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The headline is dramatic but this is literally how bitcoin is designed to work. Miners leave, difficulty drops, costs go down, mining becomes profitable again.

• Aperocky 6mo ago
  This 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 6mo ago
    I 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 6mo ago
    Yup 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
    • andai 6mo ago
      What's a shovel?
      • metrix 6mo ago
        They're using the analogy of mining for gold. the cost of a shovel/pitchfork goes up when the price of gold goes down - which is a double whammy
        • shlant 6mo ago
          you didn't answer the question. A shovel in this case is the equipment + energy needed to mine (GPU's etc.)
          • raverbashing 6mo ago
            Which is pretty much obvious to anyone who has heard of bitcoin in the year of our lord 2026 Especially since the "sell shovels during a gold rush" has been used to apply to nVidia
            • latexr 6mo ago
              But the person upstream hasn’t. It’s not obvious to them. Which is why a good answer has to include the detail.
  • knocte 6mo ago
    > below miner leaving rates. What does this mean, sorry? > the edge case collapse the entire system. If you mean that if it reaches a certain point, the entire system will collapse, it means you don't understand the difficulty adjustment. If it's too expensive to mine, then some miners leave, which makes blocktimes be longer, but not to worry because the consequence of that it just that difficulty will go down, which means that you need less hashrate to mine (and maybe some of those miners that leave will come back because it is profitable again for them). This means that it is essentially impossible for all miners to leave at the same time; some of them stay even if at a loss, and some of them are just hobbyists that can already feed their miners with solar power (so there's really no loss for them in leaving them connected).
    • Aperocky 6mo ago
      This makes sense but what if nobody get the system to the next checkpoint where the difficulty is allowed to go down?
  • samrus 6mo ago
    No but if more miners leave then dofficulty with drop faster right? Its modelling supply and demand curves which are a stable equilibrium in these circumstances
    • RichardLake 6mo ago
      Might be wrong about what Aperocky is alluding to but there is an entirely theoretical edge case. The time to the next difficulty adjustment is based on the current speed of mining, and the possible change in difficulty is capped. With enough minors leaving it will drop the speed of mining/network speed/ and push out the expected time to the next difficulty adjustment. I can't think of any realistic way this can occur given the miners that stay will (personally) be producing blocks as often, the increase in time being balanced out by being a larger proportionate of the mining rate. They don't care if they get 1% of the blocks, which average about 20 mins per block or 5% of the blocks that average 100mins per block.
    • the_mitsuhiko 6mo ago
      Difficulty only adjusts every 2016 blocks. If the system gets out of whack enough it could slow down to a crawl for an extended period of time. In practice it’s not much of an issue because bitcoin is not use for commerce but it’s a store of value and it some of the trades are not even on chain.
  • embedding-shape 6mo ago
    > but once it does happen, the edge case collapse the entire system. Which is when exactly, and how likely is that to happen? It hasn't happened yet in ~14 years, but I guess "never say never". There is a lot of money saying it won't happen very soon though.
    • bombcar 6mo ago
      It's also a side-effect of apocollapse of bitcoin itself; it becomes worth so little that nobody is mining means nobody will mine to a new block difficulty; but the collapse already occurred.
    • rcxdude 6mo ago
      If it happens it'll probably the result of a positive feedback loop forming: miners leaving slowing down transactions and affecting utility/faith in the system resulting in people selling, meaning more miners leaving, etc. That said, I don't know of any clear examples of this happening to any other proof of work coins: I think in general other parts of a cryptocurrency tend to fail first, it requires a particularly fast death for this kind of thing to happen.
• illiac786 6mo ago
  What does “leave” in this context mean?
  • ajross 6mo ago
    "stop" (Obviously the equipment doesn't go away. You can start it again. But if you can't make a buck doing something, you won't do it.)
    • illiac786 6mo ago
      But I mean, their bitcoins are not going away, their wallets are still there, their bitcoins also right? I thought bitcoin mining was proportionally hard to the number of already mined bitcoins, not the number of people mining? I probably should look this up in wikipedia first.
      • haakon 6mo ago
        It's a common misunderstanding that mining just gets harder and harder as time goes by and more coins are minted. It's often misreported that way. But in fact, the difficulty is dynamic and adjusts itself to keep minting at the predetermined rate regardless of the number of participants. Mining has gotten harder on long timelines, but only because more computing power has been added.
