The flaw in the solo mining arguments is that they don't take into account the fixed and variable cost that all start at t0. If you aren't making a dent in the cost and operation of your rig between difficulty increases you need to join a pool. If you are still unprofitable you shouldn't mine, your throwing money out the window. Another easy way to figure this out in practical terms is to look at the hashrate of the top users in the top pools (Slush, Deepbit, and BTCGuild). Look at how often they are solving blocks. There is usually a sharp falloff in hashing power in the big pools. The top 2-10% usually have way over 2GH/s. These power players are pulling the weight in terms of blocks discovered. The other 90% operate as insurance to further smooth out variance. It's the reason why if you have respectable hashing you can earn a little more at BTCGuild because there is less competition, but more variance.
At the end of the day you have to be able to cover your cost. Cash out your initial stash of BTC to cover the fiat used to buy the machines. As long as there is a chance that Bitcoin could go to zero miners should sell some percentage of their yield. Commerce is the only sustainable future for Bitcoin.
-btcbaby
Topic: Anti solo mining myths debunked (Read 12312 times)
Really it seems simple to me, if you don't have a high enough hash rate to reasonably expect to generate a block before the next difficulty increase (you can look at the mining calculators to see your odds based on your hash rate), then you will lose solo mining, because if you don't mine a block before that difficulty increase your odds of generating a block will go down, and got nothing at that lower difficulty. If however you have a high enough hash rate that you can reasonably expect to generate a block before the difficulty increase then you can save yourself the fees, etc. of a pool and comfortably mine solo, as the odds would be the same (you would just have to put up with the variance but over a period of a couple of weeks you would likely come out ahead solo in this case). Am I right or am I missing something?
Not really. Difficulty increases have very little to do with it (though when making projections of whether you can take the variance you may want to consider that the variance will increase in the future). It is always the case that solo mining has the same expectation (without fees) and higher variance. And, if it takes a week to find a block, it will take years until your payouts will be anywhere near the statistical average.Really it seems simple to me, if you don't have a high enough hash rate to reasonably expect to generate a block before the next difficulty increase (you can look at the mining calculators to see your odds based on your hash rate), then you will lose solo mining, because if you don't mine a block before that difficulty increase your odds of generating a block will go down, and got nothing at that lower difficulty. If however you have a high enough hash rate that you can reasonably expect to generate a block before the difficulty increase then you can save yourself the fees, etc. of a pool and comfortably mine solo, as the odds would be the same (you would just have to put up with the variance but over a period of a couple of weeks you would likely come out ahead solo in this case). Am I right or am I missing something?
Not really. Difficulty increases have very little to do with it (though when making projections of whether you can take the variance you may want to consider that the variance will increase in the future). It is always the case that solo mining has the same expectation (without fees) and higher variance. And, if it takes a week to find a block, it will take years until your payouts will be anywhere near the statistical average.
Really it seems simple to me, if you don't have a high enough hash rate to reasonably expect to generate a block before the next difficulty increase (you can look at the mining calculators to see your odds based on your hash rate), then you will lose solo mining, because if you don't mine a block before that difficulty increase your odds of generating a block will go down, and got nothing at that lower difficulty. If however you have a high enough hash rate that you can reasonably expect to generate a block before the difficulty increase then you can save yourself the fees, etc. of a pool and comfortably mine solo, as the odds would be the same (you would just have to put up with the variance but over a period of a couple of weeks you would likely come out ahead solo in this case). Am I right or am I missing something?
Not really. Difficulty increases have very little to do with it (though when making projections of whether you can take the variance you may want to consider that the variance will increase in the future). It is always the case that solo mining has the same expectation (without fees) and higher variance. And, if it takes a week to find a block, it will take years until your payouts will be anywhere near the statistical average.Really it seems simple to me, if you don't have a high enough hash rate to reasonably expect to generate a block before the next difficulty increase (you can look at the mining calculators to see your odds based on your hash rate), then you will lose solo mining, because if you don't mine a block before that difficulty increase your odds of generating a block will go down, and got nothing at that lower difficulty. If however you have a high enough hash rate that you can reasonably expect to generate a block before the difficulty increase then you can save yourself the fees, etc. of a pool and comfortably mine solo, as the odds would be the same (you would just have to put up with the variance but over a period of a couple of weeks you would likely come out ahead solo in this case). Am I right or am I missing something?
Not really. Difficulty increases have very little to do with it (though when making projections of whether you can take the variance you may want to consider that the variance will increase in the future). It is always the case that solo mining has the same expectation (without fees) and higher variance. And, if it takes a week to find a block, it will take years until your payouts will be anywhere near the statistical average.Really it seems simple to me, if you don't have a high enough hash rate to reasonably expect to generate a block before the next difficulty increase (you can look at the mining calculators to see your odds based on your hash rate), then you will lose solo mining, because if you don't mine a block before that difficulty increase your odds of generating a block will go down, and got nothing at that lower difficulty. If however you have a high enough hash rate that you can reasonably expect to generate a block before the difficulty increase then you can save yourself the fees, etc. of a pool and comfortably mine solo, as the odds would be the same (you would just have to put up with the variance but over a period of a couple of weeks you would likely come out ahead solo in this case). Am I right or am I missing something?
