[HN Gopher] The problem with Bitcoin miners
___________________________________________________________________
The problem with Bitcoin miners
Author : paulgb
Score : 251 points
Date : 2022-05-15 18:19 UTC (4 hours ago)
(HTM) web link (paulbutler.org)
(TXT) w3m dump (paulbutler.org)
| doomroot wrote:
| TLDR people are throwing capital at mining companies because they
| want traditional financial access to bitcoin gains. Mining
| companies will reach their proper evaluation when a bitcoin spot
| ETF is available to investors.
| zionic wrote:
| While I have heard a myriad of arguments against PoS, my opinion
| is that the ecological benefits alone are worth switching as soon
| as possible. We can continue to iterate on it to improve the
| negative sides, but we can't afford to wait for a "perfect"
| replacement forever while PoW does such extreme harm.
| tylersmith wrote:
| The main feature of PoW over PoS is being completely objective
| and uncensorable. There will always be networks using it
| because of this even when most are using and better off with
| PoS.
| zionic wrote:
| How is PoS easier to censor than PoW, specificity ETH 2.0's
| implementation.
| eldenwrong wrote:
| Vitalik Buterin : stop all trading!! Reverse the chain!
|
| Its okay if we control all the supply because we have it in
| the premine to our friends and they have the best interest
| in keeping Ethereum safe.
| yokem55 wrote:
| Yeah, the most obvious externality of an ethereum validator
| is a few megabits of sustained internet traffic that makes
| it difficult to run on capped internet services. Otherwise
| it is just a matter of being able to buy the eth, setting
| up the node (cheap commodity pc hardware) and putting it in
| a corner in your home.
|
| In contrast for POW you have to be able to source
| specialized hardware and an electricity supply cheap enough
| to make the hardware profitable, both of which are much
| more noticable to the outside world.
| tylersmith wrote:
| The censorship doesn't happen at the network level but at
| the protocol level, by removing a validators stake.
| yokem55 wrote:
| Which would either require an in protocol slashing event
| or a hard fork. In which case the fork with the broadest
| legitamacy would prevail (see the events around the
| Steem/Hive hard fork). Blockchains cannot escape being
| fundamentally social creatures with values and priorities
| and the communities around those chains will ultimately
| have the last word about their operation.
| tylersmith wrote:
| I'm not sure what your point is. Obviously it would
| require a protocol change, and such a change can't be
| done with fungible work.
| tylersmith wrote:
| The first way is that it's subjective; you have to trust
| the initial source of the data to give you the correct
| validator set to use layer. This is a vector for censoring
| some stake.
|
| The second, probably more important way, is that validators
| in PoS can decide to ignore or slash a particular
| validators stake. This can't be done in PoW because the
| hashes are fungible and stake is not.
| rcxdude wrote:
| AFAIK, the PoS in ethereum is structured that it is
| extremely hard to ignore a stake (you're vulnerable to
| slashing if you do), and that you are only vulnerable to
| slashing if you cheat (not if you are merely offline, at
| which point you just forego any rewards). Counteracting
| this requires a similar or greater amount than a PoW
| chain would require for similar effects (where a 51%
| attack can also simply refuse to build off of a
| particular miners blocks, thus effectively stopping their
| reward).
| [deleted]
| henvic wrote:
| > As of writing, there are 1,960,775 bitcoin remaining to be
| mined.
|
| There will be more: https://henvic.dev/posts/bitcoin/#scarcity
|
| They'll find a way to convince more suckers to adopt the
| shitcoin.
| ntoskrnl wrote:
| Sorry, is that link arguing that bitcoin is not scarce because
| each bitcoin can be divided into smaller units?
| smnplk wrote:
| In the future, BTC could be more abundant, because devs in
| bitcoin core can increase the upper limit of max bitcoins
| ever mined.
| mirceal wrote:
| In the future, we will all drink Gatorade and have a
| president wrestler. You see, I can also make stuff up. It
| may also happen! Saw a documentary about this already.
| ntoskrnl wrote:
| Sure, if they also convince every miner, user, and exchange
| on earth to download the fork and agree to the protocol
| change.
|
| That's like saying "in the future the linux kernel could be
| insecure, because the devs could add a keylogger"
| everfree wrote:
| Looks like it is.
|
| If you subdivide something, that doesn't make more of it.
| fredgrott wrote:
| I once explained the same points to someone who use to pop in
| here when his name was mentioned Calacanis when he bought some
| mining rigs several years ago.
|
| You see there are some valid economic reasons why CBOT and
| several other exchanges allow the shorting of bitcoin without
| making those contracts tied to bitcoin.
|
| If any of you want to bet anyway on bitcoin do not buy mining
| rigs, think of it this way it represents a business we all are
| familiar with...
|
| Buy domains to speculate and base the business model paying for
| it on ad revenue off of the websites with each domain name buy.
|
| Its the same dam economic trends and same long term bad result
| jmyeet wrote:
| It blows my mind how well-known all the problems there are with
| crypto and yet it's become so huge _while solving virtually no
| problem other than avoiding laws about the movement of money and
| capital_.
|
| The Bitcoin network in particular uses more electricty than
| Argentina. Defenders will point out that it's majority renewable.
| That's intellectually dishonest because Bitcoin is simply chasing
| cheap power and hydro power is among the cheapest. Bitcoin miners
| will happily use coal if it's sufficiently cheap. Also, use of
| certain renewables comes at the expense of other people. In the
| Hudson Valley, miners have raised the electricty prices for other
| residents in those towns.
|
| Bitcoins transactions consume an enormous amount of electricity.
|
| Defenders will also claim we'll move to Proof of Stake ("PoS")
| over Proof of Waste but this too is a myth. For one, Bitcoin's
| massive computational and electricity waste is key to defending
| the network. I don't know what happens when we run out of coins
| to mine. Also, if it's as simple as that, why haven't we simply
| moved to PoS for everything?
|
| PoS ultimately is a rich-gets-richer scenario is why. It's really
| no different to the Luna anchor stakers getting 20% returns at
| the expense of everyone else who comes along later.
|
| And for all of this waste we get what? Transactions that can only
| be guaranteed if they're entirely contained within the network
| because as soon as you want to include something outside of that
| (eg converting crypto to or from cash) you've just added the same
| trust issue that is intrinsic to every traditional financial
| transaction.
|
| And what fuels this continued mass delusion is the fabric of
| American beliefs that every American is just a temporarily
| embarassed millionaire [1].
|
| [1]; https://www.goodreads.com/quotes/328134-john-steinbeck-
| once-...
| dlubarov wrote:
| > Also, if it's as simple as that, why haven't we simply moved
| to PoS for everything?
|
| More modern blockchains do use PoS for the most part -- Solana,
| Cardano, Polkadot, Cosmos, Avalanche, NEAR, etc. Just Bitcoin
| in particular is unlikely to make such a major change.
|
| > PoS ultimately is a rich-gets-richer scenario is why.
|
| In well-designed PoS systems, anyone can stake (perhaps with
| delegation) and access the same rate of return. If everyone
| stakes, noone is actually getting richer after we adjust for
| dilution.
| ollieglass wrote:
| > solving virtually no problem other than avoiding laws about
| the movement of money and capital
|
| This is a tremendously valuable problem to solve for some.
| jmyeet wrote:
| But at what cost?
|
| This [1] estimates the annual Bitcoin energy consumption at
| 145TWh. If the Bitcoin network were a country it would rank
| 25 in the world by energy consumption [2].
|
| The cost of that electricity is hard to estimate but if you
| use a ballpark of $0.10/kWh that puts the cost of the Bitcoin
| network at almost $15 billion annually _just for the
| electricity_.
|
| [1]: https://ccaf.io/cbeci/index
|
| [2]: https://en.wikipedia.org/wiki/List_of_countries_by_elect
| rici...
| rodgerd wrote:
| Yes, it's certainly provided North Korea with a reliable flow
| of funds for their nuclear weapons program.
| datadata wrote:
| > That's intellectually dishonest because Bitcoin is simply
| chasing cheap power and hydro power is among the cheapest.
| Bitcoin miners will happily use coal if it's sufficiently
| cheap. Also, use of certain renewables comes at the expense of
| other people. In the Hudson Valley, miners have raised the
| electricty prices for other residents in those towns.
|
| If bitcoin miners are chasing cheap power (which I believe they
| are), then it shouldn't be possible for miners to _increase_
| the price of power in a fixed area, as they would immediately
| migrate elsewhere where power is cheaper. You can 't have it
| both ways. Interestingly, the cheapest power is where supply
| completely dwarfs demand. Bitcoin miners should ultimately
| migrate to those areas of stranded power, and thus under
| optimal conditions bitcoin miners shouldn't compete with any
| other buyer of energy-- it would only be efficient to preform
| bitcoin mining for the lowest possible cost of energy where
| there is no other customer. It is largely looking like
| renewables would fit that bill, as the era of low hanging
| fossil fuels is long gone (aside from government subsidies).
| anonymous_sorry wrote:
| >If bitcoin miners are chasing cheap power... then it
| shouldn't be possible for miners to increase the price of
| power in a fixed area, as they would immediately migrate
| elsewhere where power is cheaper.
|
| If that logic were sound, I struggle to see how the price of
| any fungible good could ever increase in response to demand.
| There is some energy price at which the profitability of
| mining becomes marginal. Won't the amount of mining grow
| until all the electricity cheaper than that is being wasted
| calculating hashes?
| datadata wrote:
| Are you sure that energy is a fungible good? Energy is
| neither free to transport, nor is demand for energy
| insensitive to location. If energy were fungible, you
| wouldn't see energy pricing that varies by an order of
| magnitude or more. Something like oil on the other hand is
| quite fungible, but kwh of electricity is not. Note that
| fungibility depends on the user: Bitcoin miners are
| fungible consumers, a house in Hudson Valley is not.
|
| > Won't the amount of mining grow until all the electricity
| cheaper than that is being wasted calculating hashes?
|
| No, there is an upper bound (negating transaction fees,
| which are negligable) in that the cost of the energy used
| will never be larger than the block reward times the
| bitcoin price. There are estimates that this actually isn't
| a large enough market for the situations where bitcoin
| mining is actually a very beneficial consumer in terms of
| environmental concerns-- e.g to consume all of the methane
| flare gas (that would otherwise be burned off).
| rr808 wrote:
| > the cheapest power is where supply completely dwarfs
| demand. Bitcoin miners should ultimately migrate to those
| areas of stranded power
|
| There are lots of other uses for surplus power eg Aluminium
| smelters, desalination plants, decarbonization machines,
| cracking H20.
| datadata wrote:
| Sure, but there are areas where it is not economical to
| actually make use of that power. For example, you could
| place a bitcoin mining solar powered installation in the
| middle of a desert where there would be no need for
| desalinized water and where there is no rail or road access
| needed for something like aluminum smelting. I think the
| evidence of bitcoin mining being powered by methane flare
| gas is irrefutable evidence of that: The methane flare gas
| just been being burned off for decades, it wasn't until
| bitcoin mining that there was a marketable use for this
| energy.
| jmyeet wrote:
| > If bitcoin miners are chasing cheap power ... then it
| shouldn't be possible for miners to increase the price of
| power in a fixed area as they would immediately migrate
| elsewhere where power is cheaper
|
| Um, no. That presumes there is somewhere cheaper to move, for
| one. If powers costs $0.08/kWh in one place and the next best
| option is $0.12/kWh then even if you assume no moving costs
| you've got all that headroom before it even makes sense to
| move.
|
| But consider the concrete example of Pittsburgh [1] (emphasis
| added):
|
| > A few years ago, miners "descended upon" the city of
| Plattsburgh, New York, about a hundred and fifty miles north
| of Albany, which gets much of its electricity from
| hydroelectric dams on the St. Lawrence River. _The power is
| relatively inexpensive, but, once Plattsburgh uses up its
| allotment, it has to purchase more at higher rates_. Bitcoin
| mining drove up the cost of electricity in the city so
| dramatically that, in 2018, Plattsburgh enacted a moratorium
| on new mining operations.
|
| [1]: https://www.newyorker.com/news/daily-comment/why-
| bitcoin-is-...
| datadata wrote:
| > Um, no. That presumes there is somewhere cheaper to move,
| for one.
|
| If you assume this isn't the case, then the original
| comment I was responding to would imply that bitcoin mining
| is raising the price of energy for _the entire world_. At
| 0.5% of global energy consumption, this seems pretty
| unrealistic. The overhead of moving is obviously not zero,
| but my point is mostly that bitcoin miners will in general
| tend to flow to where there is cheaper and less demand for
| electricity. This in general should cause less tension
| between where energy is needed. More modern regulated
| bitcoin miners will generally only exist where there are
| periods of excess power, eg from wind or solar. They will
| often sell to the grid operator the ability to interrupt
| their power when electricity becomes scarce. I completely
| agree that miners shouldn 't be sucking up subsidized hydro
| power, but also that hydro power shouldn't be subsidized in
| the first place.
| hn_throwaway_99 wrote:
| Proof-of-work is so obviously, undeniably, mathematically
| guaranteed to be a crypto dead-end, that I'm gobsmacked we're
| still having discussions like this.
