Bitcoin is close to becoming worthless? • Hacker News Board

Re: Bitcoin is close to becoming worthless?

#51

Post by paulgb » Mon, Dec 03, 2018, 1:07 PM UTC

coderzach wrote: post #37

ekianjo wrote: post #19

Earlier quoted context omitted.

Why would the cost of mining not fall correspondingly? It will adjust until it becomes profitable again, nobody is going to run mining farms if they are clearly losing money every single day.

Miners probably have a bit of a sunk cost fallacy, since there's a fixed cost associated with acquiring the hardware. Plus, if they're still bullish on bitcoin, the short term loss is probably worth it in their eyes.

I think you nailed it, although I don't think miners even need to fall for a fallacy for your argument to work: some major miners have made big capital expenditures (efficient hardware, cooling, etc.) to keep variable costs low over the long term. Even if the price drop means they'll never mine themselves out of debt, it could still be the rational thing to do for them to keep the machines on, as long as their reduced variable cost is still below than the market price.

Re: Bitcoin is close to becoming worthless?

#52

Post by 21 » Mon, Dec 03, 2018, 1:08 PM UTC

moomin wrote: post #44

21 wrote: post #8

Earlier quoted context omitted.

There is only so much you can buy in a futures market before it starts pulling the spot market up.

You might be interested to learn this is a point of some contention. There have been real markets with utterly wild and out of control futures markets where the spot seems to have happily trundled along with the fundamentals.

Like? If true it means that either the futures market are tiny or that there is a barrier to efficient arbitrage.

Re: Bitcoin is close to becoming worthless?

#53

Post by uncletammy » Mon, Dec 03, 2018, 1:09 PM UTC

Slartie wrote: post #31

ekianjo wrote: post #19

Earlier quoted context omitted.

Why would the cost of mining not fall correspondingly? It will adjust until it becomes profitable again, nobody is going to run mining farms if they are clearly losing money every single day.

Because the adjustment window is not real-time-based, but block-based: every 2016 blocks, an adjustment is done - with the obvious caveat being that the duration it takes to mine 2016 blocks is based on the global hash rate. Also, the downward adjustment is limited to (IIRC) halving the difficulty at max. So, given the number of miners drops too far too fast, Bitcoin may end up in a situation in which the global mini…

> Because the adjustment window is not real-time-based, but block-based: every 2016 blocks, an adjustment is done ...

This is definitely true. Luckily for miners there are two other blockchains their mining equipment can make use of which don't suffer from the slow difficulty adjustment. They are both version of Bitcoin Cash (BCH and BSV) and they both have 10-block adjustment periods. This makes them much more resilient to sustained periods of depreciation.

Re: Bitcoin is close to becoming worthless?

#54

Post by tomp » Mon, Dec 03, 2018, 1:09 PM UTC

acomjean wrote: post #40

konschubert wrote: post #10

The article is misinformed: I am the first one to jump on Bitcoin's flaws, but this here just reeks of somebody not understanding the protocol: > As I argued, once Bitcoin’s price falls below its cost of mining, the incentive to mine will deteriorate, thrusting bitcoin into a death spiral. The cost of mining adjusts depending on the hash rate , so if nobody is mining the cost of mining goes down until people start mi…

The article addresses that further down. frankly I don’t quite know if their argument is valid. I am skeptical, as bitcoin existed before it got any significant value. “. Similarly, when the price of bitcoin falls and miners exit, the cost of mining decreases. However, the number of miners cannot fall below a certain level, because without the miners providing the computing power to maintain the ledger, the bitcoin b…

But buying only makes sense if you can "realize" the gains - for that, the BTC network (i.e. transfers between accounts) has to continue working. In the absence of mining gains from newly-minted coins, rich individuals that want to use their wealth will be paying for mining in transaction fees.

Re: Bitcoin is close to becoming worthless?

#55

Post by magnamerc » Mon, Dec 03, 2018, 1:09 PM UTC

I remember these same articles in 2013

Re: Bitcoin is close to becoming worthless?

