Cryptocurrency mining incentive

Facebook nrtO00
May 5, 2018 3 Comments

Most cryptocurrencies use proof of work to secure their network.

For miners to mine, their incentive of (coinbase + transaction fees) * (probability of mining block first) must be greater than their opportunity cost.

Furthermore, it’s often argued that miners have vested interests in networks since they have high up front costs of mining equipment + have holdings in the cryptocurrency.

However with the AI arms race, using gpus for mining has increasing opportunity cost over time. This in conjunction with developing crypto futures markets, allowing miners to hedge their risk of cryptocurrency collapse, seems to be a recipe for cryptocurrency desertion.

What am I missing?

comments

Want to comment? LOG IN or SIGN UP
TOP 3 Comments
  • Facebook nrtO00
    OP
    Bump
    May 5, 2018 0
  • Cisco / Eng im chad
    Nvidia and AMD win
    May 5, 2018 0
  • Facebook nrtO00
    OP
    Some may say that the mining difficulty will decrease to account for decreased mining power, however, this would make the network increasingly susceptible to 51% attacks by adversaries (that can now be financially motivated by shorting the cryptocurrency)
    May 5, 2018 0

Salary
Comparison

    Real time salary information from verified employees