|
| Proof-of-work requires, _by design_ , that the electricity value
| expended on mining is proportional to the _total_ market cap of
| Bitcoin. It 's really just simple arbitrage: if the value of
| Bitcoin goes up, but the electricity cost doesn't, then you have
| essentially 2 different prices for 1 good, which should attract
| more miners to spend more money on electricity. And, indeed, this
| is exactly what has happened.
|
| The problem, of course, is that if it takes an Argentina's worth
| of electricity to run Bitcoin now, how does the world manage if
| Bitcoin has a 10 or 100 times greater market cap? Obviously it
| can't, and world governments would rightly shut it all down
| before the majority of our electric output went to mining BTC.
|
| There is simply no way around this issue if you're on a proof-of-
| work system, and given that, it's so easy to see that BTC is
| _guaranteed_ to fail at some point. It 's like we're on a train
| rushing towards a bridge that's out, and everyone can see the
| bridge is out, but somehow we've convinced a large number of
| people that we'll "jump the gap" when we get there.
| kobieyc wrote:
| Nice straw man, bro.
| paulmd wrote:
| Not only is there no way around it, but it's actually
| impossible to start new networks from scratch based on proof-
| of-stake due to the "nothing at stake" problem. If attackers
| don't care if their stake gets burned (because the value is
| low) then there's no longer an incentive for attackers to
| behave. All new networks _must_ go through a proof-of-work
| stage of evolution.
|
| Further, the existence of proof-of-stake coins _at all_ means
| that decentralized exchanges exist, which makes it impossible
| to ever kill proof-of-work in a legislative sense. Even if you
| killed fiat exchange for $SHITCOIN entirely, once there is a
| coin that has sufficient value, people will be happy to have
| bitcoin instead of USD, or trade to Bitcoin and then over to
| USD. You can either ban them all entirely, or you have to live
| with both PoW and PoS together.
|
| Unfortunately, crypto is a memeplex, it's like a corporation,
| it's a self-reinforcing _living entity_ that supports itself
| (maintains homeostasis) through a series of rules and
| incentives, and now that it 's been created it can't be easily
| killed. Every individual is financially incentivized to keep
| playing their part, so everyone would have to collectively
| agree to not make money by taking part, and as people fall out
| the incentives become steeper and steeper to participate. Would
| you mine on your card for $100 a day? $1000 a day?
|
| We will just have to live with destroying our planet, because
| now that it's been created it's virtually impossible to kill.
| That was the whole point. With apologies to Alien: it's
| biologically engineered to be a survivor... the perfect
| predator (of certain other memeplexes - meaning, states and
| state-backed currencies, which are also self-sustaining
| memeplexes with their own rules and incentives). That was the
| _stated goal of the design_ , and it works! There's no "off
| button", otherwise it would be trivial for "statists" to push
| it. You wanted an unstoppable decentralized cryptopunk future
| with assassination markets, that's exactly what it does. It
| wouldn't be unstoppable if individual or collective action
| (like that of a state or other group of individuals) could stop
| it, and it was designed knowing that people would try to stop
| it. All according to keikaku.
|
| (cue the gif from dr strangelove of general turgidson's
| horrified realization of what he's just said)
| wizzzzzy wrote:
| What I don't understand though is once all bitcoins have been
| mined, doesn't that mean that transaction fees are then also
| required to be proportional to the bitcoin market cap and
| electricity usage value?
| Geee wrote:
| No, fee costs are based on supply and demand of block space.
| It's simple, miners just scoop the highest paying
| transactions into the next block. If there's congestion,
| people pay higher fees to expedite their transactions.
| wizzzzzy wrote:
| Yes but once there's no longer the financial insentive of
| bitcoin rewarded for mining, fees need to have the same
| insentive relative to bitcoin market cap? Otherwise double
| spending becomes the most profitable for miners surely.
| Geee wrote:
| Yes, total fees need to be high enough to secure the
| network.
| Geee wrote:
| You're wrong. Block rewards halve every 4 years. Next halving
| is in 2 years. This means that electricity use funded by block
| rewards trends to zero. Miners earn also transaction fees,
| which will gradually replace block rewards in the long term.
| Transaction fees are revenue from utility.
|
| It's a well designed incentive system; it will keep Bitcoin
| running as long as people find it useful, and it won't eat the
| world.
| Retric wrote:
| The issue is total transaction fees must be kept high enough
| to avoid miners defecting into double spend attacks. That
| would be easy if people where using it as a high turnover
| currency, but if people want to use it as a long term store
| of value transaction fees can quickly become many orders of
| magnitude smaller than the value stored in Bitcoins.
|
| It need not be illegal. Short Bitcoin, preform double spend
| attack between addresses you own, profit.
| rcxdude wrote:
| This is the same conclusion I came to. Bitcoin's incentive
| structure makes sense if the users of it gain value by
| being able to use it as a common medium of exchange. If you
| look at the money that e.g. mastercard and visa pull in, it
| makes sense that you could sustain bitcoin off of that
| indefinitely. It could also conceivable result in a
| relatively lower market cap if people do not in fact save
| money in bitcoin, reducing the threat of 51% attacks. As a
| store of value, the incentives no longer make sense: for
| the 'store of value', it must be deflationary, thus mining
| cannot produce new coins indefinitely. But it also cannot
| be too expensive: if just keeping your coins requires
| paying a significant percentage of the value of them to
| secure them on an ongoing basis, you're ultimately losing
| in just the same way as someone in an inflationary coin
| does. There's also no particular mechanism which makes sure
| said price is actually correct: ultimately you need to
| figure out how much mining is 'enough', and also
| realistically have some mechanism to spread those costs out
| evenly amongst holders of bitcoin, lest it become a tragedy
| of the commons where no-one wants to contribute.
| Geee wrote:
| We don't know what will happen. These problems and
| potential solutions have been hashed for years, but we'll
| have to just wait and see. You'll have to just believe that
| the economic incentive the preserve all the value will
| result in a solution.
| louloulou wrote:
| There's a simple solution to this... just wait longer
| Retric wrote:
| 51% attacks work on arbitrarily long timescales. Though
| obviously you can still do short double spend attacks at
| some probability with less hashing power.
| louloulou wrote:
| If you can maintain it, sure.
|
| But you can only double spend coins you already control,
| so at this point you would control 51% of global SHA2
| hash and have a bunch of bitcoin that you would be double
| spending?
|
| Who would accept that as payment? What incentive would
| you have to do something like that since you would be
| taking a massive loss?
|
| Maybe as a government attack?
| Retric wrote:
| The assumption was the point of the attack would be to
| destroy Bitcoin's value to make money from a short
| position not to sell the same coins twice.
| ssl232 wrote:
| An attempt to rewrite the ledger with a 51% attack would
| be detected almost immediately. The Bitcoin in the
| rewritten ledger would quickly become worthless,
| including that belonging to the keys owned by the
| attacker. All that mining gear used to perform the attack
| would then be worthless too. This doesn't seem to me like
| a profitable attack vector once you consider the complete
| picture.
| Retric wrote:
| Shorting Bitcoin doesn't require you to ever own any
| Bitcoin. It does require a counter party(s) that would
| pay out.
|
| The value of the gear is just a question of the future
| profits it can generate. If that future revenue is less
| than what you get from the great short then it's
| profitable. And that's assuming you can't reuse the same
| equipment for some other purpose.
| louloulou wrote:
| > doesn't require you to ever own any Bitcoin
|
| It requires you to borrow bitcoins from someone -> sell
| them -> do the attack -> buy them back -> and then return
| them.
|
| If you could borrow enough bitcoin, and gain enough hash,
| and crash the price enough for it to be profitable, it
| could possibly kill Bitcoin. Seems like an insane gamble
| to me though.
| Retric wrote:
| I agree.
|
| That said if I where writing a story I would have the
| protagonist gain the hashing power first, something
| strands their assets such as increased electricity prices
| making mining unprofitable or a next generation of
| hardware coming out etc. Then they come up with the idea
| of a big short.
| louloulou wrote:
| > Proof-of-work is so obviously, undeniably, mathematically
| guaranteed to be a crypto dead-end
|
| Bold claim.
|
| > Proof-of-work requires, by design, that the electricity value
| expended on mining is proportional to the total market cap of
| Bitcoin
|
| False statement (as it ignores the bitcoin emission schedule
| and transaction fees).
|
| > The problem, of course, is that if it takes an Argentina's
| worth of electricity to run Bitcoin now, how does the world
| manage if Bitcoin has a 10 or 100 times greater market cap?
| Obviously it can't, and world governments would rightly shut it
| all down before the majority of our electric output went to
| mining BTC.
|
| Constructing an irrelevant hypothetical based on the initial
| false statement.
|
| > simply no way around this issue if you're on a proof-of-work
| system, and given that, it's so easy to see that BTC is
| guaranteed to fail at some point
|
| More bold declarative statements with nothing to back them up.
|
| Learn more here: https://en.bitcoin.it/wiki/Controlled_supply
| peyton wrote:
| You're saying that as the price of Bitcoin has risen, the price
| of electricity has risen? I think something's missing from your
| argument.
| tiagobraw wrote:
| I think he meant that if the price of 1 bitcoin rise, the
| energy cost of mining 1 bitcoin should also rise in
| proportion
| gus_massa wrote:
| > _The problem, of course, is that if it takes an Argentina 's
| worth of electricity to run Bitcoin now, how does the world
| manage if Bitcoin has a 10 or 100 times greater market cap?_
|
| The amount of electricity is not proportional to the market
| cap. It's proportional to the difficulty. You can create a copy
| of bitcoin where the difficulty is keep very low and add a very
| big amount of transactions and be very easy to make fake blocks
| and forks and other nasty stuff. The difficulty is adjusted to
| keep the time to find a block somewhat constant.
|
| One problem to handle a bigger marketcap is the block size. One
| solutions is to increase the block size, another is to use a
| secondary chain. I'd like to increase the size, but most people
| prefer the other.
|
| Also, when you add the energy that goes directly from sun light
| to soy beans, I think that we are in Argentina still using a
| little more more energy than bitcoin.
| lofatdairy wrote:
| >The amount of electricity is not proportional to the market
| cap This misses the point of the argument, which is to say
| that if the market cap of bitcoin goes up, the marginal
| benefit of mining by definition goes up. This in turn drives
| up demand for electricity, until the marginal cost of
| additional mining units and associated power equilizes.
| That's not to say that there isn't a benefit to a more
| efficient proof-of-work scheme, as in theory if the scheme
| can support _all_ future and current transactions like the
| current banking system, then there's a cap on energy
| consumption. However, what OP points out is that the
| speculation and monetary utility of Bitcoin both act to
| increase power consumption due to basic economic forces.
|
| >Also, when you add the energy that goes directly from sun
| light to soy beans, I think that we are in Argentina still
| using a little more more energy than bitcoin.
|
| This is a non-sequitur. The point of using Argentina is to
| illustrate that in verifying transactions, Bitcoin uses as
| much energy as millions of people lighting their homes,
| watching television, running air-conditioning, heating water,
| charging their phones, etc etc etc. Nobody is claiming that
| Bitcoin consumes more metabolic energy or solar energy, OP's
| just highlighting that Bitcoin's electricity costs are
| potentially unsustainable.
| HWR_14 wrote:
| > by design, that the electricity value expended on mining is
| proportional to the total market cap of Bitcoin.
|
| You have to factor in the amortized cost of specialized
| hardware over it's lifetime, and a few other factors. But it's
| a good approximation.
|
| BTC tried to solve this with diminishing rewards for mining.
| The problem is BTC's market cap doubled far faster than the
| rewards halved.
|
| But I think you are wrong at the high end. If BTC was worth
| 100x tomorrow, the current miners cannot just push a button and
| draw 100x the power. I think governments would be far more
| likely to ban new rigs, but may let grandfathered rigs continue
| to operate. If that's the case, I can see miners becoming quite
| profitable.
| webinvest wrote:
| After the each "halving" you should expect the energy
| expenditure would also halve by that same logic. The halving
| would could continue until the energy requirement is minor!
|
| Haha, get it, minor?
| yuvadam wrote:
| You are making very bold statements ("of course", "obviously")
| on a topic that has been deeply analyzed over the years without
| any decisive conclusions.
|
| For one example, I really appreciate Lyn Alden's analysis [1]
|
| [1] - https://www.lynalden.com/bitcoin-security-modeling/
| hn_throwaway_99 wrote:
| I'm making bold statements because I've read reams and reams
| of treatises on the topic, and every single one ignores some
| basic, simple, fundamental truths that are _inherent_ to a
| proof-of-work system. I certainly don 't believe I'm
| particularly smarter than average, and there are definitely
| other people saying the same thing I am, and certainly much
| smarter people than I have realized this issue and are
| transitioning other cryptocurrencies to other proof systems,
| but I have come to believe that many people are content to
| keep the music going, even if they know it's going to stop at
| some point.
|
| When it comes to mining BTC, it really doesn't matter much
| how miners are paid: through block rewards, transaction fees
| or some other sort of "security fee". Miners spend money on
| electricity, and get BTC in return. Furthermore, it's, again
| _by design_ , a competitive system: those who are able to
| mine faster (i.e. are spending more on electricity, on
| average) will win the "block contests" faster and get more
| BTC.
|
| All other arguments are just "yada yada yada" _unless_ you
| are somehow arguing that electricity spend is no longer
| proportional to chance of mining a block, at which point I 'd
| argue that's probably no longer proof-of-work.
