Bitcoin – The Magic of Mining • Hacker News Board

Re: Bitcoin – The Magic of Mining

#11

Post by johndevor » Sat, Jan 17, 2015, 9:08 PM UTC

danbruc wrote: post #9

Mining is what will ultimately make Bitcoin fail. You want to give everyone a single vote so that the majority can agree on which transactions are valid and which are not. But because you don't want a central authority that checks ID documents you come up with the idea of mining - make having a vote in the Bitcoin network an expensive thing by requiring to buy hardware and then spend more money on electricity to keep…

> As the block reward goes down all the costs of running the Bitcoin network will end up as transaction fees.

You haven't mentioned off-chain transactions at all. Don't you think Coinbase and others could enable those micropayments you're worried about?

Re: Bitcoin – The Magic of Mining

#12

Post by danbruc » Sat, Jan 17, 2015, 9:16 PM UTC

johndevor wrote: post #11

danbruc wrote: post #9

Mining is what will ultimately make Bitcoin fail. You want to give everyone a single vote so that the majority can agree on which transactions are valid and which are not. But because you don't want a central authority that checks ID documents you come up with the idea of mining - make having a vote in the Bitcoin network an expensive thing by requiring to buy hardware and then spend more money on electricity to keep…

> As the block reward goes down all the costs of running the Bitcoin network will end up as transaction fees. You haven't mentioned off-chain transactions at all. Don't you think Coinbase and others could enable those micropayments you're worried about?

Off-chain transactions have nothing to do with Bitcoin - they are just changing the balances of their customers in their database. Essentially no difference to you average bank account besides that it only works between two users of the same service. Unless they make agreements between different services making them even more similar to your average bank.

You have to completely trust them because these off-chain transactions are neither visible to the public nor agreed on by the majority of the votes nor secured by any cryptographic or proof of work or whatever measures. All trades at Mt. Gox were off-chain transactions...

Re: Bitcoin – The Magic of Mining

#13

Post by brainy » Sat, Jan 17, 2015, 9:18 PM UTC

guys here in africa ze are starting to accpt bitcoin and i think this will have a positive effect on the coin http://techunzipped.com/bitcoin-conference-africa/

Re: Bitcoin – The Magic of Mining

#14

Post by mrb » Sat, Jan 17, 2015, 9:43 PM UTC

danbruc wrote: post #9

Mining is what will ultimately make Bitcoin fail. You want to give everyone a single vote so that the majority can agree on which transactions are valid and which are not. But because you don't want a central authority that checks ID documents you come up with the idea of mining - make having a vote in the Bitcoin network an expensive thing by requiring to buy hardware and then spend more money on electricity to keep…

Your math is wrong, making your entire premise/argument invalid. A transaction costs $0.60 of electricity as of right now:

150000 kilowatt (power consumption of the global Bitcoin network [1]) ÷ (3600 (sec/hour) * 7 (transaction/sec)) = 6.0 kWh/transaction

The worldwide average price of 1 kWh is $0.10, so a transaction costs $0.60 in electricity to be processed by the network.

Also, the 7 transaction/second limit comes from the current 1MB block size limit which was chosen by agreement. It will be increased in the near future. If it is raised to, say, 10MB this would allow 70 transaction/sec, hence reducing the electricity cost of a transaction down to $0.06.

[1] http://www.eetimes.com/document.asp?doc_id=1323522 - the global hashrate has increased by 50% since this article was written (~200 petahash/sec in August 2014, up to ~300 petahash/sec today) but at the same time hardware efficiency (hash/sec per watt) has increased, so the ballpark number is correct

Re: Bitcoin – The Magic of Mining

#15

Post by imaginenore » Sat, Jan 17, 2015, 9:48 PM UTC

mrb wrote: post #14

danbruc wrote: post #9

Mining is what will ultimately make Bitcoin fail. You want to give everyone a single vote so that the majority can agree on which transactions are valid and which are not. But because you don't want a central authority that checks ID documents you come up with the idea of mining - make having a vote in the Bitcoin network an expensive thing by requiring to buy hardware and then spend more money on electricity to keep…

Your math is wrong, making your entire premise/argument invalid. A transaction costs $0.60 of electricity as of right now: 150000 kilowatt (power consumption of the global Bitcoin network [1]) ÷ (3600 (sec/hour) * 7 (transaction/sec)) = 6.0 kWh/transaction The worldwide average price of 1 kWh is $0.10, so a transaction costs $0.60 in electricity to be processed by the network. Also, the 7 transaction/second limit com…

His logic is wrong too. $0.60 is not a transaction cost - the persons making the transaction are not paying that. It a cost to the miner.

Re: Bitcoin – The Magic of Mining

#16

Post by sharpneli » Sat, Jan 17, 2015, 10:09 PM UTC

mrb wrote: post #14

danbruc wrote: post #9

Mining is what will ultimately make Bitcoin fail. You want to give everyone a single vote so that the majority can agree on which transactions are valid and which are not. But because you don't want a central authority that checks ID documents you come up with the idea of mining - make having a vote in the Bitcoin network an expensive thing by requiring to buy hardware and then spend more money on electricity to keep…

Your math is wrong, making your entire premise/argument invalid. A transaction costs $0.60 of electricity as of right now: 150000 kilowatt (power consumption of the global Bitcoin network [1]) ÷ (3600 (sec/hour) * 7 (transaction/sec)) = 6.0 kWh/transaction The worldwide average price of 1 kWh is $0.10, so a transaction costs $0.60 in electricity to be processed by the network. Also, the 7 transaction/second limit com…

Where do you get 150 000 kW? Even assuming all the miners are the best I could find (Achilles lab series) [1] that comes to 190000kW based on current hashrate [2].

