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Many Bitcoin Miners Are at Risk of Turning Unprofitable
- tonysdg 9y agoWasn't part of the promise of Bitcoin that no single entity or cabal would control it? It would be a distributed platform, owned by the masses?
- qbrass 9y agoThe promise was that no single entity would want to control it since nobody else would want Bitcoin if they did.
- Brockenstein 9y agoWhich won't stop someone from trying to ride that line if that promise carries any connection with reality. Or the promise is just naive and once people are invested in using it they'll refuse to give up the value and will tolerate single entity control.
- kazagistar 9y agoThat's a dumb promise, since all it takes is one third party with the desire and means to control multiple entities for non financial reasons; for example, a state actor with treaties and regulations.
- conanbatt 9y agoThey would not be able to capture it unless they get consensus.
- mkirklions 9y agoThis electricity is used to verify transactions. I dont know how much electricity is used at Visa or the federal reserve to print money. But everything requires resources.
- dreen 9y agoSimilar thing happened with the internet when a lot of bedroom servers disappeared. A very similar thing also happened to radio some many years before. If anything, this could be a sign of maturity.
- sparkie 9y agoWhat happened to radio was due to limited spectrum availability and laws prohibiting its use. This can't really be compared to the others. Bedroom servers still exist, and are probably more popular than before. It just appears there's not so many because they've been largely eclipsed by big players and the ability to just spin up new instances on demand.
- simias 9y agoIn other words "this is good for Bitcoin"?
- dreen 9y agoMore like "nothing extraordinary"
- simias 9y agoHaving a bunch of people making millions by racing to compute SHA256 collisions is very much extraordinary IMO. Drawing parallels with the server and radio markets is not very convincing. Furthermore the way mining happens is pretty irrelevant to Bitcoin adoption and maturity at this point. Having a million miners or only 10 doesn't really change much in terms of usability or price volatility.
- Zelphyr 9y agoThe bedroom servers have disappeared in favor of cloud computing like AWS. I'm not sure I'd consider AWS being a major single point of failure a good thing. Not to mention, isn't one of the big selling points of blockchain its distributed nature?
- ct0 9y agothis is good for gamers
- juliangoldsmith 9y agoBitcoin miners use ASICs, so this wouldn't affect gamers at all. It might make it worse, actually, since people who had mined Bitcoin may move to Ethereum.
- mkirklions 9y agoETH is going POS, I would be very skeptical as an ETH miner to buy something new.
- swyx 9y ago"is going"? whats the timeline? forever 2 years out?
- rufugee 9y agoI'm really curious about the logic of this move. As I understand it, PoS will award miners who have the most coin with an increased likelihood that they'll be able to mine a coin. In other words, the more coins you own, the higher probability you can mine more. This seems to be designed to fail, or at least designed to create a mining market which is highly central to only the wealthiest players. Anyone care to refute this?
- maxerickson 9y agoThe idea is to not have the huge block reward. (the main incentive for participating in the consensus finding is the ability to do transactions)
- rufugee 9y agoI get that, but doesn't this still create a network where the most coin-holding miners wield the most power?
- eli 9y agoDoesn't the dorm room miner not pay for their electricity? Or am I being too literal?
- HenryBemis 9y agoCome on, dorm room miners do not have the majority of hashrates out there. Even with free electricity when they mine $5-10 per day (very optimistic) it doesn't make them rich.
- IkmoIkmo 9y agoMining at current prices is a $5 billion a year industry, mostly run on specialised chips at scale. Dorm room miners aren't a significant factor. Regardless, there's also capital expenditures on the equipment. The problem is that the price is so volatile. As with any industry, new entrants will keep joining in until total cost will approach total revenue. But if total revenue can just drop by 50% in the span of a few months, that can put a large portion of participants out of business, even if hypothetically one of their cost factors (electricity) is free, some participants will have to go.
