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Peter R
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May 20, 2015, 11:45:51 PM
 #24661

...
21's plan, as stated, is pure bullshit. The only question is whether they know it or not.

Let's do an order-of-magnitude calculation…

An article from Life Hacker reports that it costs about $0.50 to keep your phone charged-up for a year:



Now, my phone gets pretty warm when it's charging so the new mining chip can't draw that much more power.  But then again, a lot of times my phone is plugged in and already fully charged, and so the mining chip might as well be running.  So let's say that 21 Inc. can boost the yearly energy consumption of the typical smart phone from $0.50 to $3.00 before people start to complain about "hot phones."  $2.50 goes to mining bitcoins…

We'll also make the assumption that the cost to mine the bitcoins is exactly equal to the market value of the mined coins.  In reality, the first coins will probably be cheaper to mine, becoming progressively more expensive to mine as the network hash rate grows.  But for our order-of-magnitude calculation, we'll assume that $1 of BTC cost $1 of electricity to produce.  

At the current market value of ~$250 / BTC, this means that each phone will produce approximately

   ->  0.01 BTC per year, or
   -> 1,000,000 satoshis per year, or
   -> 83,000 satoshis per month, or
   -> 2,700 satoshis per day

For comparison purposes, note that the current dust limit is 540 satoshis.  This means that the amount of bitcoins generated by the phones is not insignificant (when compared to the dust limit) over time periods measured in days, weeks or months.  

…Let's go further…

The same Life Hacker article claims that:

Quote from: Life Hacker
Global smartphone shipments (which includes people upgrading to newer phones) will reach 567 million units [in 2012] alone.

Let's be ambitious and assume that eventually 21 Inc. chips will be included with 10% of the new smart phone shipped (~57 million phones).  The total bitcoins produced by these phones would then be

          57,000,000 x 0.01 BTC / year
    =   570,000 BTC / year

Or about 1560 BTC per day.  Since there's presently ~3600 BTC mined per day, these 57 million smartphones would contribute

        ~43% of the network hash rate.    

If 75% of these mining rewards flow back to 21 Inc and its partners, that works out to

         0.75 x 57,000,000 x $2.50 / year
  ~= $107,000,000 per year

This means that the expected revenue is not insignificant.  

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May 20, 2015, 11:51:19 PM
 #24662

brilliant analysis peter. Smiley didnt realise that their plan would be that lucrative. would these chips not reduce the battery life of phones though?

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YEAROFBULL15
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May 20, 2015, 11:56:03 PM
 #24663

http://www.bbc.com/news/technology-32781244

edit: Sorry for posting this, just read it and it's incredibly stupid.

Let the author know https://twitter.com/pcoletti
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May 21, 2015, 12:03:31 AM
 #24664

would these chips not reduce the battery life of phones though?

Just guessing, but I'd imagine that the mining chip would only run at full power when the phone is fully-charged and plugged in.  At other times, and to conserve energy, the mining chip can be running at a slower clock speed or not running at all. 

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May 21, 2015, 12:20:30 AM
 #24665

would these chips not reduce the battery life of phones though?

Just guessing, but I'd imagine that the mining chip would only run at full power when the phone is fully-charged and plugged in.  At other times, and to conserve energy, the mining chip can be running at a slower clock speed or not running at all. 

i guess that means every night then, as i would think that over night is the most common charging period. this is pretty cool i have to say. Smiley with phones collecting near half the number of bitcoins mined, thats going to cut down supply drastically - more so come the next halving.

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May 21, 2015, 12:38:41 AM
 #24666

ZH comments on Cypherdoc's fav chart
"It is very rare to see Dow Industrials hitting new highs as Dow Transports prints new range lows... one of them is wrong here..."

http://www.zerohedge.com/news/2015-05-20/one-these-things-not-other


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May 21, 2015, 12:40:12 AM
 #24667

...
21's plan, as stated, is pure bullshit. The only question is whether they know it or not.

