Catfish, I have one question for you.
Do you think that Bitcoin mining will be confined to the "garage" stage forever?
*Bit*coin is based on SHA cryptography and this is used in a LOT of other rather 'normal' and rather 'national security sensitive' applications.
If the hashpower required to build the BTC economy into the multi-billion dollar size you're envisaging was actually *built* - i.e. your company built a vast number of highly powered specifically-optimised SHA processors...
...I'd imagine that you'd swiftly come under the scrutiny of the 'No Such Agency'. Not being immediately alarmist, but the current implementation depends on a technology that is also used to protect the security of mobile phone communications, etc. It's widely used and even little old *me* knows that my little FPGA array (less than 50) plus my GPU-based 9 Ghash could be useful for cracking mundane, everyday encrypted communications.
Think about it. If our combined intense focus on optimising the SHA algorithm finds a flaw in it, a LOT of commercial encryption infrastructure comes crashing down. That's highly unlikely, but if you end up rivalling the spooks for brute-force cracking power, you're not going to be ignored. I'd imagine that the spooks already *have* large-scale brute-forcing equipment for all commercial encryption technologies (it'd be insane for them to *not* have, certainly in the toxic 'surveillance society' the USA and the UK have developed). In business, it's wise to choose one's adversaries carefully. I'd not want national security agencies (especially not from psychopathic governments like the USA) as my main rivals...
So, to answer your question directly; Yes, I reckon *Bit*coin will remain 'garage' - maybe 'big garage' as well as small enterprise - but not trillion-dollar alternative currency. Purely because of the implementation. Maybe I'm not as ambitious as you - I just want to run a macro hedge fund in the City - but I see Bitcoin as a stepping stone to future cryptocurrencies and what will finally be *accepted* by all players as means of value exchange. For the now, I can see myself making a few thousands or tens of thousands if I'm lucky. Worth it for teh lulz.
Where it *really* shines is as getting in early for what will succeed it. As a thought experiment, let's say that the dependence on a commercially widely-used cryptographic function, and the prospect of companies like yours building huge dedicated silicon that could brute-force said widely-used function, frightens governments into either interfering technologically, legally attacking companies like yours, or illegally attacking the BTC economy (bitcoin users are terrorists! etc.
). The rational response for the Bitcoin network would be to replace the core crypto function with something else - the P2P infrastructure and decentralisation has already been proven to largely escape government control. Now, replacing the function used has immediate impact on the money supply, aka the miners. If the chosen function is somewhat like Litecoin's, then GPU miners (at least the AMD ones) become less competitive. I haven't studied enough to analyse whether the popular Spartan-6 FPGAs could feasibly compete with cheap Intel CPUs on this particular function, but I make the general observation that an FPGA miner has more chance of maintaining his/her share of total hashpower if the core crypto function changes - just write a new bitstream (easier said than done, lol). However, all investment in ASICs would be lost if the core function had to change. You can't run the scrypt
function on dedicated SHA silicon (IANAE - I'd greatly appreciate any real engineers correcting my mistakes) - and without its legal, original (bitcoin mining) application for your huge SHA cracker warehouse... your company is going to need to *find* an application for all that hashpower to stay in business. I can't think of many legal options, short of contracting to a government to spy on its citizens' GSM comms. I'm not sure your personal ethics would be comfortable with this.
I'm not trying to spread FUD at you, Vladimir. I got a glimpse of your character back in the MMC days, I like you and I wish you the very best. Also, you're not the only one desperate to acquire dedicated silicon to gain the hashpower advantage, it's just that most of the others either keep quiet or don't have your marketing skill. I see you as more of a Kim Schmitz/Dotcom of Bitcoin - and I'm referring to his positive traits, take it as a compliment. However, it's very early days for global cryptocurrencies, and locking your investment down by building single-function silicon is very high-risk indeed. Remember that the Bitcoin design allows for alternative core crypto functions (otherwise things like Litecoin wouldn't exist so easily) - and I doubt that this architecture came about by chance. My analysis is that flexibility is essential - the architecture of "%coin" is flexible, so to dominate the money supply, one must also be flexible. Indeed, given the threat of %coin to fiat
currencies, the risk of Bitcoin needing to switch its core crypto function is non-negligible, unless one takes the pedantic view that the 'Bitcoin' name equals its crypto implementation, and a change would not be 'Bitcoin', as per Litecoin etc. - but I'm rambling off the point.
To extend my answer to your question, however; No, I do not think that "%coin" will remain 'garage'. I truly believe that some form of decentralised cryptocurrency will persist, that there will be multiple blockchains and one dominant form. Right now, Bitcoin is the dominant form. However, because this is truly a disruptive technology, and disruptive against *traditional finance* - whose puppet-masters control both global banks *and* government policy, it won't simply take control of a largely-empty market like Microsoft and Google did. Largely-anonymous, distributed money transfer goes against the fundamental reason why the elite (I won't get into names or theories) have power. Hence, rat-like, it must evade centralised ownership and control. It's already been designed this way. But at some point, that internal flexibility may be required. Basing the money supply on farms of ASICs is not coherent with the architectural philosophy, and not only exposes a significant point of failure, but in the most paranoid scenario, puts you and your investors at risk. Again, this isn't FUD directed at you, but *anyone* setting up dedicated silicon with the current crypto implementation aimed at *dominating* the money supply.
If I could be sure that the market-leading FPGAs we currently use for BTC mining were flexible enough to be efficient miners for the most likely alternative (i.e. academically-sound, field-proven) crypto functions, then I'd consider investing in a 'proper' FPGA farm (my own FPGA farm is, as you say, 'garage') with both admin staff and expert engineers on hand to write bitstreams as required. However, I don't know enough yet to take that risk, and I don't have the capital to have enough skin in the game to be taken seriously. Maybe you do?
Lastly, and apologies for such an expansive reply, but the big question that hasn't been answered is how governments, especially the Western ones with enormous debt and no way out but inflation or default, react to people transacting in a currency they cannot control or tax. There's been alarmist, hysterical media reaction (e.g. Silk Road yadda yadda), but no obvious government response yet. That's why I'm advocating flexibility. Being slightly flippant, you may be wasting your money building an ASIC from scratch - the spooks certainly already have such silicon, so finding where the design (or copies of the design) are kept may save some cash. Or even hacking government systems to mine Bitcoins - now that would be exquisitely ironic, turning the centralised surveillance systems against themselves to provide money supply for a distributed network...
I applaud your ambition though Vladimir. Please consider constructing share classes that pay dividends out in BTC though, and make that clear from the start... a company that clearly needs to keep the BTC economy expanding to pay its investors is a DAMN sight more friendly to the BTC economy than one that takes in fiat
, mines all the BTC, and sells them all to pay out in fiat
. The value of the BTC will crash in such a circumstance, as I'm sure you're aware. I'd buy shares that pay out in BTC - I'm aware this is a private enterprise and you're currently gauging community reaction, but I'd appreciate being 'on the list' for small investors when you *do* finalise the corporate structure.
It's times like these that make me think we could do with a BTC corporate bond market...