The answer to this question can be found in the response of David Schwartz (professional cryptographer and long-time Bitcoiner) to this same question on StackOverflow: http://bitcoin.stackexchange.com/a/11651
The long answer is: you cannot secure the network using another any other work. The work done has to be specifically tied to the previous block on the blockchain (made of up transaction data, which is of course unrelated to proteins or anything else "useful" in the view of the questioner). Otherwise, you cannot demonstrably prove the integrity of the blockchain.
The short answer is: they are doing useful work -- they're securing an increasingly large and distributed financial network.
There are alternatives to hashing proof-of-work. Two interesting ideas are:
- Peercoin (http://en.wikipedia.org/wiki/Peercoin), which introduced an alternative concept called proof-of-stake, which essentially dismisses mining in the long run
- Primecoin (http://en.wikipedia.org/wiki/Primecoin), for which the "work" is engineed to be scientifically useful (I'm not sure how useful it actually is)
I really wish the Bitcoin community had seeked more ingenious/efficient alternatives early on... a lot of energy is going to waste now.
Not really. Peercoin's security comes from the developer of the system signing every block. It attempts to use a "Proof of Stake" system where ownership of coins controls mining, but the problem with PoS is, ironically, that there is nothing at stake.
In PoW when you attempt to mine you must expend energy and so you should only mine on a consensus which is likely to be the surviving one if you want your work to not be wasted. In PoS the same is not true, and an optimally rational PoS miner will attempt to concurrently mine all forks which he does not hate.
Originally the signed blocks in PPC were supposed to be a bootstrap mechanism until most of the mining was PoS based, but then some clever miner started mining many possible histories and finding ones where he magically got lucky and his coins were the selected stake for all the blocks.
Primecoin's work isn't scientifically useful— no one had bothered describing it as interesting before it got pulled out as a PoW, and it's far less clear that its not trapdoored (that someone knows how to mine it much faster) than the one way function based proof of work.
You can convert basically any stochastic search into a PoW, but not necessarily a good one (e.g. it might have trapdoors).
More deeply, if your mining work has independent value that that dilutes your incentive to mine on the one true best consensus, since you'll still gain that value even if you mine on a losing consensus.
And ultimately the energy is _not_ wasted: It provides security for the system which is shared by all it's users. In Bitcoin you don't mint coins (with enormous energy costs) or print notes, you don't need bank vaults, or armored cars. You don't need to incarcerate counterfitters, fly around agents, or suffer counterfeiting losses. All currencies have operating costs, if Bitcoin's costs are comparatively good is a complicated analysis which I don't think anyone's done.
That's why the eventual value of bit-coin is supposed to be the value of the energy required to maintain it (because the cost of doing a transaction will be the transaction fees, which have to cover the miner spending the energy to process the transaction, but because anyone can compete in the market supply will always place the value at the cost of energy). Honestly in the long run bitcoin may be cheaper than credit cards or even cash in a pure energy sense. No matter what we do we'll have to spend energy to maintain our financial system.
* With cash we have to print and distribute cash, and move it around, and run hardware to validate it, and image scan it, and count it, and destroy it. Etc.
* Credit cards require servers, massive backups, authentication procedures, production of specialized hardware, and the same networked infrastructure as bitcoin, as well as server ops, bank managers, customer service. Etc.
* Bitcoin can use any machine, and the same internet as any other program. As chips get faster and more efficient the energy cost goes down.
> That's why the eventual value of bit-coin is supposed to be the value of the energy required to maintain it [...]
This is incorrect. The value of the sum total of fees over a certain period, will be equal (or slightly greater) than the cost of the energy required to maintain Bitcoin.
The value of Bitcoin itself is not limited to the amount of energy required to operate it. Confirming a 1M BTC transaction requires the same amount of energy as confirming a 1 BTC transaction, so the cost of the amount of energy expanded is not a limit to the value of Bitcoin.
Yes, but the (theoretical) only limiting factor on the market in a hundred years will be the cost of transaction fees. Which will be the cost of energy to maintain it. Theoretically a transaction fee will be the same regardless of amount of bitcoins in the transaction.
I think a better example would be high speed trading and similar.
Of course any big corporation or administration is going to have a lot of underused ressources and redundancy but it doesn't mean they burn power "for the sake of it" as bitcoin does.
