If current difficulty growth CAGR stays the same those investing today will never breakeven

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  • ilia7777ilia7777 Member Posts: 113
    syaoran99 said:

    syaoran99 said:

    As you were typing this, global hash has become 1.65Ths your assumption only 30% of capital pumped in is underestimating the capabilities of buyers.

    @syaoran99 You need to watch the stats a bit longer. The displayed global hashrate on netstat is a calculated number and jumps around pretty wildly. It's been bouncing back and forth between 1.4 and 1.7 and it dropped back 2 1.4 after you had posted.

    Difficulty is the only metric that can be used here and it certainly didn't rise 30% in the time it took to write my post.

    Continuing with the economics, I have made assumptions that the supply of active miners entering the field is a limiting factor to diff growth though established big hash miners will likely still be expanding unto financial equilibrium, however they choose to measure that.

    So much depends on Ethereum exchange value and with mainstream coverage of the platform in the past couple of days in both US and UK media will presumably support a rise in value. We can expect diff to float on top of that support.

    This past month's rise in diff is a reflection of the 1000% step up of eth value being matched by mining build out. There's no economic sense that that build out will continue exponentially unless eth value keeps growing exponentially.
    Apparently the price has not budged since the news were announced and I doubt it will if it hasn't already. It has only maintained at a same USD to ETH value eventhough the BTC to ETH value has risen, all due to BTC fluctuating.

    That said, do not forget the CHINA farms have yet to enter the mining industry as most are still aiming their power grids towards mining BTC and LTC. They have an unlimited supply of Graphics cards there and it wouldn't take them very long to triple the difficulty level.

    Also the difficulty I'm referring to is from etherchain.org. Which calculates the difficulty average over 24 hours. and it has been constantly rising over 10% PER WEEK and has not decreased since the transition into homestead. So i'm not sure who you're trying to fool here. Yes sure it fluctuates in the main stat page, but on the entire AVERAGE og 24 hours, it is increasing DAILY by at least 2%

    so no, difficulty WILL NOT be limited ANYTIME soon. It will continue to rise exponentially at this rate and miners will not see a ROI for 3-6 months down the road and should they begin next month, the ROI would likely not be until after PoW changes to PoS which is in 10-12 months time. That means 0 profit.
    New miners will NEVER see their ROI if the trend continues. Again I did the calculations above specifically to show that to everybody. Due to power of compounding 40% increase over 40% increase in the previous month and so own. Such difficulty rise very quickly brings your profits to zero. Its a simple calculation in excel and I encourage everybody to do it themselves.
  • workwork Member Posts: 2,084 ✭✭✭✭
    @ilia7777 if mining profits near power costs, why would people buy more GPUs? You're basically argueing that because people are buying more GPUs to mine with, people shouldn't buy GPUs... presuming eth price stays stable, difficulty isn't going to just keep rising until profitability is 0, because the number of new miners hopping on will.most certainly decrease as profits decrease.

    Just look at how stupidly profitable eth mining is right now compared to power costs... of course diff will be going up. When profits aren't so wild because diff has increased, it's unlikely many new cards will be added.
  • ilia7777ilia7777 Member Posts: 113
    bluebox said:

    So here's a quick poly (parabolic) fit — from 2/1 through the homestead fork 3/14, R^2 of .98:

    After the fork a lot of (solo, probably) miners were taken offline because they hadn't updated to homestead ethereum nodes. Trend has picked right up where it left off over the past two weeks.

    Is the rise sustainable? I'm certainly not going to be the one to say yes or no — that is for the ones now thinking of buying more gpu power to decide.

    If you look at bitcoin stats it clearly shows that 39% monthly rise is sustainable over 3 years at least. GPU supply is a limiting factor and we do see a shortage of GPUs over here at least. I'm buying R9 390 new 1-2 pieces left in a city from the largest retailers and I can't place an order for more than 2 at the time because no more is available. However when it comes to 380 there are lots of them. No problem at all. They are actually 7% more economical if you don't care about the space.
  • workwork Member Posts: 2,084 ✭✭✭✭
    edited March 2016
    @ilia7777 this isn't bitcoin... there are no ASICs on the horizon with significantly reduced power consumption. GPU supply is NOT the limiting factor... profit vs power cost is the limiting factor.

    Even if new AMD GPUs come out that are WAY more efficient, that only raises the power vs mining income ceiling a bit. And given long GPU release cycles, it would only happen once in Eth's PoW era.

    Power costs are importanr... you seen to be ignoring that.

