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May I ask you to elaborate? This sounds intriguing.
by exo762 4y ago
May I ask you to elaborate? This sounds intriguing.
- unnouinceput 4y agoIt costs an average of ~5k USD to mine one bitcoin. Meaning even if the value drops at exchanges, no miner will sell below this value due to not breaking even on electricity. That's why also bitcoin miners go to places where electricity cost is low, and why they undervoltage their mining cards.
- petters 4y agoWhat cards? Bitcoin has not been mined on GPUs for a long time and I would have thought that the ASICs used were already optimal.
- thinkmassive 4y agoASICs are also populated onto cards, and miner firmware handles tuning the hash rate of each chip (or card) based on inputs like desired temperature and power consumption. These inputs are often adjustable. Heat causes chips and other components to degrade, so not everyone runs their miners at maximum output all the time.
- exo762 4y agoWhy does it make any difference for me (a hypothetical BTC holder) how BTC is minted? > Meaning even if the value drops at exchanges, no miner will sell below this value due to not breaking even on electricity. It does not work like that. If you need to pay your bills you will sell BTC for whatever price it is right now. Unless you want to long BTC, but that's a different story.
- stale2002 4y ago> Meaning even if the value drops at exchanges, no miner will sell below this value due to not breaking even on electricity You have causation reversed here. It is not that bitcoin would not sell/be worth less than the amount to mine it. Instead, it is that it wouldn't be mined if it were worth less than the cost to mine it. At which point, miners would drop out, and the cost to mine it would reduce, as the difficulty goes down.
- SilasX 4y agoWait, really? It only costs $5k to mine one when they sell for $21k?
- unnouinceput 4y agoI meant electricity cost, on average, is ~ 5k USD. I didn't factor anything else, like cost of hardware, rent/location, living expenses etc.
- nowahe 4y agoBasically, to validate a block, you need to bruteforce a SHA-256 hash of the block by incrementing a nonce in it. And by essence, bruteforceing is wasteful (and by extension, expensive). And this is by design, as the only way to mint a new bitcoin is to throw away computational power (ie energy -> money). And the amount of power needing to be wasted is constantly adjusted by the network (it's targeting a certain amount of blocks / hour, adjusting the difficulty of the sha bruteforce, compensating for technological improvement). Now, to create a bitcoin you need to mine a block (solving the bruteforce), inherently requiring a set (on average) amount of real world value (mostly energy) to be irrevocably wasted. For the miners to recoup those losses, they MUST sell the bitcoin they just created for at least their lost value. Which in turn, guarantee the minimum value of each bitcoin. And with this system, the minimum value of each bitcoin is inversely equal to the amount of value "wasted".
- sph 4y agoAnd you can extrapolate this correlation between energy consumption and Bitcoin price into the idea that a Bitcoin represents some unit of energy. I wonder if there's a graph anywhere showing the value of 1 BTC in kWh.
- exo762 4y agoI know technical side of things really well, thank you. I'm talking about economical analysis - which is absolutely insane. Value of a thing is not determined by cost of its production. It is determined only by amount someone wants to pay for it. Claiming that PoW cost gives BTC its value is bonkers.
- josu 4y agoThis is a good explanation https://news.ycombinator.com/item?id=32583540 https://news.ycombinator.com/item?id=32583540