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

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  • ethfanethfan Member Posts: 458 ✭✭✭
    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.

    I do not think there is much pumping going on. Some, but not much. It is genuine demand driving the rise. Very risky to pump when there is that much ETH around from the pre-sale.
  • ilia7777ilia7777 Member Posts: 113
    To the one quoting Kipling I'm a poet myself and if this was another forum I would post my poetry here. But when it comes to investing I believe in fundamental analysis and this is the reason why I never lost a dollar on stock market, even in 2008. Fundamental analysis is all about intristic value. Ether has no intristic value or to be precise its value is unknown. Which makes it really bad investment for long term value investors. When I did the initial analysis for me it looked like an option game (which I never play btw except from selling puts) with very limited downside. The downside is really limited by the possible drop in your equipment. So I thought if my downside is 30% and upside in 100s why not to play it. However reading the research about bitcoin miners playing zero sum game I knew that the same is probably going to happen here. But I didn't think it would be that fast :smile: Bitcoin price is a phenomen, but it has explanation. The value of any currency essentially depends on the dynamics of all speculative and non speculative inflows and outflows. In case of fiat currencies, the prime rate and trade balance also play the role, but in the end also simply affecting inflows and outflows. So bitcon price reflects demand for it in shadow economy plus demand from all the people that just got excited for no reason. Now with Ether its purely speculative demand from those that saw the bitcoin spectacular rise. Expectations always drive up the price but fundamentals always return it back to reality. The fundamentals are that about 10K USD of ETH is probably used in the network for real payments for gas. (Look up my earlier post here).

    It takes about 8 million dollars to add additional 30% difficulty to the network. Or 80 people with 100K each or 160 with 50K each or 320 with 25K each or 640 with 12.5K. I think there are about 500-1000 miners out there. But who doesn't have additinal 12.5K in US or Canada ? Especially guys working in IT. If you don't have it you could borrow it. So this is reality guys. There are some 500-1000 miners out there and they are actively investing whether we like it or not. The result is predictable. It wrong that you can't predict the future. I proved many people wrong on stock market and I have proof (email exchanges etc).
  • o0ragman0oo0ragman0o Member, Moderator Posts: 1,291 mod
    I notice you said you never 'lost' money on the stock market. You know the vast majority of the world's population, including me, could say the same. Did you 'make' money on the stock market? That's the hard bit! ;)

    I don't think you have fully grasped the open ended utilitarian nature of Ethereum yet and why it's fundamentals, intrinsic value and projected worth can't really be compared to or appreciated by reseaching Bitcoin. I would hazard to guess by this lack of insight that you've not read the Ethereum Whitepaper which is an absolute must for anyone wanting to play here.

    I've opined on the intrinsic value of Ethereum before so won't cover old ground at length.
    ilia7777 said:


    It takes about 8 million dollars to add additional 30% difficulty to the network. Or 80 people with 100K each or 160 with 50K each or 320 with 25K each or 640 with 12.5K. I think there are about 500-1000 miners out there. But who doesn't have additinal 12.5K in US or Canada ? Especially guys working in IT. If you don't have it you could borrow it. So this is reality guys. There are some 500-1000 miners out there and they are actively investing whether we like it or not. The result is predictable. It wrong that you can't predict the future. I proved many people wrong on stock market and I have proof (email exchanges etc).

    I personally prefer 'forecasting' over 'predicting'.

    So currently we're at global hash of 1.4TH/s which is 75,000 20Mh/s equivalent GPU's. Lets estimate each GPU at $250 (fair estimate to cover the range from 2nd hand cheapies to $800 Nano's?) and we're pushing $18~20m invested in mining. 30% of that is $5.6~5.7M.

    So 1000 new miner pump up the diff for that much and we only get paid 7 times our energy cost instead of 10 times. Still a good investment. Then another $5.7 gets pumped in but that doesn't create another 30% rise. Maybe only a 20% rise. So the more money pumped in, the less effective that capital is. So somewhere, the miners stop building and just recoup.

    Furthermore, I'd say the vast majority of miners in the community are already mining. We're not likely to see another great influx, just incremental growth.
  • ilia7777ilia7777 Member Posts: 113
    Its generally bad idea to brag about your achievements, because as soon as you do something bad happens, but yes I did make money on stock market. I wish I only invested in stock market because when trying to invest in real businesses I suffered very signicant losses. In Russia its very easy to loose money, even Soros sufffered catastrophic losses over here. People are dishonest and the govt is brutal if you cross their path. The biggest investor in Russia Bill Browder was kicked out of the country and Putin tried to put him in jail. I used to wirte articles about investing on gurufocus.com. Seekingalpha didn't want to publish my article about badoo because of some grammatical errors. Badoo was about 86 at the time and I basically forecasted that its going to reach 500 USD in 5 years. After about two years it reached 250 and now its at 185 (good price to enter).

