5 ms·

Would it mean there would be less interest in mining bitcoin (and thus 'wasting' electricity)?

by nikivi 6y ago

X6S1x6Okd1st 6y ago
Only if mining has hit an equilibrium where it's entirely price dependent. If mining is constrained by supply (either of sufficiently cheap energy or of miners) then we wouldn't see a drop. Fees are still not near dominating the rewards so we do expect to see miner revenue drop due to this.
- nikivi 6y ago
  But there will be a point in future where mining no longer would make sense? Curious if there are any projections when that is expected to happen.
  - lftl 6y ago
    Presumably fees will rise at that point to making profitable enough to move transactions.
    - fiter 6y ago
      While I can understand the presumption that fees will rise to make it profitable to move transactions, is there any simple market mechanism for making sure transactions move safely? A slow continuous drop in hash rate could result in the network being more vulnerable to attacks.
  - GuB-42 6y ago
    As long a s Bitcoin has value, mining will always make sense. First thing, even if the block reward is zero, there are still transactions fees. We are not here yet but they are expected to be the primary motivation in the future. Second, difficulty scale proportionally to the global mining power so that one block is mined every 10 minutes or so. As rewards decrease, the most expensive mining operations will shut down, keeping the cheaper ones profitable. An equilibrium will be found. The last point is a problem as it makes the network more centralized, potentially allowing for 51% attacks.
  - X6S1x6Okd1st 6y ago
    Depends entirely on your operating cost and expected return. We know that the expected return from newly minted bitcoins will reach zero at some point in the future. We don't know if expected return from tx/fees will ever hit zero. TBH if it ever got back to the point where I could mine a block every couple weeks with a GPU, and I had access to a GPU, power source and internet connect I'd probably start mining again. IMO Bitcoin exists as an interesting and historical concept in too many people's minds for mining to ever stop. The real worry would be that mining drops off to the point where 51% attacks are viable on the bitcoin mainnet. We'd potentially see that if many large miners either started renting out their services to the highest bidder or sold all their miners. Once we see more hashpower for rent or purchase than goes into honest mining we have the potential for a 51% attack.
PopeDotNinja 6y ago
Tommorow it will cost twice as much to mine the same amount of Bitcoin that you would have mined yesterday (I think).
- lozf 6y ago
  Well, the cost stays the same, but the reward is halved -- so yes the effect is similar to each costing double, but that's not really precise. It's better to consider it as miners subscribe to a lottery (for the cost of their electricity). Roughly every 10 minutes someone wins that "block". Yesterday the reward for winning was 12.5 BTC per block, and now it's 6.25... the cost of entering hasn't changed. There's more to it of course, e.g. as the difficulty adjusts as in line with the hashrate on the network, but lagged by roughly a couple of weeks worth of blocks being mined. Fees in any given block vary, which are added to the block reward. Many miners pool rosources and each share a fraction of the reward. Etc.
kinghajj 6y ago
I'd assume any miners who cannot profitably operate with the new block reward * price would stop, but a decrease of new supply should cause some increase in price too.
- GhostVII 6y ago
  I don't think we should expect an increase in price given that the halvening is well know and predictable. It should be priced in, if anything I think it would be overvalued because of it since lots of people are buying in because they expect a spike in price.
new2628 6y ago
No need for quotes, it is an absolute waste of energy and effort on a planetary scale with no benefit whatsoever.
- new2628 6y ago
  Vote away, hurt bitcoiners. EDIT: sorry for the silly remark, ironically, the original comment stands at +10 at the moment after starting deep in the negative.
  - kinghajj 6y ago
    Only this comment, since it's so immature.
- banachtarski 6y ago
  It's an "extreme statement" but to be honest, I'm inclined to agree. As a currency, it's an absolute failure. Far too volatile, illiquid, and unregulated to be even remotely usable/reliable. As for everything else? It's still looking for a "solution" that isn't just something hype driven.
  - 535188B17C93743 6y ago
    Unfortunately, its technology (or maybe the combo of its popularity and technology) never really allowed for it to become anything but a speculative asset.
  - nikivi 6y ago
    Do you have any thoughts on what would make a better cryptocurrency? Either in the works and what works already? Perhaps things like Cardano (https://www.cardano.org https://www.cardano.org) or Polkadot (https://polkadot.network https://polkadot.network) are better?
- wyldfire 6y ago
  > no benefit whatsoever Clearly, the benefits for any energy consumption should be seen from the point of view of the consumer. They wouldn't do it if it were of no benefit. It would be more fair for you to describe the distributed ledger clearing as of no value to you. Because it definitely has a value to some folks. That said: some other cryptocoins do indeed provide a ledger like bitcoin, still decentralized and trustless, but without mining (and without block rewards).
EthanHeilman 6y ago
Conventional wisdom says no, decreases in the national currency value of bitcoin would reduce interest, but the halvening won't. The reason why is that electricity for mining is priced in national currency, so interest in mining bitcoins depends on a miners future expectation of the value of bitcoin price in national currency when they sell the bitcoins to pay the electricity bill. The current wisdom is that the halvening decreases the amount of bitcoin that miners receive while increasing the USD value of bitcoin because it decreases market supply and the perception of market supply.
- lultimouomo 6y ago
  But halvening happens on a fixed schedule, so all future halvenings are already priced in the value of Bitcoin in national currency. So if you get half the bitcoins for mining, ceteris paribus you are getting half the dollars.
  - EthanHeilman 6y ago
    I agree if you assume all future halvenings are priced in. It has been claimed that there is a relationship between halvenings in the past and in increases in the price of Bitcoin. If true this would suggest that at least in the past halvenings are not priced in.
ufmace 6y ago
It's a disincentive towards mining bitcoin, yes. However, everybody knew this was coming now, so any competent mining operator should have already accounted for it in their financial/business planning.
nas 6y ago
Likely yes but it depends on the Bitcoin price. The amount "wasted" (i.e. securing distributed ledger against attacks, providing difficult to fake notary service for transactions) is dependent on block rewards and fees. Since the block reward makes up most of that and has now been halved, you should expect less resources being put into mining (i.e. unprofitable miners will turn off their machines). If the price of Bitcoin now doubles presumably no miners will be turning off their machines. If it doesn't double, some fraction of all mining setups just became unprofitable.
GhostVII 6y ago
For all Bitcoin miners to be profitable, the global reward for mining Bitcoin must be less than the global cost. Since the reward has now halved, I think the electricity spend should also drop by half, but this may already be accounted for since miners have known about the halvening for a while and should have reduced capacity accordingly already.
- jcranmer 6y ago
  > Since the reward has now halved, I think the electricity spend should also drop by half I doubt that. Look at the recent oil production issues: despite demand falling off a cliff, and the price of oil following it, production (supply) hasn't dropped anywhere near enough to match the fall in demand. It's basically a game of chicken--keep going at full force, eating your losses, in the hopes that your competitors are weaker and will be forced to fold before you will.

