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No no bitcoin mining and gold mining don’t have the same economics. Gold mining average costs are determined by the actual physical costs of mining. Marginal co
by graeme 6y ago
No no bitcoin mining and gold mining don’t have the same economics. Gold mining average costs are determined by the actual physical costs of mining. Marginal costs will rise in marginal mines if the gold price goes up. But that won’t affect average gold mining costs in existing mines.
But in bitcoin average costs have to work out to marginal costs. When more mining power enters mining gets harder to compensate and mining costs rise.
- pilord8 6y agoThat makes a lot of sense. On the other hand, that also suggests that if the price of bitcoin were to rise rapidly, mining costs would take some time to catch up, no? The connection between mining costs and price is an economic one (that can be in temporary disequilibrium), right?
- graeme 6y agoDepends how rapidly. You can buy the hardware as a commodity, and connect to the power grid. Existing miners prob have expansion plans too they can accelerate. So the market may move pretty fast. Though I read an analysis that there were surplus profits in the 2017 bubble.