Is btc price sustainable with growing downward selling pressure of energy use? - page 2.

DannyHamilton

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Quote from: colinistheman on April 29, 2015, 11:49:20 AM

Now contrast that to gold and if no new money was entering the gold ecosystem, does the value of gold go lower? No, it stays the same without some kind of daily cash inflow just to keep it at the same value.

So it seems bitcoin has an upkeep cost and gold does not, when it comes to maintaining the value the same. And if that upkeep cost isn't paid (in bitcoin's case) then you get a gradually eroding price.

I think you are mistaken.

Mining gold also has costs. The gold mining corporation must pay for these costs (equipment suppliers, employees, electricity, fuel, etc) with fiat currency. This means that the gold mining corporation must dump their mined gold onto the market to cover their costs. If this gold mining "upkeep cost" isn't paid with an equivalent amount of gold demand at the current gold exchange rate then gold gets a gradually eroding price.

This is simple economics. It's true of gold, corn, pork, bitcoins, or any other valued commodity. There is always a cost associated with producing the commodity. If demand is higher than the supply, then the exchange rate increases. If demand is lower than the supply, then the exchange rate decreases.

philipma1957

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Quote from: colinistheman on April 29, 2015, 11:49:20 AM

Quote from: philipma1957 on April 29, 2015, 07:38:44 AM

Demand for BTC and price paid for the coin... If you thread water until they come you make money.

Yes, it is true.

But it's been requiring almost a million dollars per day entering the bitcoin ecosystem just to maintain this $220~ value. I agree it has been working like this so far.

But if the money stopped entering the system, the value of bitcoins would actually drop continually until the value was worth closer and closer to $0 because all the money went out toward electricity bills. (again this is hypothetically if no new money was entering the bitcoin ecosystem).

Now contrast that to gold and if no new money was entering the gold ecosystem, does the value of gold go lower? No, it stays the same without some kind of daily cash inflow just to keep it at the same value.

So it seems bitcoin has an upkeep cost and gold does not, when it comes to maintaining the value the same. And if that upkeep cost isn't paid (in bitcoin's case) then you get a gradually eroding price.

And let it be known I own bitcoin and am a complete supporter. But I like to play devil's advocate when trying to understand something, and especially something as dear to me as bitcoin is.

well this is an interesting analogy. gold = btc is part true .

but I can't send a piece of gold from Howell ,NJ, USA to Los Angles ,CA,USA for next to nothing.

So if you need the gold for a physical reason it transports at a very high cost. Ie If I send 4 oz of gold to Los Angles CA

I need to send it registered US Mail to send it safely cost is about 18 + 18 +6 = 42 usd

I would be lucky to get it to the buyer in 2 days and 42/5000 = 0.84% delivery cost

If I send 20 btc to him cost is 0.0001 to 0.0005 for under 2 hours time. So I guess there are differences in the analogy.

To me I dont see enough consumer demand for BTC as the biggest problem.

A consumer gets so much more using a cc that BTC loses to that person. I almost never buy anything with BTC other then mining gear.

This leaves speculator's
Investers
People that want to run out of one country to another without any clue to authorities that a stash of btc is waiting for them.

I feel this set of factors will never let btc grow to 2k or 3k in price.

colinistheman

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Quote from: philipma1957 on April 29, 2015, 07:38:44 AM

Demand for BTC and price paid for the coin is what matters. The price is based on demand for the coin not cost to mine it.

Mining is always been tight and profit margins small most of the time. I hit 2 runups the March- April of 2013 and the October-December runup of 2013 I have been mining since July 2012.

That is just under 35 months so for 5 months out of 35 margins were loose and easy for 30 months tight and difficult.

Miners live for the runups. If you thread water until they come you make money.

Yes, it is true.

But it's been requiring almost a million dollars per day entering the bitcoin ecosystem just to maintain this $220~ value. I agree it has been working like this so far.