Also, bitcoin is not a bank, it's supposed to be a currency. If big banks were to switch to bitcoin I don't think they would spend less energy doing all you said. So no matter what you think of bitcoin it's fair to say it's not very "green" so far.
I completely agree that Peercoin had the opportunity to become a much more efficient virtual currency, but it seems that ship has sailed. However, Peercoin as it exists now is not a fully decentralized currency and so is and was vulnerable to government intervention (during the SR era, for example).
Primecoin is not calculating anything particularly useful from a scientific or medical point of view (Cunningham chains).
This does, however, bring into question whether bitcoin can ever compete with the conventional financial system.
It seems that the cost of preventing counterfeiting, and other comparable attacks against the conventional financial system, is much lower than than the cost of the proof-of-work calculations done in bitcoin. In fact, by design the cost of these calculations must be significant, otherwise it would be cheap to hijack the bitcoin system.
I'm aware of some alternatives to proof-of-work, but until we see more of this in practice, I will continue to bet on fiat money as the future of money.
It's not just proof-of-work though. It's everything. It's maintaining the entire balance sheet since the beginning of the first minted coin by Satoshi himself.
Doing a simple google search shows that counterfeiting costs the USA alone $200bn a year which is 1.2% of annual GDP. Current market cap of bitcoin is $10bn. This means that $100m would be comparative. Maybe someone can give me the numbers on mining hardware and electricity prices.
To be completely accurate, we need to include cost of minting physical dollars etc...maybe someone can do a better analysis on all this but I'm highly skeptical that bitcoin costs more to run than conventional financial systems.
> It seems that the cost of preventing counterfeiting, and other comparable attacks against the conventional financial system, is much lower than than the cost of the proof-of-work calculations done in bitcoin.
What do you base this assertion on? I have no idea what the US spends annually on preventing counterfeiting. Do you?
Also related is David Schwartz' answer to this similar question "Is there a way to set up proof-of-work systems so it would be even more useful?"
David responds, "The work is not useless, it secures the transactions. The public hash chain ensures that Bitcoins can only be spent once... There is currently no known way to make the work more useful. " See http://bitcoin.stackexchange.com/a/334
I'm a cynic, but I like to think of this as an unusually direct measurement of the cost we all have to pay for human selfishness. We simply can't trust each other, so we must expend all this effort so that we don't need trust in the first place.
I don't have hard data, but I would suspect the effort going into Bitcoin mining is orders of magnitude less than the effort going into securing traditional monetary systems, even systems comparable in financial size to Bitcoin.
The fact that Bitcoin transactions are broadcast to the entire network should tell you that you are way off. Think of all the work that goes into processing a VISA transaction, and then imagine if tens of thousands of other payment processors had to do the same work.
"Processing a transaction in the VISA network" != "securing the monetary system".
First you have to have the VISA network in the first place, that's no mean feat. Then there are the banks themselves, hardly trivial. Only then do we get into central banks and financial regulators. All part of the package.
The same sort of reasoning applies to Bitcoin. Someone has to secure all that Bitcoin mining hardware, and as the effort that goes into mining grows, the energy spent on securing mining hardware will grow. I would also include the cost of producing ever-faster mining hardware; honest miners have to continuously upgrade their equipment just to keep pace with attackers.
Really though, the fact that every single transaction is broadcast and that every single transaction must be verified by the entire network (in theory) is what kills Bitcoin's energy efficiency. Whenever a new mining rig is brought online, the energy efficiency of Bitcoin decreases -- and Bitcoin is designed to incentivize bringing more mining equipment online.
> Really though, the fact that every single transaction is broadcast and that every single transaction must be verified by the entire network (in theory) is what kills Bitcoin's energy efficiency.
It is also the fact that ensures it's distributed nature, and the purpose of its very existence in the first place (we have plenty of centralized digital currencies).
> Whenever a new mining rig is brought online, the energy efficiency of Bitcoin decreases -- and Bitcoin is designed to incentivize bringing more mining equipment online.
This is not necessarily true. The efficiency (number of SHA256 operations per joule expanded) will increase over time. It has already increased by a factor of 1000 compared to CPU mining. So it's definitely possible for both the security and the energy efficiency to increase simultaneously.
Securing traditional monetary systems also had to deal with the fact that we cannot trust each other (enough, in aggregate), and I think that's where most of the expense goes.