Let's do an order-of-magnitude calculation…

An article from Life Hacker reports that it costs about $0.50 to keep your phone charged-up for a year:



Now, my phone gets pretty warm when it's charging so the new mining chip can't draw that much more power.  But then again, a lot of times my phone is plugged in and already fully charged, and so the mining chip might as well be running.  So let's say that 21 Inc. can boost the yearly energy consumption of the typical smart phone from $0.50 to $3.00 before people start to complain about "hot phones."  $2.50 goes to mining bitcoins…

We'll also make the assumption that the cost to mine the bitcoins is exactly equal to the market value of the mined coins.  In reality, the first coins will probably be cheaper to mine, becoming progressively more expensive to mine as the network hash rate grows.  But for our order-of-magnitude calculation, we'll assume that $1 of BTC cost $1 of electricity to produce.  

At the current market value of ~$250 / BTC, this means that each phone will produce approximately

   ->  0.01 BTC per year, or
   -> 1,000,000 satoshis per year, or
   -> 83,000 satoshis per month, or
   -> 2,700 satoshis per day

For comparison purposes, note that the current dust limit is 540 satoshis.  This means that the amount of bitcoins generated by the phones is not insignificant (when compared to the dust limit) over time periods measured in days, weeks or months.  

…Let's go further…

The same Life Hacker article claims that:

Quote from: Life Hacker
Global smartphone shipments (which includes people upgrading to newer phones) will reach 567 million units [in 2012] alone.

Let's be ambitious and assume that eventually 21 Inc. chips will be included with 10% of the new smart phone shipped (~57 million phones).  The total bitcoins produced by these phones would then be

          57,000,000 x 0.01 BTC / year
    =   570,000 BTC / year

Or about 1560 BTC per day.  Since there's presently ~3600 BTC mined per day, these 57 million smartphones would contribute

        ~43% of the network hash rate.    

If 75% of these mining rewards flow back to 21 Inc and its partners, that works out to

         0.75 x 57,000,000 x $2.50 / year
  ~= $107,000,000 per year

This means that the expected revenue is not insignificant.  

interesting analysis.

i'm amused by the guys here presuming that the 21 guys have not made a similar analysis.  in fact, i'm sure they've made a very extensive marketing and technical analysis.  Balaji and company are no slouches.  they are in a different category from your normal, shoestring startup with minimal capital.  Balaji is an established VC as are his cohorts.  he mentions this:

"towards that end, our team of PhDs in EE from MIT, Stanford, and CMU has built not just a chip, but a full technology stack around the chip — including reference devices, datasheets, a cloud backend, and software protocols. And we have already engaged with a wide variety of early access partners across the industry, from small startups to multibillion dollar hardware companies."

similarly, the list of investors includes alot of smart, analytical, successful people and companies.  they surely didn't just throw their money at this w/o any research.
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May 21, 2015, 12:51:31 AM
 #24668

i'm amused by the guys here presuming that the 21 guys have not made a similar analysis.  in fact, i'm sure they've made a very extensive marketing and technical analysis.  Balaji and company are no slouches.  they are in a different category from your normal, shoestring startup with minimal capital.  Balaji is an established VC as are his cohorts.  he mentions this:

"towards that end, our team of PhDs in EE from MIT, Stanford, and CMU has built not just a chip, but a full technology stack around the chip — including reference devices, datasheets, a cloud backend, and software protocols. And we have already engaged with a wide variety of early access partners across the industry, from small startups to multibillion dollar hardware companies."

similarly, the list of investors includes alot of smart, analytical, successful people and companies.  they surely didn't just throw their money at this w/o any research.

Vetting of a startup funding pitch always includes ensuring there is at least a plausible scenario for success, so it should be no surprise that these scenarios can be constructed. Weighing probabilities, on the other hand, is far subjective and not necessarily (in fact necessarily not) at the same level of rigor. I remain unconvinced that the valuation isn't out of whack. I most certainly would not take a piece of a $100 million funding round (which likely values the company closer to a billion) based on what we know now. There may be more we don't know, however.

It's nice to see actual numbers though, as opposed to a lot of OOMA statements about how the revenue flatly isn't significant.
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May 21, 2015, 12:56:37 AM
 #24669

...
21's plan, as stated, is pure bullshit. The only question is whether they know it or not.

