Bitcoin Forum

Two cool pieces of news in this:

1) CoinLab obtained $500k in seed funding in Seattle.
2) They figured out an interesting new business model for monetizing "free to play" games.

http://www.geekwire.com/2012/bitcoin-startup-coinlab-lands-funding-tim-draper-monetize-games/ (http://www.geekwire.com/2012/bitcoin-startup-coinlab-lands-funding-tim-draper-monetize-games/)

This is good news on so many different levels!  :D
Way to go!

So basically this is a webcl mining software (only available in google chrome beta)  with obfuscated javascript tied in to prevent "free" access to the games.

I have only one question: Where can I short it?

It's probably a bit more well thought out than that.

Maybe.
But the principle is the same and the question remains.

You can't short it.  It is privately held.

good news: this might actually work out.
bad news: it doesnt help bitcoin more than any other mining operation.

False. It shows two important things - that Bitcoin can be used for creative things and that investors are recognizing this. Very good for Bitcoin.

Exactly!  ;D

Let's see how their numbers work out when ASIC mining becomes available.

bitcoin isnt used. its only mining, no actual use of the currency.
the whole "idea" is as far removed from being creative as possible. its the most basic way of earning money off bitcoin and doesnt require any investor to recognize more than the possibility that bitcoin might stick around for a while.

Wow, great news!

Wurm Online is a nice game btw, a huge sandbox where you can build what you want and also "terraform" the world (dig, level etcetc the terrain, make hills, remove hills, plant trees, cut trees...etc)

Legal botnet FTW.

This is fantastic, and hopefully at one point the game companies might start to accept btc as real payment for games and things.

The clever bit is that neither gamers nor game developers have to actually care about Bitcoin, as such. Gamers earn in-game perks for running some widget in their spare time (the mining software to be developed by CoinLab), CoinLab gets the mined Bitcoin, and the game developers that partner with CoinLab get some kind of cut (in USD$). The last part is a bit fuzzy; can anyone clarify the business relationship between CoinLab and game developers? The CoinLab (http://coinlab.com) site is currently asking for beta participants, but there is little more information.

All around, this seems a fine way to leverage Bitcoin to monetize freemium games. Yes, they're really just running a mining pool, but the business model they've built around it could gain more mainstream appeal (outside the realm of Bitcoin), which is a very good thing for Bitcoin. I'm also particularly interested in the future of Bitcoin with games, so I wish them the best!

This is awesome. Great work Coinlab for having a solid idea and the balls to pitch it.

The other clever bit is that with the drop reward cut looming, it will ensure a pool of mining for the long term.

I thought the same thing.
On the other hand, botnet are probably making some money out of the computers they infect and use to mine, since they don't pay for the electricity.
What I mean is that, maybe CoinLab miners (the gamers) will be spending more electricity on their mining than what CoinLab will generate of revenues, but CoinLab doesn't care, as they are not paying the bill. And the gamers probably don't care that much either, all they want is to play for "free" - actually, they would be tricking themselves or their parents into believing this is free. I don't know how far can this "lie" goes on, though. Once people figure it out, they would probably rather pay directly per time of game. That would be less expensive to the gamers and more profitable to the game companies.

Agreed. Seems like a voluntarily installed botnet to me.

Exactly, well put. Sustained mining is, of course, critical to the longevity of Bitcoin. Providing external incentive to run mining processes (such as the CoinLab model) for transaction fees could ensure a healthy distributed base of miners, even after the generation reward dwindles.

Since the reward for mining with CoinLab is tied to in-game credits/perks, the two economies (in-game digital goods and Bitcoin itself) can be scaled independently. That is, even if transaction fee "mining" earns fewer Bitcoin value than today's generation reward, this doesn't strictly mean that the in-game perks are reduced; the two are independent, and gamers still have an incentive to run the CoinLab mining software.


As I was responding above, you hit on exactly my point of the two economies. Gamers want to earn in-game perks, and the pure Bitcoin value of what their mining doesn't directly matter to them.

I would tend to believe that, even if gamers are told up front about the electricity cost, that they'd still get behind running the CoinLab mining software to earn "free" perks, just because it gives their gaming rig something cool to do.