|
| This is not a hard concept. If I'm an idiot (which is
| _totally_ a valid proposition), somebody should be able to
| explain how a proof-of-work system can get around this
| "arbitrage problem" very simply - it shouldn't take pages and
| pages and pages of circular argument.
| cowtools wrote:
| You're making sweeping statements here, when in reality it
| depends on both the block reward AND the price of bitcoin.
| Currently, the block reward has decreased as the price of
| bitcoin has increased. If the market cap of bitcoin stays
| the same, then the mining reward in terms of energy will
| decrease.
| ThreeToZero wrote:
| > depends on the block reward AND the price of bitcoin
|
| The direct block reward goes to zero over the years, but
| the miner's fee will still be a positive amount.
|
| Each miner will be competing for the miner's fee, and
| will buy more electricity if they can mine more blocks
| (and get more miner's fees).
|
| The rewards will be proportional to the market cap of
| bitcoin. If it goes up, so will the investment in
| electricity.
|
| > making sweeping statements here
|
| The sweeping statements that poster made are the results
| of a microeconomics analysis.
|
| There is a large & "efficient" market competing for
| bitcoin mining rewards by buying more electricity.
|
| This is tapping into laws of economics on the level of
| supply/demand curves: Well studied scenarios that become
| more accurate the more efficient the market is.
| cowtools wrote:
| >The direct block reward goes to zero over the years, but
| the miner's fee will still be a positive amount.
|
| Yes.
|
| >Each miner will be competing for the miner's fee, and
| will buy more electricity if they can mine more blocks
| (and get more miner's fees).
|
| Yes.
|
| >The rewards will be proportional to the market cap of
| bitcoin. If it goes up, so will the investment in
| electricity.
|
| No.
|
| You're conflating two different things here: A reward-
| dominated bitcoin and a fee-dominated bitcoin.
|
| The reward takes money from bitcoin owners in the form of
| inflation. It decreases the market cap by increasing
| supply.
|
| The fees take money directly from bitcoin users.
|
| In the reward-dominated case, miners are funded by new
| demand for bitcoin, which props the market cap up. In the
| Fee-dominated case, miners are funded by bitcoin users
| who compete with each other for limited bandwidth. In
| either case, the money being given to miners by these two
| parties is always greater than or equal to the money
| spent on mining (power, hardware).
|
| What we've seen so far is a reward-dominated bitcoin in
| which demand is very high and the market cap increases as
| the block reward decreases. I predict the demand will
| stabilize and the reward will continue to decrease. This
| means there will be less mining. Eventually the reward
| will asymptotically trend to zero in which case bitcoin
| will become fee-dominated.
|
| Fees are dependent on the supply/demand for bitcoin
| bandwidth (the supply is a static 1MB/10 mins), not
| market cap or price.
| dlubarov wrote:
| You're right that there isn't a direct causal
| relationship between fees and market cap, but I think the
| ratio between them is important. If miner revenue becomes
| a tiny fraction of market cap, 51% attacks become a very
| real threat. Then the community would need to do
| something to increase the ratio, such as establishing a
| permanent block reward.
| cowtools wrote:
| I agree. In fact, some cryptocurrencies like have
| implemented constant "tail emission" block rewards. The
| problem is that this scares off investors and speculators
| because there's not as much scarcity.
| hn_throwaway_99 wrote:
| It's weird how so many of the arguments against what I've
| originally written pretend that it matters whether the
| reward comes from a block reward or transactions fees.
| _It does not matter_. Certainly miners don 't care how
| they get paid - for them they have a simple calculation
| of "bitcoin value I get out must be greater that
| electricity cost I spend".
|
| And the fundamental idea behind proof-of-work that they
| amount of work you're "proving" must be enough to make
| double-spend attacks infeasible. If the electricity cost
| to mine a block is low enough compared to the value that
| could be gained by a double-spend attack (which is of
| course comparable to total BTC market cap), then the
| network is not secure.
| cowtools wrote:
| >It's weird how so many of the arguments against what
| I've originally written pretend that it matters whether
| the reward comes from a block reward or transactions
| fees. It does not matter.
|
| It does matter. Block rewards are a transfer of value
| from bitcoin owners, which increases as people BUY
| bitcoin. Block fees increase as people USE bitcoin. Those
| are two separate things. What we are seeing now is mining
| that goes far beyond the mining necessary to secure the
| network, and that's due to (temporary?) speculative
| demand which increases the value of the block reward.
|
| >And the fundamental idea behind proof-of-work that they
| amount of work you're "proving" must be enough to make
| double-spend attacks infeasible.
|
| well, infeasible by a single antagonistic party. There's
| also the cost associated with the depreciation of the
| hardware. Even if mining somehow required no electricity,
| then the network would still be secure because there is
| some Time-Value cost associated with owning computer
| hardware.
|
| >If the electricity cost to mine a block is low enough
| compared to the value that could be gained by a double-
| spend attack (which is of course comparable to total BTC
| market cap), then the network is not secure.
|
| I agree. I think bitcoin will eventually succumb to
| selfish mining attacks.
| Closi wrote:
| When market cap / price goes up, more people enter the
| market to mine until supernormal profits are gone - This
| is the relationship being discussed.
|
| People will enter the market which pushes up the
| difficulty / electricity and hardware consumption until
| profits are brought back down to a normal level.
| cowtools wrote:
| Yes, but I predict people will cease entering the market
| once the hype dies down and people learn how flawed
| bitcoin is.
| hn_throwaway_99 wrote:
| Argh!!! I get this kind of response all the time, and
| it's frustrating for one simple reason: miners certainly
| DO NOT CARE where their reward comes from: block rewards,
| transaction fees, whatever.
|
| At the end of the day, it's a very simple calculation for
| them: electricity costs in, Bitcoin value out. No matter
| where their Bitcoin reward comes from, they will not (for
| long anyway) spend more on BTC then they are rewarded.
|
| > If the market cap of bitcoin stays the same, then the
| mining reward in terms of energy will decrease.
|
| NO! The simple rules of arbitrage would ensure that more
| miners would be incentivized to beef up their electricity
| spend to mind faster to win the reward (again, block
| rewards or transaction fees, doesn't matter).
| ssl232 wrote:
| > At the end of the day, it's a very simple calculation
| for them: electricity costs in, Bitcoin value out. No
| matter where their Bitcoin reward comes from, they will
| not (for long anyway) spend more on BTC then they are
| rewarded.
|
| True, but the hypothesis in your original comment, that
| energy expenditure will equal Bitcoin total market cap,
| does not follow. As other commenters here note, with each
| block reward halving, the energy required to mine a new
| block becomes more and more decoupled from the price of
| Bitcoin itself. In the distant future when block rewards
| are minimal and fees make up the majority of miners'
| rewards, only miners who can utilise the cheapest sources
| of energy will be able to mine profitably, which in the
| "negligible-block-reward" era will be for the lowest
| fees. And people making transactions will not pay more
| fees than they need to, so the existence of miners able
| to mine profitably for lower fees will in turn bring down
| average fees. I think all of this should be
| uncontroversial; it simply follows from the Bitcoin
| protocol and the work of Adam Smith.
|
| So, given these incentives and Bitcoin's difficulty
| adjustment mechanism, in the future the only miners
| capable of making profit from mining will be those with
| access to the cheapest forms of energy. Anyone who can
| mine for marginally lower cost is going to push out other
| miners. This will likely mean the majority of the energy
| used for Bitcoin mining will come from otherwise wasted
| energy - such as flare gas, remote hydro not economical
| to transmit to where people actually live, excess wind
| and solar supply when demand don't line up, that kind of
| thing. (And, as an aside, it's probably _not_ going to
| involve burning lots of oil and gas, since these are more
| useful to humans in other ways and will therefore cost
| more.) Obviously more efficient hardware will have the
| same effect, so there will also be an incentive there. In
| the end it will have very little to do with Bitcoin
| market cap and far more to do with the availability
| across time and space of cheap energy.
| datadata wrote:
| I think you are talking past each other. Leaving out
| transaction fees for a second (which are currently a very
| small percentage of the miner reward). The block reward
| is programmed to half every 4 years, taken alone this
| together with a fixed market cap would mean that the
| mining electricity spend would also half every 4 years.
| So the energy consumption of bitcoin will grow only so
| long as its market cap also doubles every 4 years. That's
| a tall order.
|
| Bringing back in transaction fees-- I don't think anyone
| really knows what they will be, but it will be a long
| time until the dynamics of that are more important than
| the dynamics of the block reward halving and the market
| cap.
| cowtools wrote:
| Please just stop and think for a moment FFS.
|
| Miners care about where their bitcoin comes from. Let's
| imagine the case where 100% of their income comes from
| the block reward and 0% from fees (seeing as this is
| nearly the case right now):
|
| 1. the block rewards are getting CUT IN HALF every once
| and a while. If the price of bitcoin stays the constant,
| their rewards in terms of dollars will be CUT IN HALF.
| The only way for their income (the upper limit on they
| can spend on electricity, hardware, etc.) to increase is
| for the price to increase by more than DOUBLE every time
| the mining reward gets cut in half.
|
| 2. the block rewards increase the supply of bitcoin,
| decreasing the market cap/price over time. It depends on
| the emission schedule. Even if the block reward was a
| constant 1 bitcoin per block, then you would just have a
| different (logarithmic) inflation/block reward graph with
| the same characteristics.
| xmprt wrote:
| Let's say 100% of income comes from block rewards of 1
| BTC. If it costs 0.5 BTC to mine a block then miners will
| beef up their mining capacity so they can mine more. In a
| vacuum, this would be great, but because of how mining
| works (winner takes all), the cost of mining would go up
| as the number of miners increases. This will keep
| happening until the cost to mine is close to or equal to
| 1 BTC (and because of currency conversion, the cost might
| even exceed 1 BTC today but miners are hoping that the
| price goes up so they can sell at a profit).
|
| Let's say tomorrow, the income is cut in half. All of a
| sudden, most of these miners would become unprofitable
| and stop. However as a result, the cost of mining will go
| back down to 0.5 BTC. It's a self balancing system but
| that also means that it's fundamentally flawed for
| reasons mentions by previous commenters in this thread.
| hihihihi1234 wrote:
| > I've read reams and reams of treatises on the topic
|
| Care to share any of them here? I'm not that knowledgeable
| about BTC so I have no idea whether or not you're right,
| but I'd love to learn more.
| kordlessagain wrote:
| > Proof-of-work requires, by design, that the electricity
| value expended on mining is proportional to the total
| market cap of Bitcoin.
|
| Proof of work in Bitcoin requires computation of a thing
| called a Nonce. If a miner gets the right Nonce while
| hashing, they get that block's reward. The electricity
| value expended on mining that block is proportional to the
| total amount of hashes being performed by miners in the
| network at the time. There is no "design" for requiring the
| cost of this power be equal to anything directly related to
| the market capitalization of Bitcoin, which really means
| how much Bitcoin is worth compared to other markets, such
| as USD. Are they linked to each other through human action
| and decision processes? Certainly. Is it coded in the
| chain? No.
|
| > It's really just simple arbitrage: if the value of
| Bitcoin goes up, but the electricity cost doesn't, then you
| have essentially 2 different prices for 1 good, which
| should attract more miners to spend more money on
| electricity.
|
| If the electricity cost doesn't go up, then the number of
| Nonce being computed will only go up if more miners join
| the effort. If they don't, the network is still
| operational, and produces the same amount of new coin every
| so often. What is NOT obvious here is that the _technology_
| for increasing the mining rates is _always_ increasing, so
| the clowns will continue to pay to upgrade their hardware
| over time to save on electrical costs and engage in
| competition with the technology. The exchange rate for
| Bitcoin may be related to the technological "power" that
| is required to keep the network running and producing new
| coins, but less directly so related to the amount of power
| burned.
|
| > Furthermore, it's, again by design, a competitive system
|
| By design, Humans compete. The Bitcoin blockchain could be
| mined and run by two clowns in a tent if nobody else cared.
| It's not _coded_ to be competitive, it 's coded to be
| cooperative. This means the the amount of power spent on
| mining and running the network _is_ a _cooperative_
| function. The amount of money spent on developing and
| producing faster hardware is a _competitive_ function. The
| two together produce something that is chaotic and
| interesting.
|
| Bitcoin does have a downside, and that is that it is a
| viral thing that cannot be taken down by any one person or
| organization. It would take 51% of those running the
| network to cause it to fork into two. It would take an
| impossibility to halt it. Maybe this scares some people and
| maybe it makes some people excited about the possibilities.
| Either way, we're going to need Fusion to run it in the
| future.
| ssl232 wrote:
| Most of what you said I agree with, but not your last
| point:
|
| > Either way, we're going to need Fusion to run it in the
| future.
