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From the point of view of the miner, they have a supply of electricity at a certain price and can decide what to do with it. They might run their TV, computer,

From the point of view of the miner, they have a supply of electricity at a certain price and can decide what to do with it. They might run their TV, computer, heating, industrial machinery, datacenter, or a bitcoin miner. They have to compute what profits can each of the options give them. If running bitcoin miners at that electricity cost and at that profit they can get from selling the bitcoins is more profitable than the others, then it's logical to do that. If on the other hand the price of bitcoin goes down, or the price of electricity goes up, or people start paying more for server hosting, then the decision changes. The fact that miners are now mining, means it's currently most rational to do that, given what society (users, participants) are willing to pay for the services.

ben_w 7y ago
If bitcoin is the dominant currency, another option exists: 51% attack, double-spend to get free electricity. This is useful even when it makes an apparent loss by damaging trust in the currency: If you are, say, the USA president and you’re at war with Iraq, and Iraq uses bitcoin, you can outspend on energy until they surrender. Unless the whole world uses bitcoin, but then the first few nations individually face the same problem, regardless of who else actually uses bitcoin — gotta keep the USA and China happy at the same time! (The EU isn’t integrated enough to do that sort of thing yet, but is a similar sized group). Right now, 51% needs the cost of one very large power station from when you start until when you win — large nations, the sort with global ambitions, can spare a lot more. In the previous example, that’s close to all the power Iraq produces, but 5.4% of the USA’s output. Then there’s the fact that most countries like being in charge of their own currencies as the ability to create or destroy units is a useful economic lever. > The fact that miners are now mining, means it's currently most rational to do that, given what society (users, participants) are willing to pay for the services. Or it’s speculation, like so many other things before and probably yet to come.
- trickstra 7y ago
  There is no such thing as speculation by mining - if they wanted to speculate but didn't profit from the mining itself, it would be better for them to speculate by buying - instead of giving dollars to the power company, they'd just give them to other people on the exchange. Basically the only reasons for miners to "speculate" are long term contracts like lease contracts for warehouses. And those may or may not be long term. And 51% attack has the designed side effect that all other people stop using the currency - they may keep following the previous fork without the double-spend - as shown by ETH and ETC. You'd also need some way of forcing all participant to stay with the now corrupted currency. Otherwise the attacker who performs 51% attack will gain the ownership of a network that immediately becomes completely worthless.
  - ben_w 7y ago
    > And 51% attack has the designed side effect that all other people stop using the currency That’s my point. That is literally the point. That is why it is a bad thing and why no sane nation would ever allow it to become their main currency. It is an attack surface. It is a vulnerability to your economy.
- reportgunner 7y ago
  > you can outspend on energy until they surrender If you have unlimited money then yes. If you devalue your money every time you try to outspend more then no, since you're actually bleeding money. You cannot simply throw more money at mining, the difficulty adjustment would destroy you very soon.

ben_w 7y ago

If bitcoin is the dominant currency, another option exists: 51% attack, double-spend to get free electricity. This is useful even when it makes an apparent loss by damaging trust in the currency: If you are, say, the USA president and you’re at war with Iraq, and Iraq uses bitcoin, you can outspend on energy until they surrender. Unless the whole world uses bitcoin, but then the first few nations individually face the same problem, regardless of who else actually uses bitcoin — gotta keep the USA and China happy at the same time! (The EU isn’t integrated enough to do that sort of thing yet, but is a similar sized group). Right now, 51% needs the cost of one very large power station from when you start until when you win — large nations, the sort with global ambitions, can spare a lot more. In the previous example, that’s close to all the power Iraq produces, but 5.4% of the USA’s output. Then there’s the fact that most countries like being in charge of their own currencies as the ability to create or destroy units is a useful economic lever. > The fact that miners are now mining, means it's currently most rational to do that, given what society (users, participants) are willing to pay for the services. Or it’s speculation, like so many other things before and probably yet to come.

trickstra 7y ago
There is no such thing as speculation by mining - if they wanted to speculate but didn't profit from the mining itself, it would be better for them to speculate by buying - instead of giving dollars to the power company, they'd just give them to other people on the exchange. Basically the only reasons for miners to "speculate" are long term contracts like lease contracts for warehouses. And those may or may not be long term. And 51% attack has the designed side effect that all other people stop using the currency - they may keep following the previous fork without the double-spend - as shown by ETH and ETC. You'd also need some way of forcing all participant to stay with the now corrupted currency. Otherwise the attacker who performs 51% attack will gain the ownership of a network that immediately becomes completely worthless.
- ben_w 7y ago
  > And 51% attack has the designed side effect that all other people stop using the currency That’s my point. That is literally the point. That is why it is a bad thing and why no sane nation would ever allow it to become their main currency. It is an attack surface. It is a vulnerability to your economy.
reportgunner 7y ago
> you can outspend on energy until they surrender If you have unlimited money then yes. If you devalue your money every time you try to outspend more then no, since you're actually bleeding money. You cannot simply throw more money at mining, the difficulty adjustment would destroy you very soon.