I've got to commend Bitfury, the Levi's of bitcoin.
Just as in every gold rush, it is a much more blessed position to be the one selling the blue jeans and shovels than to be the one attempting to sift and mine.
According to this calculator [0], in one month, you can expect to earn $20,724.53 dollars (ignoring price changes, difficulty changes, and operating costs). This seems too good to be true, however. Invoking the old adage, "In a gold rush, sell shovels."
I wonder what effect all this has on the Bitcoin economy. If everyone begins doing this, then it will become extremely difficult to mine any Bitcoin without any sort of gear. Feathercoin [1] appears to try and stop this, although I am not sure how effective it is.
in one month, you can expect to earn $20,724.53 dollars
They were selling the kit for $22,000, so it'll take at least 5 weeks for the ROI, probably longer given there will be at least 2 difficulty resets in that time frame.
I looked at investing in one but I couldn't come up with the funds. Instead I have pre-orders out for gear due in October.
If everyone begins doing this, then it will become extremely difficult to mine any Bitcoin without any sort of gear
This is already the case. I'm mining at about 250GH/s with 3 Avalons and I earn on average about 1.2 BTC per day per machine. A month ago is was closer to 2BTC per machine per day. Right now, GPU mining is dead. It's literally cheaper to buy a bunch of USB sticks that mine at 350MH/s for $100 each than to buy a bunch of video cards as the USB sticks are more power efficient. Even so, depending on the difficulty, those USB sticks could take a year to earn back the 1BTC.
For mining, no. This was always seen as the future state, it was just a question of when. Not too long before the first ASICs started coming out, it was already basically not profitable for most people, you had to be running a limited set of GPUs and be in a place that had cheap electricity to make any real money.
>Is it just that everyone uses fractions of BTCs now?
Since they're roughly $100 each, yes, basically everyone uses fractions. Thankfully they're way more divisible than e.g. pennies, and if the value / userbase goes up by a couple orders of magnitude, they can be made more divisible, also unlike pennies.
Mining is there to make sure there are no double spends. The end user does not need to worry about them. Just sell stuff or buy them at exchanges or the other way around as with any other currency.
Litecoin as well? I think the goal (forcefully allowing a wider base by reducing the ability of big players) seems like a good one. It prevents centralization, which is kinda the point of the whole thing.
People could still create humongous litecoin mining farms if it were profitable to do so, leading to the same centralization issue of having large mining pools/firms that are somewhat dominant.
That said, the point of Bitcoin is not to avoid that; it is to avoid forced centralization by governments (among other things), which we have for fiat money, and it is succeeding at that.
Bitcoin is not supposed to be a democratic experiment where the little guy gets some kind of special treatment. It is a digital currency that is not backed by force.
I don't think there is any real point in having more than one cryptocurrency. Litecoin could have been great if it had come first, but Bitcoin came first, so I think there is little to no point in having Litecoin.
They absolutely could build huge farms, but their advantage in doing so would be significantly less than an average person with a general purpose computer, compared to now. They would effectively have less power over the network as a whole, because it's easier to become profitable (or at least less lossy) and compete, so more people would (theoretically).
Yes, bitcoin is not a democratic currency. But it is designed (and desired) to prevent all power from landing in the hands of very few / one, since then the entire foundation it's built on is worthless. Bitcoin is fundamentally stronger with more players, and Litecoin is easier for more players to join.
Absolutely, it came out a distant second, and that very well could be it's death. But why is there no real point in having more than one? With more than one, "money" is more resilient against new crypto attacks.
As you can see from http://bitcoindifficulty.com/ the difficulty is growing exponentially. It seems to be doubling every 8 weeks or so. If you get your 400GH/s rig at the end of the month you might not even break even.
I like the calculator at http://mining.thegenesisblock.com/ better. Using the defaults for network and all that it seems to give around $23,000 profit for the year.
What amazed me about that: Within 9 months, your profit drops below $1k/m. Barely three more months later and you're down to $250/m. So after a year, you're fast approaching the point at which the energy you put into the device costs more than the bitcoin money you get out of it.
Play with the knobs some more and you realize: If you purchase the 400 GH/s August device in December, you will never make back the 7.5k that the thing costs. Wait "only" until November and you barely get a 60% ROI.
How does investing engineering effort in designing mining ASICs and spending dollars to purchase what is essentially a currency generating machine help us as a community?
I wish we were just as enthusiastic and race to solve other problems too -- like spreading education, finding out ways to purify water, or maximizing agriculture throughput in famine, or predicting when the next hurricane, tsunami, or earthquake is coming our way.
