Topic: On Bitcoin mining (Read 2414 times)

First of all, Valve would never do this, but IF they build in a BTC miner into their steam client that ran on low priority while you weren't gaming, and stopped when you fired up a 3D intensive program, then they let you buy games/hats/etc with your balance, that would catapult BitCoin into the stratosphere.

Actually, if I were Valve and I controlled the Steam client, I wouldn't mention BTC at all (bad for bitcoin), I'd rename the miner something like "The Piston". It would run as described, when the user isn't in a 3D application, and it would mine BTC for me, while the user would earn "PSI" points, equivalent to 10 PSI per $ or something, they could then spend those on select digital goods that cost me next to nothing to make (hats n stuff).

The electricity bill would piss some people off, but imagine having the whole Steam community mining for you like a huge farm... 

This is true, but hinges on the assumption that you can convince gamers that it's a good idea to mine bitcoins even when the value of the bitcoins mined is nowhere near enough to cover the increased electricity costs, as is usually the case with a machine not specifically designed for bitcoin mining. This is why the thread turned into a discussion on mining profitability. If mining with gaming machines is not only unprofitable, but causes people to actually lose significant amounts of money through electricity costs, then nobody is going to do it, simple as that.

Likelihood = Low.

Impact = Look at most of 2011.

You're welcome.

The impact will be extra hashpower to the network and an increased difficulty. This will benefit the network overall. The only gamer GPUs that will be profitable for their operators will be newer AMD chips cards. All other gamers will get puny rewards in comparison (unless, the system unfairly rewards inefficient GPUs ... but then AMD chip owners would do better to just run guiminer and connect to a pool). The effect of hundreds of thousands of new people trying to cash out bitcoins will be more contact points with outsiders getting their first taste of bitcoin. Anyone who takes the effort to understand how to cash out via an exchange will have no problem doing so and there will be no effect on the market because whatever bitcoins they mined that they are now going to sell would have just been mined and put up for sale by someone else (ie: existing miners) anyway.

So overall, more hashing power, more people using bitcoin = win.

This thread is going way OT, if you want to talk about the mining business or profitability this thread is not for you.

I want to understand instead the likelihood and impact on Bitcoin of getting a large number of gamers to turn on their GPUs and start mining. What if CoinLab's efforts lead to hundreds of thousands of additional people opting to cash small amounts of BTC out of their system?

When you invest a lot of USD in Bitcoin, and Bitcoin tanks, you will lose a lot of money.  Thus, if you have a significant amount of money already invested, you will have an incentive to reinvest.  Why did people 'buy anyway' on the way down from $33?  Why did they buy at $12?  Why did they buy at $10?  At $8?   At $4?  At $2?

Let's say you buy 1 oz. of gold at $1600.  Then the price drops to $1400.  So, you buy 1 more oz. of gold.  That way, all it would take for you to break even on your investment (instead of being down $200) is the price going back up to $1500.

At this point in time in order to make any serious BTC/USD from Bitcoin mining you have to maximize MH/w efficiency and MH/$ efficiency. You'll also have to invest in more than just a casual gaming computer if you plan on buying anything, be it USD or goods, solely from the BTC you mine.

Any place there is a profit to be made people will find a way to make it work. With the profits that miners can achieve now, aggressively pursuing a greater share of the networking throughput makes perfect sense. So long as you keep your MH/w and MH/$ efficiencies on par or higher than the average then you will come ahead in the rat race. Rat race isn't a completely accurate term, it is more a "keeping up with the Joneses" situation. A few thousand dollars, invested in the right hardware, will return a few thousand dollars within a year. Those types of margins make mining very attractive at this point in time. After the reward drop that may not be the case but I guarantee the difficulty and price will eventually stabilize to where miners are making a slight profit.

The time for the gamer to earn any significant amount of BTC by mining when not gaming with their GPUs was between the first GPU miner and before the spike to $30USD/BTC. After that spike the difficulty increase effectively pushed out single GPU miners as the network grew to 10+ TH/s. Who knows what is going to happen in the coming months with many miners aggressively switching over to FPGAs with MH/w efficiencies of 10:1 and higher.

The time for regular people to mine for themselves is long, long past; and as I just described the block reward halving in December isn't going to rescue bitcoin, if anything it's going to make the problem worse by pushing out all but those with the lowest operating costs - i.e. FPGA/ASIC and botnet miners.  If the price keeps falling after that, then the only ones who'll be able to keep the network afloat will be kids using their parents' "free" electricity and botnet miners.

The best thing for bitcion is for these "regular people" to be able to mine bitcoins themselves. The introduction of FPGAs takes the mining power away from "regular people" and puts into into the hands of the few that operate FPGA farms.

As for the falling price due to lower power consumed/coin mined, I hope the block split this December alleviates some of that.

