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The cost of mining doesn't influence bitcoin price because creating 50 new bitcoins isn't going to inflate the currency by any perceptible amount. The price doe

by pixie_ 14y ago

The cost of mining doesn't influence bitcoin price because creating 50 new bitcoins isn't going to inflate the currency by any perceptible amount. The price does influence those who might want to get into mining. Eventually no new bitcoins will be generated from mining. At that point miners will make money solely from transaction fees when creating a new blocks.

oillio 14y ago
50 new bitcoins are created every 10 minutes. That is 7200 coins a day, 2,628,000 a year. This is massive inflation and definitely has an effect on the currency. No one really knows what the effect of halving of the mining rate will be. The currency is young, relatively small, and not yet very efficient (from an economic standpoint). However, everyone know the event is coming up. It MAY already be priced in. We won't know until the end of the year. There is a small risk that this event may cause some disruptions in the underlying bitcoin infrastructure, however. The idea goes: Many miners are running full tilt going into the event. They know their income will half, so they want to get as much out of mining as possible before it happens. This drives up the difficultly level. After the event, many of these miners may drop off as their operations suddenly become unprofitable (they are already running at the edge of profitability by revenue per kilowatt hour metrics). When the miners drop off, it takes some time for the difficulty level to adjust (up to two weeks). Before the difficulty level adjusts, the time between transaction blocks will begin to grow, which slows down the confirmation of transactions. In a worse case scenario where a large volume of processing power leaves the network simultaneously, it could take several hours to get transactions confirmed for a few weeks after the event. Will this actually matter, or even be noticed? Again, noone knows for sure.
- wmf 14y ago
  People will be replacing FPGAs with much faster ASICs around the same time that GPUs drop out due to the reward halving. Many people are predicting that difficulty will increase 10x, not decrease.

by pixie_ 14y ago

oillio 14y ago

50 new bitcoins are created every 10 minutes. That is 7200 coins a day, 2,628,000 a year. This is massive inflation and definitely has an effect on the currency. No one really knows what the effect of halving of the mining rate will be. The currency is young, relatively small, and not yet very efficient (from an economic standpoint). However, everyone know the event is coming up. It MAY already be priced in. We won't know until the end of the year. There is a small risk that this event may cause some disruptions in the underlying bitcoin infrastructure, however. The idea goes: Many miners are running full tilt going into the event. They know their income will half, so they want to get as much out of mining as possible before it happens. This drives up the difficultly level. After the event, many of these miners may drop off as their operations suddenly become unprofitable (they are already running at the edge of profitability by revenue per kilowatt hour metrics). When the miners drop off, it takes some time for the difficulty level to adjust (up to two weeks). Before the difficulty level adjusts, the time between transaction blocks will begin to grow, which slows down the confirmation of transactions. In a worse case scenario where a large volume of processing power leaves the network simultaneously, it could take several hours to get transactions confirmed for a few weeks after the event. Will this actually matter, or even be noticed? Again, noone knows for sure.

wmf 14y ago
People will be replacing FPGAs with much faster ASICs around the same time that GPUs drop out due to the reward halving. Many people are predicting that difficulty will increase 10x, not decrease.