Your transactions/second is also bit off. Right now based on blockchain.info the highest transaction day had 115787 transactions [3]. And that day the backlog of unconfirmed transactions got as high as almost 6000 unconfirmed transactions [4]. It doesn't matter at all if the network can "theoretically" support 7tps if it chokes at 1.3tps

That brings the actual kWh cost into 40kWh/transaction and up to the same ballback as what GP had.

Based on the arguments on forums right now it looks that increasing the block size is impossible. Because that would hard fork the blockchain.

When new coins are no longer being awarded to miners then people will have to start to pay the transaction fees themselves. Right now the mining is subsidized by what basically amounts to printing money and thus effectively is a small inflationary tax to everyone using bitcoin.

[1] https://en.bitcoin.it/wiki/Mining_hardware_comparison

[2] https://blockchain.info/charts/hash-rate

[3] https://blockchain.info/charts/n-transactions

[4] https://imgur.com/GAklIdZ The most delicious moment was not screencapped, but this is quite close. Even as this was happening the miners happily issued small blocks (500kB and less).

Re: Bitcoin – The Magic of Mining

#17

Post by jgalt212 » Sat, Jan 17, 2015, 10:26 PM UTC

cgjaro wrote: post #8

bdcravens wrote: post #6

Earlier quoted context omitted.

In all these discussions of Bitcoin's price over N months, I don't see anyone consider this: 2 years is 44% of its tradable life (first trades on Mt. Gox were in July 2010). You might as well talk about Apple's performance since 2000, which is 44% of its tradable life. In which case, you see similar returns (almost 3000%) So if Bitcoin goes down to $30, that's an amazing investment, right? After all, that's a 500% RO…

Nobody talks about "percentage of tradable life" because this is a pointless metric. You don't see banks publishing prospectus saying "this investment gained x% over y% of its tradable life". %/year is what matters to all investors. > So if Bitcoin goes down to $30, that's an amazing investment, right? After all, that's a 500% ROI! Absolutely. Buying at $6 in january 2013, and selling even at $30 would be a 500% ROI…

yes, but drawdowns are very important to investors as well, not just ROI.

http://en.wikipedia.org/wiki/Drawdown_(economics)

Re: Bitcoin – The Magic of Mining

#18

Post by danbruc » Sat, Jan 17, 2015, 10:27 PM UTC

mrb wrote: post #14

danbruc wrote: post #9

Mining is what will ultimately make Bitcoin fail. You want to give everyone a single vote so that the majority can agree on which transactions are valid and which are not. But because you don't want a central authority that checks ID documents you come up with the idea of mining - make having a vote in the Bitcoin network an expensive thing by requiring to buy hardware and then spend more money on electricity to keep…

Your math is wrong, making your entire premise/argument invalid. A transaction costs $0.60 of electricity as of right now: 150000 kilowatt (power consumption of the global Bitcoin network [1]) ÷ (3600 (sec/hour) * 7 (transaction/sec)) = 6.0 kWh/transaction The worldwide average price of 1 kWh is $0.10, so a transaction costs $0.60 in electricity to be processed by the network. Also, the 7 transaction/second limit com…

I just looked it up in a comment [1] I wrote about a month ago - 250 PHash/s hash rate with 1 GHash/J mining efficiency, 100 $/MWh energy costs and 100k transactions per day. Sources for these numbers in the linked comment. But even your hypothetical $0.60 or $0.06 are still way to high for real micropayments if we, for example, think about paying maybe $0.10 for reading a news article as an alternative to subscriptions based or ad-financed online news.

[1] https://news.ycombinator.com/item?id=8782877

Re: Bitcoin – The Magic of Mining

#19

Post by danbruc » Sat, Jan 17, 2015, 10:30 PM UTC

imaginenore wrote: post #15

mrb wrote: post #14

Earlier quoted context omitted.

Your math is wrong, making your entire premise/argument invalid. A transaction costs $0.60 of electricity as of right now: 150000 kilowatt (power consumption of the global Bitcoin network [1]) ÷ (3600 (sec/hour) * 7 (transaction/sec)) = 6.0 kWh/transaction The worldwide average price of 1 kWh is $0.10, so a transaction costs $0.60 in electricity to be processed by the network. Also, the 7 transaction/second limit com…

His logic is wrong too. $0.60 is not a transaction cost - the persons making the transaction are not paying that. It a cost to the miner.

These are the transaction costs, the costs to process the transaction. The user pays the transaction fee which is currently (usually) lower because miners still get the block reward. But at some point in the future only the transaction fees will have to pay for the transaction costs.

Re: Bitcoin – The Magic of Mining

#20

Post by imaginenore » Sat, Jan 17, 2015, 10:59 PM UTC

danbruc wrote: post #19

imaginenore wrote: post #15

Earlier quoted context omitted.

His logic is wrong too. $0.60 is not a transaction cost - the persons making the transaction are not paying that. It a cost to the miner.

These are the transaction costs, the costs to process the transaction. The user pays the transaction fee which is currently (usually) lower because miners still get the block reward. But at some point in the future only the transaction fees will have to pay for the transaction costs.

No, there is no other fee except the standard one.

So if some miners aren't happy with that, they will quit. It's a self-correcting system.