Why you SHOULD NOT MINE Ethereum now with more rigs

syaoran99syaoran99 Member Posts: 204
You should NOT be buying more mining gear to mine now. WHY? Here's my argument.

Lets do some rough realistic calculations for those who are lazy...

50,000 USD to spend

That will allow us to buy 33 units of r9 390 Rigs that hashes 100MH/s

Compared to 7058.8 ETH @ 8.5USD

We have until early next year to mine ETH. With 1400ETH earned a month with 33 rigs this month, you are expecting about 5 month worth of mining to be able to mine the ETH required to get the same amount of ETH you could have bought.

However, in 5 month's time, the amount of ETH you earn drops by 30% a month

980 in May
686 in June
480.2 in July and so on

That would mean you would need a significantly longer period of mining to mine the same 7058 ETH you could have bought using cash. (not including yourself playing the market selling at peaks and buying on dips which would net you EVEN MORE ETH)

Realistically, By July you'd only have 3546.2 ETH with that 33 rigs. It will take another 8 months(Making that March 2017) for you to get the remaining ETH to hit the target 7058.8 ETH.

Especially if the prices go up, that would make it even harder to realize as more miners will jump in making mining even less profitable.

That said, should the current price of ETH drop below 8.5USD, Buying ETH outright would be an even better option with that 50,000USD you're about to spend on mining. Lets say ETH hits 6 USD/ETH you could just outright buy 8333.33 ETH. That amount is IMPOSSIBLE to mine with the same equivalent value of mining gear you would buy with 50,000USD by the time Ethereum moves to PoS

REMEMBER that this disregards the cost for electricity which would cut 1/4 of your ETH profits at the current state. Which means even at the current state, you would be better off buying ETH itself than to invest in mining gear.

Also that currently as a new miner you would have barely any ETH of significant value to net you a good profit if you trade it at an exchange during dips and pumps. While if you outright bought 7058 ETH, at this price, or lower, a simple 15% ETH to BTC price rise would net you 1058.7ETH!!!!. Being in the ETH Poloniex trading forum for a while now, 15% in ETH price rise/drop is NORMAL. You see that almost EVERY WEEK. Imagine making 15%(1058.7ETH) PER WEEK Hell that's way better than what any miner could net you.

Also as calculation goes, the first rise and fall you catch nets you 1058.7 ETH, the SECOND week, you have 8117.5ETH, another 15% rise and fall and you caught it, will net you 1217.6ETH! it grows more every time.

So, I think I've given a very valid argument here. Anyone who tries to tell you not to Buy ETH and Buy Mining gear is only set out to try and cut his losses and sell his own mining gear during this high season just so he can do what I just mentioned and get himself some CHEAP ETH.

If my calculations are wrong, please correct me. Thanks.

(If you don't know how to calculate and profit from pumps and dumps, you should learn because as a miner you will be trading ETH on an exchange whether you want to or not or else you WILL lose large money by selling wrongly)
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Comments

  • retherrether Member Posts: 258 ✭✭
    I honestly wouldn't do either...I'm extremely bearish on ETH. But your points are valid, it's a crazy time to put serious money into mining.

  • syaoran99syaoran99 Member Posts: 204
    rether said:

    I honestly wouldn't do either...I'm extremely bearish on ETH. But your points are valid, it's a crazy time to put serious money into mining.

    Exactly my point! I believe ETH will drop to the 5/6 USD mark by May and 3/4 is achievable by July when halving for BTC occurs.

    If price ever goes that low, at the current difficulty, those choosing to buy mining GPU rigs rather than buying ETH outright either can't do math, or have some brain development issues lol (Not intending to be insulting) but in my opinion, if information so readily laid out for you(referring to those kind of people) is available and you already are aware of it and yet you still chose the path which is less profitable, I really do not know what else to say lol. *facepalm

    Like I said in a previous thread, I'll sell every single mining rig I own just to buy ETH at 3/4 USD if it ever comes to that. Because I believe, come October where all the major releases are due, we will see a new ATH for Ethereum.
  • Marvell9Marvell9 Member Posts: 593 ✭✭✭
    Your numbers are way off say you need 10k for the motherboards ram psu etc that's 40k to buy 121 or so r9 390s which hashes for about 3400mhs
  • kotariuskotarius Member Posts: 331 ✭✭✭
    OP, your post misses a few key points:

