Topic: miners: how are you going to react to the reward halving? (Read 5960 times)

I think I will become outraged and demand a change in protocol so that the original reward may be restored. Then when nobody listens I will quit mining in disgust.

Seriously though, this has been expected for a while. Personally I already have a bunch of coins so I am willing to waste a few hundred $ worth of electricity a month to continue mining with ASICs (even at a loss) just to protect the network and the coins I already have.

Im reacting by trying to find alternative bitcoin income, for starters Im selling goods for bitcoin.

unless price doubles or difficulty halvens, I am going out.
 

What's weird?  Reward Halving?  That's the design, nothing weird about it.

What doesn't cause panic these days?
Sam

i'm starting to think that the price will be driven _down_ by the halving first, then back up again as the miners try to push it.

it's just too weird of an event and may cause some panic.

I'm only going to be able to afford half price hookers now....

o.0

wasn't BTC worth around $5 is July (difficulty was close to 1.5 million) and ~$12 now (Now it is a bit above 3 million)? when converted to fiat (yukky I know) my income has actually increased despite difficulty rises
turning on 2 FPGA and off 4 x 6950 has helped my power consumption therefore bottom line too.

some would say the reward drop is already "factored in" to the price - I guess we will see

People talk about the reward halving as if it will have some big mysterious and unprecedented effect on miners.  Income has been cut in half several times over the past few years as difficulty has increased.  Keep in mind that for any individual miner, the reward being cut in half has exactly the same effect on income rate as the difficulty doubling.  If you want to see what affect that will have, just look back at the past 3 months.  At the start of July, difficulty was close to 1.5 million.  Now it is a bit above 3 million.  How have you reacted to your income being cut in half over the past 3 months?

Stop mining, buy coins, pray ASICs are a scam and wait for bitcoins to hit $24 

i'm going to sell off all my stuff and go to disneyland

Pretty much my thoughts!!!! Kudo's 

If then stop;
if then keep going;

Mine on.

I'm in it for both immediate profit and long term investment... As I'm sure most on here are.  That's why I am upgrading and got orders in early for the next generation ASICs.  I'm hopeful the new equipment pays off itself within the first month as the rush comes online (would be great if its within the first week . I'm also hoping its paid off prior to the reward halving.  Then it's long term investing from there. And re investing in more equipment with profit. 

I am with the rest of you that think the market will balance itself and keep the current predictable ratio of:
BTC cost : Difficulty : Personal Hash Power : Daily Intake (profit). 

Those interested in immediate profit will upgrade to asic, those interested in long term investment will continue to mine, even at a loss (@current rates)

I will continue mining aslong as the profit exceeds: 1. the power costs
                                                                    2. the deappreciation of resale value of hardware, factoring in the unlikeley occational breaking.

I guess for me this means something like under 7million difficulty and an ~12,5$ exchangerate for gpu's

...and something like under 20million diff at 12,5$ for fpgas.

Absolutely. The really brilliant thing about the ASIC release timing... is that it's very close to the halving. If bitcoin survives (and I expect it to) there won't be much instability for 4 years. . . That's plenty of time even for non-technical investors to measure ROI and decide to invest... and the more people with vested interest (especially venture capitalists) the sooner we'll get a mainstream produce like a POS (point of sale) system that could really make bitcoin thrive.

Imagine if we you could do global money transfers via bitcoin through some device at your local 7-11. That would make a killing for whomever developed and the transaction fees would legitimize mining even without a block reward.

As a miner, Im investing some more, and I'll always be minning, even if it turns to be unprofitable

yes and then there will be created asic farms.. ..i don t see a problem at all for miners..big or small, the ones with the most money will still gain the most assets and shares.. but that will always be that way...but i do think allot of small miners are counting themselfs to rich thinking there pre orderd 50ghas device makes them quick money..it would today but it wouldnnot next year when deliverd....IF ever deliverd..

