- cross-posted to:
- buttcoin@lemmy.world
- cross-posted to:
- buttcoin@lemmy.world
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bitcoin mining hasn’t been profitable for a long time. Like, a decade or so.
Finally.
By design, it’s supposed to be barely profitable, so it makes sense it would cross that boundary once in a while. Then some miners leave the network or slow their hash rate, the difficulty is adjusted automatically, and it becomes profitable again. It’s actually a pretty interesting strategy.
Ostensibly, the difficulty depends on how many miners there are on the network. More miners = more difficult. Fewer miners = less difficult. The “difficulty” is just how “lucky” you have to be to hit a successful hash on a block. The block’s hash is based on the previous block + all the transactions you include in your block + a random number you add. That random number is what you change to try to hit a successful hash. If the hash starts with a certain number of zeroes, you have a successful block you can add to the chain, and you’re rewarded with some brand new coin in your wallet (you include that in the transactions in your block). If not, you change the random number and try again. How many times you have to try again is controlled by the leading zeroes requirement. You’re competing with every other miner on the network to find a successful block first.
The amount of new coin constantly goes down as the chain gets longer, until it hits zero and mining doesn’t create new coin. Then, you would charge a fee for including someone’s transaction (a lot of miners already charge a fee). The more zeroes required at the start of the hash, the “harder” it is to mine. The network automatically adjusts how many zeroes are required to keep new blocks being added at a roughly constant rate (one block every ten minutes is the target).
All of this is enforced by the algorithm Bitcoin miners use. If a “rogue miner” submits a block that doesn’t meet these criteria, the other miners just reject the block and don’t add it to their copy of the blockchain. The consensus is what really matters, and no one entity controls a majority of miners. Each miner has their own copy of the entire blockchain, so each miner can validate any block it receives before adding it to the chain.
Fewer miners would mean blocks are being added too slowly at the current difficulty, and the network adjusts to make it easier to hit a successful hash. The network automatically adjusts difficulty every 2,016 blocks (it’s all just math, and it’s part of the Bitcoin algorithm), which is roughly every 2 weeks. So, it should in theory only be not profitable for up to two weeks.
(Please note that this is simplified to the point of being technically wrong, but in principle, that’s how it works. Technically, in a mining pool, you can still get rewarded even if you don’t hit a successful hash. You get rewarded based on the hash rate you provide to the pool, with the understanding that you won’t get the full reward when you hit a successful block. Also, it’s not really about the number of zeroes, but a “target” hash that your hash needs to be “below”. A hash might have the same number of leading zeroes, but not be below the target, so wouldn’t be successful. That’s really unlikely. In practice, this basically means more leading zeroes. If the target got high enough, it can even have no leading zeroes. That would probably require an intergalactic sized network.)
Wouldn’t it be easier if a bunch of people paid a dollar every second, and one of those people was randomly selected to get every dollar submitted?
it would, but the act of giving a dollar doesn’t double as a way to validate transactions
Thanks for the refresher. I’m aware of the basics, but assumed the difficulty measured by the number of zeros could only increase. Apparently difficulty can decrease, and I’ve read it’s expected to decrease very soon to keep the system running a while longer.
Bitcoin’s creator was smart enough to design a system that automatically adjust to remain profitable for several years without intervention, but not smart enough to foresee social and environmental costs.
It’s a good example that illustrate why automated systems shouldn’t be left running unsupervised, even if it’s designed by the best minds with the best of intentions.
It’s a good example that illustrate why automated systems shouldn’t be left running unsupervised, even if it’s designed by the best minds with the best of intentions.
The network is constantly supervised and mining is a competitive business. The network was built to adjust, and is working precisely as intended.
The network was built to adjust
Then why doesn’t it adjust to avoid negative social and environmental effects? Probalby because it’s not possible to adjust bitcoin’s algorithm, only some parameters, and because miners don’t have enough intensive to abandon bitcoin for something less destructive.
My understanding is it’s not possible to modify nor fix bitcoin’s core algorithm, which include the difficulty and consensus logic.
A hard fork is possible, which means leaving the bitcoin network and setting up an alternative (hopefully better) network with a different algorithm.
