Quote from: Bicknellski on October 17, 2014, 09:32:07 AM

Quote from: gmaxwell on March 06, 2014, 10:45:37 PM

Mining is the process of converting energy into proof-of-work
for the purpose of establishing a tamper-resistant historical
record in Bitcoin.

While mining rewards miners with transaction fees and freshly
created coins, mining is not a magical money making process.
In theory, Mining exists in perfect competition, so mining
profitably can be difficult or even impossible.

Currently the Bitcoin system releases ~3600 BTC per day and
these coins are shared proportionally by the miners according
to their relative hashpowers. As overall hashpower increases
the return per hashpower decreases. In recent times hashpower
has been doubling every month or so.

Many mining companies engage in a practice of selling
"pre-orders" thereby shifting the substantial risks of hardware
development entirely onto their customers. The practice of
preorders also exploits ignorance about the future income
mining will yield: People compute their income as if they
had the hardware today, when it's not scheduled for delivery
until months later...

And then almost every hardware maker has missed their
scheduled deadlines. Because of the rapid growth of hashrate
a weeks delay can mean the difference between a nice profit
and a loss. Many makers have also delivered devices substantially
under spec, many others have been outright scams which have
failed to deliver anything at all.

Some of the most experienced people in Bitcoin have lost out
in these offerings, don't just assume you won't be taken.

Companies which have cost people thousands of coins that
they'll never recover are still operating with impunity,
fueled by a seemingly never ending wave of people eager
to get involved who think that mining is a lower risk
way of obtaining coins.

Hosted mining companies with immediately available hashpower
often sell it at greater than it's expected value and themselves
represent enormous consolidation risks to the Bitcoin ecosystem.

In reality, mining is risky: It's riskier than holding
bitcoins because it's comparatively illiquid, and current
mining hardware is not really useful for any other applications.
These risks are multiplied by the unreliability of hardware companies
and the uncertainty of future mining income. Keep in mind: few
companies disclose how much hardware they are selling to other
people, and many of them roll their profits into buying their
own gear at cost and mining in competition with their investor-customers.

That said I enjoy mining and I would not discourage people
joining in. Mining is essential to the security of Bitcoin.
It's important that mining be widely distributed and especially when people
mine using P2Pool it contributes to keeping Bitcoin decentralized and secure.

Just don't rush in thinking you are going to make a ton of riskless
money. At current retail prices I doubt most hardware available will
break even unless the growth rate slows substantially, which seems
unlikely in the near term. I think the exuberance of miners has
fueled the irresponsibility in hardware companies and driven more
competent and cautious parties out of the market.

It's all our our responsibility to behave sensibly if we want bitcoin
to flourish.

Mining is the base of bitcoin industry.

And based on the calculation, mining is still worth investment.

claytonbat

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