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No, I pay almost exactly a dollar to mine the Bitcoin in China. If I could mine it for substantially less than a dollar, then I could use 1kWh of Bitcoin produc

by vec 9y ago

No, I pay almost exactly a dollar to mine the Bitcoin in China. If I could mine it for substantially less than a dollar, then I could use 1kWh of Bitcoin production to buy more than 1kWh in the Chinese energy market, independent of international energy prices, which (assuming Bitcoin markets are even remotely efficient) would drive BTC prices down until the local arbitrage opportunity disappeared. I still don't see how the existence of Bitcoin allows anyone, anywhere to exploit the difference in energy prices to come out ahead of where they would otherwise have been.

starshadowx2 9y ago
If it costs you $1 to buy a bitcoin from somewhere with cheap electricity but it takes you $2 worth of electricity to mine one bitcoin, it's a better deal for you to buy the bitcoin. I'm not actually sure what this has to do with it being an arbitrage though, but this is what I got out of the article. "This means that if I buy Bitcoin from a Chinese miner, what the miner is really doing is wrapping up the difference between my energy cost and theirs ($0.16 /kWh) into a security and selling it to me." "When I buy Bitcoin, as long as the energy used to mine the token is cheaper then energy I have access to, I’m getting a good deal. Which is the case almost every time thanks to subsidies and difficulty adjustment."
- vec 9y ago
  That's roughly what I got out of the article as well, I'm just not sure it actually holds water. Sure, Bitcoin is less expensive to mine where energy is cheaper, so if I happen to want some Bitcoin anyway I should try and purchase it from a miner somewhere with low cost electricity. That still doesn't tell me why I should consider buying it at any price. Let me see if I can demonstrate my objection: Kangaroos aren't very common here in America. In order to acquire a one pound box of kangaroo feces domestically, I would need to find a rare animal collector to negotiate with and may expect to end up paying, say, $100. An Australian, on the other hand, might well be willing to send me a box for barely more than the shipping costs, leading to a total cost to me of only $20. I suppose I could choose to describe the shipper as wrapping up the difference between their kangaroo availability and mine into a security, but that doesn't by itself make paying $20 for a literal box of crap a "good deal". Obviously Bitcoin at least appears to have some intrinsic value, since it's currently being actively traded. And obviously energy prices serve to set an upper bound on that value. I just don't see how energy prices could serve to also set a lower bound and, therefore, can't be the source of that intrinsic value.

by vec 9y ago

starshadowx2 9y ago

If it costs you $1 to buy a bitcoin from somewhere with cheap electricity but it takes you $2 worth of electricity to mine one bitcoin, it's a better deal for you to buy the bitcoin. I'm not actually sure what this has to do with it being an arbitrage though, but this is what I got out of the article. "This means that if I buy Bitcoin from a Chinese miner, what the miner is really doing is wrapping up the difference between my energy cost and theirs ($0.16 /kWh) into a security and selling it to me." "When I buy Bitcoin, as long as the energy used to mine the token is cheaper then energy I have access to, I’m getting a good deal. Which is the case almost every time thanks to subsidies and difficulty adjustment."

vec 9y ago
That's roughly what I got out of the article as well, I'm just not sure it actually holds water. Sure, Bitcoin is less expensive to mine where energy is cheaper, so if I happen to want some Bitcoin anyway I should try and purchase it from a miner somewhere with low cost electricity. That still doesn't tell me why I should consider buying it at any price. Let me see if I can demonstrate my objection: Kangaroos aren't very common here in America. In order to acquire a one pound box of kangaroo feces domestically, I would need to find a rare animal collector to negotiate with and may expect to end up paying, say, $100. An Australian, on the other hand, might well be willing to send me a box for barely more than the shipping costs, leading to a total cost to me of only $20. I suppose I could choose to describe the shipper as wrapping up the difference between their kangaroo availability and mine into a security, but that doesn't by itself make paying $20 for a literal box of crap a "good deal". Obviously Bitcoin at least appears to have some intrinsic value, since it's currently being actively traded. And obviously energy prices serve to set an upper bound on that value. I just don't see how energy prices could serve to also set a lower bound and, therefore, can't be the source of that intrinsic value.