- gexla 9y agoThere are other coins to mine other than Bitcoin, such as Monero.
- twoodfin 9y agoWouldn’t fewer miners = higher prices with all else being equal?
- Jagat 9y agoAlso isn't fewer miners => reduced difficulty => higher chances of solving the puzzle => greater chance of a successful mine => potential profit?
- raesene9 9y agoFewer organizations mining doesn't necessarily mean lower hashrate. As new hardware comes online for the big miners the hashrate could still increase whilst the number of organizations mining decreases.
- leovailati 9y agoYes, but only momentarily. These big consolidated miners will keep investing in their highly efficient hardware and mining power will keep going up.
- adventured 9y agoThat's the problem, all things may not be equal. Bitcoin may not end up being worth what people thought it was going to be. It may continue to drop (or stagnate) over time with zero miners active. It's not an exaggeration to say that nobody knows whether that will be the outcome.
- jcfrei 9y agoNo, the difficulty adjusts every 2016 blocks (so about every 14 days). So when miners stop and blocks take longer to mine then the supply of new bitcoins is only reduced for a short amount of time.
- ctime 9y agoWhat a colossally stupid waste of resources. Right now its costing somewhere between ~3500 and ~9000 USD to mine a single bitcoin (on average). To me, we've essentially engineered a mechanism to capture and trade something that represents the value of squandered electricity. 1) we're generating a ton of co2, further destabilizing the planet ecosystem 2) if we ever _do_ sort out cold fusion energy, crytoholes are going to abuse the shit out of it. I feel like cryptocurrency and perhaps nuclear weapons are a built in 'kill switch' by nature to make sure only useful species ever get off the planet.
- maxerickson 9y agoSquandered electricity has no value, bitcoin are not imbued with any value from the mining process, their value is strictly a function of what someone is willing to pay for them. (I imagine you agree, but clarity is useful)
- bob_theslob646 9y agoI think he/she misspoke about what they meant by "squandered electricity." I think what they were referring to is how electricity is allocated or stored. Currently, we cannot do so effectively. It is ironic that Bitcoin is being referred to as a store of value. I would hesitate to say that squandered electricity has very little value but it is all dependent on what your definition of value is, potential or realized.
- maxerickson 9y agoSquandered electricity is like burning cash. It's obvious waste. Hesitate all you want. Note that chemical batteries and pumped storage hydroelectric both store large amounts of electricity very effectively (there lots and lots of deployments that were done by commercial interests seeking to improve the economics of their operations, some going back decades).
- marvin 9y agoBurning cash is a poor analogy, apart from the destruction of the physical paper (which is very cheap). Burning cash causes a small amount of deflation, which increases everyone else's fortune a tiny amount, but does not waste any human effort. A better analogy would be digging a hole and filling it up again. Or maybe better, causing a small amount of destruction to something that other people value.
- clone00 9y agoI came here to check if there was a Napalm Death joke, and I am serious disappoint. https://youtu.be/ybGOT4d2Hs8 https://youtu.be/ybGOT4d2Hs8
- pc86 9y agoThis comment would be more appropriate for Reddit.
- rbanffy 9y agoI like the possibility of having tons of high-end GPUs being sold for bargain basement prices on eBay. One of my never-started projects is to build a big GPU=based cluster shaped like a Cray-2. The original machine had, IIRC, 11 lobes and, therefore, having 11 GPU cards feels right (or 10 and use one lobe for the motherboard controlling everything. A Xeon Phi (if we are going crazy with GPUs, we should go crazy with the motherboard as well) has 36 PICe lanes, so I assume it'd be a fine choice. All this would be immersed in 3M's Novec 649 to keep the bubbly looks.
- nakedrobot2 9y agoGPU's have not been used for mining Bitcoin for years. They are being used to mine other cryptocurrencies.
- chisleu 9y agoHe wants a gpu compute cluster, not a notebook mining machine. They would be on the market because bitcoin's price is so tightly linked to many others including ethereum.
