back to article MANIC MINERS: Ten Bitcoin generating machines

Bitcoins are either the new bubble economy or the future of online commerce. It’s not the first time anonymous e-money has been tried – ask Mondex – but Bitcoin does seem to have traction. There are things you might want that you can buy with it, such as Tesla cars and Virgin Galactic trips to space. Zynga has announced that …

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  1. fixit_f

    I'm not some kind of hippy or anything, and it's an interesting experiment....

    But in an age where we're supposed to be getting more efficient and less resource hungry, does the whole mining process not strike anyone else as being an utterly futile waste of electricity and processing power?

    1. Stretch

      Re: I'm not some kind of hippy or anything, and it's an interesting experiment....

      Completely. Seems to me this is seriously undermining (ho ho) efforts to combat global warming.

      1. Tristoni

        Re: I'm not some kind of hippy or anything, and it's an interesting experiment....

        And printing money is a carbon-neutral process, yeah?

        1. mark 63 Silver badge

          Re: I'm not some kind of hippy or anything, and it's an interesting experiment....

          well i agree, unlike most above,but their points are valid , everything uses some energy , specially paper money.

          but the thing that gets me about bitcoin is the intensive processing just for the sake of it - just so that everyone dosent do it - its just a test.

          All other processing and real world stuff discussed above is doing it the easy way. Bitcoin hash cracking is just making it deliberately hard to control pace.

    2. TakeTheSkyRoad

      Re: I'm not some kind of hippy or anything, and it's an interesting experiment....

      It's not a complete waste even though it might seem it.

      Because the electricity cost is so intrinsic to how profitable a bitcoin mining rig is in the future this industry might be the source of great advances in efficiency which could benefit computing as a whole.

      There is some incentive for traditional chip makers (CPU/GPU) in the pursuit of high clock speeds and in the mobile market there is equally some incentive to save battery power but it's not as acute as with bitcoin mining.

      1. Dave 126 Silver badge

        Re: I'm not some kind of hippy or anything, and it's an interesting experiment....

        > does the whole mining process not strike anyone else as being an utterly futile waste of electricity and processing power?

        Yeah, I know how you feel.

        However, the same can be said for the physical mining or gold, or diamonds... at least Bitcoin mining doesn't pollute groundwater or result in hundreds miners being killed each year.

        One can almost imagine a swarm of self-replicating machines in orbit, feeding upon satellites for raw materials and turning sunlight into virtual gold... maybe its that sort of disastrous situation that which caused the universe of Star Trek to be a 'post money' society!

        1. Anonymous Coward
          Anonymous Coward

          Re: I'm not some kind of hippy or anything, and it's an interesting experiment....

          Generating electricity certainly does cost lives - i.e. in mining / burning the coal - so you could argue mining bitcoins does cost lives.

          1. Dave 126 Silver badge

            Re: I'm not some kind of hippy or anything, and it's an interesting experiment....

            If only the Proof of Work could be something that required human 'brain hours'.

        2. Andrew Stevenson

          Re: I'm not some kind of hippy or anything, and it's an interesting experiment....

          We do a lot of nasty mining to get the materials for computers and power generation.

          Lots of things are pushing us to find efficiency.

          Are there estimates of the volume of network traffic from Bitcoin (and its copycats)?

          How much electric power does all that mining take?

        3. Anonymous Coward
          Anonymous Coward

          Re: I'm not some kind of hippy or anything, and it's an interesting experiment....

          Running with your analogy, one might ask about the cost of feeding the financial services industry in general.

    3. Mark .

      Re: I'm not some kind of hippy or anything, and it's an interesting experiment....

      Says you, using an electricity-consuming computer to post it.

      Let's seem some stats - how does the power required for the Bitcoin network compare to other things, such as power to run banks and so on? Or indeed, what about the energy required to mine gold?

      Claiming that any use of electricity is absurd, as you could use that argument against just about anything. This is like the "Let's save the planet by turning off lights for one hour" argument from people who then continue to use electricty the rest of the time.

      1. Anonymous Coward
        Anonymous Coward

        Re: I'm not some kind of hippy or anything, and it's an interesting experiment....

        And how much power does it take to generate £1 of real money in your pocket? I'm not talking about just the minting/printing but the going to work, doing your job, everyone else doing jobs so you can do your job, government structures to manage the pound you finally get etc etc etc. Compared to all that I expect the power used by a bit mining card is sweet fuck all.

        1. fixit_f

          Re: I'm not some kind of hippy or anything, and it's an interesting experiment....

          I see your point - but I'd be hugely delighted not to work if society made that feasible, so the argument is flawed.

          All I'm saying is that it seems rather unnecessary to design the infrastructure behind a currency to be so intrinsically labour intensive that all of this number crunching is required just to help set it's value, the quantity in circulation and to manage simple transactions. Yes of course I'm aware that any currency has all kinds of overheads around it's creation, maintenance and things like FX rate discovery, that's what traditional markets do - as it happens I work in finance myself writing systems that do EXACTLY that so you'd think I'd welcome it!

          The whole thing seems rather over-engineered.

    4. Anonymous Coward
      Anonymous Coward

      Re: I'm not some kind of hippy or anything, and it's an interesting experiment....

      It has to be difficult and expensive. The whole point of a currency is that it's backed by a scarce resource. If bit coins could be mined easily and cheaply they'd have no value.

    5. Anonymous Coward
      Anonymous Coward

      Re: I'm not some kind of hippy or anything, and it's an interesting experiment....

      The people making money are the people selling this sort of tripe.

      1. keithpeter
        Windows

        Re: I'm not some kind of hippy or anything, and it's an interesting experiment....

        @AC 14:22 and all

        I'm just wondering: is there really no way of re-purposing all this hardware? Sort of switch them over to looking for Galaxies, Protein mapping or something useful once the Bitcoin rarity threshold becomes silly?

        1. boltar Silver badge

          Re: I'm not some kind of hippy or anything, and it's an interesting experiment....

