10 ms·

Bitcoin Mining’s Three Body Problem

161 points by hosolmaz 6y ago

novalis78 6y ago
That’s a very thorough overview
tines 6y ago
If an article is written in English for an English speaking audience, I wish it would include translations of non-English quotations.
- Scaevolus 6y ago
  The header quote is: "The more transparent something was, the more mysterious it seemed. The universe itself was transparent; as long as you were sufficiently sharp-eyed, you could see as far as you liked. But the farther you looked, the more mysterious it became." ——Liu Cixin "Three Body Problem"
trixie_ 6y ago
'Bitcoin is the product of hashpower. The industry wouldn’t exist without incentivizing miners to continuously invest in hardware and burning electricity to augment Bitcoin network’s settlement assurance' I think this is a common misconception. People don't need to continually invest in mining hardware to keep it going. The entire Bitcoin network could technically be run off a single Rasberry Pi. The network hash rate is only so high because the ROI is there, but without it, people would still be mining. Case in point, there are plenty of long forgotten altcoins out there that people are mining just for fun. At the end of the day your computer is no different from an expensive space heater. Might as well mine some crypto with it.
- season2episode3 6y ago
  > At the end of the day your computer is no different from an expensive space heater. Might as well mine some crypto with it. Or, you know, you could just turn the computer off while you're not actively using it. It saves you money and does a small little good thing for the environment too.
  - trixie_ 6y ago
    That is why I made the analogy to a space heater - because mining would be a free side benefit of something you actively use to keep warm. The environmental impact is also negligible if the power you're using is coming from solar or wind.
    - Klinky 6y ago
      An idle computer clocks down and sips power. Going full bore mining coins results in significant power usage increases. We're talking 10 watts vs 100s of watts.
      - trixie_ 6y ago
        Small space heaters run at 750 watts on the low setting.
        qes 6y ago
        A single Bitcoin miner runs at 1500w on its only setting and sounds like a small aircraft preparing for takeoff.
      - beervirus 6y ago
        That matters if you live in Texas. It doesn't matter if you live above the Arctic Circle.
      - thebean11 6y ago
        Right but if your goal is to heat your apartment (and your alternative heat source is also electric) running the computer is a pretty efficient heat source.
        contravariant 6y ago
        Well, efficient is hardly the right phrase. When it comes to heating using electricity then 100% efficiency is on the low side. A heat pump could be many times more efficient.
- brian_cloutier 6y ago
  I haven't read the article, but I believe it will say something like, the continual investment is necessary in order for the transactions to be irreversible (settlement assurance). I'm sure there are some forgotten altcoins out there still chugging along, but it probably does not take much money to hire sufficient hash power to double-spend those alts, or even re-write their history. For as long as bitcoin miners fight, tooth and nail, to hash incrementally more efficiently than their competitors, it will be prohibitively expensive for most actors to reverse transactions.
  - trixie_ 6y ago
    Not saying this isn't a possibility, but you'd think in the last 5 years of thousands of altcoins this sort of thing must of happened at least once? I guess the interest has to be there to attack it? Though if the interest was there more people would be mining it. Something like that.
    - brian_cloutier 6y ago
      It... has happened. Multiple times. Bitcoin Gold: https://cointelegraph.com/news/bitcoin-gold-blockchain-hit-by-51-attack-leading-to-70k-double-spend https://cointelegraph.com/news/bitcoin-gold-blockchain-hit-b... Vertcoin: https://www.coindesk.com/the-vertcoin-cryptocurrency-just-got-51-attacked-again https://www.coindesk.com/the-vertcoin-cryptocurrency-just-go... Ethereum Classic: https://cointelegraph.com/news/ethereum-classic-51-attack-the-reality-of-proof-of-work https://cointelegraph.com/news/ethereum-classic-51-attack-th... Google is happy to show you more.
      - trixie_ 6y ago
        Right, I guess I feel less at risk of being the victim of a double spend and more at risk with rewriting history. Are there any reports of that? Like coins I've held on the chain for some time being stolen?
        hn_acc_2 6y ago
- uryga 6y ago
  > At the end of the day your computer is no different from an expensive space heater. Might as well mine some crypto with it. i mean... it wouldn't be a space heater if it wasn't crunching pointless numbers...
  - mindcandy 6y ago
