Topic: Gold collapsing. Bitcoin UP. - page 642. (Read 2032266 times)

Yes I agree hash rate would have increased if the price of Bitcoin were 70% higher today, and I would expect mining hardware manufacturers to employ there own equipment rather than sell it, but an equilibrium has now been achieved. I don't think of Bitcoin mining gear as having a "prime", but rather they have an efficiency rating in the law of comparative advantage.

The Bitcoin Price will tend to be marginally higher than the total energy consumed to mine one, we are still at about 50% capacity this gives a nice buffer for volatility this also creates opportunity for new competition. the fact that old gear isn't profitable dose not imply centralization, if you bought new mining hardware 9 weeks ago (available to anyone who wants to take a business risk) you have had a RIO on your new hardware. If you have fairly cheep electricity it costs about $130 to find a Bitcoin.  If the price goes up too quickly one could see GPU's become profitable again, but we have a healthy balance now, and those who have taken the risk are now in profit taking mode until the next wave of disruption, guaranteed to occur after 87341 new block have been mined, or if the network grows, or if some of those VC funded mining investments come on line.  

Sure mining is nothing like it was in 2011, but it's decentralized enough, and the incentives to keep it so are still in play.
looking at the difficulty it seems mass deployment has stalled, and new mining hardware is now readily available. There will always be risks, and those that circumvent them most successfully will prosper. The market may respond differently but I see the readily available hardware and the upside price potential in Bitcoin as a reversal in the centralized incentives that got us here. The same incentives that encouraged the exponential growth in the security in the networks hashing power are now changing it could be starting to decentralize again.  

The risk of profitable mining is increasing so I agree not everyone can mine Bitcoin profitably, and some centralization needs to take place for efficiency of scale, but there is a limit and i think we just hit the optimum scale limit with the decrease in difficulty in this price zone.  

    

Yes because the 10x price rise over a relatively short period last year (2013) sent profitability through the roof and and manufacturers and farm builders into overdrive. Mining was being increased as fast as possible, and while difficulty was rising, it was gated by manufacturing and farm build out.

Plus it meant that older gear remained profitable long past its prime. I ran some ASICMINER blades for a while at horrific hash/watt, but they were still profitable anyway. I sold them for a reasonable price and they were still profitable for the buyer to continue running them for some time longer.

None of that is true any more, given the price drop. Yes, brand new ASICs are still profitable vs. power, but the investment is much riskier now, and old gear isn't worth running at all.

Lots of VC money in mining, just scroll through this list.http://www.coindesk.com/bitcoin-venture-capital/ over $90m invested and yet to materialize in hardware.
Not to mention existing mining operations reinvesting.

That 70% price drop has taken place over almost a year, during that time we've seen an exponential increase in mining starting in April 2013, at one stage it was almost like every 2 weeks we were adding more hashing power to the network than existed 2 weeks prior.

The feed stock energy is still below 50% the market price. what I think we're seeing is the infrastructure committed too during the April 2013 growth spurt is now implemented. planing new infrastructure If you are setting up a big farm is a big undertaking with lots of risk given the "relatively small" profit margin at the moment, just the basic you have to get a warehouse and have the appropriate energy and cooling infrastructure installed, these logistics take manpower, capital and time, so it is likely it is being planed but to launch with next gen hardware.  

I feel comfortable projecting that any hardware investment made prior to the last 2 months has had a ROI.  

Just a few hours ago we had our first negative difficulty adjustment, since Feb 2013* (its the equivalent of losing all the hashing power that existed up until about October 2013) just a small 0.73% adjustment.

It is now probably less risky to sell ASIC hardware than it is to invest in new infrastructure, given the uncertainty in price, so long as the price stays in this range.

Asic Manufactures are probably focused on design and development stages given the flat difficulty. I think we will see mining hardware drop in price now, at least until Bitcoin starts its next growth stage, at which point it won't be sold but deployed by the developers themselves, or sold at a premium.    

Also i expect about 50% of mined coins to make it into the market as most miners can cover all costs and comfortably save 50% of there BTC income. (the proponents will be saving anyway)  

If you are worried about mining distribution and bullish on Bitcoin price long term, now could be a good time to think about diversifying into mining hardware, and if some of that VC investment comes through we could start to see growth in difficulty again, hardware should become cheaper.

So I dont think mining hardware is centralizing, nor is a problem yet, it is still a function of the economic incentives driven by Bitcoin adoption.

* my last reported observation was an error, I misread the charts)

    

Good point. I've always said that side chains are a useful tool that likely make bitcoin more powerful and better.

I never said there are no direct harmful effects, I only said that the allocation is known, and then pointed out how that itself is a large step better than today.

Yes but that has no direct relevance to how much you can claim from the site chain "vault" if the side chain is flawed in some manner. Consider that.

If your point is that this has no direct harmful effect on bitcoin itself, I mostly agree (and disagree with cyperdoc) and consider side chains to be a bitcoin application that leads to more demand for bitcoin (to put in the "vault"), except for possible systemic and contagion effects, which are difficult or impossible to reason about in advance.