          "I'm just wondering: is there really no way of re-purposing all this hardware? Sort of switch them over to looking for Galaxies, Protein mapping or something useful once the Bitcoin rarity threshold becomes silly?"

          Even better if it had been used for something like [email protected] in the first place - ie something genuinely useful for humanity , rather than just a silly vanity exercise that in the future probably won't even break even in cost unless electricity is free.

        2. Loyal Commenter Silver badge

          Re: I'm not some kind of hippy or anything, and it's an interesting experiment....

          I'm just wondering: is there really no way of re-purposing all this hardware? Sort of switch them over to looking for Galaxies, Protein mapping or something useful once the Bitcoin rarity threshold becomes silly?

          Google can easily provide the answer to that question for you, but to save the wear on your fingers - it's "no".

          The specialised chips used for mining are single-purpose ASICS. The only thing they can do is generate double SHA-256 hashes (i.e. a hash of a hash) and check if the leading digits are zeroes. They are not even any use for cryptography, since nothing else (except other similiar cryptocurrencies) uses double SHA-256 hashes, and even if it did, the application of finding a certain number of leading zeroes in the result is decidedly limited. The advantage is that these chips use considerably less power than a general purpose processor doing the same job and do it in much less time.

      2. Michael Dunn
        Happy

        Re: I'm not some kind of hippy or anything, and it's an interesting experiment....

        "The people making money are the people selling this sort of tripe."

        As the old saying during the gold rush has it "You make more money selling pickaxes than prospecting for gold."

    6. Magnus_Pym

      Re: I'm not some kind of hippy or anything, and it's an interesting experiment....

      Obviously the value of Bitcoins can't go on rising at the current rate ( I think they are probably in bubble at the moment), however the difficulty of hashing can. There will at some point be an equilibrium where the cost of mining is just covered by the value of the Bitcoins produced. I don't think this is far away if it has not already happened. At that point the Bitcoin experiment reaches level 2: a steady state. Anything could happen and it will be interesting to watch, from the sidelines.

    7. N13L5

      Re: I'm not some kind of hippy or anything, and it's an interesting experiment....

      Not to mention, all these mining gear shops are selling you their previous generation hardware, while saying they're working as fast as they can on the current generation to be able to sell that to you. But in truth, they're using the current generation hardware for their own mining, until they complete building the next newer generation of hardware for themselves upon which they'll happily sell you the generation they've already stopped using.

      Given the logarithmic curve of increasing difficulty in mining additional Bitcoins, that makes perfect sense for them, and the hardware sales are just icing on the real cake.

      Waiting for the next market-manipulation-induced dip by the international banking cartel might net you more coins than the always-obsolete(TM) mining hardware you can buy.

  2. JDX Gold badge

    EC2, Azure, etc

    I wonder if companies like these use or are building ways to automatically utilise un-used PCs for BC mining? They have the hardware available for free other than power usage and wear'n'tear, on a massive scale.

    In fact if they did this, couldn't they make mining BCs commercially non-viable for everyone else as the difficulty increases with product rate (IIRC)?

    1. Anonymous Coward
      Anonymous Coward

      Re: EC2, Azure, etc

      "... other than power usage and ..."

      That's the problem with using something like EC2/AZure/Cloud etc.. These services aren't optimised for this type of work. The power consumption (and therefore the cost) of a server vastly outweighs what you could achieve with a dedicated ASIC board. Also, the actual computation for the hash is simply a couple of SHA-256's which can be burnt directly on to silicon rather than through code. As such, by current standards your ROI will be negated simply by the cost of the electricity. Of course, if you're using someone else's electricity (i.e a bitcoin botnet), then you don't pay for it. But even this is inefficient because if you're not pumping out hashes in the Giga/Terra rate then you'll simply lose each round (you have about 10 minutes per iteration to find a hash that is lower than the current difficulty).

      1. Dave 126 Silver badge

        Re: EC2, Azure, etc

        There are Crypto-currenciues (like Litecoin) based on a Proof of Work (such as Scrypt) that doesn't hand a huge advantage to specialist chips... however, it's said that Litecoin bodged the implementation, meaning that GPUs are still faster than CPUs.

  3. Spiracle

    Volatility

    "Customers who paid in Bitcoin were promised on the Bitcointalk forum that if Hashfast had to issue refunds, it would do so in Bitcoin. However, as the contract said refunds would be in dollars, it is now only offering that currency. Since $2,000 worth of Bitcoins in October would be worth $10,000 now, this has unsurprisingly ignited the ire of those who pre-ordered".

    ...and therein lies the problem for anybody using BTC for any purposes other than speculation.

    1. Jaybus

      Re: Volatility

      Yes. In fact, everything about BC smells like a scam. Perhaps that is why China has banned BC currency exchange. When the US and EU follow the Chinese it will be game over. Think about it. Why would these economic powers allow an upstart to undermine their own currencies? Why would they make life easy for the money laundering criminals? Not to mention, if these economic powers were afraid of a BC takeover of the money system, wouldn't they be bringing their many supercomputers into the fray and essentially monopolize the mining? Well, I suppose they would have to share it with the other powers, but it would certainly take the little guy out of the picture altogether.

      Which brings up another point. Those professors who started this had an easy time mining in the beginning, yes? Then sold the suckers the get rich quick scheme. The suckers then drove up the price while they sat back and got rich from their easy mining early on. The first in make all the money. The last in lose. Those few on top of the pyramid.....oh, wait! We have seen this scam before, haven't we?

      1. ectogestator

        Re: Volatility

        >>>We have seen this scam before, haven't we?

        Many times. All land sales, and every stock market are based on the same dynamic.

      2. xperroni

        Re: Volatility

        Those professors who started this had an easy time mining in the beginning, yes? Then sold the suckers the get rich quick scheme.

        That is why I am always a bit nervous about offers that purport to allow their customers to make money for themselves, especially when they promise you'll be able to "work from home". The question I always ask is, "if this stuff is so good, why are they even selling it? Why don't they keep it all to themselves and reap all the rewards?"

