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As Bitcoin Sinks, Industry Startups Are Forced to Cut Back

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Re: As Bitcoin Sinks, Industry Startups Are Forced to Cut Back

#61

Post by asfgjonuinio »

CydeWeys wrote: post #30
minimaxir wrote: post #6

At what price will the Bitcoin death spiral occur? (i.e. when it costs more to produce/handle Bitcoin than the revenue generated, so best move is to just exit the crypto industry).

As others have pointed out, the difficulty adjusts both up and down depending on the total work being done by the network, so no death cycle is possible. Additionally, even when there are rapid drops in value (and thus mining), people still want to transact Bitcoin, so transaction fees go up and become a significant percentage of the overall value of a new block, thus compensating miners for the reduced value of the…

There are tons of interesting failure modes. The simplistic one won't happen, but that doesn't mean that it isn't teetering on the bring of a death spiral.

What happens when the market is flooded with cheap miners? A 51% attack is suddenly affordable.

What happens if the price drops off a cliff right after a difficulty adjustment? As hash rate falls, difficulty adjustments become farther apart than the two weeks they're supposed to be.

What happens when smaller miners close up shop? Bitcoin mining is already very centralized. Falling profitability would move it even more into the hands of the biggest players with the most efficient hardware and the cheapest electricity. Read: China.

A falling price is a huge problem for the security and stability of the network. Bitcoin is teetering on the brink of complete collapse.

>people still want to transact Bitcoin

No one uses Bitcoin. The transaction fees would have to go up by a factor of over 100 to equal the current block rewards. And, if people don't use Bitcoin now, why would they when transactions are 100x the current price?

Re: As Bitcoin Sinks, Industry Startups Are Forced to Cut Back

#62

Post by DenisM »

tptacek wrote: post #38
wolco wrote: post #29

Earlier quoted context omitted.

It's not a scam just a bad investment. Those using bitcoin for payments saw a utility not provided by other solutions. Those investing are a different class of users. Most purchased after hearing get rich stories.

What investment scam can you not say this about? People in boiler room operations pumping up bogus pharmaceuticals --- for example --- aren't themselves drug researchers and can, of course, tell themselves that they worked not on a scam, but on a product that didn't in the end worked out and simply turned out to be a bad investment.

wolco's point, I think, is that BTC "was supposed" to be a payment mechanism, not a store of value. Those who used it "as directed" ended up no worse for it, while those who "invested" lost their money, but "it's their fault".

Please note the ample use of quotes on my part.

Re: As Bitcoin Sinks, Industry Startups Are Forced to Cut Back

#63

Post by stale2002 »

hudon wrote: post #50
stale2002 wrote: post #45

Earlier quoted context omitted.

People vastly overestimate the profitability of attacking a crypto network. There are tons and tons of much smaller coins, that can be attacked for very cheap, and yet attacks are still very rare. IMO, this is because double spends just aren't a very good idea. If you tried to steal money from an exchange, everyone would know it was you doing the attack, and then they wouldn't accept your money in the future, or mayb…

Haha, then “PoW is for security” is a myth. If you are correct (which is arguable), then you don’t need PoW, you just need an elected federation of validators. And validators won’t attack because of the counter-incentives you describe. So either PoW has a security hole related to dormant ASICs or it’s useless. Either way it’s not a good look.

Dormant POW could be as much of a benefit as it is a drawback.

If someone owns 10s of millions of dollars worth of miners that are temporarily turned off, do you think this entity would want an attack to succeed?

No. They'd want to protect their future investment in mining equipment. They might just turn that hashpower back in, if an attack was in progress, and take a temporary loss to fight off a temporary attack.

Even the threat of a big player coming in to prevent an attack would make the risk of attacking way to high.

We saw this happen recently when someone tried to attack the Bitcoin Cash network. Defending miners temporarily turned on their hashpower to stop any attacks. And it worked.

Re: As Bitcoin Sinks, Industry Startups Are Forced to Cut Back

#64

Post by asfgjonuinio »

minimaxir wrote: post #6

At what price will the Bitcoin death spiral occur? (i.e. when it costs more to produce/handle Bitcoin than the revenue generated, so best move is to just exit the crypto industry).

Already happened. The hash rate is falling and the market is flooded with cheap hardware.

You'll hear some handwaving about difficulty adjustments. That doesn't change the fact that it is becoming increasingly unprofitable and miners are already shutting down en masse.

Re: As Bitcoin Sinks, Industry Startups Are Forced to Cut Back

#65

Post by asfgjonuinio »

marcell wrote: post #9
minimaxir wrote: post #6

At what price will the Bitcoin death spiral occur? (i.e. when it costs more to produce/handle Bitcoin than the revenue generated, so best move is to just exit the crypto industry).

Bitcoin was doing perfectly fine at $100, so I think these predictions are a bit premature and have some recency bias. The price drop does lower the amount of security in the network, so it becomes cheaper to attack it. However, it also means the payoff to attack is lower.

>However, it also means the payoff to attack is lower.

