[Paul-E]

One of the assumptions the authors make in this paper is that miners can turn their hardware on and off quickly, and that they will benefit financially for doing so. Mainly by paying lower electricity bills. It turns out the really big miners don't pay for electricity the same way you or I do. Big miners sign long term contracts for continuous consumption of energy, and don't save any money for turning mining hardware off for a short duration.

I know one of the authors personally and can try to forward on questions for anyone interested, though they have moved on from academic work so may have limited interest or context.

[michaelscott]

A much bigger assumption is that this will even be necessary, considering the last BTC mined will be in 2140. With such a long time horizon any prediction is basically fanciful guesswork; at that time miners might have all moved to renewables after they become cheap enough, we may have new forms of energy generation which make supply both super easy and cost negligible, or Earth may have entered a post-apocalyptic state and mining is no longer even a consideration. To assume no advancement in tech between now and then seems reductive.

[mumblemumble]

The last BTC mined will be 2140, but the decay is exponential. The reward will halve in about 3 years, and it is likely to halve again 4 years after that, and so on.

[delaaxe]

But price appreciation is also exponential

[andruby]

That can’t stay that way, at least not in real terms (taking inflation into account)

[mumblemumble]

Although that would arguably put Bitcoin in the same deflation trap that led to the collapse of the gold standard.

A money supply that grows more slowly than the economy that rests on top of it just might be the stuff that Malthusian dreams are made of.

[woobilicious]

The gold standard was the least of the Bretton Woods Era problems.

I also wouldn't call this new fiat regime with rising property prices and stagnant wages as a "net win" over Bretton-Woods, the gold standard was probably the only thing keeping the federal spending under control, and real wage growth up.

[wmf]

Price appreciation has to stop at some point. I doubt the price will rise to $10M after the 2028 halving so miners will be under substantial pressure by that time.

[herodoturtle]

I read this comment with interest, thanks for sharing. Makes good sense to me.

If I may ask, do you think the distribution of bitcoin will be somewhat equitable as we approach 2140?

And do you you think it will actually become a medium of exchange as originally hoped? Or will it remain a store of wealth only (as things currently seem to indicate)?

And if it indeed remains only a store of wealth, will said wealth be distributed relatively equally, or will we be left with a relatively small pool of large holders?

Just trying to wrap my mind around the long-term evolution of bitcoin - and your way of explaining the energy conundrum above makes me think you probably have good insight on this.

I'd value your opinion, thanks :)

[michaelscott]

Again I can't really say much about what could happen at this point. History "behaves" too bizarrely, especially over such a long time period, and inflection points are usually completely random and unpredictable (black swans), being only obvious in retrospect.

One thing I can be fairly confident won't happen is that BTC will become a medium of exchange. This is because BTC mechanically behaves more like a commodity than a currency, which means that (for various, immutable technical reasons) it's not able to match the speed of settlement, the price stability and the reliability of supply that are required for a good medium of exchange.

[herodoturtle]

Thanks Michael, appreciate your thoughts.

And I agree. I too doubt BTC will become the medium of exchange it was originally envisaged to be.

As to whether it will retain our confidence as a store of value remains to be seen.

I will continue to follow the heated discussion on HN with much interest. It's great to be able to read the consolidated thoughts of individuals who clearly understand this technology far better than I do.

[uberswe]

It's impossible to predict the future. If everyone holds bitcoin as a store of value then the value should drop as it's not being used for anything one would think. I believe the best outcome is that people start using bitcoin for every day purchases and the hope is that by 2140 the price is relatively stable. Most likely there will be many large holders as there are with real money.

However, someone could maybe do a 51% attack on bitcoin at some point. Maybe there is a unforeseen flaw in bitcoin. Maybe something better comes a long. It's impossible to know.

[jariel]

" bitcoin for every day purchases and the hope is that by 2140 the price is relatively stable."

This is fantastically impossible.

It will about as stable as any other commodity plus the additional swings due to public stampedes one way or another, and the fact that there is no 'underlying value' to anchor the price (like Oil).

