Topic: Real honest Money - page 5. (Read 6776 times)

Another big flaw in your arguments.  Your posts all assume that the price of bitcoin is driven by production cost, but it is exactly the opposite.  The price of bitcoin is actually driving production cost.  Your $500-$600 figure all include the mining equipment costs, and what determines the equipment costs?  You think the makers of these equipments price them according to their material cost? Yea fat chance.  Why do you think BTC miners are all being sold/bought in BTC?  Or at least priced according to BTCs?  

Furthermore, cost of production in no way prevents a coin from dropping below production cost.  Let's say something catastrophic happens, such as bitcoin gets attacked via 51%, or has a major fork, what prevents it from dropping below this magical $500 threshold of yours?  And you think your miners will still cost the same amount of BTCs compared to before this drop? 

Why do you think all scrypt PoW coins drop in value so much lately such as aurora or doge or any other PoW?  You think it's because the cost of production is low? Tell that to the thousands of people that bought the gridseed blades for $1600 just a couple of months ago.   

Value of BTC comes completely from confidence in the coin, just like any other PoW or PoS coin.  But people's confidence is a lot higher in BTC than any other coins because BTC has been out there much longer.  And if BTC falls below $500, the miner prices will adjust accordingly. 

And stop talking only about Bitcoin in your arguments.  This guy created his long winded thread to tout all PoW coins.  Why are most of the alt scrypt PoW coins dropping despite the production costs? 

good read, while some alts have been pretty consistent, it is not so easy to knock them off anymore

Another guy that wants to "invent" what "backed by" means.  If the US Dollar is BACKED by gold, then the exchange rate is set by the US Treasury, 1 dollar for certain amount of gold.  In effect, U.S Dollar price no longer fluctuates against gold; because for every dollar, there is an equivalent amount of gold kept at Ft. Knox.  What is all this mumble jumble about speculated price and local spot price and admin fee???  What the heck are you talking about?  Are you talking about today's U.S. Dollar?  The US Dollar has been off the gold standard since the 1970s, aka US dollar is not backed by gold anymore.  In fact, no currency is backed by gold anymore in today's world.  

I think you are wrong, nicetry.

While is true that two years ago the production cost was ridiculous compared with the current scenario, the reality is that miners will just not release BTCs for less than the cost they are forced to pay, sure there will be exceptional cases where people will have ninja access to hardware, power, etc. but on AVERAGE if the cost if mining a BTC is 600$ surely the miners will not sell under production cost + profit margin.

This happen today at 600$ and the day of tomorrow when the mining cost of a single BTC is worth 1000$ then surely we will not see prices from miners dumping less than 1100-1200$. If I start mining today and it cost me 600$ to get a single coin, I will not give a shit about your "average production cost" arguments, and still push for getting ROI+profit.

Now if things go south and the cost of mining BTCs its not worth anymore due to not enough supply/demand, the supply of BTCs would slow down also, making the current BTCs on the market even more valuable, wouldn't that counter the dive on supply/demand?

So, it is indeed difficult to create examples of what would happen using other valuables as comparison, because BTC is quite unique in that aspect.

I don't think supply/demand justify a 650$ value for a BTC... RIGHT NOW... do you? But tell that to the miners..

So, I think BTC is indeed POW'ed and the market reflects it.

Anyway I am just a newb that started into cryptos just a month ago, I could be utterly wrong, but enjoyed writing this post anyway

Scholars feel free to correct me, I am in here to learn.

(N00b question - Would it represent the same kind of cost for a mining operation to mine BTCs and to mine just for get the transactions confirmed? or is it an indivisible operation? - When all the BTCs get mined, how costly will be to keep mining to keep the Tx going, considering the miners will get just transaction fees as profit?)

