What if mining suddenly becomes unprofitable for most miners? - page 2.

adamstgBit

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Quote from: RationalSpeculator on September 27, 2013, 10:19:41 AM

Since difficulty follows price, and price has corrected from the high, I expect difficulty to peak out too and correct due to unprofitable miners switching off equipment, just like in 2011. I would also think this will happen somewhere the coming months.

Since these are all feedback loops I wonder whether this event will have an influence on the btc price. Anyone knows?

difficulty will continue to go up for a long while still

once we reach the limits for producing the most efficient bitcoin mining machine, then hash rate will fall, but I think we are a long way off from that. idk but i feel like there will be more than 2 generations of ACIS before we reach this technological limitation.

RationalSpeculator

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This bull will try to shake you off. Hold tight!

Since difficulty follows price, and price has corrected from the high, I expect difficulty to peak out too and correct due to unprofitable miners switching off equipment, just like in 2011. I would also think this will happen somewhere the coming months.

Since these are all feedback loops I wonder whether this event will have an influence on the btc price. Anyone knows?

BobMarley

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if difficulty goes down it will be more profitable, im missing the problem?

niothor

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Quote from: User705 on September 25, 2013, 08:10:21 PM

Mining is extremely profitable against running costs right now. You don't need any higher exchange rate for that.

I think this is true if you only consider the cost of the mining process and not the initial investment the mining equipment.

Carlton Banks

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Quote from: User705 on September 25, 2013, 08:10:21 PM

Mining is extremely profitable against running costs right now. You don't need any higher exchange rate for that.

Bolded for emphasis.

I think someone in the Mining sub calculated that 1st gen 130-110nm ASICs would maintain profitability against running costs up to a difficulty of nearly 2 billion. While we're only hitting 150 million right now, I think we are projected to multiply current hashrate (1 petahash) by many, many times if all these other ASIC manufacturers deliver product. And that's just what's been promised between now and February 2014. Big "if" in some cases, but I suspect they will mostly pull through within a 6 months timeframe, even if they don't deliver to their own (promotion influenced) targets. So things may finally settle around March next year, and it could easily reach above 2 billion difficulty, even if one manufacturer scams or folds.

notme

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Quote from: User705 on September 25, 2013, 08:10:21 PM

Mining is extremely profitable against running costs right now. You don't need any higher exchange rate for that.

+1

User705

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Mining is extremely profitable against running costs right now. You don't need any higher exchange rate for that.

Carlton Banks

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Quote from: User705 on September 25, 2013, 06:53:19 PM

Quote from: Carlton Banks on September 25, 2013, 03:19:48 PM

A curious scenario would be where the difficulty has wiped out any ROI in BTC terms, but a wild exchange rate rise makes mining profitable against running costs. I guess that's two definitions of mining profit: ROI above capital outlay for equipment, and then there's profiting on price/energy input against price/minings output. You'd be unwise not to make the most out of the second possibility while it existed.

That's not possible. I think you are thinking about high but stable difficulty but the only reason current roi projections all show negative is because of difficulty rising. That will not be forever but no one can tell you when it stops. A good endpoint to calculate is when pure electricity costs are higher then btc generated without even taking capital outlay into account. At that point it's not unreasonable to assume not many new miners will come online and therefore difficulty will stabilize and then grow only with exchange rate growth.

eh?

That's not impossible at all. If the price goes high enough, it takes the miner that's been pushed out at $140 (due to total monthly returns being worth less than the electricity costs) and puts them back in the profits above running costs territory. They'll still never hit ROI on the ASIC, but they'll at least nibble a little bit more back. The difficulty trend doesn't matter as long as the exchange rate increases enough.

User705

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Quote from: Carlton Banks on September 25, 2013, 03:19:48 PM

A curious scenario would be where the difficulty has wiped out any ROI in BTC terms, but a wild exchange rate rise makes mining profitable against running costs. I guess that's two definitions of mining profit: ROI above capital outlay for equipment, and then there's profiting on price/energy input against price/minings output. You'd be unwise not to make the most out of the second possibility while it existed.

That's not possible. I think you are thinking about high but stable difficulty but the only reason current roi projections all show negative is because of difficulty rising. That will not be forever but no one can tell you when it stops. A good endpoint to calculate is when pure electricity costs are higher then btc generated without even taking capital outlay into account. At that point it's not unreasonable to assume not many new miners will come online and therefore difficulty will stabilize and then grow only with exchange rate growth.

niothor

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Quote from: HighCommander on September 25, 2013, 03:27:34 PM

Quote from: niothor on September 25, 2013, 01:10:28 PM

why didn't you read the next phrase

This complete record of transactions is kept in the block chain, which is a sequence of records called blocks.
No mining no blocks no transactions

I did read that phrase. Yes, everything is recorded in the block chain, but again, as I understand how protocol works, miners DO NOT need to know how and where previously mined coins are being sent.

Guys, think simple. Let's pretend almost all blocks are found and everyone decides to stop mining, nobody will be able to send and receive coins? Nonsense, right? Think again OR find a fact that clearly states that mining has to be in place in order to trade coins.

You're mistaken rewards with blocks
In the end there will be no more bitcoins offered as a reward for mining a block but that doesn't mean blocks won't be mined anymore.

