Bitcoin Forum

Ladies and Gentlemen,

It's only just really sunk in with me, how low on the adoption S curve we are at present. We are quite substantially below 1% so far. Typical S curves tend to exhibit slopes of about 1 in 10 in their first phase. Beyond the first crook, in mass adoption phase, this becomes about 10 in 1. Tipping points in various technical innovations over the years appear to occur at between 2 and 5% adoption. This is the inflection point in the S curve.

Thus at the inflection point, adoption accelerates 10 times faster.

If bitcoin is capable of 10x price increase in a "bubble" at present, on our early adoption "bunny" slope, what the hell will happen when adoption rate is 10x?

I put it to you that a 100 fold increase in price is possible.

I do not think this is going to happen very soon, I think we will have to be at a 100 day MA of $10,000 and get at least 7 million North American users to hit tipping point. At the earliest, I think it's 18 months away. We need a couple of "bubble" cycles to get up there.


In essence a burst dam scenario, we are the trickle.


Flash.

Of course.

BTC market cap right now: 5.1 Billion

For comparison, Apples market cap right now: 700 Billion

http://www.macrumors.com/2014/11/25/apple-market-cap-700-billion/

So after a 100 fold increase in price, all coins combined are worth less than one major US company.

Not that i compare BTC with a company. Just to give a little perspective in the amounts of money out there.

So do your math, and act accordingly. Then just wait 5, 10 or 20 years... Good Luck  ;D

Still the best asymmetric bet out there...

That's very important.  Apple's worth 700 billion, because there is real fundamental value there.    The market cap of Apple is real: if all the apple shares are sold over one year's time, there will probably be enough takers and the market cap will hold, because it has fundamentals.

Bitcoin's market cap isn't really 5 billion.  There's only a very small liquidity that is actually exchanged.  If half of the coins were sold next year, the price would plummet.  If you are holding 1 million coins, you cannot really make $350 million.  By the time you've sold half of them, the price would probably be something like $100.- or less.

That is because for the moment, the fundamentals of bitcoin (merchant adoption, and share of the gold market for instance) cannot even sustain the current market cap if bitcoin were totally liquid (if all coins were regularly exchanged).

I would guess that the highest fundamental at this moment is the black market share treated in bitcoin.

Bitcoin is as of now still a hugely speculative asset, speculative in the sense of people counting on a strong price increase in the future.  That's why many hold their coins: expecting it to be worth several $1000.- or even much more.
However, I have a hard time believing such a price is sustainable if the fundamentals don't follow.  There could be a (manipulated) surge, but I can't believe that most coins could be exchanged at such a high price - it would automatically lead to a price crash afterwards when holders would want to cash in (that is, if the coins became liquid).

So in order to have a high sustained coin price, the fundamentals must rise.  Merchant adoption is the way.  Bitcoin is way below apple, because what is actually bought with bitcoin is way below what Apple brings on the market.
I don't think that will come overnight.

Sorry but you don't understand what market capitalisation means. Apple shares, any share is precisely the same as bitcoin. If enough shares are sold the market capitalisation will collapse. Its actual value is every bit as illusory as bitcoin. Sure you can do some calculations and attempt to value apple stock. But the share price is simply a transient figure backed by supply and demand and looking at price earning multiples for a company like amazon is also highly speculative.

Not sure what you are trying to say here.

Merchant adoption is not a fundamental of Bitcoin. The currency aspect will follow the store of value speculation and not the other way around.

Higher adoption of the speculative assets will eventually lead to more market stability which might create more incentive to use Bitcoin as a currency.

But that's beside the point, the deflationary nature of Bitcoin encourages saving and discourages casual spending. Unlike the present fiat economy, savers are rewarded. People need to hoard it in order to create value.

http://www.contravex.com/2014/02/25/matters-of-bitcoin-merchant-adoption/

Is it wrong that I hoard BTC? I collect and receive tips for 25 cents and hoard it as if it will be worth $500+ in 5 years. Everytime I see someone say 10 bits, I am thinking $10 dollars in the future

Hoarding is the way to go my friend.

I think we discussed this already, but store of value needs long-term trust.  Gold has a 5000 year record.  State bonds have century-level trust.  How do you think people will build up trust in bitcoin as a long-term stable store of value ?  Who would dare to buy $10,000.- coins to set aside for his retirement 30 years later ? 


Bitcoin is now inflationary like a real 3rd world country fiat: 10% a year nominally, but in fact much more as a lot of coins are in fact out of circulation for the moment.  It will take about 8 years before the inflationary nature of bitcoin will be of the order of the nominal Dollar and Euro price inflation.

People will not hoard huge amounts of value for a long time with such an uncertain future and in such an inflationary environment as compared to things like state bonds and gold.  The only reason to hoard coins is that one is speculating for "the moon" (low probability - high return). 

Monetary assets like gold historically first became currency, and only later, through the currency aspect for a long time and build-up trust, also a store of value.  I would like to see any reasoning that could indicate conservative pension funds wanting to invest a lot in bitcoin for a store of value over 20 years or so... 

Anything more than 10k is unsustainable in current mining era. 100k coins? That would be a mining bonanza, I guess Intel ATI and other big players would join.

The guy is showing himself:

But you know that that can't last.  That's like a Ponzi.  Why would the "latecomers" enter bitcoin at high prices ?  You buy a coin at $400 because you hope for $10 000.-.  But why would you buy a $10 000.- coin ?  Hoping for $ 100 000.- ?  Ok who's going to buy $ 100 000.- coins ?  Hoping for $10 000 000.- ?   No.  So the guy won't buy the $ 100 000.- coins for his retirement.  Meaning the guy buying at $ 10 000.- won't find a buyer at $ 100 000.-.   ...

Something is a store of value if you take it that it will KEEP its value more or less, not that you speculate that it will significantly increase if that is the only drive.  Because that will obviously come to an and one day, like a Ponzi.

Bitfury says "We also sell our hardware and hosting services to other large Bitcoin miners".

A bitfury article says

"BitFury Group, the leading Bitcoin infrastructure provider and Bitcoin transaction processing company has added Young Sohn, Samsung Electronics president and chief strategy officer, to its strategic advisory board".

http://www.finextra.com/news/announcement.aspx?pressreleaseid=57849&topic=payments

Is that a sign the big players are already getting interested?

I think the halving will show the world that the coin is not something which is here for only a few short nights. It is a carefully designed economic mechanism designed to show its power to the world at key inflection points. The initial seeds were planted in the zeroth era. We are now in the first era and the sapling is taking root. It gains nourishment while remaining relatively unnoticed. Before long all will turn around and notice that its roots have grown into the bedrock of the electronic world. The halvings will play a role in this volatility as major economic events, scheduled like clockwork unlike the capricious order of old.

Then we party on the roofs of what once were banks.

They are doing so right now.

It is disingenuous to refer to Bitcoin as inflationary because of its emission schedule. It's current monetary base and limited supply creates more upside for growth than any comparative investements.

Yes it can last. That is what fixed supply assets do, grow in value as more people trust them to hold their value.

The guy buying at $100,000 obviously can not expect the same gains as earlier adopters but he can trust that he holds an assets that can not be confiscated through inflation and will reward saving instead of consumption.

Bitcoin is the ultimate store of value and the trust issue will be superceded by its spectacular growth soon enough.

No, almost nobody is holding coins right now just to keep the value and to get that value back 20 years from now with the certainty that the value will more or less be held.

Almost everybody holding coins right now is hoping for a significant value increase.  If the reason for holding coins is value *increase* and not *value holding*, then the scheme will fail of course once the hope for value *increase* will stop - that is what I wanted to illustrate.

If you buy at $300, you can hope for $10 000.  But in order to sustain $10 000, something must change.  You cannot buy at $10 000, with the same incentives as buying at $300.  The hope to buy at $10 000, and to reach $3 000 000 is much lower I would think, than to buy at $300 and hoping for $10 000.  Moreover, the influx of value needed at $10 000 to support the money supply inflation is much larger than at $ 300.

If the buying and holding incentive is the huge increase in value, we are exactly on the same incentives as a Ponzi: it will fail at a certain point, because at a certain point, to sustain the price, the influx of value needed is too high, and the prospect of still higher prices becomes essentially nihil.  At that point the price will plummet, and all people having bought at $50 000 will panic-sell.

The only store of value has buying incentives without any expectation of significant increase in value.  If you buy gold, you are not hoping on a factor 30 of value increase in a few years.  You hope that it will keep its value (which means, higher price as compared to a devaluating fiat).  You may hope for slight increase, and you are not afraid of a small decrease.

Almost nobody is holding bitcoin to KEEP its value in my opinion.  If you would know that your coins will have doubled in price 10 years from now, you wouldn't hold your coins.  You're hoping for the moon.  But if you count on other people hoping for even more moon to get yours, it's going to crash, because that's exactly the drive of a ponzi.

If bitcoin were held as a store of value, then everybody should be happy if the price is almost constant, or would rise slowly to compensate for Dollar inflation.  Most hodlers don't hold bitcoin for that.

So they are NOT doing it right now.

Sure, but to develop that trust, will take a *long* time.  If an asset has grown wildly from $10 to $100 000.- in a few years time, you take it normally that this is a high volatility, and that the opposite motion will be potentially just as quick.  You don't consider that as a store of value for the long term.

We've seen that last year, people have bought at $1200.- and end up a year later around $400.-  Do you think that after that example, people would buy in with a lot of money at $100 000.- ?
So what would convince anyone that if the price rose in 5 years time to $100 000.- that it can stay there for 20 years ?  Only by observing it for 20 years before engaging in it with serious money ! Which by itself will mean it cannot stay there !  And btw, all hodlers of today would try to cash in at such a price !

Again, this is different from the speculative market which is high risk, high gain which is the main driving force of the bitcoin price right now, but which only makes sense when the price is low of course !

This is why I think that bitcoin as a store of value at high prices is not possible in the near future.  If bitcoin would stay for 10 years at $400.- (and slightly rising to compensate for dollar devaluation) then people would start considering it as a store of value around that price. 

Bitcoin at $100 000.- because as store of value is imo not sustainable in the near future.

It is sustainable by (gigantic) merchant adoption on the other hand.

Bitcoin is currently inflationary.
The base is being inflated at ~10% per year--much faster than any self-respecting fiat currency.