        • xigoi 6mo ago
          Doesn’t that contradict the Wikipedia article? > Miners who successfully create a new block with a valid nonce can collect transaction fees from the included transactions and a fixed reward in bitcoins. To claim this reward, a special transaction called a coinbase is included in the block, with the miner as the payee. All bitcoins in existence have been created through this type of transaction. This reward is halved every 210,000 blocks until ₿21 million have been issued in total, which is expected to occur around the year 2140. Afterward, miners will only earn from transaction fees. https://en.wikipedia.org/wiki/Bitcoin https://en.wikipedia.org/wiki/Bitcoin (emphasis mine)
• JKCalhoun 6mo ago
  If "difficulty drops, costs go down" so ought the price? Isn't that basic economics? Or are they chasing the "phase difference", lag, between supply demand?
  • maxerickson 6mo ago
    The mining reward isn't a direct transaction that has a price. Competing for it is more of a game that has a cost to participate in.
  • AlOwain 6mo ago
    I am not certain; but, costs do not have a causative relationship to prices. Prices only go down because as the cost of production goes down, supply increases. It is a correlative relationship. Bitcoin's supply won't increase as costs go down, unlike other assets.
    • Joker_vD 6mo ago
      > costs do not have a causative relationship to prices. Prices only go down because as the cost of production goes down, supply increases. Um. That's a causative relationship, even if it's mediated, but it's still causative. And generally, the relationship is even more direct: the suppliers are quite reluctant to sell at the price lower than their costs unless they expect the prices go up soon enough™, so the lower boundaries for the prices exist.
  • andy81 6mo ago
    Price isn't affected by mining difficulty, only the other direction.
  • phil21 6mo ago
    It's the reverse. As price per coin goes up, more folks will find mining profitable and invest in mining operations. Difficulty goes up until it's no longer attractive for anyone to add to the global hash rate. As price per coin goes down, less of those operations are profitable and fewer new people will find it to be a good investment. Difficulty stays the same or goes down. Due to capital expenses, difficulty is more sticky in the downward direction than upwards. There is of course some marginal price action in between where there is in theory selling pressure from miners when it's less profitable to mine (to fund operational expenses and debt), but I don't think it's super material to the overall market volume these days.
• expedition32 6mo ago
  A perpetual boom bust cycle? Sounds healthy.
  • AlOwain 6mo ago
    Regression to the mean. The alternative is no adjustment at all.
  • igsomething 6mo ago
    It is a negative feedback loop, so yes, it makes systems stable.
    • WJW 6mo ago
      Technically you could have negative feedback result in a system that diverges further and further from some baseline, until it eventually collapses. This is usually because the gain of the feedback signal is too high.
  • fooker 6mo ago
    Counterintuitively that’s the definition of healthy in economics. If you don’t have busts, at some point your system will abruptly/violently cease to exist.
  • raincole 6mo ago
    This is exactly how real world economy is (ideally) meant to work.
• didgetmaster 6mo ago
  It sounds very similar to things like oil production, gold mining, and even farming. When the price is high, everyone wants in on the action. As supply explodes, the prices drop. Once prices get low enough, the costs to pump the next barrel of oil, find the next ounce of gold, or harvest the next acre of a certain crop; exceed the reward. When that happens, wells are shut down, mining operations suspended, and different crops planted. The cycle begins again.
  • eterm 6mo ago
    There's a soft failure-mode for bitcoin where due to the alternating difficulty adjustment, you could end up with people only mining every other 2016-block adjustment. Let's call this cycle A and cycle B. If A is too hard, miners drop out, cycle B gets easier, miners flood back, cycle A gets harder. This results in the hard cycle getting longer and the easy cycle getting shorter. This isn't completely critical as there is I believe a small damping effect, so it isn't completely lethal to bitcoin, but a key thing about bitcoin mining is that whether other people are mining or not doesn't actually affect your own profitiability. Other people dropping out doesn't actually mean you get more bitcoins per hour/watt, it only affects the next difficulty adjustment as a secondary effect.
    • londons_explore 6mo ago
      The damping effect is that part of your costs are the hardware, space, depreciation etc. leaving that stuff idle costs money - so it makes sense to mine in the less profitable periods too.
      • paulddraper 6mo ago
        Yes though AFAIK electricity is a large %
        • cykros 6mo ago
          The larger it is, the less likely your mining set up is actually all that solid. The best miners are doing so with near free electricity, either with things like subsidized solar, or energy acquired from things like nat gas that'd otherwise get flared, or hydroelectric power that exists too far from civilization to have a demand otherwise. If your miner is plugged into the grid, you're probably doing it wrong.