|
| In my understanding, the economics of Bitcoin mean that
| eventually mining will be performed with predominantly
| waste energy, which is by definition that which has no
| other practical use. The existence of a practical use for
| the energy other than for mining will push its price
| higher than is economical to use for Bitcoin mining,
| because other miners using waste energy will be able to
| pay less to mine the next block. It's likely that energy
| for Bitcoin mining will come from sources like heat from
| flare gas, currently just burned at oil refineries and
| released as photons into the night sky, leaving Earth
| forever. Or energy from wind turbines or solar panels
| during periods of low demand. Or a hydroelectric dam
| 1000s of km from civilisation willing to pay the
| transmission costs to use it. Or, heck, even heat
| extracted from sewage in Vegas hotels, if it's enough to
| run a steam turbine. Basically anywhere where otherwise
| useless energy can be extracted in quantities sufficient
| for mining. I don't think, given the costs of the
| infrastructure likely required for fusion, we'll be
| seeing it employed for Bitcoin mining long term.
|
| This is one of the aspects of Bitcoin I find most
| beautiful - it monetises waste.
| austinjp wrote:
| Ehm.... "waste energy"? I'm not sure there is such a
| thing. If it can be harvested and used, why should it be
| used for Bitcoin instead of... well, anything else?
| madacol wrote:
| > the electricity value expended on mining is proportional to
| the total market cap of Bitcoin
|
| That's not true, it's at most, equal to the printing rate of
| bitcoins (coinbase transactions)
| datadata wrote:
| > mathematically guaranteed to be a crypto dead-end
|
| Your argument is not mathematical at all. It assumes first that
| bitcoin needs to appreciate 10-100 times current value. And
| second, that political willpower exists to then shut it down
| purely because of energy usage. Neither of those conditions are
| mathematically guaranteed, nor are they even in the realm of
| mathematics. I won't even address the underlying assumption
| that energy usage is unilaterally bad.
|
| One possible outcome, for example, is that bitcoin just hovers
| around its current price for a long time. If feels like every
| discussion on bitcoin is made of people who either think that
| it must either take over the world or must go to zero.
| hn_throwaway_99 wrote:
| OK, of all the comments I've seen trying to refute what I've
| written, yours is the only one I've seen that at least makes
| sense.
|
| Yes, I totally agree, the crux of my argument is really just
| "in a proof-of-work system, it is undeniable that electricity
| spend is proportional to total network market cap", so if the
| market cap _doesn 't_ change, then things can certainly
| putter along.
|
| That said, if the idea is that more and more of the world's
| economy will be represented by BTC transactions, which these
| days is pretty much what every person who owns BTC believes,
| then the market cap can't stay static. I also have a very
| difficult time believing that if the market cap _did_ stay
| static for 10 years or so that people wouldn 't start to
| realize "the jig is up".
|
| But yes, I totally concede, if the market cap doesn't rise,
| current electricity spend doesn't need to rise either.
| austinjp wrote:
| What jig would be up? Mining as profiteering? For sure, and
| the end of mining is an inevitability. Bitcoin as currency
| could continue though, no?
| VHRanger wrote:
| It would be very strange for the current situation to be a
| long term stable equilibrium for Bitcoin.
|
| Bitcoin is a zero sum ecosystem, minus mining fees. So it's a
| net negative sum by some $20-30m per day in electricity and
| hardware costs.
|
| Why would it stabilize around this particular value?
| datadata wrote:
| The inflation due to bitcoin mining is already smaller than
| other systems that are widely considered stable. Note that
| I don't think bitcoin will actually be stable, but I think
| inflationary pressures are almost insignificant as a factor
| that would drive it to collapsing.
|
| For bitcoin, 90% of all bitcoin has already been mined. So
| the remaining dilution for all time is in total just about
| 11%, and the current annual rate is 1.8% inflation. Compare
| this to gold, which has 2% inflation and no max supply.
| There are also technological innovations that could inflate
| gold much faster, e.g. asteroid mining. Compared to USD as
| measured by CPI is 8%, and the Fed's own target for CPI
| inflation is 2% annually, so this is much higher than
| bitcoin and also unbounded total dilution.
| paulmd wrote:
| > Your argument is not mathematical at all. It assumes first
| that bitcoin needs to appreciate 10-100 times current value
|
| Satoshi consensus doesn't care about the numeric value of
| Bitcoin at all. It cares about _the value of the transactions
| conveyed by bitcoin_.
|
| Satoshi consensus is the observation that if the energy
| required to fork the network and roll back a transaction
| costs $X, then it's financially non-viable for someone to
| roll back a set of transactions that is worth less than $X.
| That's all. If the value transacted on bitcoin increases
| above $X, then it is potentially financially worth it to
| attack the network, unless the amount of energy expended
| increases accordingly. So the value of the transactions is
| directly tied to the (value of the) energy expenditure.
|
| As a side note, there is no automatic mechanism built into
| bitcoin that ties these two values together. The assumption
| is that the value increases and the rewards decrease and it
| all sort of works out (especially if the network transitions
| to transaction fees instead of inflation-based block
| rewards). But there is no mechanism that it _must_ , and if
| the value dropped really hard all of a sudden, for example,
| it might suddenly be more viable to attack the network.
| Attacker energy cost will significantly decrease as rational
| actor miners realize they're taking a loss and turn off their
| mining hardware, miner energy expenditure will decrease,
| which decreases the energy (and cost) required for attackers
| to fork and roll back transactions.
|
| It's an interesting variation of the "frisbee on the roof"
| attack, like a "fire all the janitors and then shit on the
| floor" attack. Nobody ever wants to go back into that
| business because there's shit all over the floor, but without
| any customers there's no money to hire janitors either. The
| network now enters a terminally unrecoverable state, without
| manual intervention from outside actors.
| hkt wrote:
| This is beautifully put, I'm saving it in my notes to remind
| myself of it later. The point about market cap was especially
| striking.
| cowtools wrote:
| >Proof-of-work requires, by design, that the electricity value
| expended on mining is proportional to the total market cap of
| Bitcoin.
|
| This is mostly true, but I think you're conflating a couple
| different things here. At market equilibrium, you would think
| it would look like the cost of power + hw depreciation = crypto
| price * (block reward + fees).
|
| >if it takes an Argentina's worth of electricity to run Bitcoin
| now
|
| It might be justified if bitcoin could replace the traditional
| financial system (think about how inefficient that is), but I
| do not think it can.
|
| >how does the world manage if Bitcoin has a 10 or 100 times
| greater market cap?
|
| I don't think bitcoin's market cap can multiply by a factor of
| 10 or 100
| remper wrote:
| > It might be justified if bitcoin could replace the
| traditional financial system (think about how inefficient
| that is), but I do not think it can.
|
| Bitcoin is already way more inefficient than the current
| financial system. Just compare cost per transaction between
| Bitcoin and Visa, for example. People seem to think that
| Bitcoin will somehow replace the entirety of the financial
| system when it's not even designed to do that and only really
| handles transactions.
| cowtools wrote:
| Yes. The fees are mostly due to bitcoin's unreasonable 1MB
| blocksize constraint. Most other cryptocurrencies do not
| have this problem because they make a more reasonable
| throughput to bandwidth/storage tradeoff
| tromp wrote:
| > the electricity value expended on mining is proportional to
| the total market cap of Bitcoin
|
| That would be the case if price doesn't vary much over time.
| But marketcap is current supply * current price, while the
| large majority of current supply was mined when bitcoin was WAY
| cheaper and thus much less electricity was spent on it.
| DerekBickerton wrote:
| Excuse me, I'm a crypto noob, but how much BTC could I make if I
| bought a dedicated mining rig for, say $2000 and let it run
| nonstop for two years? Would my investment be worth it? Could I
| cash out my earnings to fiat and have _more_ money than my
| initial investment or otherwise generate a profit?
| [deleted]
| scotty79 wrote:
| If you don't have a super cheap source of electricity then most
| likely you wouldn't break even.
| Marazan wrote:
| No.
| speedgoose wrote:
| Do you produce your electricity? (solar panels, windmills, coal
| factory...) If not you have to guess the energy price in your
| area over the next two years.
|
| You also need to estimate the Bitcoin price over the next two
| years.
|
| And you probably need to estimate the bitcoin hash rate over
| the next two years.
|
| Good luck.
| wussboy wrote:
| Based on the replies you got, it seems pretty clear that the
| answer to all three of your questions is "no".
| mirceal wrote:
| there are multiple variables here.
|
| one is the cost of the hardware. 2000$ is not enough for latest
| generation ASIC miners. It just isn't. You want the latest
| generation ones. We are probably talking 10k+ for something
| decent.
|
| The second one is the cost of power. People like to talk shit
| about the environmental impact of bitcoin and stuff, but the
| reality is that the bitcoin you mine is worth less than the
| power you are using in most places around the world. Bitcoin
| mining is profitable in areas where the cost of power is
| heavily subsidized (it's free real estate meme) or you can
| easily generate power yourself (solar, wind, thermal, etc). So,
| if the cost of power is > value of mined bitcoin, it does not
| make sense to mine it
|
| The third part is mining pools. You can build all the rigs you
| want, but the reality is that most bitcoin is mined by mining
| pools. So you will have to join one of those pools if you want
| to have a steady guaranteed small income.
|
| So to answer your question: depending where you are for an
| investment of X this could be profitable (medium/long term) but
| you need to understand more about the cost of the hardware,
| cost of power and dynamic of mining pools to actually pull this
| off (so for a noob, you're better off just buying 2000$ of BTC,
| holding for 2 years and selling. sorry noob. The wild west era
| of bitcoin mining is long behind us)
| WJW wrote:
| It is entirely impossible to say. First off, your electricity
| price will determine how much (if any) profit you'd make. Most
| bitcoins mines are in areas with very low electricity prices
| for this very reasons and if you are not, it might be outright
| impossible to profitably run a mining rig.
|
| Obviously, the price of bitcoin over those two years would be
| very important to your income and assuming a price of 60k
| (where it was a few months ago) would result in a very
| different outcome than the same calculation with the current
| price of 30k. Bitcoin has been very volatile since basically
| forever, so it is very difficult to predict of your scheme
| would be profitable.
| nradov wrote:
| This is why Bitcoin miners located in Kosovo where
| electricity is "free". They're supposed to pay, but due to
| the political situation the power company can't disconnect
| deadbeat customers.
|
| https://balkaninsight.com/2021/05/12/in-north-kosovo-
| mining-...
| Canada wrote:
| > First off, your electricity price will determine how much
| (if any) profit you'd make.
|
| No it wouldn't. The electricity cost is a factor, but it's
| not that significant compared to the capital cost of the
| equipment, the price of which fluctuates depending on the
| expected profit.
|
| You can also see this with GPUs, but it's far more pronounced
| with Bitcoin mining hardware which has no other use.
| FabHK wrote:
| Source? In fact, any breakdown of mining costs would be
| quite informative.
| _fat_santa wrote:
| This wholly depends on where you are getting energy and for how
| much. The "idea" around mining BTC is it's not free, you are
| exchanging Energy for BTC. If you live in Iceland where
| renewables are plentiful and cheap then you will likely make
| money, just about anywhere else though it's a gamble.
|
| TL;DR: Just dont.
| agoose77 wrote:
| Ultimately you can do what you want ^^, but it's worth
| considering the environmental impact of what you're proposing.
| Say a mining rig uses 1kW - for 2 years non-stop that's 1kW for
| 17520 hours. If CO2/kWh is 0.85lbs, then that's 14892 lbs, or
| 6.75 tonnes! The average passenger vehicle emits 4.6 tonnes of
| CO2 per year - that's less than our hypothetical rig!
|
| https://www.epa.gov/greenvehicles/greenhouse-gas-emissions-t...
| renewiltord wrote:
| Pretty good argument that those who work from home have
| carbon budget for two mining rigs without being worse than a
| dual-car household.
|
| Go get your mining rig, my dude. The median number of cars in
| American households is 1.88 so you have lots of room to play.
| grp000 wrote:
| On the other hand, that means a mining rig is worth a car's
| pollutants? That's a lot.
| renewiltord wrote:
| A lot for what? You get a car, he gets a rig. You're both
| carbon-equivalent in the current regime.
| ipaddr wrote:
| This says nothing because electricity depending on the source
| can have none or more than your number.
| Snowworm wrote:
| Yup. Just build a nuclear reactor in your back garden and
| it's easy passive income!
| louloulou wrote:
| Or solar panels on the roof
| wyager wrote:
| That's a lot of carbon you're helping remove from the ground
| and turn into plants!
| UncleEntity wrote:
| Other than those yahoos who recommissioned some coal-fired
| power plants not too long ago most mining operations are
| located in areas with surplus renewable energy methinks.
| [deleted]
| seaman1921 wrote:
| so as long as we are under average passenger vehicle its ok
| to do anything - great argument dude - justify an evil with a
| bigger evil
| ntoskrnl wrote:
| Any company that could build hardware capable of turning a
| profit would use it themselves, instead of selling it to the
| public. Don't try to buy a money printer. Life isn't that easy.
| vikingerik wrote:
| There is arbitrage. It's possible that a hardware company
| might be located where electricity is expensive, or in an
| unfavorable regulatory or tax jurisdiction, such that they
| wouldn't directly profit from running the mining equipment,
| but someone in a better environment could. But yeah, this
| would be a small minority of situations.
| bee_rider wrote:
| The companies could be located in an area where electricity
| is too expensive to turn a profit (and they might be relying
| on the fact that the end users are individuals, and
| distributed, so maybe they expect the end users to slip
| between the cracks and find subsidies not intended to go to
| bitcoins).
