
Texas Bitcoin Mining Startup Gets $50M from Peter Thiel - momentmaker
https://fortune.com/2019/10/15/what-is-bitcoin-mining-layer1-peter-thiel-crypto-investment/
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gorgoiler
Something I don’t really understand about bitcoin: why isn’t bitcoin tied to
the cost of electricity?

If a bitcoin costs $8000 to buy on an exchange but I can mine one using a $300
graphics card and $4200 of electricity, why doesn’t 1BTC cost something closer
to $4500? Does that 2x delta account for miner salaries / rackspace rent / AC
bills?

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gorgoiler
Answering my own question after some research — I think the main answer is
that the probabilities are so sparse that there’s no point mining unless:

(a) you have a large amount of hardware, which will incur a large capital cost
that puts up such a large barrier to entry only a few orgs can realistically
participate; or

(b) you join a mining pool, whereby your rewards for mining are diluted such
that it’s more cost effective to obtain BTC by spending dollars, than it is to
mine your own.

[https://www.coindesk.com/information/get-started-mining-
pool...](https://www.coindesk.com/information/get-started-mining-pools)

The premium charged for buying BTC on an exchange (vs the theoretical
hardware-plus-kWh costs of mining your own) reflects the market power of the
large mining operations’ ability to deploy the capital needed to do any kind
of fruitful mining.

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alwillis
It's a little bit more complicated than just the cost of electricity, since
that affects miner profitability more than what a Bitcoin costs on the open
market.

If you look at the historical prices, Bitcoin was around $3000 in February
2019, so it’s not like the price of Bitcoin and the hardware and electricity
costs are highly correlated: [https://www.coindesk.com/bitcoins-price-longest-
ever-bear-ma...](https://www.coindesk.com/bitcoins-price-longest-ever-bear-
market)

As I said in another post, Bitcoin is a non-sovereign, hard-capped supply,
global, immutable decentralized digital store of value. It’s an insurance
policy against monetary and fiscal policy irresponsibility from governments
and central banks globally.

In the world that we live, that’s gotta be worth something.

