If you're thinking buying mining hardware, read this first

[tomcollins]

Just my own story. I bought my first bitcoin mining rig and got it mining on April 1st. 2x5970's, system cost me $1500. In April it made just under 500 bitcoins for me. I sold them when bitcoins hit $3.80 shortly before coinpal went down. I made enough money in one month to pay for the machine and the electricity it used. So yes, building a mining rig right now is still very profitable.

mtGox price on Apr 1- $.70
$1500/ .70 = 2142.86BTC

mtGox price now - $3.205

2142.86 * 3.205 = $6867

Total Profit: $5367.86

vs. Total Profit of $0 (your numbers).  Fantastic decision!

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[tomcollins]

The difficulty is limited by the price because most people will only mine when it is profitable.  A large amount of hashing power was added to the network after the rise in price by people who turned there miners back on because it was profitable to mine again. (sorry that's a bit of a run on)  I'm rather surprised someone else didn't mention this when discussing the problem with the rising difficulty.  I agree that to many people are using bitcoin as a get rich quick scam (who really knows what other people are thinking) but I know many people are mining because they really believe in bitcoins.

Electricity costs are such a minor part of the equation, though.  The price needs to get super low or the difficulty super high for the best rigs to be unprofitable just looking at electricity.  The cost is the rig itself, which is difficult to recoup the investment from (it takes a while to generate enough coins to make back that investment).  In the mean time, you could have bought Bitcoins up front, and had them all go up, rather than fight to get them against increasing difficulty.

But if you already have most of the hardware and it's sitting idle, buying a few cards can be a good idea.  It's a lot easier to recoup a $300 graphics card than a $3000 rig.

[JJG]

Just my own story. I bought my first bitcoin mining rig and got it mining on April 1st. 2x5970's, system cost me $1500. In April it made just under 500 bitcoins for me. I sold them when bitcoins hit $3.80 shortly before coinpal went down. I made enough money in one month to pay for the machine and the electricity it used. So yes, building a mining rig right now is still very profitable.

mtGox price on Apr 1- $.70
$1500/ .70 = 2142.86BTC

mtGox price now - $3.205

2142.86 * 3.205 = $6867

Total Profit: $5367.86

vs. Total Profit of $0 (your numbers).  Fantastic decision!

Well done.  

Not to mention, I didn't start this thread telling people to not buy rigs to start mining on April 1st. I started this thread to tell people not to buy rigs now that difficulty has gone up and is rapidly increasing.

I'm not sure how you went from "I built a rig 5 weeks ago when the difficulty was much lower and broke even by cashing out at the peak of the market" to "building a mining rig right now is still very profitable".

[slurch]

I agree that to many people are using bitcoin as a get rich quick scam (who really knows what other people are thinking) but I know many people are mining because they really believe in bitcoins.

^^

I'm mining because I believe in Bitcoins. Also, because I hate the US Dollar and how we've all been robbed.

The difficulty is limited by the price because most people will only mine when it is profitable.  A large amount of hashing power was added to the network after the rise in price by people who turned there miners back on because it was profitable to mine again. (sorry that's a bit of a run on)  I'm rather surprised someone else didn't mention this when discussing the problem with the rising difficulty.  I agree that to many people are using bitcoin as a get rich quick scam (who really knows what other people are thinking) but I know many people are mining because they really believe in bitcoins.

But if you already have most of the hardware and it's sitting idle, buying a few cards can be a good idea.  It's a lot easier to recoup a $300 graphics card than a $3000 rig.

Or if you can get the hardware for dirt cheap (like the deal I just found...2 boxes, no hard drives, 1 missing PSU, both boards with a PCI-e x16 slot, processors, heat sinks, giant fans abound for $125), then there's no offset. Or very little. Hell, when I'm done, I can always get some monitors and have a LAN Party. That's the thing about mining hardware...you don't HAVE to use it just to mine with. Lots of other uses for it.

