be even better if I could spend $1000 of the government's money Smiley

Oh, and electricity is only deducted if you have a separate facility. If your rigs are at home, you can only deduct a PERCENTAGE of the electricity spent -- namely, you have to divide the square footage of your server room by the total square footage of the house (10% or 15%?) and that's how much of your home's electric bill you can deduct as a "business expense".

So, long story short, starting an official "business" doesn't magically make un-economical ventures economical Smiley You still have to deal with expenses, making sure your income is greater than your expenses, etc.

This is not tax advice. Please speak to your tax advisor, accountant or CPA.


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September 21, 2011, 06:15:57 PM
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Now you guys make wonder, assuming you have a bitcoin business,  if you could deduct losses of your bitcoin holdings as currency exchange costs Smiley

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September 23, 2011, 12:03:36 AM
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Eventually the "mining market" will stabilize on a low but sustainable ROI.  Something in the 5% to 20% annually range based on how risky mining is perceived to be.  Ironically the thing that people want the most will result in even LOWER profits for miners.  If bitcoin takes off and becomes very mainstream and daily volatility falls then the risk in mining decreases and economic theory tells us the margin (profit) will decline also.

I believe the 5-20% ROI figure to be accurate for the future. However, the risk is much higher than you might think.

I use a similar Mh/W efficiency to the OP in my proposal for EnCoin, a currency based around the cost to produce. According to my guestimates, a coin produced today costs about $3.60, excluding the cost of hardware. That's only a 28% ROI based on a sell price of $5. The average cost to produce, on the other hand, is $1.80. If early coins begin to circulate, 28% ROI on $1.80 makes new coins strictly unprofitable. People lose money, stop mining, and bitcoin becomes a security risk.

Feel free to peruse the proposal and the ensuing discussion.

https://bitcointalk.org/index.php?topic=44682.0

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September 23, 2011, 12:31:28 AM
 #16

Which only helps those who currently run a business. The average person can't deduct anything like that from their taxes.
And as soon as you're filing taxes for a business, H&R Block charges you $350, not $35.


Yes, this is true, because H&R is really meant to do personal taxes, not real taxes. You can get a much more reasonable deal locally, I have. And if you keep good books and do a lot of it yourself, it's usually even cheaper.

VPS, shared, dedicated hosting at: electronstorm.ca. No bitcoin payment for that yet, but bitcoins possible for general IT, and mining/GPGPU rigs. PM for details.
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September 23, 2011, 07:38:11 AM
 #17

Eventually the "mining market" will stabilize on a low but sustainable ROI.  Something in the 5% to 20% annually range based on how risky mining is perceived to be.  Ironically the thing that people want the most will result in even LOWER profits for miners.  If bitcoin takes off and becomes very mainstream and daily volatility falls then the risk in mining decreases and economic theory tells us the margin (profit) will decline also.

I believe the 5-20% ROI figure to be accurate for the future. However, the risk is much higher than you might think.

I use a similar Mh/W efficiency to the OP in my proposal for EnCoin, a currency based around the cost to produce. According to my guestimates, a coin produced today costs about $3.60, excluding the cost of hardware. That's only a 28% ROI based on a sell price of $5. The average cost to produce, on the other hand, is $1.80. If early coins begin to circulate, 28% ROI on $1.80 makes new coins strictly unprofitable. People lose money, stop mining, and bitcoin becomes a security risk.

Feel free to peruse the proposal and the ensuing discussion.

https://bitcointalk.org/index.php?topic=44682.0

You seem to think the value of a bitcoin is related to the mining cost, but it isnt. Mining cost is indirectly linked to the value, but the value of a bitcoin is purely supply and demand. Supply being fixed, no matter how many miners there are, or their cost.

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September 23, 2011, 08:32:01 AM
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You seem to think the value of a bitcoin is related to the mining cost, but it isnt. Mining cost is indirectly linked to the value, but the value of a bitcoin is purely supply and demand. Supply being fixed, no matter how many miners there are, or their cost.

Indirectly or directly, it is still linked. The value of bitcoin may be mostly based on supply and demand, but that is only because a significant amount of the supply has been withheld throughout its history. And since Bitcoin has relatively no base of demand other than speculation, if a lot of those early coins went into circulation or the security of the network drops out when the award halves at the 210kth block, it may create a cascade of effects that bring the bitcoin sell price below the value of its current cost to produce. Then another cascade (crash) of effects to follow.

The supply is not quite so fixed as you think.

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September 23, 2011, 08:44:58 AM
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Indirectly or directly, it is still linked. The value of bitcoin may be mostly based on supply and demand, but that is only because a significant amount of the supply has been withheld throughout its history. And since Bitcoin has relatively no base of demand other than speculation, if a lot of those early coins went into circulation or the security of the network drops out when the award halves at the 210kth block, it may create a cascade of effects that bring the bitcoin sell price below the value of its current cost to produce. Then another cascade (crash) of effects to follow.

The supply is not quite so fixed as you think.

None of that has anything to do with the cost of mining. I agree with your point of most of bitcoin transactions being speculation right now, but not with the rest. Whether a speculator bought bitcoins at $0.18 or $18, or a miner spent $1.8 on electricity and hardware to mine his coins. It doesnt matter and has no influence on bitcoin value.

