Topic: Why ASIC's Should Not Be The Future Of Crypto Currencies - page 2. (Read 11119 times)

Why the heck do we need 8 decimal places if the transaction fee is always .005? I thought a core tenant of bitcoin was it's ability to adjust to increased value by reducing fees, we have moved from .01 to .0005 already, why would that not continue? The real question is how big a network (in terms of power usage) we want to grow to, and adjust the transaction fees to match the typical costs so that those that are wasteful are losing money and those that are efficient are making a profit...

As for merged chains, they have their own rewards in their own currency, that revenue is of consideration for the pool and miner, but not for BitCoin itself. It's just piggybacking on the work available. If miners are making enough on these alt-chains then maybe bitcoin does not need to pay fees except for anti-spam reasons, it adds value to the miners by enabling the other protocol to profit in place of a direct reward.

(Of course, I have to ask WHY Walmart would be willing to let anyone mine their chain instead of just running a closed system.)

You sparked a new thought for me there, is/will there be an implementation that allows automated p2p exchanges using the mechanisms mentioned here: https://en.bitcoin.it/wiki/Contracts#Example_5:_Trading_across_chains? If so it could enable the future you mention where the transaction fee stays high, but we are going to have to have a completely automated conversion system in place to make it work as easily as just lowering fees. IIRC, the mandatory fees are anti-spam as much as anything else, if the blocks start filling up then a market for fees will start to be established as folks bid on space in the block for their transactions.

Buying a coffee with bitcoin might not make sense at all once bitcoin is a high value per coin, and transaction fees might be aiming more to have such trivially tiny purchases move to retail-purchase merged-mined blockchains instead of cluttering up the international balance of payments settlement network that is the original bitcoin chain.

Merged chains could also become significant sources of revenue for miners, as every Tom Dick Harry Airmile and Walmart starts looking into establishing its own brand of Canadian Tire Money.

-MarkM-

Sorry, stressed might be too strong a term, I like using overstatement.

I doubt very much that we will see aggregate fees increase to anywhere close to the level that mining revenue is at now, which means that overall the level of available money to miners will decrease over time.

Combine this with power costs and it should lead to a smaller network (some miners leave, others reduce investment) and more efficient hardware that consumes less electricity on aggregate. This is because after the minting operation is complete, 33% of the value of the mining community (to the bitcoin network) is gone, and now it's focus should be on making it's core functions more secure instead of subsidising a larger set of miners than needed. As part of this we will have to redefine a "small transaction" at some point and lower the fees on them proportionately, because having to pay a $5 transaction fee when buying a coffee because BTC makes it up to $1000 is not going to work.

I think large institutions will get into the game at some point and we will start seeing peering agreements that happen outside of the typical transaction fee mechanism. Once that happens all bets are off on fee structure as they are likely to try to eliminate them rather than increase them. That's because large institutions will be able to take a loss on their bitcoin farm (and standby equipment, and ASIC on-demand manufacturer contract) because they can make so much more from the services they offer WITH bitcoin, but they are going to want to minimize that loss.

I don't feel stressed at all. Thank you. Let POW be with us for as long as we see fit.

I don't understand how the convergence towards efficient operations solves anything. It may be efficient in terms of profit margin, but can still be wasteful. After all, bitcoin users will pay for each consumed kWh in terms of transaction fees.

Well we have the PPCoin experiment running, so we can see if proof of stake is a way forward, but they still use PoW for minting.

The other thing that PoW does that some folks forget, is it gives us an unhackable time source that does not rely on external time servers or anything else that could potentially be spoofed. You know locally when each block happened, so you have a reliable timestamp, and don't have to trust anyone. Moving to a pure PoS system would remove that timing mechanism, which is why PPC is a hybrid and was initially launched with check-pointing servers until the PoW activity became high enough.

You have to have a constraint that can reliably be applied to all members of the network. There are a lot of choices, but relatively few that are immune to manipulation. Bitcoin is based on pure CPU PoW, LiteCoin uses CPU and cache/memory IO, and PPC uses pure CPU as it's constraint for block generation to give us this timestamp. Other theoretical constraints include network latency or bandwidth (potentially manipulable by building well connected private clouds, but there could be some benefits to this like the Swiss are doing,) persistent storage, or even real-world physical token passing (and 2 guys pass a bag of tokens back and forth as fast as possible to do a 51% attack.)