But if the money stopped entering the system, the value of bitcoins would actually drop continually until the value was worth closer and closer to $0 because all the money went out toward electricity bills. (again this is hypothetically if no new money was entering the bitcoin ecosystem).

Now contrast that to gold and if no new money was entering the gold ecosystem, does the value of gold go lower? No, it stays the same without some kind of daily cash inflow just to keep it at the same value.

So it seems bitcoin has an upkeep cost and gold does not, when it comes to maintaining the value the same. And if that upkeep cost isn't paid (in bitcoin's case) then you get a gradually eroding price.

And let it be known I own bitcoin and am a complete supporter. But I like to play devil's advocate when trying to understand something, and especially something as dear to me as bitcoin is.

colinistheman

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Quote from: noobtrader on April 29, 2015, 03:52:14 AM

Quote from: colinistheman on April 27, 2015, 10:05:00 PM

I am a firm believer that some day a single bitcoin will be worth over $10,000. But I can't wrap my wits around the math when it comes to the cost of electricity required to sustain that size of a market cap.

If there are 25 bitcoins created every 10 minutes, this means there are 150 bitcoins created every hour, and 3600 bitcoins created per day.

At today's prices of roughly $230 USD per bitcoin, 3600 bitcoins per day are valued at about $828,000 USD.

That means it costs roughly that much electricity per day to mine bitcoins and just to secure the network. (The total cost of mining will typically grow until it is close to the value of the coins being mined.)

That is $302,220,000 dollars per year at current prices. And this is only for a $230 bitcoin!

To sustain a $1000 USD bitcoin it will cost $1,314,000,000 USD ($1.3 billion per year in electricity costs)

To sustain a $10,000 USD bitcoin it would cost $13,140,000,000 USD ($13.1 billion per year in electricity costs)

That is a lot of money just to maintain the bitcoin value where it is. (When the block halving occurs, then this may drop in half.)

For bitcoin value to go higher, that electricity cost will increase. It seems that the bitcoin market value is being eaten in electricity, and electricity companies are the true ones to profit in the end.

I'm not starting this thread to invite suggestions as to alternate methods of proof of work (or proof of stake). I want to look at how our existing Bitcoin model works.

Can someone please show me that this isn't such a horrible looking math equation, and how this can realistically work in the long-run with a much higher value bitcoin?

Will a $10,000 bitcoin even be sustainable with such high electricity costs?

Is this just during the inflationary period of bitcoin? Once the block reward goes down to 12.5 and then down to 6.25, will things look brighter electricity-cost-wise?

the reward for mining is still high atm, so your calculation is correct. but after the reward halving in few years then you will find that the cost to sustain price will be lower too.

if we read https://en.bitcoin.it/wiki/Controlled_supply
currently btc inflation is around 9%, next year 4% then after 2021 just 1.7% inflation.

btw the electricity cost is irrelevant because difficulty adjust to the number of miner.

I like your optimistic viewpoint of it. However, If we're going to factor in this halving then I feel that when the halving occurs the price of bitcoins will probably roughly double accordingly (because they are twice as scarce now. It may not be an immediate reaction. Probably a bit delayed, but I feel this will equal out), so while the number of bitcoins being sold to pay for mining and electricity costs will be half as many in quantity, the total value exiting the bitcoin ecosystem will be roughly the same. So, I don't see the halving as a saving grace to my concern of money exiting the bitcoin ecosystem.

I think the answer is that it does cost money to secure the network when it is based on a proof of work algorithm which expends energy as the proof that work was executed. If it were free to do the work, then there would be no stopping anyone from doing unlimited "proofs of work". But then it would be worthless.

With that being said, the reason I have a difficult time grappling with the workability of all the bitcoins being sold and the money exiting the system is best explained by doing a comparison: If you all of a sudden stopped mining gold, the value of gold would not go down. It would probably go up in fact (being scarce). But if you all of a sudden stopped mining bitcoin (pretend for sake of argument that the network still continued to confirm transactions so it actually had value to people), then the value of bitcoin would slowly drop lower and lower as the value of the entire network gradually leaves in the form of payments to electricity bills.

philipma1957

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'The right to privacy matters'

Demand for BTC and price paid for the coin is what matters. The price is based on demand for the coin not cost to mine it.

