Warning to the bulls...

[Crypt_Current]

The fact that you are making profit from mining at all underlines another fact - that the price is currently overvalued.

I just don't get why people think there should be zero profit for mining. I agree it shouldn't be a huge profit, but break-even mining removes the incentive to secure the network. Would you (or anyone else for that matter) work to only be able to pay for the gas used to get you there? What would be the point?

This, for sure.  IMO most of the people that poo-poo mining profits don't really understand how much of an undertaking it really is, if you want to stay competitive.  Plus, it's a neat hobby for those so inclined to maintaining computer hardware for specialty purposes, and it's REALLY damn neat and fun and exciting because the miner supports a necessary function, which really literally has the potential to change the entire world's monetary base, and even the potential to change the way the world views money and economy.  But I'm sure you've heard all THAT before...  

Fact of the matter is, I *LOVE* playing with comp hardware, and some people don't.  Getting it to all work together efficiently is part art, part science, and that is the type of WORK that certain people gravitate to.  It takes substantial WORK, above and beyond the raw resources (hardware, power) to efficiently mine btc and a profit is deserved for that work.

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[Crypt_Current]

I just don't get why people think there should be zero profit for mining. I agree it shouldn't be a huge profit, but break-even mining removes the incentive to secure the network. Would you (or anyone else for that matter) work to only be able to pay for the gas used to get you there? What would be the point?

The incentive is to ensure that the transactions you send to others and perhaps more importantly those you are receiving are processed efficiently. That is the only incentive required in my view. In the future, most of the 'mining' and securing of the network will be done by those with the greatest vested interest in the system itself - i.e those with profitable businesses that require the bitcoin system to function efficiently as a means of payment. They won't care about mining at a loss, when they are making plenty of profit from their individual enterprises. Do you think banks require their computer and telecommunication systems to have zero depreciation over time?

Computer and telecom systems are often outsourced, and I see outsourcing of bitcoin mining farms (hell maybe even have them in house) in the future.  Hopefully powered by wind, solar, or bio-diesel generators.

[Crypt_Current]

The fact that you are making profit from mining at all underlines another fact - that the price is currently overvalued.

Is network administration overvalued?  How about network security?  By your logic, these professions should not be profitable and perhaps not compensated monetarily?

[mjcmurfy]

Is network administration overvalued?  How about network security?  By your logic, these professions should not be profitable and perhaps not compensated monetarily?

You have a point actually. Do we really need network administrators for a network that will administer itself? Do we need experts in network security, when the network has it's own self-adaptive defense mechanisms? Networks in the future will have brains and immune systems of their own. They will not need our inefficient help, other than for unskilled manual labour - which may itself not even be required in time. The singularity is near...

[RyNinDaCleM]

I just don't get why people think there should be zero profit for mining. I agree it shouldn't be a huge profit, but break-even mining removes the incentive to secure the network.

The incentive is to ensure that the transactions you send to others and perhaps more importantly, those you are receiving, are processed quickly, correctly, and efficiently. That is the only incentive required in my view. In the future, most of the mining will be done by those with the greatest vested interest in the system itself - i.e those with profitable businesses that require the bitcoin system to function efficiently as a means of payment.

They won't care about mining at break-even, or even at a loss, when they are making plenty of profit from their individual bitcoin enterprises. Do you think banks and huge corporations require their computer and telecommunication systems to have zero depreciation, or indeed appreciation? They count these expenses as operating costs, and bitcoin mining will be no different.

Would you (or anyone else for that matter) work to only be able to pay for the gas used to get you there? What would be the point?

No I wouldn't. But if traveling there and back was the only work I actually had to do, and if I had no other obligations, I may just go along for the ride. If I liked driving enough, I'd be more than willing for someone else to pay for my pastime. I might even net a few bucks if I could find a gas station selling cheap fuel. At least until I realized what a waste of resources the whole venture was, and started to feel a bit guilty about the environment.

These are valid points.  However, There is plenty of work involved in maintaining and to a lesser extent operating mining rigs/farms as pointed out by Crypt-Current. But, to expect people to mine for zero profit out of the kindness of their hearts, so others with zero costs can send a tx at THIS early stage in the project just dumbfounds me. Don't get me wrong, I mined for 6 weeks at a loss because it's what I do, and I don't have a problem with the small loss. I make far more from trading anyway. The same mindset would be the example of the business that relies on their own mining efforts to send and receive tx. Most others right now aren't so generous though.

