Yeah, profitability is declining https://fork.lol/reward/dari/btc but it could still be quite high. When no miners shut down around the last halving it was a sign that mining was nowhere near equilibrium.
This makes no sense economically, but it seems like the difficulty is controlled by how much equipment Bitmain decides to manufacture and the profitability is controlled by how much Bitmain decides to charge.
I thought the number of miners is supposed to be equal to the expected value of the coin. If there’s profit to be made, more miners would open up shop to capture the marginal benefit.
So I guess China thinks that bitcoin will ultimately be worth half what it is now.
>> If there’s profit to be made, more miners would open up shop to capture the marginal benefit.
>> So I guess China thinks that bitcoin will ultimately be worth half what it is now.
The best BTC ASIC miners on the open market are all sold out and backordered for months, and better ones keep being developed every six months. This means that, no, literally it's not possible to bring more miners online at a faster rate since they aren't openly available for purchase, and miners are still running older hardware since those miners are not yet -$EV(power) but they don't yet have enough money to purchase the new miners (which aren't readily available anyway).
It's not a perfectly competitive market. It's supply constrained.
>So yeah, there's a huge amount of R&D and competition to get the best stuff out there. And Bitmain dominates.
You're right that Bitmain dominates ASIC Bitcoin miners, but why? Surely there are more than enough capable engineers to design ASIC miners in the US and some VC's willing to fund them, or is there something I'm missing? Manufacturing costs would be high in the US, but it's not like foreign manufacturing is an unknown concept to US based companies.
There have been a ton of mining ASIC companies but all but two of them went out of business. For some reason VCs have mostly refused to touch mining so the ASIC vendors had to use crowdfunding which went horribly wrong.
Just a hunch: No-one in the industry with the means to do anything about it thinks the trend is sustainable enough to invest in a 6mo-1yr setup followed by another year before profit?
It sounds like he and many others are investing in BTC itself, not the Bitcoin ecosystem. If you can get a 10x return per year just by hodling, why bother to develop anything? Even selling shovels isn't that profitable. When people say a (hyper)deflationary currency discourages investment, this is what it looks like.
>It sounds like he and many others are investing in BTC itself, not the Bitcoin ecosystem. If you can get a 10x return per year just by hodling, why bother to develop anything?
I completely agree as of 2018, but Bitcoin has been around for almost 10 years now and has seen "real" returns for the past 4 or 5 years. I suppose my question should be restated as "Did Bitmain take a gamble and it paid off?" I still find it strange that not a single prominent US based BTC miner manufacturer has hit the scene.
Butterfly Labs, HashFast, and CoinTerra were all US-based. Then you had KnCMiner in Sweden, Spondoolies in Israel, etc.
I would say that Bitmain was a huge gamble in the early days since the ASICs depreciate very fast and thus any delay in developing them can be fatal. But after selling eight generations of hardware at very high margins they can probably coast now.
>Butterfly Labs, HashFast, and CoinTerra were all US-based. Then you had KnCMiner in Sweden, Spondoolies in Israel, etc.
None of them produced anything. CoinTerra was the only that didn't close as a result of charges related to fraudulent activity. Not to be a jerk, but that's not what I was asking. You provided supporting evidence to my claim.
>I would say that Bitmain was a huge gamble in the early days since the ASICs depreciate very fast and thus any delay in developing them can be fatal. But after selling eight generations of hardware at very high margins they can probably coast now.
That's more in line with what I asked. I'm not in disagreement, but rather looking for any research into why the mining market currently stands this way.
>Just a hunch: No-one in the industry with the means to do anything about it thinks the trend is sustainable enough to invest in a 6mo-1yr setup followed by another year before profit?
My impression is there's a significant amount in the investing class who see Bitcoin as a hyped bubble. Sure, there's Peter Thiels, but there's also people like Warren Buffett who won't touch it with a ten foot pole at the moment. (https://www.theguardian.com/technology/2018/jan/10/bitcoin-a...).
You don't need ASICs per se for general blockchain technology... the main advantage of ASICs are speed of mining, something that probably won't be needed as much once the general mania pops one way or another. So an ASIC mining chip seems to me fairly vulnerable. For instance, if you just spent a million making a lot of ASIC mining chips, news like China possibly starting to crack down on mining (https://www.ft.com/content/adfe7858-f4f9-11e7-88f7-5465a6ce1...) would probably not make you happy.
The startup time is significant and VC money doesn't go into BTC mining. Furthermore, the engineers almost certainly have to live in China and have engineering / fabrication experience there. And you can virtually guarantee your first product will be terrible and obsoleted by Bitmain nearly immediately.
Manufacturing costs in the US wouldn't just be high, they would be impossible to actually get done. MOQ on something like this in American factories wouldn't be in the 100-500 range, probably not even 1,000. American factories are extremely non-agile, non-risk taking, and generally do not serve startups very well.
