Mining fees are passed onto end users in crypto


Welcome everyone. I’m going to do a quick
video right now. I just had an idea and I wanted to share it with you. I
recently saw an article saying that the hash power of Bitcoin has increased
dramatically so the price has increased and so has the hash power and basically what
I wanted to say is every input into the Bitcoin ecosystem directly affects your
bottom line If you do not think that the
electricity usage of Bitcoin affects your bottom line then you don’t
understand basic economics because this is how it works there’s nothing free in
this world and everything gets passed on to the end user so all that electricity
usage and all the waste will ultimately affect the cost per
transaction for Bitcoin and it’s never going to be able to compete with these
Proof of Stake protocols that use far less energy because the costs that need
to be offset to miners in order for them to maintain profitability will always
stay us above a certain threshold. Let me give you a concrete example. If you’ve
ever lived in New York City or you’ve ever been to New York City there’s a
grocery store popular grocery store called Westside Market I
believe and back in 2011 back in 2012 when I was in New York I would go to
Westside and they had the automatic doors where you can walk in to the
grocery store and what happens is during the summer it’s really hot outside so
the AC is running overtime and during the winter all that cold air and the
snow comes inside and the heaters have to run over time and what happens is
over time that makes the groceries more expensive because if the heating bill is
higher or the AC bill is higher while you’re not directly paying for it
you’re indirectly paying for it it affects the price of the food they add little taxes here and there in order to offset their
expensive rent and their expensive costs for running that grocery store it’s all
in their profit margin it’s all on their sheet so in 2013 they installed this
double door so there’s like this little plastic door that’s outside of the door
so when it’s the dead of the winter and it’s super cold there’s a low buffer
zone where people can come in without bringing all that
cold air and ultimately that increases the efficiency of the grocery store
probably saving them a lot of electricity and saving them a lot of
money on their bill and that passes on to the customer so what I’m saying is
every single issue with Bitcoin will ultimately all that electricity usage
it’s gonna be passed on to you whether you like it or not there was an article
about Bitmain the other day and it was in March I believe and they purchased
200,000 new miners to do Bitcoin transactions to mine
Bitcoin and it was just in-house because they just felt like 200,000 miners and
the average miner the cubic foot of an average miner is about 0.3
cubic feet and 200,000 of those would ultimately if you’ve ever seen those
giant shipping containers it would fill up I believe twenty-two 40′
shipping containers fill them to the brim and if it was the 20′ containers they would do around 40 or 45 and
that is a tremendous amount for just a spur-of-the-moment we’re going to add two
hundred thousand miners to this ecosystem and what happens those
miners will be outdated within a matter of time and what happens to those miners
they just end up in the landfill they end up poisoning the environment and
they’re just wasteful it can’t be reused I mean I guess a little bit can be
recycled but with those asic miners their one function miners so it’s
really hard to use them for any other purpose than what they were made for you
could melt it for scrap but the amount of metal within those particular miners
is so small that the energy input to actually recycle
that material you would lose so much in the process you get like probably ten
five maybe one percent of the actual raw materials back everything else
would be scrap and people are not thinking about this in economic terms
and the economic terms is all that money is going
pass on to you and I when we’re making our Bitcoin transactions why
were the fees astronomical once the usage of the network increased it’s
because things like that happen and people are gonna say Lightning Network
Lightning Network Lightning Network we’ll see it’s a centralized solution
first of all the Lightning Network is centralized and
they’re going to charge fees because people have to run
servers and ultimately when traffic increases when demand
increases traffic is going to increase and overhead is going to increase but
there’s a solution to all this and that’s proof of stake so if you look at
a project like Cardano you see that you can relatively run the the test net in a
relatively small environment with not a lot of hardware and it doesn’t have to
be the most powerful computer it doesn’t have to be the most powerful server and
you can run it and we’re going to have thousands of them and we’re
going to be using kilowatt hours per year while Bitcoin is reusing terawatt
hours per year and it’s a whole magnitude of difference it’s like
comparing a magnitude 6 earthquake with the magnitude 8 and if you understand
earthquakes it’s a factor of 10
so each if you go from 6 to 7 as 10 times worse and 7 to 8, 8 is 10 times
worse than 7 so you have to figure it out like that and this is what we’re
going towards and you want to make sure that you’re on the right side of this
business transaction so figure out where you want to be and if you’re truly about
low fees and an equitable cryptocurrency for all then you would choose a proof of
stake system or you would choose something like Bitcoin cash I’m not a
proponent of Bitcoin cash by the way Bitcoin the Bitcoin core is the real
Bitcoin and Bitcoin cash is a spin-off but that’s exactly what their issue is they’re increasing the block size but ultimately that also increases
hardware costs over time so everyone is going to try to solve
this and try to bring it down to zero fees but there are other crypto projects
out there that have negligible fees and that people are
ignoring because people only want to stay within this Bitcoin
ecosystem and I think that’s going to change over time I don’t think it’s
going away but people need to be cognizant of that
let me know what you think until the next video I appreciate you