    The point of the numbers is to prove that you heated space. Seriously. It proves that you burned value that you know you are not getting back if you are caught falsifying records for the system. And, everyone knows its extremely hard to not get caught if you try. Therefore you can be trusted to sign records for the system because you are risk:reward tremendously more financially motivated to be a good actor than a bad one --including whatever nefarious scenarios you might imagine.
    - uryga 6y ago
      i understand the idea of proof-of-work. but idk, when i think about all that electricity and computing power wasted on guessing arbitrary numbers... just doesn't feel right kind of reminds me of how FAANG job interviews require memorizing not-very-useful algo stuff to weed out people who "aren't motivated enough" to study that stuff for the interview¹... "proof-of-motivation" if you will. it serves a purpose, but requires "burning" a lot of ultimately pointless effort --- 1. at least that's what people say about them, never interviewed there myself
      - perl4ever 6y ago
        "Pointless" only matters if it is "a lot" and "a lot" is relative. It seems like it has not been possible to resolve the question of whether the effort is necessary. If you suggest that existing monetary systems have orders of magnitude lower overhead, particularly fiat money, then people will argue that all sorts of costs are hidden. But I don't believe it makes up the difference, and I attribute peoples' willingness to believe it to the assumption/belief that anything that virally spreads cannot be drastically worse (in some dimension).
      - lukifer 6y ago
- hn_acc_2 6y ago
  I think you're missing the point. For Bitcoin to continue to act as a decentralized currency ledger (with "settlement assurance"), then the network hash rate must remain high. Nobody is arguing that the code couldn't run on one processor, only that cryptocurrencies conceptually depend on this high hash rate
  - trixie_ 6y ago
    It doesn't 'have' to be high. The hash rate could be 1/1000 of what it is today without any risk to 'settlement assurance'
    - hn_acc_2 6y ago
      https://www.crypto51.app/coins/BTC.html https://www.crypto51.app/coins/BTC.html You could pay $384k to hire miners to 51% attack BTC right now (that is, if NiceHash had the capacity). If you cut the hash rate that much the cost would be only $400 or so. Does it sound like a secure trustless currency if anyone can pay $400 to gain 51% majority? EDIT: 51% attack != rewrite blockchain
      - trixie_ 6y ago
        There's a big difference between rewriting all history and rewriting a portion of it during an attack which costs 400k per hour. Also people may misinterpret 'rewriting history' as the ability to to change coins sent from A -> B to A -> C. Which it is not. Not saying an attack still isn't bad, but let's be clear what the extent of the damage could and could not be.
        a1369209993 6y ago
        1: It's actually, under your proposal, "rewriting a portion of [history] during an attack which costs 400 [not 400 thousand] [dollars] per hour". 2: If you are A (and regardless of whether you're also C) and you sent money to B during the 400$/hr (less than a high-profile lawyer, and probably faster to boot) attack, then yes, changing coins sent from A -> B to A -> C is exactly what you can do.
- TylerE 6y ago
  > At the end of the day your computer is no different from an expensive space heater In most of the US, at least, you want AC and not heat at least 7-8 months out of the year, if not more.
  - trixie_ 6y ago
    It also works with solar and wind.
    - TylerE 6y ago
      No it doesn’t. Because the computer is still exhausting heat that makes the AC work harder.
      - trixie_ 6y ago
        The AC is also solar powered.
- gridlockd 6y ago
  In order to maintain network stability at current prices of Bitcoin, a massive amount of hashrate is required. Those altcoins that have become worthless and are mined "just for fun" are only protected by the fact that they are worthless. Any attack would be a waste of resources. You could still attack them "just for fun" of course...
  - trixie_ 6y ago
    Not really. They are cemented into those blockchains. Unless you have a way to back write a blockchain.
    - thebean11 6y ago
      That's kind of the point, you can back write a block chain with enough hash power. Just go back a few hundred blocks in the chain, and "fork" into an alternate chain. If your chain can catch up and become longer, you win. This happens on a micro scale every day, when two people "solve" the next block at the same time. Inevitably, one of those forked chains gets longer and the other one is abandoned or "orphaned".
- tdhttt 6y ago
  > The network hash rate is only so high because the ROI is there, but without it, people would still be mining. Can you expand on that? What would be the incentive for the miners then? What happens when all blocks are mined?
  - trixie_ 6y ago