This is a good example of one primary point of the CoinLab article (original post). A major hurdle to starting a Bitcoin-related business is the stigma of the Bitcoin "brand." Just because users install and run distributed computing software doesn't make it a botnet. I used to run SETI@Home (and prime number factoring, etc) just because I want my computer to be doing something interesting when I'm not utilizing it. This does not a botnet make.

I thought of this a long time ago, but assumed the hardware constraints would limit profitability. Either the botnet has to be massive, or the users have to have 4 GPU machines.

I know it's not technically a botnet, but the topology is basically the same.

The business model is not that different from ad supported sites.  If successful, it could catch on with a variety of services and really shake things up among miners.  Monetize your free software with bitcoin transaction processing instead of ads.  It's really a fantastic idea but it's going to come down to implementation.

Considering the user base that is happy to install widgets for free games, I wonder if the additional "computer slowness" will even matter.  ;)

I agree on all points. Of course, at some level of abstraction any software installed on your computer that talks to other computers via the Internet has a "botnet" topology - That said, you are entirely correct, because the important distinction is that Bitcoin miners are effectively doing work at the bequest of some controlling system, so the botnet analogy is actually stronger than I had originally considered. Your point is well taken.

I agree that implementation and presentation are key. Regarding slowness, I think they'll just turn off the miner while they're gaming (and just run it overnight, etc). This is another good point of implementation that they have to get "right" (in the eyes of the users) for this to succeed. All very interesting.

in my experience, a miner on a low aggression setting can run simultaniously with many games.
if they are smart they will build on an existing miner and basically just preconfigure and hide it - maybe with a few modifications. its not really necessary to reinvent the wheel for this and aquiring an appropriate license for a miner will save them a lot of time and money.

Also let's remember that many gamers will have a kickass GPU computer, but might play an online free-to-play 2d browser game (or even a 3d game that doesn't use much of their power). In this case, mining won't have a significant impedance on the gaming.

Mr. Matonis wrote another article for Forbes on this:  http://www.forbes.com/sites/jonmatonis/2012/04/24/coinlab-attracts-500000-in-venture-capital-for-bitcoin-projects/ (http://www.forbes.com/sites/jonmatonis/2012/04/24/coinlab-attracts-500000-in-venture-capital-for-bitcoin-projects/)

It's a clever idea, automatic and seamless mining in exchange of ingame advantages.
You want that weapon? Nice, buy it, or pay the premium or... mine for some hours!

The BOINC project Donate@Home is basically bitcoin mining for GPUGRID but the user doesn't have to know what bitcoin is or how to mine, he just treats it like any other BOINC project and it works perfectly.

I think that's the only way this makes sense.

I like the idea that a bitcoin startup got funding but it is a bad idea. 

Making games is all about content.  If they make the next angry birds it will not matter if it is mining in the background or not.  They would make more money from ads or added cost in game content (hopefully paid with bitcoin).  If they make game that sucks, it will not matter that it mines or not.  There is nothing really new here and mining is so hard that the BANDWIDTH alone will make it not worth it on machines without GPU's. 

So it all boils down to... can they make a good game.  At least with this mining in the background business model.

I also think it is a bad idea, though I wish them luck. But I don't think they plan to make any games. They are going to go to game makers and offer it as an alternative to ads or charging.

Even if they have the option of paying a smaller fee instead?
Don't know... if you pay your own electricity, it wouldn't make much sense.

Imagine all the sad kids with Nvidia equipment. :o

That pretty much defines this field though. A person who wouldn't think twice about spending $8 at Starbucks for a coffee and a muffin because they have 30 minutes to waste won't spend $1 to play a game they enjoy for hours. It's very easy to attract people and very hard to get them to part with as much as a dime. So this might actually make sense.

I didn't know Farmville is a good game

But guess what? It has success

We are speaking about $$$, not about game quality. They can add the bitcoin mining to Farmville so players have ingame bonuses and everyone is happy for example.

It's good to see new companies using Bitcoin, but I can't help but think this idea is a bit daft.

Rather than burning through energy and CPU/GPU cycles to earn a few quid, would it not just be better to ask for Bitcoin micro payments each month?


EDIT: To add, gamers are likely to have non-optimised rigs, compared with the next generation mining kit too, making it pretty wasteful. It is still good to see companies embracing Bitcoins though.