        1. Yet Another Anonymous coward Silver badge

          Re: Volatility

          >Those professors who started this had an easy time mining in the beginning, yes? Then sold the suckers >the get rich quick scheme.

          The original "investors" who bought Manhattan for a few beads did rather well - it doesn't mean that a plot on 5th avenue is worthless today.

          1. Pascal Monett Silver badge

            Re: it doesn't mean that a plot on 5th avenue is worthless today

            There's a big difference : that plot is real. The government cannot declare that it doesn't exist anymore.

            BitCoin is another Internet fad, one that, as had been said, profits the most to those who started the pyramid.

            Everything in this article tells me to stay away from BitCoins. From the fact that the hardware is dedicated, to the fact that the vendors themselves can be thieving scum, and finally the fact that BitCoin mining is becoming so exponentially difficult that soon only industrial plants will be able to mine them. Oh, and copycats are rising, mudding the waters further. What ? Does everyone think that a dozen virtual currencies are a Good Thing (tm) ? It's just a dozen more pyramid schemes which won't actually bring anything useful.

            The only way I'm going to see a BitCoin is if someone gives it to me, and the only way that will happen is if I accept one in payment for something. Given that, at this point in time, I have no use for BitCoin nor anywhere to spend it, I won't be accepting one for a while yet I think.

            1. Loyal Commenter Silver badge

              Re: it doesn't mean that a plot on 5th avenue is worthless today

              The only way I'm going to see a BitCoin is if someone gives it to me, and the only way that will happen is if I accept one in payment for something. Given that, at this point in time, I have no use for BitCoin nor anywhere to spend it, I won't be accepting one for a while yet I think.

              Compare this to other fiat currencies, such as the dollar, or pound, which contrary to popular belief are backed up not with gold, but only the promises of government. The Bank of England practises 'quantitative easing' - essentially printing more money, so that what is in your pocket is worth less. Paper currency also suffers from the problem of forgery, which, unless there is a flaw nobody has seen in BitCoin, is not possible with such a cryptographically generated currency. The paper money in your wallet is, after all, just a token of a given value, and a bitcoin is the same, but in digital form. The authenticity of that bitcoin is guaranteed by the network itself; I'd be more inclined to trust the maths behind that than any politician.

              What remains to be seen is how much traction bitcoin gains. You can already buy several goods and services using them - the advantage being that since the transactions are between two addresses, governments cannot tax them directly, any transaction fee actually goes to the person mining the next block of coins, which will be what keeps the mining going once all the coins have been generated several years from now.

  4. Michael H.F. Wilkinson Silver badge

    Is it me?

    I have this feeling that the safest way to make money out of bitcoins is to sell mining gear. Bit like selling mining gear during the gold rush of 1849. Sure, some miners struck it rich, but the people selling gear were profiting from all mining attempts, successful ones and flops alike.

    1. Lord Elpuss Silver badge

      Re: Is it me?

      Same with stockbrokers. Sure, the client's getting filthy rich (on paper), but it can all disappear any moment. Only the stockbrokers are booking cold hard cash in commission with every trade...

      (Aside: if you haven't seen Wolf of Wall Street, go see it. Now.)

    2. Mark .

      Re: Is it me?

      The safest way to make money is put it in a bank account - and enjoy your 2% interest if you're lucky. But when comparing investments, there are a range in both risk, and potential returns.

      Also why is it either/or - I'm sure anyone into making Bitcoin mining devices bought or mined some bitcoins much earlier... They also probably test their machines by actually mining bitcoin (where as someone making a spade wouldn't necessarily go and dig for gold, as you need more equipment and effort than just testing a spade).

      1. d3rrial

        Re: Is it me?

        @Mark .

        Yes, enjoy your 2% interest @ 2% inflation ;)

      2. carrera4life

        Re: Is it me?

        You must be kidding. Most banks offer below 1% on savings; those accounts that offer 2% are capped with respect to the amount of cash one can deposit.

  5. EddieD

    The Triganic Pu

    Was wieldable. It was the Ningis you needed to get your Pu that had the problems, being a triangular rubber coin six thousand eight hundred miles per side...and no-one ever collected enough of them to own a Pu, and the galactic banks refused to deal in fiddling small change...

    1. This post has been deleted by its author

    2. Velv Silver badge

      Re: The Triganic Pu

      So exactly the way Bitcoin is going. It'll always be easy for a person to have a Bitcoin, but nobody will ever have resources to earn one

  6. Anonymous Coward
    Anonymous Coward

    You have missed the boat!!!

    It is now simply too late for @ home mining. 12 months ago you would have had a good opportunity to get in early before the arms race took hold. If you're buying hardware now, it's highly unlikely to yield the return you dream of. You might want to consider alternative routes like renting a miner for a week or simply buying bitcoins directly as a speculative investment but doing it yourself is now over.

    1. lurker

      Re: You have missed the boat!!!

      That's certainly true for BTC, which is where the alternative Crypt based cryptocurrencies such as Litecoin and more recently Doge have come from - because scrypt doesn't currently benefit from the ASIC hardware out there (although naturally there are people working on Scrypt ASICs).

      1. Aerobatic

        Re: You have missed the boat!!!

        Will Litecoin and the other alt-coins enjoy the same success when its no longer possible to mine them with old graphics cards that were formerly used to mine bitcoins?

        most people mining litecoins seem to be doing so, just to trade them for bitcoins.

        and as you say, theres nothing inherent in the scrypt algo that can't be accelerated. there's just not been enough commercial justification to do it until now. and theres several asics on the way. will any of these alt-coins survive after the asic mining transition?

    2. . 3

      Re: You have missed the boat!!!

      Actually about mid 2012 was the cut-off date when you could have bought off the shelf a (then) brand new top-of-the-line Altera Stratix V for about $6k dollars and at ~2GH/s would have had a month or two to cash in. Clearly there were a lot of folk with their finger on the pulse back then who did exactly that.

