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Bitcoin The Almighty Buck Hardware

Race To Mine Bitcoins Drives Enthusiasts Into the Chip Making Business 320

Posted by Soulskill
from the build-your-own-chips-to-build-your-own-currency dept.
holy_calamity writes "MIT Technology Review looks at the small companies attempting to build dedicated chips for mining Bitcoins. Several are claiming they will start selling hardware based on their chips early in 2013, with the technology expected to force many small time miners to give up. However, as happened in the CPU industry, miners may soon be caught in an expensive arms race that pushes development of faster and faster chips."
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Race To Mine Bitcoins Drives Enthusiasts Into the Chip Making Business

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  • Great (Score:5, Insightful)

    by Anonymous Coward on Wednesday December 05, 2012 @07:57PM (#42198427)

    An unregulated currency plagued by theft and controlled by an elite cabal of basement-dwelling enthusiasts who can afford the thousands of dollars worth of hardware to drive smaller players out of the market. I'm sure nothing will go wrong.

    • Re:Great (Score:5, Insightful)

      by Anonymous Coward on Wednesday December 05, 2012 @08:12PM (#42198545)

      Bitccoin is partly regulated. Inflation is regulated by the laws of math. Better than the government printing money at the whim of bad political agendas.

      • Re:Great (Score:5, Insightful)

        by Squiddie (1942230) on Wednesday December 05, 2012 @09:34PM (#42199251)
        Well, that shows how much you know about money.
        • Re:Great (Score:4, Insightful)

          by icebraining (1313345) on Thursday December 06, 2012 @03:55AM (#42201465) Homepage

          Well, at least he has a Nobel prize winner with him, one that the current Fed chairman claims to follow:

          I've always been in favor of abolishing the Federal Reserve and substituting a machine program that would keep the quantity of money going up at a steady rate.

          -- Friedman

          • You realize that bitcoin does not do that. There is a maximum number of bitcoin possible, after that deflation will kick in. Deflation is something any nobel prize wining economist would go to extremes to avoid.

        • Re:Great (Score:4, Interesting)

          by IamTheRealMike (537420) <mike@plan99.net> on Thursday December 06, 2012 @08:40AM (#42202547) Homepage

          Because you think Bernanke does? I don't think so [minneapolisfed.org].

          Are deation and depression empirically linked? No, concludes a broad historical study of ination and real output growth rates. Deation and depression do seem to have been linked during the 1930s. But in the rest of the data for 17 countries and more than 100 years, there is virtually no evidence of such a link.

          What you think of as mainstream economic thought is all too often little more than dogma, beliefs based on neat arguments that are never exposed to the harsh light of data.

          By the way, there's another term for what policymakers do with money printing. It's called a planned economy.

      • by isopropanol (1936936) on Wednesday December 05, 2012 @10:21PM (#42199639) Journal
        Actually nearly all money in circulation is created as debt, which must be repaid with interest (that was created as debt that must be repaid with interest). Governments printing a little money (say enough to pay for their entire non-capital, non-military budget AND eliminate poverty) would probably help the economy so long as it was done quietly. In countries with a high currency due to a single resource being exported the effect could be even bigger. Of course this only works in countries that have their own currency (so not most of the eurozone) and the central bank is not a privately held cartel (so not the USA)
        • Re: (Score:3, Funny)

          by sg_oneill (159032)

          The US treasury is not a privately held cartel lol.

          Seriously, delete the rothman lizard people conspiracy videos from your HTPC dude.

          • Re: (Score:3, Insightful)

            by Lord Kano (13027)

            The Federal Reserve bank is.

            LK

          • Re: (Score:3, Informative)

            by Anonymous Coward

            The US treasure is not a privately held cartel. It also doesn't print money.