Eth.

have a read of my post and learn a thing or two about the production cost, and what it really took to produce ALL GOLD ON AVERAGE..

gold 50 years ago was cheap, 100 years ago it was cheaper, its price does meander because there is a 20% speculation/profiteering going on.. the exact same as bitcoin.. between cost of production and demand

so the cost that gold miners sold their gold at is linked to if they used a pickaxe or an excavator, single person or a team of people
so the cost that btc miners sold their btc at is linked to if they used a CPU, GPU, FPGA or ASIC. single unit or server farm of units.

in both cases this was the true value of the item in question.. which over time increases.. then in both cases add on about 20% of speculation/profiteering..

and you may see that true gold value (gold miners sell price) and tru bitcoin value (btc miners sell price) do have a noticeable trends and show a noticeable bases to follow.

i personally do not judge bitcoin by its daily price. i do not base it on its high price. i believe true bitcoin value to be on the weekly, monthly or yearly average LOW PRICE. as being the price to back it by...

so right now i say bitcoin is backed by a mining cost of $500.

bank notes were not 100% backed by gold true value decades as gold prices fluctuated due to speculation/profiteering. today banknotes are not backed 100% by minimum wage as there is fluctuations in that too, such as tax and bank interest rates or fee's for withdrawal.. but in every case of trying to find true value of anything that is backed, their is always a 20%ish variance above proof of work.
gold (miners labour+20% spot)
banknotes(wage+20tax and fee's)
bitcoin(miners costs+20% profitering)

yet its proof of work labour that is what backs all/most things.. not supply and demand

so if im wrong. you tell me what is bitcoin and bank notes backed by and explain it in detail! dont simply pretend to be smarter without actually showing an answer, rather than just trying to prove others wrong.

if your going to say that its just backed by supply and demand, then you need to realise the supply and demand only affects the 20% speculation/profitering.
when there is high demand. it may exceed 20% reaching maybe 300% (as sen at the december spike) and when there is alot of supply and lack of demand, the price would be at the average production cost level (very small or no profit). (as seen last month when cost of mining was in the $400 range and no one was selling below $400).

but on average over a few years it is about 20%

Franky, just read my most recent post.  You need to learn a thing or two about production cost, and what it really took to product ALL BITCOINS ON AVERAGE.

Retarded argument.  "someone has done $600 dollars worth of work".  Are you assuming that it ALWAYS took $600 of work to produce these coins?  What if bitcoin price drops to $300 the next day, are you going to change your argument to "someone has done $300 dollars worth of work"?  How is that "backing" exactly?  Do you even know how many bitcoins were produced when the production cost was only $10, $50, and $100 (hint, a whole lot more than when the BTCs that were produced at $600)? 

Your argument would be partially correct if bitcoin was a PERISHABLE consumable commodity, where the end buyer chooses to consume the commodity or modify it into some other kind of product, such as coffee, corn, etc.  And the original commodity is used up in the process of production (i.e. no longer exists).  If this is the case, the original producer of the commodity will always take the production cost into consideration.  And I stress perishable because the commodity has a very short lifespan if not consumed, hence the commodity price *SHOULD* closely follow the production cost because the production cost happened just *recently*.  Unlike your flawed argument that bitcoin "cost $600 to produced", which is obviously not true for coins made 2 years ago, last year, or even 6 months ago. 

And I said *partially* correct.  This is because even in the case of these perishable consumable commodities, the price is still mostly driven by supply/demand.  Think about it.  If the market demand stays constant for corn, and there is a GREAT harvest for corn.  Corn supply will greatly exceed demand, and the price will drop.   This is where the importance of *perishable* part comes in.  If the farmer cannot sell the corn in time, it will go bad, hence he has to reduce the price even if it meant that the production cost exceeds the prices he sells at (i.e. selling at a loss). 

So the lesson for you today is that production cost is only a small factor in determining market price, even for perishable consumable commodities (which BTC is obviously not, since once it's mined, it's mined, it does not expire.)  Everything is driven by supply/demand.  So there is no backing from production costs whatsoever.  Furthermore, you don't even bother to analyze what is the average cost to produce all bitcoins, instead of the current cost of production, which makes your entire argument fall apart in 2 seconds (i'm just really sad no one else pointed this out, tells you the average IQ of people on this forum).

+1000

back when bank notes were backed by gold. you could never swap a bank note for the true value of gold. firstly the exchanger would look at the speculated price, then the local spot price for the area and add on their own admin fee.

meaning a £10 would get you £8 of true gold value. this is why people didnt really put gold under their bed and preferred to stick with bank notes as it was perceived as better value.

now bringing it to crypto currencies.. POW stops bitcoin falling too far.. because miners who have actual costs in mining, would be too stupid to sell at too much of a loss. so lets put this into perspective

mining costs have been calculated to be between $500 and $600 (dependent on electric, investment amount, size of reward person gets by being on the right/wrong pool), then as it reaches the exchanges, then comes the speculation and profiteering. adding another $50-$100 ontop.