      Since then you have had to buy ASIC boxes which transform into boat anchors the instant the next process shrink happens.

      Scrypt is quite a good leveller as your hash rate is more-or-less tied to your randomly-addressed memory bandwidth. Static RAM devices, particularly those with multi-ports gain you a bit of an advantage over PC DIMMs. Fortunately modern FPGAs are chock full of small SRAMs and an ASIC similarly dense cannot be made low-cost due to die area requirement.

      1. Loyal Commenter Silver badge

        Re: You have missed the boat!!!

        And now, you can buy an Antminer USB mining ASIC on eBay for £50, which operates at 2.2GH/s, which is about 1% of the price per GH/s six months ago. The hardware is maturing. I'm surprised not to see any of the cheaper USB devices on this list.

  7. Anonymous Coward
    Anonymous Coward

    A possibly naive but genuine question: If the idea is that punters buy these machines to mine bitcoins and make a profit, why is it not more profitable for the companies that make them to simply plug them in and get them mining for themselves rather than to sell them ?

    1. John Deeb

      The LRAC of ownership including electricity, maintenance and administration of the park might outweigh the harvest. Even if not, as another poster already wrote, supplying the gear is the more reliable and stable market. And a business has to think a few years ahead, usually, depending on how the initial costs were being paid for (eg investors).

    2. Tom_

      It seems that it is more profitable for them to plug them in and use them themselves, but only for a period of time. After that period, they start to be too slow to be profitable, so then they're sitting there with piles of stock that's making them no money and for which there is no demand.

      That means they need to sell stock on while it's still considered fast enough that other people can see profit in buying it for mining. The people making them must find the right time where they can give up any future profits from mining and balance that by selling the device.

      Anyone buying from them must therefore automatically be looking at a thinner profit margin than the people making them, but then I guess that's just how life works.

      At least when everyone was doing this with graphics cards, there was still some inherent value in the kit once it was no longer profitable to mine with it. Well, I hope so anyway. I wouldn't mind picking up a bargain graphics card just for gaming.

      Question: Is there any use at all for these ASICs once they're retire from mining?

    3. Dave 126 Silver badge

      @Ac

      Curiously, I was reading a similar roundup of BC-mining hardware, and it was noted that one supplier had started as a speculator and was now offering hardware, whilst another hardware supplier had since become a speculator.

      It seems the two companies have converged upon the same hybrid business model... part gholdminer, part seller of shovels.

    4. ectogestator

      >>>If the idea is that punters buy these machines to mine bitcoins and make a profit, why is it not more profitable for the companies that make them to simply plug them in and get them mining for themselves rather than to sell them ?

      Many if not all do just that. Here's how the game works.

      Day 1 Open a preorder opportunity for your new magic miner

      Day 2 Be flooded with millions from greedy miners

      Day 3 Use your new preorder cash for research/costs to get your product designed and made

      Day 100 Ship 50% of your finished product to your "investors".

      Day 85 Start mining for yourself with 50% of your finished product that was paid for by your "investors".

      Day 115 Hand the lawyers the keys to the office and retire to the tropics.

      1. Yet Another Anonymous coward Silver badge

        Do that with 8bit home micros and you get knighted

  8. Tom_

    Chip Manufacturers

    It sounds like some of the hardware manufacturers are quietly or openly developing and using their own chips to mine for themselves and only selling the hardware on when it becomes more profitable to sell it than to use it. I suppose there's a small window where there's still demand for the hardware - that being where the public can run it profitably before it comes obsolete.

    My question is whether this will ever be attractive to the big chip development companies, like Intel. Being as they have the facilities to fabricate large quantities of chips quickly, is there any point in them making themselves a large number fo mining chips, even if it's still only a small percentage of their chip output. Another way of phrasing it may be to ask if the economies of scale available to them mean there's be profit in using some of their capacity purely to speculate on bitcoin mining at the cost of reduced output of chips that they normally sell.

    The whole thing's fascinating, but it feels like we're well past the stage where it's worth getting involved in buying hardware - as a hobbyist anyway. Just buying some kit that's a month too old could completely kill any chance of profit, by the sound of it.

  9. Alan 6 Bronze badge

    Is it just me or does this bitcoin lark not remind you of H2G2, where they new colonists of earth decide to use leaves as currency, with the consequent massive inflation as all the leaves fall in Autumn...

    1. Joefish
      Stop

      Re: The leaf as currency

      No, what it reminds me of is the Easter Islanders who cut down every single tree they had in the process of erecting more and more of those enormous moai totems until they'd completely deforested the entire island and then proceeded to collapse as a civilisation through lack of resources.

      1. ectogestator

        Re: The leaf as currency

        >>> No, what it reminds me of is the Easter Islanders who cut down every single tree they had in the process of erecting more and more of those enormous moai totems until they'd completely deforested the entire island and then proceeded to collapse as a civilisation through lack of resources.

        At 30MW global consumption 24/7, bitcoin ranks, say, #100,000 on the list of energy consumers ranked by "industry". Look around you and see 1000 more powerful reminders every day. Look around your house and see 20. Look in the mirror and see someone casting the first stone somewhat prematurely.

        1. Johan Bastiaansen
          Facepalm

          Re: The leaf as currency

          You're wrong.

          Most people have a useful job. That means, they create something, or perhaps they are part of an organisation that creates something. To keep it simple: if you work in a carmanufactoring plant, you get paid for making a car, and with that money, you can eventually by one of the cars you make.

          Solving riddles doesn't create anything. So for the money they make, they don't create any wealth.

      2. boltar Silver badge

        Re: The leaf as currency

        "No, what it reminds me of is the Easter Islanders who cut down every single tree they had in the process of erecting more and more of those enormous moai totems until they'd completely deforested the entire island and then proceeded to collapse as a civilisation through lack of resources."

        That pretty much sums up the whole constant growth through "consumers" buying crap they don't need and then toss in landfill next year economic model that is currently dominating on this planet right now.

