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Ummm, wait what. It costs 88k to mine a bit coin?
So then Bitcoin mining only makes sense if you also heavily invest in the energy company you’re paying, and even then, it’s just a modified human centipede transaction
Sssh. It is important that the world burns for some rich dude’s fake money.
The idea behind using distributed compute nodes for blockchain was that the blockchain itself would carry applications with commercial value, and the token itself would represent a share in that commercial value which would scale accordingly. There would be no reason to mine coins if those applications never materialized, so effort would always track alongside the intrinsic value of the network itself.
Bitcoin never developed any real applications, and the entire value was speculation. This meant people raced to mine coins as fast as they could, well beyond the intrinsic value of the app stack (which doesn’t exist). So now the network has effectively collapsed for all intents and purposes, but it is still needed for moving Bitcoin around, so the people who have huge investments already basically have to keep throwing money at mining in order to preserve the “liquidity” of their current stash.
So then Bitcoin mining only makes sense if you also heavily invest in the energy company
Correct. Buying your own solar panels or wind turbines. Your mining rig only makes sense when your expected return from the rig is greater than the return you could get from backfeeding the grid.
Or if you can somehow make use of the “waste” heat, perhaps by heating your home, or preheating water before it reaches your water heater.
But the period between when costs exceed revenue and when difficulty falls low enough to restore profitability is where the damage happens, both to miners and to the spot market that absorbs their forced selling.
Ohh no, the poor people investing in a useless product are not making money while they waste energy and ressources. Next you are gonna tell me that gold and diamond prices are also dropping and some poor investors wont get richer by it.
womp, womp
The article explains that part but the short version is:
when miners operate at loss, they start to leave.
The less miners there is the lower the difficulty to mine becomes so its cheaper to mine until and equilibrium is restored.
problem is that difficulty adjustment is not automatic and its done only once every few months so until next adjustment miners would have to operate at loss or sell their expensive equipment and exit for good.
[…]problem is that difficulty adjustment is not automatic and its done only once every few months so […]
Last time I checked it was automatic and done each 2.016 blocks, which should ideally take 14 days time (10 minutes per block at average).
When the difficulty gets adjusted, it gets automatically set to a level, which would take exactly 14 days to mine the next 2.016 blocks.
https://en.bitcoin.it/wiki/DifficultyI’m no friend of PoW in general and even less so of the way Bitcoin implemented it (resource hungry arms race for specialized hardware compared to PoW done only by general computing devices cough Monero), but insinuating there’d be some manual adjustment is disingenuous.
Yes I incorrectly wrote “not automatic” when it should’ve been “not instant”. Thanks for the correction also for correcting the delay.
The gist of my comment is still valid though. miners are operating at a loss because they’re waiting for the difficulty adjustment to happen.
The gist of you comment is valid and points out a major flaw:
miners need to operate at a gain.
With shrinking amounts of BTC being created by the network for producing blocks (that reward getting halved each 210,000 blocks), that gain is at risk, because it can be doubted whether transaction fees can cover the gap.
With that gain being at risk, the network security is going to be at risk.Ethereum did the right thing and aligned ETH holders and block producers by switching from proof-of-work to proof-of-stake.
That also reduced the ecological footprint to a tiny fraction of what it was before.
Isn’t it the other way round?
Difficulty drops because miners are losing money while mining and shut down miners, which by protocol makes the Bitcoin network adjust to the resulting difficulty (happens each 2.016 blocks afair).Let more and more miners shut down and you get an idling amount of mining power capable of attacking the network. Why would they do that you may wonder. Well, shorting BTC, attacking the network and cashing in could be a way to recoup their losses. Mining equipment isn’t cheap and letting it idle makes no money.
I’m not saying this will happen soon or at all. I’m just saying it can happen. It’s one of the flaws of proof of work (PoW).