OK got it, been trying to avoid SC.

Side chains are not really pegs though and I think there's been some confusion on that. I think side chains can best be thought of as a vault with some known quantity of BTC allocated to that vault. For example side chain A has 400 BTC allocated to it while side chain B has 4000 BTC allocated to it. SC A can do whatever it wants, but it only has value of 400 BTC, similarly SC B can do whatever it wants, but it can only have value of 4000 BTC.

Compare this to gold today. Today we are told the FED's vault has x,xxx tons of gold, JP Morgan's vault has y,yyy tons of gold and Russia has z,zzz tons of gold in their vault. But there is no method at all to verify this. It is up to the vault's word, and even if the vault publishes accurate numbers it's possible they are mistaken and unknowingly have tungsten bars.

This is why time and time again pegs to gold (paper products, etc) have failed over and over again. There is no method to verify in real time how the peg is doing.

Now compare this to side chains. With side chains you can compute in any given second EXACTLY has much BTC each side chain has allocated to it. You can always know the quantities of each vault.

Now side chains can if they want "peg" their scBTC to their BTC allocated to them, or they can not. It is up to the function of that SC and there are no technology constraints. Personally I think economic factors (not technical) will cause people to only use SC's that maintain a peg otherwise it will be very visible that you are being devalued in terms of BTC.

This might be lower-level than what you're looking for, but I use Vitalik's pybtctool.  He wrote up a nice example here:

http://bitcoinmagazine.com/11113/pybitcointools-multisig-tutorial/

It requires that you have (or install) Python and then the pybtctool package, but that's fairly easy.  The nice thing is that it's a stand-alone package (it pushes the signed TXs to blockchain.info or Eligius) and doesn't require bitcoind. 

can someone direct me to a source where i can practice constructing a multi-sig tx with the equivalent of a "createrawtransaction" using bitcoind and JSON-RPC?

What I'm arguing is that separate "pegged" currencies are not really one currency after all (and can't be). Relevance to side chains.

That is an argument on why any single system controlled by people (whether a few or many) will almost always fail, not that we didn't have a single global currency for a shortish time period.

Interestingly the entire world does not use the metric system, and the analogy is flawed anyway. There is a long history of monetary systems failing with catastrophic results and no such history of measurement systems failing.

Pegs have always been fragile and failed, and that is exactly what happened.

That revolution of open source coding opens up precisely the grass roots effort of competing currencies.

Historically there has always been a dominant currency but there has never really been a true monopoly currency. The residual competition is the intersection where increasing network effect crosses with the costs of monopolization and concentration of risks. There have always been alternatives such as silver vs. gold, barter, and other valuable artifacts used as store of value and in trade (spices, art, etc.).

I expect the same digitally except that open source opens up this avenue of alternatives and experimentation to the grass roots and not just a few powerful elites.

EDIT: Also your example of physical gold is not really an argument in favor of bitcoin because gold does not have a fixed supply and also has a supply that is responsive to technological advancement (correlated with economic growth). Bitcoin might be great sound money or it may not, and arguments for either are based on theory. Theory works great until facts on the ground differ, then the theory must be reexamined. So we absolutely don't know the answer here.

Both the advantages of and also the problem in getting to a one world currency are stated in your first sentence. "controlled by the will of the majority of ppl" is the problem in that getting agreement by the majority of people is not an easy or even possible task.

A problem for sound money is gaining agreement on what construct to use as the basis for sound money. Gold bugs believe "# of atoms of gold" should be used and many will hold on tight to that belief, but why not other rare metals such as platinum or palladium? Many others (probably a majority today) believe flexible supply controlled by the government is best. Probably all of us here believe "# of BTC on the Bitcoin ledger" should be used, but why not other ledgers?

What if the FED created a FEDcoin with all of the programmable money benefits we love combined with centralized control? It is possible a majority of people would gravitate to that. Would many of us here join FEDcoin or keep fighting? The will of the majority is not always right or best and gaining a super majority agreement is unbelievably difficult given the numerous diverse views all 7 billion of us have.

It's arguable that after the Brenton Woods agreement that the world did in fact have a single global currency. All other currencies were fixed to the dollar which in turn was pegged to gold (remember foreign central banks could redeem dollars for a fixed quantity of gold even if individuals could not).   


I think what you are saying though is as cracks form and the single system becomes weaker and weaker humanity exits that system in greater and greater numbers, so that by the time such a single system fails functioning alternatives exist. Today with the dollar in the state it is, you can see multiple alternatives that could function if there was a sudden dollar disruption.

did Heartbleed kill Linux?  no.

Can you imagine the complete and utter disaster that would occur if the entire world only used the metric system?

grinding higher.  i love it.  i'll take this over a huge green candle any day.  i love to torture bears:

there are huge advantages and efficiencies to developing a one world currency that is apolitical and controlled by the will of the majority of ppl.  we can't imagine it from a digital standpoint except in the context of physical gold which actually worked pretty well for centuries.

but to deny that it is possible is to deny the revolution of open source coding which is a grassroots concept.  as Gavin says, if there is a problem, we'll fix it.