CoinLab obtains $500k in seed funding

[byronbb]

I thought of this a long time ago, but assumed the hardware constraints would limit profitability. Either the botnet has to be massive, or the users have to have 4 GPU machines.

[coretechs]

Legal botnet FTW.

Agreed. Seems like a voluntarily installed botnet to me.

This is a good example of one primary point of the CoinLab article (original post). A major hurdle to starting a Bitcoin-related business is the stigma of the Bitcoin "brand." Just because users install and run distributed computing software doesn't make it a botnet. I used to run SETI@Home (and prime number factoring, etc) just because I want my computer to be doing something interesting when I'm not utilizing it. This does not a botnet make.

I know it's not technically a botnet, but the topology is basically the same.

The business model is not that different from ad supported sites.  If successful, it could catch on with a variety of services and really shake things up among miners.  Monetize your free software with bitcoin transaction processing instead of ads.  It's really a fantastic idea but it's going to come down to implementation.

Considering the user base that is happy to install widgets for free games, I wonder if the additional "computer slowness" will even matter.  

[Nyhm]

Legal botnet FTW.

Agreed. Seems like a voluntarily installed botnet to me.

This is a good example of one primary point of the CoinLab article (original post). A major hurdle to starting a Bitcoin-related business is the stigma of the Bitcoin "brand." Just because users install and run distributed computing software doesn't make it a botnet. I used to run SETI@Home (and prime number factoring, etc) just because I want my computer to be doing something interesting when I'm not utilizing it. This does not a botnet make.

I know it's not technically a botnet, but the topology is basically the same.

The business model is not that different from ad supported sites.  If successful, it could catch on with a variety of services and really shake things up among miners.  Monetize your free software with bitcoin transaction processing instead of ads.  It's really a fantastic idea but it's going to come down to implementation.

Considering the user base that is happy to install widgets for free games, I wonder if the additional "computer slowness" will even matter.  

I agree on all points. Of course, at some level of abstraction any software installed on your computer that talks to other computers via the Internet has a "botnet" topology - That said, you are entirely correct, because the important distinction is that Bitcoin miners are effectively doing work at the bequest of some controlling system, so the botnet analogy is actually stronger than I had originally considered. Your point is well taken.

I agree that implementation and presentation are key. Regarding slowness, I think they'll just turn off the miner while they're gaming (and just run it overnight, etc). This is another good point of implementation that they have to get "right" (in the eyes of the users) for this to succeed. All very interesting.

[fornit]

I agree that implementation and presentation are key. Regarding slowness, I think they'll just turn off the miner while they're gaming (and just run it overnight, etc). This is another good point of implementation that they have to get "right" (in the eyes of the users) for this to succeed. All very interesting.

in my experience, a miner on a low aggression setting can run simultaniously with many games.
if they are smart they will build on an existing miner and basically just preconfigure and hide it - maybe with a few modifications. its not really necessary to reinvent the wheel for this and aquiring an appropriate license for a miner will save them a lot of time and money.

[evoorhees]

Also let's remember that many gamers will have a kickass GPU computer, but might play an online free-to-play 2d browser game (or even a 3d game that doesn't use much of their power). In this case, mining won't have a significant impedance on the gaming.

[evoorhees]

Mr. Matonis wrote another article for Forbes on this:  http://www.forbes.com/sites/jonmatonis/2012/04/24/coinlab-attracts-500000-in-venture-capital-for-bitcoin-projects/

[Gabi]

It's a clever idea, automatic and seamless mining in exchange of ingame advantages.
You want that weapon? Nice, buy it, or pay the premium or... mine for some hours!

The BOINC project Donate@Home is basically bitcoin mining for GPUGRID but the user doesn't have to know what bitcoin is or how to mine, he just treats it like any other BOINC project and it works perfectly.

[JoelKatz]

Also let's remember that many gamers will have a kickass GPU computer, but might play an online free-to-play 2d browser game (or even a 3d game that doesn't use much of their power). In this case, mining won't have a significant impedance on the gaming.

I think that's the only way this makes sense.

[Littleshop]

I like the idea that a bitcoin startup got funding but it is a bad idea. 

Making games is all about content.  If they make the next angry birds it will not matter if it is mining in the background or not.  They would make more money from ads or added cost in game content (hopefully paid with bitcoin).  If they make game that sucks, it will not matter that it mines or not.  There is nothing really new here and mining is so hard that the BANDWIDTH alone will make it not worth it on machines without GPU's. 

So it all boils down to... can they make a good game.  At least with this mining in the background business model.

[FreeMoney]

I like the idea that a bitcoin startup got funding but it is a bad idea. 

Making games is all about content.  If they make the next angry birds it will not matter if it is mining in the background or not.  They would make more money from ads or added cost in game content (hopefully paid with bitcoin).  If they make game that sucks, it will not matter that it mines or not.  There is nothing really new here and mining is so hard that the BANDWIDTH alone will make it not worth it on machines without GPU's. 

So it all boils down to... can they make a good game.  At least with this mining in the background business model.

I also think it is a bad idea, though I wish them luck. But I don't think they plan to make any games. They are going to go to game makers and offer it as an alternative to ads or charging.

[EhVedadoOAnonimato]

I would tend to believe that, even if gamers are told up front about the electricity cost, that they'd still get behind running the CoinLab mining software to earn "free" perks, just because it gives their gaming rig something cool to do.

Even if they have the option of paying a smaller fee instead?
Don't know... if you pay your own electricity, it wouldn't make much sense.

