6 ms·
Isn't that supposed to be an equilibrium? As in, if the price of bitcoin increases (because the economy expands, assuming that it's the main currency) then mine
by simias 6y ago
Isn't that supposed to be an equilibrium? As in, if the price of bitcoin increases (because the economy expands, assuming that it's the main currency) then miners make more money, so more miners enter the competition which means fewer rewards for individual miners and we're back to equilibrium?
Given this feedback loop, how do you establish what's the proper equilibrium? What's the total amount of hardware bitcoin is supposed to stabilize on? As a thought experiment, if BTC stabilizes at $30k, that means that the total value of all bitcoins will be about half a trillion dollars. How can that work if Bitcoin becomes the new dollar? Clearly the entire world ecomony is more than that.
Normally I'd assume that I'm missing something and the people who came up with that model know more than I do, but then again we're talking about cryptocurrencies so...
- petters 6y agoYes, I think you are right. If the price were somehow fixed at $1000, the difficulty would eventually be adjusted so that miners would barely break even. Same if the price were somehow fixed at $100,000.
- AgentME 6y ago>As a thought experiment, if BTC stabilizes at $30k, that means that the total value of all bitcoins will be about half a trillion dollars. How can that work if Bitcoin becomes the new dollar? Clearly the entire world ecomony is more than that. If people overall wanted to purchase enough Bitcoin to have more than half a trillion dollars in Bitcoin, then demand would outpace the supply and the price of Bitcoin would go up, making it possible to have whatever amount of value in Bitcoin. It's nonsense to presuppose the price of Bitcoin staying still while demand outpaces the supply. No one sets the price of Bitcoin but supply and demand.