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Comment by bidirectional | Hacker News Reader

Are there interesting technical challenges related to Bitcoin mining which induce competition and innovation? I ask because I see Bitcoin mining dismissed in the same way high frequency trading is (if you have enough starting capital/connections, you get to print money). However I know enough about HFT to realise that characterisation is very unfair (plenty of firms go bust, they capture a lot less value than the people they replaced, innovation is rife), is there anything similar going on with cryptocurrency mining, or are the surface level dismissals fair?

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There are two aspects. One is the hardware. Coin production is held nearly constant by adjusting the difficulty. Hardware evolves such that hardware from a few years ago is drastically less effective than current hardware, and the difficulty is similarly higher. This means it takes new hardware to mine effectively. With jumps in prices comes jumps in prices of the hardware. And difficulty acquiring it.

Also, the economics change with the price of btc (obviously). When btc is $50k, you can mine very profitably with $.12 kw/h domestic electricity (ie your house). When btc was $10k, you'd break even or lose money.

So if you can get the hardware, and get access to cheap power, yes you can print money. Neither of those are easy. That's the challenge and why it's so easily dismissed as you observe.

The really provocative question is imo, how high will the price of btc go? A lot of people speculate $100-300k. That kind of price justifies a lot of capital expenditure.

There's definitely plenty of engineering around making the chips, miner boxes, and data centers as efficient as possible. Much of that engineering may not be transferable to other fields like cloud computing though.

I would be much happier if there were no innovation. Instead of just wasting electricity, we are wasting lives and minds. We have teams designing custom silicon to print Bitcoin. At least it's better than them working for Google, I suppose.

A "mine" is just a big warehouse full of jerry-rigged infrastructure. It will employ maybe two people and will pack up shop in an afternoon if the owners find cheaper electricity elsewhere. It doesn't provide any value to the local economy.

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