Texas Bitcoin Mining Startup Gets $50M from Peter Thiel | Hacker News Reader

Texas Bitcoin Mining Startup Gets $50M from Peter Thiel

fortune.com

9 pointsmomentmaker5 comments

Something I don’t really understand about bitcoin: why isn’t bitcoin tied to the cost of electricity?

If a bitcoin costs $8000 to buy on an exchange but I can mine one using a $300 graphics card and $4200 of electricity, why doesn’t 1BTC cost something closer to $4500? Does that 2x delta account for miner salaries / rackspace rent / AC bills?

The same reason that certain stocks are overvalued and undervalued. Speculation.

That and the fact that Bitcoin is a non-sovereign, hard-capped supply, global, immutable decentralized digital store of value.

It's an insurance policy against monetary and fiscal policy irresponsibility from governments and central banks globally.

Answering my own question after some research — I think the main answer is that the probabilities are so sparse that there’s no point mining unless:

(a) you have a large amount of hardware, which will incur a large capital cost that puts up such a large barrier to entry only a few orgs can realistically participate; or

(b) you join a mining pool, whereby your rewards for mining are diluted such that it’s more cost effective to obtain BTC by spending dollars, than it is to mine your own.

https://www.coindesk.com/information/get-started-mining-pool...

The premium charged for buying BTC on an exchange (vs the theoretical hardware-plus-kWh costs of mining your own) reflects the market power of the large mining operations’ ability to deploy the capital needed to do any kind of fruitful mining.

It's a little bit more complicated than just the cost of electricity, since that affects miner profitability more than what a Bitcoin costs on the open market.

If you look at the historical prices, Bitcoin was around $3000 in February 2019, so it’s not like the price of Bitcoin and the hardware and electricity costs are highly correlated: https://www.coindesk.com/bitcoins-price-longest-ever-bear-ma...

As I said in another post, Bitcoin is a non-sovereign, hard-capped supply, global, immutable decentralized digital store of value. It’s an insurance policy against monetary and fiscal policy irresponsibility from governments and central banks globally.

In the world that we live, that’s gotta be worth something.

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