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Operation Wants To Mine 10% of All New Bitcoins

Posted by Soulskill on from the go-big-or-go-home dept.

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."

46 of 275 comments (clear)

  1. much industrial by SublimeCreditor · · Score: 3, Funny

    very wow many btc

  2. I admire their spunk, but... by SpectreBlofeld · · Score: 4, Insightful

    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.

    1. Re:I admire their spunk, but... by mister_playboy · · Score: 4, Insightful

      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.

      --
      Do what thou wilt shall be the whole of the Law ::: Love is the law, love under will
    2. Re:I admire their spunk, but... by phantomfive · · Score: 3, Insightful

      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.

      --
      "First they came for the slanderers and i said nothing."
    3. Re:I admire their spunk, but... by phantomfive · · Score: 2

      Regular currency is not linked to the supply and demand of gold, and hasn't been for ~80 years in the case of the US dollar.

      Bitcoin has its own supply and demand curve, like every other currency in the world.

      --
      "First they came for the slanderers and i said nothing."
    4. Re:I admire their spunk, but... by LordWabbit2 · · Score: 4, Interesting

      When I see how much hardware and electricity is wasted digging chunks of hardened carbon out of the ground, I can only shake my head.

      When I see how much hardware and electricity is wasted jumping out of perfectly good airplanes, I can only shake my head.

      We humans tend to do things because we want to, not because it makes sense to you.

      --
      There are three kinds of falsehood: the first is a 'fib,' the second is a downright lie, and the third is statistics.
    5. Re:I admire their spunk, but... by Jack+Griffin · · Score: 5, Insightful

      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.

    6. Re:I admire their spunk, but... by delt0r · · Score: 3, Informative

      Gold is not a superconductor at any temperature. Its not even a great conductor. It is soft and makes good "push" connections, hence its use in connectors.

      Also most of golds value has nothing to do with its usefulness. About 10% of mined gold is used. The rest is hoarded for perceived value based historically on the fact that its shiny when not many things where.

      --
      If information wants to be free, why does my internet connection cost so much?
    7. Re:I admire their spunk, but... by inasity_rules · · Score: 4, Insightful

      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.

      --
      I have determined that my sig is indeterminate.
    8. Re:I admire their spunk, but... by pantaril · · Score: 4, Funny

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

      The hardware and alectricity is no more wasted than hardware and electricity and employees used by your bank to secure your account.

      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.

      The last BTC should be mined sometimes in 2140 but the miners will carry on because they are needed to verify transactions. The'll get their profit from transaction fees.

    9. Re:I admire their spunk, but... by TeethWhitener · · Score: 4, Interesting

      This is the main problem I have with Bitcoin. Here we have a brilliant opportunity to harness computing power to solve a socially or scientifically relevant problem, and instead we waste it on solving random meaningless math problems. In my book, an ideal cryptocurrency would use that computing power to solve a protein folding problem, or a plasma physics problem, or any other number of things. You wouldn't need an artificial upper limit like BTC has, because in generating a new block of currency, you'd actually be creating something of value to society. Riecoin approaches cryptocurrency from this point of view (albeit still with an asymptotic limit on the number of total currency units, and only applied specifically to computations of potential counterexamples to the Riemann Hypothesis), as does IBM's World Community Grid to a certain extent (albeit without the ability to easily and securely transfer the virtual cash generated), but I'd really like to see it take off.

    10. Re:I admire their spunk, but... by TheRaven64 · · Score: 4, Insightful

      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.

      --
      I am TheRaven on Soylent News
    11. Re:I admire their spunk, but... by IamTheRealMike · · Score: 5, Interesting

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

      Bitcoin developer here. Yes, by all means shake your head, it's clear that the current level of mining is a large waste of resources. Nobody has been reporting double spends caused by hashpower attacks, which is what mining is designed to stop, suggesting that right now there's too much security.

      But what else would you expect? Inflation causes misallocation of resources. This is basic economics and is the reason Bitcoin is designed to eventually target a stable monetary base. Yet you cannot create a new currency from scratch without inflation, by definition, because the money has to come from somewhere. What's more you can't create a currency fairly if you simply give yourself all the money (pre mining), so there has to be a fairly long drawn out allocation process so everyone gets a chance of taking part in that initial inflation.

