Bitcoin price crash forces miners off network | Hacker News Reader

Bitcoin price crash forces miners off network

decrypt.co

79 pointssanefive79 comments

Thank goodness. This waste of electricity and natural resources needs to go away.

it was always funny that people with a prepper mentality touted bitcoin as some sort of rock stable currency in times of crisis when government money was going to be worthless despite the fact that it basically takes an electricity source the size of the country to keep the whole thing running.

What are you going to do in the post apocalypse, get a team of people with an abacus to calculate hash functions?

I would expect bitcoin to work properly with as few as 3 people... And any computer can calculate hashes.

3 people with electricity, networks, and computers.

You don't think 3 people could figure out electricity and computers and networks whether local or even satellite links? That would be one hell of an apocalypse.

I don't think my entire IT department could figure it out in a disaster scenario

After the power is out, and without internet access or delivery services?

As happened in parts of California last year?

How are you imagining they would do it?

I dunno. Go to a library?

I presume you are trolling.

This is a point I see a lot of people miss about Bitcoin's power consumption. It doesn't have to use as much electricity as it does, as the difficulty is adjusted to mining capacity.

The reason why so much electricity is being used on BTC is a result of an arms race between miners, not a necessity of the technical specification. Bitcoin would still operate correctly with less mining capacity. What is sacrificed is that the threshold for mounting a 51% attack becomes lower with less miners. But again, the network itself does not need a nation-state's worth of electricity to operate.

Practice significantly complicates theory here.

A price crash that forces a bunch of miners off the network means that, not only is a 51% attack cheaper, but the spare capacity to launch one exists, and is just sitting there unused, losing money.

A volatile combination.

For security, the cost of the hashing needs to be greater than the value of being able to subvert the bitcoin network with 51% attacks.

If the cost of the hashing power is less than the value, then the incentive is to just buy the hashing power and do the 51% attacks.

So to the extent that bitcoin has any value at all, it's going to either burn an amount of electricity greater than the value of a network compromise, or it's not going to be secure.

How quickly would the difficulty adjust? My understanding is that there is an algorithm that slowly adjusts difficulty. If a big chunk of the ASIC miners went offline and mining reverted to individual GPUs, it might be a very long time before the difficulty reverted to something reasonable.

Bitcoin difficulty adjusts every 2016 blocks, nominally 2 weeks. Each time it can adjust by a factor of at most 4 (in either direction). Many other cryptocurrencies adjust difficulty every single block.

No, that's not true. The problem isn't there protocol, it's the security argument. Bitcoin works with three people with one computer each, as long as none of those people has access to two more computers. As soon as one of the three can get three if their own computers, the chain's security arguments are broken. PoW doesn't work on compute, it works on scarcity of compute.

Uh.. any single person who owns more than 50% of the computation can basically mess everything up, unless I'm mistaken?

So, maybe you mean 3 independent parties.. but what's to stop those 3 people from colluding for their own benefit, etc..

Anyway you need a hell of a lot more than 3 to run it.

How much, oil, electricity, and blood does it take to prop up the US dollar???

How much more does the dollar and all it's infrastructure do than bitcoin?

Many, many, many times more. Bitcoin could barely cope with the transaction rate of a mid sized town.

A lot, that is why it is backed by the Country with the largest economy in the World...mean while Bitcoin isn't backed by anything except false marketing, it certainly isn't a P2P electronic system of cash.

Have you actively avoided learning about peer-to-peer digital cash or do you somehow feel threatened by it?

If you think someone is mistaken, correct them. Personal attacks are neither polite nor likely to convince anyone.

Hum... I don't know if I'm reading your comment correctly, but Bitcoin is absolutely not a P2P protocol.

The entire community needs to confirm an operation before it's complete. This can be only named P2P if you remove all the meaning from the expression.

tesla solar cryptoshingles

could you baseline that against solar output on a clear day?