Let's do an order-of-magnitude calculation…

An article from Life Hacker reports that it costs about $0.50 to keep your phone charged-up for a year:



Now, my phone gets pretty warm when it's charging so the new mining chip can't draw that much more power.  But then again, a lot of times my phone is plugged in and already fully charged, and so the mining chip might as well be running.  So let's say that 21 Inc. can boost the yearly energy consumption of the typical smart phone from $0.50 to $3.00 before people start to complain about "hot phones."  $2.50 goes to mining bitcoins…

We'll also make the assumption that the cost to mine the bitcoins is exactly equal to the market value of the mined coins.  In reality, the first coins will probably be cheaper to mine, becoming progressively more expensive to mine as the network hash rate grows.  But for our order-of-magnitude calculation, we'll assume that $1 of BTC cost $1 of electricity to produce.  

At the current market value of ~$250 / BTC, this means that each phone will produce approximately

   ->  0.01 BTC per year, or
   -> 1,000,000 satoshis per year, or
   -> 83,000 satoshis per month, or
   -> 2,700 satoshis per day

For comparison purposes, note that the current dust limit is 540 satoshis.  This means that the amount of bitcoins generated by the phones is not insignificant (when compared to the dust limit) over time periods measured in days, weeks or months.  

…Let's go further…

The same Life Hacker article claims that:

Quote from: Life Hacker
Global smartphone shipments (which includes people upgrading to newer phones) will reach 567 million units [in 2012] alone.

Let's be ambitious and assume that eventually 21 Inc. chips will be included with 10% of the new smart phone shipped (~57 million phones).  The total bitcoins produced by these phones would then be

          57,000,000 x 0.01 BTC / year
    =   570,000 BTC / year

Or about 1560 BTC per day.  Since there's presently ~3600 BTC mined per day, these 57 million smartphones would contribute

        ~43% of the network hash rate.    

If 75% of these mining rewards flow back to 21 Inc and its partners, that works out to

         0.75 x 57,000,000 x $2.50 / year
  ~= $107,000,000 per year

This means that the expected revenue is not insignificant.  

interesting analysis.

i'm amused by the guys here presuming that the 21 guys have not made a similar analysis.  in fact, i'm sure they've made a very extensive marketing and technical analysis.  Balaji and company are no slouches.  they are in a different category from your normal, shoestring startup with minimal capital.  Balaji is an established VC as are his cohorts.  he mentions this:

"towards that end, our team of PhDs in EE from MIT, Stanford, and CMU has built not just a chip, but a full technology stack around the chip — including reference devices, datasheets, a cloud backend, and software protocols. And we have already engaged with a wide variety of early access partners across the industry, from small startups to multibillion dollar hardware companies."

similarly, the list of investors includes alot of smart, analytical, successful people and companies.  they surely didn't just throw their money at this w/o any research.

The analyzis is flawed, in that it does not take into account all cost. The price of mining a bitcoin tends to approach the price of a bitcoin, so the question is rather is 21's approach equal to or better than large scale mining. If you suppose the chip is free, the design is free, the electricity is free and the management of the device for the mining purpose is free, then it can compete. But none of those things are free.

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May 21, 2015, 12:58:36 AM
 #24670

i'm amused by the guys here presuming that the 21 guys have not made a similar analysis.  in fact, i'm sure they've made a very extensive marketing and technical analysis.  Balaji and company are no slouches.  they are in a different category from your normal, shoestring startup with minimal capital.  Balaji is an established VC as are his cohorts.  he mentions this:

"towards that end, our team of PhDs in EE from MIT, Stanford, and CMU has built not just a chip, but a full technology stack around the chip — including reference devices, datasheets, a cloud backend, and software protocols. And we have already engaged with a wide variety of early access partners across the industry, from small startups to multibillion dollar hardware companies."

similarly, the list of investors includes alot of smart, analytical, successful people and companies.  they surely didn't just throw their money at this w/o any research.

Vetting of a startup funding pitch always includes ensuring there is at least a plausible scenario for success, so it should be no surprise that these scenarios can be constructed. Weighing probabilities, on the other hand, is far subjective and not necessarily (in fact necessarily not) at the same level of rigor. I remain unconvinced that the valuation isn't out of whack. I most certainly would not take a piece of a $100 million funding round (which likely values the company closer to a billion) based on what we know now. There may be more we don't know, however.