    1. For self-employed business owners in USA, schedule 179 allows you to deduct up to $500,000 worth of gear as a business expense.

    https://www.irs.gov/publications/p946/ch02.html

    If your business is showing a net profit, you can buy any mining gear and earn coins with it. You can defer a) a large chunk of taxes that way to later years, b) treat earned altcoins as capital gains only upon conversion to dollars, c) instead of self-employment income, d) fall into smaller tax brackets, etc, etc.

    2. Mining equipment does not immediately turn into a $0 value. Even after the mining cycle, it still retains value that you can realize by liquidating.
  • syaoran99syaoran99 Member Posts: 204
    edited April 2016
    Marvell9 said:

    Your numbers are way off say you need 10k for the motherboards ram psu etc that's 40k to buy 121 or so r9 390s which hashes for about 3400mhs

    @Marvell9 @kotarius
    The numbers are not way off. You are calculating costs for NA itself. The world doesn't = NA. I calculated based off a new rig costing approximately $1500

    rejoice that NA has 15% cheaper cards and psu compared to the rest of the world as most of us don't have our own local manufacturers, we(our local distributors) have to import parts.

    That said, that's only IF you're a self-employed business. Then again if you're thinking of it that way, ALL ETH mined are subjected to tax as well. Dependent on the nation, you are entitled to pay GST for every single ETH mined in countries that have GST. Both for Mining and Selling it. 2x GST tax. After which, that amount of ETH converted to FIAT is subjected to be taxed as per normal income rate.

    Which makes it even less profitable as a miner. BUT if you purchased ETH straight out of Poloniex and keep it there, you would not be incurred any GST tax especially if you are trading and holding it over the period of over 12 months whereby you would be entitled to a discount in Capital Gains Tax.

    Am I not wrong? If you want to include discounts, please be fair and include the other factors as well. What happens to maintenance cost? Cost for the frames? Cost to get a place to have 33 rigs running? Cost to buy risers etc? Delivery costs? Factor that all in? The figure on top described in post 1 is a very rough calculation where majority of the other additional costs are circumvented. Like I said, electricity bills also reduce ETH mined by 1/4 if ETH remains at 8.5USD/ month.

    If ETH drops below 8.5USD, the electricity bills would be reducing net profit mined ETH by a MUCH LARGER amount.

    as to mining equipment retaining value, good luck selling 122 cards on ebay. One who've sold stuff on ebay would know that would take an insanely long time and you're not the ONLY person. As to mining other coins, how sure are you that another will come along? What if you'd need to wait a year or two? Then again in a year or two, will you still be living at your current place? What happens to unused electronics for ages? Mold grows? Oxidation? Will it still be useable? Rats, spiders, racoons chewing em up and making nests etc.

    These are all the various issues you would need to consider before committing to a new rig! It's not as easy as one would think it is.

    Also the above MINING ETH VALUE does not take into account the increasing DAG Growth size, where we are expecting a SHARP DROP in hashrate with 3GB cards and even more so with 2GB ones. This means less ETH mined for those with 3GB cards (HD7950,HD7970,HD7990,280x)

    I'm not sure if I missed anything else out.

    But yeah if you bought ETH straight out, you'd have LESS risk, and have less things to worry about. You get to liquidate your ETH asap should things go down south, while if you have just bought mining rigs and things go down south, good luck selling 120+ GPUs on ebay.
  • syaoran99syaoran99 Member Posts: 204
    edited April 2016
    -double posting-
  • adasebadaseb Member Posts: 1,043 ✭✭✭
    Buying ETH directly isn't a good idea either because there is no guarantee that it will go up in the future anyways.

    Alot of people have free electricity and they can buy the cheaper R7 370 instead of the 3x cost R9 390.

