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Author Topic: Mining at a loss: Insurmountable Problem in the near future or am I mistaken?  (Read 5742 times)
hugolp
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August 03, 2011, 09:01:04 PM
 #61

Seeing as nobody is actually refuting my point, which is that Moore's Law and the difficulty of the block chain have an intersect point, past which the amount of people mining will radically decrease - unless: either BTC prices rise or 'traffic' increases on the network due to more actual economic activity.  That is the postulate I've presented and yet 90% of the people posting on this thread don't seem to realize that, even though it was in the original post.

Next time use the search option. This was my answer in another thread saying exactly the same as you said (yes, you are that original):

Quote from: hugolp
Competition is not a tragedy of the commons. The guy in the other thread is full of shit in the way he uses the terms.

What would happen is that miners would close operations and less miners would share the fees, making mining profitable again. The problem really is not with the viability of mining, as long as people use Bitcoin some level of mining will be profitable. The argument is about the level of security that can be achieved, f.e. you could argue that if some miners close, the equilibrium point will not have enough miners to mantain a certain level of security against 50% attacts. This is the real question, not the bullshit about competition being a tragedy of the commons.

I think its a flawed reasoning because the value of bitcoins depend on its use. The more people using bitcoins the more demand will be and more value they will have (since the supply its a known factor). So the more people using bitcoins the higher its value and obviously the higher the incentive to try to attack the network. The same is true in resversal, the less people that uses bitcoins, the lower its value and obviously the lower the incentives to try to attack the network. But then at the same time, the more people using bitcoins, the bigger the amount of transactions fees (also of higher value) there will be, so the more miners there will be and the higher the security. As you see there is always an equilibrium between the incentives to attack the network and the incentives to mine and make the network more secure and the attacks harder and more expensive.

Also, lets speculate on what would happen if there is a 50% attack. You have to think that a 50% attack would be recognized very quickly because it can not be sustained in time, its a very expensive operation. You would have to buy hardware and pay electricity to double the Bitcoin network hashing speed, so you are 50% (or 51%) of the network. When the news spread, there would be panic and the value of bitcoin would go lower, a lot lower. Probably a lot of merchants would stop accepting bitcoins at least until the issue is resolved. Maybe even exchanges would freeze activity for a while, etc... So the attacker would be basically spending a lot of resources to steal something that would depreciate and would be harder to use becuase of his attack. I dont think anyone would get his/her "investment" back from a 50% attack. The only option for a profitable attack would be if you are able to cash out really quick after the attack, but it seems improbable given the amount of money you would need to cash out to make up for the huge initial investment. A 50% attack makes more sense from the point of view of a government or financial institution that wants to destroy Bitcoin credibility.

The main point is there is an equilibrium between the incentives to attack and the incentives to mine.
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hawks5999
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August 03, 2011, 09:08:33 PM
 #62


Granted.  I'm out of here for this and other reasons.

Opposing viewpoints are not tolerated on a forum that pretends to promote 'freedom' and 'liberty'.  Only freedom and liberty to chant the dogma into an echo chamber of other ignorant drones who literally have never read any history book that didn't massage their already preconceived notions.

The incredulous nature of the average user here is starting to rub off on me, I'm off to greener pastures.

To those who will listen take it or leave it.

We'll see who is right.

Oh God. It's the reincarnation of LardyCake.

Please go on already and leave.

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STP
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August 03, 2011, 09:16:37 PM
 #63

I will keep my mining rigs running no matter what.  I'll completely cover the electricity costs if needed (provided I have a job to pay) at full loss.

That is an awesome attitude, and is the same thing I do.  Sure, it may not be considered profitable at every moment, but I believe in the technology and I believe prices will rise.

Right there with you. The hate for fees and control will drive this technology. Also a lot of miners I am sure are like me and work in IT. I pay for my system to sit there idle all day so I turned it into a mining rig. It keeps me entertained while working too as I work from home so I can monitor and tinker where I see fit. Would I mine at a loss? I would for some time because I believe in it and my first mining rig was already paid for before I got into mining. I netted over $1000 in my first month with an average of 1.5 Gh/s. I even hit a solo block in July on 750 mh/s in the first 2 days when I was down to one 5970! For me its going to be sometime before I am mining at total loss since I profited so early.
niemivh
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August 08, 2011, 03:50:20 PM
 #64

The latest market gyrations are not birth pangs my friends.  They are death throes.

This came sooner than I expected, nevertheless I DID predict this crash and it's preceding decline.  We are seeing the beginning of the end.  Hopefully this whole project will propel some people into the direction of political activism as that is truly the ONLY solution to our present woes.

I'll keep my politics out of your economics if you keep your economics out of my politics.

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niemivh
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August 08, 2011, 04:04:14 PM
 #65

Seeing as nobody is actually refuting my point, which is that Moore's Law and the difficulty of the block chain have an intersect point, past which the amount of people mining will radically decrease - unless: either BTC prices rise or 'traffic' increases on the network due to more actual economic activity.  That is the postulate I've presented and yet 90% of the people posting on this thread don't seem to realize that, even though it was in the original post.

Next time use the search option. This was my answer in another thread saying exactly the same as you said (yes, you are that original):

Quote from: hugolp
Competition is not a tragedy of the commons. The guy in the other thread is full of shit in the way he uses the terms.

