The negative impact of mining farms

[MrBig]

Just finished reading this article: http://mobile.bloomberg.com/news/2014-10-21/bitcoin-miner-ditches-clients-to-chase-2-billion-coding-prize.html

Basically the co-founder of KnC, Sam Cole talks about small-time mining operations becoming obsolete as their profit margins shrink and they get replaced by mega-mining farms. He continues to talk about the $2 billion in btc that will be mined in the next few years and expresses his company's intention to milk as much cash from this cow as possible.

What is interesting to note here is that this guy is measuring the profits in $$$, which is indicative that his company doesn't care for btc and are in it for the potential fiat profits. He doesn't say that there's x amount of BTC up for grabs because he and his investors are only interested in the cash/fiat that can be made from mining BTC. Another thing to note is that he mentions their cost per unit is significantly below $400.

So basically these scumbags have a lot of hashing power, fiat, and probably BTC to manipulate the market.

[brg444]

Just finished reading this article: http://mobile.bloomberg.com/news/2014-10-21/bitcoin-miner-ditches-clients-to-chase-2-billion-coding-prize.html

Basically the co-founder of KnC, Sam Cole talks about small-time mining operations becoming obsolete as their profit margins shrink and they get replaced by mega-mining farms. He continues to talk about the $2 billion in btc that will be mined in the next few years and expresses his company's intention to milk as much cash from this cow as possible.

What is interesting to note here is that this guy is measuring the profits in $$$, which is indicative that his company doesn't care for btc and are in it for the potential fiat profits. He doesn't say that there's x amount of BTC up for grabs because he and his investors are only interested in the cash/fiat that can be made from mining BTC. Another thing to note is that he mentions their cost per unit is significantly below $400.

So basically these scumbags have a lot of hashing power, fiat, and probably BTC to manipulate the market.

This is speculative.

He doesn't say there is X amount of BTC up for grab because the interviewer and his audience is not familiar with this unit of account.

In reality, it is more probable that they hold a considerable amount of BTC. I have mentioned this in another thread but Bitcoin miners are some of the most bullish entities in the Bitcoin ecosystem.

BitFury has confirmed that they hold most of their coins. DigitalBTC in a recent investors letter have confirmed they are not selling production from their mining farms "at these low prices".

[MrBig]

Yes it is speculative. This is the speculation section after all

If DigitalBTC are not selling the BTC they mine then how are they covering their costs? If they have a surplus in their accounts, it'll run out eventually and they'll be forced to sell. Anyhow, I clearly have to do more reading on the other big mining operations, so thanks for bringing those other companies to my attention.

Back to KnC, this isn't the first time they've been exposed as mining to dump for fiat: http://www.reddit.com/r/Bitcoin/comments/2182nb/kncminers_ceo_sam_cole_dumping_bitcoins_worth/

"We make three million swedish crones (466,000USD) everyday from mining Bitcoins and selling, says Sam Cole, CEO KNCminer."

That was over 6 months ago. I'd imagine they're mining more btc than that now.

Also, note how they mention in the Bloomberg article that they're in the process of tripling mining capacity in the airplane hangar and also open other mining farms. That means that a lot of BTC is being exchanged to fiat to fund these expansions.

[Cluster2k]

This is how bitcoin slowly dies from here.  What started as a chance for everyone to generate their own bitcoins and participate in the economy now turns to a few data centers producing bitcoins thus forcing new users to purchase new bitcoins from them.  We've traded fiat currency controlled by a few central banks to bitcoin controlled by a few data centers.

Meet the new 1%.  Slightly different to the old 1%, but they're still there.

[Mieehayii]

 Bitcoin prices which just fresh out of mining farms significantly higher than the market

[MrBig]

Bitcoin prices which just fresh out of mining farms significantly higher than the market

1. How much significantly more do they sell for exactly?

2. What proof do you have to back up that statement?

[dadugan]

Just finished reading this article: http://mobile.bloomberg.com/news/2014-10-21/bitcoin-miner-ditches-clients-to-chase-2-billion-coding-prize.html

Basically the co-founder of KnC, Sam Cole talks about small-time mining operations becoming obsolete as their profit margins shrink and they get replaced by mega-mining farms. He continues to talk about the $2 billion in btc that will be mined in the next few years and expresses his company's intention to milk as much cash from this cow as possible.