    As for why GPUs are down to low stock for 290s, it's because vendors are clearing out stock getting ready for the new AMD releases coming soon.
  • ilia7777ilia7777 Member Posts: 113
    @work sure when the profits will reach electricity cost people will stop. Going back to finance and economics if we look at mining as a business then its a typical manufactuing type of buisness. Manufacturers of all kinds always strugle to make profits and if you look at financials of most manufacturers the net profit for many is at 2-7% range. The reason is simple with no barriers to entry (all you need to do is simply buy an equipment) new players bring profits down close to cost for everybody. Another general problem with all manufacturing that applies here is the need to constantly upgrade the equipment therefore all manufacturers face large never ending CAPEX. You have to have a barrier (financial, unique technology, unique brand etc) otherwise your business is not sustainable. Mining is economically unsustainable, its temporal and largely depends on lack to catch the right moment.
  • ilia7777ilia7777 Member Posts: 113
    So I personally would love to move from mining to some sustainable business around Ethereum.
  • workwork Member Posts: 2,084 ✭✭✭✭
    edited March 2016
    @ilia7777 mining is definitely economically sustainable... profit margins just naturally tend towards very little, and the barrier becomes cheap power. The vast majority of the world pays much more for power then a few select hydro electric regions, and places like China where there is excess power during certain periods.

    Just look at all the mining farms in a select small town in washington state. Someone in a cheap power region of Canada can come close to competing with them, and stay in profit, but most other regions get pushed out by power cost.
  • dlehenkydlehenky Member Posts: 2,249 ✭✭✭✭
    @ilia7777 Take a look at the slock.it DAO.
  • o0ragman0oo0ragman0o Member, Moderator Posts: 1,291 mod
    ilia7777 said:

    So I personally would love to move from mining to some sustainable business around Ethereum.

    @ilia7777 or you can send eth right now to DigixDAO (Proof of Assets with gold backed reward tokens) which is crowd funding right now to a cap of $5.5m and they're already half way there after about 10 hours.

  • ilia7777ilia7777 Member Posts: 113
    @dlehenky , @o0ragman0o This is really wide stretch of imagination, interesting to see if its going to work.
  • o0ragman0oo0ragman0o Member, Moderator Posts: 1,291 mod
    @ilia7777 'Wide stretches of the imagination', is definately in the scope of Ethereum
  • retherrether Member Posts: 258 ✭✭
    I think a lot of people are justifying investment in cards thinking that if the market crashes they can sell them...but the market will be absolutely flooded with second-hand cards and it's doubly bad because both AMD and nvidia are releasing their new series of cards in the next few months. That alone will depress used card prices from the older series. Miners may not be recovering what they think from their GPU farms if things crash.
  • dlehenkydlehenky Member Posts: 2,249 ✭✭✭✭
    @rether Oh, come on now, brighten up! It's another *perfect* day! Everything works out exactly as it should, as will this. The future holds infinite possibilities! :smiley:
  • ethfanethfan Member Posts: 458 ✭✭✭
    When I had to stop mining LTC my GPUs were boxed up. Good thing too. Came back out in September for ETH mining.
  • dlehenkydlehenky Member Posts: 2,249 ✭✭✭✭
  • ethfanethfan Member Posts: 458 ✭✭✭
    dlehenky said:

    @ethfan See what I mean! :)

    YEA! GPU mining forever! :D
  • retherrether Member Posts: 258 ✭✭
    ethfan said:

    When I had to stop mining LTC my GPUs were boxed up. Good thing too. Came back out in September for ETH mining.

    Sure, that's fine if you're not counting on recouping the cost right away- some people are justifying the purchase thinking they can sell the cards later...maybe, but probably not at great prices if the eth market collapses.

    On the other hand, if it were winter you could run the cards mining anything and use the heat. But with summer here that makes things even more inconvenient.
  • hasherhasher Member Posts: 642 ✭✭✭
    I sold almost all my GPUs after the LTC crash. Super regretful that I did, because now i'm investing stupid money again in purchasing new cards just to regain my old hashing power :(
  • ilia7777ilia7777 Member Posts: 113
    Alan Greenspan would have called it irrational exhuberance, if GPUs could smile they would have right now :smile:
  • ethfanethfan Member Posts: 458 ✭✭✭
    rether said:

    ...
    On the other hand, if it were winter you could run the cards mining anything and use the heat. But with summer here that makes things even more inconvenient.

    Thought of that but not so simple. Gas (as in natural gas and not Ethereum gas) price is a quarter that of electricity over here. Using miners to heat the house is only justified if the 300% extra cost of energy usage is covered by the value of whatever is being mined. Unless you use electricity for heating...
  • retherrether Member Posts: 258 ✭✭
    ethfan said:

    rether said:

    ...
    On the other hand, if it were winter you could run the cards mining anything and use the heat. But with summer here that makes things even more inconvenient.