            The US Federal reserve IS, and DOES. To quote Wikipedia ". The Federal Reserve System has both private and public components, and was designed to serve the interests of both the general public and private bankers. "

            http://en.wikipedia.org/wiki/Federal_Reserve_System

            So, while what you said is true, its irrelevant. The people who make the money, are bankers. Banks are insolvent. The Feds job is to keep banks afloat. The banks benefit

            • by CrzyP (830102)
              You are wrong. The Bureau of Engraving and Printing prints money and the Mint produces coins. The Fed does NOT. I work(ed) for it and we just move it between commercial and private banks, physically and electronically. Thanks for reading our wikipedia page in full.
              • Are you being deliberately obtuse? It's quite clear that when people refer to the Fed "printing money" they don't literally mean running printing presses or forging coins out of molten metal. They are referring to the process by which they type a new balance into their own accounts and then proceed to use it for, eg, buying bonds. This is creating money from nothing and we use the term "printing" to refer to it, as that's a simple metaphor everyone can understand.
          • US treasury is not the US' central bank, the Federal Reserve is.
          • Re: (Score:3, Informative)

            by tftp (111690)

            Google is useful, and GP is correct. The US Department of Treasury is not a bank at all, let alone the central bank. Per Wikipedia:

            The Treasury prints and mints all paper currency and coins in circulation through the Bureau of Engraving and Printing and the United States Mint. The Department also collects all federal taxes through the Internal Revenue Service, and manages U.S. government debt instruments.

            The Federal Reserve System (also known as the Federal Reserve, and informally as the Fed) is the centr

          • by lxs (131946) on Thursday December 06, 2012 @05:40AM (#42201829)

            the rothman lizard people

            What? The Rothschilds and the Mothman had viable offspring? We're all DOOMED!

          • by isopropanol (1936936) on Thursday December 06, 2012 @11:37AM (#42204017) Journal

            Comments like this are why I added "(sorry to sound crackpot)"

            It is a great shame that any discussion of novel monetary policy which mentions the ownership of the Fed as a limiting factor gets accused of being associated with schitzophrenic delusions and/or anti-semitism.

            The US Federal Reserve Bank is literally a privately held cartel. This is a statement of fact, and it has monetary policy implications. My original comment was about a specific method of quantitative easing which would be more difficult without a national currency or with a privately held central bank. This is not a conspiracy theory, it is monetary policy.

            Most money now does enter circulation as bank account balances countered by interest bearing loans. This is a very usefull system. Without it I and probably the vast majority of people in the western world would not own any real estate. Sadly though it has nasty side effects in a contracting economy. This is not a conspiracy theory, it is economics.

      • Re: (Score:3, Insightful)

        by sg_oneill (159032)

        Remember boys and girls, in bitcoin rainbow and unicorn land, deflation is good.

        Like literally, the looneys recently celebrated the algorithm halving the new coin supply lol.

        I mean sure a recession is just another word for deflation (it really is) , but lets not sweat the details.

        • Re:Great (Score:5, Funny)

          by dadioflex (854298) on Wednesday December 05, 2012 @11:54PM (#42200327)

          Remember boys and girls, in bitcoin rainbow and unicorn land, deflation is good.

          Like literally, the looneys recently celebrated the algorithm halving the new coin supply lol.

          I mean sure a recession is just another word for deflation (it really is) , but lets not sweat the details.

          Are you one of those clever spambots that assembles a comment from random words that kinda form a sentence?

        • I mean sure a recession is just another word for deflation (it really is)

          Facts disagree. There were multiple periods during the gold standard when deflation was coupled with real growth in output.

          See Good versus Bad Deflation: Lessons from the Gold Standard Era [google.com].

    • Re:Great (Score:4, Insightful)

      by Anonymous Coward on Wednesday December 05, 2012 @08:13PM (#42198553)

      The official Bitcoin protocol is voted upon by everyone participating in the network, either accepting or not accepting changes. The official client implementation, as well as a few other implementations in other languages, are open source.

      If that's "control by an elite cabal" I'm not sure Slashdot is the site for you.

      • by artor3 (1344997)

        "Voted upon by everyone participating in the network"... So does that mean I can buy 0.001 bitcoins and have equal voting power? And therefore that I can create a million shill accounts? Or is voting weighted by total number of bitcoins possessed?

        Either way, it seems like the hardcore devotees will have control. Not that that's a necessarily a bad thing, but don't pretend it's democratic if it's not.

        • by jhantin (252660)

          I think this wiki page [bitcoin.it] says it best.

