Anti-mining movement with their own agenda READ ON

[MoonShadow]

And my point is made again. In about the time it would take someone to source a GPU, buy it, hook it up, and wrestle with drivers, the valuation of a bitcoin has nearly doubled. By just buying the coins you could have made a 100% profit in a few days instead of a year.

Thats actually pretty good. i hadn't thought of it that way.

So if i kept one bitcoin, at $1, and assumed a doubling rate of 10 days (a "few days" to be sure), then in about a year it should double 36 times.You guys can keep mining if you want.

You can't assume that it will maintain this pace.  Bitcoin muddles along for long periods, then has massive rallies when new articles are printed.

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[JJG]

...
The thing is that bitcoins are unstable, the value could double today, or halve by tomorrow.
a hd 6990 used is a good $600 to $650 for the next two years.
i bought the whole setup for 3 grand
I can sell my three 6990s for around $2000 if bitcoins do fail me, or if i so please for the next two years. after two years it might drop to 1.5k to 1.8k for all three
...

I wouldn't bet on that. 5970s were selling for $699 not too long ago, and you can now pick them up for a bit over $400. When the AMD 7000 series is released (soon, according to rumors), you can count on your 6990's value to drop significantly.

6990s are ~$700 new. That's $2100 brand new for all three. You can't realistically expect them to only lose $50 to $100 each over the next two years.

Hardware depreciates fast. High-end gaming hardware depreciates faster.

[clonedone]

...
The thing is that bitcoins are unstable, the value could double today, or halve by tomorrow.
a hd 6990 used is a good $600 to $650 for the next two years.
i bought the whole setup for 3 grand
I can sell my three 6990s for around $2000 if bitcoins do fail me, or if i so please for the next two years. after two years it might drop to 1.5k to 1.8k for all three
...

I wouldn't bet on that. 5970s were selling for $699 not too long ago, and you can now pick them up for a bit over $400. When the AMD 7000 series is released (soon, according to rumors), you can count on your 6990's value to drop significantly.

6990s are ~$700 new. That's $2100 brand new for all three. You can't realistically expect them to only lose $50 to $100 each over the next two years.

Hardware depreciates fast. High-end gaming hardware depreciates faster.

How about bitcoins? how fast do they depreciate? can you give me a definite answer like you gave about video cards?
See what i mean? can you guarantee me that the bitcoins will depreciate fast like you guaranteed me the video cards would?
if you cant then you just proved that you can indeed rely on hardware to hold a certain price, but you cant on bitcoins, hence buying a rig rather than trading is less risky.

[JJG]

...
The thing is that bitcoins are unstable, the value could double today, or halve by tomorrow.
a hd 6990 used is a good $600 to $650 for the next two years.
i bought the whole setup for 3 grand
I can sell my three 6990s for around $2000 if bitcoins do fail me, or if i so please for the next two years. after two years it might drop to 1.5k to 1.8k for all three
...

I wouldn't bet on that. 5970s were selling for $699 not too long ago, and you can now pick them up for a bit over $400. When the AMD 7000 series is released (soon, according to rumors), you can count on your 6990's value to drop significantly.

6990s are ~$700 new. That's $2100 brand new for all three. You can't realistically expect them to only lose $50 to $100 each over the next two years.

Hardware depreciates fast. High-end gaming hardware depreciates faster.

How about bitcoins? how fast do they depreciate? can you give me a definite answer like you gave about video cards?
See what i mean? can you guarantee me that the bitcoins will depreciate fast like you guaranteed me the video cards would?
if you cant then you just proved that you can indeed rely on hardware to hold a certain price, but you cant on bitcoins, hence buying a rig rather than trading is less risky.

You can't argue risk without bringing reward into the equation.

If your $3000 + $151/month rig can churn out 2100MH/sec, Bitcoins remain at 2.3:1, and difficulty increases slow down (unlikely) to 10%/period, then my model has you breaking even on your original purchase at month 8.5, after which your $151/month electricity bill overwhelms your income. Add hardware depreciation costs to that, and you never break even. Use 15% difficulty increases (following the latest trend) and you never come close. If BTC:USD falls below the current 2.3:1, you're completely out of luck.

Since I find it unlikely that difficulty will only increase at 10%/period, especially in the short term, your only hope is that the BTC:USD goes way up.

That's the same bet you would have made if you just bought BTC.

You are correct that your downside is limited in the extreme case (BTC:USD falls to 0, Bitcoin disappears, etc.) but you'd still be out the $1000 minimum you're going to lose on your hardware + $151/month for as long as you run your system.

If things stay neutral, then you might pay your hardware depreciation, electricity, and cooling bills with income.

If BTC:USD goes up, then your mining rig will briefly bring in more than electricity + depreciation are costing you, but that will fall as difficulty rises.

So you already bet on BTC:USD going up, but in this case you've severely limited your upside and locked in the downside.

[MoonShadow]

The difficulty seems to follow the 6 week moving average of the price very closely, so as the value of the bitcoin rises the difficulty increases with a lag.  If this holds true, your predictions about the rise of difficulty is irrelevent.