    Thought of that but not so simple. Gas (as in natural gas and not Ethereum gas) price is a quarter that of electricity over here. Using miners to heat the house is only justified if the 300% extra cost of energy usage is covered by the value of whatever is being mined. Unless you use electricity for heating...
    Ya, my home actually uses electric heat upstairs (old home with no vents on second floor) so it would make more sense than a space heater...but certainly not cheaper than natural gas. It still mitigates a little of the expense if you're at least not fighting the heat with AC though.
  • workwork Member Posts: 2,084 ✭✭✭✭
    edited March 2016
    ethfan said:

    Thought of that but not so simple. Gas (as in natural gas and not Ethereum gas) price is a quarter that of electricity over here. Using miners to heat the house is only justified if the 300% extra cost of energy usage is covered by the value of whatever is being mined. Unless you use electricity for heating...

    There is almost always something worth mining with GPUs that will break even on power costs, at least historically. Breaking even = free heat, minus equipment depreciation anyway. Note that this won't apply if you're in a higher power cost region (maybe anything above $0.10/KWh).

    @ethfan @hasher I am ever happy I kept most of my GPUs after the litecoin days (I did a bit of XMR and vertcoin mining after too, kept making a bit more then power costs and provided some heat over the winter). Resale value went from $180 to $300 thanks to Ethereum ;). If you believe in blockchain tech and PoW systems (personally, I don't think PoS can ever be as effective as PoW at incentivising the maintenance of a single blockchain), then there's a good chance there will be another mining boom thanks to some other new tech in the future.
  • adasebadaseb Member Posts: 1,043 ✭✭✭
    rether said:

    I think a lot of people are justifying investment in cards thinking that if the market crashes they can sell them...but the market will be absolutely flooded with second-hand cards and it's doubly bad because both AMD and nvidia are releasing their new series of cards in the next few months. That alone will depress used card prices from the older series. Miners may not be recovering what they think from their GPU farms if things crash.

    This happened back in 2014. Basically the best time to sell was about 9 months later during Christmas 2014.
  • workwork Member Posts: 2,084 ✭✭✭✭
    @adaseb yup, for sure. Or, even better time to wait to sell was in the last month or so =]. GPU purchased new in 2013 for $440 sells for $300 right now in my area. Quality ROI increase right there.
  • adasebadaseb Member Posts: 1,043 ✭✭✭
    work said:

    @adaseb yup, for sure. Or, even better time to wait to sell was in the last month or so =]. GPU purchased new in 2013 for $440 sells for $300 right now in my area. Quality ROI increase right there.

    But right now who would be selling any GPUs since they are mining with them?
  • syaoran99syaoran99 Member Posts: 204
    Well having said that, the average hashrate hasn't risen much and yet difficulty is still on the rise in the past two days. Mining is going to become dead in the coming months regardless.
  • verjicverjic Member Posts: 143
    And now I would ask, why everyone said that 2 GB card should not be bought? If mining will not be profitable in couple of months, means that DAG will never even approach 2 GB size :). For example in my country difference between rig with 5 GPU's of 2 GB vs 4 GB is 250 Euro. And if I read this thread it means that 2 GB cards are best investment for anyone! :) But of what I noticed, most of people which say mining will end in couple of months have 390 or other 4 GB cards minimum :)
  • adasebadaseb Member Posts: 1,043 ✭✭✭
    verjic said:

    And now I would ask, why everyone said that 2 GB card should not be bought? If mining will not be profitable in couple of months, means that DAG will never even approach 2 GB size :). For example in my country difference between rig with 5 GPU's of 2 GB vs 4 GB is 250 Euro. And if I read this thread it means that 2 GB cards are best investment for anyone! :) But of what I noticed, most of people which say mining will end in couple of months have 390 or other 4 GB cards minimum :)

    I only bought 2GB because I know that by the time the DAG reaches 2GB, ETH will most likely not be as profitable as it is today.

  • dlehenkydlehenky Member Posts: 2,249 ✭✭✭✭
    @syaoran99 Actually, the difficulty also rises and falls as the network tries to adjust the block time. The difficulty lately actually went up a couple days ago, came back down some, and now has gone back you. But, yes, the overall trend is definitely up, up, up ...
  • ilia7777ilia7777 Member Posts: 113
    David, lets not fool ourselves , I monitor it daily at the same time. As of right now 11am Moscow time it added another 4.8% from yesterday. This is insane. In my calculations I made an assumption that it will be rising 39-40% monthly. That means 2.9% daily. No comments necessary I think.
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