Re. "upside":  BTCeanie BTCabies, like BTCitcoin, also have an upper limit.  Unlike BTCitcoin, that limit has already been reached [no more authentic BTCeanie BTCabies are being produced].  Thus, BTCeanie BTCabies are truly deflationary [authentic BTCeanie BTCabies can be destroyed, but not created]. 

Invest in & hoard BTCeanie BTCabies FTW!

A lot of people might be seeing BTC as the stock market 2.0.
Big money entered the DJI portfolio despite a loss of 90% from $381 to $41. Crash after crash people have trusted their money in the stock market and portfolios and have retired off it. I don't think it's ridiculous to think that BTC could be similar.

 (http://stockcharts.com/freecharts/historical/djia19201940.html)

You are assuming the only people that will buy are speculators and investors.  Imagine if in 5 years coins are worth $100K each.  If I am still paid in fiat at that time, my money would (still) go in a bank.  Now imagine banks have decided to get their feet wet and allow withdrawals in BTC.  I'll withdraw in BTC thank you very much so I can spend safely and securely, and carry it with me.  At that time there would likely be enough infrastructure that the company I buy from can get its supplies purchased in BTC as well, and so on.  So I spend 100 bits to buy a $10 gift online.  Now that $10 worth of bitcoin remains as such, rather than being sold back.

So I may very well be the one who "buys" the $100K bitcoin.  Or at least some of it.  Because this is the future that I can see...

Just get a job.
Tips worth 25 Cents?  ::)
Poor fellow, I am happy with my 4 digit amount of btc (not mBTC) and it's still pocketmoney for me.

Of course, because smarter people realize that they are at the very beginning of the market adoption curve. The very basis of this thread which you have so conveniently ignored.

The purpose of everyone involved with Bitcoin, I would hope, is both conservation of value AND speculation on the increase of this value.

Of course, early adopters need an incentive to participate in this new form of money and this incentive is quite obviously future prospects of increased market adoption (speculation).

Bitcoin, like any form of money, is a technology. Technologies take some time to reach maturity. If you ask me we might just blow past 10,000$ without stopping because by that point we will have approached the "vertical" or "hyper-exponential" phase of the adoption curve. Whichever way this happens, buyers will substain the price at different price levels and the prospects of value increase need not to be the same for everyone. The further your buying price is along the adoption curve the smaller is your speculative prospect.

Yes, at some point in time, people will be buying or acquiring Bitcoin for the sole reason of value conservation combined with the attractive interest feature that rewards saving.

http://www.business-planning-for-managers.com/Worpress/wp-content/uploads/2012/01/adoption_curve.jpg


 ::)

stfu, troll.

The stock market has fundamentals which are based upon the cash flow generated by real enterprises.  You cannot compare the stock market which is based upon expected discounted cash flow with the speculative value of collectables such as gold or bitcoin and of which the value in case of "store of value" only resides in the long-term trust one has in its acceptance of value, which, in my opinion, can only grow over a long period.

In as much as bitcoin is a currency, though, the monetary formula will give its price as a function of its use as a currency.  It is the way gold got its value historically: as a currency.

This shows your fundamental misunderstanding of Bitcoin's value proposition.

Bitcoin is not a speculative asset.

It is a new form of money, a technology. If it reaches $100,000 it means that it will have been adopted globally and siphoned a large % of the world economy. By that point it will be apparent that Bitcoin is superior to its competitors. Considering its competitors are other forms of money (fiat & gold), users of these will find it more risky to ignore the trend than to participate and buy into this new economy.

Therefore you will see an exodus from the current fiat economy into Bitcoin and this is what will substain the price and drive it to the moon where only once it has saturated every accessible market will it stop its exponential rise.  

This is a zero-sum game. It is literally impossible for Bitcoin to stay at $400 for 10 years.

Last part is absolutely false. For people to use gold as a currency they had to come to a consensus that its value would hold over time. If they didn't trust it to store value they wouldn't accept it in a trade.

The trust aspect you are referring to is dependent on the network effect of technology in question. Bitcoin, as a protocol, a form of money and an internet technology, profits from what is most probably one of the strongest network effect observable in our human environment.

Greed & network effect will absolutely be enough to entice a large majority of the population to adopt Bitcoin and trust its features as the best form of money available.

The difference between the stock market and Bitcoin may be somewhat difficult to grasp, so I'll try to explain:

Shares in a company represent a real live company.  IRL.
Bitcoin, on the other hand, represents only itself--a token that fits into a digital ledger.  It has as much or as little value as the market decides.  Unlike the stock market, if Bitcoin vanished from the face of the earth tomorrow, no one but a few enthusiasts would notice or care.  It is less similar to the stock market than apples are to outboard motors.
Hope this helps.

No, that is what brg444 was claiming here https://bitcointalk.org/index.php?topic=873102.msg9652987#msg9652987

Namely that bitcoin would first be a store of value before becoming a currency.  By definition, people interested in "store of value" are investors, and we know that most people now are speculators.

My claim is that the real fundamental of bitcoin is as a currency, to buy stuff with.  What you are talking about, too !


Indeed.  Merchant adoption.

However, things will be the other way around: bitcoins will then be $100 000.- BECAUSE you are wanting your salary in bitcoin, because you want to store your bitcoins you earned to spend them directly to buy stuff, and that the guy you're buying from is also using his coins to buy his supplies from and so on.  And then the coins get their value from P x Q = M x V.
From the demand for holding currency to be able to buy stuff with.

Merchant adoption.

And that will then be the true fundamental which will make bitcoin have $100 000.- and after several years like that, you will not hesitate putting your life savings in bitcoin for your retirement, because you know that bitcoin, as long as it is used as a currency, will keep more or less that value.  It can then also become a reliable store of value.

But that will not happen 5 years from now.

Learn some manners :)

http://s9.postimg.org/l9ym8n8r3/littlefaggot.jpg

how will hoarding add value?

if everyone sat on their coins the pump and dumpers will dictate the price

spending adds value ;D

Absurd.

No one will accept a currency that has not first and foremost established itself as a store of value.

This is the very reason why you see merchants currently dumping BTC to fiat. They do not trust it to hold value. This sort of merchant adoption is certainly not what will drive the price of Bitcoin.

Theoretically, but the valuation represents the markets best guess at future earnings of that company.

Some billion dollar software tech companies have only "really" consisted of an old warehouse, rented, divided into offices, a handful of computers, and a few employees. $50,000 including the potted plant in reception.

Wrong, the hoarders are the hero.

http://nakamotoinstitute.org/mempool/im-hoarding-bitcoins-and-no-you-cant-have-any/

So it is merchant adoption, after all !


Possible, but that is what I call merchant adoption.  "store of value" without merchant adoption, replacing gold, but not the money to buy your car with, is hard to believe.  That's my point.


Why ?   Look at some paintings of some or other famous painter who is dead, so his paintings are collectibles like bitcoin.  Now, if bitcoin remains a funny curiosity within a certain circle of technology adepts, slowly growing at about the rate of inflation of bitcoin, why wouldn't it be possible ?   Maybe we are already on the top of the adoption curve of "funny curiosities".  Personally I don't think so, and I don't hope so, but it is a possibility.
Rembrandt paintings are worth a lot of money, but I think, less than the current market cap of bitcoin.  So should we expect bitcoin, as a technological curiosity if it never grows out of that status, to be so much more worth than the collection of Rembrandt paintings ?

Maybe bitcoin, as a curiosity, already came to maturity ?

Just to illustrate that it is perfectly well possible that bitcoin stays at about $400 too.  It would then be a reliable store of value for those few people interested in this kind of stuff, just like collectors of Rembrandt paintings are.  They are expensive too, but don't go to the moon either.

Store of value > Means of Exchange > Unit of Account

BTW I can imagine that any price short of about 5 million will give you a 5 year profit, ask me again when we get close to last half of late majority.

But that is absolutely not merchant adoption. The argument is not whether it will be used as a means-of-exchange. That is a given. The argument is that this use case (currency) can only be fulfilled by its success as a store of value.


Bitcoin are not collectibles, they are money so that comparison does not stick. Maybe you're just playing stupid if you are honestly trying to peg Bitcoin as a "curiosity"

On the contrary.  A store of value needs much more trust than a currency, because the holding times are much shorter for a currency, and the possibilities to exchange it are much larger with a currency.

It is much less risky to be paid in an asset as a currency and spend that currency on several goods and services, than to store your retirement in that asset if trust in the asset is limited, because the currency, you keep it for a few weeks.  The retirement, you keep it for 30 years.  

I wouldn't mind be paid in bitcoin if I could spend my bitcoin when going to the supermarket, and buying petrol and so on.  I wouldn't care about the long-term evolution of bitcoin.  Hey, during one month, it won't change too much, right ?  However, I have no idea about in 20 years.

I don't mind getting paid in fiat either.  Actually, today, I need fiat to be able to buy my groceries !  So if I would be paid in bitcoin, I'd convert them to fiat to do my shopping.  Because with that fiat, I can buy stuff all over the place.  With bitcoin, not (yet).

Using a currency is much less risky than using a store of value in the long run.

Bitcoin is not money yet.  Bitcoin acts as digital collectibles for the moment.  In order for bitcoin to be money, you have to be able to walk into a store, see the stuff priced in bitcoin, and pay in bitcoin.  Without thinking about it.  Like you do with $ in the USA, or with Euro in Europe.

Sure.  The point I'm trying to make is a BTC represents nothing external to itself.
The value it represents is purely speculative--not even a potted plant in reception.

Haha! don't believe everything you read on the internet ;D

We've been playing the spending game for too long now, let the planet heal.

Elders are talking about new golden age, that will last for thousand of years.
If Bitcoin isn't new gold, I don't know what is.

A means of exchange is exactly that: a store of value, but with the aim of using it as a means of exchange.  The store of value comes from the fact that there is a time lapse between the obtaining of your means of exchange (for instance, as a salary) and the moment of spending it (say, 2 weeks later).  
During these 2 weeks, the value of your delayed exchange is stored in the currency.   It is what gives the currency a market cap.  It comes about because it makes the velocity finite (inverse of the holding time).

What I wanted to say is that it needs less trust to store your wage in a currency for 2 or 3 weeks, rather than to store your retirement in a store of value for 20 years.  Moreover, the currency has on top of that the advantage of being able to be exchanged directly for stuff, while your store of value, if it is not a currency, first needs to be converted into a currency and then into goods and services.

