Prohashing Mining Pool Forums

Hi,

Can anyone confirm/correct my understanding please?

I understand that the Litecoin difficulty is based on the network hash rate. So, as the rate of work increases (additional or better miners coming online) the difficulty rate increases (or decreases if the hash rate goes down). This doesn't have an intrinsic link to the Litecoin price - as in, a network difficulty increase doesn't necessarily make a change to the exchange rate for the coin and vice-versa.

So - if the difficulty rate doubled over the next 12 months (for arguments sake) and the price of Litecoin stayed the same, would I be right in saying that the profitability of mining would halve (assuming other costs remain static) ?

So just two of the risks to mining; the value of the currency could fall and the network difficulty could increase meaning that a rig would produce less coins. Either could happen, or worse case, both could happen.

On the flip side, the reward from mining increases if Litecoin rises in value faster than the network rate.

Does all that sound roughly correct, or have I got it completely wrong?

Thanks in advance

Ian

That pretty much sums it up.
Another risk, which we saw a few weeks ago on BCC, if a coin can be disrupted enough that it is forced to leave the network or change its proof type then instantly the hashing power on that coin gets dumped to the next best coin and can flood it instantly. Is covered under the difficulty rising, but to me thats a special case...sorta call it a flash crash. It didn't smoke and smolder and think about burning out slowly over a day or a week.
It was there one day...and 4 hours into the next day...POOF it was gone, just like that, unusable.

Hi AppleMiner,

Thanks for confirming that I've mostly understood and for reminding me of other potential dangers. I'm guessing this is one of the advantages of Prohashing - not all eggs in one basket - in terms of volatility.

I've got my two L3+'s running now - I just need to decide if I want to gamble and buy a few more. I'd just like a quick jump in a time machine to go forward 12 months to see what's going to happen - that would make it all much easier

Thanks again

Ian