Topic: Why You Haven't Seen Miners Leave in Hordes..... - page 3. (Read 7707 times)

It doesnt. Price of bitcoins is only determined by supply and demand of bitcoins The amount of miners or mining rigs has influence on neither. Perhaps you should take that economy 101.


You have the relationship backwards.  If 1 BTC is worth $5, do you think 7 billion people will mine for it? As a miner you can not influence the price of bitcoin. You can only affect your own profitability by pulling the plug or buy more mining rigs.  It doesnt go both ways.  Adding more rigs wont influence bitcoin price.

Which, in turn, affects price. And if you think that the amount of people mining has zero influence on supply or demand, you need to take a course on economics. I am not going to try to teach you that here.


And because everyone in the world will only be getting 50/7 billion BTC per block, the cost to produce a block will be in the (hundreds of?) millions of dollars. You think 1 BTC will still sell for $5 if that is the case? Do you think 1 BTC will still sell for $5 if there are only 10 people mining?

Im not forgetting that at all. Its precisely the "per person" that make the above nonsensical. I doesnt matter how many miners there are or how many rigs they have. It has zero influence on the overall number of coins minted and zero influence on either supply or demand for bitcoins for either trade or speculation. It only affects individual miner profitability.


Assuming miners act rationally, the number of miners will auto regulate itself to be borderline profitable. But profitability of mining has nothing to do with supply or demand.  Even if everyone in the world starts mining, there will still only be 1 block found per 10 minutes.

You are forgetting that the number of miners drives up demand. For every additional miner, every other miner's payout is reduced on average by (1 / total # of miners). This lowers supply (per person) and increases demand. If the number of miners is reduced, supply is easier to get and demand reduces because the COST (time, electricity) goes down. This will, believe it or not, be reflected in the exchange sell price.

If miners don't make a profit, don't expect them to stick around. There goes demand.

None of that has anything to do with the cost of mining. I agree with your point of most of bitcoin transactions being speculation right now, but not with the rest. Whether a speculator bought bitcoins at $0.18 or $18, or a miner spent $1.8 on electricity and hardware to mine his coins. It doesnt matter and has no influence on bitcoin value.

Indirectly or directly, it is still linked. The value of bitcoin may be mostly based on supply and demand, but that is only because a significant amount of the supply has been withheld throughout its history. And since Bitcoin has relatively no base of demand other than speculation, if a lot of those early coins went into circulation or the security of the network drops out when the award halves at the 210kth block, it may create a cascade of effects that bring the bitcoin sell price below the value of its current cost to produce. Then another cascade (crash) of effects to follow.

The supply is not quite so fixed as you think.

You seem to think the value of a bitcoin is related to the mining cost, but it isnt. Mining cost is indirectly linked to the value, but the value of a bitcoin is purely supply and demand. Supply being fixed, no matter how many miners there are, or their cost.

Yes, this is true, because H&R is really meant to do personal taxes, not real taxes. You can get a much more reasonable deal locally, I have. And if you keep good books and do a lot of it yourself, it's usually even cheaper.

I believe the 5-20% ROI figure to be accurate for the future. However, the risk is much higher than you might think.

I use a similar Mh/W efficiency to the OP in my proposal for EnCoin, a currency based around the cost to produce. According to my guestimates, a coin produced today costs about $3.60, excluding the cost of hardware. That's only a 28% ROI based on a sell price of $5. The average cost to produce, on the other hand, is $1.80. If early coins begin to circulate, 28% ROI on $1.80 makes new coins strictly unprofitable. People lose money, stop mining, and bitcoin becomes a security risk.

Feel free to peruse the proposal and the ensuing discussion.

https://bitcointalksearch.org/topic/announce-encoin-an-alternative-with-a-completely-different-paradigm-44682

Now you guys make wonder, assuming you have a bitcoin business,  if you could deduct losses of your bitcoin holdings as currency exchange costs

For those unfamiliar with "writing things off" as a business expense, I'd also like to point out:
If you "write off" $1000 in expenses, you save whatever taxes you would have paid on that amount -- not the full $1000.

How it DOESN'T work: You owe $2000 in taxes, but you spent $900 on equipment, so now you owe $1100.
No, you only save the % in self-employment tax (15%) plus whatever tax bracket you're in (10%, 15%, etc.) which varies by how much you make per year.

Deducting things from your taxes basically means you get to spend your pre-tax income on them, that's all. You're lowering your total tax burden, but you *are* spending money that would otherwise be yours as well. Namely, that other 75%.

So if I buy $1000 in PC equipment, I spent $750 of my own money, plus $250 that would have gone to the government anyway. Attractive, yes, but it would be even better if I could spend $1000 of the government's money

Oh, and electricity is only deducted if you have a separate facility. If your rigs are at home, you can only deduct a PERCENTAGE of the electricity spent -- namely, you have to divide the square footage of your server room by the total square footage of the house (10% or 15%?) and that's how much of your home's electric bill you can deduct as a "business expense".

So, long story short, starting an official "business" doesn't magically make un-economical ventures economical You still have to deal with expenses, making sure your income is greater than your expenses, etc.

This is not tax advice. Please speak to your tax advisor, accountant or CPA.

I think a lot of miners have left as the network hash rate is hovering around 12 Th/s now.... it was around 12.7 or more before.

Also noticed deepbit is lingering around 4.8 Th/s where as it was more like 5.4.

Think about the figures, a lot of people have stopped, thing is were talking very big numbers all round here.

You nailed it jjiimm_64. If I had a company and I could write off the cost of electricity and hardware my mining rig farm would look like this

Which only helps those who currently run a business. The average person can't deduct anything like that from their taxes.
And as soon as you're filing taxes for a business, H&R Block charges you $350, not $35.

Also keep in mind that the elec and hardware are business expenses that can be written off..

DeathAndTaxes analysis was spot on. Unless I misunderstood you, your claims that mining is more profitable than what he says is based on a fallacy that earning BTC is somehow better than earning $. Mining generates bitcoins or cash if you sell them, or a ratio of them, but not both. Any profits from an increase in BTC value applies equally to BTC you mine or buy with cash.

Now I agree mining is  better than not mining as its currently still (marginally) profitable for most. But only because it generates more $ than it costs;  not because it generates bitcoins, $ can generate those too. The day electricity costs are higher than revenue from mining, you should turn your rig off. And possibly buy bitcoins if you think they will increase in value, but not mine them.

I'm not giving people advice here you do realize that right? I'm giving examples of what people can do. Also unless you are day trading mining is better long term because eventually you will have generated enough bitcoins to cover the initial investment and all the electricity. After that point anything generated is more then what you could have received from investing one big lump sum in coins alone.

Nope. Either you pay off the rig, or you accumulate bitcoins, not both. Again you ignore that the money you spend on electricity (and hardware) could be spent buying bitcoins.

Thank you captain obvious. I was just pointing out the reasoning of why people who are mining would want wide spread adoption. Also mining is better long term because eventually you pay the rig off and generate bitcoins only for the cost of electricity.

Calculating ROI by speculating on future BTC value is fallacious.  If you want to speculate, you can just buy BTCs with dollars. The same dollars you need to buy hardware and electricity cost, so they compete.