24 thoughts on “Mining fees are passed onto end users in crypto”

  1. I think you are right. Now there is no point transferring 5-10 bucks worth of Bitcoin because of the fees. Only worth to keep it on an exchange to trade and speculate. My dream is that one day, all the money that goes to manufacturing mining equipment, the equipment itself, electricity, etc., just go directly to crypto, then we will have trillion-dollar projects, and I think Cardano will be the one. No one time in human history OLD tech is preferred against a NEW one. Just a matter of time.

  2. Bitcoin Cash is for day to day small payment like buy a soda and cigaretts from a stand alone machines or small shops. Cardano is for State Tax systems , Hospitals, welfair systems , insurance systems and some other system that demand a lot of birocracy. Both of them have a huge potential. I think many nations need cardano. And the whole of third world needs Bitcoin Cash.(third world needs a currency that is free from inflation and state control.) Cardano will be big in the developed nations where birocracy and waiting in line is a huge problem. Cardano can solve these problems by just automating the process in a smart contract. Example Get the smart contract by scanning a QR-Code on a given paper contract or from a screen, ( now the contract is a smart contract(digital contract) on your smart phone) fill in the needed information on the smart contract and pay the fee from you yoroi wallet.(if there is more information you need to provide, they just can send you a smart contract on your yoroi wallet. Done

  3. You mean transaction fees, which pos coins also have. Sounds like you want a crypto like NANO with no transaction fees.

  4. In Austrian Economics there is a term called "malinvestment."

    <<<Malinvestment is a mistaken investment in wrong lines of production, which inevitably lead to wasted capital and economic losses, subsequently requiring the reallocation of resources to more productive uses. >>>
    https://wiki.mises.org/wiki/Malinvestment

    The increasing mining costs of Bitcoin is clearly malinvestment considering the development of alternative secure consensus protocols.

    I'm quite surprised that many in the Bitcoin community do not see this as Bitcoin is really rooted in the philosophy of the Austrian School. It is evident to me that many in the Bitcoin community have become emotionally attached to the Bitcoin project and therefore have insulated themselves from thinking outside of their limited framework.

    The cost of production investment can only be passed on to the end user so long as the end user is willing to pay for it. When this willingness becomes stagnant or there is no growth of new willing users then the Bitcoin project (and price) will stagnate leading to lower costs and less security.

    I don't see any long term future for Bitcoin personally which is why I do not hold any, despite the hype and fervour surrounding the project.

  5. Exactly this reason makes me think Bitcoin will be the digital gold (SoV) and projects like Cardano will bring real exchange of money solutions.

  6. Good to see you back on your main channel Philippe. We missed you! I deliberately did not click the "Skip Ads" button just for you brother. I really enjoy your analysis of how the costs associated with POW will end up being pushed to end user much like any other business model.

  7. The only thing i fear is that when btc will consume too much energy that it will drag all other crypto down.If btc dives everything will go down.It will look like a bubble and the average joe won't touch any crypto (anymore).I hope that btc survives for another decade so alts have time to shine and eventually replace btc.

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