Andreas Antonopoulos: BTC mining can never become unprofitable, on average

10 Apr, 2019 | Updated: 10 Apr, 2019
by David Borman
News
Andreas Antonopoulos: BTC mining can never become unprofitable, on average

It has been reported by AMB Crypto that Andreas Antonopoulos recently did a Q&A in which he explained why even when the price of Bitcoin drops, Bitcoin mining will never become unprofitable for all miners, thanks largely to the difficulty re-targeting algorithm and basic supply and demand.

The way Antonopolous explained it is that across the globe, there are a variety of mining systems operating at any given time. Some are more efficient than others. When the price of Bitcoin drops, or the amount of mining rigs increases, it can make mining unprofitable for the least efficient miners. There are other factors, but let's keep it simple.

When this happens, the least profitable equipment will be shut off, and the difficulty will recalibrate and ultimately make the profitable setups even more profitable. This could then lead to more miners being turned back on, and then the whole cycle would basically repeat.

In Antonopolous' own words:

"As the difficulty lowers, their mining equipment becomes more profitable, perhaps so profitable that the equipment they turned off is profitable again, so they turn it back on. This will cause the hash rate to increase, so by the next difficulty retargeting it will be less profitable again."

He explains that due to economic theory, the price is always trying to get to equilibrium, IE zero profitability. In practice this of course never actually happens, it fluctuates above and below the break even point.

"On average, it will hover around zero and most miners will be operating just about break-even […] The price can never make mining unprofitable [on average]. The unprofitable miners turning off [their inefficient machines] will make the rest profitable again."

This is important to note because it is this driving economic factor, combined with the re-targeting algorithm, that helps secure the Bitcoin network. If mining ever became universally unprofitable, the whole thing would break down. Fortunately, as Antonopolous just explained, that should never happen.

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