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Topic: The mining rat race - page 2. (Read 3179 times)

legendary
Activity: 3738
Merit: 3848
November 16, 2014, 01:03:49 PM
#1
In january 2013 first ASIC-based miners had arrived.
You would be surprised to learn that they were mining 18-20 BTC a day (~$240/day with BTC at $12-14).
See
http://bitcoinmagazine.com/3231/working-avalon-asic-confirmed/

Since then the network hashing speed increased X13180 fold, but bitcoin price recently stagnated or declined. In fact, network speed increased 60-fold while price decreased at least twofold in the last 11-12 mo, putting a huge strain on profitability. Eight months ago a lowly cheap antminer S1 was producing MORE BTC than expensive and efficient (relatively) spondoolies SP-30 machine does right now, but S1 cost ~$700 last March and Sp-30 ~$3800 this summer and early fall. My point is that mining efficiency declined while miner prices stayed very high.

Right now, even the most productive and efficient machines DO NOT produce even the amount of bitcoin that is equal to their cost in bitcoins over their expected lifespan.
It means, that measured in bitcoin, they are inherently unprofitable to run, even with low electricity cost.
I expect that, if stagnation in price continues, many miners who try to run a profitable operation will withdraw, which would make the network much more centralized and vulnerable. Only newcomers and large mines will remain.

I wonder if in a couple of years mining will produce just a few bits (literally) per month-who would even do it?
The "mining for bitcoin reward" model seems broken to me if rewards are miniscule and getting smaller (in $$) all the time with average miner right now clearly subsidizing both the miner manufacturers and network as a whole. Instead of getting some rewards, miners are currently making a DONATION to multiple parties. I think that this is the opposite of what Satoshi envisioned.



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