9 ms·
Bitcoin miners are losing on every coin produced as difficulty drops
- helsinkiandrew 7mo ago> When miners can't cover costs, they sell bitcoin to fund operations Surely they should stop producing until its profitable again, or am I missing something?
- ceejayoz 7mo agoYou're missing that humans are often irrational. They may be hoping it goes back up.
- Snoozus 7mo agoIf everyone stopped mining transactions couldn't go through anymore and the value of bitcoin would drop. If you're heavily invested in bitcoin that's bad. Also miners try to squeeze in their preferred transactions which they can't do when they're not mining. Finally the costs dont drop to zero when you turn the miners off, so the loss from mining might be less than the loss when not mining.
- derangedHorse 7mo agoHe's not saying everyone, just the ones who are unprofitable. Not everyone mines bitcoin at the same cost. The ones who do have to stop can also profit from curtailment depending on the price of energy relative to hash profit.
- illiac786 7mo agoIsn’t mining and transactions separate? Sure you need to have online participants, but they don’t have to actively mine, right?
- OJFord 7mo agoNo, mining is exactly what makes transactions go through, computing the next result in chain, certifying that the transaction happened.
- arter45 7mo agoYou can generate transactions but ultimately transactions are validated and written in the blockchain by miners. Mining is essentially a way to select voters based on their ability to solve puzzles, ensuring that if you are selected once you have no particular advantage next time. Without miners this whole system doesn’t work.
- singpolyma3 7mo agoWhat? That's not true. You don't need more than one CPU miner online for tx to go through. That's why there are difficulty adjustments.
- nytesky 7mo agoBut as number of miners drop arent btc at risk of a 50% attack?
- groundzeros2015 7mo agoBut if you have anywhere near the market power to do a 50% attack, you can make a lot of money mining.
- delusional 7mo agoIf you bought a bunch of hardware to mine bitcoins, then not using that hardware represents a 100% loss of value. You may lose money producing, but you would lose even more money not producing.
- acidphreak2k 7mo agoWhen I was mining circa 2017 - 2021 (approx. 1 BTC/month and 25-30 ETH/month) and planning it all out, I prepared myself psychologically to operate for up to 2 years without any profits or selling. It was a hard pill to swallow and a huge risk; my costs were $8500/month in electrical and then another ~$2200 on a lease for the warehouse. When it dropped to $3,000/BTC a few months after I came online and stayed there for 6-8 months, I started wondering if I was the biggest dumbass in my county. Thankfully, it all worked out in the end very well. I don't know how anyone would put in the effort/money to get a major crypto farm going and plan to just cash out every month to pay bills. What's the point? I always thought of it as a long-term bet on the price going way up, which it did.
- VladVladikoff 7mo agoSeems like you could have made that same bet by just buying BTC with that money and doing twice as good.
- embedding-shape 7mo agoI dunno, probably only if you don't count for human psychology. If they bought N BTC and tried to held them, would they still hold them when they double in value? What about increasing 10-fold? Compared to doing some work to getting 1 BTC per month, which you can then individually decide what to do with, instead of a lump sum you could cash out at any moment.
- VladVladikoff 7mo agoThis was my great failure with Bitcoin. Bought in at $100, had many coins at $400. Sold most of it by $3000. Hard to not cash out when your investment goes 30x. In hindsight… ugghhh.
- OJFord 7mo agoI mined in 2014 with free electricity and that was true even then. That's with hindsight though, the mining reward is more predictable than that market price would increase (more than) equivalently.
- csomar 7mo agoIt's a very low effort article. There are several places where the cost of electricity is roughly zero and state actors have interest in Bitcoin (Iran/Russia) or strong actors more powerful than the state (Libya/Venezuela). It's not surprising that this is good news for them as mining rigs for Bitcoin are much lighter to transport than the ones for oil.
- pessimizer 7mo agoYou're not missing anything. As you can see if you read through the thread, they rely on bitcoin miners being heavily invested into bitcoin and bitcoin equipment, so those people will operate unprofitably to prop up their holdings. It's a moron's economy. A system that relies on externalities and corruption, and produces nothing of value. It's the art market with no art. If bitcoin miners are smart enough to have anticipated this, and decided not to hold onto bitcoin and just let it drop; and also to have repurposed their equipment, sold it to bigger fools, or have just run it into the ground, none of these ideas make any sense. Why would they, though? The real answer is that governments and monopolists are propping up bitcoin through simply handing tax money to bitcoin holders, and in the case of the latter (also government tit-suckers) leveraging themselves to pump up bitcoin markets when they are down. I'm sick of humoring this because it was once mildly interesting technically. It's a criminal scheme and everyone involved needs to go to prison. When I hear a politician say the word bitcoin, I'm going to do everything in my power to damage that politician.