Would it mean there would be less interest in mining bitcoin (and thus 'wasting' electricity)?

by nikivi 6y ago

Would it mean there would be less interest in mining bitcoin (and thus 'wasting' electricity)?

Only if mining has hit an equilibrium where it's entirely price dependent. If mining is constrained by supply (either of sufficiently cheap energy or of miners) then we wouldn't see a drop. Fees are still not near dominating the rewards so we do expect to see miner revenue drop due to this.

nikivi 6y ago
But there will be a point in future where mining no longer would make sense? Curious if there are any projections when that is expected to happen.
- lftl 6y ago
  Presumably fees will rise at that point to making profitable enough to move transactions.
  - fiter 6y ago
    While I can understand the presumption that fees will rise to make it profitable to move transactions, is there any simple market mechanism for making sure transactions move safely? A slow continuous drop in hash rate could result in the network being more vulnerable to attacks.
- GuB-42 6y ago
  As long a s Bitcoin has value, mining will always make sense. First thing, even if the block reward is zero, there are still transactions fees. We are not here yet but they are expected to be the primary motivation in the future. Second, difficulty scale proportionally to the global mining power so that one block is mined every 10 minutes or so. As rewards decrease, the most expensive mining operations will shut down, keeping the cheaper ones profitable. An equilibrium will be found. The last point is a problem as it makes the network more centralized, potentially allowing for 51% attacks.
- X6S1x6Okd1st 6y ago
  Depends entirely on your operating cost and expected return. We know that the expected return from newly minted bitcoins will reach zero at some point in the future. We don't know if expected return from tx/fees will ever hit zero. TBH if it ever got back to the point where I could mine a block every couple weeks with a GPU, and I had access to a GPU, power source and internet connect I'd probably start mining again. IMO Bitcoin exists as an interesting and historical concept in too many people's minds for mining to ever stop. The real worry would be that mining drops off to the point where 51% attacks are viable on the bitcoin mainnet. We'd potentially see that if many large miners either started renting out their services to the highest bidder or sold all their miners. Once we see more hashpower for rent or purchase than goes into honest mining we have the potential for a 51% attack.

