Rassah (OP)
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September 05, 2013, 01:59:52 AM |
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Even if every society adopted a cryptocurrency with a mining system like bitcoin, watt-hours would essentially become a de-facto world 'currency'. How would that even work? Watt-hours would always have to be more expensive than the amount of cryptocurrency that they could produce, otherwise a power company would be better off simply 'printing' money.
edit: The more I think about this, the worse it gets. Rapidly mining currency would deflate the currency. For one, this means that the base cost of electricity will constantly be increasing. For two, as the mining gets more difficult, you need to use more electricity to mine. The cost would have to fight both the increase from mining and deflation at once. This would be a nightmare - especially for the poor.
With some more explanations: If everyone were using cryptocurrency, they would all be tied to how much electricity it uses to generate the currency. The value of the currency would then be directly tied to watt-hours. The cost of electricity would be in bitcoins. The cost of electricity would always have to be more than a bitcoin is worth, or power companies would have no reason to sell the power.
It sounds like he's arguing from the "Mining determines price" point, which is wrong, since we know mining follows price, and price is just a function of supply/demand on the free market. But either I can't wrap my head around it, or I can't explain this to him correctly. Please help?
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payb.tc
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September 05, 2013, 02:09:36 AM |
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The more I think about this, the worse it gets.
i can think of at least one solution to that problem
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Vycid
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September 05, 2013, 02:45:59 AM |
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Even if every society adopted a cryptocurrency with a mining system like bitcoin, watt-hours would essentially become a de-facto world 'currency'. How would that even work? Watt-hours would always have to be more expensive than the amount of cryptocurrency that they could produce, otherwise a power company would be better off simply 'printing' money.
edit: The more I think about this, the worse it gets. Rapidly mining currency would deflate the currency. For one, this means that the base cost of electricity will constantly be increasing. For two, as the mining gets more difficult, you need to use more electricity to mine. The cost would have to fight both the increase from mining and deflation at once. This would be a nightmare - especially for the poor.
With some more explanations: If everyone were using cryptocurrency, they would all be tied to how much electricity it uses to generate the currency. The value of the currency would then be directly tied to watt-hours. The cost of electricity would be in bitcoins. The cost of electricity would always have to be more than a bitcoin is worth, or power companies would have no reason to sell the power.
It sounds like he's arguing from the "Mining determines price" point, which is wrong, since we know mining follows price, and price is just a function of supply/demand on the free market. But either I can't wrap my head around it, or I can't explain this to him correctly. Please help? He's right that it would be more advantageous for the power company to 'print' money up to a certain point. But he doesn't seem to understand that there's a limit of roughly 150 BTC that can be 'printed' each hour (that will halve to roughly 75 BTC in a couple years). The more people using watt-hours to get at that pool of 150 BTC, the fewer BTC you get per watt-hour. (If the number of BTC mined scaled linearly with the number of watt-hours expended, he would be completely correct, by the way.) If it's cheaper for the power company to mine BTC than buy them, OK, they do that until the difficulty makes it no more advantageous to mine BTC than sell electricity and buy BTC with the proceeds. Then what? Then nothing. Equilibrium is reached and everyone is happy. If the cost of BTC was truly determined by the cost of the watt-hours producing them, then BTC is currently magically overpriced.
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barbarousrelic
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September 05, 2013, 02:48:25 AM |
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The network hashrate has quadrupled in the last month. The price of Bitcoin has remained relatively stable.
Therefore, it is proven that the Bitcoin price does not necessarily follow the hashrate, and thus the basic premise of the OP's article is wrong.
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Do not waste your time debating whether Bitcoin can work. It does work.
"Early adopters will profit" is not a sufficient condition to classify something as a pyramid or Ponzi scheme. If it was, Apple and Microsoft stock are Ponzi schemes.
There is no such thing as "market manipulation." There is only buying and selling.