        Some african who can barely feed his family obviously requires better living standards and more "stuff" that he did 10 years ago - I don't , and I'm tired of being sold the line that I must keep buying buying buying sh1t for the sake of "growth". Newsflash economists - growth is not an end in itself , its a means to and end and in the west that end was reached decades ago.

    2. badger31

      Leaves

      Alan G

      No. The problem with the leaves was that they were abundant and easy to obtain. The problem with Bitcoin mining is that it is hard and getting harder all the time. If the price of Bitcoins increases in line with the increased difficulty, the miners will be quids in. If it doesn't, they (I) will be boned. It's a gamble.

  10. Anonymous Coward
    Anonymous Coward

    Bitcoin mining == Pyramid scheme

    With the hardware vendors at the top of the heap!

    1. Sir Sham Cad

      Re: Bitcoin mining == Pyramid scheme

      So I'm buying expensive dedicated hardware that, due to the nature of the task at hand, is going to have an ever-decreasing rate of ROI *by design* so that, in order to maintain my *current* level of BTC return I'm going to have to upgrade to faster, newer hardware ad infinitum. In order for this to be viable, especially with ever increasing cost of energy, it's going to have to generate a shitload of BTC in order to be profitable. Which it won't because BTC creation is deliberately nobbled in order to retain scarcity, hence value. So as an end consumer I'm either going to have to keep giving manufacturers more money in order to maintain my position of BTC wealth (possibly slightly growing it) and these manufacturers, setting how efficiently these devices mine BTC thereby controlling how much BTC wealth I can maintain/grow, set the $ prices accordingly.

      I think you've absolutely nailed it with your pyramid scheme appellation.

    2. ectogestator

      Re: Bitcoin mining == Pyramid scheme

      >>With the hardware vendors at the top of the heap!

      This misunderstanding of a pyramid scheme can also be applied to land sales and every stock market in the world.

      In a pyramid scheme, identified individuals occupy predefined positions in the pyramid. Newcomers' funds are designated specifically for specific recipients in specific amounts. Bitcoin does not operate this way. Bitcoin operates like a land sale and like every other stock market in history.

      1. Johan Bastiaansen
        Facepalm

        Re: Bitcoin mining == Pyramid scheme

        No it doesn't. I can grow potatoes on the land I buy.

        Bitcoins are purely speculative.

      2. Pascal Monett Silver badge

        Re: misunderstanding of a pyramid scheme

        A pyramid scheme is when newcomers only serve to fatten up previous entrants and the first entrants are the ones who win the most.

        In the BTC mining era, this is exactly what is happening. Newcomers today have no chance of making money. They are simply the treadmill mice running endlessly for no significant reward. The ones mining last year are better off, the ones mining last century are far better off, and the ones who started this whole mess are the ones who see their initial, easy mining results multiply in value without lifting a finger (I'm not saying it is their fault, it's just what is happening).

        That is a pyramid scheme.

        You are free to not agree, and I will gladly leave you on the treadmill. Happy running !

  11. Halfmad Silver badge

    My gaming PC is paying for itself, whilst the sceptics sit in cold room wondering what it's all about. £100/month after electricity is not to be scoffed at from alt-coin mining, but please continue to play it down whilst I continue to milk this whilst the going is good :)

    1. Anonymous Coward
      Anonymous Coward

      You should want people to play it up, not down. Unless you're certain the coin has no long term future.

    2. Anonymous Coward
      Anonymous Coward

      My gaming PC is paying for itself, whilst the sceptics sit in cold room wondering what it's all about. £100/month after electricity is not to be scoffed at from alt-coin mining, but please continue to play it down whilst I continue to milk this whilst the going is good :)

      We aren't sceptics, we are simply people who have a slightly better understanding of how the system works. For a start, you are not earning £100/month - you are earning a perceived £100/month. Also, your alt-coin is just another attempt at trying to get on the band wagon at the beginning to take advantage of being an early adopter. It seems every 6 months someone else is inventing a xxxx-coin to reap early rewards in the hope that someday in the future it will become a viable currency. You need enough people to think it has value before it becomes 'valuable'. BTC is only just knocking on the fringes of legitimacy after many years, you think your xxxx-coin will have that kind of momentum? Nah.

      1. Andy Kay

        earning...

        "For a start, you are not earning £100/month - you are earning a perceived £100/month"

        Actually if he's doing it correctly, he really is earning £100/month.

        I have some GPU's setup mining alt-coins. Each day I trade my mined coins for BTC. Once a whole BTC is accumulated, and if the market is good ($800+ per BTC), I sell. I then withdraw that money into a bank account.

        But please go ahead and tell me how this isn't actually 'earning £xxx'...

        1. Mark .

          Re: earning...

          And even if he isn't selling, I'm not sure what the difference is between perceived value and value is. Is my house only worth so many "perceived pounds" rather than "pounds"? Sure, when it comes to valuing things, it's clear this is dependent on if you sold it at the current market rate, but that's true of anything. No one says their house is worth "perceived pounds", because that's assumed, and no need to be stated.

          On another note though, I'd argue that it's better for Bitcoin miners to argue that they aren't "earning" it, as that would make them liable for income tax (capital gains tax on the other hand means most people wouldn't have to pay any tax, unless the value is more than the annual threshold).

        2. Anonymous Coward
          Anonymous Coward

          @Andy Kay

          I have some GPU's setup mining alt-coins. Each day I trade my mined coins for BTC. Once a whole BTC is accumulated, and if the market is good ($800+ per BTC), I sell. I then withdraw that money into a bank account.

          But please go ahead and tell me how this isn't actually 'earning £xxx'...

          --

          How much is your electricity cost to power those GPUs that would otherwise be idle?

          1. Glen 1 Silver badge

            @DougS RE:@Andy Kay

            >"How much is your electricity cost to power those GPUs that would otherwise be idle?"

