posted
Anyone out there have any experience with Bitcoin Mining?
I've been looking into it, but it looks like even if I join a mining pool, and use my computer (though it is an absolute beast) I won't be able to process enough information to really make it worth my while, and will spend more electricity on power than bitcoins I gain.
I've also been looking into stand alone ASICS systems (or bitcoin mining systems) that can process from 5GH/S ($274) all the way up to 500 GH/S ($22,474)
Anyone out there use a bitcoin miner, and if so what kind of returns are you getting? If I purchase a 5 GH/S ASIC system and it pays for itself over the course of a few months, I'd be willing to invest the $274 needed.
I'm interested in the bitcoin market since I have a feeling it will only grow and get more profitable.
Posts: 1937 | Registered: Nov 2006
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posted
here, I bring some substantive blocks of text to those given interest in bitcoin by internet chatter.
SA User Heresiarch
quote: Because I am between tech writing jobs and am apparently some kind of masochist:
A Bitcoin FAQ for GBS
-Short version-
1) Should I buy bitcoins?
No.
2) But if they drop down to a dollar, then I can snap some up and
No. You are one of thousands of people who want to do this. Telling the thread that you are going to do this doesn't make you look smart.
3) How does this shit work? It doesn't make any sense!
No, it really doesn't. It's impossible to explain bitcoin in anything less than tl;dr terms so you should probably just not worry about it. Go do something useful instead of reading this awful thread full of socially inept people laughing at another group of socially inept people.
-Long version-
1) I really want to understand how bitcoin works. Please.
Okay, you asked for it. With some severe simplifications and a painfully neutral pov:
Bitcoin is a decentralized "cryptocurrency". It is a network of software that shares a common protocol designed to allow secure transfer of bitcoins between users. It uses distributed cryptography to verify transfers and balances.
Bitcoin is also the subculture that has sprung up around this software, which includes additional software that is not part of the core design. The most high-profile of these are trading services that allow users to buy and sell bitcoins using US dollars and other real-world currencies.
Bitcoins users have files called "wallets". This is sort of a misnomer, because these wallets do not actually contain anything except a cryptographic private key. One's bitcoin balance is actually recorded inside the distributed network, which is why you cannot edit your wallet file to give yourself more bitcoins. Bitcoins can be added to a particular balance using a public bitcoin address, which acts as a cryptographic public key. The private key is contained in the wallet, and bitcoins cannot be transferred out of a balance without that private key.
(If you don't understand public-key cryptography, do some reading because you can't understand bitcoin without it. While you're at it, read up on cryptographic hash functions.)
Transfers between wallets are recorded in "blocks", which are verified by the distributed cryptography system. The act of verifying transactions and then adding those transactions to the historical "blockchain" is called "mining". Transactions are stored in the blockchain using cryptographic hashing methods which allow the entire blockchain to be independently verified for consistency and integrity. In order to make blockchain verification an attractive prospect, the design of bitcoin gives "bitcoin miners" two reasons to tie up their computing hardware to maintain the network, both based around competition.
The first reason is that bitcoin transfers can contain optional transaction fees which are paid to the miner that verifies the transaction. Paying a transaction fee makes it more likely that your transaction will be processed in a timely manner, because those transactions are more attractive to the miners.
The second reason is that mining gives the miner a chance of receiving a batch of newly created bitcoins. The more cryptographic power one brings to bear, the more likely it is that the next batch of new bitcoins will be yours. There are a fixed number of bitcoins which can ever be mined, and the difficulty of the cryptography will continue to increase over time.
An important aspect of mining is that the network is designed to handle one complete block (containing a specific number of transactions) every ten minutes. If more computing power is added to the distributed network, making the blocks take less time to process, the difficulty of the cryptography increases. The inverse is also true. This scaling difficulty is meant to help prevent a single user or group of users from gaining complete control over the network by using more computational power.
The distributed verification process determines the "truth" of a transaction block by whether or not the majority of the network (as measured by contributed cryptographic work) considers it valid. The original designer thought it unlikely that any one user or organization could acquire a majority of the network's cryptographic power and therefore "cheat" the system in some way.