[slurch]

Just my own story. I bought my first bitcoin mining rig and got it mining on April 1st. 2x5970's, system cost me $1500. In April it made just under 500 bitcoins for me. I sold them when bitcoins hit $3.80 shortly before coinpal went down. I made enough money in one month to pay for the machine and the electricity it used. So yes, building a mining rig right now is still very profitable.

mtGox price on Apr 1- $.70
$1500/ .70 = 2142.86BTC

mtGox price now - $3.205

2142.86 * 3.205 = $6867

Total Profit: $5367.86

vs. Total Profit of $0 (your numbers).  Fantastic decision!

Brutal, guys.

Edit: My story...purchased 5830 for $109 for 4/12 mining start. Made 55 BTC so far.
My way: 55BTC x $3.235 = $177.93 - $109 (card) - $12 (estimated power cost at 4.8 cent/kW) = $56.93 profit
Your way: $109/$0.77 (MtGox price on 4/12) = 141.56 BTC x $3.235 = $456.95 - $109 = $347.95 profit

Touche, I guess. Mining for profit = not as efficient as playing the market.

Good thing I'm not mining for profit.

[JJG]

Again, I seriously do not know why you would spend this much effort on this particular topic.

Earlier in this thread you justified going to a lot of effort and spending a lot of money to mine at a loss out of nothing more than passion. Now you're questioning why I'm spending a few minutes per day posting in a forum?

Honestly, I'm stunned at the amount of misinformation that floats around these forums, and I cringe every time I see someone rushing out to pour money into dedicated mining rigs without understanding what rising difficulty means to their profits.

Read through the profitability posts here. The majority of them go something like this:

1) Look up video card hash rates on the wiki
2) Look up hardware costs on Newegg
3) Put projected hash rate numbers into generic income calculator with current difficulty and exchange rates
4) Multiply current projected income by 3 months, subtract upfront hardware costs
5) Become convinced that buying a mining rig is the best decision they can make

Of course, by the time the hardware shows up difficulty is up by 30% and quickly rising. These people aren't going to come anywhere near their projected profits. Meanwhile, it's stunning how hard people try to convince themselves and each other that they made the right decision.

It's like politics. If you can mathematically or logically prove that someone is wrong, chances are good that s/he will actually become more convinced of their correctness. Happens all the time, and it's happening here now. No amount of math or models or facts seems to convince people otherwise.

[slurch]

Right, let's take a market and two extreme points in the past, than assume we buy at the exact bottom, and than sell at exact top. Moreover, the market moved like 600% between the extremes.

Than we compare this with any other investment on the planet and say fi.

What a bunch of rear mirror drivers.


If I bought BRK/A sometime in the past for 10$ I would be even smarter than you guys.

What's that they say? Hindsight is always 20/20?

[JJG]

Right, let's take a market and two extreme points in the past, than assume we buy at the exact bottom, and than sell at exact top. Moreover, the market moved like 600% between the extremes.

Than we compare this with any other investment on the planet and say fi.

What a bunch of rear mirror drivers.


If I bought BRK/A sometime in the past for 10$ I would be even smarter than you guys.

vladimir, I think you missed the point of the post.

tomcollins was showing that if he had bought BTC on the exact day he starting his mining rig, then sold the same BTC on the same day he cashed out his mining BTC, he would have made much more profit. tomcollins didn't pick those dates, mjsbuddha did.

[slurch]

and I cringe every time I see someone rushing out to pour money into dedicated mining rigs without understanding what rising difficulty means to their profits

Why? I guess that's the question I've been asking.

[JJG]

and I cringe every time I see someone rushing out to pour money into dedicated mining rigs without understanding what rising difficulty means to their profits

Why? I guess that's the question I've been asking.

Why not? If you saw someone about to make a bad investment with bad information, wouldn't you say something? I'm not just going to sit here and watch the carnage.

[slurch]

and I cringe every time I see someone rushing out to pour money into dedicated mining rigs without understanding what rising difficulty means to their profits

Why? I guess that's the question I've been asking.

