It’s what matters most!
People sometimes think that distributed consensus mechanisms lead to trustless systems. In fact it reduces the required trust to a bare minimum: trust between the participants of a deal AND trust in the system which processes the deal: the coin, the blockchain, whatever you might call it.
The reputation of the system is important for the trust people have in it!
Bitcoin is being mined because it’s worth something. It’s not worth something, because it’s being mined!
The energy costs is not what makes Bitcoin expensive.
It’s the investment in mining hardware to turn the energy into Bitcoin that makes Bitcoin expensive!
There is a feedback loop between Bitcoin price and the hash rate that lead to the arms race ending at SHA256 ASICs. There still is an arms race for more energy efficient ASICS, but overall it has slowed down.
When I was mining some BTC in 2011 all you needed was a decent GPU.
In the very beginning all you needed was a CPU.
CPUs were replaced by GPUs.
GPUs were replaced by FPGAs.
FPGAs were replaced by ASICs.
ASICs were replaced by more (energy) efficient ASICs.
With each iteration the entry level to mining BTC increased. The required hardware became more and more efficient, expensive and specialized.
With my BTC mining GPU (Radeon 5850) I played games until last year.
I was talking about a feedback loop.
That arms race which was fueled by BTC price was leading to an increasing barrier (investment) to mine BTC. It was easier (and possibly cheaper) to just buy them.
That created demand for BTC, which increased the price, which in turn attracted more miners.
I’m sure the complete economical model is more complicated, but in an abstract way it worked like this.
What does that mean for Peercoin?
At the moment it’s easily possible to mine PPC or buy them. With a modern SHA256 miner and cheap electricity it shouldn’t matter (price per PPC) whether you buy them or mine them.
What happens if a lot of hash rate enters Peercoin’s PoW process (because miners move away from Bitcoin)?
The coinbase reward drops.
As a result it will be more expensive to mine them which leads to higher prices if people have demand for getting PPC and calculate how much mining them would cost.
I went in great detail regarding my take of the economical basics of how coins work.
You might ask: hat does that have to do with Ethereum?
This one might be cheaper to operate than Ethereum is: http://www.rootstock.io/
Why would you have demand for Ethereum and its PoW if you can have the same features, but the security is based on Bitcoin (in which a lot of people trust)?