Bitcoin verification power is typically measured in the speed at which a system can perform cryptographic hashes, which are required to verify the blockchain and to add transactions to it. The difficulty of the mining process is determined by the amount of "hashing" required to add a new block to the chain.
These are the core aspects of the original bitcoin design. In short, bitcoins are assigned to "wallet" addresses, with balances stored in a distributed "blockchain". The accuracy of the blockchain is verified by "miners", who have a vested interest in doing so through a reward system. Attacks (such as double-spending) are prevented by the distributed nature of the network, where any invalid transactions will be caught by other mining systems.
2) That was painful to read.
It was painful to write.
3) So what went wrong?
A lot of things, some of which are due to problems with the original design, and others which are due to problems with the bitcoin community.
Bitcoin was originally a proof-of-concept project by an anonymous crypto specialist who used the pseudonym "Satoshi Nakamoto". It is unlikely that he was actually Japanese, but his identity still remains a mystery. Bitcoin was meant to be a testing ground for theories about how cryptocurrencies might work. Initially, bitcoin was a curiosity and there was little participation in the network, as bitcoins had no real-world worth.
This all changed as bitcoin was discovered by three types of people. First, there were the internet libertarian types who liked the idea of a currency that was not controlled by a government. For them, bitcoin represented an ideology. Second, there were people who wanted to use bitcoin as a semi-anonymous international currency for illegal transactions, such as drugs, weapons, or illicit pornography, as well as a possible method for laundering money. For them, bitcoin represented safety from the law. Third, there were people who viewed bitcoin as a method to get rich by getting in on the ground floor of a new kind of money. These people saw bitcoin as an investment.
The history of bitcoin is too complicated to go into detail here, but these three groups shaped the bitcoin network and community into what it is today, which is a gigantic goddamn mess of idiocy, greed, and bad decisions.
4) What happened to the neutral pov?
I'm tired.
5) Well, then where is bitcoin right now?
Right now, the bitcoin community has been overwhelmed by the use of bitcoin as, essentially, a commodity to be bought and sold. Individual bitcoiners may talk about the future of bitcoin as a currency, but the vast majority of bitcoin transactions today are the buying and selling of bitcoins themselves using real-world money, and not the buying of goods or services using bitcoins. There is an extremely limited number of things you can spend bitcoins on without first converting them to dollars (or whatever), and many of those are done through third-party bitcoin-to-dollars systems where the merchant never sees any bitcoins.
Bitcoins are purchased and sold much like other commodities such as gold, petroleum, and the like. Exchange services are set up, where people who wish to buy the commodity put forth "buy orders", where they offer to buy a certain amount of the commodity at a given price, and these buy orders are matched with "sell orders" put in by people who wish to sell that commodity.
There are several bitcoin exchanges that let one buy and sell bitcoins using dollars and other currencies, but the most important one is "mtgox". Amusingly, Mtgox started life as "Magic: The Gathering Online eXchange", an exchange service for virtual Magic: The Gathering cards.
When someone says "bitcoin is at $50" or something similar, usually they mean that the most recent buy order on mtgox was for $50 a bitcoin.
The market prices for bitcoin have historically tended to rapidly inflate and then crash spectacularly. Bitcoin's market value has dropped by 50% in less than a day on multiple occasions.
Regardless, true believers in bitcoin (typically the libertarians or the investors, who are sometimes one and the same) keep throwing more money at the speculative market, in the hopes that one day their currency will be treated with respect by the world, or at least they'll eventually make up for their losses. Neither scenario is likely.
6) Why is this funny?
Because we're children who like laughing at dumb people, and bitcoin people are a truly spectacular level of stupid.
7) So could bitcoin ever be a real currency?
No, for one simple reason. Bitcoin does not scale. The network is already creaking under the weight of relatively few transactions, and more importantly, the blockchain size is increasing rapidly. The blockchain file is currently several gigabytes in size, and the entire chain must be downloaded in order to mine or verify your own transactions. You can use a third-party service to store and transfer your bitcoins, but these services have historically tended to get hacked or just suddenly vanish, taking all your internet funny-money with it.
If bitcoin actually became popular as a currency and not just as a speculative commodity, the network would rapidly become even more unusably slow than it already is, and the blockchain would swell to an absurd and unmanageable size.
8) Some people seem legitimately angry about bitcoin.
