Bitcoin Mining

[MachineGhost]

Anyone doing this??? I remember that Storm made a fortune using a video card a few years ago.

[Pointedstick]

I think the profitable window closed years ago.

[MachineGhost]

I think the profitable window closed years ago.

Yes, I know, but there are cloud mining contracts now where you can rent mining rigs. If they're located strategically, then the electricity cost will possibly be lower than your own locale. I'm currently getting my feet wet on one. The main risk seems to be the pace of difficulty increases and the Bitcoin price. In theory, as long as Bitcoin stays above $175 at current levels of difficulty, it is net profitable. The next halving is due around July 9th so that will tell the tale. It seems like a crazy arms race in that you have to constantly upgrade your mining hardware using your profits just to keep your head above water, so when exactly can anyone literally "cash out"?

It's also still profitable to mine on a GPU using the X11 algorithm, but you do need a rig to make it worthwhile in terms of being meaty. My video card will mine at 10MH/sec and which costs around $100 via a cloud mining contract. However, it will only make about .22 a day and not cover my expensive electricity costs at .1598 KW/h or .46 a day.

[sophie]

MG, which cloud mining company did you go with?

It's an attractive idea, since volume pricing on hardware and optimized electricity costs could make it a reasonable VP venture.

[MachineGhost]

MG, which cloud mining company did you go with?

It's an attractive idea, since volume pricing on hardware and optimized electricity costs could make it a reasonable VP venture.

I went with Genesis. They and Hashnest appear to be the only reputable ones in a land of hucksters.

Assuming historical rates of difficulty growth and a mined block halving coming soon, I don't think current contracts are going to be profitable unless perhaps all profits are 100% reinvested into more hash power. Since these cloud mining services are in business to make a profit, it may be prudent to wait to start mining until after they reprice their contracts after a difficulty increase/halving. Genesis didn't look profitable before at lower Bitcoin prices because their electricity costs were too high, though I'm not sure where you draw the line between mining at a loss for future profitability vs current income.

The halving looks like it's going to be a real killer. A lot depends on several variables that can't be exactly predicted. The mining companies have to either double their hash rate offered for the same price or lower the cost by at least 75% to stay competitive. If you just calculate with a halved block now and the average historical difficulty increase rate, then breakeven like goes from 213 days to 3 years, 11 days, etc.. From what I can tell, I should get around 6 months after the halving before the contract terminates from not be able to pay the electricity costs (assuming no reinvestment). I believe the last halving was in 2012 so this is actually a good time to be watching to jump in early on repricing.

[Kbg]

The future of Bitcoin isn't looking all that good anymore...also what you are up against if you want to be a bitcoin miner.

http://www.npr.org/sections/money/2016/ ... in-divided

http://www.nytimes.com/topic/subject/bitcoin

Bust out your little red bitcoins.

[MachineGhost]

The future of Bitcoin isn't looking all that good anymore...also what you are up against if you want to be a bitcoin miner.

http://www.npr.org/sections/money/2016/ ... in-divided

http://www.nytimes.com/topic/subject/bitcoin

Bust out your little red bitcoins.

Fascinating, but it seems fine to me. The Chinese are such gambling addicts so its not surprising they've dominated Bitcoin so far. AFAIK, Bitmain is the only one left standing that actually delivers mining rigs. Bitmain also runs Hashnest which I mentioned previously.

Making $230K a day though -- fuck wow!

The only real problem is mining is a hardware arms race because of the difficulty increases and halvings. If you want to stay in your position, you must ploy back all of your mining profits into better mining hardware ad infinitum. If you slack off for even a second, you'll start incurring losses.

[MachineGhost]

I haven't seen any reduction in my mined Bitcoins yet. The halving was supposed to be around the 9th, IIRC. The below is interesting and suggests we could move either way from here:

[MachineGhost]

Sucky! My daily mining payout has droppd 3x due to the halving and pushed up the breakeven time 3x. The trick now will be to see if contract and electricity costs will be lowered under the new reality. It's not profitable at all to mine right now. The next halving will be due in about 4 years.

[dualstow]

Anyone doing this??? I remember that Storm made a fortune using a video card a few years ago.

Nah. Had an offer from my tech-minded Italian buddy (August 2013, says my email), but he wanted me to supply the basement and I just don't have the space.
I find the whole concept very interesting, though.

[bitcoininthevp]

I would advise against the Cloud Mining route. It may work out for you but it has been rife with scams over the years.

Also, your profits will largely be based on the market price of bitcoin, so complicating your investment with 3rd party middlemen and other variables (new mining technologies, electricity prices, tying up your money, etc) might not be worth it vs just buying and holding bitcoin yourself.

[bitcoininthevp]

As to the original question about mining, yes, the window seems to have closed for personal mining to be profitable.

Mining has centralized in China due to extremely low electricity costs.

Bitcoin mining is now a specialization.

[Reub]

Another major hack and theft at a bitcoin website! A very foolish place to invest.

[Reub]

Another major hack and theft at a bitcoin website! A very foolish place to invest.

http://mobile.nytimes.com/2016/08/04/bu ... acked.html

[bitcoininthevp]

Are you saying it is foolish to keep your bitcoin investment in the exchange (because it could be hacked)?

Or are you saying bitcoin is a foolish investment because the price can drop when companies in the bitcoin space have problems?

