Why do people continue to mine bitcoins independently of their hash rate if their ROI loses 20% every month at the going difficulty rate and the exchange rate BTC/USD is at best flat?
4en.wikipedia.org/wiki/Sunk_cost– Nate EldredgeMar 26, 2014 at 19:03
thank you Nate, for the Wikipedia link on sunk costs. very informative.– user14248Mar 27, 2014 at 11:04
Be aware that mining Bitcoin only is not the only option to use your SHA256 ASICs. It's usually much more profitable to merge-mine simultaneously several coins that use the same PoW algorithm at the same type, so by mining bitcoin, namecoin and some others simultaneously your loses would drop down or you might even get a small profit.– Joe PinedaApr 2, 2014 at 23:13
Most miners are speculating that the future value of a bitcoin will be greater than the present value. No profit-oriented miner is happy about the current rate of increase in difficulty. Also, the current rate of difficulty is not a one-way phenomenon. Many factors could cause the difficulty to decrease, such as a flaw that was perceived to be un-fixable. If confidence in bitcoin in general were to drop, mining difficulty would drop as well as mining power and money fled to other virtual currencies.
Other people genuinely want to create an alternate payment network and/or currency and see their contribution in those terms, and not in monetary terms. For those people the price of bitcoins is not their primary motivation.
your answer is not correct, the only value is the exchange rate BTC/USD at best and what circulation there is, no altruistic value exists. Mar 26, 2014 at 22:31
2@user14248 I have seen this viewpoint expressed many times by members of the bitcointalk.org forum. You may not personally share their motivation, but that doesn't make it impossible for other people to see mining as a creative act. Mar 27, 2014 at 18:20
Mining is not a creative act, It is a mechanical act!If it were creative you would not have this difficulty level rising. Also it is not a non profit organization, so therefore Bitcoin is tied to BTC/USD exchange. Apr 2, 2014 at 16:16
"Most miners are speculating that the future value of a bitcoin will be greater than the present value." If that were true, you would be better off just exchanging currency for bitcoin rather than trying to mine it. That would be a more cost effective way of investing in the value of bitcoin.– user18567Jul 12, 2014 at 13:07
That is not completely true. Mining is profitable if done in the right way. That means a miner makes more bitcoin with the investments then simply buying bitcoins. Jul 12, 2014 at 18:36
The answer is, as Nate explained, that the miner is a sunk cost. Obviously, no sane person would buy a miner if they knew they would be in the situation you described.
The future value of Bitcoins is almost irrelevant to the profitability of mining. You can get the same exposure to the profitability of Bitcoins by buying and holding. (The contrary assumption leads to comically absurd results.)
Sane people buy Bitcoin mining hardware because they expect to do better than they would if they used that same money to buy Bitcoins. Changes in difficulty or the cost of electricity may result in them not making money, but no human endeavor is certain to succeed.
As soon as it costs more to provide electricity to the miner than the value of the coins mined, the miner get shut off and retired.
Losing 20% a month? Are you nuts? I bought a miner from KNC last year, the miner arrived a couple of weeks late, but I counted on that. Right now, If I sell my bitcoins as of today's price I would have not only ROI but earned quite a few dollars, not to mention If I would have sold when Bitcoin was at 1000$. Anyway as of today my miner is mining 0.01BTC/day, that is roughly 30cents per month, which equals to 186$. It is still profitable for me to keep mining even if I deduce the electricity bill.
I am one of those that keep his coin in hope of better times, but if I were another kind of guy I would not only have got my investment back, I would have also earnt some nice bucks.