|
| Also, if one company was making the majority of bitcoin
| ASICs, they'd be at risk of gaining the ability to do a 51%
| attack, right? Which would reduce confidence in the network I
| guess.
|
| I don't own any of this stuff because bitcoin seems
| fundamentally bad for the planet and a pain to manage, but I
| don't think we should assume these things are necessarily
| irrational purchases just because we don't like them.
| paxys wrote:
| Going by that logic, why does any company sell anything that
| can be used to make money?
| giantrobot wrote:
| It's profitable to sell shovels to gold miners. Mining the
| gold takes time, resources, and luck to be profitable.
| Selling just the shovels means you can make good money with
| far less luck. You can optimize costs, it's much harder to
| optimize luck.
| jabits wrote:
| Not so sure, what about a machine like a slot machine? I
| think you make money making something you know how to make
| amelius wrote:
| Solar panels are money printers. Yet no company is offering
| to put them on my roof at their cost.
| catlifeonmars wrote:
| Why not?
| colinmhayes wrote:
| There's big risk that legislation will be passed that
| allows utilities to pay wholesale price for electricity
| generated by home solar instead of retail price. It's not
| profitable at that rate to put it on roofs, building solar
| farms makes much more sense.
| betamaxthetape wrote:
| This used to be the case in the UK. There were a few
| companies that would install solar panels on your roof, at
| no cost to you. You could use the electricity generated by
| the panels at no cost.
|
| The catch was that the companies took the feed-in tariff
| (the government subsidy for generating renewable
| electricity), and that you needed to commit to having the
| panels on your house for a minimum number of years (making
| it unviable if you rented, or planned to move in a few
| years).
|
| In the mid-2010s the UK changed how the subsidies worked,
| changing from the feed-in scheme where you were paid per
| unit of electricity generated (regardless of if you
| consumed that energy or sent it back to the electricity
| grid) to the Smart Export Guarantee, where you are only
| paid for the electricity that you sent back to the grid.
| According to Wikipedia [0] this caused many of the
| companies operating the "free solar panels" schemes to go
| out of business.
|
| [0] https://en.wikipedia.org/wiki/Feed-
| in_tariffs_in_the_United_...
| vkou wrote:
| Utility solar deployment is a money printer[1], residential
| rooftop solar deployment is an expensive[2] fashion
| statement.
|
| The reason solar panel manufacturers don't go into the
| power generation business is because building a solar plant
| is a political problem, while building solar panels is a
| technological problem. It's not their core expertise.
|
| [1] In locations that need more electricity, have
| regulators that will favor you over coal-burning and gas-
| burning incumbents, and where you can deal with the NIMBYs.
|
| [2] It should be obvious when you consider that economies
| of scale mean that utility solar will _always_ be cheaper
| than rooftop solar for on-grid homes.
| giantrobot wrote:
| > residential rooftop solar deployment is an expensive[2]
| fashion statement.
|
| Not really. Panel lifetimes are measured in decades and
| the break-even point is usually around a decade, less if
| daytime utility power is expensive. They're not high
| volume money printers but they'll eventually pay for
| themselves (including their carbon usage during
| production).
|
| Solar works mathematically because the Sun is constantly
| bombarding the Earth with energy. Rooftop solar increases
| the efficiency of otherwise wasted acreage of rooftops of
| buildings. Not only can they offset energy use of the
| stuff inside the building but the rooftop shade is that
| much less cooling needed for the building.
| vkou wrote:
| > less if daytime utility power is expensive.
|
| My point is that daytime utility power that comes from a
| solar farm will always be cheaper then rooftop solar.
| Because it takes a lot less labor to deploy solar at
| utility-scale, than to bolt it to your roof.
|
| The only reason rooftop solar can currently be cost-
| efficient[1] is if its competing with _expensive_ sources
| of energy generation. If it has to compete with cheap
| sources (utility solar), it 's not cost-efficient.
|
| [1] Or if you're receiving subsidies for the energy you
| sell back to the grid.
| dleavitt wrote:
| This was/is exactly the business model of SolarCity and a
| lot of residential solar. The more general concept,
| sometimes called "Savings as a Service" or "Efficiency as a
| Service", is pretty ubiquitous in the energy space.
| rr808 wrote:
| If no company will do it your numbers are likely wrong.
| humanistbot wrote:
| Add your hardware and electric costs and calculate
| daily/weekly/monthly profit at: https://minerstat.com/mining-
| calculator
|
| But unless you can find free electricity (like at work or
| school), it usually isn't worth it. You also have to factor in
| the failure rates at keeping a computer running 24/7 at max
| cycles.
| matheusmoreira wrote:
| > free electricity (like at work or school)
|
| Solar too. Solar powered miners let you literally monetize
| the sun.
| moistly wrote:
| Who's out there giving away free solar panels? 'Cause I'd
| really like some.
| matheusmoreira wrote:
| You have to buy the panels. They pay for themselves very
| quickly. After some initial period it's literally free
| energy.
| thombat wrote:
| Stating the obvious, but if making money depends upon "free
| electricity" then it's an elaborate way to take money from
| whoever is paying that power bill.
| matheusmoreira wrote:
| Not always. In my country, they incentivize solar energy
| generation but don't actually pay us any money for it. They
| give us "kWH credits" that expire within one year if not
| consumed. So it's much better to dump all that surplus
| energy into a miner so it can be converted into actual
| money. If the power company doesn't like it, they can pay
| me real cash instead of bullshit credits.
| thombat wrote:
| I guess if the network/power company can't/won't accept
| surplus power then it hugely devalues the financial case
| for domestic solar, since if your summertime production
| doesn't much exceed consumption then you have a big
| shortfall in the rest of the year. Here (Germany) there
| are limits on what the network will accept so people play
| elaborate games of trading off battery charging vs
| selling across the day, with one eye on the weather
| forecast.
|
| But in your case you're probably not so much making money
| from the "free electricity" as reducing the potential
| loss on the cost of installing and maintaining the
| system?
| matheusmoreira wrote:
| > network/power company can't/won't accept surplus power
|
| Oh, they'll happily accept the power I'm generating...
| They just won't pay me for it.
|
| > your summertime production doesn't much exceed
| consumption then you have a big shortfall in the rest of
| the year
|
| Indeed, that's the case with most homes who invested into
| solar power. Most of them are planned precisely so
| they'll generate just enough energy to cover their yearly
| comsumption.
|
| Mine is set up to generate as much energy as possible. I
| just installed as many panels as possible.
|
| > Here (Germany) there are limits on what the network
| will accept so people play elaborate games of trading off
| battery charging vs selling across the day, with one eye
| on the weather forecast.
|
| That's interesting, I didn't know that. Everything I've
| read about the german solar power system made me think it
| was perfect: you could just generate as much power as you
| wanted and get paid for it. I had no idea people had to
| play those games. Why can't the network accept the power?
|
| > But in your case you're probably not so much making
| money from the "free electricity" as reducing the
| potential loss on the cost of installing and maintaining
| the system?
|
| In my case the equipment has already more than paid for
| itself. I generate more power than I consume almost all
| year long and my energy bill is almost zero. Maintenance
| costs have been minimal so far.
|
| When I generate more power than I consume, they give me
| expiring kWh credits. I don't want these credits to
| accumulate under any circumstances since I'm already
| generating surplus at almost all times. So it's in my
| interest to increase my energy consumption: anything else
| means giving them energy for free. So I set up a miner.
| andy81 wrote:
| You'd be competing against others who steal their electricity
| or have it subsidised (including pollution, resource depletion,
| regulatory arbitrage, financial crime and other externalities).
|
| If you can take advantage of some of those and don't mind that
| the money isn't being generated so much as taken from other
| people then it's a great idea.
| mistrial9 wrote:
| uhh - this is exactly "not systems thinking" .. it is an
| individual opportunistic thinking. Responses below link to
| broad societal effects, various environmental claims, appeals
| to morality and reason.. all of which intersect very little
| with the "I see food" diet implied by this question.
|
| As an analogy, the sticky part of lottery tickets is, people
| will reliably participate with their own money; others
| complain; nothing changes as people do it again anyway.
| Opportunistic planners take advantage of the "I see food"
| people, make glossy lottery tickets and pay a premium to food
| store managers to sell those lottery tickets; more people
| complain.
|
| Can we identify the systems parts in play here, to create
| enough context to actually decide what is important, what is
| unstoppable, and what might be a rational, thinking response to
| all of this going on ?
| cowtools wrote:
| Good points, but I think that if you want to consider the
| "ethics" of cryptocurrency mining, you have to acknowledge
| that currently there is a lot of hype around crypto that will
| eventually go away. There are a lot of irrational actors.
|
| If you want to make a statement about the nature of bitcoin,
| I would consider an "equilibrium" situation where:
|
| * The cost of specialized hardware is stable (e.g. what are
| the economies of scale as t->infinity ?)
|
| * The price of bitcoin in terms of energy (BTC/watt hr) is
| stable
|
| * Miners are rational actors
|
| It seems to me like the most concerning aspect of
| cryptocurrency mining is that the hashrate is dependent on
| externalities like the price of bitcoin, rather than the
| necessary hashrate to defeat a 51% attack.
| catlifeonmars wrote:
| > currently there is a lot of hype around crypto that will
| eventually go away.
|
| What is the mechanism that will make this happen?
| intabli wrote:
| What renders this whole calculation wrong is that it doesn't
| account for transaction fees AND transaction fees growth which
| was also supposed to be growing exponentially, had Bitcoin not
| been artificially limited to ~ 2 MB blocks every ten minutes.
|
| On an actually uncapped Bitcoin instance, Blocks (Block size) and
| transaction fees will grow exponentially, rendering all such
| "Bitcoin is environmentally terrible" and "Miners aren't
| profitable" calculations absurdly wrong.
|
| Other instances exist that are chugging along flawlessly and are
| set to help miners grow their revenue with on-chain transaction
| fees growth: DYOR.
|
| Of course, BTC Maxis lead by companies set to profit from such an
| artificial limit on Bitcoin (hint: they often peddle L2
| solutions) would hate for you or anyone to understand and study
| those facts.
| PragmaticPulp wrote:
| > On an actually uncapped Bitcoin instance, Blocks (Block size)
| and transaction fees will grow exponentially, rendering all
| such "Bitcoin is environmentally terrible" and "Miners aren't
| profitable" calculations absurdly wrong.
|
| This doesn't make any sense.
|
| If anything were to make mining _more_ profitable, we would see
| even more miners come online.
|
| There is no scenario in which Bitcoin mining becomes less
| environmentally terrible by paying more money to miners. Those
| payments incentivize more miners to come online and, if
| significant enough, would encourage miners to bring older, less
| efficient equipment online relative to today's rates.
| intabli wrote:
| If transactions scale enough for you to be able to shut down
| most bank branches, end commutes for all banking and central
| banking employees, shut down all credit card companies and
| their offices and terminals, turn off ATMs, end printing
| physical paper money and minting money, just to mention a
| few, I think the environment will be way, way better off.
|
| That's the argument behind unlimited on-chain transactions.
| nradov wrote:
| There's no evidence that any of that would be technically
| feasible. And hypothetically even if it was technically
| feasible, the nation states which have taxing authority and
| hold an effective monopoly on violence would never permit
| it.
| intabli wrote:
| Most world governments and taxing authorities work for
| their populace, they could be easily voted out if people
| saw what other nations are benefiting from such
| innovation.
|
| As for what's feasible and evidence on it, I assure you,
| Edison had no clue that the internet will one day be born
| out of his electricity inventions and that it will be
| mostly used for porn, so sit back, relax and enjoy the
| next 100 years of untold human history.
| zaphar wrote:
| As for what's feasible and evidence on it, I assure you,
| Edison had no clue that the internet will one
| day be born out of his electricity inventions and
| that it will be mostly used for porn, so sit back, relax
| and enjoy the next 100 years of untold human
| history.
|
| This is a statement of faith. As such expecting it to win
| an argument involving logic is doomed to fail. You may be
| believe it but I and many others have no reason to.
| nradov wrote:
| As a voter, why would I do something so stupid as to put
| my country's economy under the control of a Ponzi scheme
| invented by incompetent programmers? That's just
| delusional, makes no sense at all.
| wallacoloo wrote:
| > Most world governments and taxing authorities work for
| their populace, they could be easily voted out if people
| saw what other nations are benefiting from such
| innovation.
|
| you've got a lot of faith in "most world governments and
| taxing authorities". here in the US, i look at other
| countries who include in their tax statements a breakdown
| of where all your tax bill is going. that looks like a
| thing those other citizens benefit from, so please tell
| me: how can i vote this into effect here?
| JumpCrisscross wrote:
| > _end commutes for all banking and central banking
| employees_
|
| Because central banks and banks didn't exist when we were
| on metal standards...
| FabHK wrote:
| > Blocks (Block size) and transaction fees will grow
| exponentially
|
| Currently, the blockchain is 405 GB and grows by about 5 GB per
| month. In your proposal, that will go up exponentially?
| intabli wrote:
| My proposal? I won't take credit for Satoshi's work, it was
| his proposal:
|
| https://satoshi.nakamotoinstitute.org/posts/bitcointalk/485/
| FabHK wrote:
| Strictly speaking it wasn't his, it was the originator of
| that thread, jgarzik, and satoshi replied "We can phase in
| a change later if we get closer to needing it.", which
| doesn't strike me as a ringing endorsement.
