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Bitcoin Miner does the math, calls it quits

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Re: Bitcoin Miner does the math, calls it quits

#41

Post by jonnathanson »

tibbon wrote: post #6

What's interesting, is that this is what should happen. Since Bitcoins are generated at a constant rate (from my understanding) regardless of how many people are working on them, the market should eventually even out so that its a break-even at best. Likely it will be a little worse than break-even, because there are always some people out there willing to attempt to generate coins even if what they are doing doesn't…

Likely it will be a little worse than break-even, because there are always some people out there willing to attempt to generate coins even if what they are doing doesn't financially make sense, breaking the market.

I'd guess that the percentage of miners and speculators in the BTC market who are economically irrational in their activities is a lot higher than most of us think it is. Ergo, I don't place too much faith in any models, theories, or projections about this market that lean heavily on assumptions of rational actors.

Following from this logic, I can't justify taking a significant position in this market. The risk is enormous, and as risk goes, it's not incredibly attractive compared to alternative investment vehicles or strategies.

Re: Bitcoin Miner does the math, calls it quits

#42

Post by maaku »

JulianMorrison wrote: post #34
stonemetal wrote: post #29

Earlier quoted context omitted.

The system contracts and it becomes easier to mine. As long as the number of clients doesn't approach zero, transactions should be OK.

What about when the number of BTC has gotten close enough to 21 million that mining nearly never returns any new ones? The number of miners could fall to something approaching zero.

The hope is that miners will still make money off of transaction fees (a "tip" to the miner which verifies the transaction). Each new block assigns 50 BTC to the miner that found it, plus the accumulated fees of all transactions included in that block. The idea is that as mining new bitcoins becomes unprofitable, the transaction fees (set by the initiator of the transaction) will make up the difference.

That theory has yet to be tested, though.

Re: Bitcoin Miner does the math, calls it quits

#43

Post by maaku »

klhutchins wrote: post #38

It seems like a shame that all that computational power is being wasted. I mean other than generating some hashes, what good does that really do? I think it'd be cool if somehow it tied into the folding@home type of stuff. Where the computations solved something meaningful, but there could also be some "monetary" incentive.

Already working on that ;) I have a working prototype of a "bitcoin" client that replaces the hash generating function with completing a workunit of a BOINC project (the various @home stuff). It required some modification to the bitcoin protocol as the two tasks are not exactly analogous, and there are some different security implications.

Watch for it on HN soon...

Re: Bitcoin Miner does the math, calls it quits

#44

Post by ahi »

wccrawford wrote: post #32
MichaelApproved wrote: post #24

Earlier quoted context omitted.

Wow. I know very little about mining and had no idea that the market moved that fast.

Yeah, that's the bit I learned a week after doing the calculations. When people first started, they were using CPUs. When GPU usage became available, CPU-miners became so horribly inefficient that electricity cost alone killed them. Now, granted, I can't imagine anything being that much better than GPUs, but new GPUs are usually much more efficient than old ones, and they come out all the time. It could quickly becam…

FPGAs and ASICs are in use by a few people/companies. They have the opposite cost structure of GPUs. The two main measures are MegaHash per $ and MegaHash per Watt, roughly analogous to fixed expenses and operating expenses though the MH/Watt also influences investment in power and cooling infrastructure. GPUs have a high MH/$, but a rather poor MH/W.

I own 2 Radeon 5830s, $110 each, that still spit out about $5 a day at current prices making for a rather impressive rate of return in spite of high power requirements. From what I have read, FPGAs require about an order of magnitude higher capital investment with the benefit of a drastically reduced power consumption. Last I checked about 6 weeks ago, a decent GPU rig could pay for itself in a month or two, while an FPGA setup could pay for itself in about a year. The tradeoff is that the GPU rig's payout may dip below power costs before it pays itself out (likely the case for any rigs purchased in the past month) essentially betting on the short term difficulty increases, while FPGAs are betting on the long term health of the bitcoin system itself.

FWIW, the newer ATI GPUs aren't as good for mining as the older 5800 series.

I was a PoliSci/CompSci/Econ mega-nerd in Uni, so Bitcoin is my fantasy come true.

Re: Bitcoin Miner does the math, calls it quits

#45

Post by wmf »

wccrawford wrote: post #32
MichaelApproved wrote: post #24

Earlier quoted context omitted.

Wow. I know very little about mining and had no idea that the market moved that fast.