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solex
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100 satoshis -> ISO code
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September 05, 2013, 03:28:17 AM |
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On a long-term logarithmic chart the bitcoin value increases roughly with difficulty. However, I think the writer quoted in the OP is wrong because the ultimate mining ASICs will use reversible gate computing technology which means that electricity consumption falls to negligible levels. ![](https://ip.bitcointalk.org/?u=http%3A%2F%2Fblockchained.com%2Fchart_large_log.png&t=665&c=JIrfRVA2NvXNgQ)
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ktttn
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Capitalism is the crisis.
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September 06, 2013, 11:35:34 PM |
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www.kilowattcards.com/ex.cfmJust gonna leave this here. Imagine a forex between BTC and electricity vouchers. No one factor determines price, however, miners will only sell what they mined in exchange for enough to pay for their electricity plus X, where X is determined by whatever. I personally cannot believe these folks don't accept bitcoin yet.
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Wit all my solidarities, -ktttn Ever see a gutterpunk spanging for cryptocoins? LfkJXVy8DanHm6aKegnmzvY8ZJuw8Dp4Qc
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Carlton Banks
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September 07, 2013, 02:28:42 PM |
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How does the cattimiptwax propose that everyone transmits watt hours as payment to a web merchant? People maybe interceptses the energy and stealses it! Are we all to walk around with the latest in high-density battery technology, transferring watts for payment? It's almost as if there needs to be some kind of middleman abstraction to act as a more controlled and precisely defined form of value storage..... can't think what could possibly fit the bill though, this new insight has totally thrown me ![Grin](https://bitcointalk.org/Smileys/default/grin.gif)
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Vires in numeris
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johnyj
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September 07, 2013, 04:39:39 PM |
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I did some kind of roughly estimation before, with 1/10 of world's power supply to mine coins, one bitcoin will worth a bit more than one million dollars But as D&T mentioned, the daily coin supply is getting halved every 4 years, after the coin supply approach zero, it will be only transaction fees that require power consumption. With 1MB block size, 6 coin transaction fee per block is possible https://bitcointalk.org/index.php?topic=285056.msg3048862#msg3048862
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coolbeans94
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September 08, 2013, 08:50:54 AM |
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All you need is one of these:Bicycle Powered! Free Energy! ![](https://ip.bitcointalk.org/?u=http%3A%2F%2Fecofriend.com%2Fwp-content%2Fuploads%2F2012%2F07%2Fbicycle-powered-generator-_02_8qSgB_17621.jpg&t=665&c=RAIdUkxuC9PD9Q)
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(1.) Moral happiness depends upon moral order. (2.) Moral order depends upon the harmonious action of all our powers, as individuals and as members of society.
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teukon
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September 08, 2013, 09:33:28 AM |
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Even if every society adopted a cryptocurrency with a mining system like bitcoin, watt-hours would essentially become a de-facto world 'currency'.
They start with a wild assertion and build from there. If you want to get at the root of their misunderstanding, ask them to defend this point. Perhaps they are focusing on the first use of a bitcoin (as it is spent by the miner) but are ignoring later uses of the same bitcoin which require negligible energy. How would that even work? Watt-hours would always have to be more expensive than the amount of cryptocurrency that they could produce, otherwise a power company would be better off simply 'printing' money.
You might also ask them how their energy company paradox compares to oil companies which, bizarrely enough, sell their oil to gold mining companies rather than mining the gold themselves. How could a profitable gold mining company possibly acquire enough gold to fully compensate the oil providers? The more I think about this, the worse it gets. Rapidly mining currency would deflate the currency.
They've clearly made a number of false assumption about what Bitcoin is and how it works. At least this one is simple enough to dispel.
