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Race To Mine Bitcoins Drives Enthusiasts Into the Chip Making Business
holy_calamity writes "MIT Technology Review looks at the small companies attempting to build dedicated chips for mining Bitcoins. Several are claiming they will start selling hardware based on their chips early in 2013, with the technology expected to force many small time miners to give up. However, as happened in the CPU industry, miners may soon be caught in an expensive arms race that pushes development of faster and faster chips."
An unregulated currency plagued by theft and controlled by an elite cabal of basement-dwelling enthusiasts who can afford the thousands of dollars worth of hardware to drive smaller players out of the market. I'm sure nothing will go wrong.
If mining Bitcoins was so profitable why would they want to sell the chips? Wouldn't they be better off keeping these chips and mining the Bitcoins for themselves?
These are ASICs. The Bitcoin mining scene has already gone through its FPGA phase.
During the Gold Rush, it was the tool and equipment suppliers that made out filthy rich, not the miners (except for a lucky few).
Life is not for the lazy.
if you can buy the hardware on credit,
1. use the hardware to mine new BitCoins
2. pay back the hardware vendor with your BitCoins
3. ???
Le Monde had an in depth article on Bitcoin just a few days ago. I think if you really researched it you'd find the same to be true for most countries. Bitcoin has entered public consciousness.
http://www.lemonde.fr/sciences/article/2012/11/29/payer-et-vendre-sans-les-banques_1798066_1650684.html
http://www.businessweek.com/articles/2012-11-29/dollar-less-iranians-discover-virtual-currency
http://www.newscientist.com/article/mg21628925.200-virtual-economy-looms-as-digital-cash-grows-up.html?full=true
http://www.bbc.co.uk/news/technology-20510447
http://www.ftd.de/finanzen/maerkte/:kunstwaehrung-das-bitcoin-virus/70118697.html
it's in my head
thinking all the stupid articles about bitcoin have stopped.
You want a real currency? they're called gold and silver. They have lasted thousands of years, and will last thousands of years more, short of us figuring out a way to create them in the lab.
Not a stable currency for long.
http://www.planetaryresources.com/
I was mining bitcoins with two AMD Radeon 9790 cards and was barely turning a profit. The problem is that the electricity cost to run the computer and the video cards is very expensive. It tripled my electricity bill. Then the difficulty was doubled, now I'm making negative profit. There is very little chance that if I continued to mine, the bitcoins I have in my wallet would ever become worth enough to make the money back. The same is true for everyone else: The more GPU's you add the more electricity costs and so you need so much hardware to break even that you'll never go into profit. The only hope is that you're one of the lucky few first people to receive one of the ASIC units from the two companies that claim to be close to shipping. Of course neither of those companies has actually shown a working unit even though they've taken thousands of orders (including two orders from me, one to each company).
Precious metals are just as worthless as fiat currencies in most scenarios where a collapse occurs. Unless there's another fiat currency to exchange your lump of gold for, it won't do you any more good than paper money. No one will want it and you won't be able to easily exchange it for anything that's actually useful. Any currency is just a proxy for the idea of wealth. If shit hits the fan hard enough that the several local currencies become heavily devalued, it will probably happen on a global scale as everything is so intertwined at this point.
Precious medals will eventually become valuable again over a long enough period of time, but they won't guarantee that you'll see that time. Depending on the severity of the collapse, means of protecting yourself, food, and other basics to ensure survival are far more valuable, but knowledge is probably the most valuable currency available. What good is a mound of money if you're dying and don't know how to stop it?
Precious metals suffer from the same problem as any other form of currency: it's only as valuable as everything considers it to be or as someone will pay to use it to produce something else.
Actually nearly all money in circulation is created as debt, which must be repaid with interest (that was created as debt that must be repaid with interest). Governments printing a little money (say enough to pay for their entire non-capital, non-military budget AND eliminate poverty) would probably help the economy so long as it was done quietly. In countries with a high currency due to a single resource being exported the effect could be even bigger. Of course this only works in countries that have their own currency (so not most of the eurozone) and the central bank is not a privately held cartel (so not the USA)
Bitcoins don't just require an investment of cpu/gpu time and electricity. They also require an investment in disk space as well. I finally got around to seriously mining on a 3 year old video card, mostly just to experiment and finally see what the fuss was about, while getting a bit of 'free' heating for the house out of my videocard.
