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Bitcoin Mining’s Three Body Problem

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Re: Bitcoin Mining’s Three Body Problem

#71

Post by vmception »

season2episode3 wrote: post #6
trixie_ wrote: post #4

'Bitcoin is the product of hashpower. The industry wouldn’t exist without incentivizing miners to continuously invest in hardware and burning electricity to augment Bitcoin network’s settlement assurance' I think this is a common misconception. People don't need to continually invest in mining hardware to keep it going. The entire Bitcoin network could technically be run off a single Rasberry Pi. The network hash rat…

> At the end of the day your computer is no different from an expensive space heater. Might as well mine some crypto with it. Or, you know, you could just turn the computer off while you're not actively using it. It saves you money and does a small little good thing for the environment too.

The image of people mining in their residences is the furthest from the truth about crypto mining.

It uses primarily renewable resources or is repurposing pollution directly. This is the only economical way to mine. The vast majority of mining power is done this way, upwards of 80%. How much energy is being used is a purposeful misdirection.

Re: Bitcoin Mining’s Three Body Problem

#72

Post by perl4ever »

spir wrote: post #54

Mining revenue is the network cost of running the Bitcoin network. What if you ran a business that spends billions per year on network cost, then somebody told you they could reduce it by 98% and make it a flat cost, forever. That's proof of stake. Ethereum launches the first phase of proof of stake this year. When Ethereum v1.5 launches in ~18 to 24 months, Ethereum's network cost will undergo such a transformation.…

To bring $1 worth of US currency into existence, it only costs a fraction of that amount.

But to bring $1 worth of bitcoin into existence, it costs $1.

So, it seems obvious to me hash based currency is a virus that is many orders of magnitude less efficient, but many people seem impossible to convince of this.

Re: Bitcoin Mining’s Three Body Problem

#73

Post by jimmydorry »

TylerE wrote: post #53
trixie_ wrote: post #49

Earlier quoted context omitted.

Supply of what? The supply increase of coins is constant regardless of the hashrate. This is exactly why there was no effect on bitcoin price when the reward rate halved. The value of the coin drives mining behavior, not the other way around.

Actually, it doesn't. The difficulty adjusts every 2016 blocks, in theory every ~2 weeks, but if a large percentage of the hash power suddenly disappeared it could be much longer.

For a temporary period of time, before it self-corrects back to ~2weeks. It's easy to leave this part out as it is an edge case that doesn't need the extra sentences qualifying the "normal case" that will be observed 99.99% of the time.

Re: Bitcoin Mining’s Three Body Problem

#74

Post by naniwaduni »

gridlockd wrote: post #51
CalmStorm wrote: post #23

Earlier quoted context omitted.

The other common misconception is that the price of bitcoin is determined by the hashrate. It is actually the other way around, a higher price drives up the hashrate, because a higher price means more demand for bitcoin. Some founders of altcoins apparently don't understand this and try to buy hashpower to artificially increase the hashrate, hoping to increase the price of their coins. If there is no demand for their…

The price is not determined by hashrate, but hashrate is nevertheless an important metric for the market to determine the price. An altcoin that has insufficient hashrate is highly vulnerable to attacks and if its price were to rise, those attacks would become profitable. Therefore, you need enough hashrate to make attacks unprofitable right away. A Raspberry Pi is not going to cut it.

The most easily achievable way for attacks to be unprofitable right away, of course, is for your token to be worthless...

Re: Bitcoin Mining’s Three Body Problem

#75

Post by jimmydorry »

perl4ever wrote: post #72
spir wrote: post #54

Mining revenue is the network cost of running the Bitcoin network. What if you ran a business that spends billions per year on network cost, then somebody told you they could reduce it by 98% and make it a flat cost, forever. That's proof of stake. Ethereum launches the first phase of proof of stake this year. When Ethereum v1.5 launches in ~18 to 24 months, Ethereum's network cost will undergo such a transformation.…

To bring $1 worth of US currency into existence, it only costs a fraction of that amount. But to bring $1 worth of bitcoin into existence, it costs $1. So, it seems obvious to me hash based currency is a virus that is many orders of magnitude less efficient, but many people seem impossible to convince of this.

Nobody would be mining any crypto if their cost was exactly equal to their revenue. This fundamental misconception might be the reason why you can't convince anyone that crypto currency is a "virus".

Re: Bitcoin Mining’s Three Body Problem

#76

Post by perl4ever »

jimmydorry wrote: post #75
perl4ever wrote: post #72

Earlier quoted context omitted.

To bring $1 worth of US currency into existence, it only costs a fraction of that amount. But to bring $1 worth of bitcoin into existence, it costs $1. So, it seems obvious to me hash based currency is a virus that is many orders of magnitude less efficient, but many people seem impossible to convince of this.

Nobody would be mining any crypto if their cost was exactly equal to their revenue. This fundamental misconception might be the reason why you can't convince anyone that crypto currency is a "virus".

In any efficient market, profits approach zero. I don't see the relevance of saying "well, actually, there is some profit". That profit is the mechanism that drives the mining cost to match the value of the currency, isn't it? Please explain more about what you think I am missing, because it sounds like you are just referencing the mechanism that causes the problem.

