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

[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.

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. 

And it's not that mining is a terrible idea or anything.  But it is not something to take lightly and not an instant gold mine.  It depends on a lot of factors, many of which are very difficult to predict.  It's just if you are going to dump a ton of money into something for profit, you probably should at least make an effort to see if it's your best approach.  But if you enjoy mining and consider it entertaining, then maybe that is enough to make up for the suboptimal approach.

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[slurch]

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.

I don't think we have 28 more years of the US Dollar, TBH...

[gusti]

I'm a professional miner since the beginning if 2011.
Monthly ROI ranged from 8% to 35% in all that given period.

In the future ?
As all risk investment, nobody knows that answer.

[slurch]

I think I'm going to go ahead and bow out of this conversation. I guess I'm just one of those rare people that doesn't like to argue on the internet.

You all go on and have fun with your investing. I'll be screwing with my video card.

[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.

I don't think we have 28 more years of the US Dollar, TBH...

Seems like an even better deal for me.

I'll also make the same arrangement with Bitcoins.  If anyone wants to give me 10,000 bitcoins now, I'll be happy to give them 1 BTC every day for the rest of their lives.

[gusti]

[quote author=tomcollins
Seems like an even better deal for me.
I'll also make the same arrangement with Bitcoins.  If anyone wants to give me 10,000 bitcoins now, I'll be happy to give them 1 BTC every day for the rest of their lives.
[/quote]

Are you feeling generous today ? 

[njloof]

Seems like an even better deal for me.
I'll also make the same arrangement with Bitcoins.  If anyone wants to give me 10,000 bitcoins now, I'll be happy to give them 1 BTC every day for the rest of their lives.

Are you feeling generous today ?  

Either that, or he knows a hit man who accepts Bitcoins.

[tomcollins]

Seems like an even better deal for me.
I'll also make the same arrangement with Bitcoins.  If anyone wants to give me 10,000 bitcoins now, I'll be happy to give them 1 BTC every day for the rest of their lives.

Are you feeling generous today ?  

Either that, or he knows a hit man who accepts Bitcoins.

Na, I just understand math.

[mjsbuddha]

well the fact of the matter is your bitcoin profits are directly dependent of miners making bitcoins for you to buy in the first place. as more miners join the network it becomes harder for each miner to get bitcoins and the price goes up. everybody is winning here. money all around.

the difference is, if bitcoins went to 50 cents tomorrow, people that recently bought bitcoins would lose a lot of money but my machines would still be making me profit.

[tomcollins]

well the fact of the matter is your bitcoin profits are directly dependent of miners making bitcoins for you to buy in the first place. as more miners join the network it becomes harder for each miner to get bitcoins and the price goes up. everybody is winning here. money all around.

the difference is, if bitcoins went to 50 cents tomorrow, people that recently bought bitcoins would lose a lot of money but my machines would still be making me profit.

How would your machines be making a profit?  Are you neglecting the initial cost of them?  If rigs were free or extremely low cost, then yes, you would since electricity costs alone would need a huge difficulty.

If miners actually closed down shop when prices dropped, difficulty would decrease.  But the economics of the situation does not dictate this.  Miners that already purchased rigs should only shut down if the electricity costs plus any damage to their hardware from use exceeds the value they mine.

This is again the same example, give me $10,000, I'll give you $1 a day, and I guess you are profitable since you are always making $1.

But I'd rather invest my $10,000 in a stock or mutual fund or bond, which is risky, but at least not a retarded investment in most reasonable situations.

[allinvain]

Yes but please don't compare investing in bitcoins to investing in bonds, stocks, mutual funds, etc. Buying bitcoins purely for investment purposes is akin to making a bet on the foreign exchange market - ie buying Brazilian Real or Turkish Liras because you think they will appreciate in value relative to your native currency or relative to every other currency.

[mjsbuddha]

well the fact of the matter is your bitcoin profits are directly dependent of miners making bitcoins for you to buy in the first place. as more miners join the network it becomes harder for each miner to get bitcoins and the price goes up. everybody is winning here. money all around.

the difference is, if bitcoins went to 50 cents tomorrow, people that recently bought bitcoins would lose a lot of money but my machines would still be making me profit.

How would your machines be making a profit?  Are you neglecting the initial cost of them?  If rigs were free or extremely low cost, then yes, you would since electricity costs alone would need a huge difficulty.

If miners actually closed down shop when prices dropped, difficulty would decrease.  But the economics of the situation does not dictate this.  Miners that already purchased rigs should only shut down if the electricity costs plus any damage to their hardware from use exceeds the value they mine.

This is again the same example, give me $10,000, I'll give you $1 a day, and I guess you are profitable since you are always making $1.

But I'd rather invest my $10,000 in a stock or mutual fund or bond, which is risky, but at least not a retarded investment in most reasonable situations.

