psionl0
Skeptical about skeptics
When miners drop out it becomes cheaper for the remaining miners to mine bitcoin. DUH!
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psionl0
Skeptical about skeptics
You shifted the goal post from will happen to can happen. Yet you can't identify any of the practices that might/will happen nor provide any evidence of these shonky practices. Like I said:
PartSkeptic
Illuminator
Double DUH.
If the reward is less than the electricity and running costs, what difference does it make if there are no competitors?
The reward is fixed - remember.
In Bitcoin that is. If the price keeps dropping, the costs in fiat currency (the ones they use to pay their electricity bills with) drop even further.
psionl0
Skeptical about skeptics
Triple DUH!Double DUH.
If the reward is less than the electricity and running costs, what difference does it make if there are no competitors?
The reward is fixed - remember.
In Bitcoin that is. If the price keeps dropping, the costs in fiat currency (the ones they use to pay their electricity bills with) drop even further.
It is obvious that you never read anything. As has been explained millions of times in this thread, the mining difficulty increases with the number of miners so that the block generation rate remains approximately constant at once every 10 minutes.
If miners drop out then the mining difficulty will decrease and it will require less processing power (electricity) for the remaining miners to mine a block.
Get it yet?
PartSkeptic
Illuminator
Triple DUH!
It is obvious that you never read anything. As has been explained millions of times in this thread, the mining difficulty increases with the number of miners so that the block generation rate remains approximately constant at once every 10 minutes.
If miners drop out then the mining difficulty will decrease and it will require less processing power (electricity) for the remaining miners to mine a block.
Get it yet?
Oh. Kerplunk. The bitcoin dropped.
Roger Ramjets
Philosopher
Every 2 months the difficulty level is adjusted to try to maintain a constant hash rate. But the price reflects mining costs, so reducing the difficulty level will make mining even less profitable and miners will continue to drop out because there's not enough money in it anymore. The result will be spiraling Bitcoin inflation as most 'investors' pull out of the market.
But if that happens, won't it just hand Bitcoin mining back to the ordinary people who want to use it as currency? Not really, because now it cannot survive without specialist mining equipment. Even if the difficulty level was reduced to zero, you still have to deal with a blockchain that is 150GB and growing. Going back to the days of people mining Bitcoins on their home PCs is no longer practicable.
psionl0
Skeptical about skeptics
You caught on quicker than Roger Ramjets.Oh. Kerplunk. The bitcoin dropped.
Er ... no to the highlighted part. You have got it backwards. Mining costs reflect the price.
About 7900 now, with strong sell recommendation.
PartSkeptic
Illuminator
The marketing hype of cryptos reminds me of Frank Zappa song...
Roger Ramjets
Philosopher
You know that's ridiculous, right? The price is whatever people agree to buy and sell it for. Price has no direct affect on mining costs, which are set by the computing power and electricity required to process the blockchain. If costs go too high then miners stop working and the difficulty level is reduced to make it easier for them. But that only happens every two months - meanwhile costs remain static while the price varies wildly.
So what happens when miners are stuck with expensive machines and noncompetitive electricity contracts? Some are moving to countries with cheaper electricity, but that also costs money. If the price continues to drop then miners may not be able to recover their fixed costs because at a lower price the net profit is lower.
It is a fact that miners' profit margins went down dramatically when the bubble burst. If 'mining costs reflect the price' then this should not have happened. Also the transaction rate has dropped by half but the difficulty level hasn't, which makes mining Bitcoin less profitable than it was when when the price was higher. Less profit means less investment in mining, requiring further difficulty level reduction which drives prices even lower. So whether price drives cost or vice versa the result will be the same, spiraling Bitcoin inflation as the price heads towards zero.
Bitcoin attempts to turn normal business practice on its head by adjusting the cost of production according to selling price (in the real world things don't get cheaper to produce just because people aren't willing to pay as much for them). Apart from the poor implementation (difficulty level should be adjusted in real time to match price changes, not delayed by up to 2 months) artificially adjusting the cost suffers from a fatal flaw - other solutions that don't do this will be cheaper and more desirable.
