Bitcoin: An Interesting Case of a Classic Bubble?

[okashira]

Anyone here have any good links or information relating to setting up a small mining rig for 800-1000 bucks?  Seems like a fun experiment while the weather is still awful in my neck of the woods. 

Is anyone here actually mining?

Yeah. I got into it again. I am mining altcoins (Mintcoin, Vertcoin)

You can easily trade altcoins for bitcoins and vice versa (with no fee).

I was into mining bitcoin in 2011. I had ~40 of them. Sold them all for ~$17 each lol.

It's kinda fun collecting them (altcoins) and trying to predict if there is going to be a new winner.

I have $1600 worth of video cards running it. (could sell them now for $2,200)

I am currently a Mintcoin millionaire :-D 1.3M and growing. Each is currently worth 0.00000004 of a bitcoin :-D


I am philosophically against bitcoin and most cryptocoins.
They encourage massive energy waste to solve artificially difficult algorithms to "secure" the network.

The result is an overwhelming waste of energy (electricity) to mine, process transactions... all motivated by how profitable it is to mine.
The calculations are repetitive, artificially difficult and the amount of energy expended increases with the value of bitcoin.
Because the calculations are repetitive, they are well suited for "ASIC" which are dedicated microprocessors designed to do only one thing: mine bitcoin.
ASICS are much faster, and can process much more calculations per J of energy used in electricity. Of course, because they are cheaper to run, that makes them more profitable. So people just run more of them negating any energy savings, which make the calculations more difficult, leveling the playing field again. It's an out of control spiral that just leads to massive waste of energy.

Also, ASICS encourage "farms," where people will spend $10,000 - $1,000,000+ on farms of ASIC chips just to mine, undermining bitcoins original intent - decentralization.

IMO, the above is the core problem of bitcoin.
The other problems include the fact that it's deflationary. Coins are lost all the time, reducing currency in circulation. Once they are all mined, it will be even worse.

Mintcoin is interesting to me because it's structure is intended to encourage mining to a much lesser extent, which will discourage waste and discourage ASIC mining.
I haven't thou-rally analyzed the coin's structure, so it could all be marketing.

[PeachFuzzStacher]

I understand that BitCoin has a defined limit on the amount of coins that can be mined, but the concept itself is made up.  What is to stop ByteCoin or Bitv2 from coming out and adding another 42 million to the mix, like US Dollar and EUR?  The "limit" is a farce, IMO.

[okashira]

I understand that BitCoin has a defined limit on the amount of coins that can be mined, but the concept itself is made up.  What is to stop ByteCoin or Bitv2 from coming out and adding another 42 million to the mix, like US Dollar and EUR?  The "limit" is a farce, IMO.

That's already happened. There are over 100 alternative coins.

Inflation ; Mining rate, limit, all of these things can be set.

The introduction of a new coin should have no effect on bitcoin. They are not connected, nor can they be connected, except by the market.

If the market determines a coin to be superior, bitcoin could crash and be replaced by that coin.

[gotaholen1]

So if I was to start up a small rig for fun with a $1000 budget would it make more sense to....

a. Get an inexpensive motherboard and in one really nice Radeon R9 280X

b.  Get a little bit more expensive board and riser mount 2 or 3 video cards in $150 - $200 range

c.  Some other suggestion...

[soccerluvof4]

Apple announced yesterday it will not be using its Bitcoin App. Just saying.....

[PeachFuzzStacher]

I understand that BitCoin has a defined limit on the amount of coins that can be mined, but the concept itself is made up.  What is to stop ByteCoin or Bitv2 from coming out and adding another 42 million to the mix, like US Dollar and EUR?  The "limit" is a farce, IMO.

That's already happened. There are over 100 alternative coins.

Inflation ; Mining rate, limit, all of these things can be set.

The introduction of a new coin should have no effect on bitcoin. They are not connected, nor can they be connected, except by the market.

If the market determines a coin to be superior, bitcoin could crash and be replaced by that coin.

