Isn't Mining Economically Retarded?

[smoothie]

it is an oscillating cycle. Miners are really profitable then miners go through a "winter" phase. Rinse and repeat.

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[cryptocoiner]

I;ve stopped minig a while ago. I'm also done with altcoins. And stopped trading. Now i just using bitcoins and dogecoins as money. Everithing alse i've dumped. Recommend you do the same.

[cbeast]

As a thought experiment what would happen if world of war-craft gold was chosen to be the global currency? Would human labor be a better backing for money than sha256?

[cryptogeeknext]

Many people are still caught in their investment/return/profit loops.
They simply can't see beyond that, while they are at it.

The concept of mining in the long run is very simple.
It is an arms race for control of a first-of-a-kind global money system on the planet.

Large geo-political players will be competing with advances in technology and resources to dominate the mining space in the future. Think of it as expenses on army to protect your share of land. You don't normally get returns on investment in security, you get security as the end product.

EDIT:

Currently mining can be compared to hunting/fishing. Some people prefer to buy their food in stores, others like to spend their time and resources to find food on their own, while also mastering their skills. The food found in the wild, while more expensive, is often healthier than that in the stores, as it is free from taint of various E-additives. Sometimes it's not the goal of the game that is so precious but the game itself. You will see that in sports (and life).

[Soros Shorts]

As a thought experiment what would happen if world of war-craft gold was chosen to be the global currency? Would human labor be a better backing for money than sha256?

What would happen? I think mining would move from places with 2 cent electricity to countries where people earn $2 a day on average.

And to answer the OP's question, as a whole mining is not economically retarded as long as it is still profitable for some people (which may not include the average Joe).

[newflesh]

Stopped mining about a year ago, also gave up chasing the latest alt-currencies due to the crazy number of clones being released every week. Thinks it's great as a hobby but for anything more it's easier just to buy btc from an exchange.

[franky1]

ok so i talked about the nature of POW mining but now ill talk about individual peoples mining in regards to return of investment

hobby mining is not really cost effective.(owners of only a few rigs)

people that buy single rigs do not get bulk discount and have to pay full delivery charge and are usually left to the 2nd or third batch after the main mining farms get their hands on units.

but if your a serious investor there are ways to cut the price of the units (bulk buy discount) cut the price of electric (business rate) and the delivery costs are split across multiple units. aswel as normally being front of the queue to start mining before difficulty changes too much

but even when not effective to mine in bulk. some large whale investors find it easier to buy X rigs and mine for 3 months rather than find exchanges with a low 'spot'(spread) price that allows multiple thousands of dollars purchase without affecting the price to much.

EG
just buying 200 coins can make the price of bitcoin move alot. so imagine if you wanted to buy 200,000

for instance if i wanted to buy 200k coins today. i would cause coinbase's price to go from $360~ all the way above $1000. meaning if i had lets say $72million, you would think that equates to 200k coins at $360.. but no,,, as soon as i start buying some the price rises thus by the time i have bought 2000 coins the price could be in the $400 price range. by the time i get to 4000 coins it could be in the $500 price range.. and thus with 196k coins to go, its becoming more and more expensive to just buy the amount of coins i like.

however by mining them i can grab coins and never need to touch an exchange, thus getting closer to the 200k coin figure i want, than i would have simply buying them.

[fryarminer]

You're missing that mining hardware could last for years. Get a S3+ and use it for 2-3 years. You'll be more than profitable. Yes with difficulty increases every subsequent few months will be worth less than the prior, but it will still make money. If you break even after 8 months on hardware costs, and still maintain even the slightest revenue over power costs, then you're still in the green.

Then once it gets to the point where you're not maintaining profit to electric costs, sell it on eBay to somebody that has no clue and is just looking for mining hardware, and then buy a newer unit with that money you made from the sale.

This used to be true before cloud mining. Not sure if it still is. But the thing about hardware is that you get the full price of 3 months mining at the current difficutly TODAY, for every unit you sell. So if you sell 500 preorders, thats a lot of money that you would never get mining.

If you buy one of those machines and it arrives within a few days and you mine with it for several months, you do get profit. But the variables are just impossible to gamble with.

You will never make any profit with cloud mining. Not by any calculation I've made.

I really wish I could mine again. But that ship has sailed. Instead I buy BTC instead of buying hardware. Usually its close to the amount of BTC that the logical life of the machine will produce, but you get it today. Also it is guaranteed, not dependent on the difficutly increase. When the value goes up, you're golden.

[fryarminer]

Another advantage to mining is getting clean fresh coins that the money systems of banks and credit cards don't know you have.
That is priceless.

[jonald_fyookball]

@notbatman,

seems like you're contradicting yourself here.

