This Mining Thing

The mining subject comes up a lot when people discuss Bitcoin. Even now when people first hear of Bitcoin it seems the first thing many do is rush into mining. I try to warn them that mining is a rather precarious business and one that is hard to do profitably. People whose opinions I respect about fiat finance have written about how mining is problematic on a profit perspective and people whose opinions I respect most highly on Bitcoin finance have posted on the problems of securitizing mining investments. I just kind of get tired of seeing n00bs hear about Bitcoin and thinking mining is some magical way to get in Bitcoin. Here's why mining stopped being interesting around the time Bitcoin started getting interesting.

The first problem anyone new to Bitcoin should note about this mining stuff, is that a large portion of the people buying mining equipment and mining securities are acting either completely irrationally or on very incomplete information. Generally every new generation of mining equipment has a narrow window in which it could be kind of profitable and after that hashrate climbs enough that late deliveries might, if they are lucky break even. In the immortal words of one of the IRC bots on freenode's illustrious #bitcoin-assets channel not long after the latest difficulty change:

267731249.48242 | Next Diff in 2009 blocks | Estimated Change: 58.7302% in 5d 18h 5m 3s

And we can see after going up more than 40% in one difficulty adjustment period, difficulty is set to increase still more. It's like the month after Avalon "delivered" and started actually delivering, the distinction between the two is chronicled here.1 History with small variations tends to repeat itself.

We are at the point even where it seems that adversarially related governments are investing in this Bitcoin mining thing as reported by people with better intelligence networks of a voluntary nature than myself. If you want to get Bitcoin these days, and with a minimum of hassle just buy some god damned Bitcoins.23 This mining scene is getting crazy.


  1. This is the second link to Trilema this post and it won't be the last. If you want to get into this Bitcoin deal, a Trilema subscription is a much better investment than any play securities are going to be.  

  2. Yes nominally some sort of relationship between difficulty and price of Bitcoin is supposed to exist, but really you can suppose anything. Supposing without evidence is nothing.  

  3. Yes I do mean god damned in that ideas necessary to civilized Bitcoin commerce go against "faith," "church" and all of that holy roller unjustified certainty jazz.  

2 thoughts on “This Mining Thing

  1. The method you're using to get next difficulty isn't good, because it tooks very few blocks to estimate (2016-2009 = 7!).

    gribble now estimates it at 13%, though it's likely going up. At the start of the period, your best source is ;;estimate: "Next difficulty estimate | 303728842.509 based on data since last change | 341902384.289 based on data for last three days"

    Related.

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