15 ms·
It's a self-correcting equilibrium though, since the block difficulty is tied to the hashrate, which will fall as miners pull out. That said, the hashrate is n
by thematrixturtle 4y ago
It's a self-correcting equilibrium though, since the block difficulty is tied to the hashrate, which will fall as miners pull out.
That said, the hashrate is not showing major drops yet:
https://www.blockchain.com/charts/hash-rate https://www.blockchain.com/charts/hash-rate
- MengerSponge 4y agoIf they're either using subsidized or pirated electricity, and their hardware is paid for, why would miners pull out?
- DeathArrow 4y agoBasically you assume miners mine for free.
- RL_Quine 4y agoYou don't have to do anything dodgy to get power at an unbelievably low cost, even in north america bulk rates are a couple of cents per kilowatt hour if you know where to look, and in some cases you can even be paid to use power due to politics. You can also be mining at a loss and have it be completely rational, because it is less of a loss than turning it off and writing off the equipment. The economics are very non intuitive for people who aren't exposed to the industry.
- edmundsauto 4y agoWhat is the situation where people are being paid to sustainably consume power? Genuinely curious - seems like a ripe arb situation so I’m curious why it isn’t being taken advantage of.
- pmorici 4y agoPeople using flair gas from oil wells for example to power a generator. The alternative is just burning the gas.
- foepys 4y agoWhy would is this energy go to waste now if it was so cheap?
- latchkey 4y agoBecause large scale electricity transmission is very very expensive and depending on how remote, sometimes impossible. If you can burn the gas in a generator (which is a lot more efficient and less environmentally damaging than flare burning it) and convert that into value directly, that seems like a better outcome.
- skybrian 4y agoOne reason is if it's "stranded" energy in some remote place. Building power lines or pipelines (for natural gas) can be expensive. Maybe they're at capacity, or still under construction. As a result, the power is only going to be useful if you can move whatever consumes it to that location.
- MarkMarine 4y agoI worked for a startup that tried to do this, compressing at the wellsite to capture the flared gas. It’s an extraordinary amount of gas just flared off in a year
- majewsky 4y agoThere are other useful things to do with "stranded energy" though. In Northern Germany, they're now building hydrolysis plants to convert excess offshore wind energy into hydrogen. And if we're talking about natural gas wells, you already have a pipeline infrastructure in place, so it's not that far of a stretch to add a hydrogen pipeline to that.
- AngryData 4y agoI would assume it has to do with how long it takes certain power plants to spool down and then back up again. It might not make sense to spend hours spooling down when you know not long after demand will jump right back up again as AC units, factories, processing facilities, ect turn ramp back up.
- RL_Quine 4y agoThat's one way of getting extremely cheap rates, it's called "interruptible power" in supply terms, you might be expected by the utility to drop your entire load within a set amount of time with absolutely no warning- something a normal customer would be extremely unable to do, but miners can do in milliseconds.
- codeflo 4y agoI don’t know anything about particular political distortions in the US, though I wouldn’t be surprised if they exist, at least on a small scale. What I can tell you is that electric energy is traded on complicated spot markets that are designed to ensure that production and consumption are balanced at every point in time. Overproduction is as bad as underproduction, as the power grid can’t store excess energy. Fuses are tripped to prevent short-circuits, causing blackouts. This makes time-based arbitrage difficult. Since power demand isn’t entirely predictable, flexibility is rewarded in these markets. For example, if there’s a downward spike in demand that causes an imbalance, you can earn extra money by either having a power plant that can ramp down very quickly, or by being a consumer that can ramp up very quickly. I wouldn’t be surprised if mining rigs participated in these spot markets. In theory, they should be able to adjust their power consumption within seconds. BTW, it’s been theorized that overnight charging of electric cars could do the same thing and dynamically adjust the charging speed based on spot prices.
- dathinab 4y agoTexas isolated power grid design means they have no where to ship excess energy to (in relevant amounts, neither can they get missing energy). It's also under-provisioned but increasing supply is a problem because of excess energy. So they started making deals with miners where the miners act as a sponge for excess energy and in turn pay much less. Taking the same situation just more extreme (and likely more local) and being payed for handling excess energy doesn't seem absurd. (I intentionally didn't judge anything about the Texas gird here, it's just meant as an example.)
- praptak 4y agoStopping a turbine is costly and demand has unpredictable variations. This means sometimes it makes sense to pay consumers to burn the excess power. We have no technology to quickly store and release huge amounts of energy.
- IfOnlyYouKnew 4y ago“Due to politics” is doing a lot of work in that statement.