You are losing money on cloud mining, you got
screwed basically ordering mining gear,
and yet you dont agree its less risky
to just buy Bitcoins?

The question of risk was with regards to competition, the rising hashrate and diminishing returns. The risk in mining is from criminals and scam companies.

There's financial risk, then there's the risk some motherfucker is waiting around the corner for you with a sawed-off shotgun ready to decapitate you for the 20 in your pocket.

yes, but don't you see the connection? The fact that you never got your miner is typical for this industry. People don't get their gear on time precisely because it is a very competitive market.  It is rare to actually order some mining gear, get it quickly, and make a positive ROI on it. 

[cryptogeeknext]

...
for instance if i wanted to buy 200k coins today. i would cause coinbase's price to go from $360~ all the way above $1000. meaning if i had lets say $72million, you would think that equates to 200k coins at $360.. but no,,, as soon as i start buying some the price rises thus by the time i have bought 2000 coins the price could be in the $400 price range. by the time i get to 4000 coins it could be in the $500 price range.. and thus with 196k coins to go, its becoming more and more expensive to just buy the amount of coins i like.

however by mining them i can grab coins and never need to touch an exchange, thus getting closer to the 200k coin figure i want, than i would have simply buying them.

That's very good point, franky!

This separates PoW from other systems, where all money are assigned to a group of participants and the most of it might simply be "not for sale". Mining allows to get as much of it as there is still under the digital crust and after that still get what is available in the flow of transactions.

[notbatman]

@notbatman,

seems like you're contradicting yourself here.

You are losing money on cloud mining, you got
screwed basically ordering mining gear,
and yet you dont agree its less risky
to just buy Bitcoins?

The question of risk was with regards to competition, the rising hashrate and diminishing returns. The risk in mining is from criminals and scam companies.

There's financial risk, then there's the risk some motherfucker is waiting around the corner for you with a sawed-off shotgun ready to decapitate you for the 20 in your pocket.

yes, but don't you see the connection? The fact that you never got your miner is typical for this industry. People don't get their gear on time precisely because it is a very competitive market.  It is rare to actually order some mining gear, get it quickly, and make a positive ROI on it.  

So it's unreasonable for me to expect paid for computer hardware to be delivered because of the fact there's a competitive market due to the machines being profitable?

[fenican]

The WoW Gold analogy is dumb. WoW Gold does NOT, in any way shape or form, reflect human labor - it is, rather, a CENTRALIZED fiat currency minted by one mid-size US company in any quantity Blizzard chooses.

[fran2k]

In the case of GPU mining you always can sell the hardware if the operation is non proffitable. You probably would get around 50% at least in return. In the case of ASICs this may not be true (i.e. BFL).

And yes, mining is economically retarded, DPoS rocks.

http://letstalkbitcoin.com/blog/post/lets-talk-bitcoin-155-beyond-bitcoin
http://wiki.bitshares.org/index.php/Main_Page

[jonald_fyookball]

@notbatman,

seems like you're contradicting yourself here.

You are losing money on cloud mining, you got
screwed basically ordering mining gear,
and yet you dont agree its less risky
to just buy Bitcoins?

The question of risk was with regards to competition, the rising hashrate and diminishing returns. The risk in mining is from criminals and scam companies.

There's financial risk, then there's the risk some motherfucker is waiting around the corner for you with a sawed-off shotgun ready to decapitate you for the 20 in your pocket.

yes, but don't you see the connection? The fact that you never got your miner is typical for this industry. People don't get their gear on time precisely because it is a very competitive market.  It is rare to actually order some mining gear, get it quickly, and make a positive ROI on it.  

So it's unreasonable for me to expect paid for computer hardware to be delivered because of the fact there's a competitive market due to the machines being profitable?

Well, whether its "reasonable" or not depends on how you look at it.

But if you look at what's actually happened in the retail consumer
mining gear market, there's always been tons of delays and the whole
"game" is how fast can you get your hands on the gear.  Historically,
a lot of people have lost money because by the time they got the
gear, it was outdated.  That's a natural consequence of the arms-race
nature of mining.  And, it makes sense that it would be that way
because why would a company sell you a piece of gear at a price
that would give you an easy profit, when they can run the machine
themselves?  That doesn't make sense business-wise.  The reason
they sell it to you is because there is no easy profit.  By the time
you get it, its no longer efficient.  There is a conflict of interest
and I think is part of what the OP is alluding to.  

Mining is a highly competitive, serious business,
and is completely commoditized (your hashes
are just as good as mine).  Only the most
efficient lowest cost miners will win, and that generally doesn't
include your retail consumers.  Some people have goten lucky
and gotten their machines early, or bought just before the price
went up, but that is back to the point of why not just buy Bitcoin?
It is much less risky to do that than get into the mining business.

