Author Topic: What do you think of adding a low% of crypto allocation  (Read 80507 times)

ChpBstrd

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Re: What do you think of adding a low% of crypto allocation
« Reply #1200 on: April 08, 2022, 11:42:28 AM »
If I create a private company with one employee (me) and no profits or business model at all, but issue one trillion shares . . . then sell a single share (to my mom) for one cent . . . I'm now the owner of a company with a market cap of A BILLION DOLLARS!

Market caps are really fun and easy to use if you want to manipulate/inflate the value of something.

And if next month you hold a share auction in your front yard and mom is willing to pay a nickel for her second share, your company is now a FIVE BILLION DOLLAR company with 500% growth in just one month!!! That's "parabolic"!

Anyone who disagrees with the value and thinks your company is worthless is ignoring the FACT that the company is actually trading at that valuation in an open marketplace.

MustacheAndaHalf

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Re: What do you think of adding a low% of crypto allocation
« Reply #1201 on: April 08, 2022, 11:53:36 AM »
If I create a private company with one employee (me) and no profits or business model at all, but issue one trillion shares . . . then sell a single share (to my mom) for one cent . . . I'm now the owner of a company with a market cap of A BILLION DOLLARS!

Market caps are really fun and easy to use if you want to manipulate/inflate the value of something.
I think we'd agree that's fraud, with buying and selling within your family not really constituting a "market".  So it's not really "market cap" without a market.

Meanwhile, CME runs a Bitcoin futures market.  You can buy & sell on that market, get tax forms, etc.
https://www.cmegroup.com/media-room/press-releases/2017/10/31/cme_group_announceslaunchofbitcoinfutures.html

It's not fraud if the shares were publicly traded and mom has no insider information about my business other than me owning it.  100% above board.  Market cap is meaningless when it's so easy to fake a market.
While I don't know securities law in detail, this view seems laughable to me.  Nobody believes a market with you as the only seller and your mom as the only buyer is an arm's length transaction.  Take that view to a lawyer and make their day.

I know a bit more about IRAs since I studied them recently - and there it's not allowed.  If your IRA (more likely your self-directed IRA) makes a trade specifically with your mom, the IRS will strip it's status as an IRA and force distribution of the entire amount with taxes and penalties (according to IRS code 4975 if I remembered right).
https://www.law.cornell.edu/uscode/text/26/4975

talltexan

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Re: What do you think of adding a low% of crypto allocation
« Reply #1202 on: April 08, 2022, 12:04:31 PM »
If I create a private company with one employee (me) and no profits or business model at all, but issue one trillion shares . . . then sell a single share (to my mom) for one cent . . . I'm now the owner of a company with a market cap of A BILLION DOLLARS!

Market caps are really fun and easy to use if you want to manipulate/inflate the value of something.

And if next month you hold a share auction in your front yard and mom is willing to pay a nickel for her second share, your company is now a FIVE BILLION DOLLAR company with 500% growth in just one month!!! That's "parabolic"!

Anyone who disagrees with the value and thinks your company is worthless is ignoring the FACT that the company is actually trading at that valuation in an open marketplace.

Isn't the person who disagrees with that valuation able to sell it short?

ChpBstrd

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Re: What do you think of adding a low% of crypto allocation
« Reply #1203 on: April 08, 2022, 12:34:38 PM »
If I create a private company with one employee (me) and no profits or business model at all, but issue one trillion shares . . . then sell a single share (to my mom) for one cent . . . I'm now the owner of a company with a market cap of A BILLION DOLLARS!

Market caps are really fun and easy to use if you want to manipulate/inflate the value of something.
I think we'd agree that's fraud, with buying and selling within your family not really constituting a "market".  So it's not really "market cap" without a market.

Meanwhile, CME runs a Bitcoin futures market.  You can buy & sell on that market, get tax forms, etc.
https://www.cmegroup.com/media-room/press-releases/2017/10/31/cme_group_announceslaunchofbitcoinfutures.html

It's not fraud if the shares were publicly traded and mom has no insider information about my business other than me owning it.  100% above board.  Market cap is meaningless when it's so easy to fake a market.
While I don't know securities law in detail, this view seems laughable to me.  Nobody believes a market with you as the only seller and your mom as the only buyer is an arm's length transaction.  Take that view to a lawyer and make their day.

I know a bit more about IRAs since I studied them recently - and there it's not allowed.  If your IRA (more likely your self-directed IRA) makes a trade specifically with your mom, the IRS will strip it's status as an IRA and force distribution of the entire amount with taxes and penalties (according to IRS code 4975 if I remembered right).
https://www.law.cornell.edu/uscode/text/26/4975
Take out the mom part, and make it "a random stranger on the internet". Is the point any different?

lifeanon269

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Re: What do you think of adding a low% of crypto allocation
« Reply #1204 on: April 08, 2022, 12:36:45 PM »
Isn't the person who disagrees with that valuation able to sell it short?

Not necessarily. In order to short the stock you'd have to borrow shares in order to sell them into the market to be able to capitalize on a price drop later. If the mom is the only one that actually owns any shares in this "market", you'd have no means of being able to perform a short sale. Unless you can get your hands on some borrowed stock to be able to short it, then no. But that's where I'd disagree here with the notion that this is an "open marketplace". Because in an open market you'd likely be able to find opportunities to perform an actual short sale.

GuitarStv

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Re: What do you think of adding a low% of crypto allocation
« Reply #1205 on: April 08, 2022, 01:31:23 PM »
Isn't the person who disagrees with that valuation able to sell it short?

Not necessarily. In order to short the stock you'd have to borrow shares in order to sell them into the market to be able to capitalize on a price drop later. If the mom is the only one that actually owns any shares in this "market", you'd have no means of being able to perform a short sale. Unless you can get your hands on some borrowed stock to be able to short it, then no. But that's where I'd disagree here with the notion that this is an "open marketplace". Because in an open market you'd likely be able to find opportunities to perform an actual short sale.

Short selling has always confused me.  There were more than 141% of Gamestop stocks being shorted at one point.  It feels like that couldn't happen if everyone had to borrow a stock to short it.

Telecaster

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Re: What do you think of adding a low% of crypto allocation
« Reply #1206 on: April 08, 2022, 01:42:11 PM »
Meanwhile, the bitcoin company Strike just partnered with NCR and Blackhawk, two of the largest point of sale payment companies in the country to bring bitcoin lightning network payments to in-person point of sale merchants (McDonald's, Walmart, CVS, Walgreens, Whole Foods, Kroger, Home Depot, Lowe's, etc). People that really keep telling themselves that bitcoin is just going to go to $0 are delusionally ignoring an unrelenting growth that is happening at the industry and user level and taking place outside of the uncorrelated price movements that are just based on speculative trader moves. I hate to break it to you, but bitcoin isn't going to $0.

I don't think it is going to zero either.  People own Bitcoin because they like the idea of owning Bitcoin.  As long as people like the idea owning Bitcoin, Bitcoin will have value.  Simple as that.   People who like Bitcoin really like Bitcoin so I think there is a floor there somewhere.   Similarly, if more people like Bitcoin in the future (or like it more) the price will go up.   Not much mystery here in my view.   

I remain skeptical however that there is a meaningful use case for Bitcoin.   For example, what you just wrote above.     If you have the Strike app you can now spend your Bitcoin at Home Depot.  Great!  Except Home Depot receives payment in US Dollars.  All Strike does is make the conversion for you. 

Remember the raison d'etre for Bitcoin is the ability to make trustless transactions.   When you involve Strike and NCR to make the transaction it is no longer trustless.    And if you use Bitcoin, you don't really know from one day to the next or even one hour to the next how much that new Weber pellet smoker is going to cost.   For example, if you were saving up Bitcoin to buy that smoker, the smoker got 20% more expensive over the last six months.  So if there is no price stability and there is no trustless transaction, what is the advantage of using Bitcoin?   

The use case arguments always come down to some version of Bitcoin is great if you live in Venezuela or Iran.  I'll buy that.  But I don't live there.   Most people don't live there.

the_gastropod

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Re: What do you think of adding a low% of crypto allocation
« Reply #1207 on: April 08, 2022, 02:21:02 PM »
. . . 
Bitcoin is on the order of 2.5 Million times less efficient than Visa. 2.5 Million.
. . .

I assume this mighty number comes from the openly anti-Bitcoin Digiconomist article.

For an alternative openly pro-Bitcoin interpretation, see What Bloomberg Gets Wrong About Bitcoin's Climate Footprint.

Lots of agendas here and I suggest that scepticism should be liberally applied to both sides of the argument.

No. This "both sides" thing is, itself, pretty gross Crypto propaganda. The author of this article is Nic Carter—a venture capitalist with colossal investments in crypto. In traditional journalism, having investments in companies bars you from writing about those companies. That is a conflict of interest. Nic Carter's rebuttal here is pure nonsense. I really encourage people to read it to see the childish mental gymnastics he does to try to sow doubt about actual good journalism.

Editing to actually add some reasons I think Nic Carter's article is nonsense
- Nic is mad at the per-transaction number. Fine. Look at the entire system's footprint. It uses more electricity than the entire country of Argentina. That the per-transaction number is astronomical simply highlights that this huge carbon footprint is for a pretty minimally-used side-hobby for some very niche libertarian computer-nerds. Let's think about this even more. By fairly generous estimations, there are ~80M people who own Bitcoin (only about 400k daily users, but anyway). There are 45 Million people living in Argentina. In other words, 45 Million people live their entire lives (including mining some bitcoin, flying to far away lands, etc.) on less energy than it takes to support a play-thing very casually used by ~70% more people. That is grotesque. Vulgar. Obscene.
- Nic claims that the comparison is unfair, because Bitcoin is a complete network, and Visa relies on banks and settlement systems—whose systems are (allegedly?) not included in the Visa energy calculations. This is hardly true in practice. Virtually every user of Bitcoin uses a Bitcoin exchange, expects to convert it back-and-forth with USD (or their own local currency), etc.
- Nic tries mightily to suggest that oil backs the USD (and somehow not Bitcoin?) There's no coherent explanation why—just lots of hand-wavy thought-terminating nonsense.
- He argues that Bitcoin transactions are of higher value transfers than Visa ones?!?! Computers do not care whether they're sending the binary sequence for $1 or $1B. It's the same cost. This is irrelevant.
- He argues that in the future things will be better because the block rewards will diminish! He then arbitrarily chooses transaction count and a weird $10 fee to make his point. He made those numbers up based on nothing other than making his argument make sense. (Plus, y'know, let's stick to the topic of *today*. CO2 released today is still relevant, Nic)
- He tries to suggest that much of Bitcoin mining uses renewable energy! This. Is. Not. How. Electrical. Grids. Work. Electricity is fungible. Electricity wasted on mining bitcoin is energy that could have been used for something useful elsewhere. Plus, it's just not true (as many of the sources below will show). Bitcoin mining tends to happen most where it's cheapest. Coal tends to be a very cheap source of energy throughout the world. Nic's argument is the financial equivalent of buying a TV with your income tax refund because, hey, it's just your income tax refund! FREE MONEY

In sum, this is a pretty weak argument. For what it's worth here are several more sources for Bitcoin's environmental impact, if you're interested:

https://ieeexplore.ieee.org/document/9385063
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3779720
https://www.sciencedirect.com/science/article/abs/pii/S2214629619305948?via%3Dihub
https://arxiv.org/pdf/2112.01238.pdf
https://ccaf.io/cbeci/index

Aside: I'm a software engineer. I have a Computer Science degree. I'm intimately familiar with code efficiency and how to at least estimate it (SUP BIG O NOTATION?). And I cannot emphasize this strongly enough: traditional financial systems are written in code attempting to be efficient. Bitcoin is purposefully wasteful. The mechanism by which it is secure against malicious miners, is to have them each deliberately waste computational time, guessing numbers, such that it would be too costly to cheat. Each miner is significantly less efficient than something like a Visa network. But remember: there are millions of bitcoin miners. It isn't very difficult to assess the magnitude in difference between Visa and Bitcoin—though people have done very deep investigative work, and found the ~2.5 Million x to be accurate.
« Last Edit: April 08, 2022, 03:19:16 PM by the_gastropod »

LateStarter

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Re: What do you think of adding a low% of crypto allocation
« Reply #1208 on: April 08, 2022, 03:42:41 PM »
. . . 
Bitcoin is on the order of 2.5 Million times less efficient than Visa. 2.5 Million.
. . .

I assume this mighty number comes from the openly anti-Bitcoin Digiconomist article.

For an alternative openly pro-Bitcoin interpretation, see What Bloomberg Gets Wrong About Bitcoin's Climate Footprint.

Lots of agendas here and I suggest that scepticism should be liberally applied to both sides of the argument.

No. This "both sides" thing is, itself, pretty gross Crypto propaganda.

Oh please . . . . "my sources are all good and yours are all bad" ?   WTF ??


The author of this article is Nic Carter—a venture capitalist with colossal investments in crypto. In traditional journalism, having investments in companies bars you from writing about those companies. That is a conflict of interest. Nic Carter's rebuttal here is pure nonsense. I really encourage people to read it to see the childish mental gymnastics he does to try to sow doubt about actual good journalism.

Did you miss the bit where I said he's openly pro-Bitcoin and that there are agendas on both sides ?


Here are several more sources for Bitcoin's environmental impact, if you're interested:

https://ieeexplore.ieee.org/document/9385063
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3779720
https://www.sciencedirect.com/science/article/abs/pii/S2214629619305948?via%3Dihub
https://arxiv.org/pdf/2112.01238.pdf
https://ccaf.io/cbeci/index

I'm familiar with the general issue thanks - I was just querying this 2.5 million thing. However, none of these papers seem to make any mention of a Bitcoin / Visa comparison . . . or 2.5 million . . .


Aside: I'm a software engineer. I have a Computer Science degree. I'm intimately familiar with code efficiency and how to at least estimate it (SUP BIG O NOTATION?). And I cannot emphasize this strongly enough: traditional financial systems are written in code attempting to be efficient. Bitcoin is purposefully wasteful. The mechanism by which it is secure against malicious miners, is to have them each deliberately waste computational time, guessing numbers, such that it would be too costly to cheat. Each miner is significantly less efficient than something like a Visa network. But remember: there are millions of bitcoin miners.

Note that I made no claims about Bitcoin efficiency other than suggesting that this 2.5Mx comparison has a whiff of agenda-biased-bullshit about it.


It isn't very difficult to assess the magnitude in difference between Visa and Bitcoin—though people have done very deep investigative work, and found the ~2.5 Million x to be accurate.

Impartial people ? Links / references ? A brief search only found the Digiconimist article I linked previously     - (and linked poorly - links now fixed!!)

Digiconimist: About:  ". . . . New technologies are rarely perfect, as illustrated by the gigantic environmental impact that the cryptocurrency Bitcoin had (as a result of its mining mechanism). . . . . "

There's your agenda right there in plain view. No impartial analyst would describe themselves or their mission in such blatantly biased terms.


As I said:
Lots of agendas here and I suggest that scepticism should be liberally applied to both sides of the argument.

maizefolk

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Re: What do you think of adding a low% of crypto allocation
« Reply #1209 on: April 08, 2022, 05:51:57 PM »
Short selling has always confused me.  There were more than 141% of Gamestop stocks being shorted at one point.  It feels like that couldn't happen if everyone had to borrow a stock to short it.

People were borrowing the shares to sell them to people who in turn loaned them to other people to sell them again.

Imagine a company with 1 share.

Person A owns the share.

Person B  borrows the share from Person A and sells it to person C.

Person D borrows the same share from person C and sells it to person E.