Stores of value which have no other fundamental than "trust that it is a good store of value", need, well, a lot of trust.  Gold has that trust, because of its 5000 year history.  Famous paintings have that trust too, if they are old and famous enough.  New paintings don't.  They can be speculative assets.

The stocks in the stock market have discounted cash flows for them.  

So while a software tech company might be 99% intangible, valued in fiat promises on paper that is 99% intangible, the last 0.01% tangibility that bitcoin doesn't have over that really bugs you? Interesting.

It seems you don't understand what makes money.

The store of value feature and the currency aspect are not separate. For an object to become money it needs to offer both.

The one and only reason why something becomes money (and subsequently is used as currency) is that people trust it to hold value over time and be exchangeable for other goods and services.

So any currency is only useful as its ability to store value over a determinate amount of time as only then will people trust it to use as a means of exchange

Means-of-exchange and store of value are functions of money.

Means-of-exchange != Store of value.

Store of value function is not dependent on long term holding or time preference.

http://en.wikipedia.org/wiki/Store_of_value

Bitcoin as money is both store of value, currency and unit of account.

Only when people will trust it to hold value can it get a foothold as a means-of-exchange.

http://en.wikipedia.org/wiki/Medium_of_exchange

You are putting the cart before the horse

You (intentionally?) missed the joke.  I'll explain it in dryer terms:

Stocks represent assets--both tangible [potted plants and such] and intangible [intellectual property, skills, etc., etc.].  Presumably your software co. has plenty of the latter.  If it truly has nothing more to offer than a potted plant in the lobby, I'd have to advise against investing--sounds like a typical Bitcoin scam co. to IPO in the "Securities" section :-\

Bitcoin [the unit] does not represent anything beyond itself.  Or, rather, that it fits into this fork of the blockchain.  In other words, if the technology behind Bitcoin has value, owning BTC does not mean you own a share of that technology--simply an instance of the technology.

But, again, Bitcoin is less similar to the stock market than apples are to outboard motors.

I disagree.

Bitcoin is literally a proof-of-work in conjunction with a point on an adoption curve.

The proof-of-work part is what makes it tangible IRL, the point in the adoption curve is what makes it relevant to society. Yes, the same thing in a vacuum wouldn't be of much value, but value is a social construct and Bitcoin has that.

+1

Beautiful way to put it.

If real mass adoption ever takes hold, which i think is still extremely speculative right now, we will see surges in one day in the thousands of dollars. The term Gap-up will seem completely inadequate.

There simply are not enough coins to deal with the number of people that will potentially be seeking them out.

We will go to sleep one day with the price at $3,500 and when you wake up it will be $15,000. Nothing will be able to stop the gaps up when the world's fiat begins to crumble.

In this future time, Bitcoin will be useful for payments for most of what you buy, Miners and all holders will not switch to Fiat for anything and everyone will be buying Bitcoin for their financial salvation.

1 Bitcoin will be like one share of Berkshire Hathaway, if you own one, you are basically a filthy rich bastard.

Had to google it:

Stock price: BRK.A (NYSE) $221,725.00 +672.17 (+0.30%)
Nov 25, 4:00 PM EST

0.3% was a $600+ change, now that would be fun to trade.

This is also why your never "cash out"

I set out to delineate the difference between Bitcoin and the stock market, not the value of Bitcoin.  But I'll follow your tangent.

"Proof of work" is not proof of useful work.  It's proof that an amazing amounts of electricity was wasted on what amounts to little more than digital thumb twiddling.  Useful to ASIC manufacturers?  Sure.  Useful to mining contract resellers?  Yeah.  But useful to society as a whole?  Not really.

How useful is a currency that consumes 10% of its market cap, each year, to secure?  Well, if Satoshi is right, and price of mining does approach the price of mined coins, then Bitcoin is costing just that:  ~10% of all the coins in existence were mined this year :-\

I had the chance to buy a share at 15k, i thought it was insanely expensive.....  so I bought a car instead, stupid stupid stupid

If more people starts to use bitcoins, the demand is higher and the price rise.

But if it hits for example $5k, lots of people might sell their coins to fiat. Wouldn't this lead to a price fall, or will the price just be the same? Depending on the demand and how many people want to buy at that time.

There is some speculations in other threads etc saying that it could go up to low 5 digit, not sure what they base this on, maybe exponential growth.

And we still have to take in consideration that bitcoin is not easy to handle for people who don't know more then the average about computers and internet. And some of the bitcoiners see it as an investment and not a currency.

Correct me if I am wrong!

We are currently in the speculation phase, each bump up has an army of holders ready to cash out to make their millions. Soon Bitcoin will bump up and there will be no safe haven for your value. You won't want to cash out of Bitcoin for any reason because fiat currencies will be such a bad option. Holders will simply hold and hold.

It may not be the next bump but I think it will be within 5 years. I think we will see 1 more purely speculative bump with a crash, but then you get a fiat replacement bump that will blow our minds... gapping up in ways that will make you sick to your stomach, only stopping at the very top of what Bitcoin can ever be worth.

Be grateful you have any coins right now, because in the future you will never buy even 1 with your life's savings of fiat.

It is arguably the only way to create an immutable, decentralized ledger. Not useful work? Very much useful since without the work the chain is not secure.

How useful is a currency that is easily attacked and vulnerable to corruption?

You are starting with a few dubious assumptions:

1. An immutable, decentralized ledger is the right way to do money.
2. Ten percent, yearly, of the entire worth of Bitcoin (or any currency) is a reasonable amount to spend on security.
3. The current supermine distribution is decentralized and immune to corruption.

A means of exchange is always a store of value, between the moment of earning, and the moment of spending.  The wiki article talks about intrinsic value, which is often the genesis of a means of exchange (originally postulated by Menger).  It is often a medium with high intrinsic (usage) value, and also high tradability.
In as much as that means of exchange has a total "stored value as value store" which is far below its market cap as a useful good, its value is essentially given by its intrinsic value, and not its monetary value.

However, for assets which have low, or zero, intrinsic value, such as gold and bitcoin, all of their value is derived from its monetary function, that is, from the demand for it as a store of value. 

Now, you will argue that that goes against my argument, and that such a medium must become first a store of value before becoming a medium of exchange.  My point is that a medium of exchange *automatically* implies a function of store of value (because of the finite holding times between earning and spending), and that this is a much more *solid* way of conferring the function of storage of value, than the pure store of value function without it being a medium of exchange.

Bitcoin has no function as store of value without medium of exchange on short holding times.  There's no point in converting your salary from fiat to bitcoin in the beginning of the month, and to convert those coins back to fiat each time you want to purchase (in fiat, as bitcoin is then, under this hypothesis, not a medium of exchange, and only fiat is). 
Holding fiat for the rest of the month is just as good.  The hassle isn't worth it.

So the only pure store of value function of bitcoin is in the long term.  My point is that that needs a lot of trust if there is no "to the moon" speculation drive anymore, which won't exist anymore if we "are at the moon". 

On the other hand, merchant adoption can confer the store of value function to bitcoin in the short term, because you hold it between getting it and spending it.  That doesn't need much trust.  If I can BUY stuff in bitcoin, I wouldn't mind my salary to be paid in bitcoin.  And automatically, bitcoin becomes a store of value, for a few weeks, the time I spend it.  I don't have to worry about its long-term exchange rate variation. 

In the beginning, I would want my salary to be paid in bitcoin, but calculated in fiat, as for me, bitcoin could just as well go to $10, - as it could go to $1000.-   Most merchants would also do so.

Only after years of practice, and after bitcoin would take up value because of its exchange storage of value, people may start trusting bitcoin on the longer term (without "to the moon" speculation drive).

I also think the demand will be higher for bitcoins in the future as more rich people might put some of their savings in btc. But I am not sure about if we will go away from fiat totally. Maybe this will just become a good first or second alternativt payment system or what ever one wants to call it.

What is your statment based on when you say that even 1 btc will be so epxensive that one can't buy it with all their lifesavings in fiat? It's interesting but some has 4 digits in lifesavings and some up to 6 digits, just to use some logic numbers.

Do you think that the next halving will effect the price in a huge way? Since by then more people have adopted bitcoins than before. And if we know that bitcoins would go up a lot in value it would not be so useful to spend it yet.

And the question still kind of remains, if the price goes up to a new all time high, will it stay there if some people want to cash out to fiat? Or will the price drop.

The question is: why would they do that ?

(I'm not saying they won't ; I'm asking what do you think would drive them to do so).

True, but the value of something is not given by the cost of production.  That has a long time been a problem in the value theory of money (and value theory in general), until von Mises pointed out exactly that error.

If it costs so much to keep bitcoins safe, that's more a disadvantage than an advantage.  The cost of production is a price bottom of the offer curve.  There's not necessarily a demand that corresponds to it (or it can be a very small demand).  If bitcoin needs to spend a billion $ of worth per year just to keep it up and running, then that is more a cost of usage (in competition with other stores of value) than anything else.

If I have a very expensive way to make absolutely disgusting food, not many people are going to buy my unique, expensive, and terrible tasting food.  It is not because there is only an expensive way to make it, that it will be valued so much by the costumer.

The uselessness of PoW outside of the context of the blockchain is actually not accidental:
https://bitcointalk.org/index.php?topic=855520
This is what makes money system neutral towards any type of useful work.

I don't think comparison of money system to a stock market is appropriate. Money system is a playing field, which needs to be simple, neutral and robust. Stock market is a competition of various players within the money system.

Mining allows competition of control to stay an open game for as long as innovation can occur (indefinitely).
Other schemes would tend towards concentration of control with long lasting network effects.

Diversity, but of course if they see a value in it, which I think some rich people do.

This is in fact a very intelligent point.  I have to say that I was first attracted in principle to such things as primecoin, because they solve at least some obscure mathematical problems during mining.  But you are right that what constitutes "useful work" is part of what the market has to decide, and will change over time, so it would be silly to cast it in stone in any successful cryptocurrency.