- majewsky 9y agoAren't all serious Bitcoin miners using ASICs at this point? AFAIK those people who buy up all the GPUs are mining Ethereum and other, smaller coins.
- amluto 9y agoIf this happens to too great an extreme, it’s a major security problem. If at any point there is enough old-and-not-quite-profitable mining hardware around to mount a 50% attack, then a 50% attack becomes reasonably cheap.
- Klathmon 9y agoLike many things with computers, scales can be deceivingly large. I want to preface this with a note that I haven't done even napkin math on this, so there's a good chance my numbers are WAY off All of the CPUs in the world probably won't be able to match even a handful of ASICs. It's probably the same with GPUs. Each generation of ASICs is hashing about 4x faster with roughly the same power usage as the last. So after a generation or 2, you quickly run into the same sorts of issues where there is a good chance that all of the Antminer S3s in existence won't be able to hold a candle to a medium sized current-gen install. And to mount an attack like that, you'd need to buy and power a monumental amount of these devices. The current hashrate is roughly 30,000,000 TH/s The current generation of Antminer can do roughly 14 TH/s You'd need a million current-gen antminer S9's running at 1.3 gigawatts of power to get 50% of the hashrate (and from my extremely rough guesses, 4 million S7s, 12 million S5s, etc... Each generation also multiplying the power needed by some amount as well). And that kind of buying, manufacturing, and power generation isn't going to be easy to conceal. Not to mention that evidence of a 50% attack will basically end bitcoin, making all of the money, time, and power spent on that attack truly worthless as you are left with a million completely worthless SHA256 hashing machines. If you are able to pull off that kind of hashrate, you might as well just be a good player at that point, as you would be making $50,000 every 10 minutes at current prices.
- amluto 9y ago> If you are able to pull off that kind of hashrate, you might as well just be a good player at that point, as you would be making $50,000 every 10 minutes at current prices. You’re missing my point. If there is a pile of unused unprofitable hardware (because energy efficiency is too low given the mining rewards), then you can’t use it to make an honest profit. That means that it has very little value to honest miners and might be sold for a non-crazy amount of money. A dishonest buyer could use it to mount a 50% attack for a few million dollars of electricity, but I bet a dishonest miner planning such a thing could arrange to benefit in an amount far exceeding a few million dollars. (I bet that the actual major cost would be the connections involved in acquiring the power, not the power itself. But there are many, many GW of working-but-idle non-base-load power plants in the world. You can’t buy their power at rates that make honest mining profitable, but short-term dishonest mining may be an entirely different story.) Some people may attach considerable value to the destruction of bitcoin if nothing else.
- nakedrobot2 9y ago""We’ve returned to some level of rationality," Flack said." Uh, not quite.
- thisisit 9y agoAside from the electricity usage concerns, this presents a big risk for bitcoin. Centralization of mining power was one of the biggest issues of the BTC vs BCH debate. BCH proponents wanted bigger block size. While BTC proponents argued that bigger block size will lead to centralization, as not everyone will be able to propagate bigger blocks. So, if Bitmain et al. do end up controlling 90% of the hashing power, they might be able to control voting and other aspects of the network. They could prioritize their own transaction, pay lower fees etc. Now this will lead to two things. First, cryptocurrency circles love perfect game theory. The argument is always going to be - Bitman etc are not going to harm the network even if they take over. The reason being it will always be in Bitmain's favor to ensure bitcoin's sanctity. If things go downhill they will lose tons of money and mining worthless coins. So, people should not turn away from bitcoin. Second, we are talking about human nature and not a perfect prisoner's dilemma. So, Bitmain etc will be sneaky and maybe even vote against some BIPs they don't like. Some of their behavior will warrant people to leave bitcoin. But, then bitcoin supporters will bring up the first point again. Game theory, hence HODL. This will at the end become a roundabout discussion: Step 1 - News - Bitmain etc does X which is very bad. People should leave a centrally mined coin. Step 2 - Bitcoin supporters - Game theory says Bitmain etc wont harm the network as their coins will worthless too. HODL. Rinse and repeat. The irrational belief in perfect math and game theory will give lot of leeway to anyone who captures Bitcoin's mining power.
