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Ask HN: What is the Bitcoin price level at which miners will leave?
55 points by slake 38 days ago | hide | past | web | favorite | 60 comments
Is there a price point at which mining is no longer financially viable. I'm guessing the point is higher for the smaller mining pools/miners and lower for the bigger mining pools. At what levels is the risk of a 51% mining power to one pool likely.



Bitcoin Can Drop 50% and China Miners Will Still Make Money https://www.bloomberg.com/news/articles/2018-01-10/bitcoin-c...

discussed 6 days ago in https://news.ycombinator.com/item?id=16120062

Money quote from the top comment: "The break even is 1 BTC = $922". Personally I have my doubts, but even at the $6,925 the bloomberg article claims is still very profitable.


As we've learned from oil production lately, quite a number of people/companies are willing to do things that are "globally unprofitable".

E.g. if you adopt the mindset that your CAPEX is a sunk cost, which is reasonable if you already own something nobody wants to buy (unprofitable oil or mining rig), your break even becomes much lower (just has to beat cost of operations/electricity).

With mining it's even more difficult, since mining at an "unprofitable" point in time could later actually become a very profitable venture if the price goes back up, assuming that the mining difficulty also goes down in unprofitable times.


-Why mine at a loss? Even with the outrageous transaction costs, you could just buy at the going rate and be left with way more bitcoin when/if the market rebounds...

Edit: ninjaed by mkempe.


Mining at a loss might make sense for a while if you've made hosting/power commitments.


That fits into what OP said. Because then, like your mining equipment, your electricity cost essentially becomes part of your CapEx, and your operational expenditures (OpEx) become almost zero (for Bitcoin mining anyway).


From CNBC: https://www.cnbc.com/2018/01/16/bitcoin-headed-to-100000-in-...

I know it's just "one analyst", but I don't mind investing (gambling) on something that may give me a x10 yield.


He still said you have to "beat [the] cost of operations/electricity"...


Mining at a loss is not a good idea.

Say your [marginal] production cost is USD 100, but BTC market price is USD 50. You could spend USD 100 to make 1 BTC, or you could turn off your mining equipment and spend USD 100 to buy 2 BTC...

Added: and when the market price goes back up to say USD 1000, would you rather have the 1 or 2 BTCs in hand?


No, that's right.

But there are (perhaps edge) cases where your operation cost is essentially zero. A couple of friends are using their gaming rigs for altcoin mining, and simultaneously as space heaters (we live in cold climate). If they stopped mining, they'd have to turn on the actual space heaters, no electricity cost saved. And they already have the hardware, so no expense there either.


There has to be some additional power expense, otherwise mining rigs would be sold in the "space heater" aisle.


No, simple thermodynamics ensures us that when no significant mechanical work is being done by the rig acting on the environment, and no significant exchange of mass between the rig and the environment is happening, all net electric energy going into the box will come out again as heat.

The reason why mining rigs aren't sold in the space heater aisle is that people usually don't buy $2000 space heaters.


He still said you have to "beat [the] cost of operations/electricity"... Which is the production cost.

You just aren't trying to make a return on the cost of your initial investment (CapEx).


But once you have the hardware, you only need to pay electricity. And that means that current capacity will stay online until ~$1,000 in regions with low energy prices.


You also edited after comment...


Indeed. I inserted "[marginal]" to qualify the production cost, and "Added:" a question to crystallize the profit options.


You also swapped out 'sell' for 'turn off'.


Nope.


OMG, your own archive even shows it!


But then you no longer have your mining hardware to mine with when it does go back up...I don't think you understand any of this.


The other poster said turn it off, not scrap it.


He edited his comment. He had previously said "sell" not turn off.


Absolutely not; you may have misread? If I had considered selling off the capital there would have been some USD amount attached to that sale!


Where does the 100 dollars to spend on 2 coins come from? Turning off your rig would give you 100 like selling would. It's already established you're a liar though.


From the same place as the money to pay for electricity would have come from... It's a simple arithmetic problem; John has USD 100, he can either spend it on electricity (to produce 1 BTC) or he can buy 2 BTC. Obviously owning 2 BTC is better than owning just 1, so the more profitable path is to spend the money buying BTC instead of paying for electricity to mine at a loss. I hope this helps.


