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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

#121

Post by iwontberude »

chistev wrote: post #76
didgetmaster wrote: post #67

Earlier quoted context omitted.

It sounds very similar to things like oil production, gold mining, and even farming. When the price is high, everyone wants in on the action. As supply explodes, the prices drop. Once prices get low enough, the costs to pump the next barrel of oil, find the next ounce of gold, or harvest the next acre of a certain crop; exceed the reward. When that happens, wells are shut down, mining operations suspended, and differ…

Satoshi thought of everything, man.

Clearly not because they created wallets that they can’t even use without unmasking their pseudonym. Seems pretty stupid to me.

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

#122

Post by catlikesshrimp »

pessimizer wrote: post #51
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?

You're not missing anything. As you can see if you read through the thread, they rely on bitcoin miners being heavily invested into bitcoin and bitcoin equipment, so those people will operate unprofitably to prop up their holdings. It's a moron's economy. A system that relies on externalities and corruption, and produces nothing of value. It's the art market with no art. If bitcoin miners are smart enough to have ant…

I need to buy a service. The service is provided in the US, where it is a grey area service. The service provider is not trustworthy enough to give it my credit card, and it doesn't accept neither paypal nor stripe. Unsurprisingly, it accepts bitcoins.

The way bitcoin exists, the provider accepts bitcoin; it doesn't accept other crypto. I would rather bitcoin, or something equivalent to exist than not.

There is also the case of people who hold value in bitcoin because it is more stable than their banks; go figure. This was the case in Argentina and Venezuela. That was also a gray area, but I think it would morally acceptable to do that even if it was prohibited

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

#123

Post by Lerc »

didgetmaster wrote: post #67
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.

It sounds very similar to things like oil production, gold mining, and even farming. When the price is high, everyone wants in on the action. As supply explodes, the prices drop. Once prices get low enough, the costs to pump the next barrel of oil, find the next ounce of gold, or harvest the next acre of a certain crop; exceed the reward. When that happens, wells are shut down, mining operations suspended, and differ…

The difference is that the quantity of what is being supplied is a factor with supply of oil/gold/grain/etc.

For mining it is just necessary that it happens.

The amount of work in mining is way higher than is required to prevent another party from being able to overwhelm the Blockchain. It is that high because of the subsidy of the mining reward means if Bitcoin has a high value the reward is worth a lot.

This is factored in with the halving of the reward. Either the price will increase exponentially or the mining reward will drop. Causing mining to reduce to those who can be profitable from fees. Which rewards those who can mine most efficiently, it becomes a supply and demand calculation in a market where there are relatively low barriers for competitors.

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

#124

Post by jrm4 »

My big picture take here; this is precisely why bitcoin itself could perhaps go to zero, and yet other cryptocurrencies could survive, aka the so-called "flippening."

It may come to pass that "proof-of-work" was merely a good proof of concept to launch the idea; but proof-of-stake is (of course) better.

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

#125

Post by hackernudes »

littlecranky67 wrote: post #49
mathgeek wrote: post #12

Earlier quoted context omitted.

It’s not a lie, nor a damn lie. It’s statistics!

Exactly: "The average production cost was sitting at $88,000 per bitcoin in mid-March". Emphasis on average . Just as in a free market, those miners with higher mining costs are priced out of the market. Or are pressured to become more efficient. Those that are below-average probably already are efficient.

You left off the critically important part of the quote, IMO...

> ... according to Checkonchain's difficulty regression model

It's a guess based on oil costs (as a proxy for energy costs). Personally I think it is completely worthless.

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

#126

Post by [deleted] »

eterm wrote: post #74
didgetmaster wrote: post #67

Earlier quoted context omitted.

It sounds very similar to things like oil production, gold mining, and even farming. When the price is high, everyone wants in on the action. As supply explodes, the prices drop. Once prices get low enough, the costs to pump the next barrel of oil, find the next ounce of gold, or harvest the next acre of a certain crop; exceed the reward. When that happens, wells are shut down, mining operations suspended, and differ…

There's a soft failure-mode for bitcoin where due to the alternating difficulty adjustment, you could end up with people only mining every other 2016-block adjustment. Let's call this cycle A and cycle B. If A is too hard, miners drop out, cycle B gets easier, miners flood back, cycle A gets harder. This results in the hard cycle getting longer and the easy cycle getting shorter. This isn't completely critical as the…

[deleted]

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

#127

Post by 01HNNWZ0MV43FF »

didgetmaster wrote: post #67
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.

It sounds very similar to things like oil production, gold mining, and even farming. When the price is high, everyone wants in on the action. As supply explodes, the prices drop. Once prices get low enough, the costs to pump the next barrel of oil, find the next ounce of gold, or harvest the next acre of a certain crop; exceed the reward. When that happens, wells are shut down, mining operations suspended, and differ…

Yep economics rules everything around me

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

#128

Post by ur-whale »

Sensationalistic headline.

The compute supply/demand for mining is designed in the bitcoin algorithm to oscillate, and the mining game is about being able to forecast a complex combo of BTCUSD price, power price, hardware price and depreciation.

Remarks like the title of this clickbait article are strictly meaningless, they assume the instantaneous price of bitcoin / power / hardware is what's used to compute profitability, when in practice mining is basically a futures market.

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

#129

Post by luke5441 »

qweiopqweiop wrote: post #120

Can someone convince me bitcoin mining isn't anything other than a huge waste of energy?

Depends on if you see the use case of censorship resitant payment as something we should allow or not (such as paying the Ayatollah to go through the strait).

I for one don't.

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

#130

Post by ziml77 »

luke5441 wrote: post #129
qweiopqweiop wrote: post #120

Can someone convince me bitcoin mining isn't anything other than a huge waste of energy?

Depends on if you see the use case of censorship resitant payment as something we should allow or not (such as paying the Ayatollah to go through the strait). I for one don't.

But even of you do see the use, why not proof of stake rather than proof of work?
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