|
| At any rate, the suggestion was for one increase, not an
| infinite sequence of increases, which your suggested
| exponential growth amounts to.
| intabli wrote:
| One increase every time its theoretical limit is
| approached, which becomes exponential as transaction
| growth becomes exponential.
| stickfigure wrote:
| You either misunderstood the parent or are being
| deliberately disingenuous.
|
| He/she asked, in effect: How do you plan to deal with the
| blockchain growing exponentially instead of linearly? And
| how much acceleration do you think is reasonable?
| intabli wrote:
| I needed to clarify that it wasn't my proposal, as to how
| to gradually approach this, test nets are already
| deployed on many of the uncapped networks, I believe
| you'll enjoy this great presentation by Peter Rizun and
| Andrew Stone, they're far smarter than I'll ever be:
| https://youtu.be/5SJm2ep3X_M
| imtringued wrote:
| If it doesn't, then Bitcoin is dead. It has no future.
| mdoms wrote:
| So in a fantasy universe that doesn't exist this analysis
| doesn't make sense. Ok?
| intabli wrote:
| These uncapped forks do exist, they're the reason the whole
| community split in 2017; so when those "analysis" articles
| ignore them and ignore the fact that the white paper and
| Bitcoin's creator explicitly called for on-chain growth and
| scaling, they're being either dishonest or ignorant.
|
| It's like someone saying "Look at how wasteful this car
| limited to 20MPH is! All cars are wasteful!". No, not all
| cars, especially that the original design explicitly said to
| scale the engine as more speed is needed.
| DanHulton wrote:
| No, not all cars, sure, but like, the vast, vast majority
| of 'em.
|
| You're still ignoring the practical for the theoretical.
| paulgb wrote:
| I don't see how any of this undermines the post. What
| "uncapped fork" could these big miners switch to that would
| give them anywhere near the revenue they have today?
| intabli wrote:
| I won't point you to any, but you should dig deeper into
| the 2017 block size wars and understand why the community
| forked then and how, avoid the commercially appealing
| answers and the laser eyes.
| paulgb wrote:
| I assume you're alluding to bitcoin cash. I don't see
| what it has to do with any of this, given that the
| aggregate transaction fees are not enough for big fish
| like the ones my article to migrate to at scale.
| intabli wrote:
| When you discuss miners, on a network DESIGNED to emit
| less Bitcoin and change to transaction fees down the
| line, it's ultra important to note that this actually
| working vehicle exists and the same miners protecting the
| speculative vehicle are also protecting the actually
| working one. And when calculating for the working one,
| miners are set to be some of the richest businesses on
| the planet, even when ALL Bitcoin has been already mined,
| a 100 years from now, because of transaction fees.
|
| Crypto is still very, very, early. I assure you of that.
| paulgb wrote:
| This article is about bitcoin miners. What I'm struggling
| to understand is, what does any of that have to do with
| _bitcoin_ miners? Are you just wishing I 'd pump BCH or
| something?
| intabli wrote:
| You mentioned it before that I did. And no I don't want
| you to pump it, but answer the following yes/no questions
| please:
|
| -) Did your article discuss miner profit from finding
| Bitcoin?
|
| -) Did you mention that Bitcoin's emission halves and
| will eventually end?
|
| -) Did you mention that miners profit from including
| transactions?
|
| -) Did you mention that transactions become the SOLE
| source of income once all Bitcoin is mined in around a
| century from now?
|
| -) Did you mention that BTC is a version of Bitcoin which
| allows only for a maximum of 200k transactions every ten
| minutes?
|
| -) Did you mention that the original design should allow
| for millions (and billions 30 years from now) of
| transactions every ten minutes?
|
| -) Would such a huge number of transactions processed
| render miners more profitable than your calculation?
|
| -) Would revenue from fees be much higher than the 1-2%
| you mentioned miners currently do?
|
| -) Does omitting the above facts render your article
| possibly half-factual?
| WJW wrote:
| > they're the reason the whole community split in 2017
|
| This makes it seem like it was some sort of 50/50 split,
| but in reality it was more like 99/1. A tiny group split
| off to do their own thing while "normal" bitcoin is just
| chugging along with unchanged block size. It's all fine and
| well that Satoshi may have wanted something different for
| block sizes, but he hasn't been involved in bitcoin
| development for over a decade now so his wishes are pretty
| irrelevant. Right now, the vast majority of "bitcoin" value
| is in the original one and speculating about how things
| could be different is just the crypto version of "world
| peace is easy if we all could just get along".
| intabli wrote:
| But you make it seem as if it's a done tale, as if there
| were no bad actors, no companies set to profit from
| selling their own "Layer 2" solutions, no censorship,
| etc. Reality is, even if the whole planet (not only the
| 99% of the community you claim) were set on a broken
| vehicle which they can barely drive but just speculate
| on, it won't be long before most realize that this is
| just that, a broken vehicle meant for speculation and has
| nothing to do with peer to peer electronic cash, you
| know, Bitcoin.
|
| So when you discuss miners, on a network DESIGNED to emit
| less Bitcoin and change to transaction fees down the
| line, it's ultra important to note that this actually
| working vehicle exists and the same miners protecting the
| speculative vehicle are also protecting the working one.
| And when calculating for the working one, miners are set
| to be some of the richest businesses on the planet, even
| when ALL Bitcoin has been already mined, a 100 years from
| now.
| WJW wrote:
| Perhaps, if and only if bitcoin manages to win out
| against the traditional banking system AND the
| governments of the world do not regulate miners into
| oblivion. Even if some form of cryptocurrency does win
| out against the combined might of traditional banking and
| governments, let's hope for the sake of these mining
| companies that the winning currency is one that both
| depends on Proof of Work (I can stake PoS chains just
| fine from a raspberry pi, after all) and also requires
| hashing of the type supported by the current equipment of
| the miners.
|
| All in all, the chance that a crypto mining company
| becomes one of the richest businesses on the planet is
| slim and the chance that that company will be one of the
| mining companies already existing is slimmer still. Buyer
| beware when investing in the current crop.
| cowtools wrote:
| As someone who is more familiar with BCH rhetoric, I can
| tell you that what the parent comment is referring to is
| not mining companies but rather LN relay node operators
| and other "services"
|
| https://www.youtube.com/watch?v=UYHFrf5ci_g
| cowtools wrote:
| >This makes it seem like it was some sort of 50/50 split,
| but in reality it was more like 99/1
|
| In reality most bitcoin owners/users were the silent
| majority, and the "default" option was to do nothing, so
| they did nothing.
|
| >speculating about how things could be different is just
| the crypto version of "world peace is easy if we all
| could just get along".
|
| bitcoin's current blocksize/transaction fees are
| basicially an artificial problem that could be fixed with
| a minor storage/bandwidth tradeoff. It's more like "world
| hunger could be solved if we produce more food and stop
| limiting ourselves with insane protectionist trade
| policies".
| cowtools wrote:
| >What renders this whole calculation wrong is that it doesn't
| account for transaction fees AND transaction fees growth which
| was also supposed to be growing exponentially, had Bitcoin not
| been artificially limited to ~ 2 MB blocks every ten minutes
|
| I agree that bitcoin should use an adjustable block size, but
| I'm not exactly sure that this logic follows. Can you explain
| this to me? If the network could handle more transactions per
| block, wouldn't the fees per transaction just decrease?
| intabli wrote:
| Correct, the fees would decrease, but when when you can only
| process 200k transactions every ten minutes, there's an upper
| limit of how much people are willing to pay before it becomes
| absurdly expensive. This reached almost $100 in the 2017
| rush. It's unsustainable and renders the network unusable for
| most of the planet.
|
| When you on the other hand can process millions of
| transactions every block (and scalable as needed), you'll
| charge far less per transaction while still allowing miners
| to generate a huge (and ever growing) revenue, while also
| enabling most of the planet to transact next to free.
|
| From an environmental perspective, if you divide the hash
| rate environmental impact on a mere 200k transactions every
| ten minute, the carbon foot print per transaction would seem
| absurdly high. Do the same calculating for millions of
| transactions every ten minutes, and you'll arrive at a far
| better environmentally friendly figure.
| _alex_ wrote:
| Then why isnt bcash or bsv more valuable than bitcoin?
| cowtools wrote:
| In my experience, BTC has more "brand recognition"
| amongst uninformed investors who are more concerned with
| "number go up" technology than digital cash technology
| intabli wrote:
| If you measure value by the thing Bitcoin came to replace
| (fiat), your vision will be distorted.
|
| If you measure value as a consequence of utility, they're
| certainly far more valuable than BTC (BSV however is a
| corp coin and has weird copyrights so I wouldn't touch it
| with a stick).
| wmf wrote:
| Why wouldn't fees go all the way to zero? Zero times a
| zillion transactions is still zero.
| shawabawa3 wrote:
| ...because miners choose whether to include a transaction
| or not. Obviously they have no incentive to include a
| zero fee transaction
|
| There would be an equilibrium where the fee is worth the
| marginal cost of mining it
| colinmhayes wrote:
| Unless miners start colluding their strategy will become
| "include every possible transaction with fee greater than
| $0." which means fees will settle at the smallest
| possible value greater than 0.
| imtringued wrote:
| Yeah sure, everything I buy costs the smallest possible
| value greater than zero.
|
| shawabawa3 already explained it "There would be an
| equilibrium where the fee is worth the marginal cost of
| mining it"
|
| The miner has cost X and wants profit Y. He adds those
| together and now the price is X+Y. Someone wants his
| transaction on the blockchain, he is going to pay X+Y
| unless there is a miner that offers an even lower rate.
|
| You're making the assumption that the block reward is
| high enough to make transaction fees irrelevant, which is
| a trivial observation and not what we are interested in
| talking about here.
| mustyoshi wrote:
| Miners still have to choose to include your tx. The risk
| of losing during two blocks being mined goes up as
| blocksize does (longer to transmit across the network),
| so you still have to incentivize the miner to include
| your tx.
|
| Ofc there will be miners who make much larger blocks no
| matter what, but it comes down to how urgent is your tx?
| imtringued wrote:
| If we assume no blockreward then the fees will be
| whatever motivates miners to include your transaction. If
| the fee was zero, then no miner would even bother.
| FabHK wrote:
| So currently every transaction costs around $101, of which
| $1 visible in transaction fees, and $100 invisible in
| mining reward (aka seignorage, leading to money supply
| growth of 1.7% p.a.).
|
| To maintain current mining hash power, as the mining reward
| halves away to zero, every transaction would have to incur
| around $100 in fees.
|
| > still allowing miners to generate a huge (and ever
| growing) revenue, while also enabling most of the planet to
| transact next to free
|
| If blocks would grow 10x, the blockchain would grow about
| 50GB per month, every human being could do around 10
| transactions in their lifetime, and those would cost around
| $10 each. I don't see how huge and growing revenue for
| miners is compatible with "next to free" transactions.
| intabli wrote:
| I think you will enjoy this great presentation by Peter
| Rizun and Andrew Stone:
|
| https://youtu.be/5SJm2ep3X_M
| FabHK wrote:
| That was an interesting talk, thanks. Looks like with
| some optimisations they could support blocks of around
| 100 MB, yielding around 500 transactions per second.
| Would mean though that the blockchain grows by a few
| hundred GB every month.
| hajhatten wrote:
| > This reached almost $100 in the 2017 rush.
|
| Ethereum, with a bigger blocksize had transaction fees
| going up to $3,500 a couple of weeks ago. A larger
| blocksize is not the answer.
|
| https://web3isgoinggreat.com/?id=popular-nft-mint-spikes-
| eth...
| intabli wrote:
| Ethereum is account based, not UTXO based, has a
| completely different overhead and you can't possibly
| compare it to Bitcoin.
| joshcryer wrote:
| Just to clarify your number, an average Bitcoin block
| (currently) has about 2000 transactions, each of which, be
| it a transaction for half a cent, or a billion dollars,
| cost around $3 each. What you described is what happened
| when Bitcoin was actually being adopted by people, the
| mempool, that is, transactions not added to the latest
| block, started to fill up, and the market took hold and
| people who offered more to transact were included in the
| block. You don't _have_ to offer more for the transaction
| and your transaction will sit in the mempool forever.
| Offering more is simply a way to expedite your transaction.
| brian_cloutier wrote:
| It's not possible to have an uncapped block size. As blocks get
| larger they take longer to propagate through the network.
| Longer propagation means more forks, which means more work is
| wasted on forks which do not become canonical, which lowers the
| effective hash rate of the network and therefore the threshold
| for a 51% attack.
|
| 2MB is far too small, but it would be a gross mistake to
| overcorrect by removing the cap entirely.
|
| See, for example: https://www.gsd.inesc-
| id.pt/~ler/docencia/rcs1314/papers/P2P...
|
| > On an actually uncapped Bitcoin instance, Blocks (Block size)
| and transaction fees will grow exponentially
|
| Transaction fees would drop to zero. The fee is a bid in an
| auction for scarce block space. If block space is not scarce
| then the winning bid is always zero.
| intabli wrote:
| Uncapped is a pseudo name for "capped just in time". It's
| never really uncapped.
