> assumes that the depreciation of miners [snip] makes it worth turning them off
Mining rig costs are usually sunk costs: turning off never saves depreciation (which is just an accounting entry). Unless the miner can do something else with the mining rig (repurposed, sold, withhold purchasing new rigs), then t variable costs dominate their decision.
A miner should keep mining if marginal revenue (expected from minting new blocks and receiving block tx fees) exceeds marginal costs (mostly electricity if miner doesn’t get free electricity). https://www.investopedia.com/ask/answers/041315/how-marginal...
Not to say that the system is not unstable (which is an interesting idea). Maybe a control engineer could inform us of the parameters for instability.
Typical accounting depreciation is very long and makes some assumptions about stuff breaking by chance and getting outdated and what not. Many assets outlive their depreciation schedules.
I suspect crypto mining rigs are a very different beast, actually burning out after a relatively short period of overuse. Turning it off may well extend the actual life of the assets. And if they’re regularly buying more for the rig then that’s worth considering too.
I think I worded it badly, I meant that if depreciation is high then you wouldn't want to turn it off because you'd want to mine as much as possible while it was still worth something.
So I meant the depreciation would need to be low enough to make turning them off a worthwhile strategy.
Edit: I see what you mean about sunk costs, I had worded it badly but you were still arguing against my intended meaning.
I don’t think I misunderstood. How fast equipment is “depreciating” is entirely irrelevant, unless you are using the term in a manner I am misunderstanding.
Understanding marginal economics is difficult because it is counter-intuitive. I am currently on a personal binge trying to help understand the economic theory because it helps me challenge whether I have understood and whether I can pass that understanding on to others.
Unfortunately marginal economics is poorly explained - the link I referenced was the only one of five I quickly skimmed that seemed to be free of gross errors and had no misleading content.
Edit: latchkey seems pretty froody and made a couple of relevant comments:
Doesn't really matter. If the price of Bitcoin is below the cost of electricity and labor required to mine it, then it's irrelevant that the card won't be as productive (lose money at a greater rate) in future. You're still losing money either way.
The only valid reason to continue mining would be that you expected that the price of Bitcoin would exceed the mining costs in the future. Then you would stockpile them and take advantage of the reduced hashrate as other market participants exited.
Mining rig costs are usually sunk costs: turning off never saves depreciation (which is just an accounting entry). Unless the miner can do something else with the mining rig (repurposed, sold, withhold purchasing new rigs), then t variable costs dominate their decision.
A miner should keep mining if marginal revenue (expected from minting new blocks and receiving block tx fees) exceeds marginal costs (mostly electricity if miner doesn’t get free electricity). https://www.investopedia.com/ask/answers/041315/how-marginal...
Not to say that the system is not unstable (which is an interesting idea). Maybe a control engineer could inform us of the parameters for instability.
Disclaimer: crypto novice.