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What might this do to the acceptance of bitcoin? In an article yesterday, someone mentioned in the comments that it was no longer financially viable to make mon

by debacle 14y ago

What might this do to the acceptance of bitcoin? In an article yesterday, someone mentioned in the comments that it was no longer financially viable to make money from mining, I would assume that this would make it doubly so. If that is the case, will there be required transaction fees for processing transactions, and how will that effect the price of BTC?

DennisP 14y ago
Transaction fees will be one factor, and are already built in. Pay a transaction fee and your transaction gets processed faster. But also, miners who can't be profitable anymore will drop out. As they do, the mining difficulty will decrease until mining becomes viable again. On the other hand, the first special purpose mining ASICs are starting to be offered, and people with those will be able to mine more efficiently. I'm not expecting the bitcoin price to change significantly, since I figure it's determined more by the demand for bitcoins than by production costs. Looking forward to seeing whether that's correct.
mrb 14y ago
This person is misinformed. Mining is still quite profitable to many of us. Eg. each one of my Cairnsmore1 FPGA boards makes about $43/month, after the halving. Before the halving, they made $86/month. I paid $640 for each one. Electrical cost for one of them (40W) is $2.90/month at the worldwide average rate of $0.10/kWh.
- debacle 14y ago
  So it takes the better part of a year to make your money back? What kind of money do you make on transaction fees?
  - mrb 14y ago
    You can make your money back in 3 months. Because after 3 months you would have mined $129, and the resale value of the board is at least $500 on eBay. So, in essence, anything mined after 3 months is pure profits. However I don't recommend anyone to buy FPGAs right now, as ASICs are coming in December/January, and they will change the game. Transactions fees only increase my revenues by ~1%.
    - jeremyjh 14y ago
      What do you think the resale value of that board will be after everyone switches to the next great tech? The long-term trend for BTC mining is always going to be that it is not profitable for people who pay average or above-average for electricity. If you invest capital at the right point in a tech-surge then I'm sure you can see some profits but this business has almost no barrier to entry so you should not expect it to be something you can rely on for profits.
      - debacle 14y ago
        From what I know about BTC, it's engineered so that the currency is constantly operating and "peak mining" - if mining begins to fall off, within a certain number of cycles mining will become easier, thus making mining more profitable again.
        jeremyjh 14y ago
        The point of that is to keep the rate of block solutions relatively constant, regardless of how many people are mining. After the last big price crash, it was instantly extremely unprofitable to do any mining, and the number of miners crashed overnight. eBay was flooded with 3d video cards. So the difficulty came down again until blocks were being solved regularly, but no one was making any money unless they weren't seeing their electric bill (or had really low local rates).
- graue 14y ago
  This sounds like good business. Any links on getting started? I'm especially curious about the legal aspects like how you report mined-Bitcoin income when you do taxes.
  - cwkoss 14y ago
    Well, if you are mining as a hobby, you get to write off all of your expenses before having pay taxes on any profits. Want a new top-of-the-line graphics card? Until it pays for itself, you don't owe any taxes. (In the us, from my understanding. IANAL, IANACPA)
    - graue 14y ago
      I was thinking more along the lines of, based on mrb's figures, buying 11 FPGA boards and letting them pay my rent. That's substantial enough profit that if I didn't file properly, I'd be worried about a knock on the door from the IRS.
      - sequoia 14y ago
        > Eg. each one of my Cairnsmore1 FPGA boards makes about $43/month, after the halving. ... I paid $640 for each one. 11 boards... do you have $6500 laying around? And you'll invest it to make a (possible, read: Your Milage WILL Vary) return of ~$450/mo? Shoot for the moon, I guess...
        groby_b 14y ago
        What's so wrong with a ~7% return per month ?
  - vitno 14y ago
    people who mine bitcoins probably don't report that on their takes.
  - alaaibrahim 14y ago
    I don't think that the government could tax it, as it's not money :) I'm not a lawyer or anything even close, but if your income is not money, but something else (e.g. potatoes), would that be taxed?
lectrick 14y ago
1) GPU mining is still profitable, if your power is cheap. 2) FPGA mining is still plenty profitable (I'm making, eh, 20BTC a day or so? And already paid for my hardware) 3) ASIC, coming soon, will change everything again, but keep it profitable

