Bitcoin 'Miners' Face Fight For Survival As New Supply Halves (reuters.com)

SpzToid quotes a report from Reuters: On Saturday, the reward for [bitcoin] miners will be slashed in half. Written into bitcoin's code when it was invented in 2008 was a rule dictating that the prize would be halved every four years, in a step designed to keep a lid on bitcoin inflation. From around 1700 GMT on Saturday, instead of 25 bitcoins up for grabs globally every 10 minutes, worth around $16,000 at the current rate BTC=BTSP, there will be just 12.5. That means only the mining companies with the leanest operations will survive the ensuing profit hit. "The most important thing is to be the most efficient miner," said Streng, the 26-year-old co-founder of German firm Genesis Mining, which has "mining farms" in Canada, the United States and eastern Europe, as well as in Iceland. "When the others drop out, that means that they leave the market and give you a bigger share of the pie."

Comments

Other motivations

[stikves]

With smaller players dropping out of the game, soon it might become a "single player" game after all. If this scenario happens, then a single entity controlling 51% of the keychain nodes can potentially disrupt the entire BitCoin economy by effectively "rewriting history".

I'm not sure this is a good thing. Every advancement seemed to have moved the needle to this direction. While everyone was able to run CPU miners is was very democratic. Then GPUs came, but still people could drop in a few hundred, and continue. After FGPA, and the ASICs, it's not just very large firms, where smaller people can only "rent" nodes, and hope they can trust the infrastructure.

We might need a "reset", where ASIC is no longer viable, but I'm not sure that would still be possible.

Re:Other motivations

[TeknoHog]

We might need a "reset", where ASIC is no longer viable, but I'm not sure that would still be possible.

Many if not most altcoins started because they wanted to avoid the ASIC path, by choosing more elaborate hash functions. Of course, it's always possible to design ASICs for these too, even if they end up looking like special versions of GPUs. Besides hash functions, many altcoins have other interesting features that might end up in Bitcoin some day.

However, it's easier to start using the altcoins themselves than hard fork Bitcoin. With cryptocurrencies and automated exchanges, there's less need for everyone to stick with the same coin.

Re: Other motivations

[Entrope]

No reasonable person wants to carry a dozen wallets to conduct commerce, even if they're of the cryptocurrency variety. There are huge network effects for having a de facto standard (crypto)currency in an area.

Re:Other motivations

[cryptizard]

Every Bitcoin transaction has an optional "transaction fee" that you can include as an incentive to miners to include your transaction in the block chain. The idea is that eventually miners will make their money not from the block rewards but from transaction fees.

Re:Other motivations

[cryptizard]

That is why Bitcoin includes transaction fees. As the block rewards get lower, transaction fees will become a larger part of the incentive for miners to keep mining. Eventually there will be no new bitcoins, at which point 100% of the money from mining will come from transaction fees.

Re:Other motivations

[sphealey]

Bitcoin: designed by a brilliant mathematician who had never read a macroeconomics textbook or intermediate-level survey.

sPh

Re:Other motivations

[codebonobo]

With smaller players dropping out of the game, soon it might become a "single player" game after all.

Be aware there are also strong forces occuring that are pushing the decentralization of mining right now. Most principly hitting Moore's cliff with ASIC manufacturing will insure that newer generation ASICs only are slightly better than older generation ASICs.

can potentially disrupt the entire BitCoin economy by effectively "rewriting history".

This isn't true and not the consequences of a 51% attack. History cannot be re-written by a 51% attack as the amount of energy needed to ourun the longest chain with the most proof of work going several confirmations back is insurmountable. This is typically why the historical record of bitcoin txs are referred to as "immutable" . A 51% attack could potentially create double spends or prevent txs occurring in the present, not several confirmations past.

We might need a "reset", where ASIC is no longer viable, but I'm not sure that would still be possible.

This is of course possible and the code has already been written in the event of an unlikely attack from miners. This is unlikely to be needed however because there are both forces that drive centralization of mining and forces that drive decentralization of mining and a more likely outcome in the future is a mix of p2pool mining with some large industrial locations.

Re:Other motivations

[codebonobo]

" there are other options that allow bitcoin to scale where "layer 2" payment channels that are onchain and secure can occur that will allow bitcoin to scale to over 100k txs per second"

That's pretty fucking slow, actually. Bitcoin won't be viable for shit until you can process a few million per second.

