$500,000 per Bitcoin, baby. The math behind it.

[BurtW]

Even today (I mean right here, right now) with all the problems Bitcoin has (and there is plenty - such as it doesn't scale well) it's already superior to gold so I don't see a reason why it shouldn't be on par with gold.

No way.  This post (from very early in this thread) is a bit dated because we are now in the next era but the point is still valid:

We cannot/do not want to get to $500,000 per BTC any time soon.  Here is the math behind it:

https://bitcointalk.org/index.php?topic=694401.0

If BTC were to go to $500,000 in this era it would cause a catastrophic mining bubble:

   $500,000 x 25 = $12,500,000 per block = $75,000,000 per hour

   $75 million per hour would drive the mining to attempt to use 675 GW.  This is about 30% of all the power generated on the planet.

So, in order to keep our power consumption under about 2% of world wide power production, we cannot/do not want the price to get to $500,000 before era 6, which is about 2033 or so.

Using my previously derived formula for the power consumption:

P = (6(50/2^e) + f)(x)(1 - g)/c [kW]

where:

x = exchange rate [USD/BTC]
e = era [0..32] (we are currently in era 1)
f = average fees per hour [BTC/hour]
c = cost of energy [USD/kWh]
g = average gross profit margin [unitless ratio]

we can look at the power consumption in each era assuming a price of $500,000 per BTC.

In order to make it simple I will make the following assumptions:

x = $500,000 per BTC
f = fees per hour will keep the coinbase above 6 BTC/hour (1 BTC/block) in all eras
c = $0.10 per kWh
g = 0.1 miner gross profit margin

Code:

     Original target      Subsidy    Est Fees  Power  % of total world
Era    starting year    BTC/block    BTC/hour     GW  power production
---  ---------------  -----------  ----------  -----  ----------------
  0             2009  50.00000000  0.00000000  1,350            58.41%
  1             2013  25.00000000  0.00000000    675            29.20%
  2             2017  12.50000000  0.00000000    337            14.60%
  3             2021   6.25000000  0.00000000    169             7.30%
  4             2025   3.12500000  0.00000000     84             3.65%
  5             2029   1.56250000  0.00000000     42             1.83%
  6             2033   0.78125000  1.31250000     27             1.17%
  7             2037   0.39062500  3.65625000     27             1.17%
  8             2041   0.19531250  4.82812500     27             1.17%
  9             2045   0.09765625  5.41406250     27             1.17%

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[jbreher]

To build upon BurtW's work, it may be worthwhile to ask ourselves 'what is a reasonable share of the world's power production for Bitcoin mining to consume?'.

The Financial industry currently accounts for about 9% of US GDP.

Lacking any data one way or the other (i.e., as an initial conjecture), let us posit that this industry consumes power proportional to its share of GDP. Accordingly, let us posit that this financial sector consumes 9% of the world's (I made a leap there from US to global) power.

As Bitcoin increases in value, it seems absurd to think that it could do so without cannibalizing a fair share of the financial sector's share of GDP. Just as a hypothetical, let us assume that Bitcoin (i.e. direct p2p finance) can displace half of the financial industry.

Accordingly, let us allocate 4.5% market share -- and thereby power consumption -- to each of Bitcoin and legacy finance.

That would put us somewhere in the middle of era 3 for $500,000 per BTC, without increasing carbon footprint. Not too shabby.

Obviously, there are several SWAG proportion guesses that need analysis. But this framework may be helpful for sorting 'how bad is Bitcoin for the ecology?' issues.

Or from and alternative viewpoint, if Bitcoin were to increase to $250,000 per in the next several years, the issue of unemployed bankers would be a bigger problem than anthropogenic global warming. Oh-the-huge-manatee.gif

[w00t]

Even today (I mean right here, right now) with all the problems Bitcoin has (and there is plenty - such as it doesn't scale well) it's already superior to gold so I don't see a reason why it shouldn't be on par with gold.

No way.  This post (from very early in this thread) is a bit dated because we are now in the next era but the point is still valid:

We cannot/do not want to get to $500,000 per BTC any time soon.  Here is the math behind it:

https://bitcointalk.org/index.php?topic=694401.0

If BTC were to go to $500,000 in this era it would cause a catastrophic mining bubble:

   $500,000 x 25 = $12,500,000 per block = $75,000,000 per hour

   $75 million per hour would drive the mining to attempt to use 675 GW.  This is about 30% of all the power generated on the planet.

So, in order to keep our power consumption under about 2% of world wide power production, we cannot/do not want the price to get to $500,000 before era 6, which is about 2033 or so.

This is very interesting - thanks for re-posting it. Can you please post current numbers in this formula? P = (6(50/2e) + f)(x)(1 - g)/c [kW]

In your opinion what is the current maximum non-bubbly price?

[dhampir-D]

I saw another analysis that presents the possibility of Bitcoin reaching the $ 25,000 range, and I think that's a possible value, even though the odds are low. But a price in the $ 500,000 range, even if achieved, would take more than a decade to happen, and for that it would be necessary for Bitcoin to be recognized as a currency by a very large number of people around the world.

[Nathan047]

Someone says 1 million $ per bitcoin, some other says 100.000$, all in all the future seems bright

Lots of people say lots of things, but just because somebody on the internet says something doesn't make it true. I'm hope for the best but I still feel skeptical.