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September 23, 2011, 09:00:31 AM
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None of that has anything to do with the cost of mining. I agree with your point of most of bitcoin transactions being speculation right now, but not with the rest. Whether a speculator bought bitcoins at $0.18 or $18, or a miner spent $1.8 on electricity and hardware to mine his coins. It doesnt matter and has no influence on bitcoin value.

You are forgetting that the number of miners drives up demand. For every additional miner, every other miner's payout is reduced on average by (1 / total # of miners). This lowers supply (per person) and increases demand. If the number of miners is reduced, supply is easier to get and demand reduces because the COST (time, electricity) goes down. This will, believe it or not, be reflected in the exchange sell price.

If miners don't make a profit, don't expect them to stick around. There goes demand.

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September 23, 2011, 09:19:19 AM
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You are forgetting that the number of miners drives up demand. For every additional miner, every other miner's payout is reduced on average by (1 / total # of miners). This lowers supply (per person) and increases demand.

Im not forgetting that at all. Its precisely the "per person" that make the above nonsensical. I doesnt matter how many miners there are or how many rigs they have. It has zero influence on the overall number of coins minted and zero influence on either supply or demand for bitcoins for either trade or speculation. It only affects individual miner profitability.

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If miners don't make a profit, don't expect them to stick around. There goes demand.

Assuming miners act rationally, the number of miners will auto regulate itself to be borderline profitable. But profitability of mining has nothing to do with supply or demand.  Even if everyone in the world starts mining, there will still only be 1 block found per 10 minutes.

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September 23, 2011, 10:45:27 AM
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Im not forgetting that at all. Its precisely the "per person" that make the above nonsensical. I doesnt matter how many miners there are or how many rigs they have. It has zero influence on the overall number of coins minted and zero influence on either supply or demand for bitcoins for either trade or speculation. It only affects individual miner profitability.

Which, in turn, affects price. And if you think that the amount of people mining has zero influence on supply or demand, you need to take a course on economics. I am not going to try to teach you that here.

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Assuming miners act rationally, the number of miners will auto regulate itself to be borderline profitable. But profitability of mining has nothing to do with supply or demand.  Even if everyone in the world starts mining, there will still only be 1 block found per 10 minutes.

And because everyone in the world will only be getting 50/7 billion BTC per block, the cost to produce a block will be in the (hundreds of?) millions of dollars. You think 1 BTC will still sell for $5 if that is the case? Do you think 1 BTC will still sell for $5 if there are only 10 people mining?

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September 23, 2011, 11:28:31 AM
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Im not forgetting that at all. Its precisely the "per person" that make the above nonsensical. I doesnt matter how many miners there are or how many rigs they have. It has zero influence on the overall number of coins minted and zero influence on either supply or demand for bitcoins for either trade or speculation. It only affects individual miner profitability.

Which, in turn, affects price.

It doesnt. Price of bitcoins is only determined by supply and demand of bitcoins The amount of miners or mining rigs has influence on neither. Perhaps you should take that economy 101.

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And because everyone in the world will only be getting 50/7 billion BTC per block, the cost to produce a block will be in the (hundreds of?) millions of dollars. You think 1 BTC will still sell for $5 if that is the case?

You have the relationship backwards.  If 1 BTC is worth $5, do you think 7 billion people will mine for it? As a miner you can not influence the price of bitcoin. You can only affect your own profitability by pulling the plug or buy more mining rigs.  It doesnt go both ways.  Adding more rigs wont influence bitcoin price.

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September 23, 2011, 11:40:32 AM
 #24

It is not a coincidence that bitcoins are selling for around $5. That puts the ROI within a somewhat reasonable margin. With the silk road effect being over with, bitcoins are never going to return to $30 unless new demand is created. That means businesses need to start accepting bitcoins. Since any established business is going to realize what a joke it is, the odds of that happening are low. And if the only solution the bitcoin community can come up with is a way for businesses to immediately convert bitcoins to cash, then there is absolutely no reason for them to use bitcoin at all. And LOL no new demand is created because the coins are instantly put back on the market anyway.

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You have the relationship backwards.  If 1 BTC is worth $5, do you think 7 billion people will mine for it?

I do not have the relationship backwards, I just didn't think I would have to spell it out for you that it would be a gradual process. 1 BTC will not be worth $5 if 7 billion people are mining, this should be patently obvious and helpful to draw the conclusion that the cost to miners does indeed have an affect on the price.

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September 23, 2011, 12:06:07 PM
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It is not a coincidence that bitcoins are selling for around $5. That puts the ROI within a somewhat reasonable margin.

Again, you got it backwards. That bitcoins are selling for $5 *is* indeed "coincidence". Or at least, its totally unrelated to the miners, but purely a result of demand, mostly speculation and some demand for commerce.

That ROI is somewhat reasonable is NOT coincidence. Not because of the price, but because the number of miners automatically adjusts to an equilibrium. You can even calculate that, its really simple. Bitcoin creation is currently fixed at 50 BTC per 10 minutes. Assume a BTC market price of $5 per BTC.

