Operation Wants To Mine 10% of All New Bitcoins

An anonymous reader writes: "Mining new Bitcoins is computationally expensive — you can't expect to do much on your standard home computer. Many miners have built custom rigs to mine more efficiently, but it was only a matter of time until somebody went industrial. Dave Carlson's goal is to mine 10% of all new Bitcoins from now on. He's built literally thousands of units. They collectively use 1.4 million BitFury mining chips, which are managed by a bunch of Raspberry Pis. 'The current rigs each contain 16 boards, with each board containing 16 BitFury chips, for a total of 256 mining chips on each rig. Carlson said about 90,000 processor boards have been deployed, which would put the number of rigs at about 5,600. A new board [being designed] will have 756 chips on each rig instead of 256.' Carlson says his company spent $3-5 million to get everything set up. They current generate 7,000 — 8,000 Bitcoins per month, which, at current rates, would be worth over $4 million."

Re:What about the alternative virtual coins ?

[lister king of smeg]

Bitcoin is the most valuable but is I were this guy I would do merged mining where you mine several crypto currencies on the same hardware simultaneously.

Re:I admire their spunk, but...

[LordWabbit2]

When I see how much hardware and electricity is wasted digging chunks of hardened carbon [wikipedia.org] out of the ground, I can only shake my head.

When I see how much hardware and electricity is wasted jumping out of perfectly good airplanes [wikipedia.org], I can only shake my head.

We humans tend to do things because we want to, not because it makes sense to you.

Re:I admire their spunk, but...

[TeethWhitener]

This is the main problem I have with Bitcoin. Here we have a brilliant opportunity to harness computing power to solve a socially or scientifically relevant problem, and instead we waste it on solving random meaningless math problems. In my book, an ideal cryptocurrency would use that computing power to solve a protein folding problem, or a plasma physics problem, or any other number of things. You wouldn't need an artificial upper limit like BTC has, because in generating a new block of currency, you'd actually be creating something of value to society. Riecoin [riecoin.org] approaches cryptocurrency from this point of view (albeit still with an asymptotic limit on the number of total currency units, and only applied specifically to computations of potential counterexamples to the Riemann Hypothesis), as does IBM's World Community Grid [worldcommunitygrid.org] to a certain extent (albeit without the ability to easily and securely transfer the virtual cash generated), but I'd really like to see it take off.

You forgot

[justthinkit]

You forgot to mention gold's inertness. Yes, copper and silver conduct better than gold but both of them corrode like fiends. To combat this you have to alloy, or coat. You don't need this with gold, and combined with its "softness" (better described as extreme ductility), you can lay down a very thin layer indeed. "Atoms" thick, vs "fractions of an inch" thick. Ask someone designing a satellite which is more valuable. Or a jeweler. Or a circuit board maker.

Re:I admire their spunk, but...

[IamTheRealMike]

When I see how much hardware and electricity is being wasted on these various mining processes, I can only shake my head.

Bitcoin developer here. Yes, by all means shake your head, it's clear that the current level of mining is a large waste of resources. Nobody has been reporting double spends caused by hashpower attacks, which is what mining is designed to stop, suggesting that right now there's too much security.

But what else would you expect? Inflation causes misallocation of resources. This is basic economics and is the reason Bitcoin is designed to eventually target a stable monetary base. Yet you cannot create a new currency from scratch without inflation, by definition, because the money has to come from somewhere. What's more you can't create a currency fairly if you simply give yourself all the money (pre mining), so there has to be a fairly long drawn out allocation process so everyone gets a chance of taking part in that initial inflation.

This initial misallocation of resources towards excessive security is annoying, but tolerable - existing currencies inflate all the time and this causes huge misallocation of resources towards things like asset bubbles. If we're going to misallocate towards something, more security against rollback attacks is perhaps not the worst thing we could want, especially as market incentives should push people towards using renewable power over the next few years.

I'm not sure when BTC is slated to have all of its coins mined, but it will be instructive to see what happens to it at that point.

The rate halves every four years. It rounds to zero in 2140 but will presumably become irrelevant long before that. How irrelevant really depends on Bitcoin's long term value in dollar/euro/fiat terms though, which is impossible to predict.

At that point mining will be supported entirely by fees. How much mining takes place will depend on how much security the Bitcoin user community really needs, which I am expecting to be determined by letting it fall until double spending attacks start to become commonplace and an actual risk to business. Then the game theory becomes quite complicated because mining is a public good, but I'm expecting merchants and other big sellers who need the security to form assurance contracts with each other to incentivise mining. In theory this solves the problem of people not wanting to subsidise their competitors, but the use of assurance contracts for continuous goods like hash power is a rather under-researched area. I'm looking forward to reading papers written by academic economists and game theorists over the coming years to learn more about what the post-inflation world will look like.