[AmpEater]

If your $3000 + $151/month rig can churn out 2100MH/sec, Bitcoins remain at 2.3:1, and difficulty increases slow down (unlikely) to 10%/period, then my model has you breaking even on your original purchase at month 8.5, after which your $151/month electricity bill overwhelms your income. Add hardware depreciation costs to that, and you never break even. Use 15% difficulty increases (following the latest trend) and you never come close. If BTC:USD falls below the current 2.3:1, you're completely out of luck.

This makes no sense; you write-off the cost of the miner completely right off the bat ($3000)....and then say "Add hardware depreciation costs to that".  Uhhh, what is that $3000 exactly?

[Littleshop]

Difficulty does not drive price, price drives difficulty.  Right now bitcoins are going up in price because more people are using them.  If interest continues price will continue to rise.  When price is steady, difficulty will rise until it nears a place where mining is only marginally or not at all profitable for people with average electricity. 

[JJG]

If your $3000 + $151/month rig can churn out 2100MH/sec, Bitcoins remain at 2.3:1, and difficulty increases slow down (unlikely) to 10%/period, then my model has you breaking even on your original purchase at month 8.5, after which your $151/month electricity bill overwhelms your income. Add hardware depreciation costs to that, and you never break even. Use 15% difficulty increases (following the latest trend) and you never come close. If BTC:USD falls below the current 2.3:1, you're completely out of luck.

This makes no sense; you write-off the cost of the miner completely right off the bat ($3000)....and then say "Add hardware depreciation costs to that".  Uhhh, what is that $3000 exactly?

Depreciation is the declining value of your hardware over time. If you buy a $700 video card and the going price on eBay or craigslist or gaming forums is $500, then you have a 'cost' of $200 that you need to account for. This cost goes up over time.

Unless you're already buying the hardware for other purposes (e.g. gaming) then these costs are very real and can't be ignored.

[Meni Rosenfeld]

Depreciation is the declining value of your hardware over time. If you buy a $700 video card and the going price on eBay or craigslist or gaming forums is $500, then you have a 'cost' of $200 that you need to account for. This cost goes up over time.

Unless you're already buying the hardware for other purposes (e.g. gaming) then these costs are very real and can't be ignored.

If you count depreciation, you can't also count the original cost of purchasing the hardware.

[JJG]

Depreciation is the declining value of your hardware over time. If you buy a $700 video card and the going price on eBay or craigslist or gaming forums is $500, then you have a 'cost' of $200 that you need to account for. This cost goes up over time.

Unless you're already buying the hardware for other purposes (e.g. gaming) then these costs are very real and can't be ignored.

If you count depreciation, you can't also count the original cost of purchasing the hardware.

You guys are missing the point. You can look at your 'balance' like this:

Initial hardware cost - electricity cost + resale value + (mining income - withdrawal fees)

OR

(Mining income - withdrawal fees) - depreciation - electricity cost


I'm not trying to double-count depreciation and the hardware cost. However you setup your equation, the outcome is the same.

[molecular]

Once spending $80/month on electricity isn't profitable, I'll spend $80/month on bitcoins instead!

In retrospect, instead of buying mining rig in January for 700€ and putting 200€ power into it so far, I would've been better off investing in coins right from the start (which my calculations showed, but I wanted to mine for other reasons, too (it's cool and secures bitcoin)).

Back then price was 0.4USD, 1 USD was around 0.7 USD, so my 900 EUR where (900/0.70)/0.4 = 3,214 BTC, which would now be roughly 3,214 * 2.5 = 8,035 USD = 5,880 EUR. Minus the investment I would've made 4,980 EUR by now.
I only mined 1,500 BTC (2,512 EUR) so by buying brand-new mining rig, I actually made a profit of "only" 1,612 EUR, 32% of what I would've made by buying bitcoin.

In short: I think entering mining biz with brand-new HW is still profitable nowadays, but simply buying bitcoin might be 3 times as profitable.

[phelix]

molecular: +1

[JJG]

Difficulty just jumped 19% 12 hours ago, and the projected difficulty jump for the next round on Bitcoin Charts (not sure if it's stabilized yet or not) is 33% in 1937 blocks.

At the current block rate, the next difficulty jump will come in only 10.3 days. As people join in, production will speed up more and that will push the next difficulty jump even closer.

For miners, this means that if the 33% difficulty jump predicted by Bitcoin charts holds true, then 10 days from now your BTC output will be 63% of what it was a couple days ago.

Take a look at how popular the Bitcoin thread was on overclock.net in the 2 days before it got closed. People who were lusting after 6990s ran some quick calculations and used those to justify their purchase. Many of those people bragged about how they don't pay for electricity, so they can justify mining no matter how little BTC it brings in. These guys are the future of mining.

Many people keep arguing that you can count on the exchange rate to keep going up with difficulty. While I strongly doubt that for many reasons, if you truly believe that then you shouldn't be buying hardware anyway. You should be buying bitcoins.