What is interesting to note here is that this guy is measuring the profits in $$$, which is indicative that his company doesn't care for btc and are in it for the potential fiat profits. He doesn't say that there's x amount of BTC up for grabs because he and his investors are only interested in the cash/fiat that can be made from mining BTC. Another thing to note is that he mentions their cost per unit is significantly below $400.

So basically these scumbags have a lot of hashing power, fiat, and probably BTC to manipulate the market.

This is speculative.

He doesn't say there is X amount of BTC up for grab because the interviewer and his audience is not familiar with this unit of account.

In reality, it is more probable that they hold a considerable amount of BTC. I have mentioned this in another thread but Bitcoin miners are some of the most bullish entities in the Bitcoin ecosystem.

BitFury has confirmed that they hold most of their coins. DigitalBTC in a recent investors letter have confirmed they are not selling production from their mining farms "at these low prices".

They will eventually sell due to shareholders pressure. If the price is dropping when these mega farms are holding, what is going to happen when sentiment really turn negative and all mining companies decided to cut loss?


As for the 2B figure coming from Sam of Knc, he is probably using an optimized bitcoin price estimation. If he really build a farm so big that will threaten integrity of the network, what is going to happen to the price? Not to mention the constant selling from his company will further depress the price.

[fewcoins]

This is how bitcoin slowly dies from here.  What started as a chance for everyone to generate their own bitcoins and participate in the economy now turns to a few data centers producing bitcoins thus forcing new users to purchase new bitcoins from them.  We've traded fiat currency controlled by a few central banks to bitcoin controlled by a few data centers.

Meet the new 1%.  Slightly different to the old 1%, but they're still there.

If this turns into a giant downhill snowball effect & miners decide to cut losses btc will be finished... Maybe with a new all time low 

[MrBig]

Just finished reading this article: http://mobile.bloomberg.com/news/2014-10-21/bitcoin-miner-ditches-clients-to-chase-2-billion-coding-prize.html

Basically the co-founder of KnC, Sam Cole talks about small-time mining operations becoming obsolete as their profit margins shrink and they get replaced by mega-mining farms. He continues to talk about the $2 billion in btc that will be mined in the next few years and expresses his company's intention to milk as much cash from this cow as possible.

What is interesting to note here is that this guy is measuring the profits in $$$, which is indicative that his company doesn't care for btc and are in it for the potential fiat profits. He doesn't say that there's x amount of BTC up for grabs because he and his investors are only interested in the cash/fiat that can be made from mining BTC. Another thing to note is that he mentions their cost per unit is significantly below $400.

So basically these scumbags have a lot of hashing power, fiat, and probably BTC to manipulate the market.

This is speculative.

He doesn't say there is X amount of BTC up for grab because the interviewer and his audience is not familiar with this unit of account.

In reality, it is more probable that they hold a considerable amount of BTC. I have mentioned this in another thread but Bitcoin miners are some of the most bullish entities in the Bitcoin ecosystem.

BitFury has confirmed that they hold most of their coins. DigitalBTC in a recent investors letter have confirmed they are not selling production from their mining farms "at these low prices".

They will eventually sell due to shareholders pressure. If the price is dropping when these mega farms are holding, what is going to happen when sentiment really turn negative and all mining companies decided to cut loss?


As for the 2B figure coming from Sam of Knc, he is probably using an optimized bitcoin price estimation. If he really build a farm so big that will threaten integrity of the network, what is going to happen to the price? Not to mention the constant selling from his company will further depress the price.

The $2 billion figure is based on the current price of BTC multiplied by the approximate amount of BTC that will be mined in the next few years.

[NetTime]

I hope Sam and Co. fuckin' choke.

[fr4nkthetank]

This is how bitcoin slowly dies from here.  What started as a chance for everyone to generate their own bitcoins and participate in the economy now turns to a few data centers producing bitcoins thus forcing new users to purchase new bitcoins from them.  We've traded fiat currency controlled by a few central banks to bitcoin controlled by a few data centers.

