Bitcoin Forum

Just finished reading this article: http://mobile.bloomberg.com/news/2014-10-21/bitcoin-miner-ditches-clients-to-chase-2-billion-coding-prize.html

Basically the co-founder of KnC, Sam Cole talks about small-time mining operations becoming obsolete as their profit margins shrink and they get replaced by mega-mining farms. He continues to talk about the $2 billion in btc that will be mined in the next few years and expresses his company's intention to milk as much cash from this cow as possible.

What is interesting to note here is that this guy is measuring the profits in $$$, which is indicative that his company doesn't care for btc and are in it for the potential fiat profits. He doesn't say that there's x amount of BTC up for grabs because he and his investors are only interested in the cash/fiat that can be made from mining BTC. Another thing to note is that he mentions their cost per unit is significantly below $400.

So basically these scumbags have a lot of hashing power, fiat, and probably BTC to manipulate the market.

This is speculative.

He doesn't say there is X amount of BTC up for grab because the interviewer and his audience is not familiar with this unit of account.

In reality, it is more probable that they hold a considerable amount of BTC. I have mentioned this in another thread but Bitcoin miners are some of the most bullish entities in the Bitcoin ecosystem.

BitFury has confirmed that they hold most of their coins. DigitalBTC in a recent investors letter have confirmed they are not selling production from their mining farms "at these low prices".

Yes it is speculative. This is the speculation section after all :)

If DigitalBTC are not selling the BTC they mine then how are they covering their costs? If they have a surplus in their accounts, it'll run out eventually and they'll be forced to sell. Anyhow, I clearly have to do more reading on the other big mining operations, so thanks for bringing those other companies to my attention.

Back to KnC, this isn't the first time they've been exposed as mining to dump for fiat: http://www.reddit.com/r/Bitcoin/comments/2182nb/kncminers_ceo_sam_cole_dumping_bitcoins_worth/

"We make three million swedish crones (466,000USD) everyday from mining Bitcoins and selling, says Sam Cole, CEO KNCminer."

That was over 6 months ago. I'd imagine they're mining more btc than that now.

Also, note how they mention in the Bloomberg article that they're in the process of tripling mining capacity in the airplane hangar and also open other mining farms. That means that a lot of BTC is being exchanged to fiat to fund these expansions.

This is how bitcoin slowly dies from here.  What started as a chance for everyone to generate their own bitcoins and participate in the economy now turns to a few data centers producing bitcoins thus forcing new users to purchase new bitcoins from them.  We've traded fiat currency controlled by a few central banks to bitcoin controlled by a few data centers.

Meet the new 1%.  Slightly different to the old 1%, but they're still there.

 Bitcoin prices which just fresh out of mining farms significantly higher than the market

1. How much significantly more do they sell for exactly?

2. What proof do you have to back up that statement?

They will eventually sell due to shareholders pressure. If the price is dropping when these mega farms are holding, what is going to happen when sentiment really turn negative and all mining companies decided to cut loss?


As for the 2B figure coming from Sam of Knc, he is probably using an optimized bitcoin price estimation. If he really build a farm so big that will threaten integrity of the network, what is going to happen to the price? Not to mention the constant selling from his company will further depress the price.

If this turns into a giant downhill snowball effect & miners decide to cut losses btc will be finished... Maybe with a new all time low  :'(

The $2 billion figure is based on the current price of BTC multiplied by the approximate amount of BTC that will be mined in the next few years.

I hope Sam and Co. fuckin' choke.

we should have a full month or two where everyone stops buying bitcoin.  everyone stops buying.
buying not allowed.

Then these guys sell to meet expenses maybe and all go bankrupt.  hopefully.

Why so much hate from the farmers?

The system was designed that way for every miner to compete, not for everyone in the world have equal amount of coins.
Competition is good, it brings more security to the network.
Sure, now instead of having 10000 miners we have 500 but to compete in this market is much more difficult and if someone try to takeover it will be much more expensive $$

If you care so much about the world start giving your coins for the fellas in Africa.

Because KnC in particular built their company on the goodwill of their first generation miner customers, and then turned around and shafted everyone.

The system wasn't "designed" with megafarms in mind.  If anything, the system was "designed" to allow anyone with a CPU to participate in the network, incentivizing random_d00d to join the Bitcoin ecosystem.  Megafarms broke that.

Claiming that megafarms help to secure the network borders on absurd.  Concentrating so much hashpower solves a nonexistent problem, while creating a real ones:  greater centralization and entities with both financial incentive and capacity to corrupt the network.

TL;DR:  foxes guarding the chicken coop.

You act as if mega CPU farms wouldn't exist if ASICs didn't come around...  Back with CPU farms we had botnet issues, those people are even greedier since they are using other's resources completely for their own gain.

I'm not saying that CPU megafarms are impossible, only that megafarms of any kind are undesirable.

Competition only leads for the best fitted miners, like nature.

So yes, the system was designed around this concept.

It depends on what you wish to succeed--Bitcoin or "best fitted miners." 
But yeah, if megamines kill Bitcoin, it doesn't deserve to survive.

There are 3600 bitcoins created every day no matter what. What do the large farms have to do with it?

If this is the case, then it's a flawed system. What happens when mining is controlled by a small handful of companies and governments decide to shut them down or seize control of them? What happens if they get hacked? What happens if they go rogue? They're not pools that people can just pull their hashing power away from.

Wait, didn't you get the memo that the supply of new bitcoin is diminishing over time? [edit]
And absolutely nothing is stopping you from mining bitcoin right now or starting a business that produces asic miners.

Maybe you'd like to donate $20 or $30 million to him so he can get his mining business going?

If I had the money I might try that myself. The point is if he can convincingly sell his business plan there will be investors.
Since when was there a guarantee for profit?
How much should an individual be able to mine? You do realise that if something is profitable there will be an incentive to try and expand to gain even more profit?
Since everyone will be doing that the difficulty will increase ultimately diminishing profits for everyone again.

You can't have a valuable and widely used bitcoin while being able to substantially mine as an individual with low end hardware. At least not in a free market

Remember that Bitcoin did not solve the Byzantine Generals problem but merely created an economic incentive for actors to behave.

The fact is, ASICs and professionalized mining ultimately improves decentralization.

https://gist.github.com/oleganza/bd14f60643395706efaa

That only applies to the third question. Hackers don't care about the miner's incentive, and neither do governments. Besides what we're seeing right now is less companies building mega-mining farms and a more uneven distribution of hashrate.

