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re: Why is Bitcoin soaring?
Posted on 3/9/24 at 11:23 pm to Jag_Warrior
Posted on 3/9/24 at 11:23 pm to Jag_Warrior
I will preface this with I know some not a lot about the overall concept of Bitcoin and I have an immaterial amount already invested in BTC but I don’t know a lot of the details.
It seems to me the value of bitcoin comes from the blockchain. People “mine” bitcoin which essentially means they provide servers for the blockchain to run on. They get rewarded for this with Bitcoin. The halving cycle cuts the reward for mining in half every four years. Which is fine when the price of Bitcoin keeps going up.
I think eventually the idea of Bitcoin is to be used as a currency. To be used as a currency, you need a somewhat stable value of the asset. With an ever increasing value of the asset, you’d be stupid to use it to purchase everyday items (see the guy that bought two pizzas with 1 bitcoin a long time ago).
I guess my question is eventually what is the reward for people to host the blockchain network? How do the economics not flip to where it’s more costly to host it than the eventual rewards you get? If the value of bitcoin is stable, then my rewards constantly get dwindled down to nothing. Then when we’ve reached the 21 million mark there’s nothing left to reward people with.
Why wouldn’t they quit hosting it at that point?
It seems to me the value of bitcoin comes from the blockchain. People “mine” bitcoin which essentially means they provide servers for the blockchain to run on. They get rewarded for this with Bitcoin. The halving cycle cuts the reward for mining in half every four years. Which is fine when the price of Bitcoin keeps going up.
I think eventually the idea of Bitcoin is to be used as a currency. To be used as a currency, you need a somewhat stable value of the asset. With an ever increasing value of the asset, you’d be stupid to use it to purchase everyday items (see the guy that bought two pizzas with 1 bitcoin a long time ago).
I guess my question is eventually what is the reward for people to host the blockchain network? How do the economics not flip to where it’s more costly to host it than the eventual rewards you get? If the value of bitcoin is stable, then my rewards constantly get dwindled down to nothing. Then when we’ve reached the 21 million mark there’s nothing left to reward people with.
Why wouldn’t they quit hosting it at that point?
This post was edited on 3/9/24 at 11:25 pm
1
Posted on 3/10/24 at 9:55 am to Weagle25
quote:
Why wouldn’t they quit hosting it at that point?
They will make enough money just on fees alone. The more Bitcoin rises in price, the more money miners make on fees. Between now and approximately the year 2140 when the last Bitcoin is mined, the miners' break even point also doubles in price at each halving. To some extent, Bitcoin has to appreciate in price over time for the network to survive, but also as the price appreciates, the miners make more and more on fees, and that will reach a price where miners make plenty just on fees alone. Also, the break even price for individual miners is dependent on what they have to pay for electricity. Some get it dirt cheap.
This post was edited on 3/10/24 at 10:06 am
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