Re: Bitcoin Mining’s Three Body Problem

#77

Post by segfaultbuserr »

This is an interesting article, but IMHO, its discussions on Hacker News lacks depth. Almost all threads are debating about superficial Bitcoin issues that has already been talked endlessly, and none of the thread focused on the main thesis of this article:

> Bitcoin mining is a complex phenomenon that connects hardware and software, the energy and financial markets. Invisible rules govern every aspect of it. The performance of an individual operation is determined by various external factors that are often hard to quantify and almost impossible to forecast.

It stated that Bitcoin mining as a whole, is a complex social-economical-computational-environmental phenomenon with a huge number of moving parts and uncertainties. The most fascinating fact to me, is the direct impact of climate cycle in southern China on the mining industry, almost with a mythical tone found in some Sci-Fi novels. While Bitcoin is a highly artificial and technical construct, but its yield can be severely affected by weather, some Bitcoin miners even routinely migrate their operation according to seasonal changes like the nomadic groups of the past. The flood seasons are visible on the Bitcoin hash rate chart, and even dominates the date of trade shows and R&D schedule of new mining rigs.

> May-October is the flood season in Southwest China. It is also a festival period for mining businesses as the large supply of surplus hydro capacity significantly cuts down miners’ operating expenses. For small-medium scale miners, the flood season can reduce the cost by as much as 40%. For large miners who own proprietary facilities, the flood season electricity cost is practically negligible. Over 80% of the miners in Xinjiang, Inner Mongolia will migrate in flocks to Sichuan, Yunnan, and Guizhou to take advantage of the discount, and they move back or sell their equipment after the dry season arrives in November.

> Gradually, the industry structured itself around these climate patterns. Like ancient rituals, every year before the flood season arrives, major mining conferences get organized in Sichuan’s capital Chengdu. Some facilities are only open to external customers during the flood season. Manufacturers plan their new product release right before it arrives. Miners race to source the latest and greatest machines in bulk.

Re: Bitcoin Mining’s Three Body Problem

#78

Post by lukifer »

uryga wrote: post #52
mindcandy wrote: post #32

Earlier quoted context omitted.

The point of the numbers is to prove that you heated space. Seriously. It proves that you burned value that you know you are not getting back if you are caught falsifying records for the system. And, everyone knows its extremely hard to not get caught if you try. Therefore you can be trusted to sign records for the system because you are risk:reward tremendously more financially motivated to be a good actor than a ba…

i understand the idea of proof-of-work. but idk, when i think about all that electricity and computing power wasted on guessing arbitrary numbers... just doesn't feel right kind of reminds me of how FAANG job interviews require memorizing not-very-useful algo stuff to weed out people who "aren't motivated enough" to study that stuff for the interview¹... "proof-of-motivation" if you will. it serves a purpose, but req…

Nature is full of examples of intentional waste as a form of signaling: https://en.wikipedia.org/wiki/Signalling_theory

That said, IMO Proof of Work is indistinguishable from Proof of Stake with extra steps. And considering the massive environmental externality of Bitcoin mining, I want to see the major nations heavily tax, if not completely outlaw, Proof of Work mining.

Re: Bitcoin Mining’s Three Body Problem

#79

Post by thaumasiotes »

perl4ever wrote: post #72
spir wrote: post #54

Mining revenue is the network cost of running the Bitcoin network. What if you ran a business that spends billions per year on network cost, then somebody told you they could reduce it by 98% and make it a flat cost, forever. That's proof of stake. Ethereum launches the first phase of proof of stake this year. When Ethereum v1.5 launches in ~18 to 24 months, Ethereum's network cost will undergo such a transformation.…

To bring $1 worth of US currency into existence, it only costs a fraction of that amount. But to bring $1 worth of bitcoin into existence, it costs $1. So, it seems obvious to me hash based currency is a virus that is many orders of magnitude less efficient, but many people seem impossible to convince of this.

> To bring $1 worth of US currency into existence, it only costs a fraction of that amount.

> But to bring $1 worth of bitcoin into existence, it costs $1.

But this just says the seigniorage value of creating bitcoins is 0. It doesn't say the total value of creating bitcoins is 0 -- they might continue to produce value after being created!

For example, the situation you describe applies in full to actual physical currencies. The Somali shilling trades at the (quite low) cost of printing the paper note. But the existence of the shilling still has value; it enables commerce in Somalia.

Economies operating on a basis of metal currency, or cowry shell currency, also have this feature - pretty much by definition, the trade value of the currency is mostly just the cost of producing it. (For coins, the trade value is usually slightly higher.) But every time a trade occurs, gains from trade are produced, so the currency constantly generates additional value just by being in use.

Re: Bitcoin Mining’s Three Body Problem

#80

Post by nullc »

trixie_ wrote: post #4

'Bitcoin is the product of hashpower. The industry wouldn’t exist without incentivizing miners to continuously invest in hardware and burning electricity to augment Bitcoin network’s settlement assurance' I think this is a common misconception. People don't need to continually invest in mining hardware to keep it going. The entire Bitcoin network could technically be run off a single Rasberry Pi. The network hash rat…

> The entire Bitcoin network could technically be run off a single Rasberry Pi.

Pedantically, a rpi wouldn't meet the target interblock time because of minimum difficulty.

But a system using a single 2014 era 800w shoebox sized mining device could meet minimum difficulty on its own.

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