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Topic: Does this constant price drop lead to mining centralization? (Read 2509 times)

legendary
Activity: 1988
Merit: 1012
Beyond Imagination
I guess the trend towards mining centralization would have happened irrespective of price movements.
In every aspect of life, you have large companies with efficiencies of scale coming up.

That's the trend during a market development, when the market matures and demand stabilizes, the large ones will get thinner and thinner margin and start to outsource, and eventually be overtaken by competitors. Just look at Compaq/Microsoft/Nokia/...

This is especially true for bitcoin mining, where the industry landscape changes so fast and no one knows for sure what will happen in the next 6 months. If some chip maker try to dominate the production, they will have the risk to bite all those useless ASICs when the exchange rate is lower than electricity cost. The exchange rate only depends on the market demand, it can go anywhere, the cost will be a baseline for valuation, but not a guarantee for the lowest possible exchange rate, since the cost will go down together with the exchange rate when difficulty is dropping

Due to such kind of risk, few business dare to make a long term plan and scale up dramatically, this is more like gambling, they have to reduce their risk by selling miners to individuals. If bitcoin exchange rate stayed at current level for another year, most of those businesses will go broke, and their useless ASICs will be picked up by hobby miners with free electricity
legendary
Activity: 1067
Merit: 1000
The opposite, casual miners does not care about the electricity and machine cost, running them as a hobby. Although large farms have economy of scale and can do better when price is higher than the cost, but they also carry higher risk: They must pay for rent, cooling and electricity costs. If price continuously fall, those large farms will be forced to run underwater, they can not sell their coin to cover the cost, since that will bring down the exchange rate further

During 2011, the price fall was followed by a hash rate decrease, this has not happened yet, means majority of the farms are still profitable, when price further decline and that hope is gone, we will see how large farms being shut down

Currently they are teamed up to sell the hash rate, add some profit margin to compensate their cost, but due to the cloud hashing has many doubts about being a scam, not so many people are buying into this, especially when they have an anticipation of higher difficulty in the near future

Only the large scale asic producers are profitable if they run their own farm. Anyone else buying the miners or hash rate from the market to mine do not have any profit what so ever.
hero member
Activity: 675
Merit: 500
I guess the trend towards mining centralization would have happened irrespective of price movements.
In every aspect of life, you have large companies with efficiencies of scale coming up.
legendary
Activity: 1988
Merit: 1012
Beyond Imagination
The opposite, casual miners does not care about the electricity and machine cost, running them as a hobby. Although large farms have economy of scale and can do better when price is higher than the cost, but they also carry higher risk: They must pay for rent, cooling and electricity costs. If price continuously fall, those large farms will be forced to run underwater, they can not sell their coin to cover the cost, since that will bring down the exchange rate further

During 2011, the price fall was followed by a hash rate decrease, this has not happened yet, means majority of the farms are still profitable, when price further decline and that hope is gone, we will see how large farms being shut down

Currently they are teamed up to sell the hash rate, add some profit margin to compensate their cost, but due to the cloud hashing has many doubts about being a scam, not so many people are buying into this, especially when they have an anticipation of higher difficulty in the near future
full member
Activity: 210
Merit: 100
with bitcoin deviating from all predicted trend lines and constantly dropping in price

the hash rate and difficulty is just inversly climbing up and up

So the result is clearly all those mid level bitcoin miners are left with loss ultimately have to quit and mining becomes only a market for the whale like players with lots of money who make bitcoin mining more centralized!

by 2012 domestic bitcoin became a thing of the past..

by 2014 even mid level mining players have to quit

mining affordable by diamond and coal mine owners?

 

Bitcoin mining, as it is, is already semi-centralized, and I don't see any change in the future. It doesn't matter if the price rises or falls.
newbie
Activity: 3
Merit: 0
dont know much about this Sad
sr. member
Activity: 453
Merit: 254
ASICs produces could mine and consolidate the mining process, increasing their profitability but (there is always a but):

1) Monopoly or Oligopoly mining would depreciate the value of Bitcoin as a currency and as a network
2) Having too much control over the network put anyone in the crossair of TPTBs, because you have the power to  censure transactions and they can point a gun to your head and pull strings on you.
3) Mining opensource and openprotocol, so anyone could mine if it join the network. So, if the miners extract too much wealth from mining, someone else could decide to invest money in mining Rigs and compete with them. If mining generated 5 billions of $ of revenues and 500 M of profits, do you think Intel, Motorola or TMSC could not come out with their own ASICs?

As soon as the technology of ASICs mining reach the state of the art, everyone will be on the same level.
legendary
Activity: 1722
Merit: 1000
If any housing market on the planet pops..

