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...

[LordWabbit2]

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.

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...

[pantaril]

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.

Re:I admire their spunk, but...

[TeethWhitener]

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.

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...

[IamTheRealMike]

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.

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.

Why?

[Hognoxious]

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

Also, FP.

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:What about the alternative virtual coins ?

[SuricouRaven]

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

Re:What about the alternative virtual coins ?

[SuricouRaven]

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

Not even one of the biggest

[Animats]

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.

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.

You forgot

[justthinkit]

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.

Current rates

[symes]

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...