Bitcoin mining becomes unprofitable as BTC price falls to average cost of mining | Hacker News Reader

Bitcoin mining becomes unprofitable as BTC price falls to average cost of mining

finbold.com

351 pointslakis444 comments

It's a self-correcting equilibrium though, since the block difficulty is tied to the hashrate, which will fall as miners pull out.

That said, the hashrate is not showing major drops yet:

https://www.blockchain.com/charts/hash-rate

If they're either using subsidized or pirated electricity, and their hardware is paid for, why would miners pull out?

Basically you assume miners mine for free.

You don't have to do anything dodgy to get power at an unbelievably low cost, even in north america bulk rates are a couple of cents per kilowatt hour if you know where to look, and in some cases you can even be paid to use power due to politics. You can also be mining at a loss and have it be completely rational, because it is less of a loss than turning it off and writing off the equipment. The economics are very non intuitive for people who aren't exposed to the industry.

What is the situation where people are being paid to sustainably consume power? Genuinely curious - seems like a ripe arb situation so I’m curious why it isn’t being taken advantage of.

People using flair gas from oil wells for example to power a generator. The alternative is just burning the gas.

Why would is this energy go to waste now if it was so cheap?

Because large scale electricity transmission is very very expensive and depending on how remote, sometimes impossible. If you can burn the gas in a generator (which is a lot more efficient and less environmentally damaging than flare burning it) and convert that into value directly, that seems like a better outcome.

One reason is if it's "stranded" energy in some remote place. Building power lines or pipelines (for natural gas) can be expensive. Maybe they're at capacity, or still under construction.

As a result, the power is only going to be useful if you can move whatever consumes it to that location.

I worked for a startup that tried to do this, compressing at the wellsite to capture the flared gas. It’s an extraordinary amount of gas just flared off in a year

There are other useful things to do with "stranded energy" though. In Northern Germany, they're now building hydrolysis plants to convert excess offshore wind energy into hydrogen. And if we're talking about natural gas wells, you already have a pipeline infrastructure in place, so it's not that far of a stretch to add a hydrogen pipeline to that.

I would assume it has to do with how long it takes certain power plants to spool down and then back up again. It might not make sense to spend hours spooling down when you know not long after demand will jump right back up again as AC units, factories, processing facilities, ect turn ramp back up.

That's one way of getting extremely cheap rates, it's called "interruptible power" in supply terms, you might be expected by the utility to drop your entire load within a set amount of time with absolutely no warning- something a normal customer would be extremely unable to do, but miners can do in milliseconds.

I don’t know anything about particular political distortions in the US, though I wouldn’t be surprised if they exist, at least on a small scale. What I can tell you is that electric energy is traded on complicated spot markets that are designed to ensure that production and consumption are balanced at every point in time. Overproduction is as bad as underproduction, as the power grid can’t store excess energy. Fuses are tripped to prevent short-circuits, causing blackouts. This makes time-based arbitrage difficult.

Since power demand isn’t entirely predictable, flexibility is rewarded in these markets. For example, if there’s a downward spike in demand that causes an imbalance, you can earn extra money by either having a power plant that can ramp down very quickly, or by being a consumer that can ramp up very quickly.

I wouldn’t be surprised if mining rigs participated in these spot markets. In theory, they should be able to adjust their power consumption within seconds.

BTW, it’s been theorized that overnight charging of electric cars could do the same thing and dynamically adjust the charging speed based on spot prices.

Texas isolated power grid design means they have no where to ship excess energy to (in relevant amounts, neither can they get missing energy).

It's also under-provisioned but increasing supply is a problem because of excess energy.

So they started making deals with miners where the miners act as a sponge for excess energy and in turn pay much less.

Taking the same situation just more extreme (and likely more local) and being payed for handling excess energy doesn't seem absurd.

(I intentionally didn't judge anything about the Texas gird here, it's just meant as an example.)

Stopping a turbine is costly and demand has unpredictable variations. This means sometimes it makes sense to pay consumers to burn the excess power.

We have no technology to quickly store and release huge amounts of energy.

“Due to politics” is doing a lot of work in that statement.

>The economics are very non intuitive for people who aren't exposed to the industry.

In the short term, sure. There'll probably be fireworks for the next month or two. But thread ancestor might well be talking medium-long term where the economics are really simple - the amount of resources the miners put in to hashing will drop until they are making a profit again.

The miners will be profitable again inside 12 months. Even if all that means in practice is that "miners" is some kid in a basement in Khazakstan with an old Pentium.

That’s if, in 12 months, people forget about this crash and has faith that btc/crypto is worth something.

Once bitten, twice shy? We’ll see.

No coins are ever 'worth' anything really. They're just coins. It's a question of who mints them, whether bad actors get to help themselves as the coins come fresh off the presses, and whether the economy that trades them will keep allowing fair future trade or not.

A dude I know has cheap electricity on his allotment garden where he built a wooden hut/cabin. He uses three PCs built from throwaway parts to heat the hut in the autumn and early spring (in winter there's nothing to do there).

On the PCs he runs an app that basically manages the mining for you, automatically switching between cryptos to get the most microcents per watt per second.

I have no idea why the allotment gardens got the cheap deal on electricity and I don't know if the mining gives him a significant "discount" on the heating.

That auto switching software is a joke. It doesn't actually get any more profit and likely costs money.

I had a setup like this back in 2013 and it worked very well, mining profitability changed everyday between altcoins.

You have to assume that the cost of switching is less than the difference in profitability. Computing that is nearly impossible. It is a case of not knowing what you're losing, but feeling like you got a good deal at the same time.

At least for GPUs, the cost of switching workloads on the fly, is actually quite high.

You got downvoted by people that know nothing about mining it seems.

And yes the auto switching which in this case is almost certainly nice hash is a joke. For years the only thing you would mine on a gpu has been ethereum.

Nicehash takes an absurd fee and their software might as well be return "Ethereum".

Nicehash got "hacked" [1] for 60m (at the time). Some claim they just "hacked" themselves, but nobody really knows. For some reason, people kept using them, but I wouldn't trust their stuff at all.

A lot of GPU miners really believe that since they are paid in bitcoin, they are mining bitcoin. Just look at any FB group of GPU miners. It goes to show that a lot of people really don't understand what they are doing at all, which is kind of neat actually... all this stuff still works even though the underlying infrastructure is run by people who don't even fully understand it.

[1] https://securityaffairs.co/wordpress/66417/hacking/nicehash-...

He's stealing from society to feather his own nest. I'll bet he also thinks this makes him smarter than other people.

well, if he was going to be running a space heater otherwise then this is basically the least harmful instance of mining

That's a pretty inefficient space heater

It's close to 100% efficient in converting electricity to heat.

anything that converts electricity to heat, by whatever means, is essentially equally efficient in doing so.

In a society as large as ours, I think it generally is strictly smarter. Personally I think it’s detestable for ethical reasons.

How is paying for electricity, at the price the provider offered, stealing?

Because the electricity was almost certainly offered for a specific subsidized purpose, likely being funded by a grant of some sort, and thus it is being misused?

Maybe, but then the heating itself would be the problem, not the mining on top of that.

How is it stealing? He's paying for the electricity, the same price as everybody else who has an allotment in that community.

> You can also be mining at a loss and have it be completely rational, because it is less of a loss than turning it off and writing off the equipment.

It depends what you mean by mining at a loss.

It's never rational to mine when the cost of power is higher than the expected return. Turn off your equipment and go buy bitcoin directly.

> It's never rational to...

Amusing fact: if we go look up dollar auctions [0] the process described sounds superficially like Proof of Work mining.

[0] https://en.wikipedia.org/wiki/Dollar_auction

Half-serious counterpoint: if you use electric space heaters, might as well mine bitcoin to heat up the house. In that case it's still rational to mine because you'd use that energy anyway.

1/4 serious reply: except than you can probably heat the house the same with less energy, or put you money in thermal insolation.

All in all agree than BTC will adjust is difficulty with long term economics, and so, it will not be quick, short-term actors will lose money.

When people are renting and don't own their own home, the incentive to actually improve the property isn't there, so an extra expensive space heater that can be moved to the next place has more value than improved insulation.

> you can probably heat the house the same with less energy

No, a 1000 watt heater is just as efficient as a 1000 watt computer in heating.

That's true but a 1000W heat pump can get you 3000W of heating. I.e. if you use a given amount of energy to transfer heat from the outside, you effectively get more than 100% (most heat pumps are at 300% efficiency).

Efficiency can't be higher then 100%, if it could be then you've got a perpetual motion device or in other words, you're creating new energy that didn't exist in the universe before - breaking physics.

Not to mention that heat pump efficiency isn't linear as it depends on the humidity and temperature in which it's operating.

Electric heaters more or less just lose energy in light that they produce, which is quite often negligible.

You confusion is a failure to understand what heat pumps are doing.

An electric heater uses 1000W of electricity to increase the energy in an air volume directly.

Heat pumps use 1000W of electricity to transfer energy from one area to another.

In the former case, the energy in the warmed air is entirely from the supply of electricity.

In the latter case, the energy in the warmed air comes from the intake air and the electricity is only used to move that energy around.

So absolutely a heat pump using 1000W of electricity can move 3000W of thermal energy from the hot side to the cold side.

This, by the way, is why you're absolutely right that efficiency is variable, as it depends on the energy gradient between intake and output.

It is called appearant efficiency and it can be and usually are greater than 1.

>Efficiency can't be higher then 100%, if it could be then you've got a perpetual motion device or in other words, you're creating new energy that didn't exist in the universe before - breaking physics.

Only in a closed system, heat pumps are not a closed system, they take advantage of ambient heat in the environment which brings efficiency above unity if measured as power input vs heat output.

But yearly deprecation cost of a 1000 W heater is significantly lower than that of 1000 W computer equipment usable for bitcoin mining.

They could still sell their hardware to recoup some costs. And I doubt most miners are using free electricity.

Bitcoin miners used specialised mining hardware that isn’t useful for anything but mining bitcoin.

And best of all, it becomes completely obsolete at around 6 months when better specialised hardware comes out. So the only thing the miners can do is stop and throw their hardware in the dump.

They use graphics cards.

Bitcoin mining hasn’t been done on gpus in a decade.

It has, in fact it's being done right this minute on GPUs.

But not on GPUs in bulk for a decade, that is likely a true statement.

I don’t doubt there is at least 1 GPU mining bitcoin. But it would be a less than pointless effort since the power would cost more than the bitcoins being mined by a long shot.

Still a useful learning experience, and if the GPU is free and the power is free, then the low return rate would still make sense.

I imagine there are more than a few dorms where this kind of thing is going on.

For learning why bother with a very inefficient GPU, just mine with the CPU or better with pen and paper: https://hackaday.com/2014/09/29/mining-bitcoins-with-pencil-...

Because you want to? You want to see how the GPU works with bitcoin?

Install a program, sing up on pool. Run it for few minutes or days get disappointed and stop? Wonder if there is any pools anymore even...

It really wasn't anyway practical or fun experience.

There would be no return rate.

Not much, but still not zero.

I'm sure you wouldn't be interested, but for people who are doing it for other reasons and do t really care about the return rate, why would you try to deny their existence?

No, there would be zero return rate. The amount a graphics card could even add to a pool would be negligible, and pools pay out when they 'win' a block, based on proof of partial solutions during that block, to prove the contributory hashrate. ASICs are so far beyond what a GPU can do that it is likely that a graphics card would never achieve even a single partial solution and therefore merit any fractional payout from a pool even.

So I'll say again, it's likely that a graphics card mining bitcoin right now would produce nothing. Ever.

I'd be looking for proof that these people exist before assuming that there are people who are wasting their time and energy on doing something that will never produce a single cent's worth of bitcoin, 'for fun'.

Maybe. But that doesn't mean that there aren't people out there trying.

Hell, Jeff Geerling is the kind of guy who would attach a GPU to his Raspberry Pi(s), just to prove that he could. And then turn around and do some Bitcoin mining on those rigs, again -- just to prove he could. And he'd get lots of hits on his YouTube channel for doing so.

And he's not the only one to try to do that sort of thing. Have you eliminated all the possible YouTube channel owners who might be inclined to pull this kind of stunt, just for publicity and traffic to their YouTube channel?

> Hell, Jeff Geerling is the kind of guy ...

Right, but is he actually doing it? Or are you just supposing again that someone might?

> Have you eliminated...

I don't need to, that's not how evidence works. You're claiming this thing happens, it's up to you to prove that. Unless you can find any actual evidence of people still mining BTC on a GPU at this point, you're just grasping at straws to try and justify your position.

The original point was that bitcoin mining is not done on GPUs any more. This is true in the sense the original post was meant, because the industry moved on years ago and mining on GPUS is now entirely unproductive. It's also true philosophically - if you don't produce anything, can you really be said to be 'mining' anyway?

And even if you show that one person or a few people are still doing it "for fun", it doesn't really contradict or disprove the post you replied to.

I won't touch crypto with a 100 foot pole, I've said it many times. So many people ask me about this or that coin, about helium, about new protocols and decentralized Internets...

Yeah, no. Waiting for this massive crypto bubble to finally deflate so I can see if there's anything worth caring about in the mess that'll be left over.

GPU miners use software that mines the most profitable coin at a given moment. Bitcoin was not the most profitable one to mine in almost a decade now.

Unless someone launched a miner ten years ago, before the advent of protocol switching software, they do not mine Bitcoin.

Here is a list of profitability of coin mining on GPU. Bitcoin is not even on a list. https://whattomine.com/coins

I never said that these people are interested in profit. If you want to learn how bitcoin works from the perspective of a miner, then you mine bitcoin. Mining ETH won't tell you anything about what it's like to mine bitcoin.

