A bitcoin miner in every hand

[jtoomim]

21 Inc's business plan is brilliant.

A common problem with the modern electronics economy is that most transactions are made for a product. Customers pay once, and they pay before they know how useful the product is actually going to be to them. This means that they systematically overpay for crappy products and underpay for solid, useful products with long useful lifetimes. Many companies have tried to deal with this problem by switching over to a subscription-based model instead, but consumers often resist that idea because they don't like it when someone else owns and controls the things they use and rely on. 21's pitch is a way to allow subscription-type revenue streams while still offering consumers complete ownership of their device.

VCs understand this pitch. They see how huge this could be if it works. However, this pitch is not 21's business plan.

21's business plan is to engineer a convincing pitch, which they then present to VCs in order to get a ton of funding, which in turn they then use to design and fab their own ASIC using the world's best microprocessor fabs (Intel's), and then build multi-MW datacenters which they use to self-mine. The VCs and shareholders would not have ordinarily invested in mining, but when they see revenue coming in, they won't think too much about where it's coming from.

So far, it looks like they've been succeeding.

[brontosaurus]

It's absolute horseshit, period.

I've said it before and will do so again - do the maths.

+1

Can anyone explain how they made money off IPO with information like these articles?   Do investors not care? Or did they not understand to invest with these guys?

The donors, sorry 'investors' will go for any pitch that they think will make them money as quickly as possible. This was not an Initial Public Offering but there's been plenty of those in the past 50 years where totally worthless businesses get pumped up by their merchant banker partners and go public. There's a huge anticipation (and demand) for the public offering and so the stock will launch at some absurd price, quickly peak then fall back leaving the mugs holding the baby. Some companies survive (lastminute.com in the UK a prime example of this nonsense - annual sales of £250k, market valuation at launch? £800 MILLION) purely and simply because they've been given so much money by idiots.

So don't confuse a good business idea with a ploy to extract as much money as possible from the gullible. This is just another pump and dump scheme, no matter what their publicity says.

On a closing note, if you manufactured a modem, fridge or set top box would you really chance your tech support budget going up by a factor of 100 due to all the problems those pesky little chips will cause your customers? (I'm not making any money ...etc etc)

[s1gs3gv]

Unless they make open pool choices, they become number 1. If they don't make open pool choices, they then have to convince everyone to spend that extra $8 initial and $1 per month in exchange for almost exactly nothing in return.

$1 a month might not sound like much, but put another way, who would "subscribe to the bitcoin network" for $12 a year? That doesn't sound like something that can be sold en-mass.

But buying $12/year of lottery tickets ? No problem. There are ways to structure compensation to the consumer that can make this work, even in the face of marginal mining economics.

[SebastianJu]

I think the only way this would work would be if implemented in cheap electronics and letting the customers in the dark about the additional power draw. I mean if they claim it will use X watt then they might not have to tell the customer that they will draw that all the time. So customers think they buy cheap while in fact they buy for way more.

Seeing that business model... i cant imagine that enough investors believed this. Maybe they were noobs and never heard of difficulty. Miners work for the first month, second a little bit and thats it. If a miner doesnt sell in the first month then its hard to get a profit at all. So i dont see an incentive for any hardware producer and i cant imagine that this will work.

Could they have faked the donation height? Did they promise world domination over bitcoin? You know, these devices have to be run through a pool 21 controls, otherwise they are useless.

This makes no sense at all. And i doubt they are magicians that found a way nobody else thought about.

[jonnybravo0311]

I think the only way this would work would be if implemented in cheap electronics and letting the customers in the dark about the additional power draw. I mean if they claim it will use X watt then they might not have to tell the customer that they will draw that all the time. So customers think they buy cheap while in fact they buy for way more.

Seeing that business model... i cant imagine that enough investors believed this. Maybe they were noobs and never heard of difficulty. Miners work for the first month, second a little bit and thats it. If a miner doesnt sell in the first month then its hard to get a profit at all. So i dont see an incentive for any hardware producer and i cant imagine that this will work.

Could they have faked the donation height? Did they promise world domination over bitcoin? You know, these devices have to be run through a pool 21 controls, otherwise they are useless.

This makes no sense at all. And i doubt they are magicians that found a way nobody else thought about.

I don't think they are magicians, but the idea certainly has merit.  I don't buy the "miner in a phone" argument, simply because of the detrimental effect of constant power draw on your battery.  However, for always-on devices like your cable box, your refrigerator, etc, embedding a chip or two is not a stretch.  In the IoT world, you've got virtually every device connected and talking.  Let's say a chip is produced that can mine at 10GH/s for 3W.  That's not too far a stretch from where we are now.  Throw 10 of those chips in your cable box and it's only throwing off an extra 30W of heat.  At current difficulty, that's $7.35 a month, and at $0.10 per kWh, it'll cost you an extra $2.19 a month in electricity.

