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As long as there is a non trivial profit margin, more miners will keep entering the game until the the margin shrinks to a small enough figure that nobody else

by wz1000 9y ago

As long as there is a non trivial profit margin, more miners will keep entering the game until the the margin shrinks to a small enough figure that nobody else wants to start mining.

Klathmon 9y ago
Wouldn't that drive the remainder of players to find cheaper and cheaper energy, proving the authors point? Since getting cheaper power means you can hold out that much longer than everyone else since you make that much more profit.
- wz1000 9y ago
  Even if they find cheaper energy, they will still spend $27 million on it a day. They will just consume more electricity.
  - Klathmon 9y ago
    But consuming more electricity would produce more bitcoin. The 2 are pretty much linked for each "generation" of miner. So in order to continue spending $27 million per day at the cheaper electricity rate, they would need to buy more miners, which would produce more bitcoin, which means more profit. So their whole incentive is based around the price of electricity, and the cheaper they can get it for, the more money they are going to make.
    - wz1000 9y ago
      > But consuming more electricity would produce more bitcoin. No, Bitcoin is produced at a fixed rate. If more power goes into mining, difficulty increases to compensate.
      - Klathmon 9y ago
        Globally yes, but locally, that's not true at all. If I have 2x as much hashpower as I did yesterday, i'll get roughly 2x as much bitcoin as a reward (which over time will go down as the global hashrate goes up). In other words I'll get a larger percentage of global bitcoin production, which is fixed.
        changchuming 9y ago
        You're talking about imperfections in the market. I.e. You having a cheaper source of power than everyone else which allows you to mine the same amount of bitcoins at lower costs and thus higher profits. Thus, some of the $27 million is not used on electricity and becomes profits instead. In reality, how likely is this scenario in which you have a persistent cheaper source of energy which other miners cannot access?
        Klathmon 9y ago
        Pretty realistic. One of the largest US mining operations are said to be located in Seattle where there is dirt cheap hydroelectric. So are many of the Chinese operations. It's not as mich of a zero sum game as it might seem, it's more of a race to the bottom. If your competitors are running on cheaper electric, you'd better find some cheaper electric or they are going to increase the difficulty to the point that it's not profitable for you.

by wz1000 9y ago

As long as there is a non trivial profit margin, more miners will keep entering the game until the the margin shrinks to a small enough figure that nobody else wants to start mining.

Klathmon 9y ago

Wouldn't that drive the remainder of players to find cheaper and cheaper energy, proving the authors point? Since getting cheaper power means you can hold out that much longer than everyone else since you make that much more profit.

wz1000 9y ago
Even if they find cheaper energy, they will still spend $27 million on it a day. They will just consume more electricity.
- Klathmon 9y ago
  But consuming more electricity would produce more bitcoin. The 2 are pretty much linked for each "generation" of miner. So in order to continue spending $27 million per day at the cheaper electricity rate, they would need to buy more miners, which would produce more bitcoin, which means more profit. So their whole incentive is based around the price of electricity, and the cheaper they can get it for, the more money they are going to make.
  - wz1000 9y ago
    > But consuming more electricity would produce more bitcoin. No, Bitcoin is produced at a fixed rate. If more power goes into mining, difficulty increases to compensate.
    - Klathmon 9y ago
      Globally yes, but locally, that's not true at all. If I have 2x as much hashpower as I did yesterday, i'll get roughly 2x as much bitcoin as a reward (which over time will go down as the global hashrate goes up). In other words I'll get a larger percentage of global bitcoin production, which is fixed.
      - changchuming 9y ago
        You're talking about imperfections in the market. I.e. You having a cheaper source of power than everyone else which allows you to mine the same amount of bitcoins at lower costs and thus higher profits. Thus, some of the $27 million is not used on electricity and becomes profits instead. In reality, how likely is this scenario in which you have a persistent cheaper source of energy which other miners cannot access?
        Klathmon 9y ago
        Pretty realistic. One of the largest US mining operations are said to be located in Seattle where there is dirt cheap hydroelectric. So are many of the Chinese operations. It's not as mich of a zero sum game as it might seem, it's more of a race to the bottom. If your competitors are running on cheaper electric, you'd better find some cheaper electric or they are going to increase the difficulty to the point that it's not profitable for you.