Yeah, that's the bit I learned a week after doing the calculations. When people first started, they were using CPUs. When GPU usage became available, CPU-miners became so horribly inefficient that electricity cost alone killed them. Now, granted, I can't imagine anything being that much better than GPUs, but new GPUs are usually much more efficient than old ones, and they come out all the time. It could quickly becam…

That's what you'd think, but people are mostly using 2009 vintage GPUs because the newer ones are not more efficient.

Re: Bitcoin Miner does the math, calls it quits

#46

Post by omouse »

JonnieCache wrote: post #40
joejohnson wrote: post #37

Earlier quoted context omitted.

Yeah, at least one: http://esspe.net/bitcoins-and-weed

He mentions the power usage, people do get reported over that. However the police also check for unusual heat signatures coming out of buildings at night, that could also have been what happened. Interestingly, in some jurisdictions (notably canada) looking through someone's roof with an IR camera constitues an invasion of privacy, and requires a warrant. Looking forward to the future when Bitcoin gets banned, and we…

However the police also check for unusual heat signatures coming out of buildings at night, that could also have been what happened.

Uh, wtf, since when? They're allowed to do this without a warrant? They just randomly drive along the streets and check heat signatures?

Looking forward to the future when Bitcoin gets banned, and we see documentaries with police officers breaking down makeshift barricades to gain entry to innocuous looking barns way out in the countryside, pulling back layers of plastic sheeting to find a state of the art datacenter inside, with racks of clustered GPUs, and one very dishevelled looking vietnamese nerd sleeping on a bare mattress.

That'll happen soon and it won't be just for BitCoin, it'll be for any p2p network or any encrypted network since the governments of the world are all going censorship crazy at the moment.

Re: Bitcoin Miner does the math, calls it quits

#47

Post by ahi »

pavel_lishin wrote: post #4

> The fact that every 2016 blocks (about 11 days), 100,800 new BTC are minted. That means that, to maintain the CURRENT price of $13.50, we'd need $1,360,000 of NEW MONEY entering the system every 11 days. I don't know anything about economics - literally nothing - but that doesn't seem right to me.

The main currency exchange does about $1 million in volume daily. Getting $124k in new money in there doesn't seem so difficult to me.

Re: Bitcoin Miner does the math, calls it quits

#48

Post by hollerith »

khafra wrote: post #18

Power and wifi are free at many coffee shops and fast food joints. When I'm in one, spending the time between my work and martial arts training group, I mine on my laptop. If I were especially ambitious, I'd bring a tower with a bunch of ATI cards in it; but the McDonalds manager might complain when the lights dim.

This is why we can't have nice things (e.g., free power in cafes and fast-food places).

Re: Bitcoin Miner does the math, calls it quits

#49

Post by nextparadigms »

sp332 wrote: post #12
tibbon wrote: post #6

What's interesting, is that this is what should happen. Since Bitcoins are generated at a constant rate (from my understanding) regardless of how many people are working on them, the market should eventually even out so that its a break-even at best. Likely it will be a little worse than break-even, because there are always some people out there willing to attempt to generate coins even if what they are doing doesn't…

In fact, it's worse than that, because the global rate of BTC production goes down over time. After 2025, hardly any new bitcoins will be generated. https://secure.wikimedia.org/wikipedia/en/wiki/Bitcoin#Monet...

That's the whole point. As the amount of Bitcoins gets closer to the maxim, it will become harder and harder to mine them. But ideally, this should be overcome by Bitcoin's increasing popularity and value.

This isn't happening right now, and it appears to have stagnated, but that's not a problem for Bitcoin's future, because the continous mining of Bitcoin is not necessary to ensure its success.

This simply means that there has to be a bigger real economy behind Bitcoin's value, and once that economy is strong enough and catches up with Bitcoin's inflated value, the value should start rising again, and miners will appear again as it becomes profitable to mine them.

Re: Bitcoin Miner does the math, calls it quits

#50

Post by cabalamat »

klhutchins wrote: post #38

It seems like a shame that all that computational power is being wasted. I mean other than generating some hashes, what good does that really do? I think it'd be cool if somehow it tied into the folding@home type of stuff. Where the computations solved something meaningful, but there could also be some "monetary" incentive.

It seems a shame that all the effort that people put into making padlocks is being wasted, what good does that really do?

Answer: padlocks, like bitcoin hashes, are a way of allowing people to collaborate without having to trust each other.

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