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Topic: ROI of a Mining Hardware - Quotes from ckolivas - page 2. (Read 3798 times)

legendary
Activity: 4256
Merit: 8551
'The right to privacy matters'



Speaking purely from investment terms, it's a curious phenomenon that in the history of bitcoin, you could always convert dollars into more bitcoin than any mining machine you could buy with those dollars would generate over its lifetime, yet people inevitably choose to buy bitcoin miners because of the concept of buying a "money making machine". It is the most expensive and technically challenging way to convert dollars into bitcoin. By far the most money anyone ever made off ASIC hardware are those who purchased avalon generation 1. At bitcoin prices when the avalon was first announced, there is still a chance they'd be better off just having converted their dollars into bitcoin at that time. When the avalon actually arrived they were a steal at 60GH @ 1500$=80BTC but you could not order them any more since they were always preorders (how much is 80BTC worth now?). I think bitcoin was worth less when they made their Avalon preorders so they were much more than 80BTC. They may have been the one exception and ironically the first ASIC ever so they capitalised on the diff at the time.

It's funny because for years people would happily expand/extend their hardware for reasons that had nothing to do with making money, like having the best gaming machine, or the best Mprime or setiathome or folding@home results or whatever. Yet the attraction of bitcoin mining has been that the hardware expansion you've been doing has been in the quest for return on investment. It has clouded people's judgement and brought in a different population of miners compared to the population it grew from. Somehow people lost sight of the fact that bitcoin mining moved from the former group of enthusiasts to a massive money making venture and the former group unintentionally became part of the latter group unwittingly, and then started complaining that they would never make a return on investment (which strictly speaking is incorrect, they mean they would never pay off their hardware). People got caught in the bitcoin mining wave and unintentionally converted from hobbyists to real money investors, and that's the real crime here.

As I read this I can see myself as I am sure many others can as well. Looking back when I started with buying my first 30 Bitcoins @$130 each so I could get 15 USB miners in a group buy to spending my mined coins until I had 75 of them running, then selling moving on to BFL singles selling them for the S1's and now down to 4 S'3 in the basement still mining .... It's been like catching a falling knife but I am done. Thinking of right now to sell off two of my miners and turning the last to "out to pasture" in your solo pool.


The bold type needs correction from always to mostly.  While I admire ckolivas as a person with a brilliant mind there have been spots where buying gear is better then buying coins.  The batch 1 s-3's are a true btc roi .  that is more coins out then in.   But this is the exception.  it is also not true if your power is 25 cents a kwatt or you paid a big vat or you need a shitload of psu's.  But I am willing to say many batch 1 buyers of s-3's have done btc roi.

 I would say less then 1 in 10 pieces of gear were more btc out then btc in.  So if ckolivas changes that to 90 % of the time and not always it would explain why miners take a shot as they hope to grab that small 10% + btc roi .  rather then the more certain 90% roi faliure of most gear.

Case in point my 2 s-3 from batch 1 cost 1.5 btc.
 I was given a refund of .15btc  so the true cost was 1.35 btc

They have earned 1.526 BTC they have earned 2.276 NMC

That is true btc roi.   But of all my gear purchased and I have purchased 50,000 usd worth of gear.  this is one of very few tru btc roi gear I purchased.

 My 2 units have resale on ebay  at 225 usd each  that would cover any psu cost and power cost.  So I took power and psu out of the calculations.

But frankly this is rare for the home miner.  I think a lot of us chase the what if coins go to 1000 or 2000 or 3000 usd. dream .. the spring 2013 and the fall 2013 runups keep miners chasing.
hero member
Activity: 784
Merit: 504
Hi ckolivas, Thank you for your great write-up.
Now what you think about the BTC future and the after effects of the current situation if we see in the perspective of mining.
hero member
Activity: 784
Merit: 504



Speaking purely from investment terms, it's a curious phenomenon that in the history of bitcoin, you could always convert dollars into more bitcoin than any mining machine you could buy with those dollars would generate over its lifetime, yet people inevitably choose to buy bitcoin miners because of the concept of buying a "money making machine". It is the most expensive and technically challenging way to convert dollars into bitcoin. By far the most money anyone ever made off ASIC hardware are those who purchased avalon generation 1. At bitcoin prices when the avalon was first announced, there is still a chance they'd be better off just having converted their dollars into bitcoin at that time. When the avalon actually arrived they were a steal at 60GH @ 1500$=80BTC but you could not order them any more since they were always preorders (how much is 80BTC worth now?). I think bitcoin was worth less when they made their Avalon preorders so they were much more than 80BTC. They may have been the one exception and ironically the first ASIC ever so they capitalised on the diff at the time.

It's funny because for years people would happily expand/extend their hardware for reasons that had nothing to do with making money, like having the best gaming machine, or the best Mprime or setiathome or folding@home results or whatever. Yet the attraction of bitcoin mining has been that the hardware expansion you've been doing has been in the quest for return on investment. It has clouded people's judgement and brought in a different population of miners compared to the population it grew from. Somehow people lost sight of the fact that bitcoin mining moved from the former group of enthusiasts to a massive money making venture and the former group unintentionally became part of the latter group unwittingly, and then started complaining that they would never make a return on investment (which strictly speaking is incorrect, they mean they would never pay off their hardware). People got caught in the bitcoin mining wave and unintentionally converted from hobbyists to real money investors, and that's the real crime here.

