Topic: Gold collapsing. Bitcoin UP. - page 324. (Read 2032265 times)

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

"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.

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.

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?

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.

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?

"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.

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.

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.

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.

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:


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.