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Bitcoin miners are losing on every coin produced as difficulty drops

coindesk.com

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Re: Bitcoin miners are losing on every coin produced as difficulty drops

#21

Post by acidphreak2k »

helsinkiandrew wrote: post #2

> When miners can't cover costs, they sell bitcoin to fund operations Surely they should stop producing until its profitable again, or am I missing something?

When I was mining circa 2017 - 2021 (approx. 1 BTC/month and 25-30 ETH/month) and planning it all out, I prepared myself psychologically to operate for up to 2 years without any profits or selling. It was a hard pill to swallow and a huge risk; my costs were $8500/month in electrical and then another ~$2200 on a lease for the warehouse. When it dropped to $3,000/BTC a few months after I came online and stayed there for 6-8 months, I started wondering if I was the biggest dumbass in my county.

Thankfully, it all worked out in the end very well. I don't know how anyone would put in the effort/money to get a major crypto farm going and plan to just cash out every month to pay bills. What's the point? I always thought of it as a long-term bet on the price going way up, which it did.

Re: Bitcoin miners are losing on every coin produced as difficulty drops

#22

Post by knocte »

Aperocky wrote: post #14
dmk wrote: post #7

The headline is dramatic but this is literally how bitcoin is designed to work. Miners leave, difficulty drops, costs go down, mining becomes profitable again. The interesting part isn’t the loss per coin, it’s how long the lag between unprofitable mining and difficulty adjustment keeps forced selling pressure on the market.

This only works when the difficult drop rates are below miner leaving rates. Which in normal times, are something taken for granted, but once it does happen, the edge case collapse the entire system. edit: the earlier language is not exact, the scenario is an exponential drop of value that results in exponential drop in miner willing to mine until this discrepancy can be resolved. i.e. the system is not protected aga…

> below miner leaving rates.

What does this mean, sorry?

> the edge case collapse the entire system.

If you mean that if it reaches a certain point, the entire system will collapse, it means you don't understand the difficulty adjustment. If it's too expensive to mine, then some miners leave, which makes blocktimes be longer, but not to worry because the consequence of that it just that difficulty will go down, which means that you need less hashrate to mine (and maybe some of those miners that leave will come back because it is profitable again for them). This means that it is essentially impossible for all miners to leave at the same time; some of them stay even if at a loss, and some of them are just hobbyists that can already feed their miners with solar power (so there's really no loss for them in leaving them connected).

Re: Bitcoin miners are losing on every coin produced as difficulty drops

#23

Post by derangedHorse »

Snoozus wrote: post #13
helsinkiandrew wrote: post #2

> When miners can't cover costs, they sell bitcoin to fund operations Surely they should stop producing until its profitable again, or am I missing something?

If everyone stopped mining transactions couldn't go through anymore and the value of bitcoin would drop. If you're heavily invested in bitcoin that's bad. Also miners try to squeeze in their preferred transactions which they can't do when they're not mining. Finally the costs dont drop to zero when you turn the miners off, so the loss from mining might be less than the loss when not mining.

He's not saying everyone, just the ones who are unprofitable. Not everyone mines bitcoin at the same cost. The ones who do have to stop can also profit from curtailment depending on the price of energy relative to hash profit.

Re: Bitcoin miners are losing on every coin produced as difficulty drops

#24

Post by VladVladikoff »

acidphreak2k wrote: post #21
helsinkiandrew wrote: post #2

> When miners can't cover costs, they sell bitcoin to fund operations Surely they should stop producing until its profitable again, or am I missing something?

When I was mining circa 2017 - 2021 (approx. 1 BTC/month and 25-30 ETH/month) and planning it all out, I prepared myself psychologically to operate for up to 2 years without any profits or selling. It was a hard pill to swallow and a huge risk; my costs were $8500/month in electrical and then another ~$2200 on a lease for the warehouse. When it dropped to $3,000/BTC a few months after I came online and stayed there f…

Seems like you could have made that same bet by just buying BTC with that money and doing twice as good.