          Normally, however, a change proposal [bitcoin.it] is floated with the community, and if adoption seems likely but not certain, the course of action may be to take a poll [bitcoin.it] by specifying a voting period in which miners are asked to include a vote in any blocks they find if they support the proposal. In this context, it is quite literally 'one block, one vote'. In the case of pooled mining [bitcoin.it], it's up to pool participants to work out how they want to vote with their combined power, with th

          • by iluvcapra (782887)

            Natch', the concept of "economic majority" is extremely nebulous and in any event almost completely based on transaction volume. If you make a thousand 5 cent transactions a day, you get that many votes on wether or not you're using X network to sign off on your blocks. OTOH, if you have a million dollars in BTC but only trade once a month (or even better, you have a future contract denominated in BTC, like hosting contract or a promissory note), you get almost no vote at all.

        • by Linsaran (728833)

          "Voted upon by everyone participating in the network"... So does that mean I can buy 0.001 bitcoins and have equal voting power? And therefore that I can create a million shill accounts? Or is voting weighted by total number of bitcoins possessed?

          Voting power is determined by how many processor cycles you're dedicating to mining the next block, it's not a 'how many coins do I have' or a 'one vote per one voice' kind of system, it's a 'how much am I actively contributing to the system as a whole'.

          On a slight tangent, I can't help but think that it'd be interesting to see a democratic political system where the amount of contribution you make to the good of society affected how much influence you had on the political process. Course I don't realistic

    • Yes but (Score:5, Funny)

      by Spy Handler (822350) on Wednesday December 05, 2012 @08:26PM (#42198685) Homepage Journal

      if you can buy the hardware on credit,

      1. use the hardware to mine new BitCoins
      2. pay back the hardware vendor with your BitCoins
      3. ???

      • you mean like just before the great depression when people started to by stocks on credit and pay them off with the returns? yeah that worked out well for everyone involved.

      • There's over $300,000 USD equivilant in pre-orders at the major vendors and most of it was paid for in bitcoins but converted to USD for a fee by bitpay, who is holding the BTC on purpose due to the 50 to 25 split that will drive the price to double in theory eventually.
      • by mysidia (191772)

        This is barely any different from buying a house on interest-only loan, in anticipation of being able to flip it a few years later for a huge profit, after the skyrocketing home values lead to increase in equity.

    • It is absolutely, 100% unregulated and uncontrollable by nature. Stop commenting on bitcoin stories if you have no idea how it works or what you're talking about.
  • Um? (Score:5, Interesting)

    by The Grim Reefer (1162755) on Wednesday December 05, 2012 @08:00PM (#42198441)
    If mining Bitcoins was so profitable why would they want to sell the chips? Wouldn't they be better off keeping these chips and mining the Bitcoins for themselves?
    • Re:Um? (Score:5, Insightful)

      by Anonymous Coward on Wednesday December 05, 2012 @08:07PM (#42198503)

      Because the companies themselves don't believe in the Bitcoin. They're basically in the divining rod business. The only reason they wouldn't just use the rods themselves to find gold is because...

    • Re:Um? (Score:4, Insightful)

      by hawks5999 (588198) on Wednesday December 05, 2012 @08:08PM (#42198509)
      • Re:Um? (Score:5, Insightful)

        by TFAFalcon (1839122) on Wednesday December 05, 2012 @09:13PM (#42199105)

        So what are you trying to say? Changing the owner of the equipment won't make it make more/less money. So it either produces enough money to pay for itself or it doesn't. And if the companies are selling it, the answer is probably that it doesn't or they'd just keep it and mint for themselves.

    • Re:Um? (Score:5, Insightful)

      by korgitser (1809018) on Wednesday December 05, 2012 @08:18PM (#42198597)

      By that logic, you would want to do everything by yourself. Well, if you are a fisherman, you probably will not start a bank yourself even if being a bank looks profitable. Unless you are from Iceland, that is.
      There is a thing called the division of labour which says that if each of us specialize, we will get more stuff done as a whole. This is what built the civilization.
      Also, if you are looking into investing, you can choose between a high-risk high-profit endeavour, like building chips for your own mining operation, or a low-risk low-profit endeavour, like building chips for other's mining businesses. By going the second route, you can hedge yourself against the uncertain final success of bitcoin, while pulling your profit from the general public's current and certain interest in bitcoin.

      • You could summarize what you said with a quote from Mark Twain: "When everyone is looking for gold, it's a good time to be in the pick and shovel business."

        To summarize the summary of the summary: people are a problem.

        • "people are a problem."

          True enough. But also, People are the solution.

