Second discussion about Bitcoin with merit awards - the shutdown of mining rigs.

[Jet Cash]

The price of Bitcoin has dropped recently, and this is coupled with a reduction in transaction volumes. It has reached the point where a few miners have turned off their rigs as mining is no longer profitable for them, or switched them to other coins. This leads us to the second discussion topic.

If the price continues to drop, what effect will that have on Bitcoin mining and transactions?

Please note - this is not a discussion on the probability or otherwise of a change in the price of Bitcoin. As always - initial posts by newbies and juniors.

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[BanishedDemon]

The price of Bitcoin has dropped recently, and this is coupled with a reduction in transaction volumes. It has reached the point where a few miners have turned off their rigs as mining is no longer profitable for them, or switched them to other coins. This leads us to the second discussion topic.

If the price continues to drop, what effect will that have on Bitcoin mining and transactions?

Please note - this is not a discussion on the probability or otherwise of a change in the price of Bitcoin. As always - initial posts by newbies and juniors.

If most of the mining will stop , however the entire quantity of miners gets drastically reduced, the remaining ones may also maintain and continue to be profitable. However, with a far smaller wide variety of miners, unconfirmed transactions may also more larger and many of them will hard to get confirmation – and to mine a block – may get very long.

This terrible
kind of situation may goes very long for remaining for weeks or months. Such an inconvenience may additionally  affect a few greater drop of the Bitcoin price. when things get terrible enough, the mining might also getting shutdown permanently – and of course it could take a day or even weeks to mine a block.

[vphasitha01]

If you're an individual miner I don't think you won't be profitable due to this price reduction. If you're trying to run a Bitcoin mining business, you will be still profitable at today's prices but only you're reasonably good at finding cheep electricity. When looking in to the elite miners still making huge amount of money. But this might not be the case forever. The hash rate of network is increaaed almost 300% since December 2017, actually it's growing like breakneck speed, meaning unless your operations are too, you're getting smaller share of Bitcoin network rewards. But miners are getting creative, finding cheaper sources of energy and this will likely continue for the near future. If 3000$ per bitcoin we will start to seeing a squeeze on industrial miners and they will either move to cheeper areas or take their systems offline given current network hash rates.

[petyang12]

If the price continues to drop then the miners won't earn profit and miners may stop mining or getting offline and if the price doesn't go up very quickly, up two times, it means a lot of the older machines will be force to shut down. It also affect the transactions as they will need to use huge energy for verifying transactions since the transactions are greatly reduce because or the bitcoin's price drop and the bitcoin they mined won't be enough to pay for the electricity expenses. The results will be the SHUTDOWN OF MINING RIGS as it uses electricity because of all the electricity needed for computational processing while about 80 percent of mining costs go toward electricity.

[OgNasty]

This seems relevant again (happens every few years).

The most profitable bitcoins I ever mined, were the ones I mined when it was unprofitable to do so.

[EternityFirst]

If the prise continues to drop it will be certainly no good for everyone   Bitcoin is still the biggest crypto on the market, and as we all can see now - when BTC is falling everyone else is going down too. That`s for starters.
Worst scenario possible - Bitcoin blockchain will face 51% problem if big players continue to change horses. It`s not a situation, that we had in the beginning - a few enthusiasts can`t maintain safety and decentralization of whole blockchain. Now an industrial size farms and rigs are needed for that purposes. And number of transaction has increased.
Also, the sutuation may affect transactions speed, which is not very fast in the first place. Anyway, I don`t think, that such catastriphic things will happen. Less players - less complexity and more profit for big guys. And if ones was mining, when 1 BTC was $2700 they definitely will do the same even if we`ll see 1 coin for $4000. I see the problems are more in accesstories cost, which increased rapidly and that is not good for industry too.
Newertheless, this is economy games, it always balances itself.
BTW it may have a positive influence on altcoins, but that is the matter of another conversation.

[audaciousbeing]

The price of Bitcoin has dropped recently, and this is coupled with a reduction in transaction volumes. It has reached the point where a few miners have turned off their rigs as mining is no longer profitable for them, or switched them to other coins. This leads us to the second discussion topic.

If the price continues to drop, what effect will that have on Bitcoin mining and transactions?

Please note - this is not a discussion on the probability or otherwise of a change in the price of Bitcoin. As always - initial posts by newbies and juniors.

What would happen would be going back to the basics. Before bitcoin reached $5000, miners still work and transactions still gets confirmed so also when it was touching $1000 and the problem of covering cost is for those who bought equipment when the price was high. Currently, I don't expect equipment sold for say $2000 when price was $15000 to still be sold at the same time when it has crashed to what it is now. What I see here is that a whole lot of importance have been attached to the price of bitcoin that we everything that have relationship with crypto just increased alongside. Now that there is a challenging time, there is struggle on how to cope. Just like before the breakout of internet, people have been leading their lives normally and if its taken away, we will improvise.

[r1s2g3]

what if all miner bitcoin stops working does not generate or distributes bitcoin for one day if it could affect bitcoin price?

there aren't a small number of miners like 5 miner to stop mining all of a sudden! there are thousands of miners who are mining bitcoin, possibly more. they won't just stop all at once and out of the blue for no reason.
these "what if"  questions need to have some reality to it so that they can be answered. otherwise you will be entering the realm of science fiction.

in reality what can happen is that price can go down so that mining profit can fall so miners start to go away. then difficulty will come down so it becomes profitable again. even if price falls to $1 and a lot of miners leave still difficulty will come down and mining will become easy. until you can mine bitcoin with your computer again. so at the end of the day if all the miners leave you can start your PC and mine bitcoin with it. so it won't die.
in short miners don't leave the price takes effect. price changes (up or down) then miners come in or go out.