Right, but if and when there are so many bitcoins used up that it becomes too expensive to get in, other virtual currencies will become more attractive, and the inflation starts again, since there's no limit to the amount of "all other currencies".

[okashira]

So if I was to start up a small rig for fun with a $1000 budget would it make more sense to....

a. Get an inexpensive motherboard and in one really nice Radeon R9 280X

b.  Get a little bit more expensive board and riser mount 2 or 3 video cards in $150 - $200 range

c.  Some other suggestion...

what is your goal to use it for? mining ONLY?

[Ipodius]

A couple of points on mining:

- Don't buy ASICS for mining bitcoin directly - as the network difficulty increases, your hardware becomes worthless. Rather buy GPUs (gaming graphics cards) and then mine Altcoins and convert to bitcoins. This way, when your hardware can no longer get a decent return mining you will still be able to sell it for something.

- GPU prices are pretty crazy at the moment in the US, especially for the R9 series. I would personally try and find one of the following second hand: HD5870, HD5850, HD6950, HD6970, HD7950, HD7970. You can find their hashing rates for mining scrypt coins online and then see what card gives you the best bang for your buck.

- A lot of guides online aim to get the best bang for your buck by getting the most GPUs on a single rig, and with each GPU being the most powerful. However, at this point because GPU prices are so high it can make more sense to buy more cheaper cards spread across more rigs, even though you end up using a little bit more power.

I followed this guide for setting up: http://edjiang.com/post/69758178501/mining-altcoins-for-fun-and-profit

Only thing I disagree with from this guide -  I wouldn't put my coins into coinbase, but rather into a paper wallet using https://www.bitaddress.org

Good luck and have fun!

[Khan]

Alternatively, buy a shovel and start searching for gold.

[gotaholen1]

Thanks everyone.  Two people from my office wanted to try this so I am just putting in the time to setup the machine and keep 1/3 of the coins.  I found a second hand R9, and pieced together parts based around this card.  Hoping to have it all setup this weekend.

[Cassie]

My son just sent us our monthly statement so I thought people might be interested in knowing how it is going.  In June, 2013 we invested $3,000 in Bitcoin mining. Actually my son mines whatever is profitable and then exchanges for Bitcoin. As of the end of Jan we now have $8,000 even with the drop in price if we were to cash out now.  We intend to hold.

[Khan]

So...

It's happening. The crash. Mt Gox is dead. Bitcoin is down 20% on the other exchanges.
http://coinmarketcap.com/
http://buttcoin.org/extended-dormancy-mt-gox-erupts
http://www.scribd.com/doc/209050732/MtGox-Situation-Crisis-Strategy-Draft

[oddients]

So you're saying...Bitcoins are on sale!

[Khan]

So you're saying...Bitcoins are on sale!

Sure... that's exactly what I'm saying.

Speaking of saying, you need air to speak, would you like to buy some off me?

[Daley]

So...

It's happening. The crash. Mt Gox is dead. Bitcoin is down 20% on the other exchanges.
http://coinmarketcap.com/
http://buttcoin.org/extended-dormancy-mt-gox-erupts
http://www.scribd.com/doc/209050732/MtGox-Situation-Crisis-Strategy-Draft

But, but... that's UNPOSSIBLE! TEH BITCOINZ IZ FOOTURE OV MONIEZ! *froth froth* WHO COULD HAVE POSSIBLY SEEN THIS COMING!?

Bubble model

Oh, right.

[soccerluvof4]

The air starts coming out the Bitcoin story as one of its leading major exchanges, Mt.Gox, went offline amid fears that it is on the verge of bankruptcy. Always thought this virtual currency was bound to end badly but it still has fans.

[arebelspy]

So you're saying...Bitcoins are on sale!

That's one way to look at it, but you know what they say about trying to catch a falling knife...

[tomq04]

Pretty curious chain of events.  $120-200 i suspect is the floor based on the all time highs of $1200, based purely on looking at year 2000 charts of tech stocks and watching them fall to 10% of their highest valuation.