As I read this I can see myself as I am sure many others can as well. Looking back when I started with buying my first 30 Bitcoins @$130 each so I could get 15 USB miners in a group buy to spending my mined coins until I had 75 of them running, then selling moving on to BFL singles selling them for the S1's and now down to 4 S'3 in the basement still mining .... It's been like catching a falling knife but I am done. Thinking of right now to sell off two of my miners and turning the last to "out to pasture" in your solo pool.
hero member
Activity: 784
Merit: 504
Reply to moss by ckolivas.

How low would the price of bitcoin need to fall for mining to be unsustainable for the big mining companies?  If the resulting dramatic reduction in network hash caused a corresponding reduction in difficulty, would mining then become sustainable again for the home miner?
It no longer matters what the numbers are. For even if the value of bitcoin would drop to, for example, 1/10th of what it is, it is guaranteed that more than 1/10th of the existing big miners will remain. They will always be at an advantage compared to you, and the investment on their side has already happened so you'll push out the least efficient of the big miners but keep the most efficient of them. If anything, the other way is more likely to bring home miners in, but it will only be a temporary effect which will be offset by yet more big miner investors, and the stakes will be higher than ever. The only chance small miners have is for bitcoin to become small time again, so the value would have to drop to 1/100th or less of what it is, and stay there for an extended period.

Speaking purely from investment terms, it's a curious phenomenon that in the history of bitcoin, you could always convert dollars into more bitcoin than any mining machine you could buy with those dollars would generate over its lifetime, yet people inevitably choose to buy bitcoin miners because of the concept of buying a "money making machine". It is the most expensive and technically challenging way to convert dollars into bitcoin. By far the most money anyone ever made off ASIC hardware are those who purchased avalon generation 1. At bitcoin prices when the avalon was first announced, there is still a chance they'd be better off just having converted their dollars into bitcoin at that time. When the avalon actually arrived they were a steal at 60GH @ 1500$=80BTC but you could not order them any more since they were always preorders (how much is 80BTC worth now?). I think bitcoin was worth less when they made their Avalon preorders so they were much more than 80BTC. They may have been the one exception and ironically the first ASIC ever so they capitalised on the diff at the time.

It's funny because for years people would happily expand/extend their hardware for reasons that had nothing to do with making money, like having the best gaming machine, or the best Mprime or setiathome or folding@home results or whatever. Yet the attraction of bitcoin mining has been that the hardware expansion you've been doing has been in the quest for return on investment. It has clouded people's judgement and brought in a different population of miners compared to the population it grew from. Somehow people lost sight of the fact that bitcoin mining moved from the former group of enthusiasts to a massive money making venture and the former group unintentionally became part of the latter group unwittingly, and then started complaining that they would never make a return on investment (which strictly speaking is incorrect, they mean they would never pay off their hardware). People got caught in the bitcoin mining wave and unintentionally converted from hobbyists to real money investors, and that's the real crime here.
hero member
Activity: 784
Merit: 504
Quoting some important messages from ckolivas for Miners

Do you have some comments on how mining will turn now? A lot of home miners stopped mining due to -ve ROI.
Interesting question. All the more interesting because no one has actually asked me before on the forums, even though I've discussed it at length on IRC and am very happy at any time for people to know what I think.

Mining died for the community/home miner a long time ago. It's just that the community miners haven't realised or accepted it yet. Community mining is only 15% of the hashrate now and shrinking. They're always hopeful and expectant but there really is no reason for them to be that way. Mining has gone to the data halls and the massive farms, mostly run by the manufacturers themselves who have the ability to create hardware on the cheap and offer it to the select few entities who can help their mining operations or provide funding or cheap hosting, instead of the consumer buyer market which is annoying, small time, noisy and boring. The only reason they continue to sell to that regular consumer market is there are enough people who have unrealistic expectations of making a profit somehow because they simply cannot believe that the numbers are stacked against them, such that the hardware manufacturers can charge a ridiculous premium to sell to that market to make it worth their while.

This should come as no surprise to anyone who's been watching bitcoin at large, but it will continue to surprise bitcoin miners, past, present and future. The reason miners don't see it is they're so blinded by the concept of a "money making machine" or the "goose that laid the golden egg" that they just can't see it.

Here's a quote of mine. Note the date on it:

Long term, cgminer will be the lowest overhead c software to drive ASICs to do bitcoin mining, with lots of code in it that is no longer relevant to BTC mining. What I really worry about, is that new hardware will continue to come out frequently enough that people end up on a cycle of investing in hardware that basically never pays itself off as slightly newer hardware and higher diffs keep coming out. Sure at some stage the limits of technology will be reached, but given the best tech at the moment is going to be 65nm ASICs when CPUs are 28nm devices, I can see the cycle going on for some time, and then even if btc mining ASICs end up in line with CPU manufacturers, they still continue to evolve over time. Dramatic profits from ASICs will likely only last a couple of weeks at most for a lucky few. The rest of you who paid for devices that don't even exist yet will not be making any magical profit no matter how big the hashrate appears. Your proportion of the total bitcoin hashrate will remain pitiful.


To give you an idea of how long this has been known to the bitcoin community, even if miners refuse to see it, I think it's best to leave the final word to Satoshi himself, the inventor of bitcoin:

The current system where every user is a network node is not the intended configuration for large scale.  That would be like every Usenet user runs their own NNTP server.  The design supports letting users just be users.  The more burden it is to run a node, the fewer nodes there will be.  Those few nodes will be big server farms.  The rest will be client nodes that only do transactions and don't generate.
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