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EvilPanda
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September 08, 2013, 03:28:17 PM |
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Electricity price? Why would I care? ![Cool](https://bitcointalk.org/Smileys/default/cool.gif) ![](https://ip.bitcointalk.org/?u=http%3A%2F%2Fchicagoweekly.net%2Fwp-content%2Fuploads%2F2009%2F05%2Fsolar-web.jpg&t=665&c=rDDtKHVRmCPClg)
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johnyj
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September 08, 2013, 08:28:20 PM |
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Actually I think the energy cost is also very high for mining of the gold under a gold standard monetary system. Should be higher than bitcoin since you also need energy to transfer the physical gold
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600watt
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September 09, 2013, 12:02:28 AM |
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I did some kind of roughly estimation before, with 1/10 of world's power supply to mine coins, one bitcoin will worth a bit more than one million dollars But as D&T mentioned, the daily coin supply is getting halved every 4 years, after the coin supply approach zero, it will be only transaction fees that require power consumption. With 1MB block size, 6 coin transaction fee per block is possible https://bitcointalk.org/index.php?topic=285056.msg3048862#msg30488621/10 of the world´s power supply ? my thinking was that if bitcoin will go mainstream what would be the limit on the price ? 1/10 of world´s energy supply - now that would be a limit. bitcoin opponents will not let that happen, all this global warming for some crypto-ponzi ? the environmentalists will hate it and fight it. governments will be forced to act. i guess we should start developing heating systems for houses based on hashing. it could be argued that mining is only the by-product of those fancy new radiators. after all, that´s what miners are...
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Rassah (OP)
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September 10, 2013, 05:07:41 AM |
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Oh it got even more messed up than that. Eventually I just dropped the conversation, because it was taking more time and braincells to process than I cared to waste on him, but here's is a highlight: A society would have long since collapsed before that, since nobody could afford electricity. One more time... - A: 1 bitcoin = 1MWh = 30 tons of coal = $1000
- difficulty up!
- B: 1 bitcoin = 1.1MWh = 33 tons of coal = $1100
- difficulty up!
- C: 1 bitcoin = 1.2MWh = 36 tons of coal = $1200
Here we have an example with actual cash value attached, just so you can see. At point A, a single bitcoin can buy you 30 tons of coal. Obviously, you're going to use a small fraction of a bitcoin for something like milk and eggs, so a single bitcoin being produced is a LOT of money, relatively. Obviously the value of a bitcoin would start out much smaller, with much higher amounts, but this is sorta throwing you in to the point where it has been mined for a little while. Suppose, as you said, that the 'value' of the bitcoin 'doubled'. If you look at the above, there's simply no way it can double, without having an equal impact on everything else. Suddenly, mining would be twice as profitable, because you'd do the same work for twice the reward. Knowing this, coal/resource prices would rise to twice as much, because selling them any less would be less profitable than simply using them on their own to generate electricity. So the electric company pays twice as much, and produces the same amount of electricity as normal. Obviously, the electric company has to charge more for electricity to make up for this sudden change, so the cost to a consumer of 1MWh has to be double what it used to be, otherwise the electric company would be better off simply mining to break even. Another example would be a great new invention that allowed one to mine bitcoins with half the needed power. Unfortunately, this is no different than the above example. If you halve the power needed, you halve the floor value of the currency. Were it not for the increasing difficulty, this would actually help in lowering costs (and profits, so companies have no reason to do so), so long as it happened with regularity. I don't even see any way that you could 'fix' these problems with it, were it to be used as a real currency. The mining aspect would have to be completely revamped, or removed. If you eliminated the difficulty curve entirely, that would prevent the cost of electricity of rising, but it would also ensure that everyone ever would have absurd amounts of bitcoins, which would devalue the currency just the same. The only other alternative would be direct and heavy government regulation (price fixing, government controlled power companies, etc), which would still probably require some modification to the core of bitcoin. Basically, in order to make it work, you have to make it less like it is, and more like what we already have. My gist of the entire exchange is that cattimiptwax believes in the labor theory of value, where things are priced based on how much work you put into it, instead of being freely exchanged on the market based on supply/demand. It seems this whole claim is based on the idea that as bitcoin costs more to make, electric companies will demand higher price for bitcoin, and thus bitcoin value will go up. Maybe I misread it, but it was rather difficult to follow at times.
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bitcon
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September 10, 2013, 09:29:32 AM |
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Electricity price? Why would I care? ![Cool](https://bitcointalk.org/Smileys/default/cool.gif) ![](https://ip.bitcointalk.org/?u=http%3A%2F%2Fchicagoweekly.net%2Fwp-content%2Fuploads%2F2009%2F05%2Fsolar-web.jpg&t=665&c=rDDtKHVRmCPClg) thats what i want! electric co. pays you every month!