1 TSC = 1 day of solar panel power with a clear sky at sea level at the equator, or something

I'm not really a big bitcoin guy (own a few hundred dollars worth), but this seems like a straw man.

I really doubt that anyone is buying bitcoin for the collapse of industrial civilization. The more prepper-case for bitcoin comes from either very high inflation, financial instability, and/or severe capital controls. It's not implausible that these conditions coexist with the continued existence of industrial civilization.

It's not implausible because it's happened many times before in history. For example, if you were a Jew in Germany circa 1936, Bitcoin would have been very very valuable to you. In much the same that diamonds were valuable to those in that time and place, because of the ease by which they could be hidden and smuggled against the authorities' wishes.

But a service like Paypal would likely work just as well but with the added benefit of being much more stable. That, combined with gold is really enough for most middle class people in Asia.

Once you start getting into the tens of thousands of USD, you can afford to obtain bank accounts outside of the country tied to a business. These are widely available and there's an entire cottage industry of lawyers who can provide everything you need.

You don't see the value proposition of peer-to-peer digital cash, cool.

Bitcoin needs a highly reliable network to work properly. Without block propagation, you cannot do anything with it.

Thinking that there would be a network when even the slightest disruption to civilization happens is simply naïve. The internet would probably be the first thing to go. Even before electric cars.

Bingo. Gold is pretty straightforward -- shiny metal. You don't need any understanding of cryptography, networking, distributed services, or modulus calculus to "get" gold.

You also don't need electricity (or most other modern luxury) to modify, trade, or use gold -- plenty of gold changing hands throughout the ages.

Cryptographic currencies have their use, but if the economy is looking shaky I'd rather have cash, gold, silver, cans of beans, or ammunition; BTC wouldn't even rank top 25.

a service like paypal would not have helped in a (dramatic) example like the hypothetical jew in nazi germany. the nazis would have given paypal a list of known jews and told them to freeze their accounts if they wanted to continue doing business in germany.

Oh come on man, you think that Germany directing a foreign country to freeze assets during the lead in to a war is a more likely way for a Jew in Nazi Germany to lose their hidden savings as compared to them trying to smuggle a USB wallet as they get stripped of all their belongings, clothes, and dignity and loaded on a train? Are they gonna hide it in their butthole and hope they don't have to take a dump until they get out of the concentration camp 7 years later and can finally get around to a computer so they can plug it in and access their bitcoins?

Get the fuck out of here.

I mean, it's no secret that foreign banks absolutely did help Nazi Germany in many ways, including transacting assets seized from Jews in Germany. We also have no shortage of stories about large transaction companies like PayPal closing or freezing people's accounts due to unspecified (but apparently political) reasons.

I wouldn't say "GTFO" quite yet. Not without some more explanation for why you think it's so improbable.

You don’t need a physical token. All you need is the seed, which you can store in your head. Educate yourself.

Because a public personal ledger of every cent you ever transacted is perfect for protecting you from an authoritarian regime willing to use force against you...

See Monero. Transaction senders, recipients, and amounts are hidden by default.

It's obviously not as simple as you conjecture. For the simple reason that the blockchain is simply a record of transactions on anonymous public keys. Generating a new private-public key pair can be done trivially and secretly.

Everyday thousands of illicit transactions are carried out on the blockchain. The US government has never shown a shortage of force when it comes to stopping drug dealers. Yet the number of people who've been arrested based on blockchain analysis can be counted on one hand.

You need to think more along the lines of Zimbabwe during massive inflation of local currency.

If this is true, which I welcome because Chinese miner centralization has been a massive worry for us since about 2012, that still has yielded they highest hash rate (the computing power dedicated to mining Bitcoin) in the History of BTC:

https://bitinfocharts.com/comparison/bitcoin-hashrate.html

Its easy to skew this if you don't understand the underlying tech, but Bitcoin continues to work despite a supposed exodus of miners (best example being the last fork with BCash), what secures the network are the nodes, not miners. They're just participants who are rewarded for appropriating the network with hashing power.

