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Essentially, Bitcoin generation is tied to energy usage, which means not only do the power companies profit from Bitcoin generation, they can essentially regula
by jarin 16y ago
Essentially, Bitcoin generation is tied to energy usage, which means not only do the power companies profit from Bitcoin generation, they can essentially regulate the price of it (until BTC is mined out, anyway).
- javert 16y agoPower companies can't regulate the price of Bitcoin because they don't control the price of electricity, which is determined by the government and/or the market. Nobody ever regulates or controls the price of anything, except if they're the only supplier or the government.
- eru 16y agoYou forgot the "only buyer" case.
- javert 16y agoWell, if there's only one buyer, then it's a negotiation between the seller and the buyer. The seller has to answer the question, "Where is the cut-off point where it's no longer in the buyer's economic interest to buy from me," and charge right below that. Of course, in such a situation, new sellers will typically emerge.
- eru 16y agoYou forgot the "only buyer" case.
- weavejester 16y agoIt's not quite that simple, because you can't just exchange X bitcoins for Y watts. Let's say you want 1000 BTC. You could get this by investing several thousand dollars in a mining rig, and then waiting a year. In that time, you'll likely succeed in generating your 1000 BTC. Alternatively, you could buy bitcoins from an exchange for $3000. The current price of bitcoins is several times higher than the cost of the electricity used to generate them, because there's a significant initial cost to mining, in both capital and time.
- stcredzero 16y agoIt's not quite that simple, because you can't just exchange X bitcoins for Y watts. Well, you can, if you're also willing to pony up some cash to Amazon for some EC2 time. It's more like you can just exchange X bitcoins for Y BogoMIPS, but this also varies over time.
- weavejester 16y agoEC2 instances don't have high-end graphics cards, and the payout from CPU-mining is not usually cost effective. It would be far cheaper to buy bitcoins over an exchange than spend money mining them on a EC2 instance. There's also a limit to how many coins you can generate per day. Even if your grid of EC2 instances accounted for say, a quarter of all Bitcoin processing power, you'd still only make 15 coins an hour.
- wmf 16y agoEC2 does have GPUs: http://aws.amazon.com/about-aws/whats-new/2010/11/15/announcing-cluster-gpu-instances-for-amazon-ec2/ http://aws.amazon.com/about-aws/whats-new/2010/11/15/announc... People have calculated that you still can't make money mining Bitcoins on EC2, though.
- stcredzero 16y agoMy point was that you can do this, not that it would be profitable.
- orblivion 16y agoSo if I'm correct, this is based on the assumption that rarity creates value, correct? (which I am personally not convinced of). You spend energy to create a bitcoin, but you can't take a bitcoin and create energy. This adds value to the energy because it can create bitcoins (assuming bitcoins have any value), but it doesn't do the reverse. Or is there something about the Bitcoin economy that I missed?