Author: praxeology_guy 2017-04-08 20:38:43
Published on: 2017-04-08T20:38:43+00:00
Electrical power is a general consumer good that can be used for many things, while bitcoin mining equipment capital is an extremely specific kind of capital that only has exactly one use, which is efficiently and competitively mining a coin with a particular PoW algorithm. This makes investing in power generation capital less risky than investing in bitcoin mining equipment capital, which is a barrier to entry. Mature Arithmetic Logic Unit (ALU) bound PoW algorithms lacking new attacks can only be out-dated by more general-purpose transistor fabrication technology. However, memory latency bound PoW algorithms lacking new attacks are at risk of being encumbered by all sorts of physical hardware patent inventions, which increases the price of capital equipment or enforces a monopoly on the capital. Investing in memory latency bound mining equipment is even riskier because of the likeliness of a new patented optimization making your capital non-competitive, and given its specific nature, worthless. With the existence of Bitcoin, given other cost factors being less significant, Bitcoin causes all sources of power everywhere to be more equal in price at a particular time. Memory latency bound PoW algorithms result in the mining capital component being the larger component than the electricity component being a good thing because then mining would be less local to otherwise untapped power sources. However, as the mining capital matures, we go straight back to the power cost being the largest component, and various entities unpredictably attaining a monopoly on mining would have to be suffered before arriving there.
Updated on: 2023-06-12T00:01:44.714455+00:00