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Why a Cryptocurrency Mining Giant Is Burning Money in a 'Black Hole'

• https://motherboard.vice.com/ by Jordan Pearson

Learning about cryptocurrency economics can be a bit like biting into an oatmeal cookie and finding raisins when you thought they were chocolate chips: Entirely unexpected, and frankly unsettling.

Consider the case of AntPool—one of the largest cryptocurrency mining pools in the world. According to announcements on social media on Friday, the pool is "burning" 12 percent of the money it makes mining the Bitcoin Cash blockchain and is encouraging other miners to also burn a portion of their earnings. This appears counterintuitive, since for profit-seeking businesses there is normally an imperative not to light the money you make on fire. Very interesting! But why?

Coin burning, if you're not familiar, is a well-trod path to inflating the value of a cryptocurrency with a fixed supply, like Bitcoin Cash. The value of coins with a fixed supply is based on increasing demand and steadily decreasing supply.

1 Comments in Response to

Comment by Ed Price
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But consider the other side of it. Bitcoin or cash might be limited regarding how many tokens will ever be available. And this limitation might never be allowed to increase, but only to decrease. But the offset is that the divisions of the coins will always be allowed to increase. The smallest division of a bitcoin is the satoshi. The satoshi is one hundred millionth of a bitcoin. Imagine that there was only one bitcoin left in the whole world. No more could be created. The satoshi, however, with a simple line change in the programming, could easily be divided into a billion parts or more. So, the problem lies in the way people consider things. It doesn't lie in a technical limit of the number of full tokens of any cryptocurrency.


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