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Bitcoin is largely controlled by a small group of investors and miners

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Re: Bitcoin is largely controlled by a small group of investors and miners

#391

Post by graeme »

NickNaraghi wrote: post #68
graeme wrote: post #52

Earlier quoted context omitted.

> You're assuming miners are sellers. Actually, I’m not. If a Bitcoin is worth $60,000, then in an efficient market miners will spend just under $60,000 to get it. Will some choose to keep the Bitcoin? Certainly. But, they still have to pay the bills. To do so they have a few options: * Raise money from private investors or on the public markets. RIOT and MARA have done this. They pay their bills by selling shares. *…

It's actually way below efficient: a Bitcoin only costs $7-11k to mine at scale. [0] https://minerdaily.com/2021/how-much-does-it-cost-to-mine-a-...

That’s very interesting. But those figures are from May, and once you include ASIC price the average is $19,000 at 5.5 cents per kwh.

Is that the average electricity price paid today, after the China ban? If either electric rates or hardware costs have risen, then the cost rises.

The article also ignores other costs: staff, accounting, real estate, all the other costs involved in running a company.

It’s just looking at an ASIC magically teleported to a generator, and magically protected from the elements. Useful calculation but not 100% of costs.

Would be very interested if someone did that calc. Probably can find it for RIOT or MARA by digging through their books. May do it for fun later.

Re: Bitcoin is largely controlled by a small group of investors and miners

#392

Post by olalonde »

JumpCrisscross wrote: post #278
olalonde wrote: post #267

Earlier quoted context omitted.

> Not saying they would. Incentives are actually an important part of the equation. Why would a wealthy individual or government spend billions of dollars to do a 51% attack? There's basically no incentive to do so. The best they could achieve is to censor transactions for a while until the Bitcoin community decides to fork to a slightly different PoW algorithm.

> Why would a wealthy individual or government spend billions of dollars to do a 51% attack? There's basically no incentive to do so. China has banned cryptocurrencies [1]. So there is precedent. (Until recently, I believed nobody had an incentive to mess with cryptocurrencies. They're too niche and too attractive as a revenue source.) > best they could achieve is to censor transactions for a while until the Bitcoin…

> China has banned cryptocurrencies [1]. So there is precedent. (Until recently, I believed nobody had an incentive to mess with cryptocurrencies. They're too niche and too attractive as a revenue source.)

China's ban on crypto had very little effect on Bitcoin although a large share of the Bitcoin mining used to be located in China.

> In the scenario that close to 50% of Bitcoin miners and a similar fraction of Bitcoins become possibly (though not irrefutably) state controlled, you're claiming it would be trivial to just fork them away? Who makes that decision? If those people can just uncoin wallets of their choosing, why bother with a cryptocurrency in the first place?

First, let me preface by saying that I find this scenario very unlikely. China might have had the ability to do it at some point but no longer now that all the miners have left. USA now has the largest share of the mining power but it can't just suddenly seize all miners to perform a 51% attack due to the way government works. At minimum, a law would have to be passed and the miners would have already left the country by the time it did. Finally, the US does not even have 51% of the hash rate (about 35% currently).

But let's say it does happen. The vast majority of the community (exchanges, merchants, users, etc.) would likely move to a hard fork with a slightly changed PoW algorithm that would render all those seized miners obsolete. Governments and wealthy individuals know about this possibility which gives them even less of an incentive to pursue a costly 51% attack.

Re: Bitcoin is largely controlled by a small group of investors and miners

#393

Post by jayd16 »

rglover wrote: post #381
jayd16 wrote: post #70

Earlier quoted context omitted.

I have at least some control (though small) over the politics that control my nation's fiat currency. I feel I have much less control over 51% of the mining community. Considering that, why should I feel its more democratic?

You have absolutely zero control. Countries are owned, not elected. Elections are an illusion to keep you docile and not asking too many questions.

So if its all the same, why waste the overhead on proof of work?

Re: Bitcoin is largely controlled by a small group of investors and miners

#394

Post by jayd16 »

glenvdb wrote: post #294
EdwardDiego wrote: post #172

Earlier quoted context omitted.

Bitcoin is money now? I feel that the one thing we've definitely established so far is that it is absolutely not a viable currency.

The people of El Salvador would appear to disagree.

I'm not so sure about that but it would be interesting to see a poll.

Pretty ironic to bring up a major example of state control of currency as good example of Bitcoin adoption.

Re: Bitcoin is largely controlled by a small group of investors and miners

#395

Post by danShumway »

McGuive7 wrote: post #91

Soooo. . . you're saying a tiny fraction of the population controls the vast majority of the resource? You mean just like every other major resource on the planet? :)

Bitcoin was created in no small part to address this problem. The fact that it's not addressing it is a legitimate criticism of the coin.