Feasibly, if exchange rates are razor thin (unlikely) then it might be possible buy milk and bread with BTC simply by doing the conversion on point, but that of course requires someone to do some 'investing math / intuition' every time they buy a stick of gum.

It can't be a functional currency, at least as it's designed.

And the notion that it consumes gigantic amounts of energy for no net value gained should have everyone up in arms.

[uncletammy]

> It can't be a functional currency, at least as it's designed.

Citation needed

> And the notion that it consumes gigantic amounts of energy for no net value gained should have everyone up in arms.

For what it's worth, bitcoin aims to deprecate every single brick-and-morter bank as well as all the armored trucks driving paper currency to and from them.

When you start to add up all of the energy that would be saved if bitcoin succeeds, the energy costs associated with mining start looking quite a bit smaller.

[imtringued]

>For what it's worth, bitcoin aims to deprecate every single brick-and-morter bank as well as all the armored trucks driving paper currency to and from them.

Is this supposed to be some joke? No it doesn't. Someone had to create a fork of Bitcoin called Bitcoin Cash just to increase the block size. You've had your chance and you blew it.

What's going to happen from now on is that Bitcoin will be absorbed by Visa, Mastercard and Paypal who build an actual payment layer on top of Bitcoin and then people will use Visa, Mastercard and Paypal as their bank. It's the Bitcoin you know and love that is going to die.

[jariel]

"Citation needed"

I literally just explained it to you.

The price of BTC has always been highly unstable. There is absolutely no evidence it will ever be stable, to the contrary in fact, all evidence points to the fact that it will remain unstable.

Every single commodity or currency extant to an economy is unstable relative to the currency of that economy. The only thing 'stable' in terms of USD are things closely tied to the managed USD.

Just the mere fact that it's highly unstable - all other things notwithstanding - make it impossible to be a currency.

"For what it's worth, bitcoin aims to deprecate every single brick-and-morter bank as well as all the armored trucks driving paper currency to and from them."

It's really bizarre that anyone would believe this.

Starting with the fact that 'digitization of currency' is already well under way and so there are no 'truck rolls' in the future.

But of course, the implication that banks only provide a 'place to store' money is completely false. Financial Services are an entire industry. Lending, transactions, authorizations, contracts, accounting, risk management, asset allocation, it's a gigantic industry.

But it's moot, BTC will be the same in 20 years that it is one, something to talk about.

[ynik]

Or maybe there's a foreseen flaw in bitcoin. It's based on public-key cryptography which can be broken by quantum computers. Those don't exist yet (at least not in any form relevant to cryptography in practise), but I think they will by 2140.

[piercebot]

People often bring up the Bitcoin algorithm to make arguments against it, but don't seem to acknowledge the fact that the protocol is mutable.

If the sha-256 algorithm was cracked such that BTC blocks could be solved instantly, the existing miners would have to choose between:

1. No more income, or

2. Adopt a quantum-resistant protocol.

Market economics being what they are, I think it's safe to assume that BTC would survive the "quantum apocalypse." There's too much money at stake for any other choice to be the logical outcome.

[woobilicious]

From my understand, and I'm no expect, but the only known quantum attack against symmetrical crypto like sha-2 is [Grover's](https://en.wikipedia.org/wiki/Grover%27s_algorithm), and the recommended advice is to double the key size, so sha-256 would probably see a huge boost in "hash rate" but not be broken, a move to sha-512 would work probably work.

The problem is that Shor's algorithm breaks asymmetrical crypto used in the wallet signing, that means you can forge ownership of any transaction outputs, which would completely shatter confidence in the coin before they could migrate all ownership of all funds to a new post-quantum signature scheme, this problem is a lot harder to solve compared to a hash algorithm upgrade.

[tromp]

If they are physically realizable at all in practice, then they very likely will be by 2140.

But I think there's a non-negligible chance that the theory of quantum mechanics will break down as we move to superpositions of 2^1024 classical states that must be faithfully represented with physical elements.