People like overstock and tigerdirect are still working to bring legitimacy to bitcoin, and I do think kryptocurrency is here to stay, just another bump in the road.

For what it is worth, i'll be buying another chunk come payday, granted my chunks are only $40...so it's all pretty well fun.

[yahui168]

So...

It's happening. The crash. Mt Gox is dead. Bitcoin is down 20% on the other exchanges.
http://coinmarketcap.com/
http://buttcoin.org/extended-dormancy-mt-gox-erupts
http://www.scribd.com/doc/209050732/MtGox-Situation-Crisis-Strategy-Draft

I noticed in the MtGox Situation: Crisis Strategy Draft document, the timeline to transition from Mt. Gox to Gox ends on April 1. Poisson d'avril!

[Rob]

Kind of want to put a very small amount in Bitcoin just so I follow it, where do you guys buy it?

[arebelspy]

Kind of want to put a very small amount in Bitcoin just so I follow it, where do you guys buy it?

You know you can follow it for free, in real time.  Just refresh this website every X*: http://bitcoinity.org/markets

*Month, Week, Day, Hour, Minute, whatever.

Do you also like to put money down so you can follow this board (instead of just looking at it for free):



;)

[Russ]

Do you also like to put money down so you can follow this board (instead of just looking at it for free):

SERIOUS TALK: if anybody does, PM me and we can set something up

[GuitarStv]

P.S. The real reason you want bitcoin is to buy porn without it showing up on your credit card. Admit it, bro. ;P

Hey!  Let's be fair to him.



He may also be jonesin' for some drugs.

[Rob]

Kind of want to put a very small amount in Bitcoin just so I follow it, where do you guys buy it?

You know you can follow it for free, in real time.  Just refresh this website every X*: http://bitcoinity.org/markets

*Month, Week, Day, Hour, Minute, whatever.

Do you also like to put money down so you can follow this board (instead of just looking at it for free):



;)

You know what I mean. Cryptocurrency is interesting and having a small investment (read bet) in it will help me learn more about it than I would as an observer. Right now it's obviously a little bit sketchy so I was curious if others found the process to actualize that way. It's not like I'm going to put 10% of my portfolio in it, I agree that it's not really an investment.

@shadow thanks, I should've read the rest of the thread before asking that question... Was an interesting read back though, turns out arebelspy and I are on a pretty similar page.

[arebelspy]

BitCoin is certainly an interesting case study.  I do hope some cryptocurrency eventually works out.

Someone made an interesting point over in the comments on Slashdot in one of the BitCoin threads a day or two ago.

They said (emphasis added):

The mathematics of bitcoin are sound enough. The issue I have with it is the possibility of hacks.

We all know that most computer systems are insecure. In the past, cracking a computer could only yield things like names, addresses, passwords (hashed and salted, one hopes), confidential files... in short, information. But with Bitcoin, crackers now enjoy the tantalizing possibility of stealing money! That makes Bitcoin exchanges (and, if bitcoin becomes popular, all ordinary PCs with bitcoin wallets) highly attractive hacking targets. So how can we be sure that an exchange won't be hacked? How can we be sure that our PCs won't be hacked? This issue--my inability to know that my coins are secure--has made me reluctant to buy them in the past.

Also, what regulations exist to ensure exchanges are secure? What incentives exist to encourage exchanges to be bulletproof against against hacks (or scams / social engineering)? And finally, how can we know that the exchange itself is entirely legitimate?

And by the way, I'm sure conventional large banks and financial institutions occasionally have hacks too, which reminds me of another difference between bitcoin and traditional money management. The difference is that you can mostly trust traditional institutions to compensate customers for any funds stolen from customer accounts (as long as it wasn't blatantly the customer's fault). To what extent is this assurance available in the bitcoin world?

Lots to consider.  Fun though.  :)

[soccerluvof4]

Major bitcoin exchange seeks bankruptcy protection. Bitcoin exchange Mt. Gox has filed for bankruptcy protection with debts of ¥6.5B ($63.6M) and said it may have lost 850,000 bitcoins because of hacking. Mt. Gox's liabilities are well above its total assets of ¥3.84B. Bitcoin was -3.1% at $558.68 at the time of writing.

