From mboxrd@z Thu Jan 1 00:00:00 1970 Return-Path: Received: from smtp1.linuxfoundation.org (smtp1.linux-foundation.org [172.17.192.35]) by mail.linuxfoundation.org (Postfix) with ESMTPS id 1659FC00 for ; Wed, 2 Mar 2016 18:07:43 +0000 (UTC) X-Greylist: whitelisted by SQLgrey-1.7.6 Received: from mail-vk0-f50.google.com (mail-vk0-f50.google.com [209.85.213.50]) by smtp1.linuxfoundation.org (Postfix) with ESMTPS id 6C6F0D5 for ; Wed, 2 Mar 2016 18:07:42 +0000 (UTC) Received: by mail-vk0-f50.google.com with SMTP id e185so210036028vkb.1 for ; Wed, 02 Mar 2016 10:07:42 -0800 (PST) DKIM-Signature: v=1; a=rsa-sha256; c=relaxed/relaxed; d=gmail.com; s=20120113; h=mime-version:in-reply-to:references:date:message-id:subject:from:cc; bh=1vweCdN4wtScLVdmfl6pvv962NITnjoAEhuvNiECvWQ=; b=SwOhAWvu8/DVpA8fgUVw0yiqa57+9sAczZNjCDHgvWwRJOBTJcLNSzv8xSkmu2kfy+ 71DBY8H1nlAuFklb8v5JHNPacsttWEDATQrKTMRWprgo3CMtTp6mC/qJDn6RrVaFloMR hYdtMmfScDG/Lezq5nk4HzpNFct8JA/dcT4g7O0lrcYp46jE0fULR73O/XlsL0DSg1sr ufB8pkFl9YDqBnVVhhR+xsRSbxNC21H9iOjh3UMgCiFT8JyxmzHAYzX+1JmqkfaZOMOG LCK/Qinmtb9eGy5TpQnDSd1y5XRPEBT8erdX/Gpo9IC/e6chbgkoz68FCdn4axuUS5ou n3zg== X-Google-DKIM-Signature: v=1; a=rsa-sha256; c=relaxed/relaxed; d=1e100.net; s=20130820; h=x-gm-message-state:mime-version:in-reply-to:references:date :message-id:subject:from:cc; bh=1vweCdN4wtScLVdmfl6pvv962NITnjoAEhuvNiECvWQ=; b=Kh4zbCaGr8BjxVeMH/gOLf72I4G2YwJKqiQuuq2I9GGjq+hRmIGbuOjwSE2o2mEVsg 0f1VBahEHIzxQ8SIECaB//FwKvP4OSidTD/WBpOa09UI6NWZQMnmy0FyWCMS6TXIX/KJ 98FrSnKGOjcJdBYIaGlboD+UQY+idRtCqLiykLSvlooZk4KIobe/il2KgdGcU8ggz2u0 Nyc417t8DoJrly+Pg5ZMqmS4kwimXiwnaMjhv7PleXCYEzgmniuk5F72v/uIdK/sN7Cz f5m2vM4LevdEAwGHDq0L0AZu0O/gmTLhjeNBG6z56S7liYTXr1ZhzqznR6c1p+4BjmbR OtEw== X-Gm-Message-State: AD7BkJJsB5R6RY9H0HST3M6XqLC2MGggUVZRqHaXPc5/buQFCSnn7BodEFv4xWJUfXJe8XTSmzDC36rKSSquhg== MIME-Version: 1.0 X-Received: by 10.31.172.135 with SMTP id v129mr18652651vke.154.1456942061628; Wed, 02 Mar 2016 10:07:41 -0800 (PST) Received: by 10.159.37.137 with HTTP; Wed, 2 Mar 2016 10:07:41 -0800 (PST) In-Reply-To: <56D71488.4080607@gmail.com> References: <201603021456.15820.luke@dashjr.org> <201603021542.29609.luke@dashjr.org> <56D71488.4080607@gmail.com> Date: Wed, 2 Mar 2016 18:07:41 +0000 Message-ID: From: Tier Nolan Cc: Bitcoin Dev Content-Type: multipart/alternative; boundary=001a1143e3dc0ab286052d14c2fe X-Spam-Status: No, score=-1.7 required=5.0 tests=BAYES_00,DKIM_SIGNED, DKIM_VALID,DKIM_VALID_AU,FREEMAIL_FROM,HTML_MESSAGE,MISSING_HEADERS, RCVD_IN_DNSWL_LOW autolearn=no version=3.3.1 X-Spam-Checker-Version: SpamAssassin 3.3.1 (2010-03-16) on smtp1.linux-foundation.org X-Mailman-Approved-At: Wed, 02 Mar 2016 18:37:45 +0000 Subject: Re: [bitcoin-dev] Hardfork to fix difficulty drop algorithm X-BeenThere: bitcoin-dev@lists.linuxfoundation.org X-Mailman-Version: 2.1.12 Precedence: list List-Id: Bitcoin Development Discussion List-Unsubscribe: , List-Archive: List-Post: List-Help: List-Subscribe: , X-List-Received-Date: Wed, 02 Mar 2016 18:07:43 -0000 --001a1143e3dc0ab286052d14c2fe Content-Type: text/plain; charset=UTF-8 