It's nice to see actual numbers though, as opposed to a lot of OOMA statements about how the revenue flatly isn't significant.

but this isn't your average startup.

this is a company comprised of pre-existing industry leaders and companies that clearly are trying to change an industry.
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May 21, 2015, 01:02:14 AM
 #24671

i'm amused by the guys here presuming that the 21 guys have not made a similar analysis.  in fact, i'm sure they've made a very extensive marketing and technical analysis.  Balaji and company are no slouches.  they are in a different category from your normal, shoestring startup with minimal capital.  Balaji is an established VC as are his cohorts.  he mentions this:

"towards that end, our team of PhDs in EE from MIT, Stanford, and CMU has built not just a chip, but a full technology stack around the chip — including reference devices, datasheets, a cloud backend, and software protocols. And we have already engaged with a wide variety of early access partners across the industry, from small startups to multibillion dollar hardware companies."

similarly, the list of investors includes alot of smart, analytical, successful people and companies.  they surely didn't just throw their money at this w/o any research.

Vetting of a startup funding pitch always includes ensuring there is at least a plausible scenario for success, so it should be no surprise that these scenarios can be constructed. Weighing probabilities, on the other hand, is far subjective and not necessarily (in fact necessarily not) at the same level of rigor. I remain unconvinced that the valuation isn't out of whack. I most certainly would not take a piece of a $100 million funding round (which likely values the company closer to a billion) based on what we know now. There may be more we don't know, however.

It's nice to see actual numbers though, as opposed to a lot of OOMA statements about how the revenue flatly isn't significant.

but this isn't your average startup.

this is a company comprised of pre-existing industry leaders and companies that clearly are trying to change an industry.

I've been around the scene a bit. Their team and backers make the cut, but pretty much every well funded startup looks like that. There are a lot of MIT, Stanford, CMU, etc. PhD. and second-time entrepreneurs around. A whole lot.

That valuation at their stage is out of line, even considering the team (again with the caveat that we don't know everything). VC's most certainly do screw up and burn money on big deals. Often it's the most impressive startups that encourage overpaying (what idiot would overpay for a bunch of amateurs?).
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May 21, 2015, 01:04:04 AM
 #24672

The analyzis is flawed, in that it does not take into account all cost.

The analysis estimates the revenue that might flow to 21 Inc and its partners from the mining chips, under the assumed conditions.  Trying to estimate the profits (in which case you'd "take into account all cost") would require more guesswork.  

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May 21, 2015, 01:16:40 AM
 #24673

The price of mining a bitcoin tends to approach the price of a bitcoin, so the question is rather is 21's approach equal to or better than large scale mining.

"Tends to approach" is vague.

In the short term, the marginal cost of mining almost exactly equals the price of a Bitcoin (excluding, possibly, some short transition periods when the price of a Bitcoin is just so high and/or increasing so fast that it is hard to catch it), but if you are below marginal cost, then you are more efficient than the marginal miner and you make a operating profit, which may or may not cover your investment. In the long term, that's the time horizon when investments pay off, or don't. Nothing lasts forever.
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May 21, 2015, 01:31:57 AM
 #24674

The price of mining a bitcoin tends to approach the price of a bitcoin, so the question is rather is 21's approach equal to or better than large scale mining.

"Tends to approach" is vague.

In the short term, the marginal cost of mining almost exactly equals the price of a Bitcoin (excluding, possibly, some short transition periods when the price of a Bitcoin is just so high and/or increasing so fast that it is hard to catch it), but if you are below marginal cost, then you are more efficient than the marginal miner and you make a operating profit, which may or may not cover your investment. In the long term, that's the time horizon when investments pay off, or don't. Nothing lasts forever.


No, tend to approach is the correct term. There cost will never exactly reflect the price, due to speculative errors from the miners when they decide to expand or contract, therefore the cost will be different also between miners. So again, can the 21's plan for mining compete with large scale mining? Small scale mining can be and is continually tested, what they bring to the table is a new chip. So can the new chip revive small scale mining?


