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Napkin math suggests Bitcoin will perish unless its mining incentives change

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Re: Napkin math suggests Bitcoin will perish unless its mining incentives change

#21

Post by OutOfHere »

fromMars wrote: post #5

That would be a positive. We need alternatives other than just burning energy to base a currency on.

The petrodollar relied on burning significant resources, although its power is waning now. Gold relies on mining. As for Ethereum, it's proof-of-stake, implying it's not decentralized.

The only alternative currency that wouldn't burn energy would be shares in transferable energy itself. This would require a global energy grid which we don't have, and are not intelligent enough to seek to develop. Once such a grid exists, then shares in transferable energy would have a relatively stable value.

Re: Napkin math suggests Bitcoin will perish unless its mining incentives change

#22

Post by Ekaros »

qerti wrote: post #18
fromMars wrote: post #5

That would be a positive. We need alternatives other than just burning energy to base a currency on.

Just wait until you find out how much energy the financial industry uses

Most likely they are not intentionally burning it for sake of burning it. And they do run almost all of the money in the world, so some energy expenditure is expected.

Re: Napkin math suggests Bitcoin will perish unless its mining incentives change

#23

Post by superjan »

jvanderbot wrote: post #8

In essence, if mining incentives go low (and unspoken in title: If transaction volumes stay low so that transaction incentives are also low), then a 51% attack becomes trivial over time b/c miners drop out. So, either we start using bitcoin a lot , generating significant transaction fee revenue to keep miners in, or it's doomed to an inevitable compromise. So they are attacking bitcoin as a stable store of value, but…

The currently agreed protocol leads to https://en.wikipedia.org/wiki/Bitcoin_scalability_problem

Re: Napkin math suggests Bitcoin will perish unless its mining incentives change

#24

Post by lern_too_spel »

qerti wrote: post #18
fromMars wrote: post #5

That would be a positive. We need alternatives other than just burning energy to base a currency on.

Just wait until you find out how much energy the financial industry uses

If global finance ran on Bitcoin instead of on bank ledgers, all that energy would still need to be spent, but then an astronomical amount more energy would be spent on transaction processing on top.

Re: Napkin math suggests Bitcoin will perish unless its mining incentives change

#25

Post by OutOfHere »

tantalor wrote: post #20
OutOfHere wrote: post #16

Earlier quoted context omitted.

It doesn't negate the legitimacy of the argument in any way. The issue takes time to manifest. Your comment is essentially the same as shitting on climate change for the reason.

I'm not negating the argument at all! I'm saying this is a well-known, fairly popular argument, and it is as old as bitcoin itself.

And people need to be reminded of it from time to time.

Re: Napkin math suggests Bitcoin will perish unless its mining incentives change

#26

Post by lern_too_spel »

tromp wrote: post #17
superkuh wrote: post #12

Earlier quoted context omitted.

Yep. Every couple of years "Bitcoin will perish" and then doesn't.

This article explains how Bitcoin will experience severe problems in 20-40 years, not in a "couple of years".

Cryptobros will play negative sum games with greater fools right up until the collapse, and then the meme stock buyers will jump in to get wiped out as well.

Re: Napkin math suggests Bitcoin will perish unless its mining incentives change

#27

Post by ftlio »

AlexandrB wrote: post #19
glitchc wrote: post #10

A key mistake is to think that mining rewards are measured in coins, whereas they are actually measured in fiat currency. Miners pay their bills in dollars/pounds/euros/etc. To them, the price of a coin matters as much as the mining reward. As Bitcoin becomes scarce to obtain, it's price will skyrocket, offsetting any reduction in mining incentives. It's designed to balance itself. And of course if it becomes a real…

> As Bitcoin becomes scarce to obtain, it's price will skyrocket This kind of logic always reminds me of the Terra/LUNA fiasco. An economic model that works as long as nothing unexpected happens. For the price of bitcoin to skyrocket, you need a constant stream of new investors willing to buy bitcoin at these inflated prices. What if this just doesn't happen?

Begging the question. What makes the prices inflated today?

Re: Napkin math suggests Bitcoin will perish unless its mining incentives change

#28

Post by [deleted] »

scohesc wrote: post #4

I would assume this would be somewhat concerning for anybody investing in crypto. Correct me if I'm misguided - I'm not an economist, let alone a crypto-economist - I would assume the price of a bitcoin would go up as the mining rewards get fewer and fewer, but with Bitcoin being "tied" in a sense with traditional currencies, I wonder how much of a effect the lowering mining rewards would have compared to other globa…

[deleted]

Re: Napkin math suggests Bitcoin will perish unless its mining incentives change

#29

Post by big-green-man »

AlexandrB wrote: post #11

> For years, analysts have gone on channels like CNBC calling Bitcoin “digital gold”, and many everyday crypto investors truly believe that. This has always been silly. You can stick gold in a basement and come back 200 years later to find it completely intact. Redeeming bitcoin depends not only on a functioning software ecosystem (imagine trying to run today's software 200 years from now) but also on the mining comm…

Yep, I like to frame it as: gold is secured on the bare metal of the universe. Bitcoin is secured via an abstraction and therefore has a continuous overhead.

Holders are free riders in bitcoin; their value is secured by those actually using the currency. But due to the capped supply and capped blocks, fees tend upward, incentivising holding over using. This drives miner revenue, and therefore security, and therefore value of holders' coins, down over time.

Re: Napkin math suggests Bitcoin will perish unless its mining incentives change

#30

Post by OutOfHere »

There are two flaws in the argument:

> they would need to pay ~$37.50 to move them, which would likely cause them to make fewer transactions

Various soft forks to Bitcoin have been proposed that will allow a higher transaction rate. Even without them, people will pay not only $37.50 for a transaction, but even $100 on the busy days. This is because only big transactions will need to happen on layer 1. Smaller transactions can continue on layer 2. Secondly, no, there don't have to be fewer transactions, especially as the technical fixes to the transaction scalability are introduced.

Even so, the transaction fees only delay the inevitable, which is the complete stoppage of miner rewards, so the argument is not without merit. Relying on miners to secure the network seems weird.

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