[ahbritto]

Imagine all the sad kids with Nvidia equipment.

[JoelKatz]

Even if they have the option of paying a smaller fee instead?
Don't know... if you pay your own electricity, it wouldn't make much sense.

That pretty much defines this field though. A person who wouldn't think twice about spending $8 at Starbucks for a coffee and a muffin because they have 30 minutes to waste won't spend $1 to play a game they enjoy for hours. It's very easy to attract people and very hard to get them to part with as much as a dime. So this might actually make sense.

[Gabi]

I like the idea that a bitcoin startup got funding but it is a bad idea. 

Making games is all about content.  If they make the next angry birds it will not matter if it is mining in the background or not.  They would make more money from ads or added cost in game content (hopefully paid with bitcoin).  If they make game that sucks, it will not matter that it mines or not.  There is nothing really new here and mining is so hard that the BANDWIDTH alone will make it not worth it on machines without GPU's. 

So it all boils down to... can they make a good game.  At least with this mining in the background business model.

I didn't know Farmville is a good game

But guess what? It has success

We are speaking about $$$, not about game quality. They can add the bitcoin mining to Farmville so players have ingame bonuses and everyone is happy for example.

[Traktion]

It's good to see new companies using Bitcoin, but I can't help but think this idea is a bit daft.

Rather than burning through energy and CPU/GPU cycles to earn a few quid, would it not just be better to ask for Bitcoin micro payments each month?


EDIT: To add, gamers are likely to have non-optimised rigs, compared with the next generation mining kit too, making it pretty wasteful. It is still good to see companies embracing Bitcoins though.

[JoelKatz]

Rather than burning through energy and CPU/GPU cycles to earn a few quid, would it not just be better to ask for Bitcoin micro payments each month?

Better if the players are rational, but they aren't. As I said, someone will spend $4 on a coffee without thinking but won't spend $1 to buy an app they've enjoyed for hours.

EDIT: To add, gamers are likely to have non-optimised rigs, compared with the next generation mining kit too, making it pretty wasteful. It is still good to see companies embracing Bitcoins though.

Gamers tend to have the most advanced video cards, and when they're playing games like Farmville or in-browser MMOs, the video cards are basically snoozing. Yeah, it will be hit or miss. But remember, your cost is near zero.

I agree that the economics are bad, but I don't think they're nearly as bad as others seem to think.

[Technomage]

Indeed it will be profitable to mine that way for a long time to come. The added electricity use for running low prio mining while already playing a game, is quite moderate and thus the added electricity cost is low as well. So it does make sense. It's also great for Bitcoin, the network will become more secure in the process.

However I seriously doubt that this is the only thing they have in store. $500k for only something like that is way too much in my opinion. They most likely have aces up their sleeves but are not revealing them just yet because it doesn't make sense from a business perspective.

[hazek]

It's also great for Bitcoin, the network will become more secure in the process.

I'd like to challenge this because I don't believe it's necessarily true. If they get a bunch of gamers to mine, the difficulty is going to rise and if the price doesn't follow since these players obviously wont care about their electricity costs and will continue to use this software even if mining at a loss, the raised difficulty and the not high enough price will drive out the current dedicated miners. So net net without a simultaneous significant price increase I don't believe the network will be that much more secure than it is right now.

It may only be more secure in the sense that we will have a base of guaranteed miners who will keep securing the network even if the price doesn't necessarily warrant it.

[Nyhm]

...
Rather than burning through energy and CPU/GPU cycles to earn a few quid, would it not just be better to ask for Bitcoin micro payments each month?

EDIT: To add, gamers are likely to have non-optimised rigs, compared with the next generation mining kit too, making it pretty wasteful. It is still good to see companies embracing Bitcoins though.

One brilliant part of the CoinLab business model is that gamers don't have to know anything about Bitcoin. You are correct that it is more economically rational to pay a monthly Bitcoin fee, but what CoinLab recognizes is that 99.9% of the gaming population doesn't have any. If/when they do, then there's more potential to simply get paid in Bitcoin from customers.

Regarding wasteful energy/cycles, it doesn't matter in this scheme. The 100% rational player will have to decide whether increased electricity cost is worth the in-game perks they're getting. If CoinLab/developers discover that players aren't running the mining app because of this, then just bump up the in-game rewards. Digital goods are free to produce, so that economy can easily be adjusted to overcome the burden on the customer. Even if the customer's mining is wicked slow, it's still adding to the CoinLab mining pool.

In the end, I entirely agree with JoelKatz insight:

Rather than burning through energy and CPU/GPU cycles to earn a few quid, would it not just be better to ask for Bitcoin micro payments each month?

Better if the players are rational, but they aren't. As I said, someone will spend $4 on a coffee without thinking but won't spend $1 to buy an app they've enjoyed for hours.

[Gabi]

It's good to see new companies using Bitcoin, but I can't help but think this idea is a bit daft.

Rather than burning through energy and CPU/GPU cycles to earn a few quid, would it not just be better to ask for Bitcoin micro payments each month?


EDIT: To add, gamers are likely to have non-optimised rigs, compared with the next generation mining kit too, making it pretty wasteful. It is still good to see companies embracing Bitcoins though.

It would be better if gamers know what bitcoin is, how to use it and have them

But since almost no one know Bitcoin (let alone using it), the idea is nice.

The gamer just need to play and press "mine" and he will receive ingame bonus as time passes. That's all.

Then maybe hardcore gamers will discover bitcoin and pay for that in bitcoin, but it will be a later step