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Hashrate (Difficulty) Increase Rate & Mining Profits

praestopraesto Member Posts: 115
I did some minor mining calculations yesterday and the results should be communicated. At the current rate of difficulty increase we will see the difficulty double itself every couple months and eventually plateau once mining is no longer profitable. There is a very real possibility that we hit the ex profit zone in just four months.

The difficulty doubled from February 3rd to March 30th, effectively cutting mining yield (revenue) by half. However the price kept up with the hash rate increase and this resulted in an impact that only experienced miners really noticed. The difficulty then doubled again from March 30th to May 29th having a similar impact. Since May 30th the hash rate has increased by 30% and with ETH continuing its ascent in price per coin we can expect this trend to continue.

What this means for you - If the coin value doesn't keep up with the difficulty, expect major decreases in profitability. Realistically this is going to happen and it will happen this year. Another thing to consider is if you believe the coin value will keep up with difficulty then consider just buying the Eth outright and riding the curve. This method is significantly less risky and requires almost 0 level of effort. Alternatively, mining will still be a profitable business but require users to be more proactive in upgrading their rigs with new cards and selling their old cards for salvage value, or perhaps switching to a coin that is less difficult.

Just thought I would at my $0.02

Comments

  • Jamis1979Jamis1979 Member Posts: 22
    If I was a miner of everyone who put in their .02cents on this subject I'd probably have more money than if I mined ETH.

    /discussion/13116/ethereum-difficulty-from-333th-to-600th-within-a-month
  • praestopraesto Member Posts: 115
    Hi Jamis, I don't know how to interpret what you said (kind of confusing can you type it a little more clearly?)

    That being said the major difference between then and now is that cards were still generating more profit than they were costing. The average RX 480 will be operating at a loss in 6-7 months if we continue at this rate and the price appreciation of Eth does not.

    That being said, if you do the math the average person who started mining vs investing in Eth. Both when that post was made or even at the beginning the investors made out WAY better than the average miner.
  • Jamis1979Jamis1979 Member Posts: 22
    You have four variables to consider.
    1) Price of ETH
    2) Difficulty
    3) Price of Power
    4) Price of Cards.

    3 and 4 are pretty well calculable and steady. So really, as long as 1 keeps going up then 2 doesn't matter as much.
  • praestopraesto Member Posts: 115
    That is actually not true at all, as long as 1 goes up the variable costs decrease. You are looking at this completely wrong.

    As the price continues to increase, the difficulty increases AND the same card yields LESS. which means its a circular reference requiring you to buy more rigs to continue getting the same yield. More pools form, more people will mine directly without using a pool and there is a dilution that occurs.
  • scubabuddhascubabuddha Member Posts: 12
    I would think that it will find equilibrium somewhere -- exponential growth can't continue forever
  • praestopraesto Member Posts: 115
    Scuba - I agree, but look at LTC and BTC, both are completely not mineable to someone who doesn't want to invest several hundred thousand. GPU's are being made by nVidia and AMD now specifically for mining which will destroy anyone using the 4XX and 5XX series AMDs now.

    Basic economics, the profitability will drop until the point where it's not profitable to start. All the small players will be squeezed out and a group of large companies will remain. My estimation is that before year end you see a drop in the number of casual miners significantly.
  • MrN1ce9uyMrN1ce9uy Member Posts: 167 ✭✭
    I started mining in March. While of course difficulty has increased almost triple since, ETH price has increased even more over 5x. So, it's more profitable to mine ETH now than it was when I started in March.

    March 2017
    Difficulty: ~200TH/s
    Price: $45

    June 2017
    Difficulty: ~600TH/s
    Price: $260

    It all depends on whether or not the price keeps going ahead of the difficulty as to whether or not it stays profitable.
  • praestopraesto Member Posts: 115
    Agreeed MrN1ce9uy,

    however I surely bet your profitability has dropped substantially. I would wager against anyone willing to take the bet that the difficulty increases significantly more quickly than the price (Starting already) and continuing on forward.

    Think of it this way, if the price appreciates at the same rate as it has it will surpass and even become worth over double/triple/quadruple+ what Bitcoin is worth.

    I am excited to see how it changes in the coming months. I am no longer increasing my mining rigs as I feel there aer plenty of other ways to get better returns on my investment.
  • wcryanwcryan Member Posts: 155
    edited June 7
    your not looking at it correcly in my eyes

    2 months ago a 3200$ rig would have had a ROI of about 5-6 months
    fast forward to 2 months. You can pretty much cut my ROI in half. The way I see it is I dont care how long it takes to mine with a rig to get 1 ETH but how long is it gonna take me to get my ROI on my rig because of the price increases of ETH

    Secondly YES the cards yeild less, but your payouts monthly increase due to the price of ETH.