Long story short: 3 months of mining on a 'low-end' card (70~MH/s) has netted me a total of ~0.25 BTC. At current rates that's around 3 dollars worth of bitcoin (assuming a 12 dollar rate, I've seen it from the low 11s to mid 12s in the past month or so.). Mining is already cost ineffective for anyone who's not running cutting edge hardware, and worst yet wastes huge amounts of disk space to verify the blockchain (I'm up to ~5.5 gigs for the current blockchain, and there's still another.. 17 million BTC to go before mining is exhausted, not including what would happen if there was tons of BTC transfers to verify) And in order to 'recieve' your bitcoins you need to have a complete blockchain image to pick them out of, which will then show how many BTC you have. You would probably at current mining levels be better off brute forcing passwords to miner's accounts, BTC recieve keys (since unless you spent them they're all waiting in the blockchain for someone to swipe.). or running exploits against either the BTC exchanges or miners to gain access to pre-mined coinage.
While it's a cool experiment in alternative currency, it's just as intangible as fiat currency and unfortunately requires the processing capacity of a large base of miners to stay ahead of the 'pure processing' curve for BTC theft (If someone were ever to have more processing capability than the Bitcoin network itself, they could essentially hijack the entire blockchain and claim their fork as legit due to having more 'legitimate work' processed than the actual network did, at which point the currency will collapse. This isn't likely to be much of a problem while mining demand is still high, but unless the worth of bitcoins goes up to match the cost of electricity, fewer and fewer people will be mining heavily, which will lower the barrier to hijacking the blockchain.
The fact that more people didn't flag the potential abuse case in this (it was actually in one of the security reviews of bitcoin a year or two back), and consider how/when it could happen, just shows how shortsighted so many of the bitcoin miners are in their quest for 'free' money. Much like the gold rush there's a limit on return for when it's worth making the trip, and for bitcoin that point is already past for all but the most well funded expeditions.
The US treasury is not a privately held cartel lol.
Seriously, delete the rothman lizard people conspiracy videos from your HTPC dude.
Excuse the Unicode crap in my posts. That's an apostrophe, and slashdot is busted.
From a society-level point of view I see a business model which consumes resources for hardware, energy for operating the hardware, and man-hours spent planning and operating the mining setup. And what is created? Nothing at all. Just some half-random redistribution of wealth based on a dubious scheme. Participating in this type of setup seems about as good an idea as being in the bottom 1-2 layers of a pyramid. May I suggest visiting a casino instead; probably a lot more fun, and consumes less of the planet's resources.
As I understand it, no matter the speed of calculating, there are only a set number of bitcoins given out per time, for one year this is 1,310,400 BTC, which are currently worth $13 so roughly $17M total will be awarded. Your amount is only based on what percent of the mining force you represent, it will never go over this. So lets say butterfly could dominate and take 50% of the computational force (which is highly unlikely since there are 5 companies making ASICS and the huge stock of FGPAs and GPUs still online), regardless this would bank them perhaps $8M. Making a HUGE assumption the exchange rate of BTC doesn't fall, which I think it will (explained below). In threads on butterflys website you can read that they have already sold 20k units, and are expecting 2 more rounds of 30k units each, at $150/pop this is $13.5M, already over what they would expect to make mining themselves. Note manf costs are irrelevant in comparisons since butterfly has to make the units if they keep themselves or if they sell them.
I think the exchange rate price is going to tank for 2 reasons, first it will take a while for the difficulty to catch up with the new onslaught of computing power, as is always the case since it is adjusted once per week, during this time there will be a flood of BTC on the market driving the price down. Secondly you will see a huge shift of BTC production from small groups with GPUs to much larger capital intensive groups with ASICS, this is not a graphics card you are using in your spare time, this is a custom built piece of hardware built solely for the purpose of speculating on mining bitcoins, and is worthless otherwise. This will vastly reduce the population mining BTC and thus reduce the number of people using and interested in BTC. As the BTC mining industry ramps up it may be the very thing that unravels interest in BTC. Coupled with more BTC for sale it could crash the market, again.
I'd advocate choosing some other useless and less expensive random "commodity" to stockpile along with your guns and food.
Suddenly, the bottle cap currency in the Fallout series makes perfect sense.
The Federal Reserve bank is.
LK
"Hi. This is my friend, Jack Shit, and you don't know him." - Lord Kano
Ha ha ha ha ha, very funny :P but for the record, BFL could out-process the entire network with their current inventory of ASICs by running them all at once in a private pool. Then they could form a block with fake data before anyone else and then verify it themselves and place it in the chain. It's called a >50% attack. But that would cause a massive crash and destroy the entire bitcoin system and they'd go out of business so nobody thinks anyone would be stupid enough to do that.
