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

ilia7777ilia7777 Member Posts: 113
Dear friends I'm sorry to disappoint you all, but I did some calculations and reached some sad conclusions.
First of all please take a look at this graph and make sure that you set the period from 2010 till 2016.


If somebody doesn't know what CAGR is please look at wikipedia.
So the monthly difficulty growth CAGR for bitcoin was 39% in 2014 (i.e the difficulty grew 39% per month on average)
38% in 2015 and already 49% since the beginning of 2016. Before 2014 it was growing in such rate that still allowed for some profit for miners.

I took a cost of 6 R9 390 rig which is today about 204K rubles (the currency doesn't matter and your numbers may be slightly different). It produces around 64,752 rubles a month now after deducting electricity (its about 5 cents US here). With such difficulty growth next month its going to be 46,921 and so on. If the network difficulty froze you would get your money back in just over three months, but surprisignly with such monthly CAGR it appears that you can't breakeven even after three years. Here is the the table for 2 years as you can see even after two years we can't reach 204K initial investment in cumulative profits.

Months Income Cumulative

1 46 921,85р. 46 921,85р.
2 34 001,34р. 80 923,19р.
3 24 638,65р. 105 561,84р.
4 17 854,10р. 123 415,93р.
5 12 937,75р. 136 353,68р.
6 9 375,18р. 145 728,87р.
7 6 793,61р. 152 522,47р.
8 4 922,91р. 157 445,38р.
9 3 567,32р. 161 012,70р.
10 2 585,02р. 163 597,72р.
11 1 873,20р. 165 470,92р.
12 1 357,39р. 166 828,31р.
13 983,62р. 167 811,93р.
14 712,77р. 168 524,69р.
15 516,50р. 169 041,19р.
16 374,27р. 169 415,47р.
17 271,21р. 169 686,68р.
18 196,53р. 169 883,21р.
19 142,41р. 170 025,62р.
20 103,20р. 170 128,82р.
21 74,78р. 170 203,60р.
22 54,19р. 170 257,79р.
23 39,27р. 170 297,06р.
24 28,45р. 170 325,51р.


  • ilia7777ilia7777 Member Posts: 113
    This of course assuming that the price stays the same. If it drops things will look even uglier. Now we already so 30% difficulty growth in about 22 days. Which brings us to 40% monthly difficulty increase for ethereum mining surpsingly similar to bitcoin mining history.
  • o0ragman0oo0ragman0o Member, Moderator Posts: 1,291 mod
    edited March 2016
    @ilia7777, what makes you think that Ethereum difficulty has anything to do with Bitcoin difficulty?

    Bitcoin difficulty grows exponentially with the roll out of every new generation of ASIC, whereas Ethereum's difficulty can only grow linearly by additional GPU hash.

    -edit- BTW, that's a damn impressive climb the FinFET ASICs have made. Haven't looked at bitcoin diff charts for long time. I already consider it an obsolete technology about to die.
  • ilia7777ilia7777 Member Posts: 113
    Ethereum difficulty seems to be growing like bitcoin at least over last month. The current network hash rate is still very low, all that is required is that new or existing miners simply keep investing more.
  • o0ragman0oo0ragman0o Member, Moderator Posts: 1,291 mod
    Yes but every miner knows POW is time limited by the introduction of POS, whereas bitcoin miners have got another >100 years to fight it out.

    Sure there'd still be farms coming on line but were unlikely to see the same diff explosions as bitcoin does because of ethash's ASIC resistance. It's something you could keep up with by adding new rigs to your own farms and without having to e-trash all your previous miners like old bitcoin ASICs.
  • ilia7777ilia7777 Member Posts: 113
    And 40% growth in a month is exponential, definitely not linear
  • ethfanethfan Member Posts: 458 ✭✭✭
    Your figures are wrong. In USD: 6x390 = $1800; ETH mined per month = $1100. That is a ratio of ~3:2 whereas you are saying 204 to 65 or almost 3:1. That means your starting point is completely off.
  • ilia7777ilia7777 Member Posts: 113
    edited March 2016
    390 X 6 = 2340 + board, memory, CPU, risers, box, two power supplies you will get to exactly 2900 USD which equals about 200K in rubles. Suppose it produces 1100 which is not the case anymore based on my stats from ethpool.org. Now deduct about 15% for electricity (for me its currently about 10 but the percentage will be growing every month so I used 15% for simplicity). So minus 15% its 935 USD per month. That is today. In a month with difficulty increase of 39% its going to be 39% less which is 570 USD ! If you'd like to check my calculations multiply that by about 70 (1 USD is about 70 rubles). So you get the same numbers. It gets compounded. All that I repeat if difficulty is going to continue exponential increase like last month.
  • o0ragman0oo0ragman0o Member, Moderator Posts: 1,291 mod
    @ilia7777, There's no doubt it's a 'gold rush' boom time phenomenon. But what we are seeing is an exponential increase in the number of miners entering the game rather than bringing better rig. Everyone is coming with essentialy the same picks and shovels rather than riding rough-shot over us all with excavators, and then draglines