It s going to be an exciting next half year in miners land, block halving, ASIC delivery, total hash power due to testing  ect.ect....

I edited my post, as that is pure speculation on my part.  I don't know if it is priced in or not.  I was just relaying how when the exchange rate was $5 the argument was that as people consider the block halving, the exchange rate should double.   And I was just trying to make the argument that perhaps this has already occurred, is priced in, and won't be going up further just because the halving is about to arrive.

oh I hadn't thought so...

pure speculation on my part of course, but I'm expecting to see ~25% increase in price within a week of the halving. For the simple fact that some people will shut down small mining operations and imho the bigger mining operations tend to sell less of their earned btc.

Sure, there will always be people willing to mine at a loss (which might occur when they don't run the calculations and realize it is long past time to power down, or because they think they are "helping bitcoin" or for whatever reason.)



[Edit: Perhaps] we're already at the expected price increase (from $5ish to $12ish)  It could nearly double, yes, and that would mean GPUs are just as profitable then as today when the block reward drops (presuming difficulty doesn't change.  That's a big if).

No - everyone was making statements like this when btc was 5.50 with lower difficulty. halving the block reward is effectively the same as halving the price of btc. People are were still mining at 5.50, and 2.50, and 0.02.

Minor point, pools may need to charge higher fees.

Major point, tech change - ASICs coming out, what if you're lovely BFL SC single is only netting you $120 per month (40x difficulty) - extreme example, but thats the only uncertainty in btc right now, the potential for asic mining to kill the hobbyist aspect by making gpu mining pointless, thus killing demand for btc in general.

Personally, I think we'll see a 10 or 20 times increase in difficulty once asics saturate the market... which probably won't make gpu mining die entirely, if it comes with the price increase expected to go along with the halving, you might see people running gpu farms for another year or so.

I personally will keep my rig on as a heater this winter and then shut it down for good in the spring.

I let my gpu,s run as long as they make btc,s     and will see what will happen, or the price or difficulty will change, but I hope in the long run the made coins will pay it self in about 3 years from now so i am thinking in a long term, maybe next year i will turn around to asic if they are for real,...and dropped in price vs needed ghase vs difficulty..i adjust to the market even when blok reward is halving.  

If I'm reading my stuff correctly, and I think I am, at the present cost of Bitcoin, I will still be making ~$1.14 per day with my GPU rigs, minus electricity after reward halving. Of course, I get pretty cheap electricity. I plan on continuing to GPU mine, probably over the winter while it can help heat. For those that can, most of it is written off as a business expense as well, so the revenues for GPU mining will still be there, they just won't be anywhere near the value of FPGA and especially ASIC.

Also, remember that at $30/coin, Bitcoin was even profitable for CPU miners back in June 2011. Not by much, but it *was* profitable. It was this refusal to price based on the new GPU miners that really cause the price to skyrocket. I know people said it was due to people "hoarding" Bitcoin, but I think it was a refusal of old CPU miners to sell that cause the spike. Finally one of them did, which caused the price to decline, and the rest followed suit.

I'm not familiar with your pool, but operating under the assumption that you keep the transaction fees, and that your pool fees aren't already really high, the bolcks don't have to come near to 50 BTC for you to leave the pool fee structure alone and make the same BTC amount per block.  For instance (simple math, not based on any specific pool), with a 1% pool fee, you get .5 BTC per block, so transaction fees would only need to be .5 BTC higher in total per block for the pool to continue to make the same amount.  Obviously there are lots of different fee structures and payout structures and competition will matter more than what amount a pool has made historically, but >50BTC blocks only matter if you pay transaction fees out to miners and take your cut only from their payout.  Also obvious, but not yet relevant, is the fact that eventually transaction fees will be more than generation amounts, and miners will be very unlikely to let pools keep them.

ETA: A block with 50 transactions each having a .01 fee would meet the requirements in my example above.  I don't really keep up with all of this, but .01kB is recommended in the Bitcoin GUI, and 50 transactions isn't a massive number for a block.