    You never mine all the blocks, and regardless of the reward there is always a transaction fee which incentives mining. Regardless though my point about space heaters was that 'being warm' is enough incentive for some people to mine crypto.
    - tdhttt 6y ago
      Sorry for not being clear, I meant when all 21 million bitcoins are mined. The transaction fee is pretty small compared to the reward from the new coin, right? Also, since many cryptos have addressed the incentive issue. Maybe let's just focus on bitcoin specifically?
  - rodonn 6y ago
    If ROI goes down, fewer miners will mine. When all blocks are mined, transaction fees will be the main source of incentive to mine.
- perl4ever 6y ago
  It's been a long, long time since your computer drew the same power independent of processing load.
- nullc 6y ago
  > The entire Bitcoin network could technically be run off a single Rasberry Pi. Pedantically, a rpi wouldn't meet the target interblock time because of minimum difficulty. But a system using a single 2014 era 800w shoebox sized mining device could meet minimum difficulty on its own.
- roenxi 6y ago
  > The entire Bitcoin network could technically be run off a single Rasberry Pi. But can that be done practically? At some point you lose the ability to tell which of the forks is 'Bitcoin' and which are 'pretender' altcoins. I can imagine a future where you run a chain for 6 months on a Pi then someone turns up with an ASIC and writes a new 6 month history and calls it Bitcoin instead. The risks of shenanigans would be huge.
- ramblerman 6y ago
  > The entire Bitcoin network could technically be run off a single Rasberry Pi. The network hash rate is only so high because the ROI is there, but without it, people would still be mining. That's a bit of a naive view. It's like saying, we don't need this expensive security vault in our bank, we could just store it all in a shed. the proof of work is crucial to the proper functioning of bitcoin, and if the only miners were running on a raspberry pie anyone could come along and do a >50% attack stealing what they want.
- jayd16 6y ago
  Doesn't the hashrate need to stay high for security reasons? If miner participation is low, can't bad actors dominate the system and produce false transaction? If the hashrate ever collapses isn't the whole system at risk?
- spyder 6y ago
  And there are altcoins without mining.
- kevingadd 6y ago
  > At the end of the day your computer is no different from an expensive space heater This has been false for probably a decade or more. Pretty much any modern processor has dramatically lower power consumption when not under load through a combination of things like clock adjustment, powering off cores, and even dynamically adjusting voltage. This is part of why smartphones have battery life measured in dozens of hours instead of 1-4 hours.
dnprock 6y ago
This analysis misses altcoin mining. When mining adjusts on BTC, miners don't just turn off their rigs. They can go mine altcoins. This behavior introduces another dimension to mining economics. Miners are practical. They have to make money with their hardware and electricity. They can't afford to be ideological. In the Bitcoin mining world (SHA256), miners like to have BCH, BSV and other alternatives. Altcoins allows them to diversify. That's why these chains will never die. They always have mining support.
- lukifer 6y ago
  They'll die if they can't make enough returns to pay for the electricity (and I'd be happy if we helped make that a reality through a tax on carbon and/or POW mining itself).
spir 6y ago
Mining revenue is the network cost of running the Bitcoin network. What if you ran a business that spends billions per year on network cost, then somebody told you they could reduce it by 98% and make it a flat cost, forever. That's proof of stake. Ethereum launches the first phase of proof of stake this year. When Ethereum v1.5 launches in ~18 to 24 months, Ethereum's network cost will undergo such a transformation. The millions per day paid to Ethereum miners will stop being paid, forever. It's a ~98% cost reduction in perpetuity.
- gjs278 6y ago
  lol. people have been saying it’s 2 years away for 5 years now. don’t be surprised when ethereum is worth nothing after this. ARK tried to do this and is pennies now.
- iancoleman 6y ago
  > The millions per day paid to Ethereum miners will stop being paid, forever. Do you mean paid _by_ Ethereum miners? The network pays miners rewards (which will continue under proof of stake, ie the cost _to the network_). The miners pay the cost of running their mining (eg electricity and hardware costs), which is what will be reduced by proof of stake. Am I understanding this correctly?
  - omarchowdhury 6y ago
    ...it's both.
- lalaland1125 6y ago