Not really. Difficulty increases have very little to do with it (though when making projections of whether you can take the variance you may want to consider that the variance will increase in the future). It is always the case that solo mining has the same expectation (without fees) and higher variance. And, if it takes a week to find a block, it will take years until your payouts will be anywhere near the statistical average. 
Pools are the tax authorities, which levy tax on ignorance and lack of knowledge of elementary theory of probability. Kind of like weird reverse lotteries.
That is an odd statement coming from someone who owns a pool
If truthfulness is odd, than yes it is odd.
But I must also note that pools do provide reduced variance, which could be valuable.
Pools are the tax authorities, which levy tax on ignorance and lack of knowledge of elementary theory of probability. Kind of like weird reverse lotteries.
That is an odd statement coming from someone who owns a pool
Really it seems simple to me, if you don't have a high enough hash rate to reasonably expect to generate a block before the next difficulty increase (you can look at the mining calculators to see your odds based on your hash rate), then you will lose solo mining, because if you don't mine a block before that difficulty increase your odds of generating a block will go down, and got nothing at that lower difficulty. If however you have a high enough hash rate that you can reasonably expect to generate a block before the difficulty increase then you can save yourself the fees, etc. of a pool and comfortably mine solo, as the odds would be the same (you would just have to put up with the variance but over a period of a couple of weeks you would likely come out ahead solo in this case). Am I right or am I missing something?
More or less a reasonable concept. I wish that googlebot were still around, would be interesting to see if he still felt the same way about a month later on his idea about economics of solo mining at ~1.75million difficulty on lower hash rate.
Really it seems simple to me, if you don't have a high enough hash rate to reasonably expect to generate a block before the next difficulty increase (you can look at the mining calculators to see your odds based on your hash rate), then you will lose solo mining, because if you don't mine a block before that difficulty increase your odds of generating a block will go down, and got nothing at that lower difficulty. If however you have a high enough hash rate that you can reasonably expect to generate a block before the difficulty increase then you can save yourself the fees, etc. of a pool and comfortably mine solo, as the odds would be the same (you would just have to put up with the variance but over a period of a couple of weeks you would likely come out ahead solo in this case). Am I right or am I missing something?
Although statistics is no easy subject, this particular problem is by no means difficult 
Pooled mining reduces variance, usually at a cost. The bigger the pool, the smoother the variance.
From a statistical point of view, there are no other differences.
If your business model/speculation strategy relies on reduced variance, go with a pool.
If not, don't. It's that easy...
Pooled mining reduces variance, usually at a cost. The bigger the pool, the smoother the variance.
From a statistical point of view, there are no other differences.
If your business model/speculation strategy relies on reduced variance, go with a pool.
If not, don't. It's that easy...
This is getting tiring. Nothing seems to confuse homo oeconomicus more than applied statistics.
You model the solo case one-sided as if it was a rule that one will find nothing. There is equal probability to get a block on the first day of mining as there is to find one too late.
0% pools still keep the transaction fees and suffer from more stale shares than possible when you go solo. Again, I didn't claim that pools are considerably worse, they just don't have better returns on average.
You model the solo case one-sided as if it was a rule that one will find nothing. There is equal probability to get a block on the first day of mining as there is to find one too late.
0% pools still keep the transaction fees and suffer from more stale shares than possible when you go solo. Again, I didn't claim that pools are considerably worse, they just don't have better returns on average.
It is just as tiring hearing your side of things. You seem to be implying that you have a grasp on statistics, yet you fail to even consider the fact that a moving average might not be the same as a static average.
Hint: It's not.
For more information on statistics, see the thousands of papers showing you why the argument "A lottery ticket is just 1 dollar and I could win MILLIONS! So it's not a bad investment" is total crap (same argument as yours).
5,923,676,160,960,014 is not an irrelevant number.
0% pools still keep the transaction fees and suffer from more stale shares than possible when you go solo. Again, I didn't claim that pools are considerably worse, they just don't have better returns on average.
I've been concerned about this lately myself. Right now ~ 3% of my hashes are stales. I'm definitely thinking about getting out of the pool. ;-)
Again, I didn't claim that pools are considerably worse, they just don't have better returns on average.
Pools generate 100% guaranteed daily income, esp. if you opt in for a PPS scheme.
You are guaranteed nothing while solo mining and might not even find a block at all at 1-3m difficulty using a single gpu
Again, I didn't claim that pools are considerably worse, they just don't have better returns on average.
Pools generate 100% guaranteed daily income, esp. if you opt in for a PPS scheme.