    The GPUs themselves will never be worth $0. So the ROI period you calculated was incorrect. Most of the GPUs you can resell for 40% of what you paid for, even if the market gets flooded with GPUs. I was around in Spring 2014, and there were gpus flooded on eBay but they still weren't free. And 6 months later in Dec 2014, the prices went up and you could sell a 280X for around $150 USD, which was originally brand new at $300 USD.

    I know you went on this rant to scare people so the difficulty doesn't go up, but the truth is, right now its still VERY profitable to mine. And the difficulty will keep going up and up.
  • syaoran99syaoran99 Member Posts: 204
    edited April 2016
    adaseb said:

    Buying ETH directly isn't a good idea either because there is no guarantee that it will go up in the future anyways.

    Alot of people have free electricity and they can buy the cheaper R7 370 instead of the 3x cost R9 390.

    The GPUs themselves will never be worth $0. So the ROI period you calculated was incorrect. Most of the GPUs you can resell for 40% of what you paid for, even if the market gets flooded with GPUs. I was around in Spring 2014, and there were gpus flooded on eBay but they still weren't free. And 6 months later in Dec 2014, the prices went up and you could sell a 280X for around $150 USD, which was originally brand new at $300 USD.

    I know you went on this rant to scare people so the difficulty doesn't go up, but the truth is, right now its still VERY profitable to mine. And the difficulty will keep going up and up.

    Firstly this isn't a rant to scare anyone. You're being very unjust in accusing me so. It's legit and the things to consider are very much real life situations.


    I should bold this. Remember I'm not merely talking about ROI. I'm talking about the amount of ETH you WILL GET from just buying it outright as compared to the amount of ETH you will get from MINING.


    Regardless of the ROI duration, the amount of ETH you will get doesn't change. The amount of ETH you mine contribute to the ROI duration. Selling the cards doesn't change the fact that by the time you sell it, should ETH price be high, your card's sale values are insignificant. Should the price drop, you already have liquid ETH which can easily be cashed out to reduce losses. Often times, MUCH less than the losses for Electricity, property rental costs, maintenance costs and also the 60% drop in equipment value. Remember your Rigs, doesn't only comprise of cards, it includes unsellable/more worthless stuff like your [shelves,power cables,motherboards,CPU,cooling fans,risers, extension boards, powerboards, etc]

    ETH will definitely be worth more come October and a new ATH will definitely be reached at that time so buying ETH is definitely one of the options to consider besides mining and my first post explains why. If ETH value doesn't go up, then the more reason for you to not mine. Because with difficulty the way it is, at least the amount of ETH you BOUGHT is still more that the amount of ETH you will ever mine.

    If you're not experiencing such situations then you're luckier than 80% of the people in the world out there. Either that or you have your own agenda for trying to promote new miners to go in at this time unless you would like to help me understand better your "still very profitable" by breaking down the calculations rather than just claiming it as it is.

    Also regarding "still very profitable" You should not just calculate the CURRENT state as that is not the true nature of Ethereum. Please educate us on the ROI which you're envisioning and the said amount of ETH that could be mined by say March using the same 50,000USD investment fund.

    You see, not everyone has unlimited amount of money and even then that's not an accurate way of calculating profit to cost. You would need to take the circumstances from a FIXED amount of funds and calculate which is more profitable.

    By Free electricity that is not possible. Unless you're stealing electricity. That's illegal and I would never condone such an act. Do not forget that the world doesn't only revolve around the USA. USA is only a small part of the world. A very tiny percent of the world's population. When you mention free electricity, I would be inclined to believe it's solar energy. But really? Enough solar energy to power 33 rigs? You'd need a whole solar farm to do that. Unless you're already filthy rich owning Hectares of land and that much money to afford all those solar panels, I do not see how you could generate enough electricity for 33 rigs.

    That said 33 rigs 100Mhs each would require a 275A power supply in NA am I right? I'm curious as to what sort of housing area would supplement such an output on top of having people live in it. You'd need your own transformer in your backyard for that and that'd cost thousands.

    Again, a mere 33 rigs is but small scale. We're talking about thousands of rigs being added to the network daily. I wonder, how does that happen in NA alone...
  • kotariuskotarius Member Posts: 331 ✭✭✭
    I have customers who are buying and setting up multi-hundred rig mines. They, and their investors, are not influenced by this forum's FUD, nor any faulty logic that results from its dissemination.