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johnyj
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September 10, 2013, 01:07:47 PM |
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Oh it got even more messed up than that. Eventually I just dropped the conversation, because it was taking more time and braincells to process than I cared to waste on him, but here's is a highlight: A society would have long since collapsed before that, since nobody could afford electricity. One more time... - A: 1 bitcoin = 1MWh = 30 tons of coal = $1000
- difficulty up!
- B: 1 bitcoin = 1.1MWh = 33 tons of coal = $1100
- difficulty up!
- C: 1 bitcoin = 1.2MWh = 36 tons of coal = $1200
Here we have an example with actual cash value attached, just so you can see. At point A, a single bitcoin can buy you 30 tons of coal. Obviously, you're going to use a small fraction of a bitcoin for something like milk and eggs, so a single bitcoin being produced is a LOT of money, relatively. Obviously the value of a bitcoin would start out much smaller, with much higher amounts, but this is sorta throwing you in to the point where it has been mined for a little while. Suppose, as you said, that the 'value' of the bitcoin 'doubled'. If you look at the above, there's simply no way it can double, without having an equal impact on everything else. Suddenly, mining would be twice as profitable, because you'd do the same work for twice the reward. Knowing this, coal/resource prices would rise to twice as much, because selling them any less would be less profitable than simply using them on their own to generate electricity. So the electric company pays twice as much, and produces the same amount of electricity as normal. Obviously, the electric company has to charge more for electricity to make up for this sudden change, so the cost to a consumer of 1MWh has to be double what it used to be, otherwise the electric company would be better off simply mining to break even. Another example would be a great new invention that allowed one to mine bitcoins with half the needed power. Unfortunately, this is no different than the above example. If you halve the power needed, you halve the floor value of the currency. Were it not for the increasing difficulty, this would actually help in lowering costs (and profits, so companies have no reason to do so), so long as it happened with regularity. I don't even see any way that you could 'fix' these problems with it, were it to be used as a real currency. The mining aspect would have to be completely revamped, or removed. If you eliminated the difficulty curve entirely, that would prevent the cost of electricity of rising, but it would also ensure that everyone ever would have absurd amounts of bitcoins, which would devalue the currency just the same. The only other alternative would be direct and heavy government regulation (price fixing, government controlled power companies, etc), which would still probably require some modification to the core of bitcoin. Basically, in order to make it work, you have to make it less like it is, and more like what we already have. My gist of the entire exchange is that cattimiptwax believes in the labor theory of value, where things are priced based on how much work you put into it, instead of being freely exchanged on the market based on supply/demand. It seems this whole claim is based on the idea that as bitcoin costs more to make, electric companies will demand higher price for bitcoin, and thus bitcoin value will go up. Maybe I misread it, but it was rather difficult to follow at times. With his theory, he can not explain this: With the arriving of ASIC, the mining efficiency increased by 10 fold but the price of bitcoin also raised by 10 fold The daily coin supply is fixed, efficiency has nothing to do with coin generation. What really matters is the number of miners. If the number of miners doubled and their individual cost stays the same, the coin price will double, and the total electricity consumption will also double It can also be like this: The number of miners do not change, but each of them use double electricity to mine the coin, in this case the coin price will also double
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xxjs
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September 10, 2013, 10:59:33 PM |
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Oh it got even more messed up than that. Eventually I just dropped the conversation, because it was taking more time and braincells to process than I cared to waste on him, but here's is a highlight: A society would have long since collapsed before that, since nobody could afford electricity. One more time... - A: 1 bitcoin = 1MWh = 30 tons of coal = $1000
- difficulty up!
- B: 1 bitcoin = 1.1MWh = 33 tons of coal = $1100
- difficulty up!
