aja8888
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So the VALUE of a bitcoin is the past expenditure of electricity? But the power is used, so where is the VALUE?
Bitcoin - World's 30th largest Currency
- Thread starter Running_Man
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So the VALUE of a bitcoin is the past expenditure of electricity? But the power is used, so where is the VALUE?
NW-Bound
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The value "goes into" bitcoins, 
although I think the current value of all bitcoins is a lot more than the significant cost of energy to compute the encoding.
The idea is that gold and diamonds are valuable because it takes a lot of work to get them. The fact that they are shiny, do not corrode or degrade with time also helps, because that allows them to be buried and hidden in time of trouble. And then with time, when the "easy" gold and diamonds have been found, it gets harder and harder, and that makes them more valuable.
The bitcoin protocol calls for the encoding criteria to be automatically re-adjusted to be harder and harder when more miners join in the fray.
The mining got quite tough long ago, hence people say "screw it", and start a new blockchain. Unlike gold and diamonds, it is not hard to say "let's start a new game where newcomers like us have a fresh shot at getting rich". Hence, more and more digital currencies are created.
And bits are fungible, while gold and diamonds are not fungible with other metals or stones.
although I think the current value of all bitcoins is a lot more than the significant cost of energy to compute the encoding.The idea is that gold and diamonds are valuable because it takes a lot of work to get them. The fact that they are shiny, do not corrode or degrade with time also helps, because that allows them to be buried and hidden in time of trouble. And then with time, when the "easy" gold and diamonds have been found, it gets harder and harder, and that makes them more valuable.
The bitcoin protocol calls for the encoding criteria to be automatically re-adjusted to be harder and harder when more miners join in the fray.
The mining got quite tough long ago, hence people say "screw it", and start a new blockchain. Unlike gold and diamonds, it is not hard to say "let's start a new game where newcomers like us have a fresh shot at getting rich". Hence, more and more digital currencies are created.
And bits are fungible, while gold and diamonds are not fungible with other metals or stones.
aja8888
Moderator Emeritus
The value "goes into" bitcoins,
The idea is that gold and diamonds are valuable because it takes a lot of work to get them. The fact that they are shiny, do not corrode or degrade with time also helps, because that allows them to be buried and hidden in time of trouble. And then with time, when the "easy" gold and diamonds have been found, it gets harder and harder, and that makes them more valuable.
The bitcoin protocol calls for the encoding criteria to be automatically re-adjusted to be harder and harder when more miners join in the fray.
The mining got quite tough long ago, hence people say "screw it", and start a new blockchain. Unlike gold and diamonds, it is not hard to say "let's start a new game where newcomers like us have a fresh shot at getting rich". Hence, more and more digital currencies are created.
And bits are fungible, while gold and diamonds are not fungible with other metals or stones.
Gold is easily alloyed.
https://en.wikipedia.org/wiki/Colored_gold#Rose,_red,_and_pink_gold
NW-Bound
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Yes, and that's why gold is only $1,300 per oz, and a bitcoin is recently between $12,000 to $20,000. And bits are weightless, so the cost per oz is infinite.
The value "goes into" bitcoins,
What is the cost of the energy that goes into creating this bitcoin that you speak of? Can manufacturing of bitcoins be outsourced next to a dam in Mongolia that produces lots of cheap electricity that the Mongolians aren't using?
NW-Bound
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I just got curious about this bitcoin recently, so I needed to go look myself.
A recent Oct 2017 article by IEEE (Institute of Electrical and Electronic Engineers) Spectrum Magazine has a very good article on the Chinese miners and their arrays of machines. A specially built machine called an Antminer S9 which is smaller than a desktop PC houses 189 ASICs (Application Specific Integrated Circuit), each of which has 100 cores that compute the hash function to look for that elusive encoding before the competition. The S9 consumes 1.4kW each, and computes 14 terahashes/sec or 14 trillion hashes/sec.
Another Web site shows the total hash rate has been as high as 17 million terahashes/sec.