|
| If you're interested in some work being done on such larger
| blocks, you'll enjoy this presentation:
|
| https://m.youtube.com/watch?v=5SJm2ep3X_M&feature=youtu.be
| cowtools wrote:
| Mining is always a rat race against the rest of the network.
| Although this article makes me hopeful for alternative PoW
| solutions like RandomX[1] that seek to combat the advantages
| specialized mining hardware altogether.
|
| [1] https://github.com/tevador/RandomX
| tromp wrote:
| RandomX makes for a poor PoW though, as its huge complexity and
| high cost of verification run counter to the design principles
| for a good PoW.
| cowtools wrote:
| I disagree, those are relatively minor tradeoffs.
| RedBeetDeadpool wrote:
| The entirety of evolution and social progress is a neck to neck
| rat race run against a red queen. Blaming mining (of any kind,
| gold, diamonds, rare earth metals, oil, bitcoin) for being a
| rat race is like blaming you for being a mammal that uses
| oxygen. Yes you are a mammal that uses vital oxygen. So are all
| the other animals out there.
| cowtools wrote:
| Cryptocurrency mining isn't analogous to Gold mining in this
| way. The purpose of cryptocurrency mining isn't to produce
| cryptocurrency, but rather to secure cryptocurrency
| transactions by making the order of transactions hard to
| reverse by any attacker. Mining produces cryptocurrency
| merely if it is designed to reward those who secure the
| network.
|
| Mining specialization is against the purpose of
| cryptocurrency mining because it gives specialized attackers
| (a centralized group) power over the rest of the stakeholders
| (not just owners, but users).
| andy81 wrote:
| Specialized mining hardware is an environmental disaster but it
| does make 51% attacks more difficult.
|
| With POW on general purpose CPUs, anyone can rent cloud
| processing to mine for short bursts in a way that's just not
| possible for attacks on bitcoin.
| cowtools wrote:
| That is a good point, but consider the following:
|
| 1. If a cryptocurrency is dominated by specialized miners,
| then you have a centralization effect as the majority hash-
| rate can be more controlled by monopolies that can take
| advantage of their economies of scale. Because mining is
| mostly done by companies at scale, it is easier for
| governments to impose regulations on miners and control the
| type of transactions that are allowed to be verified.
|
| 2. Vendors accepting cryptocurrency can always choose their
| own level of risk by deciding how many blocks to wait before
| accepting a transaction. This allows them to "wait out"
| temporary attacks.
|
| I would say that the permanent miner takeover as described #1
| is an order of magnitude more threatening than the temporary
| attacks as you've described. But it is still quite an issue.
|
| Specialized hardware will depreciate if it is tied to a
| cryptocurrency that has been attacked. So miners are
| incentivized not to attack, lest they devalue the resell
| value of their hardware. Note that this advantage doesn't
| really apply to GPU-mined cryptocurrencies.
| nuclx wrote:
| Botnets are playing a big role in CPU-based mining as well.
| ttul wrote:
| Many of the same people who made millions swindling investors in
| copper mines and such have pulled the same truck in the crypto
| world. It seems there is plenty of dumb money around willing to
| play the same game over and over again. And yes, it never ends
| well.
| SergeAx wrote:
| This is a great moment to remind myself that "markets can stay
| irrational for much longer than I can remain solvent".
| bseidensticker wrote:
| I managed a Bitcoin mining operation a long time ago. We made
| machines that made 50% of their BTC in the first month of their
| operation, and the remaining 50% over the next 5 months. After
| that they cost more to run than they produced.
|
| The accountants wouldn't believe us when we told them that the
| machines were worthless after only 6 months.
| yuvadam wrote:
| Worthless? People still mine on S9s released in 2017.
| rtkwe wrote:
| You can mine on worse machines if you have lower power costs
| or are valuing the BTC higher than the electricity costs (ie
| you're long/bullish on BTC or you're doing it somewhat
| altruistically or alternatively not doing the math on how
| much it's costing.)
| threeseed wrote:
| Replace worthless with unprofitable.
|
| And we don't know if it's unique to his situation or for any
| miner at a certain scale.
| chucknthem wrote:
| How long ago was this? The rate of improvement on ASICS as well
| as new entrants to mining hasn't been this intense in a long
| time.
| amelius wrote:
| Worthless? Did you use ASICs?
| andy81 wrote:
| Bitcoin mining is almost entirely ASICs. GPUs aren't much
| good at the algorithm used.
| rcxdude wrote:
| GPUs are pretty good at the algorithm (certainly much more
| than CPUs), just nowhere near as good as ASICs. Mostly this
| was because the proof of work function wasn't really
| designed with any such target in mind, and the basic
| cryptographic primitives available tend to lend themselves
| to ASICs dominating everything else unless you explicitly
| design it otherwise (like ethereum's PoW which is intended
| to be memory bandwidth limited and thus best suited to GPUs
| with ASICs offering minimal benefit, or Monero's algorithm
| which is designed to be extremely branchy and thus best
| suited for general purpose CPUs).
| [deleted]
| Snowworm wrote:
| Wow. I can't delete comments in hacker news. That's so
| stupid. Anyway, I was getting downvoted for a stupid
| opinion FYI.
| jagger27 wrote:
| GPUs haven't been viable for Bitcoin mining for over a
| decade.
| amelius wrote:
| Perhaps the ASICs should be designed so that they are a
| little more general-purpose then. Perhaps capable of
| mining for the next cryptocoin on the block?
| RL_Quine wrote:
| That would make them less efficient for no reason.
| wyldfire wrote:
| But...they're application-specific, by design. If they
| were more generalized, they'd start to approach CPUs or
| DSPs.
|
| If you devoted extra area to some other algorithm, it
| would be a big cost for no benefit. Put that logic on
| some other ASIC and buy that one instead.
| rcxdude wrote:
| ASICs only offer a benefit through significant
| specialisation. Specifically with bitcion the double-
| SHA256 hash lends itself to an extremely efficient
| hardware operation which beats any general-purpose system
| substantially.
|
| In general what you want to do is design the algorithms
| differently. There's a few reasons to do this. Firstly
| your new coin probably doesn't want to run best on
| hardware which is already used by a bigger coin,
| especially bitcoin, because then there's a massive attack
| vector just looming over you as the existing miners could
| just turn a fraction of their processing power towards
| your network and destroy it easily. This means you
| generally want to come up with a novel proof of work
| function which is not easily computed by existing miners.
| The best form of this is using a completely different
| hardware resource.
|
| Secondly (and apart from the few large coins which
| generally got to this idea first, competing with the
| first point), if you care about keeping your miners
| distributed in terms of ownership and control, it helps
| if said algorithm is tuned for some general purpose bit
| of hardware your users are already likely to have for
| some other purpose. Ethereum's PoW was expliticly
| designed to be optimal for GPUs (because computing it is
| memory-bandwidth limited), and Monero's was designed to
| be optimal for CPUs. Chia's system was optimised for
| storage space instead of compute power. Lower-effort
| clones (e.g. dogecoin) tend to at least change the
| hashing algorithm used at little to provide some
| protection, but to a lesser degree (e.g. Ethereum is
| probably safe from attacks by bitcoin miners, Monero is
| probably safe from ethereum miners, but while dogecoin is
| probably safe from attacks by bitcoin miners, it's not
| safe from the other larger coins, and especially bitcoin
| forks have actually been attacked by bitcoin miners).
| cortesoft wrote:
| Ummm a more general purpose version would just be a GPU.
| The point is that it has to be specific purpose to be
| efficient.
| tromp wrote:
| It would be more like an FPGA, which is what ASICs
| replaced in bitcoin mining evolution.
| amelius wrote:
| I think it is quite a leap going from something that
| computes hashes to a full GPU.
| jagger27 wrote:
| This is sort of what Nvidia did with the cards they sold
| directly to miners. At the end of the day they're still
| GPUs (albeit without display outputs) so they could in
| theory be repurposed for work that actually benefits
| society.
|
| In practice that would never happen because by the time
| miners are done with the cards they'd be too out of date
| for machine learning or other general compute workloads,
| and useless for budget gamers because of the lack of
| display outputs. It's really a shame how much power and
| silicon is being wasted on cryptomining.
| miked85 wrote:
| You seem to be missing the point of what an ASIC is.
| VHRanger wrote:
| Necessarily so.
|
| It's been over 7 years since mining on anything except ASICs
| is a guaranteeing a loss.
| RichardHeart wrote:
| solveit wrote:
| How does proof of wait deal with sybil attacks?
| CipherThrowaway wrote:
| GP is probably referring to HEX which is one of the more
| shameless Ponzi coins. HEX is an Ethereum token so its "proof
| of wait" mechanism is not actually a consensus protocol. The
| name is a marketing gimmick that merely apes (pun intended)
| the PoX terminology.
| cowtools wrote:
| >proof of wait
|
| Care to enlighten us with a link?
| humanistbot wrote:
| Link or GTFO
| Heston wrote:
| I propose we move to a new system. Proof of Wasted Electricity
| hammock wrote:
| Goes to show you that energy is the real base metal of the
| world. Whether you are mining bitcoin or gold, or drilling oil
| - the power rests in the hands whoever controls the energy to
| pull it out of the ground/air.
| prox wrote:
| Aren't you just describing "labour" ie "work" , which is
| indeed energy.
| marvinblum wrote:
| I really like that they use Energy as currency in Stellaris
| (the game made by Paradox). I think it shows what really
| matters.
| RedBeetDeadpool wrote:
| Exactly. You could use anything as currency. Prisoners use
| cigarettes or ramen. Its not about the product being mined so
| much as work being done, and therefore work being stored.
|
| Replace any currency with any power generation you want.
|
| In prison, its the work of smuggling that stores economic
| value in cigarettes. In a gold based system, its the work of
| mining elements out of the earth that stores economic value
| in base metals. In a peer to peer network, its the work of
| electricity(of any kind whatsoever, clean or polluting) that
| stores economic value on a fair distributed ledger.
|
| Money is about storage of work, and quite frankly the weaker
| the money used to store energy, the more lethargic and rusted
| the whole economic system gets. Fiat, i.e. "proof of wasted
| energy" just does a lot of work and lets it evaporate in
| economic terms leaving the entire society that uses it in
| constant need of more and more fiat because that energy, that
| work done, keeps dissipating.
|
| It doesn't matter what money is: seashells, carved rai
| stones, arrowheads, cigarettes, ramen, non-livable apartment
| homes sold solely for wealth storage, luxury cars, art, gold,
| printed paper with your uncle sam's face and "guarantee"
| stamped on it, centralized entry in a private database,
| decentralized entry on a public blockchain. Society needs
| money in order to achieve higher levels of cooperation. Might
| as well use the strongest form of money that exists. And as
| far as I know, it aint proof of wasted electricity, i.e.
| fiat.
| Thorentis wrote:
| Energy has always been the real measure of wealth, whether
| that be in the form of human Labor: number of slaves or
| peasants you owned, number of workers you employed, amount of
| power you can generate from coal, and so on.
| snovv_crash wrote:
| The problem with cryptocurrency, unlike eg. gold, is that you
| can't melt it down and get the energy back somehow. It's just
| wasted entropy somewhere.
|
| This means that when the music stops, someone ends up holding
| a big bag of nothing, since there's no backstop.
| RedBeetDeadpool wrote:
| > when the music stops
|
| When the music stops, your account in the global open
| distributed ledger is stored in hundreds of thousands of
| harddrives distributed evenly throughout the entire free
| world.
|
| And when the music starts again, your account is still
| exactly where it was when it stopped, available to you
| wherever you want to go in the free world.
| rcxdude wrote:
| Assuming the music starts again. Not just in terms of
| whether anyone ever decides they want the money in your
| account again, but also in terms of whether you can
| actually restart the network again, if the music stopped
| particularly abruptly.
| RedBeetDeadpool wrote:
| It only takes one guitarist to start a song, and I can
| play a few chords.
| RedBeetDeadpool wrote:
| You mean fiat?
|
| Thats not new at all. We've used it for decades now it only
| leads to boom and bust cycles, while pushing the power of work
| done into the hands of people who didn't do the work.
| ben_w wrote:
| Fiat is more of "proof of a monopoly on the use of violence".
| You may not like the idea of relying on such a proof, but it
| has the important feature of still being both necessary and
| sufficient regardless of what system you use with it. That it
| isn't present in Bitcoin is actually a reason why Bitcoin is
| a bad idea as a currency, because you can't get your money
| back when you're scammed.
| RedBeetDeadpool wrote:
| > because you can't get your money back when you're
| scammed.
|
| Thats a feature not a bug. Not your keys not your coin.
| Neither scammers nor government can take it from you
| without you voluntarily giving it up.
|
| Which makes "proof of a monopoly on the use of violence"
| obsolete since no amount of force can pry it from your dead
| body.
| hkt wrote:
| > voluntarily giving it up
|
| https://en.m.wikipedia.org/wiki/Rubber-hose_cryptanalysis
| sofixa wrote:
| https://xkcd.com/538/
| RedBeetDeadpool wrote:
| Which is why you store just a little in one address to
| "give up". And store the rest elsewhere. And never tell
| anyone how much you really have.
|
| For example, you hold 100 bitcoins. Randall Munroe's
| wrench hacker holds you up for bitcoin because he knows
| you have some. You give him 0.1 from an address. He lets
| you go. You keep 99.9 of your bitcoins, but your attacker
| thinks he took got the whole bag.
