Ordinals and other non-monetary "use cases" as miner reward on 2140+

[d5000]

The security of the Bitcoin is in hands of the few companies, if profitability drops or they find something more profitable to mine then Bitcoin network will be doomed.

I disagree with this logic.

First, if "they" (I guess you mean the big mining companies like Riot, ViaBTC etc.?) find something more profitable, then difficulty will go down, and it will become easier for smaller players to enter mining again. Decentralization in this case will probably grow, although more slowly than in the past due to higher entry barriers.

Second, this will be a gradual process. While halvings are unique events, the consequences are different for each miner, depending on its exact business model (e.g. if it relies more on cheap electricity or on other scale effect, on speculation [HODLing] or not, etc.). So the most likely scenario is that if some big miner retires from the business or goes bankrupt this would be first good for the other mining companies as the difficulty pressure will be lower (hashrate will probably grow more slowly), and will help them to stay in the business.

There is only one factor I could be a little bit more afraid of - if a country becomes too dominant, then an event (be it a new tax, a ban or a sudden rentability problem) driving out miners from there could drop hashrate again like during the China ban. However, the US has currently probably around 35-40% of the worldwide hashrate, so in the current situation it would be less of a problem than in 2021, and 60% of the current hashrate would be still "secure enough". But such events could be problematic in the far future when the attack cost has lowered. So I share a bit your concerns about decentralization problems.

But I anyway expect a change in miner behaviour in the next 5-10 years. As electricity cost is about 70% of the cost of each Bitcoin mined (for the miners) and renewable energy share is growing around the world, I expect to switch them slowly from a 24/7 mining model to a model where they use a wholesale energy tariff (these are becoming more common now) to benefit from very low prices in times of high solar/wind production and thus at least turn off their gears voluntarily when energy is expensive, mining e.g. only 70-80% of the time but to a even lower price than now (< 5 ct/kWh is easy with this strategy, even < 3 ct is feasible. i.e. better than the famous Riot agreement of 3.5 ct). This model is much more likely to be adaptable all around the world (the "duck curve" is starting to look the same in several countries), so mining could decentralize again due to this evolution. This is controversial and has been disputed by some forum members, but they haven't convinced me that my thoughts are wrong.

There is also an additional point. Bitcoin mining companies are basically server farms. In periods of low profitability, they can diversify their income sources offering servers for other cloud services. This is already been done by most big mining companies, and it is also one of my reasons why I think that if profitability drops there will not be a "big hashrate crunch", but a very gradual process, because bigger miners will slowly dedicate more percentage of their farms to other cloud services once their hardware becomes unprofitable, instead of going offline completely. And that will re-balance with difficulty growth again and again.

[cryptosize]

But I anyway expect a change in miner behaviour in the next 5-10 years. As electricity cost is about 70% of the cost of each Bitcoin mined (for the miners) and renewable energy share is growing around the world, I expect to switch them slowly from a 24/7 mining model to a model where they use a wholesale energy tariff (these are becoming more common now) to benefit from very low prices in times of high solar/wind production and thus at least turn off their gears voluntarily when energy is expensive, mining e.g. only 70-80% of the time but to a even lower price than now (< 5 ct/kWh is easy with this strategy, even < 3 ct is feasible. i.e. better than the famous Riot agreement of 3.5 ct). This model is much more likely to be adaptable all around the world (the "duck curve" is starting to look the same in several countries), so mining could decentralize again due to this evolution.

IIRC, what you're suggesting is already a reality in Texas.

Miners there don't work 24/7/365, but only when the state has a surplus of energy.

When there's high demand for energy (during heat waves or harsh winters), they switch off ASICs.

This is controversial and has been disputed by some forum members, but they haven't convinced me that my thoughts are wrong.

Why should we trust them? Are they the sole arbiters of truth or what?

I've been saying for a long time that BTC + renewable energy + AI (to manage the energy distribution grid faster and more effectively than human beings) will be the ultimate combo until 2050 at least.

How it started:

https://www.weforum.org/agenda/2017/12/bitcoin-consume-more-power-than-world-2020/

How it's going:

https://www.instagram.com/worldeconomicforum/reel/C35FfRytPtJ/

 

Net Zero/Greta fanatics still cannot believe that Bitcoin/PoW is more ecological than they thought!

Imagine if BTC was centrally planned (like ETH) and switched to PoS:

https://cleanupbitcoin.com/

Bitcoin will help speed up the green energy transition. Few people understand this (even among the BTC community, let alone no-coiners).

ps: I'm not saying Satoshi invented it for this purpose, nor that WEF had this planned from the get-go.

[pooya87]

Hint: Profitability - It's not going up.
And there's nothing wrong with it until it hits the wall of no profit.

The hashrate is constantly rising and it has risen massively. That means mining has to be increasingly more profitable to create that incentive for people to join the mining scene by making that commitment and investment every year.

[d5000]

IIRC, what you're suggesting is already a reality in Texas. Miners there don't work 24/7/365, but only when the state has a surplus of energy.

Yes, it's beginning, but I think it's still a 95-99%-on model. AFAIK those miners only turn off the gears in periods of extreme demand surplus, when they're "ordered" to turn off operations by the electricity distributor, as a condition to benefit from energy credits (Riot case).

Anyway, I think soon we'll start to see miners doing the same but voluntarily chosing their on-/off-cycle due to them using the wholesale price (i.e. participating in auctions in the energy exchanges themselves, or with access to a tariff which follows the wholesale price - something already available in several European countries even for retail energy consumers). By the way this method would even stay relatively attractive if the "DAME" mining tax is implemented in the US, as the prices they would pay when they effectively consume would be low, and thus also the tax (Anyway I don't like the tax concept, above all own renewable generation should be always excepted.).