I already know how to purify water. I go to Walmart and buy a replacement filter for my Britta pitcher. As for fixing famine, that I have no clue where to start.
However, I do know how to write code, and if I can take some of the money I've earned to buy one of theses "useless" devices which can also make me some money, maybe one of the engineers at that company can spend his paycheck to send his daughter to college, where she can study ways to fix these other problems you mentioned.
In other words, read up on the economic theory called "guns and butter".
As for fixing famine, that I have no clue where to start.
Whilst there will always be localised crop failures and unlucky weather, true famine requires incompetent government; historically, either no effective government (through war or some other circumstance) or a government able and willing to enforce agricultural insanity. Peoples who have been farming for generations know about crop failure and unlucky weather; incompetent government is just plain stupid.
Mao's famine, for example, despite the constant claims that it was really bad weather, was an endless cycle of stupid agricultural decisions, totalitarian enforcement of stupid decisions, a horrifically useless harvest reporting scheme, massive movement of people, refusal to give people stored food as they were starving, efforts to save face internationally, on and on in a perfect storm of government created famine.
North Korean famine of the nineties; whilst it's hard to get data on government policy at the time, it seems that there was a move to implement utterly inappropriate terrace farming, which was subsequently disrupted (or indeed, washed away) by pretty normal rains, rendering those terraces useless and also causing new flooding (as the terraced fields use to be water absorbers and rain diffusers).
Ethiopian famine of the eighties; civil war going on.
Soviet famine of 1947; an awful lot like Mao's famine.
On and on. Certainly in modern times; obviously there's a lot less explanation of the causes as one goes further back, and it is in the nature of incompetent government to blame the weather.
I suppose what I'm saying is that to prevent famine, we need competent government.
How does investing engineering effort in designing mining ASICs and spending dollars to purchase what is essentially a currency generating machine help us as a community?
It's supposed to help said currency become more solidly established, and therefore more useful to more people.
I wish we were just as enthusiastic and race to solve other problems too -- like spreading education, finding out ways to purify water, or maximizing agriculture throughput in famine, or predicting when the next hurricane, tsunami, or earthquake is coming our way.
I'm pretty sure people are enthusiastic about those things, and probably quite a lot more people than are into bitcoin. They're just less visible, since those aren't the cool new shiny thing (and aside from the weather/earthquake predictions, they're probably not heavy enough on software to be considered of interest here).
It's supposed to help said currency become more solidly established, and therefore more useful to more people.
I don't think you're going to find people flocking to a currency where it turns out that they have zero change of a big score. At least during the gold rush there was the possibility that a small miner could get lucky.
The idea is that once a sizeable enough amount of bitcoin is in circulation, the amount of risk associated with it will go down, thus making it more useful to people - volatile money is of no use to me.
The obvious answer is incentives. Bitcoin mining has real financial rewards. It is hard to make a profit off of ending famine. That is the point of things like XPRIZE. It attaches a capitalistic incentive behind technological advancements that benefit society.
Who's to say that some of the tech developed to mine bitcoins won't find other applications. Or perhaps the expertise developed by people trying to optimize bitcoin mining, or bitcoin commerce infrastructure could end up helping them change the world in other ways.
I'm totally not saying the two are equivalent, but look at the non-obvious ways that NASA has helped all of us: http://www.wtfnasa.com/
by the same way of thinking it also could do more harm than good.. like how many nasa technology its being used to kill, to spy, etc..
creating something with good will, and with a good purpose at least can do us less harm.. but even than.. it always depends of the intentions of human beings..
(a plain could be used for fast transport or to kill)
(discoveries about the atoms can cure câncer, energy reactors or to create atomic bombs)
you are just reinforcing what hes saying.. those things shouldnt need to have prizes in Money to people start working on it..
the point being maded by ultimoo (and i agree with it) is that WE need to change the way we think about things.. the way we are..
we need to change our prizes, and become happy with other sort of payments.. (like be happy to help others to have a better life)
if we get to manage to have a income to our needs, and do what we like.. be happy with it, and help others in the process.. what could be better than that?
Is such a waste to have so many bright people working to make rich people even more richier, while there are so many simple needs that all of those good brains could be helping to solve.. there are people that doesnt even have basci needs like water, food security, eletricity, education, dignity, etc..
meanwhile all the rich people problems "how i can get even more rich?" get all the brains working for it..
