Bitcoin Currency Inflation Rate Will Drop 50% Next Year
Every bitcoin in existance first passes through the hands of a Bitcoin Miner.
That is how the currency is issued.
Today the targeted rate that bitcoins are issued occurs at a level of about 7,200 new bitcoins per day — calculated using the 50 BTC per block and blocks solved about once every 10 minutes.
That level will be changing in about a year though when the block award drops in half from 50 to just 25 BTC per block.
For the bitcoin currency itself, that drop has been known since its inception and would already be priced into the exchange rates. To miners, however, that drop will be felt suddenly. One day the income that each Ghash/s earns will be at one level, and the next day that revenue will drop 50%.
There are some miners who plan to shut down and some will liquidate even once the block reward drop occurs once block 210,000 is reached — an event that will occur perhaps as early as November or possibly as late as January 2013.
The difficulty level will adjust shortly after miners drop out but with the equipment representing an investment in time as well as money, many miners generally need to feel the pain in the form of electric bills exceeding revenues before they capitulate. At the same time, there will always be a chance that the exchange rate will climb enough to compensate for the decline in the supply of new coins.
Attempting to predict Bitcoin twelve months out is particularly difficult as this is the first block reward drop — something that will occur just once about every four years.
Anyone evaluating whether or not to buy a mining rig or to add capacity to an existing mining operation today should be keeping this block reward drop in mind in the decision process.
Anonymous asked: Hello, my friend and I are thinking about investing in a small mining operation. I realize things are slow right now what with the exchanges, but we're patient and feel that prices will go up again. As what I read varies from post to post, and opinions on tech change so quickly, I ask you--if you were to build a basic rig right now for 500-1000 dollars, what would you use? I realize every beginner might ask, but it's good to have a fresh answer.
realize things are slow right now what with the exchanges, but we’re patient
Slow? That is an understatement. The revenue from mining is now for nearly all miners below the cost of their electricity. That means it is cheaper to purchase bitcoins at market than it is to mine them — assuming you are paying for electricity.
Put more clearly — mining at the current price levels is currently a money-losing proposition for nearly all participants. Adding hardware at this time for economic reasons is purely a speculative play.
if you were to build a basic rig right now for 500-1000 dollars, what would you use
There are those with access to capital and technical skill who will add capacity when profits return. They then enjoy economies of scale that aren’t obtained by individual owner/operators. A “small mining operation” is no longer single low-end PC and instead now refers to a rack of rigs perhaps.
What you are describing is a hobby box. And with most hobbies, all you are likely to get out of it is some entertainment or an opportunity to learn. if you don’t mind contributing your time and money to achieve those ends for this hobby, then by all means proceed.
As far as specific hardware, why not look for a rig being sold by a miner that is liquidating at a discount. There are plenty to be found.
Anonymous asked: hey there, i have a dedicated server and I am thinking about doing some mining, but I am curious what the "mining" really is? Are you processing algorithms in order to generate coins for your self? Or are you getting paid to process things for others?
What is Mining? The short answer: Miners perform computations that enable Bitcoin to be a decentralized currency system that does not rely on a master node or other authority. The long answer is on the Bitcoin wiki.
The incentive to the miner comes in the form of issuance of a small amount of digital currency. That currency received by the miner can be used to make purchases or it can be exchanged for other funds through an exchange.
As far as using a dedicated server … you may wish to reconsider. Unless it has a GPU you will be wasting your time and electricity.