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The bitcoin mining industry will end once the electricity (and hardware) becomes more expensive than the value of mined bitcoins - it stops being economically f

by beat 9y ago

The bitcoin mining industry will end once the electricity (and hardware) becomes more expensive than the value of mined bitcoins - it stops being economically feasible. If we're already breaking .1% of the world's energy consumption, then we're probably pretty close. Bitcoins will continue to be valuable, short of some security flaw wrecking them, simply because of scarcity and functionality. But if they can't be used for a majority of (legal) financial transactions, the value will be limited. And as long as the exchange rates are highly unstable and exchanges are unreliable/untrustworthy, mainstream banking won't touch it with a ten foot pole. They don't want the risk.

VMG 9y ago
> The bitcoin mining industry will end once the electricity (and hardware) becomes more expensive than the value of mined bitcoins You do not understand mining difficulty adjustment
- beat 9y ago
  Apparently not. Care to enlighten me? Because seriously, .1% of global electricity consumption, if that number is accurate, is expensive. Are we going to go up from there, or down, and how does it relate to a long-term stable bitcoin exchange rate, relative to mainstream reserve currencies? If we're in a speculative bubble (we are), it justifies the mining. But bitcoin will never, ever be a viable global currency if it's deflating 500% a year, like it is right now. Mainstream reserve currencies are designed and carefully regulated to inflate at 1-4% or so, slowly losing value - inflation encourages investment, because sitting on cash hurts. What could someone invest their bitcoins in that could justify giving up the possibility of a 500% annual return just for the techno-equivalent of stuffing them in a mattress? Bitcoin mining, apparently. See where I'm going with this? Investing outrageous sums in bitcoin mining makes sense when it's a massive deflationary bubble. It makes almost no sense at all when it's slowly inflating like a grownup currency does.
  - ianai 9y ago
    There’s not a currency out there that costs .12% of co2 to print. Pretty sure the former currency backers (gold, silver) don’t either. That factor alone is reason enough to not use it.
    - Anderkent 9y ago
      You must also consider the cost of storing, moving and exchanging, and guaranteeing the currency. Printing on its own is useless. How many mainframes keep track of money at banks? How much paper is used for ledgers? What % of internet traffic is about moving money? How many vans of cash move through cities to fill ATMs?
      - beat 9y ago
        Some years ago, I worked at the Federal Reserve, on a system that moved $100B (billion!) a DAY, on a pretty reasonable server farm. Yes, there's a fair bit of energy committed to the existing financial system, but it's moving far, far more actual value with many orders of magnitude more actual exchanges than bitcoin is going.
        VMG 9y ago
        The Federal Reserve is doing something completely different than Bitcoin is doing.
        beat 9y ago
        Yeah. It's providing a useful, widely accepted, and stable currency. But I'm addressing the argument that the energy consumption for bitcoin mining and the energy consumption of the mainstream financial system is directly comparable (they're not).
  - Anderkent 9y ago
    > Apparently not. Care to enlighten me? Because seriously, .1% of global electricity consumption, if that number is accurate, is expensive. Are we going to go up from there, or down, and how does it relate to a long-term stable bitcoin exchange rate, relative to mainstream reserve currencies? The electricity cost of mining bitcoin is directly related to the transaction fees, once all bitcoins are mined. This is because if mining is very profitable (transaction fees >> electricity cost), more people are incentivised to mine, thus raising the hash rate and difficulty, thus making mining more expensive. If mining is very unprofitable (transaction fees << electricity cost), people turn off their machines, hashpower and electricity cost drop, and mining becomes easier. Thus if successful BTC has ~300k on-chain transactions a day, transaction pays average $1 in transaction fees, you expect ~$300k of electricity to be used a day. -- No one expects BTC to keep deflating 500% once it reaches saturation. Currently all of BTC value is speculative - based on the 0.1% change it'll become successful and be worth $MOON, against the 99.9% change it'll fail and be worth 0. In the end-game scenario where it's an established global exchange network, with all the coins available already mined, it's only as deflationary as other currencies are inflationary. The 'inflation causes investment' theory only applies to investment that has expected return of 1-2%; given that the stock market return is estimated at ~7%, and yet people still hold cash, it seems hard to believe that inflation has significant impact on investment.