Difficulty is what balances the profits. When price rises, difficulty is sure to follow. So, profits are driven down. When profit drops below comfort level, miners will start to drop out.
If they continue to make a small profit, the difficulty will remain high enough to keep massive profits in check, while still being worth the time to mine.

I'm not trying to troll you. I have just read so many posts of "Miners shouldn't make any money".  It's kind of aggravating, and I am done now.
BTT 

[anu]

True, and that is exactly why the price is so easy to manipulate right now. But rationality always wins out in the end.

What has rationality to do with economy? If everyone would act strictly "rational", the economy would spiral down because almost all of the economy is driven by men's sex drive. So what rationality do you think will win out at the end? The rationality of Diogenes?

[Crypt_Current]

True, and that is exactly why the price is so easy to manipulate right now. But rationality always wins out in the end.

What has rationality to do with economy? If everyone would act strictly "rational", the economy would spiral down because almost all of the economy is driven by men's sex drive. So what rationality do you think will win out at the end? The rationality of Diogenes?

I'm pro-technology, and I think this is an appropriate place to point out that life-extension technology (not limited to, but definitely including plastic surgery) is getting better and better, such that we are seeing hotter and hotter cougars.  Maybe someday soon the economy will be largely driven by womens' sex drives.

[mobodick]

Bitcoin is a fantastic, world-changing technology. But a few people are getting WAY ahead of themselves. The price of a bitcoin cannot be supported by wishes and dreams. In the end, the market will decide a price that is reflective of the underlying bitcoin economy. Bitcoin can be used as a viable trade medium at any price, granted, but at the same time it will not, and cannot, be held artificially afloat for long.

That's not what i'm seing.
The BC economy is much smaller than the action on the exchanges.
So the actual influence of the economy will be smaller and basicly bitcoin is played by speculators.
And miners, which produce bitcoin.
The economy just tags along. They had to deal with sub-1 prices, they had to deal with 30+ prices and then back to 2 and now 5 again.
That price is not driven by the sales of goos or services for bitcoin. It's way too unpredictable for that.
If you see a rally on the exchanges it is not because people spend bitcoin in shops. It is purely people speculating or dumping their mined coins. Those are the real factors in the price.
I have been unable to find back the effects of the 'economy' (goods/services) on bitcoin pricing.
But sentiment and speculation trends are easy to find.
So, in fact, bitcoin has been supported by wishes and dreams all along.

[cypherdoc]

Silver taking a beating again today.  C'mon over to the Bitcoin side!

[cypherdoc]

i hear an apology coming...

[ineededausername]

i hear an apology coming...

a very heartfelt apology

[rebuilder]

I just don't get why people think there should be zero profit for mining. I agree it shouldn't be a huge profit, but break-even mining removes the incentive to secure the network. Would you (or anyone else for that matter) work to only be able to pay for the gas used to get you there? What would be the point?

I don't see what there is to argue about. Miners mine, they are paid a reward
. No-one decides how much of a profit they make.

[Gabi]

Is network administration overvalued?  How about network security?  By your logic, these professions should not be profitable and perhaps not compensated monetarily?

You have a point actually. Do we really need network administrators for a network that will administer itself? Do we need experts in network security, when the network has it's own self-adaptive defense mechanisms? Networks in the future will have brains and immune systems of their own. They will not need our inefficient help, other than for unskilled manual labour - which may itself not even be required in time. The singularity is near...

Then we will need John Connor

[bitcoinBull]

Bitcoin is a fantastic, world-changing technology. But a few people are getting WAY ahead of themselves. The price of a bitcoin cannot be supported by wishes and dreams. In the end, the market will decide a price that is reflective of the underlying bitcoin economy. Bitcoin can be used as a viable trade medium at any price, granted, but at the same time it will not, and cannot, be held artificially afloat for long.

That's not what i'm seing.
The BC economy is much smaller than the action on the exchanges.
So the actual influence of the economy will be smaller and basicly bitcoin is played by speculators.
And miners, which produce bitcoin.
The economy just tags along. They had to deal with sub-1 prices, they had to deal with 30+ prices and then back to 2 and now 5 again.
That price is not driven by the sales of goos or services for bitcoin. It's way too unpredictable for that.
If you see a rally on the exchanges it is not because people spend bitcoin in shops. It is purely people speculating or dumping their mined coins. Those are the real factors in the price.
I have been unable to find back the effects of the 'economy' (goods/services) on bitcoin pricing.
But sentiment and speculation trends are easy to find.
So, in fact, bitcoin has been supported by wishes and dreams all along.