The point is, Bitcoin can end up saving a lot of energy, by replacing traditional banking transactions, while everyone seems to be seeing it as "wasting" energy. Everyone sees the glass half-empty. Bitcoin only needs to be mined for another few decades, and then it won't need to be mined anymore.
Bitcoin will still need to be mined - the whole 'trust' system is built on it, just the block reward will be zero. Miners will then profit only from transaction fees, so either the fees will go up or difficulty will go down to adjust for smaller income from mining.
The actual purpose of mining is to extend the blockchain. It just currently has the incentive-producing side-effect of creating bitcoins. In the end, mining will be funded through transaction fees.
Others have addressed a point on which you're mistaken, but it could still be that bitcoin proves cheaper.
My concern about bitcoin winding up more expensive is that it's a bit of a red queen's race. Unlike most applications of encryption, attackers and defenders are on even footing (except, like in most human spheres, in that defenders hopefully outnumber any coordinated group of attackers). This means that whatever latest best tech we have for efficiently turning power into hashes, we've still got to burn about the same amount of power to keep things secure (and continually update to the next newest tech). In other spheres, technological process makes doing the same work cheaper - but in bitcoin it stays the same; you've got to run as fast as you can just to stay in the same place.
securing existing financial systems is useless so long as central banks can print money, bailout TBTF banks for brazen theft, sheer criminality, money laundering the whole lot and seize the assets of honest bank customers and investors to keep them afloat.
The growth of Bitcoin is nothing but a symptom of the lack of faith most of the world have in the policies of the US Govt, the Fed, their politicians and other Central banks in general. They have proven that they simply can't be trusted.
That's a very good point. An other comment points out that the computation has to be tied to previous blocks to maintain integrity but it would be great if once the hardware is decommissioned (newer hardware came out/bitcoin crashed) it could be repurposed to do something else.
Well, the GPUs and FPGAs are (and have been) easily reconfigured after decommission. ASICs, however, are inherently specific-use (Application-Specific Integrated Circuit). So because of the requirements of the Bitcoin computation mentioned in my comment [0], repurposing of ASICs is not possible.
Of course, with bitcoin it's not possible (unless you want to crack sha-256 hashed passwords maybe?), I was wondering if by designing the bitcoin algorithm differently that might have been possible.
For instance, to stay with the protein folding example, maybe bitcoin could have used an algorithm that used similar logic as the one used by the folding@home project but with different input data and expected results. Once the hardware is no longer needed for mining it can be easily repurposed for research.
> unless you want to crack sha-256 hashed passwords maybe?
It makes you wonder if we'll ever hear of anyone turning their bitcoin cluster to this purpose. Perhaps someone unauthorized.
Edit: Downthread, nwh explained why this isn't possible:
> No, they can't crack passwords. They increment a nonce at the end of a supplied string and only return if the nonce results in a low hash. They're not a generic "fast SHA" device like you're thinking.
well, btc mining involves sha256(sha256(x)). Not being a hardware person, I don't know if the designs of the asic miners can be re-used to just compute sha256. Maybe, maybe not?
Very specific sha optimizations are put into these circuits, which makes it doubtful that they can be reused for any other kind orf computation involving sha.
To do that the chip would have to be designed to have that feature already. Otherwise it's like looking at a bicycle and wishing you could repurpose it into being a plane. The structure is just not there to do that sort of modification.
Eh, not really. I don't think any form of electronics is recyclable, best you probably get is third world countries burning the boards to get the gold out and killing themselves with the gases produced.
Well some of it can be recycled, like rare metals, but you are right that the majority of the value is in the combination of those raw materials, rather than the materials themselves.
Yes, but how many general purpose chips have been made that aren't useful for anything any more - 386, Pentium, etc. After their useful life has ended they just end up on the scrap heap anyway.
No, it's not misplaced at all. At least in America, Food makers & their exec buddies and all kinds of other social-economic factors make it difficult to choose otherwise. I've already had this debate before... https://news.ycombinator.com/item?id=6604104
The excuse that "Well, nobody forced them. It was their choice." is an elaborate illusion that needs to be done away with. There have been a couple of articles this year about how being poor causes bad decisions, not necessarily vice-versa. I'm glad those articles are being written because it shows at least a few people are starting to realize how the system traps people and others can be convinced it was they're own fault.