That's wrong, you don't get the money you'd save on electricity up front like you would from selling your rig. You're just digging yourself a hole.


Which make me think what would happen if the oil was taxed with the expected environmental impact cost.


Disclaimer: I'm not a bitcoin expert, so please correct me if I'm wrong.

With that said, here's what I think would happen:

1. Bitcoin price goes down enough that a lot of miners leave

2. The difficulty decreases since blocks are taking more than 10 minutes to produce

3. It gets cheaper to mine bitcoins, since less hash calculations are necessary per block (on average)

4. Miners want to join the system again, since it's cheap, thus taking away the risk of a 51% miner

So, bitcoin should self-correct


Mostly correct, except the price dropping squeezes out some miners who have less efficient hardware or more expensive electricity.

It’s possible those miners would find it more profitable to 51% attack, or sell their hardware to someone who wants to.


If prices drop, miners may get priced out of mining if they don't have free electricity. Just like what happened when BTC was mined with CPUs and later GPUs and later ASICs people just stopped mining or using that method. Bitcoin is self adjusting, the only thing that doesn't adjust is the supply which is why some people found value in mining BTC when it was basically worthless.

I don't see how a dropping price has any bearing on a 51% attack.

All IMHO


> I don't see how a dropping price has any bearing on a 51% attack.

Sure it does. Lower miner income = lower security.


This is a logical but too theoretical argument.

Counter-arguments: 1. Mining equipment is a sunk cost usually, so many will keep mining. Inotherwords, its easy to continue operations as normal versus trying to sell off all the equipment (at a loss?) Also, cloud mining contracts are locked in for a year or two, most cannot be cancelled, so mining continues regardless.

2. The difficulty may not actually decrease that much to have a huge impact on the profitability. It really depends on the magnitude of the mining drop-off.


This is the correct answer...


I don't think it's only a matter of Bitcoin price, rather a difficulty adjustment + bitcoin price.

So the question is how many miners will leave at what price.


I have an S1 I received for free. At this point I'm losing $7 a month on it...I'm using it to poorly launder money from my checking account to the power company to my bitcoin wallet.

The GPU is doing a little better, but it's not even rent money, more like 'lunch once a week' money.


You could do some immersion cooling to reduce power usage. Not sure about the S1, but the S7 is still very profitable if you do immersion cooling on it. Although you're also risking damaging the miner (it might have components that dissolve in your coolant).


Miners were mining when Bitcoin was at $10.

Marginal capacity that's barely profitable at $19,000 will disappear at $18,000.

As the hashrate decreases at same difficulty level and transaction volume, fees go up which attracts more capacity.

The difficulty level adjusts approximately every two weeks, so if mining isn't profitable and blocks aren't created fast enough, difficulty will drop to make mining more profitable.

In the last 30 days during the latest bloodbath du jour, hashrate is actually way up from 13 exahashes/second to 17 exahashes/second.

https://blockchain.info/charts/hash-rate?timespan=30days


The cost of production is simply the cost of the (produced) factors of production (see Böhm-Bawerk's "Value and Price", part of his "Capital and Interest" works).

So the answer to your question is that miners ought to leave when the market value of their mined product is less than the marginal cost of production (assuming they keep track). If you have already recovered the cost of the mining tool, then the marginal cost is determined by power (electricity, cooling) and difficulty. At that point you'd be better off turning off the mining tools and using your money to buy BTC rather than power. On the one hand, BTC can go a long way down before that point, and difficulty would change; on the other hand, if the market price were to fall so much as to stop mining it would be tantamount to a complete destruction of the BTC system; I'm not sure how that would happen, it would surely not be simply a question of BTC pricing.


Depends on the cost of electricity, difficulty adjustment, etc

So if you're running a miner right next to the hoover dam, with your basically free hydro-electricity, you can mine for a lot longer than someone in San Francisco where PG&E quadruple charges them for any use above a certain threshold at an already high electric bill rate


The answer is that no one knows for sure, but you’ll be able to see when by looking at this graph, which is an estimate of the global Bitcoin hash rate: http://bitcoin.sipa.be/speed-lin-10k.png


What is a more interesting question for me, is what will happen to bitcoin when mining (almost) stops.


