4 ms·

It 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 5

by eterm 4y ago

It 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 ago
  I 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.
  - jcbrand 4y ago
    Note that bitcoin mining is independent of anyone else mining. I don't think this is correct, because not everyone has the same hashing power. Yes the amount of blocks you would statistically generate per hour is dependent on your hash rate and the current difficulty. However, other miners with higher hash power will mine blocks quicker than you, and therefore take the rewards for those blocks ahead of you. The amount of rewards you get is dependent on your share of the total hashing power, which includes other miners, and not just your own hashing power relative to the difficulty level. An artificially low difficulty level simply means that blocks are mined more quickly, so yes in a way miners are making more money per unit of time, but the rewards are distributed according to your percentage of the total hashing power. This is even more explicit in mining pools, where you might never mine a block, but still get rewards simply by virtue of providing hashing power to the pool itself.
    - jstanley 4y ago
      This isn't right. Your parent comment was right. Mining a block is just brute-forcing until you find a SHA hash that is small enough. Your chances of successfully finding a small-enough hash are completely independent of everyone else. It's not some sort of race to find a block, and as soon as someone finds a block everyone has to start again. (Other than that they can't reuse the same transactions, and need to update the parent block pointer). If I give you £100 every time you find a random number that satisfies some property, the amount of £100s you get is independent of how many other people are making money with the same scheme. The only reason competition matters at all is because of the difficulty adjustment.
      - jcbrand 4y ago
        Mining a block is just brute-forcing until you find a SHA hash that is small enough. Or until someone else mines a block, in which case you have to start again from scratch. It's not some sort of race to find a block, and as soon as someone finds a block everyone has to start again. If miner A and miner B are both mining, and miner A mines a block, then miner B has to start from scratch with a new block because in all likelihood miner B was including transactions in his un-mined block that are now already mined by miner A. So yes, as soon as someone finds a block, everyone has to start again and that's why mining is in fact a race to find a block. If I give you £100 every time you find a random number that satisfies some property, the amount of £100s you get is independent of how many other people are making money with the same scheme. This is not how Bitcoin mining works. The "random number that satisfies some property" is dependent on the transactions included in your block, and if other miners include those transactions that are mined in blocks before yours, then you have to start from scratch.
- deleted 4y ago
  [deleted]
- cyanydeez 4y ago
  The best thing to happen is that it'll go to 0 and all this energy gets put into. Project with real benefit.
robocat 4y ago
> assumes that the depreciation of miners [snip] makes it worth turning them off Mining rig costs are usually sunk costs: turning off never saves depreciation (which is just an accounting entry). Unless the miner can do something else with the mining rig (repurposed, sold, withhold purchasing new rigs), then t variable costs dominate their decision. A miner should keep mining if marginal revenue (expected from minting new blocks and receiving block tx fees) exceeds marginal costs (mostly electricity if miner doesn’t get free electricity). https://www.investopedia.com/ask/answers/041315/how-marginal-revenue-related-marginal-cost-production.asp https://www.investopedia.com/ask/answers/041315/how-marginal... Not to say that the system is not unstable (which is an interesting idea). Maybe a control engineer could inform us of the parameters for instability. Disclaimer: crypto novice.
- eterm 4y ago
  I think I worded it badly, I meant that if depreciation is high then you wouldn't want to turn it off because you'd want to mine as much as possible while it was still worth something. So I meant the depreciation would need to be low enough to make turning them off a worthwhile strategy. Edit: I see what you mean about sunk costs, I had worded it badly but you were still arguing against my intended meaning.
  - robocat 4y ago
    I don’t think I misunderstood. How fast equipment is “depreciating” is entirely irrelevant, unless you are using the term in a manner I am misunderstanding. Understanding marginal economics is difficult because it is counter-intuitive. I am currently on a personal binge trying to help understand the economic theory because it helps me challenge whether I have understood and whether I can pass that understanding on to others. Unfortunately marginal economics is poorly explained - the link I referenced was the only one of five I quickly skimmed that seemed to be free of gross errors and had no misleading content. Edit: latchkey seems pretty froody and made a couple of relevant comments: * Bitcoin OPEX (marginal cost) estimation of $7k to $9k per Bitcoin: https://news.ycombinator.com/item?id=31797201 https://news.ycombinator.com/item?id=31797201 * CAPEX vs OPEX: https://news.ycombinator.com/item?id=31796669 https://news.ycombinator.com/item?id=31796669