• Scholmo 6mo ago
  Its still true and shows one of many issues with bitcoin. Based on bitcoin cryptobros, you need a certain amount of independent miners for the 'quality' of bitcoins. A bitcoin miner if its a state, can operate with a loss a lot longer if not even infinit, than the decentralized normal people (who do not exist anyway). It also creates a lot of pressure on miners if you do not run your gpus, yuou are also at a loss, which can break the mining for everyone if too many in parallel go offline, than go olnine again because difficulty droped to much. And if it becomes to volatile, no one wants to risk it anymore
  • bdcravens 6mo ago
    > if you do not run your gpus Bitcoin hasn't been viably mineable on GPUs for over ten years. It requires specialized hardware. As such, mining is typically restricted to those with massive capital investment in a single-purpose, so you really won't see random offloading and onloading of that capacity. As long as it's marginally profitable (with capital investment being a sunk cost, this is the price where it's more than ongoing costs), those miners will keep their machines running.
  • matheusmoreira 6mo ago
    The original idea was for every single person out there to mine bitcoins on their own computers. Bitcoin screwed that up by allowing big corporations to push out the smaller players. Their big purpose built hardware increased mining difficulty to the point mere mortals need not even apply. Mining on GPUs? Nope, you need purpose built ASICs for this. Monero is the only cryptocurrency today that's at least trying to implement the original "one CPU, one vote" vision but nobody really cares about it since number doesn't go up.
• arbuge 6mo ago
  I'm far from a crypto expert but aren't costs largely GPUs and electricity here? Those are now being driven by massive AI demand and are likely to remain so for the forseeable future. So how would costs go down?
  • vardump 6mo ago
    I don't think GPUs are competitive at all. You need specialized mining rigs with bitcoin mining specialized chips.
    • dopidopHN2 6mo ago
      And that since a solid decade.
  • vaelin 6mo ago
    The cost of finding a block goes down because it becomes less difficult. The goal in proof of work is to find a block hash less than a given value. That value is determined by the network difficulty. The lower the value, the more difficult it is to find a block, and thus the more expensive it will be to mine. Difficulty is adjusted once every two weeks to target an average block time of 10 minutes. If the average block time during the preceding 2 weeks is less than 10 minutes, it means that blocks were too easy to find (i.e. the difficulty was too low relative to total hash rate of the network). Conversely, if the average block time was greater than 10 minutes, the difficulty was too great. This is how it the network has maintained a roughly 10 minute block time as the hash rate of the network has grown over the past 16 years. The difficulty (i.e. cost) of finding a block is constantly being adjusted.
  • rokkamokka 6mo ago
    Bitcoin is no longer mined by GPUs but by ASICs
    • ivewonyoung 6mo ago
      Don't the ASICs compete with the same fab capacity that fabs GPUs, RAM, SSDs etc.
• patapong 6mo ago
  But mining costs are (cost of equipment+cost of electricity)/total coins mined, so can miners not end up in a situation where they need to keep mining to pay off equipment despite the individual coins being unprofitable?
  • comprev 6mo ago
    It's no different to a mortgage being in negative equity as the home owner would still be in debt after selling the property.
• TacticalCoder 6mo ago
  > 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. I follow Bitcoin from a theoretical point of view and I find it fascinating. Something that boggles my mind a lot is this: Bitcoin, which is somehow a bit "programmable", and Ethereum (which is definitely programmable) are basically the most correct computers on earth. Due to the consensus that needs to be reached by thousands+ of machines. Even if they're imperfect, ECC-less (for the most part), machines. Now they may still run code with flaws: but they'll all run it exactly in the same way. If, say, a bit-flip occurs on a machine, that machine won't create a block or won't sign a transaction accepted by others. Not part of the consensus. That is wild. Then the other thing which boggles my mind and which relates to your comment: the "selling pressure on the market" by Bitcoin miners is, no matter what they do, halved every four years. There were, 8 years ago, still 1800 Bitcoins mined per day. Today it's 450. And in two years (we're midway before the next halving), it's going to be 225. And Satoshi Nakamoto planned, from the very start. Maybe it doesn't make sense (economically or from a security point of view: who's going to secure the network when there's not enough block reward anymore?). But miners will mine 225 Bitcoins per day, not 450, in two years. And that is totally fascinating.