BTC being over $10k is a very new thing, too. The insane mining profits at a 1MB blocksize + $10k+ price may not last and is a new signal. It takes a lot of time, effort, luck, and perseverance - and Jihan is a formidable enemy. Sometimes it's best to just avoid a high-risk area where many, many others failed.
I'm surprised to hear there aren't more manufacturers in China that reverse engineer Bitmain's circuits, replicate, and sell them in the local market where US IP law doesn't apply.
Imagine that bitcoin is a bubble, and then I don’t think humanity would have had ever spent such a huge amount of energy and resources for such a « useless » purpose.
"We buy things we don’t need, with money we don’t have, to impress people we don’t like." - Fight Club
I'd venture to say that the majority of human effort today is spent on useless things. Consumerism is the base of our entire economic system, Bitcoin mining doesn't seem all that different to me.
Except people don’t buy anything with bitcoin ( and i’ve read about potential millionaires, but never about people having actually made millions of usd, since nobody sells).
For the moment it’s only the most gigantic and cpu intensive distributed number increment algorithm.
There are absolutely people who have cashed out significant non-crypto money from BTC. In fact crypto has allowed multiple people I know to retire.
Bitcoin also offers the very real value of enabling monetary transactions without government involvement. That’s a huge deal to some of us who value individual liberty and/or live under corrupt regimes.
I transact in BTC all the time. And while I haven't made millions of USD, it's a considerable sum. My friends have cashed out plenty of BTC into USD/EUR; well into the millions.
You haven't read enough then. There is, quite literally, an app for that. People are getting real bank transfers of "real" money all the time out of bitcoin & co.
We are talking about and learning a lot from Bitcoin. A lot. this is a valuable experiment. Especially if you consider what could have been, but isn’t, which we couldn’t know in advance. [edit: and still could be—who knows? Only one way to find out :)]
We could do worse than Bitcoin. Diamonds, for example…
[edit 2: disclosure: I have no stake in either :p ]
It seems well past the experiment stage. The question I have is if the ideas presented in Hashgraph have already rendered the whole Blockchain approach obsolete. I think Bitcoin may be dead already and not know it yet.
Nuclear weapons? Their existence is a blight on humanity. MAD hasn’t prevented wars, only caused them to be outsourced to countries no one cared about like Vietnam and Afghanistan. It is only through dumb luck that a superpower has not destroyed the world by accident
The military-industrial complex:
Every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed.
I disagree. While yes there were still proxy wars for the last 50 years, there has been no all out world war. Considering that for the 500 years before WW2 there was wars nearly every 20 years between major powers, this is an improvement.
That’s because Europe realized it could not sustain another war of that destructiveness. So there have been no wars in Europe, but I don’t think it’s impossible that another WW1 like crisis could occur again, especially with tensions high between China, The US and Russia.
Tensions aren't really high between China, US, and Russia. We are all huge trading partners, and no one wants to see the money stop flowing. In any time besides modern history they would be considered friendly.
>Without question, atomic weapons summarily ended the bloodiest war in all of human history.
There are many questions about that, many people hold the opinion that the nuclear weapons did not in fact end the war.
Whether or not that is true, I do not pretend to have the expertise to say, however saying there is no question is flat out wrong and ignoring the debate.
This stretches the imagination. Surrender came mere days after the A-bomb was used, but this timing was purely coincidental?
The Empire of Japan was willing to die fighting a dominant superpower for every blade of grass, but a second superpower (one hurt far worse in the European theatre) suddenly tipped the imaginary balance?
There's an argument for the A-bomb being effective but unnecessary to the end the war; but this article's view that it had nothing to do with it is seriously by no honest historian.
Between the close of the Korean war in 1953 (though no peace treaty was ever signed) and 2006, when North Korea's first tested an atomic bomb, the US did not invade North Korea for the same reason it has not invaded today, which is not due to DPRK's nuclear capability.
Seoul, the capital of South Korea, is a scant 35 miles from the North Korean border, and North Korea has an unknown amount of conventional artillery pointed at South Korea, enough to kill millions of South Koreans.
If the US were to invade North Korea, Seoul, and the surrounding areas would be obliterated.
That North Korea now has nuclear weapons changes things a bit, but the nukes weren't previously the thing holding the US back from invading North Korea.
The Korean war was an absolute disaster for all involved. Three years and a million dead people for nothing (or less than nothing if you consider the amount of sheer destruction). I think that has been the main rationale for avoiding another war in Korea since then.
The "perfect" time to do it would have been in the 90s when China was still poor enough to ignore and Russia was still self-combusting. Things are different now. Compare Russia's non-response to the destruction of Yugoslavia to their direct role in Syria, both diplomatically (red line etc) and militarily.
I think killing Gaddafi was NATO's biggest disaster in a long time (if not the worst so far). It was a clear example to DPRK that they must have a capable ICBM. It was also the last straw for Putin which spurred him onto more aggressive actions like taking Crimea and using "fake news" farms.
The question was, why don't the pickaxe manufacturers charge more, since there's an axe shortage. Maybe they will, when they finally get around to filling all those orders. Or maybe they're just trying not to alienate their core market?
