I'm fairly new to the Bitcoin world, but it seems to me that ultimately (in 10 years or so) one of two things will happen:
1) Bitcoin will gain large-scale adoption. As a result, the value of Bitcoins will greatly increase from what it is today.
2) Bitcoin will fail due to government regulations, better alternatives, or other unforeseen reasons. As a result, Bitcoins will become effectively worthless.
Am I oversimplifying so far? If I'm not, then it seems like investing substantially in Bitcoins (purchasing coins) now will either make me very rich in 10 years, or I'll lose my initial investment.
By the same logic, if I earn coins by mining now and hold them, I will either be rich in 10 years, or I'll lose my mining investments.
I'm not interested in diving into mining to earn a quick 10-20k while the market fluctuates, so as a long term strategy it sounds like investing is the more sensible and less time consuming option. Thoughts?
It's not the only possibility— e.g. Bitcoin could putter around for a long time basically where it is now, maybe acting as a very mild threat the keep the alternatives on their toes enough that Bitcoin never gets widespread adoption.
Right now it's possible to make a decent amount _today_ with mining as a small / hobby business, supplying coins to people who don't want to get into the mining stuff, without engaging in major speculation yourself.
That sounds pretty much correct. I compare investing in Bitcoin to investing in an early stage startup.
Regarding mining, each time Bitcoin mining technology improves there's a mini gold rush. If you can get your hands on the technology before everyone else you can make quite a bit of money for a few months. But there's also the chance your preordered miner won't be profitable by the time you get it. This may be why hardware manufacturers prefer to sell hardware (i.e. pickaxes) rather than mine themselves.
Long term, once Bitcoin ASICs catch up to the state of the art Bitcoin mining will be very a very low margin business. Only the most efficient hardware located in places with cheap electricity will be profitable.
EDIT: what I meant by a waste of electronic computing power is that it does nothing for the world beyond pumping out more bitcoins. I guess it's more of my opinion on bitcoins in general than this particular artile. All the computational energy is not used to search for a cure for cancer, or aliens, or crack a code, or used to compute a deep neural net. I guess I would compare it to high-frequency trading---it makes people (a lot) of money, but doesn't deliver any net gain for society.
It's not a "waste" of computing power at all, in my opinion.
- If BTC did not exist, this computing power would not exist. The demand for this power is in addition to other forms of demand. This isn't taking away power from any other field, it's simply new power being added for a new cause.
- The technology derived from this "arms race" can benefit far more than this field.
Why wasn't the moonlanding a "waste" of money, talent and science? Because of the training it provided people and the tools and technologies they developed, etc.
What about the electronic power and human work that goes to operating banks? By that logic, the alternatives to Bitcoin are much more wasteful.
Edit: What I was trying to say, that maybe wasn't quite clear, is that Bitcoin mining isn't wasteful because it helps protect the integrity of the Bitcoin network. Other methods for holding and transferring money requires trusted third parties, who also "waste" (probably much more) energy, time and resources to operate.
That could be said in the time of CPU, GPU or FPGA mining, but since these ASICs do nothing but Bitcoin mining, I think computing power is only wasted when they aren't running. In other words, I don't think they qualify as "computing power" for anything but Bitcoin mining.
> what I meant by a waste of electronic computing power is that it does nothing for the world beyond pumping out more bitcoins.
This is a deep, though common, misunderstanding of what mining is for. The purpose of mining is to achieve consensus and protect transactions against reversal. The dissemination of new coins is a wisely-aligned side effect.
The computation here is computation spend making the history of Bitcoin secure and permanent. It's not a waste.
All the work effectively makes bitcoin more and more secure, so it isn't waste at all. Potential 51% attacker has less chances to succeed the more miners there are.
So... I agree that Bitcoin has some advantages, but it's disadvantages are quite high as well.
It seems to me that all the money going into Bitcoin mining equipment, and all the power being used to run it is essentially an indirect tax on Bitcoin usage... I wonder what the total value of Bitcoin transactions in USD compared to the cost of electricity to keep the block chain up is.
The true value that Bitcoin mining provides must be some low percentage of the total Bitcoin transaction volume... or am I missing something?
It is impossible for Bitcoin transactions to take place without miners. BTC miners provide cryptographic integrity, proving that transactions took place at a certain time between certain people.
Bitcoin is purely held up by the community of miners. The integrity of BTC becomes greater and greater the more trusted miners enter the system.
The supply of "subsidy"— newly created coins— declines exponentially over time. So a long time before all 21m is mined, sometime around the year 2140 the amount of new coins created this way will be insignificant.
Bitcoin transactions can optionally provide transaction fees which are paid to the first miner to include their transaction. Blocks have a limited size in order to prevent the biggest nodes from centralizing the system by producing more load than smaller ones can handle, so there will be competition for access to that limited space. Miners can then be funded collecting these fees.
This basically will signal an end to the typical BTC pools. At .1 BTC (~$10) per chip, it is now possible to beat a $400 AMD 7970 with just $20 worth of chips.
If my off-the-cuff calculations are right, then a little under $10/hr for the whole batch of 10,000 chips that just arrived(i.e., each chip will generate about $0.01/hr), which seems pretty low until you realize that each chip costs only about $10. Break even point is about 40 days, right? Not bad at all. Unfortunately, difficulty will probably spike, so these rates are not sustainable. And who knows what the price will do.