That is $250 per 10 minutes or $1500 worth of BTC per hour.

assume electricity costs $0.1 per KwH
assume everyone uses identical paid for videocards that draw 100W.

One GPU costs $0.1*0.1Kw =$0.01 per hour

So there will be an equilibrium at 150.000 GPUs.  Doesnt matter if its 2 people owning those 150K rigs, or 150K people with a single gpu. More than 150K GPUs, difficulty will increase and the miners will lose money (causing some to pull the plug). Less than 150K GPUs, difficulty will drop and they will make profit (attracting more of them).

Note how I havent used difficulty in the math. Thats because it doesnt change the equation. Difficulty level is what governs the amount of miners towards the equilibrium. If you make an assumption for hashrate, You can even calculate the resulting difficulty level if you want. its that simple.  the amount of miners adjust themselves to the price and costs, not vice versa.

Now you show me the math or even logic how changing the amount of GPUs or # of people owning them somehow influences the price of bitcoins? There is no such relationship.


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September 23, 2011, 01:11:01 PM
 #26

yada yada yada the THash/s has been relatively stable for months now as the price has dropped like a rock. It can't go much lower than $5, or the thash/s is going to start dropping like a rock as well. Supply and demand are at relative parity. But when miners stop "demanding" new coins when the award halves, it's going to fricken crash. That's my point. They are related. I didn't say that the price only comes from the miners' cost to produce. I said it's that plus the speculation. Since there's no real demand for coins other than speculation, the price is approaching the point where it is cost to produce+ROI, but the average cost to produce is half of what people are actually paying to produce. It's dangerous and unhealthy.

miner: I DEMAND coins to sell to speculators!

it isn't one-sided, and it's a terrible economy.

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September 23, 2011, 01:18:48 PM
 #27

It can't go much lower than $5, or the thash/s is going to start dropping like a rock as well.

Yeah! You're beginning to understand the relationship now !
Smiley

Quote
Supply and demand are at relative parity. But when miners stop "demanding" new coins when the award halves, it's going to fricken crash. That's my point.

Oh, no, you arent Sad
I give up.

As for hashrate being stable. Really?
http://bitcoin.sipa.be/speed-lin-ever.png

You know whats been relatively stable? Mining profit:
http://tvori.info/bitcoin/charts/historical.png
(green line)
Just a short spike when bitcoin bubbled and people couldnt follow bringing enough mining rigs online.

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September 23, 2011, 01:23:47 PM
 #28

here is what I said

Quote
it may create a cascade of effects that bring the bitcoin sell price below the value of its current cost to produce. Then another cascade (crash) of effects to follow.

Another cascade to follow. people stop mining, people sell, end of the world is nigh, etc. ad nauseum.

You believe the cost to produce has no bearing whatsoever. But it does. The network becomes less secure, people have less faith, etc. etc. etc. etc.


durrr but the difficulty will just decrease to compensate, jebediah!

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September 23, 2011, 01:39:27 PM
 #29

Quoting your own previous fallacies does little to prove you point. People stopping to mine has nothing to do with people selling bitcoins. You still dont seem to realize that no matter how many or how few people mine, combined they accumulate exactly the same amounts of bitcoins. 50 BTC per 10 minutes. Whether that is divided by 10 miners or 10 million change nothing about the amount bitcoins they will sell. The will sell 50 BTC per 10 minutes, minus what they keep as speculation.

That in 2 or so years, only 25 BTC will be mined per 10 minutes will have 2 effects: everything else remaining equal (so ignoring a potential increase in transaction fees and especially an appreciation of bitcoins), the amount of miners will half. And admittedly, something will drop in price substantially: the price of used AMD cards. Nothing else.

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September 23, 2011, 02:01:02 PM
 #30

I think the original answer for the original question is that it is still considered profitable.

One can still get a considerable amount of BTC through alternate currencies and I believe "merged mining" in a pool could make that even more profitable in the future when it comes on line.When merged mining comes online the alternate currencies should actually increase in value considering the difficulty increase.

Currently,Solidcoin is the most profitable to BTC.

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September 28, 2011, 05:22:38 PM
 #31


Mining peaked around August 1, 2011.

The mining graph has roughly the shape of the Bitcoin/USD price graph, but trails it by about two months. One interpretation of this is that miners hang on an average of two months after they start losing money, then quit.
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September 28, 2011, 07:20:53 PM
 #32

Mining is speculation. There is no magical time frame for how long miners will hold out. They simply stay in the game as long as they believe it may be more profitable in the long run.
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September 29, 2011, 03:48:40 AM
 #33

I can't believe we're another 6 months into this experiment and people still don't understand that the auto-adjusting difficulty means that # of miners has absolutely nothing to do with the supply of bitcoins, thus nothing to do with the demand for bitcoins except in really indirect ways (a miner being perhaps more likely to increase demand for bitcoins by evangelizing about them or convincing a local retailer to accept them, etc)
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September 29, 2011, 06:16:11 PM
 #34

Calculating ROI by speculating on future BTC value is fallacious.  If you want to speculate, you can just buy BTCs with dollars. The same dollars you need to buy hardware and electricity cost, so they compete.

pretty much all ROI calculations are based on assumptions and "speculating on future"  BTC is not immune to that.
you just have to try to some close to "guessing" what reality/future will be...
variance is used to create several situations/expected outcomes and then you can use probability to pick a scenario that is most likely to happen.