Edit: You can never know in advance, but I would guess that if the chip is good in a random small scale device, it is even better if you pack a few hundred in a dedicated device with proportionally designed power supply, fans the rest of the stuff that is needed. Is it possible to construct a chip that is better than current mining, and at the same time can not be used large scale?

You can not rely on persons with experience in funding. Stranger projects have been started, a company with million dollar donut cars, selling for 100K per car and losing 900K per car comes to mind.

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May 21, 2015, 01:41:33 AM
 #24675

The price of mining a bitcoin tends to approach the price of a bitcoin, so the question is rather is 21's approach equal to or better than large scale mining.

"Tends to approach" is vague.

In the short term, the marginal cost of mining almost exactly equals the price of a Bitcoin (excluding, possibly, some short transition periods when the price of a Bitcoin is just so high and/or increasing so fast that it is hard to catch it), but if you are below marginal cost, then you are more efficient than the marginal miner and you make a operating profit, which may or may not cover your investment. In the long term, that's the time horizon when investments pay off, or don't. Nothing lasts forever.


No, tend to approach is the correct term. There cost will never exactly reflect the price, due to speculative errors from the miners when they decide to expand or contract, therefore the cost will be different also between miners. So again, can the 21's plan for mining compete with large scale mining? Small scale mining can be and is continually tested, what they bring to the table is a new chip. So can the new chip revive small scale mining?

Okay sure, but "tends to approach" over what time period?

If you invest something new such as chip that taps into a new, previously underutilized market and/or mining resource, then it may take quite a while for those values to "approach"

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May 21, 2015, 01:43:20 AM
 #24676

So again, can the 21's plan for mining compete with large scale mining? Small scale mining can be and is continually tested, what they bring to the table is a new chip. So can the new chip revive small scale mining?

People are focusing too much on the cost that these chips will produce bitcoins for.  That's not the play I'm imagining.  The play I'm imagining is to create some hype and then get a bunch of phones out across the world with these chips in them!

Once the phones are out there, they'll start generating bitcoins.  It doesn't matter at that point whether they do so cost-effectively or not (we're only talking a few bucks a year anyways).  As long as 75% (or whatever %) of the coins flow back to 21 Inc and partners, the cost of the electricity used to produce those coins doesn't matter very much to their revenue .  

From the perspective of the end-user, once they've bought the phone, they are going to use it for a few years, and thus mine bitcoins for 21 Inc. and partners.  They're not going to throw out a $100+ phone because it consumes a few extra dollars per year in electricity.

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May 21, 2015, 01:45:41 AM
 #24677

The price of mining a bitcoin tends to approach the price of a bitcoin, so the question is rather is 21's approach equal to or better than large scale mining.

"Tends to approach" is vague.

In the short term, the marginal cost of mining almost exactly equals the price of a Bitcoin (excluding, possibly, some short transition periods when the price of a Bitcoin is just so high and/or increasing so fast that it is hard to catch it), but if you are below marginal cost, then you are more efficient than the marginal miner and you make a operating profit, which may or may not cover your investment. In the long term, that's the time horizon when investments pay off, or don't. Nothing lasts forever.


No, tend to approach is the correct term. There cost will never exactly reflect the price, due to speculative errors from the miners when they decide to expand or contract, therefore the cost will be different also between miners. So again, can the 21's plan for mining compete with large scale mining? Small scale mining can be and is continually tested, what they bring to the table is a new chip. So can the new chip revive small scale mining?

Okay sure, but "tends to approach" over what time period?

If you invest something new such as chip that taps into a new, previously underutilized market and/or mining resource, then it may take quite a while for those values to "approach"


It (the cost) tends to approach, but never quite reaches the price. This is the problem of the evenly running economy, the ERE, a system that can never exist, (because among other things risk disappears and therefore changes the assumptions at the outset), but still everything approaches that state.



TPTB_need_war
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May 21, 2015, 01:47:30 AM
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the only financial plan i've heard of is the 25/75% split btwn the consumer and 21, so the consumer is going to get spending coin.  and that would be business savvy for the companies b/c that allows consumers to purchase other services and features.  yes, the mining and hardware wallet will be on autopilot and already setup which makes it brain dead easy for even guys like you to use so you won't feel so bad for having not bought @ $13.

I can't quite tell but I think you're serious?