Gold and bitcoin will hit the moon before you can open your trading account.
full member
Activity: 164
Merit: 100
Scaling is the reason why centralization is occurring regardless of what kind of fiat or crypto currency we used.

legendary
Activity: 1176
Merit: 1005
Decentralized Asset Management Platform
increasing difficulty and decreasing profitability will keep new and small miners away from bitcoin mining
and only big mining farm will do mining those already got return for their investment in hardware
while its hard to get ROI with hardware mining at current price
so it will take bitcoin to  mining centralization with big mining farms
legendary
Activity: 1610
Merit: 1183
in principle mining is a form of investment, and each investment must have risk, high profit is something expected but we should not forget that there is a risk of loss in any investment, to minimize this loss every investment that we do have to go through the calculations very right

I think with the falling price of bitcoin now, requires us to not make investments in the form of mining ...  Cool

The problem is when the whole thing depends on people wanting to invest in mining to function. If people dont mine it's simply game over.
sr. member
Activity: 280
Merit: 250
in principle mining is a form of investment, and each investment must have risk, high profit is something expected but we should not forget that there is a risk of loss in any investment, to minimize this loss every investment that we do have to go through the calculations very right

I think with the falling price of bitcoin now, requires us to not make investments in the form of mining ...  Cool
sr. member
Activity: 394
Merit: 250
with bitcoin deviating from all predicted trend lines and constantly dropping in price

the hash rate and difficulty is just inversly climbing up and up

So the result is clearly all those mid level bitcoin miners are left with loss ultimately have to quit and mining becomes only a market for the whale like players with lots of money who make bitcoin mining more centralized!

by 2012 domestic bitcoin became a thing of the past..

by 2014 even mid level mining players have to quit

mining affordable by diamond and coal mine owners?

 

The opposite.  As soon as bitcoin increased enough in value to where it was profitable to create dedicated mining devices, the outcome was inevitable.  I'm not sure what you mean by "leading to..."; virtually all mining is completely controlled, directly or indirectly, by a small number of individuals.
Much of the current "control" is by operators of pools. If the decisions made by the pools are not generally accepted by the community as a whole then the control will go away

Most of the "control" is by a small number of asic manufacturers who, if push came to shove, could easily run without any of the major pools, or without the community.  Consider too that not only do they control a substantial share of the hashing power directly, but they indirectly control the rest in that they decide who can mine, and in what amounts they can mine.  There is nothing you, me, or any "community" can do to change that.
I agree. But that misses another point. The reason why people tend to prefer pooled mining is because of risk aversion. Solo mining offers a low probability of a high reward. Pooled mining offers a high probability of a low reward. The latter is more attractive to most people for the same reason that people generally prefer to invest the bulk of their cash in low-risk low-reward investments rather than lottery tickets. Indeed this is the case even if the net discounted return from pooled mining is actually lower than from solo mining. Of course none of this has anything to do with ASICS. It is simply a reflection of the low probability of any given solo miner mining a block. The solution is simply P2P pooled mining which avoids the centralized control problem.
Even if we have few pools controlling large percentages of hashrates, it does not mean that the pools have any real amount of power (long term) over the network. All the fact that a pool has a large amount of the hashrate of the network means is that miners feel that a pool is temporarily trusting of the subject pool, however the miners are able to change their "vote" at any time if the pool no longer appears to be trustworthy
sr. member
Activity: 350
Merit: 250
with bitcoin deviating from all predicted trend lines and constantly dropping in price

the hash rate and difficulty is just inversly climbing up and up

So the result is clearly all those mid level bitcoin miners are left with loss ultimately have to quit and mining becomes only a market for the whale like players with lots of money who make bitcoin mining more centralized!

by 2012 domestic bitcoin became a thing of the past..

by 2014 even mid level mining players have to quit

mining affordable by diamond and coal mine owners?

 

The opposite.  As soon as bitcoin increased enough in value to where it was profitable to create dedicated mining devices, the outcome was inevitable.  I'm not sure what you mean by "leading to..."; virtually all mining is completely controlled, directly or indirectly, by a small number of individuals.
Much of the current "control" is by operators of pools. If the decisions made by the pools are not generally accepted by the community as a whole then the control will go away

Most of the "control" is by a small number of asic manufacturers who, if push came to shove, could easily run without any of the major pools, or without the community.  Consider too that not only do they control a substantial share of the hashing power directly, but they indirectly control the rest in that they decide who can mine, and in what amounts they can mine.  There is nothing you, me, or any "community" can do to change that.
I agree. But that misses another point. The reason why people tend to prefer pooled mining is because of risk aversion. Solo mining offers a low probability of a high reward. Pooled mining offers a high probability of a low reward. The latter is more attractive to most people for the same reason that people generally prefer to invest the bulk of their cash in low-risk low-reward investments rather than lottery tickets. Indeed this is the case even if the net discounted return from pooled mining is actually lower than from solo mining. Of course none of this has anything to do with ASICS. It is simply a reflection of the low probability of any given solo miner mining a block. The solution is simply P2P pooled mining which avoids the centralized control problem.

