Mining VS Buying: The Only 2 Options | Bitcoin Education | Hashpower Academy

Video Transcript:

hello there and welcome to the Hash Power Academy your place to learn anything to do with Bitcoin and the topic of today’s video is the direct comparison between mining versus buying are you growing your tomatoes or buying it from the shop that’s the key difference and so here with mining versus buying the first thing to understand is the 99.99% of you have probably logged into a platform deposited your fiat currency clicked purchase to buy your Bitcoin suffering a spread and a fee and I’m hoping that you’re withdrawing with another fee and depositing into cold storage to hold your timeless energy money units and preserving your purchasing power for now and forever over time and that’s why I have this orange line here that over time your quantity of Bitcoin doesn’t change if you go and put it in a lending platform or hand it to Michael Sailor for yield that’s your risk to take this key comparison is buy and hold versus say potentially mine and hold so where does mining come into this well mining is the other avenue to acquire one of those 21 million units that if everyone goes and buys all the Bitcoin they can the only thing left is what is available to produce and when that runs out when all the subsidy is gone it’s what Bitcoin is moving and in circulation through payment of fees that’s what is available to be collected and so with mining it boils down to this whatever you spend on mining you have a direct comparison of how much Bitcoin you could be holding the opportunity cost of do I hold this one whole Bitcoin $100,000 or spend it on Bitcoin mining hardware and what’s my goal well if I spent one whole Bitcoin potentially I want to produce more than one whole Bitcoin and effectively what happens with mining is exactly that that you start with purchasing those computers and you have no Bitcoin you didn’t buy any you have an opportunity cost of potentially selling it even to to buy those machines so here’s the thing what happens with mining is it produces the most amount of Bitcoin uh the more efficient the machine is but the younger it is as well relative to other machines so most Bitcoin mining hardware in this diminishing returns environment of how much Bitcoin you can earn per day with the hings coming every four years what happens is you have this very steep curve that slows down and this is possible to outperform your original purchase or just held in in the first place this is possible as an opportunity and what I mean by this is high uptime good computers that that haven’t got all these fee extractions or high electricity rates that there is a certain amount of revenue that you have the ability to capture and what gets taken away from you is how high is your electricity bill how much uptime this could be a theoretical 100% uptime but if you’ve only got 95% uptime and you’ve only lost or it’s going to take longer if your electrical bill is really high or your machines need lots of repairs then you’re continually spending more you’re going to have to keep increasing this rate and so that payback period might take even longer and so one of the key things to understand about mining is that going onto a calculator and understanding the profitability today is not at all anywhere accurate to what it is tomorrow cut it in half that’s what you think the profitability might be but this is the key thing the objective goal on the Bitcoin mining side of things is to accumulate a greater quantity of Bitcoin over time than what you simply could have just purchased all the way back at the beginning and yes there is a lot of miners that regret buying their machines and learning the hard way and they would have accumulated way more Bitcoin by simply holding so where the opportunity to go into the mining side versus just buy it is if you have access to cheap electricity a lot of capital with good operators or hosts or running it yourself or doing it small scale with an energy setup that you’ve already paid for if you’ve got a solar battery setup and excess electricity sitting and and you can read it on your meter that there’s power you’re not using you can sell it back to the grid or sell it to a global monetary network it’s up to you and so the other side of this is well when you buy Bitcoin you’re depositing dollars you’re purchasing that Bitcoin so there’s an exchange rate and a spread so you’re losing some in the process you’re paying a fee most definitely for the services of that exchange and they’re probably going to charge you to withdraw so there’s sort of three fees in that process versus with Bitcoin mining you earn revenue i’m going to draw these in you earn revenue big stack of Bitcoin and the fundamental thesis behind Bitcoin is that it has a cost to produce all right and what this means is a form of money with a cost to produce truly comes into reality through your electrical bill and here’s the thing your profit is what’s left over if you was to sell your Bitcoin to pay the electrical bill but if you’re trying to stack Bitcoin you’re not trying to sell it so pay the electrical bill with dollars and you’re accumulating the Bitcoin you would have sold what I’m trying to say is essentially that the electrical bill is your way of buying Bitcoin without fees suggesting that your bank transfer doesn’t cost you anything so to speak and that’s one thing so mining allows you to do the same experience of buying without fees you’re buying you’re essentially buying Bitcoin by paying the electrical bill dollars and keeping Bitcoin that you’ve already mined that’s one thing so that’s the electrical bill aspect the second thing is that Bitcoin mining hardware has these tax advantages if you buy Bitcoin there’s no tax incentives there but if you buy a physical good like a computer that depreciates over time and eventually breaks and trends to zero but produces potentially a greater quantity of Bitcoin than what you could have spent on it in the first place that is an asset that can be a tax deduction so if you’re looking for tax advantage investing that might be different to say a retail person well the opportunity to mine is also deductions on that inevitable profit that you get on the other end and then on the the payout side of things that experience of either going into a platform to buy your Bitcoin and withdraw it to cold storage with the exchange probably got it getting your know your customer personal information and all the anti-money laundering aspects of things uh it’s a double-edged sword because I believe that more information has been hacked from these centralized collections of information than uh the actual protections that AML and KYC actually offer topic for another video but the point I’m trying to make is you’re your Bitcoin is tracked you are pseudo anonymous but the exchange knows who you are onchain analytics is getting better and better and better when it comes to mining there is this aspect of privacy you could scale it with millions of dollars to the rate of producing your own blocks which is there is no sender address just a receiver freshly issued Bitcoin which means you are producing Bitcoin but you also have Bitcoin which is effectively private a compliance aspect of being able to have Bitcoin that has no transaction history is another benefit if you’re a large financial financial institution you don’t want Bitcoin that’s got this long story from a theft or a hack or something that could affect your ability to use it and impact its fungeability so to speak into the future so buying Bitcoin in in an exchange you’re you’re getting that money that’s uh been through several hands so to speak versus freshly issuing it yourself and so mining has these different sort of benefits but with more risk you’re not buying Bitcoin immediately you’re buying a computer that produces it over time another way I like to refer to Bitcoin mining is is it’s like energy staking the proof of work to proof ofstake comparison being that it’s the energy entering the system versus um existing monetary units in proof of stake being staked against other people’s ability to uh spend and save in the same units and just collecting collecting rents we don’t want to go back to that system we want to go to towards a system where we’re building out energy based infrastructure that is also a monetary system which helps us build out more energy infrastructure which makes energy cheaper in a fixed supply unit so everyone’s getting more purchasing power and so the importance of mining and buying is a duopoly it’s a circular economy but to those that want to step out and just save and live their life buying is one offer but mining offers different other aspects that could be more institutional but there’s there’s opportunities for retail as well that’s the hosted mining aspect of things but the limitations there is you need a financial barrier to to hurdle over that a typical computer is5 to$10,000 and the average person out there in the world does not have five5 to$10,000 the average um and so there’s there’s a few limitations there but the overall gist for this video is that yes mining is an opportunity to accumulate a greater quantity of Bitcoin over time than what you could have purchased in the first place if you have cheap electricity access to computer cheap rate wholesale rate versus a retail price for those computers and the performance your proof of work over time is the revenue minusing the electricity and your uptime and that true reality of where that point is and there are sadly some miners that don’t make their money back or machines break or they burn something down the insurance won’t pay out and they never make their money back and there is a loss that happens that is the brutal game of Bitcoin mining but there you go so thank you for listening i hope you enjoyed and I will see you in the next video goodbye