When I start thinking about a potential future where we want to control power usage, I'm noticing that really what you are talking about is "increasing the cost of mining equipment so that power cost/performance parity is reached earlier" So instead of an ASIC that costs $1300 and uses 1W/GH, you have a computer that costs $2500 and uses 5W/(GH equiv) of power. Assuming that folks like bitcoin and keep mining, it would end up being a completely power neutral move that would have no advantage in security, minting, or timekeeping. (my opinion, but I think the conclusion is pretty obvious)

The good news is that you are stressing out over a short term issue that does not need to be solved because Satoshi designed the solution into it. Block halving will make this look like the 1849 gold rush (http://en.wikipedia.org/wiki/California_Gold_Rush) once the reward drops to a level that is not economic for all but the most efficient operations. These larger and more efficient operations will be motivated by profits, but will likely be more interested in maintaining the network security to ensure bitcoin profits in other endeavors rather than directly from mining itself. I would not be surprised at all if the BitCoin world of 2030 is almost 100% institutional (finanacial houses/banks) mining, with partnering agreements on planned hash levels to help reduce costs, and a big warehouse full of standby gear that can be powered on if a rouge does appear on the network.

So even if PoW is not ideal, it still seems to be the best solution, and I don't see any real advantage to changing it from a simple solution to a more complex one if it does not bring a substantial additional value.

I second that. We'd need more ideas of how to implement a fair POW system which cannot be easily corrupted. Satoshi ruled against Proof-of-IP, because it's even easier to attack.

A fundamentally fair system rewards the miner by their contribution to the network (in terms of transaction processing and related services). The difficulty increase does not add any beneficial factors to the bitcoin network, except resilience against a 51% attack. Thus the focus should lie on how to implement resilience against 51% attacks without the consumption of a lot of energy.

Hah.  That's a joke, right?  You need to get your eyes examined, then.

Avalon is on an ancient 110nm technology while the BFL chip is the most advanced bitcoin mining ASIC in on the planet by several orders of magnitude, performance is 7x better than Avalon and the release date is 2 months prior to Avalon... yeah, exactly the same!

"competition"? To me it looks like avalon and bfl use exactly the same asic  similar prices, similar performance and similar release date 

Revise history!  GO!

You offered a "pre-order" of $1300 with a "regular" price of $1900!  There was no magnanimity there; if you could have stuck to your original $1900 price point, I have absolutely no doubt you would have.  It was Cablepair and BFL that forced you to stick to your "preorder" price just to compete.

To be perfectly honest, the Avalon pricing played basically no part in our pricing structure and I'm pretty confident that it played very little if any part in Tom's either.  We responded to Tom's offering, as Avalon is frankly not really competitive due to power consumption issues.

Competition is a wonderful thing. Thank you for bringing it.

Although I support you guys (most of the time, lol), I believe that Tom cablepair did say that he was considering licensing his company's ASIC chip out to a 3rd party manufacturer, although there has been no confirmation of who the 3rd party could be, or any additional information. But the intention was announced, and it hasn't been retracted.

What gives you the impression ASIC will not be mass produced?

In addition, Avalon will be the only company so far to have an option to purchase ASIC chips directly from us if you wish to design your own PCB and controller. the details will be revealed in a later time.

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(disclaimer: The following message express the opinion of Yifu G. and Yifu alone. It does not reflect Avalon ASIC in any way or form.)

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I personally got into the ASIC game in the first place for network contingency. Business and profits aside, I realized the community was practically beat in the head and robbed blind by the existing competition after I gotten our ASIC simulation results.

before Avalon announced our unit, the market looked like this,  ~$1000 for 27Gh/s and ~$1300 for 40Gh/s
Avalon announcs their unit $1300 for 60Gh/s.
after Avalon announced their unit, the market looked like this within a week, ~$1000 for 54Gh/s(+200%) and ~$1300 for 60Gh/s(+150%)

It really makes me wonder what our competitors' profit margin was before, and what would have happened if Avalon decided against the ASIC project.