This^

Market speculation will necessarily be many multiples of 'spending'... I have tried to explain this. It is not an aberration, it is how currencies work. M0 will always be a fraction of M2.

Glad that there's at least a couple of people who share my view.  To look for an "underlying economy" of merchants is looking at the thing upside-down.  Just as with dollars, the volume of speculative exchange far exceeds the volume of commercial trade (trillions each day in Forex, while real GDP is only trillions each year).  And that's with a "real currency".

What if bitcoin is, as that Wired article suggests, a "meta-currency".  The term implies that its primary use will be as a go-between for the real-world currencies.  Price is determined by speculation, which then forms the base for commerce.  Again, speculation supports commerce, not the other way around.  The volume of commerce is just a fraction of the bitcoin economy, which is the huge exchange volume (speculative or otherwise) staring everyone in the face.

Is there any reason or historical precedent that the commerce should come before the speculation?  That seems backwards.  Which came first: that bullion became valuable because it could be used to buy things, or that bullion could be used to be used to buy things because its inherent properties were conducive to storing value?

[cypherdoc]

Bitcoin is a fantastic, world-changing technology. But a few people are getting WAY ahead of themselves. The price of a bitcoin cannot be supported by wishes and dreams. In the end, the market will decide a price that is reflective of the underlying bitcoin economy. Bitcoin can be used as a viable trade medium at any price, granted, but at the same time it will not, and cannot, be held artificially afloat for long.

That's not what i'm seing.
The BC economy is much smaller than the action on the exchanges.
So the actual influence of the economy will be smaller and basicly bitcoin is played by speculators.
And miners, which produce bitcoin.
The economy just tags along. They had to deal with sub-1 prices, they had to deal with 30+ prices and then back to 2 and now 5 again.
That price is not driven by the sales of goos or services for bitcoin. It's way too unpredictable for that.
If you see a rally on the exchanges it is not because people spend bitcoin in shops. It is purely people speculating or dumping their mined coins. Those are the real factors in the price.
I have been unable to find back the effects of the 'economy' (goods/services) on bitcoin pricing.
But sentiment and speculation trends are easy to find.
So, in fact, bitcoin has been supported by wishes and dreams all along.

This^

Market speculation will necessarily be many multiples of 'spending'... I have tried to explain this. It is not an aberration, it is how currencies work. M0 will always be a fraction of M2.

Glad that there's at least a couple of people who share my view.  To look for an "underlying economy" of merchants is looking at the thing upside-down.  Just as with dollars, the volume of speculative exchange far exceeds the volume of commercial trade (trillions each day in Forex, while real GDP is only trillions each year).  And that's with a "real currency".

What if bitcoin is, as that Wired article suggests, a "meta-currency".  The term implies that its primary use will be as a go-between for the real-world currencies.  Price is determined by speculation, which then forms the base for commerce.  Again, speculation supports commerce, not the other way around.  The volume of commerce is just a fraction of the bitcoin economy, which is the huge exchange volume (speculative or otherwise) staring everyone in the face.

Is there any reason or historical precedent that the commerce should come before the speculation?  That seems backwards.  Which came first: that bullion became valuable because it could be used to buy things, or that bullion could be used to be used to buy things because its inherent properties were conducive to storing value?

+1

[anu]

The price of a bitcoin cannot be supported by wishes and dreams.

Nothing else supports a price. Tell me: What would the price of anything be in a world of enlightened Buddhas with no wishes and dreams?

[Piper67]

Bitcoin is a fantastic, world-changing technology. But a few people are getting WAY ahead of themselves. The price of a bitcoin cannot be supported by wishes and dreams. In the end, the market will decide a price that is reflective of the underlying bitcoin economy. Bitcoin can be used as a viable trade medium at any price, granted, but at the same time it will not, and cannot, be held artificially afloat for long.

That's not what i'm seing.
The BC economy is much smaller than the action on the exchanges.
So the actual influence of the economy will be smaller and basicly bitcoin is played by speculators.
And miners, which produce bitcoin.
The economy just tags along. They had to deal with sub-1 prices, they had to deal with 30+ prices and then back to 2 and now 5 again.
That price is not driven by the sales of goos or services for bitcoin. It's way too unpredictable for that.
If you see a rally on the exchanges it is not because people spend bitcoin in shops. It is purely people speculating or dumping their mined coins. Those are the real factors in the price.
I have been unable to find back the effects of the 'economy' (goods/services) on bitcoin pricing.
But sentiment and speculation trends are easy to find.
So, in fact, bitcoin has been supported by wishes and dreams all along.

