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There's no economic rationale for it to be profitable over the long term, since there's no moat to prevent competition and the resultant race to the bottom.
If fee rates spiked, that would just bring more miners online, thereby increasing overall hash rate and driving the cost of mining higher until it's unprofitable.
It's all just math, there no branding or sales channels, no regulatory capture. Anyone can arb out the premium.
Access to ASICS and energy have been the source of any margin, but mentioned AI has squeezed the energy/footprint arbs, and ASICS have become increasingly commoditized over time... especially with AI also increasing the number of fabs.
The waste-heat/ideological/security dividends take otherwise an perfect break-even arb opportunity and drive it negative.
Thinking mining has to be profitable is bearish, that assumes Bitcoin only exists as an arb play, repackaging capex and marking it up to gain fiat. My outlying takes are because i'm unequalled in bullishness.
If fee rates spiked, that would just bring more miners online, thereby increasing overall hash rate and driving the cost of mining higher until it's unprofitable.
The capex time drag to deploy this at scale has an upper bound. Only so many ASICS and rack space exist. If fees jump to 20BTC per block today how long will it take arb out the profit margin? a week? a month? A year?
Access to ASICS and energy have been the source of any margin, but mentioned AI has squeezed the energy/footprint arbs, and ASICS have become increasingly commoditized over time... especially with AI also increasing the number of fabs.This is because all the margin is attributed to the block reward. If the subsidy drops to 10 million sats today so many institutional miners will go bust due to their reliance on that subsidy to pay op ex. We only have a week of data when fees were well above the subsidy.
Yeah the AI boom has already impacted the supply for ASICS until that market.
Thinking mining has to be profitable is bearish, that assumes Bitcoin only exists as an arb play, repackaging capex and marking it up to gain fiat. My outlying takes are because i'm unequalled in bullishness.
On a fiat standard sure but is it crazy to think electricity priced in sats (that should go down per kilowatt/hr) can’t make mining purely profitable from a sat flow perspective?
Maybe I am naive or bias but I think mining could end up being a lucrative business.
The waste-heat/ideological/security dividends take otherwise an perfect break-even arb opportunity and drive it negative.
This changes what it means for mining to be profitable. It'll be a profitable way for people to produce heat, unless the ideological element is a lot stronger than I anticipate.
I always think what if blocks become so full fees make mining a really lucrative business. Plus a million sats in today’s purchasing power can be vastly different 50 to 60 years from now.
If this protocol is going to become the world’s financial operating system I think your opinion on mining not being profitable is a bit bearish on the economics of the entire protocol