As for the price dip, well I welcome anyone to buy $100 of BTC and hold onto a $100 and see which is more valuable now that the Federal Reserve has dropped Interest rates to 0%, and is issuing a $700 Billion QE program:

https://www.cnbc.com/2020/03/15/federal-reserve-cuts-rates-t...

> They should never be there anyway, Bitcoin is a waste of time.

Personally, this couldn't have come at a worst time for me as I stepped down from my day job to undergo my SpaceX interview(s), I've turned down some gig/jobs in the last month too, but I'm glad that I have BTC as a cushion with some cash on hand.

Bitcoin is fundamentally not a cash alternative. Which means definitionally the alternative to holding onto $100 BTC is NOT holding onto $100 cash. In fact cash is intentionally inflationary and BTC is intentionally deflationary (over long enough time scales) so yeah, you'd win your silly bet if there's no major crash. Doesn't mean you'll come out ahead of other strategies.

> Bitcoin is fundamentally not a cash alternative

Funny, I built a fintech startup on helping the cannabis Industry from their supposed 'cash' problem(s): predominately having too much of it and not having banking, or having thier cash taken indefinitely by the bank/paypal upon closure of their account(s). While also doing B2B transactions where banks/CC companies failed to lend them services, despite having Local/State laws permitting so. None of which Cash seemed to prove as useful as you think it is.

I think you're looking at this the wrong way: rather than looking at it as a paradigm shift in what programmable money can do, you are measuring Bitcoin by how it fails to function (or dysfunction) as your local Fiat currency does.

That's a very poor measure/metric, as for being able to use it day-to-day, provided you're willing to operate within a KYC/AML system, you can have Visa Credit Cards that draw from your source of BTC in real time/previously loaded, depending on what service you use.

Merchants who accept Bitcoin is a constraint, mainly a tech related one, but just like how many restaurants now take UberEats/Doordash/GrubHub that amount to a growing/large(r) percent of their revenue (moreso when States are limiting restaurant hours or outright operation to online orders only [1]) you will see new use cases appear which Bitcoin's layer 1/2 can utilize natively as a private p2p system.

I think its very telling that despite guy's like Jack Dorsey backing Bitcoin, who I think understands the fintech landscape, and has been orientating Square to be integrated and compatible with it many of you still refuse to see the shift has already happened.

Price drops happen in Bitcoin, I've been in this long enough that it doesn't phase me anymore; and is the only real antidote to the supposed 'what about the early adopter whales' issue people bring up, personally I'm using some of my discretionary budget to buy more.

I'm not here to convince you to use Bitcoin, or why it would work for you/your business: I'm just pointing out why what you said is skewed and not framed correctly. Otherwise you'll have to do what IBM did: offer a good salary for consultant fees to do so. :)

[1]: https://www.usatoday.com/story/news/nation/2020/03/15/corona...

I tend to measure bitcoin by how its proponents sell it. It has failed at all of these things -

  Being a fast/cheap payments network
  Being a decentralised cash equivalent
  Being a store of value

The shift hasn't already happened - large businesses that have accepted bitcoin in the past have almost all stepped back from it citing a variety of problems, but mainly boiling down to it not being worth the effort, and nobody using it.

And why would they? It's inflationary in theory and speculative in actuality, anyone that actually thinks BTC is the way of the future would be a fool to part with it.

> ...anyone that actually thinks BTC is the way of the future would be a fool to part with it.

Namely these mainly Silicon Valley based Billionaires: Jack Dorsey, Peter Theil, Ben Horowitz, Andreessen Horowitz, Tim Draper. Add Mark Cuban in there, too if you want, but he's not SV based.

Seriously, if you want to put your money where your mouth is I can essentially prove your 1st/2nd points right now. The 3rd will take longer as a store of value is relative to the period you bought, so by default needs time to accrue value.

