Inside a Chinese Bitcoin Mine | Hacker News Reader

Inside a Chinese Bitcoin Mine

thecoinsman.com

151 pointsdanoprey44 comments

Is there any estimate of how much income this particular mine can produce, compared the the capital outlay and the ongoing costs?

Using this calculator https://alloscomp.com/bitcoin/calculator and using 575,000 Gh/s (is that right?) the calculator gets about $260k per month. With $60K for electricity and let's say $10k for misc. overhead I would guess they are clearing close to $190k per month.

This operation currently mines about $262k per month:

230e9 (each machine does 230 Ghash/s) * 2500 (# of machines) * 3600 (second/hour) * 730 (hour/month) / (2^32 (average number of hashes to solve a block at diff=1) * 19.8e9 (current Bitcoin difficulty)) * 25 (BTC/block) * 590 (USD/BTC) = $262000/month

The article says their electricity bill is $60k per month. Subtract the 3 employees salaries, say $5k per month (this is China). So you are looking at a pure profit of $197k per month. Of course these profits are declining quickly over time; look how fast the difficulty has been rising: http://bitcoin.sipa.be/speed.png (logarithmic scale!)

And this mine only represents 0.3% of the total network speed (about 170,000,000 Ghash/s).

Edit: bellerocky: most exchange fees are < 1% to turn BTC to fiat.

Edit: FigBug: roughly yes, but because the network is growing, there are more than 3600 coins mined per day (blocks are solved a bit more often than every 10min).

> So you are looking at a pure profit of $197k per month.

Not including liquidity issues and fees for turning that stuff into actual money, at least until you can start paying all your bills with bitcoin.

$200k/month is not going to run you into liquidity issues.

It's $200k/month worth of Bitcoin. The 'liquidity' we're talking about here is converting Bitcoin into local currency that you can purchase things with.

Again, not a problem.

Possible, perhaps, "not a problem", seems pretty untrue. How exactly would someone go about cashing out $200k worth of bitcoin?

I sold $800k US of bitcoin on bitstamp market earlier this year - i did it over 30 minutes and it dropped the spot price about $6

Sell on an exchange. The big ones have a monthly trade volume of 100k+ BTC ($50+ million): http://bitcoinity.org/markets/list?currency=ALL&span=30d Clearly $200k is a drop in the bucket for them.

that doesn't include the cost of hardware but I guess it is negligible... and I thought mining was not profitable at current prices.

It's not profitable for people with expensive electricity. Location matters greatly.

Mining tends to not be profitable if you pay retail prices for ASICs, but if you make your own ASICs it's still pretty profitable.

The article says their electricity bill is $60k per month. Subtract the 3 employees salaries, say $5k per month (this is China). So you are looking at a pure profit of $197k per month.

Three other significant expenses worth considering: rent/physical plant, hardware, and taxes.

In most cases in mainland China, no tax is paid and cash is king. Only if you are a large, visible company doing business with other large, visible companies do you need to get formalistic. Even then, double or triple sets of accounts are normal.

I pay plenty of taxes. Heck, I pay the tax on my rent for a fapiao that gives me a tax benefit at work. The PRC is getting better about tax collection, though a lot of activity still goes on underground, especially those that are related to money laundering.

If they have 0.3% speed, wouldn't it be expected that they get 0.3% of the coins per month?

3600 coins per day * 30 days * 588.41 BTC/UDS * 0.003 = $189831.60 USD gross per month?

I think for this kind of work $5k is already too much for three Chinese workers. Each worker about $500 and maybe some fees for the living room and food. If you pay $2k it might be fine.

If you pay $5k for such kind of 24/7 job in China you'll make a middle man very happy.

How much would they have paid for 2500 machines that can do 230 Ghash/s each?

you forgot to include capital expenditures, asics are expensive.

Quite interesting. What's to stop the bitcoin pool from consolidating into a few key players as difficulty to mine progresses? There's no way that the miners are spending >250k/mo and pushing bitcoins back into the system. Wouldn't this hypothetically consolidate wealth in the hands of those with enough capital to create monstrous factories like this?

I wonder about the effects of such establishments on the Bitcoin ecosystem as a whole. In theory, they're supposed to strengthen the network by providing more hashing power. But what worries me is the onset of mega-pools composed of such factories that will gain >51% of the network's computational power effectively gaining a monopoly on Bitcoin.

That's the one thing that keeps eating at me. Would it not be trivial for a large corporation or government entity to throw enough money around to accomplish this? The only response I hear is that the market will magically prevent this.

they can change the client's code at any time (this might be a Bitcoin flaw)

for example, they fixed critical bugs in clients updates... new bugs could easily be introduced (on purpose or not)...

The hope I've heard from cryptocurrency enthusiasts is that they stay under the radar until they're too big for any traditional organization to overpower the network.