Two different people have each borrowed and sold one share of stock so the short interest is 2 and the number of outstanding shares is 1 so 200% of the company's one shares have been shorted. 

lifeanon269

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Re: What do you think of adding a low% of crypto allocation
« Reply #1210 on: April 08, 2022, 06:26:58 PM »
I remain skeptical however that there is a meaningful use case for Bitcoin.   For example, what you just wrote above.     If you have the Strike app you can now spend your Bitcoin at Home Depot.  Great!  Except Home Depot receives payment in US Dollars.  All Strike does is make the conversion for you.

Remember the raison d'etre for Bitcoin is the ability to make trustless transactions.   When you involve Strike and NCR to make the transaction it is no longer trustless.    And if you use Bitcoin, you don't really know from one day to the next or even one hour to the next how much that new Weber pellet smoker is going to cost.   For example, if you were saving up Bitcoin to buy that smoker, the smoker got 20% more expensive over the last six months.  So if there is no price stability and there is no trustless transaction, what is the advantage of using Bitcoin?   

The use case arguments always come down to some version of Bitcoin is great if you live in Venezuela or Iran.  I'll buy that.  But I don't live there.   Most people don't live there.

Let me clarify something because I believe there is some misunderstanding on what Strike is doing here and it is a big part of what makes what Strike is doing so great. Basically Strike is disrupting incumbents that have had almost no competition for over 50 years by replacing them with an open network (Lightning Network/Bitcoin).

I want to clarify, you do not need the Strike app to interact with these merchants. Strike is partnering with NCR and Blackhawk on the point-of-sale (PoS) side to allow merchants to then interact with the Lightning Network for instant settlement. The merchants can choose to receive bitcoin, USD, or any other currency they choose that Strike may support a conversion to. For the customer, since Strike interfaces with the Lightning Network, they just need to use ANY application they so wish that also works over the Lightning Network. The could use their open source wallet like BlueWallet, Breez, Muun, etc. Or they could use a custodial app that interfaces with Lightning like CashApp, or they could use the Strike app itself. The demo that Jack Mallers showed off demonstrated using 3 different wallets to make 3 different purchases. But replacing VISA, Mastercard, Discovercard, etc with an open network, it opens up the customer the option of using an open network to be able to make purchases without needing to have their funds stored with a third-party custodian (an option we've never had digitally before bitcoin). The merchant, they don't really care about the trust-less aspect since they're a legal organization anyway, so working with a trusted third-party vendor like Strike is par for the course. The merchant benefits here by disrupting the incumbents that essentially had a monopoly on PoS payments for an eternity and reap tons of fees from merchants. Strike charges much less fees (due to the lower overhead of using the Lightning Network) and so is a good option for merchants to want to work with.

Open networks almost always win out over closed networks (Internet vs Intranets). Being able to choose what service or app you want to use while being able to instantly integrate with a network/protocol that will interoperate with the rest of the ecosystem is huge. Think internet browsers and how everyone is free to choose the browser they prefer and we can all still browse the same websites. Someone can build a new browser and use it to browse the web. If someone doesn't like the current crop of wallet apps out there, they are free to build a new one and use it instantly to start buying things at these stores. Open networks are terrific and this is what is being built here and it will disrupt the payments industry.
« Last Edit: April 08, 2022, 07:55:03 PM by lifeanon269 »

lifeanon269

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Re: What do you think of adding a low% of crypto allocation
« Reply #1211 on: April 08, 2022, 06:29:50 PM »
Short selling has always confused me.  There were more than 141% of Gamestop stocks being shorted at one point.  It feels like that couldn't happen if everyone had to borrow a stock to short it.

Yes, it is called naked short selling and IMO it should be illegal.

maizefolk

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Re: What do you think of adding a low% of crypto allocation
« Reply #1212 on: April 08, 2022, 07:59:44 PM »
Short selling has always confused me.  There were more than 141% of Gamestop stocks being shorted at one point.  It feels like that couldn't happen if everyone had to borrow a stock to short it.

Yes, it is called naked short selling and IMO it should be illegal.

Naked short selling already is (usually) illegal. The problem is that it still happens and often isn't punished despite being illegal.

the_gastropod

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Re: What do you think of adding a low% of crypto allocation
« Reply #1213 on: April 08, 2022, 09:17:06 PM »
. . . 
Bitcoin is on the order of 2.5 Million times less efficient than Visa. 2.5 Million.
. . .

I assume this mighty number comes from the openly anti-Bitcoin Digiconomist article.

For an alternative openly pro-Bitcoin interpretation, see What Bloomberg Gets Wrong About Bitcoin's Climate Footprint.

Lots of agendas here and I suggest that scepticism should be liberally applied to both sides of the argument.

No. This "both sides" thing is, itself, pretty gross Crypto propaganda.

Oh please . . . . "my sources are all good and yours are all bad" ?   WTF ??


The author of this article is Nic Carter—a venture capitalist with colossal investments in crypto. In traditional journalism, having investments in companies bars you from writing about those companies. That is a conflict of interest. Nic Carter's rebuttal here is pure nonsense. I really encourage people to read it to see the childish mental gymnastics he does to try to sow doubt about actual good journalism.

Did you miss the bit where I said he's openly pro-Bitcoin and that there are agendas on both sides ?


Here are several more sources for Bitcoin's environmental impact, if you're interested:

https://ieeexplore.ieee.org/document/9385063
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3779720
https://www.sciencedirect.com/science/article/abs/pii/S2214629619305948?via%3Dihub
https://arxiv.org/pdf/2112.01238.pdf
https://ccaf.io/cbeci/index

I'm familiar with the general issue thanks - I was just querying this 2.5 million thing. However, none of these papers seem to make any mention of a Bitcoin / Visa comparison . . . or 2.5 million . . .


Aside: I'm a software engineer. I have a Computer Science degree. I'm intimately familiar with code efficiency and how to at least estimate it (SUP BIG O NOTATION?). And I cannot emphasize this strongly enough: traditional financial systems are written in code attempting to be efficient. Bitcoin is purposefully wasteful. The mechanism by which it is secure against malicious miners, is to have them each deliberately waste computational time, guessing numbers, such that it would be too costly to cheat. Each miner is significantly less efficient than something like a Visa network. But remember: there are millions of bitcoin miners.

Note that I made no claims about Bitcoin efficiency other than suggesting that this 2.5Mx comparison has a whiff of agenda-biased-bullshit about it.


It isn't very difficult to assess the magnitude in difference between Visa and Bitcoin—though people have done very deep investigative work, and found the ~2.5 Million x to be accurate.

Impartial people ? Links / references ? A brief search only found the Digiconimist article I linked previously     - (and linked poorly - links now fixed!!)

Digiconimist: About:  ". . . . New technologies are rarely perfect, as illustrated by the gigantic environmental impact that the cryptocurrency Bitcoin had (as a result of its mining mechanism). . . . . "

There's your agenda right there in plain view. No impartial analyst would describe themselves or their mission in such blatantly biased terms.


As I said:
Lots of agendas here and I suggest that scepticism should be liberally applied to both sides of the argument.

“Both sidesism” and this notion that any position taken is biased is really bizarre. These arguments are not equally valid. Critics of Exxon-Mobil for their climate denialism campaigns are not “openly anti-Exxon” with a bias that needs to be countered. And, FWIW, I responded directly to Nic Carter’s article, explaining the flaws in his arguments. I didn’t just dismiss him as biased, though I thought it was worth mentioning he has a massive financial stake in convincing others to buy crypto.

What makes this argument even sillier, to me, is that it’s fairly easy to just do this calculation. Take Bitcoin’s global energy usage. Let’s use the University of Cambridge’s estimates (source: https://ccaf.io/cbeci/index) of 146.2 TWh annually. Bitcoin has around 100M transactions annually (source: https://ycharts.com/indicators/bitcoin_transactions_per_day). That is 1.462MWh per transaction. Visa transactions are estimated to take 1.48Wh. Ok, so maybe Bitcoin is only 1 Million times worse than Visa by this latest “study” we’ve just done. But you probably should just discount this, because I’ve shown myself to be biased against Bitcoin ;-)
« Last Edit: April 08, 2022, 09:42:25 PM by the_gastropod »

MustacheAndaHalf

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Re: What do you think of adding a low% of crypto allocation
« Reply #1214 on: April 09, 2022, 06:51:01 AM »
If I create a private company with one employee (me) and no profits or business model at all, but issue one trillion shares . . . then sell a single share (to my mom) for one cent . . . I'm now the owner of a company with a market cap of A BILLION DOLLARS!

Market caps are really fun and easy to use if you want to manipulate/inflate the value of something.
I think we'd agree that's fraud, with buying and selling within your family not really constituting a "market".  So it's not really "market cap" without a market.

Meanwhile, CME runs a Bitcoin futures market.  You can buy & sell on that market, get tax forms, etc.
https://www.cmegroup.com/media-room/press-releases/2017/10/31/cme_group_announceslaunchofbitcoinfutures.html

It's not fraud if the shares were publicly traded and mom has no insider information about my business other than me owning it.  100% above board.  Market cap is meaningless when it's so easy to fake a market.
While I don't know securities law in detail, this view seems laughable to me.  Nobody believes a market with you as the only seller and your mom as the only buyer is an arm's length transaction.  Take that view to a lawyer and make their day.

I know a bit more about IRAs since I studied them recently - and there it's not allowed.  If your IRA (more likely your self-directed IRA) makes a trade specifically with your mom, the IRS will strip it's status as an IRA and force distribution of the entire amount with taxes and penalties (according to IRS code 4975 if I remembered right).
https://www.law.cornell.edu/uscode/text/26/4975
Take out the mom part, and make it "a random stranger on the internet". Is the point any different?
My original post discussed crypto market caps, and you and GuitarStv turned it into this tangent about trading with someone's mom being a scam.

As an example of crypto markets, take Coinbase.  $800 million USD worth of BTC and ETH were traded in the past 24 hours.  Willing buyers and willing sellers trading on an established exchange - and a publicly listed one on the US stock market (COIN).
https://coinmarketcap.com/exchanges/coinbase-exchange/

For the largest crypto exchanges using the most traded crypto currencies, would you agree market forces determine the price?

Most crypto exchanges do not list most coins.  Scrolling down to the 8,000th crypto coin by volume shows only $100 of 24h volume, which looks like fraud to me.
WARNING: The following link contains scams.  Do not buy anything you see.
https://coinmarketcap.com/?page=81

But you will also see scams in penny stocks on US markets.  Someone accumulates a significant position, hypes the stock to buyers and draws in their money.  Then the "pump and dump" scammer dumps their shares at a profit.

All of which I would summarize by saying there are scams in crypto exchanges and on public US stock markets, but if you look at larger coins and larger companies, that trade volume is not a scam: it's price discovery that determines the market cap of crypto currencies.

LateStarter

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Re: What do you think of adding a low% of crypto allocation
« Reply #1215 on: April 09, 2022, 07:31:35 AM »
. . . 
Bitcoin is on the order of 2.5 Million times less efficient than Visa. 2.5 Million.
. . .

I assume this mighty number comes from the openly anti-Bitcoin Digiconomist article.

For an alternative openly pro-Bitcoin interpretation, see What Bloomberg Gets Wrong About Bitcoin's Climate Footprint.

Lots of agendas here and I suggest that scepticism should be liberally applied to both sides of the argument.

No. This "both sides" thing is, itself, pretty gross Crypto propaganda.

Oh please . . . . "my sources are all good and yours are all bad" ?   WTF ??


The author of this article is Nic Carter—a venture capitalist with colossal investments in crypto. In traditional journalism, having investments in companies bars you from writing about those companies. That is a conflict of interest. Nic Carter's rebuttal here is pure nonsense. I really encourage people to read it to see the childish mental gymnastics he does to try to sow doubt about actual good journalism.

Did you miss the bit where I said he's openly pro-Bitcoin and that there are agendas on both sides ?


Here are several more sources for Bitcoin's environmental impact, if you're interested:

https://ieeexplore.ieee.org/document/9385063
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3779720
https://www.sciencedirect.com/science/article/abs/pii/S2214629619305948?via%3Dihub
https://arxiv.org/pdf/2112.01238.pdf
https://ccaf.io/cbeci/index

I'm familiar with the general issue thanks - I was just querying this 2.5 million thing. However, none of these papers seem to make any mention of a Bitcoin / Visa comparison . . . or 2.5 million . . .


Aside: I'm a software engineer. I have a Computer Science degree. I'm intimately familiar with code efficiency and how to at least estimate it (SUP BIG O NOTATION?). And I cannot emphasize this strongly enough: traditional financial systems are written in code attempting to be efficient. Bitcoin is purposefully wasteful. The mechanism by which it is secure against malicious miners, is to have them each deliberately waste computational time, guessing numbers, such that it would be too costly to cheat. Each miner is significantly less efficient than something like a Visa network. But remember: there are millions of bitcoin miners.

Note that I made no claims about Bitcoin efficiency other than suggesting that this 2.5Mx comparison has a whiff of agenda-biased-bullshit about it.


It isn't very difficult to assess the magnitude in difference between Visa and Bitcoin—though people have done very deep investigative work, and found the ~2.5 Million x to be accurate.

Impartial people ? Links / references ? A brief search only found the Digiconimist article I linked previously     - (and linked poorly - links now fixed!!)

Digiconimist: About:  ". . . . New technologies are rarely perfect, as illustrated by the gigantic environmental impact that the cryptocurrency Bitcoin had (as a result of its mining mechanism). . . . . "

There's your agenda right there in plain view. No impartial analyst would describe themselves or their mission in such blatantly biased terms.


As I said:
Lots of agendas here and I suggest that scepticism should be liberally applied to both sides of the argument.

“Both sidesism” and this notion that any position taken is biased is really bizarre.

That's not what I said. It's perfectly rational to consider the underlying mission of a source when reviewing their statements.
I handle openly pro-Bitcoin Nic Carter's proclamations on the wonders of Bitcoin with caution. I handle openly anti-Bitcoin Digiconimist's proclamations on the evils of Bitcoin with caution.

That doesn't mean all sources are biased. I assume that Cambridge Uni's declared mission relates to solid impartial science and my guess is that they're fairly trustworthy. I'm more inclined to take their findings at face value.

These arguments are not equally valid. Critics of Exxon-Mobil for their climate denialism campaigns are not “openly anti-Exxon” with a bias that needs to be countered.

"openly" is not the issue.

Are you really suggesting that no "critics of Exxon-Mobil for their climate denialism campaigns" are fundamentally "anti-Exxon" and/or anti fossil fuels in general ? You can't be serious - that's ludicrously naive - and quite obviously wrong.
It doesn't mean their arguments are false, but only a fool would ignore the context / underlying mission of the source.

And, FWIW, I responded directly to Nic Carter’s article, explaining the flaws in his arguments. I didn’t just dismiss him as biased, though I thought it was worth mentioning he has a massive financial stake in convincing others to buy crypto.

Yeah, I thought that was worth mentioning too - I also clearly mentioned that he has an agenda.
Notably, you still haven't acknowledged that your number also seems to come from a source with an agenda. Confirmation bias ?

What makes this argument even sillier, to me, is that it’s fairly easy to just do this calculation. Take Bitcoin’s global energy usage. Let’s use the University of Cambridge’s estimates (source: https://ccaf.io/cbeci/index) of 146.2 TWh annually. Bitcoin has around 100M transactions annually (source: https://ycharts.com/indicators/bitcoin_transactions_per_day). That is 1.462MWh per transaction. Visa transactions are estimated to take 1.48Wh. Ok, so maybe Bitcoin is only 1 Million times worse than Visa by this latest “study” we’ve just done. But you probably should just discount this, because I’ve shown myself to be biased against Bitcoin ;-)

Yeah, pulling loosely related numbers together and comparing them as like-for-like equivalents is trivially easy, as you've demonstrated. It might be fun, but it's not science.

lifeanon269

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Re: What do you think of adding a low% of crypto allocation
« Reply #1216 on: April 09, 2022, 08:13:19 AM »
For those in 2022 that are still not aware, bitcoin transactions are settlement. While transactions in the early days were often 1 to 1 transactions, to keep bitcoin decentralized, bitcoin transactions in the future will be increasingly settlement based and scaled via layers.

