Inside One of the World's Largest Bitcoin Mines
thecoinsman.com
thecoinsman.com
They really are just throwing tons of electricity and hardware at "nothing", but if this kind of activity helps replace the current inefficient systems of currency, then I'm all for it.
I don't know why you mention paper currencies and gold when most money today is transferred electronically, in a far more efficient way than Bitcoins.
And one block will include a whole slew of transactions, that's fixed overhead with economies of scale built in.
(If you wish to say they encourage unhealthy behavior, that's another argument.)
Mt. Gox collapsing was a worse wealth loss than bank bail outs, by far.
Compared to what? You can't compare it to the results of not having done bailouts, so the comparison is largely a matter of economic prediction, and economic prediction is obviously very controversial. The only non-controversial part is that the bailouts were certainly very good for the banks receiving them.
The bail outs stabilized the currency in lieu of massive wealth loss (e.g. toxic debt), while not adding to transnational costs because the returns were positive.
Most bitcoin evangelists fail to grasp the negative impact that volatility has on currencies, and instead think of bitcoins like assets, even hording them.
They required the devaluation of the dollar via Fed 'printing.' The Fed had to take trillions in nuked assets off the balance sheet of Bank of America, Citi, and others.
The primary bailout was not the Treasury program TARP, but the Fed programs.
That stole purchasing power from everyone that uses the US Dollar. That purchasing power will never be returned. Trillions in real wealth were destroyed, that is gone. Even if you supposed all assets returned to their previous value, the time cost, wrecked credit ratings, debt accumulation, etc. that was involved in that loss of wealth is still massive when it has to do with tens of trillions in total asset value.
The collapse of Mt Gox isn't even a rounding error compared to the real wealth destroyed by the Fed in the last five years through dollar devaluation. It's equivalent to about ten hours, from one day, of QE the past year.
Not to mention, any bitcoins lost in the collapse of Mt Gox, increases the value of all other bitcoins over time due to the reduction in supply. To be like the bank bailouts ala the Fed, Mt Gox would have had to create a lot of new bitcoins in the process of being destroyed.
You've chosen a particularly odd phrase here, since BitCoin mining was fundamentally designed to get computationally more expensive over time.
So, no, an economy of THE OPPOSITE OF SCALING was built in.
As an aside, "economy of THE OPPOSITE OF SCALING" is probably better termed "diseconomy of scale" (http://en.wikipedia.org/wiki/Diseconomies_of_scale).
Revenues of Brink's alone, sayeth Google, are roughly $4 billion. My understanding is that a substantive portion of that represents cost of transporting cash and gold, and of course they are only one of several such companies.
Consider the impact of minimal fluctuations of exchange and interest rates. No one could just say "fuck it" and buy into a completely unpredictable new system. Governments would give up control, and random people who happened to have mined Bitcoin until that point would hold the world's wealth? I don't think so.
Currencies can only be political instruments up until a point -- and then people get tired of it and start looking for other mediums of exchange, units of account, and stores of value. Bitcoin is theoretically something people could turn to for one or more of those, though it would have to be a pretty bad situation to make Bitcoin's volatility look good.
(Disclaimer. The overall likelihood of this happening at a large scale is not something endorsed by this post.)
The United States alone spends tens of millions of dollars a year on producing pennies - beyond the face value of the pennies.
So the entirety spent on mining bitcoin is not too far off from what one country spends just on minting pennies.
http://en.wikipedia.org/wiki/Penny_debate_in_the_United_Stat...
It's true, pennies are a horrible waste. It costs almost $0.02 to make one, and nobody even likes them very much, but the mint still churns out billions of the things ever year. That should probably stop.
But overall, coinage is a tiny fraction of the overall dollar economy. And Bitcoin isn't really comparable to coinage, anyway, since BTC is not a fast, convenient, anonymous, peer-to-peer mechanism for exchange that's appropriate for use in small transactions. Compared on that level, BTC seems sub-optimal long before we start worrying about details like energy efficiency of production.
What BTC really compares to is a currency in general, such as the dollar. There BTC at least has a chance of comparing on a vaguely level playing field. And at that scale, pennies are insignificant.
Since "waste" is a loaded term, let's call it "the cost of Bitcoin".
Current market cap is 6.7 billion $, with 13.2 million of a total of 21 million btc mined. Early "mining" was very cheap, but now costs are only going up (barring any surprising breakthroughs in computing).
Anyone care to speculate the total cost of Bitcoin?
Since Bitcoin is currently ~$500, that's ~$1.8mm per day.
Compared to that, there is a cost, if you will. n powerplants had to be built, or x tons coal had to be burnt to do all the calculations. Does that make sense?
Given the application of new primes is far less than, say, sending humans to live on the mars, I imagine the vast majority of people would not.
Yes, but researching primes is way, way less expensive than sending humans to the Red Planet. It's all about cost versus benefit. As one example, some mathematicians think the Riemann Zeta function might reveal something basic about primes, and if so, it would be well worth our time spent studying it, and primes in general.
I could say that my handling and use of physical dollar bills could help microbiologists understand how organisms can spread. Technically true, but of dubious value at best.
In an ideal world, imagine instead a variant of bitcoin that works like this:
* All miners do their hashing & number crunching for a second or so, then report their peak hashing rates to each other.
* Instead of one of them randomly mining the next block of bitcoin, the next block gets divided out proportionately according to hash rate.
* All miners then agree not to do any more hashing for (say) a minute or so.
* Process repeats.