- catlikesshrimp 7mo agoI need to buy a service. The service is provided in the US, where it is a grey area service. The service provider is not trustworthy enough to give it my credit card, and it doesn't accept neither paypal nor stripe. Unsurprisingly, it accepts bitcoins. The way bitcoin exists, the provider accepts bitcoin; it doesn't accept other crypto. I would rather bitcoin, or something equivalent to exist than not. There is also the case of people who hold value in bitcoin because it is more stable than their banks; go figure. This was the case in Argentina and Venezuela. That was also a gray area, but I think it would morally acceptable to do that even if it was prohibited
- paulryanrogers 7mo agoWhat did folks in Argentina and Venezuela do before Bitcoin? Perhaps that's even better?
- catlikesshrimp 7mo agoDecades ago, in my country it was illegal to hold dollar bills. Naturally, you couldn't have dollar bank accounts. What was done back then was to illegally keep bills inside bags, hidden, and pray god they weren't found because you would go to prison. The alternative is not holding money yourself. Buy everything as soon as you can, and hoard physical goods, which is cumbersome, dangerous and inefficient. Bitcoin is an upgrade in all senses.
- tgsovlerkhgsel 7mo agoIf you've already bought a miner, you will mine until the price of electricity exceeds the revenue from mining. If what's left over after paying for the electricity isn't enough to pay for the cost of the miners (and other already-committed fixed costs), you might make a loss, but still be incentivized to continue to at least recoup some of the loss.
- ece 7mo agoIs there a SQQQ for BTC?
- bryceneal 7mo agoIf you're being sincere, there are many easily accessible ways to short Bitcoin with leverage.
- isubkhankulov 7mo agoYou can take stable-coins, borrow bitcoin against them and sell them. (Fully or over-collateralized). Then buy back bitcoin if/when it drops. If you’re wrong, you lose your stable-coins. Let us know how it goes :)
- zdc1 7mo agoSMST (Defiance Daily Target 2x Short MSTR ETF) could be a rough equivalent. As the other poster mentioned though, many miners won't be using oil-based energy sources, so it does make one wonder about cause and effect. Maybe a dip in BTC would've done it regardless of oil?
- martinflack 7mo agoThe CME offers Bitcoin futures which can be shorted if you have a futures trading account with a broker.
- hazelnut 7mo agoThere is BITI which is the inverse of IBIT, the largest Bitcoin ETF afaik
- kingleopold 7mo agoThis is just a lie. Coindesk is the worst media in the world. They can't calculate correct price of mining because it's more complex and enerrgy costs are different in so many regions and inside the electiric producers etc. !
- mathgeek 7mo agoIt’s not a lie, nor a damn lie. It’s statistics!
- littlecranky67 7mo agoExactly: "The average production cost was sitting at $88,000 per bitcoin in mid-March". Emphasis on average. Just as in a free market, those miners with higher mining costs are priced out of the market. Or are pressured to become more efficient. Those that are below-average probably already are efficient.
- hackernudes 7mo agoYou left off the critically important part of the quote, IMO... > ... according to Checkonchain's difficulty regression model It's a guess based on oil costs (as a proxy for energy costs). Personally I think it is completely worthless.
- suryajena 7mo agoIsn't AI the new hot thing, why are the miners still going after Bitcoin, when they can probably just use the same infra for AI and make more money, stay profitable.
- vscode-rest 7mo agoHash mining asics don’t work well for AI
- OJFord 7mo ago"don't work well for AI" is a hell of an understatement, the Application they are Specific to is literally just sha256(sha256(x)), what AI are you going to do with that? GP probably didn't mean that hardware though, but rather the facility, electricity supply, cooling, etc.
- oblio 7mo agoWhy double sha256?
- vscode-rest 7mo agoa that’s the botcoin hashing algorithm.
- oblio 7mo agoI figured that part out, I wonder why it's being doubled.
- vscode-rest 7mo agoThat was the way satoshi wanted it. No other explanation is known.
- haakon 7mo agoThe disappointing truth is that we simply don't know. Satoshi never explained it. For SHA-2 it can be used as a mitigation against length-extension attacks¹, and this seems like the most likely explanation, but it's just speculation. ¹ https://en.wikipedia.org/wiki/Length_extension_attack https://en.wikipedia.org/wiki/Length_extension_attack
- dmk 7mo agoThe headline is dramatic but this is literally how bitcoin is designed to work. Miners leave, difficulty drops, costs go down, mining becomes profitable again. The interesting part isn’t the loss per coin, it’s how long the lag between unprofitable mining and difficulty adjustment keeps forced selling pressure on the market.