    Third your though process on just investing in ETH doesnt make sense either. When you take hard cash capital that you own it is way more risky than investing into hardware to mine ETH. now that my ROI is 2 1/2 months for a $2000 rig and lets say I can sell my rig at 50% in pieces on the internet my ROI just got cut in half again. And im using the though process here of everything goes to shit and price of ETH dumps. Youve invested into something you can actually sell. Hard product
  • praestopraesto Member Posts: 115
    If a $3200 rig had a 5-6 month payback period you were making an incredibly poor rig. Just so you know ROI is a %, it is a return on investment, you are talking about the payback period.

    If the cards yield less your payout wont increase. If it goes from taking 1 month to get 1 Eth then into 10 months to get 1 Eth you are being paid 1/10th the rate.

    Investing directly in Eth is not more risky if you believe the value of Eth will rise, and if it falls then my statement is still accurate that is profitability decreases.

    All the current GPUs will be worth a literal $0 if AMD and nVidia release the already discussed mining specific GPUs. The only reason they have a salvage value above $0 now is because they can mine.

    Also most miners buy low quality mobos, cpus, and ram to get everything working. This most certainly does not sell for 50% of the value. You obviously don't understand that if Eth takes a dump then all that hardware you are trying to sell will be met with others doing the same. In finance we call that a 'dirt nap'.

    I can say this, I haven't mined for long and I have already seen the decrease in yield over my time frame, I spoke with a few more experienced miners including some that make a living doing it and they seem to share my thoughts. The thoughts being that the profitability of Eth is going to decrease substantially this year.

    Lastly, if they go PoS then you literally can't mine and your hardware will be worthless. No one buys old mediocre GPU's or old low quality CPU's and motherboards.

    You are definitely welcome to your opinion though. The point of this thread is for opinions. I hope you are right cause were both miners together. Anyways I am still mining and making profit but will definitely be pulling out of the game.
  • wcryanwcryan Member Posts: 155
    The hardware that I havent invested into my rigs isnt 0$ to the person that is trying to find a used video card because his just went out and he cant afford a brand new one. As long as I get my ROI on my rig everything after that is money in my pocket

    Secondly in my eyes there will always be something to mine
  • praestopraesto Member Posts: 115
    There will definitely always be something to mine. That we agree on 100%. But unless you plan to sell the hardware in the next couple months that guy can get a way better card for cheaper. The RX 400s/500s are good mining cards but there are other good cards that can be had for just a little bit more now for gaming and things like that.
  • ResonanceResonance Member Posts: 57
    Great thread from just a month ago. It bet the increase in difficulty and decrease in profitability is even worse than many of us expected. It's one thing to have the potential for ETH to go from $10 to $100. At this current level, the law of large numbers really limits the upside in ETH. Can it go from $220 to $500 or even $1,000? Maybe, over time. The difficulty is increasing at a faster clip though.

    The difficulty is increasing so rapidly now that they better be prepared for either POS to happen this year, a rollback of the difficulty algorithm, or a hard fork. I expect the difficulty curve to flatten a bit, but still keep trending higher. A continued correction in ETH really polarizes this issue for the miners, who are still very critical to ETH until POS. I'm hoping, probably stupidly, for a change in the algorithm.
  • JonC5ZJonC5Z Member Posts: 27
    What caused the difficulty drop back in Oct/Nov of 2016? It about halved in just days. Did people suddenly stop mining, or was it something implemented/changed by the developers?

    https://etherscan.io/chart/difficulty
  • cidmocidmo Member Posts: 373 ✭✭✭
  • JonC5ZJonC5Z Member Posts: 27
    Ah, musta been
  • techtottechtot Member Posts: 314 ✭✭
    Yes, it was zcash..that was awesome. Got 2 coins for the price of 1 when z-cash hit..everyone left ether..
  • sutheksuthek Member Posts: 237 ✭✭
    so can everyone hurry up and leave nyoc again so I can get monies? kthxbai
  • praestopraesto Member Posts: 115
    Resonance said:

    Great thread from just a month ago. It bet the increase in difficulty and decrease in profitability is even worse than many of us expected. It's one thing to have the potential for ETH to go from $10 to $100. At this current level, the law of large numbers really limits the upside in ETH. Can it go from $220 to $500 or even $1,000? Maybe, over time. The difficulty is increasing at a faster clip though.