#56

Post by wongarsu » Mon, Dec 03, 2018, 1:10 PM UTC

pbhjpbhj wrote: post #39

vbezhenar wrote: post #9

Earlier quoted context omitted.

This is wrong argument. Mining costs are different for different miners. Someone has cheap electricity, someone has cheap electronics. If mining is not profitable for some part of miners, they'll stop mining and difficulty of mining will decrease, making mining more profitable again. It's a self-regulating mechanism.

>If mining is not profitable for some part of miners, they'll stop mining // Real world is always more complex than this. My expectation would be that done miners will contribute to mine at below profit levels because they seek to cut their losses. If they have cheap electricity but large sunk costs due to expensive hardware, that's not paid off, then - absent other uses for the hardware - they'd seek to reduce the l…

There is a level below profitability but above electricity costs where most professional miners will keep mining. But at some price level miners start dropping out because the electricity is more expensive than the mining income.

Luckily this wouldn't be one huge even but dragged out over a large price range since electricity prices vary considerably depending on location and source. This ensures that there is enough time for difficulty adjustments to kick in and correct the market.

Re: Bitcoin is close to becoming worthless?

#57

Post by deif » Mon, Dec 03, 2018, 1:12 PM UTC

mcv wrote: post #30

I may still have some bitcoin, but I certainly hope it becomes worthless. It's turned out to be ridiculously energy-consuming, and it seems to be used mostly for speculation rather than payment. Transactions have become too slow and expensive to be efficient for a payment system. It's entirely possible that cryptocurrencies will be the future, but it won't be bitcoin. It needs to be more efficient and more scalable t…

Sounds like someone hasn't been keeping up with recent bitcoin tech and is merely repeating lines from Dec 2017.

Re: Bitcoin is close to becoming worthless?

#58

Post by Felz » Mon, Dec 03, 2018, 1:12 PM UTC

> And it looks as though the Blockchain economy is here to stay, where many of our transactions will be processed on the blockchain and use cryptocurrency for daily transactions. Indeed, while the world maybe forever be indebted to Satoshi Nakamoto for giving us a viable cryptocurrency, bitcoin may cease to exist.

Huh? Does anyone seriously use cryptocurrencies for daily purchases right now?

It seems to me like cryptocurrencies are entirely useless (except maybe for illegal things and ransomware) and the entire space will be dead after it's done crashing. Ultimately, Satoshi Nakamoto may have accomplished nothing but caused untold misery for thousands of bankrupted people, redistributed money like a lottery, and burned the rest in electricity.

Re: Bitcoin is close to becoming worthless?

#59

Post by paulpauper » Mon, Dec 03, 2018, 1:13 PM UTC

konschubert wrote: post #10

The article is misinformed: I am the first one to jump on Bitcoin's flaws, but this here just reeks of somebody not understanding the protocol: > As I argued, once Bitcoin’s price falls below its cost of mining, the incentive to mine will deteriorate, thrusting bitcoin into a death spiral. The cost of mining adjusts depending on the hash rate , so if nobody is mining the cost of mining goes down until people start mi…

this article is misinformed. there is no single mining profitability threshold and some miners will mine at a loss. some miners are profitable at a very low price.

Re: Bitcoin is close to becoming worthless?

#60

Post by paulpauper » Mon, Dec 03, 2018, 1:15 PM UTC

wongarsu wrote: post #7

Bitcoin's price drop might look bad enought to warrant sensational articles, but if you take any bitcoin price chart over the last years (like [1]) and switch it to logarithmic price, it doesn't appear exceptional. The same thing happened in 2013. 1: https://coinmarketcap.com/currencies/bitcoin/#charts

log charts are misleading because by changing the base and the vertical axis you can make a huge decline look like a blip. but seeing 80% of your money gone is anything but a blip. also there is no guarantee bitcoin will continue to have exponential returns.