Operation Wants To Mine 10% of All New Bitcoins

An anonymous reader writes: "Mining new Bitcoins is computationally expensive — you can't expect to do much on your standard home computer. Many miners have built custom rigs to mine more efficiently, but it was only a matter of time until somebody went industrial. Dave Carlson's goal is to mine 10% of all new Bitcoins from now on. He's built literally thousands of units. They collectively use 1.4 million BitFury mining chips, which are managed by a bunch of Raspberry Pis. 'The current rigs each contain 16 boards, with each board containing 16 BitFury chips, for a total of 256 mining chips on each rig. Carlson said about 90,000 processor boards have been deployed, which would put the number of rigs at about 5,600. A new board [being designed] will have 756 chips on each rig instead of 256.' Carlson says his company spent $3-5 million to get everything set up. They current generate 7,000 — 8,000 Bitcoins per month, which, at current rates, would be worth over $4 million."

Comments

I admire their spunk, but...

[SpectreBlofeld]

My friends and I have already switched to Dogecoin. Sorry. And when you start mining that, we'll move again, etc.

I'm not serious, I haven't invested in any virtual currency. But isn't this a sort of problem? When it looks like a Major Player moves in and starts dominating the generation of your pet virtual currency, why wouldn't you just jump ship to the next one, where you can stand a chance to make money in the early days of generation?

It's not like mining gold. Gold is gold and there's only so much of it, and it's there or it's not. These virtual currencies only have value due to consensus, and can be abandoned on a whim, especially when some guy comes in with his 1.4 million mining chips and upsets everything. I know there's a limited number of bitcoins available before computation is done, so in that sense it's 'limited' like gold and thus perceived to be a scarce valuable item, but unlike gold, the users can just up and quit Bitcoin forever, especially when they sense 'unfairness' in the operation.

Re:I admire their spunk, but...

[mister_playboy]

When I see how much hardware and electricity is being wasted on these various mining processes, I can only shake my head.

I'm not sure when BTC is slated to have all of its coins mined, but it will be instructive to see what happens to it at that point.

Re:I admire their spunk, but...

[phantomfive]

I know it's a hard concept to understand, but gold only has its value based on consensus as well.

A more precise way of saying it: the value of gold varies according to the supply and demand curves. Bitcoin will vary the same way.

Re:I admire their spunk, but...

[Jack Griffin]

Stupid analogy.
Chicks love shiny things, Guys want chicks. Anything that impresses chicks has value.
Dorks love BTC, nobody cares what dork think. See it doesn't really work the same way.

Re:I admire their spunk, but...

[inasity_rules]

Hardened carbon does have industrial uses. Jumping out of aeroplanes has military applications. Not sure what applications bitcoin mining has apart from an expensive to run currency. Maybe worthwhile for just that, I don't know.

Re:I admire their spunk, but...

[TheRaven64]

If the value of gold were tied solely to its utility, it would be about 10-20% of what it is today. If the value of Bitcoin were tied solely to its utility, it would be 0% of what it is today.

Re:I admire their spunk, but...

[Mr D from 63]

I don't know why gold is the comparative of choice. Nobody is using gold currency. How about paper currency? That would be a more appropriate comparison. Paper currency is worth a lot more than the paper its printed on. There is added cost in producing paper that is 'secure' (hard to reproduce), but its value is much greater than what it takes to produce it, and its not based on gold or any other physical material.

Re:I admire their spunk, but...

[wrook]

Random guy here. I may be wrong, but I think you are confusing inflation with deflation. The value of BTC is rising against real goods. So in other words, it costs less in BTC to buy things today than it did last year. This is deflation.

I have been watching Bitcoin with interest to see what it will do. In hindsight, if I were to criticise Bitcoin, I would say that it is too difficult to receive BTC. It is interesting that the very thing that makes it secure has the potential to limit its distribution. As the price of BTC goes up, it becomes more lucrative to mine. This increases interest in mining and encourages people to invest in hardware to mine. This, in turn, increases the difficulty, raising the barrier to entry. So new BTC are likely to remain in a relatively small group of people.

Of course, people can buy BTC, but if they do so speculatively, they may be loath to part with the BTC until they have made a profit. This can further limit the spread of BTC. In other words, you could get into a situation where people holding BTC are largely those who have spent a large amount of money mining it, and those who are speculating on its value. For those who wish to use BTC as a token of exchange for goods and services, it can be difficult/expensive to acquire in any quantity.

