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Ask HN: Bitcoin mining: anyone doing it?
51 points by kf on Feb 26, 2011 | hide | past | favorite | 19 comments
From my brief research, the economics of Bitcoin mining with a Radeon HD 5970 seem a little too good to be true, especially if I buy a supercomputer for a friend in a college dorm with free electricity, or something.

Can anyone tell me how much bitcoin they are really generating per month with various setups, how much you are paying in electricity, as well as broad future on the future value of bitcoin?

A typical system with a 5970 consumes just under 500 Watts lets say, including the GPU (some examples here: http://www.bitcoin.org/smf/index.php?topic=3892.0 ).

That's 12kWh at let's say a $0.12/kWh residential electric rate ( http://www.bitcoinminer.com/post/2361900289/where-to-mine-el... ) that's about $1.44 per day for your electricity.

A 5970 hashes at just under 600 Mhash/s, per http://en.bitcoin.it/wiki/Mining_hardware_comparison so punch that 600000 number in as khps here: http://www.alloscomp.com/bitcoin/calculator.php

and it shows that at the current difficulty level, you should generate 50 BTC about every 3 days and 29 minutes.

So in a 24 hour period you get about 16.55 BTC per day. Converting that 16.55 BTC to USD: http://bitcoin.1t2l.net/widget/?from=BTC shows you earn about $15.28 per day with a rig holding a single 5970.

Then to send those BTCs to your PayPal, you use http://coincard.ndrix.com (starting again monday morning) and you lose 3% doing that conversion so you end up with $14.82 in revenue per day. Subtract the $1.44 in electricity that nets you $13.38 a day. If that were to hold, you'ld have the card paid off in well under two months.

That said, ... difficulty is rising (fast! ... http://bitcoin.sipa.be/speed.png ). If the BTC/USD exchange rises more ( it's had quite a run http://bitcoincharts.com/charts/mtgoxUSD#rg60ztgSzm1g10zm2g2... ), then that payout might continue at these levels. Otherwise, the payout from mining will decrease.


I was reading that the switch to generating 25 BTC at a time instead of 50 will happen very soon.

Even then, if you were only earning $7/day with a single 5970 rig, the payback period is not that long. It seems obviously worth doing, unless you think there will be a run on Bitcoin within the next 6 months or that a sudden move to ASIC will make GPU mining obsolete. I think I'm going to go for it. I might even take the risky investment and hold my bitcoins.

The switch to 25 BTC will happen at block 210,000, which will happen in January 2012. https://en.bitcoin.it/wiki/File:Total_bitcoins_over_time_gra... Just like how GPU mining made CPU mining unprofitable, something else could come along and make GPU mining unprofitable. Probably couldn't happen before you've gotten your hardware purchase paid off though. Of course, if the exchange rate drops significantly, like the scenario pointed out here: ( http://mtgox.com/blog/?p=262 ) and doesn't recover for a while, you could end up never covering the cost of the equipment for your rig.

wow... I was all excited to try to generate some bitcoins, so I installed the software, checked the box to generate bitcoins, and walked away from my machine...

I come back a few days later and no bitcoins... I should have done a little bit more research because the rate I'm doing hashes on this old machine is a factor of 1000 slower than what people are getting out of GPUs. I'll be lucky if I generate 1 group of bitcoins in the next 10 years!

From an economics standpoint and a personal opinion, I don't think there is any future value for Bitcoin (or any digital or virtual currency).

From what I've been told, there is a finite amount in Bitcoin which means there is a limit on how much one can theoretically amass.

However, that's not to say that people will not trade money for it. If it is worth a lot to someone (and I suppose not everyone), then the value of Bitcoin will be high. But not everyone wants a Bitcoin. Not everyone can do much with a Bitcoin compared to other currencies. It will only be worth a lot to those who know what to do with it.

It's not knocking on Bitcoin alone - currencies and gold work the same way. The only reason gold has such a high value is because of its perceived value and it's theoretically accepted everywhere in the world. If everyone said they will not accept gold but silver instead, then the value of gold will certainly drop.

That said, if you do want to data mine, make sure you do it when the times are hot. :) (which could well be right now)

I think it's a bootstrapping problem. Gold was bootstrapped eons ago because it was shiny and rare (and survives because it remains rare to this day). Fiat currencies are bootstrapped by governments (you can pay your taxes in them and governments pay their workers and contractors in them).

I'm not sure how Bitcoin is going to be bootstrapped, how one might conclude if/when it becomes a stable currency or if it is even possible. I think a significant proportion of the market might need to receive some benefit to switching before they will buy in, much like any new product in a traditional economy.

Bootstrapping is growing daily: http://bit.ly/bitcoinnodes though there are too many areas where Bitcoin does not yet exist.

