Quote from: thef on August 27, 2013, 11:16:14 PM

Quote from: the joint on August 27, 2013, 07:00:32 PM

It's true I made a generalized statement, and of course you can always make a poor hardware purchasing decision. Some purchases are dead right from the get go, and sometimes people just flat out overpay for things. However, acting within the right time frame, I think expecting 66% resale value for an ASIC isn't unrealistic.

However, the value of an ASIC is not "purely" determined by the BTC it generates because the value of an ASIC in terms if btc is mediated by fiat conversion rates. If I spend $1000 on an ASIC that makes 0.1 btc per month, it's a good decision if the value of btc is $10,000. It's better to receive 0.1 btc valued at $1000 than to receive 1 btc valued at $100. Of course, if the price of btc drops, then the profitability of the miners also drops. What I'm saying is that, given a reasonable purchase price, purchasing a miner with fiat may incur less loss than using that fiat to purchase btc.

Of course, the exchange rate also affects the dollar amount you can receive by reselling your equipment. What I meant was that there is no floor to the resale value of your mining equipment. With GPUs, people will always buy them to game, so you could always count on recouping at least that much. If bitcoin dies, ASICs become worthless.

Also, you would have to sell very quickly to get 66% of what you paid back when you sell your ASIC. If you assume that difficulty increases 20% forever, then you would need to sell after 3 weeks to get 66% back in a rational market. Obviously, difficulty isn't going to increase like that forever but it will continue that way for a long time and by then, you will be barely making anything so the calculations should result in a similar result.

Quote from: the joint on August 27, 2013, 07:00:32 PM

So two general mathematical statements representing my point might be:

1) If btc price drops, buying btc < purchasing miner with fiat < do nothing
2) if btc price rises, do nothing < purchasing miner with fiat < buying btc

This is a possible scenario but unlikely. Most of the time, either buying the miner is better or it isn't regardless of the price of btc. You can estimate your return on the miner as the amount of btc mined and the amount of btc it will mine in the future, which should be equal to the resale value. If this amount of btc is greater than the amount you could have received by purchasing btc directly, then it will be the better option no matter what the exchange rate is.

The only way this changes when the btc price goes down is that the amount of btc you expect to mine in the future to increase. If btc crashes, less people will order miners and future difficulty won't be as high so you can mine more btc that are worth less. However, the effect of this is very small because most of the btc a miner will make in its lifetime will probably happen in the first few months since the difficulty will continue increasing for a long time.

Even if you end up profiting in terms of fiat because the price increases, that doesn't mean buying mining equipment is a valid choice. If you're offered $100 or $200 and you pick $100, then you will have made a bad decision even though you gain money. If you want to argue that buying mining hardware is a valid option, then either you think you can get such a great deal where a miner can produce more bitcoins than what you can get by buying directly or the small benefit in the event that the btc price decreases is worth the difference. However, I believe that the disadvantages of mining far outweigh this one small advantage.

1. You have to set up the miner and make sure it stays running. Most people run calculations assuming 100% uptime.
2. You receive btc over time rather than all at once. Let's say that some news comes out causing the price to drop. If you bought btc, you could sell them immediately. On the other hand, a large amount of your value is tied up in the resale value of your mining hardware and you can't sell it quickly.

1) Valid point, and although it's totally plausible that Bitcoin will become worthless, the mere fact that I'm even talking about buying miners suggests that I'm assuming Bitcoin will stick around for a while.

2) I can't speak for others, but ongoing math helps me determine a good time to sell, and I can move stuff pretty easily...

3) ...because there are always irrational buyers.

4) I've bought mining hardware on six separate occasions, all at different price points ranging from $4 to $108 with btc value oscillating between purchases (i.e. btc price neither rose continually or declined continually with each subsequent purchase). Four of the six have paid for themselves. One of them appears like it will because those are the erupters, and with the recent btc hike I'm still earning the same amount in fiat as I did last week despite the difficulty adjustment. One hardware purchase will never achieve ROI -- a BFL Little-SC that I sold as a pre-order. Because I purchased with BTC, I lost out on about 30 BTC by the end. If I had purchased that Little-SC with PayPal, I would have about 350% ROI. I agree that if BTC price goes up it's better to buy BTC outright. But I disagree that buying a miner is either better or it's not, at least in the sense that I'm not a fortune teller. Price oscillation changes the variance in profitability between each method, and I think that the way in which it affects that variance can make buying a miner a safer bet (obviously given certain conditions, but I think those conditions are more likely than you'd think).

5) I disagree with the words "no matter what the exchange rate is." If you can sell your equipment at a price such that (selling price + mined btc value) > (fiat purchase price), then you can still profit even if the value of BTC goes down. However, the more BTC value goes down, the less likely this scenario becomes. But, if you purchase BTC directly and the price drops, there is no possibility of ROI unless you wait and hope the price goes back up.

As an example, I think it's entirely reasonable to think that someone could privately purchase a 60 gh/s BFL Single for $3000 today (good for ~23 BTC), mine with it for a month, watch the value of BTC drop to $110, and sell the thing for 22.7 BTC (~$2500, so assuming a $500 depreciation in value in a month). He would have mined between 10-15 BTC during that month, giving him 32.7-37.7 BTC in holdings, or about $3,600-$4,150. If he had purchased BTC from the get go, he would have lost ~$470 (i.e. 3000 - (~23 x 110) = ~470) and would have 23 BTC. Obviously this is a hypothetical scenario, but I think it's just one of many that are plausible and not unlikely.

6) I didn't even take this into consideration, probably because I assumed that I'd have already sold my equipment long before the price breaches any freak-out low resistance level.

7) The fundamental goal of any monetary investment is to at least break even. The name of the game is ROI, and how fast ROI is achieved is influenced by many variables. The analogy of choosing between $100 or $200 is irrelevant because you're assuming $200 already exists. Again, if we know without a doubt that BTC will go up, then buying is always the better option. But right now, $131.57 is the reality and it would have already been to $200, $500, $1000 and beyond if people knew the price was going to go there (they'd buy instantly with this knowledge, and so would you and I). But, were not rushing to our wallets right now because we don't know $200 exists. But, we do know that 1) miners generate daily income x(y) where x is the amount of btc mined per day and y is the fiat conversion rate, and 2) miners can be sold for a varying value, z. Having (xy + z) as part of a known profit formula p = ([(E_(n)-->...xy) + z] - i) can be better than taking your chances on the unknown formula of the market, and unlike when you purchase BTC, you can actually calculate on the fly where you will be in the future.

Cool

In practice, ~~I get about 98% up-time.~~ I get it up all the time.

9) Yep, that would suck.

Edit: Fuck my math notation skills. How would you notate the sum of daily income xy?