Gold collapsing. Bitcoin UP.

[Richy_T]

@Richy_T I do not think the majority of miners are mining at a loss, the latest generations of equipment are still profitable, mining at a loss is essentially irrational. Furthermore these miners can not switch to the altcoins since they are using ASICs and there are no where near enough altcoins that use SHA256. SHA256 mining can even be seen as a single self balancing economy across several cryptocurrencies, the profitability of mining Bitcoin is already influenced by the existance of alternative SHA256 cryptocurrencies, in part due to the multipools, when Bitcoin becomes unprofitable for them they will have no where else to go.

I meant they would be mining at a loss immediately after the halving.

If you are spending $51 to mine $100 of bitcoin before the halving, once it happens, you are operating at a loss. I doubt many miners have such fat margins these days and the hashrate continues to sky-rocket.

If it's not profitable to mine bitcoin, you stop mining bitcoin. You don't want to just turn your rigs off though since you have overhead so you start looking for any SHA256 alts that might be profitable.

 

[AdrianX]

I think it's probably safe to assume that mining is less than 50% profitable so when the halving happens, we are going to see a lot of miners switch off. It's 10 days to next the difficulty adjustment after that assuming a constant hashrate but it will likely be much down so it could be extended out quite a lot further, especially if it causes a crash and more miner switch-offs. I used to think this was going to be a bad thing but right now, I think it's probably what the miners deserve.

This gets said a bit but one needs to understand the dynamics and facts.

The fact is hardware costs are sunk coats. Equipment is not part of profitability. (If you financed your mining investment your creditors have skin in the game and you've not put that investment at risk.)

So hardware as a sunk cost is not a variable expense. It's the cost of a ticket to the mining party.

Mining profitability comes from the miners bottom line, it.s input costs less operating expenses.

If you look at the return on energy expenditures on new hardware being deployed now (the greatest of the variable costs), you'll see that most miners are not at risk of bankruptcy when halving happens. Those who financed their hardware with debt may be at risk as they have a higher variable cost (interest on that debt)

Most miners won't have a problem if price stagnates, all that happens is old hardware goes offline. That old hardware is already paid for a sunk cost.

If the price increase the dynamic functions in a similar manner to the last halving. Except there is more competition for asics so arguably there is a greater decentralizing force at play.

The halving is an opportunity for miners to focus on the TX revenue that never halves. The subsidiary is still too high to be relevant.

The real tragedy is Blockstream are like the Europeans taking over America (TX fees being a substitute for the bounty provided by the land.) Miners don't think it's relevant as the subsidy is so good given the relative demand.

It's too soon to call the Blockstream Core degradation of the incentives an inevitability.

 

[Peter R]

"After you, my dear non-mining node"

https://www.reddit.com/r/btc/comments/477u34/nodes_first_applying_what_we_know_works_for/

 

[cypherdoc]

 

[VeritasSapere]

I meant they would be mining at a loss at the time of the halving.

If you are spending $51 to mine $100 of bitcoin before the halving, once it happens, you are operating at a loss. I doubt many miners have such fat margins these days and the hashrate continues to sky-rocket.

If it's not profitable to mine bitcoin, you stop mining bitcoin. You don't want to just turn your rigs off though since you have overhead so you start looking for any SHA256 alts that might be profitable.

I misunderstood what you said, the current generation will indeed most likely be unprofitable after the halving, I suspect that the latest generation by Bitfury will most likely continue after the halving though I have not seen any numbers yet for their latest generation. So it is hard to to know but I suspect the numbers on those 16mm chips are very good.

I think you are missing out on part of what I was saying before though. The SHA256 altcoins literally follow the same profitability of Bitcoin mining, in part because of the existence of multipools. People simply switch their miners over the most profitable coin at all times. Unless the market cap of another SHA256 rises to the point where it gives similar rewards to Bitcoin, which is extremely unlikely. The miners truly have no where else to go, since the SHA256 altcoins do just mirror the profitability of Bitcoin at all times.