    I've read the white paper and I keep following everything on Ethereum. However value investor approach is purely based on analyzing financials of existing business and not about expectations, great ideas etc. Great ideas may or may not come to life. But when you are looking at annual reports of a company that has been in business for 7 years and you see that they have consistently managed to meet the goals set its completely different story. I'm not going to go into details of fundamental analysis its quite complex.

    Like David says its a game without rules but it feels great when you rig is working and its stable. So I'm just going to approach it as a game even though I kind of feel what the end result is going to be. The brave ones already got rewarded. Its not a reason to pour all your money into this but something to think about.
  • syaoran99syaoran99 Member Posts: 204

    I notice you said you never 'lost' money on the stock market. You know the vast majority of the world's population, including me, could say the same. Did you 'make' money on the stock market? That's the hard bit! ;)

    I don't think you have fully grasped the open ended utilitarian nature of Ethereum yet and why it's fundamentals, intrinsic value and projected worth can't really be compared to or appreciated by reseaching Bitcoin. I would hazard to guess by this lack of insight that you've not read the Ethereum Whitepaper which is an absolute must for anyone wanting to play here.

    I've opined on the intrinsic value of Ethereum before so won't cover old ground at length.


    ilia7777 said:


    It takes about 8 million dollars to add additional 30% difficulty to the network. Or 80 people with 100K each or 160 with 50K each or 320 with 25K each or 640 with 12.5K. I think there are about 500-1000 miners out there. But who doesn't have additinal 12.5K in US or Canada ? Especially guys working in IT. If you don't have it you could borrow it. So this is reality guys. There are some 500-1000 miners out there and they are actively investing whether we like it or not. The result is predictable. It wrong that you can't predict the future. I proved many people wrong on stock market and I have proof (email exchanges etc).

    I personally prefer 'forecasting' over 'predicting'.

    So currently we're at global hash of 1.4TH/s which is 75,000 20Mh/s equivalent GPU's. Lets estimate each GPU at $250 (fair estimate to cover the range from 2nd hand cheapies to $800 Nano's?) and we're pushing $18~20m invested in mining. 30% of that is $5.6~5.7M.

    So 1000 new miner pump up the diff for that much and we only get paid 7 times our energy cost instead of 10 times. Still a good investment. Then another $5.7 gets pumped in but that doesn't create another 30% rise. Maybe only a 20% rise. So the more money pumped in, the less effective that capital is. So somewhere, the miners stop building and just recoup.

    Furthermore, I'd say the vast majority of miners in the community are already mining. We're not likely to see another great influx, just incremental growth.
    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.

    To me it would likely increase exponentially. And the difficulty rise would skyrocket along with miner increase as well as the problem of difficulty set to naturally increase even without increase in miners as discussed in the other thread. At this rate encouraging more new miners, you are bringing them to their doom and doing the community evil. Do not ask someone to mine at this point promising them ROI.

    On the contrary you should be telling them to be careful of investing.
  • o0ragman0oo0ragman0o Member, Moderator Posts: 1,291 mod
    @ilia7777, there's no denying that Ethereum as a platform is still years away from mainstream awareness and useage. It's not like Facebook where you can just throw up a vanity platform in a web browser from your dorm and call it Social Media. Web3 is a completely different technology which the broader culture, (who have been asking for it for so long), will need to learn and adjust to. Ethereum is a long term investment but with some pretty amazing returns and fun from mining in the interim.
  • o0ragman0oo0ragman0o Member, Moderator Posts: 1,291 mod
    @syaoran99 where was i encouraging new miners in my post?
  • ilia7777ilia7777 Member Posts: 113
    @syaoran99 yes it went up 5% a day, which is about 65% monthly equivalent ! Its not going up, its flying up with speed of light. We are up for a ride down :)
  • ilia7777ilia7777 Member Posts: 113
    edited March 2016
    Now the kids could pick up their toys and read some serious book about the "tragedy of commons" or about ehtereum inability to scale because you can't shard/partition gas :)))
  • ilia7777ilia7777 Member Posts: 113
    edited March 2016
    I have to remove the pic.
    Post edited by ilia7777 on
  • Marvell9Marvell9 Member Posts: 593 ✭✭✭
    edited March 2016
    hash rate will keep going up since GPU's are reasonably priced right now , unless that changes I dont see any reason to not expect 30% rises monthly. You basically just have to buy 30% more hash each month to keep up.
  • AnjesAnjes Member Posts: 5
    Is there any info on how PoS is going to work? how it will be mine?
  • CryptuxCryptux Member Posts: 118 ✭✭
    You are speculating on a speculative market! BTC != ETH
  • syaoran99syaoran99 Member Posts: 204

    @syaoran99 where was i encouraging new miners in my post?

    when you mention that there's only such a minor increment in difficulty and that most miners are already mining, that is indirectly telling new guys

    "Hey difficulty won't rise much, at this rate you can still get ROI get more cards and mine!"