PopeDotNinja 6y ago

Tommorow it will cost twice as much to mine the same amount of Bitcoin that you would have mined yesterday (I think).

lozf 6y ago
Well, the cost stays the same, but the reward is halved -- so yes the effect is similar to each costing double, but that's not really precise. It's better to consider it as miners subscribe to a lottery (for the cost of their electricity). Roughly every 10 minutes someone wins that "block". Yesterday the reward for winning was 12.5 BTC per block, and now it's 6.25... the cost of entering hasn't changed. There's more to it of course, e.g. as the difficulty adjusts as in line with the hashrate on the network, but lagged by roughly a couple of weeks worth of blocks being mined. Fees in any given block vary, which are added to the block reward. Many miners pool rosources and each share a fraction of the reward. Etc.

kinghajj 6y ago

I'd assume any miners who cannot profitably operate with the new block reward * price would stop, but a decrease of new supply should cause some increase in price too.

GhostVII 6y ago
I don't think we should expect an increase in price given that the halvening is well know and predictable. It should be priced in, if anything I think it would be overvalued because of it since lots of people are buying in because they expect a spike in price.

new2628 6y ago

No need for quotes, it is an absolute waste of energy and effort on a planetary scale with no benefit whatsoever.

new2628 6y ago
Vote away, hurt bitcoiners. EDIT: sorry for the silly remark, ironically, the original comment stands at +10 at the moment after starting deep in the negative.
- kinghajj 6y ago
  Only this comment, since it's so immature.
banachtarski 6y ago
It's an "extreme statement" but to be honest, I'm inclined to agree. As a currency, it's an absolute failure. Far too volatile, illiquid, and unregulated to be even remotely usable/reliable. As for everything else? It's still looking for a "solution" that isn't just something hype driven.
- 535188B17C93743 6y ago
  Unfortunately, its technology (or maybe the combo of its popularity and technology) never really allowed for it to become anything but a speculative asset.
- nikivi 6y ago
  Do you have any thoughts on what would make a better cryptocurrency? Either in the works and what works already? Perhaps things like Cardano (https://www.cardano.org https://www.cardano.org) or Polkadot (https://polkadot.network https://polkadot.network) are better?
wyldfire 6y ago
> no benefit whatsoever Clearly, the benefits for any energy consumption should be seen from the point of view of the consumer. They wouldn't do it if it were of no benefit. It would be more fair for you to describe the distributed ledger clearing as of no value to you. Because it definitely has a value to some folks. That said: some other cryptocoins do indeed provide a ledger like bitcoin, still decentralized and trustless, but without mining (and without block rewards).

EthanHeilman 6y ago

Conventional wisdom says no, decreases in the national currency value of bitcoin would reduce interest, but the halvening won't. The reason why is that electricity for mining is priced in national currency, so interest in mining bitcoins depends on a miners future expectation of the value of bitcoin price in national currency when they sell the bitcoins to pay the electricity bill. The current wisdom is that the halvening decreases the amount of bitcoin that miners receive while increasing the USD value of bitcoin because it decreases market supply and the perception of market supply.

lultimouomo 6y ago
But halvening happens on a fixed schedule, so all future halvenings are already priced in the value of Bitcoin in national currency. So if you get half the bitcoins for mining, ceteris paribus you are getting half the dollars.
- EthanHeilman 6y ago
  I agree if you assume all future halvenings are priced in. It has been claimed that there is a relationship between halvenings in the past and in increases in the price of Bitcoin. If true this would suggest that at least in the past halvenings are not priced in.

ufmace 6y ago

It's a disincentive towards mining bitcoin, yes. However, everybody knew this was coming now, so any competent mining operator should have already accounted for it in their financial/business planning.

nas 6y ago

Likely yes but it depends on the Bitcoin price. The amount "wasted" (i.e. securing distributed ledger against attacks, providing difficult to fake notary service for transactions) is dependent on block rewards and fees. Since the block reward makes up most of that and has now been halved, you should expect less resources being put into mining (i.e. unprofitable miners will turn off their machines). If the price of Bitcoin now doubles presumably no miners will be turning off their machines. If it doesn't double, some fraction of all mining setups just became unprofitable.

GhostVII 6y ago

For all Bitcoin miners to be profitable, the global reward for mining Bitcoin must be less than the global cost. Since the reward has now halved, I think the electricity spend should also drop by half, but this may already be accounted for since miners have known about the halvening for a while and should have reduced capacity accordingly already.

jcranmer 6y ago
> Since the reward has now halved, I think the electricity spend should also drop by half I doubt that. Look at the recent oil production issues: despite demand falling off a cliff, and the price of oil following it, production (supply) hasn't dropped anywhere near enough to match the fall in demand. It's basically a game of chicken--keep going at full force, eating your losses, in the hopes that your competitors are weaker and will be forced to fold before you will.