RT @Leorzhang: I just published "Bitcoin MIning's Three Body Problem".
Mining is a complex inter-disciplinary phenomenon. While it has grown into a billion-dollar industry over the years, the invisible rules governing every aspect of it remain secretive to outsiders.
This is an interesting article, but IMHO, its discussions on Hacker News lacks depth. Almost all threads are debating about superficial Bitcoin issues that has already been talked endlessly, and none of the thread focused on the main thesis of this article:
> Bitcoin mining is a complex phenomenon that connects hardware and software, the energy and financial markets. Invisible rules govern every aspect of it. The performance of an individual operation is determined by various external factors that are often hard to quantify and almost impossible to forecast.
It stated that Bitcoin mining as a whole, is a complex social-economical-computational-environmental phenomenon with a huge number of moving parts and uncertainties. The most fascinating fact to me, is the direct impact of climate cycle in southern China on the mining industry, almost with a mythical tone found in some Sci-Fi novels. While Bitcoin is a highly artificial and technical construct, but its yield can be severely affected by weather, some Bitcoin miners even routinely migrate their operation according to seasonal changes like the nomadic groups of the past. The flood seasons are visible on the Bitcoin hash rate chart, and even dominates the date of trade shows and R&D schedule of new mining rigs.
> May-October is the flood season in Southwest China. It is also a festival period for mining businesses as the large supply of surplus hydro capacity significantly cuts down miners’ operating expenses. For small-medium scale miners, the flood season can reduce the cost by as much as 40%. For large miners who own proprietary facilities, the flood season electricity cost is practically negligible. Over 80% of the miners in Xinjiang, Inner Mongolia will migrate in flocks to Sichuan, Yunnan, and Guizhou to take advantage of the discount, and they move back or sell their equipment after the dry season arrives in November.
> Gradually, the industry structured itself around these climate patterns. Like ancient rituals, every year before the flood season arrives, major mining conferences get organized in Sichuan’s capital Chengdu. Some facilities are only open to external customers during the flood season. Manufacturers plan their new product release right before it arrives. Miners race to source the latest and greatest machines in bulk.
'Bitcoin is the product of hashpower. The industry wouldn’t exist without incentivizing miners to continuously invest in hardware and burning electricity to augment Bitcoin network’s settlement assurance'
I think this is a common misconception. People don't need to continually invest in mining hardware to keep it going. The entire Bitcoin network could technically be run off a single Rasberry Pi. The network hash rate is only so high because the ROI is there, but without it, people would still be mining.
Case in point, there are plenty of long forgotten altcoins out there that people are mining just for fun. At the end of the day your computer is no different from an expensive space heater. Might as well mine some crypto with it.
This analysis misses altcoin mining. When mining adjusts on BTC, miners don't just turn off their rigs. They can go mine altcoins. This behavior introduces another dimension to mining economics. Miners are practical. They have to make money with their hardware and electricity. They can't afford to be ideological.
In the Bitcoin mining world (SHA256), miners like to have BCH, BSV and other alternatives. Altcoins allows them to diversify. That's why these chains will never die. They always have mining support.
Mining revenue is the network cost of running the Bitcoin network.
What if you ran a business that spends billions per year on network cost, then somebody told you they could reduce it by 98% and make it a flat cost, forever. That's proof of stake.
Ethereum launches the first phase of proof of stake this year. When Ethereum v1.5 launches in ~18 to 24 months, Ethereum's network cost will undergo such a transformation. The millions per day paid to Ethereum miners will stop being paid, forever. It's a ~98% cost reduction in perpetuity.