Thread - Nostr Hypermedia

Troy Cross troy@NostrVerified.com 10 months ago

Been thinking about Dhruv Bansal’s idea that bitcoin are not produced or generated — wrong way of thinking about it induced by “mining” metaphor — but rather all bitcoin existed from the moment the network was launched, but are auctioned off to miners as a whole, in exchange for hashes (compute), on an auction schedule of 140 years or whatever it is. Each miner decides to take the network’s offer or not, by running their machines or not. Collectively, they determine how much that latest round of auctioned bitcoin is worth, in hashes and/or in energy. Then there’s another market on top of this one which is coincidental but distinct, and that’s the market for block space, where the sellers are individual miners and the buyers are would-be transactors and of course that’s sat/vbyte. I really do think it’s more accurate than thinking of bitcoin miners as “producing” bitcoin the way a manufacturer produces a product like cars or even discovered like gold miners discover gold. The bitcoin, all 21 million exist, just not on the ledger, from the get go. They only need to be auctioned, like treasuries. We don’t think the bidders on treasuries produce the 10-year! It’s just a weird auction mechanism where you have to prove work and your odds of winning the auction are proportional to your work / the total work by bidders. I do get it and I think it’s right and I think it helps with a lot of misconceptions once you grok it fully. And as Dhruv says it shows you the formula for how bitcoin disrupts everything which is by making markets where there weren’t any, and building layers of distinct markets, including lighting and eventually the internet. So, good job Dhruv. But… it is not so easy to communicate is it? This thing is bloody hard to explain, as someone said once.

Replies (11)

Troy Cross troy@NostrVerified.com 10 months ago

@Craig Warmke you do allow that the fiction that determines the existence of the fictional stuff known as bitcoin… this fiction isn’t just the time chain, right? But the software too? So this fictional stuff can exist, according to the fiction, but be no one’s and nowhere on-chain? Is that consistent with your work? (Sorry I should just look it up.)

Tauri tauri@mynostr.com 10 months ago

That’s wrong on many levels.

Rusty Russell rusty@rusty.ozlabs.org 10 months ago

No, the gold mining analogy is a good one: you have to do real work, and the results diminish over time as easier deposits get extracted. You're over-thinking it because that of course is not quite right, but that's the nature of analogy. But most importantly, this is an abberation: the final state of Bitcoin matches neither the mined nor the discovered analogy. It's all block space market.

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Hypno Kitty hypnokitty@nostrplebs.com 10 months ago

The mining analogy is useful because it's easily grokked. Also, I'm compelled to point out that all of earth's gold also already exists. Work (energy over time) is required to locate and extract it -- just like bitcoin.

prepare to jibe 10 months ago

Thank you for the description. But I don’t particularly like the auction analogy. Sometimes the lowest bidder wins. It’s probably closer to buying lottery tickets—more tickets = more chances, but all you need is 1 chance to win. At any rate, I think the notion of collaboratively mining or searching for the block makes good sense to me.

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Troy Cross troy@NostrVerified.com 10 months ago

Yeah that’s exactly the kind of weird auction it is.

Cykros psyche_eros@iris.to 10 months ago

The issue seems to be, bitcoins don't exist anywhere, as such. Before or after they're mined. What exists is the value on the network, as expressed by the code. And yes, insofar as their value is accounted for in the code, that value exists before mining. We can think of mining almost like when authorized shares become outstanding shares when they are issued. They exist ahead of time, but they are only considered to have any value (in fiat terms, and in the case of stock, voting rights as well) once they are issued. Just like the issuance of authorized shares into outstanding shares dilutes market value, so too does the mining of bitcoin dilute the market value of outstanding bitcoin (even if we often just express the market cap based on the 21 million figure out of what amounts to sloppy accounting).

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Troy Cross troy@NostrVerified.com 10 months ago

Analogy is good but I don’t like the idea that the value exists before issuance. The bitcoins exist, but their value is yet to be decided because they haven’t touched a market. But their quantity has already been fixed.

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Troy Cross troy@NostrVerified.com 10 months ago

True. The gold isn’t manufactured. But its rate of discovery is a function of technology and demand. Bitcoin’s is pre-set. That constantly trips people up when they think of mining. Dhruv’s way of thinking about it is better. The network already has the bitcoin: they just haven’t sold them to the miners yet in exchange for hash.

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Rusty Russell rusty@rusty.ozlabs.org 10 months ago

The term "mining" actually seemed to have actually smoothed funding for Bitcoin mining from traditional mining investors: it's a commodity where you spend on infrastructure up-front with unknown returns which depend on market factors outside your control.

Cykros psyche_eros@iris.to 10 months ago

That's a valid concern, and it's not a perfect analogy. Authorized stock is not a hard limit in the way not yet mined bitcoin is. Perhaps it's better to think of Bitcoin not yet mined as existing, but belonging to an entity who has published its schedule of "spending them" on the labor and resources used by the mining network. That entity being the network itself.