Better if the players are rational, but they aren't. As I said, someone will spend $4 on a coffee without thinking but won't spend $1 to buy an app they've enjoyed for hours.


Gamers tend to have the most advanced video cards, and when they're playing games like Farmville or in-browser MMOs, the video cards are basically snoozing. Yeah, it will be hit or miss. But remember, your cost is near zero.

I agree that the economics are bad, but I don't think they're nearly as bad as others seem to think.

Indeed it will be profitable to mine that way for a long time to come. The added electricity use for running low prio mining while already playing a game, is quite moderate and thus the added electricity cost is low as well. So it does make sense. It's also great for Bitcoin, the network will become more secure in the process.

However I seriously doubt that this is the only thing they have in store. $500k for only something like that is way too much in my opinion. They most likely have aces up their sleeves but are not revealing them just yet because it doesn't make sense from a business perspective.

I'd like to challenge this because I don't believe it's necessarily true. If they get a bunch of gamers to mine, the difficulty is going to rise and if the price doesn't follow since these players obviously wont care about their electricity costs and will continue to use this software even if mining at a loss, the raised difficulty and the not high enough price will drive out the current dedicated miners. So net net without a simultaneous significant price increase I don't believe the network will be that much more secure than it is right now.

It may only be more secure in the sense that we will have a base of guaranteed miners who will keep securing the network even if the price doesn't necessarily warrant it.

One brilliant part of the CoinLab business model is that gamers don't have to know anything about Bitcoin. You are correct that it is more economically rational to pay a monthly Bitcoin fee, but what CoinLab recognizes is that 99.9% of the gaming population doesn't have any. If/when they do, then there's more potential to simply get paid in Bitcoin from customers.

Regarding wasteful energy/cycles, it doesn't matter in this scheme. The 100% rational player will have to decide whether increased electricity cost is worth the in-game perks they're getting. If CoinLab/developers discover that players aren't running the mining app because of this, then just bump up the in-game rewards. Digital goods are free to produce, so that economy can easily be adjusted to overcome the burden on the customer. Even if the customer's mining is wicked slow, it's still adding to the CoinLab mining pool.

In the end, I entirely agree with JoelKatz insight:

It would be better if gamers know what bitcoin is, how to use it and have them

But since almost no one know Bitcoin (let alone using it), the idea is nice.

The gamer just need to play and press "mine" and he will receive ingame bonus as time passes. That's all.

Then maybe hardcore gamers will discover bitcoin and pay for that in bitcoin, but it will be a later step

I also see this as a sort of step 1. I'm quite sure they have a lot of other stuff in mind for the long term.

I blogged about the CoinLab deal (the post wanders off into bigger-picture economics thoughts at the end):
  http://gavinthink.blogspot.com/2012/04/coinlab-and-bitcoin.html

As I see it, the most positive thing about this is that Coinlab - and investors - will have to report Bitcoin-related income to the IRS.  They'll have more legal power at hand than a typical miner, and any precedents that they set will be that much better for all of us.
Another positive thing is that, if it works, it creates a buzz among tech investors. It validates Bitcoin as a solid, secure, and free system that is open to use and innovation.

I wonder if they realize they have a dynamic limit to their growth though because they can't allow themselves to ever represent more than say 30-35% of total hashing power or else they'd start hurting themselves by shaking the confidence in Bitcoin and probably crashing it's exchange rate as a result..

Just got slashdotted!  Front page

http://news.slashdot.org/story/12/04/25/1549252/bitcoin-mining-startup-gets-500k-in-venture-capital

More interest in BitCoin is good by any standards.

I've never understood the hate for bitcoin.

Whee. That was my submission. I've managed to get 3 out of 4 to the front page so far. Fairly good stats. :)

The hate for bitcoin is relative to the promotion of it. There are hardcore economists who believe that the idea is fruity, but an experiment is an experiment so who cares. Enter psycho-hyper-libertarians who want to destroy the governments all over the world, become literal terrorists and anarchists, and who try their best to go against every single social construct and law in place and call it "good for everyone".