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September 29, 2011, 06:18:09 PM
 #35

Which only helps those who currently run a business. The average person can't deduct anything like that from their taxes.
And as soon as you're filing taxes for a business, H&R Block charges you $350, not $35.


turbotax.

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September 29, 2011, 06:22:28 PM
 #36

I can't believe we're another 6 months into this experiment and people still don't understand that the auto-adjusting difficulty means that # of miners has absolutely nothing to do with the supply of bitcoins, thus nothing to do with the demand for bitcoins except in really indirect ways (a miner being perhaps more likely to increase demand for bitcoins by evangelizing about them or convincing a local retailer to accept them, etc)

spot on!

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September 30, 2011, 08:14:28 AM
 #37

In regards to the OP, seems miners are leaving.... noticed the network is down to an estimated 11.8 Th/s at this time..... as the post above says if its 1.4 Th/s down, thats an awful lot of GPUs :-)



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September 30, 2011, 08:59:31 AM
 #38

In regards to the OP, seems miners are leaving.... noticed the network is down to an estimated 11.8 Th/s at this time..... as the post above says if its 1.4 Th/s down, thats an awful lot of GPUs :-)

11,2Th/s now and the drop in 2 month is of about 4Th/s, 24% less computational power or about 20000 low/medium power video cards (we are back at the levels of end of june but with a higher difficulty and a lower price).
The net is slow to adeguate the difficulty, we need at least a 10% drop in difficulty to keep the pace: if see the graphs when power grows difficulty is all the time below the actuall power, but when there is a drop difficulty stay well over:

Bitrated user: ercolinux.
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September 30, 2011, 06:14:13 PM
 #39

Now you guys make wonder, assuming you have a bitcoin business,  if you could deduct losses of your bitcoin holdings as currency exchange costs Smiley

Don't forget to report your income generating bitcoins as well.


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September 30, 2011, 06:38:27 PM
 #40

Don't forget the botnets!  Since there is now malware out that can utilize a person's GPU to mine coins, I wouldn't be surprised if as much as 1/3 of all the TH/s is acquired through botnet activity.
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September 30, 2011, 08:47:34 PM
 #41

Don't forget the botnets!  Since there is now malware out that can utilize a person's GPU to mine coins, I wouldn't be surprised if as much as 1/3 of all the TH/s is acquired through botnet activity.

1/3rd??? how do you figure that number?  that would be PR disaster for bitcoin...

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October 01, 2011, 01:50:41 AM
 #42

Don't forget the botnets!  Since there is now malware out that can utilize a person's GPU to mine coins, I wouldn't be surprised if as much as 1/3 of all the TH/s is acquired through botnet activity.

1/3rd??? how do you figure that number?  that would be PR disaster for bitcoin...
Just a guess.  But I wouldn't be surprised.

Antivirus agencies have already reported on systems being infected with GPU-mining trojans.  Since such viruses are out in the wild, who knows how many systems have been infected?  I think the last estimate was there was something like 50,000 GPU's making up the total amount of hashing power.  And there's how many computers in the world?  Several billion?  Granted, the vast vast majority of those do not have a graphics card capable of producing more than a few MH/s, but still, it wouldn't take much of a percentage of those billions of computers having a trojan to make up a decent amount of the total hashing power in the Bitcoin network.

Think about it...
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October 01, 2011, 06:58:50 AM
 #43

Just a guess.  But I wouldn't be surprised.

I would.  The vast majority of botnet machines are desktops in some office, for the simple reason that those are the vast majority of PCs.  These sorts of machines rarely have GPUs with any significant amount of hashpower.

The printing press heralded the end of the Dark Ages and made the Enlightenment possible, but it took another three centuries before any country managed to put freedom of the press beyond the reach of legislators.  So it may take a while before cryptocurrencies are free of the AML-NSA-KYC surveillance plague.
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October 01, 2011, 07:26:02 AM
 #44

Just a guess.  But I wouldn't be surprised.

I would.  The vast majority of botnet machines are desktops in some office, for the simple reason that those are the vast majority of PCs.  These sorts of machines rarely have GPUs with any significant amount of hashpower.

Ok, what's the typical botnet size?  And we'll go from there...
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October 01, 2011, 07:59:03 AM
 #45

There are more laptops than there are desktops. There are FAR more corporate style desktops than there are gaming rigs. I would be surprised if 1/10th of the PCs out there would be remotely suitable for mining.
Scratch that, more like 1/100, as it seems even among gamers,  only 5% has DX11 capable hardware:
http://store.steampowered.com/hwsurvey


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October 01, 2011, 08:03:34 AM
 #46

There are more laptops than there are desktops.

Another good point.  Can't believe I forgot about that.

Heat/power-sensitive laptops are great for sending "V14GR4 SP4MZ T0 3NL4RGE J00R M4NH00D!!!!" but pretty useless for mining.

