Difficulty has just jumped 5%, some 14/16nm chips are being turned on?
Previous two bubbles in bitcoin are mostly caused by the several magnitudes of efficiency raise of mining: Because mining usually is the lowest possible cost to get coin, when mining technology shifts, majority of miners will lose the ability to get enough coin through mining, and decided to go to market and purchase, that made the exchange rate skyrocket
After technology shift is over and new generation mining rigs can be deployed at large scale, the cost of mining will again become the lowest cost to get coins, so coin's exchange rate will eventually get close to the cost of mining due to arbitraging
During the bubble, many people paid their fiat money to get mining rigs or bitcoin, directly or indirectly supported the miners to upgrade infrastructure. And after the upgrading, the whole network commands much higher hash rate and becomes much more secure. Because many of those infrastructure projects have been ROIed, they can be easily relocated to places with cheap electricity and maintain same hash rate as before
This means, the network hash rate will never go down long term wise, due to more and more mining rigs will be ROIed over time. At the same time the barrier of entry will become higher and higher: There is a cost for each mining rig, unless you can make rigs of magnitudes higher efficiency, it might never ROI. Even if you have much more efficient miner, it would still take quite some time to ROI because of the heavy investment in chips
So, bitcoin's value is not only guaranteed by the mathematics in the protocol, but also driven by the continuous increase in the hashing power. When the barrier of entry getting higher and higher, anyone who want to invest in bitcoin mining would have to throw in a fortune to get some meaningful return
This is quite different than gold. Depleting a gold mine will not increase the difficulty of future gold mining too much, you would have similar cost when a new gold mine is found. But in bitcoin, all the investment are accumulative, makes it more and more difficult worldwide to get bitcoin over time, even the supply is constant in a 4 years period
That's the reason after each bubble, the bitcoin exchange rate will stabilize at much higher level than last bottom, due to higher barrier of entry in mining. This barrier drives small investors to exchanges and raise the exchange rate
Previous two bubbles in bitcoin are mostly caused by the several magnitudes of efficiency raise of mining: Because mining usually is the lowest possible cost to get coin, when mining technology shifts, majority of miners will lose the ability to get enough coin through mining, and decided to go to market and purchase, that made the exchange rate skyrocket
After technology shift is over and new generation mining rigs can be deployed at large scale, the cost of mining will again become the lowest cost to get coins, so coin's exchange rate will eventually get close to the cost of mining due to arbitraging
During the bubble, many people paid their fiat money to get mining rigs or bitcoin, directly or indirectly supported the miners to upgrade infrastructure. And after the upgrading, the whole network commands much higher hash rate and becomes much more secure. Because many of those infrastructure projects have been ROIed, they can be easily relocated to places with cheap electricity and maintain same hash rate as before
This means, the network hash rate will never go down long term wise, due to more and more mining rigs will be ROIed over time. At the same time the barrier of entry will become higher and higher: There is a cost for each mining rig, unless you can make rigs of magnitudes higher efficiency, it might never ROI. Even if you have much more efficient miner, it would still take quite some time to ROI because of the heavy investment in chips
So, bitcoin's value is not only guaranteed by the mathematics in the protocol, but also driven by the continuous increase in the hashing power. When the barrier of entry getting higher and higher, anyone who want to invest in bitcoin mining would have to throw in a fortune to get some meaningful return
This is quite different than gold. Depleting a gold mine will not increase the difficulty of future gold mining too much, you would have similar cost when a new gold mine is found. But in bitcoin, all the investment are accumulative, makes it more and more difficult worldwide to get bitcoin over time, even the supply is constant in a 4 years period
That's the reason after each bubble, the bitcoin exchange rate will stabilize at much higher level than last bottom, due to higher barrier of entry in mining. This barrier drives small investors to exchanges and raise the exchange rate
Yes
