6 ms·

What's interesting, is that this is what should happen. Since Bitcoins are generated at a constant rate (from my understanding) regardless of how many people ar

by tibbon 15y ago

What's interesting, is that this is what should happen. Since Bitcoins are generated at a constant rate (from my understanding) regardless of how many people are working on them, the market should eventually even out so that its a break-even at best. Likely it will be a little worse than break-even, because there are always some people out there willing to attempt to generate coins even if what they are doing doesn't financially make sense, breaking the market. Just because you've got a competitor in business, doesn't mean that they are profitable or running good business. Trying to meet them can easily run you into the ground. It just happens in bitcoin-world, everyone has the same 'product'.

sp332 15y ago
In fact, it's worse than that, because the global rate of BTC production goes down over time. After 2025, hardly any new bitcoins will be generated. https://secure.wikimedia.org/wikipedia/en/wiki/Bitcoin#Monetary_differences https://secure.wikimedia.org/wikipedia/en/wiki/Bitcoin#Monet...
- nextparadigms 15y ago
  That's the whole point. As the amount of Bitcoins gets closer to the maxim, it will become harder and harder to mine them. But ideally, this should be overcome by Bitcoin's increasing popularity and value. This isn't happening right now, and it appears to have stagnated, but that's not a problem for Bitcoin's future, because the continous mining of Bitcoin is not necessary to ensure its success. This simply means that there has to be a bigger real economy behind Bitcoin's value, and once that economy is strong enough and catches up with Bitcoin's inflated value, the value should start rising again, and miners will appear again as it becomes profitable to mine them.
  - Swannie 15y ago
    Isn't the expectation that the miners will compete to confirm transactions, and there is an expectation they will work for small transaction fees?
  - mikey_p 15y ago
    It doesn't matter how many people are mining, coins are generated at a fixed rate. The difficulty to mine coins is varied automatically to assure this. It's this difficulty that affects miners when more folks start mining. In effect they are taking the known portion of the pie (coins to be mined in a given time frame) and slicing it into many more pieces. This means that you have to work for a much longer time to have a nice large piece of pie with plenty of room for ice cream and whipped cream on top.
  - tzs 15y ago
    Except if Bitcoin becomes popular, other similar digital currencies will arise. Bitcoin will be no more speicial than nickels are in the non-digital currency realm. It will be just another kind of digital coin in your digital pocket.
- weavejester 15y ago
  Beyond a certain point the majority of the mining reward will come from transaction fees.
tomp 15y ago
If I remember correctly, they are being generated at an (decreasing) exponential rate, i.e. first n years 7 million, next n years 3.5 million, etc...
gravitronic 15y ago
Bitcoins are not generated at a constant rate. The difficulty of generating bitcoins increases exponentially over time, so the number of bitcoins generated by the pool (assuming the pool remains the same size) will decrease accordingly. However the pool didn't remain the same in the past. All the BTC press (and $10 USD rate) substantially increased the number of people mining. This sped up the discovery of bitcoins but it also gave each miner a smaller cut. At this point the only way to mine a non-trivial amount of BTC is to invest $ in a GPU-heavy mining rig.
- DarkShikari 15y ago
  The difficulty of generating bitcoins increases exponentially over time No, it changes in proportion to the number of blocks generated in the past week or two. This could even result in a decrease if the number of miners decrease.
  - gravitronic 15y ago
    .. really? Interesting! Thank you for the correction, I've been reading enough about BTC while considering mining and this is the first time I've heard this.
    - DarkShikari 15y ago
      https://en.bitcoin.it/wiki/Difficulty https://en.bitcoin.it/wiki/Difficulty The difficulty is adjusted every 2016 blocks based on the time it took to find the previous 2016 blocks. At the desired rate of one block each 10 minutes, 2016 blocks would take exactly two weeks to find. If the previous 2016 blocks took more than two weeks to find, the difficulty is reduced. If they took less than two weeks, the difficulty is increased. The change in difficulty is in proportion to the amount of time over or under two weeks the previous 2016 blocks took to find.
- tghw 15y ago
  The goal of changing the difficulty is to maintain a constant rate. As the computational power dedicated to mining Bitcoins increases, the difficulty increases proportionately, to keep the overall rate of Bitcoin discovery more or less constant. If tomorrow, everyone agreed with this guy and quit mining, the next difficulty adjustment would make it easier to mine Bitcoins, to keep the constant rate with a smaller pool.
jonnathanson 15y ago
Likely it will be a little worse than break-even, because there are always some people out there willing to attempt to generate coins even if what they are doing doesn't financially make sense, breaking the market. I'd guess that the percentage of miners and speculators in the BTC market who are economically irrational in their activities is a lot higher than most of us think it is. Ergo, I don't place too much faith in any models, theories, or projections about this market that lean heavily on assumptions of rational actors. Following from this logic, I can't justify taking a significant position in this market. The risk is enormous, and as risk goes, it's not incredibly attractive compared to alternative investment vehicles or strategies.
- teadrinker 15y ago
  Not to mention the lack of proper regulation. Particularly at the exchanges: http://nerdr.com/bitcoin-exchange-scam-bitcoins-are-worthless/ http://nerdr.com/bitcoin-exchange-scam-bitcoins-are-worthles... I was days away from entering the Bitcoin marketplace until I read that. Now I realize it's speculation propping up an artificial market price. Saying that, I would be open to hearing opinions on estimates of the true value of a Bitcoin, based on it's use cases and value proposition if anyone has any...
  - ScottBurson 15y ago
    I would be open to hearing opinions on estimates of the true value of a Bitcoin Forget it. Nobody knows. It's a function of how big the Bitcoin economy gets, and how many Bitcoins people decide to keep in their wallets. (It's convenient to keep some amount, to save the hassle of doing conversions all the time, but the volatility of the currency may well dissuade most people from keeping large amounts.)
  - URSpider94 15y ago
    The "true value" of a Bitcoin is zero -- it's just some bits on a computer. In the same way, the "true value" of paper currency is very close to zero -- I guess you could use it for note-taking. The market value of Bitcoin will depend on the demand to own Bitcoin, as opposed to any competing commodity or currency.
fr0sty 15y ago
> Likely it will be a little worse than break-even Only if you are marking against the current market price for bitcoins, which is not necessarily the best way to look at this. 1. Conversion Costs: Converting USD->BTC is currently very cumbersome so it may be worthwhile to go USD->Mining-Rig->BTC instead if only to avoid the hassle (as well as securing a low-cost source of BTC going forward after the Rig has paid for itself. 2. Market impact: Buying BTC on the open market will put short-term upward pressure on the price which is bad if you are trying to accumulate a position (especially in the aggregate). Mining them nets you an increasing BTC position without this impact. 3. Pricing against expected value: Many miners likely believe that the current market price is artificially low and are not 'marking' their mining efforts against this. Unless the miners are simply churning their BTC into other currency at the spot price this is entirely reasonable[1]. If/When the exchange rate goes up to the effective price the mined bitcoins will be 'worth it'. [1] This only really holds if you don't have an alternative way to convert USD->BTC (see #1) or don't have any USD to convert. If you did you would buy the cheap BTC with cash instead of paying to mine.