They would not have to set extortionate prices. They simply could auction off whatever supply they produce to the highest bidder. With a market as rife with… optimists as cryptocurrencies are, there's a good chance they could capture more than 100% of the profits.
It seems to me that bitcoin mining should be about as purely economic a business as there is. It's not like their clients would not abolish the ASIC manufacturers as soon as their hardware is no longer cost effective.
In the previous bubble, there was a manufacturer that would 'test' or 'burn in' the miner until it became unprofitable to run and then they'd ship it to you. They'd get paid twice.
They do. The ASIC miners are placed on pre-order about two months in advance at a price reflective of the current expected mining output. With a healthy secondary market.
Assuming there is a free market everywhere this is true. However China does not have anything close to a free market, electricity is heavily subsidized and freedom to invest and run businesses is heavily restricted which can easily cause market failures such as this. The key takeway from the article is that for Chinese miners specifically there is still a large profit to be made, which indicates something screwy with the market in China.
> Assuming there is a free market everywhere this is true
Sorry, but you can't assume that what theoretically holds in a long term stable equilibrium of a perfect idealised market holds at every moment in a fast moving dynamic real world market.
At equilibrium, yes. Bitcoin's value seems to be changing faster than miners can acquire and set up new hardware. Also, it's probably not rational to buy hardware right up until the point the marginal gain becomes 0 if you expect the price is likely to drop in the future (are miners able to buy financial instruments to hedge this risk?).
Theoretically they can sell futures to hedge price risk. But if you really believe in bitcoin rather than the "fiat world," would you really trust a futures contract?
It's a Bloomberg article, I think they wanted to keep it simple on the tech side and focus on the money. Besides, electrical costs are essentially a predictor of difficulty. The higher the electrical costs the fewer miners there will be. Smaller operations and household miners might have to close up shop if high electrical costs and low Bitcoin price don't make mining feasible. Miners dropping off the network means the difficulty will drop too.
"Miners break even at $6,925 at China’s top power price." It is my understanding that they don't pay top power price but rather they locate in areas where local electricity is abundant and cheap.
The bottom 150-160 countries in terms of corruption are extraordinarily corrupt compared to the top few dozen that are the least corrupt. The gap between New Zealand or Denmark, two of the least corrupt nations, and Croatia or Hungary, is night and day.
There is a dramatic acceleration of corruption after you get outside of that general top 30-40 group. Your statement is an equivocation, when in actuality the level of corruption often varies dramatically from nation to nation. Saying every country has corruption is meaningless as such.
“Streetlight consumption translates into profits for electricity producers, distributors and the state, he said. The profits of electricity distribution companies are paid out ‘in dividends to the local municipalities that own shares in them, and in salaries and stipends to the local politicians who sit on their oversight boards,’ he explained.“
the American concept of corruption is so endemic to him the Chinese system works it's not even really considered corruption there it's just how things work there. it's part of a formal business meeting to give gifts in exchange for favors
Westerners who travel abroad on behalf of corporations are trained on this religiously. It’s considered corruption on home turf, and entertaining it can come back on a company quite hard both domestically and internationally, particularly when a government official is involved.
“But $trainer, you mean I really have to report the $80 dinner I was treated to in Shanghai?” You bet. If you operate a startup that does deals internationally and aren’t training your team from a risk management standpoint, the legal downside is huge if a government decides to look at you. Start with the Bribery Act of 2010, the FCPA, and so on.
There is a difference between giving a gift, even a lavish gift, and trading public services directly for private gain. This isn’t an American or Chinese view. When these arrangements become public, Weibo goes wild and Beijing is incentivised to respond.
That's a bit hyperbolic. Corruption is illegal there, too. Nobody there cares much until you step on the wrong toes, then you are in serious trouble. It's a case of rule of law vs rule by law.
If I recall correctly, bitcoins from a coinbase (mining reward) transaction can only be transferred after 100 blocks confirmation (ie about 16.5 hours). I'd assume that they might keep a bit of a speculative long position, but otherwise liquidate - they have bills to pay.
As far as I know only 6 confirmations are required for a transaction to be considered practically irreversible. Is it different for coinbase (reward) transactions?
Yeah, it's different for coinbase transactions because those transactions and the reward from them vanishes if that block is ever reorganized out of the main chain, whereas ordinary transactions will generally be included in the new chain too. It's as much a protection against technical issues as it is malicious attacks. I think there have been a small handful of reorganisations that are larger than 6 blocks in practice, and this has generally held up well.
Why would they with the insane transaction fees, instability of value and slow transaction time? It’s of very limited use as a currency.
Miners and mining hardware makers don’t actually care for bitcoin from a philosophical point of view, so they have no incentive to use it as a currency. It’s literally just a means to an end for creating value to them. If they were growing tulips instead, you’d see them investing in farming techniques just as happily.