That we're utilitarian in nature? This isn't exactly Nobel-prize winning stuff.
The idea that we collect money and this is greedy or inherently bad is a highly personal view. Besides, what about Bill Gates and others who are donating their fortunes to do EXACTLY what you two ask?
You're also ignoring the fact that "getting richer" is not the enemy of "doing good."
I have nothing against somebody making a fortune, at least through hard work, and by creating value to society, like Bill Gates did..
but there are parts of "getting richer" that can really do harm.. drugs? corruption? greedy banks?
Im all the way for the "good capital", and thats the one that creates goods and value to us all..
acomplished people should have sucess, this is cool..
but i see a lot of the "get rich first, donate later" much people praise.. but in the majority of cases.. this is just a way they can feel good about themselves.. but in the end it will just create more greedy people that doe more harm than good..
the beginings, and true intentions always count.. easy money without real value, is what corrupts our society, and worse.. make the dollar created by value of the real working people (and i include bill gates/steve jobs in that list) less valuable..
thats all about the 2008 crysis.. its the same evil root.. but see the guys behind it.. and how they use to make money
What "corrupts" our society has nothing to do with money and everything to do with utility. We evolved to seek greater utility in all forms it takes shape. That is not something you can erase from our psyche.
A P2P currency might help people allocate resources more effectively (to solve problems like the ones that you mentioned). Right now much of our wealth is flushed down the toilet when stolen through taxes and inflation and given to bankers and other government corporate welfare recipients.
There's no technical reason there couldn't be a cloud version of this, but of course it makes absolutely no sense as a cloud service, which make me wonder what's going on here.
An exchange of money for a thing usually means that the buyer wants the thing more than they want the money, and the seller wants the money more than they want the thing, but in this case the seller is selling ... money?
It requires some work to set up and use and, probably more importantly, there's substantial risk involved. The $/year this thing can produce is not a fixed quantity, both because the BTC/$ exchange rate is not fixed, and because the BTC/hash rate is not fixed. If the $ made over the lifetime of the unit exceeds its cost, then the buyer wins, and the manufacturer could have theoretically made more money by hanging onto it and running the units themselves. However, that's not guaranteed, and it could be a net loss.
In essence, they're selling a risky bet. It's like a lottery ticket, except more dependent on external factors. The buyers get to make a bet that might pay off, and the seller gets more concrete payment in exchange. It's sort of a physical embodiment of a financial instrument.
There are "mining bonds" that are essentially cloud Bitcoin mining. As you said, they tend to not be worth buying. One exception is ASICMiner which has paid very nice dividends to their shareholders.
It's not quite as simple as selling money, since the amount of money that the box will print depends on various factors like the difficulty, exchange rate, and delivery date. So it's really a question of whether the customer's risk analysis is better than the vendor's (which is doubtful given the information asymmetry; see also Goldman Sachs). And the delivery date is definitely not guaranteed; most vendors are shipping late.
I gotta say, am I the only one who see's the numbers and then immediately goes to the Bitcoinx calculator to see how much "money" I could make in a day if I bought one of these rigs? On paper it seems like some of these things could pay for themselves in relatively short order if you could actually get your hands on one and run it day and night...and liquidate your mined coins asap at the current prices. A lot of ifs. Has anybody met somebody who's managed to pay off a big rig in short order? I'd really like to see a "success story" with Bitcoin mining.
http://blockchain.info/charts/hash-rate -- This graph shows the total network hashing power, a.k.a. mining competition. As ASICs are finally being released/shipped on a noticeable scale, the network hash power is massively increasing and will probably increase 1-2 orders of magnitude more. Mining profits will most likely be driven to almost zero.
EDIT: another thing to consider is that the ASIC companies have had much trouble shipping on schedule, affecting ROI calculations
This needs to be repeated every time btc ASICs are discussed: ASIC economics don't work like most physical products, and instead work more like software. For high-performance asics, the costs of design and masks completely overshadow the costs of actually making chips unless your volume is in the millions. To make the first chip costs many millions, to make the next chip costs $15. The most valuable assets they have are the masks. One of the least risky ways of bootstrapping an ASIC venture is to presell enough chips to pay off R&D, and when you can make them for cheap, keep the rest.
Oh shit, so what you are saying is once the R&D is paid for, they can just stop selling them and manufacture as many $15 400GHash units as they please. At that point they would have virtually zero worry about "breaking even", it's pretty much pure profit as soon as they plug in the device.
