Comment by danbruc | Hacker News Reader

Comment by danbruc | Hacker News Reader

Parent Full thread

Slightly above 1.5 GHash/J seems to be the best available hardware. I have no idea how often people throw away their mining equipment but I find it unconvincing that everybody is already using the newest hardware.

The calculation of the transaction costs was for that particular time frame so 100k transactions was a pretty fair assumption. But I was also talking about the future without block rewards so you have a point there that there is room for more transactions.

So maybe we will end up at about a Dollar if we throw in hardware costs, rental, cooling, profit and so on. This is still prohibitive for micropayments. And it makes the assumption that the network will not grow if the transaction volume grows. The problem I have with this is that I don't think that it would be a good idea.

Processing ten times the volume as of today but protecting it with the same amount of money in hardware and electricity costs as of today kind of makes the network ten times more interesting to attack. I estimated that gaining 50 % of the processing power would cost you 100 million in hardware, add electricity for two, three months and you end up in a range where a determined state, large company or even individual could wreak havoc.

KnC Neptune does 1.8 GHash/J: https://www.kncminer.com/pages/neptune-setup-info

> I find it unconvincing that everybody is already using the newest hardware.

Only a third or at most half of the network is mining with the Neptune at 1.8 Ghash/J. The rest is mostly the 1½ year old Bitfury at 1.2 GHash/J. Then there is a bunch of Monarch at 1.4 GHash/J, some Antminer at 1.3 GHash/J, and so on. So yeah a 1.5 Ghash/J average is very likely. You have to remember mining is extremely competitive. If you are not on the latest generation hardware, you are making less money than the competition.

> I estimated that gaining 50 % of the processing power would cost you 100 million in hardware

These days the estimate is closer to half a billion dollars. (There was a nice article about that - can't remember the link, sorry)

The list I used has the KnC Neptune at 1.429 GHash/J which seems to be the number they advertised before the update in July 2014.

But if you have to replace your hardware every year this makes the whole thing even worse - not only are you spending over 200 millions for electricity each year, you are now also spending a similar amount on hardware.

Officially they spec 1.4 GHash/J but in practice it measures 1.8 GHash/J: see the "0.57 watts per GH/J" quote in the link I gave. Only a few low-performing units bottom out at 1.4.

> But if you have to replace your hardware every year this makes the whole thing even worse

You used to have to replace your hardware every year, but not anymore. There was a big race to get the ASICs to the next fab node as Bitcoin startups progressively got better and better funded and could develop for more and more expensive processes. In 24 months we went: ASICMINER 130nm -> Avalon 110nm -> BFL Single SC 65nm -> Bitfury 55nm -> Jupiter 28nm -> Neptune 20nm. But now that we have reached the top-of-the-line 28-20nm, Bitcoin ASIC developers are just waiting for foundries to make the next node available (16nm), so the lifetime of a Bitcoin miner should grow from less than a year to at east ~2 years.

If a Bitcoin miner lasts ~2 years, its hardware cost is relatively small compared to electricity costs, so replacing them is not much an issue: a $1500 2kW Neptune consumes $3500 of electricity over 2 years at $0.10/kWh. TCO = $5000. The hardware represents only 30% of that. So not only it is affordable but it makes sense to throw that hardware away and replace it for a more efficient one after 2 years.

Okay, that will gives us total transaction costs with hardware, electricity, rental, profit and so on in the range 1.5 to 2.0 of the electricity costs which again makes electricity costs a pretty good proxy for transaction costs.

So the remaining question is how the total costs of running the Bitcoin network will evolve with changing transaction volume. Will competition among miners drive up or lower the total costs? Will total costs evolve proportionally to the transaction volume - which I think is important for security - or will they decouple? It would probably be interesting to model the whole system and see what happens. Is there an equilibrium for transaction costs and Bitcoin adoption? And is it stable or will the system run away?

Reply on news.ycombinator.com