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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."
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."
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.
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.
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.
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...
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.