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It is how the mining works from a bird's eye view. > A certain amount of bitcoin -- the amount determined by a schedule that was defined before the network bec
by michaelscott 6y ago
It is how the mining works from a bird's eye view.
> A certain amount of bitcoin -- the amount determined by a schedule that was defined before the network became operational -- is given as a mining reward every 10 minutes. The incentives of the individual miners is such that the expenses of the miners (collectively) equals the mining reward -- and the major mining expense is electricity.
The 10 minute rate is true, but the expense is not collective. I as a miner am in active competition with my fellow miners and am incentivised to find ways to decrease costs (electricity), but only mine. In fact it would be in my best interest to increase the electricity cost of a competing miner in order to force them off the network, and if I win the block it is only my personal power backing that block.
> If the mining reward is cut in half, the electricity consumption of the network is cut in half, too.
Not necessarily. If the reward is cut in half but the price of BTC has risen considerably since starting mining operations then I will remain on the network as the profit is sufficient to continue. This is why the "halving" event that Bitcoin goes through has never had a major impact on either the price of BTC or the scale of mining operations globally.
> In contrast, if the rate of transactions changes or the number of miners change, electricity consumption stays the same. (More precisely, the expenses of running the network equals the mining reward plus any transaction fees, and since the blocks are of fixed size, for more transactions to compete for space in the blocks increases transaction fees, but I am guessing that transaction fees are currently a small fraction of the mining reward.)
This is very wrong. The expense of running the network is equivalent to all the energy burned by the entire network in order to find the next block. This isn't felt by the individual miner in any way other than a potential increase in competition to find the block, but taken as a whole the network is for example now considered to be using the total energy consumption of Argentina.