The printing press heralded the end of the Dark Ages and made the Enlightenment possible, but it took another three centuries before any country managed to put freedom of the press beyond the reach of legislators.  So it may take a while before cryptocurrencies are free of the AML-NSA-KYC surveillance plague.
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October 01, 2011, 05:48:41 PM
 #47


Mining peaked around August 1, 2011.
The mining graph has roughly the shape of the Bitcoin/USD price graph, but trails it by about two months. One interpretation of this is that miners hang on an average of two months after they start losing money, then quit.

A proper economic analysis of this needs to take into account both the initial cost, buying the video cards, and the running cost (electricity). Back in June, miners thought that the price was going to keep on going up, so it was seen as worth it for a very large number of new miners to come in, and they did, paying the initial cost. The price went far down, and it is now no longer worth it for new miners to enter (unless they're not paying for their electricity), but even in July it was worth it for existing miners to keep mining.

In August, however, the price kept on falling, and fell below the threshold so that the least efficient of even the existing miners were forced to shut down, which is why it's only then that the number of miners started to go down. It's not a 2 month lag, it's http://en.wikipedia.org/wiki/Hysteresis - like a thermostat only increasing or decreasing the power to the heating when the temperature falls substantially below the target. The price threshold for miners to stay mining is about 1/3 of the threshold for there to be new miners, so there is a 3x range within which the price can change without changing the number of miners, but if the price falls outside the range it drags the number of miners up and down with it (technically, it's the expectation of future high prices that brings new miners in, and that's what happened in June, but it's a good simplification in the long term).

Argumentum ad lunam: the fallacy that because Bitcoin's price is rising really fast the currency must be a speculative bubble and/or Ponzi scheme.
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October 01, 2011, 07:10:26 PM
 #48

Regarding botnets GPU mining on the sly --

As someone pointed out, that's very difficult as many people would wonder why their office is suddenly 10 degrees hotter than it was last week, with the same outside temperature and/or household climate control settings.

"Last week, my A/C was set at 78 and my office was comfortable. Now it's too hot in there."

Don't you suppose some people would notice their graphics card spinning up its fan a LOT more than usual (which is usually never, unless you're playing a game).

Even CPU mining could be noticeable, as many CPU fans only spin up when the CPU is getting hot from 100% type work.

When PCs start grinding to a halt, the desktop graphics start lagging, etc. that's when people take their PC to the local PC doctor, or they wipe their machine.

BotnetPopulation = BotnetPopulation - 1


P.S. We had this discussion months ago, back in the glory days when BTC were still $18 or more each. Remember -- botnets have a monetary value for their owners. Now that a Bitcoin brings in a lousy $5, it's even less economically worth it to risk giving up an infected PC.
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October 01, 2011, 08:37:16 PM
 #49


Mining peaked around August 1, 2011.
The mining graph has roughly the shape of the Bitcoin/USD price graph, but trails it by about two months. One interpretation of this is that miners hang on an average of two months after they start losing money, then quit.

A proper economic analysis of this needs to take into account both the initial cost, buying the video cards, and the running cost (electricity). Back in June, miners thought that the price was going to keep on going up, so it was seen as worth it for a very large number of new miners to come in, and they did, paying the initial cost. The price went far down, and it is now no longer worth it for new miners to enter (unless they're not paying for their electricity), but even in July it was worth it for existing miners to keep mining.

In August, however, the price kept on falling, and fell below the threshold so that the least efficient of even the existing miners were forced to shut down, which is why it's only then that the number of miners started to go down. It's not a 2 month lag, it's http://en.wikipedia.org/wiki/Hysteresis - like a thermostat only increasing or decreasing the power to the heating when the temperature falls substantially below the target. The price threshold for miners to stay mining is about 1/3 of the threshold for there to be new miners, so there is a 3x range within which the price can change without changing the number of miners, but if the price falls outside the range it drags the number of miners up and down with it (technically, it's the expectation of future high prices that brings new miners in, and that's what happened in June, but it's a good simplification in the long term).

I mostly agree, except there is a delay. Bringing new rigs online takes time. First the miner has to be convinced its worth it, and the price increase isnt a fluke,  so he may watch prices for a while before deciding to buy. Then he has to order, build, configure. It takes time. Though probably not as much as reducing hashrate; first there is the same effect, miners will look at prices for a while before being convinced its not a short term dip and decide to pull the plugs and/or sell their equipment.  Look at the for sale section, there is gazillion cards for sale there now. I bet many still have their rigs running as marginal profits may still beat marginal costs for most people, so why not use them while they wait for their cards to be sold. To be fair, I suspect most cards bought on this forum will end up mining again, but on other fora I see truckloads of AMD cards being offered to gamers from miners who threw the towel.

In the long run, particularly if bitcoin price remains less volatile, this effect will fade. Miners are learning, some the hard way, the economics behind mining.  If there is a new big bubble you might get a similar effect from newcomers though.

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October 03, 2011, 08:27:13 PM
 #50

Regarding botnets GPU mining on the sly --

As someone pointed out, that's very difficult as many people would wonder why their office is suddenly 10 degrees hotter than it was last week, with the same outside temperature and/or household climate control settings.