What would happen is that miners would close operations and less miners would share the fees, making mining profitable again. The problem really is not with the viability of mining, as long as people use Bitcoin some level of mining will be profitable. The argument is about the level of security that can be achieved, f.e. you could argue that if some miners close, the equilibrium point will not have enough miners to mantain a certain level of security against 50% attacts. This is the real question, not the bullshit about competition being a tragedy of the commons.

I think its a flawed reasoning because the value of bitcoins depend on its use. The more people using bitcoins the more demand will be and more value they will have (since the supply its a known factor). So the more people using bitcoins the higher its value and obviously the higher the incentive to try to attack the network. The same is true in resversal, the less people that uses bitcoins, the lower its value and obviously the lower the incentives to try to attack the network. But then at the same time, the more people using bitcoins, the bigger the amount of transactions fees (also of higher value) there will be, so the more miners there will be and the higher the security. As you see there is always an equilibrium between the incentives to attack the network and the incentives to mine and make the network more secure and the attacks harder and more expensive.

Also, lets speculate on what would happen if there is a 50% attack. You have to think that a 50% attack would be recognized very quickly because it can not be sustained in time, its a very expensive operation. You would have to buy hardware and pay electricity to double the Bitcoin network hashing speed, so you are 50% (or 51%) of the network. When the news spread, there would be panic and the value of bitcoin would go lower, a lot lower. Probably a lot of merchants would stop accepting bitcoins at least until the issue is resolved. Maybe even exchanges would freeze activity for a while, etc... So the attacker would be basically spending a lot of resources to steal something that would depreciate and would be harder to use becuase of his attack. I dont think anyone would get his/her "investment" back from a 50% attack. The only option for a profitable attack would be if you are able to cash out really quick after the attack, but it seems improbable given the amount of money you would need to cash out to make up for the huge initial investment. A 50% attack makes more sense from the point of view of a government or financial institution that wants to destroy Bitcoin credibility.

The main point is there is an equilibrium between the incentives to attack and the incentives to mine.

Am I getting 'phantom pwned' again?  Am I the 'other guy' in reference here?  In reference to 'my terms' at least I can define what I'm talking about.  Unlike yourself to which my challenge of stepping out of the realm of phrasology with your favorite term "Free Market" into real tangible understanding that comes with terms defined remains unfulfilled. 

Err... Did you not read the part of my original post when I said that the level of usage in terms of an actual means of exchange IS NOT large enough to make it up to the mining network in terms of fees on transactions?  It's unfortunate, but it's true.  By the way you don't even directly address Moore's Law in this post.

People are either showing their cognitive dissonance or lack of critical reading capacity when it comes to addressing what might be a fundamental flaw in Bitcoin.  It's like you guys don't want to be aware of these problems.

I wish as must as the next person that we aren't all on the Titanic but it certainly looks like we've hit and iceberg and are taking on water.

I'll keep my politics out of your economics if you keep your economics out of my politics.

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niemivh
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August 08, 2011, 04:18:21 PM
 #66


Granted.  I'm out of here for this and other reasons.

Opposing viewpoints are not tolerated on a forum that pretends to promote 'freedom' and 'liberty'.  Only freedom and liberty to chant the dogma into an echo chamber of other ignorant drones who literally have never read any history book that didn't massage their already preconceived notions.

The incredulous nature of the average user here is starting to rub off on me, I'm off to greener pastures.

To those who will listen take it or leave it.

We'll see who is right.

Oh God. It's the reincarnation of LardyCake.

Please go on already and leave.

I had to get out of the lifeboat and come back to watch all the panic and denial regarding the collapse that's occurring.  Yet most are such cultists here that even though my predictions and foresight proves stunningly correct the plugging the fingers in the ears and chanting 'la la la' continues unabated.

Macabre?

Perhaps.

I'll keep my politics out of your economics if you keep your economics out of my politics.

16LdMA6pCgq9ULrstHmiwwwbGe1BJQyDqr
hawks5999
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August 08, 2011, 05:04:03 PM
 #67

The latest market gyrations are not birth pangs my friends.  They are death throes.

This came sooner than I expected, nevertheless I DID predict this crash and it's preceding decline.  We are seeing the beginning of the end.  Hopefully this whole project will propel some people into the direction of political activism as that is truly the ONLY solution to our present woes.

Why would the Dow crashing and the S&P tanking and Bank of America collapsing propel people into political activism?

Oh wait... you were talking about the US economy right?

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TraderTimm
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August 09, 2011, 05:12:04 PM
 #68

Why would the Dow crashing and the S&P tanking and Bank of America collapsing propel people into political activism?

Oh wait... you were talking about the US economy right?

The euro is next Smiley

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hawks5999
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August 09, 2011, 05:14:46 PM
 #69

Why would the Dow crashing and the S&P tanking and Bank of America collapsing propel people into political activism?

Oh wait... you were talking about the US economy right?

The euro is next Smiley

From a currency perspective, the Euro is first. The US Dollar follows that.

■ ▄▄▄
■ ███
■ ■  ■               
LEDGER  WALLET    ████
■■■ ORDER NOW! ■■■
              LEDGER WALLET
Smartcard security for your BTCitcoins
■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■
Decentralized. Open. Secure.
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