From mboxrd@z Thu Jan 1 00:00:00 1970 Return-Path: Received: from smtp1.linuxfoundation.org (smtp1.linux-foundation.org [172.17.192.35]) by mail.linuxfoundation.org (Postfix) with ESMTPS id 3EBB81073 for ; Sun, 7 Feb 2016 17:54:18 +0000 (UTC) X-Greylist: from auto-whitelisted by SQLgrey-1.7.6 Received: from c.mail.sonic.net (c.mail.sonic.net [64.142.111.80]) by smtp1.linuxfoundation.org (Postfix) with ESMTPS id E14CF2F for ; Sun, 7 Feb 2016 17:54:15 +0000 (UTC) Received: from [192.168.1.190] (63.135.62.197.nwinternet.com [63.135.62.197] (may be forged)) (authenticated bits=0) by c.mail.sonic.net (8.15.1/8.15.1) with ESMTPSA id u17HsAvQ005039 (version=TLSv1 cipher=DHE-RSA-AES128-SHA bits=128 verify=NOT); Sun, 7 Feb 2016 09:54:11 -0800 Mime-Version: 1.0 (Mac OS X Mail 7.3 \(1878.6\)) Content-Type: multipart/signed; boundary="Apple-Mail=_AE988D28-38EF-45E5-AFD1-D738F5407771"; protocol="application/pgp-signature"; micalg=pgp-sha512 X-Pgp-Agent: GPGMail 2.5.2 From: Jonathan Toomim In-Reply-To: <22e401d161cc$66af6b50$340e41f0$@xbt.hk> Date: Sun, 7 Feb 2016 09:56:48 -0800 Message-Id: <7D9FA815-D816-4DFD-B96A-469C9051885F@toom.im> References: <1804222.7gVHPiWqto@kiwi> <201602062046.40193.luke@dashjr.org> <20160207151927.GA14750@sapphire.erisian.com.au> <57C403C6-2680-4C3D-8860-E33A525A99D4@toom.im> <22e401d161cc$66af6b50$340e41f0$@xbt.hk> To: jl2012@xbt.hk X-Mailer: Apple Mail (2.1878.6) X-Sonic-CAuth: UmFuZG9tSVYtCkyFrL0fP7ByzaOesUMjcSjMyL2/PJR89OgQTzKL1Xva4tEKMUbieD2N3T5O461WozvUHeRpReZPK9QUFeHa X-Sonic-ID: C;Qo2IysPN5RGi08El14k5kQ== M;mIgOy8PN5RGi08El14k5kQ== X-Sonic-Spam-Details: 1.2/5.0 by cerberusd X-Spam-Status: No, score=-2.6 required=5.0 tests=BAYES_00,HTML_MESSAGE, RCVD_IN_DNSWL_LOW autolearn=ham version=3.3.1 X-Spam-Checker-Version: SpamAssassin 3.3.1 (2010-03-16) on smtp1.linux-foundation.org Cc: Bitcoin Dev , Anthony Towns Subject: Re: [bitcoin-dev] BIP proposal: Increase block size limit to 2 megabytes X-BeenThere: bitcoin-dev@lists.linuxfoundation.org X-Mailman-Version: 2.1.12 Precedence: list List-Id: Bitcoin Development Discussion List-Unsubscribe: , List-Archive: List-Post: List-Help: List-Subscribe: , X-List-Received-Date: Sun, 07 Feb 2016 17:54:18 -0000 --Apple-Mail=_AE988D28-38EF-45E5-AFD1-D738F5407771 Content-Type: multipart/alternative; boundary="Apple-Mail=_61C52ACD-6C96-4CFD-ABBE-366FBD5B6D7E" --Apple-Mail=_61C52ACD-6C96-4CFD-ABBE-366FBD5B6D7E Content-Transfer-Encoding: quoted-printable Content-Type: text/plain; charset=iso-8859-1 On Feb 7, 2016, at 9:24 AM, jl2012@xbt.hk wrote: > You are making a very na=EFve assumption that miners are just looking = for profit for the next second. Instead, they would try to optimize = their short term and long term ROI. It is also well known that some = miners would mine at a loss, even not for ideological reasons, if they = believe that their action is beneficial to the network and will provide = long term ROI. It happened after the last halving in 2012. Without any = immediate price appreciation, the hashing rate decreased by only less = than 10% >=20 In 2012, revenue dropped by about 50% instantaneously. That does not = mean that profitability became negative. The difficulty at the time of the halving was about 3M. The exchange = rate was about $12. A common miner at the time was the Radeon 6970, = which performed about 350 Mh/s on 200 W for about 1.75 Mh/J. A computer = with 4 6970s would use about 1 kW of power, once AC/DC losses and CPU = overhead are taken into account. This 1 kW rig would have earned about = $0.22/kWh before the halving, and $0.11/kWh after the halving. Since = it's not hard to find electricity cheaper than $0.11/kWh, the hashrate = didn't drop much. It's a common misconception that the mining hashrate increases until an = equilibrium is reached, and nobody is making a profit any longer. = However, this is not true. The hashrate stops increasing when the = expected operating profit over a reasonable time frame is no longer = greater than the hardware cost, not when the operating profit approaches = zero. For example, an S7 right now costs a little over $1000. If I don't = expect to earn more than $1000 in operating profit over the next year or = two with an S7, then I won't buy one. Right now, an S7 earns about $190/month and costs about $60/month to = operate, for a profit of $120/month. After the halving, revenue would = drop to $95/month (or less, depending on difficulty and exchange rate), = leaving profit at about $35/month. The $120/month profit is good enough = motivation to buy hardware now, and the $35/month would be good enough = motivation to keep running hardware after the halving. I know in advance when the halvings are coming. There's going to be one = in about 5 months, for example. I'm going to stop buying miners before = the halving even if they're very profitable for a month because I don't = want to be stuck with hardware that won't reach 100% return on = investment (ROI). --Apple-Mail=_61C52ACD-6C96-4CFD-ABBE-366FBD5B6D7E Content-Transfer-Encoding: quoted-printable Content-Type: text/html; charset=iso-8859-1
On Feb 7, 2016, at 9:24 AM, jl2012@xbt.hk = wrote:

