Join 79,207 users and earn money for participation

The soundness, the essential feature of the money that we want.

27 220 boost
Avatar for ErdoganTalk
Written by   761
1 year ago

It is the cost of mining that adjusts to the coin price, not the other way round.

It is a common fallacy to believe that the price comes from the cost to produce something, it is called the labour theory of value, and it has been shown to be wrong. This is demonstrated clearly with bitcoin, which is a rather clean experiment, because it adjusts so quickly. The market finds the right price with someone offering to sell coins, other to buy coins, the hashing cost follows.

And also it is the cost of mining, not the hashrate, that is decided by the value of the coins.

With gold it is the same. Some people in the gold bug community understand this, and they can show that the production increases with the increasing market value of gold. It is not so clear, because the investment needed for gold production is so large, but if you compare price and production volume (in gold there is no difficulty adjustment, so produced volume will increase), you can see that there is a delay of about 10 years, understood to be 5 years to make the investment decision, then another 5 years to actually develop a new mine. The cost increases for the new mines because they use slightly less rich deposits, and the mines with better richness will increase their cost by more expensive land cost, more tax. higher labour prices and other cost driving factors. Likewise, the profit can change a lot but will slowly converge to the general profit level, which has its roots in the time preference. With this mechanism, nobody gets free gold, you have to buy it or mine it for approximately the same cost. As in bitcoin, anybody can mine, and gold is everywhere, it is in the ground you stand on right now, not rich enough currently to extract it, but it could be done. There is no need for a central bank for gold, and this lack of a need for an authority is what makes the gold sound.

The role of the difficulty adjustment is to decide a timeframe for the initial distribution of coins (with the halving plan), and to have a predetermined block time, which is needed for payments. It is not fundamental for the soundness. The soundness is that nobody gets coins for free, and the resulting lack of need of an authority. So what would happen if there was no difficulty adjustment? This is a thought experiment, but it can be useful for the understanding. With increased coin price, the miners would put more effort into mining, and the time between blocks would decrease (block rate increases). It would go down to one minute, a few seconds, and we would get lots of orphans and reorgs. We would end up with miners producing hundreds of blocks per second, and finding a block is for a miner just half the work, because most of the blocks he finds will be abandoned, the effort wasted, adding to his cost. But the coin would still be sound. The halvings would come weekly, and all coins will be mined in the short time, but the cost of newfound coins would be the same as now, approximately the market price. We need the difficulty for various reasons, to stretch out the coin creation, and give the market time to adapt, and to make sure we have a reasonable block frequency for the payment function. Summa summarum, the difficulty adjustment is needed, but it is not essential to the soundness.

I could construct examples from production of consumer goods that show the same, first value from consumer preferences, then the cost follows (and volume, if practical).

The enforcement of the developer fund (in Bitcoin Cash) increases the mining cost, and the other cost factors have to be reduced, mostly power but also the number of asicminers, thus the hashrate will go down.

Enforced here means that it is included in the rules for valid blocks. On a higher level, it is not enforced, because there could be a split and the market could choose the alternative coin, so the market still decides. The change which diverts some or the subsidy for mining to a fund and establishes an authority, will not stop the world from having sound money, if the world wants it.

32
$ 10.82
$ 5.00 from @btcfork
$ 5.00 from @molecular
$ 0.50 from @jonny
+ 3
Avatar for ErdoganTalk
Written by   761
1 year ago
Enjoyed this article?  Earn Bitcoin Cash by sharing it! Explain
...and you will also help the author collect more tips.

Comments

sir I learn from each of your articles. Thank you so much for explaining Btc cash to us in such a beautiful way. Truly you are engaged in a great work sir. May Allah protect me. May you live a long life💕❣️

$ 0.00
9 months ago

Sir I am inspired your great articles thanks a lot for sharing

$ 0.00
1 year ago

very educative writting sir! i also inspired by you!

$ 0.00
1 year ago

I would like to say that I have translated every beautiful writing of yours into Bengali.

$ 0.00
1 year ago

hi sir @ErdoganTalk can i also translate your article in tagalog so that my fellow Filipinos can easily understand, especially the new ones in readcash, I hope you will also give me permission and allow me,thank you

$ 0.50
1 year ago

Thank you but I don't want more translations for now. You can write about the same things if it interests you, using your own words. You don't need my permission for that. Good luck.