- Aperocky 7mo agoThis only works when the difficult drop rates are below miner leaving rates. Which in normal times, are something taken for granted, but once it does happen, the edge case collapse the entire system. edit: the earlier language is not exact, the scenario is an exponential drop of value that results in exponential drop in miner willing to mine until this discrepancy can be resolved. i.e. the system is not protected against extreme volatility (e.g. -99% over a block cycle)
- derangedHorse 7mo agoI don't think you know what you're talking about. If the difficulty lowers at a lower rate than miners leaving then the difficulty rate will stop dropping.
- raverbashing 7mo agoYup The problem with BTC going down is that it's a double whammy of not only BTC going down but also the cost of its shovels going up Before: BTC pays $100k but a shovel costs $300 Now: BTC pays $70k but a shovel costs $$?? Bitcoin asked the right questions but came back with the wrong answers
- testing22321 7mo agoMaybe a basic question - do miners use solar? Prices are dropping so fast it seems like the cheapest way to power mining rigs. Also free grid electricity for three hours a day in Australia will be interesting.
- tgsovlerkhgsel 7mo agoThey generally use whatever is available and cheapest. However, due to the constant power demand and the capital cost involved (you don't want your miners sitting idle), if that isn't grid power, its often either "reliable" renewables (e.g. hydro), "stranded" fossil energy (e.g. gas that would otherwise be flared off), or in the worst case, literally buying a coal power plant that was about to shut down just to power a Bitcoin mine.
- expedition32 7mo agoThere's a reason why countries invented a central bank who decides how much currency gets printed.
- petermcneeley 7mo agowhich is?
- reenorap 7mo agoIf bitcoin miners are losing $19k for every bitcoin they mine, why would they sell bitcoin to continue funding their mining operations. That just makes it even less profitable because they are driving down the price of their remaining bitcoin. It makes more sense to shut their rigs off completely and wait for the price to rise. The funny thing about bitcoin is that the rate of bitcoin discovery doesn’t change when they shut off their rigs so it won’t change supply. It would actually make more sense to sell all their bitcoin, flood the market with coins to do the price, wait for large miners to collapse and then restart mining at hopefully lower prices.
- klodolph 7mo ago> […] why would they sell bitcoin to continue funding their mining operations […] There are usually some fixed costs involved and you need cash flow. Without cash flow, your business can shut down pretty damn fast. With cash flow, your business can stay around longer, maybe long enough for the economics to shift. This sort of thing happens with oil. There are oil producers which sell at a loss. There was even a brief moment when the price of an oil barrel went negative, which meant that if you gave somebody a barrel of oil, you had to pay them for the privilege of taking that oil off your hands. Oil producers did not all shut down when that happened. I am a little doubtful of the $19k figure anyway. > It would actually make more sense to sell all their bitcoin, flood the market with coins to do the price, wait for large miners to collapse and then restart mining at hopefully lower prices. This kind of market manipulation is not so straightforward.
- KellyCriterion 7mo ago> There was even a brief moment when the price of an oil barrel went negative More accurate: The price for an _option_ to buy/sell oil was negative, not the price of the barrell itself.
- duskdozer 7mo agoHow could the option price go below 0? Why couldn't someone just not exercise it in that case?
- paoliniluis 7mo agoIt's 2026 and there's still people that believe that proof-of-work makes sense as a consensus mechanism
- wslh 7mo agoThere is a breakthrough on a more productive Po(useful)W: https://news.ycombinator.com/item?id=47430951 https://news.ycombinator.com/item?id=47430951
- Detrytus 7mo agoIsn't the whole point of PoW that the work done is otherwise useless? I mean: you invest money (in form of your hardware/electricity bill) to mine a block, and that ensures that whoever would like to fork the chain has to spend at least as much money to do it. If PoW can earn you extra money outside of the Bitcoin ecosystem (by making the work "useful") it lowers the cost of the 51% attack, potentially making it profitable.
- wslh 7mo agoI understand that there was a problem finding a useful PoW from the computer science perspective, and that paper is showing a solution. Now, it doesn't necessarily lower the cost of an attack because you can adjust the required output to a cost that is suitable.
- toenail 7mo agoSure, why should my opinion have changed?
- oofbey 7mo agoHopefully between this and looming cryptographically relevant quantum computing, this whole house of cards will come crumbling down. And those who invested vast capital to burn carbon in order to evade finance regulations will lose everything. Probably not. But it’s a nice dream.
