Bitcoin Hash Rate Rapidly Growing Despite Price
cryptoslate.com
cryptoslate.com
But betting on future price, speculation, also is important.
Also there maybe could be influence from changes in energy pricing.
Marginal return. The ASICs could have been bought for $10 with the expectation of making $1 a year and paying out 50¢ for electricity (a 5% yield). Now it’s making 51¢ a year (a 0.1% yield). Not enough to make economic sense, but enough to keep running the rig; 0.1% is more than zero.
Broadly, I was pushing back against the author’s inchoate claim that “the continued growth in hash power demonstrates a strong, continued belief in Bitcoin by miners worldwide.”
An article about an ASIC startup that made HN mentioned an 12-24-month lag, IIRC, between design and mass production at scale.
So we're not even past the point of seeing the effect of the peak bitcoin value.
I do not believe the increase has anything to do with better mining hardware since the top mining hardware has not really changed much in over two years.
My guess is either:
1. Most people have already invested in the hardware and are therefore okay mining at a loss with the hope that the Bitcoin price will rise again in the future.
OR
2. A lot of miners are using renewable energy in which case it wouldn’t make sense to stop. For example, if you are using wind or solar or hydro energy, then the energy is still going to be available even if you turn off your mining hardware.
That's only true if you can't sell the energy for more than bitcoins mined for that energy.
And buy bitcoin for that money ... :)
3. VCs invest in miners, and the investment money is used to pay the costs until the price rebounds.
The Bloomberg article says
> the defendants conspired to launder the equivalent of more than $95,000 through a web of transactions
So while they may have done some mining, I think the majority came via other sources.
That is certainly an interesting perspective though – that the increase in hash rate is due to people wanting to evade traditional currency systems to fund their illicit activities. It would not surprise me at all if some governments were involved in this too.
The Conspirators funded the purchase of computer infrastructure for their hacking activity in part by “mining” bitcoin. Individuals and entities can mine bitcoin by allowing their computing power to be used to verify and record payments on the bitcoin public ledger, a service for which they are rewarded with freshly-minted bitcoin. The pool of bitcoin generated from the GRU’s mining activity was used, for example, to pay a Romanian company to register the domain dcleaks.com through a payment processing company located in the United States.
63. In addition to mining bitcoin, the Conspirators acquired bitcoin through a variety of means designed to obscure the origin of the funds. This included purchasing bitcoin through peer-to-peer exchanges, moving funds through other digital currencies, and using pre-paid cards. They also enlisted the assistance of one or more third-party exchangers who facilitated layered transactions through digital currency exchange platforms providing heightened anonymity.
It doesn't make sense to mine at a loss, as in that case they can buy more bitcoins at market price, rather than mining them.
If that is actually the case, then the "operating at a loss" part is not really an issue: I suspect all means of money laundering have a sizable built-in cost.
[edit]: both theories are discussed at length in other comments below.
If not, what kind of business provides you with hashing equipment from dirty money?
For example, if you go to Ritchie Street in Chennai, India there are plenty of stores that will sell you a top of the line GTX 1080 GPU for cash. No record of the transaction, and no taxes. A lot of stores will probably even accept USD.
You wouldn't be able to launder boatloads of cash this way, but with enough motivation you could do this on a regular basis and offset some cash.
This is a very profound loss of individual freedom, almost as important as losing right to free speech would be, yet strictly no one on the political spectrum seems the least concerned about it.
Be careful equating money with free speech.
Citizens United in the US has had equally-troublesome consequences, based on the premises that corporations are people and money is their speech.
Conflict of interest plays a role here, and that's unfortunately something that has been under constant 'redefinition', especially in the last 20-40 years.
Taxes are 5-18% on top of that.
That part is easy. Other businesses don't know if your money is dirty, the issue is transactional, i.e. buying without a receipt in the tax domain you're in.
So, if you can somehow take 'dirty USD' and buy ASICs anywhere outside of America, it will probably work.