Obviously my calculations are based on the BTC world as it exists today.  You suddenly throw chips into every device and the network difficulty is going to go up.  Unless the price of BTC goes up with it, which historically hasn't happened, those embedded chips are going to cost you more to run than they will make.  Add into this the upcoming reward halving next year and suddenly things are even more ugly.

So... while I do think the idea of embedded chips in the IoT world has merit, the practical application of such is a far-fetched pipe dream.

[Biodom]

I think the only way this would work would be if implemented in cheap electronics and letting the customers in the dark about the additional power draw. I mean if they claim it will use X watt then they might not have to tell the customer that they will draw that all the time. So customers think they buy cheap while in fact they buy for way more.

Seeing that business model... i cant imagine that enough investors believed this. Maybe they were noobs and never heard of difficulty. Miners work for the first month, second a little bit and thats it. If a miner doesnt sell in the first month then its hard to get a profit at all. So i dont see an incentive for any hardware producer and i cant imagine that this will work.

Could they have faked the donation height? Did they promise world domination over bitcoin? You know, these devices have to be run through a pool 21 controls, otherwise they are useless.

This makes no sense at all. And i doubt they are magicians that found a way nobody else thought about.

I don't buy the "miner in a phone" argument

it might work on the phone if it will mine ONLY during charging, which is ~7-8hr/24 hr for many people.
Of course, router is the most obvious candidate.

[alh]

As I've read things, this "Mining USB Charging Hub" is supposed to be somewhere now, or at least prototypes right? Or is the Q1 mean Q1 of 2016? I don't know how many of you have a "Charging Hub", but who's going to go to the trouble an Ethernet cable to that surprising RJ45 jack on the side, that's not present on any other "Charging Hub"? If it has a WiFi built-in, unless and until I "configure" it, it will have to hope that one of my neighbors in range has an unsecured WiFi network to sponge off of.

Don't you think even the VC guys will want to see the first "product" they are supposed to produce?

I actually think that jtoomim's analysis is right on, and that the "Internet of Things" is just a sideshow to secure funding.

[Biodom]

21 Inc's business plan is brilliant.

A common problem with the modern electronics economy is that most transactions are made for a product. Customers pay once, and they pay before they know how useful the product is actually going to be to them. This means that they systematically overpay for crappy products and underpay for solid, useful products with long useful lifetimes. Many companies have tried to deal with this problem by switching over to a subscription-based model instead, but consumers often resist that idea because they don't like it when someone else owns and controls the things they use and rely on. 21's pitch is a way to allow subscription-type revenue streams while still offering consumers complete ownership of their device.

VCs understand this pitch. They see how huge this could be if it works. However, this pitch is not 21's business plan.

21's business plan is to engineer a convincing pitch, which they then present to VCs in order to get a ton of funding, which in turn they then use to design and fab their own ASIC using the world's best microprocessor fabs (Intel's), and then build multi-MW datacenters which they use to self-mine. The VCs and shareholders would not have ordinarily invested in mining, but when they see revenue coming in, they won't think too much about where it's coming from.

So far, it looks like they've been succeeding.

it might be, considering that we were happy to use 0.5-0.7w/GH equipment from Spond and bitmain while they (21 inc) were flying on 0.22w/Gh
I now start to think that a significant portion of "other" in pools was 21 inc

In addition, accumulating and then selling a large number of bitcoins without creating a large market is meaningless by itself or even damaging as KnC and Bitfury has shown during 2014-early 2015.
The advantage of 21inc approach is that many people will have some bitcoin that they might/will spend, creating a much bigger market (enriching 21 inc investors in the meanwhile, of course, but this is fine).

[alh]

21 Inc's business plan is brilliant.

[Some removed for brevity]

VCs understand this pitch. They see how huge this could be if it works. However, this pitch is not 21's business plan.

21's business plan is to engineer a convincing pitch, which they then present to VCs in order to get a ton of funding, which in turn they then use to design and fab their own ASIC using the world's best microprocessor fabs (Intel's), and then build multi-MW datacenters which they use to self-mine. The VCs and shareholders would not have ordinarily invested in mining, but when they see revenue coming in, they won't think too much about where it's coming from.

So far, it looks like they've been succeeding.

it might be, considering that we were happy to use 0.5-0.7w/GH equipment from Spond and bitmain while they (21 inc) were flying on 0.22w/Gh
I now start to think that a significant portion of "other" in pools was 21 inc

In addition, accumulating and then selling a large number of bitcoins without creating a large market is meaningless by itself or even damaging as KnC and Bitfury has shown during 2014-early 2015.
The advantage of 21inc approach is that many people will have some bitcoin that they might/will spend, creating a much bigger market (enriching 21 inc investors in the meanwhile, of course, but this is fine).

