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State mining

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Written by   496
2 months ago

This goes for all mined coins.

A state (or government) might favour the idea of mining bitcoin, because they have seen some temporal high profits.

This is not new in history. Finding gold and capturing mines have been something kings have wanted. Example: The spanish conquistadors in south america. Why have some countries relied on gold as money, others with silver? Because the king had access to (could confiscate) mines of the respective type. A silver example is norway in northern erurope, some unlucky farmers sons found a bundle of string of silver, got arrested (why would some poor peasant be in possession of silver? Where is the source of funds?) and the land was confiscated and a mine established. But the silver mine, in it's 300 years of operation, never produced a consistent profit, only some lucky years where they found large bundles (see below about production cost of sound money). Even copper, which is not very good money and have never been. Imagine paying with copper, the example from sweden is large coins like plates, very impractical due to the amount of copper you had to transport to pay. The explanation is that the swedish king did not have easy access to rich gold or silver mines. (They were big in robbing neighboring kings, but that is another story).

Now to the production cost of sound money: It is simple, any new unit of sound money has a production cost in the long run of the price of that unit in the market, less a small profit comparable to other businesses. In short, mining money is not more profitable than growing flowers, cutting someones hair, or serving beer. But the kings did not know that! They heard about some mineral finding and imagined large profits. But no, there is nothing special about mining money, and the non voluntary nature of the mines they built, made them in fact less profitable than the average social profit.

But they did not know, the same way as the current kings (republican or democratic political leaders). Or worse, they didn't care or even worse, they liked the violence. They chartered ships (in the colonial era) with the message: Whatever you do (I give you authority (of which they had none to give)), come back with gold. Give me gold. They used that unethically acquired money to kill and steal from neighboring kings and princes, which easily could be their close relatives.

Bitcoin (all mined coins) tries to mimic that most important property of gold, silver and copper, with the hashing difficulty algorithm self regulating to make the mining cost equal to the coin price less a reasonable profit.

This is the light in which we have to view the interest or effort by some states to mine cryptos. Recently in Iran, but earlier in kazakhstan.

The essence is that due to the nature of sound money it is not more profitable than any other business, and to the degree that they can profit on it, it depends on violence. One way is to give them selves a privilege in the form of free electricity or zero tariff import of equipment, while other people have to pay the cost of energy plus maybe a tax on energy, and import tariffs. It is just a way of stealing value from other people in the place of their reign.

Therefore, state mining is neither a threat to bitcoin nor an advantage to bitcoin. It is just confusion on the part of the government people, plus the usual parasitic behavior you can expect from them.

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Written by   496
2 months ago
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Comments

I am an amateur in cryptocurrency mining. I was just doing something salty doing a fee.

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2 weeks ago

Good information...

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3 weeks ago

Great article...

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1 month ago

but still bitcoin has less blockchain at it abused the transaction fee policy. the holders have suffer in this kind of system.

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2 months ago

i heard about mining cryptocurencies but i never use it for now,i hope i will one day when i will have enough crypto

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2 months ago

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2 months ago

a long time ago i used mining bitcoin ,that time was profitable .Thanks for informative article

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2 months ago

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2 months ago

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2 months ago

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2 months ago

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2 months ago

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2 months ago

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2 months ago