Mining difficulties oh my!

Author's note: This article is part of an ongoing blog about my adventures in the world of alternate currencies.

While writing some of my other articles I kept an eye on my CEX account and noted that there has not been any new mining rewards in at least an hour. The especially annoying part about it is that earlier today I sold off the bulk of my remaining investment Devcoins so that I could purchase another Bitcoin worth of hashing power in an effort to increase my mining revenue.

And then right after I do that I quickly see three instances of block rewards, which were probably still reflecting my previous GHS balance, and then absolutely nothing. Can we say big letdown after a major purchase? Not quite buyer's remorse, but definitely some buyer second guessing going on.

Because I've been burned in several scams, thefts and plain bad investments I tend to think of the worst when there's a change in the norm I've come to expect. On CEX one thing I do expect is numerous and consistent mining rewards. When that's not happening I start wondering if the site is getting hacked or if the owners are in the process of making off with all our funds.

Just like mcxNow, CEX has a trollbox, so I decided to check it and see if I could learn something. Other users were commenting on the long time with no mining rewards. “That's one tough block!” one exclaimed. OK, that makes sense. I remember once the Devcoin blocks were taking forever to open and that delayed the closing of a round in terms of submission deadlines by at least an entire day. I remember it well because I was scrambling to submit as much content as possible with a deadline I figured was hours away but it turned out I had all day, all night, and into the next day to keep submitting articles. In that case I was glad I'd taken advantage of the moments I had because even though the round stretched on, my life did not allow me another opportunity to just write for several hours as it had the day I expected the round to close.

I was relieved about it just being a really tough block, but then I also learned something that didn't make me happy. The difficulty level was going to adjust within the next hour. One user said it was going to increase by 19 percent. I had thought the difficulty level had already been adjusted because it sure looked to me like my mining rewards had really slowed down in the last couple weeks. But I wasn't exactly keeping track of any sort of objective announcement or prediction of when the difficulty levels would increase. Mining difficulty increases sometimes cause the price of GHS to dip and I would have loved to have waited a bit to buy on the dip. But the price of GHS had already been dropping and it looked to me like it was back on the way up when I made my purchase. OK, so there are reasons why I'm not a trading champion, but still, I thought I was getting a reasonably good deal.

I was also seriously hoping to increase my mining revenue for the next month to compensate a bit for my less than stellar Devtome earnings starting yesterday. But instead I get an hour or more of no mining rewards followed by a planned difficulty increase. This leaves me wondering if I'll ever break through the mining glass ceiling.

Mining can feel like beating your head against a wall sometimes. You put more money into it expecting to get more yield, and instead you're just managing to keep up with previous yields because the difficulty level increased yet again. My strategy with mining has been to reinvest any and all merged mined coins and half of the Bitcoin rewards. But I think I need to gain some sort of critical mass of hashing power, enough so that the amount of rewards it kicks off can on its own keep up with and get ahead of the next mining difficulty increase. I don't believe I have that critical mass yet, and I'm not sure how much more I need to acquire in order to achieve it. I remember reading one of the criticisms of CEX which said that the serious miners no longer purchase their hashing power in Gigahashes, but rather in terrahashes, 1,000 GHS at a time. That kind of makes my 150 GHS seem rather puny.

I did learn something interesting the day I was working with joefox to get my NXT wallet working properly. He said that theoretically at least, Bitcoin mining difficulty could decrease. The whole goal of Bitcoin mining from the network perspective is to have one new block opened up every ten minutes on average. If more people join the collective mining pool then the overall mining difficulty has to increase so that more hashing power isn't opening up blocks more frequently. But what if the difficulty increased to the point where a lot of miners decided to stop mining? In that case without a mining difficulty adjustment in the other direction, suddenly there wouldn't be enough hashing power to keep opening a new block every ten minutes. In that case the difficulty level would have to decrease. Given that possibility, it makes sense for someone like me to keep holding onto my hashing power even as the return decreases. I mean, that is one possibility to consider.

I haven't yet decided what I will do in the event that it becomes clear I will never be able to overcome the difficulty increases with the resources I have. The great thing about CEX is that should I decide to quit mining I can simply sell off my GHS and use the Bitcoins for something else–possibly for loaning out on BTCJam. I personally have made no lasting investment in mining hardware and I'm certainly not running my own little mining farm. I do not pay increased electricity costs, and neither my living room nor office looks like a data center. It would be as easy for me to get out of the mining business as it was to get in. And the last two big purchases I made of hashing power were done at the lowest prices I've ever seen. In all likelihood I will be able to recover my investment and then some should the day come when I need to get out.

For now, though, I'm still enjoying it. I looked again at my CEX account and that oh so difficult block got opened and I have earned a few more rewards since the long reward dearth. Reflecting my increase in hashing power the rewards I'm getting now are substantially bigger than what they used to be. I also see some indications that the difficulty level did indeed increase. I'm not sure if that will mean fewer instances of rewards or if it will mean the rewards are smaller per instance or both. There is still so much about mining I do not understand.

I still can't beat the return on investment I get from mining anywhere. For now and the foreseeable future I'm in.

Devtome Writers

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