Unless you're a very shrewd businessman and want to do this full-time, you're far better off just buying Bitcoins if you're interested in speculating on them. Just remember that Bitcoin prices will inevitably plummet, go sky high a few months, and then re-plummet. It's just what Bitcoins do.
[+] [-] atte|12 years ago|reply
1) Bitcoin will gain large-scale adoption. As a result, the value of Bitcoins will greatly increase from what it is today.
2) Bitcoin will fail due to government regulations, better alternatives, or other unforeseen reasons. As a result, Bitcoins will become effectively worthless.
Am I oversimplifying so far? If I'm not, then it seems like investing substantially in Bitcoins (purchasing coins) now will either make me very rich in 10 years, or I'll lose my initial investment.
By the same logic, if I earn coins by mining now and hold them, I will either be rich in 10 years, or I'll lose my mining investments.
I'm not interested in diving into mining to earn a quick 10-20k while the market fluctuates, so as a long term strategy it sounds like investing is the more sensible and less time consuming option. Thoughts?
[+] [-] nullc|12 years ago|reply
It's not the only possibility— e.g. Bitcoin could putter around for a long time basically where it is now, maybe acting as a very mild threat the keep the alternatives on their toes enough that Bitcoin never gets widespread adoption.
Right now it's possible to make a decent amount _today_ with mining as a small / hobby business, supplying coins to people who don't want to get into the mining stuff, without engaging in major speculation yourself.
[+] [-] tlrobinson|12 years ago|reply
Regarding mining, each time Bitcoin mining technology improves there's a mini gold rush. If you can get your hands on the technology before everyone else you can make quite a bit of money for a few months. But there's also the chance your preordered miner won't be profitable by the time you get it. This may be why hardware manufacturers prefer to sell hardware (i.e. pickaxes) rather than mine themselves.
Long term, once Bitcoin ASICs catch up to the state of the art Bitcoin mining will be very a very low margin business. Only the most efficient hardware located in places with cheap electricity will be profitable.
[+] [-] fatjokes|12 years ago|reply
EDIT: what I meant by a waste of electronic computing power is that it does nothing for the world beyond pumping out more bitcoins. I guess it's more of my opinion on bitcoins in general than this particular artile. All the computational energy is not used to search for a cure for cancer, or aliens, or crack a code, or used to compute a deep neural net. I guess I would compare it to high-frequency trading---it makes people (a lot) of money, but doesn't deliver any net gain for society.
[+] [-] criley2|12 years ago|reply
It's not a "waste" of computing power at all, in my opinion.
- If BTC did not exist, this computing power would not exist. The demand for this power is in addition to other forms of demand. This isn't taking away power from any other field, it's simply new power being added for a new cause. - The technology derived from this "arms race" can benefit far more than this field.
Why wasn't the moonlanding a "waste" of money, talent and science? Because of the training it provided people and the tools and technologies they developed, etc.
[+] [-] nadaviv|12 years ago|reply
Edit: What I was trying to say, that maybe wasn't quite clear, is that Bitcoin mining isn't wasteful because it helps protect the integrity of the Bitcoin network. Other methods for holding and transferring money requires trusted third parties, who also "waste" (probably much more) energy, time and resources to operate.
[+] [-] gbl08ma|12 years ago|reply
[+] [-] nullc|12 years ago|reply
This is a deep, though common, misunderstanding of what mining is for. The purpose of mining is to achieve consensus and protect transactions against reversal. The dissemination of new coins is a wisely-aligned side effect.
The computation here is computation spend making the history of Bitcoin secure and permanent. It's not a waste.
[+] [-] cLeEOGPw|12 years ago|reply
[+] [-] chris_mahan|12 years ago|reply
[+] [-] cryowaffle|12 years ago|reply
[+] [-] vehementi|12 years ago|reply
[+] [-] chmodd|12 years ago|reply
[+] [-] jgross206|12 years ago|reply
[+] [-] pontifier|12 years ago|reply
It seems to me that all the money going into Bitcoin mining equipment, and all the power being used to run it is essentially an indirect tax on Bitcoin usage... I wonder what the total value of Bitcoin transactions in USD compared to the cost of electricity to keep the block chain up is.
The true value that Bitcoin mining provides must be some low percentage of the total Bitcoin transaction volume... or am I missing something?
[+] [-] dragontamer|12 years ago|reply
Bitcoin is purely held up by the community of miners. The integrity of BTC becomes greater and greater the more trusted miners enter the system.
[+] [-] oh_sigh|12 years ago|reply
[+] [-] nadaviv|12 years ago|reply
[+] [-] nullc|12 years ago|reply
Bitcoin transactions can optionally provide transaction fees which are paid to the first miner to include their transaction. Blocks have a limited size in order to prevent the biggest nodes from centralizing the system by producing more load than smaller ones can handle, so there will be competition for access to that limited space. Miners can then be funded collecting these fees.
[+] [-] unknown|12 years ago|reply
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[+] [-] richcollins|12 years ago|reply
[+] [-] unknown|12 years ago|reply
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[+] [-] unknown|12 years ago|reply
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[+] [-] dragontamer|12 years ago|reply
[+] [-] cryowaffle|12 years ago|reply
[+] [-] nerdo|12 years ago|reply
[+] [-] jnbiche|12 years ago|reply
Unless you're a very shrewd businessman and want to do this full-time, you're far better off just buying Bitcoins if you're interested in speculating on them. Just remember that Bitcoin prices will inevitably plummet, go sky high a few months, and then re-plummet. It's just what Bitcoins do.
[+] [-] laserbrain|12 years ago|reply