TX Fees will not come even close to making the block subsidy make up for the reward halving.  Regardless of how big the network becomes, we will likely never see blocks of > 50 BTC again except when somebody screws up their transaction.

yeah sorry, I think you are a little confused
transaction fees (paid by people when sending btc to other people/places) are paid to miners to include the transaction in a block specifically - that is how Bitcoin was designed
 

:O

Isn't that the tail wagging the dog?  Transaction fees are for transactions, not mining specifically.  If mining were a significant enough fraction of all transactions I could see it but I don't think it is.

Couldn't an increase in transaction fees solve this problem?  Bitcoin was designed to run only on transaction fees in the extremely long term, so couldn't pools change the rules there if the latest daemon isn't going to already?

please note that in June 2011 profitability halved within in a couple of weeks already - several times.

I totally agree Herr Gornick.  It's really just a hobby and I'm already planning my next move with the GPU since I'm a programmer.  I've learned a lot about OpenCL programming and have some potentially profitable ideas I'd like to explore.

BTW, my kWH rate is $0.086 and the power draw difference between mining and idle is around 35 W.  Works out to around $0.07/day in electricity.
Why not just buy my BTC at an exchange?  Anonymity for one thing.  I mine and run my client behind Tor for maximum paranoia and I'd never bare my privates to one of these BTC exchanges.

Presuming you are like most other GPU miners and pay a normal electric rate (e.g., $0.15 per kWh) then your electricity for the rig will likely exceed $0.43/day.

But let's say it is break even.  You'ld rather pay $12 to your electric company for a month of mining which yields 1 BTC versus sending $12 to an exchange and getting your 1.0 BTC that way?

And if your electric bill comes in higher than the $0.43 per day, then you are paying above market rate to buy -- and you are going through the effort of managing a rig for free.

If it is a hobby, then call it a hobby.   But anyone mining GPUs for the purpose of profit should know right now ... in about 60 days the party is over. [Edit: Of course, there are other uses for your GPUs, but mining BTC for-profit is specifically what I'm addressing.]

We're going to transition our GPU hashing power to solving other High Performance Compute problems, like protein folding and CGI rendering, while continuing to pay out our miners in Bitcoin.  

If you're worried about your GPU miner no longer remaining profitable, you should check out our Protected Pool. When mining earnings drop, you'll be able to sell us a number of shares at a guaranteed price ($2.5 per GH/s per day) equal to the number of shares you submitted to us before the price drop.  

This rate should keep most rigs profitable, so if you mine with 10GH/s for 6 months before GPU mining earnings plummet, our pool will let you keep your same 10GH/s earning for another 6 months.  Or, sell half your cluster, and you'll have 12 months of runway at 5GH/s (or 24mo at 2.5 GH/s...).  We can offer this because we'll be able to sell your GPU compute power at higher-than-bitcoin rates, and your rig will be solving these more-valuable work units.  

You can read more about our pool in the link in our signature.

They won't have to.  It's going to go up on its own through normal market forces.

will the miners band together and demand a higher sell price for bitcoin?

I've been mining since Jan 8, 2012.

When I started I was making about 0.13 BTC/day with difficulty=1,250,758.  During that period the exchange rate was about $6.50/BTC.  $0.84/day in Jan 2012.

As of today the difficulty is 2,864,141 and I'm making about 0.07 BTC/day.  (I wasn't making as much as I could in January because I didn't know how to overclock).  The exchange rate is $12.32/BTC.  $0.87/day today

If the exchange rate is still $12.32/BTC on halving day I'll drop to $0.43/day.  Actually less because the difficulty will be somewhat higher.

The thing is, I don't look at this like I'm making so many dollars/day income.  I'm accumulating BTC for speculation and I personally think BTC will be worth much more than $12.32 in the long run.  So the halving doesn't bother me at all.

Pool income is something I hadn't thought about before eleuthria - thanks for bringing that up.

