Santa Clara University Professor of finance: Bitcoin is close to becoming worthless. No professor, you are wrong

2018-12-4 23:40

Marketwatch published an op-ed by Atulya Sarin, a professor of finance at Santa Clara University. In this biased and error-packed piece, professor Sarin bases his bitcoin is soon to be dead assumption on the decreased mining profitability.

As we can see from the reports of mining tracking websites, bitcoin hash power has dropped significantly in November.

Several reports and videos out of China over Thanksgiving weekend have shown large-scale shutdowns of bitcoin mining equipment, as the falling price of bitcoin made mining unprofitable. This prompted bitcoin objectors to pounce on this opportunity and to declare yet another bitcoin death.

Sarin writes:

As I argued, once Bitcoin’s price falls below its cost of mining, the incentive to mine will deteriorate, thrusting bitcoin into a death spiral. That is, without the mining activities supporting the ledger that maintains the records of who owns what — bitcoin is, after all, a set of encrypted numbers that cannot establish the ownership of anything — bitcoin will become worthless.

What professor Sarin obviously is not familiar with is one ingenious feature Satoshi Nakamoto built into the bitcoin mining design. And that feature is difficulty adjustment. Thanks to this stroke of genius baked into its fundamental design, every time a mining rig is shut down, the bitcoin protocol increases the incentive for other miners to stay online.

Yet the cost of mining bitcoin is not a fixed-dollar amount. There is a feedback mechanism in mining any commodity that applies to bitcoin: as the price of bitcoin increases, new miners enter the market, increasing the effort required to mine a bitcoin, as its reward will be shared among a larger group of miners. Similarly, when the price of bitcoin falls and miners exit, the cost of mining decreases. However, the number of miners cannot fall below a certain level, because without the miners providing the computing power to maintain the ledger, the bitcoin blockchain will not remain viable.

Again, incorrect. If the price of bitcoin fell so hard as this professor wishes and predicts, professional miners would jump ship making way for ordinary users and small pools of enthusiasts to spin up their (old) rigs and start mining bitcoin again, liked they used to do back in the early days of bitcoin. This would actually make bitcoin more secure and stable since more small miners would mean more real decentralization.

So, it appears bitcoin is now entering a death spiral: If the price continues to drop and the cost of mining does not fall correspondingly (the cost of mining will algorithmically decrease, but not necessarily to same extent as the decline in prices), bitcoin will quickly go to zero.

Bitcoin proponents will argue that bitcoin’s price has dropped by large percentages before. Except this most recent decline is different in three significant ways. First, the magnitude of the recent decline dwarfs the magnitudes of past declines. Second, the losers in the recent decline are new investors who will likely retreat until there is more clarity around bitcoin’s use cases. Third, the futures markets have changed the game, enabling miners to estimate their mining losses and profits at the outset — if you can buy in a futures market at a price below my mining costs, why mine for a sure loss?

Another round of wishful thinking of a traditional bookworm professor with glaring lack of knowledge about how bitcoin works. There was enough people to mine bitcoin when it was worth $0 (kudos Satoshi and Hal) and there is certainly enough people when 1 BTC costs $3k+.

As breakermag aptly puts it:

“but it (difficulty adjustment) is the reason that bitcoin is nearly immune to true destruction, whether by state regulation or market fluctuations. It’s the reason bitcoin is superior to a centralized digital currency system like eGold, even if bitcoin is more expensive to run in aggregate. It’s what makes blockchains more persistently “real” than mere data saved to a hard drive, or even, arguably, to a Google cloud server farm.”

The post Santa Clara University Professor of finance: Bitcoin is close to becoming worthless. No professor, you are wrong appeared first on CaptainAltcoin.

Similar to Notcoin - Blum - Airdrops In 2024

origin »

Wish Finance (WSH) íà Currencies.ru

$ 0 (+0.00%)
Îáúåì 24H $0
Èçìåíåèÿ 24h: 0.00 %, 7d: 0.00 %
Cåãîäíÿ L: $0 - H: $0
Êàïèòàëèçàöèÿ $0 Rank 99999
Äîñòóïíî / Âñåãî 0 WSH

professor bitcoin santa finance university clara mining

professor bitcoin → Ðåçóëüòàòîâ: 93


Indian Institute of Tech (IIT) Professor: A 51% Blockchain Attack on Bitcoin Isn’t Advantageous or Profitable

It seems that it might be more difficult than expected to perform a 51% attack on Bitcoin’s network. According to Professor Saravanan Vijayakumaran, an Associate professor at the Indian Institute of Technology (IIT) Bombay, a 51% attack on Bitcoin’s network would require ‘significant expenditure’ and would provide ‘little financial returns.’ This information was released in […]

2018-11-28 00:16


Nouriel Roubini Cheated Crypto Investors In Saying Bitcoin Was A Bad Buy At $58 In April 2013

Nouriel Roubini is famous for a lot of things. The Stern School professor is widely recognized as an economist around the world, while he’s spoke ill of Bitcoin and the rest of the industry. He’s called Ethereum a scam and has even accused builders within blockchain technology as being “greedy kids” for their work. However, […]

2018-10-15 11:08


Berkeley Professor Questions Stablecoin Viability in Unflattering Op-Ed

University of Berkeley Professor Barry Eichengreen has taken a swipe at the viability of stablecoins in an op-ed published on Project Syndicate. The critique, entitled “The Stable-Coin Myth,” argues stablecoins are not automatically "viable" just because they are pegged to an asset, though Eichengreen does believe they have an advantage over "conventional cryptocurrencies" such as bitcoin which he says "is highly unstable" and "unattractive as units of account.

2018-9-13 18:07


Ôîòî:

Stern Professor Says Bitcoin Will Hit Zero After 70 Percent Drop, Illogical Argument

Nouriel Roubini, a Stern School professor and prominent economist, has criticized the major correction of Bitcoin and the rest of the crypto market, claiming that Bitcoin will drop to zero. Tales From Crypt-Apocalypse: Bitcoin has lost 70% from the peak; Ethereum 85%; other Top 10 crypto-currencies about 90%; the remaining crypto-zombie-currencies between 95% & 99% of […] The post Stern Professor Says Bitcoin Will Hit Zero After 70 Percent Drop, Illogical Argument appeared first on CryptoSlate.

2018-9-11 08:00