This is similar in the way that our current financial system is structured. Central banks are at the top with federal reserve banks settling and issuing cash to other large financial institutions. Those financial institutions become clearing houses for traditional banks and credit unions. Those banks and credit unions integrate with payment networks like VISA and Mastercard and those payment networks handle the point of sale transactions for retail customers. The transactions that are performed at the point of sale, are not settled immediately. This entire system is a debt based payment system where almost all transactional money is fronted and spent as debt. The payment network transactions are then settled to banks much later (which coincidentally creates a charge back risk for all transactions). Those settlements are then aggregated all the way up to the clearing houses and then the reserve banks where networks like SWIFT and Fedwire come into play. Transactions that reserve banks settle, while fewer, are the aggregate of all transactions further below in the hierarchy.

The same is and will continue to be true of bitcoin. Transactions are settlement and what takes place on the blockchain as blocks are confirmed will be transactions that are the aggregate of other types of transactions happening in other layers that are utilizing the security of bitcoin's blockchain for its security. That security is the energy spent by miners that has absolutely no correlation to the actual number of transactions being performed and secured by the bitcoin network. Aggregation can take place through numerous methods. They could take place completely off-chain where security is enforced through bitcoin's scripting language to allow for revocation and penalization of fraudulent breaches of contract. I've previously showed the efficiency of this with my own personal data that is not anomalous in any way. You can also have transactions simply be a batch of numerous payments to many individuals through the use of batching. Most exchanges today batch their withdrawals to many of their customers at once through a single on-chain transaction to save on fees. Here is a transaction that was a payment to 36 individuals, but was done with just a single on-chain transaction:

https://mempool.space/tx/fd33e1c0a4e253338fa20a1e6f450002eeabdeae574e9a4bfde5fb958ee12965

You can also have assets issued on the bitcoin network through a new design called Taro. This means you can effectively issue a stablecoin backed by the USD to effectively create new payment rails for the US dollar to allow for instant settlement. The settlement of these assets will take place completely off-chain which means you can have billions/trillions in settlement completely uncorrelated to the number of on-chain transactions (utilizing the lightning network). As someone who has worked in Information Security with financial institutions for over 15 years, I can say that instant settlement is something banks are actively seeking as the world's financial needs are rapidly changing around them. My organization just rolled out an implementation of the real time payments network, but even that pails in comparison in volume, uptime, and efficiency to what an open network like bitcoin can do.

https://www.forbes.com/sites/alysekilleen/2022/04/05/new-bitcoin-technology-enables-instant-global-usd-transactions/

If you're still calculating energy usage per transaction in 2022, after the numerous times that the metric has been debunked, you're being disingenuous to those whose ear you have. You could have zero transactions in a block and the energy usage won't change. You could have millions of transactions being settled in a single block and the energy usage won't change. The energy being spent is just energy spent to calculate a hash of some block of data and doing that calculation doesn't change based on the number of transactions. Furthermore, the block reward halving is an opposing force against exponential energy use increases. It will force a transition of the bitcoin network from having energy spent based on a fixed sum of bitcoin as reward to energy spent based on the fees the industry of bitcoin is willing to pay to have settlements secured by the bitcoin network. Therefore, within the decade, the energy spent by bitcoin will be a direct result of economic activity and value looking to be processed and secured. This is an efficiency in our current financial structures that we do not have today. There is very little overhead costs in that compared with the massive overhead costs of the banking industry today.

When proponents of bitcoin play "whataboutism" with the banking industry as criticized, it isn't playing a game of logical fallacy. It is an acknowledgement of a dichotomy that our economy must play to. What people criticize the environmental impacts of electric cars and EV drivers say "whatabout" gas cars? They're not just brushing off things that EVs could do better, but acknowledging that they are still better than gas cars when you're faced with a dichotomy in a society that is built around driving and transportation. Economic activity and transactions have to happen in a functioning modern society. In the same way that EVs are an alternative to gas cars and that the environmental costs must be viewed from a comparative lens, bitcoin's future efficiencies must be view from a comparative lens with the legacy financial system. That's not whataboutism, that's just acknowledgement of the dichotomy we're faced with.

If you're someone who has never used bitcoin or any of its scaling technologies and you're just simply parroting elementary calculations of energy/txns, the bias becomes evident and the unwillingness to learn about a technology even more so.

StashingAway

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Re: What do you think of adding a low% of crypto allocation
« Reply #1217 on: April 09, 2022, 10:28:02 AM »
If you're someone who has never used bitcoin or any of its scaling technologies and you're just simply parroting elementary calculations of energy/txns, the bias becomes evident and the unwillingness to learn about a technology even more so.

My man, not gonna quote the whole thing, but why is this better than current banks?

lifeanon269

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Re: What do you think of adding a low% of crypto allocation
« Reply #1218 on: April 09, 2022, 01:28:55 PM »
My man, not gonna quote the whole thing, but why is this better than current banks?

Well to be frank, bitcoin isn't going to do away with financial services. Things like lending inherently require trust. The bank has to trust you to pay back a loan and in order for them to be able to assess credit risk, they need your financial background. This relationship requires trust which is why the whole "DeFi" buzz is nonsensical from the start. So there will still be banks that provide financial services like that to people.

Critics will chirp about how bitcoin mining doesn't provide a lot of jobs as if that is a negative. But that's the entire point. There is almost no overhead to bitcoin mining. The fees that are paid for a transaction will be translated almost entirely to electrical costs to confirm a block.

There is so much overhead in our current payments industry and a lot of it has to do with the fact that it is built on an entirely flawed design model. It is build on a pull payment design. So in order to make a payment to someone, you give them all of your financial information and with that information, the recipient is able to pull funds from your account. It could be your credit card information and address info or account and routing numbers to make an ACH transaction. Because of this, every single merchant we interact with ends up becoming a central point of failure for massive amounts of confidential PII/PCI data. This design flaw creates an extremely costly structure that must then be backwardly remedied with security controls, fraud analysis, identity protection, breach insurance, etc. This is a massive amount of overhead that ends up actually increasing the costs of all the goods we buy by some estimates upwards of 10%. All just to make a payment from one party to another. It doesn't have to be this way.

With bitcoin it is, by design, a push payment method. No one has the ability to spend your funds or make a payment with your funds except for you. When you want to pay someone, you push the payment to them. There is no chargeback risk and settlement is instant.

Like said, financial services can and will still be build on top of bitcoin. This is already taking place today. In fact, I just purchased a house last fall. In this competitive real estate market, almost all offers that are accepted are cash offers. A good portion of my liquid wealth (non-equities, etc) is in bitcoin. Bitcoin thankfully is seen as pristine collateral. Unlike say your car as collateral for a loan that can be destroyed in an accident, stolen, lost, and must be repossessed in the event of a default. Bitcoin on the other hand can be transferred immediately to the lender with complete custody and held by them for the duration of the loan. So I was able to receive a loan with some of my bitcoin held as collateral. If I didn't pay back the loan or I defaulted on any payments, then they could liquidate my bitcoin at any time. Because bitcoin can be verified by anyone, I can transfer my bitcoin to any institution willing to lend me money with bitcoin held as collateral. With the loan I was able to put down a full cash offer on the house and then receive a mortgage post-close which then allowed me to pay off the temporary bitcoin loan.

So bitcoin isn't in direct competition with financial services that inherently require trust, just more with the payments and central banking side of things where the trust and design flaws of the system are in direct contrast with how bitcoin functions.

the_gastropod

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Re: What do you think of adding a low% of crypto allocation
« Reply #1219 on: April 09, 2022, 06:00:31 PM »
For those in 2022 that are still not aware, bitcoin transactions are settlement. While transactions in the early days were often 1 to 1 transactions, to keep bitcoin decentralized, bitcoin transactions in the future will be increasingly settlement based and scaled via layers.

This is similar in the way that our current financial system is structured. Central banks are at the top with federal reserve banks settling and issuing cash to other large financial institutions. Those financial institutions become clearing houses for traditional banks and credit unions. Those banks and credit unions integrate with payment networks like VISA and Mastercard and those payment networks handle the point of sale transactions for retail customers. The transactions that are performed at the point of sale, are not settled immediately. This entire system is a debt based payment system where almost all transactional money is fronted and spent as debt. The payment network transactions are then settled to banks much later (which coincidentally creates a charge back risk for all transactions). Those settlements are then aggregated all the way up to the clearing houses and then the reserve banks where networks like SWIFT and Fedwire come into play. Transactions that reserve banks settle, while fewer, are the aggregate of all transactions further below in the hierarchy.

The same is and will continue to be true of bitcoin. Transactions are settlement and what takes place on the blockchain as blocks are confirmed will be transactions that are the aggregate of other types of transactions happening in other layers that are utilizing the security of bitcoin's blockchain for its security. That security is the energy spent by miners that has absolutely no correlation to the actual number of transactions being performed and secured by the bitcoin network. Aggregation can take place through numerous methods. They could take place completely off-chain where security is enforced through bitcoin's scripting language to allow for revocation and penalization of fraudulent breaches of contract. I've previously showed the efficiency of this with my own personal data that is not anomalous in any way. You can also have transactions simply be a batch of numerous payments to many individuals through the use of batching. Most exchanges today batch their withdrawals to many of their customers at once through a single on-chain transaction to save on fees. Here is a transaction that was a payment to 36 individuals, but was done with just a single on-chain transaction:

https://mempool.space/tx/fd33e1c0a4e253338fa20a1e6f450002eeabdeae574e9a4bfde5fb958ee12965

You can also have assets issued on the bitcoin network through a new design called Taro. This means you can effectively issue a stablecoin backed by the USD to effectively create new payment rails for the US dollar to allow for instant settlement. The settlement of these assets will take place completely off-chain which means you can have billions/trillions in settlement completely uncorrelated to the number of on-chain transactions (utilizing the lightning network). As someone who has worked in Information Security with financial institutions for over 15 years, I can say that instant settlement is something banks are actively seeking as the world's financial needs are rapidly changing around them. My organization just rolled out an implementation of the real time payments network, but even that pails in comparison in volume, uptime, and efficiency to what an open network like bitcoin can do.

https://www.forbes.com/sites/alysekilleen/2022/04/05/new-bitcoin-technology-enables-instant-global-usd-transactions/

If you're still calculating energy usage per transaction in 2022, after the numerous times that the metric has been debunked, you're being disingenuous to those whose ear you have. You could have zero transactions in a block and the energy usage won't change. You could have millions of transactions being settled in a single block and the energy usage won't change. The energy being spent is just energy spent to calculate a hash of some block of data and doing that calculation doesn't change based on the number of transactions. Furthermore, the block reward halving is an opposing force against exponential energy use increases. It will force a transition of the bitcoin network from having energy spent based on a fixed sum of bitcoin as reward to energy spent based on the fees the industry of bitcoin is willing to pay to have settlements secured by the bitcoin network. Therefore, within the decade, the energy spent by bitcoin will be a direct result of economic activity and value looking to be processed and secured. This is an efficiency in our current financial structures that we do not have today. There is very little overhead costs in that compared with the massive overhead costs of the banking industry today.

When proponents of bitcoin play "whataboutism" with the banking industry as criticized, it isn't playing a game of logical fallacy. It is an acknowledgement of a dichotomy that our economy must play to. What people criticize the environmental impacts of electric cars and EV drivers say "whatabout" gas cars? They're not just brushing off things that EVs could do better, but acknowledging that they are still better than gas cars when you're faced with a dichotomy in a society that is built around driving and transportation. Economic activity and transactions have to happen in a functioning modern society. In the same way that EVs are an alternative to gas cars and that the environmental costs must be viewed from a comparative lens, bitcoin's future efficiencies must be view from a comparative lens with the legacy financial system. That's not whataboutism, that's just acknowledgement of the dichotomy we're faced with.

If you're someone who has never used bitcoin or any of its scaling technologies and you're just simply parroting elementary calculations of energy/txns, the bias becomes evident and the unwillingness to learn about a technology even more so.

Among crypto skeptics, “But the Lighting Network!” has become a bit of an inside-joke. It’s always pulled out as an excuse one way or another. Let’s factor in lightning transactions! It’s a little tough to find numbers, but we can estimate for order-of-magnitude purposes, anyway. In September 2021, Lightning processed 660k transactions (source: https://www.research.arcane.no/the-state-of-lightning) Let’s be generous, and call it a cool million. And say that was an average month, so 12 million transactions in 2021. Cool, so we’re now ~10% more efficient, so only ~900,000x less efficient than Visa. What else we got? (Bear in mind, this ignores transactions from tumblers, wash trades, etc., which probably *shouldn’t* be counted for this, but are hard to measure)

And if we’re still having problems with the transactions-as-a-denominator thing (I’m puzzled as to why, since it is a system intended to transact in?), but what denominator should we look at? Users? Market Cap? Memes generated? In what angle are we looking at this where the colossal energy needs seem reasonable?
« Last Edit: April 09, 2022, 06:04:33 PM by the_gastropod »

lifeanon269

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Re: What do you think of adding a low% of crypto allocation
« Reply #1220 on: April 09, 2022, 08:15:38 PM »
Among crypto skeptics, “But the Lighting Network!” has become a bit of an inside-joke. It’s always pulled out as an excuse one way or another. Let’s factor in lightning transactions! It’s a little tough to find numbers, but we can estimate for order-of-magnitude purposes, anyway. In September 2021, Lightning processed 660k transactions (source: https://www.research.arcane.no/the-state-of-lightning) Let’s be generous, and call it a cool million. And say that was an average month, so 12 million transactions in 2021. Cool, so we’re now ~10% more efficient, so only ~900,000x less efficient than Visa. What else we got? (Bear in mind, this ignores transactions from tumblers, wash trades, etc., which probably *shouldn’t* be counted for this, but are hard to measure)

And if we’re still having problems with the transactions-as-a-denominator thing (I’m puzzled as to why, since it is a system intended to transact in?), but what denominator should we look at? Users? Market Cap? Memes generated? In what angle are we looking at this where the colossal energy needs seem reasonable?

It amazes me that you could choose to cite that report and yet still come away with the initiative to post a negative post against bitcoin in comparison to VISA. I mean the very first graphic in the report is a comparison between's VISA txn/sec capabilities (tens of thousands per sec) and the lightning network's capabilities (millions per sec). Something that you previously argued against. It is especially funny that you choose to cite certain things while ignoring other things. Clear cherry-picking. It is a clear indication of bias on your part. For example, earlier you claimed how the lightning network is a centralizing feature for bitcoin, but the report you just linked to says that the lightning network is not inherently centralized and has actually be decreasing in centrality over time.

The fact that you're using numbers based on a nascent network that just 3 years ago had only ~$5M in value in it shows a clear lack unbiased critical thinking to look at what it can actually do based on its capabilities.

