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I have been exploring mining hardware at http://mining.thegenesisblock.com today. No matter what hardware I look at, all of them are making no profit by Oct 2014.

How is this a good purchase? I assume the answer is that if you spend 5K on hardware and electricity and make 60K back in bitcoin in a years time, then you can consider it a good purchase (even though the hardware is now losing money).

Also, how is this model sustainable? Will new hardware be developed fast enough to continue mining past the middle of 2014? Am I reading too much into that prediction tool?

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    The rule of thumb is that you run a miner until the cost of electricity equals the value of Bitcoins mined. Then you try to sell it to someone who has cheaper electricity (or less wisdom) than you do. – David Schwartz Nov 21 '13 at 4:01
  • Is it true that if people stop mining due to difficulty, then mining will become slightly less difficult and extend the lifespan of mining hardware? – zkent Nov 30 '13 at 16:33
  • @zkent: Yes. But in addition to people stopping mining, you always have people starting mining with new, more efficient hardware. – Meni Rosenfeld Feb 5 '14 at 18:04
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Mining really can be a zero sum game. The profitability factor though is the potential of increase in Bitcoin value. If you start mining now and begin start to mine less and less, you may only come out even. Hold those coins long enough, and you may be able to make a profit if the value of Bitcoin continues to increase.

If you throw all this money at ASIC hardware and it becomes useless in a year, it's trash. There is no use for out of date ASICS. Invest into GPUs and CPUS, in a year, you can at least sell the hardware.

Personally, I feel as though there is more potential for growth in GPU and CPU coins such as Litecoin and Primecoin/Quark. You can mine these coins and transfer to Bitcoin if that feels right for you. I started mining Litecoin in June with the assumption that I would break even around January. The value of Litecoin skyrocketed and the whole deal became very profitable. It all comes down to whether or not you believe cryptocurrencies will continue to grow in value. I believe that cryptos are just in their infancy, and things are just getting started. You might also be better off simply buying coins.

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Since I am a math freak, I will use some math to describe to you why investing in mining equipment is a bad idea or not. Consider Moore's Law, to which every chip/gpu manufacturer bases their requirements to. According to Moore's Law the number of transistors that you find in CPU doubles every 2 years. Moore's law was expected to stop at around 1990 but is still happening. With new advancements in circuit technology and quantum computing theoretically it can keep going forever.

What that means is that whatever you buy today will be twice as slow after 2 years, so your mining efficiency will go down asymptotically, now if in the meantime the value of bitcoin goes up exponentially you can potentially make some money in the short time that you will be using your mining equipment. But don't look at it as a long term investment point of view at all.

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