On Feb 7, 2016, at 9:24 AM, jl2...@xbt.hk wrote: > You are making a very naïve 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% >
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).
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