I'm game if you are, here is my address if you want to make it happen:

3FeN7m31dksxmGhXTMRM9ggxbEcPnfUDHy

I have no bitcoin and would never give one red cent to the shabby, frequently fraudulent outfits that call themselves exchanges in order to obtain any.

You have fun now with all that name dropping. The track record of cryptocurrencies so far has quite thoroughly shown me and most of the world AFAICT that those points are a bust. It's worse than the systems we already have, in pretty much every way.

I note you don't actually address the points made either.

cryptocurrency is what alchemy would look like if it appeared in 2008 instead of the 13th century. Both are the work of people who work up ever more complex technical arguments from fundamentally invalid premises, who try to reify these prwmises by endlessly tweaking their implementation apparatus instead of rethinking their assumptions from first principles.

both phenomena even ascribe these first principles to color coded documents purportedly authored by mythical, pseudonymous departed sages, the emerald tablet of Hermes trismegistus and the white paper of Satoshi nakamoto.

> I have no bitcoin and would never give one red cent to the shabby, frequently fraudulent outfits that call themselves exchanges in order to obtain any.

Not that I entirely disagree with your sentiment, but do you realize the biggest exchange in the US/World is actually a YC backed venture based in Silicon Valley?

You're the one that said they were 'fools to be parted with,' yet these are the very VC titans of the Silicon Valley most of you adore, I just took the time to name a few who you were referring to. I personally don't care, they're just like any other person to me.

> I note you don't actually address the points made either.

Not if I'm not paid to, no; I'm a professional, and I'm compensated for my labour/skill set, why would I bother to if I'm not compensated for my time/effort?

I wouldn't ask you to build me a iOS app that I think currently is not available because 'Apple sux, lol' and expect you to do so solely because of my views may contrast with your own. I know you are paid well for what you do, so why ask such an absurd request?

Moreover, I could just prove it to you in practice far more readily rather than just provide a written counter-argument. But you have declined.

Again, this comes down to not wanting to base any of your assumptions beyond anything than just simply stating them to be fact; there seems little to no foresight or effort in them and they seem mainly sensationalist and reactionary.

What's even worse is how broadly you guys generalize things, rather than say: right, I don't understand how this technology benefits me directly, but I can see how it would given the circumstances of someone else. That's my problem with most of these ill-informed criticisms, you cannot see beyond your own position and circumstances, often until it's too late.

Sidenote: Had you purchased BTC 8 hours ago when I made that post, the 'store of value' of your purchase would have yielded an increase in 8% in a matter of hours while everything else in the stock market and fiat currencies is tanking.

> Had you purchased BTC 8 hours ago when I made that post, the 'store of value' of your purchase would have yielded an increase in 8% in a matter of hours while everything else in the stock market and fiat currencies is tanking.

Wow, now you're using the massive volatility as if it's some sort of benefit for something you're selling as a 'store of value'

If I'd bought a month ago I'd be down 50%.

You really are off on one.

Also that's hilarious "I won't address your arguments on the internet because I get paid for that, so I'm just going to tell you I already won the discussion without actually taking part".

LOL. Amazing.

The foresight you claim has had over ten years to play out now, and we've just had failure after failure after failure. The world has not been changed by it. It's time that the players in this space demonstrated real benefits or stopped the grandiose claims. Preferably both.

Because Bitcoin is inherently deflationary and there is incentive to not spend it, that pushes its purchasing power into socially/legally marginal areas of the economy. This is why it's the transactional unit of choice for online illegal drug purchases, prostitution, extortion/ransom demands, etc.

All of this of course, makes Bitcoin even more socially marginal. But yes, this is an area where Bitcoin excels for purchases.

(and to clarify, this is not to say that I personally think that drug purchases should be illegal although I have no problem with extortion demands being illegal, just pointing out the place of such transactions in the social milieu as it exists)

Illegal transactions use Bitcoin because it's irrevocable, not because of deflation. You can see that people don't shop with stablecoins either.

The problem with bitcoin is specifically that it is deflationary. In over simplified macro economic terms when you have deflation it is in the consumers interest to not spend money, because the cost of a service or good will be lower in the future. So the longer you wait the more you save.