The problem with bitcoin is that there are so many morons in it promoting it poorly and giving the SolidCoin style "UP UP UP EXPLODE IN YOUR FACE TAKE THE WORLD BY STORM" speech so often everyone thinks we're all wackos. This is why I troll people. You have got to learn to lighten up and start working with the world to change it, not against it.

Good work Technomage.  I've *never* been able to have a successful submission to Slashdot.  Not sure how you do it but excellent work.

If they are so successful that the gamers using this system represent 1/3 of the Bitcoin mining network, then CoinLab will be very profitable, the investors will be happy, and more investors will invest in still more Bitcoin companies. This drives price higher and encourages miners outside the system to join.

You must see these things dynamically, not as static occurrences. Bootstrapping this new monetary system requires a sort of ratcheting of successes. One team gets something right, and it sparks others to succeed.

I thought I used the word dynamic in there somewhere.


Yep I did do so.  ;)  :D

This this this this this.  Anytime I see someone ask why they should use/support bitcoin and a BTC user explains it by saying anything about fiat/the fed/da govurnmint they the chances are that the BTC user just drove someone away from using BTC.

There are tons of benefits of BTC to explain to someone without going all foamy-mouth nutty

Terrible (unprofitable) business model, terrible lack of creativity (BITCOIN STARTUP THAT MINE BITCOINS AND SELL THEM FOR $$$ HURR DURR).

Nothing good for Bitcoin. This will not impact, help, or promote the Bitcoin economy in any way AT ALL. Honestly this means so little for the Bitcoin community that it's barely even relevant for this forum.

The more I think about this business model, the more I want to laugh/puke. It's just that bad. It's morally unjust (tricking 13 year old kids into installing shady software that he doesn't understand on daddys computer) and it would barely be profitable today. However its long term viability is even more terrible.

>Botnet of volunteers using shitty CPU and GPU's to compete with ASIC rigs for ($5*25*144) $18000 per day in a zero-sum game.

It's laughable.

Unprofitable business model? 

The gamer reluctant to make micro payments for games gets to access paid content for "free" (at the cost of electricity). Game developers get a chance to monetize a huge non-paying user base.  All Coinlab has to do is run a mining pool.  Looks like a win win win.

Sure, it's inefficient mining, but as long as everyone's happy..?

Yay for hiding fees in electricity bills :o

Ok, how about repackaging a handful of photoshop filters into an phone app... for 1 BILLION dollars?

Seems like an interesting idea.

I think it is overall very positive. We have seen some brilliant ideas executed what you can do with bitcoin very poorly.

Now we will see a mediocre idea executed with tons of capital - i suspect it will be a greater success as most of you imagine.

Hmm, try looking at it from a slightly different perspective.

This new company seems to basically be proposing to buy in-game perks for game-players, paying the game companies fiat currency for those perks.

How much of a discount will game companies want to give this middleman? Normally that would depend on how much the middleman is willing to pay for how many perks for how many players compared to how much that might lower the perceived value of the perks to the game company's existing population of players.

From the sound of it this middleman doesn't actually have any players to bring to the deal, they plan to leech off the game company's own player-aquiring efforts and player-populations.

How competitive will this new pool company be compared to existing pools that could quite possibly offer competing "we will handle the mining pool end of this for you" offers?

And what the heck do they need half a million bucks for? Marketing? Ten 50,000/year salespeople to run around trying to talk games companies into going for this scheme?

Maybe it would cost any already operational mining pool a similar amount to be able to talk game companies into mining with them instead?

Maybe they plan to make an even more GUI miner than GUIminer and sell the code to the game companies to integrate with their clients or webservers? Or are offering to do that integration for them? Somehow trying to lock them in to using this company's pool rather than shopping around existing pools?

-MarkM-

Right.

Today nobody can say with certainty how their mined bitcoins are viewed by tax authorities and regulators.  Are mined Bitcons a security, a commodity, or a currency?   When they are sold do you pay capital gains? If so, how do you determine cost basis?   Do you need to keep records of which bitcoins were sold and to whom, and to keep those records for 5 years?  Or are there thresholds, sell under $1K per day and nobody cares?

CoinLab's Jack Jolley was in the Treasury group at Microsoft.  I suspect there are now (or will be soon) some conversations that will result in a more clear understanding on these topics that will result from CoinLab's pioneering.