That said, there is indeed a fundamental difficulty with PoW.  In order for it to make the blockchain safe, a lot of work has to be done.  On the other hand, that is a cost for the use of the currency (a kind of tax on its usage if you want to).  During the early mining phase, that tax is essentially paid for by inflation (the phase we are in).  Later, the tax will be the fees that have to be paid.
If it is true that the cost of PoW is comparable to the inflation right now, that is, 10%, now that would be terribly huge.  As long as bitcoin adoption is growing, that's not so much of an issue, but imagine that the whole world economy is taken over by bitcoin.  It would mean that 10% of the world economic resources would go into PoW ?  It is what I touched upon in that other thread https://bitcointalk.org/index.php?topic=865870.0

I have no idea how much world resources are spent today to the fiat banking sector (I don't mean, how much money the banking sector is handling, but how much the banking sector's functioning is costing: salaries, real estate .... of banking and financial institutions).  The cost of the fiat banking sector is the fiat equivalent of the economic cost of PoW for cryptos.

The question was: what makes them "see value in it" ?

Because if the answer is "because they think it might significantly increase in price", then that's a Ponzi kind of motivation.  I already outlined that.  If the reason for people to buy bitcoin is essentially that they expect a significant increase in its price, then this cannot be the motivation for the "last ones".  As they will realize this, they will not buy, or they will sell after a while.  If they do, the second-last entries will realize that they will not find sellers at much higher prices than they bought.  So they will sell too.  Etc...
If the main or sole reason to buy something is the "greater fool" hypothesis (it will rise in price) then we are definitely in a Ponzi.

So if the motivation is NOT "it will rise in price", but rather "it will keep its value long-term" what will make these people think that and prefer bitcoin over other stores of value ?

And as to why anyone would buy at $100,000 plus a quote from an article today


http://www.bloombergview.com/articles/2014-11-25/tech-bubble-wont-burst-in-2015-2016

Your account is relatively new, so I'll play Nostradamus and tell you a bit about the future.
You will continue to post well-reasoned, rational arguments.  For a while.  
Then you'll realize that no amount of logic will persuade those who are invested in believing the opposite.  A lunatic insisting that he is "a little teapot, short and stout" will not be persuade to think otherwise, no matter the force and elegance of your reasoning.

Then you'll start posting gifs.

Below, a quote describing the type of minds you're dealing with here much better than I could:

"...I have never seen a more sublime demonstration of the totalitarian mind, a mind which might be linked unto a system of gears where teeth have been filed off at random. Such snaggle-toothed thought machine, driven by a standard or even by a substandard libido, whirls with the jerky, noisy, gaudy pointlessness of a cuckoo clock in Hell.

The boss G-man concluded wrongly that there were no teeth on the gears in the mind of Jones. 'You're completely crazy,' he said.

Jones wasn't completely crazy. The dismaying thing about classic totalitarian mind is that any given gear, thought mutilated, will have at its circumference unbroken sequences of teeth that are immaculately maintained, that are exquisitely machined.
Hence the cuckoo clock in Hell - keeping perfect time for eight minutes and twenty-three seconds, jumping ahead fourteen minutes, keeping perfect time for six seconds, jumping ahead two seconds, keeping perfect time for two hours and one second, then jumping ahead a year.
The missing teeth, of course, are simple, obvious truths, truths available and comprehensible even to ten-year-olds, in most cases."

 ;D

Point is, I'm pretty new at *this* forum, but I'm an old whale in forums on the internet, and you tell me nothing new.

My main aim is not to come here and "educate people" or something.  I use the method of pretending to educate people to look at the reactions, and to find out if there are arguments that show me wrong (that convince ME that I might be wrong). 
In fact, I already changed my mind on some aspects of bitcoin (to which I'm pretty new).  I used to think that history would repeat and that a run-up would come soon.  I'm now pretty convinced I have all my time watching how price will evolve.

I'm less pessimistic about bitcoin than you are.  But it is, in my opinion, a bet on a VERY long term (measured in decades).  There's a high chance of it failing, but there's a small chance of it succeeding.  I'm trying to argue one way, and see if there are strong arguments the other way, in which case I learn.

The best way to learn, is to pretend to teach.  I'm here to learn.  Not to teach.  But I pretend to teach in order to learn.

Speculative attacks aka "Your dirty fiat is no good here". The currency war is coming and Bitcoin is David amongst Fiat Goliaths.

http://nakamotoinstitute.org/mempool/speculative-attack/

I was about to write that they will see value in it as they see the value in gold or fiat money, but I didn't, because I thought it would be obvious.

If rich people buy BTC, they will probably buy to diversify their money from fiat or gold. If they are rich, they don't need to see it as a investment. But if the price increase over time, I don't think it would be negative for them.

But the main question remains, why would someone buy bitcoins? Because it's an anonymous method of payment? Because less decentralization? Because less banking control? Because lower fees? You can pretty much meet like half of these requests in regular money, fiat.

The point is that fiat and gold have two (different) fundamentals.  Gold is a historical store of value (and used for centuries to be a currency, until it was replaced by fiat).  So gold has historical trust, most people value gold and I would think that rich people looking for a store of value would think that even 30 years from now, people will still value gold (somewhat more, or somewhat less than today).

Fiat is currency which can actually buy stuff.  Even if you don't trust the value of fiat in the long run, it is a relatively safe store of value in the short or medium term, simply because you can buy directly a lot of stuff with it.  The nice thing with fiat is that, as it is a currency, you will be able to buy any other store of value with it when you want.  It has the highest possible liquidity.

So these two things have established fundamentals which make you consider rationally that they are stores of value.

Bitcoin, on the other hand, is something totally new, has very high volatility and an uncertain future (very bright, or not at all).  As a high risk, high return investment, of course it would be a good idea to invest a tiny fraction of your holdings into bitcoin, like it is to invest a tiny fraction in start-up shares.   But it is only a high-risk, high return asset if its price is low when buying!  Otherwise, it is just a high-risk, no high return asset.

This would be totally different if bitcoin were a currency, and if there were massive merchant adoption.

So this is where my question came from: what rational motivation would "rich people" have to buy bitcoin at a high price ?
And if they don't, price will fall of course, until it is again low enough so that there's a good chance for a high return.

I think this is what we are witnessing right now: price remains low (might even get lower ?) because at this price, there's still the potential for high return.  From the moment the price rises, the potential for high return diminishes, but the risk remains the same.  So at that point, other high-risk, high-return investments are more interesting.

Maybe you'd like to believe this guy then :

Murray Rothbard

Thanks for understanding! :)

I would like to compare mining to gaming. Imagine the number of graphics cards sold annualy (tens of millions) and the amount of energy humanity "wastes" on shooting aliens in video games. Nobody seems to complain about that, as there is a lot of fun there. Plus there is an added benefit - gaming led to the development of highly efficient parallel processors that now contribute to research in other areas of human life.

The same way, mining has a lot of fun for nerds building custom rigs and playing with various settings, while manufacturers and vendors push state of the art silicon technology to produce the most efficient machines. Mining might become an incentive for humanity to push research in energy-efficient compuattion, development of new types of energy sources as well as deeper understanding of cryptographic hash functions. So it's not all that useless as it seems on the surface.

Competition requires energy, you can't change that. The good thing, is that energy is not actually "wasted", just transformed.

Interesting point re. all the graphic cards sold.
It would be a great point if those graphic cards were running at maximum energy consumption 24/7 during their lifetime, and if that energy consumption was anywhere close to today's ASICSs.

And if those graphic cards were used to fill giant aircraft hangers, like so:

https://pbs.twimg.com/media/BrxyUeUCUAASNcy.jpg:largehttp://www.datacenterknowledge.com/wp-content/uploads/2014/04/knc-sweden-470.jpg

And yes, energy is never wasted, only transformed.  Because first law of thermodynamics.  Good one :D

We're waiting for you to propose a better alternative, troll.

Not until you lrn some tact :)
http://s9.postimg.org/l9ym8n8r3/littlefaggot.jpg

Beautiful pics :)

Actually, I would be interested to know the estimates of energy consumption in gaming versus mining.
I don't have the data, but something tells me that the former is orders of magnitude greater than the latter.

Bitcoiners' community is just a few millions in total and only a small part of it crowd-funded mining operations, including those of Asicminer, Avalon, KnC, BFL and others. Gamers, on the other hand, are in hunderds of millions worldwide if not more.

Anyways, competition is fun, it's worth the energy.

If you make your own altcoin, and you mine it exclusively yourself, and you hoard it 100%, and you replace bitcoin by the name of your altcoin in the above argument, what changes ?

Going away from fiat is not really the point, people still use fiat in Argentina and their currency goes down in value constantly. The question is if you have savings where will you keep it.

When i say life savings I mean the majority of humanity. Certainly, some people will be able to buy a Bitcoin no matter the price, but not anyone I know.

I think there is little doubt that the halving will be a catalyst, probably the next speculative bubble. Six months before the halving the pressure will start to build and price will grow until it pops.

We have one more speculative bump and drop. After that we will enter a new phase of Bitcoin where market adoption exceeds any ability to provide enough coins.

We will spike late 2015 and drop to 1200 mid-late 2016. After that, the next run up will be to the top of what Bitcoin will ever be worth in our lifetimes--The last truly great bubble. I think it will be an x100+ run up and won't stop until the price is so high that even stone cold holders like me will sell coins to diversify, my feeling is before 2020. Then it will be the mature phase of Bitcoin where price fluctuates based much less than on non-speculative factors.

According to satoshi and common sense, the cost of mining should approach the price of the coins mined.
This year, approximately 10% of the total Bitcoin in existence has been mined.  In other words, if satoshi is correct, the total cost of maintaining Bitcoin network at the present level of security is 10% of the total market cap.
Few will argue that the lion's share of that cost is electricity.  There are online mining calculators which will give you a relatively accurate number, the only guesswork on your part would need to be the the breakdown (by brand and model, and, thus, efficiency) of the gear being used.  

Right now, Bitcoin's market cap is small enough for this to be almost inconsequential.  But if Bitcoin does succeed as the new world currency, this implies that 10% of the world's wealth will be consumed each year.  Most of it in electrical costs.  That's staggering, and supplying that much energy is likely unfeasible.  Certainly not too eco friendly :D


But that's all irrelevant.  We're starting off with the assumption that running a Bitcoin network is the right way to do money.  It's not.
Presupposing that blockchain must be maintained is as justified as specifying mice as the prime mover in the next space shuttle design.  Sure, it could be done by introducing some truly Goldbergian complications, but ... see where I'm going with this?

If I understand something of the macro economics of bitcoin, you can say that the cost of the mining is of the order of the value of the inflation (somewhat less because miners want to make a profit).  Now, the cost of mining is in part the hardware, and in part the energy.  I don't know the ratio, but let's say half-half.  