Meet the new 1%.  Slightly different to the old 1%, but they're still there.

we should have a full month or two where everyone stops buying bitcoin.  everyone stops buying.
buying not allowed.

Then these guys sell to meet expenses maybe and all go bankrupt.  hopefully.

[Capt Drake]

Why so much hate from the farmers?

The system was designed that way for every miner to compete, not for everyone in the world have equal amount of coins.
Competition is good, it brings more security to the network.
Sure, now instead of having 10000 miners we have 500 but to compete in this market is much more difficult and if someone try to takeover it will be much more expensive $$

If you care so much about the world start giving your coins for the fellas in Africa.

[NetTime]

Why so much hate from the farmers?

The system was designed that way for every miner to compete, not for everyone in the world have equal amount of coins.
Competition is good, it brings more security to the network.
Sure, now instead of having 10000 miners we have 500 but to compete in this market is much more difficult and if someone try to takeover it will be much more expensive $$

If you care so much about the world start giving your coins for the fellas in Africa.

Because KnC in particular built their company on the goodwill of their first generation miner customers, and then turned around and shafted everyone.

[NotLambchop]

Why so much hate from the farmers?

The system was designed that way for every miner to compete, not for everyone in the world have equal amount of coins...

The system wasn't "designed" with megafarms in mind.  If anything, the system was "designed" to allow anyone with a CPU to participate in the network, incentivizing random_d00d to join the Bitcoin ecosystem.  Megafarms broke that.

Claiming that megafarms help to secure the network borders on absurd.  Concentrating so much hashpower solves a nonexistent problem, while creating a real ones:  greater centralization and entities with both financial incentive and capacity to corrupt the network.

TL;DR:  foxes guarding the chicken coop.

[zoinky]

Why so much hate from the farmers?

The system was designed that way for every miner to compete, not for everyone in the world have equal amount of coins...

The system wasn't "designed" with megafarms in mind.  If anything, the system was "designed" to allow anyone with a CPU to participate in the network, incentivizing random_d00d to join the Bitcoin ecosystem.  Megafarms broke that.

Claiming that megafarms help to secure the network borders on absurd.  Concentrating so much hashpower solves a nonexistent problem, while creating a real ones:  greater centralization and entities with both financial incentive and capacity to corrupt the network.

TL;DR:  foxes guarding the chicken coop.

You act as if mega CPU farms wouldn't exist if ASICs didn't come around...  Back with CPU farms we had botnet issues, those people are even greedier since they are using other's resources completely for their own gain.

[NotLambchop]

Why so much hate from the farmers?

The system was designed that way for every miner to compete, not for everyone in the world have equal amount of coins...

The system wasn't "designed" with megafarms in mind.  If anything, the system was "designed" to allow anyone with a CPU to participate in the network, incentivizing random_d00d to join the Bitcoin ecosystem.  Megafarms broke that.

Claiming that megafarms help to secure the network borders on absurd.  Concentrating so much hashpower solves a nonexistent problem, while creating a real ones:  greater centralization and entities with both financial incentive and capacity to corrupt the network.

TL;DR:  foxes guarding the chicken coop.

You act as if mega CPU farms wouldn't exist if ASICs didn't come around...  Back with CPU farms we had botnet issues, those people are even greedier since they are using other's resources completely for their own gain.

I'm not saying that CPU megafarms are impossible, only that megafarms of any kind are undesirable.

[Capt Drake]

Competition only leads for the best fitted miners, like nature.

So yes, the system was designed around this concept.

[NotLambchop]

Competition only leads for the best fitted miners, like nature.

So yes, the system was designed around this concept.

It depends on what you wish to succeed--Bitcoin or "best fitted miners." 
But yeah, if megamines kill Bitcoin, it doesn't deserve to survive.

[RoadStress]

There are 3600 bitcoins created every day no matter what. What do the large farms have to do with it?

[MrBig]

Competition only leads for the best fitted miners, like nature.

So yes, the system was designed around this concept.

If this is the case, then it's a flawed system. What happens when mining is controlled by a small handful of companies and governments decide to shut them down or seize control of them? What happens if they get hacked? What happens if they go rogue? They're not pools that people can just pull their hashing power away from.