Re: Bitcoin miners are losing on every coin produced as difficulty drops

#25

Post by samrus »

Aperocky wrote: post #14
dmk wrote: post #7

The headline is dramatic but this is literally how bitcoin is designed to work. Miners leave, difficulty drops, costs go down, mining becomes profitable again. The interesting part isn’t the loss per coin, it’s how long the lag between unprofitable mining and difficulty adjustment keeps forced selling pressure on the market.

This only works when the difficult drop rates are below miner leaving rates. Which in normal times, are something taken for granted, but once it does happen, the edge case collapse the entire system. edit: the earlier language is not exact, the scenario is an exponential drop of value that results in exponential drop in miner willing to mine until this discrepancy can be resolved. i.e. the system is not protected aga…

No but if more miners leave then dofficulty with drop faster right? Its modelling supply and demand curves which are a stable equilibrium in these circumstances

Re: Bitcoin miners are losing on every coin produced as difficulty drops

#26

Post by embedding-shape »

Aperocky wrote: post #14
dmk wrote: post #7

The headline is dramatic but this is literally how bitcoin is designed to work. Miners leave, difficulty drops, costs go down, mining becomes profitable again. The interesting part isn’t the loss per coin, it’s how long the lag between unprofitable mining and difficulty adjustment keeps forced selling pressure on the market.

This only works when the difficult drop rates are below miner leaving rates. Which in normal times, are something taken for granted, but once it does happen, the edge case collapse the entire system. edit: the earlier language is not exact, the scenario is an exponential drop of value that results in exponential drop in miner willing to mine until this discrepancy can be resolved. i.e. the system is not protected aga…

> but once it does happen, the edge case collapse the entire system.

Which is when exactly, and how likely is that to happen? It hasn't happened yet in ~14 years, but I guess "never say never". There is a lot of money saying it won't happen very soon though.

Re: Bitcoin miners are losing on every coin produced as difficulty drops

#28

Post by embedding-shape »

VladVladikoff wrote: post #24
acidphreak2k wrote: post #21

Earlier quoted context omitted.

When I was mining circa 2017 - 2021 (approx. 1 BTC/month and 25-30 ETH/month) and planning it all out, I prepared myself psychologically to operate for up to 2 years without any profits or selling. It was a hard pill to swallow and a huge risk; my costs were $8500/month in electrical and then another ~$2200 on a lease for the warehouse. When it dropped to $3,000/BTC a few months after I came online and stayed there f…

Seems like you could have made that same bet by just buying BTC with that money and doing twice as good.

I dunno, probably only if you don't count for human psychology. If they bought N BTC and tried to held them, would they still hold them when they double in value? What about increasing 10-fold?

Compared to doing some work to getting 1 BTC per month, which you can then individually decide what to do with, instead of a lump sum you could cash out at any moment.

Re: Bitcoin miners are losing on every coin produced as difficulty drops

#29

Post by andai »

raverbashing wrote: post #19
Aperocky wrote: post #14

Earlier quoted context omitted.

This only works when the difficult drop rates are below miner leaving rates. Which in normal times, are something taken for granted, but once it does happen, the edge case collapse the entire system. edit: the earlier language is not exact, the scenario is an exponential drop of value that results in exponential drop in miner willing to mine until this discrepancy can be resolved. i.e. the system is not protected aga…

Yup The problem with BTC going down is that it's a double whammy of not only BTC going down but also the cost of its shovels going up Before: BTC pays $100k but a shovel costs $300 Now: BTC pays $70k but a shovel costs $$?? Bitcoin asked the right questions but came back with the wrong answers

What's a shovel?

Re: Bitcoin miners are losing on every coin produced as difficulty drops

#30

Post by illiac786 »

dmk wrote: post #7

The headline is dramatic but this is literally how bitcoin is designed to work. Miners leave, difficulty drops, costs go down, mining becomes profitable again. The interesting part isn’t the loss per coin, it’s how long the lag between unprofitable mining and difficulty adjustment keeps forced selling pressure on the market.

What does “leave” in this context mean?
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