  Proof of stake is as equally expensive as proof of work. The trick is that both of based on burning money, proof of work burns by using CPU cycles while proof of stake burns through lost interest. http://www.truthcoin.info/blog/pow-cheapest/ http://www.truthcoin.info/blog/pow-cheapest/ gives a nice discussion of how this works.
  - taywrobel 6y ago
    The problem is that the claim that nothing is as cheap as proof of work as made in that article is only applicable if you think cryptocurrencies have value in a way that is comparable to tangible goods in reality, like the electricity they burn to have proof of work. I don’t. Your “lost interest“ on a currency that has nothing beyond speculative value is literally worthless to me. The increased energy production and subsequent pollution that proof of work costs, however, has a real value and does real damage to the environment. Proof of work currencies need to be shut down, for environmental impact reasons if nothing else. You keep playing with your speculative assets all you want. I don’t subscribe to the idea but it doesn’t bother me, until you start damaging the real world with it. Then I have to insist you stop.
segfaultbuserr 6y ago
This is an interesting article, but IMHO, its discussions on Hacker News lacks depth. Almost all threads are debating about superficial Bitcoin issues that has already been talked endlessly, and none of the thread focused on the main thesis of this article: > Bitcoin mining is a complex phenomenon that connects hardware and software, the energy and financial markets. Invisible rules govern every aspect of it. The performance of an individual operation is determined by various external factors that are often hard to quantify and almost impossible to forecast. It stated that Bitcoin mining as a whole, is a complex social-economical-computational-environmental phenomenon with a huge number of moving parts and uncertainties. The most fascinating fact to me, is the direct impact of climate cycle in southern China on the mining industry, almost with a mythical tone found in some Sci-Fi novels. While Bitcoin is a highly artificial and technical construct, but its yield can be severely affected by weather, some Bitcoin miners even routinely migrate their operation according to seasonal changes like the nomadic groups of the past. The flood seasons are visible on the Bitcoin hash rate chart, and even dominates the date of trade shows and R&D schedule of new mining rigs. > May-October is the flood season in Southwest China. It is also a festival period for mining businesses as the large supply of surplus hydro capacity significantly cuts down miners’ operating expenses. For small-medium scale miners, the flood season can reduce the cost by as much as 40%. For large miners who own proprietary facilities, the flood season electricity cost is practically negligible. Over 80% of the miners in Xinjiang, Inner Mongolia will migrate in flocks to Sichuan, Yunnan, and Guizhou to take advantage of the discount, and they move back or sell their equipment after the dry season arrives in November. > Gradually, the industry structured itself around these climate patterns. Like ancient rituals, every year before the flood season arrives, major mining conferences get organized in Sichuan’s capital Chengdu. Some facilities are only open to external customers during the flood season. Manufacturers plan their new product release right before it arrives. Miners race to source the latest and greatest machines in bulk.
- eddieoz 6y ago
  It is a very interesting approach to the aspects which interferes directly to the mining environment. And I totally agree the discussions around this subject normally are superficial and around the market emotions. Considering climate (weather) aspects is one of the strategic decisions about how to conduct the business in this case.
SRTP 6y ago
One of the best, most in-depth and accurate Bitcoin articles to ever grace the front page of HN.
isoprophlex 6y ago
Fantastically written article, very to the point without too much flourish, and very in depth as others have noted. This bit is funny imo: But in late 2019, the National Development and Reform Commission (NDRC) removed mining from a list of activities to be eliminated. Note that the NDRC also oversees the energy industry. Massive amounts of hydropower squandered during flood season is a longstanding issue. The officials are beginning to realize that Bitcoin mining is a highly effective way of transforming excess local capacity into a global digital commodity. One point of view would be that speculation and greed of bitcoin hodl-er fanboys is subsidizing China's renewables industry...
noxer 6y ago
>"If mining operations migrate to more diverse locations in the future and become less concentrated on a single power source, this cycle will cease to play such a significant role." Why should that happen? After the initial very diverse mining, it only ever got more concentrated to places with cheap energy. The place my change but there will always be an optimum place.