It isn't about BTC price anymore. It may go down or not - doesn't matter. The fees is much bigger game now, and given the hard limit on the tx slots number, the fees don't really have space to go down.


Fees are denominated in BTC, though.


I have read an article that $6500 is the point where the chinese miners with custom ASIC's will not be able to mine anymore.


Does that include plane fare to Québec?

https://www.forbes.com/sites/sarahsu/2018/01/15/chinas-shutd...


What happens when the Bitcoin mines close down?


A lot of miners lose their jobs.


Nothing. The system will adjust difficulty and will continue working.


There can't be transactions, so nobody can move bitcoins around.


There is an adjustment every 2016 blocks, roughly 14 days (under the assumption that a block is mined every 10 minutes). When too many miners drop out, the block time will increase until 2016 blocks are mined and the difficulty readjusted. So transactions can be made, they simply will take longer.

In the possible but unrealistic scenario of all huge miners disappearing overnight right after an adjustment and thus making it impossible to reach 2016 blocks, the users will offer higher transaction fees and so make mining profitable again (or, at least, provide incentive to the miners to come back).


What you describe as an equilibrium really involves lots of disappointed people whose transactions take far longer than expected. Some wallets probably don't support CPFP, lots of people don't have any idea where to look for features like this.

While the system will ultimately reach stasis eventually, it will be seen as an "outage" that will end up playing to many altcoins' strengths (more frequent/softer difficulty adjustments, no-PoW coins, etc).


> that will end up playing to many altcoins' strengths

So what, then the difficulty gets adjusted and that's it. People won't stay on altcoins except for speculation, they're not usable anywhere except on trading platforms or, in case of Dogecoin, on Reddit. The "big whales" BTC, ETH and LTC have sucked up the market - most of the other currencies can't even be directly traded against the dollar but trading has to be done against BTC... thus, whenever BTC drops, everything else drops.

The problem is/will be that BTC has lost its value as an usable payment instrument due to high tx fees, confirmation time and the ridiculous price volatility. I hope this will reverse a bit.

[disclosure: holding ~500€ in BTC]


Not exactly.

If a large percentage of miners stop mining, the difficultly will be adjusted so it's easier to mine Bitcoin. The difficulty is tuned such that blocks are solved every 10 minutes, regardless of how many miners are working.


One problem is that the time required for the adjustment to happen is determined by how many miners are left and is unbounded.


Why am I getting downvoted!? The question is what happens if (all) miners shut down. To me, it does NOT seem to be asking what happens if some miners begin to fade out.

I'm sure my answer is technically correct. Transactions only happen if a block is mined. If all miners suddenly stop mining, there are no blocks mined, there are no transactions, all bitcoins are frozen.

I understand this seems an absurd situation, but this was the question, or have I misunderstood it?


The question wasn't specific about the number of miners stopping operations. At 0 miners indeed transactions will halt and only resume when somebody starts mining again. As the number of miners reaches zero it will become trivial to perform a >50% attack. It will be much simpler to replace the 'legitimate' block chain with an own one as nobody will be there to check it. I up voted your answer.


Thanks, I see now, OP's asking about mines, not necessarily miners (though I guess it's a bit hard to distinguish... if I mine, do I have a mine? how many cores should I have to qualify that as a mine?)

Anyway, on the >50% attack, I'm not totally in agreement. The attack can drop transactions, but can't forge any (which, btw, goes towards the "there won't be transactions"). If the network would ever restart, it will be eventually verified.


never. if it's not profitable miner will leave diffoculty will drop and miners will make profit so the ones that left will come back etc.


It's already at the point where you have to spend lots on money on hardware and have cheap power to make it work.


I can't find the article right now, but there was one on HN recently were the number, at least for chinese miners, was in the high 6k range.


When the price of producing bitcoin > the cost of bitcoin, it will stop. It's like all other forms of mining. For many miners, that's probably the cost of electricity, which could be free in some parts of the world, or very, very cheap.




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