[rmah]

The wealth distribution of bitcoin is even worse than the wealth distribution of society as a whole. Further, I suspect that this would be the typical state for any finite/limited asset. IMO, things like bitcoin (and gold) as a primary wealth store are how you create stratified societies with entrenched elites and banking orgs with more money/power than nation states. Not that bitcoin could ever happen dominate, but it's certainly not egalitarian in any sense.

[mumblemumble]

I would expect it to get worse, over time, too. When the block reward was high, it meant that the (strictly financial) cost of actually operating the Bitcoin network was covered by Bitcoin dilution, which meant that everyone was paying it pro rata based on how much Bitcoin they actually own. As the block reward decreases, though, it increasingly has to be covered by transaction costs. That's going to progressively price people out of participation in the direct Bitcoin economy.

I can see using Bitcoin as a primary wealth store, similar to gold. I agree, it would have most the same social features, which seems problematic since none of that is really in line with Bitcoin's original political vision, but I'm not sure Bitcoin's original political vision is anything more than a piece of nostalgia cherished by people sitting on the periphery of the contemporary Bitcoin economy, anyway, so maybe that's no big deal.

The bigger problem I see with Bitcoin relative to something like gold is that it has some troubling practicalities. It's theoretically much easier to steal vast sums of Bitcoin in one go (because 1,000,000 BTC wouldn't be quite as subject to conservation of momentum as a tonne of gold bars would be), and it's definitely much easier for vast sums of Bitcoin to accidentally poof off into a crypotgraphic pocket universe where nobody can reach it anymore.

[dmichulke]

Can you give an example of an egalitarian currency or store of value?

[tromp]

One that has a fixed block subsidy. After any amount of time, whether years or decades or centuries, it will have been distributed evenly over all that time.

Rather than having 50% distributed in just the first 4 years, and only crumbs in later decades.

Gold is much more like the former.

[hulahoof]

I don't see how that logic follows, if this was a fixed block subsidy over the first 4 years instead of just 50%, surely the situation you are describing would be worse ?

[WorldMaker]

"Egalitarian currency" and "store of value" are somewhat mutually opposed goals.

A stable store of value is always going to socially/psychologically encourage hoarding and other human traits that lead exactly back to inequal distributions of value ("wealth").

A truly egalitarian currency would need to focus on the velocity and acceleration (the current of the currency) curves far more than the value at rest, which likely would be an afterthought.

[phroobster]

>do you think the distribution of bitcoin will be somewhat equitable as we approach 2140

I don’t see why the distribution of anything would be “equitable”, outside of a communist utopia/dystopia. These days that word is mostly used by people exploiting the empathy of others to gain power for themselves.

[herodoturtle]

I see what you're saying. Forgive my choice of wording. Perhaps "equitable" wasn't the correct choice.

I more meant whether it will become a currency of the people. Or a store of wealth for the average person.

I'm looking at this through an African lens. Bitcoin showed a lot of promise for cheap and reliable remittance payments and one day a fully fledged currency for the masses. Gave us Africans lots of hope in many ways.

These days I worry it is increasingly growing more difficult to acquire. It's no longer destined to benefit the people.

I don't mean to imply that everyone deserves an equal share. I hope I'm making sense. I guess I'm more wondering about its overall accessibility long term.

[imtringued]

It's ironic. Bitcoin can only keep going up if it becomes more accessible and more people use it. Yet people resist making it more accessible. It's like they are betting on a failing technology stack that will blow up after x amount of users.

[piercebot]

I don't see why Bitcoin's technology stack is failing if it's what is enabling its current value.

Keep in mind as well that the protocol is mutable as long as people agree to change it.

Saying BTC is doomed to fail as it's living alongside a multitude of other cryptocurrencies that attempt to solve its shortcomings is also a dubious proposition to me. Take for example the Mina Protocol[0], which eschews proof of work, huge blockchains, and slow transaction speeds for solutions built on top of zk-SNARKs.

