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Comment by eterm | Hacker News Reader

There's a soft failure-mode for bitcoin where due to the alternating difficulty adjustment, you could end up with people only mining every other 2016-block adjustment.

Let's call this cycle A and cycle B.

If A is too hard, miners drop out, cycle B gets easier, miners flood back, cycle A gets harder.

This results in the hard cycle getting longer and the easy cycle getting shorter.

This isn't completely critical as there is I believe a small damping effect, so it isn't completely lethal to bitcoin, but a key thing about bitcoin mining is that whether other people are mining or not doesn't actually affect your own profitiability.

Other people dropping out doesn't actually mean you get more bitcoins per hour/watt, it only affects the next difficulty adjustment as a secondary effect.

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The damping effect is that part of your costs are the hardware, space, depreciation etc. leaving that stuff idle costs money - so it makes sense to mine in the less profitable periods too.

Yes though AFAIK electricity is a large %

The larger it is, the less likely your mining set up is actually all that solid.

The best miners are doing so with near free electricity, either with things like subsidized solar, or energy acquired from things like nat gas that'd otherwise get flared, or hydroelectric power that exists too far from civilization to have a demand otherwise.

If your miner is plugged into the grid, you're probably doing it wrong.

Crypto-miners are switching to AI token farming when bitcoin is low. They have compute that's both installed and powered, so why not do what pays better?

For bitcoin at least, you need totally different silicon.

I guess you could share the power supply and cooling infra, but I am dubious the savings are enough to have half your silicon idle all the time.

What the hell is AI token farming?

I think they mean serving inference workloads

How does that work? Isn't most bitcoin mining done on custom ASICs? I didn't think that the ASIC could be repurposed for inference.

The biggest cost is the power which is often on multi year contracts. The hardware is comparatively cheap

That's wildly inaccurate. The cost in enormous both on the inference side and the mining side and has short lifetimes if you want SOTA.

Training ASICs (like Google’s TPUs) can generally run inference too, since inference is a subset of training computations. TPUs are widely used for both.

Mining ASICs (Bitcoin, etc.) cannot be repurposed…they’re hardwired for a single hash algorithm and lack matrix math needed for neural networks.

That depends on each miner's energy costs, so long as (variable cost of energy - revenue from coins) < fixed costs. It's still negative cashflow either way, but the monthly losses have to be weighed against the cost of going insolvent and losing the hardware.

I think you're right, it's counterintuitive but less competition means less rewards to share for those who keep mining. Though transaction fees / hour shouldn't decrease, maybe your share of that is bigger.

The difficulty can only adjust by a factor of 4 which also limits the incentive change. You'd need more than 90% of miners to disappear to start seeing actual problems.

I thought the rate of mining was tied to the maximum transaction rate the network can support?

It's the other way around, and there's no obligation to even carry transactions when mining, although it's incentivised through fees.

Your mining rate is simply your hash rate vs the hash difficulty.

Conceptually, it's analoglous to rolling random numbers in (0,1) until you get to a number smaller than 1/X, where X is large.

How long it takes you to do that, isn't dependent on how many other people are also trying to do that, if you get 1 hit per hour, then lots of other people getting hits doesn't actually stop you getting your 1 hit per hour.

Now, that's not quite the whole truth, as there's a small amount of time needed for propagation of the previous chain, but with an average hit globally of ~10 minutes, that's not actually a big factor.

What could happen to incentivise people is increased fees if blocks get less common due to dropped miners, there'd be more competition to get into blocks if they start filling up.

That combined with the fixed costs such as depreciation as othes mentioned, keeps the risk of this form of failure to a minimum.

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