Yeah, mainly for political reasons - they were one of the main supporters of Bitcoin Cash and it re-enabled the secret mining optimization they'd promised they weren't using, honest, which was accidentally broken by Segwit. At the time they started requiring it as the sole method of payment it was basically unusable with block times measured in hours, little in the way of exchange and other support, and I think the exchanges may still have required so many confirmations it took days to get funds onto them. They could get away with this because they had no real competitors.
There were some rather unamused comments at the time from miners who got their first experience of Bitcoin Cash by having to use it to buy from Bitmain, questioning whether it was always this terrible given that all its very vocal boosters had been claiming it was the fast option compared to Bitcoin. (The usual response was to argue that the block speed varied between a minute per block and the hour+ one and they were just unlucky - which technically it did, it's just most of the time it was in slow mode and the brief fast intervals were days apart.)
This is correct. It's also important to note that bitmain is one of the main responsible parties for the creation of Bitcoin Cash and this move is mostly a way to boost it's value, because even though Bitcoin fees are high, they aren't that bad ($3 to $30 depending on the load) when you're selling devices for $2K+.
If price shoots up, lots of new miners join, difficulty shoots up, they can no longer produce enough bitcoin to cover their shorts, they lose a ton of money on the shorts.
Commodity futures only work when you produce a consistent amount.
That doesn't change the economics. Either way they have short exposure to BTC and no guarantee they will be able to produce BTC, which could hurt them if market moves against them too quickly.
The altcoin crowd insists that people with a lot of bitcoins can and do "diversify" their cryptocurrency holdings by exchanging them for altcoins, thus making bitcoin somewhat of a "reserve" cryptocurrency.
This would also give those mining altcoins a nice market to convert their coins to btc and subsequently cash out.
I guess the question is, if bitcoin drops, will everything drop? Or will spreading your stake around the altcoin minefiled be enough to protect against huge losses?
I think they're talking about marginal cost of electricity only, assuming the hardware, location, and tech support costs are negligible. I'm not sure how valid that is as an analysis of total profitability. It depends how dominant the electricity costs really are.
It's a quote from the main Bloomberg video on the page linked above. The presenter seems to have gotten the meanings to a few of his buzzwords mixed up.
Mining is the best way to export cheap energy without building high-power lines. I am surprised Germany doesn't have more dominance in the field, considering the headlines of their wind energy farms going into negative at certain hours of the day.
> I am surprised Germany doesn't have more dominance in the field
Germany's power grid is well-connected to its neighbours. During peak production of renewable energy, it is "exported" to France, Poland, Austria etc. These neighbours have a different mix of production and can easily scale down power production from fossil fuels.
[0]:in quotes, because trade within the EU isn't technically export/import
This is the first time I've heard "easily" in the same sentence as "scale down power production from fossil fuels". Usually it's everyone whinging about how coal plants can't be efficiently throttled and still burn 50% of their fuel or something at idle.
I really don't understand this statement, the energy isn't being transferred between power grids or otherwise exchanged as energy. The energy consumed during mining no longer exists as grid-based energy, it is waste heat. You don't get it back at the other end of another transaction. From the point of view of energy transfer for use in a power grid, mining has a 100% loss rate.
Do you really not see the difference between money changing hands for a comodity that has a physical basis, and the nominal creation of value through a process where the computation involved results in waste heat?
This sort of thinking represents all of the things wrong with the current hype-cycle of cryptocurrencies, damaging both their long-term credibility and short-term stability.
That's like claiming aluminum plants are the best way to export energy without high power lines. You aren't actually exporting energy, you're exporting something created with energy that can't be converted back into that energy.
People can exchange it for more energy, but you haven't reduced energy generation.
Aluminium can be turned back into energy. There have been proposals to ship blocks of aluminium from Iceland to Britain, oxidise it (capture the electricity) and send the oxide back.
Looks like a bullshit marketing document. It's based on using their new magic experimental batteries that can do 10 times better than existing batteries.
Not really exporting energy, the energy isn't being exported to another country. From an energy perspective, they are converting heterogeneous energy sources into homogeneous waste-heat.
Okay, the bitcoins may be an export product but not the energy. Energy is no more exported here than it would be exported if use with non-metaphorical mining of iron ore. In real world mining you might say energy is converted into a physical comodity, e.g., the ore. In bitcoin, it's converted into a much more abstract financial instrument & transaction verification service.
Actually Bitcoin needs to drop 94% for mining to be unprofitable. The break even is 1 BTC = $922. Yes, mining is insanely profitable right now. Miners are swimming in cash.
This is assuming $0.05 per kWh (which is a rate available to many miners outside of China, eg. Gigawatt Mining in Washington State pays $0.028 per kWh,) and a miner efficiency of 0.1 joule per gigahash (such as the popular Bitmain Antminer S9). The break even point is calculated with:
The parameter are: j_over_gh = 0.1, cost_per_kwh = 0.05, reward = 12.5 BTC per block, diff = 1931136454487.72. (This ignores transaction fees which have pushed the average block reward from 12.5 to around 17 BTC over the last few weeks, so the true break even point is even lower, around 1 BTC = $680).