As I said before, mu machine paid for itself in the first month. anything after now is just profit

[JJG]

As I said before, mu machine paid for itself in the first month. anything after now is just profit

Good job. Congrats.

However, like we've said before. That was then and this is now.

The problem is that those new to bitcoin mining are seeing these claims and assuming it will be just as easy and profitable now that difficulty is going through the roof. It's not.

[allinvain]

I agree with you JJG. I don't think it would be a smart idea to invest large sums of $ into mining hardware now. If one can find a super cheap deal on a good mining video card then maybe, but otherwise I can't justify buying something like a new 6990 JUST to mine..or more.

[gusti]

I agree with you JJG. I don't think it would be a smart idea to invest large sums of $ into mining hardware now. If one can find a super cheap deal on a good mining video card then maybe, but otherwise I can't justify buying something like a new 6990 JUST to mine..or more.

If you find an investing deal that gives you more than 5% to 30% monthly, then it's not a smart idea.   

[slurch]

I agree with you JJG. I don't think it would be a smart idea to invest large sums of $ into mining hardware now. If one can find a super cheap deal on a good mining video card then maybe, but otherwise I can't justify buying something like a new 6990 JUST to mine..or more.

From what I've seen on the forums, the 5850 is a pretty solid card. Not terribly power-hungry and ~320 MHash/sec or so. Still very cheap, too...can probably get one for $120-$130, or cheaper used. I'm also very happy with my 5830, but it's not as efficient. I couldn't justify spending $700 on a GPU like a 5970 or a 6990...especially considering the risk. Assembling this pile of parts, throwing Ubuntu on it and snagging a cheap 58XX? Perfectly reasonable.

I guess I want to thank JJG after all. For being a killjoy. And for convincing me to do a little bit better modeling on my projections.

Having said that, I still want to grow a little bit of a mining farm. But I'll be reasonable about it.

I know I said I was going to stay out of this.

[bitcoinBull]

Difficulty is rising, but BTC price is rising even faster.  For some rough estimates, difficulty was between 75,000 and 100,000 when BTC was between $0.75 and $1.00.  Now BTC is over $3.00, (projected) difficulty spiked and crossed 150,000 but has leveled off a bit over the past 48 hours.  It will probably spike again after new miners' equipment deliveries arrive.  If BTC stays over $3.00, difficulty will still has to go over 300,000 before it is back on track with the previous ratio (it may happen in a month or two).

Furthermore, difficulty growth has been declining over the long term (http://bitcoin.sipa.be/growth.png).  This could be signifying the end of already bought video cards coming online.  So new investments in mining are less and less competing with hardcore gamers who already have the equipment to start mining.  In that case, new investments in mining will be more profitable than before.

But let's examine the possible risks that they'll be less profitable.

Previously, small investments in mining probably have been less profitable than small buys.  The main reason for this is the competition with hardcore gamers.  But as this demographic is exhausted, a new one could fill the gap.

The new demographic is Big Players (tens of thousands $$ and over).  Some will choose not to buy much because it would push up the price (even in dark pools).  Instead, they will invest in mining capacity.  We would see signs of this happening if we see the difficulty factor outpacing the price (the opposite of what has been happening recently).

Evaluating the equipment options available to potential big players, they don't seem likely to be able to squeeze out the small miners in the short term.  The estimate of the FPGA performance thread shows that although FPGAs blow away commodity AMDs on a hash per watt basis by at least some 5x-10x, they are probably more expensive by at least 3x.  If the cost of electricity on a monthly basis for an AMD is some 5-10% of the cost of the card C, then over a number of months T, the total cost would be [C + (0.1C)T].  If the cost of the FPGA is 3C is then the FPGA beats the AMD after 20-40 months.

ArtForz has come out publicly as one such player.  He claims in the IRC logs to have invested some $65k in 100 structured ASICs (not named as such explicitly, but "like FPGAs without the FP").  So this is a longer term bet that they will outperform commodity AMDs over the next 2-3 years.  After that, an evaluation will have to be done again between next-gen structured ASICs or FPGAs, and next-gen AMDs.

The point is that signs of any such large investments (FPGA/structured ASIC as well as commodity AMD farms) by bigger players versus direct investments buying coin will be reflected in the difficulty factor outpacing the price of BTC.  Right now, the signs are the opposite (BTC price outpacing the difficulty factor).

I'm a trader, not a miner, but even so my opinion is that a play in mining (big and small alike) is even smarter today, than a play in trading.  The longer the play the more competitive they are.  The trick to profiting in either is the same: selling high.

[allinvain]

I agree with you JJG. I don't think it would be a smart idea to invest large sums of $ into mining hardware now. If one can find a super cheap deal on a good mining video card then maybe, but otherwise I can't justify buying something like a new 6990 JUST to mine..or more.