It would certainly still be feasible for the US government to overpower the network, but it would not be cheap. The Minerscube 15 is due to ship next month, and will get you about 1.666 GH/s/$ [0]. The current speed of the bitcoin network is about 160,000 TH/s [1]. Duplicating this would cost about $96M, assuming you could get that many Minerscube 15 chips at that price, and assuming the infrastructure costs are trivial. So I would say it's still doable, but far from trivial.

  [0] https://en.bitcoin.it/wiki/Mining_hardware_comparison#ASIC
  [1] http://bitcoin.sipa.be/

Subverting the entire Bitcoin network is almost certainly not as much as a 1 ACE problem. (Aircraft Carrier Equivalent)

Except the network can adapt by modifying the code, so calculating the cost of destroying Bitcoin is not trivial. The security of the network is not static, because it's also made of people with economic incentives, the same way any other system is also made of people, eg: When a website is under a DOS attack, their administrators will do various things to mitigate or completely stop the attack.

That, and for all we know, bitcoin was started by $FRIENDLY_GOV in the first place.

For starters, the incentives are just not there to destroy Bitcoin. Most governments are either positive or neutral toward Bitcoin. The ones that are hostile toward it would rather make it illegal to fight it with the law instead of with technical attacks. Financial corporations? The smart ones would realize they would benefit more from embracing Bitcoin than fighting it. And the non-smart ones don't even realize how much of a threat Bitcoin may be to their business models.

But let's just go with your assumption that some entity with big pockets decide to run a majority attack against Bitcoin miners. How much effort and money would it require?

1 year and 20 billion dollars; here is why:

The best 20-28nm mining ASICs require about 1 watt per Ghash/sec. The network is currently at 170,000,000 Ghash/sec so it would require at least 170 megawatt of ASICs, or a ~200 megawatt datacenter (with PUE = 1.15). The fastest TOP500 supercomputer facilities barely reach 20 megawatt. The biggest datacenters in the world are just about 100 megawatt. So the attacker would require two of the world's most powerful datacenters (in terms of electricity and cooling) to attack Bitcoin. But it would take at least 1 year to plan, design, build, and deploy the hardware in two such facilities. And the Bitcoin network will continue to grow during this time. It has grown by 400x in the last year (400,000 to 170,000,000 Ghash/sec). By the lowest estimate, the network will grow at least by 10x in the next year (170,000,000 Ghash/sec to 1,700,000,000 Ghash/sec). So you need to plan to build not 2, but 20 world-class 100 megawatt datacenters by August 2015 to be ready to have a chance to majority-attack Bitcoin. Knowing that a 100 megawatt datacenter costs $1 billion [1], you need pockets with $20 billion in them. And if you under-estimate the growth of the Bitcoin network in the next 12 months, you will have failed and wasted $20 billion for nothing.

[1] http://www.greendatacenternews.org/articles/share/416983/

There is no reason factories like this would WANT to disrupt the Bitcoin network if it's their source of income.. If any organization can get enough hashrate to topple the network, they will lose all that money by toppling the network.

Toppling it isn't the only option, though. Threatening to topple it could be pretty lucrative for a while.

> factories like this would WANT to disrupt the Bitcoin network

You're assuming the people disrupting the network for short term gain are the same as those who made the up front investment into the operation.

This is not true. GHash's past double-spend attack was carried out by a rogue employee. The BGP-hijacking attack which was in the news a few days ago shows another route to a 51% attack. An attacker who can trick a bunch of big miners to mine for him instead of themselves could just as easily have tricked them into performing a doublespend attack.

The cables snaking everywhere and the old hardware piles give me flashbacks to Serial Experiments Lain.

All they're missing is some chrome and neon, and we're living the cyberpunk dream.

I wonder how much effort they've put into optimisation? Small gains (1-2% rather than order of magnitudes) for these guys obviously mean a lot more than for any bedroom operation.

They're ASIC processors. It's already set in stone (silicon, whatever).

That occurred to me while writing the comment, but I assume there are other factors which could be worth monitoring and improving, for example network topologies or even cooling methods.

OTOH, every day earlier that you start mining is also worth money. This favors more conservative chip design. Now that conservative 28 nm ASICs are available, they may switch focus to optimizing the design.

What is their internet connection, fiber? Surely they must have a special contract or multiple providers.

I don't think Bitcoin is a big bandwidth user. A lot of little/small connections.

They also only need one connection; they can simply split the data across all the workers. They will need to send shares from all the workers if they're not solo mining, but even those are less than 100 bytes each, and if that becomes too much of a nuisance they can just solo mine.

For an operation like this you'd need, at most, a couple of kilobytes per second. It runs as its own pool. Internally the traffic would be much higher.

Running a wallet with a full block chain would take more bandwidth.

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