| ben_w wrote:
| If attackers so much as think that's _likely_ , they will
| look at victims the way children look at these:
| https://www.amazon.com/dp/B07NVB4WH1/ref=sbl_dpx_m_toys-
| part...
| RedBeetDeadpool wrote:
| At what point does one decide a pinata is empty if there
| is 0 evidence available that a pinata might not even be a
| pinata?
| ben_w wrote:
| Why does that matter to the pinata?
| notreallyserio wrote:
| It's not like these folks don't know you can have
| multiple wallets. How many whacks to the head would you
| or your family have to suffer before you admit you have
| more coins somewhere?
| RedBeetDeadpool wrote:
| Or better question. How many whacks on a rock would an
| "attacker" have to make before they decide its not going
| to print any money and they are just wasting their life?
|
| Keep in mind, no one knows if this rock prints money or
| if that other rock prints money. One of the rocks you've
| been told can print money but you dont know which one.
| How many rocks are you going to whack? or maybe its just
| easier to drive an uber and make money.
| ben_w wrote:
| > Neither scammers nor government can take it from you
| without you voluntarily giving it up.
|
| What exactly do you think a _scam_ is?
| ben_w wrote:
| (Someone, I didn't catch the username, posted "The
| Federal reserve and taxation", but deleted it before I'd
| finished writing this. I think this response is worth
| posting even though they changed their mind):
|
| That's a very short list.
|
| What do you call it when someone offers goods or
| services, but does not deliver them? Or delivers less
| than advertised? Or sends official-looking demands for
| payment of parking/speeding fines without due authority?
| Or sends a fake invoice, based on a real invoice, at the
| time a customer is expecting and for the amount expected,
| but with a different receiver?
|
| I would call each of things "scams".
|
| All of them have happened.
|
| A good system needs a way to make people whole when they
| have been wronged.
| [deleted]
| ookdatnog wrote:
| I'm sure there exists an amount of force that can pry it
| from your living body though :)
|
| Also the Ethereum DAO debacle proves that crypto needed
| less than ten years for "too big to fail" (preferential
| treatment for the sufficiently influential) to
| materialize and essentially undermine all promises of
| cryptocurrency. You can get your money back when you're
| scammed or hacked, provided you have enough influential
| friends.
| RedBeetDeadpool wrote:
| > I'm sure there exists an amount of force that can pry
| it from your living body though :)
|
| No there isn't, because you don't know how much I have. I
| can always give up some and claim I gave up everything.
| To do what you claim you literally need to be omniscient.
| And if you are, then at that point you wouldn't be prying
| it from me.
|
| See my comment to someone else posting
| https://xkcd.com/538/.
| ookdatnog wrote:
| To be clear, I am assuming we're talking about the
| security of the system as it relates to its users in
| general, not you specifically. I'm completely happy to
| yield that you are entirely unassailable.
|
| For the vast majority of people, it's not too hard to
| make an educated guess about their wealth based on their
| house, their car, the area they live, their lifestyle,
| their age, their job, etc. For most people, this
| information isn't hard to find. If you're torturing them
| to give you access to their crypto wallets, and they give
| up less than you expected, you just keep torturing. You
| may argue that people should be protective of this
| information, but they aren't and will probably never be.
|
| (As an aside, I don't actually believe torture is a
| viable large-scale threat to cryptocurrency.
| Pointlessness is though.)
| jagger27 wrote:
| That's the current system.
| toss1 wrote:
| Yeah, but maybe we could do something more spectacular with
| the electricity - maybe run giant Tesla coils and reward who
| can create the longest / most durable / most spectacular /
| etc. sparking events . . .
| hypertele-Xii wrote:
| That's the joke.
| thfuran wrote:
| Then how about proof of steak, based on holding beef call
| options?
| MetaWhirledPeas wrote:
| Let's call the coin "Entropy".
| woodruffw wrote:
| This is a really excellent summary of _just one among many_
| sufficient reasons why bitcoin's economics are fundamentally
| untethered from reality. Just the last points alone are
| condemning: no legitimate scheme in history has seen its
| executives cash out _real_ money against such a small proportion
| of expected future earnings (in scrip).
| repomies69 wrote:
| This article has really nothing to do with Bitcoin itself. It
| is just a story how stupid investors are pouring money to
| companies that have the Bitcoin in its name, without really
| going through the business at all.
|
| These companies have been ridiculously lousy investments.
| Borderline scams, when you look at executive compensation.
| catlifeonmars wrote:
| > This article has really nothing to do with Bitcoin itself.
| It is just a story how stupid investors are pouring money to
| companies that have the Bitcoin in its name, without really
| going through the business at all.
|
| How do you figure? Much of the (featured) article is centered
| around hashrate to bitcoin production ratios over time.
| Literally one the central features of bitcoin.
| woodruffw wrote:
| It has "nothing to do with Bitcoin itself" in the sense that
| it's about the economics of mining, which has everything to
| do with bitcoin and its valuation.
| wallacoloo wrote:
| it's about the economics of mining _using an external
| source of capital_. the more significant interaction is not
| between the ASICs and the bitcoin rewards, but the
| companies and their investors. in that sense, it's more
| accurate to say it has "everything to do with public stock
| markets".
|
| the author gives the oil analogy. the oil wells themselves
| have very similar economics to mining. it's the
| relationship between these similar operations and the
| investors which sets them apart more than the activity
| they're involved in.
| MuffinFlavored wrote:
| Given all of the "problems" surrounding BTC/crypto, when will
| they actually matter enough to make BTC/USD stop being $30k and
| go to $10k or $0?
|
| It dropped to $25k for like... what feels like a split second
| and people are still FOMOing into it, running it up to $30k
| (unless it's some kind of manipulation by whales to trap
| people's money... who really knows?)
| woodruffw wrote:
| This is the eternal problem with all scams: the music doesn't
| stop until it stops, and anybody with _accurate_ information
| about when is unlikely to be on "your" side.
| mirceal wrote:
| > bitcoin's economics are fundamentally untethered from reality
|
| are they thought? What's untethered from reality is the
| understanding of how bitcoin work. Everyone wants to throw in
| 100$ and wake up to millions in 5 years. That just does not
| work anymore.
|
| One can model all costs involved when it comes to mining and
| can make a decision based on cost vs expected profit. Bitcoin
| (and cryptocurrencies) are not vending machines. The math to
| model this is harder and there is a lot more uncertainty. Can
| it be done? Probably. Will we have winners and losers in the
| mining game? of course.
| woodruffw wrote:
| > are they thought? What's untethered from reality is the
| understanding of how bitcoin work. Everyone wants to throw in
| 100$ and wake up to millions in 5 years. That just does not
| work anymore.
|
| Economics is a social activity, not an abstract property of
| an asset or instrument. If the body of people using or
| interacting with bitcoin are fundamentally misguided about
| its economic properties, then the economics of bitcoin itself
| are fundamentally misguided ("unreal").
|
| As I read it, the article's point was this: the economics
| behind large mining initiatives are bunk (it would be more
| profitable to simply buy bitcoin at current prices using the
| same capital). _Simultaneously_ , it is true that bitcoin's
| mining activity is a supporting factor in its valuation. In
| other words, bitcoin is doing the economic equivalent of the
| toothpick trick: two supposedly supporting factors are
| actually _mutually vulnerable_ to the same outside pressure
| (the availability of gullible investors, or lack thereof).
| paulgb wrote:
| Thanks! FWIW, this is a follow up to an older article that
| covered a number of other issues with bitcoin's economics:
| https://paulbutler.org/2021/betting-against-bitcoin/
| t_mann wrote:
| Some of the top-rated comments make me wonder whether the authors
| have even read the article. This isn't about whether PoW or
| cryptocurrencies as a whole make sense, but strictly about the
| economics of mining, and how standard accounting practices might
| obfuscate miners' true profitability. The author sounds like an
| investor who would be equally happy to hold long instead of short
| positions in those stocks if their prices were different.
| wmf wrote:
| Of course they haven't read the article and even if they did,
| most people won't discuss the details of something if they
| object to the fundamentals.
| wyager wrote:
| This should probably be titled something like "the problem with
| an accounting strategy that I made up, which some people might be
| using, I'm not sure".
| gitfan86 wrote:
| Sure, maybe the books of these companies are not as cooked as
| implied in the article, but the question remains:
|
| How does a company who spends 31k mining BTC that is currently
| worth 30k and pays their executives tens of millions in
| compensation work out in the long run?
| mirceal wrote:
| here is the thing. there are good investments and bad
| investments. good execution strategies and bad execution
| strategies. i have no doubt that a lot of these companies
| will go belly up. happens in every new domain where there is
| a lot of uncertainty and FUD.
|
| So the question is not: how does a company ... work out in
| the long run? the question is: which company actually does
| things in a sane manner and will survive to be a dominant
| player in the space once the dust settles?
| salmonlogs wrote:
| Operating cashflow and depreciation curves are the most basic
| accounting principles out there, the author did not make
| anything up - he is applying a logical analysis to publicly
| available data.
| mirceal wrote:
| sorry, but what works for the printing press does not work
| for ebooks.
|
| If someone were to talk to you about the cost of printing and
| distributing books and how much X costs and depreciation over
| 10 years, you as an ebook seller would laugh them out of the
| room. Sure there are things that still apply across all
| businesses, but people seen to dance around the fact that the
| reason why depreciation model does not work for bitcoin
| mining is that it's highly correlated to advances that were
| made in the mining hardware + the huge role the cost of power
| (geographical location in the end) has on the whole
| profitability of things.
| salmonlogs wrote:
| This is an invalid argument.
|
| Mining needs hardware, which loses value as new hardware is
| released and mining gets harder. Thus, it depreciates over
| time.
| mirceal wrote:
| the point is that you cannot compare apples to oranges
| and the constraints around bitcoin are NOT the same
| constraints like the ones around a vending machine. (so
| that applying the same model is probably a flawed
| approach)
| benreesman wrote:
| I think this is what we call "self-limiting". Maybe miners are
| subsidizing their mining by BTC appreciation (though, it seems
| it'd be easier to just buy BTC), and if they are then some people
| are going to find new jobs when the price changes slope.
|
| Problem solved.
| andreyk wrote:
| The post makes this exact point actually, so seems the author
| agrees.
| benreesman wrote:
| I mostly agree, my little TLDR is a matter of emphasis.
|
| This article should be like a tweet: "Watch out for MinerCo,
| their depreciation schedule looks wonky, I'm short!"
|
| And then maybe footnote if it's not obvious.
|
| But it's Movie Trailer Voice: "The Problem with BitCoin
| Miners".
|
| Wait there is one problem that so exceeds in importance all
| the other pros and cons that it's The Problem?
|
| Oh no you're short some companies and want people to sell
| them. Jim Cramer's got to retire someday.
| mdoms wrote:
| This is covered in the article.
| woodruffw wrote:
| "Self-limiting" is a game-theoretic property, not an economic
| property. The point of the post is that there's a fundamental
| economic unreality in how these mining companies are valued,
| and all signs (such as hearty executive bonuses) point to the
| fact that their leadership is _aware_ and is emptying the bag
| before leaving others holding it.
| vmception wrote:
| Yeah publicly traded bitcoin mining companies are a very new
| phenomenom, and investors are undiscerning and being taken
| advantage of.
|
| Its fine though, as long as those investors find new investors
| who only care about revenues. The actual company is a conduit,
| the revenues still occur but nobody had been asking what happens
| to the actual money. Lucrative game.
|
| Good article, calls for nothing except FYI to investors.
| dbv1 wrote:
| How are the investors being taken advantage of exactly?
| Investors normally primarily care about profits, that's not
| abnormal.
| vmception wrote:
| Investors care about corporate governance and management of
| the finances as well, corporate profits for share buybacks
| can accelerate investor profits
|
| The article details this basically pointing out that c-suite
| payouts are high and this is currently being tolerated but
| _maybe_ by ignorance
| davidgerard wrote:
| nice to see an article about bitcoin mining's _shonky accounting_
| , and not about PoW itself.
|
| the other weird accounting thing: in 2021, bitcoin miners started
| stockpiling unsold bitcoin.
|
| This was new behaviour. Miners didn't hold onto cryptos for ages
| in the ten years previously - maybe for a short time, but then
| they sold it.
|
| I can find no sensible reason for this, except that there aren't
| enough actual dollars in the crypto market to sell the bitcoins
| without crashing the market.
|
| (I ask coiners about this from time to time. Most answers are
| some more complicated version of "there aren't enough actual
| dollars not to crash the market." Some of them confidently state
| that miners have magically transmuted some time in June 2021 from
| uncompromising economic agents into bitcoin moon boys, who are
| sure it'll go to a million. I don't believe them.)
|
| The miners have tended to borrow against the bitcoins - from
| other companies in the crypto industry. Because they all know
| they're all in this together.
| paulgb wrote:
| Thanks David, means a lot because I'm a fan of your work :)
|
| One thing that will be interesting is what happens when they do
| start selling hoarded bitcoin (and unless a new source of
| capital appears, they will need to). RIOT already quietly sold
| $9M of cryptocurrencies in Q1 of this year. Given the mining
| hardware they have already ordered, I suspect they'll be doing
| more of that into an already distressed market.
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