It changes quite a lot.

Botnets cost a certain amount, and are valued at a certain amount.

If a $500/monthly botnet rental brings in $2,027.40/month of bitcoins, then it is a worthwhile investment.
If the same botnet (after ASICs are released) bring in $150/month of bitcoins, then it's a waste of the botnet renter's time.

Likewise, if a botnet owner can mine $2,027.40/month of bitcoins, but only rent it out at $500/month, then it makes sense to mine on that botnet instead of renting it out.  But if ASICs are released, and the same botnet would only bring in $150/month worth of Bitcoins, then it makes sense to rent it out instead of mine bitcoins with it.

Most botnets are already at their max size.  In other words, they can't just "add more nodes" to their botnet - the nodes are being added at precisely the rate that people's computers are infected.  An operator couldn't just increase the infection rate - if they could, they would have already done so.  For some reason, you seem to think it is as easy as the click of a button and doesn't cost anything.

Don't see why botnet operators have anything to do with this??

Even with ASIC, botnets will still exist. 

If they want to make the same amount of money as they were before ASIC's, they will just have to add more nodes to their botnet. 

So that doesn't change anything for anyone really..

http://www.reddit.com/r/IAmA/comments/sq7cy/iama_a_malware_coder_and_botnet_operator_ama/
Without ASIC's, this botnet operator earns $67.58/day.
With ASIC's, this botnet operator would earn around $5.00/day.

http://www.reddit.com/r/Bitcoin/comments/zk24s/i_earn_over_500_bitcoinmonth_by_mining_on_a/
Without ASIC's, this botnet operator earns $129.50/day
With ASIC's, this botnet operator would earn around $10/day.

Etc, etc, etc.

Enough said.

Thank you everyone for adding your opinion!

*bump*  

Of course newbies use what they have. Doesn't everyone? I mean it isnt really possible to use that which you do not possess. New people will always start hashing. Last year when the best gpu for hashing was a 6990 people didnt stop mining because they got all sold out. They continued with whatever they had or whatever they could get their hands on. Many new people try it with what they have and whenever they purchase something with their bitcoins or convert them to fiat they either decide to continue with what they have or they upgrade. That is another thing that will always remain true.

 Im pretty sure you completely missed my  point so i will restate it. Everytime the technology changes people complain and squeal doom and gloom. Yet the reality is people still mine with cpu's even though gpu's are so much better. People still mine with gpus even though fpga's are better or at least more efficient. Asics will come along whenever they finally start shipping and people will still mine with cpu's gpu's and fpga's. The difficulty will go up the network hash rate will go up but it wont matter people will still mine. Almost anyone can afford an ASIC of one type or another as they are not expensive and they are actually much much cheaper than building a gpu rig especially if you want to build one with comparable hash rates.

As for your statement mining will be a specialty business. It already is. Otherwise everyone would be doing it already. There will always be hobby miners and there will always be more profit minded miners. This will be true no matter what the difficulty rises to or how many times the block reward halves.   

Nicely put mrb.

Also, what do you guys think it helps becoming more and more decentralized?

A. Buy a small $150 device that you can just "plug and play" via its one and only USB cable

B. Buy video cards that you need to put inside your computer, check if you have free slots, upgrade MB if not, create racks as wooden scaffolds, have a lot of noise and heat, etc.

I'm not sure how you read that into anything I typed.

And, without being dismissive, I think that this thread isn't really the place to discuss the perfect world according to FLHippy. If you are truly interested in reading about a fantasy society I'll post it in off-topic.

Quite true. There's a lot of overhead to running a mining operation. Uptime, installing new releases, always on Internet connection, etc. Mining isn't for everyone. You don't see everyone who owns gold also running a gold mining operation. Bitcoin users don't need to mine.


It will strength the security of the network. Professional miners will be more diligent in keeping their systems up-to-date and running optimally. That is what keeps the network healthy. Not amateur miners.