I am occasionally interviewed by journalists who write about Bitcoin mining and they often get many details wrong. This one is no exception—Dan Murtaugh should have contacted me :)
This means that miners in these areas operate with a 1500% profit after buying hardware equipment (1500% is computed with current price of 1btc=$16000 and the break-even point at 1btc=$1k). So are they scaling up and buying more hardware as fast as they can?
There have been several instances where the manufacturer mines with each manufactured device for a few months "for quality assurance purposes" (enriching themselves at lower difficulty levels, and then shipping after they've pushed difficulty up).
It does. The bitcoin protocol adjusts its difficulty every 2 weeks by analysing the number of miners in the network. The adjustment is such that a block is discovered every ~10 minutes.
You are right. However even sunk costs have been recovered very quickly lately. To give an idea: an S9 deployed in early November has already fully recouped its cost ($1500 in 40-60 days).
Honest question (I have no actual ASIC experience, I'm just curious)
Where are you getting the USD1500 price tag, I've just done a quick search and I only found a bunch of S9 Miners (Bitmain Antminer S9) advertised for over USD6000 on Amazon.
The batches sold and shipped in Nov were priced $1500. That was the price when buying directly from bitmain.com. Since then Bitmain hiked the price: the latest batch released yesterday (now sold out) was priced $2300. But yeah, since Bitmain's batches sell out in minutes, S9s often reach ~$5k in unofficial resale channels.
It is if they want to bet on the value of bitcoin. Why use some hardware for 40-60 days to mine some coin which may or may not be worth $1500 when you could sell immediately for that amount? Sure you can mine for longer, but I'd bet they have more stable returns by investing profit from sales back into the business for fast/cheaper manufacturing, expanding their area of operations, etc.
Yes, and they operate a decent amount of mining farms. However mining comes with a certain risk (eg. Bitcoin could crash) which is eliminated when selling the hardware right away. They can also manufacture hardware a lot faster than they can deploy data centers.
How many machines would you need to be sure that you actually mine a block in a given year? AFAIK its a stochastic process right?
I think I calculated once that , given the current hash power, you'd need about 20 miners in order to have P(you mine a block within a year) close to 1.
Can you confirm/discard my conclusion?
I'd post my calculations but I don't have it here at work!
Don't all fleets mine as pools these days? You put your hash capacity in a pool, and if any machine in the pool mines successfully the BTC is shared according to contributed capacity.
This is just basic math, and nearly axiomatic: All else being equal, any mining setup that was was profitable when Bitcoin was at half its current price will still be profitable with a 50% drop.
Because the price spike is so recent, the headline is true for nearly any mining setup that existed even shortly prior to the spike.
Besides, it increases equally for all miners, so a rig that existed on Nov 1st and was profitable would still be profitable now at Nov 1st exchange rate and today's difficulty. Only the rate of profit/day would change.
I'm going to go out on a limb and emote regarding the article (especially the headline), rather than be terribly contributory to the conversation or add to knowledge of trivia. I believe this is more in spirit of the BTC speculative bubble we find ourselves in.
---
Yeah.... but I won't!
Please everyone, keep logjamming the transaction/second throughput to drive up the relative scarcity!
Ah, whatever, it's more or less monopoly money anyway.
China has already started to hunt down all Bit coin exchanges and individual miners.I think the value is going to drop even further as China was the major stake holder.
This kind of has to remain true for Bitcoin to remain secure. If the price were to drop enough that a large fraction of the mining fleet were unprofitable to operate honestly, it could be bought up on the cheap to launch 51% attacks.
The ASIC developer (mainly Bitmain) is in a huge position of power here.
Bitmain seems to be the only serious game in town, and spooling up a chip run isn't quick, even for someone like Intel, AMD, or the dozens of other chip makers (TI, microchip, etc). This gives them something of a headstart.
I wonder how long they can stay ahead of the other chip makers.
And it's NOT a waste of resource. Miners mostly use seasonal renewable energy that otherwise would not be converted to electricity in the first place.
To maximize profit, they utilize hydroelectric power plants built on Yangtze river. Not the ones like Three Gorges Dam, but those small/micro plants (<10MW installed capacity). Most of those plants are owned by local governments or private companies. Usually, State Grid -- which is obviously owned by the state -- would purchase their power output but during rainy seasons, there is just too much electricity that State Grid wouldn't buy it all.
That's when miners came and built datacenters close to the power plants, made deals with the power plant owners to buy the power that State Grid didn't want. It's a win-win for everyone: power plants get extra cash, miners get cheap electricity.
And when it comes to dry season (starting October), miners ship their mining rig to Xinjiang or Gansu, where wind turbines are having a similar situation.
One season perfectly coinciding with another with a giant consistent pile of surplus electricity? And all of these miners transport whole data centers worth of miners a couple of times a year?
I want to believe it but this sounds too convenient to be true. It sounds more like propaganda invented to cover up the massive waste of energy. Do you have any sources to back it up?