As far as transactions go, the lightning network has seen parabolic growth over the last year. Even since this report was created several major exchanges and brokers have since announced support for lightning such as Kraken, CashApp, and BitStamp. While there is no true way to determine how many transactions it is processing (since all transactions are anonymous), the entire point of it is that it scales bitcoin effectively. This report you've now cited runs counter to the many claims against the lightning network you've previously argued. Here are a few points from the report that you've probably decided to overlook because it doesn't fit your narrative:

-Exponential network growth taking place
-28% of channels were private channels (so no data from them)
-Usage is global with significant LN presence in emerging markets
-El Salvador lightning adoption accelerating; estimated 1.4 billion transactions annually by 2030
-Lightning scaling to the tune of hundreds of trillions of transactions possible

As I've said numerous times before, this is bitcoin's cost of capital phase. Bitcoin is being minted and that is what is driving the overall energy usage and growth. Bitcoin that is brought into circulation during this phase will be the only bitcoin that will ever be in circulation. So this is a one-time energy expenditure to kick start a new monetary network that is native to the internet. Since you're intent measuring energy expenditure per "something", since this is the capital production phase for bitcoin I'd propose looking at it from a different lens.

This is a cost of capital phase. Bitcoin is being "minted" into circulation which means that since the vast majority of energy being spent is for the purpose of "minting" that bitcoin. At the moment there are about 900 new bitcoin brought into circulation every day. So about 328,500 annually. At a price of about $42,000 currently, that is a total value of $14 billion. Right now the cost to produce bitcoin equals about the cost of energy. Average cost of electricity worldwide is about $80/MWh. With the estimated bitcoin network's 200TWh of annual consumption, this equals about $70M/TWh which is pretty close the to $80M/TWh. This is all at today's prices and today's block reward (6.25 btc/block). A vast majority of bitcoin was mined during the first two halving cycles of 50 btc/block and 25/btc/block respectively and during this phase it was mostly mined with CPUs and GPUs. By 2017 a majority of the 21 million max bitcoin had already been mined (~16M). The network was consuming less than 10TWh of electricity annually at this time. However, all this bitcoin is still in existence and circulation today. For example, in 2015 there were 1,314,000 bitcoin mined during that year for a total value in today's dollars of about $55B. The bitcoin network was only consuming about 5TWh of electricity annually. This equals about $400M in today's value per MWh of electricity used (at a cost of $80/MWh) that was spent to create it. That is an amazing cost of capital and there really is no comparison to anything else out there. To be able to produce that much usable economic value and put it into circulation at such an unbelievably low cost is invaluable.

The reason why this is an important metric is because as I've said, bringing bitcoin into circulation is a temporary phase. If the bitcoin economy continues to grow, the cost of producing the value that will be used to support this economy will be a one-time justifiable cost. The capital phase of bitcoin no doubt uses a lot of energy, but it is energy being spent in today's dollars that can be forever used by the economy for generations to come. No more capital energy needs to be ever spent again once all the bitcoin is mined. 90% of all bitcoin has already been mined and 99% will have been mined in about 8 years. Once this happens, then it is just operation cost that is expended as a result of on-chain fees (economic activity) and this is where bitcoin's efficiencies will shine (see lightning report).

Bitcoin fees account for less than 10% of the rewards miners receive currently (often about 1%). This balance in rewards (subsidy vs fees) will flip. This is a fact. This isn't just speculation on what will happen in the future. It is just a matter of when. Every 4 years the reward gets cut in half (next halving in ~2 years). So probably within the next decade or so the fees will begin to make up a dominant portion of the rewards. Again, as I've said, this will result in either a decrease of energy being used or a justified amount of energy used based on how much economic activity takes place. When fees become dominant, that is when bitcoin becomes more efficient than any other payments company that have a much larger overhead.
« Last Edit: April 22, 2022, 05:43:44 PM by lifeanon269 »

boarder42

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Re: What do you think of adding a low% of crypto allocation
« Reply #1221 on: April 09, 2022, 08:45:38 PM »
But uhh what's it actually do?  Outside of creating a while new complex financial system you can currently make money off of in various ways if you're willing to hold the assets. 

What does it do? 

I mean seriously answer that question with out what it could do or what it might do.  How does it fundamentally build wealth.   What was this wealth created from. What work was changed or accomplished because of this thing.

Fundamentally what does it do. 

You keep comparing it to visa but nobody fucking uses it like that. If it's the next visa cool I'll cash out my stocks that produce shit to exchange funds for goods and services.

Seriously what's it do
 

lifeanon269

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Re: What do you think of adding a low% of crypto allocation
« Reply #1222 on: April 10, 2022, 06:04:12 AM »
But uhh what's it actually do?  Outside of creating a while new complex financial system you can currently make money off of in various ways if you're willing to hold the assets. 

What does it do? 

I mean seriously answer that question with out what it could do or what it might do.  How does it fundamentally build wealth.   What was this wealth created from. What work was changed or accomplished because of this thing.

Fundamentally what does it do. 

You keep comparing it to visa but nobody fucking uses it like that. If it's the next visa cool I'll cash out my stocks that produce shit to exchange funds for goods and services.

Seriously what's it do
 

This question has been answered ad nauseam in this thread. At this point you're either being pedantic or were too busy posting spam messages and trolling to read anything in the thread.

Bitcoin is live today. You can use it if you wish or don't.

Juan Ponce de León

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Re: What do you think of adding a low% of crypto allocation
« Reply #1223 on: April 10, 2022, 06:24:48 AM »
But uhh what's it actually do?  Outside of creating a while new complex financial system you can currently make money off of in various ways if you're willing to hold the assets. 

What does it do? 

I mean seriously answer that question with out what it could do or what it might do.  How does it fundamentally build wealth.   What was this wealth created from. What work was changed or accomplished because of this thing.

Fundamentally what does it do. 

You keep comparing it to visa but nobody fucking uses it like that. If it's the next visa cool I'll cash out my stocks that produce shit to exchange funds for goods and services.

Seriously what's it do
 

This question has been answered ad nauseam in this thread. At this point you're either being pedantic or were too busy posting spam messages and trolling to read anything in the thread.

Bitcoin is live today. You can use it if you wish or don't.

Amen.  There is that much money to be made in crypto, but not everyone is along for the ride.  Some people are just NGMI.

the_gastropod

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Re: What do you think of adding a low% of crypto allocation
« Reply #1224 on: April 10, 2022, 07:05:08 AM »
Among crypto skeptics, “But the Lighting Network!” has become a bit of an inside-joke. It’s always pulled out as an excuse one way or another. Let’s factor in lightning transactions! It’s a little tough to find numbers, but we can estimate for order-of-magnitude purposes, anyway. In September 2021, Lightning processed 660k transactions (source: https://www.research.arcane.no/the-state-of-lightning) Let’s be generous, and call it a cool million. And say that was an average month, so 12 million transactions in 2021. Cool, so we’re now ~10% more efficient, so only ~900,000x less efficient than Visa. What else we got? (Bear in mind, this ignores transactions from tumblers, wash trades, etc., which probably *shouldn’t* be counted for this, but are hard to measure)

And if we’re still having problems with the transactions-as-a-denominator thing (I’m puzzled as to why, since it is a system intended to transact in?), but what denominator should we look at? Users? Market Cap? Memes generated? In what angle are we looking at this where the colossal energy needs seem reasonable?

It amazes me that you could choose to cite that report and yet still come away with the initiative to post a negative post against bitcoin in comparison to VISA.
😂 there’s no winning with you lot. I post sources critical of Bitcoin, and “that source is biased!”. I cite very pro-Bitcoin sources that happen to give up some not-so-rosy numbers (buried deep deep in the doc), and you’re amazed I didn’t just absorb your opinion? Believe it or not, I read crypto sources all the time. It’s comedy gold most of the time and occasionally informative.
I mean the very first graphic in the report is a comparison between's VISA txn/sec capabilities (tens of thousands per sec) and the lightning network's capabilities (millions per sec). Something that you previously argued against. It is especially funny that you choose to cite certain things while ignoring other things. Clear cherry-picking. It is a clear indication of bias on your part.

Incorrect. One is Visa’s actual transactions/second. The other is Lightning’s theoretical upper-limit capacity.

For example, earlier you claimed how the lightning network is a centralizing feature for bitcoin, but the report you just linked to says that the lightning network is not inherently centralized and has actually be decreasing in centrality over time.

Number of nodes is not the only measure of decentralization. If some of the nodes are orders of magnitude more commonly used, that’s a form of centralization.

The fact that you're using numbers based on a nascent network that just 3 years ago had only ~$5M in value in it shows a clear lack unbiased critical thinking to look at what it can actually do based on its capabilities.


If it’s too new to criticize, it’s probably too new to evangelize as well. You’re here doing the latter, so… pick your poison.

As far as transactions go, the lightning network has seen parabolic growth over the last year. Even since this report was created several major exchanges and brokers have since announced support for lightning such as Kraken, CashApp, and BitStamp. While there is no true way to determine how many transactions it is processing (since all transactions are anonymous), the entire point of it is that it scales bitcoin effectively. This report you've now cited runs counter to the many claims against the lightning network you've previously argued. Here are a few points from the report that you've probably decided to overlook because it doesn't fit your narrative:

-Exponential network growth taking place
-28% of channels were private channels (so no data from them)
-Usage is global with significant LN presence in emerging markets
-El Salvador lightning adoption accelerating; estimated 1.4 billion transactions annually by 2030
-Lightning scaling to the tune of hundreds of trillions of transactions possible

Cool. Parabolic scaling and predictions that it’ll continue….

As I've said numerous times before, this is bitcoin's cost of capital phase. Bitcoin is being minted and that is what is driving the overall energy usage and growth. Bitcoin that is brought into circulation during this phase will be the only bitcoin that will ever be in circulation. So this is a one-time energy expenditure to kick start a new monetary network that is native to the internet. Since you're intent measuring energy expenditure per "something", since this is the capital production phase for bitcoin I'd propose looking at it from a different lens.

This is a cost of capital phase. Bitcoin is being "minted" into circulation which means that since the vast majority of energy being spent is for the purpose of "minting" that bitcoin. At the moment there are about 900 new bitcoin brought into circulation every day. So about 328,500 annually. At a price of about $42,000 currently, that is a total value of $14 billion. Right now the cost to produce bitcoin equals about the cost of energy. Average cost of electricity worldwide is about $80/MWh. With the estimated bitcoin network's 200TWh of annual consumption, this equals about $70M/TWh which is pretty close the to $80M/TWh. This is all at today's prices and today's block reward (6.25 btc/block). A vast majority of bitcoin was mined during the first two halving cycles of 50 btc/block and 25/btc/block respectively and during this phase it was mostly mined with CPUs and GPUs. By 2017 a majority of the 21 million max bitcoin had already been mined (~16M). The network was consuming less than 10TWh of electricity annually at this time. However, all this bitcoin is still in existence and circulation today. For example, in 2015 there were 1,314,000 bitcoin mined during that year for a total value in today's dollars of about $55B. The bitcoin network was only consuming about 5TWh of electricity annually. This equals about $11,000 in today's value per MWh of electricity used (at a cost of $80/MWh) that was spent to create it. That is an amazing cost of capital and there really is no comparison to anything else out there. To be able to produce that much usable economic value and put it into circulation at such an unbelievably low cost is invaluable.

The reason why this is an important metric is because as I've said, bringing bitcoin into circulation is a temporary phase. If the bitcoin economy continues to grow, the cost of producing the value that will be used to support this economy will be a one-time justifiable cost. The capital phase of bitcoin no doubt uses a lot of energy, but it is energy being spent in today's dollars that can be forever used by the economy for generations to come. No more capital energy needs to be ever spent again once all the bitcoin is mined. 90% of all bitcoin has already been mined and 99% will have been mined in about 8 years. Once this happens, then it is just operation cost that is expended as a result of on-chain fees (economic activity) and this is where bitcoin's efficiencies will shine (see lightning report).

Bitcoin fees account for less than 10% of the rewards miners receive currently (often about 1%). This balance in rewards (subsidy vs fees) will flip. This is a fact. This isn't just speculation on what will happen in the future. It is just a matter of when. Every 4 years the reward gets cut in half (next halving in ~2 years). So probably within the next decade or so the fees will begin to make up a dominant portion of the rewards. Again, as I've said, this will result in either a decrease of energy being used or a justified amount of energy used based on how much economic activity takes place. When fees become dominant, that is when bitcoin becomes more efficient than any other payments company that have a much larger overhead.

Hey. Guess what else has parabolic growth over the past 12 years? Bitcoin’s electrical usage. While its block rewards are decreasing and the number of bitcoins mined is decreasing So forgive me if I don’t buy your:
1. Lightning usage is growing rapidly and will continue to do so because I say so
2. Bitcoin energy usage is growing rapidly but will stop any day now because I say so

And Bitcoins will continue to be mineable for the rest of our lives, through the year 2,140. And—importantly—you and I have no idea how that’ll affect the game theory of miners. Maybe developers lift the cap, and there’s consensus to do so, assuming the oceans haven’t boiled by then.

Editing to add:

If I understand your argument correctly, you’re basically suggesting the electricity used to mine Bitcoin, today, is largely waste? In case that deduction isn’t clear, let me explain:

- You state that once Bitcoin rewards are sufficiently smaller, electricity use will decrease. I’m guessing that is because:
- Fewer miners will compete to mine Bitcoin, since it’s less profitable to do so
- And this is not a problem
- Therefore much of the mining being done today is redundant (waste)

Is this accurate?
« Last Edit: April 10, 2022, 07:24:08 AM by the_gastropod »

lifeanon269

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Re: What do you think of adding a low% of crypto allocation
« Reply #1225 on: April 10, 2022, 08:29:09 AM »
😂 there’s no winning with you lot. I post sources critical of Bitcoin, and “that source is biased!”. I cite very pro-Bitcoin sources that happen to give up some not-so-rosy numbers (buried deep deep in the doc), and you’re amazed I didn’t just absorb your opinion? Believe it or not, I read crypto sources all the time. It’s comedy gold most of the time and occasionally informative.

You took that wrong. It was more like you took an extremely positive report on bitcoin's lightning network and managed to spin it negative somehow.

Incorrect. One is Visa’s actual transactions/second. The other is Lightning’s theoretical upper-limit capacity.

False. The "tens of thousands" of transactions per second noted for VISA is their theoretical upper limit as well.

Number of nodes is not the only measure of decentralization. If some of the nodes are orders of magnitude more commonly used, that’s a form of centralization.

It is like you didn't even read the part in regards to centralization in the report.

If it’s too new to criticize, it’s probably too new to evangelize as well. You’re here doing the latter, so… pick your poison.

It is definitely not too new to criticize. But your criticisms just need to extend beyond claiming things without backing anything up. Like when you claimed it is centralizing in three separate paragraphs after I asked you to explain the reasoning behind that claim but never did. You just kept repeating "it is, it is, it is!", then followed that up by citing a report that makes the claim to the contrary while ignoring that part of it.

Cool. Parabolic scaling and predictions that it’ll continue….

Parabolic growth, not scaling. The scaling side has already been proved out. You know there is a testnet where these transaction per second figures are tested out? These aren't "theoretical upper limit" figures, but actual figures that have been shown it can perform at those levels. I also give you real world numbers on its efficiency, but for some reason (without ever even having used the technology yourself) you claim its false. When you say "I don't know why those numbers are false, but I just know they're false", that's called bias. Full stop.

Hey. Guess what else has parabolic growth over the past 12 years? Bitcoin’s electrical usage.

This is factually not true. Not even close. I am beginning to feel like you don't understand what a parabola is. Its energy usage has seen pretty linear growth throughout most of its existence and, for much of it, it has seen plateaus of energy use between cycles.

https://digiconomist.net/bitcoin-energy-consumption/

And Bitcoins will continue to be mineable for the rest of our lives, through the year 2,140.

Either you believe something will continue to go up in price exponentially all the way until 2140 or fees will end up becoming the dominant incentive for miners. Both those things can't be true. That's a fact.

If I understand your argument correctly, you’re basically suggesting the electricity used to mine Bitcoin, today, is largely waste?