 

[Richy_T]

This gets said a bit but one needs to understand the dynamics and facts.

The fact is hardware costs are sunk coats. Equipment is not part of profitability. (If you financed your mining investment your creditors have skin in the game and you've not put that investment at risk.)

Yes, hardware is a sunk cost. I was discounting that in my speculation. The calculation is electricity cost vs mined income. This will be heavily affected by several factors over the next 3-4 months including the hashrate (heading vertical), the price (who knows) and energy costs (anyone's guess).

I think you are missing out on part of what I was saying before though. The SHA256 altcoins literally follow the same profitability of Bitcoin mining, in part because of the existence of multipools. People simply switch their miners over the most profitable coin at all times. Unless the market cap of another SHA256 rises to the point where it gives similar rewards to Bitcoin, which is extremely unlikely. The miners truly have no where else to go, since the SHA256 altcoins do just mirror the profitability of Bitcoin at all times.

If the altcoins are, indeed unprofitable then miners do just switch off.

 

[Peter R]

Thanks (I'm the author). One of the next articles on my list is something explaining the 'market driven emergent consensus' philosophy. If anyone here (special request for Zanglebert and/or Justus) would be up for reading an early draft and giving feedback, let me know.

Yes, that was one of the best articles I've read in the last while. Thanks for digging up all those great quotes!

I noticed that some people were critiquing your statement about "a block size limit above demand," arguing the usual "but there is infinite demand" nonsense. I think what you mean is a block size limit above the free-market equilibrium block size (so that the limit does not significantly affect the economics):

 

[VeritasSapere]

So I have finished with this new narrative I have constructed. I have essentially constructed a narrative of peaceful cooperation between the two camps, I found a way to explain this in a reasonable and rational matter which is palpable to both sides. All that I was asking for was a bump up to two megabytes, to make us big blockist happy, so that both visions for Bitcoin could still live side by side and time would tell which theory was truly superior. I thought this was a beautiful and elegant solution. Yet it was still rejected by Lauda...

https://bitcointalk.org/index.php?topic=1330553.msg13985734#msg13985734

Well I tried...

 

[cypherdoc]

 

[VeritasSapere]

@VeritasSapere Another way to look at changing the PoW so that home computers can mine is that it lowers the entry barrier to mining. There will still be professional miners and good luck to them, but lets get teenagers from England to India to Thailand to Argentina excited and joining the community. We could have hundreds of thousands, perhaps even millions, of enthusiasts setting up mini rigs in their bedroom and garage. Empirical evidence of this is from the early days of Bitcoin and volunteer grid computing - look how healthy it is! http://boincstats.com/

This situation is unsustainable even with an ASIC resistant algorithm, eventually the profitability equilibrium will be found and the majority of mining will be done by larger farms again. The idea is nice but essentially I do think it is a fantasy, profitable GPU mining like this only occurs in the rare opportunistic moments when the infrastructure is still catching up to the profit that there is to be made. The early history of Bitcoin mining is an example of this. Not something that should be seen as a sustainable model for mining, I do appreciate the sentiment I really do, I just do not think this could be a reality in the way that you describe.

In regards to lowering the barrier to entry to mining, it would not change much. It is about the same price to setup a single GPU rig compared a single ASIC miner. Depending on the ASICs available at the time of course. Even then if you have a "normal" electricity price, both would still be unprofitable, under normal conditions, with a very similar barrier to entry, electricity price is still the determining factor for the viability and barrier entry to mining both for GPU/CPU and ASICs, its not really that different.

 

[cypherdoc]

in light of this tweet from Brito, what is the best way to decentralize Bitcoin? continue with the identification of major players in the space along with a central pt of failure at Blockstream in relation to the core code or spreading Bitcoin usage worldwide involving as many human users as possible ala the post above by SpiderImAlright?:

 

[satoshis_sockpuppet]

They are scenting the weakness.

 

[cypherdoc]

check this out:

http://www.onlinevideoservice.com/clients/cftc/video.htm?eventid=cftclive

 

[freetrader]

Samson takes a break from taunting Brian Armstrong and shows us a piece of his CEO mentality.