Nope, wrong again.  In reality there are more and more mega-mining farms being built. Just look at the hashing distribution right now and where we were this summer with GHash.

As more of these continue being built the risk continues to be distributed effectively rendering hacking attacks and/or government takeover ineffective.

What needs to be realized is that a high value bitcoin will give a tremendous economic incentive to invest into mining.
At 3600 coins a day even at current prices we are looking at up to half a billion dollars a year of new value created (until halving)

Now you can fill in the blanks on how much might be spent to gain a piece of that pie.
Lets face it. If bitcoin gains global adoption mining will be a multi billion dollar industry.

Does this mean the current value is unsustainable? I really don't know.
The numbers speak for themselves. Either we will see a very big change in mining or a very big change in value.

exactly.

I know people hate Marc Andreesen for saying this but the likely scenario in the long run is enormous mining syndicates around the world being regulated in such a way as to PROTECT the Bitcoin network and discourage monopolies.

Is GHash a mining farm or a pool? If it's a pool then your point carries no weight as miners simply pointed their machines to other pools thus decreasing GHash's hashrate. A giant mining pool is not the same as a giant mining farm.


Regulated by whom? A centralized authority? Syndicates aka mafias? I can only speak for myself, but I sure wouldn't trust them.

Ghash is a pool but I'm sure they have their own farms as well.

Anyway, this irrelevant to the situation and I find it a bit strange for you to point this out since it effectively defeats your point as well.

If Ghash is not a concern for you then we can safely say no private, unique entity's mining farm as even approached the necessary 51% hash rate. Considering more mining farms are being set up by other individuals we can safely say the danger of mining centralization is decreasing every day

An snake oil salesman actually telling the truth on how it really is.
Well, that's something you don't see every day..

I don't necessarily see it that way. Most likely there will be both, giant mining farms, as well as smaller enterprises that use local advantages such as cheap energy or technological advantages such as more efficient chip designs.
The great thing about bitcoin is that the blockchain and mining was specifically designed around allowing an anonymous creation of new blocks/coins through PoW.
At least for now it is pretty hard to regulate who can or cannot participate in mining.

[edit] the irony in this is that we might observe something similar to the arms race of the cold war in mining if bitcoin gains wide adoption

Regulated by whom? A centralized authority? Syndicates aka mafias? I can only speak for myself, but I sure wouldn't trust them.
[/quote]

Regulated by each and everyone of the countries where they are based.

Again, understand that I'm not referring to regulation that would allow for coercion of mining syndicates into maliciously using their power but regulation that would limit their hashing growth so as to secure the decentralization of the now global (in this scenario) Bitcoin economy.

You'd have no choice but to trust them.

Cheap energy and technological advantage are things that can be leverage much more seriously by giant mining farms than smaller enterprises.

One alternative that should be kept in mind is appliance mining where energy consumption/heat from the miners are effectively recycled for other purposes. This could certainly improve and increase decentralization.

I strongly disagree with that idea. The moment you see a regulation of who gets to post new valid blocks is a big red warning sign.

Regulated by each and everyone of the countries where they are based.

Again, understand that I'm not referring to regulation that would allow for coercion of mining syndicates into maliciously using their power but regulation that would limit their hashing growth so as to secure the decentralization of the now global (in this scenario) Bitcoin economy.

You'd have no choice but to trust them.

[/quote]

You simply can't regulate this market, it's global and anonnymous, you don't know who is mining and where he is.

You could by having a large group of miners collude (ignoring your blocks). It will be observable, it will destroy trust, it could happen.

[edit] One should never forget that the rules governing bitcoin are just program code being executed on many machines. Code that can be changed.
We as participants decide what version we trust, which rules we accept. I would not put it into the realm of the impossible that by law states would try to prevent individuals from mining.
We also know that this thing is like a hydra. Try to behead it and see what you get ;)

Correct, it does raise a dangerous precedent.


Yes and no.

If we assume Bitcoin is behind the world's financial system then I can certainly envision a scenario where governments would want to use force to prevent some mining installations from approaching uncomfortable hashing %.

Considering the advent of mining farms it certainly is possible to find out where the operations are located. This is not someone mining on his computer anymore.

Of course this is all speculation. If Bitcoin achieves global reserve status then it is fair to question whether governments will have much power at all.

I'm talking about centralization of mining and this crook Sam Cole milking BTC for fiat. Meanwhile, you're talking about BTC becoming the dominant world currency and decentralizing the global economy? I think we're on totally different pages.

And I'm saying centralization of mining is not happening and miners in majority are not dumping BTC for fiat.

Well if the mining profit margins are so narrow, how are they staying in operation without dumping BTC for fiat to cover their costs? They must have endless reserves of cash to hold all that BTC until the price rebounds right?

1. They have millions of dollars from selling mining gears
2. They have millions of dollars from VC investement
3. They have millions of dollars in Bitcoin profit from mining in the early days

So yes they must be burning through quite a lot of cash right now but in the long run they will be fine and they know it. Of course I am not suggesting they are ALL holding 100% of the Bitcoin mined but my guess is they are holding a good majority of them.

Additionally, I don't see a problem for them to cover some costs by selling to fiat during a bear market. You can be certain though that they will not "dump" their BTC during a bull market.

I think we're confusing few issues here. As someone else has pointed out there WILL BE around 3600btc mined each day, or around $1.2MM at current prices period. And the smaller the margin the more of the mined BTC will HAVE to be sold to cover expenses. Market has to find a price point at which there's enough demand to absorb around 3600 new btc daily regardless who mined those coins.

As far as ASIC manufacturers they're in it for the profit (:o shocker i know) at certain point once the risks are more known and protocol is more stable and it's easier to raise capital, it's natural for someone at the board meeting to stand up and ask why are we selling these boxes that can generate $400 at a cost of ($400 - x)??? And business plan will naturally shift to most profitable stream and go after the biggest part of the $2B industry. The higher the profit margin the more of the pie you'll get. Naturally that will squeeze out your dorm room miners, and will be left with few ASIC manufacturers with their own mega farms (matrix comes to mind).  The cost of new entrants will be too high which would lead to monopolies/conglomerates and all the bad things that come with them, centralization regulations etc...