"Last week, my A/C was set at 78 and my office was comfortable. Now it's too hot in there."

Don't you suppose some people would notice their graphics card spinning up its fan a LOT more than usual (which is usually never, unless you're playing a game).

Even CPU mining could be noticeable, as many CPU fans only spin up when the CPU is getting hot from 100% type work.

When PCs start grinding to a halt, the desktop graphics start lagging, etc. that's when people take their PC to the local PC doctor, or they wipe their machine.

BotnetPopulation = BotnetPopulation - 1


P.S. We had this discussion months ago, back in the glory days when BTC were still $18 or more each. Remember -- botnets have a monetary value for their owners. Now that a Bitcoin brings in a lousy $5, it's even less economically worth it to risk giving up an infected PC.
Honestly though, I mine on two machines I use daily.  It would be very difficult for me to notice a difference.  The fan on the GPUs are still nice and quiet (they're not overclocked), and there's no noticeable difference in heat.  I have a window A/C at home set to a specific temperature, and it stays there, regardless of heat output in the room.  The other computer is contained in a room of several hundred square feet, so obviously not going to be able to tell a difference in a room of that size.

There's no lagginess on the desktop, except slight lag when scrolling an Excel document, for instance.  But not something that someone who didn't have extensive knowledge of desktops wouldn't already know.  Games run perfectly, no lag.  If the botnet was set to mine very passively, as I have my computers set, it would only lose 5% or less of the total potential production, while being nearly invisible to the user of the computer.

There are more laptops than there are desktops. There are FAR more corporate style desktops than there are gaming rigs. I would be surprised if 1/10th of the PCs out there would be remotely suitable for mining.
Scratch that, more like 1/100, as it seems even among gamers,  only 5% has DX11 capable hardware:
http://store.steampowered.com/hwsurvey
Ok, let's go with 1/100.

Say you have a botnet of 50,000 computers infected with your GPU-mining trojan.  500 effective mining machines (say, 250MH/s each on average), and 49,500 ineffective miners (say, 2.5MH/s).  That's a 250 GH/s botnet.

Now, say you have 20 friends who have botnets themselves.  5 TH/s.

I'm not saying it is true (who knows how many computers might be infected except A/V companies), but only that it is possible, and I would not be surprised if a large portion of the current mining capacities were made up of botnets.
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October 03, 2011, 08:38:03 PM
 #51

Honestly though, I mine on two machines I use daily.  It would be very difficult for me to notice a difference.  The fan on the GPUs are still nice and quiet (they're not overclocked), and there's no noticeable difference in heat.  I have a window A/C at home set to a specific temperature, and it stays there, regardless of heat output in the room.  The other computer is contained in a room of several hundred square feet, so obviously not going to be able to tell a difference in a room of that size.

LOLZ.  What GPU.  On say a 5970 even underclocked the fan is very noticeable.  Not "oh my god I can't stand it" but no gamer is going to miss the fact that their GPU sounds like it is playing Crysis while sitting at the desktop.

Quote
Say you have a botnet of 50,000 computers infected with your GPU-mining trojan.  500 effective mining machines (say, 250MH/s each on average), and 49,500 ineffective miners (say, 2.5MH/s).  That's a 250 GH/s botnet.

Yeah @ 100% load 24/7/365 with heat blazing, fans screaming, and nobody noticing.  If you run if at lower load then it isn't going to generate anything like that.  Plus 50K computer botnet puts it in the top 3 botnets in the world.  There are 20 "friends" each with 50K botted computers (oh which also happens to have top of the line graphics cards on a significant fraction of them).

http://www.darkreading.com/security/security-management/208808174/index.html

Botnets are far more valuable for quick high value targets (like cracking password hashes, DDOS attacks, etc) not running 24/7/365 mining coins which is very easily detectable by end users.
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October 03, 2011, 08:47:30 PM
 #52

what's postulated here regarding botnets and bitcoin is lala-land...

no-one is going to not notice GPU being in use and they will figure it out...

further more, botnet'ed computers are probably not modern systems with up to date security (unless it got disabled, yeah, sure there maybe a small number, but not constant like this)... so that leaves botnets to be full of "older" poorly attended to/neglected computers... this is not going to be a system with lots of computing power by any good measure.

so, CPU is the only thing a botnet is good for for bitcoin hashing...

so if we assume that this really is out there on a MASSIVE scale of 50K machines and if you assume 2 Megahashes per CPU (could be hidden when idle), we then have ~100,000 Mhashes/sec. or 100 Gigahashes?  is that right?

this would be hardly noticeable...

does this make sense?

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October 03, 2011, 09:10:57 PM
 #53

Honestly though, I mine on two machines I use daily.  It would be very difficult for me to notice a difference.  The fan on the GPUs are still nice and quiet (they're not overclocked), and there's no noticeable difference in heat.  I have a window A/C at home set to a specific temperature, and it stays there, regardless of heat output in the room.  The other computer is contained in a room of several hundred square feet, so obviously not going to be able to tell a difference in a room of that size.