If all machines were as good as that S9, the total number of machines in the entire world would be 1.2 million. And together, they would draw 1.2 million x 1.4kW = 1700 MW. Over 24 hr, they consume 40,800 MWh.
If they have to pay the average rate of electricity of $0.12/kWh in the US, that daily consumption is around $5 million/day for all the miners.
The IEEE article writer visited a bitcoin mining operation in inner Mongolia and said the cost of electricity there was 4c/kWh. The power was generated by coal burning.
References:
1) https://spectrum.ieee.org/computing/networks/why-the-biggest-bitcoin-mines-are-in-china
2) https://blockchain.info/charts/hash-rate
A recent Oct 2017 article by IEEE (Institute of Electrical and Electronic Engineers) Spectrum Magazine has a very good article on the Chinese miners and their arrays of machines. A specially built machine called an Antminer S9 which is smaller than a desktop PC houses 189 ASICs (Application Specific Integrated Circuit), each of which has 100 cores that compute the hash function to look for that elusive encoding before the competition. The S9 consumes 1.4kW each, and computes 14 terahashes/sec or 14 trillion hashes/sec.
Another Web site shows the total hash rate has been as high as 17 million terahashes/sec.
If all machines were as good as that S9, the total number of machines in the entire world would be 1.2 million. And together, they would draw 1.2 million x 1.4kW = 1700 MW. Over 24 hr, they consume 40,800 MWh.
If they have to pay the average rate of electricity of $0.12/kWh in the US, that daily consumption is around $5 million/day for all the miners.
The IEEE article writer visited a bitcoin mining operation in inner Mongolia and said the cost of electricity there was 4c/kWh. The power was generated by coal burning.
References:
1) https://spectrum.ieee.org/computing/networks/why-the-biggest-bitcoin-mines-are-in-china
2) https://blockchain.info/charts/hash-rate
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NW-Bound
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Currently, the successful miner is awarded 12.5 bitcoins for each block that he encodes before anyone else. There are 144 blocks generated per day. So, together the miners earn 1,800 BTC/day. At the recent price of $16,000 per bitcoin, the miners make $29 million/day.
Neglecting the capital cost, the production cost per bitcoin due to electricity alone is $5M/1800 = $2,800, or as low as $933 for 4c/kWh. Just a rough estimate, but we can see that the Chinese make good money with the current price of bitcoin above $10K each.
Neglecting the capital cost, the production cost per bitcoin due to electricity alone is $5M/1800 = $2,800, or as low as $933 for 4c/kWh. Just a rough estimate, but we can see that the Chinese make good money with the current price of bitcoin above $10K each.
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Wow, NW-B...Wow...
Thirty years ago, if someone told you that you would be a bitcoin maven and that redduck would be your bitcoin muse, I imagine you would have just laughed or not paid much attention or maybe just quietly slinked away. Or, maybe you would have started researching bitcoin. I'm betting on the latter.
I'd like to ask:
Were you one of those kids in grammar school who always turned in extra credit reports?
And, did the teachers display your reports on back-to-school night for all the parents to see?
And, then did all the parents ask their own kids why they don't work as hard NW-B?
And, then the next day, did the kids punch you hard in the shoulder and take your lunch?
Thirty years ago, if someone told you that you would be a bitcoin maven and that redduck would be your bitcoin muse, I imagine you would have just laughed or not paid much attention or maybe just quietly slinked away. Or, maybe you would have started researching bitcoin. I'm betting on the latter.
I'd like to ask:
Were you one of those kids in grammar school who always turned in extra credit reports?
And, did the teachers display your reports on back-to-school night for all the parents to see?
And, then did all the parents ask their own kids why they don't work as hard NW-B?
And, then the next day, did the kids punch you hard in the shoulder and take your lunch?
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NW-Bound
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My old friend redduck (I hope you don't mind me addressing you as such, as I just learned from your bond thread that you are 12 years my senior), I am glad you like my brief report. I am also glad that this thread and your earlier question made me more interested in this bitcoin business and spend time to learn more.