Then you buy an usb mining dongle for $10 or mine on cpu.

I’ve met multiple people from the bitcoin mining and research community in my 10 years and I don’t remember a single person doing gpu mining since 2013.

edit: also, you can’t even find an up to date gpu bitcoin mining software novadays. I dare you to provide a link here if I’m mistaken

Can you honestly say that you have personally met every single person on this planet who is doing Bitcoin mining "for fun" or doing research, and that you have continued to meet all the new ones as they pop up?

Didn't think so.

Just because you haven't heard of it doesn't mean that it doesn't exist.

After some thought: I think you may be confusing “bitcoin mining” as in using gpu to mine other crypto that gets auto-converted to bitcoin with actually mining bitcoin.

The former is popular on gpu, looks the same from the user perspective (to the point of users only needing a bitcoin wallet and receiving payouts only in bitcoin), but doesn’t actually mine any bitcoin underneath - just other cryptos that get transparently exchanged into btc.

Perhaps for “fun”, no serious miner is using GPUs. It’s like comparing panning for gold vs a fully mechanised gold mining operation.

Oh, absolutely agreed.

But there are still some people in this world who are panning for gold.

The larger miners are using something called an application specific integrated circuit (ASIC). Hobbyist retail miners use gpus. the big farms you see in new organization photos are using silicon explicitly built for btc mining and only btc mining. Or a handful of proof of work algorithms. But still specialized.

The functionality is burned into the silicon at the factory and cannot be changed. There are also specialized devices that can give you the benefits of an asic and can also be changed and reprogrammed. these are called field programmable gate arrays (fpgas). Large scale miners do not use gpus or fpgas due to cost and efficiency reasons.

Not quite. Bitcoin is mined with ASICs by anyone mining it. GPU mining is for other coins where the PoW algorithm needs more RAM.

You’re thinking of eth.

not for bitcoin (in any relevant degree)

for some other crypto currencies small and mid-sized miners do use graphic cards but large sized ones still use custom chips

for some other all miners use graphic cards

and for some no one uses graphics cards

Imagine if their hardware had other use, what would happen?

The non-miners that need to use that hardware would suffer because of increased demand

Do you doubt that it’s most, or doubt that it’s many/any?

They haven't been making money for a year or two now -- they can't sell their coins without crashing the market, so they're getting loans with their coins and mining equipment as collateral [0] [1] [2]. Those loans are failing now.

[0] https://www.coindesk.com/business/2022/04/26/bitcoin-miner-c...

[1] https://www.coindesk.com/business/2021/12/31/miner-bitfarms-...

[2] https://www.coindesk.com/business/2022/04/28/battered-bitcoi...

> mining equipment as collateral

So the same hardware that becomes useless when the btc price falls?

Good for the miners, the equipment and the coins are worthless, worst case, and thr money is gone. The bank will hold the bag so.

If you think the bank is losing out here, I have a bridge to sell you.

Depending on the bank in question that bag will be passed on rather quickly. Doesn't mean a bank cannot be bitten, in 2008 most banks held CDOs only for a short period of time, it was tue volume they held thatvwas the problem for those banks.

I guess it depends if they are custom ASICS or just GPUs. GPUs can be useful elsewhere, custom ASICS not so much.

They're ASICs. GPUs haven't been used for BTC mining in a long time.

But people are always blaming crypto miners for the shortage of GPUs.

ASIC are used for major cryptos like Bitcoin that can justify the design and fabrication costs. For random shitcoins, you need GPUs.

There're cryptocoins other than BTC. Ethereum and Monero are two that are popular and GPU profitable.

Aren't all their prices pretty correlated though? When Bitcoin falls like this, the altcoins do too.

Even if there were a fixed peg between cryptocurrencies, that still wouldn't imply that GPU-mining BTC is just as good as GPU-mining other cryptocurrencies.

>GPUs haven't been used for BTC mining in a long time.

False. For westerners who have to pay market price on electricity that's true, but GPUs have still been used in geographic areas where dirty energy is super cheap of even free for the right connected people (China, Iran, Russia and former Soviet republics, disputed conflict zones in former Yugoslav states, etc.)

That's also where most of the mining is still happening.

GPUs are being used to mine ETH, not BTC. Hashrate by GPU cards on BTC is tiny compared to ASIC. It takes literally 1000x more power and 1000x the cost at the same hashrate.

This is just not true

Other coins are minable with GPUs (because their algorithm was purposely designed to be ASIC resistant)

But bitcoin has been exclusively ASIC mined since probably 2013 at least

Even with free electricity and stolen GPUs you cannot profitably mine bitcoin (you'd get a fraction of a penny a month, less than the cost of simply storing a gpu)

>> Even with free electricity and stolen GPUs you cannot profitably mine bitcoin (you'd get a fraction of a penny a month, less than the cost of simply storing a gpu)

And even if you could mine it profitably, you would be better off mining the worst shitcoin instead, much less a reasonable alternative like ETH or RVN.

No one smart enough to mine BTC is dumb enough to use GPUs for it, regardless of the price of electricity. If electricity is so cheap that there's profit to be made from GPU mining, the profit would be astronomically higher with ASIC mining.

>No one smart enough to mine BTC is dumb enough to use GPUs for it

How much intelligence is required to mine bitcoins?

> That's also where most of the mining is still happening.

Not true. Almost 40% of the hashrate is being generated from the US. https://ccaf.io/cbeci/mining_map

Interesting discussion whether GPUs are used or not. i don't know the answer and obviously many others don't.

So instead of being dependent on central banks, crypto is dependent on inside knowledge held by plain criminals or at least very shady businessmen. That much about the openness and transparency in real life.

> Interesting discussion whether GPUs are used or not. i don't know the answer and obviously many others don't.

The discussion is not interesting. It is well-known GPUs are not used for mining BTC. Mining other cryptocurrency? Sure. BTC? No.

False. If your electricity is free and you can earn $1 mining Bitcoin, or $10 mining Etherium, then you would mine Etherium. You would only mine Bitcoin if you had another reason to want to mint blocks apart from the expected return for minting a Bitcoin. https://whattomine.com/coins?aq_2080Ti=1&a_2080Ti=true (edit: improved wording).

None of what you said is accurate. GPU mining is very popular... just not for BTC. Even at discount/free electricity, it's not worth it given the alternatives of mining ETH, XMR, RVN, etc.

For BTC I think ASICS have been required (to make money) for a long time, and you needed to be able to get them early - buying them and finding that there were other people using newer more efficient chips meant your money was wasted because you would not discover any coins.

I had always wondered if mining had been profitable at all, ever, except for the very beginning. I feel like being a late entrant into this required huge fixed costs, and this was back in 2014 or so. Only through joining a huge mining pool or staking pool would the numbers make some sense.

I would guess the profitability would be linked to the cost of electricity. Many counties have subsidised power (1c/kWh), some are naturally cheap (iceland), and some people steal electricity (some weed farms)

Sure you won’t make money if you are lying 35c/kWh, but bitcoin could be seen as a way of exporting abundant renewable electricity from isolated areas.

Bitcoin should be seen as a way of exporting cheap low quality dirty sulfuric coal and massive amounts of CO2 and carcinogens from remote unregulated regions through the atmosphere to the rest of the world.

Heavy industry does the same kind of thing, so it's not just bitcoin.

For example: heavy industry that's located in Mexico instead of U.S for environmental regulation reasons.

At least the heavy industry is fxkcing doing something.

As you already know quite well, heavy industry produces useful products and jobs, and is not a get-rich-quick pyramid scheme.

Take a step back and look at what you're doing: lamely attempting to justify and carry the water for Bitcoin's horrible energy waste and pollution, when you already know quite well what the counterarguments to your ridiculous shilling and apologetic whataboutism arguments are.

https://en.wikipedia.org/wiki/Whataboutism

Your arguments have been thoroughly and widely debunked already, in glorious detail, and claiming you don't have enough time in your busy online shilling and gambling schedule to educate yourself by watching a factually accurate video about reality is a cop-out that shows you're afraid to look at the facts because you know you're wrong.

https://www.youtube.com/watch?v=YQ_xWvX1n9g

Surely you don't actually believe what you're saying, that factories are as useless as bitcoin, and already know why that is an invalid argument, so I should not have to remind you.

Or do you really not give a flying fuck about the environment or public health? Then say so.

I'm bending over backwards trying to give you the benefit of the doubt that you're not that dumb to believe your own argument that heavy industry justifies bitcoin, so if you've simply lost a lot of money gambling on cryptocurrencies and you're just trying to trick other suckers into covering for your unforced mistakes, then just admit it and stop pretending.

> Take a step back and look at what you're doing: lamely attempting to justify and carry the water for Bitcoin's horrible energy waste and pollution

I think I'm not doing that. I'm just part of a conversation and my goal is not to make excuses for Bitcoin. Broadening the view and mentioning other facts doesn't mean that I make excuses for something else. I just don't want to argue pointlessly about this. I'm already in the "ban bitcoin" camp, so anything you try to say to convince me is also time wasted :)

I would advise, do more conversation and less argumentation on the forums

Then why do you think factories are as useless as bitcoin, if you think bitcoin should be banned, and why are you using whataboutism as an argument? Do you also want to ban heavy industry?

You're the one who is throwing whataboutism arguments around. So don't say you don't want to have an argument, after you started with an invalid whataboutism argument and an inconsistent position, in defense of another invalid argument that bitcoin is "a way of exporting abundant renewable electricity from isolated areas".

In case you haven't been paying attention for the past few years, of if you're only pretending to be incredulous, your argument and the argument you're defending are regularly made by bitcoin shills, and always shot down by the facts because they make no sense.

If you'd watch Line Goes Up or read any other comprehensive analysis critical of cryptocurrencies, you'd already know quit well how terribly bad and insincere your whataboutsim argument and the "exporting abundant renewable electricity" arguments you're defending are, and how thoroughly they have already been debunked, and how tired the HN community is of hearing them mindlessly parroted again and again.

You're not the first person to think of using whataboutism to justify bitcoin.

I think two different industries can be corrupt and environmentally damaging at the same time. It's not about picking sides. Maybe use common viewpoint to attack both problems.

You're just very rude in your first reply. That's one thing.

The second thing is that I don't care to argue so much about bitcoin, so I just want to not be in your path, you seem to really be angry about this. That's fine, but I don't want to be in the way. Let me leave thanks.

Heavy industry factories make such toxic waste comparing them to bitcoin is like comparing water to oil. The toxic waste created making credit cards or printing money is very toxic and not something you want to live beside.

Bitcoin uses electric power. So does electric cars, your iphone, lights that businesses leave on overnight. If you are against bitcoin because it uses power.. you really need to lobby for a law that would ban businesses polluting the night sky with lights that aren't needed.

"but bitcoin could be seen as a way of exporting abundant renewable electricity from isolated areas."

The electricity is simply wasted, not exported. It cannot be used to do work anymore.

No, and generating green hydrogen would be far more useful, but the only thing I can contort out of the argument would be it would encourage capital investment in more renewable generation which would then mean the price per kWh would reduce once the cancer of Bitcoin mining ends.

> they can't sell their coins without crashing the market

They should be able to, with the yearly supply of mined coins at just over 1% of the circulating supply.

Most of so called circulating supply is not circulating. 25% are in addresses that have been dormant for more than 5 years. Several percent are locked in "DeFi" or long term contracts. When Bitcoiners say "circulating supply" they really just means "all coins ever mined" and you shouldn't actually use that number for any practical purpose (doesn't stop people from using it for calculating the "market cap")

Non sequitur. The ability to sell without crashing the price depends on whether there is sufficient demand.

Indeed. Remember the first rule of finance: in order for someone to sell an asset at a price, someone else must want to buy that asset at that same price. If you're selling 15,000 BTC, maybe only 200 people want to buy them for $22,000, and 10,000 people want to buy them for $20,000. And the remaining only want to spend $19,000. The market depth (the number of people willing to buy/sell for a given price) on crypto tends to be surprisingly shallow.

Selling off large amounts will push the price down, simply because you're going to run out of people buying for the high price. Then people realize you're dumping coins, and then realize since you need to get rid of them, they can buy for cheaper since you need to unload them, so why spend more? And also the psychological aspects of dumping coins (why are miners dumping unless they thought they would go down).

Why not sell the coins? The market is big enough. I can't see why someone would mine coins without selling them as they are mined, otherwise you don't realize your profits. When there is enough cheap dollar in the market, there would be someone else who believes the coin price would rise at a later point and buy BTC for profit.

Miners have started to sell. One just sold 1,500 BTC, which was part of what broke the $20k buy wall. [0]

[0] https://www.coindesk.com/business/2022/06/17/bitfarms-looks-...

"boost liquidity" what a wonderful euphemism

If miners sell, it means more money has to enter the system in order to keep the price from falling. And conversely, in the absence of more money entering the system, miners can't sell their bitcoins without crashing the price.

The thing is you have to sell it sooner or later or you won't make a profit. If you sell it to such a price that it's significantly lower than people expect it to be, someone will buy it so they can be sold at a higher price later. It's extremely easy to open both short and long positions on BTC market, so the current price should remain close to its expected price.

Is the collateral denominated as N bitcoin or $N worth of bitcoin?

It self-corrects slowly.

The protocol adjusts the hash rate every 2160 blocks, or about once every two weeks, and the maximum negative slew rate is -75%. If sufficient miners pull out of the network within a fortnight or two, it's conceivable that Bitcoin will enter into a death spiral.

It goes something like this:

1. Miners realise that their operations are unprofitable, and do some mix of raising tx costs and/or turning off their kit.

2. The tx rate drops, so instead of one hash found per 10 minutes, it might be one every 20-30 minutes or even slower. The competition to get into these blocks heats up, further pushing up tx costs.