      This initial misallocation of resources towards excessive security is annoying, but tolerable - existing currencies inflate all the time and this causes huge misallocation of resources towards things like asset bubbles. If we're going to misallocate towards something, more security against rollback attacks is perhaps not the worst thing we could want, especially as market incentives should push people towards using renewable power over the next few years.

      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.

      The rate halves every four years. It rounds to zero in 2140 but will presumably become irrelevant long before that. How irrelevant really depends on Bitcoin's long term value in dollar/euro/fiat terms though, which is impossible to predict.

      At that point mining will be supported entirely by fees. How much mining takes place will depend on how much security the Bitcoin user community really needs, which I am expecting to be determined by letting it fall until double spending attacks start to become commonplace and an actual risk to business. Then the game theory becomes quite complicated because mining is a public good, but I'm expecting merchants and other big sellers who need the security to form assurance contracts with each other to incentivise mining. In theory this solves the problem of people not wanting to subsidise their competitors, but the use of assurance contracts for continuous goods like hash power is a rather under-researched area. I'm looking forward to reading papers written by academic economists and game theorists over the coming years to learn more about what the post-inflation world will look like.

    12. Re:I admire their spunk, but... by PopeRatzo · · Score: 3, Funny

      It's not about Satan. It's about Pussy!

      There's a difference?

      --
      You are welcome on my lawn.
    13. Re:I admire their spunk, but... by deadweight · · Score: 2

      Gold is something I can hold in my hand. It will NEVER be worth nothing - it has value in industrial processes and making wedding rings. BitCoin could very very easily be worth exactly as much as my collection of old Word 2.0 documents overnight.

    14. Re:I admire their spunk, but... by Mr+D+from+63 · · Score: 3, Insightful

      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.

    15. Re:I admire their spunk, but... by AmiMoJo · · Score: 2

      You can buy stuff with Bitcoin, so that seems like a fairly worthwhile application. There must be a lot of pissed off miners out there though because at this point anything that isn't an ASIC isn't worth running, and people who spent thousands of Euros on ASIC miners are about to see their investments devalue even faster. At this point even most ASIC rigs aren't worth it and may never pay for themselves, let alone turn a profit.

      --
      const int one = 65536; (Silvermoon, Texture.cs)
      SJW, n: "Someone I don't like, and by the way I'm a fuckwit" - AC
    16. Re: I admire their spunk, but... by 1s44c · · Score: 2

      You could equally say the same about all the infrastructure needed to validate USD.

    17. Re:I admire their spunk, but... by wrook · · Score: 5, Insightful

      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.

    18. Re:I admire their spunk, but... by swillden · · Score: 2

      Gold is something I can hold in my hand. It will NEVER be worth nothing - it has value in industrial processes and making wedding rings.

      Sure, but on the other hand, how would you like to exchange your gold for an equal weight of aluminum -- which is also not worth nothing, but until the late 19th century was more valuable than gold. . Or silicon, which is also valuable in industrial processes, particularly in the manufacture of semiconductors, but only after tremendous work has been done to purify it?

      The fact that some physical substance always has some utility doesn't mean all that much. The actual industrial value of gold is not nothing, but neither is it all that large. Further, it's possible that in the not too distant future we could be mining gold from asteroids and shipping millions of tons of it per year to Earth. Or we could find a cost-efficient and safe way to manufacture gold, by transmuting other metals. Or we could just become better at finding it and digging it up. In any of those scenarios, dramatically-increased supply will cause the value to fall, probably even more dramatically, since much of gold's current price is driven by the expectation that it will always be valuable and evidence that that is untrue will quickly erase the speculative drivers of gold's current high price.

      About the only thing I can think of which truly has intrinsic value is energy, since it is the necessary input to all productive processes. It's hard to store in a vault, though, physical or electronic.

      --
      Note to ACs: I usually delete AC replies without reading them. If you want to talk to me, log in.
    19. Re:I admire their spunk, but... by IamTheRealMike · · Score: 2, Insightful

      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.

  3. how by phantomfive · · Score: 2

    How do they know the current value of BitCoin? Who is considered the primary exchange now? Are there any that are considered even remotely trustworthy?

