Can You Make Money Bitcoin Mining?
5 stars based on
70 reviews
Stephen Gornick on April 15, ASICs are the most efficient. There will be a tendency for the same electrical power to be used whatever the technology.
ASICS just go faster for the same power. This numbers on ASIC power consumption support my theory that the bubble was partly due to a change in the amount of daily produced BTCs that miners had to sell to cover operating costs.
Once ASICs arrive the electric costs are so small you can cover costs with just a fraction of mined coins. And this caused a drying up of coins flowing into the exchanges. Naturally the existing stock of coins is large compared to the daily inflow but their are also large outflows as well so with a lower inflow rate prices had to rise.
And that caused a self reinforcing cycle of both more people buying coins speculatively and more miners hoarding rather then selling their production.
By the height of the bubble I suspect virtually no newly mined coins were being sold and you could only move a coin by getting another hoarder to finally give up and sell.
The July bubble and crash probably had the same underlying cause but with the transition from GPU to CPU mining being the trigger. That's an interesting theory Impaler, but I don't believe it can be more than a butterfly effect, the initial trigger of the speculative mania. When bubbles hit Bitcoin the trading volume increases 10x relative to the mining revenue. Even if miners dump all production and stock at that time, it's too late to stop the greed and mania, the demand is simply too large.
As I said its the trigger for the mania, the bubble becomes self-sustaining very quickly. Normally newly mined coins are producing a constant downward pressure on price, but leaps in the energy-efficiency of mining removes the downward pressure allowing price to build upward momentum, once the momentum is created it is clearly self sustaining and the miners themselves can become speculators by 'stealth buying' coins by just eating their own electric costs.
During most of the bubble this would have been the equivalent of buying coins at a fraction of their cost on the exchange, it would seem like a fabulous deal. The rapid increase in trading volume is not an increase in the pool of coins being fought over, it is almost certainly just high trading velocity and it's perfectly possible for that pool to actually be shrinking as prices rise, in fact that's what we would expect.
I don't believe that miners ever dumped their coins en-mass, the bubble likely popped due to exhausting the supply of new adopters at which point the short term speculators were unable to find new buyers and drove the price down. Driven by the recent swings in the value of a Bitcoin, more and more people are learning about and becoming interested in the currency. While they could just buy Bitcoins at the current market rate, others are looking to try their luck at mining Bitcoins.
Thats why PPCoin was invented - with proof of stake you don't need this crazy power consumption for maintaining the network. Has the proof of stake concept been implemented? Or is it before time for that to start doing it's thing yet?
As far as power goes