          Simple version is, SOME people are the problem, and SOME people are the solution. Some of the people that are the problem were previously the solution to a previous people problem. People are the problem, and the solution.

          • Re: (Score:2, Funny)

            by Anonymous Coward

            You're a VB programmer, am I right?

          • by Fnord666 (889225)

            SOME people are the problem, and SOME people are the solution

            and SOME people are part of the precipitate.

    • May be, because, sealing chips is a faster way to make money? If I were given two options one is quick but less money, other takes time and makes more money, I would choose the quick.

      • by NitroWolf (72977)

        May be, because, sealing chips is a faster way to make money? If I were given two options one is quick but less money, other takes time and makes more money, I would choose the quick.

        That's why you're poor.

    • by stms (1132653)

      Perhaps to get the cost of manufacturing the chips down.

    • Re:Um? (Score:5, Insightful)

      by ourlovecanlastforeve (795111) on Wednesday December 05, 2012 @08:31PM (#42198735)
      Most of the money made during the gold rush was made by merchants selling mining and panning equipment.
      • You hit the nail on the head. Investing in holding BTC and the electricity and assembly and parts is risky. With over a quarter million USD in pre-orders, selling chips is guaranteed income.
    • Re:Um? (Score:5, Insightful)

      by NitroWolf (72977) on Wednesday December 05, 2012 @08:32PM (#42198745)

      If mining Bitcoins was so profitable why would they want to sell the chips? Wouldn't they be better off keeping these chips and mining the Bitcoins for themselves?

      If BFL were to mine instead of selling the chips, they would quickly have more than 51% of the network hashrate and the confidence in the bitcoin network would erode and the value would drop. It doesn't make any sense for one entity to mine all the bitcoin and devalue the currency... then it's worth nothing and it was for naught. No, it's far better to distribute the hardware far and wide, making it impossible for any single entity to gain a controlling portion of the network.

      No, it doesn't make any sense for BFL to mine with their own hardware, it makes much more sense to grow the bitcoin network and for BFL to supply the hardware to do so.

    • by jamesh (87723)

      If mining Bitcoins was so profitable why would they want to sell the chips? Wouldn't they be better off keeping these chips and mining the Bitcoins for themselves?

      Unless the chips had backdoors in them...

    • by Albanach (527650)

      Perhaps mass production of the chips is necessary to bring the cost down to a profitable level.

      It's like producing a drug. The first pill might cost $1 billion, while the second pill costs $1. Making one chip costs $1 billion, but make 1,000 and they're $1 million each.

      I'd imagine chip production is somewhat similar. Of course, having more chips will result in some devaluation of the currency since more can be produced, but as long as the devaluation is less than the amount saved by mass-producing the chips

      • by rerogo (1839428)

        Chip production is very similar, though the prices I usually hear quoted for the first unit (I am a student, so these may be out of date) are usually somewhere in the mid-hundreds of thousands. And the incremental cost (the cost of chip #2) is as low as pennies, depending on how big the chip is.

    • Re:Um? (Score:4, Informative)

      by Lagmo (972467) on Wednesday December 05, 2012 @10:21PM (#42199637)

      Actually one of the more serious projects(ASICMINER) DO plan to use the first batches of chips to compensate the IPO investors by using them for mining and later to possibly help fund more R&D and production runs. Additional and future income will be based on sales of the hardware

      And since this is /. Preliminary chip info:
      Built on 130nm node process (approximately comparable to the Pentium III generation)
      It'll use a 15 x 15mm BGA package.
      It's expected to run at around 200-300Mhz
      It'll be a couple orders of magnitude more power efficient than GPUs and serveral times more than current FPGAs at hashing the SHA256 algorithm.
      More info here: https://bitcointalk.org/index.php?topic=99497.980 [bitcointalk.org] and older (but more geek bait): https://bitcointalk.org/index.php?topic=91173.0 [bitcointalk.org]

      Project is only about 2/3rds of the way through the foundry process, so atleast a month left till these chips could be active on the BTC network.

    • Owning bitcoin mining hardware is a risky buisness. The income generated by mining hardware is dependent on both the value of each bitcoin and the total ammount of mining power out there both of which are difficult to predict.

      Selling the tools rather than running them yourself spreads that risk around more people.

