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Wouldn’t the banning of additional bitcoin production limit supply and drive the price of existing bitcoin up, assuming similar demand?

ycIsGarbage 5y ago
sedeki 5y ago
The PoW algorithm's complexity factor is adjusted automatically every two weeks iirc, so the supply of new Bitcoins is steady.
enkid 5y ago
My thoughts on this: This assumes there's no pressure on the demand side. If fewer people have access to the coins, demand could go down faster than supply goes down. Additionally most people who use it don't actually know how BC works. They read BC banned and assume that's the entire architecture, not just mining, and don't want to be stuck with an illegal asset. Alternatively they see the mining bans as a first step toward making the crypto completely illegal, making them want to dump them.
q1w2 5y ago
No, because it does not alter the supply. The algorithm in the blockchain software forces a certain rate of coins minted, regardless of the number of miners. It will just make remaining miners more profitable. It will though reduce the security of the network by reducing the cumulative hashrate, but it's already incredibly secure, so I doubt that would have a big price impact.
onion2k 5y ago
"assuming similar demand" relies on people believing that they'll be able to sell their BTC at an arbitrary point in the future to realize any profit they've made - if they don't believe that then they won't buy. Banning bitcoin mining puts a huge negative pressure on people believing that will be the case. It's likely that would drag the price down more than the limited supply will push the price up.
- WorldMaker 5y ago
  Bitcoin mining is also its transaction reconciliation process, so at some point too, it affects their ability to sell BTC at all. That point won't be reached easily at all (the "difficulty" adjustment will try to keep transaction processing rates steady as miners get shut down), but truly global enough ban with no miners means no further transactions may be processed ever. Again, that's not an easy or likely outcome knowing the nature of Bitcoin's intended resilience against it, but it is a possible outcome and knowing it is a possible outcome can indeed affect price today. (Markets take such uncertainties into account.) Bitcoin can't make transactions if it doesn't have miners. Miners are not just for coin production, but for all transaction processing.

ycIsGarbage 5y ago

sedeki 5y ago

The PoW algorithm's complexity factor is adjusted automatically every two weeks iirc, so the supply of new Bitcoins is steady.

enkid 5y ago

My thoughts on this: This assumes there's no pressure on the demand side. If fewer people have access to the coins, demand could go down faster than supply goes down. Additionally most people who use it don't actually know how BC works. They read BC banned and assume that's the entire architecture, not just mining, and don't want to be stuck with an illegal asset. Alternatively they see the mining bans as a first step toward making the crypto completely illegal, making them want to dump them.

q1w2 5y ago

No, because it does not alter the supply. The algorithm in the blockchain software forces a certain rate of coins minted, regardless of the number of miners. It will just make remaining miners more profitable. It will though reduce the security of the network by reducing the cumulative hashrate, but it's already incredibly secure, so I doubt that would have a big price impact.

onion2k 5y ago

"assuming similar demand" relies on people believing that they'll be able to sell their BTC at an arbitrary point in the future to realize any profit they've made - if they don't believe that then they won't buy. Banning bitcoin mining puts a huge negative pressure on people believing that will be the case. It's likely that would drag the price down more than the limited supply will push the price up.

WorldMaker 5y ago
Bitcoin mining is also its transaction reconciliation process, so at some point too, it affects their ability to sell BTC at all. That point won't be reached easily at all (the "difficulty" adjustment will try to keep transaction processing rates steady as miners get shut down), but truly global enough ban with no miners means no further transactions may be processed ever. Again, that's not an easy or likely outcome knowing the nature of Bitcoin's intended resilience against it, but it is a possible outcome and knowing it is a possible outcome can indeed affect price today. (Markets take such uncertainties into account.) Bitcoin can't make transactions if it doesn't have miners. Miners are not just for coin production, but for all transaction processing.