> On Oct 20, 2019, at 10:10, JW Weatherman <[email protected]> wrote: > > I think the assumption is not that all miners are unprofitable, but that a > single miner could make an investment that becomes unprofitable if the hash > rate increases more than he expected.
This is a restatement of the assumption I questioned. Hash rate increase does not imply unprofitability. The new rig should be profitable. What is being assumed is a hash rate increase *without* a proportional block reward value increase. In this case if the newest equipment is unprofitable, all miners are unprofitable. > Depending on the cost of the offered insurance it would be prudent for a > miner to decrease his potential loss by buying insurance for this possibility. > > And the existence of attractive insurance contracts would lower the barrier > to entry for new competitors in mining and this would increase bitcoins > security. > > -JW > > > > > ‐‐‐‐‐‐‐ Original Message ‐‐‐‐‐‐‐ >> On Sunday, October 20, 2019 1:03 AM, Eric Voskuil via bitcoin-dev >> <[email protected]> wrote: >> >> Hi Lucas, >> >> I would question the assumption inherent in the problem statement. Setting >> aside variance discount, proximity premium, and questions of relative >> efficiency, as these are presumably already considered by the miner upon the >> purchase of new equipment, it’s not clear why a loss is assumed in the case >> of subsequently increasing hash rate. >> >> The assumption of increasing hash rate implies an expectation of increasing >> return on investment. There are certainly speculative errors, but a loss on >> new equipment implies all miners are operating at a loss, which is not a >> sustainable situation. >> >> If any miner is profitable it is the miner with the new equipment, and if he >> is not, hash rate will drop until he is. This drop is most likely to be >> precipitated by older equipment going offline. >> >> Best, >> Eric >> >>>> On Oct 20, 2019, at 00:31, Lucas H via bitcoin-dev >>>> [email protected] wrote: >>> Hi, >>> This is my first post to this list -- even though I did some tiny >>> contributions to bitcoin core I feel quite a beginner -- so if my idea is >>> stupid, already known, or too off-topic, just let me know. >>> TL;DR: a trustless contract that guarantees minimum profitability of a >>> mining operation -- in case Bitcoin/hash price goes too low. It can be >>> trustless bc we can use the assumption that the price of hashing is low to >>> unlock funds. >>> The problem: >>> A miner invests in new mining equipment, but if the hash-rate goes up too >>> much (the price he is paid for a hash goes down by too much) he will have a >>> loss. >>> Solution: trustless hash-price insurance contract (or can we call it an >>> option to sell hashes at a given price?) >>> An insurer who believes that it's unlikely the price of a hash will go down >>> a lot negotiates a contract with the miner implemented as a Bitcoin >>> transaction: >>> Inputs: a deposit from the insurer and a premium payment by the miner >>> Output1: simply the premium payment to the insurer >>> Output2 -- that's the actual insurance >>> There are three OR'ed conditions for paying it: >>> A. After expiry date (in blocks) insurer can spend >>> B. Both miner and insurer can spend at any time by mutual agreement >>> C. Before expiry, miner can spend by providing a pre-image that produces a >>> hash within certain difficulty constraints >>> The thing that makes it a hash-price insurance (or option, pardon my lack >>> of precise financial jargon), is that if hashing becomes cheap enough, it >>> becomes profitable to spend resources finding a suitable pre-image, rather >>> than mining Bitcoin. >>> Of course, both parties can reach an agreement that doesn't require >>> actually spending these resources -- so the miner can still mine Bitcoin >>> and compensate for the lower-than-expected reward with part of the >>> insurance deposit. >>> If the price doesn't go down enough, the miner just mines Bitcoin and the >>> insurer gets his deposit back. >>> It's basically an instrument for guaranteeing a minimum profitability of >>> the mining operation. >>> Implementation issues: unfortunately we can't do arithmetic comparison with >>> long integers >32bit in the script, so implementation of the difficulty >>> requirement needs to be hacky. I think we can use the hashes of one or more >>> pre-images with a given short length, and the miner has to provide the >>> exact pre-images. The pre-images are chosen by the insurer, and we would >>> need a "honesty" deposit or other mechanism to punish the insurer if he >>> chooses a hash that doesn't correspond to any short-length pre-image. I'm >>> not sure about this implementation though, maybe we actually need new >>> opcodes. >>> What do you guys think? >>> Thanks for reading it all! Hope it was worth your time! >>> >>> bitcoin-dev mailing list >>> [email protected] >>> https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev >> >> bitcoin-dev mailing list >> [email protected] >> https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev > > _______________________________________________ bitcoin-dev mailing list [email protected] https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev
