9

From the FAQ :

Creating a block is a proof of work with a difficulty that varies with the overall strength of the network.

So with these purty graphs there is a continuous exponential trend in increasing difficulty due to the combined total of network's computation strength.

My question is, now that the difficulty is shooting up like a rocket this year, why bother investing in any type of miner hardware? Feels like the difference between buying $100 worth of lottery tickets and buying just $1. The odds of winning the lottery are so low that buying $100 still leaves you with very low odds and you out of that much more cash.

  • 2
    Note that it's a feedback loop: if enough people feel as you do and decline to add mining hardware to the network, the difficulty will stop going up. – Nate Eldredge Nov 20 '13 at 20:29
  • @NateEldredge, that's true, but there must also have been an explosion on mining app usage this year as well, think about sheer numbers of folks just running with their PC's own GPU. That alone will keep the network strength very high. So unless you're going to invest big in the best hardware (which may quickly decrease in abilities as time goes on), there's no point trying to mine for profit, unless of course, you're instead selling gear to prospective miners ;-) – Chris O Nov 26 '13 at 2:33
7

The mining difficulty is going up very fast. You are correct. But the mining industry is also stimulating the Bitcoin economy significantly. See this news story, for instance: KnCminer sells $3M of bitcoin mining equipment in 4 days

My best answer to your chart is another chart:

enter image description here

From: https://blockchain.info/charts/miners-revenue

Even with the bitcoin difficulty skyrocketing and the hash rate of the network steadily climbing, the math says it all.

(number of bitcoins mined per day + transaction fees) * market price

Now mining at that scale is not for everyone, that is where hashing data centers come in to the picture. If someone wants to mine some of this currency but cannot afford to buy the expensive gear that is required to keep pace with all of these numbers, cloud services will allow little guys to play ball at whatever prices they can afford to pay.

4

The primary purpose of mining is to secure the bitcoin blockchain from hostile entities. It is designed such that it should only be minimally profitable over the cheapest electricity costs with the most efficient mining, and thus achieve the highest security without unjustly enrichening miners. Unfortunately, the difficulty is slow to adapt, and this combined with preorders creates an unreasonably high demand for mining hardware.

0

TL;DR - There's not enough coin for everyone on earth to have 1, or even 0.01 -- the value will eventually adjust once early adopters sell their massive stores of coin, thereby spreading the coin around.


Aside from what others have mentioned, here's the problem as I see it:

There's still quite a few early adopters who are selling at below what the market value should be. They mined early, and instead of buying 10,000 BTC pizzas, they sat on the coin until it was worth selling.

Now that it's hit some great numbers (in the greater scheme of things), they're selling steadily -- not enough to kill the price, but enough to keep it from climbing with the network difficulty.

Current miners who know the current cost of mining (which is pretty damned significant in terms of computer costs, power costs, and especially time) are a lot less likely to dump their coin at current-day prices. They, like the earliest adopters, would rather see bitcoin at higher marks to let their coins go for fiat. This is where I fall in as well.

Sure, I can sell my few coin at today's prices, but if I make a profit (not sure if I do after with power costs), the profit would barely be worth the time. I'd rather wait for more digits -- hitting $1,000/btc again would be nice to see, and I'd probably start spending a bit of coin here and there, but until we see $5,000+, I'm not going to sell any coin.

Given that $4,500 worth of hardware, tons of power and heat, and endless RMAs only gets me 1-2% of a bitcoin per day right now (WAY less than a few months back), I feel that if I sold all of my coin, it would take me a very long time to see a full coin again.

Remember that we've got over 7 billion people on this planet currently. By the time all bitcoin is mined, probably closer to 8 billion. With only 21 million coins to go around, if everyone had an equal share, they'd have what, 200k Satoshi? (0.002 bitcoin)

By sitting on a few bitcoin, you're hundreds of times better off than what the average person can possibly achieve in terms of bitcoin savings. Also, remember that the past few times the value jumped, it did so by 10-12x -- wait for a few more of those. :)

  • While this was an interesting read, I kinda miss the part where you argue whether one should invest in mining hardware or not. I take it, that you'd advise people to rather buy Bitcoin then mine themselves? – Murch May 8 '14 at 6:44
  • With the right hardware, I think mining will continue to be better in terms of what you can gain long-term. All things considered, and with current market value, I'd just buy the coin. – Red-Beard May 8 '14 at 15:09
0

My take on this: I see 2 reasons to start mining bitcoin: - to help the network and be part of the bitcoin experiment - to make money

The first reason is a good one, but expect to not break even on your hardware/electricity costs. To make money you need instant access to new hardware (a profitable mining machine which is not in your hands is not a profitable miner), cheap electricity and preferably some kind of scale.

In short: I looked at it, then I just bought bitcoin :).

PS: I mined some altcoins for a while when it was profitable, but there the reign of gpu's is almost over as well so I expect it to become the same as bitcoin mining

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.