At the current inflation rate, which is 10%, the energy cost of mining per year would then be of the order of 5% of the market cap.
At a current market cap of $5 billion, the mining energy cost would then be $250 million per year.  Let's put the price of a KWhr to $0.1 (in China and USA), then we have 2.5 billion KWhr per year, which comes down (there are 8760 Hrs in a year) to an average power consumption of 300 MW.  That is still reasonable.  A third of a big power plant for bitcoin to be mined.

However, imagine that bitcoin price goes up with a factor of 10.  Then all the mining in the world would go to something like 3 GW - 3 nuclear power plants.   If bitcoin takes over the world economy, and the market cap of bitcoin becomes the world fiat market cap, we arrive at 3000 GW.  Now that's embarrassing.    That's more than the world's electricity production !

So creating a universal ledger is not the way to do money? Maybe you have something better to propose, troll?

Yah, two sets of books, one set kept in pencil.

what changes is no one cares about my altcoin nor is there any demand for it.

 :D

maybe LambChop can be the universal scribe

Yes, faggot, I do.  And the whole world is already using it.
It's called money, or "fiat" as you retards have taken to calling it.
You may now return to being a spergy little faggot.

http://s17.postimg.org/pyu1y98sv/lucky.gif

 :D

fantastic, the "fiat" experiment is working so well anyway, why should we bother, right troll?

Yes.  Working great.  Unlike the Bitcoin fiasco--a "store of value" that loses half of its value in a year :D
Props for getting me to answer your faggotry. 

http://s30.postimg.org/jccb3fyld/coal.gif

Message recieved  ::)

Arbitrary timeframe is arbitrary

As I've mentioned before, there was a time when BTCeanie BTCabies were a good investment.  That time is but a memory.
As is the case with BTCitcoin.

First of all, the current 10% inflation is temporary, it will go down gradually over time.
Secondly, the amount of resources and energy spent on mining reflects the demand for competition in control for transactions.
Mining has nothing to do with market cap in the long run, adjustable difficulty reflects the demand for control.
You don't need to mine Bitcoin in order to use it, you can make profit by providing services or doing some useful work.

The beauty of PoW is that money and control are separate. They must be, as they are two different archetypes. Things you cannot buy with money, you get through control. Keeping them separate ensures the competition for both.

Probably the part that's worrying him. Don't worry, I'm sure that pretty soon after governments start to take tax payments in bitcoin, they'll start paying welfare in it also.

Sure, the next reward halving would cut it in half.  Also cutting the security of the network in half by causing miners to shut down (remember--the cost of mining should approach the price of coins mined according to satoshi).  Unless Bitcoin prices happen to double on that happy day.


No, mining has everything to do with market cap, see above.  Bitcoin's market cap is simply (price of BTC) * (total BTC in existence).
Lower market cap means that each bitcoin is worth less.  Would you spend $300 to mine a coin worth substantially less than $300?
Sure mining depends on market cap.


That's true, though not relevant to this conversation.


Not sure what you're trying to say.

D00d going by Flashman:  Unless you have more than your snark to contribute to the conversation, learn to STFU.
ty

Which is safe to assume it will because, you know... half supply.

 :D

the irony

Yeah, I know.  Limited supply.  That's what made BTCeanie BTCabies valuable...

"The company's strategy of deliberate scarcity, producing each new design in limited quantity, restricting individual store shipments to limited numbers of each design and regularly retiring designs, created a huge secondary market for the toys and increased their popularity and value as a collectible."--wikip

...until it didn't.

There's that other variable at play here, called "demand."  The absence of it is what's tanking the price of your  BTCeanie BTCabies Bitcoin nao :-\

In a balanced PoW system mining is a break-even game, it doesn't matter if 1 BTC is woth 300$ or 10k.
If you are, as Bitcoin user, satisfied with the quality of control over transactions, you don't need to mine Bitcoins.

If you want to challenge the controllers though, you might want to crowd-fund your own farm, or develop some innovation in this space. As adoption and the market cap increases, the mining market can grow to reflect the growing importance of control over the system, but it doesn't have to match it in any way.

In an extreme case a single computer with network's difficulty equal to 1 will be able to handle all of the transactions regardless of the market cap, only the amount of competition for control over the system will determine the cost of mining and future network's difficulty.

Still not sure what you're trying to say.
Maybe if you could start by answering my question: "Would you spend $300 to mine a coin worth substantially less than $300?"

If my motive is profit, then the answer is certainly "no", unless I'm too smart and can predict the value increase in the future.
If my motive is getting a share of control over the system, then I might consider doing this even at a loss.
If I don't need a share of control myself, I might still wanna compete for it, so that it doesn't get concentrated in single hands.

Freedom has costs of defending it, you might consider doing it at a loss sometimes, but not all people understand it.

Mining is the only truly anonymous way to get Bitcoin so some people (who buy illegal shit) would be prepared to pay more to mine coins.

Now we're getting to the root of your misunderstanding.
If you can predict that Bitcoin will be worth more in the future, you should simply buy it at current price [below $300 in my example], and not mine it [at substantially more than $300 in my example].
Because math.


Unless you're a pool operator or a megamine [solo mining], it's the pool that has control, not you.  You're just providing the hashpower & getting paid when a block is solved.


Bitcoin is no more freedom than BTCeanie BTCabies.  Stop gulping that Kool Aid.

http://s30.postimg.org/6i3yzrm1t/jimjones.jpg

You can certainly earn your bitcoins or buy them, I have no problem with that.


Yes, but I can withdraw my hashpower at any moment, so there is that.


While I myself might not be in position to fight for control over the system, the rules of the game are such that other players always will. That's good enough for me.

>...I myself might not be in position to fight for control over the system, the rules of the game are such that other players always will...

That's like the bleakest thing ever.  What, exactly, is worth looking forward to here?  Sounds no different than fiat at its worst.
Nvrmnd, keep bein' rebel :-\

http://www.sportsposterwarehouse.com/catImages/whofooledaq-1.jpg

In fiat, control is fixed and cannot be challenged, different fiats can compete though.

In PoW, control is a tough competition, that ensures robustness.
You simply don't have time and resources to start screwing people over with their money if you're busy fighting for control.
And by the time you think you've established a monopoly, a shadow player emerges and obliterates your efforts with some unforeseen tech. That's the freedom in Bitcoin, that's the beauty of it.


Actually, I am not.
Just felt that certain points of view have recently overwhelmed this forum and thought that balance needed to be restored.
Balance is the key! :)

If you run p2pool (with your own local node) then pretty much anyone can retain control.  Although some hardware has problems with stales.

Of course.  But if you adhere to the S-curve adoption, the bending point (the middle of the S) will be somewhere in the not-too-far future according to that viewpoint (which is based upon theories of good money drives out bad ones, and so on).

Now, if the S-curve comes in before 2017, we are at 10% inflation.  If the S-curve comes in before 2021, we are at 5% inflation.  If the S-curve comes in before something like 2025, we are at 2.5% inflation.

So if "general adoption in the world" happens before 2017, ALL of the world's electricity will go to mining  :o
If "general adoption in the world" happens before 2021, more than HALF OF THE WORLD's electricity will go to mining.
And if it happens before 2025, about a third of the world electricity production will go to mining.

Simply because the reward is SO HIGH, that it is beneficial to consume more electricity to mine.

If the full world economy runs on bitcoin (S curve, remember) a coin should have the value of what is now about $3 million.  That's namely the amount of M2 fiat that circulates in the world right now if all coins become liquid.  If there are still hodlers at that moment, coins will even be worth more under total adoption, because a smaller amount of coins than the full supply will have to carry all of the current M2 fiat worth.

If you mine before 2017, you'll obtain 3600 coins a day, which is the worth of 10 billion dollars of right now.  More than the price of a nuclear power plant A DAY.  The incentive to mine is HUGE.

So, if you adhere to the S-curve theory and "good money drives out bad money", there's no escaping of huge power consumption for mining if it happens before 2025.

So what logical options do you take ?

A) the S-curve is wrong

B) good money doesn't drive out bad money

C) it will happen after 2025 (then how will it keep up until then ?)

D) yes, miners will use up a large chunk of all electricity in the world !




The reward is given by the coin price, and hence by the market cap.  If a day of mining brings in the equivalent value of 10 billion, you are going to be willing to use up a lot of electricity to get that value  in your pocket, no ?

Thank you for highlighting that, but it's not my quote, it's NotLambchop's.

You are exaggerating.
You still need electricity to produce food and other stuff, you can't eat your bitcoins even if they are super precious.

In short, market cap reflects demand for money (bitcoins), mining costs reflect demand for control.
These two are not directly related. In the long run it's the volume of transactions and fees that will define the costs of running the network, not the market cap.

The efficiency of miners is improving though, it might be around a watt a gigahash installed on average at the moment, but with the older hardware getting turned off, it's going to approach 0.5W/gh soon, the next gen 16nm is supposed to be coming in at 0.2W/GH beginning next year. We could be down to 0.1 before the next block halving.

The thing about bitcoin though, is it is VERY cheap to export. Cheaper actually than electric power is to move, if the power can be produced 100s of miles away from population centers, industrial areas etc. There's a lot of potential areas for wind turbines, solar, hydro, tidal, geothermal etc that are just too far away from use points to consider tapping into. If there is a huge and insatiable demand for wind turbines and solar, sure an initial price spike on those, but it would actually lead to cheaper wind and solar plant for everyone, due to economies of scale and mass market factors.

There's also the fact that nuclear power plants are very hard to run to capacity, that's because you can't just turn them on and off, they need to be run at the output required to provide "base load". Reactive load is supplied by fossil fuel burning plants (One reason Earth hour is bad, they have to fire up more fossil fuel plants for the load spike when everyone turns the lights back on! ) Anyway, after about midnight, there is "too much" electricity in the system and spot electricity market prices tend to go negative until about 6 AM. Power utilities world wide would love to have something to soak up excess load on demand. They may see the benefit in putting a huge bitcoin mine next to a nuke plant as a load sink, then they can finally run that spendy plant at full capacity, and dump load into bitcoins overnight.

Anyway, there will be places where power can be got 10x cheaper than anywhere else but require considerable site investment. These places will get 10x the mining power anyone else can use. Due to limited amount you can put in one place, this will ensure decentralization geographically.