This^

Market speculation will necessarily be many multiples of 'spending'... I have tried to explain this. It is not an aberration, it is how currencies work. M0 will always be a fraction of M2.

Glad that there's at least a couple of people who share my view.  To look for an "underlying economy" of merchants is looking at the thing upside-down.  Just as with dollars, the volume of speculative exchange far exceeds the volume of commercial trade (trillions each day in Forex, while real GDP is only trillions each year).  And that's with a "real currency".

What if bitcoin is, as that Wired article suggests, a "meta-currency".  The term implies that its primary use will be as a go-between for the real-world currencies.  Price is determined by speculation, which then forms the base for commerce.  Again, speculation supports commerce, not the other way around.  The volume of commerce is just a fraction of the bitcoin economy, which is the huge exchange volume (speculative or otherwise) staring everyone in the face.

Is there any reason or historical precedent that the commerce should come before the speculation?  That seems backwards.  Which came first: that bullion became valuable because it could be used to buy things, or that bullion could be used to be used to buy things because its inherent properties were conducive to storing value?

Yup. This is why we won't see Bitcoin taken seriously until it can manage sustained exchange rates above $50/BTC. Because without that you can not make even reasonably large purchases without causing a liquidity crisis. Trading has to be many multiplies of 'spending' volume or 'spending' will result in wild swings in the exchange rate. If folks want to see a 'stable' Bitcoin (i.e. highly correlated to other currencies) there will first have to be trading volume to support a minimum exchange rate of $50. That means Bitcoin can be a billion dollar market... Without that, it's a niche curiosity.

The other advantage of a high price per BTC is that it weeds out small time manipulators. If each BTC is worth upwards of $50, manipulating the market becomes a much more expensive proposition. Not impossible, by any means, but only within reach of those able to manage large sums of money.

[proudhon]

Bitcoin is a fantastic, world-changing technology. But a few people are getting WAY ahead of themselves. The price of a bitcoin cannot be supported by wishes and dreams. In the end, the market will decide a price that is reflective of the underlying bitcoin economy. Bitcoin can be used as a viable trade medium at any price, granted, but at the same time it will not, and cannot, be held artificially afloat for long.

That's not what i'm seing.
The BC economy is much smaller than the action on the exchanges.
So the actual influence of the economy will be smaller and basicly bitcoin is played by speculators.
And miners, which produce bitcoin.
The economy just tags along. They had to deal with sub-1 prices, they had to deal with 30+ prices and then back to 2 and now 5 again.
That price is not driven by the sales of goos or services for bitcoin. It's way too unpredictable for that.
If you see a rally on the exchanges it is not because people spend bitcoin in shops. It is purely people speculating or dumping their mined coins. Those are the real factors in the price.
I have been unable to find back the effects of the 'economy' (goods/services) on bitcoin pricing.
But sentiment and speculation trends are easy to find.
So, in fact, bitcoin has been supported by wishes and dreams all along.

This^

Market speculation will necessarily be many multiples of 'spending'... I have tried to explain this. It is not an aberration, it is how currencies work. M0 will always be a fraction of M2.

Glad that there's at least a couple of people who share my view.  To look for an "underlying economy" of merchants is looking at the thing upside-down.  Just as with dollars, the volume of speculative exchange far exceeds the volume of commercial trade (trillions each day in Forex, while real GDP is only trillions each year).  And that's with a "real currency".

What if bitcoin is, as that Wired article suggests, a "meta-currency".  The term implies that its primary use will be as a go-between for the real-world currencies.  Price is determined by speculation, which then forms the base for commerce.  Again, speculation supports commerce, not the other way around.  The volume of commerce is just a fraction of the bitcoin economy, which is the huge exchange volume (speculative or otherwise) staring everyone in the face.

Is there any reason or historical precedent that the commerce should come before the speculation?  That seems backwards.  Which came first: that bullion became valuable because it could be used to buy things, or that bullion could be used to be used to buy things because its inherent properties were conducive to storing value?

Yup. This is why we won't see Bitcoin taken seriously until it can manage sustained exchange rates above $50/BTC. Because without that you can not make even reasonably large purchases without causing a liquidity crisis. Trading has to be many multiplies of 'spending' volume or 'spending' will result in wild swings in the exchange rate. If folks want to see a 'stable' Bitcoin (i.e. highly correlated to other currencies) there will first have to be trading volume to support a minimum exchange rate of $50. That means Bitcoin can be a billion dollar market... Without that, it's a niche curiosity.