- charlesdm 9y agoThis only applies if you can't short things. If they short a ton of coins, destroying the network becomes very profitable.
- yongjik 9y ago> The argument is always going to be - Bitman etc are not going to harm the network even if they take over. The reason being it will always be in Bitmain's favor to ensure bitcoin's sanctity. Wait wait... there are bitcoin supporters arguing this? Now s/Bitmain/US government/ and this is basically the argument for dollar. (Or any fiat currency, for that matter.)
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- fixermark 9y agoIf a single org does end up with 51% mining engine de-facto control of BTC, what happens next? Would people transition off of BTC to another ecosystem, or would people just accept that BTC is now under the auspices of a (one would hope) benevolent dictatorship?
- aiCeivi9 9y agoIt is hard to verify if separate pools aren't controlled by single entity so we won't know when it happens.
- jovial_cavalier 9y agoAren't the "guy in a dorm-room" operations already pretty much out of the game? Couldn't GHash.io do pretty much whatever they want with the blockchain at this point?
- Qub3d 9y agoYup. As a self-described guy in a dorm room throwing his single GPU cycles at some crypto for self-education purposes, people are using multi-coin pools that mine ASIC-resistant coins and flip around depending on which is most profitable (often monero/litecoin). That said, pools like nicehash pay out in BTC anyways, effectively locking altcoins to the BTC index price. Where goes bitcoin, so goes the market.
- balls187 9y agoDoes this mean consumer GPUs will come back down in price?
- alimbada 9y agoNo. Bitcoin isn't mined with GPUs.
- balls187 9y agoGood point, yet the value of other crypto currencies are correlated to bitcoin. So what happens to bitcoin should impact the crypto market?
- mv4 9y agoEven though Bitcoin isn't mined with GPUs (other cryptos are), the GPUs have already come down in price, and most vendors now have them in stock, close to MSRP prices.
- Faark 9y ago> I feel like cryptocurrency and perhaps nuclear weapons are a built in 'kill switch' by nature to make sure only useful species ever get off the planet. There are a lot of potential Great Filters [1], but crypto currencies doesn't seem like one of them. They will might slow mankind down and waste a bunch of energy&resources, but beyond that doesn't particularly hurt our survival chances. Kind of like a lot of entertainment we produce has marginal benefits. But prof of work based crypto currencies have real chance to end up irrelevant once their novelty wears off (and the interesting parts of it might even be adopted elsewhere). [1] https://en.wikipedia.org/wiki/Great_Filter https://en.wikipedia.org/wiki/Great_Filter
- Boulth 9y agoMany Bitcoin Miners Are at Risk of Turning Unprofitable, they will go bankrupt, and after two weeks bitcoin difficulty gets adjusted and mining is easy again, just as designed. So the problem is not really a problem for people that understand how the system works. But it's far easier to bikeshed about electricity, gpus and everything related to cryotocurrencies but not the topic submitted.
- mancerayder 9y agoSo how well will Proof of Stake be able to solve the ecological and mining cost issue, here, for the cryptocurrencies that moved/are moving to that?
- Qub3d 9y agoIn theory, PoS would fix the energy waste. Unfortunately, aside from ETH, nobody has a real roadmap so I doubt it will make much of a dent.
- jacquesm 9y agoJust imagine how bad space heaters based on electricity are. Baseboard heating, radiant electric heat it's all terribly inefficient and turns 'steak' (electrons) into hamburger (IR radiation).
- oliwarner 9y agoLooking forward to the flood of "uneconomical" graphics cards. Pricing got stupid.