LOLZ.  What GPU.  On say a 5970 even underclocked the fan is very noticeable.  Not oh my god I can't stand it but no gamer isn't going to notice their GPU sounds like it is playing some Crysis while sitting at the desktop.

Quote
Say you have a botnet of 50,000 computers infected with your GPU-mining trojan.  500 effective mining machines (say, 250MH/s each on average), and 49,500 ineffective miners (say, 2.5MH/s).  That's a 250 GH/s botnet.

Yeah @ 100% load 24/7/365 with heat blazing, fans screaming, and nobody noticing.  If you run if at lower load then it isn't going to generate anything like that.  Plus 50K computer botnet puts it in the top 3 botnets in the world.  There are 20 "friends" each with 50K botted computers (oh which also happens to have top of the line graphics cards on a significant fraction of them).

http://www.darkreading.com/security/security-management/208808174/index.html

Botnets are far more valuable for quick high value targets (like cracking password hashes, DDOS attacks, etc) not running 24/7/365 mining coins which is very easily detectable by end users.
On a 5770 and 5850.  Neither are noticeable with the fan and GPU running.

I didn't realize botnets were that small... so I guess that counts my suspicions mostly invalid then.  Wink
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October 03, 2011, 10:46:06 PM
 #54

I didn't realize botnets were that small... so I guess that counts my suspicions mostly invalid then.  Wink

Well I wouldn't call 20K to 250K nodes small.  There are likely less than that mining bitcoins.  It is the rise of GPU that has provided bitcoin some level of protection to botnets.

Very rough (back of napkin numbers).


Current network hashing power is ~10TH/s.  Most of that comes from GPU.  Say average miner has 200MH/s of hashing power (now likely the average is higher but that just helps prove the point). That means bitcoin is powered by ~50,000 average GPU.   Say GPU mining didn't exist and instead everyone was CPU mining.  50,000 CPU would be enough to gain 51% of hashing power on the network.  Yeah very simplistic numbers but the reality is likely more difficult.  It is far easier to mine with 2, 3, 4 GPU than it is to mine with 2-4 CPU so the average node under a CPU only system would likely be much weaker.  Maybe even 80% weaker at which point even a 10,000 node botnet could present a real danger.

GPU caused two things:
1) made average mining hardware more powerful than average botnet hardware
2) created a compounding effect because it is relatively easy to mine with multiple GPU.

That combination means the average mining node is magnitudes more powerful than the average botnet thus requiring a staggering amount of bots to compromise bitcoin network and also makes the profit w/ subpar hardware minimal.
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October 04, 2011, 12:35:50 PM
 #55

Are there other miners out there like me who are still turning a profit?  When Bitcoins were $18 a piece I was making $300/month, now that the price is down I'm still making $90/month so I see no reason to quit.  I initially bought more efficient hardware (80 Plus Gold PSUs and Radeon 5000 series cards) so my watt consumption is rather low.  I am on the fence about building another rig at this time, I want to get another 5970 since the heat output will be negligible in the winter (just crack open the nearby door) but don't want to deal with that extra heat come next summer.  The 7970s coming out have made me reconsider investing again so soon.  My rigs are paid off at this point I'm just waiting to reinvest.  I definitely will not be buying any more 6950s since their hash/watt ratio is nowhere near 5770s or 5970s so hopefully the 7000 series cards will be far more energy efficient.

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October 04, 2011, 01:00:50 PM
 #56

Are there other miners out there like me who are still turning a profit?  When Bitcoins were $18 a piece I was making $300/month, now that the price is down I'm still making $90/month so I see no reason to quit.  I initially bought more efficient hardware (80 Plus Gold PSUs and Radeon 5000 series cards) so my watt consumption is rather low.  I am on the fence about building another rig at this time, I want to get another 5970 since the heat output will be negligible in the winter (just crack open the nearby door) but don't want to deal with that extra heat come next summer.  The 7970s coming out have made me reconsider investing again so soon.  My rigs are paid off at this point I'm just waiting to reinvest.  I definitely will not be buying any more 6950s since their hash/watt ratio is nowhere near 5770s or 5970s so hopefully the 7000 series cards will be far more energy efficient.

I think in the medium term nothing can touch the 5970s and that includes the futue 7xxx series.  The 7xxx series will likely close to double performance per watt and performance per $ however the prices will be back to full retail cutting into the value.

So while a 7990 will likely be in the ballpark of 2x the performance of a 5970 (or 6990) it will also be $750 to $800 making the hash per $$$ roughly the same or maybe a little worse. I bought some 5970s @ $400 and some used ones on ebay @ ~$350 simply because that is an amazing value even considering the potential for 7xxx series.  After the 7990 hits I imagine many gamers will drop their 5970s on ebay so there should be a good market for me to cheaply expand hardware. 

I am actually slowly getting rid of my 6950s and 6970s because the 5970s beats them in every category (density, price, efficiency).  My goal is to consolidate my hardware (currently 8 rigs both open and closed cases with 3-6 cards of various types) into 6 standardized open frame rigs of 4x 5970s ea in the garage plus my watercooled workstation w/ 3x 5970 in the office.  That should give me ~19 GH/s (maybe an even 20GH/s if I can tweak a little more out of em) at very low cost per MH and decent MH/kWh (~2MH/kWh).