What I'm trying to say is, that the bitcoin price will be wayyyy above the actual electricity cost to mine, but be close to what it would cost to mine at 15 cent a kWh or so. The difference would be underutilised power resource development costs, and equipment replacement costs, with the mines betting that they get to double up every 18months due to moores law.


So, counter-intuitively, there is a possibility for bitcoin mining to make world energy greener, just by creating a HUGE mass market for solar and wind plant, and by allowing fossil fuel plants to be displaced by exchanging their ability to ramp load quickly, for an ability to dump load quickly.

And this is why I post gifs :'(

I liked those, thanks :)

I'm not denying there is a relation, just that it's not very obvious.
If the market cap is huge, but no one is sending money, there will be no fees for miners to collect, and the whole mining expenses will be negligible. But the truth is of course somewhere in the middle.

So, counter-intuitively, there is a possibility for gas guzzling cars to make world energy greener, by rapidly exhausting the world's oil supply and creating a HUGE mass market for solar and wind-powered vehicles 8)

The obvious relation both I and dinofelis pointed to is this:  the cost of mining can not substantially exceed the price of BTC mined--according to satoshi, math, logic, and common sense. 
The market cap is (price per BTC) * (total number of BTC created).
Enjoy the gifs.

Let's stop playing games, let's stop watching movies, these are all very wasteful activities.
We should just sit on our couches quietly and get our food for free.
This way the world will be greener and everyone happier :)

So you're arguing that there is a cap on mining expenses, that I agree with.
In the long run, when only fees constitute the reward, the volume of transactions will be the major contributor to mining expenses, not the market cap.

However consider this scenario, if current controllers decide to freeze certain super rich addresses, then those people might eventually wake up and decide to fight for control at a huge loss in order to save at least something.

Keeping money and control separate has this interesting dynamic to it.

Lol, I once took my V8-powered Bugeye Sprite shopping at Stop & Shop, to prove to my GF that it was a practical car.  It had no passenger seat, so shit worked out real well.  She remained unconvinced.

*I pointed out that Flashman's argument was absurd, not that fun was wrong.  

You win, I finally see the untenability of my position.
Bitcoin--a system where your money could vanish because nefarious miner cabal.  Much freedom, such better than fiat.

Enjoy the gifs.

Not the same thing, we can bring the bitcoin mines to the energy, whereas energy has to be brought to the vehicles. It's already happening, renewable is cheaper, mines are moving near hydro plants in Washington state, geothermal in Iceland, etc. Fossil fuels are only in competition elsewhere because they are more portable, portability is a non issue in bitcoin mining.

In fact, the biggest portability issue with the largest known source of energy is how difficult it is to get power or things made from power from earth orbit. The sun always shines up there, there's no atmospheric attenuation. It's the most efficient place to gather solar energy.

Bitcoin is a system where competition for control is ensured and never stops.
You can't lose your freedom if you don't already have it.

Flashman, electricity is quite easy to transport--see high-tension power lines.  A megafarm which sets up next to a hydro plant & uses up all of its energy is anything but "green."
To make up for that wasted energy, coal-burning plants will simply have to burn more coal.
Think more than one step ahead.

FTFY  Thanks for explaining how everything in the world works.

We know how to do it, that does not necessarily make it "easy" or cheap for long distances. Just the copper is gonna costs 10s of thousands per mile.

>thinks high-tension power line cables are copper

Did you learn that from Zerohedge or from Cato Institute?

Yah there's increasing use of aluminum and even carbon fibre cores, take that as shorthand for "materials cost."

Actual installed cost per mile is in the neighborhood of a third of a million a mile, single conductor, at that rate it's cheaper to develop bleeding edge asics from scratch rather than build 50 miles of lines.

^

The cool thing about building power lines vs. building ASICs is power lines don't become obsolete in 5 months :D

The needs of others are usually not a consideration when making money.  You are right, though: the price of electricity would sky-rocket when fighting for the last few available GW, as the demand for the current would be in competition with "making money".  As such, there will be a market equilibrium between those rich people who can still afford high electricity prices to produce food and stuff, and miners.

In other words, electricity will become hugely scarce, and the marginal price of electricity will be given by the trade-off between the desire to eat, and the desire to mine coins.


Price is not influenced by mining.  But mining is of course influenced by price: you will put into mining the amount of value minus a profit margin, equal to the mined coins.

If mining 3600 coins at $3 million each per day, mining will be rewarded $10 billion.  Any investment with a cost seriously less than $10 billion A DAY will be profitable.  I estimated that half of the mining cost goes to electricity, the other half goes to new hardware.

So you can easily spend 4 billion $ A DAY on electricity, 4 billion $ A DAY on new hardware, and still put 2 billion $ in your pocket.
A 20% ROI.  Who does better ?

Wouldn't you invest like crazy to get part of those $10 billion a day ?

That doesn't matter.  If you have miners 10 times as energy efficient, you can afford to put 10 times more miners !
What matters is the COST of electricity.  As long as the cost of electricity is way below the mining reward (which is about $10 billion a day if we are in full bitcoin economy), it is profitable to put more mining equipment, consuming more power.



Absolutely.
Now, there is something to say for that: deserts could be paved full of photo-electric cells with integrated mining equipment.  We could put the Sahara full of mining stuff.  However, I think a good old coal power plant will win cost-wise.  Remember that this must be up and running 2 years from now :-)



Nope, mining will adjust so as to have electricity cost to be, say, one third or so of the mined value.  (one third profit, one third hardware, and one third electricity, just guessing).


It is true that the reward-halving will leave us with a lot of newly constructed, unused power plants :-)
Like we will have mountains of obsolete mining equipment.

Because the other market that would be seriously distorted, is the electronics industry.  A huge part of it would be converted in making mining equipment.

Half of that will die at every reward halving.

And you can get the taxpayer to fund them, because they have a NIMBY attitude towards power plants.

Lol @ trotting out ur tax hobby horse when you got nothing.  GG, bro!

True. That's why I call PoW - Proof of World :)


It's correct, only I don't see where you get 3600 coins at $3 million each.
Market cap simply cannot grow that fast, if you see that, it's a bubble and it will burst.

By the time the market cap is substantial the reward would mostly consist of transaction fees.

S-curve adoption, good money (bitcoin) drives bad (fiat) out of the market, and the total market cap of fiat in the world today (55 trillion or so).  This means that if bitcoin takes over all M2 fiat in the world (it will be driven out, and adoption will be fast, according to S-curve theory, and good/bad money theory), with similar velocity, that it will have a similar market cap.

If we have a market cap of, say 17-18 million coins, and it has to have the value of 55 trillion which is the M2 cap today, then we arrive at $ 3 million for a coin.

It is "bitcoin full moon".

Hypothetical, but the basis for the reasoning.

With S-curve adoption hypothesis and good drives out bad, there is no other option but "full market cap".

So your option is: "S curve adoption will occur far in the future".  Then the question is: what happens in the mean time with bitcoin ? 

In the mean time, people need to learn and understand that old money is bad and that new money is Bitcoin. I met an old friend recently, working in IT, he heard about Bitcoin, but didn't think it was money. He also had no idea what was wrong with the current system. So this will go on for awhile.

You used to have reasonable, well-informed friends.

I know it will take (A LOT OF) time !  I was just illustrating the logical consequences of any theoretical model that postulates:

- S-curve technology adoption in the "near" future
- good drives out bad (meaning: finite market share is not possible, it has to be 100%)

as has been put forward a few times to say 'with certainty' that bitcoin will "go to the moon" soon (in a few years).

Then you get plots of technology adoption of internet, mobile phones, TV and so on to illustrate the S-type adoption.

The only point is: if it is now clear that S-curve adoption in the near future to 100% is not a very viable model, and if it is, that it would be catastrophic given the still very high mining rewards, then what IS a viable model ?

Because how does something like a speculative asset do for, say, more than 20 years without "breakthrough" ?  How does confidence and trust behave if after 20 years, it is still a small thing ?

I'm trying to explore critically what are the possibilities of bitcoin.  I just showed the peculiarities of the model "to the moon soon", which make it hard to believe.  

Could it go stepwise ?  Every few years, a new conquest of a small niche market ?  To keep it slowly growing ?  To keep the flame burning ?  It started out in the black market.  It is taking on a few "geek" niches.
However, how long can this slow stepwise conquest without "the big S-curve hit" last ?

S-curve adoption does not imply instant 100% market penetration. Your 3 million$ coin scenario is only an hyperbole to support your stance

The S-curve adoption by itself not: that only means that at a certain point, a quick evolution to a natural market share is obtained.
But if you combine S-curve adoption AND "good money drives out bad money" as a hypothesis, then by definition there is no room for "bad money", as the hypothesis is that it will be driven out.

And it cannot be driven out "slowly" because that would contradict S-curve adoption.

Both hypotheses together can only mean an S-curve that saturates at 100%.

If "good money doesn't drive out bad", then ANY market share could be the limiting market share.  Maybe we already reached that.  Maybe bitcoin then came already to maturity and its market share is more or less reached.  Maybe it will go to 0.1% of the total money market.  Maybe it will go to 0.1% of the gold market share.  Ha, it is there already.  Maybe it is 1%.  Maybe it is 10%.

But I was taking the often-mentioned two hypotheses of S-curve adoption AND "good drives out bad" together.  Then there is no choice, except for the moment of the "vertical", and then people say "soon".  I considered: within the next 10 years.

Maybe. He complained that a few companies he worked for went bankrupt during recent economic woes and the one he is currently at doesn't look very stable either. He had no idea that the debt-spiral model of today's fiat system was the cause though. He has now.


Periods of rapid growth will be interleaved with periods of slide-down and some stability. That's how Bitcoin has been since inception, that's how it will go on.

Try to understand that repeating hollow, meaningless nonsense, no matter how convincing it seems to you, is still nothing but repeating hollow, meaningless nonsense.
You'll get a "+1!!!!1!" from other loons, but sane folks will just point fingers and laugh :-\

I don't know if the early days are still a good model for the future.  

In the past, the surges never penalized a lot of people, it was a small club of enthousiasts (I suppose), and the surges followed quickly enough so as to make up for past losses.  Not a lot of money was involved after all.

The MtGox manipulation hurt.  People got burned.  More important sums were lost.

Tullips didn't boom twice.