Bitcoin would appear to be a mostly harmless way for idiots to throw money at each other, except for the fact that bitcoin mining has (not surprisingly) become an arms race to see who can get the most hashing power online.
The original design of bitcoin did not account for the possibility of specialized, expensive hardware which could make mining without that hardware almost useless. Certain kinds of ATI Radeon video cards proved so effective at performing bitcoin hashing that mining solely on a general-purpose PC CPU gives negligible results, due to the vastly increased hashing difficulty. Miners purchased huge amounts of these video cards to create custom (and often hilarous) "mining rigs", essentially converting electricity into heat and bitcoins.
The stakes have been raised again with the advent of specialized bitcoin-only ASIC hardware which is even more effective than the video cards were. The future of bitcoin mining appears to be in the hands of a small minority of users who can afford this specialized equipment, making the "distributed" nature of bitcoin something of a joke.
The bitcoin network now must use vast amounts of power, far out of proportion to its actual usefulness and typically generated by fossil fuel plants, just to maintain itself. It is a tremendous waste of actual real-world resources that could be better used on something important (like, for example, watching cat videos) and this makes some people actually angry at the situation.
9) Wait, what about this "BFL" thing, and who's "Atlas"? What the hell are you people talking about?
Look at all these ****ing words I've already written. God, what a waste of effort.
SA User Leperflesh
quote: The issue is similar to that faced by daytraders who make dozens of trades on small fluctuations in price of some security per day; predicting floors and ceilings. There are all sorts of "technical analysis" techniques for doing this, most of which work just often enough for millions of people to rely on them, but break just often enough that millions of other people are quite sure they're useless (I'm one of the latter).
The thing is, though, real securities (stocks, bonds, etc.), and real commodities (soybeans, gold), and real currencies (euros, yen) all move in response to actual real-world events which affect the underlying thing (companies, crops, supply of metals, the financial condition of a government). So you can watch the news and make trades based on headlines, and you can watch other traders who watch the news and make trades based on what other traders do, and you can watch the overall market and make trades on individual securities which have prices that tend to respond to the overall market, and so forth.
But bitcoins are different because there is no underlying thing. The number of new bitcoins per hour is relatively fixed, so there's no surprises there for the market to respond to. That means the main events that bitcoin prices can respond to are things like "mount gox broken into again: ten bazillion bitcoins may be stolen", "silk road being investigated by Interpol", and "a famous blogger mentioned Bitcoins in his article in a way possibly interpretable as positive". These news items do move the price, of course, but since there's no real thing behind bitcoins, there's no natural floor in price set by that real thing. Soybean futures may rise or crash, but the chances we'll suddenly stop producing soybeans altogether - or produce so many soybeans that they're now totally free - are pretty much zero. Whereas the chances that at some point absolutely nobody on Earth will still use a bitcoin for anything are somewhat greater than zero. And the natural ceiling on bitcoin prices is essentially equivalent to the greatest potential of fools and money to be parted.
So I think it'd be fair to say it's harder to predict ceilings and floors with bitcoin, and thus, more difficult to make money daytrading bitcoin in the long term.
But forget about all of that. Really, forget it, it's all irrelevant. All you need to know is that there does not exist a single way to trade bitcoins that is regulated. Every option for buying and selling bitcoins relies on unregulated intermediaries who, demonstratably, have a terrible record of reliability. You could be 100% certain that the price of bitcoin is about to go up for the next 30 minutes, buy into a position, and then see all your bitcoins locked up inside a shitty website for three hours while it's "down due to another DDOS" or whatever excuse. You could sell all your bitcoins at a huge profit, and then never get your money because the bullshit website run by amateurs that you have your money in finds its Polish bank account seized by authorities. There are several exchanges for bitcoins and they each have listed exchange rates that are utterly out of sync with each other. The fact that arbitrageurs do not very, very quickly resolve those differences demonstrates that they are ****ed up; it means the costs, in terms of transactional fees but even more especially in terms of time, are so huge and problematic that people are not able to efficiently exploit a ten dollar difference in BTC price across two exchanges which persists for hours or even days.