    • As I understand it, no matter the speed of calculating, there are only a set number of bitcoins given out per time, for one year this is 1,310,400 BTC, which are currently worth $13 so roughly $17M total will be awarded. Your amount is only based on what percent of the mining force you represent, it will never go over this. So lets say butterfly could dominate and take 50% of the computational force (which is highly unlikely since there are 5 companies making ASICS and the huge stock of FGPAs and GPUs sti

    • by F1re (249002)

      If growing cotton was so profitable, why would Monsanto want to sell seeds? Wouldn't they be better off keeping these seeds and growing the cotton for themselves?

      • by tftp (111690)

        If growing cotton was so profitable, why would Monsanto want to sell seeds?

        In this case Monsanto would need land and workers and sales channels, which they don't have. Note also that farmers are subsidized, but a large corporation may not qualify, thus further skewing the comparison.

        But a company that makes machines for making money would only need a place on a shelf and a little electric power. That is always available.

    • That has been a nuclear level topic I started on the bitcoin forums and is still being debated. Every single chip maker assures us they won't "compete with their customers" by mining themselves and yet 10,000GH/s just randomly appeared out of nowhere in the last 1.5 months on the main net. Hmmmm. But I calculated and unless they're the first in, they're going to get drowned. The anticipated payoff period to run an ASIC right now is around 15 days but after all the pre-orders are shipped, it'll be 10-15
    • by dadioflex (854298)
      Perhaps they're going to sell them for Bitcoins. The money and energy spent on hardware to mine Bitcoins must far exceed how much the entire Bitcoin economy is worth.
  • Walking about SC12 this, like many years there are literally hundreds of FPGA vendors that build some what custom hardware that would mine bit coins extremely efficiently. I can understand some hobbyist chip designer looking to do something interesting for the heck of it, but really, there's already a huge cache of available products on the market that have been through the ringer and are well tested to perform this exact type of work load.
    • Re: (Score:3, Insightful)

      by Anonymous Coward

      These are ASICs. The Bitcoin mining scene has already gone through its FPGA phase.

  • by DigiShaman (671371) on Wednesday December 05, 2012 @08:19PM (#42198609) Homepage

    During the Gold Rush, it was the tool and equipment suppliers that made out filthy rich, not the miners (except for a lucky few).

  • by ourlovecanlastforeve (795111) on Wednesday December 05, 2012 @08:35PM (#42198769)
    I was mining bitcoins with two AMD Radeon 9790 cards and was barely turning a profit. The problem is that the electricity cost to run the computer and the video cards is very expensive. It tripled my electricity bill. Then the difficulty was doubled, now I'm making negative profit. There is very little chance that if I continued to mine, the bitcoins I have in my wallet would ever become worth enough to make the money back. The same is true for everyone else: The more GPU's you add the more electricity costs and so you need so much hardware to break even that you'll never go into profit. The only hope is that you're one of the lucky few first people to receive one of the ASIC units from the two companies that claim to be close to shipping. Of course neither of those companies has actually shown a working unit even though they've taken thousands of orders (including two orders from me, one to each company).
  • Seeing as how computing power devoted by miners ramps up difficulty levels, won't this just create a self suppressing feedback loop?

    • My very hotly contested and controversial but realistic estimate put it at 14x higher difficulty 3 months after the first wave of ASICs are released. So yeah. It'll just keep getting worse and worse with everyone making less money...except not really. There's 25 BTC split every 10 minutes when a block is formed and that's that. The speed of the chips in the system is only important relative to everyone else you're mining against.
    • by citizenr (871508)

      Seeing as how computing power devoted by miners ramps up difficulty levels, won't this just create a self suppressing feedback loop?

      It will. Unfortunately Bitcoin creators didnt take Mining Pools into consideration and with them self correction mechanism has a slight lag. Enough to still screw up the market and make a profit.

  • Pretty soon we won't be able to tell the counterfeit bitcoins from the real ones!
    • Ha ha ha ha ha, very funny :P but for the record, BFL could out-process the entire network with their current inventory of ASICs by running them all at once in a private pool. Then they could form a block with fake data before anyone else and then verify it themselves and place it in the chain. It's called a >50% attack. But that would cause a massive crash and destroy the entire bitcoin system and they'd go out of business so nobody thinks anyone would be stupid enough to do that.
      • Then they could form a block with fake data before anyone else and then verify it themselves and place it in the chain. It's called a >50% attack.