    Which is entirely false as we can obviously see that the mining difficulty has been rising more than 10% per week. Most often 5% in just ONE night. OBVIOUSLY not all miners are already mining at this point and the sort of impression you're giving is going to drag many new miners to hell with cards that they can't either sell later or get a ROI.

    That said, maybe you are trying to get new miners to buy cards just so that you could sell yours? Just wondering.
  • o0ragman0oo0ragman0o Member, Moderator Posts: 1,291 mod
    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.
  • syaoran99syaoran99 Member Posts: 204

    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.
  • adasebadaseb Member Posts: 1,043 ✭✭✭
    I don't think the difficulty will rise exponentially but will rise linearly like it has since February. Pretty soon there will be shortages of GPUs and most who have a farm will just stop upgrading in fears of losing money.

    However this doesn't mean anything because "what-if" ETH breaks 0.037BTC and starts heading into the 0.10BTC-0.20BTC area, nobody will care about difficulty then.

    And even if ETH goes back to 0.10BTC, people will still mine because its sure as hell more profitable than an Antminer S7, and quieter too.
  • workwork Member Posts: 2,084 ✭✭✭✭
    @adaseb There's not going to be any shortages of GPUs... I'd bet on that.
  • blueboxbluebox Member Posts: 181 ✭✭
    adaseb said:

    I don't think the difficulty will rise exponentially but will rise linearly like it has since February.

    Except it's not linear — it's parabolic, near exponential/power law.
  • ethfanethfan Member Posts: 458 ✭✭✭
    Jan 2 terahash increase. Feb 4 terahash. Mar 6 terahash (if exponential should be 8 terahash; though there is three more days in March). Do you expect 16 terahash in Apr? 32 terahash in May?? That is what exponential means...
  • dittoditto Member Posts: 139 ✭✭
    Yeah and Ethereum can hit $100+ in the end you really don't know.
  • blueboxbluebox Member Posts: 181 ✭✭
    @ethfan Tell me this does not look parabolic. If not for the hitch in the homestead fork, you can clearly see the trend over the last two months — and it's not linear.

    Wish I could download the data, I'd give you an equation.
  • ethfanethfan Member Posts: 458 ✭✭✭
    bluebox said:

    @ethfan Tell me this does not look parabolic. If not for the hitch in the homestead fork, you can clearly see the trend over the last two months — and it's not linear.

    Wish I could download the data, I'd give you an equation.

    Yes it is near exponential these three months. My figures supports that. My point is do you see the same next month? The month after?? Exponential growth is NEVER sustainable.
  • syaoran99syaoran99 Member Posts: 204
    ethfan said:

    bluebox said:

    @ethfan Tell me this does not look parabolic. If not for the hitch in the homestead fork, you can clearly see the trend over the last two months — and it's not linear.

    Wish I could download the data, I'd give you an equation.

    Yes it is near exponential these three months. My figures supports that. My point is do you see the same next month? The month after?? Exponential growth is NEVER sustainable.
    You're probably underestimating the potential of buyers then. There is a LOT of cards out there. I myself know because I could put in an order for 40 cards and I would get it within the week. As long as price remains constant miners will continue to flood the mining field. It will continue to increase exponentially especially if false assumptions about ROI and "potential" decrease in miners are made. People won't know they're buying into an already saturated market as most New miners won't bother calculating these factors and would just calculate based on what they can earn currently. Not everyone is a veteran with LTC/BTC mining experience and it's people like you who urge them to burn themselves by being unrealistic.

    That said, whoever said ETH will reach $100 is just a pure hype idealist. It will reach that but never within he mining PoW period. That said it would be unlikely to reach $100 even after post PoS. Not until the banks actively USE the network which won't be anytime soon. Realistically speaking that will take at least another decade before the banks do create a network international system that works and is acceptable internationally.

