Comment by gitfan86
4 years ago
Miners could make a profit at $1/coin. The issue is that profit comes from somewhere. And that somewhere is new money being put into BTC. Hence, BTC is negative cashflow.
4 years ago
Miners could make a profit at $1/coin. The issue is that profit comes from somewhere. And that somewhere is new money being put into BTC. Hence, BTC is negative cashflow.
Help me here. All databases are negative cashflow. They only 'cost', don't generate 'revenue' by themselves. This is true of ACH mechanism to transfer funds from one bank account to another. Does that make USD negative cashflow? Does the cost of maintaining this ACH system affect the price of USD v/s GBP?
The value provided by a database such as BTC is that it provides a record of 'who owns what at what point of time in history'. I can argue separately about why the 'immutability' of this database itself is a value created by Bitcoin, for which holders can be willing to pay premium for.
Miners earn profit if Operating Costs > $ value of (Transaction Fees + BTC mined). Over a long enough timeline, Fees + BTC mined will ~~ operating costs of the rig. If not, more miners will continue to see economic opportunity, and keep joining the miner pool till that equation is balanced.
The other source of BTC value going up need not be more demand for it, let's say over next 12 months. The ~6% inflation could show up there too.
What am I missing?
The energy waste is designed to go up as each individual Bitcoin goes up in value.
Profit comes when their operating costs are less than the take home from any transaction fees and Coinbase rewards they’ve collected in the same period. It’s not a direct function of liquidity entering the system. It’s true that rising prices from new cash flow means more profit for miners, but that doesn’t imply the opposite. The price could stay constant for the next 100 years and miners that have found a way to remain profitable within that price point would be fine.
Miners have real expenses: electricity, depreciation, etc. Miners also generarte revenue, $45 million per day is a reasonable estimate [1]. This revenue is extracted from the Bitcoin system through both transaction fees and inflation (creating new Bitcoins), but these are sold in portion to pay real expenses, with presumably some profit.
We can estimate 300k transactions per day, which implies about $150 revenue per transaction. Miner revenue is your cost: it is what they extract from the Bitcoin system.
One Bitcoin transaction costs on the order of $150. It's really expensive.
1: https://www.blockchain.com/charts/miners-revenue
If the price stays constant for 100 years where is the money coming from to pay for those NVIDIA cards that the miners are using?