"Poor people, generally, make bad decisions—bad in the sense of their long-term physical, mental and financial welfare. But their bad decisions aren't the reason for their poverty. They're caused by it."
I never said they were making good choices. But the fact remains if people didn't buy junk food, it wouldn't get produced.
I have heard these arguments, and I don't disagree with them. I think that efforts would be better directed at educating poor people to make better decisions, than to act like a collective hovering mother and try to keep anything bad away from them. And we often end up being exactly wrong about what's good and bad anyway (see: the USDA food pyramid of the last two decades. It turns out we've had it basically upside-down).
This is drifting way off topic of this thread so I won't say more here.
I don't believe this is fair. I walk into the supermarket and consciously attempt not to eat the first crap I come across, and it costs me vastly more than if I just went and bought a 10KB tub of mayo and ate it with a soup ladle.
Not only more money, but more time, and potentially more distance (which can be described in terms of time and/or money).
For example, Whole Foods bought and closed a Wild Oats store in the same shopping complex as a Walmart. Less than a year after closure, that Walmart no longer carries organic produce. The closest store with an organic produce selection is 4 miles away.
Whether or not you think organic food is better or worse is irrelevant - Walmart offered a product to compete with another store, and once that competition was gone, they dropped that selection from their store.
Are you suggesting that there is nothing this energy might be used for that would be worth more than $10bn? I can think of a few things that might be more valuable. What if this vast amount of electrical power were used to solve traffic flow problems for major cities, thus saving fuel and reducing pollution? Maybe we could find better TSP solutions and improve transportation. Maybe we could be creating more power-efficient chips. Maybe we could be curing deadly diseases.
Maybe instead of spending this energy on computers, we could be using it to build up the infrastructure of the developing world and help them become self-sufficient. I think that would create far more wealth for far more people than Bitcoin ever will.
But then again, my phone's GPU is infinitely more powerful at 3D rasterization than the entire Bitcoin network (because the Bitcoin network can't do 3D rasterization).
My analogy might be a bit convoluted, but my point is that - as you mention - that we're comparing oranges to apples. We're comparing a general-purpose computer to doing a SHA256 hash.
While I'm not entirely sure how I feel about the "me too" altcoins, Gridcoin[0] was created for exactly this reason. Solving blocks contributes to grid computing for real world problems. Using ASICs would prevent them from switching, though.
The way I see it Bitcoin is inspiring people to create these insanely powerful mining rigs. Once they've developed the technology then its possible to make a more general application to other fields, not with the exact same hardware of course but with similar setups.
There's nothing special about this stuff really. The processors they are using at the moment are literally just standard SHA256 core designs slapped on a wafer. The ASICmimer gear is ridiculously inefficient, drawing something like 11W per gigahash of mining.
Other designs like the anonymous Bitfury's are hand routed and do a lot better, around 0.8w per gigahash, but although there's skills in doing so, it can't really be applied to anything except for Bitcoin mining.
They're pretty basic on the scheme of things, they're just very costly to get to a fabricator in the short timeframes the community wants.
So, this cooling is basically a ghetto monkey-copy of techniques Cray pioneered two or three decades ago--right down to the use of 3M Fluorinert (http://en.wikipedia.org/wiki/Cray-2).
I don't think that this technology is going to be readily adaptable to anything other than brute-forcing hashes. I don't know of any fundamentally useful engineering or research being generated that would have application elsewhere.
EDIT: Which isn't to say it isn't neat...I just don't think it'll bear fruit anywhere else.
Has any new technology been developed that's widely applicable? It seems like straightforward financial pressure being applied to existing technology. What problems exist that'd benefit from extremely high density hash calculation? That is, computing that only needs 32-bytes of input?
Actually, no, it doesn't involve finding new primes. In fact it states clearly that it is not interested in finding large primes numbers (which is a requirement for finding new primes).
This is at least more useful than running a double sha on some input to produce some output that is hopefully less than a target t. But a altcoin that does something useful with its proof of work system is still not available.
Someone should make a coin whose proof of work involves solving difficult (but verifiable) problems that are in NP, that are frequently used in commerce.
This would provide a more direct incentive for researchers to make these algorithms faster, and would therefore provide a tangible benefit to society.
I put some thought into how to do this. I think it would be hard to get right. One way, which is total vaporware and probably riddled with security flaws:
And that's based on Gromacs and several other software packages. It still doesn't address the issue of where does the data come from and will the outcome of mining it be fair and trustworthy?
