CoinLab obtains $500k in seed funding

[Stephen Gornick]

As I see it, the most positive thing about this is that Coinlab - and investors - will have to report Bitcoin-related income to the IRS.  They'll have more legal power at hand than a typical miner, and any precedents that they set will be that much better for all of us.

Right.

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

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

Imagine all the sad kids with Nvidia equipment.

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

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

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[bitlizard]

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

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

[Nyhm]

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

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

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

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

[fornit]

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

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

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

[niko]

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

[556j]

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

[jojo69]

Legal botnet FTW.

this

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

count me out

[Nyhm]

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

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

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

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

[Stephen Gornick]

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

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

[m3ta]

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

"Only in America".

[Rampion]

Legal botnet FTW.

Agreed. Seems like a voluntarily installed botnet to me.

+1

[MPOE-PR]

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

"Only in America".

Oh well. Mind your step.