I think it would have been better to encourage inflation. In an inflationary system, currency essentially expires. The longer you hold it, the less value it holds. This is an excellent feature because it encourages the use of the currency, allowing it to get into the hands of people who will use it for true growth (i.e., producing something that has tangible value to someone else). If I can not get my hands on currency, or the barrier to entry to getting currency is too difficult, then my potential productivity is wasted. I can't obtain the resources I need to do my work. The currency has failed to do its job.

Obviously this topic is too broad to discuss intelligently in a /. post. However, I would encourage Bitcoin developers to look at modern economics with a more critical eye. I think many people are unwisely discarding a lot of economic theory without really understanding it properly.

Re:I admire their spunk, but...

[IamTheRealMike]

Inflation means your purchasing power goes down, deflation means your purchasing power goes up. It's the only definition that makes sense, and per that definition BTC has been, on the whole, experiencing deflation.

Alright. If you insist on that definition please re-read my post substituting the word inflation for money supply growth.

The "central bankers" say this because it is true. Deflation encourages people to hold their currency.

Does it? Who told you that? Central bankers?

Here's some economists who tested the data and found it lacking in this regard. The consumer electronics industry is another market that's been in permanent extreme deflation since basically forever and yet is doing just fine. Having something today instead of tomorrow has real value.

But regardless, the argument is circular - if a closed economy used Bitcoin and prices fell because the economy grew and the money supply didn't, then if the hoarding theory was right the economy would stop growing and prices would stop falling. There'd be an equilibrium point.

Not every company which acquires capital is as useless as a company which makes coats for penguins. Consider most companies which manufacture electronics.

Such companies should make for good investments even when there's no inflation: if your option is to do nothing with your money and either get no return (but also no loss), or more generally a return that's no better than the general rate of economic growth, then you should still want to invest. The only kind of investments that inflation can trigger are investments that people would have left on the table, except having their money vanish was even worse. These are not the kind of "investments" our society needs.

Finally, if the goal of BTC is to avoid "massive booms and busts", I'd say that it has failed thus far. In fact, BTC is much more volatile than the national economy. If that is your criticism of the current financial system, what good is BTC?

Give it time. BTC is volatile because nobody knows its future. It could be anything from "world governments ban it" to "the future currency of humanity". In such an environment it's natural you'll get massive speculation, especially because there aren't many high risk/high yield investments kicking around right now. 10 years from now Bitcoin's future will be much clearer. Government policy will have stabilised, Bitcoin's competitiveness vs the current system will be much more established, it won't be covered in the press every day and in general will be boring. Then I'd expect the currency to be rather stable.

Current value of Bitcoin

[billstewart]

I'd strongly recommend that they start selling enough now to pay off their hardware and debts in the first couple of months. Maybe gamble on keeping half the take for future appreciation, but if they're mining it this fast they ought to nail down their initial stake quickly in case the Bitcoin ecosystem colllapses.

Re:They aren't worthless...

[khallow]

That depends to some degree on what they plan to do with the bitcoins. If they hold them, then they are exposed to more risk than if they sell them as soon as they compute them.

Re:They aren't worthless...

[ls671]

Supply and demand, if many do like this guy, chances are the market will be flooded with bitcoins and the value will go down.

https://en.wikipedia.org/wiki/...

I realize this is nothing next to HFT, but

[Truth_Quark]

what a wonderful way to utilise $3-5M to the advancement of society, produce a valuable commodity and generally bolster the economy in these times of decreasing worth.

Re:Fantastic ROI

[deroby]

Quite informative IMHO

It's paid itself off [in bitcoins] many times over already."

Call me when it has paid itself off IN DOLLARS many times over.
Dumping a gazillion btc on the market will likely push the price down and hence the profit.. It must be nice being able to dump a couple of million$ into a "hobby" project like this; but really... the only ones making a profit out of this IMHO are those who fabricate the boards/cables/etc... Off course he's going to say he makes huge profits, after all he is trying to lease out (a portion) of his infrastructure... which in itself already indicates how 'worthwhile' running the setup really is.

(if only they would/could recuperate some of the heath being produced I'd be less sad about it.. right now all I see is 3MW of energy being wasted by a ton of PCB's that will end up in a landfill somewhere in the next years... and apparently this is only 5.6 percent of what is being 'mined' around the world, the proverbial tip of the iceberg... humanity deserves to die...)

Re:They aren't worthless...

[Joce640k]

Bitcoin is designed so the market can't flood.

The work needed will go up if more people do like this guy (and his investment will be worthless...)
.