161 points by hosolmaz 6y ago

That’s a very thorough overview

If an article is written in English for an English speaking audience, I wish it would include translations of non-English quotations.

Scaevolus 6y ago
The header quote is: "The more transparent something was, the more mysterious it seemed. The universe itself was transparent; as long as you were sufficiently sharp-eyed, you could see as far as you liked. But the farther you looked, the more mysterious it became." ——Liu Cixin "Three Body Problem"

trixie_ 6y ago

'Bitcoin is the product of hashpower. The industry wouldn’t exist without incentivizing miners to continuously invest in hardware and burning electricity to augment Bitcoin network’s settlement assurance' I think this is a common misconception. People don't need to continually invest in mining hardware to keep it going. The entire Bitcoin network could technically be run off a single Rasberry Pi. The network hash rate is only so high because the ROI is there, but without it, people would still be mining. Case in point, there are plenty of long forgotten altcoins out there that people are mining just for fun. At the end of the day your computer is no different from an expensive space heater. Might as well mine some crypto with it.

season2episode3 6y ago
> At the end of the day your computer is no different from an expensive space heater. Might as well mine some crypto with it. Or, you know, you could just turn the computer off while you're not actively using it. It saves you money and does a small little good thing for the environment too.
- trixie_ 6y ago
  That is why I made the analogy to a space heater - because mining would be a free side benefit of something you actively use to keep warm. The environmental impact is also negligible if the power you're using is coming from solar or wind.
  - Klinky 6y ago
    An idle computer clocks down and sips power. Going full bore mining coins results in significant power usage increases. We're talking 10 watts vs 100s of watts.
    - trixie_ 6y ago
      Small space heaters run at 750 watts on the low setting.
      - qes 6y ago
        A single Bitcoin miner runs at 1500w on its only setting and sounds like a small aircraft preparing for takeoff.
    - beervirus 6y ago
      That matters if you live in Texas. It doesn't matter if you live above the Arctic Circle.
    - thebean11 6y ago
      Right but if your goal is to heat your apartment (and your alternative heat source is also electric) running the computer is a pretty efficient heat source.
      - contravariant 6y ago
        Well, efficient is hardly the right phrase. When it comes to heating using electricity then 100% efficiency is on the low side. A heat pump could be many times more efficient.
brian_cloutier 6y ago
I haven't read the article, but I believe it will say something like, the continual investment is necessary in order for the transactions to be irreversible (settlement assurance). I'm sure there are some forgotten altcoins out there still chugging along, but it probably does not take much money to hire sufficient hash power to double-spend those alts, or even re-write their history. For as long as bitcoin miners fight, tooth and nail, to hash incrementally more efficiently than their competitors, it will be prohibitively expensive for most actors to reverse transactions.
- trixie_ 6y ago
  Not saying this isn't a possibility, but you'd think in the last 5 years of thousands of altcoins this sort of thing must of happened at least once? I guess the interest has to be there to attack it? Though if the interest was there more people would be mining it. Something like that.
  - brian_cloutier 6y ago
    It... has happened. Multiple times. Bitcoin Gold: https://cointelegraph.com/news/bitcoin-gold-blockchain-hit-by-51-attack-leading-to-70k-double-spend https://cointelegraph.com/news/bitcoin-gold-blockchain-hit-b... Vertcoin: https://www.coindesk.com/the-vertcoin-cryptocurrency-just-got-51-attacked-again https://www.coindesk.com/the-vertcoin-cryptocurrency-just-go... Ethereum Classic: https://cointelegraph.com/news/ethereum-classic-51-attack-the-reality-of-proof-of-work https://cointelegraph.com/news/ethereum-classic-51-attack-th... Google is happy to show you more.