    --
    "First they came for the slanderers and i said nothing."
    1. Re:how by pantaril · · Score: 2

      How do they know the current value of BitCoin? Who is considered the primary exchange now? Are there any that are considered even remotely trustworthy?

      The value is determined on exchanges by suply and demand. You can use site like bitcoinaverage to get price index based on more exchanges and their volume.

      There is no exchange considered primary at this time. The biggest ones are probably: bitstamp, btc-e, huobi and btcchina.

  4. Why? by Hognoxious · · Score: 5, Funny

    Why mine them? It's much easier to set up an exchange and just steal them.

    Also, FP.

    --
    Confucius say, "Find worm in apple - bad. Find half a worm - worse."
  5. First step of a virtual central bank ? by Taco+Cowboy · · Score: 2

    What we need now is not more "exchanges" for virtual coins but a "central bank" in charge of the virtual coins.

    If they are successful in accumulating 10% of all Bitcoins they may want to use them as the base of the first ever Virtual Central Bank

    As the central bank for virtual coins, they can function much more than the "exchanges" that we've heard so much about.

    They can manipulate the value of any virtual coins via "buying" and "selling".

    --
    Muchas Gracias, Señor Edward Snowden !
  6. Current value of Bitcoin by billstewart · · Score: 4, Insightful

    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.

    --

    Bill Stewart
    New Fast-Compression-only CPR http://preview.tinyurl.com/dy575ks
    1. Re:Current value of Bitcoin by SuricouRaven · · Score: 2

      It's like much in finance: Sophisticated gambling. You can sell now and get your money, or you can wait and gamble on the price change. You might make more that way, or you might make less. The bitcoin price is ridiculously volatile, as there are so many speculators involved and comparatively little business being conducted in it.

  7. Re:What about the alternative virtual coins ? by lister+king+of+smeg · · Score: 2, Interesting

    Bitcoin is the most valuable but is I were this guy I would do merged mining where you mine several crypto currencies on the same hardware simultaneously.

    --
    ---Saying gnome 3 is better than windows 8 not so much a compliment as it is damning with light praise.
  8. Re:What about the alternative virtual coins ? by SuricouRaven · · Score: 4, Informative

    Litecoin has just enough credibility to have people trading it for non-trivial amounts of real money. The rest are generally worthless.

  9. Re:What about the alternative virtual coins ? by SuricouRaven · · Score: 4, Informative

    You'd be limited to SHA256 based coins. Most altcoins are scrypt based.

  10. Not even one of the biggest by Animats · · Score: 4, Informative

    All serious Bitcoin mining is now industrial-scale using custom ASICs. CPU-based and GPU-based mining are dead. They can't even cover their own power bill. This guy's setup is primitive compared to this large high-density liquid-cooled mining facility in Hong Kong. The two biggest mining pools control over half of the mining power, and the biggest, "ghash.io", would have over half if they hadn't deliberately split up to avoid that happening.

    The thing to remember about Bitcoin mining is that all miners are in competition for a fixed number of Bitcoins produced each week. More mining does not mean more Bitcoins are generated.

    1. Re:Not even one of the biggest by TCM · · Score: 2

      If you don't increase your mining more and more, others will do it and your global share of future Bitcoins shrinks and shrinks, since more and more mining power means less and less Bitcoins per GH/s due to difficulty adjustment.

      --
      Of course it runs NetBSD. BTC: 1NT7QvbetmANwaMzhpVL6
  11. Re:They aren't worthless... by khallow · · Score: 2, Insightful

    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.

  12. I realize this is nothing next to HFT, but by Truth_Quark · · Score: 4, Insightful

    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.

  13. Re:What about the alternative virtual coins ? by gnupun · · Score: 3

    Does someone know what a single unencrypted bitcoin looks like? For eg, what is the length of a btc coin, in bits? What are the main components of a bitcoin expressed in the form of a C language struct?

  14. Re:Fantastic ROI by deroby · · Score: 2, Insightful

    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...)

    --
    If there is one thing to be learned on slashdot, it has to be sarcasm.
  15. Re:They aren't worthless... by Joce640k · · Score: 3, Insightful

    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...)
    .