Also, most dams don't produce more electricity during high level seasons. They generally produce a fixed amount with a constant flow to the generators and then the only thing that changes is the spillways being used during the wet season.
Well definitely not perfectly coincided. In fact in dry seasons some went to Inner Mongolia where coal is cheap and coal power stations' output is much stabler... That part indeed is a waste :\
His latest mine is still under construction, between a hydroelectric power plant and the concrete shell of a disused power transmission station, between Kongyu and the city of Kangding.
As China’s economy boomed, private companies set up hydroelectric plants in western Sichuan; then, as the economy slowed, they found themselves unable to sell to the national grid, elbowed out of the market by more politically powerful state-owned firms.
“It took a lot of money to build the plants, but it doesn’t cost that much to maintain them,” said HaoBTC’s Mu. “So it makes sense for them to sell the power to anyone willing to buy, even at a low rate.”
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[ 3.3 ms ] story [ 207 ms ] threadThis makes no sense economically, but it seems like the difficulty is controlled by how much equipment Bitmain decides to manufacture and the profitability is controlled by how much Bitmain decides to charge.
So I guess China thinks that bitcoin will ultimately be worth half what it is now.
>> So I guess China thinks that bitcoin will ultimately be worth half what it is now.
The best BTC ASIC miners on the open market are all sold out and backordered for months, and better ones keep being developed every six months. This means that, no, literally it's not possible to bring more miners online at a faster rate since they aren't openly available for purchase, and miners are still running older hardware since those miners are not yet -$EV(power) but they don't yet have enough money to purchase the new miners (which aren't readily available anyway).
It's not a perfectly competitive market. It's supply constrained.
So yeah, there's a huge amount of R&D and competition to get the best stuff out there. And Bitmain dominates.
You're right that Bitmain dominates ASIC Bitcoin miners, but why? Surely there are more than enough capable engineers to design ASIC miners in the US and some VC's willing to fund them, or is there something I'm missing? Manufacturing costs would be high in the US, but it's not like foreign manufacturing is an unknown concept to US based companies.
I completely agree as of 2018, but Bitcoin has been around for almost 10 years now and has seen "real" returns for the past 4 or 5 years. I suppose my question should be restated as "Did Bitmain take a gamble and it paid off?" I still find it strange that not a single prominent US based BTC miner manufacturer has hit the scene.
I would say that Bitmain was a huge gamble in the early days since the ASICs depreciate very fast and thus any delay in developing them can be fatal. But after selling eight generations of hardware at very high margins they can probably coast now.
None of them produced anything. CoinTerra was the only that didn't close as a result of charges related to fraudulent activity. Not to be a jerk, but that's not what I was asking. You provided supporting evidence to my claim.
>I would say that Bitmain was a huge gamble in the early days since the ASICs depreciate very fast and thus any delay in developing them can be fatal. But after selling eight generations of hardware at very high margins they can probably coast now.
That's more in line with what I asked. I'm not in disagreement, but rather looking for any research into why the mining market currently stands this way.
With net worth of $2.6 billion Peter Thiel could lose $26 million and make it back with a 1% fluctuation of the market.
Other people less so.
>Just a hunch: No-one in the industry with the means to do anything about it thinks the trend is sustainable enough to invest in a 6mo-1yr setup followed by another year before profit?
My impression is there's a significant amount in the investing class who see Bitcoin as a hyped bubble. Sure, there's Peter Thiels, but there's also people like Warren Buffett who won't touch it with a ten foot pole at the moment. (https://www.theguardian.com/technology/2018/jan/10/bitcoin-a...).
You don't need ASICs per se for general blockchain technology... the main advantage of ASICs are speed of mining, something that probably won't be needed as much once the general mania pops one way or another. So an ASIC mining chip seems to me fairly vulnerable. For instance, if you just spent a million making a lot of ASIC mining chips, news like China possibly starting to crack down on mining (https://www.ft.com/content/adfe7858-f4f9-11e7-88f7-5465a6ce1...) would probably not make you happy.
I think 21.co got AH financing on the idea of building a "miner for the masses" https://www.coindesk.com/21-intel-bitcoin-mining-strategy/ but they pivoted since then.
They could probably provide a more informed comment.
Manufacturing costs in the US wouldn't just be high, they would be impossible to actually get done. MOQ on something like this in American factories wouldn't be in the 100-500 range, probably not even 1,000. American factories are extremely non-agile, non-risk taking, and generally do not serve startups very well.
BTC being over $10k is a very new thing, too. The insane mining profits at a 1MB blocksize + $10k+ price may not last and is a new signal. It takes a lot of time, effort, luck, and perseverance - and Jihan is a formidable enemy. Sometimes it's best to just avoid a high-risk area where many, many others failed.
-Chinese reverse engineering and lax IP laws aren't actually that lax; Westerners just pretend it is.
-Bitmain isn't a US corporation, it is Chinese.
-The owner of Bitmain is Jihan Wu.
Whoa, thanks for calling out my biases O_O
> lax IP laws aren't actually that lax
I thought one of the big initiatives for the TPP was to enforce US IP in Asia?