As the prices for used ATI GPUs are dropping fast (5970s selling below $300 on eBay, crikey!) the timing for this couldn't be any better!  Many Nvidia owners will be tempted to downgrade switch over to an ATI card so that they can get their in-game credits.    To a gamer the new card brings dual benefit, ... better payout versus the Nvidia card when using CoinLab software and a better gaming experience after the upgrade.

Any miner that might be considering selling GPUs in the next year will probably be benefiting thanks to this development from CoinLab.

Assuming the brains behind this whole idea are very bullish on bitcoin; could their business model be based on controlling the maximum amount of mining power with the lowest amount of capital? It's externalizing the 2 biggest costs of mining right, hardware and electricity?

Also for consideration:
-They have $500K I'm assuming one could build and operate a fairly powerful mining operation with that much capital.
-They could straight up buy nearly 100k btc (granted they would drive the price up in the process) with that money if they really wanted btc, that's a pretty significant chunk of the entire bitcoin network. 100,000 / 21,000,000 = 0.476% so they must think that they can get more than 0.47% of the total to ever be created running their mining operation. What kind of gameplayer usership scale would they have to achieve to have a mining operation capable of mining more than 0.47% of the bitcoins ever to be created?
- Did the people who provided the capital consider my points?
- Did some silly "tech fund" manager invest a portion of their fund into a bitcoin startup?

Those are great insights. Certainly running the mining scheme is technically neat-o, but it might not be the most economically efficient approach to the bottom line of actually making money. (I heard an economic anecdote claiming that, at some point in history, the most economically efficient way to make a profit in the telecom industry would have been to buy the struggling companies out, then scrap all the phone lines for their copper.)

My guess is that the mining scheme is only CoinLab's first splashy project. That undertaking is (as mentioned) little more than running a mining pool (which is already a well-trodden path, which can probably be set up on a shoestring budget). Mining pools already keep track of how much each user mines. CoinLab just needs to record this as some kind of "credits" that the integrated games "consume" for in-game perks. This is, of course, all highly speculative, because the business/technical relationships do not seem to be published yet (right?).

thats an interesting point. i think its reasonable to assume that coinlab wont have considerable mining power (if any) before the block reward is cut in half. if they could buy bitcoins for an average of 6$ right now, they would get 83k bitcoins, which is around 22 days with 100% mining power or more than 6% over the course of a year. so if they pay out 50% of their mining revenue to the game developers, they would need 12% of the whole network to beat a simple buy and hold strategy within one year assuming they have absolutely no costs whatsoever. right now 12% is rougly 1.4thz or 4000 typical mining gpus. with many gamers having slower or nvidia gpus thats likely something around 10000 gamers mining at a time.
with only one game you need to be steam top 10 to archieve that.

so either my calculations contain a serious mistake or this is very ambitious.

my guess is coinlabs needs much less capital for this and is working other projects. otherwise it likely wont work out.
 

I am bumping this thread because I am curious how ASICs change the game plan. I hope coinlab has managed to get something done for half a million by now, but there is nothing new on their Website.

I saw somewhere on these forums they had a plan to do something other than bitcoin mining that would (could?) be as/more profitable than bitcoin mining. Couldn't be more vague I know, but might help someone searching for more info.

this

so they hijack your box and steal your power while you play their "free" game

count me out

That's actually a pretty good summary! However, I'll be the average gamer doesn't care about the extra electricity being consumed, nor do they care about bitcoins at all. They'll happily run some widget overnight that gives them game credits for blowin stuff up (or whatnot).

It's actually a win-win-win-win for the gamers, CoinLab, game devs that integrate with CoinLab, and Bitcoin at large (mainstream mining).

(Full disclosure: I have a game that accepts Bitcoin (https://islandforge.com/bitcoin/) in lieu of PayPal subscription, but I do not use CoinLab... not yet anyway.)

Protect your future GPU mining earnings with CoinLab's 95-97% PPS Pool
 - http://bitcointalk.org/index.php?topic=99643.0

When you see that a pathetic website, where one can read "We help it's members" instead of "We help its members" (thus implying elementary school was a hard struggle), there's only one comment left:

"Only in America".

+1

:D

Oh well. Mind your step (http://polimedia.us/trilema/2013/mind-your-step/).