    - trixie_ 6y ago
      Right, I guess I feel less at risk of being the victim of a double spend and more at risk with rewriting history. Are there any reports of that? Like coins I've held on the chain for some time being stolen?
      - hn_acc_2 6y ago
uryga 6y ago
> At the end of the day your computer is no different from an expensive space heater. Might as well mine some crypto with it. i mean... it wouldn't be a space heater if it wasn't crunching pointless numbers...
- mindcandy 6y ago
  The point of the numbers is to prove that you heated space. Seriously. It proves that you burned value that you know you are not getting back if you are caught falsifying records for the system. And, everyone knows its extremely hard to not get caught if you try. Therefore you can be trusted to sign records for the system because you are risk:reward tremendously more financially motivated to be a good actor than a bad one --including whatever nefarious scenarios you might imagine.
  - uryga 6y ago
    i understand the idea of proof-of-work. but idk, when i think about all that electricity and computing power wasted on guessing arbitrary numbers... just doesn't feel right kind of reminds me of how FAANG job interviews require memorizing not-very-useful algo stuff to weed out people who "aren't motivated enough" to study that stuff for the interview¹... "proof-of-motivation" if you will. it serves a purpose, but requires "burning" a lot of ultimately pointless effort --- 1. at least that's what people say about them, never interviewed there myself
    - perl4ever 6y ago
      "Pointless" only matters if it is "a lot" and "a lot" is relative. It seems like it has not been possible to resolve the question of whether the effort is necessary. If you suggest that existing monetary systems have orders of magnitude lower overhead, particularly fiat money, then people will argue that all sorts of costs are hidden. But I don't believe it makes up the difference, and I attribute peoples' willingness to believe it to the assumption/belief that anything that virally spreads cannot be drastically worse (in some dimension).
    - lukifer 6y ago
hn_acc_2 6y ago
I think you're missing the point. For Bitcoin to continue to act as a decentralized currency ledger (with "settlement assurance"), then the network hash rate must remain high. Nobody is arguing that the code couldn't run on one processor, only that cryptocurrencies conceptually depend on this high hash rate
- trixie_ 6y ago
  It doesn't 'have' to be high. The hash rate could be 1/1000 of what it is today without any risk to 'settlement assurance'
  - hn_acc_2 6y ago
    https://www.crypto51.app/coins/BTC.html https://www.crypto51.app/coins/BTC.html You could pay $384k to hire miners to 51% attack BTC right now (that is, if NiceHash had the capacity). If you cut the hash rate that much the cost would be only $400 or so. Does it sound like a secure trustless currency if anyone can pay $400 to gain 51% majority? EDIT: 51% attack != rewrite blockchain
    - trixie_ 6y ago
      There's a big difference between rewriting all history and rewriting a portion of it during an attack which costs 400k per hour. Also people may misinterpret 'rewriting history' as the ability to to change coins sent from A -> B to A -> C. Which it is not. Not saying an attack still isn't bad, but let's be clear what the extent of the damage could and could not be.
      - a1369209993 6y ago
        1: It's actually, under your proposal, "rewriting a portion of [history] during an attack which costs 400 [not 400 thousand] [dollars] per hour". 2: If you are A (and regardless of whether you're also C) and you sent money to B during the 400$/hr (less than a high-profile lawyer, and probably faster to boot) attack, then yes, changing coins sent from A -> B to A -> C is exactly what you can do.
TylerE 6y ago
> At the end of the day your computer is no different from an expensive space heater In most of the US, at least, you want AC and not heat at least 7-8 months out of the year, if not more.
- trixie_ 6y ago
  It also works with solar and wind.