3. Bitcoin is no longer usable for small transactions, because the tx cost makes it a total loss. Small-to-medium users panic, as they realise that Bitcoin is not only plummeting, but that they can't get their money out without spending a significant fraction of it.

4. There's a rush to withdraw lump sums, creating a "run on the bank". This nearly instantly skyrockets tx costs.

5. Bitcoin value keeps plummeting, because nobody in their right mind would put USD into the system, and everyone wants to get out. Miners won't shut down their equipment at this point, because with high tx costs they're still profitable or nearly so. But they're paid in Bitcoin, so the real value of those tx fees is plummeting also.

If the above happens fast enough and with the right timing, with the most precipitous downturn happening right before a difficulty epoch, then the difficulty might not adjust enough downwards at the right time.

Then there's a chance that Bitcoin will go to 0 in the subsequent 14 days as miners walk away from their operations and users loose all faith that there's any value left in their coins.. and even if they do believe in that value, there's nothing they can do with their coins because hashes are found only every few hours and it costs the price of a new car to get into those blocks.

"It'll just adjust", you say. Sure... -75% after that fortnight[1], and if that's not enough, it'll be nearly a full month of an absolute crypto bloodbath. How long did it take Terra/Luna to crater? Days?

Caveat: Having said that, I suspect there's enough momentum in the system because of all the HODL-ers and self-interest in the miners. The miners have much of their earnings tied up in Bitcoin. If they let the system crash, they lose their profits. But there is a point where they'll realise they're throwing good (fiat) money after bad (crypto) and literally pull the plug and turn off the kit.

[1] Or longer! Remember, it's every 2160 blocks. If too many miners give up mining all at once, this could be over a month.. or longer.

ETH adjusts difficulty every block. They also partially reward miners for 'uncle' blocks. IMHO, it was a good modification to the protocol.

Theoretically, BTC could make a similar adjustment and avoid the doomsday scenario that you outline.

A good modification of the protocol is using a PoS as it just doesn't have these issues

But it has other issues.

I'd love to see PoS be successful and end PoW mining, I just have my doubts that the current ETH devs can pull it off successfully.

PoS opens up its own can of worms. Namely, it is vastly more complicated and not as well understood or executed in as large of a scale as PoW currently is. The Merge is honestly terrifying to me given the amount of money on the line.

As a software engineer who's built large distributed systems. I've always relied heavily on having robust test suites so that I know that when I'm deploying code, there is little risk of failure. In this case, the devs have had years to get the test suite passing [1] and the plan is to launch in a few months. I really wish that this was looking a bit better than it is at this point.

There also isn't a published set of plans for what happens if things go wrong. We could end up with a forked chain and ETC situation again and I'm not sure it would survive that.

So yea... I'm optimistic, but I'm also a doubter. I'm more than fine with them taking as long as they need to get it right. The current rush seems entirely unnecessary to me. Especially since the devs claim they don't care about the price.

[1] https://hivetests2.ethdevops.io/

I think it will be delayed a bit if necessary but it is still clear that a working PoS is completely feasible.

I had a lot of doubts too about the pace of dev but the shadowforks and ropsten testnet makes me thing it's going to happen.

I think that even if the devs don't care about the price, they care about the image and they want to get rid of the stigma that eth is bad for the environment.

When that stigma became so widespread is when eth went all in on the PoS development.

Sorry to say this, but what you think doesn’t matter. It is either secure or it isn’t. Given the added complexity of PoS that turns it into a Rube Goldberg machine and the fact that this has never been done on the scale of ETH, we have zero idea if it will work or not. Anyone with a valid hack certainly is not going to release it before it goes public mainnet and that is terrifying. We can try to be positive about it all and hope for the best, but that is about it. On the other hand, we know PoW works and has been proven secure. Despite the ESG arguments, there is a need for a secure chain.

I don’t get these arguments having worked on many PoS codebases

Then why aren't you working on PoS ETH?

I’m working on Mina already

I know and exactly my point.

If ETH PoS was the end all solution of PoS, we wouldn't need Mina. Everyone would just focus on making ETH PoS better (or just getting it shipped). In a similar way that there is just one Bitcoin, the rest of the contenders (BCH/BSV) are just shitcoins nobody cares about.

Instead, we have dozens of competing PoS chains which have little value, debatable security (there just isn't enough of a financial / political target to attack, yet), and even less real world utility (because nobody is developing apps for them). While ETH PoS is sitting there with broken unit tests.

Hopefully that explains my arguments a bit better.

One of the big puzzles for me is why the "original bitcoin" is keeping its value when there are so many innovations and gradual improvements in newer alternatives. For example what you mention, or when Zcash launched their perfect anonymity solution etc. I just didn't bet on bitcoin itself surviving.

Easy. You can trust an infinite amount of money to it. No matter what, 1 btc will always be 1 btc.

The relative simplicity is a feature, not a bug. As soon as you add features, you add complexity.

It's a weird variation on network eitffects. People trust bitcoin because it's pure, well understood and relatively stable. Yes, ETH may be better in some respects, but BTC didn't have to hard fork after the firs DAO. BTC hasn't been screwing up a move to POS for years.

BTC has tonnes of drawbacks, but the drawbacks are stable and known. And this confidence in Bitcoin stabilizes bitcoin, beleive in bitcoin because it has critical mass.

This may of course all be wrong, something may go wron tomorrow and completely hose the thing. But people generally don't think that.

The chances of bitcoin going to zero are zero. You really think there isn't a single person on this planet willing to put in 1-10 million to buy up all the bitcoin?

It will crash. It might even crash all the way back down to pre-pandemic levels. But it wont bankrupt. If you cant see this you are really missing the forest for the trees.

> The chances of bitcoin going to zero are zero. You really think there isn't a single person on this planet willing to put in 1-10 million to buy up all the bitcoin?

I mean, one person buying all the bitcoin would be an excellent way to cause the value to go to zero. If every bitcoin is held by a single person, who else would care?

Absolutely agree. Some people still don't realize the difference between a cryptocoin that has no intrinsic value, and a real currency which will always be used for at least two things :

- pay the salaries of state workers

- pay your tax

It may not look like much, but it's the reason why a regular currency is always worth at least something : some people are legally bound to using it.

The types of governments we live in are not axiomatic, they are just contracts that have formed over time that seem to work somewhat.

why a regular currency is always worth at least something

There are many fiat currencies that went to zero and no longer exist. Most recently is the Zimbabwe dollar which ceased to exist some years ago and the country had to start using USD and ZAR.

pay the salaries of state workers

When the fiat currency collapses like in Zimbabwe, state workers no longer accept salaries in the currency and demand something else.

Yea I agree that concentrated ownership should make it worth a lot less — but you are missing my point. Crashing to zero means nobody wants to buy what too many people are trying to sell. It’s not going to happen.

And also, when I say one person buy it for a million in actuality the probable “floor value” scenario is a million speculators trying to buy it for a billion dollars.

Bitcoin has been unleashed on the world and it will forever have a life of its own. Unless, of course, enough governments ban it and enough citizens obey the ban. Eventually even this scenario will become impossible.

While I agree it might not crash to 0, I'm not sure it has to to become more-or-less irrelevant.

Conversely there's an outside chance a really big crash will make it useful.

A sufficiently large crash of Bitcoin will leave most current holders burned. Those that have Bitcoin as a purely speculative play will take some big losses, and get out (maybe permanently).

Ridding Bitcoin of speculators will maybe improve Bitcoin usefulness as currency - but I think main-stream will ignore it and it'll become niche.

At its heart Bitcoin cannot decide if its a fast-appreciating asset, or a currency, and it can't be both. Perhaps a really big correction now can kill the fast-appreciating asset approach for good.

Unfortunately though it seems like as a currency its primary benefit seems to be making risky (aka illegal) face-to-face transactions safer, and hence will likely aquire an ever seedier reputation.

I agree. The big flaw in Bitcoin is technical deficiency which leads to a system which compromises its core value. It’s core value is to democratize via decentralization. It’s supposed to work for the people. That is undermined in two ways. First it is deflationary and that lead to hoarding and malicious market manipulation. If you don’t know that cryptocurrency is owned by the techno-elites then you aren’t paying attention. Second the hardware acceleration makes you totally useless. Can’t get millions in hardware along with state subsidized energy? Sorry, you have no say in the world of miners and protocol evolution.

A real solution would be truly decentralized. It needs controlled inflation to avoid incentivizing the capture of the supply and it needs CPU only mining to prevent the eventual emergence of parasitic mafia miners.

> The chances of bitcoin going to zero are zero.

I think you're right but I'm pretty sure you missed GP's point...

> You really think there isn't a single person on this planet willing to put in 1-10 million to buy up all the bitcoin?

Of course there are people/companies willing to do this: they'd short squeeze the entire supply if they could but... It's not GP's point: GP's point is that there exist a scenario in which the "work" (the "proof of work") required to find one block would be so expensive compared to the value of BTC that it'd be impossible to ever mine a new block on the blockchain. That's be a "death spiral": a PoW forever too high and nobody willing to put in the $$$ in electricity required to mine one block and let alone the huge number of blocks required before the PoW difficulty is lowered. These blocks would be mined at a gigantic loss. The problem is made worse by the PoW only being able by -75% at most: so should some big miner mine at a loss for a very long time, the -75% difficulty "easing" may not be enough.

If anything, of all the dramatic scenario about Bitcoin since it came out, this death spiral has always been the most concerning one.

Compared to the rest of the whitepaper/code this part of Bitcoin always seemed very weak due to poorly choosen parameters (way too many blocks before the difficulty adjusts itself). This poor choice of parameters may be Bitcoin's eventual downfall.

Now... There's a group of devs who basically control the code and you can bet that should the death spiral happen, these devs would magically agree with miners and big players to "vote" on adopting new parameters / relaunching the chain/mining with a much easier difficulty.

That's why I think you're right: it's highly unlikely BTC would go to zero because there'd be an army of people coming to its rescue. But it's quite a range between $18 K (as I type this) and zero.

Your analysis is wrong. The actors in this system are rational actors incentivized to preserve the system. The algorithm assists difficulty. And even in pathological cases of continuous drop with unsustained price levels — you assume the miners are going to irrationally continue to raise rates because they are too stupid to realize the scenario you are describing?

Again: missing the first for the trees.

Miners don't set the rates. They pick from existing transactions on the network to fit into limited space on the blockchain. For them picking the transactions with highest fees is rational in any case.

OP was saying the death spiral will happen because miners will decide That the combination of BTC price and block fees is insufficient motivation to mine at present difficulty levels. This is effectively miners setting rates. I am saying that miners will act in self-interest and avoid death by suicide by enabling this deadly spiral by continuously turning off hardware during times of down trend.

I see, you meant HASHrates not prices.

I expect that in the "hope dies last" spirit some of the miners will double down, to get higher share of the fees. Whether that's going to be enough to carry through till the network algorithm adapts.. I don't know but wouldn't underestimate the zeal.

If one person buys all of bitcoin, and no one else wants it, what value does it have?

Less than zero, because you have to keep putting energy into the network to keep it running.

One of the many nice things about decentralized system is that miners don't determine transaction costs, users do. You're free to attach however high of a transaction fee you want to your transaction, or even none at all. Transactions will tend to be prioritized (by miners) by fee, but they have no direct control beyond that. The market collectively decides what it's willing, or not, to pay.

I love these free market arguments.

Hey man, you're _totally free_ to pay the price of a used car to process a transaction. Ain't it grand.

Meanwhile I can send instant bank transfers for free all day long.

> Meanwhile I can send instant bank transfers for free all day long.

It's free for you, but not for the bank (work & time) and nether for a merchant (fees)

Also you are likely talking about Defi or NFTs on ETH which got ridiculous expensive. However that's contracts driving up the fee. Money sending fees rarely got above normal international banking fee prices and are usually WAY below.

> It's free for you, but not for the bank

I should have specified that I'm thinking of intra-EU bank transfers. They're as close to free for all parties involved as something can be.

There is no free in banking. With local banks you usually have a monthly or yearly banking fee. And app banks do all kind of weird financial models. Both models cashing in extra fees for withdrawals above a limit, outside the county etc.

One year I paid more than $500 banking fees in a year with zero monthly fee. For withdrawals abroad, exchange rates for deposits and withdrawals, calling with a more specific problem, etc.

Also as a merchant I do pay a fee on incoming swift transfers just to have a little automation. (Plus a monthly fee to use my company name instead of private name) Nothing is free

Edit:// also you can't send instand swift transfers on a holiday or Sunday. Sometimes not even Saturday. (or at night for that matter) Sometimes delaying up to 4 days (Easter) It's a imperfect solution either way.

For what it's worth, transfers within Europe using the local currency are usually free for consumers and have a small charge (€0.20 or so) for small businesses. I don't know if large businesses get a discount.

'Low' amounts (varies by country, call it under €20,000) are processed at evenings and weekends too.

I don't know of any bank that is clearing swift payments on the weekend (Swiss here). Not sure where you are from but I highly doubt this applies as European standard.

I refer to the "instant payment" systems.

https://www.ecb.europa.eu/paym/integration/retail/instant_pa...

Miners can set a minimum transaction fee and hope people are desperate enough to pay it to be able to send their coins.

It would require a sudden 90%+ reduction in hashrate for many months to kill the network.

Totally possible, but I don't think it will happen simply because there will always be some percentage of miners who aren't making ideal financial decisions, or who are using free electricity. Those miners will eventually bring the network back into operation, although you're right, it might take months.

Having said that, the bitcoin core developers really ought to be considering ways to fix this risk without making bitcoin too vulnerable to network splits (which is the flip side of the same issue - if there was suddenly a world war and the internet gets split into many country-nets, how do we want the network to behave?)