Visa averages around 2k tps (transactions per second) with daily peak rates of 4k tps , and a capacity of 56k tps. I like your optimism however , as you are probably suggesting that bitcoin needs much higher throughput than Visa for AI and machine to machine txs which I would agree. Don't worry, as the Lightning network will eventually be able to handle your demands - https://lightning.network/

Re:Other motivations

[sphealey]

An inherently deflationary currency in a world that has experienced 300 years of continuous economic and population growth - what could possibly go wrong?

sPh

Re:Other motivations

[Megol]

I think he meant that ASIC miners are hardwired computers which they are.

Re:Other motivations

[AchilleTalon]

The point is: Which system is having the best features, lowest energy footprint per transaction? BitCoin is having a positive cost per transaction curve while banking systems are having a negative one. Forget about moving gold bars, no one is really doing this on large scale. The bank notes transport is limited to feeding ATM mostly where already existing electronic bank transactions can fill that gap.

Re:Other motivations

[Solandri]

I'm not sure this is a good thing. Every advancement seemed to have moved the needle to this direction. While everyone was able to run CPU miners is was very democratic. Then GPUs came, but still people could drop in a few hundred, and continue. After FGPA, and the ASICs, it's not just very large firms, where smaller people can only "rent" nodes, and hope they can trust the infrastructure.

Which causes deflation (need less of the currency to buy the same thing - in other words the currency's value goes up). Which is the whole reason countries moved off the gold standard. The rate at which new gold was being mined was not keeping pace with the rate at which the economy was expanding (population and productivity increases), causing deflation, which destabilized the economy (you could "make" more money by stuffing it under a mattress, than by using it to do something economically productive).

We might need a "reset", where ASIC is no longer viable, but I'm not sure that would still be possible.

Which is exactly what governments do with a fiat currency - adjust the availability of the currency to stabilize and moderate its value, to maintain a slight inflation rate.

And we've come full circle. The folks who rejected fiat currencies and advocated bitcoin have learned the lesson governments learned with gold eighty years ago, and are advocating changes to make it behave more like a fiat currency.

Re:Other motivations

[DanielRavenNest]

> (you could "make" more money by stuffing it under a mattress, than by using it to do something economically productive).

That's only true if the rate of deflation was greater than the nominal rate of return on other investments. Stock earnings, as measured by the S&P 500 have grown at an average of 6.6% over the last 55 years, plus paid out a few percent in cash dividends on top of that. If the dividends were re-invested, then total earnings would grow around 8.8%. If your money were deflating at 2% you would be far better off with stocks.

Re:Ive said it before.

[Opportunist]

Bitcoin mining certainly is. Bitcoins themselves are just like any fiat currency: Worth what others deem it worth based on how much they trust it to still have that worth when they want to spend it.

Re:Ive said it before.

[bill_mcgonigle]

This is precisely why Bitcoin has always been a scam. If you weren't in on the ground floor you get screwed.

Not getting the maximum profit is not the same as getting screwed. Same as any company where the early investors reap the maximum profits but the companies still trade on the exchange with robust health.

There will be another halving in a few years - you could get in now and be in that advantaged position then.

Be more worried about privacy problems with bitcoin than that you weren't an early investor.

Profit like 1849 profiteers

[Antique Geekmeister]

Sell the equipment and resources to the miners, skim the illicit trade hidden from governments, and rob your clients blind as an exit strategy seems to be the result of Bitcoin operations. Are there _any_ bitcoin markets that show legitimate handling of client transactions for more than a few months without turning to direct theft from clients?

Re:Well, no miners have 100% procent margin

[Joce640k]

Or... (3) Change the algorithm so that ASICs have a hard time with it but normal CPUs don't.

No fight since price more than doubled ...

[drnb]

The price already did increased, even x3 in last ~month, possibly that was in anticipation of this effect

Exactly, there is no fight for survival since the price more than doubled. Any miner that survived during the time bitcoin spent in the mid 200's recently is quite happy even with the split. If anything miners that had shut down are now finding it profitable to turn their hardware back on, again even factoring in the split. With current prices and a split we are equivalent to the low 300's. Mid 200's to low 300's (equivalent) is a win for miners.

Sure, a handful of very old mining hardware might be turned back on for now, hardware that needs 500+, they're just going for a brief final run until the split but they haven't really been players for over a year.

Re:Well, no miners have 100% procent margin

[codebonobo]

You mean like Ethereum? Why not just jump ship from Bitcoin?

Ethereum has many problems besides its goals of switching to an untested and insecure proof of stake algo. It was largely premined , it is insecure , it won't scale, the halting problem and recursion will haunt it, its functionality can be replicated by bitcoin more securely, it lacks a network effect, most of the largest stakeholders can be targeted, they are planning on reversing the history and blacklisting thus removing immutability, ect..