    I have been in a few mining cycles, and I've seen this before. People with mining rigs are quick to make posts like this at the first sign of a drop in profitability.
  • adasebadaseb Member Posts: 1,043 ✭✭✭
    There are tons of people with free electricity. Most buildings where you pay rent, its included as a utility. Most dorms or student housing have it free as well. And most places at work, its free.

    Plus there are some countries where electricity is very cheap like 1-2c KwH.

    Its much more profitable mining ETH then it is mining BTC right now. Many folks in Asia have ultra cheap power.

    People were mining X11 and making like $0.30 a day before ETH came out, they obviously must of had free power to do so.

  • syaoran99syaoran99 Member Posts: 204
    kotarius said:

    I have customers who are buying and setting up multi-hundred rig mines. They, and their investors, are not influenced by this forum's FUD, nor any faulty logic that results from its dissemination.

    I have been in a few mining cycles, and I've seen this before. People with mining rigs are quick to make posts like this at the first sign of a drop in profitability.

    Exactly, you see there're two sides of a coin, one that educates the people about the threats and things to look out for, to calculate and such,

    the otherside would be you who require more clients to buy your cards for profit. either way, people can read up on it and whether hundreds of cards are being bought at the time or not, it doesn't change the fact that they will still face the very same issues I've mentioned above. Their loss is not mine. I'm just doing my part in warning people, while you're doing your part in marketing your merchandise.
  • syaoran99syaoran99 Member Posts: 204
    adaseb said:

    There are tons of people with free electricity. Most buildings where you pay rent, its included as a utility. Most dorms or student housing have it free as well. And most places at work, its free.

    Plus there are some countries where electricity is very cheap like 1-2c KwH.

    Its much more profitable mining ETH then it is mining BTC right now. Many folks in Asia have ultra cheap power.

    People were mining X11 and making like $0.30 a day before ETH came out, they obviously must of had free power to do so.

    I'm aware of those dorms with electricity inclusive rent. Those have clauses that if the usage for electricity exceeds that of a "normal" housing's usage statistics from the bureau they will be forced to pay the additional expenses based on the rates of the supplied electricity which the building is contracted to, often times which is a internally managed service which is slightly more expensive per kWh than normal housing ones. That's the thing you forget to mention about when you said electricity inclusive rent.

    ALso electricity which are very cheap like 1-2c kWh, please remember that is only possible for countries/districts with a small population. Any decent sized country with a large population will not offer such cheap electricity because it is not possible for the government to subsidise such a volume of citizens. All these, socio-politics. Don't neglect them. They play as much a role in our Ethereum as they do our very lives. I think many of your brief comments which encourages mining need to be elaborated more. It's very misleading.
  • adasebadaseb Member Posts: 1,043 ✭✭✭
    When I was selling my antminer S1,S2,S3 almost every person that bought it from me had free electricity somehow or somewhere. Trust me its more common then you think.

    I don't think the dorm would go after you. There are space heaters and air conditioners that use the same amount of electricity as a miner. I don't think they ban those either.

    I don't think anyone mines Bitcoins anymore unless they got free power somehow. Not possible to make money any other way.

    Point is, the ETH difficulty won't come back down to 0 when ETH becomes 1/5th of what it is today, people will still mine it.
  • syaoran99syaoran99 Member Posts: 204
    adaseb said:

    When I was selling my antminer S1,S2,S3 almost every person that bought it from me had free electricity somehow or somewhere. Trust me its more common then you think.

    I don't think the dorm would go after you. There are space heaters and air conditioners that use the same amount of electricity as a miner. I don't think they ban those either.

    I don't think anyone mines Bitcoins anymore unless they got free power somehow. Not possible to make money any other way.

    Point is, the ETH difficulty won't come back down to 0 when ETH becomes 1/5th of what it is today, people will still mine it.