            "... £100/month after electricity is not to be scoffed at..."

            emphasis added

            1. Yet Another Anonymous coward Silver badge

              Re: @DougS RE:@Andy Kay

              Ironically I'm spending more than £100/month in electricity to heat this place using a stupid electrical central heating - and it's not even doing any mining. And the furnace cost more than some of these mining boxes

        3. gerdesj Silver badge

          Re: earning...

          I earn an awful lot more than that doing something called "work". To increase the amount I take home I do "overtime".

          Get rich quick fiddling with BTC? Bollocks!

          Cheers

          Jon

      2. Anonymous Coward
        Anonymous Coward

        And what are you doing with your mined alt-coins? Most people mining alt coins seem to be doing it as a cheaper or easier way to get bitcoins?

        scrypt mining can be accelerated by asics just like sha256 mining has been. it has absolutely nothing inherent in its design that prevents acceleration. the only reason there aren't already asics available that can do scrypt mining is because it wasn't valuable enough. once the market justifies making asics, then the asics will appear (theres several in development). once asics appear, then the alt coins will have to stand up on their own two feet and not be a cheap backdoor way to get bitcoins with old out of use graphics cards.

        most alt coins have little other use except in the exchange of other coins especially bitcoins, whereas bitcoins are becoming adopted by more merchants each day and are the one that the public has heard of.

        will litecoin be as popular once you can't use a graphics card to mine it? we shall soon find out!

  12. Aldous
    Stop

    Buyer Beware

    Hashfast and Cointerra have been involved in all sorts of shenanigans(sock puppets, stealth changing ToS etc) recently and should be treated as vaporware. They were due to start delivering in December and charged people a premium for December versus January orders.

    Black Arrow are delayed by about 3 months.

    BFL were 7-9 months late on their first lot of ASICS and the Monarch has been delayed. It is unlikely given their track record this will be on time and they lie about release dates to the point "in two weeks" has become a catch phrase in the bitcoin world.

    Bitmain is a lot less shady then made out in this article and plenty of ant miners have been shipped out. You can even get them on ebay from uk resellers if you want. they also produce a USB stick miner.

    1. Aaron 10
      Mushroom

      Re: Buyer Beware

      Don't deal with Butterfly Labs. I ordered one last year in March with an expected delivery date of June. I waited until September and still wasn't getting anywhere. Their support personnel just said, "we are making them as fast as we can", yet their support site didn't show delivery of a single one of the model I requested, nor the most expensive model.

      It was quite challenging getting my money back from them. Fortunately I paid through PayPal on a "Pay It Later" account. I was able to do a chargeback and get my money back. Most people aren't so fortunate.

  13. J.G.Harston Silver badge

    These people have learned from the real-world goldrushes - you make more money selling shovels to the miners than being a miner.

  14. d3rrial

    Good List

    I only knew half of these vendors, and I am only a customer of BFL, KNC and CT.

    But thanks for making an article that is pointing out the facts, warning about the dangers and seems to be qualified in general.

  15. This post has been deleted by a moderator

  16. RalphS

    " Solving this requires a number of hashing operations. How many depends on how many coins have been minded previously so it’s an increasing level of difficulty."

    Actually no, the difficulty to generate coins is based on the computing power of the network and adjusted every two weeks to keep the flow of coins constant. So the more mining rigs running the harder it gets.

    There is a separate adjustment made every couple of years that halves the rate of coins produced, but this is purely based on time.

  17. sisk

    2 comments

    First, as the article says these ASICs are paperweights if the bottom falls out of the market tomorrow. That's why the smart money (in my opinion) is in Litecoins. You can mine those with high end graphics cards and likely will be able to till they're all mined. They're not worth near as much (around $30/litecoin last time I checked), but you get a ton more of them. I've got a friend with mining rigs for both kinds of coins and he makes far more money off his litecoin rig with two GPUs than his bitcoin rig with two ASICs (though, to be fair, one of those ASICs is absolutely tiny). The bitcoin rig barely pays his electric bill (all of it, so he's doing a little better than breakeven with them). As an added bonus if the bottom falls out of the market tomorrow he can put his graphics cards on Ebay and get almost all his investment back out of them. If the bottom stays firmly in place for another month he won't even need to do that as they'll have paid for themselves.

    Second, Butterfly Labs. Here we have a company that is owned by a convicted fraudster. Their rep is well earned I think.

    I don't mine coins seriously. Once in a while when I know my computer's going to be collecting dust otherwise for a few days I'll fire up a litecoin miner. I think I've managed to make about half a litecoin doing that since November. Still, litecoins make much more sense right now than bitcoins.

    1. d3rrial

      Re: 2 comments

      Litecoins are barely profitable to be honest. If I were you, I'd look in pools like middlecoin.com which mine different cryptocurrencies based on their profitability and sell them for bitcoins, which go directly to you. My two r9 290x are mining every day when I'm at work and my PC isn't needed for gaming or other purposes and are pulling in 0.008 bitcoins per day like this.

  18. Anonymous Coward
    Anonymous Coward

    I expect the BOFH at GCHQ has made out like gangbusters, but the number of commie decrypts has mysteriously slumped.

  19. Anonymous Coward
    Anonymous Coward

    Re. bitcoin

    Its interesting to note that the ASICs used for BTC mining might not be totally useless if BTC imploded tomorrow.

    A suitably advanced compiler could use them as password cracking rigs, in fact one suggestion was to use them to bruteforce WPA2.

    Also possible, using them as parallel processors for AI research.

    1. Suricou Raven Silver badge

      Re: Re. bitcoin

      They brute-force SHA256. That's all they do. That's all they can do. It's how they are wired. Useless for anything else. With some software hackery you might be able to make them brute-force SHA256 in a slightly different manner and use them for password cracking, in the unlikely event you get hold of some unsalted or known-salt SHA256 password hashes, but that's the most you an possibly hope for.

      ASICs are designed and built to do one thing only, and do it well.