Hypothetical if BTC goes to $1MM Intel and AMD would probably squeeze KnC and the rest out.

But that's where halfing comes in so hopefully the risk of that will keep the REALLY big guys from entering.

They're trying to get the largest market share, and as stated their costs are bellow $400. By selling they're raising capital to expand, as long as it's above their costs they're at profit (and get the benefit of squeezing other guys out). It's a win/win sell at (some) profit and guarantee more profit. They're not wall street to play the risk game. Even if they were true believers VCs would force them to sell.

There's no guarantees that these miners will be fine in the long run. That's why they'd be selling their BTC for fiat trying to expand their hashrate asap and getting a bigger share of the pie and maximize their profit potential. The mining companies who are simply holding their BTC as you say will go the way of the dodo soon.

They don't necessarily have to sell to raise capital. As previously stated, all of these major companies have millions from selling mining gears.


I'm sorry but this is not true. BitFury, probably the biggest venture backed mining company is not selling ANY of the coins they mine.

Miners are industry insiders at the top of the pyramid. I'm sure they are pretty confident about BTC's future.

Lol, a company whose worth is pegged to Bitcoin price is not going to announce "we're dumping these things as fast as we mine them, because don't believe in the future of Bitcoin."

They're hoping to be the first publicly traded Bitcoin company in the USA. You really think they "don't believe in the future of Bitcoin".

They are making MILLIONS in profit from the sale of mining rigs to other smaller mining farms. Their BTC mining is an extra curricular activity with little to no impact on their bottom line.

Try again, troll.

brg444, if you were planning to take your company public, would you announce that you don't believe in your own product?  Regardless of how you actually felt?

*And lrn to polite, faggot.

The burden of proof is on you to demonstrate they don't believe in their product.

So far, every thing indicates they are extremely bullish about it.

Try harder, troll

I never made that claim.  You fail at reading just as badly you fail at basic etiquette :)

Where did you get the illusion that you deserve respect ?

http://s30.postimg.org/wxp87j3tt/umad.jpg

Stay rude and stupid.

not mad, this is how trolls deserve to be treated, as inferior posters.

stay disingenuous & dishonest

Nah, I can spot butthurt when I see it.
I realize that constant loss of money due to stupidity is hard on you, but it doesn't excuse your abysmal manners >:(

Butthurt?

I'm just having fun here rebutting each and everyone of your childish claims and disingenous arguments  ;D

Carry on, troll

Nah, you're just shitting up a perfectly good thread with your rude faggotry.

Thread was perfectly fine until you came along, troll.

That's basic business. The bitcoins the ASICs manufacturers are sitting on is considered it's inventory. Company needs liquid cash to pay employees, taxes, cover their costs, and reinvest the remainder into expanding their business model. That would be EXTREMELY risky/suicidal for the CEO of a BIG ASIC company to try and raise more cash from the VCs (at i'm sure very unfavorable terms) instead of a logical thing, like selling your own inventory at profit. That's just not how businesses works. Sure small guys/solo miners in basement can risk it all, be visionaries and hodl until they make it big or run out of money, but not the big guys. Big guys need stability and to minimize their risks, and stick to their business model. What most likely is happening here is BTC are sold to VCs at a certain locked in rate and VCs are holding the burden of BTCs and the price fluctuation (after all risk management is what they do) and ASIC manufacturer can concentrate on their own business model.

VCs are not there to be nice. And because of their terms should be the last choice when raising capital, after your own capital, then loans from banks, then your last stop is VCs. They're not nice guys who give out free money, more like making a deal with the devil. 

did you read my posts ?

did you read this


do you have any idea how much these guys make from selling mining gears alone?

Also notion that they're so profitable that they don't need any more money is flawed too. If you're sitting on lots of money do you
A-use that to expand your business model. Build not one but 10 mega farms and go after the 20%, 30% of the pie.
B-use the profit to squeeze out competition
C-just keep it in BTC and hope it plays out in your favor

Again the bigger they are, and the more control you gave up to VCs the less likely you can do C even if you wanted to

This is your own assumption.

The reality is that literally the biggest out there (at least that we know of) is not selling his inventory of coins.

That's awesome so one CEO has enough balls and control to do that. But is it sustainable? How long do you think he can hold out at current prices? What if the market moves against him? How much of a down swing can he absorb before BEING FORCED to start liquidate his core business, dropping funds for R&D, laying off employees etc...? NotLambchop's trolling had some merit, you got to be more skeptical when reading releases from the CEO, their jobs is to paint pretty pictures. With that said i'm a bull, it's natural for supply to dwindle when price goes down hope their profits were good enough so they can hold out.

BitFury could stop mining and be a VERY profitable business.

As I've mentionned above, mining is an extra curricular activity to them.

They are most likely one of the top 3 suppliers of mining parts in the WORLD. That's enough cash to pursue their business model while betting on bitcoin on the side.

Most of these are using renewable sources of energy now so it really is not that bad.

Try bigass red bold font AND ALL CAPS 4 TRUTH²



*Lol @ "it's renewable"

http://s30.postimg.org/6ckoqa3s1/Capture.jpg
http://s13.postimg.org/jm4an1ufb/Capture.jpg

BitFury & KNC farms are in Iceland, Finland, Sweden & Georgia and are mostly powered by hydroelectricity.

Why are you making this so easy, troll?

You are such a novice troll.

"Mostly powered by hydroelectricity?"  Care to cite your sources?

KNC:  Nothing in Iceland, Sweeden--"About 25 percent of energy production is categorized to be renewable energy."
Georgia:  "Georgia Power generates more than 1,100 megawatts (MW) of renewable energy, representing about 7 percent of its generating capacity."

Keep 'em coming :)

BitFury
http://www.bitfury.org/products

https://vimeo.com/104009961

KNC

http://www.datacenterknowledge.com/archives/2014/02/06/bitcoin-miners-building-10-megawatt-data-center-sweden/

http://thenodepole.com/regional-qualities/electricity-and-infrastructure/

Maybe they're all lying too  ::)

 :D

You're so basic, troll

 :D :D :D :D

you need to refine your google skills it seems, troll

Don't you realise this is a trend mining farms are forced to follow.

Renewable energy = cheap energy = lower mining costs = profit.

OK, wrong on Georgia. 

Feel free to post links to better data :)

Well here you go, troll


http://www.hydroworld.com/articles/print/volume-21/issue-01/articles/russia---central-asia/georgian-hydropower-turns-river.html

KNC farms are located in the Node Pole region and... shall I really quote myself?