Real securities, real commodities, real currencies are traded on incredibly reliable, government-regulated exchanges run by professionals with actual knowledge and experience, whose organizations are able to handle billions of dollars per day of other people's money entirely due to having established impeccable reputations for reliability and safety. Huge corporations and the world's richest individuals trust their wealth to these agencies because these agencies have proved themselves to be trustworthy again and again.
If you want to dabble in technical trading or whatever, do it someplace where your money isn't quite so likely to disappear into a black hole overnight due to gross incompetence or illegal activity or both, on the part of the unaccountable and often anonymous people running the exchange.
posted
Glad I listened to you Samprimary, Bitcoin mining is useless.
On the other hand, I ended up building a mining rig for Scrypt currencies, and have been selling them for Bitcoin then cashing out for USD.
I've already received a return on investment for the rig, so everything now is just profit. I'm not making much (about $15-$20 a day after energy costs) but it's something. Plus I've been using it as an excuse to learn more about Linux, something I've always wanted to do.
There are so many alt-currencies popping up now that it is hard to determine if any of them are going to go up in value like Bitcoin (and to a lesser extent, litecoin) have. A few of them actually have a purpose like Namecoin (Each .01 coins registers a domain name) and Primecoin (which calculates VERY large prime numbers) but most of them are just gimmicks that are doomed to fail.
The funniest coins? Dogecoin and the soon to be released "Coinye West". Yes, a coin based on Kanye West.
Since I've already made my money back on the rig I'm not too worried where the market goes now. If cryptocurrencies end up crashing hard (And I think they eventually will, especially with China cracking down and the US looking at trying to regulate) I'll end up with an upgraded Gaming rig!
Posts: 1937 | Registered: Nov 2006
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posted
That's all fine and dandy, but like I said, I already made my money back. If I make more than what I have invested, it was a good investment.
I don't expect to get rich at all. If I keep making $15-$20 a day by mining ---> trading for bitcoins ---> cashing out to USD, hey, I'll take it. In some ways, I'm selling the "shovel" (as referred to in the article). I'm just mining the metal and making the shovels myself.
Posts: 1937 | Registered: Nov 2006
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posted
I'm hoping you'll give us an update in a month or two. It looks like there's quite a rush to build mining rigs (Radeon cards selling out everywhere) which is probably going to mean the difficulty will ramp up rapidly as more hashing power comes online. Of course the proliferation of currencies is going to give people the opportunity to start again in a less competitive space, but...until there's some aspect of value produced, it's pretty hard to imagine this is going to keep up steam for long.
It's amazing how speculative bubbles work.
Posts: 4287 | Registered: Mar 2005
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posted
Yeah, as bitcoin mining rigs start to ramp up in sales, there's going to be a processing arms race. It's already happening to a degree. Rigs will produce less and less as new rigs become more powerful and prevalent. It's all about raw processing power and the demand for power only goes up as more bitcoins and what not get mined. Geraine is probably in during the best part of it unless he's willing to roll his profits into buying a better setup.
Posts: 21898 | Registered: Nov 2004
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posted
Bitcoin itself is a lost cause when it comes to mining for profit, and has been for a while now. That's why Geraine went to a scrypt rig. Scrypt-based currencies, which is what most of the new "alts" are, cannot be efficiently mined by the special-purpose ASIC machines that are used by the Bitcoin miners now so there's still some space for an individual to get in on the fun but as scifi points out it's very speculative. If you buy a rig today and mine the right new alts early you have a fair chance of making back enough to pay for the machine, but you're very unlikely to make any real money on it.
Posts: 3275 | Registered: May 2007
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quote:Originally posted by Raymond Arnold: How much time do you spend each day upkeeping this?
even as a time investment it is being used as an educational experience learning Linux too.
I don't spend almost any time at all on the rig itself. It runs 24/7. I run a remote terminal off of my windows desktop now. Once a week or so I'll go into the Linux system itself to do updates on any software, tweak the cards, etc.
Most of the time I spend is on the markets. It has been a pretty good learning experience for me as well. I use Cryptsy to trade the altcurrencies for bitcoins, and coinbase to cash them out. I have balances of some altcurrencies that I am currently holding on to. For example I have 200,000 DOGE coins that I am keeping right now since the block reward is going to halve in the next few weeks. Once it does, the prices are expected to go up.