      1. Anonymous Coward
        Anonymous Coward

        Re: "ASICs are designed and built to do one thing only, and do it well."

        "ASICs are designed and built to do one thing only, and do it well."

        And in high enough volume they can do it for a sensible price per chip, once you've covered the one off engineering costs.

        In lower volumes (such as the volumes these things are likely to sell in?) what do these ASIC things do that couldn't be done as quickly (and as "affordably") with suitable FPGAs? The one off costs can be much smaller, the "idea to implementation" time can be much smaller thab waiting fo chips to be fabbed and packaged (which sounds like an important factor here), but the cost per chip may be higher than a specific ASIC implementation of the same logic. So at the low volume end, FPGA is more cost effective, at the high volume end, ASIC is more cost effective, and in the crossover area, who knows...

      2. dajames Silver badge
        Boffin

        Re: Re. bitcoin

        They brute-force SHA256. That's all they do. That's all they can do. It's how they are wired. Useless for anything else. With some software hackery you might be able to make them brute-force SHA256 in a slightly different manner and use them for password cracking [snip] but that's the most you an possibly hope for.

        How about brute-forcing digital signatures based on SHA-256 hashes?

        That is: trial-and-error discovery of subtly different messages that have the same hash -- and so signature -- as legitimately signed messges. If you could (say) change the recipient of a payment instruction and find different values for (say) the amount and date that resulted in the modified instruction having the same hash as the original the world would be your mollusc.

    2. Anonymous Coward
      Anonymous Coward

      Re: Re. bitcoin

      Not true, nobody encrypts passwords with double SHA-256.

      It would only be good for cracking what it was intended to crack, double SHA-256.

      Also GCHQ wouldn't make much money if they turned their (tiny in comparison) supercomputers to the task, they aren't any better at mining scrypt than someone in their bedroom with some graphics cards. A graphics card is order of magnitude better at this than a CPU is and something tells me their supercomputers aren't packing 10,000 cores of graphics power in there too.

      I read an article on coinbase about a sysadmin who plans to use his schools computer lab to mine coins over the summer while the school is out. Well he's just going to end up with a big electric bill and not very many coins... again... unless his school lab all has Radeon 290x's in them in crossfire...

      1. sisk

        Re: Re. bitcoin

        I read an article on coinbase about a sysadmin who plans to use his schools computer lab to mine coins over the summer while the school is out. Well he's just going to end up with a big electric bill and not very many coins... again... unless his school lab all has Radeon 290x's in them in crossfire...

        Correction: The school will end up with a big electric bill and he'll end up with somewhere between half a bit coin and a couple bit coins, depending on the size of the lab. Which he'll need, seeing as how he probably won't have a job anymore. That's assuming a moderate sized school. It could be higher if it's a big school or it could be laughably low if it's a small one.

      2. Loyal Commenter Silver badge

        Re: Re. bitcoin

        GPUs are no longer much use either. Anything seriously is done with custom ASICs. The single-chip USB sticks that process a few hundred million hashes a second also only consume a few watts of power, drawing it directly from the USB port - compared to a graphics card which you could be using to heat your home at the same time...

  20. Justin Clements

    Genuine question albeit probably stupid.

    If heat is always such a problem, then why not plug it into your central heating system in your house? It might sound daft, but a normal British home has maybe 8-10 radiators all fully hooked up to water system. A standard radiator is about 4,000BTUs with 1200W of power required to heat it.

    1. sisk

      Re: Genuine question albeit probably stupid.

      It's a valid question. At one point in time I heated my bedroom with servers. Obviously this was when I was single and still convinced that I'd make up for lost sleep when I died, but I had a really nice setup in my room.

  21. The Vociferous Time Waster

    This isn't money

    By the very inflationary nature of it this is just currency rather than money. Money is something with intrinsic value whereas currency is just a number. If we took away the need to mine for bitcoin currency then anyone could do what governments do and print more money, this just puts in a process to slow that down and control the inevitable inflation.

    1. Anonymous Coward
      Anonymous Coward

      Re: This isn't money

      RE:By the very inflationary nature of it this is just currency rather than money. Money is something with intrinsic value whereas currency is just a number. If we took away the need to mine for bitcoin currency then anyone could do what governments do and print more money, this just puts in a process to slow that down and control the inevitable inflation.

      It was intended to be non-inflationary. The system is only going to allow so many divisible bit coins to be made. The bitcoins themselves are not infinitely divisible. According to what I have read a bitcoin may only be divided into 1 x 10^-8 fragments. So, if you look at the bitcoins in terms of total (eventually) fragments you get (2.1 x 10^7) * (1 x 10^9) = 2.1 x 10^63 fragments. Because the currency is limited by its very design, it is little different from platinum, gold or silver. There is only so much of it, as much of it as there is, and those tiny fragments will all be worth something some day in distant future.

      Alas! Bitcoin is not the only crypto-currency system in existence. It has competition; there is Ripple, Litecoin, Namecoin, Dogecoin, Peercoin and Primcoin, all of which compete with Bitcoin. They all have roughly the same limits as Bitcoin. At least one of these competing "crypto-currencies," Peercoin, is designed to be inflationary at the rate of 1% per annum.

      What I see happening is that as soon as the crypto-currency becomes credible with enough people, they will all want to become miners, rather than the producers of other goods. This will lead to more amd more competiing crypto-currencies. This will create as much inflation as we are seeing with our fiat currencies now in common use.

      There are advantages to these currencies despite their flaws. They are not heavy, in that you do not have to carry them around with you in your wallet or purse. They are not mined in the classic sense, because they are not made of any physical substance. They are created on specialized computers that jump trhough special hoops to make the creation of the currencies very difficult. So this type of currency does not contribute to the impacts made by mining metals or making paper or plastic currencies. They are "earned" by computers owned by the people that own said specialized computers.

      The chief disadvantage of these currencies that they are not inflation proof; they can be lost without any hope of recovery should something happen to one's machine that is the maintainer of one's digital wallet; there is a total lack of anonymity in their use. There is no way to spend them without someone somewhere being able to identify you.