Hmm ... a benefit? How about "no payment network fees"? When you send $20 to a friend, your friend gets all $20. Not $19.12 like if you paid your friend with PayPal, ... Not $19.50 like if you paid your friend with SquareUp. No, .. the transaction settles at par value (all $20 goes to the recipient). Do you buy gas from the fueling station that charges $0.10 less per gallon because they only accept cash? Not everyone does, but enough do such that it continues to stay in business.

Does Bitcoin need "a significant portion of the market" to succeed, or can it succeed simply by growing just in the niches that it already excels at today (transactions that benefit from anonymity, transactions that benefit from having no fees whatsover, transactions that are too small to be cost effective on other payment networks, etc.)?

Bootstrapping is growing daily: http://bit.ly/bitcoinnodes though there are too many areas where Bitcoin does not yet exist.

Are these places that are generating bitcoin, or are they places where I could spend bitcoin if I had it? If it's just people producing bitcoin, the fundamental problem is still that it can't generally be exchanged for anything. Unless bitcoin is accepted a lot more widely than I thought, you'll have an easier time convincing me to take payment in the form of gift cards for the local grocery store.

You can buy tea, socks, domain names, t-shirts, nightlights, video games, books, pen testing, and more using bitcoins: https://en.bitcoin.it/wiki/Trade

In short, not all that is rare and limited is valuable.

I have a few additional concerns with the adoption of bitcoin. One being that it displaces those currently in control and will therefore be made illegal. It would not be too hard to portray bitcoin as the tool of illegal traffickers to the general public.

Then again, just because there is some risk, does not mean it is not worth it.

>From what I've been told, there is a finite amount in Bitcoin which means there is a limit on how much one can theoretically amass.

You are not going to eat bitcoins. So while nobody will ever get more than x bitcoin, the exchange rate between bitcoins and bread can easily change, and likely will (this will also make the hidden cost of inflation public, which is likely where the biggest threat to bitcoins are).

The relative durability of bitcoin plus the fact that it becomes scarcer through time means that bitcoins have far too high a potential to appreciate in value.

From an economic standpoint, it will encourage hoarding.

One of the problems with hoarding is that people simply stop producing because there are not enough money in circulation. This is more or less like the old money days when moneyed people didn't have to work, and people who have no money could not find work.

Bitcoins also doesn't solve the problem of derivative bitcoins, e.g. futures and debts. For instance, you can "create" more money in the system if bitcoin deposit taking institutions are permitted to do "fractional" banking.

Remember, that gold itself is a finite resource. As time passes, currencies become backed by gold instead of gold, and eventually it untethers from gold.

On the good side, Bitcoins is the environmentally friendly equivalent of gold. It would make Warrent Buffett proud, since he famously remarked "People dig up gold from somewhere out of the ground, melt and forge it into shapes, dig another hole, bury it again and employ people to guard it."

>From an economic standpoint, it will encourage hoarding.

You cannot eat bitcoins, nor do they cure illness, provide you with electricity or any of the other things you want (you in the abstract).

It is true that deflation encourage people to hoard more so than does inflation but you are ignoring things like the future value of money (a dollar today is better than a dollar a week from now) as well as peoples tendency to value the things they buy more than the money they give for them (otherwise, why buy it in the first place).

Finally deflation would enable investors to wait out bad times, hopefully killing the bubbles that crop up whenever the market can't sustain the required investments.

If you still don't believe me, consider this: in the middle to late 1990ies people new that computers would get obsolete very fast and that the expensive computer today could be had for less not long in the future, but the value of having a computer today was better than paying less for a new one tomorrow.

Good currencies share certain properties:

1. Durability - bitcoins check.

2. Have no intrinsic value - check

3. Cheap to store - check

4. Encourage the "right" economic behaviors - debatable - since we do not all share the same definition.

For instance, oil as a currency would be interesting, because much economic activity is tied to harnessing energy. Relative decline in oil reserves point to declining wealth.

The problem with a guaranteed deflation scenario is that it leads to long term economic stagnation and lack of investment activity. There will be no good times to wait for.

After going to their website and reading their FAQ in its entirety, I am still confused.

Why would anyone dream of offering goods, services, or other currencies in exchange for "bitcoins"?

Why would anyone dream of offering goods, services, or other currencies in exchange for "paper"?


"The main functions of money are distinguished as: a medium of exchange; a unit of account; a store of value; and, occasionally, a standard of deferred payment."

Here's why. It is late winter right now -- that means it is conference season for the payment networks that you use today. One of the next ones is at http://www.fontainebleau.com That's where some of the money earned from each transaction where you pay with a credit or debit card is going.

On the flip side, Bitcoin's transaction network is operated openly -- anyone can become part of the Bitcoin "payment network". Here's an example of where the costs for that are going: http://www.bitcoinminer.com/post/3441032109/bitcoin-mining-o...

So you decide. Do you want your money going to the Executive VP-Payment whatever dickwad headed to Florida or going to the dude trying to make a living running a server farm out of his kitchen.

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