[GuitarStv]

Shocking.  A company created to trade nerd cards was somehow unprepared to deal with the intricacies of a digital currency.

[soccerluvof4]

^+1  My Sentiments exactly!

[arebelspy]

Today's C&H is relevant:

[MustachianAccountant]

Major bitcoin exchange seeks bankruptcy protection. Bitcoin exchange Mt. Gox has filed for bankruptcy protection with debts of ¥6.5B ($63.6M) and said it may have lost 850,000 bitcoins because of hacking. Mt. Gox's liabilities are well above its total assets of ¥3.84B. Bitcoin was -3.1% at $558.68 at the time of writing.

A few of you have mentioned Mt. Gox already, but I thought this pinpoints the problems with any cryptocurrency:
"Customers of the bitcoin exchange may have little chance of recovering their funds if they prove to be missing, legal and regulatory experts said. Clients could file lawsuits, claiming negligence or breach of contract, but the virtual currency is subject to very little regulatory oversight and no government guarantees."
http://www.reuters.com/article/2014/02/27/us-bitcoin-legal-idUSBREA1Q07U20140227

Caveat Emptor....

[soccerluvof4]

Today's C&H is relevant:

haha!!! love it!!

More on Bitcoin:

http://www.marketwatch.com/story/are-bitcoins-just-two-bit-tulips-2014-02-28?dist=lcountdown

[mobilisinmobili]

Bitcoin could be a fun dabble, but it's still way too unregulated / unstable for me to want to dump any serious funds into it. It's like the black market ... can it be profitable ? Sure!

Is it where I want my retirement money? Noooo.

[Spork]

another one bites the dust:  http://www.theregister.co.uk/2014/03/04/bitcoin_bank_flexcoin_shuts_down_after_hackers_strike/


and... unsure what exactly the reasons are (or if it is really Bitcoin related), but First Meta CEO committed suicide:  http://www.nydailynews.com/news/world/bitcoin-ceo-found-dead-singapore-apparent-suicide-article-1.1711585

[Rich M]

Okay.  Since I started this thread, I decided to investigate further into the crypto-currency world for the entertainment purposes and education.

Here is what I did.

I looked at what crypto-currencies are around and their rank in popularity.  Bitcoin is of course the top dog but next besides some odd one is litecoin.  As you go down the popular ones, there is dogecoin (Seems popular on Reddit) and since I live in the newly legal marijuana state of Colorado, there is potcoin-not even on the lists.

I just happen to have a smoking Radeon video card that is high on the list for mining scrypt-type cyrpto currencies--No really, I got it before the craze to play the portal game, and not mine coins.  It doesn't work for bitcoin, but the rest mentioned above, it's a great miner.  Thus, I downloaded the mining software and mined me some currency for all of the above just to see what it was, how long it took and what I got in the end.

The process was easy in getting a wallet.  You download it, sync it and you get an address to accept coin.

The mining was almost as easy.  You download a program. In my case it is cgminer.  You run it with some parameters for your video card and join a pool.  A pool is necessary if you want to have a good chance of getting coin in the short run.  You run your miner that sends results to your pool and you get your fraction of coin every day or so.  You can mine solo and get a huge payout if you find a block but the odds generally make payouts in hundreds of days.  If you ever studied probability, you will find that it might be 1 day, 100 days, 1000 days or 10000 days with these kinds of odds.  Unless you have supercomputer power, It's better to pool.  Remember electricity is not free so you can't just add more computational power without penalty.

Nothing too exciting in the end.  With my hardware, and if I could  buy products with these coins, I could generate $600/year(at the current odds) after electricity so I couldn't make a living on it.  But I did make a paper profit. My best bet might be convert my tens of dollars of currency to dollars which I'm looking at doing.  I could spend $600 for a video card to generate me another $600 of profit but as you can see you are at best break even.  Newegg is selling their video cards at a premium due to this. And the specialized hardware companies are also.  Makes sense since if you could make more money using the hardware, you would, rather than selling it.