- DonHopkins 4y ago
- roenxi 4y ago>The economics are very non intuitive for people who aren't exposed to the industry. In the short term, sure. There'll probably be fireworks for the next month or two. But thread ancestor might well be talking medium-long term where the economics are really simple - the amount of resources the miners put in to hashing will drop until they are making a profit again. The miners will be profitable again inside 12 months. Even if all that means in practice is that "miners" is some kid in a basement in Khazakstan with an old Pentium.
- bfung 4y agoThat’s if, in 12 months, people forget about this crash and has faith that btc/crypto is worth something. Once bitten, twice shy? We’ll see.
- kayamon 4y agoNo coins are ever 'worth' anything really. They're just coins. It's a question of who mints them, whether bad actors get to help themselves as the coins come fresh off the presses, and whether the economy that trades them will keep allowing fair future trade or not.
- praptak 4y agoA dude I know has cheap electricity on his allotment garden where he built a wooden hut/cabin. He uses three PCs built from throwaway parts to heat the hut in the autumn and early spring (in winter there's nothing to do there). On the PCs he runs an app that basically manages the mining for you, automatically switching between cryptos to get the most microcents per watt per second. I have no idea why the allotment gardens got the cheap deal on electricity and I don't know if the mining gives him a significant "discount" on the heating.
- latchkey 4y agoThat auto switching software is a joke. It doesn't actually get any more profit and likely costs money.
- tarsinge 4y agoI had a setup like this back in 2013 and it worked very well, mining profitability changed everyday between altcoins.
- latchkey 4y agoYou have to assume that the cost of switching is less than the difference in profitability. Computing that is nearly impossible. It is a case of not knowing what you're losing, but feeling like you got a good deal at the same time. At least for GPUs, the cost of switching workloads on the fly, is actually quite high.
- cypress66 4y agoYou got downvoted by people that know nothing about mining it seems. And yes the auto switching which in this case is almost certainly nice hash is a joke. For years the only thing you would mine on a gpu has been ethereum. Nicehash takes an absurd fee and their software might as well be return "Ethereum".
- latchkey 4y ago
- ahtihn 4y ago> You can also be mining at a loss and have it be completely rational, because it is less of a loss than turning it off and writing off the equipment. It depends what you mean by mining at a loss. It's never rational to mine when the cost of power is higher than the expected return. Turn off your equipment and go buy bitcoin directly.
- roenxi 4y ago> It's never rational to... Amusing fact: if we go look up dollar auctions [0] the process described sounds superficially like Proof of Work mining. [0] https://en.wikipedia.org/wiki/Dollar_auction https://en.wikipedia.org/wiki/Dollar_auction
- bialpio 4y agoHalf-serious counterpoint: if you use electric space heaters, might as well mine bitcoin to heat up the house. In that case it's still rational to mine because you'd use that energy anyway.
- miniwark 4y ago1/4 serious reply: except than you can probably heat the house the same with less energy, or put you money in thermal insolation. All in all agree than BTC will adjust is difficulty with long term economics, and so, it will not be quick, short-term actors will lose money.
- fragmede 4y agoWhen people are renting and don't own their own home, the incentive to actually improve the property isn't there, so an extra expensive space heater that can be moved to the next place has more value than improved insulation.
- rag-hav 4y ago> you can probably heat the house the same with less energy No, a 1000 watt heater is just as efficient as a 1000 watt computer in heating.
- sumy23 4y agoThey could still sell their hardware to recoup some costs. And I doubt most miners are using free electricity.
- Gigachad 4y agoBitcoin miners used specialised mining hardware that isn’t useful for anything but mining bitcoin. And best of all, it becomes completely obsolete at around 6 months when better specialised hardware comes out. So the only thing the miners can do is stop and throw their hardware in the dump.
- sprkwd 4y agoThey use graphics cards.
- Gigachad 4y agoBitcoin mining hasn’t been done on gpus in a decade.
- bradknowles 4y agoIt has, in fact it's being done right this minute on GPUs. But not on GPUs in bulk for a decade, that is likely a true statement.
- Gigachad 4y agoI don’t doubt there is at least 1 GPU mining bitcoin. But it would be a less than pointless effort since the power would cost more than the bitcoins being mined by a long shot.
- bradknowles 4y agoStill a useful learning experience, and if the GPU is free and the power is free, then the low return rate would still make sense. I imagine there are more than a few dorms where this kind of thing is going on.