by tibbon 15y ago

sp332 15y ago

In fact, it's worse than that, because the global rate of BTC production goes down over time. After 2025, hardly any new bitcoins will be generated. https://secure.wikimedia.org/wikipedia/en/wiki/Bitcoin#Monetary_differences https://secure.wikimedia.org/wikipedia/en/wiki/Bitcoin#Monet...

nextparadigms 15y ago
That's the whole point. As the amount of Bitcoins gets closer to the maxim, it will become harder and harder to mine them. But ideally, this should be overcome by Bitcoin's increasing popularity and value. This isn't happening right now, and it appears to have stagnated, but that's not a problem for Bitcoin's future, because the continous mining of Bitcoin is not necessary to ensure its success. This simply means that there has to be a bigger real economy behind Bitcoin's value, and once that economy is strong enough and catches up with Bitcoin's inflated value, the value should start rising again, and miners will appear again as it becomes profitable to mine them.
- Swannie 15y ago
  Isn't the expectation that the miners will compete to confirm transactions, and there is an expectation they will work for small transaction fees?
- mikey_p 15y ago
  It doesn't matter how many people are mining, coins are generated at a fixed rate. The difficulty to mine coins is varied automatically to assure this. It's this difficulty that affects miners when more folks start mining. In effect they are taking the known portion of the pie (coins to be mined in a given time frame) and slicing it into many more pieces. This means that you have to work for a much longer time to have a nice large piece of pie with plenty of room for ice cream and whipped cream on top.
- tzs 15y ago
  Except if Bitcoin becomes popular, other similar digital currencies will arise. Bitcoin will be no more speicial than nickels are in the non-digital currency realm. It will be just another kind of digital coin in your digital pocket.
weavejester 15y ago
Beyond a certain point the majority of the mining reward will come from transaction fees.

tomp 15y ago

If I remember correctly, they are being generated at an (decreasing) exponential rate, i.e. first n years 7 million, next n years 3.5 million, etc...

gravitronic 15y ago

Bitcoins are not generated at a constant rate. The difficulty of generating bitcoins increases exponentially over time, so the number of bitcoins generated by the pool (assuming the pool remains the same size) will decrease accordingly. However the pool didn't remain the same in the past. All the BTC press (and $10 USD rate) substantially increased the number of people mining. This sped up the discovery of bitcoins but it also gave each miner a smaller cut. At this point the only way to mine a non-trivial amount of BTC is to invest $ in a GPU-heavy mining rig.