No, I don't think that serious investors would buy anyway.  Buy anyway?  Why would they buy if the the price momentum is downward?  The reward halving, IMO, further compounds the problem I've described.  Unless the price doubles when the reward halves, lots of miners are going to take a serious hit to their profit margin.  This will be especially true for GPU miners, whose operating costs are higher.  Botnet and FPGA/ASIC miners will, of course, take the same hit, but as their operating costs are lower, they'll be apt to stay in the game longer; but as I've already described will end up competing with each other to sell their coins to cover their operating costs and attempt to profit.  This will drive the price down.  That the price will continue down will in all likelihood scare off the newcomers the project needs.  The project is significantly more robust and the infrastructure significantly more secure, yet demand hasn't increased over last year.  The best explanation for why demand has been so weak is because of all the shit that happened last year, and that apparently continues to happen, and because the price has been in decline for so long.

Well, over the past year bitcoin difficulty has risen from increased hasing power and that has reduced the number of bitcoins per gigahash...

Bitcoin has a balance that must be achieved within a range almost continuously for long-term success. One is to increase hashing power quickly enough to thwart any attackers by the time they see it as a threat. The other is to get enough people using it to support that hashing power.

The hashing power is straightforward to measure. Adoption is harder...I for one would like to see more people use it and it just makes sense to me that GPU mining remains an untapped resource. Again, there are MILLIONS of people with GPUs that idle most of the time. Give those people just a trickle of BTC through something they've actively done(simple download and setup) and they become real users of Bitcoin.

The rise in difficulty from the increased hashing power will reduce the number of bitcoins per gigahash, keeping the price stable.

Interesting point of view.  You don't think that serious investors would buy anyway and that everything would equalize?  I mean, the reward halving in December coupled with falling prices would mean that it wouldn't take a whole lot of cash to buy the equivalent of an entire day/week of block rewards.

To me, it seems that in most plausible scenarios where a Bitcoin price drop seems likely there exists plausible counter-scenarios to create balance within the economy.

Um, it's enormously inconvenient and pretty costly compared to buying them outright to acquire any significant amount of bitcoins (more than, say, 10) by mining them these days.  You're right that FPGAs are a threat to bitcoin, but not in the way you think.  As FPGAs and botnet miners take over the network the price is going to plummet.  Why?  Because FPGA and botnet miners have much lower operating costs and can tolerate selling for lower prices and they'll essentially compete with each other to sell their bitcoins, creating a race to the bottom.  You might be tempted to get all giddy at the prospect of buying "cheap" coins, but the falling price will generate more bad press for bitcoin, thus pushing further away the sorts of people this project needs - regular people.  As people will be less inclined to participate in bitcoin, because they see a history of falling prices since it's received most of its public attention, demand will continue to wane even as supply continues to increase; and, as I've said, most of that new supply will be going into the hands of FPGA and botnet miners who can afford to race each other off a cliff.

More efficient mining produces more hashes for a given amount of energy. Nobody says "I'm going to mine at X MHash/s, regardless of how much power it takes", they say "I can spare X kilowatts, how many MHash/s can I get from that?" There is a clear incentive for people to mine efficiently, which is good, because there is only so much energy available to secure the network, so more efficiency = more security.

Yes, they are contributing hashing power, but they are consuming a disproportionate amount of electrical power, of which only a finite amount exists in the world, and somebody at some point has to pay for that electricity one way or another. People should not be encouraged to use electricity inefficiently. That's just wasteful and stupid.

I don't get your point.  
The 100 Mhashes of some inefficient GPU miner are indistinguishable to the network from some random 100 Mhashes belonging to a monster mining farm.
Mathematically - every hash adds to the security.

The 100Mh inefficient miner's 'incentive' may be that they only need a trickle of BTC anyway, are not worried about the electricity consumed, and have no means/desire to buy on exchanges. They are still contributing to the overall hashpower as I understand it.

Strictly speaking, more hashes/second means greater security for the network. It's about honest miners owning more hashing power than any attacker. Cost doesn't figure into it except as a term in the difficulty feedback equation.

Nope. When you get right down to it, mining is a business: you verify transactions and secure the network, and you get paid for providing this service. Since the barrier to entry is practically nonexistant, it is an extremely competitive business, and anyone who can't mine efficiently is just not going to make a profit from it. The incentive structure in Bitcoin is designed to encourage people to mine as efficiently as possible, since this provides the maximum security for the network. That's what mining is all about: you get paid to secure the network. Do a better job of securing the network, and get you paid more. There is not, and will never be, any incentive for people to mine inefficiently, since that doesn't help anything.

What I'm hearing is don't mine and that I expected. My question is setting aside any self-interest to profit from mining, does it make sense for as many people as possible to be encouraged to mine? I mean even small amount of BTC in many people's hands would be a good thing for adoption, no?