3 ms·

Yeah I just want to think through the claims of the maximalists. For example I often hear them say “it’s digital gold, so it has 10x to grow”. That would be $8

by graeme 6y ago

Yeah I just want to think through the claims of the maximalists. For example I often hear them say “it’s digital gold, so it has 10x to grow”. That would be $85 billion for mining, whereas gold mining annually is about $1.3 billion. ~$1000 per ounce mining cost * 130 million ounces mined. Of course it’s not an exact comparison as you prob ought to add in storage costs for gold but then maybe you’d need to add crypto online wallets and it gets messy. Mining to mining is clear and simple. It is a drop in the bucket globally, but it also means you need that much capital flowing in to maintain the market price. Just to maintain. So you would want the network to be producing that much value at least.

csomar 6y ago
Think about it this way: There is 7bn people on the planet. $170bn works out an average of $24/person. Or $2/month. Even poor people in poor countries can afford that. It might actually be cheaper for them, many poor countries (think Africa, Argentina, Brazil, etc...) are going through hyperinflation that it is safer and less volatile to hold Bitcoin.
- graeme 6y ago
  That calculus doesn’t work as a store of value. For the substantial minority of people earnings ~$2 per day, $24 per year is a sizeable fraction of wealth. As far as currency goes, it bitcoin transactions rise, does that have no impact on price? I realized my price thinking makes no mention of them and I don’t know how they affect things.
  - csomar 6y ago
    $24 is not a sizeable fraction of wealth by any measure. And here we are talking averages. The average per capita GDP is $18k. $24 is a very small number to that.
    - graeme 6y ago
      The median wealth per adult in africa is $1600. And the cost per adult would be over $24. At least a quarter of people in africa are under 18 I think, though I couldn’t find great stats. So the correct number would be more like $32. 2% of wealth per year.
andruby 6y ago
Just wanted to point out that 130M * $1000 = $130B, not 1.3B
- graeme 6y ago
  Whoops. That’s a radical difference. Thanks for catching that.
beaner 6y ago
> you need that much capital flowing in to maintain the market price There's something off about the argument that you're making and I think it's that you have cause and effect backwards. You keep phrasing this as if mining moves first before price, and investments in hardware are necessary to sustain high prices. But the reality is that high prices come first and incentivize investment. That investment is not required for Bitcoin to continue to operate, it's just an expected effect for a given cause.
- graeme 6y ago
  Hmm. I’m not 100% sure I follow so I’ll restate and see if we can go from there. I’m saying: 1. The market price is set by people deciding to buy bitcoin, and 2. Bitcoin miners will invest in equipment and energy up to whatever the market price is 3. Thus, at a market price of X, at current mining rates, the miners will have costs roughly equal to 6.5 * 6 * 24 * X per day, or C 4. So to maintain a given market price, $C must enter the market at any given time, to covet the costs of the miners. 5. If less than the miners costs enters the market in money, the price will drop and miners will exit the market until their new cost structure is in equilibrium with the new price. In other words, as new coin at a given break even point enters the market, that dictates how much new capital must enter the market to keep prices steady. If more capital than that enters prices rise, if less then they fall. This is so because unusually in the bitcoin network marginal cost equals average cost as the network adjusts difficulty based on miner effort. So I think this makes things kind of backwards and breaks our intuitions.
  - beaner 6y ago
    #4 and 5 are false

by graeme 6y ago

csomar 6y ago

Think about it this way: There is 7bn people on the planet. $170bn works out an average of $24/person. Or $2/month. Even poor people in poor countries can afford that. It might actually be cheaper for them, many poor countries (think Africa, Argentina, Brazil, etc...) are going through hyperinflation that it is safer and less volatile to hold Bitcoin.

graeme 6y ago
That calculus doesn’t work as a store of value. For the substantial minority of people earnings ~$2 per day, $24 per year is a sizeable fraction of wealth. As far as currency goes, it bitcoin transactions rise, does that have no impact on price? I realized my price thinking makes no mention of them and I don’t know how they affect things.
- csomar 6y ago
  $24 is not a sizeable fraction of wealth by any measure. And here we are talking averages. The average per capita GDP is $18k. $24 is a very small number to that.
  - graeme 6y ago
    The median wealth per adult in africa is $1600. And the cost per adult would be over $24. At least a quarter of people in africa are under 18 I think, though I couldn’t find great stats. So the correct number would be more like $32. 2% of wealth per year.

andruby 6y ago

Just wanted to point out that 130M * $1000 = $130B, not 1.3B

graeme 6y ago
Whoops. That’s a radical difference. Thanks for catching that.

beaner 6y ago

> you need that much capital flowing in to maintain the market price There's something off about the argument that you're making and I think it's that you have cause and effect backwards. You keep phrasing this as if mining moves first before price, and investments in hardware are necessary to sustain high prices. But the reality is that high prices come first and incentivize investment. That investment is not required for Bitcoin to continue to operate, it's just an expected effect for a given cause.

graeme 6y ago
Hmm. I’m not 100% sure I follow so I’ll restate and see if we can go from there. I’m saying: 1. The market price is set by people deciding to buy bitcoin, and 2. Bitcoin miners will invest in equipment and energy up to whatever the market price is 3. Thus, at a market price of X, at current mining rates, the miners will have costs roughly equal to 6.5 * 6 * 24 * X per day, or C 4. So to maintain a given market price, $C must enter the market at any given time, to covet the costs of the miners. 5. If less than the miners costs enters the market in money, the price will drop and miners will exit the market until their new cost structure is in equilibrium with the new price. In other words, as new coin at a given break even point enters the market, that dictates how much new capital must enter the market to keep prices steady. If more capital than that enters prices rise, if less then they fall. This is so because unusually in the bitcoin network marginal cost equals average cost as the network adjusts difficulty based on miner effort. So I think this makes things kind of backwards and breaks our intuitions.
- beaner 6y ago
  #4 and 5 are false