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So, pre halvening -- the average block reward was worth about $100,000. Fees totaled about $5,000. I don't really understand the economics of this, but it see

So, pre halvening -- the average block reward was worth about $100,000. Fees totaled about $5,000. I don't really understand the economics of this, but it seems there are a few possible outcomes: A) Prices double because miners refuse to sell at a price that gives them less than $100k a block and demand for coins is inelastic. B) Fees go up 10x because miners now need to make $50k in transaction fees instead of $5k per block to make up for the lower block reward, and demand for transactions in inelastic. C) Difficulty and prices drop because neither transaction demand nor coin demand is inelastic, and miners will begin turning off rigs that are no longer profitable at $50k per block. D) Some combination of the above.

rantwasp 6y ago
you should consider what the price to mine is vs the reward. as long as the reward > price to mine, the miners will keep mining. once it drops, you will either have miners dropping off the networks or the difficulty decreasing until another equilibrium is reached. once you have less miners it's possible that the TX fees will increase if you want your transactions mined (the miners cannot really impose a transaction fee. it's the transactions with the highest fees that get mined into a block and incorporated into the block chain)
- empath75 6y ago
  in a free market, the price for any commodity should roughly track the cost of producing it.
  - rantwasp 6y ago
    you're working with the assumption that it's a commodity. It's more like a currency than a commodity. also, is the price of gold for example really tracking the cost of producing it?
    - empath75 6y ago
      Either side of that equation can lead — if the price of gold rises from speculators, miners will start employing costlier means of extracting the metal to meet demand.
kinghajj 6y ago
E) Most miners accept less profits than they had previously earned. Those that can no longer profitably mine shut down, causing a small dip in hash rate.
- duskwuff 6y ago
  I wouldn't count on it being "small". Miners have always operated on the edge of profitability, and there's been a lot of consolidation in the cryptocurrency mining space over the past few years. It's entirely possible that this halving will force some major operators out of the market.
tiborsaas 6y ago
It's pretty genius system if you think about it. Each of these halving events will shuffle the market players because different actors can be motivated by different incentives. If difficulty drops, then it might be an incentive for smaller players to enter mining again. It's a chaotic system by design which makes it really hard to predict what will happen in the long run.
csomar 6y ago
Price dropped 50% recently and then tripled. There is no difference to miners between a 50% price drop and a halving. At least the halving is predictable but 50% discounts are not. People who are in this business are ready for volatility.

rantwasp 6y ago

you should consider what the price to mine is vs the reward. as long as the reward > price to mine, the miners will keep mining. once it drops, you will either have miners dropping off the networks or the difficulty decreasing until another equilibrium is reached. once you have less miners it's possible that the TX fees will increase if you want your transactions mined (the miners cannot really impose a transaction fee. it's the transactions with the highest fees that get mined into a block and incorporated into the block chain)

empath75 6y ago
in a free market, the price for any commodity should roughly track the cost of producing it.
- rantwasp 6y ago
  you're working with the assumption that it's a commodity. It's more like a currency than a commodity. also, is the price of gold for example really tracking the cost of producing it?
  - empath75 6y ago
    Either side of that equation can lead — if the price of gold rises from speculators, miners will start employing costlier means of extracting the metal to meet demand.

kinghajj 6y ago

E) Most miners accept less profits than they had previously earned. Those that can no longer profitably mine shut down, causing a small dip in hash rate.

duskwuff 6y ago
I wouldn't count on it being "small". Miners have always operated on the edge of profitability, and there's been a lot of consolidation in the cryptocurrency mining space over the past few years. It's entirely possible that this halving will force some major operators out of the market.

tiborsaas 6y ago

It's pretty genius system if you think about it. Each of these halving events will shuffle the market players because different actors can be motivated by different incentives. If difficulty drops, then it might be an incentive for smaller players to enter mining again. It's a chaotic system by design which makes it really hard to predict what will happen in the long run.

csomar 6y ago

Price dropped 50% recently and then tripled. There is no difference to miners between a 50% price drop and a halving. At least the halving is predictable but 50% discounts are not. People who are in this business are ready for volatility.