I think you should reread what I wrote if you concluded that I think it was waste. That's not what my cost of capital explanation was about at all. I think you missed something there...

the_gastropod

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Re: What do you think of adding a low% of crypto allocation
« Reply #1226 on: April 11, 2022, 06:40:06 PM »

You took that wrong. It was more like you took an extremely positive report on bitcoin's lightning network and managed to spin it negative somehow.

I used the number of transactions from the report. To expect me to take the entire “report” at face-value is… weird.

Incorrect. One is Visa’s actual transactions/second. The other is Lightning’s theoretical upper-limit capacity.

False. The "tens of thousands" of transactions per second noted for VISA is their theoretical upper limit as well.

Touche. Upon further reading, it seems I was wrong here. VISA’s limit is in the low tens-of-thousands per second.


It is like you didn't even read the part in regards to centralization in the report.

If it’s too new to criticize, it’s probably too new to evangelize as well. You’re here doing the latter, so… pick your poison.

It is definitely not too new to criticize. But your criticisms just need to extend beyond claiming things without backing anything up. Like when you claimed it is centralizing in three separate paragraphs after I asked you to explain the reasoning behind that claim but never did. You just kept repeating "it is, it is, it is!", then followed that up by citing a report that makes the claim to the contrary while ignoring that part of it.

I don’t know what your background is. I’m guessing it’s not Computer Science? I’ll try to elaborate why this is the case:

Lightning Network basically means two things these days. The “flavor” you’re largely talking about, originally proposed in 2015 where people pre-fund channels, and strive to keep them open as long as possible to avoid paying the fees to write the aggregated transactions on-chain. This obviously has its drawbacks, as it’s expensive to hold up a lot of money pre-funding your Dunkin’ Donuts channel ($200), your Jiffy Lube channel ($100), your Trader Joe’s channel $(500), etc. This is like the a pre-paid credit card with much higher fees. Not ideal.

So, we move toward a system where you can rely on the network to pay people you don’t have a direct channel with. To do this, the system needs to find the shortest (or sufficiently short) path between you and your recipient. This is the basis of the famous Dijkstra’s Algorithm. Dijkstra’s says, basically: in a network with N nodes and C connections, the shortest path can be found in order C + N log N. Here, order means computational time. The dilemma for Lightning Network is when these numbers get very high, that computational time gets too high to be feasible. Even at just 100k nodes, mobile devices are unable to find the shortest path in anything approaching “real time”. The fact that many nodes in the lightning network are devices that are being turned off and on means he network topology changes faster than it can be spanned. In such an environment, the shortest route often cannot be found. Sometimes no route can be found at all!

Fortunately, there’s an easy solution to this. Centralization! Large hubs do the intermediary work, and the problem is solved. This is what is happening in Lightning. It is why it is as performant as it is. And this is what I mean by centralization.

Another very obvious mathematical hair-in-the-soup for LN is the underlying Bitcoin transaction limit (~450k/day). So if Bitcoin was used exclusively by LN, it could support around 13.5M channel open/close monthly. Assuming an average ~monthly channel cycle time (people won’t likely pre-fund much more money than a month’s worth of expenses), that’s < 7M channels. So best case scenario here, LN can support a medium sized city, assuming people each have a couple channels open, as LN advocates seem to envision. The LN does not scale.

So enter companies like Strike, which effectively do away with actually using any decentralized and/or blockchain technology under the hood, and embrace centralization completely, to solve these dilemmas at the core of Bitcoin’s design.
Cool. Parabolic scaling and predictions that it’ll continue….

Parabolic growth, not scaling. The scaling side has already been proved out. You know there is a testnet where these transaction per second figures are tested out? These aren't "theoretical upper limit" figures, but actual figures that have been shown it can perform at those levels. I also give you real world numbers on its efficiency, but for some reason (without ever even having used the technology yourself) you claim its false. When you say "I don't know why those numbers are false, but I just know they're false", that's called bias. Full stop.


You misunderstand me. As I’ve explained again above: what you’re comparing is not apples-to-apples. I know this because I understand the fundamentals of network topologies. You. Are. Not. Comparing. Apples. To. Apples. I encourage you to share more details if you’d like me to dig in and explain what they are. What I’ve said, and I’ll re-iterate here, is: I do not need to know the details of your lightning setup to know that you’re not comparing apples-to-apples because it is quite literally impossible for lightning to out-perform Visa on a cost-basis. I do not need to know the details of someone’s road-trip, or which highways they took, to know that they did not drive from New York to California in an hour. It is an impossibility with any car technology known to man.

Hey. Guess what else has parabolic growth over the past 12 years? Bitcoin’s electrical usage.

This is factually not true. Not even close. I am beginning to feel like you don't understand what a parabola is. Its energy usage has seen pretty linear growth throughout most of its existence and, for much of it, it has seen plateaus of energy use between cycles.

Just attaching a graph here taken directly from the University of Cambridge site we’ve repeatedly cited. Here it is for posterity: https://ccaf.io/cbeci/index Note: I’m not even referring to the “cumulative” line. The bars describing monthly electricity consumption sure don’t look linear to me!
« Last Edit: April 12, 2022, 06:19:52 AM by the_gastropod »

Scandium

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Re: What do you think of adding a low% of crypto allocation
« Reply #1227 on: April 12, 2022, 07:42:47 AM »
As Schwab's newsletter just reminded me, another fun thing to note is that IRS consider crypto property, so any gains means you have to pay capital gains. Perhaps not a big deal if you're investing speculating, but imagine using crypto to make hundreds of purchases per year! Every time there is a change in price (i.e. all.the.time!) you'd end up with gains and losses and would have to keep track if and report it!

I bought some ETH for $20, two hours later it's $95, so I pay $50 in "gas fees" to buy a $20 pizza, and I pay 15% taxes on.. $20? $70?
Welcome to the glorious future! Much convenient! Remember when we used visa? WOw that was terrible, so glad we're done with that

Shane

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Re: What do you think of adding a low% of crypto allocation
« Reply #1228 on: April 12, 2022, 08:13:55 AM »
Wonder how long it will be before the US government cracks down on crypto 'currencies'? The feds are pretty slow to act sometimes, but eventually they're going to get around to it. The IRS recently started asking taxpayers on the 1040 if they'd bought/sold any crypto currencies. So, they're taking names and gathering data, now. If it's really true that bitcoin, etal., are better than the existing financial infrastructure, do you really think Visa, MC, and Amex are just going to roll over and accept defeat? Seems more likely they'll instruct their lackeys in Congress to do something about it. No?

StashingAway

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Re: What do you think of adding a low% of crypto allocation
« Reply #1229 on: April 12, 2022, 08:17:15 AM »
Just attaching a graph here taken directly from the University of Cambridge site we’ve repeatedly cited. Here it is for posterity: https://ccaf.io/cbeci/index Note: I’m not even referring to the “cumulative” line. The bars describing monthly electricity consumption sure don’t look linear to me!

Linear acceleration, maybe

lifeanon269

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Re: What do you think of adding a low% of crypto allocation
« Reply #1230 on: April 12, 2022, 08:31:31 AM »
I used the number of transactions from the report. To expect me to take the entire “report” at face-value is… weird.

The fact that you admit this and choose to accept for of their data and not others because you simply don't like that other data is a clear indication of bias. For you to claim otherwise is absurd. Especially when the comments you make that run counter to their data, you don't bring other contradictory data from other sources. Instead, you just simply say "nope, that's wrong."

I don’t know what your background is. I’m guessing it’s not Computer Science? I’ll try to elaborate why this is the case:

I am not sure why you continue to make assumptions so much, especially when I mentioned earlier what my background is. Making assumptions about someone rather than debate their arguments presented is not debating in good faith. Yet you continue to do this. You say you have a background as a computer scientist. I have not questioned your background once even though you've made numerous incorrect statements with regards to topics related to the field. I trust you're correct about your background and there is no reason for me to argue about that. But just because someone has a background in something does not mean they know the entire field with expertise, especially one as complex as computer science. Anyone intimately familiar with computer science would know this. It is a field that exemplifies the quote "The more you know, the more you realize you don't know."

Lightning Network basically means two things these days. The “flavor” you’re largely talking about, originally proposed in 2015 where people pre-fund channels, and strive to keep them open as long as possible to avoid paying the fees to write the aggregated transactions on-chain. This obviously has its drawbacks, as it’s expensive to hold up a lot of money pre-funding your Dunkin’ Donuts channel ($200), your Jiffy Lube channel ($100), your Trader Joe’s channel $(500), etc. This is like the a pre-paid credit card with much higher fees. Not ideal.

Huh?? There is no two "flavors" of bitcoin. The lightning network I've discussed and described is the lightning network that is live today. The numbers I've given are from the lightning network that is live and operating on mainnet today. There are multiple implementations of lightning network nodes (LND, c-lightning, eclair, etc), but they all conform to the adopted BOLT spec. When I talk about transaction aggregation, I'm not just talking about payments that I make personally through my channels, but also payments that route through my channels from others. Because of onion routing, there is no way for me to determine whether or not a payment routed through my node came from my directly connected peer or from a node beyond them. In the end, it doesn't matter, the balance in my channels changes all the same and the fees are still all in aggregate.

So, we move toward a system where you can rely on the network to pay people you don’t have a direct channel with. To do this, the system needs to find the shortest (or sufficiently short) path between you and your recipient. This is the basis of the famous Dijkstra’s Algorithm. Dijkstra’s says, basically: in a network with N nodes and C connections, the shortest path can be found in order C + N log N. Here, order means computational time. The dilemma for Lightning Network is when these numbers get very high, that computational time gets too high to be feasible. Even at just 100k nodes, mobile devices are unable to find the shortest path in anything approaching “real time”. The fact that many nodes in the lightning network are devices that are being turned off and on means he network topology changes faster than it can be spanned. In such an environment, the shortest route often cannot be found. Sometimes no route can be found at all!

Fortunately, there’s an easy solution to this. Centralization! Large hubs do the intermediary work, and the problem is solved. This is what is happening in Lightning. It is why it is as performant as it is. And this is what I mean by centralization.

Well for one, let's remind ourselves what your original claim about lightning was:
Quote
Lightning network is a centralization scheme that completely obviates the entire point of Bitcoin.
Quote
You also must trust the lightning network itself

However, as I stated, you are in full control of your bitcoin keys at all times actively using the lightning network. At no point while using the lightning network do you need to trust anyone. Routing a payment over the network does not require trust any other nodes with your funds. If a payment fails mid-route, you just calculate a new path; your funds can't be stolen. So any large routing node that exist on the network that your payment might route through has no ability to steal the funds in your payment. Unlike traditional payment rails where custodians must take control of your funds in order to route a payment on your behalf, this is absolutely not true of both bitcoin or the lightning network. Censorship on the lightning network is also not an issue since routing nodes don't know the true source of a payment due to onion routing and even if a payment failed at a specific node, a new path can be calculated.

As I mentioned, there is absolutely no difference between a raw lightning transaction and a raw bitcoin transaction. Furthermore, once taproot is fully implemented in the lightning network it won't be possible to discern a lightning channel on-chain from any other bitcoin transaction. Lightning network is also completely opt-in. You're not forced to use the lightning network if you don't wish to. Finally, if choosing to use the lightning network, you're not forced into a peer relationship with anyone else using the lightning network nor are you forced to route payments through any node you don't wish to route through. Given all of this I can hardly understand your claim that lightning "obviates the entire point of bitcoin".

Also, as shown in the report you cited, the number of cut nodes and channels has been decreasing for some time as the network has grown. They also show that lightning network clustering has also been trending down with time. This is a clear indication that the network is becoming more and more interconnected as time goes on. This is in direct contrast to your own claims.

As far as your comments about routing, part of your fundamental misunderstanding I feel stems from the fact that you believe the lightning network needs to route payments based on the shortest path whereas in reality paths are typically weighted based on fee cost and you don't need to choose the absolute shortest path based on all possible paths when any path that completes the transaction will suffice. This fact drastically reduces the burden when calculating a route when the full network graph is synced. The pathfinding algorithms are also not defined specifically in the BOLT spec. Each implementation can implement their own pathfinding algorithms. Dijkstra's algorithm is not strictly used by these implementations. There are in fact many routing algorithms that are both in use across the lightning network today as well as many new possibilities being researched. For example, trampoline routing has been implemented in LND that helps route calculation, but also helps by adding additional privacy, as well as promoting additional decentralization of LN's topology (contrary to your claim). It uses nested onions with an outer layer used for routing and an inner layer used for trampolines.

https://lists.linuxfoundation.org/pipermail/lightning-dev/2019-April/001956.html
https://github.com/lightning/bolts/pull/829

There is also atomic multi-path payments that can further both increase privacy and also increase the ease with which routes are calculated while decreasing the need to rely upon larger routing hubs that have large channels.

https://lists.linuxfoundation.org/pipermail/lightning-dev/2018-February/000993.html

There is also JIT routing that allows for on-demand channel rebalance that can open up new paths that were found to be invalid due to insufficient channel liquidity at the time of payment. This greatly eases the burden with which new paths much be calculated because of a previous temporary channel failure.

https://lists.linuxfoundation.org/pipermail/lightning-dev/2019-March/001891.html

There is also a lot of research into path finding that alleviates the burden of calculating routes such as the spider protocol as described here:
https://dspace.mit.edu/bitstream/handle/1721.1/124129/1142812072-MIT.pdf?sequence=1&isAllowed=y

And also Ant routing algorithm:
https://core.ac.uk/download/pdf/237320294.pdf

It seems to me that you've continued just parroting simplistic views on how bitcoin and lightning operate based on singular terms or talking points you've might of heard somewhere without understand the large breath and scope of the topic at hand. You do continue to do this all while at the same time discrediting the very real world numbers from my own node that I operate on the lightning network all because you claim "you know otherwise" without real world use by yourself or data presented to the contrary.

I encourage you to share more details if you’d like me to dig in and explain what they are. What I’ve said, and I’ll re-iterate here, is: I do not need to know the details of your lightning setup to know that you’re not comparing apples-to-apples because it is quite literally impossible for lightning to out-perform Visa on a cost-basis. I do not need to know the details of someone’s road-trip, or which highways they took, to know that they did not drive from New York to California in an hour. It is an impossibility with any car technology known to man.

You can keep going on about your same tired and inapt analogy about cars and apples, but at the end of the day I've given you actual real world usage and numbers. My account is not anomalous in anyway. What more would you like me to share? I've presented to you how much volume my node routes as well as how much fees I've collected and paid, and the number of transactions I've successfully forwarded. Based on this, I've shown you how little the fees are in percentage of the volume being moved. My node isn't even a top node on the network. So I'll ask again, what more information would you like me to share? You claim to know so much about lightning, so clearly if you believe my numbers to be false then you'd be able to provide some reasoning as to why you think they're false and request the data that would (according to you) invalid what I'm saying. The reality is that you have no idea what you're talking about and my numbers are in fact valid and true and anyone who has run a lightning node can confirm. You say it is "impossible" for lightning to out-perform VISA (even though the report you cited claims otherwise) and yet against all the data being presented to you, you continue to present your own data that would back up your claim of impossibility.

Just attaching a graph here taken directly from the University of Cambridge site we’ve repeatedly cited. Here it is for posterity: https://ccaf.io/cbeci/index Note: I’m not even referring to the “cumulative” line. The bars describing monthly electricity consumption sure don’t look linear to me!

I already linked to the data that shows clear linear growth throughout the ASIC age. Showing data growth from periods where CPUs and GPUs were used in mining is not a valid comparison since obviously mining hadn't matured yet as it had not been both optimized nor industrialized yet. The graph you showed is absolutely not parabolic. If you look at bitcoin's energy from the ASIC age you can clearly see linear growth as well as plateaus. Look at what I linked to again without the tail end period between 2014-2016. If you look at from 2017 onward which is really when the age of ASIC became dominant, then you can clearly see the linear growth here. To make the claim that bitcoin's energy growth is parabolic then you'd have to ignore this fact.