Miners really shouldn't have much to worry about.  The portion of miners that will mine at a loss is very low.

When reward is halved, gross revenue is halved, and profit is cut in more than half since expenses are static.  Miners will drop out, difficulty will drop.  ASICs won't have a big effect on this.  It's very simple economics.  X investment returns an average of Y profit.  The more profit to be had, the more people mine, the worse their profit margin becomes.

The key here is the following formula:   Price/Difficulty * Block Reward.  If half as many coins are produced per day, difficulty will be cut in half (not precisely, but very close), unless price doubles, in which case difficulty would be roughly the same.  Obviously it will be a mixture of the two.  It will be worse off than we are now because there will always be hobbyists (who mine at a loss), botnets (who mine at no cost), and people with "Free" electricity (who effectively steal it from their oblivious landlord).

The only thing miners are going to notice is pool fees will likely go up/pools will cease to be free.  The reward halving DOES cut pool operator income in half, assuming each pool loses speed proportional to their current share of the network.  This is because pool's earn [at neutral luck]:  Pool Fee * Pool Share of Network * 7200 BTC (daily production of BTC).  With the change, pool's will be earning:  Pool Fee * Pool Share of Network * 3600 BTC (daily production of BTC).

I'll still be mining... not on GPU's though.

Im newish to bitcoins and have only just recently bought my GPUs and started mining. I bought them second hand and used other hardware I already had laying around. Once my hardware is paid for its all profit for me. Even if I only just breakeven Im happy because I love playing around with computer hardware and I would have done something similar anyway with zero return.

But it is that simple for me, if the market crashes I'll sell my hardware and move on, if it doesnt I'll keep mining.

But I am perplexed.  

One argument is that even when BTC daily production drops [Edit: the block reward], if the exchange rate rises maybe to the $20 range and difficulty doesn't rise much, that come December, mining can still be done profitably --- barely.

So today let's say a 58xx GPU might sell for $150 or whatever.  

But if the exchange rate does rise from today's $12 to $20, isn't that $150 worth of value better invested in BTCs than in GPUs?   Sure, the GPU will still be worth $150 or whatever in December after the drop, so there's not a lot of risk in waiting to see if the exchange rate does rise sufficiently to compensate, but you'll definitely miss the opportunity to capture the increase in the BTC/USD from $12 to $20.  But if it doesn't rise you'll be selling the hardware then.

And regardless, how much longer after the reward drop before ASICs will decimate GPU mining entirely?

Unless you have really cheap (e.g., $0.05 per kWH) electricity (or free if included in rent, lease, botnet, etc.) the likelihood that you'll continue mining on GPUs in 2013 is approaching zero.    

But for now, .... the less risky move is to dance while the music is playing I guess (er ..., to milk that cow while it is still producing.)

It's not like even, if you bring 100x times more hashpower to pools, they will mine ridiculously more coins. There is difficulty to keep sure there is only 1 block per 10 minutes.
Though, nothing stops US gov.

The same thing I was planning when I started mining over a year ago, keep on mining.  Not like this is an unexpected event.  It's the way bitcoin works.

What are you planning?

What comment would you expect the pool operators to have?
Sam

Hm... keep on mining?

US Govt prints ridiculous amounts of currency

BFL produces a ridiculous amount of asics

Reward halves


Guess I'll go buy some gold.

I'll react like this:

o_o

im liquidating all my coins and gpus the week prior... then using the funds to buy ammo, firearms, and canned food.  december 21st is right around the corner!

GPUs are definitely going to be done.   ASICs should be arriving about that time.

I may just hold the coins minted with the expensive hardware for a while, if the value does not increase at least a bit.

I imagine it's the same for most miners: they will either continue mining or they will not.

I plan on watching what the market does and either continuing mining or not.

sure, nobody knows what will happen to the market when the reward halving happens, but what are the miners PLANNING?

can any pool operators comment?