      1. Yet Another Anonymous coward Silver badge

        Re: This isn't money

        They are mined in exactly the same sense. The limiting value of metals is how much it costs to get it out of the ground, this varies around the world with concentration of ore, distance from markets and the cost of workers. Bitcoins depend on the cost of electricity which follows exactly the same rules as the cost of mining.

        Bitcoin's real competitor is aluminium - if it's more profitable to use your electricity to mine bitcoins than smelt bauxite - you "mine" numbers

  22. psychonaut

    xcoin currency based on something usefull?

    What about a similar thing but instead of pointlessly crunching arbitrary numbers how about cern data or biotech data (a la that seti program from years back...)?

  23. Dick Pountain

    Milk It!

    If you ever get bored with bitcoin mining, I've invented a unicorn milking machine and am looking for kickstart finance...

  24. Anonymous Coward
    Anonymous Coward

    Keep your pretend coins

    As someone who invested heavily in Gold in 1997 when it was about £5,500 per kg, you can keep your pretend money. At least I know Gold will never reach that low again, and when you think that it peaked at £36,000 per kg not that long ago (when I traded some in), real, hard, tangible metals will never be beaten by virtual currency.

    Lets be fair, BC isn't even virtual currency because it's being hoarded as an investment more than it's being spent on products. It's basically a stock share now.

    1. gibman70

      Re: Keep your pretend coins

      people who bought bitcoins as little as 18 months ago have seen them go up by over 100X... pretend currency or not (and I agree, they're ridiculous when stacked up against commodities such as gold or compared against the classic definitions of money), someone who bought a couple of thousand of them summer 2012 is now a millionaire - its relatively easy to shift a few thousand of these a day now on the exchanges or via localbitcoin etc.

      (no, not me sadly to my eternal chagrin)

  25. DainB Bronze badge

    DC Mining

    So what a rack of 48-core systems can mine you these days ? I have a few sitting around idle and free electricity.

  26. Johan Bastiaansen
    Angel

    miner '49er

    there's no gold in them thar hills, but we will sell you a shovel and a pickaxe anyways.

  27. Anonymous Coward
    Anonymous Coward

    Alas and Alack!

    I cannot trust anything I cannot put my hands on. Gold is completely out of my reach as is silver. Both of those are being played by Big Banking anyway. Even Big Government cannot tame Big Banking. What's a little guy like me to do? I am convinced that the answer is bronze. When we make our money out of bell metal we will be allowing freedom to ring. Yes, I really am that corny, and yes, I really am serious. You may keep your bitcoins. I prefer something I can hold in my hand while being able to acquire it. I think that a 31 gram bell metal coin is the perfect answer.

  28. Anonymous Coward
    Anonymous Coward

    I should like to add further caveats.

    These kinds of systems have a very chequered record. Go here and follow the chain of links and you will find much that is unsettling.

    https://en.wikipedia.org/wiki/DigiCash

    And I am wondering how the Bitcoin system will achieve its predicted deflation when it has compeition such as litecoin.

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

    And then there is the additional complication that middlecoin offers:

    http://middlecoin.kobal.org/index.php/Main_Page

    So, you're gonna git rich how?

  29. Anonymous Coward
    Anonymous Coward

    Sad but not a single one of these machines will give you ROI. They will all become useless bricks as a few months after you buy your 1TH miner, theres a 2TH and when you buy 2 theres 3.

    I've been mining for 6 months and made about $50 worth of bitcoin with ASICMiner Blockerrupters which are now more or less worthless and cost me £150 when new. Then I got a litecoin mining rig and was earning £25 a day back in November... flash forward only 2 months and I'm earning about £9 with a £1500 mining rig, the only benefit of which is that I'll be able to play games on it when it stops being profitable.

    The difficulty and the number of miners joining the networks is making it impossible for anyone but the bigboys to play this game. If you sink just a few grand into this, you will have lost it in a few months. It's an all or nothing game now. You either hit it with a big hash-rate, or you throw your money away.

    .As soon as scrypt mining ASICs come out, all of us with big powerful graphics card mining rigs will be screwed. The best we can hope for is to mine the most profitable altcoin de jour (which changes probably every 10 mintues) and convert that to BTC. There are many profit switching pools that will do that automatically and some will even convert and pay you in BTC.

  30. Anonymous Coward
    Anonymous Coward

    Being conned much?

    The entire bitcoin industry is utter theft and a sham, wrapped up in the illusion of deliberately complex computation problems to give the impression that some useful work is being done for the money 'earned'. In reality, all that is happening when a bitcoin is created is that the value of all world currency is diluted by the value of the bitcoin.

    Did you guys think that somehow value was magically being created out of nowhere?

    To date the world economy has been conned out of $10 billion in currency value dilution by the bitcoin scam. How much of that, I wonder, has been 'mined' by the creators of bitcoin on the sly, simply by having a headstart on the algorithms?

    Bitcoin is only being allowed to continue because 99.9% of people don't understand what's going on and really do think that they're mining leprechaun gold out of thin air, while the other 0.1% work in the CIty of London and aren't saying anything because they're essentially up to the same thing.

    1. Aldous

      Re: Being conned much?

      What are you bibbling on about?

      There was no pre-mine with bitcoin. Any ALTcoin that try's that is quickly ignored and left for dead.

      Your arguments about value are just insane, if you want a crude answer to where the value was look at Silkroad. Then add in Humble Bundle, Overstock.com and various small businesses that sold items for BTC.

      Anyway i'm off to the secret lizard people meeting, remember sheeple don't use google to find out basic facts before posting!

      1. Anonymous Coward
        Anonymous Coward

        Re: Being conned much?

        QED

  31. Purlieu

    Legal ?

    Bitcoin mining looks to me a lot like theft or fraud. Is it not similar to repeatedly appearing at a bank teller and asking if this is the right account number if so can I have $400 ?

    How come it's even legal ?

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