On Wed, Mar 2, 2016 at 4:27 PM, Paul Sztorc via bitcoin-dev < bitcoin-dev@lists.linuxfoundation.org> wrote: > For example, it is theoretically possible that 100% of miners (not 50% > or 10%) will shut off their hardware. This is because it is revenue > which ~halves, not profit. It depends on how much is sunk costs and how much is marginal costs too. If hashing costs are 50% capital and 50% marginal, then the entire network will be able to absorb a 50% drop in subsidy. 50% capital costs means that the cost of the loan to buy the hardware represents half the cost. Assume that for every $100 of income, you have to pay $49 for the loan and $49 for electricity giving 2% profit. If the subsidy halves, then you only get $50 of income, so lose $48. But if the bank repossesses the operation, they might as well keep things running for the $1 in marginal profit (or sell on the hardware to someone who will keep using it). Since this drop in revenue is well known in advance, businesses will spend less on capital. That means that there should be less mining hardware than otherwise. A 6 month investment with 3 months on the high subsidy and 3 months on low subsidy would not be made if it only generated a small profit for the first 3 and then massive losses for the 2nd period of 3 months. For it to be made, there needs to be large profit during the first period to compensate for the losses in the 2nd period. --001a1143e3dc0ab286052d14c2fe Content-Type: text/html; charset=UTF-8 Content-Transfer-Encoding: quoted-printable
On W= ed, Mar 2, 2016 at 4:27 PM, Paul Sztorc via bitcoin-dev &= lt;bitcoin-dev@lists.linuxfoundation.org> wrote:
For example, it is theoretically possible that 100% of miners (not 50%
or 10%) will shut off their hardware. This is because it is revenue
which ~halves, not profit.

It depends on ho= w much is sunk costs and how much is marginal costs too.

= If hashing costs are 50% capital and 50% marginal, then the entire network = will be able to absorb a 50% drop in subsidy.

50% capital= costs means that the cost of the loan to buy the hardware represents half = the cost.

Assume that for every $100 of income, you have = to pay $49 for the loan and $49 for electricity giving 2% profit.=C2=A0 If = the subsidy halves, then you only get $50 of income, so lose $48.=C2=A0
But if the bank repossesses the operation, they might as we= ll keep things running for the $1 in marginal profit (or sell on the hardwa= re to someone who will keep using it).

Since this drop in= revenue is well known in advance, businesses will spend less on capital.= =C2=A0 That means that there should be less mining hardware than otherwise.=

A 6 month investment with 3 months on the high subsidy a= nd 3 months on low subsidy would not be made if it only generated a small p= rofit for the first 3 and then massive losses for the 2nd period of 3 month= s.=C2=A0 For it to be made, there needs to be large profit during the first= period to compensate for the losses in the 2nd period.
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