    It won't last that long with Casper haunting the gold fields.
    But those who are established now are earners and those who come late will likely be disappointed and out of pocket when all the gold is gone... All I can do is warn the latecomers "There be ghosts here."
  • ethfanethfan Member Posts: 458 ✭✭✭
    @ilia7777, You are still wrong but I am not going to go into details. If you manage to discourage new miners that is good for me as well.
  • ilia7777ilia7777 Member Posts: 113
    ethfan, if you have something to say, say it, the purpose is not to discourage new miners but to initiate discussion. If somebody disagrees I'd like to hear the details.
  • BiodomBiodom Member Posts: 693 ✭✭✭
    edited March 2016
    Conclusion: in Russia, ethereum eats YOU ( a la Smirnoff)

    On a more serious note, ethereum difficulty rise cannot match that of bitcoin because ethereum doesn't have ASICs (at least, not yet)
  • ilia7777ilia7777 Member Posts: 113
    You keep saying that, but what matters is not the actual number, but the speed of growth monthly. If this is one time spike (this is what I'd like to hope for) its not a problem, but if in a month we will see another 30-40% rise in difficulty then its for sure going same direction like bitcoin. You don't need to buy bunch of asics to waste your money and time, you could easily do it with cards.
  • dlehenkydlehenky Member Posts: 2,249 ✭✭✭✭
    @ilia7777 Operative word in your post is "if". There are a thousand "if's" in all of this, which is to say: the future will be whatever it becomes, regardless of anyone's analysis and predictions. What's the purpose of the discussion, when there can be no concrete conclusion?
  • workwork Member Posts: 2,084 ✭✭✭✭
    Without better (more power efficient) mining hardware (ASICs basically), difficulty is not likely to increase past the point where power costs more then is earned by mining. Why? Because nobody is going to add GPUs if the profit margins are so small. Yes, some people with more expensive power may get pushed out, but there is likely a peak diff to price ratio that will not be broken.
  • millefiorimillefiori Member Posts: 3
    GPU's can be sold 20-30- max 50% off in a year (decent top-line cards of cource) but asics are becoming crap after same period and work only if you have free energy or extremely low rate less then 0,01 usd per kwh. Your rig's pci-e slots (on decent MoBo with solid PSU) can be filled again with new top-line products like new Arctic Islands AMD GPUs with HBM2 memory and 14nm core unit. Or if you use something like r7 370 or r9 380 with 4g gddr5 and got 15-20 mhs speed you can switch to better r9 390 with 8g onboard and get 30+ mhs speed or even to r9 nano's with first gen. HBM and most wide 4 kbit bus for today, because after anouncing of new GPUs in summer 2016 old ones will be cheaper. So you can stay in a stream longer.
    I understand your nascent anxieties and affraid of that difficulty leaps but there are some proverbs like "He who doesn't risk never gets to drink champagne" So take the risk or just take a detached view

  • zorvalthzorvalth Member Posts: 174
    @ilia7777 i think you should migrate to real farming...
  • blueboxbluebox Member Posts: 181 ✭✭
    edited March 2016
    IF difficulty and network hashrate had continues on its parabolic rise as it had over the past couple of months, ETH production would have continued down in reverse parabolic fashion. By my calculations, there would be near zero production in about 3-1/2 to 4 months. But what do I know, it's only an observation...

    If you can keep your head when all about you
    Are losing theirs and blaming it on you;
    If you can trust yourself when all men doubt you,
    But make allowance for their doubting too:
    If you can wait and not be tired by waiting,
    Or, being lied about, don't deal in lies,
    Or being hated don't give way to hating,
    And yet don't look too good, nor talk too wise...
    — Kipling
  • nogo10nogo10 Member Posts: 26
    edited March 2016
    Two items to consider:
    1/ Yes the Ethash (a modified version of the Dagger-Hashimoto algorithm) is different than Bitcoin's PoW algo.. from the Homestead lit , the whole concept revolves around the network generating a block every 15secs. this important because from miner's perspective, it's a collective work somewhat like mining pools

    2/The other and thus far never mentioned item that VB hasnt maybe considered is the Tragedy of the Commons game theory (look it up on wikipedia). This theory says a diminishing common pool resource may escalate greed whereby individuals will selfishly grab a larger share even if it is at the expense of eveyone including themselves.

    Given the limited resource in question (the limit of ONE new block every 15 secs) to avoid a Tragedy of the Commons it is to all stakeholders benefit to avoid a gpu arms race of maxing out rigs to get more Mh/s.. It is counter-intuitive but think: if everyone does that the result would be an increase of difficulty and a negative feedback loop leading to more gpu escalation (and expense) with dimishing returns for all.