Also, this year, a lot more trained traders are on the market, bigger money is circulating, and financial derivatives are being put in place.  That's usually something that stabilizes, in the sense that there are now so many speculative tools operational, that any surge is going to be professionally sucked out by fast traders.

The fact that people have seen the price fall (sometimes at their expense) for more than a year, means to me that any BIG surge is not going to be sustainable: many people are going to cash in (traders most !), and not much money is going to flow in for a long time at high prices.  Everybody would expect a drop again.  Unless something FUNDAMENTAL changes (say, the Swiss national bank guarantees the Swiss franc against bitcoin :-) ).

One thing most here overlook is it was very difficult to short Bitcoin until about a year ago.  Now it's a thing.
Shorting and penny stock together = Bitcoin market :)

I'm glad there is still sane people in this world. Otherwise this place would be boring :)

There is no amount of financial instruments that would be able to hold the price down once the flood-gates are open. But you have to wait for it, as conditions for this to happen might take some time to develop. It wouldn't be all or nothing though. It would just get to the next level, slide-down a bit (so that sane people can rejoice once in a while) and stabilize there. Rinse and repeat.

Tulips didn't boom twice.  True... Bitcoin has boomed at least 4 or 5 times depending on how you count.  Bitcoin = Not Tulips.  You can't just pick a number on a certain peak and say, "well that's a high number so therefore bitcoin will not go any higher"

Bitcoin is superior to every traditional form of currency that exists.  Billions of people use currency.  If anything, price is far too low!

Thanks for your comments, have a good day

One thing Bitcoiners are great at is repeating vacuous buzz phrases.
What do you mean by "superior to every traditional form of currency that exists"?  How?
Can you gas up your car with it?
Spend it in more places than real money?
Can you get it back when Anon going by ABitInterested sells you shares in his "Legit offline business?
Can you spend it without web access?
Does it give head?

Or did some senile liber tell you that it was "freedom"?

The point is that the initial booms of bitcoin were potentially of another kind.  There weren't the same trading possibilities, one was not involving so much money (I suppose), and, I pointed this out, except in 2011, there has never been a very prolongued decay that did hurt several people so much for so much money as the MtGox manipulation (which was the origin of the rise to $1200.- if I understand it: willy bot, no ?).
This is, in other words, the first time that somewhat serious money got lost.
The MtGox rise made people think the trip to the moon started and they had to get onto the train before.   Now, everybody informing himself about the bitcoin price knows that after a surge, you better wait for the price to come down again before buying.   Yes, price can be somewhat higher than the "stable" price before the peak.  But not too much.

I really would be surprised if there were a lot of people burning themselves again in a peak to a few $1000.- in the coming months.  And if nobody, or almost nobody's buying at such prices, price WILL of course come down. 

Bitcoin may eventually one day become a currency.  If there is generalized merchant adoption.

You are repeating the "good money drives bad money out of the market" theme.   Point is, it is the market that decides what good money is :-)  It will be determined by merchant (and customer) adoption.

Nop, only FOMO and greed. Merchants will follow.

If you believe that once we reach 1000$ people are not gonna be throwing money at Bitcoin like no tomorrow then you are more clueless than I would've thought.

It depends how $1000.- is reached.  If it is smoothly reached over a long period of steady rise, yes.  If it surges, no.

One already knows that a surge is not a departure for the moon, but will be followed by a prolonged period going down.
And now one can make profit with that , by shorting.  

If greed is the drive, then it would be based upon the "greater fool" hypothesis.  We all know how that ends.
Point is, the greater fool has already been tested last year.
The higher the price, the lower the expected remaining rise, so the less the greed motive works.

Point is: the ceiling of bitcoin is in sight.  The absolute maximum price of a coin is $3 million.  At that point, bitcoin took over all of fiat, and mining is going to consume all of electricity if it happens soon.

When bitcoin was $1.-, there was potentially a factor of 3 million to win.  That's a huge potential.  Even if bitcoin only takes 1% of that, you still have 30 000 as a gain.  Huge.
Now that bitcoin is some $300, the potential gain is 10 000.  Still huge, for full moon.  Even if bitcoin only reaches 1% of that, the gain is 100.  Not huge, but significant.

If bitcoin is $3000, the potential gain is 1000.  Very big.  If bitcoin only takes 1% of that, a factor of 10.  Well.  A factor of 10, that's not spectacular, is it.  It is a good investment.  Not more.  If you are sure.

1% of world economy, that's BIG.  So the 1% estimates are already very optimistic for the near future. 
This is why the potential for 'greater fool' falls rapidly when the price rises in the few $1000.-.

Bitcoin would then reach quite some maturity.  It is maybe already quite mature.

How does "one already knows that a surge is not a departure for the moon" ? How do you know where the "surge" will stop? It can be 1000, 1500,3000, 5000, 10000.

Greed has fueled most of the previous bubble. It has nothing to do with "greater fool" but FOMO. Yes we do know how this ends : the price bubbles up an order of magnitude above previous low and then pops to eventually create a new, higher low. You need to recognize that there has been numerous bubbles in BTC and that last year was not unique. The Tulips analogy does not apply.

I also disagree with your last statement. Please refer to OP. The rises or bubbles we have seen pale in comparison to the potential market adoption that Bitcoin could experience. I will venture to say that the next bubbles will be significantly bigger than previous ones. There is considerably more money looking at Bitcoin right now then there ever was. If somehow we show any sign of approaching previous ATH, that money will want to ride the next wave. FOMO

Because there will be no "departure for the moon".  If the moon is reached, it will be slowly.


As far as I understand, the previous bubble was a scam from MtGox.  I won't think such a naive manipulation would be possible at such a scale, again.  People learn.


As I pointed out, that market adoption, which is a fundamental, will be obvious, slow, and through merchant adoption.  It won't happen overnight.  You don't wake up a sudden morning to realize that 1% of world economy has switched to bitcoin overnight.
You don't wake up a sudden morning to find out that 10% of the gold market switched to bitcoin the evening before.
This is for $30 000. - a coin.  A "rocket to the moon" to $30 000.- is hence not possible overnight. 
Which means that a surge to, say, $3000.- is not going to go much higher overnight.  You can really take your time to watch.  There's no FOMO.  If you are at $3000.- and you've not seen the gold market being taken over, you've not seen 1% of world economy taking on bitcoin, you know it won't rise a factor of 10.  So it is at the ceiling at $3000.- (hence no hurry) or it will go down (most probably).




The point is that the higher bubbles are, the more expensive they are.  And the money that is looking at bitcoin is also much less naive than before.
Bigger, smarter money won't get trapped so easily in a bot manipulation on an exchange.

just watch  ;)

I don't really understand what you mean, do you think the next halving will increase the bitcon price?

You think the highest price for bitcoins will be at end 2016 or mid 2016? Lots of people say that around 2016 we should see some rise in the price because of the halving. And anything that is made in less quantity, people will be ready to pay more for it, most of the time.

You're right that the proof of the pudding is the eating :-)

A good theory is time-invariant, or gives good reasons of why special times are special.
It means that if you have an explanation for something happening now, based upon observations of the past, there are two possibilities:
1) your explanation will be also valid tomorrow, with the data of tomorrow (which will be the result of your explanations today)
2) your explanation is unique and only valid today, not valid tomorrow, and you should have a good reason for that.  Indeed, the same reason that makes your explanation tomorrow invalid, could make it invalid already right away.

This is what I try to point out with the "to the moon" scenario, where people say that people buy bitcoin because the price will rise.  So the theory here is: "people buy bitcoin today, because they expect its price to be 10 times higher in 2 years from now".

That theory should then also be applied 2 years from now, where people will buy bitcoin at 10 times higher prices.  And again in 4 years, where it will be 100 times higher.  And so on. So obviously that theory will FAIL some day: when coins are at $ 3 million, they won't rise 10 times anymore !  So if that theory fails then, why doesn't it fail today !

Now, your theory is interesting, in that you say "there will be one more surge". 

Then 2 questions arise: 

1) why will your theory NOT hold after the next surge ?  What changes, that makes you think that there will still be another surge, that will change after that surge so that your theory "there will be one more surge" will NOT hold after that ?

2) If your theory does not hold after the next surge, then why doesn't that reason apply right now ?  That is, it already applies now, and we've had already the last surge ?

What makes this moment special with respect to the past (we're before the last surge) and makes this moment special with respect to the future (there won't be a surge anymore) ?

In other words, how do you know that there won't be any surges anymore after the next one, and why do you think there will still be one ?

Just to be clear I am saying there will be two more in my lifetime (maybe 50 more years, which is all I am going to talk about), one that is shortly coming (3-9 months from now) and one after (3-5 years from now).

What is different before these two bubbles compared to any point after? Mass adoption. Once mass adoption is close to being here, you are way too late.

How many times have you come out with that thing about Beanie Babies in just one thread, damn, pot, kettle.

When in Rome...  I used to waste time with logic and facts, no one likes those here :-\

So you think the final S-curve adoption will happen 3 - 5 years from now ?  Will that essentially be 100% fiat replacement ?

Are we then on the two hypotheses:
- (multi-) S-curve adoption
- good money drives bad out (--> no stopping before almost 100% replacement)

What about my problem with power consumption then ?  5 billion dollar equivalent in mining every day...

Two separate events:

1. Mainstream adoption for payments and remittance
2. Sustainable equilibrium

Fiat replacement is not going to happen in my lifetime. Mainstream adoption for payments and remittance is not a fiat replacement event.

As for power consumption. Your estimates don't account for what Bitcoin has done and will do: push computational advanced beyond anything the consumer computing business will ever do. You will see processing/power advancements that will make your power assumptions seem silly.

Profits are an incredible driving force for innovation. We have just barely scratched the surface with plunging nanometer asics. Bitcoin will be the catalyst that pushes mankind into the next phase of computing.

What remains for fiat if all payments are done in bitcoin ??


I already said this: the power consumption has nothing to do with technological advancement, but with the expected benefit from mining, and the price of power. 

You crank up the power consumption until it costs so much that there is no reasonable margin for profit anymore.  Because if you consume less (and have a higher profit margin potentially) your neighbor using the same technology, will crank up his consumption to hash you out of the market.  His profit margin will be lower, but he will win the blocks.
So you will spend more and more resources on power consumption, until almost no profit can be made.  What will stop you, is the price of power.