The consumer is going to get 25% of jack shit, and a bigger electricity bill. You can't possibly think this is a business model.

These ASICs are going to be nearly obsolete by the time anyone plugs them into a socket. They are not going to mine anything of value, certainly not enough to pay for any real world resources. A few satoshis is below the dust limit and unspendable.

You need to quantify the BTC earned and the cost of the hardware produced. If the former is larger than the latter, and if the electricity is "free" due to the 100% mining efficiency of the heat appliance (because the heat is consumed), then it is a viable economics in theory (assuming the company can pull off the opaque, auto-pilot integration of the mining into the heater appliance). Note smooth's upthread point that cutting edge silicon is not necessary. One could go back to older (e.g. 64nm or greater) lithography to attain the necessary heat and low-cost, and for as long as the BTC generated exceeds the cost of the device and support network, then the business model is in theory viable.

Since you appear to be referring to the smartphone device which does not replace consumed heat, then the assumption is the users don't count variability in their electricity bill. The designers will presumably keep the targeted electricity below the normal variability on the typical electric bill (or below the differences that consumers pay attention to), larger battery, larger charger, and thus the user may not notice.

Remember the target market are dumb (ignorant, naive), non-technical users in the developing world.

Any one who claims this target market is going to care that their device has been captured for mining without their active knowledge and participation, has not spent enough time with ladies in the Philippines and their interaction with their mobile phones.

Larry Summers is likely laughing how we want to bring the unbanked into Bitcoin and they will fulfill that goal with captured devices that mine for the cartels which these dumb (ignorant, naive) users operate and supply with electricity. Be careful what you wish for, you might just get it.

Even if that were somehow overcome, do you really think that all the power outlets that people can use today for free, will still be free, once it becomes clear freeloaders will be making real profits by stealing power? Of course not. They're only free today because no one is trying to take advantage of them.

This is pretty much an accurate statement, but irrelevant to the business model. It is an accurate refutation of cypherdoc's Freudian slip.

21's plan, as stated, is pure bullshit. The only question is whether they know it or not.

No you haven't thought it out well. Hope I have helped you above to sort out your mistakes.

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May 21, 2015, 01:49:48 AM
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So again, can the 21's plan for mining compete with large scale mining? Small scale mining can be and is continually tested, what they bring to the table is a new chip. So can the new chip revive small scale mining?

People are focusing too much on the cost that these chips will produce bitcoins for.  That's not the play I'm imagining.  The play I'm imagining is to create some hype and then get a bunch of phones out across the world with these chips in them!

Once the phones are out there, they'll start generating bitcoins.  It doesn't matter at that point whether they do so cost-effectively or not (we're only talking a few bucks a year anyways).  As long as 75% (or whatever %) of the coins flow back to 21 Inc and partners, the cost of the electricity used to produce those coins doesn't matter very much to their revenue .  

From the perspective of the end-user, once they've bought the phone, they are going to use it for a few years, and thus mine bitcoins for 21 Inc. and partners.  They're not going to throw out a $100+ phone because it consumes a few extra dollars per year in electricity.

I obviously don't agree to that, it has to be economically viable to exist. Are you suggesting a big con?

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May 21, 2015, 01:52:55 AM
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I obviously don't agree to that, it has to be economically viable to exist. Are you suggesting a big con?

My retort based on on-the-ground experience your armchair lacks:

Since you appear to be referring to the smartphone device which does not replace consumed heat, then the assumption is the users are too dumb to count variability in their electricity bill. The designers will presumably keep the targeted electricity below the normal variability on the typical electric bill (or below the differences that consumers pay attention to), larger battery, larger charger, and thus the user may not notice.

Remember the target market are dumb (ignorant), non-technical users in the developing world.

Any one who claims this target market is going to care that their device has been captured for mining without their active knowledge and participation, has not spent enough time with ladies in the Philippines and their interaction with their mobile phones.

I have relatives in the Philippines who live in a squatter area. I know exactly how these people manage their lives and electric bill — they don't.

In short, they have no discipline whatsoever and run up huge electric bills then pay it off with short-term debts. They are perpetually in debt.

Many of you all apparently have some incorrect fantasies about the developing world. It would help if you actually had experience.

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