Please do.  Link?

https://www.kncminer.com/news/news-102


http://www.datacenters.com/news/featured/its-green-at-the-top-of-world-cold-hard-bitcoin-data-centers-and-renewable-energy/

Cheap, sustainable renewable energy? All is lost :-\

Cheap, sustainable renewable energy? All is lost :-\
[/quote]

But LambChop says it's only a sales pitch  :'( :'(




 :D

Lol, that's their pitch for their new cloud mining farm.  Reading comprehension fail.

One of their real farms is what you have pictured below.  The link you offered is another pitch, all I see is "will reside."
Now highlight the part stating renewable energy is actually being used :)


P.S:  Sam said plenty of things, along with the fact that they would only mine if the network was being threatened and that KNC would never compete with its customers.  That worked out pretty well, drop by the KNC thread and say hi, tell'em I sent you :D

This farm pictured is right there, in Boden. All of their farms are.


http://www.bloomberg.com/news/2014-10-21/bitcoin-miner-ditches-clients-to-chase-2-billion-coding-prize.html

It is my understanding that all facilities in the Node Pole are fed directly from the hydropower station nearby (one of the biggest in the world). Sorry, no exact quotes.

When do you stop trying, troll?

So, you got nothing other than "your understanding"?  Don't even joke like that. :D  

http://thenodepole.com/regional-qualities/electricity-and-infrastructure/

This is the location of their farm.

If after reading this you are so dishonest as to say KNC's farm might not be powered by renewable energy than I can't help you anymore.

I tried to spoon feed you every information so you wouldn't choke on the truth but looks like trolls have digestion problem.

Face it troll, even after moving the goal posts, you lose.

You are linking me to a promo site.  I'm giving you actual stats for renewable energy in Sweden.

"The share of renewable energy in Sweden: [8]  (http://en.wikipedia.org/wiki/Energy_in_Sweden#cite_note-8)
1990 33 % 1995 36 % 2000 38 % 2005 41 % 2010 48 %"

Node Pole is in Sweden.  Why is Sweden not 100% green if there's a surplus of hydro power?  Or?

A brain twister:

All of country_A's energy needs met by hydro power.
Megamine comes to country_A, and uses its hydropower, calling itself "green."
Since now there's not enough power left for the rest of country_A, coal burning plants are built to supply the deficit.
The coal plants aren't feeding megamine, they're feeding country_A; country_A is now dirty, while megamine is "green."

[spoiler]The country is burning shitloads of coal it wouldn't have, if not for the "green" megamine using up all the hydro.[/spoiler]

Good point. I thought we were talking about Georgia...

I was talking about country_A, more of an exposition than a dialog, really. Would you like to have a talk?  What's on ur mind?

I was wondering what the bare minimum cost is these days to mine a bitcoin. Seems a good deal cheaper than I thought.

It's hard to guess, and ASIC companies are a secretive bunch.  It's certainly not cheap for retail-buying, non-electricity-thieving miner.

I don't think that the arms race of the ASIC companies is doing any bad to bitcoin. It's rather some competition and an entire industry built up on bitcoin. If bitcoin's price goes down again, those guys will go bankrupt in seconds. They're the ones keeping the price pumped. We should love big mining farms rather than hate them. We're still on the early days (now), imo it's mainly the asic mining industry that keeps the price up.

Not sure if true, also not sure if pumping price like that is too good for Bitcoin.  And not sure what "decentralized" will mean when 95% of the mining is done by a cabal of a few companies.  

If anything it's weeding out competition from the solo miners and concentrates it in mega farms. Is competition between say 3 mega minining farms really decentralized?

Are you intentionally retarded?


KNC is in Sweden yes, but in Boden, Sweden, next to what is likely the biggest hydropower facility in the country.

Is your stupid ass suggesting they are actually routing power from coal facilities outside the region right up there near the artic circle to power their data centres

Here is a quote directly from Hydro66 data centre press release, they're a neighbour of KNC :


If we're being honest, this is likely the case for every data centres in the Node Pole.

Mining can still serve it's purpose of verifying transactions even if it's done solely by 3 parties. As long as it's somehow possible to mine profitably, people will do their best to break even by mining. This has become too hard for individuals. If bitcoin remains active, I predict that in the upcoming years only companies with huge assets and access to bulk orders of hardware will be able to profit from mining. As long as we have a variety of pools and more than 2 major hash sources the network is going to work in it's full potential though.

I guess that after a point has been reached that no one can profit from mining, no matter how high the price has gone or how much he's able to invest mining is going to be something equivalent of running a node. Only done by hobbyists and supporters that are looking to help the network.

Additionally, some of the bigest mining operations right now are cloud mining operations, where the mining profits are paid to investors. Are they ponzi schemes? We don't know (with exceptions), but huge amounts of BTC are being transferred through them to individuals on a daily basis. Maybe in the end centralised mining is not all that bad since the BTC is going back to people. Yes, mining is becoming more and more centralised, but people are still earning from mining and you can't really argue that mining with your own hardware is more accessible to the average individual. It's harder both financially and technically. 

Lrn to polite.

https://i.imgur.com/8E5aGnH.jpg

I'm not sure how this you could envision this happening

Or even by one person with a few boxen.  That's not ideal, tho.  It may be inevitable, but we don't have to say it's great.

*The cost of mining should approach the price of bitcoins being mined.  That means if Bitcoin was the world currency today, 10% of the world's wealth would be burned by Bitcoin mining per year :)

Most people invested in BTC would strongly disagree.

Super strongly. Isn't there a hard fork for this kind of thing?

I'd agree that you cherry picked the worst part out of my post. :P The part you quoted arguably sounds bad. Especially since you left out my explanation on why I don't think it's all that bad since most of the mined bitcoins (although mined from a a few companies) are still distributed and circulated from/to a large range of individuals.

In regards to your point surrounding cloud mining passing coins among many users instead of the HW owner/operators, how are these contracts paid for?  In most cases: BITCOIN!   TaDa!  So in reality there's actually very little coin holding diversification occurring.

I tried  :P

But how's that different from say have just google run one large mega farm, as long as you own stocks of google and get your share of btc through dividends you're good right? ...right?