It's what I'd expect from someone in charge of a ruling party - or a cartel believing itself firmly in power and wanting to retain the status quo.

The term 'election' is apparently a threat to this mindset. The money must (still) be good. Too bad the foresight isn't, the hindsight will be something to behold.

 

[albin]

in light of this tweet from Brito, what is the best way to decentralize Bitcoin? continue with the identification of major players in the space along with a central pt of failure at Blockstream in relation to the core code or spreading Bitcoin usage worldwide involving as many human users as possible ala the post above by SpiderImAlright?

The recent secret meeting is making me very concerned that Bitcoin could receive the eGold treatment finally after all these years due to the association with Blockstream and their cronies. Not that Bitcoin couldn't survive after the US Federal gov't prosecuting current self-appointed principals, but it would be an enormous setback.

 

[cypherdoc]

imo, a takedown of Blockstream would be a bullish event.

 

[sgbett]

Ugh the google translate of the latest chinese version is horrible.... very difficult to read.

Bitcoin roundtable consensus on expansion

On February 21, 2016, in Hong Kong's Cyberport, representatives from industry and the development of Bitcoin community agreed on the following points:

• We agree that isolation will continue to witness a bifurcated approach to the development of soft actively, according to the original timetable is expected to release in the next two months.
• We will continue to develop throughout the Bitcoin community together to develop a disclosure-based security isolation witness improvement over hard fork. Attend Bitcoin Bitcoin Core roundtable contributors agree: Within three months after the release of the witness isolation, this will be hard to achieve a bifurcation, as recommendations to be submitted to the Bitcoin Core.
• This should include some hard bifurcation features in the technical community under discussion, including: an increase in non witness data to around 2MB, the total volume of less than 4MB. The bifurcated only in hard to get broad support throughout the community Bitcoin case would be implemented.
• Bitcoin Core after the release of a forked code that contains the hard version, we will run in a production environment isolation witness.
• In the foreseeable future, we will run and Bitcoin Core consensus protocol compatible system, which will eventually include isolation future witness and the hard bifurcation.
• We have been able to develop a more efficient use of block space expansion technology, such as multi-Schnorr signature.

Based on the above, the estimated time node follows:

• April 2016, isolated testimony released;
• July 2016, hard-forked code development is completed and available for use;
• In July 2017, if we can get a wide range of community support, hard fork effect.

The undersigned support this roadmap. Co-signer:

Panzhi Biao
Manager
AntPool

Anatoly Legkodymov
CEO
A-XBT

Li Zhao Jing
Bitcoin Association Hong Kong

Leonhard Weese
Bitcoin Association Hong Kong

Cory Fields
Bitcoin Core Contributor

Johnson Lau
Bitcoin Core Contributor

Luke Dashjr
Bitcoin Core Contributor

Matt Corallo
Bitcoin Core Contributor

Peter Todd
Bitcoin Core Contributor

Xie Kang
Bitcoin Roundtable

Phil Potter
Chief Strategy Officer
Bitfinex

Valery Vavilov
CEO
BitFury

Alex Petrov
CIO
BitFury

Wu Ji Han
Co-CEO
Bitmain

Janke group
Co-CEO
Bitmain

James Hilliard
Pool / Farm Admin
BitmainWarranty

Yoshi Goto
CEO
BitmainWarranty

Alex Shultz
CEO
BIT-X Exchange

Ye Hanxin
CEO
Blockcloud

Nicholls yuan
CEO
BTCC

Right Wing Miao
COO
BTCC

Yao Yuan
CTO
BW

Obi Nwosu
Managing Director
Coinfloor

Mark Lamb
Founder
Coinfloor

Wang Chun
Admin
F2Pool

Marco Streng
CEO
Genesis Mining

Marco Krohn
CFO
Genesis Mining

Oleksandr Lutskevych
CEO
GHash.IO & CEX.IO

Wu Gang
CEO
HaoBTC

Li Lin
CEO
Huobi

Zhang
Vice President
Huobi

Adam Back
Individual

Eric Larchevêque
CEO
Ledger

Liu Xiang
CEO
LIGHTNINGASIC & BitExchange

Xu star
CEO
OKCoin

Liu Chengqi
Head of International
OKCoin

Guy Corem
CEO
Spondoolies-Tech

 