[blackmagician]

Someone says 1 million $ per bitcoin, some other says 100.000$, all in all the future seems bright

Lots of people say lots of things, but just because somebody on the internet says something doesn't make it true. I'm hope for the best but I still feel skeptical.

This is what they see in the future of bitcoins, maybe im already dead when bitcoin reach the $100k price that have been dreaming by some bitcoin holders.that will be the start of a new era.

[Carmen_Sandiego]

Someone says 1 million $ per bitcoin, some other says 100.000$, all in all the future seems bright

Lots of people say lots of things, but just because somebody on the internet says something doesn't make it true. I'm hope for the best but I still feel skeptical.

Not everything you see on the internet should be taken as true, of course, but there are certain analyzes that make sense. I don't think the price will reach the $ 500,000 range for years to come, but I think it's possible to see Bitcoin reach the five digits in less than three years.

[Febo]

https://ybitcoin.com/articles/bitcoin-as-an-investment/

I never thought of max value of Bitcoin, but yes I agree it exist. This picture is nice, but what most people dont see, that Bitcoin price is many factors together. It is hedge founds allocations, it is gold holders diverts some % of their holdings in BTC, it is some % of black market is done in BTC.  So on my opinion price can  reach over one million USD. Even if USA inflation is similar as today. But of course that will not happen that fast. Can take decades.

[lionheart78]

https://ybitcoin.com/articles/bitcoin-as-an-investment/

I never thought of max value of Bitcoin, but yes I agree it exist. This picture is nice, but what most people dont see, that Bitcoin price is many factors together. It is hedge founds allocations, it is gold holders diverts some % of their holdings in BTC, it is some % of black market is done in BTC.  So on my opinion price can  reach over one million USD. Even if USA inflation is similar as today. But of course that will not happen that fast. Can take decades.

This at least have some reference why he came out with that statistics.  There might be an error in the calculation but I think it is better than others who are just putting random thing in the calculation.  What I mean is the given figure is very possible but the problem would be when will those prices happen.

[BillyBobZorton]

https://ybitcoin.com/articles/bitcoin-as-an-investment/

I never thought of max value of Bitcoin, but yes I agree it exist. This picture is nice, but what most people dont see, that Bitcoin price is many factors together. It is hedge founds allocations, it is gold holders diverts some % of their holdings in BTC, it is some % of black market is done in BTC.  So on my opinion price can  reach over one million USD. Even if USA inflation is similar as today. But of course that will not happen that fast. Can take decades.

I can definitely see bitcoin becoming the global e-commerce currency during the next 10 years if we get our shit together and activate segwit so lightning network is working at its full potential and tons of transactions per second, instant and almost free, are possible, that's when bitcoin usage will explode.

[brole]

^Agree. Targets in my head about bitcoins for '27 are ~$10K. So this story has some logic. 

[HabBear]

Divide 12M coins into $8.5 trillion

$500,000 Bitcoin baby.

Well, thanks for your logic. It would be nice to have more detail but I suppose you did provide a link for us to explore.

By the way, you're math is wrong...which is ironic given that the headline of your post highlights "the math behind" the idea.

$8,500,000,000,000 / 12,000,000 = $708,000.

BUT, your post is from 2014 and it's 2017 now and we've got 17 million coins in existence, so based on your math the projected price per coin would go down to about $500,000 (so your answer is still correct.)

[JANGKRIK BOSS]

I'm not sure the price bitcoin could reach $500.000 without exceptional events. the unusual examples are: bitcoin used officially by a State, thus triggering the whole citizens buy bitcoin so prices skyrocket.

[warwar]

I'm not sure the price bitcoin could reach $500.000 without exceptional events. the unusual examples are: bitcoin used officially by a State, thus triggering the whole citizens buy bitcoin so prices skyrocket.

Agree without a big impact from market bitcoin will not reach with that price because i couldnt think that the price will be at that peak though nothing is impossible with bitcoin if almost of the people here is using it as a means of payment then i think it will . But now i think it really takes time first before reaching it.

[rajasumi3]

I am waiting for the price of bitcoins to be 500000$,well that thing to happen it needs a lot of patience .well i may not be alive when the price of bitcoins hits so much amount.Mass acceptance is required so that the price of bitcoins goes high and otherwise it will be a total flop.

[BitHodler]

Mass acceptance is required so that the price of bitcoins goes high and otherwise it will be a total flop.

Mass acceptance will help, but in order to make a rocket jump forward, we need professional capital to flow into Bitcoin.

As soon as institutional investors have a solid and legal way of jumping on board (which is why an ETF will be very important), then playtime is over for the average trader.

People already complain about Bitcoin's price being high, but as soon as the big boys come in, one tenth of a Bitcoin will cost the same as one whole Bitcoin right now ~ and it will even go beyond that.

[Grillo]

gotta love math   

[Tesorex]

The reason why Satoshi yet to sell even one of his coins, he designed it to rise much more than the current prices.
I'm gonna hodl just like him.

[7jaka7]

It would be nice to see it rise like that....I am skeptical mainly because I am involved now...When I first started on Bitcoin prices were around $800 dollars.  Highest I have seen since then is around $650. 

So, if Bitcoin fails we can blame me:0

Noone blames you

[Febo]

^Agree. Targets in my head about bitcoins for '27 are ~$10K. So this story has some logic. 

I am quite positive that in 2027 price of BTC will be way over $10k.  for that only 2 bubbles are needed. I expect we will see at least 3.