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For Proof-of-Work coins, the miners need significant amounts of electricity. Electricity is not free, so maintaining the network costs a significant amount of m
by WJW 5y ago
For Proof-of-Work coins, the miners need significant amounts of electricity. Electricity is not free, so maintaining the network costs a significant amount of money. This money is "reimbursed" to them through mining rewards, but since electricity companies typically can't be paid in cryptocurrencies the miners will need to sell (a part of) their mining reward to pay the power bill. This means that there is always a money outflow proportional to the hashrate, which somehow has to be made up from money inflows from users.
A cryptocurrency without users putting in "new" money will slowly bleed out through electricity costs. This will become even more "fun" in the future as all coins will eventually be mined and the ginormous electricity bill will need to be paid through transaction fees alone. This is one of the main reasons Proof-of-Stake is getting so much research btw, since it should use way less electricity.
(The above is true for most currencies btw, even dollars and euros bleed out money because they have to pay mints and central bankers. The difference with those is that there will always be demand for (say) dollars because US citizens MUST pay their taxes in dollars. If they don't, a number of measures up to and including prison can be taken against them. Bitcoin has no such backstop since nobody ever NEEDS a bitcoin to pay off someone. Ransomware is a rare exception)
- freeone3000 5y agoIs ransomware that rare an occurrence? I could see ransomware being the taxes of web3.
- WJW 5y agoIf ransomware ever becomes big enough to rival the cumulative tax bill of a nation state, you can bet that combating it would get a lot more priority. Spec ops teams raiding office buildings in foreign nations type priority. Countries are very protective of their cash flows.