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Question for the bitcoin enthusiasts out there - if stolen computing time is a reasonable component of the current hash power, why would market rate for mined c

by airza 11y ago

Question for the bitcoin enthusiasts out there - if stolen computing time is a reasonable component of the current hash power, why would market rate for mined coins ever be above the cost of electricity?

natrius 11y ago
Because the cost of electricity required to mine competitively is variable. When the price of bitcoins goes up, mining becomes more profitable. More hashpower is added by new and existing miners until it no longer makes financial sense to do so. The value of a bitcoin is almost always near the cost of mining one, but it's the value that determines how much mining there is.
placeybordeaux 11y ago
These days the extreme majority of hashing power comes from ASICs not from botnets.
- Phlarp 11y ago
  A few edge cases to consider here: 1) ASIC hardware running on free, stolen or "creatively accounted" electricity. Maybe it's as mundane as a janitor with a bunch of hardware stashed in a closet, or an office complex that charges a flat rate for utilities. Maybe it's as exotic as a mining farm getting a cut rate on nearby power generation in a cold climate. 1) ASIC hardware, by it's very nature, requires some type of network connectivity-- either with other miners, a special dispatching machine or directly to the bitcoin network over TCP, one way or another it needs to know what the blockchain looks like at any given point in time. This means attack surface area. All it takes is one widely deployed bug and those machines you run are mining into someone else's account. Both of these scenarios, along with countless others, make mining in any capacity a negative sum game.
  - brighton36 11y ago
    It's clearly not a negative sum game as evidenced by the 6 years that miners have been mining. It's typically a very low-profit, high-stress business - but you can't argue with the numbers.
VLM 11y ago
Whats the standard world wide cost of electricity? It varies by well over 10:1. Also it varies over time. Its an arbitrage market for electricity, kind of. This is assuming a perfect efficient market, LOL. Note that if you mine your own coins its very hard to track where they came from, what with there being no paper trail of you purchasing them from anyone. If you buy coins from someone then that someone can be strong armed by a .gov or .com into telling them who they sold coins to, assuming they don't have a direct data feed right to the DEA or whatever. So in the stereotypical bleating tabloid form of "buy weed online with BTC" if "they" have a list of BTC buyers as 0.001% of the population and give it to customs as a filter on packages coming in from Amsterdam... On the other hand if you're not on a list of BTC buyers because you mined your own... Of course WRT paranoia, being on a list of known custom ASIC owners is about as bad as being on a list of weed grow light purchasers, so I'm not sure this product fixes anything.
sp332 11y ago
Well if demand is high enough, they'll run out of cheap illicit bitcoins and start getting into the more expensive legitimate supply eventually.
- placeybordeaux 11y ago
  What are you talking about? Where are these cheap illicit bitcoins for sale?
  - sp332 11y ago
    Why wouldn't they be sold in a normal marketplace? It's not readily apparent that they're any different from normal ones.
TD-Linux 11y ago
It wouldn't. Stolen computing time is a negligible component of the current hash power.
andrewla 11y ago
I don't think the question is well-posed. Why would the market rate for electricity affect the price at all if stolen computing time were a reasonable component of the current hash power? If bitcoin mining were competing for the market for stolen computing time, then the "pwner" of each zombie would make an economic decision as to whether to use the machine for other tasks (spamming, password cracking, etc.) based on the relative value of those tasks in bitcoin vs. the amount of bitcoin produced by the machine. As the price/hashrate ratio increases, more zombies would switch to mining; as it decreased, the flow would go in the other direction. The price of electricity is irrelevant to the "pwner" of the machine as regards this decision; for them electricity is free. In terms of how this were to affect price, that's a more complex relationship, even in theory. As the difficulty increases, it gets more expensive to attack the network (and thus artificially expand supply), so the price will presumably face upward pressure to keep the relationship of difficulty to inverse price constant (assuming price/hashrate as the function is disingenuous, but is probably reasonable for local price and difficulty changes). That said, it is unlikely that the antecedent holds -- it is extremely doubtful that stolen computing time (or even total CPU + GPU mining) is a reasonable component of the current hash power.
brighton36 11y ago
tldr: It's a market. If demand that day is greater than the supply, then you'll make money. The cost of bitcoin is dependent on the demand, not the cost of production. If/as demand goes down, the cost of production will go down commensurately. There's always a fixed supply of coins entering the market every day. It does not matter how many people are mining, or at what price those people are mining. Also, it's 'stolen'/'subsidized' energy that is being leveraged. Not computing time.

by airza 11y ago

natrius 11y ago

Because the cost of electricity required to mine competitively is variable. When the price of bitcoins goes up, mining becomes more profitable. More hashpower is added by new and existing miners until it no longer makes financial sense to do so. The value of a bitcoin is almost always near the cost of mining one, but it's the value that determines how much mining there is.

placeybordeaux 11y ago

These days the extreme majority of hashing power comes from ASICs not from botnets.

