Topic: Is there a Hashing Bubble in the making? (Read 1613 times)

this is very intriguing and i think of it often , how will the transition from 'profits mostly from mining new coin' over to 'profits mostly from transactions' occur? is there a way to position oneself in advance to take advantage of the change over?

when i read about the transaction fee issues with LTC dust, it makes me think that small miners might be able to serve a niche market where  they service transactions from specific 'front end networks' or groups  exclusively, to ensure those transactions are processes quickly

sort of how electrical power plants that might use nuclear or coal powered generators for their base load still have diesel or natural gas generators on standby for peak load times

i think this hash bubble is one of the drivers of the recent alt coin explosion, small miners looking for somewhere to put there hash  power where they can still dream of getting rich

like the Klondike gold rush near the end when people made more by catching the gold dust falling through the cracks of the saloon floor than in actually mining gold in the field

Can there be such a thing as a mining bubble? Mining should increase exponentially now, remember bitcoin has taken off, to Jupiter in a few years   

This should provide incentive for more miners to sell and trade Bitcoins and to get more of a marketplace established, to seed the market and create more transactions for gathering the fees.

what if it becomes harder to convert crypto into fiat? From a distance appears as if the money transfer outfits are being pressure to close the doors to the exchanges.

It will happen much sooner than that. 95% of GPU hashing will be gone by the end of the summer. The only ones left who will be mining are those who get free electricity.

does anyone think that the hashing war will level off once mining revenues switch mainly from block rewards to transaction fees?

But what if the recent events sky rockets the price? At least in local traders...

I think I may be in the minority opinion, but believe that the 'writing is on the wall' for gpu mining. I guess it is discussed a lot in other threads, but ya, ASICS are just so much more efficient I think GPU mining will be 75% - 90% phased out by the start of 2014.

Regarding the hashing bubble, I don't think this is really all that possible. I see what you are saying, but do not believe it is accurate to call this a bubble.

It is not a fast moving as a bubble. The difficulty gains equalizes with the price gains, roughly. If there is too much hashing going on for the ROI then it will scale back, but it will never rapidly decrease as in other bubbles, unless there is corresponding massive drop in BTC/USD.  Hashing rates are reactive to the price, but I don't think you could see it as ever artificially higher than it 'should be'. It's always pretty much perfectly 'where it should be' as it is a self - correcting system.

What will happen is that mining profit margins will get lower, % wise. Mining will be dominated by fewer, bigger players, and you'll need to get a ROI in 3 or 4 months otherwise you'll be hooped.  If you are looking to get into mining, you'll likely need a greater amount of capital to by a reasonable ASIC.

Once the 2nd gen of ASICS of come, and ASICS are easier to come by and there is more competition (hoping this will happen, though it's not guaranteed) then will see another shift in the metrics. But we are still in the early ASIC stage, where  most GPUs will soon be no longer hardly be at all profitable (at the end of the summer), even for scrypt coins.

note how they are closing the money transfer to the exchanges, one by one. The underworld crime association with crypto has to stop and fast or there will be no crypto coins with any value whatsoever very soon . People investing 10's of thousand in equipment should be aware of this. On the other end, the crazy difficulty forecast will have big ASIC miners run them to cover the investment. The promise land of fat profits (AKA greed) will not be there.

Unlike an exchange rate bubble that can easily lead to a crash, a hash rate explosion will not be followed by a significant drop unless mining results drop so much that even mining with high-performance gear does not yield enough profit. Then miners will probably switch off hardware until difficulty goes down far enough to make it profitable again.

And yes, if ASIC developers really deliver the hardware that's currently in the pipeline, hash rates will skyrocket.

Onkel Paul

Yes,

 and its not going to pop any time soon 

https://blockchain.info/charts/hash-rate?timespan=all&showDataPoints=false&daysAverageString=1&show_header=true&scale=0&address=

After reading about AsicMiner and Avalon adding 100's of TH/s in the upcoming weeks/months, I saw this graph on blockchain.info.

Is this trend sustainable? Will is level out? Is there a reason it might suddenly drop? How are they continuing to make money now that the price is leveling off? Are the speculating that the price will go up eventually?

Additionally, the block creation is down to 8.5 minutes and dropping. Doesn't this reduce the security of the network? Will all this added hashing power lower the security to some sort of equilibrium or will it continue until double spending is common, and orphan blocks are the norm?