I highlighted a different part of jtoomim's message, which I think is the most likely scenario.

If on the other hand, you believe the "Massive Internet of Things" plan, I still don't see how it helps Bitcoin acceptance. The amount of Bitcoins which most folks would garner from their 20GH that they paid dearly for in electricity costs, will be difficult to exchange (I need a wallet?), and will yield only a pittance in terms of fiat they can actually spend.  Does a million folks, each with .1 BTC, really move the needle on Bitcoin acceptance?

[Biodom]

21 Inc's business plan is brilliant.

[Some removed for brevity]

VCs understand this pitch. They see how huge this could be if it works. However, this pitch is not 21's business plan.

21's business plan is to engineer a convincing pitch, which they then present to VCs in order to get a ton of funding, which in turn they then use to design and fab their own ASIC using the world's best microprocessor fabs (Intel's), and then build multi-MW datacenters which they use to self-mine. The VCs and shareholders would not have ordinarily invested in mining, but when they see revenue coming in, they won't think too much about where it's coming from.

So far, it looks like they've been succeeding.

it might be, considering that we were happy to use 0.5-0.7w/GH equipment from Spond and bitmain while they (21 inc) were flying on 0.22w/Gh
I now start to think that a significant portion of "other" in pools was 21 inc

In addition, accumulating and then selling a large number of bitcoins without creating a large market is meaningless by itself or even damaging as KnC and Bitfury has shown during 2014-early 2015.
The advantage of 21inc approach is that many people will have some bitcoin that they might/will spend, creating a much bigger market (enriching 21 inc investors in the meanwhile, of course, but this is fine).

I highlighted a different part of jtoomim's message, which I think is the most likely scenario.

If on the other hand, you believe the "Massive Internet of Things" plan, I still don't see how it helps Bitcoin acceptance. The amount of Bitcoins which most folks would garner from their 20GH that they paid dearly for in electricity costs, will be difficult to exchange (I need a wallet?), and will yield only a pittance in terms of fiat they can actually spend.  Does a million folks, each with .1 BTC, really move the needle on Bitcoin acceptance?

as i mentioned, what you highlighted was already done by KnC and bitfury without ANY positive influence on bitcoin acceptance or use. This is not a winning strategy, clearly. You can't use something that you don't readily have. I don't know about a million, but 10-100 million will certainly move the needle. We have ~ a billion of android phones being sold/year and ~250 mil of Apple's

[Meech]

I believe the fine print stated that 75% of btc mined would go back to 21 inc.  Correct me if I'm wrong.

[sidehack]

That right there makes the whole idea pretty much a disaster for any consumer, especially ones capable of simple math.

[Biodom]

average iphone uses $0.5/year of electricity for charging. Let's assume that, instead, it will use four times as much or $2/year.
So, you get 50c electricity use worth of mined bitcoin (could be ~$2) , some gimmick like a ringtone and 21inc gets $1.5 worth of your electricity or $6 worth of bitcoin.
You broke even, got bitcoin to play with, got a ringtone.
It will be acceptable to many, assuming that it is all spelled out properly when you sign a contract.
as far as basic math skills-those people are clearly in minority, and in addition, they also don't seem to care about supporting all those ad systems on the phone, which pretty much doubles it's power use.

The point is: centralized mining system of bitfury, KnC, Bitmain, upcoming Spondoolies did not work to increase bitcoin acceptance and cannot possibly work to achieve this in the future. The independent mining could work if there are energy efficient chips/machines for it that are/will be available to miners and are on par with the best of them.

As it stands, I was saddened to find out that we were basically losing money or barely breaking even with 0.5-0.7w/Gh miners during 2014-2015 while 21 inc were mining at 0.22w/GH

[sidehack]

That's great, for the phone where you get a ringtone out of it. What about everything else? What gimmick do they feed you to double the power consumption on your new wireless router?

I agree there needs to be a change toward decentralization and mass adoption. That's good for everyone. But I don't see the practicality in charging people extra money to integrate miners into their devices and then pocket almost all of the returns. That's not actually decentralizing, it's just a new centralized model. I mean sure it distributes the hashpower, but one entity still controls the majority of the coins generated. Without user-configurable pools and payouts, they'd be supporting the economy more effectively by just buying that many dollars worth of existing coins instead of that many dollars worth of added mining chip and electricity cost.

[Biodom]

That's great, for the phone where you get a ringtone out of it. What about everything else? What gimmick do they feed you to double the power consumption on your new wireless router?