Phlarp 11y ago
A few edge cases to consider here: 1) ASIC hardware running on free, stolen or "creatively accounted" electricity. Maybe it's as mundane as a janitor with a bunch of hardware stashed in a closet, or an office complex that charges a flat rate for utilities. Maybe it's as exotic as a mining farm getting a cut rate on nearby power generation in a cold climate. 1) ASIC hardware, by it's very nature, requires some type of network connectivity-- either with other miners, a special dispatching machine or directly to the bitcoin network over TCP, one way or another it needs to know what the blockchain looks like at any given point in time. This means attack surface area. All it takes is one widely deployed bug and those machines you run are mining into someone else's account. Both of these scenarios, along with countless others, make mining in any capacity a negative sum game.
- brighton36 11y ago
  It's clearly not a negative sum game as evidenced by the 6 years that miners have been mining. It's typically a very low-profit, high-stress business - but you can't argue with the numbers.

VLM 11y ago

Whats the standard world wide cost of electricity? It varies by well over 10:1. Also it varies over time. Its an arbitrage market for electricity, kind of. This is assuming a perfect efficient market, LOL. Note that if you mine your own coins its very hard to track where they came from, what with there being no paper trail of you purchasing them from anyone. If you buy coins from someone then that someone can be strong armed by a .gov or .com into telling them who they sold coins to, assuming they don't have a direct data feed right to the DEA or whatever. So in the stereotypical bleating tabloid form of "buy weed online with BTC" if "they" have a list of BTC buyers as 0.001% of the population and give it to customs as a filter on packages coming in from Amsterdam... On the other hand if you're not on a list of BTC buyers because you mined your own... Of course WRT paranoia, being on a list of known custom ASIC owners is about as bad as being on a list of weed grow light purchasers, so I'm not sure this product fixes anything.

sp332 11y ago

Well if demand is high enough, they'll run out of cheap illicit bitcoins and start getting into the more expensive legitimate supply eventually.

placeybordeaux 11y ago
What are you talking about? Where are these cheap illicit bitcoins for sale?
- sp332 11y ago
  Why wouldn't they be sold in a normal marketplace? It's not readily apparent that they're any different from normal ones.

TD-Linux 11y ago

It wouldn't. Stolen computing time is a negligible component of the current hash power.

andrewla 11y ago

I don't think the question is well-posed. Why would the market rate for electricity affect the price at all if stolen computing time were a reasonable component of the current hash power? If bitcoin mining were competing for the market for stolen computing time, then the "pwner" of each zombie would make an economic decision as to whether to use the machine for other tasks (spamming, password cracking, etc.) based on the relative value of those tasks in bitcoin vs. the amount of bitcoin produced by the machine. As the price/hashrate ratio increases, more zombies would switch to mining; as it decreased, the flow would go in the other direction. The price of electricity is irrelevant to the "pwner" of the machine as regards this decision; for them electricity is free. In terms of how this were to affect price, that's a more complex relationship, even in theory. As the difficulty increases, it gets more expensive to attack the network (and thus artificially expand supply), so the price will presumably face upward pressure to keep the relationship of difficulty to inverse price constant (assuming price/hashrate as the function is disingenuous, but is probably reasonable for local price and difficulty changes). That said, it is unlikely that the antecedent holds -- it is extremely doubtful that stolen computing time (or even total CPU + GPU mining) is a reasonable component of the current hash power.

brighton36 11y ago

tldr: It's a market. If demand that day is greater than the supply, then you'll make money. The cost of bitcoin is dependent on the demand, not the cost of production. If/as demand goes down, the cost of production will go down commensurately. There's always a fixed supply of coins entering the market every day. It does not matter how many people are mining, or at what price those people are mining. Also, it's 'stolen'/'subsidized' energy that is being leveraged. Not computing time.