Mining is always been tight and profit margins small most of the time. I hit 2 runups the March- April of 2013 and the October-December runup of 2013 I have been mining since July 2012.

That is just under 35 months so for 5 months out of 35 margins were loose and easy for 30 months tight and difficult.

Miners live for the runups. If you thread water until they come you make money.

Eastwind

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Quote from: noobtrader on April 29, 2015, 03:52:14 AM

the reward for mining is still high atm, so your calculation is correct. but after the reward halving in few years then you will find that the cost to sustain price will be lower too.

if we read https://en.bitcoin.it/wiki/Controlled_supply
currently btc inflation is around 9%, next year 4% then after 2021 just 1.7% inflation.

btw the electricity cost is irrelevant because difficulty adjust to the number of miner.

I agree with that and said similar earlier.

Amph

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Quote from: Billy Hlapinnio on April 29, 2015, 03:30:32 AM

Quote from: mrhelpful on April 28, 2015, 10:45:24 AM

Its pretty basic, if the cost of day to day operations arent covered, you`ll be in the red.

The price should make up for those differences, but its a matter of waiting til it does or not and if you can even do that. The cheaper the elecricity the better off-set it will be, but like most there is none.

Unless its like a cheap foreign country.

Yes, perhaps if you are willing to move to some of those cheap countries that have cheaper electricity.

no need to do that, there are clouds service, they were born for that, to help those who have high electricity cost

or you can search for some good hosting facility, and send there your miners

noobtrader

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Quote from: colinistheman on April 27, 2015, 10:05:00 PM

I am a firm believer that some day a single bitcoin will be worth over $10,000. But I can't wrap my wits around the math when it comes to the cost of electricity required to sustain that size of a market cap.

If there are 25 bitcoins created every 10 minutes, this means there are 150 bitcoins created every hour, and 3600 bitcoins created per day.

At today's prices of roughly $230 USD per bitcoin, 3600 bitcoins per day are valued at about $828,000 USD.

That means it costs roughly that much electricity per day to mine bitcoins and just to secure the network. (The total cost of mining will typically grow until it is close to the value of the coins being mined.)

That is $302,220,000 dollars per year at current prices. And this is only for a $230 bitcoin!

To sustain a $1000 USD bitcoin it will cost $1,314,000,000 USD ($1.3 billion per year in electricity costs)

To sustain a $10,000 USD bitcoin it would cost $13,140,000,000 USD ($13.1 billion per year in electricity costs)

That is a lot of money just to maintain the bitcoin value where it is. (When the block halving occurs, then this may drop in half.)

For bitcoin value to go higher, that electricity cost will increase. It seems that the bitcoin market value is being eaten in electricity, and electricity companies are the true ones to profit in the end.

I'm not starting this thread to invite suggestions as to alternate methods of proof of work (or proof of stake). I want to look at how our existing Bitcoin model works.

Can someone please show me that this isn't such a horrible looking math equation, and how this can realistically work in the long-run with a much higher value bitcoin?

Will a $10,000 bitcoin even be sustainable with such high electricity costs?

Is this just during the inflationary period of bitcoin? Once the block reward goes down to 12.5 and then down to 6.25, will things look brighter electricity-cost-wise?

the reward for mining is still high atm, so your calculation is correct. but after the reward halving in few years then you will find that the cost to sustain price will be lower too.

if we read https://en.bitcoin.it/wiki/Controlled_supply
currently btc inflation is around 9%, next year 4% then after 2021 just 1.7% inflation.

btw the electricity cost is irrelevant because difficulty adjust to the number of miner.

Billy Hlapinnio

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Quote from: mrhelpful on April 28, 2015, 10:45:24 AM

Its pretty basic, if the cost of day to day operations arent covered, you`ll be in the red.