so just like the gold backed bank note. bitcoin IS backed by POW costs, because this month bitcoin refuses to go below $500 (which has been proven).

in both cases there is a variance of 0%-20% but thats speculation/profiteering. but there is proof that POW costs do factor into the value of bitcoin, and the fact that bitcoin is over $500 due to it costing atleast that to mine them..

bitcoins true value is not $1 with $640 speculation, meaning bitcoin can drop and stay dropped to $1.. it can swing up and down, but on average it will be at or above mining costs because smart miners will refuse to sell at a lose, thus keping the prices on average above mining costs (excluding the random crackpot that dumps coin for a temporary crash..) but as i say ON AVERAGE the bitcoin value and mining costs do tally..

just watch out if someone makes a multi-terrahash miner that can mine a bitcoin for lets say $100.. then you will see the miners selling coins instantly, crashing the price to $100-$150 to grab profits.. but luckily i dont think that will happen..  

what makes me laugh is when people true to say bitcoin is not backed by POW, and bank notes are not backed by minimum wage/cost of living (+/- upto 20% speculation).. these people can never actually make an articulate argument using examples and numbers to say what bank notes and bitcoins is backed up by, in their opinion

Deep thought. Good read anyway.

I love a guy that creates a whole long freaking post to talk about PoW being "backed" by energy when he has no clue what "backed" even means

https://bitcointalksearch.org/topic/m.7624335

To be backed by energy, your exchange rate back to energy cannot change, just like when dollar was backed by gold until the 1970s (http://money.howstuffworks.com/currency7.htm).  It has to be set at a constant exchange rate and be guaranteed by some kind of entity that you can exchange the coin back to "energy cost" that it ORIGINALLY took to produce these coins.  Your oh-so-dear PoW coin values fluctuates with no regard whatsoever to what energy costs to produce these coins.  And it isn't backed by anybody.

A perfect analogy for your flawed argument is like saying "just because a stock X is dollar denominated (traded in US dollars), it is backed by the US Dollars" (and somehow that prevents it from dropping in value).  Yes it is worth a certain amount of US dollars but that amount is always changing.  A stock can be worth $50 one day and drop to $1 the next if people loses confidence in that stock (or even $0 if the company goes bankrupt).  The value of the US Dollar does not affect the stock price or vice versa.  

Same thing with PoW coins.  If people loses confidence in a coin, no matter if it's PoW (or even PoS for that matter, but i'm only concentrating on your flawed premise, which is what your argument is based on), it is going to drop regardless, no matter how much "energy" you put into making this coin a week ago, or a month ago, or a year ago.  This is the proof that there is NO "BACKING" of any kind from energy.  Plus no entity would guarantee that "backing" of yours.

Don't talk about stuff that's over your head please.  

Minimum wage has nothing to do with concentration of wealth, it is simply the rate that a worker with no skills and experience will make at an entry level job.

Don't know about the UK, but here in the USA, federal minimum wage has not kept pace with inflation since 1968.

We're going on 50 years of stagnating wages coupled with ever-increasing inflation. Is it really any wonder that the wealth is being concentrated at the top?

Well it really depends on your definition of "cost" as there are a number of different ways to measure this. If you are measuring in terms of electric use (really the most accurate) then it costs much less then $500 to mine one bitcoin. If you are measuring in terms of renting mining capacity then it will cost ~1.05BTC to mine one bitcoin.

yea when it reaches 2000+ that would be awesome lol

Besides Bitcoin prices are too low now, maybe when it reaches a thousand again, some things would be different...

it's because they're both older and earlier than others. and other crypto her becoming known as bitcoin and litecoin well. if bitcoin takes time to be recognized and accepted the crypto must. that all running stable and balanced

FIAT promise is linked to minimum wage.

£10 bank note is worth 1.5 hours of minimum wage labour.. (roughly)

so that is the measurement.. knowing that somewhere along the line someone worked 1.5 hours just to get a £10 bank note

this is why minimum wage increases have been sluggish for 7 years. because changing the minimum wage too fast or bringing it upto £8 (cost of living estimates) would devalue the bank notes considerably (inflation)

Thanks, now it makes all sense to me. Never could figure out why only a few hundred nxt are traded on average and there is 1 Billion of them available

Wow, serious calculations! Thank you! Excellent article!