I feel the need to remind you that you can simply buy BTC on the exchange. You don't have to actually mine it. I sell computer hardware on the forums for BTC and get more that way than from mining. And obviously anyone can run the trading client that actually sends the money without any massive CPU usage. The mining clients maintain transactions and process blocks, sort of for a commission. The client runs the actual trades. You can use bitcoins all day every day without ever touching mining.
The US treasure is not a privately held cartel. It also doesn't print money.
The US Federal reserve IS, and DOES. To quote Wikipedia ". The Federal Reserve System has both private and public components, and was designed to serve the interests of both the general public and private bankers. "
http://en.wikipedia.org/wiki/Federal_Reserve_System
So, while what you said is true, its irrelevant. The people who make the money, are bankers. Banks are insolvent. The Feds job is to keep banks afloat. The banks benefit. Banks are privately owned. Etc. Etc Etc.
US treasury is not the US' central bank, the Federal Reserve is.
Bitcoin is susceptible to having the block chain taken over by authorities, some of whom have built up significant processing power.
It's too bad about this whole thing since BTC is more stable the more people are doing the cryptography. It was however predictable with a deflationary (less being produced over time) and obviously dedicated hardware being developed.
Oh and for those who don't know on December 1st the amount of BTC entering the market was cut by 50%... so far price increase is about 20%
Google is useful, and GP is correct. The US Department of Treasury is not a bank at all, let alone the central bank. Per Wikipedia:
You are wrong. The Bureau of Engraving and Printing prints money and the Mint produces coins. The Fed does NOT. I work(ed) for it and we just move it between commercial and private banks, physically and electronically. Thanks for reading our wikipedia page in full.
Guns and government don't uphold the value of a currency. Trust does.
If you can pay your taxes with it, then it has real value.
If you can manufacture things with it, then it has real value.
If you can eat it, then it has real value.
If you can't do any of those things with it, then it has only speculative imaginary value.
"His name was James Damore."
http://bitcoin.stackexchange.com/questions/5617/why-are-bitcoin-calculation-useless/
It does kinda make me want to invent my own internet currency, so I can get huge amounts of money.
Associating monetary value with computing cycles would eventually incentivize the development of faster and better technology.
I just hope that whatever these guys come up with will also have applications in the real world.
the rothman lizard people
What? The Rothschilds and the Mothman had viable offspring? We're all DOOMED!
If you can pay your taxes with it, then it has real value.
If you can manufacture things with it, then it has real value.
If you can eat it, then it has real value.
If you can't do any of those things with it, then it has only speculative imaginary value.
So dollars have only speculative imaginary value for me? (Note i'm not paying my taxes in dollars)
Are you being deliberately obtuse? It's quite clear that when people refer to the Fed "printing money" they don't literally mean running printing presses or forging coins out of molten metal. They are referring to the process by which they type a new balance into their own accounts and then proceed to use it for, eg, buying bonds. This is creating money from nothing and we use the term "printing" to refer to it, as that's a simple metaphor everyone can understand.
Comments like this are why I added "(sorry to sound crackpot)"
It is a great shame that any discussion of novel monetary policy which mentions the ownership of the Fed as a limiting factor gets accused of being associated with schitzophrenic delusions and/or anti-semitism.
The US Federal Reserve Bank is literally a privately held cartel. This is a statement of fact, and it has monetary policy implications. My original comment was about a specific method of quantitative easing which would be more difficult without a national currency or with a privately held central bank. This is not a conspiracy theory, it is monetary policy.
Most money now does enter circulation as bank account balances countered by interest bearing loans. This is a very usefull system. Without it I and probably the vast majority of people in the western world would not own any real estate. Sadly though it has nasty side effects in a contracting economy. This is not a conspiracy theory, it is economics.
Then they could form a block with fake data before anyone else and then verify it themselves and place it in the chain. It's called a >50% attack.
True, but note that there are limits on what you can do with a "50% attack". Most importantly, it won't let you spend anyone else's bitcoins, as that still depends on access to their private key. If you control 50% or more of the network then you can basically do two things: first, you can delay other peoples' transactions indefinitely by refusing to include them in your blocks; second, you can reverse past transactions by allowing them to be included in a block, and then mining a new, longer chain which doesn't include the transaction.
The second case is basically the same as chargeback fraud, which can easily be committed through existing payment networks, except that the Bitcoin version is much more expensive for the attacker.
The protocol was designed to make "50% attacks" uneconomical in the extreme. They really only have value to someone interested in spending large amounts of money on mining specifically to undermine the network, which does not fit BFL's profile.
"The state is that great fiction by which everyone tries to live at the expense of everyone else." - Bastiat