You are guaranteed nothing while solo mining and might not even find a block at all at 1-3m difficulty using a single gpu
Yes, pooled mining gives (some small %) less than solo mining in return for less variance. Any argument stating otherwise is incorrect. The only thing left to add is that variance is a bitch, and it may well be worth giving up a couple of % in expected value in order to reduce it.
The majority of what is written in this thread is BS, either because it under or overstates the loss of EV due to pooled mining, or understates the benefit of pooled mining's reduced variance.
In my opinion anybody who thinks that lower variance has no value hasn't really experienced variance.
If bitcoin continues on its current trend then eventually solo mining will have an extra cost, as the "average user" will no longer have the hardware and connectivity to run a full node.
The majority of what is written in this thread is BS, either because it under or overstates the loss of EV due to pooled mining, or understates the benefit of pooled mining's reduced variance.
In my opinion anybody who thinks that lower variance has no value hasn't really experienced variance.
If bitcoin continues on its current trend then eventually solo mining will have an extra cost, as the "average user" will no longer have the hardware and connectivity to run a full node.
This is getting tiring. Nothing seems to confuse homo oeconomicus more than applied statistics.
You model the solo case one-sided as if it was a rule that one will find nothing. There is equal probability to get a block on the first day of mining as there is to find one too late.
0% pools still keep the transaction fees and suffer from more stale shares than possible when you go solo. Again, I didn't claim that pools are considerably worse, they just don't have better returns on average.
You model the solo case one-sided as if it was a rule that one will find nothing. There is equal probability to get a block on the first day of mining as there is to find one too late.
0% pools still keep the transaction fees and suffer from more stale shares than possible when you go solo. Again, I didn't claim that pools are considerably worse, they just don't have better returns on average.
Beats Las Vegas in 2/3 aspects. Pooled mining would also return more than 100% right now, but with zero fun and much time wasted for a wimpy return (or considerable risk if you scale).
You fail to take in account that every day you don't find a block, you lose 0,55 BTC that would otherwise be in your bitcoin wallet. Those "wimpy" losses add up very fast.
So for every 100 days you find nothing, you are losing over 50BTC or a whole block because you're not in a pool.
Variance only evens out in the long term so it could be another 100 days or even 3 years before you find your next block.
Just because you win the lottery once doesn't mean it's going to happen again anytime soon. Just because you found a single block with a 5870 doesn't mean it's going to be a regular event.
However, a pool with 3000 ghash/s finds blocks in about 20 minutes average.
Your share of the current block doesn't necessarily even have a fee for variance reduction if you mine in a 0% pool like BTCguild.
It seems some people get overly enthusiastic about solo mining just because they got lucky once
the whole blockchain will be rebuildable with a desktop pc in an afternoon in less than a decade, driving btc prices down to 0 - if you're a long term investor skip ALL bitcoin mining and invest USD, stocks, or buy some sheep.
Alot of us do not try and achieve the gambling man orgasm while mining for bitcoins, alot of us have legit reasons for running their miners as a business with realistic daily/weekly and monthly income projections. It would be a self destructive decision for alot of users on a big pool to move into solo mining.
I'm sorry, but IMHO anyone who has invested anything into dedicated mining hardware, since the beginning of this month, "even" when he is mining pooled, is a much worse gambler than I am. There is real money at stake. I, in contrast, just don't switch my PC off at night as I would normally do and that's all. The "business" of recent rig buyers runs on the assumption that we won't reach 10.000.000 difficulty anytime soon (which won't even pay electricity for many and might be on the horizon within weeks) and that the current XXX/BTC rates aren't moon prices. Pooled mining doesn't hedge this risk. There is no market of considerable size for the exchange of real goods or services for Bitcoins. There is just one huge speculation bubble with thousands of people hoarding them in the hope to get rich and who might dump them any time, if they get cold feet. There is no necessary correlation between difficulty and exchange rate. A too high difficulty might also make many people loose interest and motivate to move on and cash in. I don't want to hold Bitcoins on the day when hoards of miners become scared when the long-term uptrend breaks on high volume one day (the recent break was just a short-term trend). We might very well see cent/BTC territory again, and if you ask me, that wouldn't even be a bad thing for Bitcoin as a currency. A couple of weeks ago it was still hot to tell friends of Bitcoin and they could all earn their share with a little effort. Even at the current difficulty this isn't true anymore and many couldn't justifiably care less for the returns you get with pooled mining ATM.
Pooled mining at the current difficulty is only "worth" the effort, if you leverage the current profit by buying extensive amounts of mining gear. This leverage in itself is very, very risky. Even the aftermarket value of the latter is severely threatened by a scenario when mining suddenly becomes unprofitable for many. Because of that I see people, who undertake pooled mining on a business-scale (anything else doesn't pay enough on a pool), as the real gamblers in this game. I couldn't be farther away from that with my solo mining HD5870.
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