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Cryptocurrency Collapse

4 points by yarapavan 8y ago

yarapavan 8y ago
The price peak was December 2017 — but the hash rate was six times that by August 2018, at one-third of the price. Mining 1 BTC cost way less than 1 BTC during the bubble. So, to compete, miners built out big. The hash rate changes approximately every two weeks. But capital expenditure — building and deploying single-purpose mining hardware — has a rather longer lead time. The price just crashed, and the hash rate is now dropping off sharply. So everyone’s getting squeezed — the cost of mining 1 BTC is circling 1 BTC, like it was in the doldrums of 2014-2015. F2Pool founder Mao Shixing estimates 600,000 Bitcoin mining machines shut down in the last two weeks — mostly older, less efficient machines. ... The interview with Mao Shixing gives us numbers for how cheap Chinese power actually is. Summer prices are around 2.9 cents per kilowatt-hour. We’re coming into winter, and it’s more like 4.3 c/kWh. The current worldwide hash rate is 45×1018 hashes per second. If everyone is running an Ebang E-10 (which they’re not — most mining is less efficient), at 0.092 joules per gigahash — then in summer, that’s about $2750 a bitcoin for the electricity alone. Around now, it’s getting to … around $4000 to mine a bitcoin.
- bethly 8y ago
  It's fun to watch a market that's actually nearly perfect: no barriers to entry or regulation to capture means that lead time is about the only source of surplus and profit consistently trends to zero.
  - nostrademons 8y ago
    Would be nice if that applied to general computing. Margins on AWS are ~90%; that's pure rent that Amazon is capturing because they're the market leader in a small oligopoly. There are startups like Golem [1] that are working on tackling this market, but it seems like they're starting with a small set of verticals, none of which are applicable to anything I need. [1] https://golem.network/ https://golem.network/
  - wmf 8y ago
    One wrinkle is that mining equipment has been supply-constrained for almost the entire life of Bitcoin and the mining equipment vendors have a huge information advantage over their customers because they know the future difficulty.

4 points by yarapavan 8y ago

The price peak was December 2017 — but the hash rate was six times that by August 2018, at one-third of the price. Mining 1 BTC cost way less than 1 BTC during the bubble. So, to compete, miners built out big. The hash rate changes approximately every two weeks. But capital expenditure — building and deploying single-purpose mining hardware — has a rather longer lead time. The price just crashed, and the hash rate is now dropping off sharply. So everyone’s getting squeezed — the cost of mining 1 BTC is circling 1 BTC, like it was in the doldrums of 2014-2015. F2Pool founder Mao Shixing estimates 600,000 Bitcoin mining machines shut down in the last two weeks — mostly older, less efficient machines. ... The interview with Mao Shixing gives us numbers for how cheap Chinese power actually is. Summer prices are around 2.9 cents per kilowatt-hour. We’re coming into winter, and it’s more like 4.3 c/kWh. The current worldwide hash rate is 45×1018 hashes per second. If everyone is running an Ebang E-10 (which they’re not — most mining is less efficient), at 0.092 joules per gigahash — then in summer, that’s about $2750 a bitcoin for the electricity alone. Around now, it’s getting to … around $4000 to mine a bitcoin.

bethly 8y ago
It's fun to watch a market that's actually nearly perfect: no barriers to entry or regulation to capture means that lead time is about the only source of surplus and profit consistently trends to zero.
- nostrademons 8y ago
  Would be nice if that applied to general computing. Margins on AWS are ~90%; that's pure rent that Amazon is capturing because they're the market leader in a small oligopoly. There are startups like Golem [1] that are working on tackling this market, but it seems like they're starting with a small set of verticals, none of which are applicable to anything I need. [1] https://golem.network/ https://golem.network/
- wmf 8y ago
  One wrinkle is that mining equipment has been supply-constrained for almost the entire life of Bitcoin and the mining equipment vendors have a huge information advantage over their customers because they know the future difficulty.