See first diagram here:
https://digiconomist.net/bitcoin-energy-consumption/

The only way you could claim that bitcoin energy consumption is exponential and parabolic is if you somehow think that ASIC manufacturers can produce chips at a continuously accelerating rate and also that electricity will continue to become available to miners at a continuously accelerating rate. Both of these statements are absurd and obviously not true.

MustacheAndaHalf

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Re: What do you think of adding a low% of crypto allocation
« Reply #1231 on: April 12, 2022, 08:59:03 AM »
As Schwab's newsletter just reminded me, another fun thing to note is that IRS consider crypto property, so any gains means you have to pay capital gains. Perhaps not a big deal if you're investing speculating, but imagine using crypto to make hundreds of purchases per year! Every time there is a change in price (i.e. all.the.time!) you'd end up with gains and losses and would have to keep track if and report it!

I bought some ETH for $20, two hours later it's $95, so I pay $50 in "gas fees" to buy a $20 pizza, and I pay 15% taxes on.. $20? $70?
Welcome to the glorious future! Much convenient! Remember when we used visa? WOw that was terrible, so glad we're done with that
Just to add a link to that, it looks like Ethereum gas fees stayed above $40 for at least a month, and this article mentions a $52 gas fee.
https://news.bitcoin.com/average-ethereum-gas-fee-jumps-20-per-transfer-l2-fees-follow-rise/

I have no crypto in my portfolio now (*), but I did sell some last year - and had to do the calculations myself.  Maybe until I confirm my latest address, Coinbase doesn't want to provide a 1099-B, so all I got was a summary.  Where I only had to deal with a few sales by hand, some users are struggling with Coinbase despite getting a 1099-B... like this example with 841 transactions.
https://ttlc.intuit.com/community/taxes/discussion/when-i-upload-my-1099-b-from-coinbase-it-is-asking-me-to-verify-841-transactions-manually-that-is/00/2492696


(*) on Coinbase I have ETH2 that I "staked" until the proof-of-stake Etherium network (2.0) goes live.  That could be months or years, and until then I cannot sell, trade or move the staked ETH2.

the_gastropod

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Re: What do you think of adding a low% of crypto allocation
« Reply #1232 on: April 12, 2022, 02:37:39 PM »
I used the number of transactions from the report. To expect me to take the entire “report” at face-value is… weird.

The fact that you admit this and choose to accept for of their data and not others because you simply don't like that other data is a clear indication of bias. For you to claim otherwise is absurd. Especially when the comments you make that run counter to their data, you don't bring other contradictory data from other sources. Instead, you just simply say "nope, that's wrong."

Heads up: this is my final response to you. :)

I disagree that looking at things with a critical eye is biased. RT may publish articles with figures that lend credence to an anti-Putin argument. This does not mean the entirety of the article, or the source, should be taken at face-value.

I don’t know what your background is. I’m guessing it’s not Computer Science? I’ll try to elaborate why this is the case:

I am not sure why you continue to make assumptions so much, especially when I mentioned earlier what my background is. Making assumptions about someone rather than debate their arguments presented is not debating in good faith. Yet you continue to do this. You say you have a background as a computer scientist. I have not questioned your background once even though you've made numerous incorrect statements with regards to topics related to the field. I trust you're correct about your background and there is no reason for me to argue about that. But just because someone has a background in something does not mean they know the entire field with expertise, especially one as complex as computer science. Anyone intimately familiar with computer science would know this. It is a field that exemplifies the quote "The more you know, the more you realize you don't know."

I feel like there's many misunderstandings here. And this is another one. I was not at all trying to disparage you or anyone else without a CS background. Your previous responses in this thread made me feel like you did have such a background. I was less-than-explicit in my "centralization" arguments prior, because I assumed it was clear enough. That was not the case, and I expanded here. Sorry for my wording here. No ill-will here.

Lightning Network basically means two things these days. The “flavor” you’re largely talking about, originally proposed in 2015 where people pre-fund channels, and strive to keep them open as long as possible to avoid paying the fees to write the aggregated transactions on-chain. This obviously has its drawbacks, as it’s expensive to hold up a lot of money pre-funding your Dunkin’ Donuts channel ($200), your Jiffy Lube channel ($100), your Trader Joe’s channel $(500), etc. This is like the a pre-paid credit card with much higher fees. Not ideal.

Huh?? There is no two "flavors" of bitcoin. The lightning network I've discussed and described is the lightning network that is live today.

Two "flavors" of LIGHTNING. Not Bitcoin. The two flavors are: 1. one channel per vendor. And recently-ish 2. the full network setup that has many centralized hub nodes.

The numbers I've given are from the lightning network that is live and operating on mainnet today. There are multiple implementations of lightning network nodes (LND, c-lightning, eclair, etc), but they all conform to the adopted BOLT spec. When I talk about transaction aggregation, I'm not just talking about payments that I make personally through my channels, but also payments that route through my channels from others. Because of onion routing, there is no way for me to determine whether or not a payment routed through my node came from my directly connected peer or from a node beyond them. In the end, it doesn't matter, the balance in my channels changes all the same and the fees are still all in aggregate.

So, we move toward a system where you can rely on the network to pay people you don’t have a direct channel with. To do this, the system needs to find the shortest (or sufficiently short) path between you and your recipient. This is the basis of the famous Dijkstra’s Algorithm. Dijkstra’s says, basically: in a network with N nodes and C connections, the shortest path can be found in order C + N log N. Here, order means computational time. The dilemma for Lightning Network is when these numbers get very high, that computational time gets too high to be feasible. Even at just 100k nodes, mobile devices are unable to find the shortest path in anything approaching “real time”. The fact that many nodes in the lightning network are devices that are being turned off and on means he network topology changes faster than it can be spanned. In such an environment, the shortest route often cannot be found. Sometimes no route can be found at all!

Fortunately, there’s an easy solution to this. Centralization! Large hubs do the intermediary work, and the problem is solved. This is what is happening in Lightning. It is why it is as performant as it is. And this is what I mean by centralization.

Well for one, let's remind ourselves what your original claim about lightning was:
Quote
Lightning network is a centralization scheme that completely obviates the entire point of Bitcoin.
Quote
You also must trust the lightning network itself

However, as I stated, you are in full control of your bitcoin keys at all times actively using the lightning network. At no point while using the lightning network do you need to trust anyone. Routing a payment over the network does not require trust any other nodes with your funds. If a payment fails mid-route, you just calculate a new path; your funds can't be stolen. So any large routing node that exist on the network that your payment might route through has no ability to steal the funds in your payment. Unlike traditional payment rails where custodians must take control of your funds in order to route a payment on your behalf, this is absolutely not true of both bitcoin or the lightning network. Censorship on the lightning network is also not an issue since routing nodes don't know the true source of a payment due to onion routing and even if a payment failed at a specific node, a new path can be calculated.

As I mentioned, there is absolutely no difference between a raw lightning transaction and a raw bitcoin transaction. Furthermore, once taproot is fully implemented in the lightning network it won't be possible to discern a lightning channel on-chain from any other bitcoin transaction. Lightning network is also completely opt-in. You're not forced to use the lightning network if you don't wish to. Finally, if choosing to use the lightning network, you're not forced into a peer relationship with anyone else using the lightning network nor are you forced to route payments through any node you don't wish to route through. Given all of this I can hardly understand your claim that lightning "obviates the entire point of bitcoin".

In other words: people who care about decentralization can pay a premium to do it. Everyone else can use the centralization inherent in the efficient Lightning Network. I guess that's cool, but... for a protocol that expends a shit-ton of energy and waste for the sole purpose of being decentralized, that definitely feels like somehting that "obviates the entire point of bitcoin" to me. But maybe I'm a stickler.

As far as your comments about routing, part of your fundamental misunderstanding I feel stems from the fact that you believe the lightning network needs to route payments based on the shortest path whereas in reality paths are typically weighted based on fee cost and you don't need to choose the absolute shortest path based on all possible paths when any path that completes the transaction will suffice. This fact drastically reduces the burden when calculating a route when the full network graph is synced.

FWIW, Dijkstra's algorithm uses weighted directed graphs. It specifically is designed for cost minimization, not minimum number of hops. Other, less expensive algorithms, like Floyd-Warshal would necessarily lead to even more centralization and less fee competition.

The pathfinding algorithms are also not defined specifically in the BOLT spec. Each implementation can implement their own pathfinding algorithms. Dijkstra's algorithm is not strictly used by these implementations. There are in fact many routing algorithms that are both in use across the lightning network today as well as many new possibilities being researched. For example, trampoline routing has been implemented in LND that helps route calculation, but also helps by adding additional privacy, as well as promoting additional decentralization of LN's topology (contrary to your claim). It uses nested onions with an outer layer used for routing and an inner layer used for trampolines.

https://lists.linuxfoundation.org/pipermail/lightning-dev/2019-April/001956.html
https://github.com/lightning/bolts/pull/829

There is also atomic multi-path payments that can further both increase privacy and also increase the ease with which routes are calculated while decreasing the need to rely upon larger routing hubs that have large channels.

https://lists.linuxfoundation.org/pipermail/lightning-dev/2018-February/000993.html

There is also JIT routing that allows for on-demand channel rebalance that can open up new paths that were found to be invalid due to insufficient channel liquidity at the time of payment. This greatly eases the burden with which new paths much be calculated because of a previous temporary channel failure.

https://lists.linuxfoundation.org/pipermail/lightning-dev/2019-March/001891.html

There is also a lot of research into path finding that alleviates the burden of calculating routes such as the spider protocol as described here:
https://dspace.mit.edu/bitstream/handle/1721.1/124129/1142812072-MIT.pdf?sequence=1&isAllowed=y

And also Ant routing algorithm:
https://core.ac.uk/download/pdf/237320294.pdf

It seems to me that you've continued just parroting simplistic views on how bitcoin and lightning operate based on singular terms or talking points you've might of heard somewhere without understand the large breath and scope of the topic at hand. You do continue to do this all while at the same time discrediting the very real world numbers from my own node that I operate on the lightning network all because you claim "you know otherwise" without real world use by yourself or data presented to the contrary.

Full disclosure: I randomly chose one of these (Ant routing) to pick on. I am not going to waste time debunking every other techno-babbly thing you bring up. But let's talk Ant routing. What is it? A proposal to solve, and I quote: "... several problems of current implementation, such as channel information update and centralization by beacon nodes". Oh! Centralization? No way! Shocked, I am, that centralization is apparently problem in the LN! (source: https://arxiv.org/abs/2002.01374)

Moving on... this is a new theoretical idea. It hasn't—as far as I can tell—been implemented. It's more "SOME DAY!" can-kicking that we've been hearing since 2011 with Bitcoin critiques. It's exhausting. Update us all when this is working!

Just attaching a graph here taken directly from the University of Cambridge site we’ve repeatedly cited. Here it is for posterity: https://ccaf.io/cbeci/index Note: I’m not even referring to the “cumulative” line. The bars describing monthly electricity consumption sure don’t look linear to me!

I already linked to the data that shows clear linear growth throughout the ASIC age. Showing data growth from periods where CPUs and GPUs were used in mining is not a valid comparison since obviously mining hadn't matured yet as it had not been both optimized nor industrialized yet. The graph you showed is absolutely not parabolic. If you look at bitcoin's energy from the ASIC age you can clearly see linear growth as well as plateaus. Look at what I linked to again without the tail end period between 2014-2016. If you look at from 2017 onward which is really when the age of ASIC became dominant, then you can clearly see the linear growth here. To make the claim that bitcoin's energy growth is parabolic then you'd have to ignore this fact.

See first diagram here:
https://digiconomist.net/bitcoin-energy-consumption/

The only way you could claim that bitcoin energy consumption is exponential and parabolic is if you somehow think that ASIC manufacturers can produce chips at a continuously accelerating rate and also that electricity will continue to become available to miners at a continuously accelerating rate. Both of these statements are absurd and obviously not true.

OH! Pardon me for getting in the way of your cherry-picked date range! Why you think it's obvious that moving from less efficient CPU's/GPU's to more efficient ASICs results in greater electrical use confuses the hell out of me! But I'm clearly not all that bright :)

I'm claiming bitcoin energy consumption is exponential because the data shows it's exponential. This ain't difficult, my man.

Anyway, that's it from me! Enjoy your cryptoing.

lifeanon269

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Re: What do you think of adding a low% of crypto allocation
« Reply #1233 on: April 12, 2022, 03:32:39 PM »
Huh?? There is no two "flavors" of bitcoin. The lightning network I've discussed and described is the lightning network that is live today.

Two "flavors" of LIGHTNING. Not Bitcoin. The two flavors are: 1. one channel per vendor. And recently-ish 2. the full network setup that has many centralized hub nodes.

I meant to say two flavors of lightning there. That was a mis-type by my part there. There are not two flavors of lightning. The moment the current spec of lightning network that was worked on between c-lightning, LND, and eclair went live on mainnet, it always had payments routes implemented in it. Saying it is a "recently-ish" thing is false since it is something that has been "always-ish".


I feel like there's many misunderstandings here. And this is another one. I was not at all trying to disparage you or anyone else without a CS background. Your previous responses in this thread made me feel like you did have such a background.

For the record, my background is computer science. I've been in the field for 19 years. Sometimes I wonder if you read my posts fully. I literally said that I even mentioned what my background was in a previous response to you. Then you respond to me saying that you're guessing that my background isn't computer science, then follow that up with saying you weren't meaning to be disparaging and that you felt my background was CS contrary to your earlier statement. You're all over the place. No ill-will either, but I was just making the point that if you want to debate in good-faith, it is best to just debate the subjects at hand based on the merit with which they're presented. It doesn't matter to me what either of our backgrounds are. If you're making a claim that I disagree with, regardless of either of our areas of expertise, then you should back those claims up with reasoning and data. Something that you've failed to do time and time again.

Full disclosure: I randomly chose one of these (Ant routing) to pick on. I am not going to waste time debunking every other techno-babbly thing you bring up. But let's talk Ant routing. What is it? A proposal to solve, and I quote: "... several problems of current implementation, such as channel information update and centralization by beacon nodes". Oh! Centralization? No way! Shocked, I am, that centralization is apparently problem in the LN! (source: https://arxiv.org/abs/2002.01374)

Moving on... this is a new theoretical idea. It hasn't—as far as I can tell—been implemented. It's more "SOME DAY!" can-kicking that we've been hearing since 2011 with Bitcoin critiques. It's exhausting. Update us all when this is working!

"randomly chose one of these"...sure. Yet here is another instance of you saying you're going to debunk something that I bring up and in that very same paragraph you don't actually get to the part where you debunk it. Then, you follow that up with a claim about about how it is more "SOME DAY" stuff and yet fail to realize that 3 of the 5 concepts that I brought up are actually currently live and being utilized today (Trampolines, AMPP, and JIT routing). But sure, I'm sure you "randomly" chose that one...


OH! Pardon me for getting in the way of your cherry-picked date range! Why you think it's obvious that moving from less efficient CPU's/GPU's to more efficient ASICs results in greater electrical use confuses the hell out of me! But I'm clearly not all that bright :)

I'm claiming bitcoin energy consumption is exponential because the data shows it's exponential. This ain't difficult, my man.

Anyway, that's it from me! Enjoy your cryptoing.