If you find an investing deal that gives you more than 5% to 30% monthly, then it's not a smart idea.   

lol...no that's not what I meant...that is clearly a smart investment IF it is stable and you can rest reasonably assured that you will get that return for the time span that it takes to get your principal back (in this case the amount of $ you invested in the hardware). If the BTC/USD exchange rate reasonably outpaces the rise in difficulty then some hard core miners can justify new builds. You just better pray that new demand comes in and always drives up the exchange rate, otherwise if it stabilizes and yet difficulty rises due to a slew of new miners hoping to strike it bitcoin rich then it will take that much longer for you to recover your initial hardware investment.

[allinvain]

I agree with you JJG. I don't think it would be a smart idea to invest large sums of $ into mining hardware now. If one can find a super cheap deal on a good mining video card then maybe, but otherwise I can't justify buying something like a new 6990 JUST to mine..or more.

From what I've seen on the forums, the 5850 is a pretty solid card. Not terribly power-hungry and ~320 MHash/sec or so. Still very cheap, too...can probably get one for $120-$130, or cheaper used. I'm also very happy with my 5830, but it's not as efficient. I couldn't justify spending $700 on a GPU like a 5970 or a 6990...especially considering the risk. Assembling this pile of parts, throwing Ubuntu on it and snagging a cheap 58XX? Perfectly reasonable.

I guess I want to thank JJG after all. For being a killjoy. And for convincing me to do a little bit better modeling on my projections.

Having said that, I still want to grow a little bit of a mining farm. But I'll be reasonable about it.

I know I said I was going to stay out of this.

I agree. The 5850 is indeed a good mining card from a cost for performance basis. Then again so is the 5870 which is my current favorite. Why my favorite? Well mainly because I can't seem to find cheap 5970s. I can pickup some 5870s for $150-180 (CAD) so for me that's worth while. Also should the unthinkable happen and bitcoin goes flop I still have a reasonably well performing card that I can sell for a fairly good price. The key here is to buy your hardware used and well well below the market price - hard to do I know, but it's the ideal method. 

On the flip side I guess it's also less risky if you have a newer card like the 6990 because you cam more readily re-sell that one but once again that card costs MUCH more than a 5870 or 5850 so it will take you longer to pay it off and in that time you are far more exposed to market risk (of bitcoin itself, difficulty rise, etc).

[slurch]

I agree with you JJG. I don't think it would be a smart idea to invest large sums of $ into mining hardware now. If one can find a super cheap deal on a good mining video card then maybe, but otherwise I can't justify buying something like a new 6990 JUST to mine..or more.

From what I've seen on the forums, the 5850 is a pretty solid card. Not terribly power-hungry and ~320 MHash/sec or so. Still very cheap, too...can probably get one for $120-$130, or cheaper used. I'm also very happy with my 5830, but it's not as efficient. I couldn't justify spending $700 on a GPU like a 5970 or a 6990...especially considering the risk. Assembling this pile of parts, throwing Ubuntu on it and snagging a cheap 58XX? Perfectly reasonable.

I guess I want to thank JJG after all. For being a killjoy. And for convincing me to do a little bit better modeling on my projections.

Having said that, I still want to grow a little bit of a mining farm. But I'll be reasonable about it.

I know I said I was going to stay out of this.

I agree. The 5850 is indeed a good mining card from a cost for performance basis. Then again so is the 5870 which is my current favorite. Why my favorite? Well mainly because I can't seem to find cheap 5970s. I can pickup some 5870s for $150-180 (CAD) so for me that's worth while. Also should the unthinkable happen and bitcoin goes flop I still have a reasonably well performing card that I can sell for a fairly good price. The key here is to buy your hardware used and well well below the market price - hard to do I know, but it's the ideal method.  

On the flip side I guess it's also less risky if you have a newer card like the 6990 because you cam more readily re-sell that one but once again that card costs MUCH more than a 5870 or 5850 so it will take you longer to pay it off and in that time you are far more exposed to market risk (of bitcoin itself, difficulty rise, etc).

I was on CL and found just piles of guts...more than I would need to get started building a number of decent rigs. Boards with 1 and 2 PCI-e 16 slots, all kinds of fans...hell, one was a lot of 8 towers for $60 with pretty much everything I needed for 3 solid rigs, minus decent power supplies and cards.

I bought none of it...but the prospect is there. Spending $200-$300 to get a rig operational isn't exactly a lucrative prospect, but it's feasible.

One of the best kept secrets is where the hell you guys are getting 5870's for prices like that.

And like I've said many times on this forum...if Bitcoin suddenly disappeared, I have plenty of uses for a bunch of computer hardware. To be honest, I'd probably go back to SETI@Home. How's that for altruism?

Edit: Instead of mining rigs, I bought one of these for the missus...and another one shortly to follow for me. I bet I could get 20kHash/sec out of this...