The purpose of Money Laundering is to get money into a bank account that the government will recognize as legit, but 'dirty money' can still be used for whatever reasons for nefarious purposes, a lot of it even from 'good businesses'.
Buying a few ASICS in cash from individual stores will not raise eyebrows like walking into a Ferrari dealership with cash might.
It does seem like a powerful opportunity for nefarious activity, and this may be keeping the price propped up on some level.
Organized crime is big business and they aren't stupid.
Sadly.
Or you can just do a festival and claim that you had a lot more visitors. It's hard to count people after all, and easy to print fake tickets.
So, I simply think that ASICs are not the things used for money laundering, because their output is very constant, and the hashrate is public knowledge, so easy to verify how much money you made.
secondly, when you do buy mining hardware or buy hashrate (cloud mining), most manufacturers and service providers ONLY take bitcoin, so if the money was dirty it still never passed through a reportable system. when you pay for invoices with cryptocurrency there is no billing address or any other information about the buyer. if you funds came from a botnet, a hack or even drugs but stayed in the system, there is no necessity to link your identity to anyone. you can ship your hardware to any address, or straight to a data center, and even if you think that will reveal your identity even the mining proceeds can go to any random address recipient and this is all new money.
instead of trying to reveal the flaws, try imagining it as if you had five million dollars in bitcoin to launder and i2p/TOR and see how you could remain anonymous without messing up your OPSEC on either the blockchain or from your other activities.
At Bitcoin’s peak, a single block was worth almost a
quarter million dollars and miners may view the current
market as a way to accumulate more Bitcoin at lower prices
It won’t. It’s a bubble. No real commodity or currency increases 20x in value in a year. It’s funny-money, Just like the dotcom Boom in the late 1990s.
Bitcoin is basically unused as a currency except by criminals, and has no functional advantages over other payment systems for honest people. Just like stock of pets.com in 1998.
In the real mining industry we see the same effect, where there is a commodity price (for say Nickel or Iron), and the suppliers, faced with very high capital costs, will continue to produce until their marginal cost is underneath the marginal revenue. At this stage they slow or mothball mines, smelters and refineries. That comes at a huge cost.
The last mines left are the ones with the most efficient costs/tonne, which is combination of access to ore, the type of ore, the closeness and efficiency of smelters and refineries and so on. A big part of it is the scale of the operation, and how up to date the equipment is, but also how well it is all operated.
Aluminium refining is particularly relevant, as electricity is one of the main input costs. We have seen refineries close down and sell their power back during extended periods of high electricity prices and relatively low aluminium prices (e.g. when Enron dove up Ca. prices). Newer/larger aluminium plants are fr more efficient, but the price of electricity is everything.
(I've led turnarounds at very large nickel and alumninium smelters/refineries and helped others with their turnarounds on mines/operations)
In the case of bacon mining the main factors are, once the computing equipment is acquired, the price of electricity and the conversion efficiency per kWh.
https://en.bitcoin.it/wiki/Mining_hardware_comparison
The top one (other than the Dragonmint miners which are not listed) is the Antminer S9 which you can see was released over two years ago.
If you are aware of some new mining hardware that is much faster please let me know.
Other than that, a person might not have access to the equivalent volume of BTC but have easy access to energy/miners. Additionally, depending on how you predict hash rate and BTC price to evolve, mining might have a better ROI.
My best explanation is that we are noticing the runup to another peak.
Money can't buy enough coins through mining equipment anymore, and therefore will eventually buy existing coins directly, causing another peak.
1) The supply of the miners are usually delayed by a month or two in some cases. So people buying miners when bitcoin was 18,000 to 12,000 in Jan, would be receiving their miners in March or later.
2) Prices of miners have fallen because of the price of bitcoin. You can buy an s9 miner for just USD 600 right now (https://shop.bitmain.com/product/detail?pid=0002018062817430...) which might have resulted in people increasing their investment in miners, increasing the hashrate.
The amount of power used on bitcoin miners isn't good for the world, unless it funds alternative energy infrastructure that eventually gets repurposed for other reasons, but I doubt that is the case.