[cypherdoc]

the CFTC guy gets it:

and you're right, the value of a decentralized clearing network is proportional to the amount of usage. But that's not really any different from a clearinghouse or CCTP and the level of complexity that's involved in setting up something like this is pretty similar to level of complexity setting up a clearinghouse or a CCP you need to have a critical mass of usage for it to be worthwhile.
[doublepost=1456258287,1456257636][/doublepost]fascinating:

I can attest from a CME group perspective the few consortium -- industry consortiums that we're a member of, there is very much the inclusion of regulatory bodies to be at least, in the very least an observer status in the network, or, further to that, you know, having additional powers inside of the network.

 

[VeritasSapere]

On Bitcoin Governance:

I think that Bitcoin relies on the economic self-interest of the masses to govern consensus. I actually perceive Bitcoin as being the evolution of governance. Voluntary and decentralized non geographically bound governance, the evolution of the modern democracy if you will into something better and superior.

Bitcoin's governance mechanism is a form of democracy, not a democracy in the way that we know today. It is very different, I think better. However there are very democratic aspects to it, like reflecting the will of the economic majority. Which is not that dissimilar to reflecting the will of the people, which is what democracies are supposed to do in theory at least.

Bitcoin is interesting as a form of democracy, because it is different to modern state democracies in that it places positive incentives on a select group of people who essentially vote in the interests of the economic majority, almost the opposite of how modern state democracies work, since our representatives in modern state democracies often have perverse incentives acting upon them. Which is what makes decentralized proof of work blockchains arguably a superior form of governance.

Consensus is an emergent property which flows from the will of the economic majority. Proof of work is the best way to measure this consensus. The pools act as proxy for the miners, pools behave in a similar way to representatives within a representative democracy. Then in turn the miners act as a proxy for the economic majority. Since the miners are incentivized to follow the economic majority. In effect the economic majority rules Bitcoin, in other words the market rules Bitcoin. Bitcoin relies on the economic self-interest of the masses to govern consensus.

https://bitcointalk.org/index.php?topic=1330553.msg13986783#msg13986783

 

[cypherdoc]

And thanks for your panel discussion, I found it very interesting and informative. My question for all of the panelists gets back to something that Sandra said at the beginning, which is the scalability concern. There have been some widely publicized scalability issues with the Bitcoin blockchain that we're going to be addressing in various ways. How do you see the technology scaling to markets in which there are millions of transactions a day?


Sure, well, and I can speak -- I would say mainly to the etherium blockchain, which -- as well as the consortium blockchain that we run off of the etherium. One is the foundation itself has been working on the scaling issue, where right now we have a proof of work similar to the blockchain -- the Bitcoin blockchain. There would also be a couple different technical sides of things, but a proof of stake and a charting of addresses to increase the scalability.

ween these public block chains and the so-called permissioned or governed block chains. Because there is a reason why scael ibility is so hard in public block chains like Bitcoin and etherium, is because you have to build them in such way to mitigate against the risk of what's called a civil attack. Because anybody can become a -- anyone can become part of the validation set, they're anonymous. So you have to raise the cost of participating in the network as a way of preventing a single party from taking a significant proportion of the consensus process over. In a permissioned blockchain you don't have to mitigate against that civil attack. So already, without some of the innovations that etherium has been working on around shard ing and some other techniques even without those innovations we can achieve some fairly high level of throughput and scalability. With permission networks, already. And it gets down to detailed about which consensus algorithm you use, what working topology do you need, can the notes be located in one geographic location or do they need to be geographically dispersed, but they're all imminently solvable problems in the permission context.