Without a long term bitcoin price increase, mining operations will still have to halve every 4 years to remain profitable, along with the block subsidy.

> miners who aren't making ideal financial decisions,

We seem to have lots of these. In the last few months, the price of bitcoin is down 60%, yet the mining rate has barely decreased. Surely at least some miners have been priced out of the market now?

It seems to me that if a company wants to get out of mining then the first thing they're going to do is to liquidate their hardware. And that hardware is going to get flipped right back on by somebody else. Supporting this view would be what happened after China banned mining. The hashrate collapsed about 50%, but then spiked back to higher than ever in a period of 3 or so months. So if we ever see a "real" decline in hash rate, it would probably take a very long form as hardware fails and isn't replaced/repaired.

As the hash rate gets more and more decentralized price tolerance approaches infinity. Some guy running a small number of ASICs at his house is going to have near zero price sensitivity.

As long as the hash rate is more than 0 and BTC/USD as well (which I think will always be the case), the Bitcoin network will reach another sort of equilibrium eventually. I'm not saying it'd go back up to current valuations or that it'd keep the same reputation among its followers, but I don't think the network will ever die (as in, the chain stops at a certain block for one year).

If the hash rate and BTC/USD became very low (on their way to the 0 you're mentioning), there'd quickly be an incentive for deep pockets (it's HN, so read "VCs") to start mining operations and create a new speculation wave they'd be well-positioned to benefit from.

The notion of a fee amount of a new car is wildly implausible. The current block subsidy is 6.25 BTC, about 200k at recent prices where mining was clearly functional. A block can fit around 2000 transactions. Your scenario of a run where blocks are full and fees are the value of a new car (call that $10000) would imply a total miner reward of 20 million, about 100x the block reward that is currently enough to attract minors. In such a scenario if 100x the reward for minors, mining would be wildly profitable.

"self-correcting equilibrium" sounds like the whole thing is doing OK...

but after Luna-fiasco and self-proclaimed "stable" coins being unstable, how does anyone keep trust in crypto-coins?

I still trust in crypto coins. In those that I hold in a wallet only I have the private keys to. Don't really care about all that fancy defi/nft/whatever stuff. Let idiots burn their money. But I still have trust in the concept of crypto currency.

Your currency is worthless if nobody else trusts it.

Well it's a good thing one other person still trusts it.

That is kind of apples and oranges. In the case of Bitcoin, the algorithm is only trying to maintain a consistent block creation rate of 1 per 10 minutes, not attempt to compensate for the price. If the price drops faster than the hash rate because all the minors are playing chicken with each other, well that will be interesting to watch.

By being able to look at how each individual one is designed and its mechanics, which allowed us to avoid Luna the entire time as well.

Believing a stablecoin to be stable because it has the word 'stable' in is like believing a country to be democratic because it has 'Democratic' in the name.

> after Luna-fiasco and self-proclaimed "stable" coins being unstable, how does anyone keep trust in crypto-coins?

After Chernobyl and self-proclaimed "stable" nuclear reactors being unstable, how does anyone keep trust in nuclear power?

The answer is that we analyze each design for soundness, rather than making blanket statements about an entire class of technology.

Dai hasn't moved an inch, what you're seeing is the collapse of investment vehicles that were stable in name only.

If you look at the raw data and not the 7 day average, there's been a precipitous drop (20% or more) just recently, assuming the graph is accurate.

> It's a self-correcting equilibrium though

There's nothing that says equilibrium has to be reached above zero though...

Exactly. This article is kind of a joke/click-bait to anyone who knows how bitcoin works.

Ah, a self correcting crypto algorithm. Now where have I heard that before…

I'm actually very curious to know where you've heard of something like that that predates the Bitcoin protocol's mining difficulty adjustment algo.

I think they’re referring to the recent Terra/Luna crash.

You may be right, but in that case I don't understand the relevance of Terra/Luna to bitcoin's difficulty adjustment algorithm.

There is none. But in this divisive world crypto must be either perfect, or every single part of it broken, according to people.

It corrects every N blocks (1180?), iirc around once a week.

But, and correct me if I'm wrong, there is't much damping in the correction.

This means that if 50% of miners pull out, then it'll be longer before the correction.

The correction will then "over-correct" in a sense and the difficulty will be easier, and then there'll be a short half-week if that causes all the dormant miners to come back online.

If miners are serious about turning off miners when the difficulty is high we could see a ping-pong effect where we end up with "easy weeks" lasting 2-3 days when the difficulty makes it super profitable and then hard-weeks lasting 2-3 weeks where the difficulty makes it unprofitable.

That will get worse and worse as people are less inclined to mine the hard weeks.

That said, that assumes that the depreciation of miners and overhead of switching based on difficulty makes it worth turning them off rather than just running them full time anyway because there's a time window before they're out-scaled.

( Is mining tech still getting out-scaled or has it plateau'd per device now? Originally when I supposed this theory, mining devices only had a 3-6month window before more efficient devices would replace them) .

> The correction will then "over-correct"

What matters is whether the system is convergent. The best thing that could happen (for POW digital currencies in general) is that it stabilises, around the current value long term. Then we know an upper bound on the energy cost and speculation will evaporate leaving BTC as a utility. The worst thing that can happen is it stays oscillatory with increasing amplitude as various interests try to push it one way then the other. After that most systems go chronically and irreversibly chaotic, and that will be the end of that experiment.

I don't think you need any nefarious interests to push it into instability, just the basic economic assumption of greed suggests that people would only want to mine the "easy weeks" and not mine the "hard weeks".

Note that bitcoin mining is independent of anyone else mining. At difficulty X you are expected the same number of blocks regardless of how many others are mining, so others' dropping out doesn't increase your bitcoin income per hour.

To me that's the fundamental missing part that could deliver stability. As others drop out, you aren't incentivised by the economy to mine. You might think you're getting a bigger share of the pie, but you're still getting the same number of blocks per hour no matter how many or few others are mining.

There are two main factors for why this scenario can be avoided:

1. The difficulty can't go beyond what the Potential Total Hashrate can bring to the table. In other words, even if the difficulty were to suddenly drop to 2010 levels and the block-week solved essentially instantly, the new difficulty after that block-week has been mined would still be what that hash-rate is capable of.

2. There are limits to how much the difficulty can drop, so it can't actually fully drop that far in one go. To get to full "easy week / hard week" pattern would be a slow oscilation that could be corrected with new algorithms including a bit of damping / smoothing via a soft fork.

But it's still an interesting scenario for a real "death" of bitcoin and how it could play out.

Note that bitcoin mining is independent of anyone else mining.

I don't think this is correct, because not everyone has the same hashing power.

Yes the amount of blocks you would statistically generate per hour is dependent on your hash rate and the current difficulty.

However, other miners with higher hash power will mine blocks quicker than you, and therefore take the rewards for those blocks ahead of you.

The amount of rewards you get is dependent on your share of the total hashing power, which includes other miners, and not just your own hashing power relative to the difficulty level.

An artificially low difficulty level simply means that blocks are mined more quickly, so yes in a way miners are making more money per unit of time, but the rewards are distributed according to your percentage of the total hashing power.

This is even more explicit in mining pools, where you might never mine a block, but still get rewards simply by virtue of providing hashing power to the pool itself.

This isn't right. Your parent comment was right.

Mining a block is just brute-forcing until you find a SHA hash that is small enough. Your chances of successfully finding a small-enough hash are completely independent of everyone else. It's not some sort of race to find a block, and as soon as someone finds a block everyone has to start again. (Other than that they can't reuse the same transactions, and need to update the parent block pointer).

If I give you £100 every time you find a random number that satisfies some property, the amount of £100s you get is independent of how many other people are making money with the same scheme.

The only reason competition matters at all is because of the difficulty adjustment.

Mining a block is just brute-forcing until you find a SHA hash that is small enough.

Or until someone else mines a block, in which case you have to start again from scratch.

It's not some sort of race to find a block, and as soon as someone finds a block everyone has to start again.

If miner A and miner B are both mining, and miner A mines a block, then miner B has to start from scratch with a new block because in all likelihood miner B was including transactions in his un-mined block that are now already mined by miner A.

So yes, as soon as someone finds a block, everyone has to start again and that's why mining is in fact a race to find a block.

If I give you £100 every time you find a random number that satisfies some property, the amount of £100s you get is independent of how many other people are making money with the same scheme.

This is not how Bitcoin mining works. The "random number that satisfies some property" is dependent on the transactions included in your block, and if other miners include those transactions that are mined in blocks before yours, then you have to start from scratch.

No, I still think you don't get it.

You seem to think that mining a block is something that takes a long time, and that work is wasted if someone else managed to mine a block first. Mining a block takes an incredibly short amount of time, but pays off with incredibly low probability. You have to do lots of attempts to find a block. You don't spend 10 minutes trying to compute one hash, and then throw up your hands in disappointment if it wasn't low enough.

> Or until someone else mines a block, in which case you have to start again from scratch.

You always start again from scratch after every single hash. Billions of times per second. You're no more likely to find a block on your millionth hash than on your first. The work doesn't add up. Each hash you try is either low enough or it's not, and either way you try again.

> The "random number that satisfies some property" is dependent on the transactions included in your block, and if other miners include those transactions that are mined in blocks before yours, then you have to start from scratch.

That's correct, but you only wasted a small amount of time during the overlap between the other miner finding a new block and you hearing about it.

The random number that you're trying to find by means of (yes, repeatedly) hashing, is dependent on the transactions in your block (which are hashed together in a Merkle tree).

Not only that, but the number you're trying to hash is also dependent on the previous block (hence it being called a blockchain).

So as soon as another miner mines a block, the block you're mining immediately becomes invalid. For two reasons, the block height of your block is now too low (it has the wrong parent) and it (most likely) includes already mined transactions.

So even if you happened to still mine your current block, it will be rejected by the nodes in the network for having the wrong block height and for including already mined transactions.

So, you have to assemble a new block, which uses the latest mined block as parent and you have to include new transactions from the mempool.

There's a cost to doing this, it takes time away from the actual hashing, which is what I meant with "starting from scratch".

For the reasons outlined above, you're not mining blocks independently from everyone else.

Great, this is now all correct!

Yeah thanks, I do now understand the point the grandparent was making better.

> The only reason competition matters at all is because of the difficulty adjustment.

Which seems relevant here (I think you’re both right?) because with more competition the next adjustment will be very quick, and will adjust your expected returns to your hash rate fraction of the competition?

The contentious claim was:

> At difficulty X you are expected the same number of blocks regardless of how many others are mining, so others' dropping out doesn't increase your bitcoin income per hour.

So, yeah, you're right. Others dropping out increases your total income because you get to mine at low difficulty for longer. But the claim was about income per hour.

Thanks for digging up the original quote and clarifying what I was replying to. Agreed, income per hour indeed doesn’t depend on competition until the next adjustment.

The grandparent was talking about blocks mined per hour, and I was thinking of blocks mined per difficulty period (I guess because I didn't properly read the grandparent's post).

Given that the difficulty period is variable, and becomes shorter when more hashing power comes online, the amount of blocks you'll mine for the current difficulty period does decrease, even if the amount of blocks you mine per hour stays the same.

> Others dropping out increases your total income because you get to mine at low difficulty for longer

But not if they only drop out when the difficulty swings high and rejoin when it swings low.

> It's not some sort of race to find a block

This is precisely what it is, every pool operator I've worked with put considerable engineering expense into ensuring that they could broadcast their solved blocks as quickly as possible to the network.

This is the definition of a race. It's somewhat common for a pool to mine a block a second or two before another pool.

Mining is zero sum. If you have more guesses per second than your neighbor, you will win. Only in a pedantic sense could this not be considered a race. If my neighbor then doubles his hashrate, I will lose comparably to his increase. We just each make less overall money as the difficulty increases since we're engaged in an arms race with each other.

If the rest of the network doubles its hashrate relative to yours, then (up until the next difficulty adjustment) you'll still find blocks at the same rate as you were doing before. The rest of the network will find blocks faster, but you will not find blocks any slower, apart from a very small percentage of the time where you find blocks at roughly the same time as someone else, which will now happen more frequently.

Yes, broadcasting solved blocks quickly matters, but the principal deciding factor in how quickly you find blocks, for any given difficulty target, is how quickly you compute hashes, independent of how quickly everyone else is computing hashes.

you'll still find blocks at the same rate as you were doing before

Yes, but the difficulty adjustment will now also happen more quickly because the confirmation times will decrease due to the higher hashing power, and then after that you'll be finding blocks at a much slower rate.

The idea of an "easy cycle" and "hard cycle" is interesting, but I'm not convinced it's an issue, because if many miners decide to only mine during the easy cycle and not at all during the hard cycle, the difficulty adjustment will mean that the hard cycle will take much longer (due to increased difficulty AND decreasing hashing power) than the easy cycle, in a way that evens out and removes the arbitrage of only mining during the "easy" cycle.

apart from a very small percentage of the time where you find blocks at roughly the same time as someone else

Not only that, every time a block is mined you have to spend time to construct a new block, which takes time.

Sorry I missed this reply, but for the record...

Yes, you will mine blocks at the same rate you were before the network hash doubling, until the difficulty reset.

However, this is still zero sum and the network just beat you. You will mine less blocks now that the network increased even prior to the difficulty reset.

The reason why is the difficulty algorithm is block-based not time-based. After N number of blocks are mined, difficulty will then reset itself. You only get that number of blocks to mine at a given difficulty, not a set window of time. Once those blocks are solved, it's on to the next difficulty window regardless of if it took a day or 10. Someone doubling the hashrate the moment difficulty resets will cut your expected return in half for that round as "people other than you" are now solving blocks at double the previous rate.