You have the same issue with Bitcoin, because it is deflationary it is in the holder's interest to not spend it, because it's future buying power will be increased.

So if you look at how bitcoin was distributed you have early holders that have a tremendous amount and have been rewarded for it.

Add to that speculation and you have this whole cycle ramped up on steroids, with huge swings up, and then down, and all the while the value continues to increase because it is designed to do so.

The problem was that bitcoin tried to solve two problems, but should have only solved one.

The first problem was how to transfer value in an untrusted network which was a great success.

The second, was unneeded, which is to make it deflationary as some sort of perhaps response to the inflationary world we live in.

But the reality is that the inflationary world was designed by economists so that wealth continues to circulate. Yes, there are still issues. Yes we have imbalance. But inflation does case wealth to circulate, though not as quickly as some would hope for.

In bitcoin, you have the exact opposite, wealth gets accrued to early backers and just sits there.

Bitcoin's supply is disinflationary, with the yearly supply inflation rate going toward 0 (and reaching it in 2140).

But so is a constant emission, the major difference being that the latter goes toward 0 a lot slower, e.g. taking 50 instead of 12 years to get below 2%. More importantly, it accrues wealth to late adopters as much as to early backers, combining a fairer distribution with reduced spending aversion.

This assumes that every bitcoin ever mined stays in circulation. We know this isn't true. We know that millions of dollars of bitcoin have gone missing, never to be recovered. And if Bitcoin is the real deal (it probably isn't) then we've only just started. If this thing hangs around for decades or even centuries we will see trillions more go missing.

Yes, taking lost bitcoin into account, the supply inflation rate is maybe 25% lower, and long before 2140, emission will be too low to compensate for ongoing coin loss.

In this model of inevitable coin loss, the alternative constant emission will eventually, perhaps in 50 to 100 years, reach a rough equilibrium where yearly emission roughly balances yearly coin loss. Like a softcap instead of a hardcap.

There is hidden inflation that comes from other crypto currencies.

Once Bitcoin inflation is too strong and people are not willing to sell, it becomes profitable to start another currency. That currency will absorb liquidity and the deflation of BC stops. Like information in the internet, value flows around obstacles.

edit: Once Bitcoin deflation is too strong ...

> BCash

If anyone wonders what this is, it's a demeaning name for the Bitcoin Cash fork, used to discredit it.

https://medium.com/@jonaldfyookball/why-some-people-call-bit...

That's not how economies of scale work in a price crunch. This will drive further consolidation of mining power since the largest players are the most efficient. It's the smaller indie miners that will be forced out.

When margins are squeezed only the largest vertically integrated players survive.

> When margins are squeezed only the largest vertically integrated players survive.

And yet, that's not what happened when it forked Bitmain (who may have had 70-80% of Bitcoin's hashing power at one point) was the one to take the hardest hit and essentially folded; its founder was exited and disgraced, and the company was pivoted to what seems to be primarily an AI business now [2] after that utter failure to 'prove' what you have said is accepted as 'Truth' when its not simply true when it played out in this space.

I think what many, especially those not actively working or participating in this space, seem to not understand is that Bitcoin, and to some extent cryptocurrency in general, is defying the supposed 'conventional wisdom' by just exisiting and then disproving them with these occurences.

Most of the criticisms are cherry-picked and mis-focused to react to it in a negative light--eg the ICO craze had nothing to do with Bitcoin.

After all this time I don't see any of those price drops as bad, its allowing newer participants to into this system if seen as investment, that they otherwise may have not been able to enter. And for those that were using to transact for goods/services during this volatility it may have hurt, but as someone pointed out merchant adoption is not so large that it could kill a business right now, not to mention there are ways to mitigate this with other instruments (tethered to USD and such).