The other advantage of a high price per BTC is that it weeds out small time manipulators. If each BTC is worth upwards of $50, manipulating the market becomes a much more expensive proposition. Not impossible, by any means, but only within reach of those able to manage large sums of money.

Seems like manipulating the price down would be pretty easy for those people with many tens of thousands of bitcoins.

[Piper67]

Bitcoin is a fantastic, world-changing technology. But a few people are getting WAY ahead of themselves. The price of a bitcoin cannot be supported by wishes and dreams. In the end, the market will decide a price that is reflective of the underlying bitcoin economy. Bitcoin can be used as a viable trade medium at any price, granted, but at the same time it will not, and cannot, be held artificially afloat for long.

That's not what i'm seing.
The BC economy is much smaller than the action on the exchanges.
So the actual influence of the economy will be smaller and basicly bitcoin is played by speculators.
And miners, which produce bitcoin.
The economy just tags along. They had to deal with sub-1 prices, they had to deal with 30+ prices and then back to 2 and now 5 again.
That price is not driven by the sales of goos or services for bitcoin. It's way too unpredictable for that.
If you see a rally on the exchanges it is not because people spend bitcoin in shops. It is purely people speculating or dumping their mined coins. Those are the real factors in the price.
I have been unable to find back the effects of the 'economy' (goods/services) on bitcoin pricing.
But sentiment and speculation trends are easy to find.
So, in fact, bitcoin has been supported by wishes and dreams all along.

This^

Market speculation will necessarily be many multiples of 'spending'... I have tried to explain this. It is not an aberration, it is how currencies work. M0 will always be a fraction of M2.

Glad that there's at least a couple of people who share my view.  To look for an "underlying economy" of merchants is looking at the thing upside-down.  Just as with dollars, the volume of speculative exchange far exceeds the volume of commercial trade (trillions each day in Forex, while real GDP is only trillions each year).  And that's with a "real currency".

What if bitcoin is, as that Wired article suggests, a "meta-currency".  The term implies that its primary use will be as a go-between for the real-world currencies.  Price is determined by speculation, which then forms the base for commerce.  Again, speculation supports commerce, not the other way around.  The volume of commerce is just a fraction of the bitcoin economy, which is the huge exchange volume (speculative or otherwise) staring everyone in the face.

Is there any reason or historical precedent that the commerce should come before the speculation?  That seems backwards.  Which came first: that bullion became valuable because it could be used to buy things, or that bullion could be used to be used to buy things because its inherent properties were conducive to storing value?

Yup. This is why we won't see Bitcoin taken seriously until it can manage sustained exchange rates above $50/BTC. Because without that you can not make even reasonably large purchases without causing a liquidity crisis. Trading has to be many multiplies of 'spending' volume or 'spending' will result in wild swings in the exchange rate. If folks want to see a 'stable' Bitcoin (i.e. highly correlated to other currencies) there will first have to be trading volume to support a minimum exchange rate of $50. That means Bitcoin can be a billion dollar market... Without that, it's a niche curiosity.

The other advantage of a high price per BTC is that it weeds out small time manipulators. If each BTC is worth upwards of $50, manipulating the market becomes a much more expensive proposition. Not impossible, by any means, but only within reach of those able to manage large sums of money.

Seems like manipulating the price down would be pretty easy for those people with many tens of thousands of bitcoins.

True, and if that was the case with very early adopters, it would make sense. Or, for that matter, for anyone who suddenly found themselves in possession of huge quantities of BTC (i.e. the allinvain or mybitcoin theft). But it would make very little sense for someone who has either mined or hoarded to dump extremely large amounts into the market, IF the price per BTC is as high as that.

My point is that higher prices actually dampen the ability to manipulate in either direction. If I own 100K BTC, and the price is at $50, I have little incentive to dump them all at once (unless I want to buy myself a mansion), when smaller sales will satisfy my needs and maintain the value on the BTC that remain.

[evoorhees]

I just don't get why people think there should be zero profit for mining.

It's not that there should be "zero profit." Rather, profit for miners will tend toward zero, always. This is not unique to bitcoin mining, but is a phenomenon of all markets - profit rates tend toward zero as competition chases efficiency. It's an asymptote, of course, but it's important to understand the tendency.

Further, since all miners don't have the same electric and component costs, mining will always be unprofitable for some people in some areas.