I am not sure if difficulty is tied with block number or it is tied with the amount of hash power generated. But if I believe the post of "Pursuer" then I can imply that drop in price cause drop in hash rate (as miners moved away). Now difficulty decrease and mining will become again profitable.

[Talk merit]

Thank goodness that somebody mentioned that the difficulty would reduce to maintain the same block generation rate.

[kitty94]

I am going to break down the scenario as this is meant to be a learning moment for all the crypto newbies.

Q1) What are miners doing?

They are finding a special number to add to end of a block. Once they have successfully find that number we call “A block has mined”.

Q2) That answer leads to the next question, What is a block? What does it consist of?

A block has three major components,

1.   Hash of the previous block (Not applicable for genesis block)
2.   Set of bitcoin Transactions (Though It does not happen nowadays, Blocks can be generated without any transactions, You can go to blockchain.info and search for first few hundreds of blocks and see!)
3.   Proof of work (This is the special number miners try to find using SHA256 function)

Q3) what would happen if miners stop mining?
The blockchain technology solely depends on the blocks, once there are no miners, the basic concept of blockchain vanishes, which is the decentralized trust!

Q4) In the present it takes about 10 minutes to a block to be mined. Once there is a lesser number of miners will it be increased?

No, The Administrators (I do not know how exactly to call them) of Bitcoin will announce that they have reduced the hash difficulty. They will say something like this,

“Hey Dear miners, Instead of finding a number with 30 zeros at the front (Finding a such number has a probability of 1/Billion! ) Now you need to find a number with only  ‘x’ (Where x is a variable which is less than 30) zeros at the front since we have lesser manpower now, Hope you guys will stay with us!  ”

With less hash difficulty the amount of time to be mined a block will not vary. This case also applies in the other way too, when the number of miners are increasing the hash difficulty is also increased to make sure the blocks are not mined too quickly.  


Do you know?

A long time ago there was a miner called Satoshi Nakamoto and he single-handedly mined more than 1 million bitcoins! Oh, I forgot to tell you, there were no other miners at that time, He was the only miner in the world! Lucky guy!!

Q5) Now to the original question, How would the decreasing value of bitcoin effect on miners?

Why would miners mine with investing their resources, time on mining? For a reward of course! Once they successfully mined a block they are rewarded with Bitcoins!

This answers our question if the BTC value is dropping why anyone would want to be paid with BTC! They will stop BTC mining, which we have discussed in question 3.

Bonus:

Miners Reward for mining a block.

From 2009 -2012 – 50 BTC
From 2012- 2016 – 25 BTC
From 2016- 2020 – 12.5 BTC
From 2020- 2023 – 6.25 BTC

References

https://www.youtube.com/watch?v=qOVAbKKSH10

[Strawbeary]

If the price continues to drop, what effect will that have on Bitcoin mining and transactions?

Good question! I've divided my answer into these two points

1. Effect of lower prices on Bitcoin miners

If the price per Bitcoin drops, there will be a point when mining gets not profitable anymore. This break-even is difficult and depends on the individual costs of each miner to mine one Bitcoin. The first miners getting problems are those having high electricity costs and high salaries to pay for their employees. The cheapest conditions are actually mainly in China and Russia, where energy and salaries are low, but also renewable miners, which have special contracts to get a surplus of enery from hydropower stations (like in canada).

The result of miners leaving the network means a decrease of hashing power (if in addition more miner leave the network as new miners coming in) and the decreasing of hashing power wil result in a lower difficulty (the difficulty is a result of all miners confirming transactions and the more miners join the higher the difficulty gets (the difficulty is updated every 14 days to adjust the difficulty for the avarage blocktime of 10 min). Also the block rewards (12,5 BTC per block) are divided among more participants, if more miners join). If the difficulty decreases the block rewards will be divided among less participants and this means every miner gets more BTC.


2. Effect of lower BTC prices on transactions

The transaction fees will decrease most likely as we have seen this in the past. Remember in January 2018 it was other way round: increasing transaction time and costs due to a very high BTC/USD rate. But there was another issue: the unconfirmed transactios. So the miners confirmed the transactions first who had a high transaction fee and the others had to wait. Now we have only around 2.000 unconfirmed transactions, in January 2018 we had around 200.000 unconfirmed transactions.

Lower transaction fees also mean that the miners (who are getting the transaction fees besides the block rewards) earn less BTC as if the transaction fees are higher.

[Wittmann]

If you check cloud mining you can see mining btc isn't profitable at all since difficulty still going up and the price going down.

Since at least april no profitable anymore.

[BrewMaster]

It has reached the point where a few miners have turned off their rigs as mining is no longer profitable for them, or switched them to other coins.

you say this as if it has actually happened. but it has not. it is only in theory that they say miners may turn off their rigs if ....

you can check the hashrate charts if you like. this is the hashrate of past 6 months versus the price:


it looks a little messy because i used photoshop to change the color of the price line to make it look different. you can see the charts here:
https://bitinfocharts.com/comparison/bitcoin-hashrate.html#6m
https://bitinfocharts.com/comparison/bitcoin-price.html#6m

as you can see the price has been going  down but the average hashrate has been rising instead. the fluctuations are normal, they don't exactly show miners turning off anything. they are common all over the chart.