The best thing to happen is that it'll go to 0 and all this energy gets put into. Project with real benefit.

> assumes that the depreciation of miners [snip] makes it worth turning them off

Mining rig costs are usually sunk costs: turning off never saves depreciation (which is just an accounting entry). Unless the miner can do something else with the mining rig (repurposed, sold, withhold purchasing new rigs), then t variable costs dominate their decision.

A miner should keep mining if marginal revenue (expected from minting new blocks and receiving block tx fees) exceeds marginal costs (mostly electricity if miner doesn’t get free electricity). https://www.investopedia.com/ask/answers/041315/how-marginal...

Not to say that the system is not unstable (which is an interesting idea). Maybe a control engineer could inform us of the parameters for instability.

Disclaimer: crypto novice.

I think I worded it badly, I meant that if depreciation is high then you wouldn't want to turn it off because you'd want to mine as much as possible while it was still worth something.

So I meant the depreciation would need to be low enough to make turning them off a worthwhile strategy.

Edit: I see what you mean about sunk costs, I had worded it badly but you were still arguing against my intended meaning.

I don’t think I misunderstood. How fast equipment is “depreciating” is entirely irrelevant, unless you are using the term in a manner I am misunderstanding.

Understanding marginal economics is difficult because it is counter-intuitive. I am currently on a personal binge trying to help understand the economic theory because it helps me challenge whether I have understood and whether I can pass that understanding on to others.

Unfortunately marginal economics is poorly explained - the link I referenced was the only one of five I quickly skimmed that seemed to be free of gross errors and had no misleading content.

Edit: latchkey seems pretty froody and made a couple of relevant comments:

* Bitcoin OPEX (marginal cost) estimation of $7k to $9k per Bitcoin: https://news.ycombinator.com/item?id=31797201

* CAPEX vs OPEX: https://news.ycombinator.com/item?id=31796669

Capex is spending on your crap, ie buying it and maintenance. Opex is what you spend to run your crap.

Doesn't really matter. If the price of Bitcoin is below the cost of electricity and labor required to mine it, then it's irrelevant that the card won't be as productive (lose money at a greater rate) in future. You're still losing money either way.

The only valid reason to continue mining would be that you expected that the price of Bitcoin would exceed the mining costs in the future. Then you would stockpile them and take advantage of the reduced hashrate as other market participants exited.

Typical accounting depreciation is very long and makes some assumptions about stuff breaking by chance and getting outdated and what not. Many assets outlive their depreciation schedules.

I suspect crypto mining rigs are a very different beast, actually burning out after a relatively short period of overuse. Turning it off may well extend the actual life of the assets. And if they’re regularly buying more for the rig then that’s worth considering too.

Disclaimer: just thinking aloud with no evidence

The question is if miners pull out at all. In theory there are two important price points: the one where building up a new facility with initial investments is profitable and another price point where keeping an existing facility running is profitable.

We're long past the first point already, it's the second tipping point we're expecting now.

That's the entire point though, miners are quitting mining.

There is a serious problem that is not much discussed. Bitcoin is susceptible to a 51% hash rate double-spend attack. As Bitcoin has grown, this has never been a practical issue. No miner or consortium has had that much hash-rate compared to the rest of the market.

But when the hashrate drops below 50% of its previous maximum, that means that there are idle mining resources enough to carry out the attack. And owners of those resources may not mind throwing the whole Bitcoin system into chaos if they can get one last big payday.

The lower the active hashrate grows, the smaller the consortium required to make an attack.

So watch for chain forks and double-spend attacks. Maybe not this month or this year, but my expectation is it will be part of the eventual Bitcoin downward spiral.

In some sense bottom buyers wait for the worst news possible, and then calculate if the financial object can go to zero. This sounds like it might be the kind of news those kind of buyers would be waiting for.

Good. The world definitely does not need more wasteful bitcoin mining.

Do you think the world could benefit from money that can't be manipulated by governments? If so, is it worth some expenditure of energy?

It's being manipulated by private entities, so, I'm not really sure it's an improvement.

Just like the government itself?

Governments are far more answerable to average citizens than the people behind Tether or the whales currently, even if government isn't ideally accountable. Also, governments have reasonable incentives to keep currencies at levels that maintain economic conditions. Being voted out or overthrown are consequences of economic mismanagement.

I've yet to see that from Tether.

> I've yet to see that from Tether

The wheels of bureaucracy turn slowly, it's no different with any other financial scandal.

True, but the fact that government regulation is needed kinda voids the argument that crypto currencies are great because they can't be manipulated by the government like a fiat currency.

This is only true in democracies. In autocracies like Russia and China they just do whatever the government tells them.

The CCP is oppressively authoritarian because it's scared of its own citizens, especially its young NEET men.

> Do you think the world could benefit from money that can't be manipulated by governments?

Maybe, but that's not Bitcoin for sure.

Isn’t the money being manipulated by the governments an important positive feature for their economy?

I do think so, but also believe bitcoin will not be that protocol.

It's the first, but not the best, and while it benefits from being the first, that will only take it so far.

If we assume for a moment it's a currency (and not a security) and it fulfills the goal of an non manipulable currency well (IMO it doesn't) then you could say:

Besides the operators (miners, devs) following people are the main profiteers:

- in a progressive well working country, mainly organized crime, terrorists and people wanting to destabilize the country, so if you live in such a (non existing) country you would not want it at all

- in a autocratic country it's the opposite, you want it really really hard

- in a dysfunctional country it can be helpful but the "it's safe from government manipulation" point matters less then the it's not operated by the government point

Now most countries are somewhere in-between so there is no clear cut answer.

But as far as I can tell all ethically "good" use-cases which couldn't simpler be archived with other means are also illegal by law of at least some involved parties/countries.

Now by-law illegal doesn't mean bad.

Still IMHO Bitcoin completely failed as currency, and some of the other promises aren't really there either.

It did have a temp. huge success as security, (stock like) speculation target and high risk speculators (at some point, not now).

No, and no.

"Manipulated by governments" primarily means "tax evasion and crime".

Some expenditure, but how much? Because right now it's an incredibly large amount of energy. Also, the US govt controls quite a substantial amount of bitcoin, I even have a conspiracy theory that bitcoin could have been created by the US govt ..

> Do you think the world could benefit from money that can't be manipulated by governments?

Not really, no. What you call manipulation is really necessary maintenance and management meant to avoid the hypervolatility we see in crypto.

How many real world experiments do we need to run before people accept that markets, especially for money, aren't self regulating.

> What you call manipulation is really necessary maintenance and management meant to avoid the hypervolatility we see in crypto.

It depends on the government...

How many real world experiments do we need to run before people accept that governments aren’t self-regulating? Why do laws matter when the government can get around them and change them whenever it wants? Eliminating alternative means of exchange is just cementing the opportunity for governments to implement their own digital currencies, and if you don’t think they’ll abuse the power that gives them, you need to read more history.

If governments are successful in manipulating money to avoid volatility, why are these still scores of hyperinflation failed currencies, financial crises due to too much debt, and so on? Why is these not a clear law of economics that can lead to stability and no recessions?

Because politicians and lobbies get away with leveraging laws to create moats and red tape.

Economic policy is just a charade.

Less interference would be ideal, but a government is still a necessary evil. It’s just too large in most cases.

Yes it probably is worth “Some”. It is worth about 10 watts based on the transaction processing rate.

Bitcoin is a failed experiment and it's in free fall.

This seems like a temporary problem given the difficulty adjusts? https://news.bitcoin.com/bitcoins-sinking-price-pushes-hashr...

It's a market. As bitcoin goes down, amount supplied of mining/hashing goes down. Difficulty adjusts downward which shifts the supply curve a little, but nowhere near enough to make it worth it to all the miners who mined before.

A few percent change in difficulty doesn't make a 50% drop in bitcoin all better.

The used market is flooded with ASICS and GPUs so it seems the adjustment isn't working well.

Also, many large miners didn't sell their coins and instead they borrowed real money to expand and fund their new mining operations. As the interest rates are climbing and crypto prices are going down, that's not possible any more.

Nobody has used a GPU to mine Bitcoin in a decade now.

GPUs are used for eth. There is clearly a broad downturn in the mining sector.

Ethereum is mostly mined using custom hardware, it's not graphics cards really, certainly nothing you could re-sell to anybody who expects to play Bioshock or whatever. Very small operations are people buying and using actual consumer GPUs, but they tend to be absolutely destroyed by the process and then sold to unwitting buyers. I've sorted through literal milk crates of GPUs before to find a single one which could reliably display a video output after they had been used in a mining operation.

> Ethereum is mostly mined using custom hardware

Very large ETH miner here, we use GPUs. Mostly 4-5 year old tech too. Unlike BTC, ETH does not require the latest hardware because the algo, ethash, is memory bound. This is a great explainer [1].

You may be implying that the majority of the network is custom ASICs. I doubt it is more than about 30%, if that. Come august, all the ones with 5gb of ram will also disappear off the network because of DAG growth.

GPUs are also not destroyed by using them. I've got GPUs sitting in the worst possible conditions, running just fine for many years now. We have started to change the thermal paste on the hot ones though... it dries out. I don't know what you were dealing with, but that sounds like something else caused the failures as the chips themselves don't wear out like that.

[1] https://www.vijaypradeep.com/blog/2017-04-28-ethereums-memor...

It does absolutely destroy the hardware through, even very early mining farms had the sole issue of the fans in the cards burning through their bearings. A local electronics recycler had an entire crate of burned out ATX PSUs from some local mining operation, every single one of them had the fan melted off the hub. It's worth being aware that all silicon chips are temporary anyway, they all die to electron migration eventually.

I don't have fans on my cards. PSUs are generally shit (hand soldered) and that's not what we are talking about here.

do most miners choose to run cards without fans because of known issues?

The smart ones do.

Fans are moving parts and require electricity.

We also put 12 cards in a case instead of the usual 8 or 9.

This means fewer other parts too... psus, mobos, ram, ssd, case fans... all of which use power.

That is not true. I have 2 1060s and 2 580RX running 24/7 since 2 years. I recently used one to compensate for my broken gaming GPU. Everything works no issues so far. Guess it always depends but it is not like 2 years of mining will render a GPU useless.

You're within the "small miners" part of my comment.

You wrote they get "absolutely destroyed by the process". I do not understand, why you wrote this. It is not true. The stress on the gpu might even be higher while gaming, depending how the gpu is tuned.

I agree with you, he's totally wrong.

In fact, smart miners overclock/undervolt their gpus... so they are running faster, but with less power. Power is what creates heat and heat is what hurts things. Except it really doesn't.

Fans certainly die out though... we go through a lot of those on our cases. PSUs are also generally failure prone since they tend to be hand soldered on the insides.

> using actual consumer GPUs, but they tend to be absolutely destroyed by the process and then sold to unwitting buyers

This is such an urban legend. There's been quite a few tech people testing this and there's countless articles on the topic. In short - I have not seen a single one which actually found real significant issues with the hardware, even if some are listed in theory. If this was common at least one of them would buy a severely degraded batch, or we'd see some proven report about this.

Not in bulk, no.

But I'm sure there's at least a few people playing around with it on GPUs.

That's like saying people mine BTC with pencil and paper [1].

[1] http://www.righto.com/2014/09/mining-bitcoin-with-pencil-and...

Not at all. It's people who want to play around with the technology, but can't afford FPGAs or ASICS to do the job. Or maybe they could afford FPGAs or ASICS, but they want to be able to see more of what's going on behind the curtain.

Not a huge number of people, no. But then a lot of services on the Internet have a long tail.

But from what you describe, it's an open question whether anyone has used a GPU to mine bitcoin in the last ten years, as opposed to just setting a GPU to work on the kinds of problems involved in mining bitcoin.

If you never mine any bitcoin, are your tools being used to mine bitcoin?

The bitcoin market is big enough, and there are enough places where power is free and the hardware is already paid for, that I am quite certain there's at least a few people still mining bitcoin today on GPUs.

Then there's the educational market, where it's less important that people mine bitcoin to earn money, and more about learning how bitcoin works by actually running the code.

So, no -- I don't think that's actually an open question at all. I don't have any proof, but then neither do you.

And all I'd have to do to create my proof would be to spin up my own machine with a GPU and use it to mine bitcoin for a while. Maybe on a free AWS account or something. Not that I'd actually do that, but it would be possible.

Name one piece of software that mines BTC on GPUs that has been updated in the last few years.

> and more about learning how bitcoin works by actually running the code.

You can find an old CPU miner for that. There's a few that have been written clearly with demonstration/learning in mind. If you don't expect any gains, why even go with a GPU?

Maybe because you want to study how Bitcoin works on a GPU?

Then they'll play with https://github.com/FourDizzle/js-gpu-bitcoin-miner/blob/mast... or similar on some custom chain or simulated environment. They wouldn't be doing any actual mining.

Maybe. Maybe not. But you can't force them to do so, even if that is the only way to save your theory.

Maybe they want to play with real software on real hardware. And maybe they've got access to free power to do it, or they already pay enough for power that the cost of a single GPU is not material to them.

> The bitcoin market is big enough, and there are enough places where power is free and the hardware is already paid for, that I am quite certain there's at least a few people still mining bitcoin today on GPUs.

> So, no -- I don't think that's actually an open question at all.

But you didn't even address my question! It doesn't matter whether someone is assigning their GPU to the job of mining bitcoin. Has any bitcoin actually been mined by a GPU? That would be the difference between "using a GPU to mine bitcoin" and "using a GPU to LARP mining bitcoin".

Can you prove that there is any Bitcoin throughout history that wasn't mined on GPU?

If that's what people are doing, then they have their reasons. And unless you can prove that they don't exist, then you can't rightly claim they don't exist.

