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In today’s interview, PW confirmed the thinking I had put forward in this thread. Essentially the mining difficulty has lagged the march of the machines in terms of efficiency/speed. Peter confirmed also that the mining difficulty (which is adjusted every two weeks or 2016 blocks) is due to fall, for next two weeks.
So all things considered, having a lower difficulty level bodes well for miners getting their capacity upped in H1, ie ARB. Going into H2, there will be a huge number of machines coming online from various listed miners, and therefore anticipation is of difficulty level rising significantly. Of course a meteoric bitcoin price rise might neutralise the drop in profitability %. For now a stable bitcoin price at 45-50k, and difficulty level staying here suits our HODL ambitions perfectly. All imho only. Please feel free to correct me on my logic.
@Lottohopes You again make interesting and valid comment regarding the 'store of value' concept for Bitcoin and the possibility of it acting as leverage against other financial concepts and the fact it can give security of decentralised ledger. Can it eradicate fraud in this area who knows but it will surely make it more difficult to happen (I'm probably being extremely naive in this matter!).
To more pressing matters a good RNS at 7am will put a smile on our faces and give us more evidence that have backed a winner.
Just as a disclaimer, at this stage, bitcoin is behaving more as store of value, ie asset bit like property or gold (as Kevin says in the video I posted). So it’s NOT a currency yet. It may never become a currency and it doesn’t bother me. Its a bit like asking what can you do with a rare coin or a stamp (didn’t want Pearls to sulk). Nothing, you just hoard it and it increases in value.
What gets more interesting is how we can leverage the bitcoin we hold? Interest rates on it? Like Fiat. Or more use cases such as proof of stake etc. Plenty to read and the most important uses may not even have emerged yet. Until then its just our digital gold brick ;)
Sma11Time: forgot to add-this is 900 NEW coins added every day. There is of course transaction fees that is paid in bitcoin, which is a considerable proportion of miner profits. You can track this on various websites and going forwards, I expect ARB annual report will comment on this in some form. So fast forwards to the time where new coin mined is negligible, the network stays intact, because the miners collective incentive is no longer predominantly new coins but the fees for maintaining the network. I may be wrong, but it could be loosely compared to say a Visa network “interchange fee”. Note the manner in which Visa/banks screw over everyone. The retailer pays, the owner of the credit card pays a hefty fee. Eliminating these greedy middle merchants and decentralising this whole transaction could make the bitcoin network (or something else that comes in place of current system) the “go-to” for cash movement frictionlessly and minus all the exchange rate/regulatory hurdles currently facing money movement. Again just my novice thoughts, I m sure plenty here have a deeper understanding and I m happy to be corrected.
I think as we add newer machines, become part of a bigger “pool” and make the whole process more efficient (see Luxor’s work in terms of hash rate pooling), the probability of us cracking the solution and getting that bitcoin increases. So we can expect to have a higher likelihood of getting that bitcoin versus an older/less organised miner I suppose.
I read this interesting article that mentioned that managing a bitcoin mining business is a bit like managing a portfolio of investments. There are so many variables that each needs to be considered in relation to each other and the whole. So Peter may well be trading the coin, selling a slice when it heats up and buying back on dips for ex. This may also explain the exahash capacity varying, machines being shut down/optimised, coins mined varying month to month (obviously also related to Zcash pricing as report monthly is bitcoin equivalent).
So here’s a question to ponder: taking the ethical coin argument, could the chinese be selling their coins aggressively given lack of a market for them amongst institutions which tend to be US leaning? Anyways just my thoughts, probably mostly conjecture. “With time and patience, the mulberry leaf turns to satin.” We are paid to sit on our hands mostly. Good luck all
Firstly apologies for starting a new thread. Some may recall my post few days ago-about ethical bitcoin (a bit like ethical cobalt) and the issues around bitcoin mining. Where its mined, what energy is used, the regulatory environment, the JOURNEY its taken etc. Kevin in the interview above speaks exactly about this, was somewhat humbling to see that he refers to the issues I considered independently. IMHO institutions will cherry pick where they invest in bitcoin. The beauty of bitcoin is that its entire history, its journey is recorded digitally. Who can say that about fiat?
Again, ARB comes up a winner. A transparent solid management team with operational excellence. Mining in a well regulated environment (North America). Energy sources increasingly green. And top efficiency in terms of publicly listed miners. The secret ingredient is the proprietary tweaking that the tech team does, on their machines and the input from Luxor (imho).
RC: I was reading your post earlier today and about to respond-about mining difficulty and hash rate, and the coins mined. This is my rough understanding-happy to be corrected and make no bones about the fact I m learning every day here. The three variables are in some sort of equilibrium: hash rate/difficulty, bitcoin pricing and profitability. Essentially, every miner understands that they have to keep increasing hash rate to keep up with each other. As price goes north (or even if it stays at this superb level of say 45-50k) the hash rate and difficulty will adjust as more and more miners join the fray. The amount of bitcoin mined is the same everyday ie 900 coins, but if we don’t keep raising our capacity, we fall behind and someone else gets a higher likelihood of getting that coin. For H1 21, most people agree that the mining difficulty is not set to rise to that extent that it balances out the price rise. In other words, the miners who add capacity in H1 will profit to a larger extent than H2, where difficulty will rise faster I read somewhere. Adding the newest machines means we will stay at a “technical advantage” even as difficulty rises continuously. As each miner keeps adding huge capacity, the amount of bitcoin mined per exahash has to logically REDUCE (ie we cannot just extrapolate coins mined in past and multiply). The variable that will make profitability still good enough is the rising price. In other words, if bitcoin flies to 100k, huge number of old-marginal miners come back online, huge competition for same coin, hash rate rises faster and difficulty adjusts upwards to keep block rate the same.
So what’s my conclusion for ARB? The bitcoin price staying here is good for us given our HODL policy, instead of rising too fast. Why? Because difficulty stays here, and we mine more coin given we are one of few expanding in H1. Plus we don’t sell the coin, so who cares what the price is right now?