But one thing I have learned is that there is definitely a craze at hand and as more people mine the coins, the difficulty goes up--I have seen litecoin double in difficulty in the past month.  So if you are making say $5 a day on a coin, in six months, you might likely be making $0.50 a day.  Which means either the coin value has to increase or you have to have better hardware like the people jumping into it.  It seems this is more about the companies selling the shovels to the miners making the real money over the miners. 

....., I'm still trying to see where the brothels fit in here.  ;)

PS: as far as a money concept.  If it wasn't for the exchange fees from dollars and price volatility, crypto-currencies are a great idea.

[warfreak2]

PS: as far as a money concept.  If it wasn't for the exchange fees from dollars and price volatility, crypto-currencies are a great idea.

What I would prefer is if we could cryptographically trade in the currencies we already use, without centralised payment networks and high transaction fees, and without a "let's buy a million GPUs and leave them running 24/7" arms race.

Creating a new currency seems mainly to pander to the "the Fed prints toilet paper" and "I keep gold in my nuclear bunker" crowds. In practice, the vast majority of people are deterred from trading in a currency other than the one they already use.

[arebelspy]

[Ipodius]

Some quick feedback on my mining adventures. I started mining in December with $1000 worth of hardware, and I've spent $420 on electricity. Currently my Bitcoin is worth $1200, and the hardware I have I could sell for $800 (I got the hardware at cost through my business, and got some hardware for free). So I've made a profit, but not a huge profit.

I need to run the numbers again, but from what I can see this month will be the first month that my miners don't earn enough bitcoin to cover electricity & a notional "repayment" (IE, return on capital) on the hardware. IE, if I keep mining I'm losing money. And at the current rate, I think next month I wouldn't even cover electricity costs alone, let alone a return on the hardware. So, assuming my rough math is correct, I'm going to sell the hardware.

I haven't lost money (and would have no risk if I sell all my Bitcoin now) - however I'll probably just sell the hardware and keep the Bitcoin as a ridiculously risky investment / speculation / gamble.

My initial suspicions where confirmed - I broke even and made a small profit, but only because I could get hardware at cost and had some components lying around already. Purely as a hustle it's made no sense, but viewing it more as a cost neutral hobby it's been worth it.

[arebelspy]

Curious on the environmental impact - how much electricity was wastedused in the last 6 months?

My initial suspicions where confirmed - I broke even and made a small profit

Only if you sell now, right?  Now you're moving to speculation, where you could lose or make money?

Or do you have enough to sell and break even, and still a good chunk to speculate?

[Cassie]

In the last year the 10 of us who invested together have made quite a bit of $.  Also you have to upgrade your hardware otherwise you can not keep up with the faster miners. We are still using our old machines but have bought some incredibly fast machines with our profits so did not cost us anything.  Everyone invested small amounts to start with.  Also Bitcoin has approval to go on the New York Stock Exchange & Nasdaq before the end of this year.  I can't remember the particulars but my son was telling me that once it goes on these places you will no longer need a secure wallet to hold it, etc. It will be totally different.

[Ipodius]

RE the electricity - they used about $420 worth of power (4200kwh) over six months. So there definitely is a environmental impact. I've heard arguments on both sides (that it's either a complete waste of power, or that Bitcoin based payments are more environmentally friendly than other alternatives) - don't know enough to say either way.     

Curious on the environmental impact - how much electricity was wastedused in the last 6 months?

My initial suspicions where confirmed - I broke even and made a small profit

Only if you sell now, right?  Now you're moving to speculation, where you could lose or make money?

Or do you have enough to sell and break even, and still a good chunk to speculate?

I made enough that if I sold now, I'd need to sell half my bitcoin + the hardware to cover my costs to date. But I'll probably keep all my bitcoin, so I'm speculating either way :P

[shawn77777]

been reading up on this and thinking about buying a few...

[arebelspy]

been reading up on this and thinking about buying a few...

Why?