I agree there needs to be a change toward decentralization and mass adoption. That's good for everyone. But I don't see the practicality in charging people extra money to integrate miners into their devices and then pocket almost all of the returns. That's not actually decentralizing, it's just a new centralized model. I mean sure it distributes the hashpower, but one entity still controls the majority of the coins generated. Without user-configurable pools and payouts, they'd be supporting the economy more effectively by just buying that many dollars worth of existing coins instead of that many dollars worth of added mining chip and electricity cost.

I guess i am mostly agreeing anyway, but essentially, their model is similar with facebook, etc.
i don't think that they will ask you to pay extra (those $35 for USB , then $8 for router, then cents for cell phone chip-it is their cost).
Essentially, they want to entice you to use their services at essentially zero cost to you.
facebook basically entices you to look at ads. You get social interations, they get money from ads (and they should actually share some, but they don't-at least not yet)
In fact, some company superior to FB/goog/yahoo might want to share some ad $$ with consumers in the future through 21 inc bitcoin chip.

[RoadStress]

Unless they make open pool choices, they become number 1. If they don't make open pool choices, they then have to convince everyone to spend that extra $8 initial and $1 per month in exchange for almost exactly nothing in return.

$1 a month might not sound like much, but put another way, who would "subscribe to the bitcoin network" for $12 a year? That doesn't sound like something that can be sold en-mass.

They are not advertising it as that. They are betting on the incentive to get rid of ads or buying extra mobile data for their phones and the micropayments. Pay attention please.

That's great, for the phone where you get a ringtone out of it. What about everything else? What gimmick do they feed you to double the power consumption on your new wireless router?

Do you really think that they plan to sell routers that have double power requirements? I think that you are very wrong. It will be hard to design cases for those routers. They will want to keep this simple so they will add just a few extra W to them.

[brontosaurus]

I believe the fine print stated that 75% of btc mined would go back to 21 inc.  Correct me if I'm wrong.

You might well be correct but they really don't know how wrong things will turn out for them if they start believing that.

Do they think all the companies that pioneered mining chips are a bunch of idiots?

[sidehack]

What's the typical power draw for a consumer-grade router? A couple watts? Probably 5-10 I'd guess, which probably means one good chip added to that could about double it. What's the power cost vs expected yield (or 25% of expected yield) for a 5W chip getting say 50GH over a three-year lifetime?

Are they advertising a service based around microtransactions? How do they propose to solve the problem, as mentioned earlier, of microtransactions overwhelming the protocol?

What service are they offering that is inherently benefited by integrating a hashing chip that pays the customer a fraction of its yield?

Novak and I both really don't see what they're doing that's actually any good, which means we both don't like it. Which, statistically, means it's going to be highly profitable for them.

[alh]

What's the typical power draw for a consumer-grade router? A couple watts? Probably 5-10 I'd guess, which probably means one good chip added to that could about double it. What's the power cost vs expected yield (or 25% of expected yield) for a 5W chip getting say 50GH over a three-year lifetime?

Are they advertising a service based around microtransactions? How do they propose to solve the problem, as mentioned earlier, of microtransactions overwhelming the protocol?

What service are they offering that is inherently benefited by integrating a hashing chip that pays the customer a fraction of its yield?

Novak and I both really don't see what they're doing that's actually any good, which means we both don't like it. Which, statistically, means it's going to be highly profitable for them.

My cynical response: None of the above questions were on the Power Point slides shown the Venture Capital guys. If you think about it, both ASICMiner and Bitmain could have pursued the same approach. The BE100 was no more than 2-3 watts, and even the BM1380 couldn't  have been terrible since it was the basis for the U1/U2 USB miner wasn't it?

What would you be thinking now if Linksys had decided to integrate a BE100 into every one of their routers in the last 2 years? I think what's most innovative here is that 21e6 is getting their money from guys that have deep pockets, rather than a thousand pre-orders from customers (turned creditors/investors).

[TheRealSteve]

If you think about it, both ASICMiner and Bitmain could have pursued the same approach. The BE100 was no more than 2-3 watts, and even the BM1380 couldn't  have been terrible since it was the basis for the U1/U2 USB miner wasn't it?

Correct - and power used isn't that high if you plot it against people's yearly power use, expressed in dollars, etc.  The Block Erupter USB and AntMiner U1 / U2 do get rather toasty, though... add that to a router that's already putting out a fair bit of heat (there's a reason for the giant vent holes in the top that make it easy for conductive things to fall into), and now your router needs active cooling

Either running them slower or using a more efficient chip would work.  But, as I've mentioned elsewhere (and others have said as well), they need to come up with a pretty good pitch to convince manufacturers to integrate and/or license their chip/tech... consumers aren't really the issue (short of some popular website raising a stink about Device X 'secretly' mining Bitcoins without actually digging into the numbers).