The price should make up for those differences, but its a matter of waiting til it does or not and if you can even do that. The cheaper the elecricity the better off-set it will be, but like most there is none.

Unless its like a cheap foreign country.

Yes, perhaps if you are willing to move to some of those cheap countries that have cheaper electricity.

mrhelpful

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Its pretty basic, if the cost of day to day operations arent covered, you`ll be in the red.

The price should make up for those differences, but its a matter of waiting til it does or not and if you can even do that. The cheaper the elecricity the better off-set it will be, but like most there is none.

Unless its like a cheap foreign country.

notlist3d

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Quote from: judypug1956 on April 28, 2015, 08:01:35 AM

Quote from: DannyHamilton on April 28, 2015, 06:05:38 AM

Quote from: colinistheman on April 27, 2015, 11:26:06 PM

That money just disappears and goes back into the fiat economy in this endless stream to pay for electricty.

Actually, it doesn't disappear. It just changes hands from the miner to someone else that wants it.

The miner has bitcoins. The electric company wants fiat. Someone else (lets call him Bob) has fiat and wants bitcoins. The miner must exchange his bitcoins for Bob's fiat. That way the miner can pay the electric company, but the bitcoins haven't disappeared, they've just gone to Bob that wants them. The loop is closed.

I am posting with my none signature account.

Just to:
a) respect your legendary status
b) to agree with this post

and to add the money and the btc are closed loop just like money and gold.

The biggest problem with BTC is it does not work as well for consumers as a CC does.
No chargeback.
No price protection
No extended warranty
No points earned for purchases
No free loans as many CC's give you a 1 to 2 year free balance transfer not interest no fees.

...snip ....

BTC is making strides, soon I should have a card from Bit-X that will allow me to spend my BTC like fiat if i wanted via a card anywhere mastercard is accepted. So BTC is becoming more for the everyday person not just techno people.

I do agree no chargeback, protection is a bummer with btc. And it's something escrow can do, but it's no where near what a credit card does. And extended warranty and other things the big card companies were able to get chances are BTC will never get.

judypug1956

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Quote from: DannyHamilton on April 28, 2015, 06:05:38 AM

Quote from: colinistheman on April 27, 2015, 11:26:06 PM

That money just disappears and goes back into the fiat economy in this endless stream to pay for electricty.

Actually, it doesn't disappear. It just changes hands from the miner to someone else that wants it.

The miner has bitcoins. The electric company wants fiat. Someone else (lets call him Bob) has fiat and wants bitcoins. The miner must exchange his bitcoins for Bob's fiat. That way the miner can pay the electric company, but the bitcoins haven't disappeared, they've just gone to Bob that wants them. The loop is closed.

I am posting with my none signature account.

Just to:
a) respect your legendary status
b) to agree with this post

and to add the money and the btc are closed loop just like money and gold.

The biggest problem with BTC is it does not work as well for consumers as a CC does.
No chargeback.
No price protection
No extended warranty
No points earned for purchases
No free loans as many CC's give you a 1 to 2 year free balance transfer not interest no fees.

All of the above kills Joe consumer's interest in BTC.

This means:
inflation hedging
Speculation
an escape fund that your current government can't touch

are good reasons to have btc.

This lack of demand drives prices downward.

efficiency- power cost- diff are all set in the loop.

coin price can go way up or way down outside of the loop of watt/power cost/difficulty.

Best way to look at it is 14 million coins at 225 usd = 3.15 billion usd

I am Bill Gates you are Warren Buffet we make a bet lets see which one of us can own the most BTC the two of us can drive prices up to 2250 or 10x trying to win the bet . This demand would make price high and sip the fuck out of the

watt/cost/difficulty triangle.

Eastwind

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Quote from: Ingatqhvq on April 28, 2015, 05:35:04 AM

Such question never be answered yet.
Maybe it hint that $10,000 can't be sustainable in the near feature, until the reward of every block reduce to a very little number, like 12.5 or 6.25?

Yes. The difficulty will track price. The cost of mining is determined by block reward.