[Daley]

Since the thread has been resurrected by someone else, I no longer feel guilty about necroposting so I'm adding this...

Thoroughly stolen from Joshua Fruhlinger, The Comics Curmudgeon on March 30, 2015:

Barney Google and Snuffy Smith, 3/30/15



Hey, are you vaguely aware of bitcoin, the distributed cryptocurrency that very few people care about but the ones who do care about it care about it a lot and won’t shut up about it? Were you wondering when it would stop being a thing? Well, good news, it’s a punchline in Snuffy Smith, so I’m pretty sure it’s officially not a thing anymore.

[Cassie]

WE sold all our video cards from our old machines because they were no longer profitable. They were too slow.  Our newer machine is still mining. Overall we have still made plenty of $.

[arebelspy]

WE sold all our video cards from our old machines because they were no longer profitable. They were too slow.  Our newer machine is still mining. Overall we have still made plenty of $.

As we said above, mining can make money, but selling it into a stable currency is the only "investment" part of it.. the rest is speculation, and if you're just mining and holding BTC, you're gambling.  And losing, based on the trend on how it's been going for well over a year.

[Cassie]

It has been very worthwhile for our group. However, it involves a fair amount of work on my son's part to mine, buy, hold, sell, etc between different coins & at the right time. Everyone in our group is satisfied with the outcome.

[ascZend]

I remember first reading about Bitcoin back in 2008 and 2009 and thinking it was a novel idea, but would never receive mainstream popularity and take off.  I remember when they could be purchased for a few pennies.  I had entertained the idea of mining or trading for them (especially after they skyrocketed in value in late 2013), but I never did.  Obviously prices have dropped quite a bit since. 

I don't know if it's still worth speculating on for those who do not currently own BTC.  Mining seems like an unprofitable and wasteful venture at this juncture, and trading is just so volatile.

[Cassie]

With our super fast machine mining continues to be profitable. The old machines not so much so we sold the cards. I would never advise someone to invest a ton of $ but everyone in our group invested a small amount that they would be fine with losing.  People lose $ in investments all the time so this is no different. However, our group was formed a few years ago & we continue to do well.

[Syonyk]

I made a good chunk of change a few years ago selling bitcoin mining hardware.  For those familiar with such things, it was during the era when FPGA miners were no longer being sold because Butterfly Labs was going to release the first ASIC Miners, which were Totally Going to be AWESOME, in Two Weeks(TM).  Well, I mean, Two Weeks(TM) from now.  Or, from two weeks.  Anyway, realllly soon, just hold on a little bit longer, and... Two More Weeks(TM).

Etc.

So I found myself a big batch of FPGA miners (some ModMiner Quads, some of the ZTEX 1.15y clones with the side tabs, if you know the history there), and sold them for pretty well obscene markups.  It was quite profitable for me.  And I mined a bunch with about half the cards, turned a nice profit there, and then sold them after the ASICs took solid hold for about what I paid (I think they went to people doing Monte Carlo simulations & other math related work - not mining).

It's been doing a great job following the gold rush pattern.  We're well into industrial mining.

Though, I do know a guy with a bunch of solar, and instead of his load banks being resistive heating elements, he's got a bunch of older bitcoin miners he turns on and off as needed.  His area won't let him do net metering, so if he has a surplus of power, he has to do something with it (his panels apparently don't like running unloaded), and he mines with the surplus.

[dragoncar]

Since the thread has been resurrected by someone else, I no longer feel guilty about necroposting so I'm adding this...

Thoroughly stolen from Joshua Fruhlinger, The Comics Curmudgeon on March 30, 2015:

Barney Google and Snuffy Smith, 3/30/15



Hey, are you vaguely aware of bitcoin, the distributed cryptocurrency that very few people care about but the ones who do care about it care about it a lot and won’t shut up about it? Were you wondering when it would stop being a thing? Well, good news, it’s a punchline in Snuffy Smith, so I’m pretty sure it’s officially not a thing anymore.

I'm embarrassed to say this but.... I don't get it :-(