by eterm 4y ago

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 ago
I 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.
- jcbrand 4y ago
  Note that bitcoin mining is independent of anyone else mining. I don't think this is correct, because not everyone has the same hashing power. Yes the amount of blocks you would statistically generate per hour is dependent on your hash rate and the current difficulty. However, other miners with higher hash power will mine blocks quicker than you, and therefore take the rewards for those blocks ahead of you. The amount of rewards you get is dependent on your share of the total hashing power, which includes other miners, and not just your own hashing power relative to the difficulty level. An artificially low difficulty level simply means that blocks are mined more quickly, so yes in a way miners are making more money per unit of time, but the rewards are distributed according to your percentage of the total hashing power. This is even more explicit in mining pools, where you might never mine a block, but still get rewards simply by virtue of providing hashing power to the pool itself.
  - jstanley 4y ago
    This isn't right. Your parent comment was right. Mining a block is just brute-forcing until you find a SHA hash that is small enough. Your chances of successfully finding a small-enough hash are completely independent of everyone else. It's not some sort of race to find a block, and as soon as someone finds a block everyone has to start again. (Other than that they can't reuse the same transactions, and need to update the parent block pointer). If I give you £100 every time you find a random number that satisfies some property, the amount of £100s you get is independent of how many other people are making money with the same scheme. The only reason competition matters at all is because of the difficulty adjustment.
    - jcbrand 4y ago
      Mining a block is just brute-forcing until you find a SHA hash that is small enough. Or until someone else mines a block, in which case you have to start again from scratch. It's not some sort of race to find a block, and as soon as someone finds a block everyone has to start again. If miner A and miner B are both mining, and miner A mines a block, then miner B has to start from scratch with a new block because in all likelihood miner B was including transactions in his un-mined block that are now already mined by miner A. So yes, as soon as someone finds a block, everyone has to start again and that's why mining is in fact a race to find a block. If I give you £100 every time you find a random number that satisfies some property, the amount of £100s you get is independent of how many other people are making money with the same scheme. This is not how Bitcoin mining works. The "random number that satisfies some property" is dependent on the transactions included in your block, and if other miners include those transactions that are mined in blocks before yours, then you have to start from scratch.
deleted 4y ago
[deleted]
cyanydeez 4y ago
The best thing to happen is that it'll go to 0 and all this energy gets put into. Project with real benefit.

robocat 4y ago

> assumes that the depreciation of miners [snip] makes it worth turning them off Mining rig costs are usually sunk costs: turning off never saves depreciation (which is just an accounting entry). Unless the miner can do something else with the mining rig (repurposed, sold, withhold purchasing new rigs), then t variable costs dominate their decision. A miner should keep mining if marginal revenue (expected from minting new blocks and receiving block tx fees) exceeds marginal costs (mostly electricity if miner doesn’t get free electricity). https://www.investopedia.com/ask/answers/041315/how-marginal-revenue-related-marginal-cost-production.asp https://www.investopedia.com/ask/answers/041315/how-marginal... Not to say that the system is not unstable (which is an interesting idea). Maybe a control engineer could inform us of the parameters for instability. Disclaimer: crypto novice.

eterm 4y ago
I think I worded it badly, I meant that if depreciation is high then you wouldn't want to turn it off because you'd want to mine as much as possible while it was still worth something. So I meant the depreciation would need to be low enough to make turning them off a worthwhile strategy. Edit: I see what you mean about sunk costs, I had worded it badly but you were still arguing against my intended meaning.
- robocat 4y ago
  I don’t think I misunderstood. How fast equipment is “depreciating” is entirely irrelevant, unless you are using the term in a manner I am misunderstanding. Understanding marginal economics is difficult because it is counter-intuitive. I am currently on a personal binge trying to help understand the economic theory because it helps me challenge whether I have understood and whether I can pass that understanding on to others. Unfortunately marginal economics is poorly explained - the link I referenced was the only one of five I quickly skimmed that seemed to be free of gross errors and had no misleading content. Edit: latchkey seems pretty froody and made a couple of relevant comments: * Bitcoin OPEX (marginal cost) estimation of $7k to $9k per Bitcoin: https://news.ycombinator.com/item?id=31797201 https://news.ycombinator.com/item?id=31797201 * CAPEX vs OPEX: https://news.ycombinator.com/item?id=31796669 https://news.ycombinator.com/item?id=31796669