I can't see why a company running a mining farm would want to cause harm to bitcoin. They're all deeply invested and are actively profiting from it, therefore keeping their business alive. Killing it would hurt them more as a company than it would hurt you and me. Remember that one time the evil GHASh.IO reached 51% of the total hashrate? It wasn't even entirely their fault that the pool held 51% of the network's hashing power for a moment since people willingly choose to mine there. Yet no harm was caused.

Don't think they ever reached 51% did they? thought they just got close.

And there are so many arguments against centralization i don't even know where to start. I guess the easiest is regulations, even if it's not in the companies interest, companies are easily manipulated and have to report to government. Regulation will go in place to try to control it/shut it down/freeze accounts etc etc etc etc...

Why do you call it negative? Its actually the positive impact of mining farms. I on my part love the price swings, that's where markets are made.

Referred to the Sam Cole interview on Bloomberg http://www.bloomberg.com/news/2014-10-21/bitcoin-miner-ditches-clients-to-chase-2-billion-coding-prize.html

interesting to note that he refers the price of mining a coin "significantly lower than $400" - now how much lower, that we will test out in coming weeks.

What we are seeing now is a race to dump coins by the miner farms. Why? Simply, its the the survival of the fittest. Its as if - "let me lower it down, and see whether it is matched by someone else" and in this race, farms are desperate to get their own price point, before the price fall again. They will drag each other down and at some point either they have to stop or else ;)

Love it, all of this. Very soon we will see few of them going bust and icing would be the price swings.

FTFY.  No need to "kill" Bitcoin to manipulate it to one's advantage.  If I devalue Bitcoin by 50% in the process of accumulating 51% more coin, that's profit for me & loss for you.

this guy gets it

I consider it negative because it will centralize mining, therefore eroding many people's trust in BTC. We already have less than 1000 addresses controlling the bulk of the existing BTC.  People said as time goes by we'll see BTC become more evenly distributed, but it's only a small portion of the available BTC spreading to more hands, while the bulk of it is still controlled by a few. Now we're seeing the same thing happen with mining. This is an easily manipulated market, which will suck the wealth out of many and give it to a few.

Larger and larger mining farms are not what's increasing selling pressure. To the contrary, the larger the farm the cheaper the electricity and the cheaper the hardware to better the operating margin becomes.
A high operating margin gives miners the option to retain more of the mined Bitcoins while a low operating margin forces the miner to sell or at least get more capital by other means to pay bills.

So at the end where is the pure decentralization ?

In our dreams

Bitcoin: A Peer-to-Peer Electronic Cash System

Its only a matter of time before bitcoin is replaced by something that is decentralized and peer-to-peer.  Greed and lack of competent leadership are the root causes for this version 1.0 failure.

Large mining farms will be the first to shutdown when exchange rate dive below the electricity + maintenance cost, unless there are large VC backing them to mine certain amount of coins regardless of cost

Spare miners however could last much longer due to lower cost overhead and even free electricity

Gavin is very competent. A fork is in the works, remember?

I was surprised that nothing was done to thwart FPGAs.  And look where we are now.

I thought the lead developer was changed.

How exactly is Bitcoin not peer-to-peer?

I believe he means that mining has become a job of a few entities (mining farms). Not exactly Satoshi's idea about decentralized peer-to-peer systems.

yes

If you think Satoshi didn't envision mining farms then you are underestimating him

Mining farms are in the business of mining, not risk taking on currency fluctuation. Once gain if they're so profitable in mining the logical thing is to reinvest that income and expand the profitable mining operation, not horde your inventory in hopes it goes up. Just like a gold mining, i'm assuming they sell most of their resources as soon if not before they get it, they don't speculate on price swings (much).

And once again there are 3600BTC mined EVERY day. Either by mega farms or solo miners across the glove. In both cases i think everyone agrees that MAJORITY of those BTC will end up on the market, so market needs to find a price point at which those BTC can be absorbed. Now the argument is:
1-who is more likely to sell most of mined coins, mega farms or your solo farmers?
2-And by how much? If it's by 1-2% does it really make a difference.

I think history shows that first miners were horders, and actually just did it as a hobby at a loss. So i tend to lean that mega farmers would sell more, but again how much does it matter? There will be 3600new btc today and someone will own them

I've already tried to make this same point multiple times in this thread, but it just seems to make the naysayers more stubborn. These mega-mining farms are working to devour their competition while raking in the dough. They're not delusional hodlers who are betting on BTC going to the moon in 10 years or whatever. There's profits to be taken right now, and these people are ready to milk this cash cow dry.

you have made nothing but assumptions while I've provided you with factual reports tha indicate this is not so black or white

Yeah i'm yet to hear a valid counter point to this. Although i don't see them as evil, just part of the ecosystem/capitalism. Hope the halving and a risk of a hard fork if they get out of control would keep them in check.

Not really a counter, just this: It's possible that nobody who is starting mining now breaks even, even with cheap or stolen electricity. (If you'll assume a constant btc price, free electricity and >2% periodic difficulty increase for instance no consumer miner makes money ever)
In that sense Bitcoin mining is a gamble in it's own and so larger mining farms aren't necessarily more risk-aware.

I think we'll see a few weeks where mining costs more in electricity alone some time in the coming months like we did in 2011.

This is not the case, it certainly is still doable to mine at profit, even at current price

With a theoretical ROI of over a year which is far from certain. If the price tanks even further I'd even say that most of these farms gonna be out of business a year from now.

Sure, that's if you believe the price is still gonna be down a year from now.

They're betting it won't and you can be certain they know more than you about the dynamics of this market.

Again the fact that this one time event was so against the norm that it made the news should hint on how the normal course of business goes. Would BitFury selling their inventory to fund new farm made the news??? Think that be considered the normal course of business

 not sure how many time "significantly below $400" per unit can be quoted here. If they're profitable why can't other ASIC manufacturers be?

 ???

That was no event. This quote made the news because it was a comment made after the announcement of yet another round of VC funding.

Here's another one from Josh Garza from GAWMiners at Hashers United conference :


More from this conference :


Again, I'm not saying all of the miners keep 100% of their coins but it is naive to believe the majority of them dump their Bitcoins for fiat

Bottom line is money has to come from somewhere to cover costs and generate fiat profit. And your argument that they'd rather indefinitely raise capital from VCs to cover their costs rather than sell their own inventory is conceptually flawed. Simple as that.