If BTC has value as a long-term store of wealth, and if other cryptocurrencies exist to transact at faster rates with more liquid capital, and if that capital can flow between systems freely (as fast at BTC will allow), then every system is working as designed, right?

0: https://minaprotocol.com/

[eloff]

Exactly. I came here to say this, but you've said it quite eloquently.

I'll just add that some inequality is also a good thing. If you don't have differential outcomes then you don't have a meritocracy where "better" is rewarded. You have a system where everyone is equally poor like the USSR and there is no incentive to improve.

[dcolkitt]

As a tangent, I wonder if Bitcoin mining could re-ignite the nuclear power industry. Nuclear power plants involve a high upfront capital cost, then produce a long-life of fixed electricity output at near-zero marginal cost.

My understanding is that one reason more plants were built in the 60s was because electricity prices were fixed by regulators. That made financial modeling easier, because investors could legibly forecast their payback on the capital investment. When electricity moved to free floating price markets, it introduced much more risk and therefore increased the cost of capital.

Seems like nuclear power and bitcoin mining are a match made in heaven. Demand remains smooth and predictable, even from minute to minute. The marginal cost of electricity is near zero. Many of the large mining pools are so large and well capitalized that they could afford to commission a dedicated plant.

[ska]

Predicting nearly anything (today) about crypto over the timelines necessary to even only commission a new nuclear plant, let alone its lifetime, seems ... risky.

[syngrog66]

I wrote a bit of fiction recently which portrayed a future where a starship needed to run its own Bitcoin mining cluster (because "reasons") and the ship also happened to use a nuclear power plant. and for "reasons" the mining host hardware was also placed as close to the nuclear reactor as they could get away with (well the electricity generation portions anyway.) all needed for (arbitrary, fanciful) plot reasons, but one of ideas I used to justify it was because the power generation qualities fit the power needs of the crypto miners pretty well. stable load, low cost per watt, theres no wind or geothermal or tide in space, and solar is sometimes too weak and other times entirely blocked (picture situation when ship in planetary orbit, on far side from the star, so light is eclipsed.)

[jki275]

Most miners are on hydro, located right next to the dams, and probably colluding with them for either zero or near zero cost. Similar advantages to nuclear I'd imagine.

[tim333]

Nuclear power isn't cheap. Miners need cheap.

[rstuart4133]

> Nuclear power isn't cheap. Miners need cheap.

Yep. And I suspect there isn't any power cheaper than the output of an over provisioned wind or solar farm on a windy or sunny day. And they all will be over provisioned. In fact they all assume a faction of nameplate output now.

[bouncycastle]

Very unlikely it will be turned off, the miners could still keep mining other coins while mining bitcoin blocks even if there is no BTC reward. See "merged mining" https://blog.bitmex.com/the-growth-of-bitcoin-merge-mining/.

[uncletammy]

This is a good point that the authors don't touch on. There are many coins secured by sha256 and I'm sure many more will come along before BTC finishes it's release schedule.

Switching to any one of them is likely to provide more revenue than just attacking the network for a little extra transaction fee money.

This is one of those times it's really useful to make a distinction between bitcoin the currency and bitcoin the protocol. If it was the authors intention to describe a future problem on the BTC network then they messed up by not addressing the rest of the sha256 mining ecosystem. However, if it was their intention to describe a problem with the protocol itself then it kind of makes sense to not touch on miner's alternatives.

[tromp]

All other sha256 coins combined only account for less than 2% of bitcoin's hashrate, so this doesn't really change the arguments.

[bouncycastle]

No, this is not what we are discussing. We are discussing using bitcoin's hashrate to mine other coins. No modification to bitcoin is needed, the other coins simply need to be aware of bitcoin and be able to verify bitcoin's blocks. Other coins can have an auxillary mining algorithm too, or even merged mined with other coins besides BTC, doesn't have to be sha256.