"Your money is safe because it's not worth anything anyway."

Re: As Bitcoin Sinks, Industry Startups Are Forced to Cut Back

#66

Post by jMyles »

The discussion of blockchain tech on HN is puzzling to me.

On the matter of value: I suspect that if we find ourselves able to send a message back in time two years (when BTC was less than $1,000 USD) and report that the price is now over $3,700, that we'll find this message to be met with an understanding that this is, at least, a validation of the use of blockchain tech as a store of value.

I suspect that if we describe the details of the lightning network in this message and report that transactions are radically faster and cheaper for retail-scale use, that we'll hear cheers about blockchain utility as a currency.

If we describe LivePeer and Fluence and the Origin protocol, if we stream talks from this year's DevCon about the incredible Python tooling that is coming of age and the progress on sharding, proof-of-stake, ring signatures, and zero-knowledge proofs, I'm certain that we'll hear nothing but confidence about the ecosystem and the extensibility of blockchain tech.

If I am permitted to send one of my recent talks[0] back with this message about our progress at NuCypher on developing new cryptographic primitives and cryptological narratives to accompany them, I have no doubt whatsoever that we'll receive back both excitement and gratitude, not on account of our work but because everybody in December of 2017 will be so grateful to know that they're about to be alive during a time when organizations like ours actually have the funding and mission to dust off tech that has sat largely stagnant for the preceding 10-15 years and move it substantially forward.

Yet, look at us HN. Instead of these reactions we're sitting here filled with cynicism and darkness. Why? Where have we misplaced our joy at these developments?

I'll tell you what: let's just pretend that somebody from December of 2021 has posted a message here with similar signs of encouragement. Let's imagine that they've told us about Ethereum 2.0 and Monero coming online. That new turnkey technologies include decentralized access management via NuCypher, buttery transcoding via LivePeer, and fast and flexible decentralized queries via Fluence.

Let's hear in our mind's voice about the next cohort of decentralized tech following these, including fully-homomorphic encryption (perhaps via NuFHE), solutions to several of the open oracle problems, and blockchain use in all sorts of gaming scenarios to ensure fairness of loot boxes and other intra-game economics.

Let's celebrate all the adoption they report to us: medical devices that work without the need for trust in insurance companies, communications infrastructure with far greater robustness and in widespread use to thwart spy apparatuses of despotic governments, sharing frameworks to ensure that media is able to spread throughout the world despite attempts at censorship or outdated notions of "intellectual property."

Please, let's let 2019 be a year when optimism and childlike curiosity are not only permitted in these parts but celebrated like they (largely) were just two years ago when the BTC price was less than 30% what it is today.

[0]: https://www.youtube.com/watch?v=OuY9WXK61gY

Re: As Bitcoin Sinks, Industry Startups Are Forced to Cut Back

#67

Post by tlrobinson »

btown wrote: post #55
mikeyouse wrote: post #19

Earlier quoted context omitted.

If they’re dormant, by definition they’re already unprofitable to operate. If the price decreases further, only the most efficient miners will remain, not the least efficient of them.

I've speculated before that the Chinese government may use this to sow confusion in the event of an altercation, "hot" or otherwise, with the West - in which case, the profitability of a miner is moot, only the ability to spin up a majority of the network.

Instead of “strategic oil reserves” countries will need “strategic Bitcoin miner reserves”.

Re: As Bitcoin Sinks, Industry Startups Are Forced to Cut Back

#69

Post by kss238 »

hudon wrote: post #23
mikeyouse wrote: post #19

Earlier quoted context omitted.

If they’re dormant, by definition they’re already unprofitable to operate. If the price decreases further, only the most efficient miners will remain, not the least efficient of them.

Unprofitable to operate in friendly conditions* If you can flip a switch and 10x the hashrate of a network, all under your control, and you don’t care about killing the chain in your attack, it may be a perfect exit for you if you no longer want to play the mining game. There’s actually a mining pool doing something like this on smaller PoW bitcoins https://sharkpool.cash (not associated, just think it’s interesting)

Any large miner will be profitable mining long before they have more dormant hashing power to 51% bitcoin.

Re: As Bitcoin Sinks, Industry Startups Are Forced to Cut Back

#70

Post by carlob »

InGodsName wrote: post #47
minimaxir wrote: post #6

At what price will the Bitcoin death spiral occur? (i.e. when it costs more to produce/handle Bitcoin than the revenue generated, so best move is to just exit the crypto industry).

Bitcoin will rise again. Bitcoin removes the need to trust a bookie/agent to move money offshore. Whenever flow of money is possible between a safe haven and a corrupt/socialist big country with high tax rate/more population burden. Money flows to the safe heaven. Bitcoin is one such way to move money from african nations/india/china to safe haven like Switzerland, Singapore, UK etc... I am talking about illict gains…

First of all the word you're looking for is haven (as in a harbor), not heaven.

Secondly, are you saying that bitcoin exists solely for the purpose of money laundering and tax evasion?

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