- C: 1 bitcoin = 1.2MWh = 36 tons of coal = $1200
Here we have an example with actual cash value attached, just so you can see. At point A, a single bitcoin can buy you 30 tons of coal. Obviously, you're going to use a small fraction of a bitcoin for something like milk and eggs, so a single bitcoin being produced is a LOT of money, relatively. Obviously the value of a bitcoin would start out much smaller, with much higher amounts, but this is sorta throwing you in to the point where it has been mined for a little while. Suppose, as you said, that the 'value' of the bitcoin 'doubled'. If you look at the above, there's simply no way it can double, without having an equal impact on everything else. Suddenly, mining would be twice as profitable, because you'd do the same work for twice the reward. Knowing this, coal/resource prices would rise to twice as much, because selling them any less would be less profitable than simply using them on their own to generate electricity. So the electric company pays twice as much, and produces the same amount of electricity as normal. Obviously, the electric company has to charge more for electricity to make up for this sudden change, so the cost to a consumer of 1MWh has to be double what it used to be, otherwise the electric company would be better off simply mining to break even. Another example would be a great new invention that allowed one to mine bitcoins with half the needed power. Unfortunately, this is no different than the above example. If you halve the power needed, you halve the floor value of the currency. Were it not for the increasing difficulty, this would actually help in lowering costs (and profits, so companies have no reason to do so), so long as it happened with regularity. I don't even see any way that you could 'fix' these problems with it, were it to be used as a real currency. The mining aspect would have to be completely revamped, or removed. If you eliminated the difficulty curve entirely, that would prevent the cost of electricity of rising, but it would also ensure that everyone ever would have absurd amounts of bitcoins, which would devalue the currency just the same. The only other alternative would be direct and heavy government regulation (price fixing, government controlled power companies, etc), which would still probably require some modification to the core of bitcoin. Basically, in order to make it work, you have to make it less like it is, and more like what we already have. My gist of the entire exchange is that cattimiptwax believes in the labor theory of value, where things are priced based on how much work you put into it, instead of being freely exchanged on the market based on supply/demand. It seems this whole claim is based on the idea that as bitcoin costs more to make, electric companies will demand higher price for bitcoin, and thus bitcoin value will go up. Maybe I misread it, but it was rather difficult to follow at times. With his theory, he can not explain this: With the arriving of ASIC, the mining efficiency increased by 10 fold but the price of bitcoin also raised by 10 fold The daily coin supply is fixed, efficiency has nothing to do with coin generation. What really matters is the number of miners. If the number of miners doubled and their individual cost stays the same, the coin price will double, and the total electricity consumption will also double It can also be like this: The number of miners do not change, but each of them use double electricity to mine the coin, in this case the coin price will also double Well, nope, this is the labour theory of value. Cost follow price, modified with speculative foresight and errors. Same with gold.
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Rassah (OP)
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September 11, 2013, 12:24:22 AM |
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^ ^^ Thank you. This is what I've been arguing with him about. If miners spend twice as much on electricity, and demand twice as much for their coins, they'll be laughed out of the market, where lots of people already have coins they didn't spend twice as much to obtain.
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xxjs
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September 11, 2013, 01:19:27 AM Last edit: September 11, 2013, 01:34:27 AM by xxjs |
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^ ^^ Thank you. This is what I've been arguing with him about. If miners spend twice as much on electricity, and demand twice as much for their coins, they'll be laughed out of the market, where lots of people already have coins they didn't spend twice as much to obtain.
Yes. With gold, it takes maybe 10 years to respond to an increase in price. First the mine owners have to be certain that the price increase is stable, then they have to invest in planning, geological investigation, equipment and organization. With bitcoin it is a bit quicker. Another difference is that increased mining will not increase supply basically, because the strong negative feedback of the difficulty (exept there is a time lag on the difficulty). Bitcoin mining is more speculative, because it is not enough to know the price of the equipment, the delivery time and the cost of electricity. The most important factors in mining is 1. when will the equipment really be delivered? 2 What is the price at that time of delivery and the time afterwards? 3. What will be the difficulty at the time of delivery and the time afterwards? Since all these things are partly interdependent, there is a lot of room for speculative error in either direction.
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xxjs
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September 11, 2013, 01:27:29 AM |
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I might add that if the speculators really believe that cost drives price, there will be some volatility around the block reward halving, but that didn't happen the last time, if I remember correctly.
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