Sequoia Capital China Said To Invest In Bitmain's $400M Round At $12B Valuation
chinamoneynetwork.com
chinamoneynetwork.com
Given that it's mathematically impossible for BTC to succeed until they change their POW, this doesn't make sense as a political play. Most likely Sequoia is just paying for BTC in advance to get a deeper discount than they'd normally get for buying in volume. It's also possible that they're just selling the BTC as they go and hoping for a short payback period, but while this makes sense financially it's unclear how it would relate to their overall portfolio strategy.
Sequoia's China team is has more bankers than Sequoia's U.S. team. The investment may have been made with cash-yielding convertible debt.
Citation desperately needed, and not random rantings, please.
8 gigawatts is a lot.
Blockchains don't scale. Period. If you know of a way to make them scale, publish it and you'll find instant fame and fortune.
The power consumption will continue to increase, and that is purely the fault of POW.
If that's your position then changing the POW won't help.
(I know no one cares, but there could be a pragmatic scaling path where you increase on-chain throughput while you do sharding/layer 2 research.)
They don't need to scale linearly with off-chain transmissions acting as a secondary transmission network.
It's just math. The amount of electricity needed to secure the network is directly proportional to the price (or more technically, the profitably of mining). This is because if you don't arbitrage out the profitability of mining, then the network is open to a 51% attack because the marginal cost of adding more hash power makes it profitable to keep adding more miners until you have control of the network. Basically the way the current POW is designed, BTC is only secure as long as it isn't obvious in advance whether or not mining at scale will be more profitable than buying BTC after it's been mined.
So given that for BTC to become a successful reserve currency it would need to be worth at least 100x what it's worth today, that means it would need to use at least 100x as much electricity. But that's more electricity than currently exists, and there's no way it would be feasible for BTC to even use a fraction of that.
This means that BTC can't actually ever reach those price levels, because if it did then it would no longer be secure, so would need to immediately drop back down in price in order to account for (and mitigate) the security risk.
This is not a variable that will remain constant once it starts becoming profitable to invest in power generation solely for the purpose of bitcoin mining.
I'm afraid I can't understand how you made such a conclusion. Why bitcoin can't be worth 100x than now using only 2x more electricity?
Or the same thing, but stated the other way round, as the profitability of mining increases (due to price rises), more participants are attracted to the market, raising the hash rate and bringing profitability of mining back down to the marginal equilibrium.
Essentially the argument is that cost of mining/attacking is always in rough equilibrium with price, because whenever it isn't someone will take advantage of that in a way which will have the feedback of narrowing the gap again.
Price and electricity usage ARE NOT perfectly elastic. Electricity usage is a product of total hashes mined and difficulty rate. These continue to go up, even when Bitcoin price is falling (see 2014-2015). Additionally, the electricity used did not rise 19x in 2017 even as the price did so.
The algorithm will compensate and the difficulty will adjust so that the same number of bitcoins is generated, but the new equilibrium will happen at a point where 100x more electricity will be wasted compared to the original state.
The only thing that can change this equilibrium is the halving of the block reward happening every 4 years, or short term adjustments like the ones you mention, where the market is slowly building capacity or does not have enough trust in a price increase to invest in new capacity. On the long run, in a given 4 year window, these even out so that 100x price means 100x electricity.
This is why Ethereum founder calls bitcoin deadcode...as it will continue its decline unless it moves to PoS
Your premise is wrong to start with... BTC could be very successful without necessarily being a major worldwide reserve currency!
«But that's more electricity than currently exists»
Not true. Bitcoin currently uses only about 0.2% of the world's electricity consumption (http://blog.zorinaq.com/bitcoin-electricity-consumption/#upd...). 100× would be 20%. Some miners are currently building their own power plants for their mining farms. Getting to 20% is definitely possible.
Good way to start off this rebuttal.
>> The amount of electricity needed to secure the network is directly proportional to the price
OK, this is a good argument, actually. But you are neglecting future improvements in energy, adoptions in solar, and the fact that electricity is not a statically-defined generation amount; there are many, many megawatts available that are not being tapped into - particularly in hydro - due to infeasibility of transmission. This is trivially evident in the number of people moving to Chelan County, Washington, as well as Quebec, amongst other initiatives and movements.
Your "just math" argument neglects... a lot of math, which is what I figured.
Obviously the price of electricity is unlikely to 100x, but I think it's entirely reasonable that jurisdictions start placing taxes on electricity use for crypto miners specifically, which would have the same effect, without affecting the rest of the economy.
Miners will also probably start investing in, and operating, cheaper power sources that are not connected to the grid, if/when those taxes get too burdensome.
Loosing money buy truckloads every day === success?
If you look at it slightly differently: this is a company who was able to be successful in the cut-throat B2B hardware integration business. Even if some of the key aspects of that hardware might not be relevant, they have demonstrated agility at scale, which is valuable. Every company with the same scale in China has been able to negotiate full pivots repeatedly: maps become platform, search engines conversation agents, integrators turn into high-street brands, etc.
In addition to the block reward, the miner who finds each block also gains a fee from every transaction in that block. Ideally this fee stays low, but it depends on network congestion (and what miners are willing to accept, since they choose the transactions that make it into each block). The transaction fee has already hit the equivalent of $50 per transaction, back in late 2017.
Even with improvements such as batching, segwit, and lightning, there is still likely to be sufficient returns to incentivize miners for the foreseeable future.
The carrying cost (or at least opportunity cost) is high for holding large inventories of cash, so it's not very attractive from a business perspective to do so unless there's either a market or regulatory demand to do so.
The 27 year old American accountant who desires to quit his desk job will send $4,000 of his salary (or more) to buy some Chinese-made machines. The 200 or so major shareholders of Bitmain profit instantly.
The accountant barely profits on his transaction. [1]
[1] some will profit more than others depending on length of time holding assets, but statistically someone ultimately holds the bag.
We are free to trade Bitcoin and other cryptocurrencies, or exchange USD for pretty much any other currency in the world, and most goods/services. Chinese citizens are, well, not.
Bitcoin is not something a free economy with mostly free trade fears. It is something a controlled, planned market very much fears.
The ability to print money and collect tax is the cornerstone of political power.
The cryptocurrencies attack those foundations and, thus, are going to be prevented from becoming mainstream.
echo “127.0.0.1 auth.minerlink.com” >> /etc/hosts
Anyway, Bitmain better watch out. Cryptocurrencies are now regularly implementing hash function changes. GPU mining is dying, but not to ASICs but to the more configurable FPGAs instead.
It is not the strongest that survive, but the ones most responsive to change.
https://ravencoin.org/wp-content/uploads/2018/03/X16R-Whitep...
Cycles through 16 different algos based on hash of prior block.
https://www.coindesk.com/crypto-kill-switch-monero-going-war...
This might happen, but Bitmain's future does not appear to have much to do with blockchain. The company supposedly diversifying into ASIC designs for AI/ML/flavor of the month applications and is expected to do well in the post-Trump political environment, hence the attention by investors.
At the heart of all the cheap Chinese android phones is generally a qualcomm chip, much to the chagrin of the Chinese government. BitMain is likely well positioned to take advantage of their governments increased attention and investment in the high tech sector.
They are hiring a lot of people, even fresh grads, from top universities in China to build ASICs for AI/ML. I got told that the time creating those is already 5-times bigger than the BTC asic team.