  • Tepix 6mo ago
    > I follow Bitcoin from a theoretical point of view and I find it fascinating. I find it horrible: The damage done to the planet doesn't correlate with the number of transactions. It's maximizing uselessness.
    • bit-anarchist 6mo ago
      How is it maximizing uselessness? Anymore than anything else, at least?
      • Zetaphor 6mo ago
        It does have an outsized environmental impact compared to other technologies people would call useless. The only thing that really tops it in terms of ire and pollution is AI, but that has far more realized applications
• schmorptron 6mo ago
  In the gap between cost going down and profitability, is there not an increased risk of sybel attacks?
  • Zetaphor 6mo ago
    You'd still need to have 51% of the network to perform any successful attack, which despite the price drop is a a MASSIVE capital investment.
• hn_throwaway_99 6mo ago
  It is how bitcoin is designed to work, but it also shows very directly how proof-of-work systems can never scale to be the global monetary replacement its boosters push. If the opposite happened, and the price for some reason sky rocketed to, say, $1 million per bitcoin, it would necessarily mean that it would induce more miners until the difficulty and consequent electricity cost (regardless of the efficiency in electricity generation) also would rise to the neighborhood of $1 million per coin. At the point you're far beyond "Argentina levels" of electricity and getting into "Europe levels" of electricity to run the network. The electricity demand (and here I mean the overall cost of the electricity, so improvements in $ per kilowatt just mean you need to use more electricity) in proof-of-work systems fundamentally scales linearly with the overall valuation of the coins in the network, which means proof-of-work systems can never scale as large as their fanboys would have you believe.
  • Thorrez 6mo ago
    While I don't disagree in general, there are a couple gaps in your reasoning that weaken the argument: Adoption doesn't necessarily correlate completely with price. Price can increase without much adoption, due to speculation. In theory, adoption could also increase without much price increase. Electricity isn't the only requirement for mining. Hardware is also required. Miners can't simply use lots of additional electricity if the hardware isn't there. Yes, new hardware can be manufactured, but it takes time. The block reward decreases over time. If it's using Europe levels of electricity at time X, then after a block reward decrease, it'll use Europe/2 amount of electricity. This decreasing also disincentivizes manufacturing new hardware. Miners can have different efficiencies, due to different types of hardware, and different types of electricity generation. So while the least efficient miner will be operating at near breakeven, the most efficient miner will be making much more profit. So while the least efficient miner will use $1M of electricity to mine a $1M coin, the most efficient miner will use less dollars of electricity.
    • hn_throwaway_99 6mo ago
      > In theory, adoption could also increase without much price increase. Not really. A fundamental purpose for any currency is to act as a "store of value". There is no way for bitcoin to represent a store of value (i.e. value commensurate to real-world goods) for a larger and larger portion of society without the price skyrocketing, especially since Bitcoin is inherently deflationary with a max number of coins. Regarding your other paragraphs, I think this is a fundamental misunderstanding of how proof-of-work is designed to protect the network. The entire idea behind POW is that the total amount of work must be in direct relationship to the total value of the coins in the network, or else coordinated attacks become possible. I see this misunderstanding all the time in "the block reward decreases over time" argument. It doesn't really matter if miners get their payoff from block rewards or mining fees - they must (on average, over time) get enough reward to make their mining activity worthwhile, and, again, by the inherent design of POW, they need to spend enough on mining to make 51% attacks not worth trying. Just think about how your "If it's using Europe levels of electricity at time X, then after a block reward decrease, it'll use Europe/2 amount of electricity" sentence doesn't make any sense, because eventually in 2140 or so there will be no block rewards, so according to your logic no electricity at all would be required to run the network. There is simply no getting around the fact that resource costs need to grow linearly with the total value of the network in POW systems.
• Animats 6mo ago
  The headline is confusing the issue. Bitcoin miners are losing money because October's crash took Bitcoin from $126,000 to below $70,000, and the Iran war has pushed up oil and electricity prices. The minor difficulty drop is a result of that, as some Bitcoin miners drop out. It's not the cause.
• deleted 6mo ago
  [deleted]
• MrSkelter 6mo ago
  Bitcoin is arguably the worst designed technology product in history. Burning $88k of carbon to run the world’s slowest payment network and produce a tiny corpus of data is stratospherically dumb. The technological equivalent of raising a forest to produce a toothpick. Just because “it works” (which is arguable in itself) doesn’t mean it isn’t stupid.