[dualstow]

I admittedly don't know much about it. I just have the fractional bitcoin that Marc generously gave on this site. But, if I had my gold stored at a fort that kept getting raided, I'd want to pull out. And if no fort felt secure, I might give up on gold.

[bitcoininthevp]

dualstow, totally reasonable.

The option to store bitcoin yourself is there as well. You dont need an exchange to hold it for you.

You can store your wallet on a piece of paper and secure that.
Or you can have paper copies of it with trusted individuals.
You can use a "brain wallet" and store it in your own memory (cool, but not recommended).
You can actually split parts of your bitcoin wallet and share in different locations such that each piece doesnt get access to any funds (shamir secret sharing) and 3/5 pieces would restore the wallet. Good for long term "cold" storage. Even cooler is that you can keep sending bitcoin to this split up and secure wallet without having to get all the pieces together. (as you "stack")

[dualstow]

I guess I have a wallet. I don't even remember how it works, but I have a very long code printed on paper and stored in a binder on the shelf. I guess I thought that it was also stored on a server somewhere. That is not necessarily the case?

(if I had more than a fractional coin, I'd have done a lot more reading up on it )

[bitcoininthevp]

Dual,

The code you have printed on the paper is what is referred to as a "cold/paper wallet". The code is essentially a long password. It doesnt exist anywhere else in the world (unless youve given it out).

Due to the "magic" of cryptography that password unlocks your special bitcoin address without you having to actually ever give out that password to the outside world.

I think your bits are probably safe as is, but if you need help moving them or whatever in the future, ping me and I can walk you through the process.

[dualstow]

Cool, thanks.
Mind-boggling stuff!

Due to the "magic" of cryptography that password unlocks your special bitcoin address without you having to actually ever give out that password to the outside world.

[Kbg]

So this Bitcoin stuff is awesome...


Hong Kong-based Bitcoin (COIN, OTCQB:BTCS) exchange Bitfinex said it may spread the $68M loss among its users, including ones not directly impacted by the hack. "We are leaning towards a socialized loss scenario," the exchange wrote in a blog post. Bitfinex is still "settling positions and balances" and will provide more details soon

[bitcoininthevp]

Much like storing gold with a third party, storing bitcoin at a bitcoin exchange introduces third party risk.

The ecosystem around bitcoin (exchanges, etc) is young and this risk is particularly high at the moment as services start to build up around bitcoin.

I hope people learn not to store significant sums of bitcoin at exchanges!

But it is quite interesting to follow the news around these exchange "hacks".

[Reub]

Owning bitcoin is a recipe for disaster. I would recommend finding other more tangible investments.

[bitcoininthevp]

Owning bitcoin is a recipe for disaster. I would recommend finding other more tangible investments.

Reub,

Im a big fan of "Rule #9: Don't ever do anything you don't understand." Is that is what you are saying above? If so, more power to you.

If what instead you are saying instead is bitcoin is a bad investment, Id like to hear your specific criticisms of it. Believe me there are plenty of risks, criticisms and downsides, Im not here to say its perfect.

It seems like you have concerns about tangibility. You can hold bitcoin tangibly if youd like (see the paper wallet examples earlier in the thread). However its "digitalness" is viewed as one of its upsides. Do you believe email is not valuable because you cant hold it and instead prefer to communicate via letters? What about your mp3s vs cds? Do you hold all of your stock and bond certificates tangibly? What about cash?

[dualstow]

Do you hold all of your stock and bond certificates tangibly? What about cash?

Those are very fair points. I do feel like we are better protected when it comes to these instruments, though. For example, when someone used my credit card number to buy a bunch of computer equipment from a company that supplies that stuff to businesses, I was able to clear it right up. If I get mugged and someone steals cash from my wallet, I'm probably out of luck.

Putting myself out there digitally (credit card) makes it easier for thieves to steal in the first place. Oddly, though, I feel more comfortable physically walking down the street with an ATM/credit card and very little cash because of the systems in place to protect me. Not perfect, but good.

Stocks are a little different. In addition to the regular risk that a stock may naturally fall, there's the chance of corporate mismanagement and finally, the perennial fear (in some hearts) that "the system is rigged." But, the intangibility of my stock holdings is not an issue because I trust my brokerage houses. They're not perfect, but they make me feel safe, even if that's an illusion. A stock certificate could get torn apart by a pet or lost in a flood, easily.

If someone hacked into Vanguard, I think I'd still get my shares back eventually. And, if someone hacked into my bank and/or robbed my branch at gunpoint, I'd still get my FDIC-insured dollars.

I'd like to see the same thing from bitcoin, rather than, we're spreading the loss around to our customers even if they were not direct victims of the hack. Until then, as you have pointed out, we don't need those exchanges to store our bitcoins in the first place.

- - -
What about spending the coins? I saw a couple of interviews in the past, possibly posted at this forum. It was a pro-bitcoin interviewer who scared me. He said that once someone tried to purchase something online and the "merchant" took his bitcoins and delivered nothing. The pro-bitcoin guy proudly announced that many people in the bitcoin community generously donated a coin each to the victim.

That's heartwarming and everything (and I don't mean that in a snarky way), but I don't think I'd like to depend on that. People have been known to buy entire automobiles with a credit card. After hearing this story, I'm not sure how I could feel safe exchanging $45- or $65,000 in bitcoins and then waiting for delivery. Or maybe there are new safety mechanisms in place since that story aired a few years ago?