        True, but note that there are limits on what you can do with a "50% attack". Most importantly, it won't let you spend anyone else's bitcoins, as that still depends on access to their private key. If you control 50% or more of the network then you can basically do two things: first, you can delay other peoples' transactions indefinitely by refusing to include them in your blocks; second, you can reverse past transactions by allowing them to be included in a block, and then mining a new, longer chain which do

  • Bitcoin has a built in limit and a built in "profitability scale" for its mining. The faster you mine the less profitable it is. Unless you could jump WAAAY ahead of the curve (as some early adopters did) you won't be able to make money mining.

    Bitcoin needs people to spend it, not mine it, and thats a difficult problem which can't be solved without top-down (gov't) influence. People have to psychologically learn to accept bitcoins, and that wont happen unless they are made to.

    There are a lot of benefits t

    • by Anonymous Coward

      Bitcoins don't just require an investment of cpu/gpu time and electricity. They also require an investment in disk space as well. I finally got around to seriously mining on a 3 year old video card, mostly just to experiment and finally see what the fuss was about, while getting a bit of 'free' heating for the house out of my videocard.

      Long story short: 3 months of mining on a 'low-end' card (70~MH/s) has netted me a total of ~0.25 BTC. At current rates that's around 3 dollars worth of bitcoin (assuming a 1

    • by Rockoon (1252108)

      Bitcoin needs people to spend it, not mine it, and thats a difficult problem which can't be solved without top-down (gov't) influence. People have to psychologically learn to accept bitcoins, and that wont happen unless they are made to.

      Ineed, for quite awhile after Germany joined the Euro Zone almost nobody in the country used euros. Then the government announced that it would only accept tax payments in the euro. Within a few short months almost everyone was using euros.

  • What has always bugged me about bitcoins is just how pointless those calculations are.

    Why not use them for the good of humanity? Why not link with projects like seti, @folding or other?
    Surely the technical hurdles aren't that high, and instead of causing localized heating (cpu) just to get a hash value, one would benefit society too?
    • My old rig drew 550 watts 24/7 with dual 5830's overclocked and got to around 644 million hashes per second. The new Jalapeno ASIC runs at 2.5 watts and get 3,500 MH/s. Problem solves.
  • From a society-level point of view I see a business model which consumes resources for hardware, energy for operating the hardware, and man-hours spent planning and operating the mining setup. And what is created? Nothing at all. Just some half-random redistribution of wealth based on a dubious scheme. Participating in this type of setup seems about as good an idea as being in the bottom 1-2 layers of a pyramid. May I suggest visiting a casino instead; probably a lot more fun, and consumes less of the plane

    • ...until Paypal decides they don't like your country and stop operating in it and the world bank decides to jack up your currency exchange fees. Then bitcoin starts to look a hell of a lot better. Also if you have bad credit. Or if you're under 18. Or if you want to donate to something 100% anonymously. You don't actually know much about bitcoins, do you?
  • Bitcoin is susceptible to having the block chain taken over by authorities, some of whom have built up significant processing power.

    It's too bad about this whole thing since BTC is more stable the more people are doing the cryptography. It was however predictable with a deflationary (less being produced over time) and obviously dedicated hardware being developed.

    Oh and for those who don't know on December 1st the amount of BTC entering the market was cut by 50%... so far price increase is about 20%
    • by NitroWolf (72977)

      The ASIC era will aim to fix the 51% attack problem... or at least make it extremely costly. The farther we get into the ASIC era, the less and less likely and more costly it will be for someone to subvert the network.

      1 year ago, it would have taken less than 1 million dollars to wreck the bitcoin network. 1 year from now it will take at least $100 million, if not more, assuming the price of BTC doesn't tank or something.

      Granted, $100 million is pocket change for some large corporations and of course gove

  • Great side-effect (Score:4, Interesting)

    by Arancaytar (966377) <arancaytar.ilyaran@gmail.com> on Thursday December 06, 2012 @03:56AM (#42201473) Homepage

    Associating monetary value with computing cycles would eventually incentivize the development of faster and better technology.

    I just hope that whatever these guys come up with will also have applications in the real world.

I'm all for computer dating, but I wouldn't want one to marry my sister.

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