- deleted 4y ago[deleted]
- Jasper_ 4y agoThey haven't been making money for a year or two now -- they can't sell their coins without crashing the market, so they're getting loans with their coins and mining equipment as collateral [0] [1] [2]. Those loans are failing now. [0] https://www.coindesk.com/business/2022/04/26/bitcoin-miner-cleanspark-raises-35m-in-equipment-backed-debt-from-trinity-capital/ https://www.coindesk.com/business/2022/04/26/bitcoin-miner-c... [1] https://www.coindesk.com/business/2021/12/31/miner-bitfarms-raises-100m-bitcoin-backed-loan-with-galaxy-digital/ https://www.coindesk.com/business/2021/12/31/miner-bitfarms-... [2] https://www.coindesk.com/business/2022/04/28/battered-bitcoin-miners-increasingly-turn-to-debt-financing/ https://www.coindesk.com/business/2022/04/28/battered-bitcoi...
- tromp 4y ago> they can't sell their coins without crashing the market They should be able to, with the yearly supply of mined coins at just over 1% of the circulating supply.
- larma 4y agoMost of so called circulating supply is not circulating. 25% are in addresses that have been dormant for more than 5 years. Several percent are locked in "DeFi" or long term contracts. When Bitcoiners say "circulating supply" they really just means "all coins ever mined" and you shouldn't actually use that number for any practical purpose (doesn't stop people from using it for calculating the "market cap")
- lottin 4y agoNon sequitur. The ability to sell without crashing the price depends on whether there is sufficient demand.
- Jasper_ 4y agoIndeed. Remember the first rule of finance: in order for someone to sell an asset at a price, someone else must want to buy that asset at that same price. If you're selling 15,000 BTC, maybe only 200 people want to buy them for $22,000, and 10,000 people want to buy them for $20,000. And the remaining only want to spend $19,000. The market depth (the number of people willing to buy/sell for a given price) on crypto tends to be surprisingly shallow. Selling off large amounts will push the price down, simply because you're going to run out of people buying for the high price. Then people realize you're dumping coins, and then realize since you need to get rid of them, they can buy for cheaper since you need to unload them, so why spend more? And also the psychological aspects of dumping coins (why are miners dumping unless they thought they would go down).
- deleted 4y ago[deleted]
- jiggawatts 4y agoIt self-corrects slowly. The protocol adjusts the hash rate every 2160 blocks, or about once every two weeks, and the maximum negative slew rate is -75%. If sufficient miners pull out of the network within a fortnight or two, it's conceivable that Bitcoin will enter into a death spiral. It goes something like this: 1. Miners realise that their operations are unprofitable, and do some mix of raising tx costs and/or turning off their kit. 2. The tx rate drops, so instead of one hash found per 10 minutes, it might be one every 20-30 minutes or even slower. The competition to get into these blocks heats up, further pushing up tx costs. 3. Bitcoin is no longer usable for small transactions, because the tx cost makes it a total loss. Small-to-medium users panic, as they realise that Bitcoin is not only plummeting, but that they can't get their money out without spending a significant fraction of it. 4. There's a rush to withdraw lump sums, creating a "run on the bank". This nearly instantly skyrockets tx costs. 5. Bitcoin value keeps plummeting, because nobody in their right mind would put USD into the system, and everyone wants to get out. Miners won't shut down their equipment at this point, because with high tx costs they're still profitable or nearly so. But they're paid in Bitcoin, so the real value of those tx fees is plummeting also. If the above happens fast enough and with the right timing, with the most precipitous downturn happening right before a difficulty epoch, then the difficulty might not adjust enough downwards at the right time. Then there's a chance that Bitcoin will go to 0 in the subsequent 14 days as miners walk away from their operations and users loose all faith that there's any value left in their coins.. and even if they do believe in that value, there's nothing they can do with their coins because hashes are found only every few hours and it costs the price of a new car to get into those blocks. "It'll just adjust", you say. Sure... -75% after that fortnight[1], and if that's not enough, it'll be nearly a full month of an absolute crypto bloodbath. How long did it take Terra/Luna to crater? Days? Caveat: Having said that, I suspect there's enough momentum in the system because of all the HODL-ers and self-interest in the miners. The miners have much of their earnings tied up in Bitcoin. If they let the system crash, they lose their profits. But there is a point where they'll realise they're throwing good (fiat) money after bad (crypto) and literally pull the plug and turn off the kit. [1] Or longer! Remember, it's every 2160 blocks. If too many miners give up mining all at once, this could be over a month.. or longer.