- Geee 7mo agoNo one is producing Bitcoin at loss, because it doesn't make any sense, but it might happen temporarily. Imagine the mining cost as a distribution curve, and bitcoin miners filling the distribution from the cheapest upwards to where the cost equals the revenue, i.e. the highest cost miner is at break-even, so that total of 3.125 (+transaction fees) bitcoin worth of hashrate is produced every 10 minutes. All but the highest cost miner operate at profit.
- tgsovlerkhgsel 7mo ago> No one is producing Bitcoin at loss, because it doesn't make any sense The cost of producing bitcoin is a combination of the marginal cost (running the miner you already have, i.e. mostly power) and paying for the miner that you bought. If you buy a miner expecting a certain profitability but then the economics change, you can both end up with a loss long term (never able to recoup the cost of the miner) and still be better off continuing to mine (because the cost of the miner is a sunk cost, and as long as the revenue is larger than the marginal cost of running it, you'll at least recoup some of it).
- superjan 7mo agoBoth of you are right. There is one more edge case: if you commit to buying electricity in advance it might cost you extra to not consume it. It would still be in your interest to use the power at a net marginal loss rather than not using it and paying a fine for failing the contract.
- deleted 7mo ago[deleted]
- londons_explore 7mo agoMy understanding is lots of bitcoin farms use stolen electricity. Ie. Hidden away in a storage closet in a school or office, or in someone's house with an electric meter bypassed. If a decent chunk of mining does that, then it could become uneconomical for those who do pay for their power.
- declan_roberts 7mo agoYour assumption is certainly not true. The large miners are just in close proximity to electricity generation sources where power is much cheaper.
- qweiopqweiop 7mo agoCan someone convince me bitcoin mining isn't anything other than a huge waste of energy?
- luke5441 7mo agoDepends on if you see the use case of censorship resitant payment as something we should allow or not (such as paying the Ayatollah to go through the strait). I for one don't.
- ziml77 7mo agoBut even of you do see the use, why not proof of stake rather than proof of work?
- Groxx 7mo agoIt's far less studied and didn't exist (to any usable degree) at the time it was made. And it's extremely different, organizationally, so it's a difficult migration to pull off. And it has different incentives. And most miners have a lot of costs (e.g. hardware) that won't be recoverable if it's changed, so there's a fairly strong incentive to not change it. Ethereum uses proof of stake now though (since 2022). Which happened in part because Ethereum is effectively centralized, or at least significantly more-so than Bitcoin.
- z3c0 7mo agoI'll throw "proof-of-useful-work" into the ring. Reallocating at least a portion of BTCs verification onto existing energy costs could go a long way. Not suggesting it would be easy or that the entire network would be able to agree on what tasks to use, just that it's a theoretical option.
- haakon 7mo agoIt's also not simply a matter of agreeing on what tasks to use. The task has to be computationally difficult to perform, but computationally trivial to verify. It must also be verifiable with only the context of the blockchain (no "oracle" that can make claims about real-world events). Primecoin exist(ed?) and used the search for Mersenne prime numbers as its proof-of-work. That was 13 years ago and is still the only example I know of "proof-of-useful-work", and it would not be difficult to find sour voices challenging its usefulness.
- jrm4 7mo agoMy big picture take here; this is precisely why bitcoin itself could perhaps go to zero, and yet other cryptocurrencies could survive, aka the so-called "flippening." It may come to pass that "proof-of-work" was merely a good proof of concept to launch the idea; but proof-of-stake is (of course) better.
- ur-whale 7mo agoSensationalistic headline. The compute supply/demand for mining is designed in the bitcoin algorithm to oscillate, and the mining game is about being able to forecast a complex combo of BTCUSD price, power price, hardware price and depreciation. Remarks like the title of this clickbait article are strictly meaningless, they assume the instantaneous price of bitcoin / power / hardware is what's used to compute profitability, when in practice mining is basically a futures market.
- deleted 7mo ago[deleted]
- JohnMakin 7mo agoLarge amounts of btc mining are done via things like typo squatted images in compute clusters, or other compromised machines, the compute is stolen so the cost is effectively zero to the miner
- krisknez 7mo agoThis title is incorrect. When mining difficulty drops, Bitcoin becomes easier and cheaper to mine, so miners usually make more money per coin, as long as the Bitcoin price stays the same.
- deleted 7mo ago[deleted]
- abhinaystha 7mo agoJust waiting what quantum computing would do to crypto.
- dboreham 7mo agoShouldn't the price therefore go down? (Bitcoin should be an instrument the price of which correlates with the cost of the energy required to make new ones).
- walrus01 7mo agoIf I had a dollar for every time, at some time in the past ten years, when the true believer bitcoin pumpers were saying things like "Bitcoin will be above a million per coin in the next five years!"... Yeah, about that....
- trizuz 7mo ago[dead]