DannyHamilton

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Quote from: colinistheman on April 27, 2015, 11:26:06 PM

That money just disappears and goes back into the fiat economy in this endless stream to pay for electricty.

Actually, it doesn't disappear. It just changes hands from the miner to someone else that wants it.

The miner has bitcoins. The electric company wants fiat. Someone else (lets call him Bob) has fiat and wants bitcoins. The miner must exchange his bitcoins for Bob's fiat. That way the miner can pay the electric company, but the bitcoins haven't disappeared, they've just gone to Bob that wants them. The loop is closed.

Ingatqhvq

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bronan

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Lazy Lurker Reads Alot

Mining is for the smaller miners like me dead, there is no viable or sustainable value to continue.
Its plain and uther useless to constant buy hardware and endless huge bills for energy just to get a few coins which not even cover the costs of the electricity bill.

The so called $10.000 dollar will not happen in the near future because the massive companies mining have to sell the coins to cover the bills of energy as well.

Bitcoin is as heavily centralised as fiat is, some huge investors get the most.

The development of new and more efficient miners has slowed down enormous already, and i do not expect huge breakthroughs to become available for the small miners as well. Those will also be in the hands of the large investors and companies.

And yes the costs of solar energy are in my country insane for 4500 Kwh a year i had to pay 12000 euro, try to give me a calculation where mining would make profit on this. ( 0.26 euro per kwh )

countryfree

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Your country may be your worst enemy

Forget everything about solar or renewable energy, that costs way more than dirty electricity from coal or another fossil source, but nobody said processors couldn't get more efficient. They have.

Eastwind

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Quote from: NUFCrichard on April 28, 2015, 03:34:24 AM

Quote from: Eastwind on April 28, 2015, 03:31:26 AM

Quote from: Kaneki on April 28, 2015, 02:08:10 AM

Quote from: Ruckspin on April 28, 2015, 01:34:42 AM

Miners might have to look at alternative energy. Maybe the big mining farms in the future will be run off huge solar pannels or wind turbines etc and generate their own electricity for free.

I agree with this, should probably use an alternative electricity or create their own power source for mining purposes.

But the total cost (machine+human+electricity) is the same even if all of us use cheap electricity. We will buy more machine to mine and total electricity cost will remain the same. If we have more efficient machines, we will also buy more, the result is the same. The total cost of mining is more or less same as the block reward including fees.

New generation miners will become more efficient reducing the amount of electricity needed.
Bitcoin mining farms will also be more often powered by hydro-electric/solar/wind power, also reducing the negative CO2 emissions related to bitcoin mining.

If the price rises as you say, then difficulty will rise accordingly, but the mining profit margins will remain razor thin, meaning people will have to become more efficient somehow.

If everybody uses hydro-electricity, which means cheap unit price, then more miners will be used, then more electricity will be consumed. The total cost will be the same as the more expensive unit cost electricity.

Billy Hlapinnio

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Quote from: Kaneki on April 28, 2015, 02:08:10 AM

Quote from: Ruckspin on April 28, 2015, 01:34:42 AM

Miners might have to look at alternative energy. Maybe the big mining farms in the future will be run off huge solar pannels or wind turbines etc and generate their own electricity for free.

I agree with this, should probably use an alternative electricity or create their own power source for mining purposes.

Alternative sources are not very effective for constant mining. Solar energy is produced only during the day.

unamis76

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Quote from: Ruckspin on April 28, 2015, 01:34:42 AM

Miners might have to look at alternative energy. Maybe the big mining farms in the future will be run off huge solar pannels or wind turbines etc and generate their own electricity for free.

This... And I also think mining will always be sustainable without really depending on the price. We will eventually find a way to more efficient chips and after that we'll find ways to make the heat from the chips heat our homes, our ovens, furnaces, barbecues... And we'll eventually find a way to make chips that don't make heat haha Cheesy

Topic: Is btc price sustainable with growing downward selling pressure of energy use? - page 2. (Read 3794 times)