by beat 9y ago

VMG 9y ago

> The bitcoin mining industry will end once the electricity (and hardware) becomes more expensive than the value of mined bitcoins You do not understand mining difficulty adjustment

beat 9y ago
Apparently not. Care to enlighten me? Because seriously, .1% of global electricity consumption, if that number is accurate, is expensive. Are we going to go up from there, or down, and how does it relate to a long-term stable bitcoin exchange rate, relative to mainstream reserve currencies? If we're in a speculative bubble (we are), it justifies the mining. But bitcoin will never, ever be a viable global currency if it's deflating 500% a year, like it is right now. Mainstream reserve currencies are designed and carefully regulated to inflate at 1-4% or so, slowly losing value - inflation encourages investment, because sitting on cash hurts. What could someone invest their bitcoins in that could justify giving up the possibility of a 500% annual return just for the techno-equivalent of stuffing them in a mattress? Bitcoin mining, apparently. See where I'm going with this? Investing outrageous sums in bitcoin mining makes sense when it's a massive deflationary bubble. It makes almost no sense at all when it's slowly inflating like a grownup currency does.
- ianai 9y ago
  There’s not a currency out there that costs .12% of co2 to print. Pretty sure the former currency backers (gold, silver) don’t either. That factor alone is reason enough to not use it.
  - Anderkent 9y ago
    You must also consider the cost of storing, moving and exchanging, and guaranteeing the currency. Printing on its own is useless. How many mainframes keep track of money at banks? How much paper is used for ledgers? What % of internet traffic is about moving money? How many vans of cash move through cities to fill ATMs?
    - beat 9y ago
      Some years ago, I worked at the Federal Reserve, on a system that moved $100B (billion!) a DAY, on a pretty reasonable server farm. Yes, there's a fair bit of energy committed to the existing financial system, but it's moving far, far more actual value with many orders of magnitude more actual exchanges than bitcoin is going.
      - VMG 9y ago
        The Federal Reserve is doing something completely different than Bitcoin is doing.
        beat 9y ago
        Yeah. It's providing a useful, widely accepted, and stable currency. But I'm addressing the argument that the energy consumption for bitcoin mining and the energy consumption of the mainstream financial system is directly comparable (they're not).
- Anderkent 9y ago
  > Apparently not. Care to enlighten me? Because seriously, .1% of global electricity consumption, if that number is accurate, is expensive. Are we going to go up from there, or down, and how does it relate to a long-term stable bitcoin exchange rate, relative to mainstream reserve currencies? The electricity cost of mining bitcoin is directly related to the transaction fees, once all bitcoins are mined. This is because if mining is very profitable (transaction fees >> electricity cost), more people are incentivised to mine, thus raising the hash rate and difficulty, thus making mining more expensive. If mining is very unprofitable (transaction fees << electricity cost), people turn off their machines, hashpower and electricity cost drop, and mining becomes easier. Thus if successful BTC has ~300k on-chain transactions a day, transaction pays average $1 in transaction fees, you expect ~$300k of electricity to be used a day. -- No one expects BTC to keep deflating 500% once it reaches saturation. Currently all of BTC value is speculative - based on the 0.1% change it'll become successful and be worth $MOON, against the 99.9% change it'll fail and be worth 0. In the end-game scenario where it's an established global exchange network, with all the coins available already mined, it's only as deflationary as other currencies are inflationary. The 'inflation causes investment' theory only applies to investment that has expected return of 1-2%; given that the stock market return is estimated at ~7%, and yet people still hold cash, it seems hard to believe that inflation has significant impact on investment.