Input data could come from the protein database, which has catalogs of thousands of protein structures. The issue being is when is a protein folded? Do we have some known ending structure and we just need to get within an acceptable Root Mean Square Deviation? The other issue would be there need to be some sort of centralized server used to collect the resulting data, and create the Markov State Model.
Not to worry, the unintended consequence of the increasing need for large computational power will lead to faster and cheaper computers. The fact that someone can directly justify spending large amounts of money means that they will. We all win in the end.
No. This was (insignificant but) true in the CPU and GPU mining days, but ASICs dedicated to double hash collisions do not have any non-Bitcoin use, nor do these appear to push the state of the art in any way.
So, you're saying that none the of innovation or money funneled into finding Bitcoins will lead to zero reusable innovation? It will not create more profitable companies that produce ASICs? It won't possibly lead to even lower power ASICs? Better manufacturing techniques?
Doesn't the fact that money is being redistributed to technology companies good for technology, by definition?
Also, you're asking how Bitcoin mining, the use of technology, and SV start-ups will directly impact the future. I can't do that.
Of course, I couldn't tell you in the late 90's how a search engine company would lead to better self-driving cars (among other things), or how a company that made paying online popular would lead to electric sports cars and rockets.
I bet convincing most people that Likes and building a better social graph in 2005 would lead to any sort of innovation would have been a stretch too.
All of those startups combined are a small fraction of the chip market. And I don't see a Google/Amazon-like culture of innovation in these companies where the profits from a monopoly are invested to create new things. What I see are cutthroat, beyond-lean companies that are trying to extract as much value as they can in the short term, cash out, and move on.
Good luck. Making hardware in general, and silicon specifically, is a clusterfuck compared to the software world HN readers likely expect.
Know how a good undergraduate CS degree involves writing hundreds of fully functioning programs? A great graduate EE degree might involve one single functioning piece of silicon.
Know how we bitch about compile time in the minutes or, god forbid, hours? Turnaround time on silicon is weeks at the minimum.
Oh, I've no illusion that it's easy. It's just one of the few possible "building something for bitcoin miners" developments that is likely (if it happens) to have significant positive benefits (other than through bitcoin) long term. I wish anyone attempting it substantial luck, as well!
There's no advantage in selecting them "randomly", the resulting hash is always random. If there was a benefit in some sort of incrementing method, the entire system would be broken. They do some optimisation with the way the hash is calculated in some cases, but that's about it. The current processors are so fast that they can increment through the entire 32bit nonce space in under a second.
I suppose with an incrementing system, you could doll out the search space more efficiently. I imagine the more hash power you have, the more likely any two engines could randomly try the same nonce. (Assuming they were working off identical blocks). But it could be that there's a relationship between the way difficulty ratchets that keep the chances of testing the same nonces twice somewhat constant relative to the chance of finding a block.
Even if you're working on the same block, it's never the same work for the processor, the timestamp, order of transactions, number of transactions, and the coinbase all make the work unique.
ASIC - or Application Specific Integrated Circuit - is one purpose only - so unless the exact thing being accomplished is sha256(sha256(x)), then it can't be repurposed - this even limits its use as a password cracking machine unless the password is encrypted using that specific routine.
No, they can't crack passwords. They increment a nonce at the end of a supplied string and only return if the nonce results in a low hash. They're not a generic "fast SHA" device like you're thinking.
And this is why mining makes zero sense for any individual, at least as a profit making endeavor. When confronted with this scale of computational power, it will be impossible for "the little guy" to make any profit mining.
As a side effect, it will effectively centralize control of the currency to a few major computational groups that have the resources to make such big investments. If they ever wanted to cooperate, just a few of these groups could be able to determine policy for bitcoin as a whole.
This is false. "Little guys", think the guy mining with 1 or 2 USB thumbdrive-sized miners, make more relative profit than large scale miners. Whether you spend $50 to mine at 3 gigahash/sec, or $50,000 to mine at 3,000 gigahash/sec, in theory the relative profit is the same, but the extra costs associated to the 1000x scale become non-negligible.
For the little guy, space, power, and cooling are effectively free. He makes use of space that was already available and unused (eg. his desk), cooling is easy (a few watts can be passively cooled), and power is so small (2.5W per port) that he effectively writes it off as insignificant.