DarkShikari 15y ago
The difficulty of generating bitcoins increases exponentially over time No, it changes in proportion to the number of blocks generated in the past week or two. This could even result in a decrease if the number of miners decrease.
- gravitronic 15y ago
  .. really? Interesting! Thank you for the correction, I've been reading enough about BTC while considering mining and this is the first time I've heard this.
  - DarkShikari 15y ago
    https://en.bitcoin.it/wiki/Difficulty https://en.bitcoin.it/wiki/Difficulty The difficulty is adjusted every 2016 blocks based on the time it took to find the previous 2016 blocks. At the desired rate of one block each 10 minutes, 2016 blocks would take exactly two weeks to find. If the previous 2016 blocks took more than two weeks to find, the difficulty is reduced. If they took less than two weeks, the difficulty is increased. The change in difficulty is in proportion to the amount of time over or under two weeks the previous 2016 blocks took to find.
tghw 15y ago
The goal of changing the difficulty is to maintain a constant rate. As the computational power dedicated to mining Bitcoins increases, the difficulty increases proportionately, to keep the overall rate of Bitcoin discovery more or less constant. If tomorrow, everyone agreed with this guy and quit mining, the next difficulty adjustment would make it easier to mine Bitcoins, to keep the constant rate with a smaller pool.

jonnathanson 15y ago

Likely it will be a little worse than break-even, because there are always some people out there willing to attempt to generate coins even if what they are doing doesn't financially make sense, breaking the market. I'd guess that the percentage of miners and speculators in the BTC market who are economically irrational in their activities is a lot higher than most of us think it is. Ergo, I don't place too much faith in any models, theories, or projections about this market that lean heavily on assumptions of rational actors. Following from this logic, I can't justify taking a significant position in this market. The risk is enormous, and as risk goes, it's not incredibly attractive compared to alternative investment vehicles or strategies.

teadrinker 15y ago
Not to mention the lack of proper regulation. Particularly at the exchanges: http://nerdr.com/bitcoin-exchange-scam-bitcoins-are-worthless/ http://nerdr.com/bitcoin-exchange-scam-bitcoins-are-worthles... I was days away from entering the Bitcoin marketplace until I read that. Now I realize it's speculation propping up an artificial market price. Saying that, I would be open to hearing opinions on estimates of the true value of a Bitcoin, based on it's use cases and value proposition if anyone has any...
- ScottBurson 15y ago
  I would be open to hearing opinions on estimates of the true value of a Bitcoin Forget it. Nobody knows. It's a function of how big the Bitcoin economy gets, and how many Bitcoins people decide to keep in their wallets. (It's convenient to keep some amount, to save the hassle of doing conversions all the time, but the volatility of the currency may well dissuade most people from keeping large amounts.)
- URSpider94 15y ago
  The "true value" of a Bitcoin is zero -- it's just some bits on a computer. In the same way, the "true value" of paper currency is very close to zero -- I guess you could use it for note-taking. The market value of Bitcoin will depend on the demand to own Bitcoin, as opposed to any competing commodity or currency.

fr0sty 15y ago

> Likely it will be a little worse than break-even Only if you are marking against the current market price for bitcoins, which is not necessarily the best way to look at this. 1. Conversion Costs: Converting USD->BTC is currently very cumbersome so it may be worthwhile to go USD->Mining-Rig->BTC instead if only to avoid the hassle (as well as securing a low-cost source of BTC going forward after the Rig has paid for itself. 2. Market impact: Buying BTC on the open market will put short-term upward pressure on the price which is bad if you are trying to accumulate a position (especially in the aggregate). Mining them nets you an increasing BTC position without this impact. 3. Pricing against expected value: Many miners likely believe that the current market price is artificially low and are not 'marking' their mining efforts against this. Unless the miners are simply churning their BTC into other currency at the spot price this is entirely reasonable[1]. If/When the exchange rate goes up to the effective price the mined bitcoins will be 'worth it'. [1] This only really holds if you don't have an alternative way to convert USD->BTC (see #1) or don't have any USD to convert. If you did you would buy the cheap BTC with cash instead of paying to mine.