Comment by WJW
4 years ago
> people would stop mining which would decrease the difficulty of mining causing it to use less electricity.
This is true, but then you have a bunch of costly mining ASICs sitting idle. The bitcoin network does not pay miners out of the goodness of its heart but because it needs a very high hash rate to defend against double spend attacks. Guess what those unused ASICs might be very effective at? A prolonged fall in mining power caused by a falling BTC price is a death sentence for bitcoin as it would lead to massive attacks by opportunists renting hashing power to double spend their coins. You can already see this in many smaller coins.
> nearly free sources of electricity such as flared gas wells, solar, etc
Those may be cheaper than regular power, but they are not free. Taking solar as an example, you need to invest capital to buy the solar panels and they have a finite lifespan. Cost divided by lifespan gives you the running cost in $/year. Similar things are true for flared gas wells; you still need to capture the energy somehow and generators are not free.
> If Tesla accepts Bitcoin/Doge for solar panels then you may have a system independent of fiat.
This just moves the problem by one degree of separation. Unless Tesla can buy solar panels for bitcoin, they will need to sell crypto for fiat to buy their inputs. This goes all the way down the supply chain down to the real-world miners who dig up the ores for the solar panels and even they will need to pay their taxes, which you cannot do in bitcoin.
> I think BTC's value relative to USD will increase over time due to fiat's inflationary nature (Fed is targeting 2-3% inflation).
Perhaps. I suppose that this will depend on how much the maintenance costs in electricity and miner ASIC replacement costs as a percentage of total bitcoin market cap per year. If these costs are higher than 2-3% per year, bitcoin will see a net outflow of fiat as running costs and can only rise in price if new users continuously flow in (and of course, only ~7 billion potential users exist).
Also, it might be interesting to read up on why central banks universally target a low but nonzero inflation. There is a ton of established theory about why this is desirable and none of it is based on "let's screw taxpayers". Throwing that away will basically guarantee that crypto will never be very useful to pay your bills with.
That's a really interesting scenario. But I'd imagine if double-spends became a persistent threat, they'd just hard fork to a slightly different hashing algorithm. That would brick all the pre-existing ASICs.
In the 2018 bear market, BTC lost 82% of its market value peak-to-trough. Double spend attacks by dark ASICs didn't become a factor then. So most likely you'd have to see BTC fall by 95% or more before this became a threat.
>>> This goes all the way down the supply chain down to the real-world miners who dig up the ores for the solar panels and even they will need to pay their taxes, which you cannot do in bitcoin.
Unless more countries follow El Salvador's example, and accept cryptocurrencies as legal tender. If El Salvador hadn't banned metals mining in 2017, you could the guys digging up ores with BTC today.