[davidgerard]

Miners do turn their hardware off quickly, we saw this in November 2018. After a long period of profit, suddenly only the top-of-the-line miners were making money, and they just threw out a pile of stuff. Writeup I did at the time: https://davidgerard.co.uk/blockchain/2018/11/27/the-bitcoin-...

[Closi]

Commercial energy prices do vary throughout the day though, so if they are signing a single fixed price contract per kWh that would miss the opportunity to run older hardware more profitably during cheaper times.

Besides, I doubt miners are keeping going during triad periods.

[jcpham2]

Absolutely! When miners are priced out they will be. If you can make a profit mining bitcoin, you’ll have already _arbitraged_ the pricing discrepancies in energy prices and made a boatload of money by now doing it.

And once you get priced out, you are operating at a loss. Then you turn the miners off, sell ‘em to the next person willing to gamble vs. doing their homework.

Re read that first paragraph real closely. I personally used to have a blog teaching people how to mine bitcoin on Ubuntu 10.04... until I didn’t anymore.

Now, whether anyone likes it or not: Bitcoin has both value and utility until at least 2040, block rewards incentivize mining for 20 more years (19, whoops) if we read the white paper.

Two thousand and forty. Every 10 mins, new block. Chain, new block. Huge billion dollar economy of SHA256 miners custom built for proof of work. That money to pay for all of that is coming from somewhere. Mark my words, proof of work doesn’t crash overnight. It wasn’t built built in a day either.

AFTER that, there’s 100 years of “will bitcoin live” because of minimal to NO block rewards.

These papers are so old and the subject matter is still misunderstood, it’s nice to see people learning and stuff but HN gah, just omagersh

[comex]

Given that we’re talking about less than 10 minutes’ worth of energy, I wonder if a battery might be a viable option.

[konschubert]

Energy from a battery is almost always more expensive than energy from a grid.

You have to account for the depreciation of the battery.

[mistrial9]

the box on page 5 defines DefaultCompliant as "The default Bitcoin mining strategy, including all available transactions, mining on the end of the longest chain, choosing the older block in a tie, and publishing all blocks."

the core code does not choose the older block in a tie, the code chooses the block with the largest legitimate chainwork (under current TARGET epoch)

Second note: this paper investigates the era in the future when there are no mining rewards, only transaction fees. How far away is that ? How valuable is one satoshi now? Much of what is said is relative to that far-away case

(reading through the paper) This is an interesting (and thorough) thought experiment for what behavior might emerge when only transaction fees are the reward for mining. However the case the paper makes for a serious security problem gets weaker, as the argument depends on a growing number of assumptions as the paper goes on..

I fail to understand why a PETTY-COMPLIANT miner would ever realistically take a set of Tx that does not short-term maximize profit, given the competition for new blocks goes WAY up as the value increases. In other words, the undercutting and LAZY-FORK behavior would be crowded out right away, as it is insufficiently popular.

In the AGGRESSIVE-UNDERCUTTING discussion, it assumes a lot of "forks" or alternate chain tips, to chose from, is this true in practice? Are there really that many chain tips to chose from, to make this practice even a consideration?

I see in page 10 that there is a more refined and detailed descriptions on miner strategy. From a math perspective this is interesting, but the comments above stand.. would anyone even have a chance to move ONE BLOCK using these considerations, given the value and competition for every single block?

[SilasX]

>It turns out the really big miners don't pay for electricity the same way you or I do. Big miners sign long term contracts for continuous consumption of energy, and don't save any money for turning mining hardware off for a short duration.

Really? Those contracts don't let them resell the unused electricity at (some fraction of) the spot price?

[rkagerer]

Depending where they are and the nature of their rate contract, can't they can resell their unused, pre-purchased capacity back to the grid?

[troysk]

They talk about miner turning off the system just after they have mined a coin as they probability of getting another soon is very low while the cost of running the system same.

[retsibsi]

I don't think the probability changes, does it? But the block will be less valuable if there are fewer transaction fees to claim.

[bawolff]

That sounds like gambler's fallacy.