Why should we trust them? Are they the sole arbiters of truth or what?

Of course, that's also why I will repeat this argument until somebody proves I'm wrong - but then I've no problem to admit an own error. But I think evidence is clearly pointing into this direction

The hashrate is constantly rising and it has risen massively. That means mining has to be increasingly more profitable to create that incentive for people to join the mining scene by making that commitment and investment every year.

I think you can't deduce from the risen hashrate that mining has become more profitable. Only that it stays profitable, but currently only for those who can afford efficient ASICs and cheap electricity. The hashrate increase is very likely largely a product of hardware improvements (Moore's law).

However I agree with you that MeGold666's fears are probably unfounded - if profitability was that bad we would see a slower increase.

[pooya87]

I think you can't deduce from the risen hashrate that mining has become more profitable. Only that it stays profitable, but currently only for those who can afford efficient ASICs and cheap electricity. The hashrate increase is very likely largely a product of hardware improvements (Moore's law).

That's a good point but that's also only one of the things affecting the hashrate rise.
Keep in mind hardware improvement doesn't happen every day. For example Bitmain released S19 miner in 2020 but then the next major improvement which is S21 released 4 years later in 2024.

BTW I don't disagree that block reward falling can become a concern regarding the incentive for hashrate to continue rising. But I don't see us there yet. I believe we are far from that time, at least a couple of more halvings are needed for it to become a real concern.
Also we definitely don't need spam attacks to increase the fee to provide that "unhealthy" incentive.

[d5000]

That's a good point but that's also only one of the things affecting the hashrate rise.
Keep in mind hardware improvement doesn't happen every day. For example Bitmain released S19 miner in 2020 but then the next major improvement which is S21 released 4 years later in 2024.

Even if this is of course correct, the "hardware upgrading process" for the miners should be in general a gradual process. Not all farms will upgrade their gears at the same time, not even in the same year. And that's in my opinion the explanation that the hashrate increase looks "gradual".

Let's see how much can be explained by Moore's law with a short calculation:

- Antminer A19 (2020): 95-110 TH/s
- Antminer A21 (2024): 200 TH/s

So we have roughly a duplication in 4 years. The hashrate however quadrupled in this time (from 120 to 550 Eh/s), so Moore's Law explains about half of the hashrate growth probably.

Of course however the other big factor is the Bitcoin price increase, but the impact on miner profitability is not 1:1 as you always have to take into account the previous difficulty increases as well (that's the reason why some talk about "production costs" of Bitcoins, even if I strongly disagree calling it that way ...). And it's a bit difficult to calculate the impact due to the cyclic price behaviour. In early 2021 the price was still much lower than today, in mid-2021 and late-2021 the price spiked to similar values than now, but with a big "valley" of 35-50k in mid-2021, and in 2022 it fell drastically again.

Also we definitely don't need spam attacks to increase the fee to provide that "unhealthy" incentive.

Fully agree here

[Kruw]

Even if just 1% of the hashrate remains anti-censorship, it has a high chance to produce 1 block everyday. That's enough to clear the mempool from all blacklisted transactions every day.

The only way to censor Bitcoin is to attack it, which incidentally will affect your own income either directly through waste of electricity or indirectly through capital devaluation.

This assumes the remaining 99% of hashrate won't reorg the block created by the anti-censorship pool.

[BlackHatCoiner]

This assumes the remaining 99% of hashrate won't reorg the block created by the anti-censorship pool.

That's exactly what I mean by "attack".

[stompix]

I don't understand why in the name of god it's 2024 and we still cling to things like hashrate is going up, everything is fine the networks is more secure, and we ignore when it comes to security basic things about mining, things that guys like Burtw mentioned decade ago!!!
Quick example of why hashrate on its own is just a useless metric, so, assuming attackers need 10 billion (number pulled out of my *) now at 600exa that means back in 2013 at 400th/s you could have attacked the network with $10k? No!

So why not go the easy path of doing things, best case scenario:
- all miners are ar 3cents kwh, we completely ignore ROI, last day read was $27,476,575.85, let's round it up to 30 million, so that's 1 full TWH a day, your best efficient gear at the moment draws 85kwh so we can feed with this 11 million ASICs worth 50 billion! Nice one!
Bad scenario:
- we no longer have rewards, but Bitcoiners are spending like nuts so the fee is not 1 mil but 5 mils, all miners have 4 cents per kwh, but they also have a ROI of 2 years on the gear so we're down to 125Gwh, before ROI so with that we need additional 8$ per day per gear , so we're down to 400 000 asics being the maximum of economically viable, and that's 2 billion! Still out of my pocket reach, we're safe!
Worse case scenario:
- fees are the same as now 1mil, kwh is at 5, adding expenses keeping 2 years ROI, and we can't feed more than  70 000 asics worth 350 million.

350 million to attack a destabilize a network worth 1.4 trillion, cheap, expensive?
The good part in this is, why would Buttercup do this? Or Kim Join Us! Or the reptilians and the bildenbergs! 

Oh my bad, forgot in the worst-case scenario the attacker might not want to buy the most expensive gear but a cheaper one in cost of TH/s/$, so in head to head battle you won't need $5000 of gear to overpower a s21 you would do it with s19 that are selling for almost scarp on the market for $1800.
Which would bring down our scenario from 350 million to 126 million 

But why would anyone who feels threatened by Bitcoin spend twice the wage of the CEO of JP Morgan on killing it....