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I thought the number of miners is supposed to be equal to the expected value of the coin. If there’s profit to be made, more miners would open up shop to captur
by chis 9y ago
I thought the number of miners is supposed to be equal to the expected value of the coin. If there’s profit to be made, more miners would open up shop to capture the marginal benefit.
So I guess China thinks that bitcoin will ultimately be worth half what it is now.
- icelancer 9y ago>> If there’s profit to be made, more miners would open up shop to capture the marginal benefit. >> So I guess China thinks that bitcoin will ultimately be worth half what it is now. The best BTC ASIC miners on the open market are all sold out and backordered for months, and better ones keep being developed every six months. This means that, no, literally it's not possible to bring more miners online at a faster rate since they aren't openly available for purchase, and miners are still running older hardware since those miners are not yet -$EV(power) but they don't yet have enough money to purchase the new miners (which aren't readily available anyway). It's not a perfectly competitive market. It's supply constrained.
- hrrsn 9y agoI still don't see why we aren't seeing new ASIC suppliers set up shop. Is there a significant amount of R&D that goes into creating these chips?
- icelancer 9y agoThey're application-specific integrated circuits (ASIC) made specifically for generating money out of thin air (well, electricity). So yeah, there's a huge amount of R&D and competition to get the best stuff out there. And Bitmain dominates.
- tmh88j 9y ago>So yeah, there's a huge amount of R&D and competition to get the best stuff out there. And Bitmain dominates. You're right that Bitmain dominates ASIC Bitcoin miners, but why? Surely there are more than enough capable engineers to design ASIC miners in the US and some VC's willing to fund them, or is there something I'm missing? Manufacturing costs would be high in the US, but it's not like foreign manufacturing is an unknown concept to US based companies.
- wmf 9y agoThere have been a ton of mining ASIC companies but all but two of them went out of business. For some reason VCs have mostly refused to touch mining so the ASIC vendors had to use crowdfunding which went horribly wrong.
- RhodesianHunter 9y agoJust a hunch: No-one in the industry with the means to do anything about it thinks the trend is sustainable enough to invest in a 6mo-1yr setup followed by another year before profit?
- tmh88j 9y agoPeter Thiel is throwing his weight into Bitcoin. Surely there are more people out there like him, albeit less vocal about BTC/cryptocurrency.
- wmf 9y agoIt sounds like he and many others are investing in BTC itself, not the Bitcoin ecosystem. If you can get a 10x return per year just by hodling, why bother to develop anything? Even selling shovels isn't that profitable. When people say a (hyper)deflationary currency discourages investment, this is what it looks like.
- tmh88j 9y ago>It sounds like he and many others are investing in BTC itself, not the Bitcoin ecosystem. If you can get a 10x return per year just by hodling, why bother to develop anything? I completely agree as of 2018, but Bitcoin has been around for almost 10 years now and has seen "real" returns for the past 4 or 5 years. I suppose my question should be restated as "Did Bitmain take a gamble and it paid off?" I still find it strange that not a single prominent US based BTC miner manufacturer has hit the scene.
- wmf 9y ago
- sebleon 9y agoI'm surprised to hear there aren't more manufacturers in China that reverse engineer Bitmain's circuits, replicate, and sell them in the local market where US IP law doesn't apply.
- icelancer 9y agoBecause: -Chinese reverse engineering and lax IP laws aren't actually that lax; Westerners just pretend it is. -Bitmain isn't a US corporation, it is Chinese. -The owner of Bitmain is Jihan Wu.
- sebleon 9y agoGot it, makes sense. Whoa, thanks for calling out my biases O_O > lax IP laws aren't actually that lax I thought one of the big initiatives for the TPP was to enforce US IP in Asia?
- hrrsn 9y agoHuge amount of R&D, sure. But the mining ASIC market is largely dominated by Bitmain right now.
- bsaul 9y agoImagine that bitcoin is a bubble, and then I don’t think humanity would have had ever spent such a huge amount of energy and resources for such a « useless » purpose.
- sebleon 9y ago"We buy things we don’t need, with money we don’t have, to impress people we don’t like." - Fight Club I'd venture to say that the majority of human effort today is spent on useless things. Consumerism is the base of our entire economic system, Bitcoin mining doesn't seem all that different to me.
- bsaul 9y agoExcept people don’t buy anything with bitcoin ( and i’ve read about potential millionaires, but never about people having actually made millions of usd, since nobody sells). For the moment it’s only the most gigantic and cpu intensive distributed number increment algorithm.
- malvosenior 9y agoThere are absolutely people who have cashed out significant non-crypto money from BTC. In fact crypto has allowed multiple people I know to retire. Bitcoin also offers the very real value of enabling monetary transactions without government involvement. That’s a huge deal to some of us who value individual liberty and/or live under corrupt regimes.
- icelancer 9y agoI transact in BTC all the time. And while I haven't made millions of USD, it's a considerable sum. My friends have cashed out plenty of BTC into USD/EUR; well into the millions.
- gomox 9y agoYou haven't read enough then. There is, quite literally, an app for that. People are getting real bank transfers of "real" money all the time out of bitcoin & co.
- microtherion 9y ago> The best BTC ASIC miners on the open market are all sold out and backordered for months [...] But in that case, why don't ASIC manufacturers sell to the highest bidder and let mining companies bid up prices? If the barrier to entry is in ASIC manufacturing, why don't the manufacturers capture the excess profit, instead of the miners?
- rangibaby 9y agoSelling pickaxes vs gold mining. One is quite a bit less risky than the other.
- deleted 9y ago[deleted]
- rdiddly 9y agoThe question was, why don't the pickaxe manufacturers charge more, since there's an axe shortage. Maybe they will, when they finally get around to filling all those orders. Or maybe they're just trying not to alienate their core market?
- wmf 9y agoYeah, it does look bad if the price is so high that it's literally impossible for miners to profit.
- microtherion 9y agoThey would not have to set extortionate prices. They simply could auction off whatever supply they produce to the highest bidder. With a market as rife with… optimists as cryptocurrencies are, there's a good chance they could capture more than 100% of the profits. It seems to me that bitcoin mining should be about as purely economic a business as there is. It's not like their clients would not abolish the ASIC manufacturers as soon as their hardware is no longer cost effective.
- cortesoft 9y agoRight, but there was never a time during the Gold Rush where there was a shortage of pickaxes.
- testvox 9y agoAssuming there is a free market everywhere this is true. However China does not have anything close to a free market, electricity is heavily subsidized and freedom to invest and run businesses is heavily restricted which can easily cause market failures such as this. The key takeway from the article is that for Chinese miners specifically there is still a large profit to be made, which indicates something screwy with the market in China.
- FabHK 9y ago> Assuming there is a free market everywhere this is true Sorry, but you can't assume that what theoretically holds in a long term stable equilibrium of a perfect idealised market holds at every moment in a fast moving dynamic real world market.
- rlanday 9y agoAt equilibrium, yes. Bitcoin's value seems to be changing faster than miners can acquire and set up new hardware. Also, it's probably not rational to buy hardware right up until the point the marginal gain becomes 0 if you expect the price is likely to drop in the future (are miners able to buy financial instruments to hedge this risk?).
- ajross 9y agoIt's lagging. A new ASIC order takes at best 2-3 months to arrive in the market.