There are other methods of operating a blockchain, besides proof of work, which are much more energy efficient. Think of Bitcoin being like a coal fired power-plant and some other cryptos based on proof of stake being akin to solar panels.
but also proof of stake is just taking off the mask and outright saying that rich people control the network
This is exactly as designed. Bitcoin mining is intended to becomes less profitable the more people do it, using market forces to control the amount of mining that’s being done. Headlines like this are kind of ridiculous.
The headline is only ridiculous if you are inferring something else that isn’t in the headline. Otherwise it’s just… true?
I generally expect a headline to be about something notable. “Sky remains blue”, “Boiling water said to be hot”, and so forth are ridiculous headlines IMO.
Right. But your examples are about a situation not changing. You know what news is right?
Or are you saying Bitcoin was never worth mining?
No, I’m saying that Bitcoin’s designed so that there will always be some miners that are slightly unprofitable. It’s worth mining for most of the miners, but not the ones that are just over that edge. The edge automatically adjusts so that there will always be some that are just over it.
If you want to interpret that as “Bitcoin is always unprofitable to mine”, then sure, you can interpret it that way. Profitability varies from mining operation to mining operation, though. Not everyone will be over that threshold, and even if by some strange sequence of events everyone was over it the difficulty would adjust downward soon enough.
New data tells us that mining a single Bitcoin or one BTC costs the largest public mining companies over $82,000 USD, which is nearly double the figure it did the previous quarter. Estimates for smaller organisations say you need to spend about $137,000 to get that single BTC in return. BTC is currently only valued at $94,703 USD, which seems to be a problem in the math department.
Bitcoin mining will always be profitable for the people with the cheapest electricity and largest economies of scale. There is a difficulty adjustment algorithm in the protocol that ensures this. When the price tanks people turn off thier miners, difficulty adjusts downwards, and then it takes less electricity to find a block.
tl;dr title is wrong
this is what im always trying to get people to understand. bitcoin is programmed to take more resources to artificially increase in value. its why its so horrible for the environment and why it could never really be used as a currency. Now other coins fix this issue but bitcoin tends to be popular because its fixed. Some even do useful work like gridcoin.
Libertarian economic theory failing in front of our very eyes
At this point, if we were smart, we would recognize that this thing is going nowhere and leverage it to drive the renewables market. The planet will be sterile before any revolution happens. Capitalism is another thing that is going nowhere. But you can fold it in on itself to trick it into actually doing something good for a change.
Gotta play the hand you’re dealt.
Yeah this article is woefully uninformed. Author seems to be butt hurt about GPU pricing rather than any serious interest in how the protocol actually works.
The quote is actually from the article this one paraphrased and linked to, while leaving out all of the actual, you know, information
So wait. You’d have to read the article and not just the headline to know the story?
No, you’d have to read the article that this one linked to. :b
Lol fair enough
The headline isn’t accurate as usual, but isn’t completely wrong either. Anyway, the article you’ve quoted is more informative than the one I posted, so thanks for that quote.
We’re at a point where it’s no longer profitable for individual miners, even if we ignore externalities like the cost we’re collectively paying due to pollution and carbon emissions.
Mining require increasing amount of energy and resources as time pass, so unless there’s a radical change in bitcoin’s algorithm or unless energy becomes free, we should expect mining to get non-profitable in more and more situations.
We’re at a point where it’s no longer profitable for individual miners
We have been at that point since GPU mining stopped being feasible in 2014, it’s just gotten worse. ASICs made it so the only people who could profit off mining were people who could place a wholesale sized order of hardware from bitmain, etc. Anyone else who claimed to be mining profitably was likely someone who was:
- buying old hardware 2nd hand (or new hardware at MSRP) and capitalizing on free electricity in their rental
- not selling their Bitcoin immediately (they weren’t making money from mining, they were making it from speculating)
- lived in Quebec and could double dip (North America’s cheapest grid + free heating for 8 months of the year)
unless there’s a radical change in bitcoin’s algorithm
The algorithm already does this though. Every 2016 blocks if it took more than 10 minutes per block, the difficulty of mining bitcoin goes down, not up. This is why every halving event you see a radical drop in difficulty, because at a given kWh you are producing half as many bitcoin - meaning people turned off their miners because it’s less profitable. The flipside is the rate of issuance goes down, so there is a lower inflationary effect, and the price of Bitcoin usually also skyrockets (which means eventually these miners re-enter, and difficulty eventually goes back to where it was). It can never get to a point where Bitcoin mining is completely unprofitable unless the price goes to zero, because there will always be a guy with a solar panel and fully paid-off hardware who can mine it for free. Granted, it can get to a point where a lot of people have to take a huge loss on capital expenditures if the price nosedives and never recovers
I don’t believe this is necessarily true. Miners like Riot Blockchain are operating at a loss and other people are stealing electricity.