 :D

You are one stubborn fellow

I know people on this forum tend to be very selective in their reading but did you not read the part where they have made/are making millions selling mining gear or did you conveniently ignore it?

On GAWMiners :

KNC :

I can't pull up any numbers for BitFury but my guess is it is more than both these two.

Sales != profit.

And again you're whole argument seems to be that they're so profitable they can do whatever they want. Even if that the case in one instance, clearly that's not sustainable on a long term scale

Not one instance, most instance.

Tell me exactly how it is not substainable? I should add that most of these companies are now setting up cloud mining services and selling mining contracts at what are most certainly extremely high profit margins.

What is not substainable is this persistent bear market in the face of continuing innovation and development in Bitcoin's infrastructure.

When the price starts shooting up again, these companies will be even less enticed to sell any Bitcoin.

It seems to me you have little to no argument and keep moving the goal posts. I, on the other hand, have brought forward numerous arguments and factual reports to indicate that miners are not all dumping to fiat the BTC they mine.

In one word competition. If it's so profitable what's stopping 100 new asian manufacturer coming online tomorrow at the fraction of the cost and driving hashrate through the roof squeezing those profits? What about Intel entering the market? It's always a risk/reward game you won't see crazy profits for too long, but when you do and first to the game you reinvest to try as grab as big of the pie early on, not hodle because you get way too much money from other business.

So they're not dumping now, and even less likely to dump when market goes up. Perpetual hodlers?? Great business plan with no exit strategy, but even if that's the case and 1% ASIC manufacturers horde up all new coins there's the risk of the other 99% revolting and hard forking you out of the game.

There is nothing stopping them doing it.... In fact there are some doing it at this very moment, have you not seen hashrate going "through the roof" in the last few months?

Again, I fail to see what argument you are trying to make.


That's exactly what the biggest ones are doing. At the moment, they don't need to sell their Bitcoin to do that.

Do you not understand that them and their backers believe in the technology?

They're going to eat their share of the pie as long as they can sit at the table. They have a business model that allow them to profit and accumulate assets.

Certainly for the majority of them their business model is not substainable. But don't fool yourself that selling their BTC for fiat would change any of that.

Bigger player (Intel) will enter the market once the price of Bitcoin starts appreciating again and grows another order of magnitude. Once that happen, maybe, just maybe, even major first movers like BitFury will be forced out the market but guess what? They will be sitting on thousands of Bitcoin from early days.


Couldn't make any sense out of this

Big players making farms.  Sure.  Everyone can see that.  Specialized silicon that would lead to 1 or 2 large players controlling bitcoin.  No.

The intent was a decentralized peer-to-peer system.  Failing to adapt the core to that end put bitcoin on a path of greater and greater consolidation that will eventually make it vulnerable to a number things and non-viable.  It will be replaced by a version 2.0 that is peer-to-peer decentralized and probably has other fundamental innovations.

Remember there is an economic incentive for players not to collude and respect decentralization of the system.

Moreover you are also underestimating the prospects of commoditized ASICs and development of p2p mining pools.

https://pbs.twimg.com/media/BmeL0hPCcAAWP7c.jpg

Well if the mining farms do put a lot of their Bitcoin on the market it means that there will be a depressing effect on the bitcoin price for a while, this combined with increasing merchant adoption with conversions to fiat using bitpay means a price drop
The question is when the stabalizing effect and market upside begin to return to offset these factors.

Holy shit I thought I was the only one that noticed that. Nice to meet you I have been saying that for 10 months.  ;D

Good diagram.  Really helps to clearly understand your perspective and whats guiding it.  Couple thoughts that I think may materially impact the degree of centralization differently than what you drew.

1. Why would a company making the best (most efficient cost per hash) sell that for less than what they would make mining themselves?  The trend so far has been get public support to raise start up capital.  If successful phase out public to maximize profits.
2. Assuming the best hardware is commoditzed and sold to the public; mining would still centralize around cheap power and cooling.  Anyone paying $0.15+ in a hot climate is not going to be viable against someone paying $0.05 or even lower if subsidized like it is in some countries.  http://en.wikipedia.org/wiki/Electricity_pricing (http://en.wikipedia.org/wiki/Electricity_pricing)

brg444 = full blown retard.. welcome to my ignore list.  ;D ;D ;D ;D

I wonder what would happen to the gold mining companies if they tried 'hodling' their gold until it went to the moon...

gold mining companies do not have other revenue stream

Right there are totally no gold mines on the stock exchange. Cryptocurrency miners on the other hand......

Im not sure as I dont have he data but I think mantaining a gold mine business is way more expensive than maintaining a btc mining business, so they are forced to buy to pay a lot of expenses anyway.

So basically the BTC mining companies take the money from their other revenue streams and throw it into a bottomless pit, right?

Bottomless pit?

Not sure what you're referring too.

They're using the money to build large scale industrial farms that can mine BTCs at significantly lower prices than even current market price. I'd say that inventory need not to be sold unless the market price goes down to that production cost level.

to be fair this is not my diagram.

I have no answer for your first question, only time will tell how all of this unfold. As for your second question, my vision of commoditized ASICS is that they would essentially be integrated to regular house appliances and personal computers in a way that they are essentially everywhere and run at no significant premium cost for the user. Of course if their propagation is marginal it might have no significant impact but imagine a world where every personal computer is sold with an ASIC running inside.

>ZEUSMINER EXPANDS PARTNERSHIPS TO INCLUDE ASICMINER, XBTEC AND ROCKMINER (https://www.cryptocoinsnews.com/zeusminer-expands-partnerships-include-asicminer-xbtec-rockminer/)

Ignorance.

 :D

consolidation of small fries != centralization

they probably amount to less than 10-15% of the network hashing power so I don't see the problem

try again, troll

If a small fry controls 15% of the network hashing power, I wonder how much a big fry will control.

And simple greed.  Make as much as you can as quickly as you can.  You cant really blame them.  They are fighting tooth and nail with other ASIC/rig makers.  Its not like they have been in business for a hundred years or looking to go another hundred.  The root of the problem is bitcoin core development failed to evolve and keep it P2P and the consequences will be centralization and open the doors to the many downfalls that p2p decentralization solves.