$ 0.00
1 year ago

thank you so much for giving me an upvote and encourage me you are really very kind person and humble

$ 0.00
1 year ago

Dear @ErdoganTalk sir, I'm from Bangladesh. There are a lot of people in read cash from Bangladesh. I read your article twice and I realize If I translate your article into Bengali that may help lots of people. I will do it, if you give me permission. I'll wait for your confirmation. Thank you sir. Jewel

$ 0.00
1 year ago

Sir, I am very happy to read this important article of yours. I really can't say that I like your articles so much. I keep looking for some articles like this so that I can learn something in the future. Your article is very important, sir. I learned a lot from this article. And I want everyone to read your article and learn something new. Because I may not find the information in your article anywhere else. I really like this kind of article and I can learn and understand a lot from it. So this article is very helpful to me. Sir but one problem is my language is very hard to understand this language of yours. So I definitely don't want to miss such a beautiful article so I translate this for you. Really awesome. I have already told you that you are very eager to translate these articles into my language. I have talked to you about this before. But sir, if you give me permission, I would like to translate this article and present it to my friends. If you give permission. Because I want no one to miss your important article. Yes, of course you will have the whole moment, sir. I'd be happy if you would allow me, sir.

$ 0.00
1 year ago

It is not mainstream economic lessons that's for sure. But there are many heavyweights out there on the austrian side. I like this one, he talks like a priest!

https://www.youtube.com/watch?v=7hJC-OZI6PA

$ 0.00
1 year ago

Many thanks sir, @ErdoganTalk for this video. I'm watching this video sir. Sir I have presented one of your essays in my own language. Will you allow me to present this article in my own language? If you give me permission, I will translate this important article of yours and present it in my language. And of course I want to spread it among my friends and the people of my country and all over the world who understand my language. Thank you very much sir if you allow me. Having given me a chance before I want another chance. If you give permission, sir. Thank you very much.

$ 0.00
1 year ago

Write your own style, about the same things if you want, you don't need my permission for that.

I don't want to continue the translations for now.

$ 0.00
1 year ago

Ok sir thank you very much i will decorate this article of yours like me. And you will have full credit for this article. I will definitely mention you. Thank you so much for giving me such a beautiful opportunity.

$ 0.00
1 year ago

It's really informative about cost of mining. I'm not native English. That's why I read to use translator. I think it really important for all to know. Can I translate it with my native language??? So that my country's people can know about that. At first I need to your permission. That's why I ask you sir @ErdoganTalk.

$ 0.00
1 year ago

Haha alright go ahead.

You have my permission to translate and publish my article.

$ 0.00
1 year ago

Thanks a lot sir. Without your permission, I can't do it. Thanks for your permission. I hope it will be very helpful article for my country's people who are in read.cash platform. 😊

$ 0.00
1 year ago

Yes, it is right.. Good article

$ 0.00
1 year ago

Very well said sir

$ 0.00
1 year ago

very nice articles sir

$ 0.00
1 year ago

Nice article sir

$ 0.00
1 year ago

Thanks, it was written while the first IFP effort was going on.

$ 0.00
1 year ago
$ 0.00
1 year ago

Thank you

$ 0.00
1 year ago

I can't really tell if you were actually talking about the ifp at all, but I guess so?

I added it at the bottom.

$ 0.00
1 year ago

The soundness is that nobody gets coins for free, and the resulting lack of need of an authority.

damn that's well-said.

I can't really tell if you were actually talking about the ifp at all, but I guess so?

amaury could argue that he doesn't get the coins for free, but has to work for them. he could argue that if he didn't do the work, miners would pay another implementation instead, so him doing good work is a precondition to him getting the coins (with some delay, so he can at least exit-scam)

$ 1.00
1 year ago

I can't really tell if you were actually talking about the ifp at all, but I guess so?

I wrote it when the IFP came to light in its first version. A few days later, I was really taken by surprice, and I knew the strong position of Amaury and abc.

He gets the coins for free all right. I have not made an agreement with him, neither have anybody else (*).

(*) unknowable. The maybe millions of users have not.

$ 0.00
1 year ago