    I agree that ETH difficulty won't go down that was never my intention. It's just what I am sharing is relevant to many of the things those who aren't students/stealing office electricity will have to consider. Dorms won't go after you if you have 1rig mining. 2 will be tricky during the summer period. But any more than that and they will notice the unusual electriciy bill and will definitely do a spot check of your apartment. That said, even then each apartment can only take that many rigs because of the Power supply wire limit. So if you're going to be having say 10 or so rigs in your apartment with "free electricity" that's impossible. Firstly due to the insane electrical bill alerting the dorm and secondly, your switch board won't be able to take it. You would need to rent another apartment unit to have more and that would add to the cost of mining. Some places might have very cheap rental costs, but yeah usually if you're in a student dorm with utilities included, that's not cheap and never will be.
  • MrYukonCMrYukonC Member Posts: 627 ✭✭✭
    kotarius said:

    OP, your post misses a few key points:

    1. For self-employed business owners in USA, schedule 179 allows you to deduct up to $500,000 worth of gear as a business expense.

    https://www.irs.gov/publications/p946/ch02.html

    If your business is showing a net profit, you can buy any mining gear and earn coins with it. You can defer a) a large chunk of taxes that way to later years, b) treat earned altcoins as capital gains only upon conversion to dollars, c) instead of self-employment income, d) fall into smaller tax brackets, etc, etc.

    2. Mining equipment does not immediately turn into a $0 value. Even after the mining cycle, it still retains value that you can realize by liquidating.

    @kotarius That is incorrect. If you're going to file as a business, you must report mined coins as income -- not mined coins that have been converted to fiat.

    See here:
    https://ttlc.intuit.com/questions/2747272-i-mined-bitcoin-in-2014-which-i-didn-t-sell-how-do-i-claim-depretiation-of-equipment-and-do-i-claim-bitcoin-i-didn-t-sell

    and here:
    https://bitcoin.tax/blog/filing-your-bitcoin-taxes-income-spending-mining
  • syaoran99syaoran99 Member Posts: 204
    MrYukonC said:

    kotarius said:

    OP, your post misses a few key points:

    1. For self-employed business owners in USA, schedule 179 allows you to deduct up to $500,000 worth of gear as a business expense.

    https://www.irs.gov/publications/p946/ch02.html

    If your business is showing a net profit, you can buy any mining gear and earn coins with it. You can defer a) a large chunk of taxes that way to later years, b) treat earned altcoins as capital gains only upon conversion to dollars, c) instead of self-employment income, d) fall into smaller tax brackets, etc, etc.

    2. Mining equipment does not immediately turn into a $0 value. Even after the mining cycle, it still retains value that you can realize by liquidating.

    @kotarius That is incorrect. If you're going to file as a business, you must report mined coins as income -- not mined coins that have been converted to fiat.

    See here:
    https://ttlc.intuit.com/questions/2747272-i-mined-bitcoin-in-2014-which-i-didn-t-sell-how-do-i-claim-depretiation-of-equipment-and-do-i-claim-bitcoin-i-didn-t-sell

    and here:
    https://bitcoin.tax/blog/filing-your-bitcoin-taxes-income-spending-mining
    As far as I understand how it works in many countries out there who recognize crypto is that you get taxed when you mine(as income), you get taxed when you buy using fiat, you also get taxed when you convert those already taxed mined coins when you convert them to fiat again(as business sales) as CGT if you sold it at an exchange?

    On top of the GST which is also charged both ways.
  • kotariuskotarius Member Posts: 331 ✭✭✭
    No one should take any tax advice from unqualified individuals. Anything here should only be used a a starting point for your own research.
  • JBaETHJBaETH Member Posts: 40
    What makes you think ETH price won't rise up to 20USD in future?
  • MrYukonCMrYukonC Member Posts: 627 ✭✭✭
    kotarius said:

    No one should take any tax advice from unqualified individuals. Anything here should only be used a a starting point for your own research.