- latchkey 4y ago
- More-nitors 4y ago"self-correcting equilibrium" sounds like the whole thing is doing OK... but after Luna-fiasco and self-proclaimed "stable" coins being unstable, how does anyone keep trust in crypto-coins?
- kybernetyk 4y agoI still trust in crypto coins. In those that I hold in a wallet only I have the private keys to. Don't really care about all that fancy defi/nft/whatever stuff. Let idiots burn their money. But I still have trust in the concept of crypto currency.
- glitchcrab 4y agoYour currency is worthless if nobody else trusts it.
- desmond373 4y agoWell it's a good thing one other person still trusts it.
- bragr 4y agoThat is kind of apples and oranges. In the case of Bitcoin, the algorithm is only trying to maintain a consistent block creation rate of 1 per 10 minutes, not attempt to compensate for the price. If the price drops faster than the hash rate because all the minors are playing chicken with each other, well that will be interesting to watch.
- tinco 4y agoDai hasn't moved an inch, what you're seeing is the collapse of investment vehicles that were stable in name only.
- yieldcrv 4y agoBy being able to look at how each individual one is designed and its mechanics, which allowed us to avoid Luna the entire time as well.
- bragr 4y agoIf you look at the raw data and not the 7 day average, there's been a precipitous drop (20% or more) just recently, assuming the graph is accurate.
- jedberg 4y ago> It's a self-correcting equilibrium though There's nothing that says equilibrium has to be reached above zero though...
- JasonBorne 4y agoExactly. This article is kind of a joke/click-bait to anyone who knows how bitcoin works.
- kristianc 4y agoAh, a self correcting crypto algorithm. Now where have I heard that before…
- eterm 4y agoIt corrects every N blocks (1180?), iirc around once a week. But, and correct me if I'm wrong, there is't much damping in the correction. This means that if 50% of miners pull out, then it'll be longer before the correction. The correction will then "over-correct" in a sense and the difficulty will be easier, and then there'll be a short half-week if that causes all the dormant miners to come back online. If miners are serious about turning off miners when the difficulty is high we could see a ping-pong effect where we end up with "easy weeks" lasting 2-3 days when the difficulty makes it super profitable and then hard-weeks lasting 2-3 weeks where the difficulty makes it unprofitable. That will get worse and worse as people are less inclined to mine the hard weeks. That said, that assumes that the depreciation of miners and overhead of switching based on difficulty makes it worth turning them off rather than just running them full time anyway because there's a time window before they're out-scaled. ( Is mining tech still getting out-scaled or has it plateau'd per device now? Originally when I supposed this theory, mining devices only had a 3-6month window before more efficient devices would replace them) .
- nonrandomstring 4y ago> The correction will then "over-correct" What matters is whether the system is convergent. The best thing that could happen (for POW digital currencies in general) is that it stabilises, around the current value long term. Then we know an upper bound on the energy cost and speculation will evaporate leaving BTC as a utility. The worst thing that can happen is it stays oscillatory with increasing amplitude as various interests try to push it one way then the other. After that most systems go chronically and irreversibly chaotic, and that will be the end of that experiment.
- eterm 4y agoI don't think you need any nefarious interests to push it into instability, just the basic economic assumption of greed suggests that people would only want to mine the "easy weeks" and not mine the "hard weeks". Note that bitcoin mining is independent of anyone else mining. At difficulty X you are expected the same number of blocks regardless of how many others are mining, so others' dropping out doesn't increase your bitcoin income per hour. To me that's the fundamental missing part that could deliver stability. As others drop out, you aren't incentivised by the economy to mine. You might think you're getting a bigger share of the pie, but you're still getting the same number of blocks per hour no matter how many or few others are mining. There are two main factors for why this scenario can be avoided: 1. The difficulty can't go beyond what the Potential Total Hashrate can bring to the table. In other words, even if the difficulty were to suddenly drop to 2010 levels and the block-week solved essentially instantly, the new difficulty after that block-week has been mined would still be what that hash-rate is capable of. 2. There are limits to how much the difficulty can drop, so it can't actually fully drop that far in one go. To get to full "easy week / hard week" pattern would be a slow oscilation that could be corrected with new algorithms including a bit of damping / smoothing via a soft fork. But it's still an interesting scenario for a real "death" of bitcoin and how it could play out.
- stkdump 4y agoThe question is if miners pull out at all. In theory there are two important price points: the one where building up a new facility with initial investments is profitable and another price point where keeping an existing facility running is profitable.
- thematrixturtle 4y agoWe're long past the first point already, it's the second tipping point we're expecting now.
- Salgat 4y agoThat's the entire point though, miners are quitting mining.