...
Even if it was, how is this relevant to Bitmain, run by Jihan Wu, who is not American?
I'd venture to say that the majority of human effort today is spent on useless things. Consumerism is the base of our entire economic system, Bitcoin mining doesn't seem all that different to me.
For the moment it’s only the most gigantic and cpu intensive distributed number increment algorithm.
Bitcoin also offers the very real value of enabling monetary transactions without government involvement. That’s a huge deal to some of us who value individual liberty and/or live under corrupt regimes.
We could do worse than Bitcoin. Diamonds, for example…
[edit 2: disclosure: I have no stake in either :p ]
The military-industrial complex:
Every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed.
I disagree. While yes there were still proxy wars for the last 50 years, there has been no all out world war. Considering that for the 500 years before WW2 there was wars nearly every 20 years between major powers, this is an improvement.
That's what people in Europe thought after WW1, yet WW2 happened. I hope this time you're right.
Since then, they have limited war to insurgencies, rebel groups, and other mostly internal conflicts.
You think North Korea (or China for that matter) would've stayed within their borders without nuclear powers following their every move?
There are many questions about that, many people hold the opinion that the nuclear weapons did not in fact end the war.
Whether or not that is true, I do not pretend to have the expertise to say, however saying there is no question is flat out wrong and ignoring the debate.
The Empire of Japan was willing to die fighting a dominant superpower for every blade of grass, but a second superpower (one hurt far worse in the European theatre) suddenly tipped the imaginary balance?
There's an argument for the A-bomb being effective but unnecessary to the end the war; but this article's view that it had nothing to do with it is seriously by no honest historian.
Because the atomic bomb had not yet been invented.
If North Korea didn't have nukes, you bet we would have invaded them by now.
Seoul, the capital of South Korea, is a scant 35 miles from the North Korean border, and North Korea has an unknown amount of conventional artillery pointed at South Korea, enough to kill millions of South Koreans.
If the US were to invade North Korea, Seoul, and the surrounding areas would be obliterated.
That North Korea now has nuclear weapons changes things a bit, but the nukes weren't previously the thing holding the US back from invading North Korea.
The Korean war was an absolute disaster for all involved. Three years and a million dead people for nothing (or less than nothing if you consider the amount of sheer destruction). I think that has been the main rationale for avoiding another war in Korea since then.
The "perfect" time to do it would have been in the 90s when China was still poor enough to ignore and Russia was still self-combusting. Things are different now. Compare Russia's non-response to the destruction of Yugoslavia to their direct role in Syria, both diplomatically (red line etc) and militarily.
I think killing Gaddafi was NATO's biggest disaster in a long time (if not the worst so far). It was a clear example to DPRK that they must have a capable ICBM. It was also the last straw for Putin which spurred him onto more aggressive actions like taking Crimea and using "fake news" farms.
But in that case, why don't ASIC manufacturers sell to the highest bidder and let mining companies bid up prices?
If the barrier to entry is in ASIC manufacturing, why don't the manufacturers capture the excess profit, instead of the miners?
It seems to me that bitcoin mining should be about as purely economic a business as there is. It's not like their clients would not abolish the ASIC manufacturers as soon as their hardware is no longer cost effective.
https://bitcoinmagazine.com/articles/bitcoin-mining-company-...
Sorry, but you can't assume that what theoretically holds in a long term stable equilibrium of a perfect idealised market holds at every moment in a fast moving dynamic real world market.
Has this happened before? It sounds bizarre and Googling gave me nothing.
There is a dramatic acceleration of corruption after you get outside of that general top 30-40 group. Your statement is an equivocation, when in actuality the level of corruption often varies dramatically from nation to nation. Saying every country has corruption is meaningless as such.
https://www.transparency.org/news/feature/corruption_percept...
“Streetlight consumption translates into profits for electricity producers, distributors and the state, he said. The profits of electricity distribution companies are paid out ‘in dividends to the local municipalities that own shares in them, and in salaries and stipends to the local politicians who sit on their oversight boards,’ he explained.“
“But $trainer, you mean I really have to report the $80 dinner I was treated to in Shanghai?” You bet. If you operate a startup that does deals internationally and aren’t training your team from a risk management standpoint, the legal downside is huge if a government decides to look at you. Start with the Bribery Act of 2010, the FCPA, and so on.
Miners and mining hardware makers don’t actually care for bitcoin from a philosophical point of view, so they have no incentive to use it as a currency. It’s literally just a means to an end for creating value to them. If they were growing tulips instead, you’d see them investing in farming techniques just as happily.
There were some rather unamused comments at the time from miners who got their first experience of Bitcoin Cash by having to use it to buy from Bitmain, questioning whether it was always this terrible given that all its very vocal boosters had been claiming it was the fast option compared to Bitcoin. (The usual response was to argue that the block speed varied between a minute per block and the hour+ one and they were just unlucky - which technically it did, it's just most of the time it was in slow mode and the brief fast intervals were days apart.)