But a large scale miner like friedcat has to build or rent a data center facility, has to pay for air conditioning units, has a electricity bill he cannot ignore as insignificant, has to pay people to deploy and maintain the dozen of racks, etc.
Source: I have been mining since 2010, at some point I was mining with 20 killowatt of GPUs (ten racks or so).
The only way to make money is to be able to mine more than your costs. A small USB ASIC miner is now around $30-40 for 330 Mhash/sec and the 2-3Ghash/sec USB models are ~$200 on ebay. You'd have to make more than that much money with your mining. At current exchange rates, you can make about 50-75 cents a week with a 330 Mhash/sec miner. That would require 40-60 weeks to pay back the costs. And that's not counting the electricity that you're using, which is small, but is probably more than 50 cents a week in some areas of the country. And that also doesn't then into account the expected drops in mining rewards.
At some point when you are scaling, your costs are lower than your expected income. You have to be doing this at scale in order to break even, let alone make money. And, if you have a sufficiently large setup, you aren't talking about mining in pools, you have your own pool, where you keep the rewards for each mined block.
Little guys mining get minuscule rewards for negligible costs. You aren't going to make any significant money with it.
Source: I've been running a 330Mhash/sec USB ASIC miner for the past two weeks :) I'm a total newbie, but the economics of it aren't good.
Because they shouldn't. If you want to speculate on BTC, just buy it. If the cost to mine each BTC today is higher than the cost to buy it today then mining doesn't make sense regardless of future price.
the real economics of buying Bitcoin mining rigs should be as follows:
If the cost of the mining unit will buy more BTC than it will generate, just buy the bitcoin. So a 2.2ghash miner (e.g. Blue/Red Fury from BPM) will generate 0.1BTC over 6 months. That miner would cost you approx $280. That would buy you 0.35BTC at a price of $800 per BTC.
There is obviously a point at which these would be economical to buy but that price point is less than $80, which is just over a quarter of their current price and that is probably close to what the manufacturer is paying for the production of them (including chip costs etc).
Source - I resell a lot of mining equipment on ebay, I charge approx 2 - 3 times what I pay for the units in bitcoin and i sell out of stock usually within 48-96 hours.
Now it may be that obtaining bitcoins is more difficult that obtaining mining equipment, or the fact that you can buy them on ebay (a site people are familiar with) as opposed to a site like localbitcoins (where people are not familiar with it and it requries sending money direct from your bank account) means people prefer to buy miners instead of BTC. The argument that coins will be worth more does not factor in as you can buy more coins now whoch will also be worth more.
Final point I would make on this is that mining has not been a profitable endeavour for most of bitcoins history. Anyone who mined from 2009 to late 2010/early 2011 will probably have done so at a loss, based ont he understanding that coins would be worth more later on down the road. The big difference however is that obtaining coins now is much easier than it was in 2009/10 if you are looking to obtain them without mining.
Hmmm. Regarding the "relative profit" of small scale mining: There must be some gain in efficiency to moving to these largescale mining systems. Or everyone would just make lots of the small scale systems, right?
I think you misunderstand me. By "large scale" I mean people having 10,000 watt or more of mining hardware. It doesn't matter for my argument how these 10,000 watts are deployed (5,000 USB thumbdrive-sized miners, or 500 large water-cooled PCBs).
Obviously, someone with 10,000 watts of USB thumbdrive-sized miners would run into the same costs eating his profitability: 10,000 watt of electricity bill, 10,000 watt that need to be cooled, etc.
I think I get your point now: As an example, if I could somehow distribute a million USB sticks to a million different people and get them to mine for me (using their electricity and PC at no cost), I could more efficiently mine bitcoins because my lower costs would exceed the gains in processing efficiency that the largescale miners achieve?
But that's actually less efficient! You are making negligible amounts for each small USB miner, and whoever you are giving them to is probably spending more in the electricity than you are making! It would be just as profitable to ask those million people to just give you a penny every day or two.
At least with larger setups, you get to pool your costs, and your power usage would be more efficient.
Now, the counter to this are the micro-mining setups where you are using very little electricity, such as using a flashed router or Raspberry Pi to host your USB miners. In this case, you could even probably run it off of solar in most places to make running costs actually zero. You'd have maybe $100 more in initial costs (for solar), but you'd have no ongoing costs, only profit.