Yup, and that is the great irony of Bitcoin in my eyes. In the long term, the value of Bitcoin will probably continue to stabilize around the price of electricity, which is of course defined in US dollars.
In other words, Bitcoin will be anchored to the value of USD (with some factor comprised of average rig efficiency and prices per watt)
> Yup, and that is the great irony of Bitcoin in my eyes. In the long term, the value of Bitcoin will probably continue to stabilize around the price of electricity, which is of course defined in US dollars.
No, you have completely misunderstood how bitcoin mining works. The bitcoin value won't ever stabilize to electricity, the rewards of mining will. The effective reward per Ghash can go up or down independently of the bitcoin price, and tends towards costs (ie, electricity). Electricity costs have no bearing on the actual bitcoin value.
None of the 8 persons who replied to you have the correct facts. They are planning to mine with the chips.
The complete story is that the chips are developped in a 50/50 partnership between Leszek Rychlewski (aka "tytus"), and "bitfury" (a group of investors and engineers mostly from eastern europe):
- Tytus set up a company to launch a project known as 100TH-Mine that will deploy a farm running 100 Thash/s of these chips in Wenatchee, WA: https://picostocks.com/businessplan/19
- Bitfury is very discrete and was, as far as we know, merely planning to mine for themselves.
But over time, both entities realized they would be able to generate a lot more predictible revenues if they sold chips and/or fully assembled devices. So Tytus partnered with Megabigpower.com and BFSB as distributors is US and Europe. And the Bitfury group partenered with MetaBank to resell chips and devices in Russia.
They probably are for awhile, then selling them. Hence the delay. Riding out some mining, then slowly releasing them.
I'm thinking if someones smart enough to built a specialized piece of hardware like this, they are smart enough to write up an algorithm that tells when to sell the hardware once the commodity hits peak level.
A mass dump of these would too quickly devalue the market since the increase in new Bitcoins would cause inflation.
edit: Ha, obviously they know it by taking Bitcoins and charging €700 difference in the price of one chip between a July & October delivery.
There wouldn't be any more coins entering the market then there normally would. 1 new block every 10 minutes, doesn't matter how much hashing power there is. You are assuming people would dump them immediately, which I don't necessarily think is fair.
Basically, there's an ideal balance of running it themselves and selling them, and I'm sure they've calculated out the maximum profit strategy and are executing it.
Because they know that doing so would spike the difficulty and dramatically lower the expected value of bitcoins mined per unit. They can sell them for $20k a pop now, claiming that you can make that $20k back in a month of mining - but if they sell out and all their customers start mining back their $20k immediately, it'll take far longer. In the meantime, Bitfury already collected their money and are laughing on the way to the bank.
They've probably plugged a few in, increasing the difficulty in the time that they're shipping them. That way they get most of the benefit of plugging them in, and also get the benefit of selling them.
It's not a Ponzi scheme, because the mining rig builders aren't promising profits, they just promise to deliver the machine. It may very well be a bubble, though.
I wonder when BitCoin will reach the stage at which mining is not economically viable because the expended electricity is more expensive than the amount of BC gained. It is my understanding that such a point should be eventually reached due to the mathematical nature of BCs.
The price of electricity varies by location. I expect within 9 months Bitcoin mining will only be profitable for people with the cheapest electricity. Essentially there will be three phases: first, ASICs will get more efficient as they move from 130 nm to 28 nm (this is in progress with KnC and HashFast), then profit margins will reduce from 90% down to ~10%, and finally there will be an endgame where even a 28 nm ASIC sold at cost won't be profitable unless you have super-cheap electricity.
I think in order for those products to be profitable they need to sell them very very quickly (because of the ever increasing difficulty of the bitcoin mining), so maybe they didn't take the time to design an enclosure and decided to start selling them as soon as they had something working.
Very expensive hardware with a very short shelf life, it must be quite interesting (and stressful) to design.
Gh/s means gigahash/second. 1 billion "Bitcoin hash" per second. With 1 hash defined as SHA256(SHA256(80-byte block header))
I don't have my notes with me but these Bitfury chips run around 150-250 MHz individually. There are 256 of these chips in the 400 Ghash/sec device. Each spits out about 10 hashes per clock cycle.
Just as in every gold rush, it is a much more blessed position to be the one selling the blue jeans and shovels than to be the one attempting to sift and mine.
I wonder if Bitfury accepts bitcoin as payment. I suspect they do not. EDIT: You can totally pay with bitcoin - http://www.bitfurystrikesback.com/checkout/