[proudhon]

Once spending $80/month on electricity isn't profitable, I'll spend $80/month on bitcoins instead!

In retrospect, instead of buying mining rig in January for 700€ and putting 200€ power into it so far, I would've been better off investing in coins right from the start (which my calculations showed, but I wanted to mine for other reasons, too (it's cool and secures bitcoin)).

Back then price was 0.4USD, 1 USD was around 0.7 USD, so my 900 EUR where (900/0.70)/0.4 = 3,214 BTC, which would now be roughly 3,214 * 2.5 = 8,035 USD = 5,880 EUR. Minus the investment I would've made 4,980 EUR by now.
I only mined 1,500 BTC (2,512 EUR) so by buying brand-new mining rig, I actually made a profit of "only" 1,612 EUR, 32% of what I would've made by buying bitcoin.

In short: I think entering mining biz with brand-new HW is still profitable nowadays, but simply buying bitcoin might be 3 times as profitable.

Yeah, I wish I wouldn't just bought bitcoin when I decided to set out mining.  It was 1.18USD/BTC at the time, but the whole project was too new to me and I wasn't as confident in it as I am now.  Plus, the nerd factor of setting up a dedicated mining rig really pulled me in too.

[allinvain]

If you make a profit from trading bitcoins your earning are still taxable - should you choose to report them. Bitcoin trading is much the same as forex trading (something I'm deeply into) so for me I treat it the same from a "paying taxes" point of view.

[Ian Maxwell]

I'd assume that selling bitcoins for more US dollars than they're bought for is subject to capital gains tax. But then, selling them for less than they're bought for is subject to a tax credit for capital loss. Mining would probably be treated as self-employment. You could declare it if you like, but be sure to write off your mining rig as well.

Disclaimer: I'm just some guy on the internet, don't listen to anything I say.

[allinvain]

If you make a profit from trading bitcoins your earning are still taxable - should you choose to report them. Bitcoin trading is much the same as forex trading (something I'm deeply into) so for me I treat it the same from a "paying taxes" point of view.

It's not exactly the same; the details are complicated.  Are you confident you can make a section 988 election, for example?  If you're just taking all gains as ordinary income, that should at least be an unobjectionable treatment under the code.  (Again, that's not personal tax advice and you shouldn't rely on it!)

Mining, on the other hand, might require the payment of self-employment taxes in the US.  That's in fact how I expect to declare any income I have from mining.  With mining, the timing of recognition is the tougher question.

Hmm, well mining yes it would be classified as self-employment because you are deploying capital (mining rigs) for the purpose of producing income.

I plan to treat the income as plain regular income from non employment sources. If bitcoins were classified as securities I'd have to pay a capital gains tax too. Bear in mind I'm not in the United States. But for US Citizens this bit of info may prove useful:

"some forex transactions are categorized under Section 1256 contracts while others are treated under the Section 988 – the Treatment of Certain Currency Transactions.

Section 1256 provides a 60/40 tax treatment which is lower compared to its counterpart. By default, all forex contracts are subject to the ordinary gain or loss treatment. Traders need to “opt-out” of Section 988 and into capital gain or loss treatment, which is under Section 1256."

[TurboK]

Once spending $80/month on electricity isn't profitable, I'll spend $80/month on bitcoins instead!

In retrospect, instead of buying mining rig in January for 700€ and putting 200€ power into it so far, I would've been better off investing in coins right from the start (which my calculations showed, but I wanted to mine for other reasons, too (it's cool and secures bitcoin)).

Back then price was 0.4USD, 1 USD was around 0.7 USD, so my 900 EUR where (900/0.70)/0.4 = 3,214 BTC, which would now be roughly 3,214 * 2.5 = 8,035 USD = 5,880 EUR. Minus the investment I would've made 4,980 EUR by now.
I only mined 1,500 BTC (2,512 EUR) so by buying brand-new mining rig, I actually made a profit of "only" 1,612 EUR, 32% of what I would've made by buying bitcoin.

In short: I think entering mining biz with brand-new HW is still profitable nowadays, but simply buying bitcoin might be 3 times as profitable.

In retrospect, I should've put the winning numbers on the lottery instead of all the others.

[ribuck]

In short: I think entering mining biz with brand-new HW is still profitable nowadays, but simply buying bitcoin might be 3 times as profitable.

Noting beats the buzz you get when you see the message "Generated 50 Bitcoins" in your client!

[steelhouse]

I personally don't give a damn if new miners join the game. If they wish to run at a loss that's their personal choice and their right. I do think that the majority of them will leave the mining game once they see that the $80 extra on their power bill has earned them only a meager 5 BTC.

That is a complete joke.  You put 2 5970 cards in a computer.  That is a 1.3 Gh/s system.  The electricity to run that at $0.10 per kw-hr  (600W x 24 x 30 x .1) = $43.20 per month electricity.       You will be generating presently 11 BTC every day.  You will pay the electricity off in 2 days!

It is a great time to upgrade to a new computer system, if your computer is less than 2 gz, why not upgrade to a new computer and have an income of $15 a day that is far more than the payments.