BTW, your username is funny to me - those are my initials. It's like I'm having an argument with myself. It's been known to happen.
There is some scale level where you've captured all the manufacturing efficiencies (e.g. the asicminer boards in those pictures are only 10GH/s per board), and once you've crossed that it's generally more efficient to distribute the hardware because you can make better use of low level waste heat as home heating (or at least not having to actively cool it).
I doubt the bitcoins mined via raspberry pi would ever cover the sunk cost of $100. When it comes to mining bitcoins ASICs are a millions times more power-efficient than the raspberry pi.
I meant a Raspberry Pi running as the host for a bunch of USB ASICs. This way you are effectively reducing the power requirements of the host to the minimum amount. You could do the same thing with any low-power embedded system that could run bfgminer or cgminer and keep up with the network.
This would be opposed to running a Linux or Windows desktop system as a host.
Actually there are rather vicious allegations that some of the ASIC manufacturers do mine with their own designs for some time before shipping them to customers and moving onto hardware rev+1.
Allegations which are just that. They're unsubstantiated, not even supported by the hashrate visible on the network. People are trying to rationalize out how someone they though was trustworthy would be so overdue in delivering.
People actually went as far as to sneak into Butterfly Labs' facilities and found no evidence of it.
> Whether you spend $50 to mine at 3 gigahash/sec, or $50,000 to mine at 3,000 gigahash/sec
You forget to take into account that cost per GH plotted against volume is non-linear. At $50,000 investment one won't see much difference and the graph will look linear. At $500,000, though, one can design and manufacturer their own ASIC and purchase everything in high volume. Then the cost plummets like a rock. And I would argue $500k is where large scale mining starts these days, not $50k.
Yes, but there is so much competition between ASIC manufacturers that eventually (in the next 6-12 months), the profit margin of mining hardware vendors will drop to typical high-volume electronics industry levels: 5-10% or so.
When this happens, all a large scale miner can hope to accomplish by manufacturing his own ASICs is to save that 5-10% which is going to be insignificant compared to the free power/cooling from small scale miners.
Good point. But the margin between cost of goods and MSRP is much larger than 5-10% for consumer electronics. Distributors and retail stores take a large chunk. Nobody in particular makes a large profit, but all those chunks from factory to store shelf add up to a huge percentage, 50% and up. Those are the costs small scale miners will have to overcome.
I am interested to see how the dynamics play out, but find it hard to believe that they will be much different than anything else.
Take home gardening, for example. It's easy to say that it's cheaper, and pretend the food is free, but it isn't. The biggest cost there is time. People are willing to discount the time spent gardening, because they get pleasure out of it. But it's a real cost, and that time could have been more profitably spent doing contract work (for example).
If you sum up everything one gains from having a home garden, will the consumer see a net gain? Probably not. But people do it anyway, because they don't see it as work. They'd rather do that, than fill their time with another job. That's where mining will end up in the long run, in my opinion. And I have my doubts that that sector will be large enough to prevent centralization.
P.S. I appreciate the discussion. Speaking honestly, I'm still close to the fence on this one. I hope my remarks don't come off as rude; I enjoy seeing the arguments made for one side or the other.
You'd need ~ $500 in upfront costs (12*~$40 + $20 USB hub, plus cooling - unless someone knows where to get USB ASICs cheaper - if so, I want to know!), and you're probably not going to make that back in any reasonable amount of time.
There are online calculators to tell you what the time to get a return on your investment is, but ballpark, you'd be looking at 30-50 weeks minimum to get back your money. And that's factoring in running the system for 24 hours, which would put extra wear and tear on your MBP. And by that time, your effective rewards would be less for mining... etc...
Yes. If you have a setup where the extra cost of power and cooling is negligible, then you would be able to mine effectively for free.
But then you still have the issue of buying the mining gear. And you'll probably never mine enough Bitcoins to ever pay back the initial purchase price. You'd be better served to just buy some coins from an exchange.
I have a 330Mhash/sec USB ASIC miner running right now on an old netbook, but I'm just doing it for fun. It's been running now for the past 2 weeks, and I've made less than $2. I spent only $20 for my ASIC though, so it's not too bad. A similar miner today would cost $35-$40 on ebay.
Absolute rubbish -- the only thing centrally controlled will be the generation of new BTC. That eventuality is expected and after all coins are mined then the reward will be transaction fees.
