Negative Difficulty (Difficulty DEcrease)

[philipma1957]

amazing that people are adding gear as price is now under 300 usd.  I purchased 1 coin today. My new idea is buy a coin a day as long as price keeps dropping. I am now close to the most coins I have ever had on hand.

Not really that amazing... cheap power ($0.01-$0.03) still proves to turn a profit even if the price of BTC stays at $285 with 10% jumps.  Manufacturers with access to both cheap hardware and cheap power can continue adding gear and still make profit for quite some time yet.

yeah true.  if asicminer and bitmaintech can build s-3's and long tubes for cheap and pay under 3 cents a kwatt diff can go 3x before they really get hurt.

if they put a 1th on line in their mine for 150 usd it runs a profit.  even at 250 usd a coin.  I think both asic miner and bitmaintech can do the chart below in house

[Some1else0]

I'd say it's definitely possible if the price keeps decreasing.

[Syke]

We're seeing the effect of how the price affects difficulty. Low price has caused people to buy fewer miners and/or turn them off. My 2 J/GH miners are idle ATM until the price goes way up or I need some heat this winter.

[daddyfatsax]

We're seeing the effect of how the price affects difficulty. Low price has caused people to buy fewer miners and/or turn them off. My 2 J/GH miners are idle ATM until the price goes way up or I need some heat this winter.

The next diff jump should be small, I really do not see it going negative.

Already got a little cold where I am at. My power bill is gonna be going wayyyyy down with no AC running.

[fairlay]

Yes - our market is also pretty sure. The likelyhood is between 3% and 0.01% percent.
Currently you would get more than 20times your money back if you predict a decrease:

https://www.fairlay.com/predict/registered/new/difficulty-will-decrease-on-next-change/

most likely is a difficulty around 36B. That is more or less currently 50/50 if it is above or under.
https://www.fairlay.com/predict/registered/new/next-difficulty-36b/

[testerman]

it seems an average of 5% increase, and i cant understand, how difficulty is still increasing with these btc prices.

[jonnybravo0311]

it seems an average of 5% increase, and i cant understand, how difficulty is still increasing with these btc prices.

Because people are still adding hash to the network.  Those with cheap electricity and cheap hardware still turn a profit even at the decreased price of BTC.

[blunthammer]

Great thread.

So I had a chat with a 40 year veteran of the US Electric Power Industry over the weekend and based on what he was telling me, getting power in the US for under 3 cents sustained is next to impossible. You can get it in shifts, during off peak, do peak shaving and other tricks of the trade but here is the bottom line, at least in the US:

Generators will make more selling into the 'market' and to the ISO's even if it means taking generation offline. The example was that if a generator can generate power at 1 cent per Kwh and a miner came to them with a 40MW requirement and said they would pay 2 cents (100% margin), the gerator woul turn it down because they can get 7 cents per Kwh in the market someplace else. There are a bunch of other regulations that add to the reasons why buying direct can't or won't happen anytime soon.

I asked why not build a power plant and plug in a data center/mining operation into it and get a direct feed - regulation and the fact that you would need to have two generating plants for redundancy and your costs double. If you had grid tie in or wanted grid tie in to sell excess or to provide back up load, the regulations REALLY kick in and are prohibitive.

So the notion of continuous cheap power is a notion, at least in the US from what I was told, again from a guy who remembers the first NERC and FERC meetings.

The second thing I just looked at was hash rate to difficulty ratio growth for the last 6 months and the hash rate has gone up 5.5 times in the past 6 months while the difficulty has risen 4.3 times according to the data on blockchain.info I looked at. So the hash rate is growing ahead of the difficulty still, which leads me to believe that is a good thing and money can still be made but you need to go big (decimegawatt scale, 10MW at a time) and throw as much hash rate while the difficulty slips... Right?


 

[philipma1957]

Great thread.

So I had a chat with a 40 year veteran of the US Electric Power Industry over the weekend and based on what he was telling me, getting power in the US for under 3 cents sustained is next to impossible. You can get it in shifts, during off peak, do peak shaving and other tricks of the trade but here is the bottom line, at least in the US:

Generators will make more selling into the 'market' and to the ISO's even if it means taking generation offline. The example was that if a generator can generate power at 1 cent per Kwh and a miner came to them with a 40MW requirement and said they would pay 2 cents (100% margin), the gerator woul turn it down because they can get 7 cents per Kwh in the market someplace else. There are a bunch of other regulations that add to the reasons why buying direct can't or won't happen anytime soon.

I asked why not build a power plant and plug in a data center/mining operation into it and get a direct feed - regulation and the fact that you would need to have two generating plants for redundancy and your costs double. If you had grid tie in or wanted grid tie in to sell excess or to provide back up load, the regulations REALLY kick in and are prohibitive.

So the notion of continuous cheap power is a notion, at least in the US from what I was told, again from a guy who remembers the first NERC and FERC meetings.

The second thing I just looked at was hash rate to difficulty ratio growth for the last 6 months and the hash rate has gone up 5.5 times in the past 6 months while the difficulty has risen 4.3 times according to the data on blockchain.info I looked at. So the hash rate is growing ahead of the difficulty still, which leads me to believe that is a good thing and money can still be made but you need to go big (decimegawatt scale, 10MW at a time) and throw as much hash rate while the difficulty slips... Right?


