Topic: FAQ for bitcoin newbies who think mining is free money? (Read 8645 times)
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I don't keep up with all the BFL ASIC nonsense, so I am not the best person for this. There must already exist posts where people explain this stuff to newbies. I just need links to them.
Sounds like we have a volunteer to write up that FAQ then.
Obviously you will need to read the FAQ too then. I'll just do some math here since I'm bored, but I'm sure this has been pointed out in many posts before:
If you think the price of bitcoins is going to go up a lot, it is MUCH better to buy bitcoins than to buy hardware. You still will make money by buying hardware, but buying bitcoins will make you more. To see this, suppose we think the price of bitcoin will double this month. We can either buy 2k in hardware or buy 2k worth of bitcoins.
If you buy hardware, after one month:
You mine 4 bitcoins (according to your estimate)
You have 4 bitcoins + 1.5k worth of hardware
The bitcoins are worth twice as much, so you have, at a trading price of $286, about $1144 in bitcoins and $1,500 in hardware because the rig devalued a bit when you bought it. So you have $2,644 total
If you buy bitcoins, you can buy 14 bitcoins. After one month:
The bitcoins are worth twice as much, so you have, at a trading price of $286, about $4000 in bitcoins.
The amount we have from mining will be: $1500 + (bitcoin price)(4 bitcoins)
The amount we have from buying bitcoins will be: (bitcoin price)(14 bitcoins). If we set them equal, we can get the breakeven price increase:
1500+4x = 14x
1500 = x(14-4)
1500 = x(10)
x = $150
So if you think the price of bitcoin will go up more than 5% to $150 one month from now, then you should buy bitcoin instead of mine. You might say "but my rig will keep making money after this." This does not matter. Your total net worth will be higher after one month. You should still buy bitcoins, and then consider buying mining equipment in one month.
The calculation is more complicated if you think the price will go to $500 by december because of increasing hash rates, and someone has done the math on here somewhere, but you will still be better off buying bitcoins. The fact that posters in this mining forum don't understand this is further indication to me that there should be an FAQ.
If you think the price of bitcoins is going to go up a lot, it is MUCH better to buy bitcoins than to buy hardware. You still will make money by buying hardware, but buying bitcoins will make you more. To see this, suppose we think the price of bitcoin will double this month. We can either buy 2k in hardware or buy 2k worth of bitcoins.
If you buy hardware, after one month:
You mine 4 bitcoins (according to your estimate)
You have 4 bitcoins + 1.5k worth of hardware
The bitcoins are worth twice as much, so you have, at a trading price of $286, about $1144 in bitcoins and $1,500 in hardware because the rig devalued a bit when you bought it. So you have $2,644 total
If you buy bitcoins, you can buy 14 bitcoins. After one month:
The bitcoins are worth twice as much, so you have, at a trading price of $286, about $4000 in bitcoins.
The amount we have from mining will be: $1500 + (bitcoin price)(4 bitcoins)
The amount we have from buying bitcoins will be: (bitcoin price)(14 bitcoins). If we set them equal, we can get the breakeven price increase:
1500+4x = 14x
1500 = x(14-4)
1500 = x(10)
x = $150
So if you think the price of bitcoin will go up more than 5% to $150 one month from now, then you should buy bitcoin instead of mine. You might say "but my rig will keep making money after this." This does not matter. Your total net worth will be higher after one month. You should still buy bitcoins, and then consider buying mining equipment in one month.
The calculation is more complicated if you think the price will go to $500 by december because of increasing hash rates, and someone has done the math on here somewhere, but you will still be better off buying bitcoins. The fact that posters in this mining forum don't understand this is further indication to me that there should be an FAQ.
I don't think you got what I was laying down.
If you were to either put in a bunch of money to buy BTC or a rig, dollar for dollar, in somewhere between 3-5 months from now the miner will have more bitcoins. When mining gets unprofitable (or undesirable), the miner also has some equipment to sell off.
It doesn't matter what price point BTC goes to. In fact, the higher the price, the better off the miner is.
we'd need a hash rate of 300Th/s to make $150/BTC not profitable for video cards (5x hash power of now). As the price goes up, so does the mining margin.
If you were to either put in a bunch of money to buy BTC or a rig, dollar for dollar, in somewhere between 3-5 months from now the miner will have more bitcoins. When mining gets unprofitable (or undesirable), the miner also has some equipment to sell off.