That makes zero sense. If someone wants to play around with the concept of mining with a GPU, then mine ETH. Not only is there recent software that supports ETH mining on GPUs, but also the fact that it would take a long time to mine a single share on a BTC pool at this point.

Software for mining BTC on GPUs hasn't been updated in many many years. It would be a struggle to even get something working.

Maybe. Maybe not. Bitcoin is a better known name, and an easier algorithm to compare the differences between running on CPU versus GPU, and so that might be a very interesting thing to study.

I can definitely see a CS professor assigning that kind of work to their class for a while.

Then maybe a couple of weeks later, they do ETH instead. Or maybe Dogecoin, or whatever else the professor wants people to study.

For a hobbyist, maybe they really are married to Bitcoin on GPU, and damn the torpedoes.

The point is that there are billions of people in the world, and presumably at least millions of people who might be interested in mining Bitcoin. You can't account for every single person who might want to do that, nor can I.

My advantage is that only one such person needs to exist to support my thesis, whereas your position requires that there are no such people anywhere on the planet.

Like I said, these aren't going to be large bulk operations, I totally grant you that point. But I'm confident that there are at least a few examples out there.

Are you sure you really understand mining and the different algorithms used by the different cryptos? You don’t learn sha256 by putting a GPU rig that was only a transition between original CPU mining in the beginning and current ASICS mining.

> My advantage is that only one such person needs to exist to support my thesis, whereas your position requires that there are no such people anywhere on the planet.

Still nobody sane or competent would do it.

There are still edge cases where it could be done by people who are "sane". They're just interested in other things than you are. And they may have different cost structures than you do. But they're not "insane", even though they are making very little profit.

Brad, it would be literally zero profit to mine BTC with a GPU at this point. Even with pooled mining, the difficulty is so high that the odds of a GPU finding a nonce, even at a pool level of difficulty, is nearly impossible.

As I said before, there isn't even software available to mine BTC on a GPU (you never answered my challenge about naming it). It would be a lot of work to even get it running. So yes, it would be insane to even try at this point... just like doing it by hand on paper.

Fun thought experiment you're having here, but realistic, it is not. Definitely encourage people to try mining ETH with a GPU though... that opportunity is ending soon and it is quite interesting. Some GPUs have about a billion knobs in them to twist for tuning efficiency. They have silicon lottery effects on them as well, each chip is a snowflake.

I have so many GPUs that I've even written software to collect where each one was located on the wafer and done analysis of how that affected its performance. Spoiler, the ones on the edge don't perform as well.

In Norway until recently the electricity was cheap. So many apartments and even houses in suburbs use resistive heating as installing heat pumps was not profitable. But then in winter one can just mine crypto coins on GPU for free to heat the home. Granted the wast majority of miners work on alt coins but some do try their luck with bitcoins.

Stealing from society and burning fossil fuels in order to profit yourself.

It's disgusting.

How are they stealing from soceity?

This is achtually the nichest of niches where mining bitcoin is not stealing from Society: the existing alternative resisting heating, would produce as much heat per watt as mining bitcoin would.

Sure, there's the question of using the hardware for this purpose, and possibly this dampens the transition to heat pumps, but it's the 'least immoral' mining situation I've heard of so far.

Norwegian power production is to 90%+ hydro power. Norway is under the NO column in this table.

https://www.statnett.no/en/for-stakeholders-in-the-power-ind...

It's not in Norway that they are burning fuel to produce electricity…

The selling also has its own "difficulty adjustment". The miners who managed to sell their extra hardware early at the inflated prices made a good decision. Now that you can buy GPUs at below msrp again, there won't be a many exits.

The difficulty adjustment is deliberately slow (once every 2016 blocks) to prevent volatility in block hardness. That the hash rate is not dropping off a cliff over the last 6 months is testament to that.

https://www.blockchain.com/charts/difficulty

> to prevent volatility in block hardness

Kind of, it's to prevent an attack where nodes could be isolated and then duped to believe that the network difficulty is substantially lower than it should be. If we adjusted difficulty with every block (some altcoins do this), we could simply disrupt your connection to the network, wait until you would accept a block with a very low difficulty because 8 hours have passed with no blocks, and then mine that.

ETH adjusts every block. Your attack scenario is inaccurate. There is no single point of disruption to be had.

The block difficulty is calculated from the time between previous blocks. The time since you last received a block is not taken into account. Because not everyone clock is exactly the same, you could end up with different difficulties.

No, some altcoins actually do adjust like this to prevent their networks being "stuck" at a high difficulty.

You'd only get the isolated nodes to accept that block though, most nodes would reject it. So I'm not sure what you'd gain.

Many miners are currently finding themselves in an interesting situation.

Money was cheap. So if a miner thought that their cryptocurrency was going "to the moon", it was better to borrow money at low interest rates and stash the CC away for later.

Now that interest rates are increasing and the CC market is crashing, they cannot offload their CC quickly to cover their (future) costs and payments on their loans.

Is that true? Mining business has mostly fiat-based balance, and one doesn’t simply mix currencies in a business without hedging. I mean it is plausible that people could leave profits in crypto, but that’s just an intersection of a businessman and a crazy tothemooner.

Environment breathes a sigh of relief.

Certainly not a fan of crypto currencies since I don't see any good use in them but how come you only see comments like these in a crypto currency thread and not in a, lets say, computer games one? Games certainly are more wasteful and as useless as crypto currencies are.

Games have an positive impact on the gamer relaxation. I wouldn't call that useless.

And crypto does not have a positive impact on people "playing" crypto?

Sure, just as gambling does.

You should compare energy usage of Bitcoin to gambling, not gaming.

Isn’t it a zero sum? If one wins money, one lose some.

You can still be relaxed after losing a game, after losing crypto not so much.

Sure but the energy expenditure per-person isn't balanced per person for crypto, it's balanced to the amount of energy and money willing to be spent on the thing. If I "enjoy" crypto to the tune of a $1 million dollar server farm, that'll burn ridiculously electricity than the biggest possible monitor and the most powerful GPU available to power one computer for one gamer's enjoyment.

From my personal experience, playing computer games is a dopamine hit, but they don't result in me feeling particularly relaxed afterwards - often I'd play too long and feel tired, a kind of a hangover.

Try a different style of game. One which doesn’t reward stress. Alto’s Adventure added a zen mode so it would be even more relaxing to those who are playing it to chill: https://www.theverge.com/2016/6/1/11785058/altos-adventure-z...

The environment claim is total bs. Crypto uses 0.5% of global energy supply. It's beaten by things such as residential television use, and only the wasted light from outdoor lighting (0.85%). It's also the only time that people try to blame an energy consumer for the sins of energy producers.

The environmental damage of energy is caused by coal plants, not how many people are watching the simpsons at the same time.

> It's beaten by things such as residential television use, and only the wasted light from outdoor lighting (0.85%).

TV usage is a contribution of billions of people. Same with outdoor lighting.

Both are necessary, unlike Bitcoin.

No, it's not outdoor lighting @ 0.85%. It's only the waste from outdoor lighting. Outdoor lighting is far higher. [1]

But now we're playing a game where you tell me the thing you like and the things you don't like and I can either present a counterargument of things I like and don't like and we can both get mad that we have different preferences...

Or, we can design a system that allows people to have different preferences without trying to regulate our preferences on each other.

The math: (residential power %)(lighting %)(lighting % wasted) (21)(.13)(.35) = 0.9555% (oh, it was higher than I remembered)

1 - https://www.darksky.org/light-pollution/energy-waste/#:~:tex....

"Mostly by lights that aren't shielded." Overall, the lighting is still necessary, it's just not as efficient as it could be. By that standard, over 99% of Bitcoin mining is waste because because most of the power goes into solving artificial difficulty.

The only people who genuinely care about PoW are miners and a handful of enthusiasts. I'll generously estimate that 1 million people fall into this category. So you have a million people using .5% of the world's electricity just for one of their interests. Contrast that with the billions of people who enjoy videogames or outdoor lighting.

> By that standard, over 99% of Bitcoin mining is waste because because most of the power goes into solving artificial difficulty.

This is circular reasoning. The difficulty adjustment is part of the protocol, and the purpose of the protocol is to secure the network from attacks. You might think that’s useless, I don’t.

> Overall, the lighting is still necessary, it's just not as efficient as it could be

Yes, and the completely fixable loss in efficiency has a significantly greater impact on our consumption than the entirety of cryptocurrency yet I have yet to see someone complaining about the perils of unshielded lighting.

TV and outdoor lightning aren't necessary. I don't have a TV, and I know astronomers who are very much opposed to outdoor lightning. Bring your own light! See the stars!

> TV and outdoor lightning aren't necessary.

General populace would disagree.

> 0.5% of global energy supply.

1. You mean consumption?

2. That's _huge_. Incredible. I just hope it doesn't rise further.

3. References for your claim that more energy is spent on TV use than on crypto mining.

4. For every person mining crypto, there are, oh, maybe 1,000 people who watch TV? 10,000?

1. Pedantry but long term energy storage isn't really a thing. consumption is more or less supply

> Results from EIA’s 2015 Residential Energy Consumption Survey (RECS) show that televisions and related peripheral devices—such as digital video recorders (DVRs), video game consoles, and streaming devices—consumed 7% of the electricity used in American homes in 2015 [1]

quick edit: I derped the math. I think American residential is 21% so that's ~1.48% of total supply. You'd need a 33% efficiency increase in residential TV efficiency to match the energy saved by abolition of crypto. That's without taking into account that crypto is on average produced from _more_ renewable energy than the average.

1 - https://www.eia.gov/todayinenergy/detail.php?id=37032

2 - https://hbr.org/2021/05/how-much-energy-does-bitcoin-actuall...

(1.) Ok, as long as I understand what you mean.

(2.)-(4.) According to this page:

https://worldpopulationreview.com/country-rankings/electrici...

US electricity consumption is ~1/6.5 of global electricity use (and the ratio has probably dropped since 2017). So, 7% of electricity used in American homes is ~1.48% of total US electricity consumption, but only 0.23% of total consumption. Granted, TV is in wide use throughout the world, but not nearly as much as in the US, I believe. So instead of 6.5, let's divide by... say... 2.5 instead? That's about 0.5% of total consumption. Similar to crypto then :-)

No, your math is very wrong here. If you're trying to adjust the global rate for America being an outlier in tv consumption, you don't get to multiply by their representation in the global supply. That's just flat wrong.

Further, even a multiple of 2 isn't really reasonable [1] [2] [3]

1 - https://www.worldatlas.com/articles/which-country-watches-th... 2 - https://china.usc.edu/resources/average%20day#:~:text=ON%20A.... 3 - https://www.statista.com/statistics/186833/average-televisio...

Video games don’t consume as much electricity as modern western countries.

You can make the same argument about any type of entertainment. It won't make it less invalid, though.

Games are entertainment, and average gamer certainly doesn't consume electricity on a scale of Bitcoin farm 24/7.

Neither does any single bitcoin user?

Miners should be compared to data centers, like those massive ones powering cloud games?

> Miners should be compared to data centers, like those massive ones powering cloud games?

Data centers host more than cloud games.

Which you consider a rebuttal because…?

Its fairly useless as solely an observation, mining farms often also do other things with byproducts, so even if the crux of this conversation relies on a futile effort of comparing relative utility of "entertainment" or "bitcoin", it would be inaccurate either way

If there were no users, presumably there would be no network (at least if "users" include people who are in it for the financial speculation), so it is meaningful to attribute energy usage to users. But how to quantify that? One reasonable approach that shows up a lot is to say that usage is making transactions, and just consider the energy usage of all transactions to be that of the entire network (since mining exists to add credibility to transactions). Then estimates will say that on average, any transaction uses more than 1 MWh of electricity.

All of those presumptions are wrong.

The network uses the same amount of energy whether a block has transactions or not. Surely you see how that would actually help your “I hate energy use” argument if you actually made that one. Your argument is a common argument though, its incompatible with the more accurate argument.

Secondly, trading for speculation occurs offchain, meaning most speculators are not transacting on the network.

I'd wager that games have a higher cost to society than crypto coins.

First games waste a lot of electrical power. A modern GPU is what at its peak? 500 watts? A modern CPU isn't too far off. That's 1kwh that per gamer that gets turned into heat and lootboxes.

2nd technological game progress means that computers/gpus are considered obsolete too fast. Back in the day your home computer would last over a decade until you had to throw it away and buy new hardware.

3rd (young) people wasting a lot of time in computer games. Teenagers waste their youth infront of a screen over going out and enjoying the world in their prime. Leading to adults that lack life experience and get depressed/anxious easily. (Mental health crisis)

4th modern game design makes games pretty much a gateway drug to gambling addiction.

5th spending all that time sitting means it's an enormous health care crisis. Pair that with the deregulated dopamine cycle in game addicted people and you can easily see how this leads to over eating and obesity. Which is even more of a cost to society.

> game progress means that computers/gpus are considered obsolete too fast

The miners got a few architecture jumps where everything older became obsolete as well. It's not much different from the availability point of view. On the other hand, unless you're chasing AAA titles, you don't really need to upgrade much - I can play all my game library with 4yo hardware and I'm sure I could go further back. And that's ignoring console gamers who use the same generation for ages.

> Teenagers waste their youth infront of a screen over going out and enjoying the world in their prime.

"that's like, your opinion man". You seem to assume online interactions don't improve life experience, or don't provide enjoyment of the world - that's just a set of your values. That's ok, but it's not universal.

> modern game design makes games pretty much a gateway drug to gambling addiction

You're missing a lot of qualifiers. There's a tonne of games with no lootboxes. There's likely more of them than those with. This is not "modern design", but rather "late stage capitalism in game design" - it's very related to some genres and producers - not to modern games in general. For every lootbox-heavy AAA released in a year there's a gamejam that results in some new creative indie title.