To answer your recent questions, no, I was not always the top guy in the class. It took a lot less time to be the 2nd or 3rd guy, and I meant a lot, although I occasionally got lucky or the class was so easy. Quite early in life, I knew about diminishing returns. And so, I had a lot of time left to read about electronics and play with my beloved vacuum tubes and transistors, starting at the age of 12.
Now, the guy who strived to be the top student all the time, he was my close friend. He did not have all the free time as I did, and still occasionally I, or my luck, beat his hard work. Life was not always fair.
You asked if some other kids beat me up and stole my lunch. That never happened. You see, I was friend with C-grade students too, and together we did some mischief and had some fun.
My friend, the top achiever, was also never beat up. Being the guy that had to excel in everything, he learned karate. If there was anything I envied him, it was his black belt. But I really could not be envious, because he went to his dojo every afternoon, and I could not spare time from my electronic hobby to do that.
To answer your recent questions, no, I was not always the top guy in the class. It took a lot less time to be the 2nd or 3rd guy, and I meant a lot, although I occasionally got lucky or the class was so easy. Quite early in life, I knew about diminishing returns. And so, I had a lot of time left to read about electronics and play with my beloved vacuum tubes and transistors, starting at the age of 12.
Now, the guy who strived to be the top student all the time, he was my close friend. He did not have all the free time as I did, and still occasionally I, or my luck, beat his hard work. Life was not always fair.
You asked if some other kids beat me up and stole my lunch. That never happened. You see, I was friend with C-grade students too, and together we did some mischief and had some fun.
My friend, the top achiever, was also never beat up. Being the guy that had to excel in everything, he learned karate. If there was anything I envied him, it was his black belt. But I really could not be envious, because he went to his dojo every afternoon, and I could not spare time from my electronic hobby to do that.
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Running_Man
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For all the talk from many people that this is a disaster waiting to happen and all the hapless little guys are in bitcoin, I wondered about that because no one I know has bought any bit coin, a few have heard of it, no one understands it.
CNBC after having about 12 guests sound like most of the posters to this thread -- it is bound to go to zero, my shoeshiner asked me about bitcoin, it's going to zero, there is no real value, well the technology is interesting but it's not a currency, etc ... CNBC sent a reporter out to try and get people to accept bitcoin, asked over a 100 and noone knew what she was talking about and only knew of bitcoin a little bit from news.
One person she asked knew about it and promptly showed her how to process and pay for things with bitcoin and set her up an app to purchase it, which this bitcoin reporter didn't even have the first clue on what to do.
What I take from this is that the idea of a bitcoin "mania" is far overdone. I agree the pricing action gives the same look as many mania's but either this is the most limited mania in history or more likely something else is in play here.
CNBC after having about 12 guests sound like most of the posters to this thread -- it is bound to go to zero, my shoeshiner asked me about bitcoin, it's going to zero, there is no real value, well the technology is interesting but it's not a currency, etc ... CNBC sent a reporter out to try and get people to accept bitcoin, asked over a 100 and noone knew what she was talking about and only knew of bitcoin a little bit from news.
One person she asked knew about it and promptly showed her how to process and pay for things with bitcoin and set her up an app to purchase it, which this bitcoin reporter didn't even have the first clue on what to do.
What I take from this is that the idea of a bitcoin "mania" is far overdone. I agree the pricing action gives the same look as many mania's but either this is the most limited mania in history or more likely something else is in play here.
A mania doesn't have to be particularly wide-spread to be a bubble. I don't personally know anyone who was big into beanie babies. For a little bit there was a lot of talk about them, and the prices when crazy, but for the most part it was a small group of people driving everything.
When the comics I collected in the early 90s went through a bubble, the vast majority of people didn't collect comics. They just got a little hot, and then some of the people who collected went a little nuts. Ironically, some of the hot comics that were expensive in the 90s, and then were purchased by the pound in the early 2000s are now a little hot again. Of course, most of the comics from that time period are worth essentially nothing.
Bitcoin looks like a textbook bubble to me. Sometimes those bubble values turn out to be justified ( see Amazon ), but most of the time it ends badly.
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