  - TylerE 6y ago
    No it doesn’t. Because the computer is still exhausting heat that makes the AC work harder.
    - trixie_ 6y ago
      The AC is also solar powered.
gridlockd 6y ago
In order to maintain network stability at current prices of Bitcoin, a massive amount of hashrate is required. Those altcoins that have become worthless and are mined "just for fun" are only protected by the fact that they are worthless. Any attack would be a waste of resources. You could still attack them "just for fun" of course...
- trixie_ 6y ago
  Not really. They are cemented into those blockchains. Unless you have a way to back write a blockchain.
  - thebean11 6y ago
    That's kind of the point, you can back write a block chain with enough hash power. Just go back a few hundred blocks in the chain, and "fork" into an alternate chain. If your chain can catch up and become longer, you win. This happens on a micro scale every day, when two people "solve" the next block at the same time. Inevitably, one of those forked chains gets longer and the other one is abandoned or "orphaned".
tdhttt 6y ago
> The network hash rate is only so high because the ROI is there, but without it, people would still be mining. Can you expand on that? What would be the incentive for the miners then? What happens when all blocks are mined?
- trixie_ 6y ago
  You never mine all the blocks, and regardless of the reward there is always a transaction fee which incentives mining. Regardless though my point about space heaters was that 'being warm' is enough incentive for some people to mine crypto.
  - tdhttt 6y ago
    Sorry for not being clear, I meant when all 21 million bitcoins are mined. The transaction fee is pretty small compared to the reward from the new coin, right? Also, since many cryptos have addressed the incentive issue. Maybe let's just focus on bitcoin specifically?
- rodonn 6y ago
  If ROI goes down, fewer miners will mine. When all blocks are mined, transaction fees will be the main source of incentive to mine.
perl4ever 6y ago
It's been a long, long time since your computer drew the same power independent of processing load.
nullc 6y ago
> The entire Bitcoin network could technically be run off a single Rasberry Pi. Pedantically, a rpi wouldn't meet the target interblock time because of minimum difficulty. But a system using a single 2014 era 800w shoebox sized mining device could meet minimum difficulty on its own.
roenxi 6y ago
> The entire Bitcoin network could technically be run off a single Rasberry Pi. But can that be done practically? At some point you lose the ability to tell which of the forks is 'Bitcoin' and which are 'pretender' altcoins. I can imagine a future where you run a chain for 6 months on a Pi then someone turns up with an ASIC and writes a new 6 month history and calls it Bitcoin instead. The risks of shenanigans would be huge.
ramblerman 6y ago
> The entire Bitcoin network could technically be run off a single Rasberry Pi. The network hash rate is only so high because the ROI is there, but without it, people would still be mining. That's a bit of a naive view. It's like saying, we don't need this expensive security vault in our bank, we could just store it all in a shed. the proof of work is crucial to the proper functioning of bitcoin, and if the only miners were running on a raspberry pie anyone could come along and do a >50% attack stealing what they want.
jayd16 6y ago
Doesn't the hashrate need to stay high for security reasons? If miner participation is low, can't bad actors dominate the system and produce false transaction? If the hashrate ever collapses isn't the whole system at risk?
spyder 6y ago
And there are altcoins without mining.
kevingadd 6y ago
> At the end of the day your computer is no different from an expensive space heater This has been false for probably a decade or more. Pretty much any modern processor has dramatically lower power consumption when not under load through a combination of things like clock adjustment, powering off cores, and even dynamically adjusting voltage. This is part of why smartphones have battery life measured in dozens of hours instead of 1-4 hours.