> spending all that time sitting

Are you assuming that removing games would not cause people to find entertainment that still involves only sitting? Do you remember how the same line was used about the TV?

Basically it sounds like you know about games and have opinions about them, but don't really have much experience with various genres or how people interact and don't enjoy them yourself. It's ok... but that's a lot of personal opinions.

You're making a lot of assumptions here.

> First games waste a lot of electrical power. A modern GPU is what at its peak? 500 watts? A modern CPU isn't too far off. That's 1kwh that per gamer that gets turned into heat and lootboxes.

Majority of gamers are smartphone users and mid to low machines.

https://store.steampowered.com/hwsurvey/Steam-Hardware-Softw...

> 2nd technological game progress means that computers/gpus are considered obsolete too fast. Back in the day your home computer would last over a decade until you had to throw it away and buy new hardware.

??????

> 3rd (young) people wasting a lot of time in computer games. Teenagers waste their youth infront of a screen over going out and enjoying the world in their prime. Leading to adults that lack life experience and get depressed/anxious easily. (Mental health crisis)

Bitcoin users waste their life chasing gambling schemes and then killing themselves.

https://www.jumpstartmag.com/are-crypto-related-suicides-a-r...

> 4th modern game design makes games pretty much a gateway drug to gambling addiction.

What's "modern game design"? Gachas existed for a long time, single player games exist and are wildly popular.

> 5th spending all that time sitting means it's an enormous health care crisis. Pair that with the deregulated dopamine cycle in game addicted people and you can easily see how this leads to over eating and obesity. Which is even more of a cost to society.

Got something to back that up?

PC gaming alone is using the same amount of electricity. It's incredibly wasteful energy wise just like crypto mining. 75 terawatt-hours per year, but obviously the console gaming is much bigger.

I’m not going to do the math, but mining probably uses several orders of magnitude more electricity than gaming. And one is art and entertainment. I don’t even know how to respond here…

>And one is art and entertainment

This does not give you a pass for being wasteful.

It's not wasteful. The energy is used for something, not deliberately wasted.

Video games are entertainment. Are you suggesting we shut down tv, radio, theatre, movies, theme parks, tourism because they are all wasteful and useless?

Well if we're trying to save the environment and make a better life for future inhabitants of this planet why not shut down all of these? Why shut down just crypto currencies?

Because video games scale with the number of human beings (with access to that technology). Even the most dedicated gamer can only play so much video game at a time. Cryptocurrency, however, scales to globally available power and cost. Because of the inherent competition between mining pools, the amount of electricity dedicated to mining just grows and grows.

Plenty of things with "no value" use electricity, but these other things don't use electricity in an adversarial way related to it's monetary cost.

Let's take the example of video games: bitcoin uses about 150TWh of electricity. From EIA.gov's stats, it looks like residential computer usage is estimated at 36 TWh across the usa (2.4% of residential usage, 1.5T kWh residential [0]). Let's assume all residential computer usage is video games, so it's using a nice 1/4th bitcoin.

So, what's different about these uses? Well, let's say that we manage to make electricity 5 times cheaper by, say, building a fusion reactor or a ton of solar panels. In that scenario, those computers playing video games still use the same amount of electricity, and their power bill goes down. Not a problem for computers/games.

However, if the price of electricity goes down, that's actually a problem for bitcoin. Bitcoin is using 150TWh of electricity, which sorta means to perform a 51% attack, you need 75TWh of electricity (I know, it's more complicated than that). Now that electricity is 5 times cheaper, cool, someone can attack bitcoin for 5 times cheaper right? Well, we can't have that, so bitcoin now has to use 750TWh to have the same security it had before.

The same thing happens for improvements to ASICs or any other improvements pretty much. If bitcoin is cheaper to mine, that just means more mining happens and the cost of mining stabilizes back out.

On the other hand, if a game can be optimized to take less electricity, or use fewer servers, of course that'll happen. Like in almost any venture, accomplishing the same work for cheaper is good when it comes to video games.

That is the difference I see. Crypto isn't just wasteful, it's adversarial to the point where it resists improvement.

If we reached some energy utopia where electricity could fulfill 100% of all non-crypto uses on the planet at no meaningful cost, bitcoin would have to use so much energy that electricity still couldn't be free, or else it could be attacked with the free electricity. I cannot think of any other use of electricity that has this adversarial property.

[0]: https://www.eia.gov/energyexplained/electricity/use-of-elect...

You need more than just access to electricity to mine. You need the hardware, somewhere to run and maintain it, as well as the whole supply chain leading back to chip fabrication. These are all limited. You'd need a multi hundred-billion dollar covert operation to do all of that and it would take years to build.

The operation wouldn't need to happen covertly, just as bitcoin's increases in electricity usage so far haven't happened covertly.

Bitcoin will, in order to secure the assets on the chain, need to have an adversarial amount of resources wasted. That's the point of proof of work, to prove that you wasted a lot of energy. It's an energy wasting contest.

There are physical limits which mean the waste in this contest-of-waste can only increase so quickly (i.e. manufacturing limits), but I think the fundamentals of the system are as I describe. It is "working as intended" that proof of work must take more energy if energy is cheaper. Practically no other systems work this way.

Because it's not a cryptocurrency issue, it's a bitcoin issue. Most cryptocurrencies are green.

Please elaborate how "most" cryptocurrencies are green.

They don’t use proof of work, they’re similar to distributed database protocols

Maybe you don't like games but in what sense are they "more wasteful"? By what measure?

Crypto is considered wasteful because you can compare it to cheaper, more traditional means of exchange. Games are entertainment or art that you can't really quantify in the same way. People enjoy the games themselves, not for any utilitarian purpose.

crypto is the only game where the person who burns the most coal wins

Because computer games do not consume 1% of the world's electric power.

Because computer games give entertainment to three billion people.

Because no one pretends that their computer games are going to overthrow the world's economic systems, and then try to sell them to some greater fool for much more money.

Not yet. I expect gaming and high end personal computing to be targeted sooner or later by the ever moving goalpost of environmental activism.

Maybe in a dark timeline triple A gaming might be only available from cloud desktops as a service from licensed ESG and DRM friendly cloud providers. Crunching numbers and cryptographic calculations being a ToS violation.

So I’m not a big fan of having people often with obvious hysterical political bias dictating what I do with the equipment and energy I paid for. This goes the same for mining or gaming. The idea that rendering realistic grass is okay but not SHA256 hashes is preposterous and borderline medieval.

I’d say if there is a concern about energy usage please price it accordingly.

One is not like the other.

Art and entertainment are not useless to society, just because they don't have a utilitarian aspect. You can see that millions of people enjoy art/entertainment in some form and pay for it. There are also big scams like predatory IP enforcement and micro transactions, which we should fight against.

Cryptocurrencies were a revolutionary idea which has mostly resulted in crap results. Scams and random ware are rampant. Transactions are slow and expensive, unless you centralize them and lose all advantages of a decentralized platform. The environment pays huge costs with PoW, and PoS is always mentioned but never implemented by any of the big players. Also contributed to a shortage of chips and GPUs which affected the rest of the world.

So no, one is not like the other.

Can't wait for Bitcoin to move to PoS

This has happened so many times, that it's not really news.

> This has happened so many times, that it's not really news.

Did it, though?

Coindesk shows BTC right now trading at 18100$, way down from it's 2-month peak of 32k and year-peak of 66k.

This means that in less than a year BTC tanked to 27% of its peak year value, and it's tanking even further.

When was the last time you saw BTC lose 48k in value?

When I saw bitcoin tank from 1000 to 500, it's all a matter of scale.

I first got interested right around the Mt. Gox implosion, when it went something like 1200 -> 300.

> When was the last time you saw BTC lose 48k in value?

Not using proportions is pure sensationalist nonsense. >50% drawdowns have happened several times in Bitcoin. So tell us again how this time is different.

The absolute amount matters as well though. It's easy to imagine something that dropped from 1000 to 500 returning to 1000. That's a small rise in value, and if you believe the currency is really a currency you can imagine a "$1000 coin" being useful.

Its harder to imagine a currency or a stock that fall $30000 returning to $60000.

It might be the same percentage, but it's not the same in terms of psychology.

One milli-bitcoin was $60 a few months ago, now it’s $20, a mere $40 drop.

> Not using proportions is pure sensationalist nonsense.

Why did you chose to ignore the reference to BTC being currently at 27% of its year peak in November?

I mean, to ignore the reference to the percentage drop and cherry pick the abs value, you had to read the whole post and decide to ignore everything except the very last sentence.

Ignore? I went a step further and acknowledged its been down more than 50% multiple times! Maybe you are the ignorant one - if you manage to pay close enough attention to read me this time.

One way this is different for BTC/crypto is that it was getting attention in mainstream/"Main Street" culture.

BTC has been acting like it's just another speculative asset for a long time. I bet a lot of Main Street investors will probably not come back to crypto after this is all over.

I suppose it depends on what you consider "main street". I noticed the largest amount of people asking me about cryptocurrencies in 2017, during the last run-up.

> I bet a lot of Main Street investors will probably not come back to crypto after this is all over.

I had similar thoughts in 2018.

The Fed didn't raise interest rates in 2018 like they just did though. The era of free money is over. That has affects on the whole economy, not just crypto. But where conservative main street is content with meager returns, just enough to beat inflation, the promise of crypto, especially for those that missed out on the during the original Bitcoin boom, is ludicrous returns which leads to yacht money.

Myopic. Those people learned the lesson and can change expectations. You can't read minds. The market is primarily emotional and using what people feel now to prove your point long term is the same thinking that causes someone to buy Bitcoin at $69k thinking its going straight to one million usd.

When it starts going up hedge funds will jump in..

> BTC has been acting like it's just another speculative What does that even mean? That makes no sense in the context of what Bitcoin actually is, rather than your straw-man interpretation of other people's incorrect assessment.

As for main street - they will come back just slightly wiser. Don't forget how much of them skipped Bitcoin and went straight to canine and DeFi which is currently unwinding.

Using proportions is misleading. The reasons for drop from 1000 to 500 are different from those for a drop from 60,000 to 30,000.

but not using absolute values is as much nonsense

The absolute values has a huge influence about potential investments (e.g. mining equipment, but also things like storing money in BTC).

EDIT: Uh I got off topic, point is if the absolute value drops blow some vague thresholds it can cause chain reactions. An losing 50% of a small and 50% of a big investment makes a big difference. END EDIT

Plus and most important by now a lot of non-tech enthusiast are in the crypto market.

For example private people tempted by celebrity and YT videos which don't understand the crypto market dynamics.

By now crypto currencies are ironically also somewhat interlinked with stock market due to investors from the stock market speculating on it in various ways.

This has pushed bitcoin so hight, but also this makes the current crash worse then crashes in the early time.

Especially a lot of "innocent bystanders" are affected directly (private person putting savings in BTC) or indirectly (e.g. through fonds).

Furthermore many of them have been bluntly lied to wrt. the risks involved, market dynamics and what technically is provided and isn't.

I.e. besides burning people this crash could also lead to more regulation, potential much more depending on how it plays out.

dec 2017 $19100 -> feb 2018 $6800 -> dec 2018 $3300 -> thats 35% of it's peak value after 2 months and 18% after 1 year. nov 2013 $1130 -> apr 2014 $400 -> jan 2015 $200 -> thats 35% of it's peak value after 5 months and 18% after 1 year. So yes, this happend before ... .

> This means that in less than a year BTC tanked to 27% of its peak year value, and it's tanking even further.

Yes, multiple times: https://www.youtube.com/watch?v=XbZ8zDpX2Mg

So Bitcoin is a shit currency because it constantly loses 75% of value?

I don’t understand Bitcoin proponents. They’re the biggest cheerleaders of the idea that Bitcoin is the worst possible Currency one could ever have.

Alternatively, if it’s constantly losing 75% of value, it’s also the worst possible store of value it can have.

So it’s neither a good digital dollar nor a good digital gold. According to Bitcoin proponents. So what is it actually good for? According to your own defensive statements?

I believe that it is good at advancing asic technology? not really sure of much else.

Bitcoin is good for immutiabity and irrocovibility. is this worth trillion? likely not but it's something. . this is why scammers like it so much even if it can be traced, because you cannot reverse it or seize it easily (if you don't make mistakes like exposing your seed/key).

Given a long enough time horizon, bitcoin is a great store of value. The returns are unbeaten in 5 year, 10 year and 13 year (that's how young bitcoin is) time horizons.

As for what it is good for - what else is a permission-less medium of exchange? Regardless of price, the fundamentals of bitcoin stands true.

Being young and having no track record does not inspire confidence.

He said on a board that's mostly about young people without track records coming up with new businesses and tech :)

Touché

> So what is it actually good for?

Among other useful properties, digital currency allows individuals to move their money across borders without anyone asking them where it came from, where it is going and taking a cut. Seems like a very useful thing to have in today's world, no? Seems like something that will become increasingly useful in the near future regardless of your particular jurisdiction...

Is it worth $60k USD or even $20k USD? I don't know. There has been a lot of speculation and hype in this space and with the relatively low liquidity it is not that surprising to see crazy spikes. But there is a fundamental value greater than 0 for Bitcoin, and you cannot dismiss that in good faith.

>Among other useful properties, digital currency allows individuals to move their money across borders without anyone asking them where it came from, where it is going and taking a cut.

A.K.A. Money laundering. Got it.

Or sometimes, your government just decides your money doesn't actually belong to you [1]. But sure, we can call it "money laundering", if it makes that boot taste better.

[1] https://www.wsj.com/livecoverage/russia-ukraine-latest-news-...

>we can call it "money laundering"

Walks like a duck, quacks like a duck...