It doesn't matter what price point BTC goes to. In fact, the higher the price, the better off the miner is.
we'd need a hash rate of 300Th/s to make $150/BTC not profitable for video cards (5x hash power of now). As the price goes up, so does the mining margin.
I see how point #4 may come off as being too negative. That one is not necessary. I still think newbies should be informed about the other 3 points. If they think bitcoin will hit $500 this year, it is stupid to buy hardware instead of bitcoin. If they already have hardware, they should be informed about how much it costs to mine, and how fast the hash rate is going up. They should also be informed that they cannot just buy an ASIC and instantly make $2500/day. I am seeing people posting who just learned about bitcoin an hour ago, and they have this idea that they can get something for free.
I thought there must be a post that outlines this stuff in detail on the forum somewhere, and I could link to that.
I thought there must be a post that outlines this stuff in detail on the forum somewhere, and I could link to that.
I constantly get questions about mining from people who have just heard about bitcoin. Is there a good post somewhere I can point them to? I think it should include the following points:
1) If they think the price is going to go up a lot, it is much better to buy coins than hardware
2) Info about what ASICs are currently doing to mining, how long it will take to get an ASIC, the risks of ordering an ASIC now, refund policies, and what the mining environment will be like once their ASIC finally arrives.
3) Electricity costs for running GPUs and CPUs and ASICs
4) General discouragement. They are two years late to the party. Newbies should be buying coins, encouraging merchant acceptance, and building the economy, not wasting time learning how to mine or giving money to semi-scam companies.
1) If they think the price is going to go up a lot, it is much better to buy coins than hardware
2) Info about what ASICs are currently doing to mining, how long it will take to get an ASIC, the risks of ordering an ASIC now, refund policies, and what the mining environment will be like once their ASIC finally arrives.
3) Electricity costs for running GPUs and CPUs and ASICs
4) General discouragement. They are two years late to the party. Newbies should be buying coins, encouraging merchant acceptance, and building the economy, not wasting time learning how to mine or giving money to semi-scam companies.
Have you ever considered that you may just be wrong?
1. At current hash rate a $2000 rig will make just over 4btc/month. At today's cost, that same amount would buy around 14 BTC. if everyday were like today, mining would have a BEP of <3 months. Even with network expansion, actual BEP will be <6 months. 14BTC will only ever be 14BTC, where the rig will keep chipping away.
2. (what the mining environment will be like once their ASIC finally arrives.) Sounds like the same game to me, just different hardware.
3. If anyone is smart enough to be able to put together a rig and not just run what they brung, I'm sure they're well aware.
4. Let adults make their own decisions, thank you.
It may sound noble to keep people from doing what you feel like is a waste of their time, electricity and money, but you just come off as an a-hole.
Oh, and just because I'm late to the party doesn't mean I'm not the life of it.
I disagree.
Financially It may not be very rewarding, but you can make small profits. If you like messing with software and hardware, have patience and are not afraid to lose some money, it's a fun hobby.
And the more people that contribute hashing power, the safer these coins get. You can do that and buy coins, ecourage acceptance and build the economy at the same time.
Financially It may not be very rewarding, but you can make small profits. If you like messing with software and hardware, have patience and are not afraid to lose some money, it's a fun hobby.
And the more people that contribute hashing power, the safer these coins get. You can do that and buy coins, ecourage acceptance and build the economy at the same time.
I constantly get questions about mining from people who have just heard about bitcoin. Is there a good post somewhere I can point them to? I think it should include the following points:
1) If they think the price is going to go up a lot, it is much better to buy coins than hardware
2) Info about what ASICs are currently doing to mining, how long it will take to get an ASIC, the risks of ordering an ASIC now, refund policies, and what the mining environment will be like once their ASIC finally arrives.
3) Electricity costs for running GPUs and CPUs and ASICs
4) General discouragement. They are two years late to the party. Newbies should be buying coins, encouraging merchant acceptance, and building the economy, not wasting time learning how to mine or giving money to semi-scam companies.
1) If they think the price is going to go up a lot, it is much better to buy coins than hardware
2) Info about what ASICs are currently doing to mining, how long it will take to get an ASIC, the risks of ordering an ASIC now, refund policies, and what the mining environment will be like once their ASIC finally arrives.
3) Electricity costs for running GPUs and CPUs and ASICs
4) General discouragement. They are two years late to the party. Newbies should be buying coins, encouraging merchant acceptance, and building the economy, not wasting time learning how to mine or giving money to semi-scam companies.
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