I hope this passage is as clear as it can be:

"Mining, or generating, is the process of adding transaction records to Bitcoin's public ledger of past transactions. This ledger of past transactions is called the block chain as it is a chain of blocks. The block chain serves to confirm transactions to the rest of the network as having taken place. Bitcoin nodes use the block chain to distinguish legitimate Bitcoin transactions from attempts to respend coins that have already been spent elsewhere."

HighCommander

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Quote from: niothor on September 25, 2013, 01:10:28 PM

why didn't you read the next phrase

This complete record of transactions is kept in the block chain, which is a sequence of records called blocks.
No mining no blocks no transactions

I did read that phrase. Yes, everything is recorded in the block chain, but again, as I understand how protocol works, miners DO NOT need to know how and where previously mined coins are being sent.

Guys, think simple. Let's pretend almost all blocks are found and everyone decides to stop mining, nobody will be able to send and receive coins? Nonsense, right? Think again OR find a fact that clearly states that mining has to be in place in order to trade coins.

Carlton Banks

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A curious scenario would be where the difficulty has wiped out any ROI in BTC terms, but a wild exchange rate rise makes mining profitable against running costs. I guess that's two definitions of mining profit: ROI above capital outlay for equipment, and then there's profiting on price/energy input against price/minings output. You'd be unwise not to make the most out of the second possibility while it existed.

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Quote from: notme on September 25, 2013, 01:27:05 PM

We either need blocks or all the transactions can be stored in memory at every node.... But then the coins can't be spent again until they are in a block. So, yeah, we need mining to keep this shit rolling.

However so far the race of ASIC and bitcoin rush has made bunch of wasteful blocks... ouch.

notme

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We either need blocks or all the transactions can be stored in memory at every node.... But then the coins can't be spent again until they are in a block. So, yeah, we need mining to keep this shit rolling.

niothor

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Quote from: HighCommander on September 25, 2013, 11:47:22 AM

Quote from: Walsoraj on September 24, 2013, 12:54:33 PM

Dear 'high'commander,

you are high and stupid and have missed the point completely. stfu and go die.

Really? You got the point - be real and prove it, or don't act like a single-celled organism. Roll Eyes

User705,
Alright. Appreciate your response. Because I was aware of that and read about it on wiki a while ago. As I understood the following:

Quote from: https://en.bitcoin.it/wiki/How_bitcoin_works

"When you send some bitcoins to someone, you create a message (transaction), attaching the new owner's public key to this amount of coins, and sign it with your private key. When this transaction is broadcast to the bitcoin network, this lets everyone know that the new owner of these coins is the owner of the new key. Your signature on the message verifies for everyone that the message is authentic. The complete history of transactions is kept by everyone, so anyone can verify who is the current owner of any particular group of coins."

Yes, everything that is broadcasted is being recorded by everyone, just like in any p2p network, but it doesn't say that peers MUST be mining. Is it understood/assumed so? If anyone can confirm that, would be good to know.

why didn't you read the next phrase

This complete record of transactions is kept in the block chain, which is a sequence of records called blocks.
No mining no blocks no transactions

Carlton Banks

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If speculators are smart, they will anticipate the difficulty correction, and try to set the price to reach an exponential apex to coincide with the beginning of the ROI-pocalypse. February/March 2014 if you asked me to guess.

superduh

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Quote from: zby on September 24, 2013, 04:09:00 AM

Quote from: Rannasha on September 24, 2013, 03:13:29 AM

Difficulty-adjustments will ensure that in the event of miners shutting down the difficulty goes down as well and mining profitability will increase again.

Yes - but the adjustments don't happen immediately - and especially down adjustments will happen slowly.

as long as bitcoins are valuable the decrease in mining - people going offline should be slow since if there is an opportunity to make money people will turn on their devices

HighCommander

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Quote from: Walsoraj on September 24, 2013, 12:54:33 PM

Dear 'high'commander,

you are high and stupid and have missed the point completely. stfu and go die.

Really? You got the point - be real and prove it, or don't act like a single-celled organism. Roll Eyes

User705,
Alright. Appreciate your response. Because I was aware of that and read about it on wiki a while ago. As I understood the following:

Quote from: https://en.bitcoin.it/wiki/How_bitcoin_works

"When you send some bitcoins to someone, you create a message (transaction), attaching the new owner's public key to this amount of coins, and sign it with your private key. When this transaction is broadcast to the bitcoin network, this lets everyone know that the new owner of these coins is the owner of the new key. Your signature on the message verifies for everyone that the message is authentic. The complete history of transactions is kept by everyone, so anyone can verify who is the current owner of any particular group of coins."

Yes, everything that is broadcasted is being recorded by everyone, just like in any p2p network, but it doesn't say that peers MUST be mining. Is it understood/assumed so? If anyone can confirm that, would be good to know.

millsdmb

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"What if mining suddenly becomes unprofitable".

...too late.

People will continue to mine, however. If not to protect the value of their BTC but also for tx fees.

ArticMine

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Quote from: N12 on September 24, 2013, 12:06:53 PM

...

What makes this even more interesting is that ASICs have 0 value (apart from materials perhaps) besides generating Bitcoins, whereas GPUs used to be modern GPUs that could be reused and resold for gaming machines.

This is not entirely correct. An ASIC can continue to have value as a space heater in winter partially subsidized by the BTC generated even after the marginal cost of electricity is well above the value of the BTC generated. This is because they are far more compact and portable than the typical GPU based mining rig.

Topic: What if mining suddenly becomes unprofitable for most miners? - page 2. (Read 7145 times)