Tuesday of this week there was a new currency called "Coinye West" released. After Kanye West sent a cease and desist order to the creators, it began to get a ton of press coverage. I mined about a million of them over the past 36 hours. I recently sold 500k of them for .125 BTC (A little over $100) The other half I'm holding on to until they hit an exchange.
It isn't of course enough to quit my job, but I am enjoying the learning experience. I've learned (and am still learning) quite a bit about Linux, but I am also learning a lot about speculative markets without having to risk capital I earned from my job.
The amount of rigs being built right now is amazing. Radeon Video cards are sold out everywhere or being sold for insane prices. This could mean either really GOOD things for alt-currency or really bad things.
On an interesting note, overstock.com just started accepting bitcoin as a form of payment yesterday. Amazon is also now mulling it over.
Posts: 1937 | Registered: Nov 2006
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quote:Originally posted by Geraine: The amount of rigs being built right now is amazing. Radeon Video cards are sold out everywhere or being sold for insane prices. This could mean either really GOOD things for alt-currency or really bad things.
I suspect really good things for the graphics cards manufacturers... and that's about it.
Posts: 9912 | Registered: Nov 2005
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quote:Originally posted by Samprimary: in a gold rush, the winner is the person selling the shovels
Or there's the case of three Chinese dudes, that bought a shack that had been used by tons of miners who had mined out the area. The seller thought he was smart for dumping the place, whereupon they dusted the floor and under the floor boards for gold dust and found a few thousand dollars worth of the stuff.
Posts: 14316 | Registered: Jul 2005
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posted
DOGE has skyrocketed from .00000025 BTC per DOGE to .00000225 BTC per DOGE in the past week. My 400,000 DOGE is now worth about 1 BTC. I'll probably hang on to them for a few more days (block reward will be halving soon) and I'll cash out. I expect the price will go even higher once the block reward halves. Supply and demand!
On an interesting note, the DOGE community donated over $30,000 worth of DOGE to the Jamaican bobsled team. They qualified but lacked funds for equipment. The community is now trying to raise money for three Indian athletes who qualified but lack the funds to compete. I will admit the DOGE community has been an amazing community and has shown that it is willing to come together and donate for a good cause.
quote:Originally posted by Geraine: DOGE has skyrocketed from .00000025 BTC per DOGE to .00000225 BTC per DOGE in the past week.
I'm issuing 1 Million Orincoins. Price per coin is 0.000002 Bitcoin. Give me that bitcoin, and I'll give you 500,000 Orincoins. IF the price goes up by even 0.000001, you'll have made a 100% profit. Orincoins are only exchangeable for Bitcoins, which are in turn only useful if they are converted back into real currency.
What do you say?? Doesn't that sound like the stupidest thing you've ever heard?
Posts: 9912 | Registered: Nov 2005
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I've decided to wait for a more efficient form of currency where we trade blocks/second directly without the inefficient storage requirements.
Posts: 4287 | Registered: Mar 2005
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posted
While you were typing that, I invented Orinc-ore, it is a raw form of Orincoins and there is only enough to make 10 Million Orincoins with it. The price of Orincoins has suddenly skyrocketed to 250 Bitcoins.
I estimate my personal fortune at 1.8X10^12, or 18 Trillion Dollars.
I'm gonna wait until the payoff halves, and then the price will shoot to 36 Trillion Dollars, because Supply and Demand, and then I will sell and buy Earth.
Posts: 9912 | Registered: Nov 2005
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posted
I have discovered a new currency called the BLT (Blind Lottery Trust). Basically, I promise to buy a power-ball ticket when the Power Ball reaches $200,000,000 and will transfer all winnings from that ticket to those who hold BLT coins.
Coins sell for .0001 dollars now, but can be traded as the market demands.
There will only be 10,000,000 virtual BLT coins in production. Each coin will be worth $2,000 if we will the lottery of $200,000 million.
There is no guarantee, but the math is easy to do.
(Note: BLT Payouts can be made in the form of BLT Coins.)
Posts: 1941 | Registered: Feb 2003
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I'm not making much (about $15-$20 a day after energy costs) but it's something. Plus I've been using it as an excuse to learn more about Linux, something I've always wanted to do. 