If you want to claim that there was an exponential increase in energy usage between the CPU/GPU/FPGA era and the ASIC era, that's fine. There absolutely has been an exponential increase in energy usage as the industry transitioned from simply being performed in people's basements to entire warehouses of ASICs (from 2009-2016). That's plain to see. But ASICs have been around for over 5 years now and since that time bitcoin's energy usage has been completely linear. That's also plain to see. So we can just leave it there.

MustacheAndaHalf

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Re: What do you think of adding a low% of crypto allocation
« Reply #1234 on: April 13, 2022, 06:29:40 AM »
Heads up: this is my final response to you. :)
Spoiler alert, it won't be.

... But ASICs have been around for over 5 years now and since that time bitcoin's energy usage has been completely linear. That's also plain to see. So we can just leave it there.
I assume the_gastropod's "final response" leaves you with time to reply to others, and I am curious about energy usage being linear.  Is the hardware you purchase using the same kilowatt hours as older generations?  Meaning for a rack of ASICs, has energy usage of that been constant?

Years ago I recall mining hardware going obsolete quickly.  You could buy hardware that was a year or two old, but it could not compete in terms of energy costs.  Bitcoin mining runs 24 hours a day and is electricity intensive, so the electricity cost is a key factor.

StashingAway

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Re: What do you think of adding a low% of crypto allocation
« Reply #1235 on: April 13, 2022, 08:21:29 AM »
Years ago I recall mining hardware going obsolete quickly.  You could buy hardware that was a year or two old, but it could not compete in terms of energy costs.  Bitcoin mining runs 24 hours a day and is electricity intensive, so the electricity cost is a key factor.

This brings some questions for me that I've had. I know far less than what you folks are talking about, am not CS trained, so correct me if I miss something:

As I understand it, the proof of work system is inherently designed to be slow/inefficient on the basis of securing the blockchain. This design is also inherently scaled to be more difficult as time goes on due to the increasing difficulty of calculations being made (everything else being equal).

So my two questions are:

1) It seems that decreasing energy costs could come from a couple of things. Obviously, more efficient hardware has come into play. Also, from my understanding, larger mining operations can more easily out-compete smaller ones, so does that mean that the distribution of earned coins from mining is becoming more centralized from bigger differences in computing power? For instance, in 2015, the difference in mining may have only been 10x between the slowest computer and largest, whereas now it could be 1000x. A hobbyist could earn coin back then, but now cannot, etc.

2) Either way, decreasing energy costs obviously are beneficial for the world at large, but isn't that competing with the design of the system? I guess I don't get the point of a proof of work design if it then becomes a game of trying to make that work easier. Then we just become really good at that game. What am I missing?

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Re: What do you think of adding a low% of crypto allocation
« Reply #1236 on: April 13, 2022, 08:29:42 AM »
Years ago I recall mining hardware going obsolete quickly.  You could buy hardware that was a year or two old, but it could not compete in terms of energy costs.  Bitcoin mining runs 24 hours a day and is electricity intensive, so the electricity cost is a key factor.

This brings some questions for me that I've had. I know far less than what you folks are talking about, am not CS trained, so correct me if I miss something:

As I understand it, the proof of work system is inherently designed to be slow/inefficient on the basis of securing the blockchain. This design is also inherently scaled to be more difficult as time goes on due to the increasing difficulty of calculations being made (everything else being equal).

So my two questions are:

1) It seems that decreasing energy costs could come from a couple of things. Obviously, more efficient hardware has come into play. Also, from my understanding, larger mining operations can more easily out-compete smaller ones, so does that mean that the distribution of earned coins from mining is becoming more centralized from bigger differences in computing power? For instance, in 2015, the difference in mining may have only been 10x between the slowest computer and largest, whereas now it could be 1000x. A hobbyist could earn coin back then, but now cannot, etc.

2) Either way, decreasing energy costs obviously are beneficial for the world at large, but isn't that competing with the design of the system? I guess I don't get the point of a proof of work design if it then becomes a game of trying to make that work easier. Then we just become really good at that game. What am I missing?
These are my understandings too (also noting the glut of obsolete mining rigs for sale, the rising energy usage, and the centralization). In any other technology, declining performance and increasing cost of use over time might be called "planned obsolescence" but here it's considered an innovation in itself.

maizefolk

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Re: What do you think of adding a low% of crypto allocation
« Reply #1237 on: April 13, 2022, 10:40:58 AM »
As I understand it, the proof of work system is inherently designed to be slow/inefficient on the basis of securing the blockchain. This design is also inherently scaled to be more difficult as time goes on due to the increasing difficulty of calculations being made (everything else being equal).

A minor modification to this:

The difficulty of the calculations gets harder the more people are trying to work on them. Because the price of bitcoin has increased dramatically in the past decade the potential value of mining has increased and so more people spend more money on calculations which drives up the difficulty. But there is nothing inherent in the bitcoin approach that requires the difficulty to get harder over time. If the price drops, over time it makes less sense for people to spend money on hardware and electricity, the total computing power drops, and the difficulty of the calculation drops in parallel.

Even if the price of bitcoin remains constant, the regular reductions in the reward size per plot (e.g. how many new bitcoins are "mined" each day) drives down the economic incentive for mining and would result in a reduced difficulty of the calculation over time.

So it's only when the price of bitcoin increases faster than the reward from mining declines that the difficulty of the calculation gets harder over time.

StashingAway

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Re: What do you think of adding a low% of crypto allocation
« Reply #1238 on: April 13, 2022, 11:34:19 AM »
Even if the price of bitcoin remains constant, the regular reductions in the reward size per plot (e.g. how many new bitcoins are "mined" each day) drives down the economic incentive for mining and would result in a reduced difficulty of the calculation over time.

So it's only when the price of bitcoin increases faster than the reward from mining declines that the difficulty of the calculation gets harder over time.

Ah, that's what I didn't understand before (and still don't tbh). Likely from abbreviated explanations of how the equation system works.

I understood it to be a "race" to be the first to finish the calculation, where the remaining mining computers are used to verify validity of the first one. Are difficulty and process speed interchangeable terms here?

How is this all related to # of transactions? I'm assuming that Bitcoin's vision is to have several order's of magnitude more transactions than is currently happening on the network.

lifeanon269

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Re: What do you think of adding a low% of crypto allocation
« Reply #1239 on: April 13, 2022, 11:56:44 AM »
I'll clarify a few things on the mining side here.

There are several factors that determine profitability. Bitcoin's price, block rewards/fees, electricity costs, miner efficiency, and bitcoin's difficulty level.

So the dynamics that play out are this:

Bitcoin is designed to try and keep the average block time at around 1 block every 10 minutes. So if blocks are being "discovered" every 9 minutes, that means there are more miners contributing hashing power to the network that results is blocks being found quicker. Bitcoin adjusts the difficulty approximately every 2 weeks (after every 2016 blocks). So less blocks being found as a result of less hashrate on the network means a difficulty adjustment downware to make it easier to find blocks and vice versa.

All things being equal (bitcoin price, electricity costs, miner efficiency, etc) a higher difficulty level means less profitability since the task at hand is becoming more difficult for the equipment you have. You're going to be solving less blocks and so therefore your rewards are getting diminished.

To try and achieve the same profitability you had before the difficulty adjustment, you'd either need to find cheaper electricity or acquire miners that are more efficient and provide more hashrate per unit of electricity consumed. If you don't make any changes to the work you're doing, eventually as the amount of computing power expands (either due to more hashrate being contributed from more efficient miners or more people bringing miners online) your share of the total hashrate diminishes which means you make less profit. It is also important to note that larger mining operations don't "out compete" smaller ones necessarily. There are very slight economies of scale with initial capital costs of mining machines. You can achieve a slight discount from manufacturers if you buy in bulk. You might also be able to find cheaper electricity prices through contract negotiation and location. But in general, miners are computing against the current difficulty level. So if I am profitable at a given electricity price with a given miner machine model, then it doesn't matter if I am using 1000 of those units or just 1, my profit percentage will be the same. So the idea that a small-time miner can't be profitable isn't really true. You can set up a single mining unit and as long as you have access to some cheap electricity, you can still mine bitcoin at a profit.

Price also plays a big factor into things. The higher the price goes, the more profits all miners are receiving. This is what really drives the increase in energy usage by the network. Because right now, a vast majority of the rewards a miner receives per block found comes from the block subsidy. Every block found gives the miners that found it 6.25 bitcoin. Fees that bitcoin users pay to have their transactions confirmed by miners are also contributed as part of the rewards for finding a block, but at the moment those only account for about 2% of the total rewards. So with the price of bitcoin going up, all miners receive higher profits which can result in expansion of their operations and overall expansion of the industry. But every 4 years, the block reward gets cut in half. So instead of 6.25 bitcoins being rewarded for finding a block, only 3.125 bitcoin will be given out. If the price doesn't follow suit, then there is an immediate and impactful cut in profits for miners across the industry. This generally results in some miners that were border line being profitable shutting down [some of] their operations. This reduction in hashrate thus then leads to a lowering of the difficulty level and a new equilibrium is found in the mining industry for the miners that remain.

This decrease in the block rewards is also a shock to the markets since there is less incoming supply of bitcoin and thus a lowering of liquidity. So price does typically respond upwards after these halvings, but it isn't always immediate. Since a vast majority of the rewards comes from this block subsidy, mining bitcoin is essentially minting new bitcoins into the market and is why this phase of mining is the capital production phase. A majority of the energy being spent on mining is being spent to generate new bitcoins rather than confirming transactions (fees).

Eventually though, since the price can't go exponential forever, these halvings will result in a higher pressure on miner profitability unless transaction fees can begin to fill in some of that void. If transaction fees don't take up some of that slack, bitcoin mining will continue to use less energy until a new equilibrium is met at which point, bitcoin's energy usage will be a direct correlation to how much the bitcoin network is being used economically. The amount spent on fees will go almost entirely to the cost of electricity to confirm it with very little overhead. The market will pay for how much security it needs. If it is a massive market and bitcoin is processing a large number of transactions, then fees will rise and this the security of the network is increased. Miner profits go up which means more energy is being spent to secure the network and thus the network is more secure against attacks. If not many people are using the network, the fees are lower and thus electricity usage goes down and bitcoin's security budget doesn't need to be as high since the network won't face as many attacks. So it theoretically all balances out.

As far as mining hardware lifespan goes, now that the mining and ASIC chip industry has matured, efficiency gains for mining machines has tampered off quite a bit and is more inline with efficiency gains in chipsets for other general computing needs. The lifespan of profitable mining machines is about 4 years at the moment. This is a good website (search for sha-256 to filter for bitcoin miners) that gives a breakdown of miner profitability based on the models available. As you can see there are many miners that were released in 2018 that are still profitable today and there are many 2020 models that are still some of the top profitable machines available.

https://www.asicminervalue.com/

If you look year to year, there really is only modest incremental improvements in efficiency at this point. A miner in 2020 that gave you 85Th/s @ 3200W might give you 95Th/s @ 3200W in 2021's next release model. Furthermore, there is quite a large aftermarket now for mining machines. Since a business cares about operational costs and turning a profit, they need to make sure their mining machines are turning as much profit as possible. An individual though has more leeway. An individual who is looking to purchase bitcoin for themselves from any exchange anyway, minus fees paid, could opt instead to mine some bitcoin at a slight cost to themselves as a means of "purchasing" bitcoin for themselves. So many miners in the list that might not be profitable for a business to run actually have a lot of secondary life for individuals that are willing to mine bitcoin at a slight cost as a means of acquiring some. So you can find a lot of those mining machines for really cheap on the secondary markets like eBay. So while they might have a lifespan of about 4 years in the business world, they could see any additional year of life in the aftermarket.

As far as energy usage for each ASIC goes, it really depends on the model, but generally there will be different tiers. You'll have some models that can operate on a 120V circuit and thus can plug into the typical home outlet and run at ~10 amps for a wattage of about 1200. Then there are models that require a 240V circuit that draw much more power at around 3000W. You don't want to have to always upgrade or change the circuit you're operating on when you swap out mining machines, so you'll generally upgrade from unit to unit with similar energy demands.

It seems like Moore's law might be slowing down a bit and the supply chain issues also seemed to slow down chip gains, this leads to an additional ceiling for the overall energy consumption of the network. It just takes time to produce miners and bring them into production and there just isn't a way to exponentially expand a now mature industry.

Also, as I mentioned in one of my earlier posts, the mining industry is much more decentralized now than it has ever been. There are now many more mining pools available and the mining entities within those pools has grown significantly over the years. Hashrate will certainly always be dominated by the large corporate miners, but there are simply more corporate miners mining bitcoin these days than there was in the past.

EDIT: I see maizefolk responded with some of the same points I made albeit much more concise.  :)

I also just wanted to add that the amount of computation power required to confirmed blocks is uncorrelated to the number of transactions being processed. A block could contain 1 transaction or 1000 and it will required the same amount of electricity to "find" either block. This is why energy calculations on a "per transaction" basis don't make much sense here.
« Last Edit: April 13, 2022, 11:59:42 AM by lifeanon269 »

GuitarStv

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Re: What do you think of adding a low% of crypto allocation
« Reply #1240 on: April 13, 2022, 12:00:24 PM »
How is this all related to # of transactions? I'm assuming that Bitcoin's vision is to have several order's of magnitude more transactions than is currently happening on the network.

Right now, the mining (which records bitcoin transactions) is paid for by giving the miners bitcoins randomly as they mine - so there's no fee to bitcoin users.  In the future there will not be enough incentive for miners to do this (as eventually all bitcoins will be given away) so the people who want to trade bitcoin will have to pay the miners a direct fee to record their transactions into the blockchain.

maizefolk

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Re: What do you think of adding a low% of crypto allocation
« Reply #1241 on: April 13, 2022, 12:09:09 PM »
Even if the price of bitcoin remains constant, the regular reductions in the reward size per plot (e.g. how many new bitcoins are "mined" each day) drives down the economic incentive for mining and would result in a reduced difficulty of the calculation over time.

So it's only when the price of bitcoin increases faster than the reward from mining declines that the difficulty of the calculation gets harder over time.

Ah, that's what I didn't understand before (and still don't tbh). Likely from abbreviated explanations of how the equation system works.

I understood it to be a "race" to be the first to finish the calculation, where the remaining mining computers are used to verify validity of the first one. Are difficulty and process speed interchangeable terms here?

How is this all related to # of transactions? I'm assuming that Bitcoin's vision is to have several order's of magnitude more transactions than is currently happening on the network.

Answering the last part first because it's easiest:

None of it is related to the number of transactions. That's the point a couple of folks were making in that long argument up thread. To a first approximation* the marginal energy cost of a bitcoin transaction is zero. But there's a large fixed energy cost to maintaining the block chain** so the average energy cost is high when few transactions are made and decreased the more total transactions are made.

Now for the other part: difficulty and process speed. Difficulty is how hard the mathematical problem that has to be solved for each new block of bitcoins to be mined. How fast the blocks are mined is determined by how hard the problem is and how much compute power is trying to solve the problem.

If more people start mining bitcoin (because the value of the bitcoin they get for mining has gone up) the problems start getting solved faster, so the bitcoin algorithm makes the problems that need to be solved harder over time. If fewer people are mining bitcoin (because the value of the bitcoin they get for mining has gone down), the the bitcoin algorithm makes the problems that need to be solved easier.

The goal is to have one problem solved on average every ten minutes, regardless of how many people are or are not participating in mining.

*Transaction fees mean the long term marginal cost is probably not exactly zero, but close enough for government work.

**And it's not really fixed, but it varies in response to the block reward and the value of bitcoin, not the number of transactions.