But if miners get the current value equivalent of $ 5 billion a day, they will be able to consume power for 1 or 2 billion $ a day (it will be paid in coins by then, but it is the current value equivalent).  Well, that's more than half the amount of electricity that is available today on our planet.

There's no reason for them not to go into competition to spend less on power.  No matter what advances in technology.

I didn't say all payments were in Bitcoin.

As for power consumption, again you are applying today's rules to the future.

Your rules and your scenarios mean nothing if I can Peta hash as much as I want with a solar panel.

There will be much more expensive limitations than power to Bitcoin blockchain maintenance.

After pondering it a while, I'm starting to think that the ASIC prices might become the main factor in keeping the entire mass of planet earth being converted to bitcoin mining equipment in 50 years.

Firstly, an accidental circumstance made 28nm come too soon and too cheap. 28nm Fab capacity got wayyy overbuilt and instead of wanting $10M plus for the setup fab were wanting "only" a couple of million. It got cheaper than ~45nm. So we got bitcoin ASICs on 28nm probably nearly a year before might have been projected, given relative size of market. The profits made with with that rather larger leap than was projected before Q1 13, have enabled a closing in on the 16nm process sooner than might have been anticipated also, even if the number of fabs available is less than 28nm.

However, soon we catch up with Moores law and the latest node and find out what a square half inch of the latest and greatest is really worth, and to intel, that figure is several hundred dollars.

Given that frequency scaling isn't happening much any more, and that IPC is unlikely to be improved with an SHA256 engine, and that more engines per chip = huge heat and power issues, we might be topping out at around 500GH on a chip, and if that's competing with the likes of intel (Yah, I know intel has own fab) it's gonna be near intel pricing, so we might also figure that 50 cents a gigahash is going to be as good as it gets for a long while. (2-3 years IMO) ... Wouldn't surprise me if bitcoin ASICS went back to a tuned up half node, and got better bang/buck/GHperW

This is probably going to mean long and therefore scary looking "ROI" times, even if price is up in the short to medium term.

Anyway, what I'm saying is difficulty slope up has been accelerated by both price expectations and rapidly dropping hardware pricing. If hardware pricing is not going to drop much further then we might expect a less steep rise in difficulty, even if price is going up as fast as Q4 13.

Bitcoin will be the first use of an ASIC that is not based on traditional die based, silicon or gallium arsenide transistors. The profits will be the driver.  Whether it be graphene or 4d transistors or whatever. Bitcoin ASICs will bring a revolutionary solution to market faster than anyone is predicting.

It is also the perfectly protected investment, you can mine and sell mining services in the cloud and nobody knows how you are doing it. Brilliant.

Then I misunderstood what you meant with "mainstream adoption of payments and remittance".


If you can Peta hash with a solar panel, then why not Exahash with 1000 solar panels, or Zettahash with a million solar panels, or Yottahash with a billion panels ?

Of course the other factor is the price of the hardware.  I was grossly assuming 50-50 division between hardware cost and power cost.

Technology may change the balance in hardware cost/power consumption cost somewhat.

I have the impression that at this moment, the hardware cost in $ and the power consumption in Watt are comparable numbers, which means that, at a price of $0.15 W per KWhr, the price of the consumed power and the price of the hardware is equal after 7 000 hours, which is about a year.
This means that at current technology, if you change your equipment once a year, the cost division between hardware and power is indeed 50-50.  If you change it faster, say, every 6 months, then the ratio becomes rather 66-33, and if you change it every 3 months, it is 75-25.

Now, of course technology advances can be such that the hardware is consuming less power.  However, if you are marginally optimizing your installation, you are not going to buy *expensive* hardware just to consume less.  If you change your hardware every 6 months, say, it doesn't pay to buy hardware that consumes half of the power if it costs 50% more.
On the contrary.  You will go for cheap hardware, even if it consumes more, if the ratio is already 66-33.

I think you are not seeing what is going to happen or you are discounting it far too much. KNC is already planning a tenfold jump in watt to hash capability in one generation of chip design. In five years, we will be talking a hundred fold or more.

What you will have is massive innovation in the ASIC realm of computing, with huge gains in both hashrate and power consumption. In five years you will see a hardware manufacturer own nearly 50% of the hashrate and be mining at a fraction of the power consumption of competitors until someone trumps them.

Nobody is going to print a billion silicon ASIC chips and plug them into a nuclear power plant, just because silicon asics are cheap, that is never going to happen.

The point is the price.  You want the highest hash rate for the lowest price, and then, if mining makes, say, $5 billion a day (total fiat in bitcoin and one halving, so after 2017 and before 2021), you are going to spend say $ 4 billion a day on hardware and on power, to put $1 billion in your pocket.

No matter what technology, you are going to put those $4 billion a day into the highest hash producing combination of hardware and power.

If new technology is cranking out more hash rate for the same buck, that is not going to change anything: the difficulty will simply go higher, and you are still going to spend $ 4 billion on hardware.  The only thing that matters, is the price of hardware versus the price of consumption of that hardware.  If hardware is going to be very expensive and consume not much at all, that may be a solution, on the condition that that very expensive hardware is going to punch out much much more hash power than the same amount of money spent on less expensive hardware.

A miner will optimize the combination of highest hash rate per bitcoin (or per $ if you want), and will then spend $4 billion a day on that.

So if there is equipment with a hashrate of X for $1000.- and consumption of 1 KW
and there is equipment with hashrate of 100 X for $1 000 and consumption of 1 KW

this will make no difference.

What will make a difference is if there is equipment with hashrate of 100 X for $ 1000 and a consumption of only 10 W

What counts is the price of the equipment over the power consumption.

As long as a $1000.- equipment will consume about a KW, no matter its technology and produced hash rate, nothing will change in the amount of power consumed.


Why not ?  On the contrary !  If that billion chips costs, say, $ 1 billion (prices of today), and you expect to mine for $ 10 million of coins a day (that is to say, you have 0.2% of the mining market share, which cranks out $ 5 billion a day - there are about 500 miners like you),
and leasing the power plant comes to $ 1 billion a year (which is a lot, given the price of a plant), then you spend $ 2 billion, and you will mine for $ 3.6 billion.  Your business is going to crank out $ 1.6 billion a year pure profit.

 

Why not? because there are other costs in play. Once you plan to consume that much power your capability to do so goes to zero. While a simple accounting assessment may make your scenario seem plausible, you simple have to think about the logistics of making it happen to realize it never will.

You mean that there is an economic potential of 1.5 trillion dollars that will not be taken because of some logisitic difficulties ? :-)

(1.5 trillion is what you get if you mine $ 5 billion worth of coins every day for a year, right).

You mean that people are going to sit on their asses and look passively at how a relatively small community of miners are gobbing in 1.5 trillion dollars worth, without moving in ?

I'm not necessarily saying that only 500 big entrepreneurs will take on 500 nuclear power plants.  I'm saying that maybe 5 million entrepreneurs are going to invest and consume the equivalent.  You're not going to be able to stop them.  They will plug in their hash machines, and consume the power.  They will pay the premium prices to get the power.  At the expense of others.

If you need to build a nuclear power plant to make your plan work, and put a billion of anything into operation, then you will figure out a different plan, one that has any shot in hell of working. Simply saying that 1 trillion dollars is enough incentive is too simplistic of a response. I don't care if your are Warren Buffet or Bill Gates and you are bringing a billion cash to the table. Nobody is going to take that plan seriously. The only place a conversation like that would even take place is in a wealthy country ran by a dictator and you or your best friend is the dictator.

If profits solve all problems, I could say the same about solving any problem that gets me my hash rate, like reinventing the micro processor. There most certainly is a way to generate 1000 petahash with a computer the size of my laptop and the power consumption of my cell phone. If you solve that problem you get a trillion dollars.

I would prefer my logistical and financial nightmare to yours.

@dinofelis:  How are your learningz progressin'? 

The point is not that if you need the power of a nuclear power plant, that you build one.  The point is that if you can afford the power of a nuclear power plant, that you will BUY it.  If you have sufficient financial incentive to buy all the electricity in the world, you will do so.  Which means that power will become very expensive for OTHER uses, such as cooking your dinner.

If there were a huge financial incentive (say, 1.5 trillion dollars worth) to use up 3/4 of all the drinking water in the world, one would also do that, and drinking would become a difficult and expensive affair.

 ;D

dinofelis has a valid argument, but some basic assumptions might be wrong.

First of all, ASIC producing capacity might become a limiting factor. Apple is often struggling with huge demand as they lock in deals with several fabs and still can't get enough chips. So thinking that you can consume all the power available on the market by simply plugging in more and more ASICs is somewhat unrealistic. Also keep in mind that highly advanced tech is initially a low-volume production as the process needs to mature.

Secondly, good money drives out bad money is a valid point in general, but reality might be such that the old money isn't that bad just yet and the new money isn't that good just yet. You see, the problem with fiat is that the debt spiral takes generations to have a substantial effect on economy, and people using fiat might not realize this within their lifetimes. As the bad money is worsening, the good money will be improving. This might take some time, maybe a generation or two.

But I agree with that !  I'm just analyzing the consequences of certain hypotheses put forward.

My personal opinion with what I learn here is that bitcoin may succeed, or not, that this is really a totally open question.  And that if it is to succeed, that the evolution will be very slow and may take decades (which by itself is also problematic for another reason).  I used to think that a next rally was due, from extrapolation of the past.  But I'm realizing how different the situation is now as compared to the past.

But I hear that most proponents of bitcoin seem to think something of the kind of "fast adoption in the coming decade".  I don't think it is going to be possible, unless one means by fast adoption: fast adoption in a niche market, to stay there.  That phase may then already be over: bitcoin may then already be mature and have acquired most of its niche.

I have no strong opinion one way or another.  I'm trying to find out, by discussing, analyzing, understanding, confronting my logical deductions with critique, in order to make the best possible decisions.  

The concrete result for the moment is that I'm cooling down on buying coins (for the moment I only put some money in it that I can afford so much to loose, that I even consider it to be lost even though it isn't - yet :-) ).  I don't think that there is any hurry in fact, contrary to a few months ago when I got into it.  If bitcoin by any accident succeeds, then I'll be happy to have those coins when I retire, a few decades from now.  And if not, hey, I don't care much.  But I don't think it would be wise to put money I could use for things now in it.

Yep, keeping a cool head is a way to do business. Balance is the key!