Quote from: J35st3r on June 05, 2013, 08:04:18 AM

Lovely rant, and the ad hom's were priceless. Can I be your friend, youll be handy in tough places Cheesy

But seriously, I was rather hoping someone would call me out on my math to see where I may have gone wrong. I especially liked OnkelPaul's calculator as is showed I was actually overestimating the ROI (it conformed my existing bias, so cool by me).

To the point, I agree that nethash prediction is the key. And this was the point I was making, that your ROI must take into account changes in difficulty, which are insanely difficult to predict. The 26% per fortnight that I quoted was actually a back-prediction from the 250BTC price to indicate the maximum rate of difficulty increase that would give a positive ROI. It was actually meant as an illustration of the sort of math you'd need to do to justify that investment (and incidentally was wildly over-optimistic as Paul's calculator shows).

I won't concede your point on inflation (or deflation as is the desired outcome for BTC). Here's why. Mining is like a cookie jar. On day one you buy a magic cookie jar. It cost you 100 cookies in the first place (or you may have got your mom to buy it for you using her dollar credit/debit card), but its worth it because its magic. But you can only take out a few cookies cookies every day (that's mining for you). The first day you get to take 16 cookies, yum. But the second day you can only take 8, and on the third you get 4 cookies. Now how many cookies will you eat before you die of old age (allowing fractions of course)? Did you get your 100 cookies back? That's the nub of the difficulty increase argument.

Now your point is that those cookies are rare, rare treats that nobody can bake any more, the recipe is lost. After a few years they are so valuable that you can command almost any price. Luckily your magic cookie jar is still churning out a few crumbs of dust every day, so you're rich. But you'd be so, so much richer if you'd never bought that damn jar in the first place and just kept your 100 cookies in a nice safe cupboard.

Of course if your magic cookie jar had let you take only eight cookies per day, but halved it every week rather than every day, you'd be in profit, but only just. So can you predict what your jar will allow you to take before handing over your cookies?

That was fun, can we do it again? Grin

I mean you pretty much just agreed with me here so I can't really retort. Thanks for I guess admitting your own logical fallacy originally and agreeing with mine? Also, I do like your cookie analogy, but I never disagreed with that point of view. In fact I elaborated on it, and re-explained it. If you actually read Part 2, you saw why Price is an important decision, and why you disregarding it defies the entire core value of this question and Bitcoin as a whole. But from your response you did not, so again, Thank you for another Victory.