    @kotarius I agree. But, those articles are quite clear. If you're going to report your mining as a "business" for tax purposes, then you need to be reporting mined coins (regardless of whether or not you converted them to fiat) as income -- that much is widely accepted and really not disputed. It's called the "cost basis".
  • dlehenkydlehenky Member Posts: 2,249 ✭✭✭✭
    @MrYukonC How can you establish cost basis before converting to fiat? ETH isn't money; USD is money. Are you supposed to assign a cost basis for each ETH based on the average exchange rate for ETH->USD at the moment you mine it? If you had a gold mine, the gold is an asset, but it doesn't have a set value until you sell it for $$, even though the equipment to mine the gold is an expense. If you own a stock, it's cost basis is based on what you paid for it in $$, and regardless of what the price of the stock does day-to-day, your profit/loss doesn't occur until you sell it for $$.
  • thesmokingmanthesmokingman Member Posts: 152 ✭✭
    The way I understand it is you take the value of the coins on the day they were mined, and then record the value of the coin when you sell it. The difference between the two is what's used to calculate the amount of capital gains tax one would have to pay.

    The part I'm not clear on is how the self-employed tax is calculated since it's an estimated value and paid on a quarterly basis. I have a meeting with my CPA/Tax Attorney tomorrow to complete my 2015 taxes and plan to ask him a few questions. I plan to cash out some of my ETH and invest the FIAT into tax liens which hopefully turn into hard assets that I can rent out for investment income to avoid the capital gains tax. Just not sure if crypto to real estate will be seen as a similar invest vehicle under the IRS code 1031.
  • retherrether Member Posts: 258 ✭✭
    dlehenky said:

    @MrYukonC How can you establish cost basis before converting to fiat? ETH isn't money; USD is money. Are you supposed to assign a cost basis for each ETH based on the average exchange rate for ETH->USD at the moment you mine it? If you had a gold mine, the gold is an asset, but it doesn't have a set value until you sell it for $$, even though the equipment to mine the gold is an expense. If you own a stock, it's cost basis is based on what you paid for it in $$, and regardless of what the price of the stock does day-to-day, your profit/loss doesn't occur until you sell it for $$.

    The IRS has already ruled on this: https://www.irs.gov/pub/irs-drop/n-14-21.pdf



  • dlehenkydlehenky Member Posts: 2,249 ✭✭✭✭
    @thesmokingman We'd like to hear what the CPA has to say on the ETH part. :) Self-emplyoyment tax (FICA+) is paid on wages/salaries, i.e. earned income, not capital gains. I was a self-emplyed consultant for years. If you have your mining business set up in such a way that the business pays you a wage to oversee the operation, then you would pay self-emplyment tax on those wages. If mining ETH is an investment in ETH, another way of acquiring that asset, and you're going to pay cap gains, then you wouldn't pay self-employment tax, just as you wouldn't if you were trading stocks in your pajamas. That's been my experience, anyway.
  • dlehenkydlehenky Member Posts: 2,249 ✭✭✭✭
    edited April 2016
    @rether Well, that clarifies a lot. :) So, there would be self-emplyment tax due, since we are basically being "paid" my the network for a service, rather than the mining analogy, where we are accumulating an asset, ETH, through our equipment/work. Other than profit/loss from *trading* ETH/BTC, etc., what we are receiving in ETH for mining is no different than someone paying us for any other service, and our equipment and consumables (power, bandwidth) are tools of the trade.
  • syaoran99syaoran99 Member Posts: 204
    dlehenky said:

    @rether Well, that clarifies a lot. :) So, there would be self-emplyment tax due, since we are basically being "paid" my the network for a service, rather than the mining analogy, where we are accumulating an asset, ETH, through our equipment/work. Other than profit/loss from *trading* ETH/BTC, etc., what we are receiving in ETH for mining is no different than someone paying us for any other service, and our equipment and consumables (power, bandwidth) are tools of the trade.

    I think that much is already clear and there's no way to evade the tax from mined ETH. Anyone who reports a particular person is also entitled to a percentage of the tax that the person evaded as an incentive to report tax evaders.

    So yeah that's the thing with ETH is that everyone forgets to calculate that the tax would also reduce the net profit of ETH mined as compared to just buying it out right. If you mined the ETH, you're not entitled to any CGT rebate. While if you bought ETH you would be entitled to the rebates if you meet the requirements.

    Then again what you mined was taxed as self employment tax and then the ETH gains that you get by trading ETH on poloniex let's say they day after you mined it and ETH prise rose since then, the % of that increase is also entitled to another CGT tax.