Those who argue that we are not headed to increased centralization sound more and more like denialist.
http://en.wikipedia.org/wiki/Denialism (http://en.wikipedia.org/wiki/Denialism)

Gold mining companies don't sell equipment to their competitors. Why would a giant mining farm sell equipment to users to compete with them and take a cut of their profits? That makes no sense. Until you realize that they sell last-gen hardware to clueless prospectors.

Are you kidding me? What exactly is your point here, you just arguing for the sake of it?

I know they don't sell mining equipment to their competitors, that's why you cannot compare it with Bitcoin mining company who, in a way, do, hence why your original comparison is asinine and holds no ground.

My point is that it doesn't make sense for a company to enable others to compete with them.

The main point that mining is becoming centralized still stands, as evidenced by the link that notlambchop posted.


Thanks for bringing this to my attention. This is further proof that mining will be controlled by a handful of big players in the future.

 ???

You do know that likely the biggest mining company out there, BitFury, sells industrial mining gears to other miners. I would say this qualifies as "enabling others to compete with them". They actually offer the service of building data centers and supplying mining equipment for mining operations i.e. other Bitcoin miners.

In fact, every mining companies in the ecosystem probably mine Bitcoins themselves AND sell mining gear. So your point really doesn't make any sense, at all.

I know that KNC, one of the largest companies out there, is

http://s13.postimg.org/g1hik8v3b/Capture.jpg (http://www.cbronline.com/news/tech/software/e-commerce/kncminer-to-stop-selling-bitcoin-mining-equipment-221014-4414659)<== click :)

https://pbs.twimg.com/media/BrxyUeUCUAASNcy.jpg:large

A fraction of one of KNC's megafarms.

That's cause they moved all the consumer products to cloud mining contracts since only small fries were buying from them and small fries can't break even anymore and so don't buy much gear (especially considering KnC history of shady business in that regard)

Cloud mining contracts also qualifies as "enabling others to compete with them" or at least split the revenue pie.

So I win again, troll.

So if a mining company makes a rig that is projected to generate $10,000 worth of bitcoin what do you think they will sell it for?

A.  $8,000 basically giving someone $2,000 because they just love people and support bitcoin.
B.  $10,000 because it allows them to get the $10K right away upfront locking in maximum profit right away.  (This leaves the buyer $0 in profit because they paid what it was going to produce)
C.  $12,000 Suckers!  Person buying looses $2,000 because they were overly optimistic about something.  

The answer is C or some form of it.  KNC characterized their shift to just mining themselves as more honest.

http://s14.postimg.org/by5mldx29/Capture.jpg

::)

*Your manners aren't improving, faggot.

unfortunately, most of the naysayers would choose option A, as they believe that mining companies are some of the biggest supporters of BTC.

the logic is : why should they split the pie

the reality is : they do

learn to logic, troll

 ???

what has this anything to do with what I said?


this is what I replied to. if mining companies would not want others to compete with them they would not sell mining gear, not offer cloud mining service and simply keep all of that good stuff to themselves.

the reality is...they don't! cause they need other revenue streams so that they don't have to sell their BTC reserve to grow their company.

do you think miners are backing out, since they spent so much on the mining gear.

If you think selling mining contracts = "splitting the pie," you'll be interested to learn that ~99% of those lose coin for the intrepid "investors."

But rubes getting ripped off by mining cos is entirely beside the point--we were talking about the harm to done to Bitcoin's decentralization by megamines.
Surprising foray into stupidity, even for a tactless little faggot like you >:(

if they can pump out so much bitcoins, isnt this a monopoly game in mining.. and its 1 sided to people who have those kind of institutional resources.

That's exactly what it is and the main point of this thread. Somehow, that logic seems to elude a plethora of bitsheep and their perpetual bleating of trying to turn any events surrounding BTC into great news.

- mtgox hacked, millions of $ lost: great news
- centralization of mining: great news
- BTC price crash: more cheap coins
- rampant scamming in BTC: it's the victim's fault
- government regulation: to da moon, best news ever
- illicit marketplaces: drug dealers are like robin hoods of crypto

Now I'm not saying that every news regarding btc is bad. It's just that some people here try to twist everything to look favourable for btc when it's obvious that isn't the case.

Have you not figured it out yet bro? That is because they have a financial gain in making suckers believe that. Bitcoin isn't all its cracked up to be. I have traded thousands of coins and spent countless hours studying. Its bullshit. Brg444 is the kinda retard that laps it up. Its not about real change but personal gain.

It is/was about real change but there was too much money in play and it drifted off its intended path.  It's still possible that bitcoin could get back on track but its looking more and more likely that it will be superseded by a 2.0 successor.

No bro it was about get rich quick, scarcity model bullshit... same thing that has been fucking over the masses for the last 6k years at least. Not a merit based system.

 :D

you are so basic

I unignored you for this! You are a faggot, get lost retard.

 :D

What's wrong with option A?  As the manuf. you sell for $8,000 today or try to mine the $10,000 over the next five months, but really you have to mine more than $10,000 because you have to pay for power and somewhere to put the machine.  That's not evem considering the possibility that the exchange rate may go to shit. While you might actually earn more BTC than it would have net you if you had just sold the unit outright, the shit exch. rate means you actually lost money relative to the $8,00 you could have made from the get go.  Further that's not even considering the opportunity cost by having your return tied up in a miner which has to earn it back over time.

But, yes. C

Well you are not going to find a very balanced discussion on here. Most people to migrate to this forum are going to be pro-bitcoin as they would not come here if they were not. Granted there are some bears, but they are vastly outnumbered.

I would argue that KnC would want to get out of the retail business because of the risks associated with selling via retail. People can claim they received defective miners and request a refund, and can claim that that they did not receive their machine, or could claim that the shipping times were excessive. The psedo anon nature of bitcoin would make it very difficult prove these claims either way and the number of bitcoin related scams are high enough that this probably happens often to them. This will result in a lot of regulatory risk

I do believe that many ASIC/rig makers adopted a variant of A.  There is a discount that should be given to lock in 80% of what you think its worth up front and remove the uncertainty.  They don't have perfect insight in to where the price is going either.  They have lots of capital in play and I'm sure spend a tremendous amount of time obsessing about their profitability projections and trying to stay competitive with other makers.

As mining has evolved over the past year or so you can see it shifting much more to C and then to D:

D.  Not for sale.  We have enough capital now to grow on our own.  We didn't expect the price was going to fall so much and leave our customers so far under water.  Sorry.  We decided we can do better on our own.  The real production costs are not that high now that we are up and running.  Having customers or limited share holders does not provide enough benefit to outweigh the issues associated with them.