[notbatman]

@notbatman,

seems like you're contradicting yourself here.

You are losing money on cloud mining, you got
screwed basically ordering mining gear,
and yet you dont agree its less risky
to just buy Bitcoins?

The question of risk was with regards to competition, the rising hashrate and diminishing returns. The risk in mining is from criminals and scam companies.

There's financial risk, then there's the risk some motherfucker is waiting around the corner for you with a sawed-off shotgun ready to decapitate you for the 20 in your pocket.

yes, but don't you see the connection? The fact that you never got your miner is typical for this industry. People don't get their gear on time precisely because it is a very competitive market.  It is rare to actually order some mining gear, get it quickly, and make a positive ROI on it.  

So it's unreasonable for me to expect paid for computer hardware to be delivered because of the fact there's a competitive market due to the machines being profitable?

Well, whether its "reasonable" or not depends on how you look at it.

But if you look at what's actually happened in the retail consumer
mining gear market, there's always been tons of delays and the whole
"game" is how fast can you get your hands on the gear.  Historically,
a lot of people have lost money because by the time they got the
gear, it was outdated.  That's a natural consequence of the arms-race
nature of mining.  And, it makes sense that it would be that way
because why would a company sell you a piece of gear at a price
that would give you an easy profit, when they can run the machine
themselves?  That doesn't make sense business-wise.  The reason
they sell it to you is because there is no easy profit.  By the time
you get it, its no longer efficient.  There is a conflict of interest
and I think is part of what the OP is alluding to.  

Mining is a highly competitive, serious business,
and is completely commoditized (your hashes
are just as good as mine).  Only the most
efficient lowest cost miners will win, and that generally doesn't
include your retail consumers.  Some people have goten lucky
and gotten their machines early, or bought just before the price
went up, but that is back to the point of why not just buy Bitcoin?
It is much less risky to do that than get into the mining business.

So you're saying this is an arms race and I need to get myself a shotgun and a hacksaw because this is serious business?

[cryptogeeknext]

Mining...

So you're saying this is an arms race and I need to get myself a shotgun and a hacksaw because this is serious business?

This is war for freedom, son!
Things are a bit rough here before they settle.

You might do it on your own, or join a star alliance

[thelonecrouton]

Mining exists to secure the blockchain, it was never intended to be a money hose for industrial scale hardware junkies. And since BTC mining is so heavily centralised thanks to a few huge operations and a few big pools, it isn't even much use any more for its intended purpose. BTC hasn't been credibly 'decentralised' for years.

The only PoW coin that has actually useful -ie, distributed- mining is Spreadcoin, the block structure excludes pools, it's solo only. It isn't perfect, it doesn't preclude large solo farms, but it's a big step in a very necessary direction. Every other PoW coin is a complete joke from a security POV.

[cbeast]

The WoW Gold analogy is dumb. WoW Gold does NOT, in any way shape or form, reflect human labor - it is, rather, a CENTRALIZED fiat currency minted by one mid-size US company in any quantity Blizzard chooses.

Thanks for not engaging in thought experiments because that's not the point. OK, let's make it a hypothetical. Pretend that someone created a decentralized world of warcraft. Updates were created on github and game players grinding away voted on the updates. So now it is DECENTRALIZED.

Better yet lets forget WoW. Chess instead. Play chess, beat the previous champ and win a block. You have the option of using a human player or computer. The game would be timed so transactions are validated every ten minutes. Would this be an acceptable PoW?

[exoton]

...
for instance if i wanted to buy 200k coins today. i would cause coinbase's price to go from $360~ all the way above $1000. meaning if i had lets say $72million, you would think that equates to 200k coins at $360.. but no,,, as soon as i start buying some the price rises thus by the time i have bought 2000 coins the price could be in the $400 price range. by the time i get to 4000 coins it could be in the $500 price range.. and thus with 196k coins to go, its becoming more and more expensive to just buy the amount of coins i like.

however by mining them i can grab coins and never need to touch an exchange, thus getting closer to the 200k coin figure i want, than i would have simply buying them.

That's very good point, franky!

This separates PoW from other systems, where all money are assigned to a group of participants and the most of it might simply be "not for sale". Mining allows to get as much of it as there is still under the digital crust and after that still get what is available in the flow of transactions.

I think he is forgetting the fact that with PoW you generally need to invest in a lot of very expensive equipment in order to "buy" bitcoin via mining. Also any bitcoin that you "buy" will not be "delivered" instantly like it will on an exchange, but will be "earned" over several months