    A more sensible approach is to avoid gpu escalation altogether.. is it doable ? maybe by standardizing rigs ..etc.. thoughts?
  • dlehenkydlehenky Member Posts: 2,249 ✭✭✭✭
    @nogo10 The PoW game has no rules, nor a means to initiate any, let alone enforce them. Some will see the writing on the wall, stop building, and be grateful for whatever they receive from here on out. Some will continue to build until PoS shuts PoW down, and they will never come close to paying for their equipment. Most will be somewhere in between. To each his own.
  • nogo10nogo10 Member Posts: 26
    cont'd Considering the PoS when rigs pay for themselves, some miners have been cashing out their Ethers to get more Mh/s.. Doing so deprives miners from having a Ether hoard with which to profit from later in PoS..

    Far better to hoard your Ethers and watch them grow in value later rather than convert them into hardware that will be worthless down the road.

    Early birds got a good start and if they keep their Ethers , will be in better position for PoS (which can be pooled).

    @dlehenky Yes actually there are rules to this 'game' it's spelled out clearly in the documentation. What each does, however, is up to each and all of us if we educate ourselves and keep informed.
  • dlehenkydlehenky Member Posts: 2,249 ✭✭✭✭
    @nogo10 Those aren't rules. That document simply explains how the network works with regard to mining. You were talking about "rules" in terms of standardizing rigs, or somehow keeping people from entering an "arms race".
  • nogo10nogo10 Member Posts: 26
    edited March 2016
    dlehenky said:

    @nogo10 Those aren't rules. That document simply explains how the network works with regard to mining. You were talking about "rules" in terms of standardizing rigs, or somehow keeping people from entering an "arms race".

    Ah yes.. no for that there are no rules.

    However in game theory there's a concept that players sometimes loose because they don't realize there is a larger game.
    EDIT: I dont mean to sound cryptic, lol, the 'larger game' here is the PoS which would reqquire that miners keep their ethers to benefit later.
  • verjicverjic Member Posts: 143
    If you get back half of the money invested your are good. Because you are at 0, no profit no lose. Just sell all equipment and that's all. This is real ROI. If you get all your money back, you are already on profit, because of the equipment. But I think most of the big miners now are earning as much as possible Ethers in hope that it will hit 100 $ or more may be 1000$ ( dreaming ) and take the big prize. I'm not a big miner, just around 300 Mhs, but this investment is more for possible big rise in value of Ether. So I would like to have couple of hundreds of Ethers in my pocket if it will happen to rise so High ( dreaming :) )
  • workwork Member Posts: 2,084 ✭✭✭✭
    @nogo10 hording Eth only makes sense if you think the price will go up. If you want to stake when PoS comes around, you could just buy Eth at that time... Leaving money in ethereum just so you can stake it way later doesn't make any sense.
  • nogo10nogo10 Member Posts: 26
    work said:

    @nogo10 hoarding Eth only makes sense if you think the price will go up. If you want to stake when PoS comes around, you could just buy Eth at that time... Leaving money in ethereum just so you can stake it way later doesn't make any sense.

    Interesting and I dont disagree. But if ether's are sold now or converted continually wont there be a risk that trying to buy 'in' later at a higher price?
    whereby if ethers are kept.. at most one would only 'cash out' if price starts going down?
  • dlehenkydlehenky Member Posts: 2,249 ✭✭✭✭
    @nogo10 Given the few details that are known about how PoS will work, I currently don't consider it a game I'm interested in playing.
  • workwork Member Posts: 2,084 ✭✭✭✭
    @nogo10 and if the price suddenly falls? It's a simple question of taking profits or investing in Eth long term. Some will believe in Ethereum's future and bet the price will go up. Others (myself included), think the price is pretty inflated right now.
  • rdnkjdirdnkjdi Member Posts: 135 ✭✭
    Litecoin pre asic would be a better comparison. I wish I could find a daily difficulty list to copy into a spreadsheet and do some comparisons but all I can find are graphs
  • dlehenkydlehenky Member Posts: 2,249 ✭✭✭✭
    @work I think ETH is fairly priced, as is. To me, it certainly has more value than DASH, and it's over $7 now. ETH is certainly all about futures, and not it's current ability to deliver on it's goals. Something as ambitious as Ethereum will take a good bit of time to mature, for sure, but it's the potential it has that's driving the price, just like a Silicon Valley startup with some great internal talent, and big names interested in what it's doing.
  • o0ragman0oo0ragman0o Member, Moderator Posts: 1,291 mod
    G416G said:

    Let's not forget the last equation. The traders have got a hold of this one and they can pump up a penny stock to anything.

    @G416G, specially now the NY Times has a piece on ethereum. I can easily imagine late 2013 bitcoin behavior being repeated on eth exchanges
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