Ta-da! We have a bitcoin system which uses a fraction of the electricity. If we were back in the days of mining on general purpose computers, then we could even put them to some other use at the same time as mining bitcoins.
Obviously, this has massive flaws. How to trust that everyone doesn't lie about their hash rates? Perhaps this could be solved by keeping the mining but setting the difficulty so that a block would only take a couple of seconds to mine. That way, there's still a numeric problem that requires real CPU work to solve.
Secondly, how to ensure that the systems don't do any more hashing for a fixed time? Perhaps the system could be tied to an unguessable source of randomness that won't be known in advance of the next block mining time. (This is the really tricky bit; you need a source that is trusted by everyone and not predictable or alterable or knowable in advance).
While proofs of work are wasteful, the only alternative I know of is simply entrusting some third party with control of the network.
Now, this gets to the real issue: We need a source for these magic numbers, it needs to be trusted and available and verifiable by everyone, and it needs to be unpredictable and unknowable until a specific time.
What possible sources are there? You could imagine a centralized system, where some computer on the internet spits out a random number for the next 'magic key' every minute. But of course, you have to trust the owner of this computer and so we'd lose all the decentralized features of Bitcoin.
Another possibility: Tie the magic key to some public knowledge, e.g. the value of the NASDAQ at a specific time. Again, this still has problems as 1) there's a limited range of possible values, so miners could pre-compute various versions, and 2) the value could be gamed by market traders.
Anyway, I don't have an answer for the ideal source of these 'magic keys', but if someone could come up with one, you could keep all of bitcoin's mechanisms while vastly reducing its energy waste
I have a suggestion for how to deal with these magic numbers. Make 9 out of 10 blocks duds (and it should be known in advance which), that contain very little reward. This means that, most mining power will switch of for these blocks, and only be active for the other 1 of 10 blocks.
This would seem to lead to a situation where, after a proof-of-work block is minted, those minting POW blocks relax and those minting POS blocks march things forward for each of their accounts until they find the earliest time that satisfies any of them - at which point they simply wait until that time arrives (for themselves or anyone else playing).
You just answered your own question on why bitcoin was deliberately made difficult. Security and fairness.
There has yet to be a proposal that has come close to offering a better solution without massive exploitable flaws.
If only it was called something like "transaction security auditing" or "ledger integrity verification" so that people would take it more seriously for what it really is.
It's the difference between terminal and instrumental values. It's one of the reason why some people are bewildered by what Tesla or SpaceX is doing - because they're missing the point that for Elon rockets and electric cars are terminal values and the money is just instrumental, while most of the companies we interact with have this the other way around.
On the one hand, I think I'm doing it to help the network, but on the other hand I kept the pitiful few coins I've got thereby, and didn't give them away. Why do I keep Bitcoins? Not as an investment, surely; I think of Bitcoin as more of another currency that I keep some money in all the time, like £ or €, so I can buy stuff when I'm there. But my little Bitcoin mining operation is being run for the purpose of "transaction security auditing" [thanks, qnr!] for the same reason I run a tor exit node: because I want to encourage such things to exist.
Yes they do. Your whole point, I thought, was that they're being paid to do it. They presently take a small fraction of value from every bitcoin. They also receive any transaction fees offered by any of the transactions they are processing, but in practice those are presently (almost?) always zero.
I'm not saying doing things for money is inherently bad. I'm just saying, let's call things what they are.
This has to be a loss leader, I see no way this is a positive ROI anywhere in the near future.
Even at 90K/day, this guy has a gigantic hole to crawl out from under before he starts to sniff a profit. That's assuming that 90K is a constant for the next 6-8 months. What if his production slows down or the market swings down in a day and he loses a few million?
BTC is anything but stable, and any way you look at it, it's a huge risk.
https://www.academia.edu/7666373/An_Order-of-Magnitude_Estim...
tl;dr:
"This means that we can expect our current industry best efficiency of 0.733 W/GH to reach 0.0000000873804 W/GH – so even the most ignorant, arrogant, narrow-minded and pseudo-intellectual critics and arm-chair academics should note that in the event that Bitcoin scales to a million times its current size and market cap over the next 30 years, it’s environmental impact will still be insignificant compared to existing systems."
The exact number of hashes per joule is irrelevant since the work being done isn't useful. This is purely a competition about spending the most. If hashes get 1000 times cheaper, they'll do 1000 times as many.
Fascinating.
[0]http://letstalkbitcoin.com/blog/post/how-many-bitcoins-does-...
It's as that comment said, basically just a way to turn Renminbi into Dollars without the Chinese government knowing about it.
This bit in particular is impressive:
"The mine operators told me that each warehouse took fifteen days to construct, and an additional ten days to fill up with hardware and get it all hashing away. The concrete was still drying on some of the buildings."
8 of those... I wonder who supplied the chips that do the mining and how much energy that facility uses.
"This entire facility has several petahashes of mining power, accounting for perhaps 5% of the entire bitcoin network. Damn."
I like their cooling solution as well!
The 'human rights violation' part seems thrown in there. I imagine some Treasury sweatshop with rooms full of slave engravers covered in ink, working 20 hours a day.
Probably part of the reason this is in china - close to the factories where the majority are produced. The owner could walk into a chip manufacturer and make a much better offer than the cost of exporting and packing them to ship internationally.
The cardboard cooling system looks pretty interesting, but I wonder how durable it is: cardboard which is constantly wet doesn't sound like it'll last too long.
I was searching online for cooling systems that could run on solar power and "evaporative cooling" seemed like a good candidate. I was looking for a "whole house cooling system" though but these folks come up in the search results.