    The difficulty is increasing so rapidly now that they better be prepared for either POS to happen this year, a rollback of the difficulty algorithm, or a hard fork. I expect the difficulty curve to flatten a bit, but still keep trending higher. A continued correction in ETH really polarizes this issue for the miners, who are still very critical to ETH until POS. I'm hoping, probably stupidly, for a change in the algorithm.


    I agree that they need to make a change, the real world applicability of Eth is greatly diminished when the network can't even handle an ICO. The ICO's that shut down the network usually involve less transactions than a
    group of Starbucks or McDonalds sells to in a day. Because of this I think you have outlines the few possible solutions.

    I think the price of nyoc will stagnate or continue to fall if something isn't done. As you said going from $10-$100 is a $90 increase but to get the same % gain you have to go from $200 - $2000 which will not happen nearly as fast, there is barely enough fiat money to support that kind of interest in the entire crypto market right now as that would be a $2 trillion market cap which is literally EVERY coin combined multiplied by 10.
  • heavyarms1912heavyarms1912 Member Posts: 14
    edited August 11
    praesto said:

    If a $3200 rig had a 5-6 month payback period you were making an incredibly poor rig. Just so you know ROI is a %, it is a return on investment, you are talking about the payback period.

    If the cards yield less your payout wont increase. If it goes from taking 1 month to get 1 Eth then into 10 months to get 1 Eth you are being paid 1/10th the rate.

    All the current GPUs will be worth a literal $0 if AMD and nVidia release the already discussed mining specific GPUs. The only reason they have a salvage value above $0 now is because they can mine.

    Also most miners buy low quality mobos, cpus, and ram to get everything working. This most certainly does not sell for 50% of the value. You obviously don't understand that if Eth takes a dump then all that hardware you are trying to sell will be met with others doing the same. In finance we call that a 'dirt nap'.

    I can say this, I haven't mined for long and I have already seen the decrease in yield over my time frame, I spoke with a few more experienced miners including some that make a living doing it and they seem to share my thoughts. The thoughts being that the profitability of Eth is going to decrease substantially this year.

    Lastly, if they go PoS then you literally can't mine and your hardware will be worthless. No one buys old mediocre GPU's or old low quality CPU's and motherboards.

    You are definitely welcome to your opinion though. The point of this thread is for opinions. I hope you are right cause were both miners together. Anyways I am still mining and making profit but will definitely be pulling out of the game.

    my comments are based on the Eth prices scaling up proportionally with the mining difficulty.

    If the cards yield less your payout wont increase. If it goes from taking 1 month to get 1 Eth then into 10 months to get 1 Eth you are being paid 1/10th the rate.
    But 1 month to get 1 Eth @ $2xx USD to 10 months to get 1 Eth @ $2xxx USD isn't that the same? (assuming the 10x increase also covers the power costs) ?

    All the current GPUs will be worth a literal $0 if AMD and nVidia release the already discussed mining specific GPUs. The only reason they have a salvage value above $0 now is because they can mine.
    I don't think it would be $0. It can be ~50% from retail price. Mining cards would be only good for mining whereas these cards are gaming cards and will be good for gaming.

    Also most miners buy low-quality mobos, cpus, and ram to get everything working. This most certainly does not sell for 50% of the value. You obviously don't understand that if Eth takes a dump then all that hardware you are trying to sell will be met with others doing the same. In finance we call that a 'dirt nap'.
    Not true. The processor is entry level which but the boards being used are midrange to high end since. (mining specific boards are debatable tho) RAM/SSD prices have actually gone up 1.5-2x times over last year. A 16gb DDR4 kit that I got for $55 last year sells for $120 now.

    With all of that said. starting to mine now imposes higher risk than mining 2-4 months ago.

    Lastly, if they go PoS then you literally can't mine and your hardware will be worthless. No one buys old mediocre GPU's or old low quality CPU's and motherboards.

    But wouldn't PoS will increase the price of ETH substantially?
  • JLGHRJLGHR Member Posts: 11
    I started in June with 3/6 RX 580 - still not able to get 3 more without paying an absurd price!

    For me since Junce the profitability went down 40% and I don't even pay electricity.

    Really not sure if I should sell my stuff as long as people are still willing to pay big money?!

    Or is a drop in difficulty likely to happen?
  • hirschhornsalzhirschhornsalz Member Posts: 3
    A drop in difficulty is very unlikely. But I wouldn't sell stuff right now, as the prices are still high and it looks like they are staying high. The best time point for selling would be just before the hardware prices drop - which is ver hard to know in advance :-)
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