Quote from: ckolivas on October 18, 2014, 11:39:37 AM

Quote from: moss on October 18, 2014, 10:52:57 AM

How low would the price of bitcoin need to fall for mining to be unsustainable for the big mining companies? If the resulting dramatic reduction in network hash caused a corresponding reduction in difficulty, would mining then become sustainable again for the home miner?

It no longer matters what the numbers are. For even if the value of bitcoin would drop to, for example, 1/10th of what it is, it is guaranteed that more than 1/10th of the existing big miners will remain. They will always be at an advantage compared to you, and the investment on their side has already happened so you'll push out the least efficient of the big miners but keep the most efficient of them. If anything, the other way is more likely to bring home miners in, but it will only be a temporary effect which will be offset by yet more big miner investors, and the stakes will be higher than ever. The only chance small miners have is for bitcoin to become small time again, so the value would have to drop to 1/100th or less of what it is, and stay there for an extended period.

Speaking purely from investment terms, it's a curious phenomenon that in the history of bitcoin, you could always convert dollars into more bitcoin than any mining machine you could buy with those dollars would generate over its lifetime, yet people inevitably choose to buy bitcoin miners because of the concept of buying a "money making machine". It is the most expensive and technically challenging way to convert dollars into bitcoin. By far the most money anyone ever made off ASIC hardware are those who purchased avalon generation 1. At bitcoin prices when the avalon was first announced, there is still a chance they'd be better off just having converted their dollars into bitcoin at that time. When the avalon actually arrived they were a steal at 60GH @ 1500$=80BTC but you could not order them any more since they were always preorders (how much is 80BTC worth now?). I think bitcoin was worth less when they made their Avalon preorders so they were much more than 80BTC. They may have been the one exception and ironically the first ASIC ever so they capitalised on the diff at the time.

It's funny because for years people would happily expand/extend their hardware for reasons that had nothing to do with making money, like having the best gaming machine, or the best Mprime or setiathome or folding@home results or whatever. Yet the attraction of bitcoin mining has been that the hardware expansion you've been doing has been in the quest for return on investment. It has clouded people's judgement and brought in a different population of miners compared to the population it grew from. Somehow people lost sight of the fact that bitcoin mining moved from the former group of enthusiasts to a massive money making venture and the former group unintentionally became part of the latter group unwittingly, and then started complaining that they would never make a return on investment (which strictly speaking is incorrect, they mean they would never pay off their hardware). People got caught in the bitcoin mining wave and unintentionally converted from hobbyists to real money investors, and that's the real crime here.

Many thanks for your excellent reply, ck. There's such a rush to buy the latest kit as soon as it comes out that it's really hard not to get swept along with it. The next time I get tempted, I am going to definitely going to re-read your post! Your solo pool is starting to look mighty attractive! Cheers.