Also, the thing most people don't seem to understand either is that Bitcoin mining has spurred on tons of renewable energy projects and has since migrated to that to capture said efficiencies [3] as documented by the International Energy Agency. The network is estimated to be operating on 70% renewable energy, and is growing with projects like Theil's backed bitcoin mining facility in Texas [4].

1: https://www.ccn.com/bitmain-jihan-wu-micree-zhan-stepping-do...

2: https://finance.yahoo.com/news/bitcoin-mining-giant-bitmain-...

3: https://www.iea.org/commentaries/bitcoin-energy-use-mined-th...

4: https://www.iea.org/commentaries/bitcoin-energy-use-mined-th...

> the company was pivoted to what seems to be primarily an AI business now

They're still the by far largest and most successful ASIC manufacturer.

> They're still the by far largest and most successful ASIC manufacturer.

That doesn't disprove the comment I was refuting, we're not talking about ASIC production we're talking about hashrate on a given network. That just shows how young this Industry really is.

Regardless of Bitcoin pros and cons this event will increase centralization and by a lot. Whales will acquire cheap hardware of bankrupt smaller or more reckless competitors and after stabilization there will be fewer major players, with remaining ones being much bigger. I wouldn't even discount emerging of "benevolent 51%" entity which will be a monopolist "for the greater good".

> issuing a $700 Billion QE program:

That's nothing.

That's a rounding error compared to the compared to the 4.4 trillion dollars spent each year by the government.

The market cap of the S&P 500 is still well over $20 trillion. It fluctuates more than $700 billion in a single day.

Curious about the network's capacity to respond to a downward trend in hash power (which doesn't seem inevitable, but possible).

Does the difficulty factor of new blocks get dropped in response to losing hash power? Is the fee / mining reward balance predictable? Does the network become non-functional for xfers below a certain value at some point?

Yes, the difficulty rebalances periodically (every two weeks, roughly?), it would take a catastrophic decrease in hashing power to affect that by too much.

The mining reward stays the same, though it drops by half every few years (one such drop is approaching in May).

The network actually becomes non-functional for low transfers the other way - when there's too much interest, and too many transactions, the fees to get a transaction through start to rocket. At the peak of the 2017 hype the y hit around $50-70, IIRC.

It balances after 2016 blocks, not 2 weeks. This is a crucial difference because when the hash rate drops dramatically, those 2016 blocks might take 4 or even more weeks to create.

Yes, it could. There is a hypothetical "stuck network" situation, but that really is dependent on a lot of network power disappearing. Before that you'd end up with a lot of idle hash power and ex-miners wondering what they could achieve in the way of an attack with it...

Bitcoin is volatile. No surprise there.

Last week a FB friend discusses with his connections the winning investment strategy wrt the virus. They agreed that BTC (besides gold) is a safe heaven. It was @ $8k back then (now it's $5k).

In my opinion, for-profit bitcoin mining is detrimental to the ecosystem. Prices should fall to unprofitable levels,so network hash power is more distributed among smaller groups.

The already existing mining hardware would make attacks easier and more probable, especially considering actors able and willing to operate at a loss.

They should never be there anyway, Bitcoin is a waste of time.

I don't care about the time, but I'm utterly horrified at the waste of resources.

It's not waste of time. I think if helped progress in the hardware. It educated people on blockchain. Now there may be rigs our there for sale, which can be reused for more important things, scientific research, etc.

Maybe so, but please don't post unsubstantive comments here.

I think it's time that the government started to consider stepping in a providing support to these out of work ASICs.

Finally, we start talking about the real issue. \s

Nah, they didn’t lobby enough or enmesh themselves in mutually-assured destruction points in the economy, therefore they can be left to wither on the vine like normal people.

In the interest of hijacking this into a productive discussion: Does anyone know if it's possible to use BTC ASICs for anything else? It's just a lot of sha256 hardware, right? Can we use it for arbitrary checksumming?

Absolutely not. They’re application specific as the name implies. They can not do anything else.

Given the run on toilet paper, a better black swan hedge seems to be Shitcoin!

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