by debacle 14y ago

DennisP 14y ago

Transaction fees will be one factor, and are already built in. Pay a transaction fee and your transaction gets processed faster. But also, miners who can't be profitable anymore will drop out. As they do, the mining difficulty will decrease until mining becomes viable again. On the other hand, the first special purpose mining ASICs are starting to be offered, and people with those will be able to mine more efficiently. I'm not expecting the bitcoin price to change significantly, since I figure it's determined more by the demand for bitcoins than by production costs. Looking forward to seeing whether that's correct.

mrb 14y ago

This person is misinformed. Mining is still quite profitable to many of us. Eg. each one of my Cairnsmore1 FPGA boards makes about $43/month, after the halving. Before the halving, they made $86/month. I paid $640 for each one. Electrical cost for one of them (40W) is $2.90/month at the worldwide average rate of $0.10/kWh.

debacle 14y ago
So it takes the better part of a year to make your money back? What kind of money do you make on transaction fees?
- mrb 14y ago
  You can make your money back in 3 months. Because after 3 months you would have mined $129, and the resale value of the board is at least $500 on eBay. So, in essence, anything mined after 3 months is pure profits. However I don't recommend anyone to buy FPGAs right now, as ASICs are coming in December/January, and they will change the game. Transactions fees only increase my revenues by ~1%.
  - jeremyjh 14y ago
    What do you think the resale value of that board will be after everyone switches to the next great tech? The long-term trend for BTC mining is always going to be that it is not profitable for people who pay average or above-average for electricity. If you invest capital at the right point in a tech-surge then I'm sure you can see some profits but this business has almost no barrier to entry so you should not expect it to be something you can rely on for profits.
    - debacle 14y ago
      From what I know about BTC, it's engineered so that the currency is constantly operating and "peak mining" - if mining begins to fall off, within a certain number of cycles mining will become easier, thus making mining more profitable again.
      - jeremyjh 14y ago
        The point of that is to keep the rate of block solutions relatively constant, regardless of how many people are mining. After the last big price crash, it was instantly extremely unprofitable to do any mining, and the number of miners crashed overnight. eBay was flooded with 3d video cards. So the difficulty came down again until blocks were being solved regularly, but no one was making any money unless they weren't seeing their electric bill (or had really low local rates).
graue 14y ago
This sounds like good business. Any links on getting started? I'm especially curious about the legal aspects like how you report mined-Bitcoin income when you do taxes.
- cwkoss 14y ago
  Well, if you are mining as a hobby, you get to write off all of your expenses before having pay taxes on any profits. Want a new top-of-the-line graphics card? Until it pays for itself, you don't owe any taxes. (In the us, from my understanding. IANAL, IANACPA)
  - graue 14y ago
    I was thinking more along the lines of, based on mrb's figures, buying 11 FPGA boards and letting them pay my rent. That's substantial enough profit that if I didn't file properly, I'd be worried about a knock on the door from the IRS.
    - sequoia 14y ago
      > Eg. each one of my Cairnsmore1 FPGA boards makes about $43/month, after the halving. ... I paid $640 for each one. 11 boards... do you have $6500 laying around? And you'll invest it to make a (possible, read: Your Milage WILL Vary) return of ~$450/mo? Shoot for the moon, I guess...
      - groby_b 14y ago
        What's so wrong with a ~7% return per month ?
- vitno 14y ago
  people who mine bitcoins probably don't report that on their takes.
- alaaibrahim 14y ago
  I don't think that the government could tax it, as it's not money :) I'm not a lawyer or anything even close, but if your income is not money, but something else (e.g. potatoes), would that be taxed?

lectrick 14y ago

1) GPU mining is still profitable, if your power is cheap. 2) FPGA mining is still plenty profitable (I'm making, eh, 20BTC a day or so? And already paid for my hardware) 3) ASIC, coming soon, will change everything again, but keep it profitable