    --
    No sig today...
  16. You forgot by justthinkit · · Score: 4, Interesting

    You forgot to mention gold's inertness. Yes, copper and silver conduct better than gold but both of them corrode like fiends. To combat this you have to alloy, or coat. You don't need this with gold, and combined with its "softness" (better described as extreme ductility), you can lay down a very thin layer indeed. "Atoms" thick, vs "fractions of an inch" thick. Ask someone designing a satellite which is more valuable. Or a jeweler. Or a circuit board maker.

    --
    I come here for the love
  17. Re:What about the alternative virtual coins ? by gnupun · · Score: 2

    Then what exactly are these so-called mining computers producing after spending millions of dollars in computing power and electricity? Smoke and mirrors?

  18. Current rates by symes · · Score: 5, Funny

    They current generate 7,000 — 8,000 Bitcoins per month, which, at current rates, would be worth over $4 million

    And at tomorrows rates $125, and the day after's rates $1.7 billion, and the day after that...

  19. Re:What about the alternative virtual coins ? by vbraga · · Score: 2

    SHA256 hashes. It keeps trying to find a hash that satisfy some boundary conditions.

    --
    English is not my first language. Corrections and suggestions are welcome.
  20. Re:Fantastic ROI by nomaddamon · · Score: 2

    Considering that the daily trading volume of popular exchanges is around 50k BTC / 27m$ at the moment, and that he dumps all coins directly to market, he might lower the price by 0.5% (8/(50*31))!

    Doge coin rig, built in December for 850$ has earned 4800$ so far and another ~1200$ is expected before it turns obsolete (cost of power passes turnover). It has paid itself in DOLLARS many times over.

    Bigger rigs, like in TFA have a bit longer lifetime and higher profit margins (assuming you use top-of-the line off-the-shelf components and won't start inventing the wheel yourself)

  21. Re:They aren't worthless... by phishen · · Score: 2

    Most Litecoin (and other crypto currency) miners actually trade all their Litecoin for BTC almost as immediately and exchange their BTC for cash.

  22. Re:What about the alternative virtual coins ? by NFN_NLN · · Score: 2, Informative

    THERE IS NO BITCOIN. Definitely not physical, but not even virtual! The closest thing is a wallet.

    Bitcoin is nothing more than a ledger of transactions. You can't own a bitcoin. You can only own a wallet that has transactions associated with it. You create a wallet with a public and private key. The public key is what people use to increase your ledger count. The private key is what you use to decrease your ledge count by increasing someone else's ledger count..

    It's like a fancy excel spreadsheet that tracks debits and credits.

    Every time you close off a group of transactions in the ledger there is a pre-determined reward for the group that finds the hash. That reward is an increase in there ledger. That is the ONLY time new ledger entries are allowed that don't have an equal decrease in someone else's wallet.

  23. Re:What about the alternative virtual coins ? by 1s44c · · Score: 2

    The ledger and the mining process are not separate things. Each ledger entry has a generation of 25 coins plus a long list of transactions affecting existing coins. You need to generate a hash within strict conditions in order to create a valid ledger block and the difficulty of that task adjusts to ensure a consistent block generation rate.

    The original paper will explain all this better than I ever could.

    https://bitcoin.org/bitcoin.pd...

  24. Re:What about the alternative virtual coins ? by Qzukk · · Score: 2

    how the "what" (bitcoin in this case) came into existence.

    It's a number, written in on the ledger. Just like how when the fed wants to give a bank a few billion dollars some zeroes appear in their computer.

    The way bitcoin works is ALL in the blockchain. Each block consists of:

    [data from previous block]
    Qzukk gives himself 0.x BTC for solving this block
    Bob gave 1.2 BTC to Dave
    Sam gave 0.8 BTC to Bob
    James gave 0.9 BTC to Bob
    [variable data]

    In order for this block to be valid, Qzukk has to find [variable data] that makes the SHA-256 of the block be 0x0000000000... (the number of zeroes in the hash is how the "speed" of mining is set. Because of the "Qzukk gives himself x" transaction, everyone is working on a different block (yours would say "gnupun gave himself..."). Furthermore, because of the data from the previous block being used, whoever solves the block and gets it in the blockchain first means everyone else has to start over on the next block, which is why it's pointless for small fry to try and mine now.

    --
    If I have been able to see further than others, it is because I bought a pair of binoculars.