You are making a very na=EFve = assumption that miners are just looking for profit for the next second. = Instead, they would try to optimize their short term and long term ROI. = It is also well known that some miners would mine at a loss, even not = for ideological reasons, if they believe that their action is beneficial = to the network and will provide long term ROI. It happened after the = last halving in 2012. Without any immediate price appreciation, the = hashing rate decreased by only less than = 10%


I= n 2012, revenue dropped by about 50% instantaneously. That does not mean = that profitability became = negative. 

The difficulty at = the time of the halving was about 3M. The exchange rate was about $12. A = common miner at the time was the Radeon 6970, which performed about 350 = Mh/s on 200 W for about 1.75 Mh/J. A computer with 4 6970s would use = about 1 kW of power, once AC/DC losses and CPU overhead are taken into = account. This 1 kW rig would have earned about $0.22/kWh before the = halving, and $0.11/kWh after the halving. Since it's not hard to find = electricity cheaper than $0.11/kWh, the hashrate didn't drop = much.

It's a common = misconception that the mining hashrate increases until an equilibrium is = reached, and nobody is making a profit any longer. However, this is not = true. The hashrate stops increasing when the expected operating profit = over a reasonable time frame is no longer greater than the hardware = cost, not when the operating profit approaches zero. For example, an S7 = right now costs a little over $1000. If I don't expect to earn more than = $1000 in operating profit over the next year or two with an S7, then I = won't buy one.

Right now, an S7 earns about = $190/month and costs about $60/month to operate, for a profit of = $120/month. After the halving, revenue would drop to $95/month (or less, = depending on difficulty and exchange rate), leaving profit at about = $35/month. The $120/month profit is good enough motivation to buy = hardware now, and the $35/month would be good enough motivation to keep = running hardware after the halving.

I know in = advance when the halvings are coming. There's going to be one in = about 5 months, for example. I'm going to stop buying miners before the = halving even if they're very profitable for a month because I don't want = to be stuck with hardware that won't reach 100% return on investment = (ROI).


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