Up until then, you are correct -- the rate of new BTC generated will be dominated by the few.
But in theory a majority cartel could control which transactions get added to the block chain. You'd be forced to follow their chain. And if you wanted your transaction processed, you'd have to follow their rules.
I'm not saying this will happen, but it's possible.
I am curious - how do you think that these large groups will be able to set bitcoin policy? Technologically, they don't have much influence over the algorithms or the distribution of bitcoins as a whole. What meaningful policy decisions can be made?
They could selectively deny transactions. They might, for example, demand that you tie a real-world identity to your Bitcoin address before you can engage in any transactions, then deny transactions to people they dislike.
eh, no. you might get to work on some interesting stuff that's unique to china/asia, but quality of life is much higher in the US if you are a worker bee, aka a talented engineer.
While the bitcoin craze is on-going I've heard anecdotally of one retired GPU system being used to do CFD work, the reasoning was that people would pay $50 - $150 per hour for CFD analysis run time and that was more than the machine had been "earning" when it had been build for Bitcoin mining. That said, with an ASIC you're rather constrained in your choices.
But something in the same form factor as the mining ASIC might make this a pretty powerful engine for computing 'X' for some useful definition of X, post BitCoin exhaustion.
Unfortunately Bitcoin ASICs are only good at double SHA-256 hashing; meaning it only does sha256(sha256(INPUT)). Probably not remotely useful of any modern password systems.
Correct, the boards are not useful for anything other than bitcoin mining. However, you give an engineer that form factor and have them design a password cracking board, now you pull out and scrap all the Miner boards, replace them with Password cracking boards, and all of the investment in the infrastructure around the boards is preserved.
My reasoning is that replacing just the boards should be less expensive than creating the entire system from scratch. It may not be much less if the infrastructure is cheap compared to the boards but less.
Why is the coolant boiling? Surely it must be more efficient to cool & retain the coolant than let it evaporate. Or are they using air bubbles to agitate or cool it?
Miners earn bitcoin from 2 sources when they find a block. One source is the award. This award is halved periodically so each block is worth fewer and fewer bitcoin. Theoretically, these awards will continue to decrease until the awards are extremely tiny and eventually (A REALLY LONG TIME FROM NOW) the last award will be given and there will be about 21 million bitcoins.
The second source is transaction fees. When you make a transaction (for instance when you buy a flight on Virgin Galactic) you have no guarantee that the rest of the world agrees that you made that transaction until someone finds a block which includes your transaction. You increase the likelihood of your transaction being approved by offering a transaction fee. This incentivizes miners to look for blocks which include your transaction.
Eventually, the awards will be very very small but there will be more transactions and thus more transaction fees available to miners. Thus miners must continue for as long as bitcoin transaction are being made.
The chain will never be finished. Mining will (should) go on forever. This hardware will only become obsolete when Bitcoin's proof-of-work is changed from SHA-256(SHA-256(x)) to something else (which might happen in a few years/decades, but until then the hardware will have largely paid itself off).
> This hardware will only become obsolete when Bitcoin's proof-of-work is changed from SHA-256(SHA-256(x)) to something else (which might happen in a few years/decades)
Once they announce whatever comes after SHA-256, would it not be possible to immediately start building ASIC's for whatever that is, and put them to work as soon as the new proof-of-work is used?
Beside that, transaction fees should make mining profitable for ever, in theory. Transaction fees, or transaction volume, only needs to grow by 10x in the next 10 years (from ~0.3 to 3 BTC per block), in order to make them generate more profits to miners than coin issuance.
If the reward gets low enough that people stop mining, then the network adapts to make mining easier, keeping the mining rate constant. It's brilliant.
I dunno, but it's a lot easier to subsidize energy costs than it is to create more space.
Plus, adding liquid cooling does not appreciably increase the energy costs, and could even decrease them if it allowed savings on, say, air conditioning.
Estimates of this sort depend crucially on the rate at which other labs ship ASICs. A good guess is that the hashing power of the network will double monthly until whatever machines people have right now are barely worth running, but there's not a lot of certainty.
Which isn't really the title of the forum post, on HN post titles tend to be changed to whatever the article/original post's title is to discourage linkbait.
Bitcoin is respected among some HNers. There are still a lot of people who question its value, its long-term prospects, who call the current price spike a bubble, who call it a toy/gimmick/scam/etc., and so forth.