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Re: What do you think of adding a low% of crypto allocation
« Reply #1242 on: April 13, 2022, 01:24:27 PM »
So the price (in USD) of a bitcoin drives the supply of computing power, and as computing power increases, problem difficulty and electricity consumption increase. Thus, if bitcoin were to keep rising in price, the amount of energy consumed would keep rising too because the incentive of mining or validating bitcoin in terms of USD would greatly exceed the cost of electricity priced in USD, net of the effect of the algorithm making problems harder. Thus, to predict a world of $100,000 or $500,000 or $1,000,000 bitcoin is to predict a world with lots of cheap transactions and lots of miners solving very hard problems and where an ever-larger percentage of the planet's energy production must be devoted to maintaining the functionality of this particular currency.

It would seem that if the price of bitcoin is somewhat pegged to the price of electricity via the interaction of the price of electricity with the availability of computing power, then there would be some point in the function where the price of bitcoin is negatively correlated to the price of electricity. I.e. as electricity gets more expensive, there is less profit to be had mining or validating, and so less supply of computing power, all things being equal. The "make the problems easier as supply goes down" algorithm mitigates this electricity-price relationship, but I wonder if the algo can handle rapidly rising costs, such as during a period of high inflation that affects the price of electricity and mining rigs? 

A key lesson in business school is that it makes sense for businesses to continue money-losing endeavors if the losses from continuing to produce are less than the losses of shutting down. This is usually illustrated in terms of mines or factories continuing to run during recessions and leading to supply gluts / price collapses, but I wonder if the effect would hold true for crypto miners?

If today's high inflation causes electricity price hikes and higher costs for equipment, that would not necessarily lead to a 1:1 reduction in miners. If you have a sunk investment in a server farm with debt payments and everything, and the equipment is depreciating to zero within the next 4-5 years, then maybe it makes sense to run at a loss and at least produce some revenue instead of unplugging everything and waiting for the bills to come in. Stated another way, if electricity is a miner's variable cost, and depreciation/rent/cost of capital is a miner's fixed cost, then it makes sense for the miner to keep the operation running at a loss as long as revenue > variable cost, because those fixed costs must be paid regardless of whether the operation is running or not. When all miners make this same optimal decision, an over-supply situation occurs. In a bitcoin context, this would look like miners losing money but continuing to produce, thereby contributing to a supply glut that would inhibit the "make the problems easier" algorithm. What is a miner to do in this situation but sell their coin inventory for USD and cover their losses that way? Maybe this is why bitcoin has plummeted in response to higher inflation around the world.

maizefolk

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Re: What do you think of adding a low% of crypto allocation
« Reply #1243 on: April 13, 2022, 01:41:46 PM »
It would seem that if the price of bitcoin is somewhat pegged to the price of electricity via the interaction of the price of electricity with the availability of computing power, then there would be some point in the function where the price of bitcoin is negatively correlated to the price of electricity. I.e. as electricity gets more expensive, there is less profit to be had mining or validating, and so less supply of computing power, all things being equal. The "make the problems easier as supply goes down" algorithm mitigates this electricity-price relationship, but I wonder if the algo can handle rapidly rising costs, such as during a period of high inflation that affects the price of electricity and mining rigs? 

A key lesson in business school is that it makes sense for businesses to continue money-losing endeavors if the losses from continuing to produce are less than the losses of shutting down. This is usually illustrated in terms of mines or factories continuing to run during recessions and leading to supply gluts / price collapses, but I wonder if the effect would hold true for crypto miners?

If today's high inflation causes electricity price hikes and higher costs for equipment, that would not necessarily lead to a 1:1 reduction in miners. If you have a sunk investment in a server farm with debt payments and everything, and the equipment is depreciating to zero within the next 4-5 years, then maybe it makes sense to run at a loss and at least produce some revenue instead of unplugging everything and waiting for the bills to come in. Stated another way, if electricity is a miner's variable cost, and depreciation/rent/cost of capital is a miner's fixed cost, then it makes sense for the miner to keep the operation running at a loss as long as revenue > variable cost, because those fixed costs must be paid regardless of whether the operation is running or not. When all miners make this same optimal decision, an over-supply situation occurs. In a bitcoin context, this would look like miners losing money but continuing to produce, thereby contributing to a supply glut that would inhibit the "make the problems easier" algorithm. What is a miner to do in this situation but sell their coin inventory for USD and cover their losses that way? Maybe this is why bitcoin has plummeted in response to higher inflation around the world.

I agree with your reasoning. People are going to invest in new computer hardware for mining bitcoins when the fixed (hardware) + variable costs (electricity mostly, rent and labor modestly) are below the expected return (the value of the expected number of bitcoins they can mine with their investment).

If the expected return is greater than variable costs but below variable + fixed, existing miners will run at a paper loss caused by depreciation but no new capacity will come online.

If expected return is less than variable costs existing miners will start shutting down, which will drive down the difficulty of the algorithm and increase expected returns until expected return at least equal variable costs.

However, keep in mind that while all miners have the same expected return per unit of compute spent on bitcoin mining, they'll have different fixed and variable cost structures including different prices for electricity and different amounts of investments in infrastructure so you still end up with a reasonably smooth supply curve in response to changes in the price of bitcoin with operations paying for electricity from the public grid most sensitive to changes in price (lower fixed and higher variable costs) and operations like this one where electricity is part of the initial investment in infrastructure rather than on ongoing variable cost being the least responsive to changes in price.

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Re: What do you think of adding a low% of crypto allocation
« Reply #1244 on: April 13, 2022, 02:24:05 PM »
lifeanon269 - Thanks for the long explanation, and the surprise that mining hardware isn't improving much in profitability.  The link you provided shows that, but I find it puzzling.  For example, "Gh/s" is a billion hashs/sec, while "Th/s" is a trilliong hashes per second - it's 1000x faster.

I sorted that link by release date, and see "Goldshell LT6" (Jan 2022) uses "Scrypt" at a hashrate of 3.35 Gh/s.  "Goldshell CK6" (Dec 2021) uses "Eaglesong" to achieve a 19.3 Th/s hashrate.  Their energy usage (3200w, 3300w) are similar, yet the hashrate is 5,000x greater for the "CK6"... and yet their daily profit is $7.86 and $8.76 per day!
https://www.asicminervalue.com/

To double-check my understanding of "Th/s" and "Gb/s", I went to the following link and changed the default "40 Th/s" ($3.12 profit/day) into "40 Gh/s" which displays a loss of $4.31/day.  According to this website, Th/s versus Gb/s would have a huge impact on profitability - unlike the prior website.
https://www.asicminervalue.com/

Is the "algo" really so important that it can overcome 5000x differences in hashrate?  Or is there something else I'm missing that can reconcile the differences between the above two websites?

lifeanon269

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Re: What do you think of adding a low% of crypto allocation
« Reply #1245 on: April 13, 2022, 02:24:44 PM »
So the price (in USD) of a bitcoin drives the supply of computing power, and as computing power increases, problem difficulty and electricity consumption increase. Thus, if bitcoin were to keep rising in price, the amount of energy consumed would keep rising too because the incentive of mining or validating bitcoin in terms of USD would greatly exceed the cost of electricity priced in USD, net of the effect of the algorithm making problems harder. Thus, to predict a world of $100,000 or $500,000 or $1,000,000 bitcoin is to predict a world with lots of cheap transactions and lots of miners solving very hard problems and where an ever-larger percentage of the planet's energy production must be devoted to maintaining the functionality of this particular currency.

There is a downward force opposing the upward force of bitcoin's price on mining profitability and in the long run, due to exponential power, downward force should win. The bitcoin halvings every 4 years cut that miner reward in half.

At today's price of $41,000, in two years when the next halving occurs, the price would need to equal $82,000 in for the block rewards to remain the same for miners. In 6 years from now, the price of bitcoin would need to equal $164,000. In 10 years from now, $328,000. ...And so on and so on. And these price points are just to maintain the same profitability for miners today. This is assuming all else equal; electricity, capital costs, etc. But given inflation over that same period, these numbers are probably on the minimum side. You can only have the price go exponential every 4 years so many times before the rewards for mining diminish to the point where either transaction fees make up a larger portion of incentives for miners. So the energy use of the network either plateaus or actually starts decreasing because the network isn't being used (fees paid) as much as the energy being consumed demands.

It would seem that if the price of bitcoin is somewhat pegged to the price of electricity via the interaction of the price of electricity with the availability of computing power, then there would be some point in the function where the price of bitcoin is negatively correlated to the price of electricity. I.e. as electricity gets more expensive, there is less profit to be had mining or validating, and so less supply of computing power, all things being equal. The "make the problems easier as supply goes down" algorithm mitigates this electricity-price relationship, but I wonder if the algo can handle rapidly rising costs, such as during a period of high inflation that affects the price of electricity and mining rigs?

There have been periods where the average profitability of miners was in the negative. This typically was during periods of high volatility and the price dropped significantly in a short period of time. Because the difficulty adjusts every 2016 blocks (~2 weeks), it would take some pretty massive shocks to keep miners from continuing to mine bitcoin. During those periods where the price plummeted, some of the miners that were on the borderline of profitability would shut down and the expected difficulty adjustment that would ensue, the remaining miners would continue to mine at losses knowing some future relief was inbound following the adjustment. But the difficulty adjustment is a pretty remarkable innovation given the fact that a massive number of miners (estimates of 20-30%) migrated from China over a period of a few weeks and the network continued to operate and the difficulty just adjusted accordingly. Chinese miners detriment was to all other miners' boon since the difficulty adjustment means everyone else's profits suddenly increased.

The thing to keep in mind with the difficulty adjustment is that it is based on block time, not actual time. So every 2016 blocks, the difficulty adjusts. But if blocks are coming in slower (say every 12 minutes on average), then this means the next adjustment period won't come until later as well. Which means during that period, because blocks aren't coming in as frequently, the network is not confirming as many transactions. This can result in higher fees during that period of time as demand for having transactions confirmed increases. This can result in some miners coming back online to collect those increased fees. So it is definitely an interesting market dynamic at play that is pretty unique to bitcoin.

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Re: What do you think of adding a low% of crypto allocation
« Reply #1246 on: April 13, 2022, 02:33:07 PM »
lifeanon269 - Thanks for the long explanation, and the surprise that mining hardware isn't improving much in profitability.  The link you provided shows that, but I find it puzzling.  For example, "Gh/s" is a billion hashs/sec, while "Th/s" is a trilliong hashes per second - it's 1000x faster.

I sorted that link by release date, and see "Goldshell LT6" (Jan 2022) uses "Scrypt" at a hashrate of 3.35 Gh/s.  "Goldshell CK6" (Dec 2021) uses "Eaglesong" to achieve a 19.3 Th/s hashrate.  Their energy usage (3200w, 3300w) are similar, yet the hashrate is 5,000x greater for the "CK6"... and yet their daily profit is $7.86 and $8.76 per day!
https://www.asicminervalue.com/

To double-check my understanding of "Th/s" and "Gb/s", I went to the following link and changed the default "40 Th/s" ($3.12 profit/day) into "40 Gh/s" which displays a loss of $4.31/day.  According to this website, Th/s versus Gb/s would have a huge impact on profitability - unlike the prior website.
https://www.asicminervalue.com/

Is the "algo" really so important that it can overcome 5000x differences in hashrate?  Or is there something else I'm missing that can reconcile the differences between the above two websites?

Yes, some blockchains attempted to be ASIC "resistant" by incorporating hashing algorithms that are very difficult to design a workable chipset around. The idea was that they wanted to maintain a proof-of-work mining network that was still targeted toward individuals being able to mine with their computers. However, it was a futile effort and there were several failures and side effects in that. One being the exorbitant costs of GPUs nowadays because of the demand for them being used to mine the alt-coins that use these alternative hashing algorithms. The other failure was that, as you can see, chipset makers were successful designing ASICs for many of these hashing algorithms which resulted in miners that were much more efficient than GPUs for these proof-of-work algorithms.

That being said, SHA256 is an extremely simple hashing algorithm and is simple to design an chipset around. This is one of the reasons why it was chosen as a tried and tested algorithm. But to answer your point, the efficiency with which manufacturers can design a chipset around these algorithms is why you'll see some ASICs able to perform at GH/s for some algorithms versus TH/s for others. There are magnitudes differences in efficiency.
« Last Edit: April 13, 2022, 02:35:12 PM by lifeanon269 »

maizefolk

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Re: What do you think of adding a low% of crypto allocation
« Reply #1247 on: April 13, 2022, 02:36:15 PM »
lifeanon269 - Thanks for the long explanation, and the surprise that mining hardware isn't improving much in profitability.  The link you provided shows that, but I find it puzzling.  For example, "Gh/s" is a billion hashs/sec, while "Th/s" is a trilliong hashes per second - it's 1000x faster.

I sorted that link by release date, and see "Goldshell LT6" (Jan 2022) uses "Scrypt" at a hashrate of 3.35 Gh/s.  "Goldshell CK6" (Dec 2021) uses "Eaglesong" to achieve a 19.3 Th/s hashrate.  Their energy usage (3200w, 3300w) are similar, yet the hashrate is 5,000x greater for the "CK6"... and yet their daily profit is $7.86 and $8.76 per day!
https://www.asicminervalue.com/

To double-check my understanding of "Th/s" and "Gb/s", I went to the following link and changed the default "40 Th/s" ($3.12 profit/day) into "40 Gh/s" which displays a loss of $4.31/day.  According to this website, Th/s versus Gb/s would have a huge impact on profitability - unlike the prior website.
https://www.asicminervalue.com/

Is the "algo" really so important that it can overcome 5000x differences in hashrate?  Or is there something else I'm missing that can reconcile the differences between the above two websites?

The issue you're running into is that these are tools for different hashing algorithms used by different crytocurrencies so they are supplying different and non-substitutable markets with different difficulty adjustments and rewards in different currencies with different dollar values.

Only the miners listed as running the SHA-256 algorithm are suitable for actually mining bitcoin specifically.

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Re: What do you think of adding a low% of crypto allocation
« Reply #1248 on: April 13, 2022, 02:41:47 PM »
maizefolk - Thanks, that was the key thing I was missing.  The "algo" limits which crypto currency the mining hardware can mine.
lifeanon269 - I see, so I should really compare either the same algo, or know which algos target the same blockchain, and compare those.


If today's high inflation causes electricity price hikes and higher costs for equipment, that would not necessarily lead to a 1:1 reduction in miners.
While a business typically shuts down to avoid paying rent and wages, a Bitcoin miner could just turn off their equipment until electricity prices fall.  I would expect a mixture of selling hardware and waiting, which could still lead to hardware being available for cheap.

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Re: What do you think of adding a low% of crypto allocation
« Reply #1249 on: April 13, 2022, 08:03:26 PM »
Even if the price of bitcoin remains constant, the regular reductions in the reward size per plot (e.g. how many new bitcoins are "mined" each day) drives down the economic incentive for mining and would result in a reduced difficulty of the calculation over time.

So it's only when the price of bitcoin increases faster than the reward from mining declines that the difficulty of the calculation gets harder over time.

Ah, that's what I didn't understand before (and still don't tbh). Likely from abbreviated explanations of how the equation system works.

I understood it to be a "race" to be the first to finish the calculation, where the remaining mining computers are used to verify validity of the first one. Are difficulty and process speed interchangeable terms here?

How is this all related to # of transactions? I'm assuming that Bitcoin's vision is to have several order's of magnitude more transactions than is currently happening on the network.

The protocol is set up to mint a certain number of blocks per hour (on average), and only a certain number of transactions can be included in each block. The product of these two limits sets the limit for the number of transactions that can be recorded on the blockchain per unit of time. Changing this limit would require changing the protocol, which requires a pretty high level of consensus amongst miners and is generally pretty hard to do. The way around this limit is to allow for transactions that are denominated in BTC but aren't actually recorded on the blockchain, such as those facilitated through the Lightning network.