Commodity futures only work when you produce a consistent amount.
I haven't looked too closely at how difficulty adjusted after previous order of magnitude efficiency gains, but the risk is certainly there.
This would also give those mining altcoins a nice market to convert their coins to btc and subsequently cash out.
I guess the question is, if bitcoin drops, will everything drop? Or will spreading your stake around the altcoin minefiled be enough to protect against huge losses?
"You have hundreds, sometimes thousands of servers out there. All trying to get to the Algo!"
Nicely tried, my friend. Nicely tried.
This will spurt R&D efforts in renewable energy once there is parity with mining chips.
Germany's power grid is well-connected to its neighbours. During peak production of renewable energy, it is "exported" to France, Poland, Austria etc. These neighbours have a different mix of production and can easily scale down power production from fossil fuels.
[0]:in quotes, because trade within the EU isn't technically export/import
Neither does the energy exporter. They get money.
People can exchange it for more energy, but you haven't reduced energy generation.
http://evworld.com/article.cfm?storyid=765
This is assuming $0.05 per kWh (which is a rate available to many miners outside of China, eg. Gigawatt Mining in Washington State pays $0.028 per kWh,) and a miner efficiency of 0.1 joule per gigahash (such as the popular Bitmain Antminer S9). The break even point is calculated with:
j_over_gh × cost_per_kwh / 3.6e6 (joules per kWh) / reward × (2^32 × diff) / 1e9
The parameter are: j_over_gh = 0.1, cost_per_kwh = 0.05, reward = 12.5 BTC per block, diff = 1931136454487.72. (This ignores transaction fees which have pushed the average block reward from 12.5 to around 17 BTC over the last few weeks, so the true break even point is even lower, around 1 BTC = $680).
I am occasionally interviewed by journalists who write about Bitcoin mining and they often get many details wrong. This one is no exception—Dan Murtaugh should have contacted me :)
Where are you getting the USD1500 price tag, I've just done a quick search and I only found a bunch of S9 Miners (Bitmain Antminer S9) advertised for over USD6000 on Amazon.
the same analogy applies here, BitCoin mining is quite profitable, however hardware business is more reliable and in demand.
https://www.reddit.com/r/BitcoinMining/comments/7jg14f/one_o...
I'd post my calculations but I don't have it here at work!
19 × 14e12 × 3600 × 24 × 365 / (2^32 × 1931e9) = 1.01
Because the price spike is so recent, the headline is true for nearly any mining setup that existed even shortly prior to the spike.
Besides, it increases equally for all miners, so a rig that existed on Nov 1st and was profitable would still be profitable now at Nov 1st exchange rate and today's difficulty. Only the rate of profit/day would change.
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Yeah.... but I won't!
Please everyone, keep logjamming the transaction/second throughput to drive up the relative scarcity!
Ah, whatever, it's more or less monopoly money anyway.
Source: https://www.wsj.com/articles/china-quietly-orders-closing-of...
Bitmain seems to be the only serious game in town, and spooling up a chip run isn't quick, even for someone like Intel, AMD, or the dozens of other chip makers (TI, microchip, etc). This gives them something of a headstart.
I wonder how long they can stay ahead of the other chip makers.
To maximize profit, they utilize hydroelectric power plants built on Yangtze river. Not the ones like Three Gorges Dam, but those small/micro plants (<10MW installed capacity). Most of those plants are owned by local governments or private companies. Usually, State Grid -- which is obviously owned by the state -- would purchase their power output but during rainy seasons, there is just too much electricity that State Grid wouldn't buy it all.
That's when miners came and built datacenters close to the power plants, made deals with the power plant owners to buy the power that State Grid didn't want. It's a win-win for everyone: power plants get extra cash, miners get cheap electricity.
And when it comes to dry season (starting October), miners ship their mining rig to Xinjiang or Gansu, where wind turbines are having a similar situation.
I want to believe it but this sounds too convenient to be true. It sounds more like propaganda invented to cover up the massive waste of energy. Do you have any sources to back it up?
Also, most dams don't produce more electricity during high level seasons. They generally produce a fixed amount with a constant flow to the generators and then the only thing that changes is the spillways being used during the wet season.
Some sources:
https://www.washingtonpost.com/world/asia_pacific/in-chinas-...
His latest mine is still under construction, between a hydroelectric power plant and the concrete shell of a disused power transmission station, between Kongyu and the city of Kangding.
As China’s economy boomed, private companies set up hydroelectric plants in western Sichuan; then, as the economy slowed, they found themselves unable to sell to the national grid, elbowed out of the market by more politically powerful state-owned firms.
“It took a lot of money to build the plants, but it doesn’t cost that much to maintain them,” said HaoBTC’s Mu. “So it makes sense for them to sell the power to anyone willing to buy, even at a low rate.”
Also:
https://news.bitcoin.com/brief-glimpse-lives-chinese-bitcoin...
http://en.people.cn/n3/2017/0223/c90000-9181806.html