This is an opinion editorial by Mickey Koss, a West Point graduate with a degree in economics. He spent four years in the infantry before transitioning to the Finance Corps.
I’ve heard some recycled fear, uncertainty and doubt recently about transaction fees on the Bitcoin network not being able to sustain the miners, and thus maintain security once the block subsidy gets too low and or disappears. This got me thinking about how incentives might play out.
Besides the obvious observation that they’re assuming no network usage growth and perpetually low fees on the base chain, I believe there are two key underlying assumptions that need to be addressed:
- Mining hardware will continue to exist in its current form as standalone, single-use computers.
- Mining companies will continue to exist in their current form as large, stand-alone companies that must constantly strive for profitability or go out of business.
Mining Hardware: One Man’s Trash Is Another Man’s Treasure
The name of the game here is utilizing waste. In its current form, electric heating elements[1] create heat through the use of resistors. Resistors[2] resist, changing the “flow” of electricity and dissipating the electrical power in the form of heat. You’re essentially utilizing poor electrical conductors in order to create heat. Seems pretty wasteful to me.
In terms of miners, their main waste product is heat. Imagine the applications you could build utilizing Bitcoin-specific ASIC chips. I see a future when every furnace and water heater produced utilizes ASIC chips as the heating element rather than the traditional electrical resistor types that exist today.
MintGreen[3] in Canada is already doing this at a pretty large scale. They utilize their waste heat from the miners to heat local businesses like breweries, sea salt