I'm sure some manufacturers are good and some are evil greedy bastards.  In the end it doesn't matter and they are all competing as businesses do.  The normal evolution of business is consolidation to get scale.  Capitalism is a great motivator and makes things move very fast.  But, its eventual outcome often is monopoly which is a horrible end result.  If market forces don't change the fundamentals to knock out monopolies then enter government and regulation to break it up and restart the cycle.  At least that is what should happen.  More and more you see business subvert the government to prevent the regulation and break up of their monopoly.  History shows that will lead to public uprising and revolt.  A horrible prospect to envision happening in modern times.

Bitcoin was intended to be more egalitarian, liberating, and peer-to-peer. More like bittorrent, seti@home, folding@home, etc.  It sprung out of those those ideas.  Satoshi wasn't trying to launch a get rich quick scheme for himself or others.  Quite the opposite.

It's too bad that bitcoin allowed dedicated silicon (FPGA/ASIC) to participate.  If they had adapted to prevent it there still would be large farms of CPU/GPU miners.  But it would be a more level playing field and there would be more use of having that much computational power in play that could also be solving real problems and not just generating a lot of heat and having an overabundance of SHA256 brute force engines lying around.

Absolutely. It was always a monopoly, first, the mining monopoly, then, the lucky investors monolopy. So we have KnC being the monolopy of the mining, and retards that have no idea what they are doing but found themselves on wealth by pure chance (basically all early investors, if somebody tells you when they invested bitcoin would hit 1K dollars, they are lying to you). Of course they will never accept it was luck, they will ramble from "skill" to "god wanted it to be like that" and so on. These guys usually become sort of gurus around here and tell other people to keep believing because they will be millonaires too if they wait enough (remember all these dumb failed predictions by rpietila?). It's a classic pyramidal scheme.
Sure, Bitcoin's technology is great, but greed of these that become very wealthy and the desperation of the 99% to become wealthy as well to scape the rat race, ruin everything as always. The system is fucked and no kind of currency can save it. We need a Resource Based Economy and worldwide education on science.

But in reality it is almost impossible to create a proof-of-work mining algorythm that will forever remain ASIC-resistant so that point is moot

 :D

do you believe all that shit you are writing

please tell me about the "original" mining monopoly  ::)

please tell me about how KnC is a mining monopoly right now  ::)

I'm pretty sure someone will come up with a good solution.  Ethereum has a couple approaches that have merit and one will go in to practice soon.
https://forum.ethereum.org/discussion/197/mining-faq-live-updates (https://forum.ethereum.org/discussion/197/mining-faq-live-updates)
https://blog.ethereum.org/2014/06/19/mining/ (https://blog.ethereum.org/2014/06/19/mining/)

So you agree that Bitcoin is good enough right now and all the other alternatives are still only "in theory"

Completely agree.

Bitcoin is not currency its a digital collectible. It is the equivalent of a digital baseball card. A lot of people around here dont see that as a problem, but if your goal is mass adoption or price stability it's a massive problem.    

Your analogy makes no sense to me. If you compare bitcoin to a government backed currency whose use they enforce then yes, it is probably harder to convince someone why they should use it.
Either you want massive external control and intervention (then you might get your stability and possibly adoption) or you want something decentralized and have to accept that your control options are limited.

Value always lies in the eye of the beholder so although you may think your precious paper bill of legal tender from country a is worth x, it is only because the current circumstances make you (and others) believe so.
Just look at extreme situations such as natural disasters etc. Suddenly your currency might be nothing more than a piece of paper, a collectible, yet that bottle of fresh water becomes a desirable trade good.

Everything I have read and watched about what they are doing and the people involved leads me to believe the are 100% legit.  I think their goals are ambitious and complex.  Time will tell if they produce a viable decentralized crypto currency.  Just calling them "one of the biggest scams in the history of alt-coins" with no basis is pointless FUD.

If you are going to chime in, by all means enlighten us.

Yeah you're not telling me anything.

Just because its decentralized doesn't mean it can't have price stability.

 Two Kinds of Money

1.The Scarcity Model: A single uniform quantity in limited supply made valuable by its own scarcity.
In other words, the value of this type of money depends on the supply of, and demand for, the money commodity itself. Conventional definitions of money define money only in terms of this model, a "medium of exchange". Examples are: cowries, gold and silver, fiat cash and coins, bank credit, and now, in the model's purest and most spectacularly speculative form, Bitcoin.

2. The Abundance Model. A promise of something specific from someone specific made valuable by its redemption in real production. The value of this type of money is defined by the promised redemption in goods and/or services. As such, this type of money is promises of an indefinite number of non-uniform commodities in indefinite supply and, unlike the limited quantity "coin" concept of money, the total quantity of these credits in circulation does not affect their value, because the value of a credit is defined by what its issuer will redeem it for in real goods and/or services. Examples are: business-to-business barter credits, customer rewards, travel points, discount coupons, mutual credit systems.

Rumors are circulating that some of the large pools are planning to shut down due to the impending government regulations.

There's also rumors that certain cloud mining services are not actually mining with investor btc, but running a ponzi scheme.

To be honest I do not care what you think about bitcoin or what solutions you advocate for an ideal form of money (http://paulgrignon.netfirms.com/MoneyasDebt/MAD2014/solution.htm , this is you right?)
Bitcoin is not forced onto you and you probably do not see the advantages of an open, decentralized system where ownership of abstract units is recorded.
It is an algorithmic construct and not some monetary policy.

Muse all you want on how to create an ideal form of money, in the meantime technology will advance and do its own thing.
It is kind of like the legal system trying to figure out how to deal with intellectual property in the digital age while p2p filesharing as a technology already exists and evolves.

God damn bro, no I am not Paul Grignon. Watch money as debt. You dont know how stupid you sound and yes I support decentralized systems bitcoin isnt one.     

BTCguild is shutting down/being sold although not because of government regulations but because large farms are not using their pool.

I would say that the larger cloud mining services are likely not running a ponzi as it can be shown that their equipment is actually finding new blocks and their payouts can be traced back to the coinbase transactions of these founds blocks

Why don't people go in for load balance and use a quota rotation, that eases the variance and increase luck factor as well as dependence on a large mining farm.

Stop crying and wait for the halving!