Now on price per watt level the 7xxx series is going to rule however my electrical costs are relatively low (about $0.09 per kWh) thus my gamble is that lower capital cost is worth more than lower power costs (at least initially).  At current difficulty a block costs me $90 in electrical costs.  The price / difficult ratio would have to fall 64% from current levels (price falls or difficult rises) before I am below break even.
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October 04, 2011, 01:27:20 PM
 #57


I think nothing can touch the 5970s and that includes the futue 7xxx series.  The 7xxx series will likely close to double performance per watt and performance per $ however the prices will be back to full retail.


I agree completely.  I hated my 5970 at first but seeing the hash/watt performance nothing else comes close, for long-term mining these are hands down the best card.  The fan was loud for the first month but after it burned in I lowered my fan speed 10% and it's not much louder than a table fan on high.  I wish I had money today to buy some on Newegg with the $100 off promo, hopefully they extend it one more week and I can nab another one.  The 7xxx series will be worth it in the long run if their hash/watt performance is close to the estimates so far.  Looking forward to those cards Cheesy

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October 04, 2011, 07:01:24 PM
 #58


I think nothing can touch the 5970s and that includes the futue 7xxx series.  The 7xxx series will likely close to double performance per watt and performance per $ however the prices will be back to full retail.


I agree completely.  I hated my 5970 at first but seeing the hash/watt performance nothing else comes close, for long-term mining these are hands down the best card.  The fan was loud for the first month but after it burned in I lowered my fan speed 10% and it's not much louder than a table fan on high.  I wish I had money today to buy some on Newegg with the $100 off promo, hopefully they extend it one more week and I can nab another one.  The 7xxx series will be worth it in the long run if their hash/watt performance is close to the estimates so far.  Looking forward to those cards Cheesy

you can get similar perf/watt with normal cards by not over clocking them or undervolting and slightly underclocking (which is how the 5970 does its magic).
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October 04, 2011, 07:08:06 PM
 #59

True but then 5970 is just even better in terms of MHash/$ by comparison.

What makes the 5970 nice is the combination of BOTH high MHashes/$ AND MHashes/Watt.
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October 04, 2011, 09:30:56 PM
 #60

Seriously i do not think a big portion of miners really left, but am certain many are waiting to bitcoin become profitable for them again.
I am fairly new to this but when i saw what my 5870 brings in 10 minutes i already knew it was not going to be impressive
The friend who asked me to see this, said to me that you should run it about a day or so to get a block.
Which would give me some higher gain.... and according to him he got 1 block about every day giving him something near 1.xxxx btc
After 40+ hours running in a pool i made the super big amount of 0,21 BTC and non block ever showed up.
I only see the top guys scoring up to hundred or more blocks

But for beginners like me its impossible to get even a tiny profit in the current state, because even while many miners are inactive or left the difficulty is still darn high to give people like me a change

But now comes the fun with the current price of electricity in our country we pay that company a fortune.
And for what to receive 1/10 the value i spend and probably even a lot less
So i constant am amazed people dare to say that mining is profitable, except the ones living in a country where the cost of electricity is still low (usa)
I am certain that non of the people in england/germany/netherlands/belgium are loosing money when mining if they would do it
Ofcourse the old school miners who made a fortune at the start of the bitcoin did, or the ones who setup a pool benefit probably pretty well here.
Others who have tons of money probably can risk trading, but again i am not one of them who can do that
So only those who do not pay the electricity bill themselfs can make some profit but when mom/dad finds out they won't be happy.
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October 04, 2011, 10:00:56 PM
 #61

Your friend is clueless or hasn't mined in a very very very very long time.

At 400MH/s (your current speed?) and current difficulty you will find about 1 block per 193 days not 1 block per day.  The chance of finding 1 block in 1 day @ 400MH/s is 1 in 200.  The chance you would find 1 block a day for 3 days in a row is roughly 1 in 8,000,000.

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October 04, 2011, 10:11:58 PM
 #62

@DeathAndTaxes I think what his friend meant is after a day the pool will have found and verified a block, so he'd get his first payment.

@OP, As for the returns, if it was as profitable as printing money, everyone would do it Smiley. The reality is, its not profitable (anymore) unless you have cheap electricity. It doesnt matter if you have 1 card or 1000. The revenue scales linearly but so do the electricity costs. You can calculate it fairly precisely here:
http://bitcoinx.com/profit/

All that said, these days are the worst days in bitcoin mining history; the price is down by a lot and difficulty has not come down yet to match the lower global hashrate. There is a delay. Its coming down, and who knows, with some luck price will go up a bit, but even so, its never going to be lucrative if you have expensive electricity.

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October 05, 2011, 12:43:58 AM
 #63

Well,not mining on my 6970 crossfire setup until BTC goes up to at least $10 per.Still running my 6950 @ 360mhs though.

I'm in Fla with 11 cents per kwh,@ $80 a month extra for all rigs,just not enough margin for me.Just the 1 little rig will be around $20 month,I can cover that with my wages.

I'll be playin BF3 & BC2 with my big rig Grin

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