With a permanent publicly readable record as well!

Government seizing your money because they don’t like the political purpose you used it for is stealing and authoritarianism.

Walks like a duck, quacks like a duck…

That is not money laundering.

Sure sounds like it qualifies in the US.

https://www.irs.gov/irm/part9/irm_09-005-005#idm139929132514...

""" transfers [...] a monetary instrument or funds from a place in the United States to or through a place outside the United States [...] to avoid a Federal or state transaction reporting requirement. """

I guess if you lived in Russia, Iran, Lebanon, Venezuela or Argentina you'd be licking gov boots all day right?

Unfortunately in order for it to be accessible for a person to actually use it, the exchange takes a cut anyway, unless they're running the exchange solely from the goodness of their heart. Which as a business, it isn't. So instead of paying the established middle man who supports eg Western Union, the cut goes to the Bitcoin exchange middleman instead.

Eg, the easiest way for a US person to buy Bitcoin is through Coinbase who will gladly charge you a fee, which is entirely justifiable because they're facilitating the transaction. Without them there's no transaction. So Coinbase takes their cut, same as everybody else in the system.

It’s worth what someone will pay for it, which at the moment seems to be in the 20k range.

Tomorrow? Who knows.

This is not even true. Not at all.

Because bitcoins don't exist as physical objects. They are fully virtual. So you need to make money virtual in order to buy them. So you need to connect to the banking system eventually. You can add middlemen, sure, but it's unavoidable.

And then you arrive to https://news.ycombinator.com/item?id=31462909

So you cant trade labor or anything physical for bitcoin?

That's just the middlemen. Where does the bitcoin come from?

One could argue that fiat is fluctuating by 75% constantly :)

I agree, it needs to work as a currency. This is why Bitcoin Cash is the real Bitcoin. BTC was co-opted at the repo level and the block size was stifled. This is how Bitcoin should work: https://www.reddit.com/user/chaintip/

It's useful to dodge regulations.

Whether that's a good thing or a bad thing depends on the regulations and who passes them. Americans and Europeans are likely to have a very different perspective on this from, say, Russians.

So, will all this wasted effort be redirected towards something useful at last?

Nah, it'll be used for "Uber for X in the metaverse".

Hopefully with interest rates rising less stupid money will be available and we can reorient efforts towards things of values and needs.

You know if we collectively insist on it. We gotta all say no to bullshit somehow.

Yeah I said no to Google & Facebook a long time ago.

Don't expect it. There's always some get-rich-quick scheme, or another research-this-investment idea. Something always fills the void. Bitcoin is just one of the biggest we've seen since everyone and their dog were buying shares / penny stocks.

Most pyramid schemes do not require massive amounts of energy.

That's what gives this scam substance. Easy to dismiss with "iT iS bAcKed bY eLeCtRiCiTy sPeNt".

Apart from the energy that has been wasted, it really pains me to think how much fab time, chemicals, wafers, etc. have gone into producing ASICS that just perform pointless busy-work… I wish at least mining rigs were useful for anything else…

This comment is smug and offers nothing to the discussion.

As several people already wrote, difficulty adjusts.

Are people playing devil’s advocate just for the sake of a rebuttal, or do you all really believe this “time is different”. Its not different enough to me. The macro environment’s influence isn't different enough to observe that the network still functions at a lower hashrate and a lower price.

The best conversation is regarding the difficulty algorithm as bitcoin’s is the oldest one and no other community has used it since 2011.

Assume for a moment that the graph in the article is trustworthy. Then mining has been highly profitable for quite a while now and is now getting unprofitable. It has been unprofitable before. That's the same as in every busines: There can be periods of unprofitability. That does not mean that such business will die out completely. Especially after a phase of high profits there are buffers and there will be hope that profits will return.

The question is how that graph is created. The mining costs are not the same for everybody. Probably some electricity used for mining is not paid for at market prices. (Including some might not be paid for at all) And even if it were, market prices (after subsidies and taxes) vary proably quite a bit over places where mining is happening.

Here’s what I don’t understand. I’m genuinely looking for an explanation for this.

Let’s assume everything works great for BTC. BTC is designed to eventually max out the number of coins. I believe the current expectation is that no more coins will be issued by 2040.

What happens after that? If no more coins are issued, there’s no incentive to mine. And if there is no more mining then there will be no more transactions.

Will the BTC blockchain just freeze at that point? If so why will it have any value any more?

I’m not sure what the ideal expectations are beyond this scenario.

There are still transaction fees to encourage mining.

If you are interested in more detail, the original bitcoin paper goes in detail and is decently well written and much more straight forward to read then most people probably expect.

A lack of block rewards will incentivize all kinds of bad miner behavior:

https://economics.princeton.edu/working-papers/on-the-instab...

A nice quote:

> ... we are able to prove that an equilibrium exists. However, it is one where miners include only a fraction of available transactions into their blocks. This results in a backlog of transactions whose size grows indefinitely with time.

I agree that the game theory arguments about it all working out become much more hand wavey once rewards decline, but on the face of it, i don't neccesarily think not all transactions being processed is a problem (just retry with a higher transaction fee)

In that case, the fee will keep rising until _some_ miner puts it into a block. Mining is decentralized so empty block attacks won't work unless they all collaborate (good luck with that).

> Mining is decentralized

To me, it appears more that mining is effectively centralized in an oligopoly of mining pools, and that there's an increasing tendency towards this, compare [1] in this thread.

[1] https://news.ycombinator.com/item?id=31796847

That's because you don't understand how mining pools work

It doesn't appear so that everyone would be free to setup their self-sustained rigg and frolic on their own with realistic prospects, as the mantra of "decentralized" (as opposed to a structured environment) alleges. At least, not at a scale that would be decisive for the entire network. Meaning, there's that structured aspect and individual miners come second to this.

But can that oligopoly collude enough to actually run a 51% attack against the network?

I guess, as is, there are sufficient incentives against this, as pointed out by the linked comment. Generally speaking, when the economic pressure increases, the pressure to cooperate may increase, as well. Which may turn out both ways. (Meaning: I really don't know, and I'm not sure anyone may know for sure. Sorry for the Socratic anticlimax.) Said paper suggests that there are incentives for colluding against the system while protecting it at the same time.

The argument used to be that rising transaction fees would balance dropping mining rewards. I haven't heard that so much lately, probably because people are already not actually transacting in bitcoin due to the high transaction fees.

>probably because people are already not actually transacting in bitcoin due to the high transaction fees

That's Ethereum, not Bitcoin.

it's a bit of a chicken and egg problem. High transaction fees should attract more miners (who might be willing to accept lower transaction fees due to competition). This ought to reduce transaction fees to the market rate.

However, because there's so little real demand for bitcoin transactions from consumers, that this market rate isn't really a proper market rate. It needs to grow in volume. But the volume of bitcoin transactions is too low (by design).

So to get more bitcoin transactions to lower the rate, you first need more bitcoin transactions, but it's too expensive and consumers don't use it!

> no more coins will be issued by 2040.

The year is projected to be in the mid 2100's, so more than a full century from now. In other words, not an immediate concern.

It will be a gradual process though, with mining rewards becoming more and more rare and approaching 0 over the years.

Bitcoin issuance halves every 4 years, it's a geometric series. It's like the lily problem but in reverse.

> Lily pads are growing in a pond, and the number of lilies doubles every day. After 30 days, lilies cover the entire pond. On what day did the lilies cover half the pond?

The answer is Day 29. Very late on the timeline.

With Bitcoin, we've got halving instead of doubling, so most issuance happens very early on the timeline. In fact, 99% of Bitcoin's issuance happens within the first 28 years of the protocol's life. Bitcoin was launched in 2009. So a mere 15 years from now, in 2037, only 1% of all bitcoins will still remain to be issued.

Will 1% be sufficient to attract enough miners to properly defend the Bitcoin protocol from attack for the entire rest of its useful life? I have my doubts.

I imagine this will spell the end of bitcoin's (already poor) utility as a transact-able unit of value.

As others have pointed out, transaction fees approach 100% of the incentive, so fees will have to increase to incentivize the hash network to keep running. A lot of the hash power will drop out without mining on the table, and I think the net result will be that transactions will be much more expensive and slow than they are currently.

The short answer is this: The block reward is not meant to be a permanent part of the system. It is only there to bootstrap it. It's designed to slowly fade out, at which point a fully self-contained market of tx-fees will have been established, which works according to the classic rules of price-finding by demand and supply.

How is "average cost of mining" calculated / assessed? (Following the link just leads to some random tweet).

It would be heavily dependent on the equipment used and the price of electricity which would vary a lot by location.

And meaningfully it could be split in two: A fixed cost that is still there if the mining stops and a variable cost. And miners would be expected (short term at least) to continue mining until the price hit the variable cost which, in cases where excess free energy is used, is probably very low.

Pretty simple really. Capex and Opex. How much does it cost to set things up and how much does it cost to run things. In large scale deployments, like what I run, we colocate in existing datacenter space and they just charge us a flat power fee, which includes everything on their end.

At scale, the costs to mine are FAR lower than the existing drops in the market. Articles like this are quite wrong... it is only unprofitable for smaller miners.

Yes. Where do they get this number from? How is it calculated?

What number?

That the average mining cost is about 19k pr Bitcoin.

On a large scale, it is more like 7-9k.

https://twitter.com/OhGodAGirl/status/1538318604847882240

>it is only unprofitable for smaller miners.

So this will lead to less smaller miners and more concentration of power for the big ones

Yes, but it doesn't really matter as long as there are mining pools. Even big miners still have to pool mine because the overall hashrate is so great that even a multi megawatt miner still doesn't have enough hashrate to solo mine.

Plus, solo mining is just more financially risky. Unless you have a couple percentage points of the total hashrate, it just doesn't make financial sense.

Even then, large miners will negotiate deals with the pools for a lower % take of the fees. Those fees effectively pay the pool for their own costs so that the miner doesn't have to worry about the rest.

So, the only real centralization is with the pools and as we've already seen in the past [1], as soon as a pool gets to 51%, miners switch to another pool (which is quite easy and not a lot of effort).

[1] https://en.wikipedia.org/wiki/GHash.io

>as soon as a pool gets to 51%, miners switch to another pool

That's not guaranteed.

"Since no long-term solution to the 51% problem is known, the participants agreed to implement some temporary measures. GHash.io released a voluntary statement promising that it would not exceed 40% of the overall bitcoin hashrate"

At the end of the day, everyone left and they went out of business.

capex is not the cost for setting things up. opex is not the cost for running things.

you mix things up.

you mean fix and var costs.

This is what I'm referring to:

https://www.investopedia.com/ask/answers/112814/whats-differ...

Capital expenditures (CAPEX) are major purchases a company makes that are designed to be used over the long term. Operating expenses (OPEX) are the day-to-day expenses a company incurs to keep its business operational.

I'm trying to imagine how many days I would lose money mining in hopes of helping establish equilibrium. I can't imagine miners are very altruistic. I can also imagine many of them deciding the party is over and selling their valuable hardware. I don't have a clue what happens when nobody wants to mine it.

The hardware would sell for a loss. But if they eat losses for 2 weeks, they could continue to extract profit from their hardware.

As a miner, do you get to chose which transactions you mine? i.e. as the mining pool dries up(why run a rig if you're losing money), can whales sponsor miners to give their transactions priority, giving them superior liquidity to smaller bagholders?

Yes.

Yes anyone sending a transaction can choose to set a higher fee rate to get their transaction prioritized to be included in the chain. The miners will try to include transactions that will pay them the highest fees in the next block.

> As a miner, do you get to chose which transactions you mine?

Yes, the mining pool can chose.

Miners do choose. Giving transactions priority is called the "transaction fee" (am I missing something here?). In addition to that, there are out-of-band services called "transaction accelerators" that work directly with miners, but that is really only useful to bump up the priority of an existing slow/stuck transaction.

It's not really serious unless transaction fees need to spike massively to compensate, otherwise like others noted, difficulty adjustments will handle to problem just fine.

Didn’t bitcoin survived the chinese crackdown on mining that yanked ~25%-ish of its hashrate overnight?

Biggest drop in hash-rate was in May/June 2021 when it dropped ~60% or something like that (https://www.blockchain.com/charts/hash-rate), but yes, it did survive that (as the network is still running, online and working as it should).

The all-time high of hash-rate for Bitcoin was in May this year.

Many people consider bitcoin as an investment, so it would not surprise me, that miners will do work if cost is higher than current bitcoin price.

Yes! Maybe I’ll finally be able to buy a new graphics card without spending an arm and a leg then…

Risk of a negative spiral if this continues and energy prices remain high…

Unless you generate your own power, I assume

hot take: it seems everything about crypto is full of problems invented for their own sake.

GPUs shall be available again, REJOICE!!!

Bitcoin is mined with ASICs, not GPUs

Still, the price of Bitcoin can have (and has had!) serious effects on the entire crypto ecosystem.

I think it's only unprofitable in the US. Since China has banned mining, the US has become the country with the largest share of miners, and now as the price drops, mining will simply move to countries with lower costs of electricity.

Why wasn't it there already?

Due to the ongoing events in the eastern Europe area, there's quite a lot of people who might have energy they'd like to sell/use for something, but can't necessarily sell it to whom they might like to.

If there's a way they can sell it to the Bitcoiners, even at a price they might not like to, they might do that.

Which would be? I’m not sure there’s much cheaper electric costs.

Probably a country with cold weather (free air conditioning) and cheap access to natural oil and gas reserves.

It was profitable at $1 and it will remain profitable because of the difficulty adjustment. This is tge second uninformed post in 2 days, the other didnt get many upvotes. Who is writing all these fake news?

Edit: read up on pow before downvoting facts.

Reply on news.ycombinator.com