Why not? If you saw someone about to make a bad investment with bad information, wouldn't you say something? I'm not just going to sit here and watch the carnage.

I suppose I would.

I guess it's a touchy point for me. I haven't made the investment in hardware yet. I bought a video card (which I needed desperately...no one wants to see a 2.9 WEI score for Graphics) and I got a pretty good deal on it to boot, so I don't feel like I've "invested" in hardware yet. Even the tinkering I plan on doing (which, I'll admit, would be just that) probably won't set me back an awful lot.

I wouldn't want to discourage anyone from mining...but I would want them to know that they are not poised to be filthy rich from doing so...and it may even cost them in the long run.

[JJG]

JJG, still when buying mining hardware an investor did not know that there will be 600% raise in bitcoins in a few weeks. From point of view risk/reward his choice was pretty reasonable (then). It is still rear view driving when you compare his profits with HUGELY UNBELIEVABLE 600% rise in a few weeks of a highly speculative market (bitcoin).

Considering that it is reasonable that the components of the rig could be sold for 80% of initial cost he only had 200-300$ at risk. People here compare it with much larger amount of money at risk in a much more volatile market for direct BTC investment. Risk/reward profiles of these two investments are rather very different. Less risk less reward is not something totally unexpected, is it?

I am not arguing with any side here, but the reasoning which is being employed in the argument by both sides is very very simplistic and with benefit of hindsight.

You saying that someone is about to make bad investment, but what if BTC exchange rate falls back to 0.70 tomorrow. It is not impossible. Which investment will be better rig or BTC?

I surely hope nobody takes anything said anywhere on this forum as an investment advise. Please nobody take anything I say as investment advise, because I am not qualified to give investment advise. I bet no posters on this thread are.

He said it took him 1 month to pay off his mining rig. If that 600% rise in BTC didn't occur, then it would have taken him 6 months just to break even on his mining rig. Actually more with rising difficulty and an additional 6+ months of electricity costs. Either way he was betting on BTC value going up, so your suggestion that it's unfair to factor that rise into this argument is baseless.

And like I said earlier, he made his decision over a month ago, which was an entirely different and much more forgiving mining environment. And he still would have been better off buying BTC directly. Now it's much harder to make mining profits if you're buying expensive computer parts.

Here's my position: Don't invest anything you're not 100% comfortable throwing away into the bitcoin ecosystem. I don't think anyone will argue with that. My secondary advice is to invest intelligently if you're going to do so, and take the rapidly rising difficulty into account.

Go back and read my original post. It includes a list of many of the small overheads, risks, and fees that prospective miners might not take into account. It also details why rising difficulty could easily make your mining rig worthless in short order. It's all valid, logical, factual information. It was meant to inform. But for some reason that doesn't stop everyone from thinking I'm here with nothing but evil intentions.

[mjsbuddha]

Just my own story. I bought my first bitcoin mining rig and got it mining on April 1st. 2x5970's, system cost me $1500. In April it made just under 500 bitcoins for me. I sold them when bitcoins hit $3.80 shortly before coinpal went down. I made enough money in one month to pay for the machine and the electricity it used. So yes, building a mining rig right now is still very profitable.

mtGox price on Apr 1- $.70
$1500/ .70 = 2142.86BTC

mtGox price now - $3.205

2142.86 * 3.205 = $6867

Total Profit: $5367.86

vs. Total Profit of $0 (your numbers).  Fantastic decision!

I'm not one for speculation. Give me a long term income any day.

[njloof]

Hey, I may have plugged the wrong device into the Kill-A-Watt, but I stand by my math.

At the end of the day, I guess I have to admit to doing this for fun. Because you're right, the gutsy move is to invest in the currency directly. But that would keep me up at night, whereas seeing bitcoins spontaneously form is like enjoying a really slow variation of roulette.

[tomcollins]

Right, let's take a market and two extreme points in the past, than assume we buy at the exact bottom, and than sell at exact top. Moreover, the market moved like 600% between the extremes.