"Our brand new environmentally-inefficient, difficult-to-regulate, needlessly-complicated, easy-to-surveil currency also falls prey to the same financial consolidation outcomes of every other traditional currency" is not really the strong defense of Bitcoin that people seem to think it is. And "Bitcoin isn't established by state violence" doesn't work when states/corporations control most of the supply and have outsized control over the protocol. This kind of consolidation undermines Bitcoin's value as an experimental/democratic currency.

From the article:

> These observations led the NBER to conclude that despite the attention Bitcoin has received over the past few years, the ecosystem is still dominated by a concentration of key players, making the ecosystem susceptible to systemic risk like a 51 percent attack, where a group of miners could take control of the majority of the network.

If someone is legitimately, honestly trying to pitch Bitcoin as a democratizing currency, then seeing outcomes like this should be worrying to them. The regular dismissal that traditional currencies have the same problems makes it hard to take Bitcoin proponents seriously when they talk about societal benefits that the coin purportedly provides.

There's a disconnect here between the theory that Bitcoin allows equal participation by anyone in the network, and the reality that even the resources required to start participating in the network can be tightly regulated and are often controlled and manipulated through centralized state/corporate apparatus. And hand-wavy dismissals of that problem don't do the currency any favors. Why adopt a new currency that still has multiple downsides, if the upsides are constantly being waved away as unimportant by even the currency's own proponents?

Re: Bitcoin is largely controlled by a small group of investors and miners

#396

Post by arcticbull »

m0zg wrote: post #282
anonporridge wrote: post #96

Earlier quoted context omitted.

Where are people pretending that bitcoin will fix wealth inequality?

As an asset not really subject to inflation (AKA tax on the poor), it could be helpful for those of moderate means to protect themselves against losing what little they have. I've experienced hyperinflation first hand some 25 years ago - it's not fun. I protected myself somewhat by buying (and then gradually selling) dollars, but that won't work if the dollar starts circling down the shitter, which it might. Going in…

People who have little, have little to lose in an inflationary environment. People who have any meaningful quantity of means invest them, and any investment other than holding a fist full of cold hard dollars isn't affected by inflation, although its real return may vary depending on how the underlying performs.

Further lower income folks tend to have a disproportionate amount of their net worth in debt instruments, and debt holders win in an inflationary environment.

> TL;DR: BTC could come in handy when printer goes brrrr.

That's not generally speaking what causes hyperinflation. It's caused by the population rejecting the currency.

Re: Bitcoin is largely controlled by a small group of investors and miners

#398

Post by bart_spoon »

Siira wrote: post #310
worrycue wrote: post #264

Earlier quoted context omitted.

Being able to print more would actually be a benefit as it allows for inflation. Central banks typically aim for 1-3% inflation to get people spending money and allowing the economy to function instead of just hoarding it.

“Hoarding” money, also known as saving in esoteric circles.

Its not simply "saving". Its where money is so much more valuable tomorrow than it is today, literally no one buys anything because why buy X today when you can buy 2 of X tomorrow? So the economy grinds to a halt.

Also, it exacerbates inequality immensely. When deflation is high, it means your existing money becomes more and more valuable for no other reason than existing. So the "rich get richer" in the most literal sense, for no other reason than having been rich in the first place. No investment or risk required.

Re: Bitcoin is largely controlled by a small group of investors and miners

#399

Post by xtracto »

ur-whale wrote: post #344
mensetmanusman wrote: post #332

Earlier quoted context omitted.

The funny thing is that death or mental illness by a hoarder means the btc go poof until the end of time. Therefore, over a long enough time scale, the number of available BTC tends towards zero.

That's assuming that BTC's aren't infinitely divisible. Currently, you can only chop them up into atoms worth 1e-8 BTC (satoshis), but there isn't much that needs be changed in the code and the protocol to get that to much finer grained. Therefore, it's unlikely that there will ever be zero bitcoins.

This is something not so many people take into account regarding cryptocurrencies. The real "total number" of any cryptocurrency is the total number of decimals they contain. There are currently a total of 2,100,000,000,000,000 Satoshis. A satoshi is $0.00059 USD. A Satoshi could cost $0.01 (1 cent) and it could still be paired with the US economy. If 99% of Satoshis became unavailable, we would still have 21,000,000,000,000 of Satoshis in circulation.

Re: Bitcoin is largely controlled by a small group of investors and miners

#400

Post by bart_spoon »

fsflover wrote: post #289
worrycue wrote: post #271

Earlier quoted context omitted.

They can but generally they don’t allow inflation to exceed 3% - ideally keeping it with 1-3% - as the destruction of the currency is not worth it long term.

So with USD, you trust that people care about long term consequences over short-term profit? With bitcoin, you trust math.

With Bitcoin, the math says that deflationary currencies are destined for failure.
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