    After which, you are to declare the FULL AMOUNT of ETH sent to poloniex for GST when you transfer it to another party. That includes every single ETH traded on poloniex down the the decimals. If you sold 100 ETH for BTC at high price all 100ETH is GST taxable. You will pay 100 GST worth of ETH tax for the tax for selling 100 ETH and also the GST for acquiring 100 ETH worth of BTC on that day.

    The next day, you buy 120 ETH because price dropped, you will pay 120ETH GST again and also 120ETH worth of BTC in GST for that days price also.

    That's how it works. If you fail to declare this annually, you're evading tax and they can very well charge you for it penalties depending on each nation. For mine it's up to 10 years in prison.

    Just for new miners out there, Tax payment is A MUST REGARDLESS OF AGE. You maybe a kid of 10/12 years old, but you are mining for profit, you are still obliged to pay tax. If you don't your parents will be held responsible for it.

    Correct me if I'm wrong.
  • adasebadaseb Member Posts: 1,043 ✭✭✭
    @syaoran99

    Man you really need to learn to relax.

    Constant rambling about why you shouldn't mine ETH, about students stealing electricity, about people not paying taxes. You make paragraph long posts.

    Seriously just enjoy your ETH mining profits.
  • kotariuskotarius Member Posts: 331 ✭✭✭
    edited April 2016
    @syaoran99 perhaps you should find another venue to voice your concerns about mining.

    I don't go to car racing forums to tell people not to drive because they may die in their car. I don't go to baking forums to tell people not to bake because using an oven increases their electricity costs. I don't go to ferret owner forums to tell people not to own ferrets because they are too stinky.

    Therefore, maybe you should not go to ethereum mining forums to tell people not to mine ethereum.
  • rdnkjdirdnkjdi Member Posts: 135 ✭✭
    edited April 2016
    I think this post may miss a bit of speculation. You are viewing it from the Ethereum angle - not the hardware angle.

    It's totally possible that people would rather own 100 390's that are 75% paid off than the same amount in today's eth prices. It's less risky because their hardware will be worth 25% and they may hope to mine whatever is next. Bottom line - miners (I think) are about investing in hardware not coins.

    That said ... don't think warning people against the pitfalls is a bad thing at all.
  • ed1ed1 Member Posts: 46
    Just mine your asses off for now! and convert, then if it drops low $5, - $4, - $3 - $2 buy some - and go mine something else !
  • MrYukonCMrYukonC Member Posts: 627 ✭✭✭
    dlehenky said:

    @MrYukonC How can you establish cost basis before converting to fiat? ETH isn't money; USD is money. Are you supposed to assign a cost basis for each ETH based on the average exchange rate for ETH->USD at the moment you mine it?

    @dlehenky Yes, that's exactly what and how you're supposed to do it.

    Etherscan.io is capable of spitting out every single transaction (including mined blocks and/or payments received from pools) to your account, with time stamps included.

    You can then load that data into https://cointracking.info/trade_prices.php to get the exact price of ETH at the time it was mined.

    And yes, it is a cost basis in this context. I know it sounds strange, it was to me too at first. But, there is no way around it if you plan to deduct mining equipment, electricity, etc. as a "business".

    Also, it doesn't really matter and doesn't hurt anything down the road by establishing the cost basis like this now. All it does is reduce the amount of capital gains taxes you will pay later when converting to fiat, because the taxes will be levied on whatever the value is then minus this original cost basis.

    Otherwise, you risk having the IRS question why it wasn't reported to begin with and attempting to assess penalty fines and interest.

    If you don't want to report anything and try to keep it compleley off the books, then you'll have to eat your mining costs (equipment, electricity, etc.). Even then, in a hypothetical best case scenario if ETH were to hit $1k+ like BTC did and you liquidate -- do you think any bank that receives that cash isn't going to file a suspicious activity report? Of course they will, thus tipping off the IRS and you know where it goes from there.

    Best to just try to do everything on the up-and-up from the get-go. Because with the world economy in its current state, entities like the IRS are on high-alert for exactly this type of stuff.
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