dnprock 6y ago

This analysis misses altcoin mining. When mining adjusts on BTC, miners don't just turn off their rigs. They can go mine altcoins. This behavior introduces another dimension to mining economics. Miners are practical. They have to make money with their hardware and electricity. They can't afford to be ideological. In the Bitcoin mining world (SHA256), miners like to have BCH, BSV and other alternatives. Altcoins allows them to diversify. That's why these chains will never die. They always have mining support.

lukifer 6y ago
They'll die if they can't make enough returns to pay for the electricity (and I'd be happy if we helped make that a reality through a tax on carbon and/or POW mining itself).

spir 6y ago

Mining revenue is the network cost of running the Bitcoin network. What if you ran a business that spends billions per year on network cost, then somebody told you they could reduce it by 98% and make it a flat cost, forever. That's proof of stake. Ethereum launches the first phase of proof of stake this year. When Ethereum v1.5 launches in ~18 to 24 months, Ethereum's network cost will undergo such a transformation. The millions per day paid to Ethereum miners will stop being paid, forever. It's a ~98% cost reduction in perpetuity.

gjs278 6y ago
lol. people have been saying it’s 2 years away for 5 years now. don’t be surprised when ethereum is worth nothing after this. ARK tried to do this and is pennies now.
iancoleman 6y ago
> The millions per day paid to Ethereum miners will stop being paid, forever. Do you mean paid _by_ Ethereum miners? The network pays miners rewards (which will continue under proof of stake, ie the cost _to the network_). The miners pay the cost of running their mining (eg electricity and hardware costs), which is what will be reduced by proof of stake. Am I understanding this correctly?
- omarchowdhury 6y ago
  ...it's both.
lalaland1125 6y ago
Proof of stake is as equally expensive as proof of work. The trick is that both of based on burning money, proof of work burns by using CPU cycles while proof of stake burns through lost interest. http://www.truthcoin.info/blog/pow-cheapest/ http://www.truthcoin.info/blog/pow-cheapest/ gives a nice discussion of how this works.
- taywrobel 6y ago
  The problem is that the claim that nothing is as cheap as proof of work as made in that article is only applicable if you think cryptocurrencies have value in a way that is comparable to tangible goods in reality, like the electricity they burn to have proof of work. I don’t. Your “lost interest“ on a currency that has nothing beyond speculative value is literally worthless to me. The increased energy production and subsequent pollution that proof of work costs, however, has a real value and does real damage to the environment. Proof of work currencies need to be shut down, for environmental impact reasons if nothing else. You keep playing with your speculative assets all you want. I don’t subscribe to the idea but it doesn’t bother me, until you start damaging the real world with it. Then I have to insist you stop.

segfaultbuserr 6y ago

This is an interesting article, but IMHO, its discussions on Hacker News lacks depth. Almost all threads are debating about superficial Bitcoin issues that has already been talked endlessly, and none of the thread focused on the main thesis of this article: > Bitcoin mining is a complex phenomenon that connects hardware and software, the energy and financial markets. Invisible rules govern every aspect of it. The performance of an individual operation is determined by various external factors that are often hard to quantify and almost impossible to forecast. It stated that Bitcoin mining as a whole, is a complex social-economical-computational-environmental phenomenon with a huge number of moving parts and uncertainties. The most fascinating fact to me, is the direct impact of climate cycle in southern China on the mining industry, almost with a mythical tone found in some Sci-Fi novels. While Bitcoin is a highly artificial and technical construct, but its yield can be severely affected by weather, some Bitcoin miners even routinely migrate their operation according to seasonal changes like the nomadic groups of the past. The flood seasons are visible on the Bitcoin hash rate chart, and even dominates the date of trade shows and R&D schedule of new mining rigs. > May-October is the flood season in Southwest China. It is also a festival period for mining businesses as the large supply of surplus hydro capacity significantly cuts down miners’ operating expenses. For small-medium scale miners, the flood season can reduce the cost by as much as 40%. For large miners who own proprietary facilities, the flood season electricity cost is practically negligible. Over 80% of the miners in Xinjiang, Inner Mongolia will migrate in flocks to Sichuan, Yunnan, and Guizhou to take advantage of the discount, and they move back or sell their equipment after the dry season arrives in November. > Gradually, the industry structured itself around these climate patterns. Like ancient rituals, every year before the flood season arrives, major mining conferences get organized in Sichuan’s capital Chengdu. Some facilities are only open to external customers during the flood season. Manufacturers plan their new product release right before it arrives. Miners race to source the latest and greatest machines in bulk.

eddieoz 6y ago
It is a very interesting approach to the aspects which interferes directly to the mining environment. And I totally agree the discussions around this subject normally are superficial and around the market emotions. Considering climate (weather) aspects is one of the strategic decisions about how to conduct the business in this case.

SRTP 6y ago

One of the best, most in-depth and accurate Bitcoin articles to ever grace the front page of HN.

isoprophlex 6y ago

Fantastically written article, very to the point without too much flourish, and very in depth as others have noted. This bit is funny imo: But in late 2019, the National Development and Reform Commission (NDRC) removed mining from a list of activities to be eliminated. Note that the NDRC also oversees the energy industry. Massive amounts of hydropower squandered during flood season is a longstanding issue. The officials are beginning to realize that Bitcoin mining is a highly effective way of transforming excess local capacity into a global digital commodity. One point of view would be that speculation and greed of bitcoin hodl-er fanboys is subsidizing China's renewables industry...

noxer 6y ago

>"If mining operations migrate to more diverse locations in the future and become less concentrated on a single power source, this cycle will cease to play such a significant role." Why should that happen? After the initial very diverse mining, it only ever got more concentrated to places with cheap energy. The place my change but there will always be an optimum place.