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Comment by wyager | Hacker News Reader

This should probably be titled something like "the problem with an accounting strategy that I made up, which some people might be using, I'm not sure".

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Sure, maybe the books of these companies are not as cooked as implied in the article, but the question remains:

How does a company who spends 31k mining BTC that is currently worth 30k and pays their executives tens of millions in compensation work out in the long run?

here is the thing. there are good investments and bad investments. good execution strategies and bad execution strategies. i have no doubt that a lot of these companies will go belly up. happens in every new domain where there is a lot of uncertainty and FUD.

So the question is not: how does a company ... work out in the long run? the question is: which company actually does things in a sane manner and will survive to be a dominant player in the space once the dust settles?

If you're confident in your analysis you should take a short position.

LOL, Financial derivatives are the exactly problem with the markets today that I'm calling out. Everyone is trying to figure out how to make a "trade" that will make money. The last thing I'm going to do is enter into a financial contract that can be short squeezed and margin called.

Operating cashflow and depreciation curves are the most basic accounting principles out there, the author did not make anything up - he is applying a logical analysis to publicly available data.

sorry, but what works for the printing press does not work for ebooks.

If someone were to talk to you about the cost of printing and distributing books and how much X costs and depreciation over 10 years, you as an ebook seller would laugh them out of the room. Sure there are things that still apply across all businesses, but people seen to dance around the fact that the reason why depreciation model does not work for bitcoin mining is that it's highly correlated to advances that were made in the mining hardware + the huge role the cost of power (geographical location in the end) has on the whole profitability of things.

This is an invalid argument.

Mining needs hardware, which loses value as new hardware is released and mining gets harder. Thus, it depreciates over time.

the point is that you cannot compare apples to oranges and the constraints around bitcoin are NOT the same constraints like the ones around a vending machine. (so that applying the same model is probably a flawed approach)

You misunderstood the vending machine analogy. The author argues that mining hardware is NOT like a vending machine, in terms of depreciation. Mining hardware becomes less productive over its lifespan, whereas a vending machine stays about the same until its broken. The author argues that these companies are applying the traditional “vending machine” depreciation even though, as you pointed out, it does not apply. And that’s the entire crux of how they’re overvaluing themselves.

> the constraints around bitcoin are NOT the same constraints like the ones around a vending machine

Exactly, that's the whole point of the article.

Did you actually read the article?

A flaw in GAAP is not Bitcoin's fault. The OP has no idea if people are actually using shitty GAAP accounting principles to evaluate these miners.

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