    I would suggest new miners to STUDY HARD before investing any more. And at that you WILL FIND OUT that investing in new hardware at this point is a HUGE risk that you would have to take. And if things go southward, CAN YOU HOLD YOUR ETH. And for MONTHS maybe YEARS and absorb the cost of running the rigs through all these deficits for the hope that one day ETH will spike to $100?
  • blueboxbluebox Member Posts: 181 ✭✭
    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.
  • dlehenkydlehenky Member Posts: 2,249 ✭✭✭✭
    @bluebox Nice to see a picture of it, although the raw numbers are obvious enough. The flattening at Homestead had mostly to due with the drop from 17 to 14+ seconds in the block time, which obviously had to bring down the difficulty for that period to achieve it. That was followed by just more blocks to mine (3.5 -> 4+ per hour). After that was all absorbed by the rising hash rate, diff started rising hard again.
  • blueboxbluebox Member Posts: 181 ✭✭
    @dlehenky Some folks have to see a picture, but also need to know what it means (not obvious from the graph).
    What it represents is worse than a halving of ether returns in the past two months for the same hash; if it continues parabolically instead of merely doubling, those caught up in the arms race will be left with little to show for it in 8 months except a lot of used game cards... and I, for one, do not expect or count on any such correlation in price increase. 4x over the past two months is sweet gravy, but chasing hashrate at this point can easily put noobs in a deep hole.
  • o0ragman0oo0ragman0o Member, Moderator Posts: 1,291 mod
    syaoran99 said:

    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.

    I think 'citation needed'. Why would you think the Chinese aren't mining Ethereum? The next DEVCON is in Shanghai. Vitalik got support funding from an automotive corp last October. It's not like they don't know about it.
    syaoran99 said:

    so no, difficulty WILL NOT be limited ANYTIME soon.

    We'll keep this quote aside and see how it fairs over the next few months.
    syaoran99 said:


    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.

    It doesn't have to rise exponentially for miners to fail ROI. A Linear rise will do the same and even stable hash is time limited by PoS. So I'm not arguing for new miners because there are too many wild uncertainties. Yes they might make good profit if they get in now and if eth value rises and if diff stablises and if PoS is delayed, and if, and if..... else they crash. Most certainly they need to educate themselves. Most certainly many won't but there's not a crap load I can do about it but be as certain as I can of my own position in the fray.

    The time to being mining was in July and I dare say most of us who did could all claim ROI. I'm personally on my second generation of rigs which have already been paid for thanks to the wild value increase of the last 2 months.
    syaoran99 said:

    ...That said, whoever said ETH will reach $100 is just a pure hype idealist. It will reach that but never within he mining PoW period. That said it would be unlikely to reach $100 even after post PoS. Not until the banks actively USE the network which won't be anytime soon. Realistically speaking that will take at least another decade before the banks do create a network international system that works and is acceptable internationally.

    The banks will never use Ethereum for the simple fact that it's a public blockchain. Even if they use it privately it can't impact in any way on ether value. What they are doing is setting up their own blockchain consortium called Hyperledger and have teamed up with the Linux Foundation to do it! :/ If they can get their POS working, they'll be running within a couple of years, not a decade. And they will want to do it as quick as possible because Ethereum poses a direct competitive risk to their entire business model.

    So I think you need to reconsider short to medium term value of ether when it holds such enormous competitive potential in the global economic system. I would say $100 is easily reachable this year and have made even wilder speculations that ETH/BTC do a complete inversion around July.
    syaoran99 said:

    I would suggest new miners to STUDY HARD before investing any more. And at that you WILL FIND OUT that investing in new hardware at this point is a HUGE risk that you would have to take. And if things go southward, CAN YOU HOLD YOUR ETH. And for MONTHS maybe YEARS and absorb the cost of running the rigs through all these deficits for the hope that one day ETH will spike to $100?

    And I would suggest old miners study just as hard, because this ain't just another alt-coin.
  • nogo10nogo10 Member Posts: 26
    edited March 2016
    Let's look at the strategy of hoarding ether that may have two possible effects: keep price of ether higher by limiting the supply in the *open market but as consequence make mining more profitable with rise in difficulty in lockstep with ether price rise. At some point just buying ether make quicker profits than mining. Of course there's a limit to short term ether price altitude because -as pointed by @ilia7777 - the fundamentals will bring about a correction in price.


    Otherwise, not hoarding means price of ether is determined strictly by demand until what? decreasing profitability of diminishing returns: a Klondike scenario where lots of money is made but no one makes money..
    Ghost Town here comes Casper? (sorry the pun was just there!).. time will tell

    edit: * open market: I am looking at this in a general economic sense.. the buying and selling of cryptocurrency in the marketplace have their own rules of which I am not fully aware.. caveats
  • ilia7777ilia7777 Member Posts: 113
    edited March 2016
    G416G said:

    @ilia7777 with all due respect you sound like a russian so what on earth do your laws of economics have to with the rest of the world. I read over some of you writings and it compares apples to oranges and stock market to crpyto market. These things have many things in common when it comes to trading and the format but absolutely nothing when it comes to how cost is derived.

    @bluebox with all due respect your post includes critique but missing any substance. If you'd like to prove me wrong please do but please be more specific. All I said is that if difficulty is going to continue increasing 40% a month every month, those investing today will never get their money back. This is math. And if I was you I wouldn't make remarks like "typical Russian". Lets not go down this road.
    Post edited by ilia7777 on
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