Than we compare this with any other investment on the planet and say fi.

What a bunch of rear mirror drivers.


If I bought BRK/A sometime in the past for 10$ I would be even smarter than you guys.

I've run this with projections including flat price, small growth, huge growth, drop in prices, complete collapse, etc...

You may come out ahead if the price of Bitcoins drops or stays even by mining rather than buying and holding.  That was about it, and it wasn't by a significant margins.

The mining guy cherry picked it to say he was right.  Sorry he was wrong.  And yes, the faster the price goes up, the worse the decision to mine is.

Nothing to do with rear view mirror.  My projections are going forward.  My guess is very very very few miners who are putting $2k+ into rigs even bother to try that, let alone are capable of it.

[tomcollins]

Just my own story. I bought my first bitcoin mining rig and got it mining on April 1st. 2x5970's, system cost me $1500. In April it made just under 500 bitcoins for me. I sold them when bitcoins hit $3.80 shortly before coinpal went down. I made enough money in one month to pay for the machine and the electricity it used. So yes, building a mining rig right now is still very profitable.

mtGox price on Apr 1- $.70
$1500/ .70 = 2142.86BTC

mtGox price now - $3.205

2142.86 * 3.205 = $6867

Total Profit: $5367.86

vs. Total Profit of $0 (your numbers).  Fantastic decision!

I'm not one for speculation. Give me a long term income any day.

Give me $10,000.  I'll give you $1 a day.  Long term income FTW!

[njloof]

Give me $10,000.  I'll give you $1 a day.  Long term income FTW!

Really? 3.65% interest for life? That's not bad these days.

[tomcollins]

Hey, I may have plugged the wrong device into the Kill-A-Watt, but I stand by my math.

At the end of the day, I guess I have to admit to doing this for fun. Because you're right, the gutsy move is to invest in the currency directly. But that would keep me up at night, whereas seeing bitcoins spontaneously form is like enjoying a really slow variation of roulette.

Why is spending money on hardware not keeping you up at night?  Because you physically have something?  If what you mine is worthless, you are screwed too, but you do have some hardware you can sell for something I suppose.  So just compare the residual value of the hardware (what you would pay for it if you had to resell it or just what you would use it for), and compare that difference.

The attitude seems to be more of "I want a new computer, and hopefully it pays for itself" more than slow roulette.

[tomcollins]

Give me $10,000.  I'll give you $1 a day.  Long term income FTW!

Really? 3.65% interest for life? That's not bad these days.

Normally when you get 3.65% interest, you get your original money back.  You don't actually get the money for 28 years.  Then you start making the interest.  I think I can grow $10,000 pretty high in 28 years, even paying $365 a year out of it.  By year 28, I'll have $16,818.  Not too shabby.  I have an interest only loan on $10,000.

But that's the miner logic.  Keep being a sucker at math.

[Litt]

Give me $10,000.  I'll give you $1 a day.  Long term income FTW!

Really? 3.65% interest for life? That's not bad these days.

Normally when you get 3.65% interest, you get your original money back.  You don't actually get the money for 28 years.  Then you start making the interest.  I think I can grow $10,000 pretty high in 28 years, even paying $365 a year out of it.  By year 28, I'll have $16,818.  Not too shabby.  I have an interest only loan on $10,000.

But that's the miner logic.  Keep being a sucker at math.

It's true. I see the math challenges people trying to convince themselves over and over again that their decision to mine was the best decision here on this forum. In fact I'm so tired of this misinformation that I've been trying to tell my own story in hope to sway this more in the middle. '

People need to know that bunch of insecure teens trying to convince their hardware investment was worth it to each other is not a sound investment advice. Not saying my advice is better in anyway, but my own situation does tell a different story to theirs that shows another side of the issue. Others who are trying to do the same are only getting cornered by them saying that we have our own interest. While the interest may overlap unintentionally, the fact remains true and numbers don't lie.