 

 the idea in bold is wrong.

basically  the current diff number is a 'real number'  

 any and all hashrate numbers are guesses and estimates.  

the next diff number will be based on the time it took to do 2016 blocks (maybe 2116 as I had a beer or two tonight)     so the diff number is always a true number and hashrate is a guess based on how fast you are making blocks.

Think of it like this. box cars or a pair of sixes with dice are a diff of 35 to 1 .   So if I had 1 guy toss 1 pair of dice 10 times an hour  it will take him a while to toss  'boxcars' or 6 + 6 .     with normal luck it takes about 3.5 hours or 36 tosses to do it.

 but if that guy tossed boxcars on ten tosses in a row. he would do 10 sets of ' boxcars ' in 1 hour  .

 it would make you think they were a few more guys tossing a few more pair of dice to get that many 6 + 6 tosses in only 1 hour .

your hashrate estimate would be very high

[jonnybravo0311]

Phil, you in AC playing craps to come up with that analogy?

[philipma1957]

Phil, you in AC playing craps to come up with that analogy?

not since I joined a program.

[Connor936]

it seems an average of 5% increase, and i cant understand, how difficulty is still increasing with these btc prices.

Because people are still adding hash to the network.  Those with cheap electricity and cheap hardware still turn a profit even at the decreased price of BTC.

In order for miners to continue to be profitable on an operating basis they will need to have ever additional cheap electricity as difficulty increases, and this is exaggerated as the price of bitcoin goes down. Miners will also be hesistant to add additional capacity to their farms as the price of bitcoin goes down as the lower the price of bitcoin is the less of a chance they will be able to ROI on their additional investment

[taipo]

The lesson that few home miners will take away from this little human experiment in greed, is that if bitcoin was to have succeeded then the movement should have spent the greater part of its time growing the use and implementation of bitcoin around the globe. Instead the bitcoin movement has obsessed with an arms race for lions share of the hashrate and lost out to the hardware providers whom the movement created, resourced via this misguided use of peoples time and energy to create this abomination that is now the industrial mining complexes that circle the globe.

[ujka]

it seems an average of 5% increase, and i cant understand, how difficulty is still increasing with these btc prices.

Because people are still adding hash to the network.  Those with cheap electricity and cheap hardware still turn a profit even at the decreased price of BTC.

In order for miners to continue to be profitable on an operating basis they will need to have ever additional cheap electricity as difficulty increases, and this is exaggerated as the price of bitcoin goes down. Miners will also be hesistant to add additional capacity to their farms as the price of bitcoin goes down as the lower the price of bitcoin is the less of a chance they will be able to ROI on their additional investment

Industrial mining farm are stil very profitable. Here is a nice graph user Puppet posted in several threads:

Doesn't matter what the J/GH is if you can never recover the capital cost of miners even with free electricity, which is where bitcoin mining stands right now.

You couldnt be more wrong. Here is a chart for you:



It shows the network speed where miners would break even after 2 years using the listed assumed variables. Even  in the current climate and with current efficiency, we are no were near where (industrial) mining  would not be profitable. And the effect of power efficiency is quite dramatic if you consider reasonable electricity cost price ranges (~0.06 / KWh)

[philipma1957]

btc is back up to 376 usd.  and diff is going to be very close to .5%

So with all said and done mining does not look too bad today. punch in  those numbers and s-3's look better.

[TheRealSteve]

well, new difficulty is in - sorry OP, no difficulty decrease after all

old difficulty:	34,661,425,924
new difficulty:	35,002,482,026
% change:	+0.9839644299

[RoadStress]

well, new difficulty is in - sorry OP, no difficulty decrease after all

Bummer 

[philipma1957]

well, new difficulty is in - sorry OP, no difficulty decrease after all

Bummer 

if it pulls 1 or  2  percent for the next few diff jumps and coins stay above 360 usd it is not a disaster for miners just yet.

[TheJuice]

Yes - our market is also pretty sure. The likelyhood is between 3% and 0.01% percent.
Currently you would get more than 20times your money back if you predict a decrease:

https://www.fairlay.com/predict/registered/new/difficulty-will-decrease-on-next-change/

most likely is a difficulty around 36B. That is more or less currently 50/50 if it is above or under.
https://www.fairlay.com/predict/registered/new/next-difficulty-36b/

I wish (as im sure you do too) you had more players. The spread on the bets is large, and 1 btc bet can push the entire market way off.

[fairlay]

Yes - our market is also pretty sure. The likelyhood is between 3% and 0.01% percent.
Currently you would get more than 20times your money back if you predict a decrease:

https://www.fairlay.com/predict/registered/new/difficulty-will-decrease-on-next-change/

most likely is a difficulty around 36B. That is more or less currently 50/50 if it is above or under.
https://www.fairlay.com/predict/registered/new/next-difficulty-36b/

I wish (as im sure you do too) you had more players. The spread on the bets is large, and 1 btc bet can push the entire market way off.

Yap, you are 100% right. However, we nearly finished our API. https://www.fairlay.com/Api
With this it will be possible to program a simple script that calculates probabilities from live hash rates and places predictions accordingly to this. This would give market makers the chance to earn some money with the spread. As soon as we have more then one they will compete for the lowest spread and then this will become the best source for difficulty predictions. At least that is our plan/hope

If you have any suggestions what we can improve let us know! And if anyone with basic programming knowledge is interested in using the API we are happy to help and give early access.