Considering how obvious this is to anyone with a basic understanding of economics we have to consider that either the inventor of Bitcoin was a moron, or it's a con.
psionl0
Skeptical about skeptics
WOW you really suck at this whole critical thinking bit. Maybe you are just digging your heels in or maybe you never went to a pre-school economics class.
THINK! What happens when the price of a commodity increases? More suppliers are attracted into manufacturing the commodity. Then either (or both) of two things happen. They may increase the supply of the commodity thus putting downward pressure on the price or they drive up the cost of production. Bitcoin is a classic illustration of the laws of supply and demand - except that the manufacturing rate can not be altered in the long run so the only remaining variable is the cost of production.
If the price of bitcoin falls then suppliers have two options: get out of the business or continue producing at a (hopefully temporary) loss in the hopes that the price will rise again. Of course there is a time lag between the price change in bitcoin and the costs of production - just like in the real world.
The idea that any buyer would factor the cost of mining into the price that they would be willing to pay for bitcoin is patently ridiculous. Some miners may choose to hold on to their bitcoins and wait for a better price while others may choose to sell them as they are mined - again, just like in the real world.
So it's not a classic illustration of those laws, is it?
psionl0
Skeptical about skeptics
How does that aspect make bitcoin defy the laws of supply and demand? Lots of things are only available in limited or even fixed quantities.
PartSkeptic
Illuminator
I tend to agree with Roger's analysis of the cost of mining.
The price goes down and hence the reward goes down. There is a lag before the "adjustment" of difficulty which does not help.
If one has a large installation it will be better than others at getting the reward, and this will cause smaller miners to drop out. As they drop out the overall consumption may drop. When only one is left, the difficulty can drop to nearly nothing because all they have to do is wait 10 minutes.
A further complexity is that the mining is likely to be part of the scam. "Investors" pay to get in the game, and the miners are assured of income and they use new investors to pay others so that it "looks" profitable. When the returns are not realized, and the investment pool dries up, mines will go out of business.
The spiral that Roger describes could get out of hand and suddenly there are no miners. Just another nail in the coffin.
Still a slow steady drop in Bitcoin price.
What about the drop in the number of nodes? The whole system was supposed to be cheaper, faster and more secure than credit cards and banks. It is failing in every respect.
The price goes down and hence the reward goes down. There is a lag before the "adjustment" of difficulty which does not help.
If one has a large installation it will be better than others at getting the reward, and this will cause smaller miners to drop out. As they drop out the overall consumption may drop. When only one is left, the difficulty can drop to nearly nothing because all they have to do is wait 10 minutes.
A further complexity is that the mining is likely to be part of the scam. "Investors" pay to get in the game, and the miners are assured of income and they use new investors to pay others so that it "looks" profitable. When the returns are not realized, and the investment pool dries up, mines will go out of business.
The spiral that Roger describes could get out of hand and suddenly there are no miners. Just another nail in the coffin.
Still a slow steady drop in Bitcoin price.
What about the drop in the number of nodes? The whole system was supposed to be cheaper, faster and more secure than credit cards and banks. It is failing in every respect.
psionl0
Skeptical about skeptics
It is hardly surprising that you would agree with anybody who disagrees with me - no matter how illogical their position might be.
In this case, it means that you are agreeing that the number of bitcoin miners (and hence the mining difficulty) has got nothing to do with the price of bitcoin.
It makes it not a classic illustration of these laws, as I said. I didn't say it defied them. Where things are fixed in supply, so that the supply can't respond to increased demand, they can't be a classic illustration of that relationship, can they?
I learned a little more from an insider
* A decent mining server costs 8 million ($NZ? doesnt matter)
* The equipment needs replacing every year
* It is the Russians Chinese and Japanese who are doing it
* Russian coal is cheap energy
* A decent mining server costs 8 million ($NZ? doesnt matter)
* The equipment needs replacing every year
* It is the Russians Chinese and Japanese who are doing it
* Russian coal is cheap energy
psionl0
Skeptical about skeptics
If you read the preceding part of that paragraph then you would see that it is totally consistent with the laws of supply and demand:
For the second time, of course it is consistent with that law. I'm not denying that, as you know. I'm saying if supply is fixed and can't respond to demand, then this is not (read this!) a classic illustration of that relationship. Did you read what I was saying this time? I most certainly hope so.
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