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

Posted by BeauHD on from the every-four-years dept.

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."

7 of 164 comments (clear)

  1. Other motivations by stikves · · Score: 4, Insightful

    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.

    1. Re:Other motivations by TeknoHog · · Score: 3, Interesting

      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.

      --
      Escher was the first MC and Giger invented the HR department.
    2. Re: Other motivations by Entrope · · Score: 3, Insightful

      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.

    3. Re:Other motivations by cryptizard · · Score: 3, Informative

      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.

    4. Re:Other motivations by codebonobo · · Score: 3, Insightful

      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.

    5. Re:Other motivations by Solandri · · Score: 3, Insightful

      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.

  2. Profit like 1849 profiteers by Antique+Geekmeister · · Score: 3, Interesting

    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?