That isn't really a solution though.  The obvious problem with that is that if you're a major asic supplier with a substantial share of the hashrate, you can simply create your own pool.  Or hash solo. 
legendary
Activity: 1094
Merit: 1006
The cool thing is that with decentralized storage is there is already $150 billion in demand each year that keeps on growing. With mining we are just devaluing the entire Bitcoin economy. The demand for the coins being generated is just not there.
full member
Activity: 154
Merit: 100
with bitcoin deviating from all predicted trend lines and constantly dropping in price

the hash rate and difficulty is just inversly climbing up and up

So the result is clearly all those mid level bitcoin miners are left with loss ultimately have to quit and mining becomes only a market for the whale like players with lots of money who make bitcoin mining more centralized!

by 2012 domestic bitcoin became a thing of the past..

by 2014 even mid level mining players have to quit

mining affordable by diamond and coal mine owners?

 

The opposite.  As soon as bitcoin increased enough in value to where it was profitable to create dedicated mining devices, the outcome was inevitable.  I'm not sure what you mean by "leading to..."; virtually all mining is completely controlled, directly or indirectly, by a small number of individuals.
Much of the current "control" is by operators of pools. If the decisions made by the pools are not generally accepted by the community as a whole then the control will go away

Most of the "control" is by a small number of asic manufacturers who, if push came to shove, could easily run without any of the major pools, or without the community.  Consider too that not only do they control a substantial share of the hashing power directly, but they indirectly control the rest in that they decide who can mine, and in what amounts they can mine.  There is nothing you, me, or any "community" can do to change that.
I agree. But that misses another point. The reason why people tend to prefer pooled mining is because of risk aversion. Solo mining offers a low probability of a high reward. Pooled mining offers a high probability of a low reward. The latter is more attractive to most people for the same reason that people generally prefer to invest the bulk of their cash in low-risk low-reward investments rather than lottery tickets. Indeed this is the case even if the net discounted return from pooled mining is actually lower than from solo mining. Of course none of this has anything to do with ASICS. It is simply a reflection of the low probability of any given solo miner mining a block. The solution is simply P2P pooled mining which avoids the centralized control problem.
sr. member
Activity: 350
Merit: 250
with bitcoin deviating from all predicted trend lines and constantly dropping in price

the hash rate and difficulty is just inversly climbing up and up

So the result is clearly all those mid level bitcoin miners are left with loss ultimately have to quit and mining becomes only a market for the whale like players with lots of money who make bitcoin mining more centralized!

by 2012 domestic bitcoin became a thing of the past..

by 2014 even mid level mining players have to quit

mining affordable by diamond and coal mine owners?

 

The opposite.  As soon as bitcoin increased enough in value to where it was profitable to create dedicated mining devices, the outcome was inevitable.  I'm not sure what you mean by "leading to..."; virtually all mining is completely controlled, directly or indirectly, by a small number of individuals.
Much of the current "control" is by operators of pools. If the decisions made by the pools are not generally accepted by the community as a whole then the control will go away

Most of the "control" is by a small number of asic manufacturers who, if push came to shove, could easily run without any of the major pools, or without the community.  Consider too that not only do they control a substantial share of the hashing power directly, but they indirectly control the rest in that they decide who can mine, and in what amounts they can mine.  There is nothing you, me, or any "community" can do to change that.
full member
Activity: 210
Merit: 100
with bitcoin deviating from all predicted trend lines and constantly dropping in price

the hash rate and difficulty is just inversly climbing up and up

So the result is clearly all those mid level bitcoin miners are left with loss ultimately have to quit and mining becomes only a market for the whale like players with lots of money who make bitcoin mining more centralized!

by 2012 domestic bitcoin became a thing of the past..

by 2014 even mid level mining players have to quit

mining affordable by diamond and coal mine owners?

 

The opposite.  As soon as bitcoin increased enough in value to where it was profitable to create dedicated mining devices, the outcome was inevitable.  I'm not sure what you mean by "leading to..."; virtually all mining is completely controlled, directly or indirectly, by a small number of individuals.
Much of the current "control" is by operators of pools. If the decisions made by the pools are not generally accepted by the community as a whole then the control will go away
sr. member
Activity: 350
Merit: 250
with bitcoin deviating from all predicted trend lines and constantly dropping in price

the hash rate and difficulty is just inversly climbing up and up

So the result is clearly all those mid level bitcoin miners are left with loss ultimately have to quit and mining becomes only a market for the whale like players with lots of money who make bitcoin mining more centralized!

by 2012 domestic bitcoin became a thing of the past..

by 2014 even mid level mining players have to quit

mining affordable by diamond and coal mine owners?

 

The opposite.  As soon as bitcoin increased enough in value to where it was profitable to create dedicated mining devices, the outcome was inevitable.  I'm not sure what you mean by "leading to..."; virtually all mining is completely controlled, directly or indirectly, by a small number of individuals.
full member
Activity: 182
Merit: 100
Its totally possible, seeing the increasing difficulty of the computations needed for Bitcoin's PoW. When that happens, there are always other coins to mine, and the new sidechains concept would possibly open up new opportunities for a more distributed mining scheme. n top of that, PoW isnt the only pick in town, assuming Maidsafe or Storj ever launch, we've just got ourselves a whole new field to explore, where just renting out your PC's resources and actually contributing to the network's overall health pays back to you.
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