Miners like Riot Blockchain are operating at a loss
I’m not a finance wizard, but I peeked at their last SEC filing, and first 3 quarters of 2024 they posted a 35m operating loss, but added almost 900m worth of assets to their balance sheet (mostly Bitcoin), which to me tells a very different story
That’s because they diluted their stock and sold it. The income doesn’t come from mining Bitcoin.
If we’re at the point where it takes “economy of scale” to remain in the game then the average miner must have invested in a whole lot of hardware and such. What happens when the cost of financing the premises and equipment outweighs the meagre returns over electricity cost from keeping things running? There could be periods where nobody’s making money. Not that I have any idea if we’re in one.
There is nothing in the algorithm tied to BTC price. Sure, you’ll likely tend to get less miners as the price decreases, but that doesn’t guarantee that it’s profitable. Plenty of people, organizations, governments, etc do things that aren’t immediately profitable and may never be.
It remains profitable for scammers who use malware botnets consisting of other peoples computing power and electricity.
Not if you outright steal the electricity.
I remember a thread where someone had put a mining rig inside a hotel or apartment’s cleaning room and was running it off the stolen electricity.
You mean getting paid for using energy is not a working business model? Was about time that the market found that out
Turns out the giant earth heater wasn’t the best business concept.
Getting paid for using energy is literally every business model.
Given the current price of bitcoin, I suspect the market still doesn’t know.
Mostly due to the fact that mining bitcoin becomes harder as more and more are found, and the “worth” of that work no longer exceeds the cost in electricity to do so.
In the past, it was basically free money, especially with how volatile it’s value is/was
To this day, I have not understood what exactly is even being calculated, and for what real world application. I mean, I understand mostly what crypto is and how it works, but not why doing those calculations results in financial gain.
There is not useful work being done. They may as well be crossword puzzles. Some coins do use the work to do useful things, but bitcoin does it as a way of “proving your work” to earn coin.
I suspected that, but why the hell is “proof of work” nothing of any use or value? That just seems so fundamentally absurd it doesn’t compute for me apparently
I always thought it would be ideal to do this to create a powerful distributed computing network that can both serve to process the transactions made with the coin and also to do something useful, like folding@home or seti@home or whatever. But apparently nope, GPU crossword puzzles that do nothing but use electricity to make heat (and, as a fraction of a fraction of the work, process a blockchain transaction) are the best they could think of.
you’re calculating the sha256 (i think) hash of the previous transaction block’s hash plus your block of transactions. What’s making it proof-of-work though, is the stipulation that “the hash has to start with at least five zeroes”, with “five” being an adjustable difficulty value. To be able to get that specific hash an otherwise meaningless number (a “nonce”) is included, and by increasing this number by one you can change the hash value.
so basically, all these servers are running hash calculations on the same thing over and over again with a single number changing between runs until they get an “approved” hash value. whoever gets there the fastest gets their block added to the chain, then everyone else has to start over with that hash as the “previous” one.
It’s called “proof of work” because it’s difficult to find a suitable value, but it’s trivial to check that it’s correct. you just need the nonce. so by presenting that nonce to everyone, you’ve proved that you “did the work”.
as for the reason why they do this, if each block’s hash is dependent on the hash of the block before it, it means the entire chain is resistant to tampering. you can’t insert a block in the middle without recalculating the entire chain.
Yeah, so you end up with a fraction of a fraction of the work time going to actually doing the block chain transaction, and the vast majority going into the artificial difficulty
yup, running a global network on top of something designed to be slow seems… inadvisable.
Now the prices of GPUs will go back to normal right?.. right?
Bitcoin mining hasn’t had anything to do with GPUs since 2014. Ether, since 2022. It’s the AI people you’re looking for.
Hey, sorry to break it to you, but there’s this thing called “AI”…
I don’t think GPU are used for bitcoin any more? You need ASICs to be able to hope for any return on investment.
Malware that feature crypto mining is probably still using GPUs, since the person getting the coins is not paying the utility bill.
In the future, games will renders about nine pixels and it will all be upscaling.
Atari games are going to make a huge comeback
Good.
