Moore's Law on Steroids: World Computing Power for One Type of Calculation is Doubling Every Three Weeks
Over at Forbes, I wrote this week about Bitcoin mining. But don't be immediately put off. This is not yet another article by a crazed libertarian and Cryptonomicon fan on the miracle effects of digital currencies. Instead, I look at the crazy economics and absurdly steep capacity and technology curves of Bitcoin mining. An excerpt:
Let’t take an example, and consider the Cointerra TerraMiner IV, a 2TH/sec machine priced at about $6000 which if purchased today would be delivered sometime in February, or about 3 months from now. At current difficulties and exchange rates, such a machine would pay back its purchase price in less than a week, producing over $25,000 a month in Bitcoins.
A no-brainer, right? But Bitcoin mining difficulty has been going up of late by a factor of 10 every 3 months. Based on a mining difficulty ten times greater than today and current exchange rates, we could expect instead to be making at delivery something more like $575 a week. Three months later we would be making a tenth of that. If we factor in the costs of electricity, this machine will never cover its costs at current Bitcoin exchange rates.
I do not think I have ever seen a business technology obsoleted so quickly. Essentially, the next generation of mining processors will be virtually obsoleted between the time of its sale and its delivery 3 months later. Every three months one has to reduce his production costs by a factor of 10, in a business where cost reduction basically means throwing out all one’s existing capital assets and buying expensive new stuff.
Elam Bend:
Wouldn't a national government or university or some such institution have an incentive to put their best and fastest processing power toward mining as much of the remaining bitcoins as possible? Even if the expense to mine them were more than the current face value, the pricing and market power gained would be big. right?
November 18, 2013, 12:33 pmMorven:
This increases the temptation to acquire computing power by fraud, too. Cloud hosting providers have to be seeing a huge fraud impact by people renting servers to mine bitcoins with fraudulently acquired credit cards, and there's the use of botnets acquired through malware for bitcoin mining.
November 18, 2013, 12:38 pmDon:
No, because CPU miners wouldn't even pay you for your time to setup the demo account and load the software. Try cpu mining some time. At the current rate, it's something like 5 years of continuous mining on the fastest CPUs to earn one bitcoin, and you're paying for a FANTASTIC amount of electricity in the process (way more than you're earning, like 50 times or more).
November 18, 2013, 12:58 pmDon:
Nah. The modern miners are single-purpose hash generators. For this singular task, $20K in hash miners outperforms the most powerful super computers on the planet.
Now, if you could learn to re-task these critters to doing scientific number crunching, kinda like people did with the PS3/Cell Processor units, that would be AWESOME, but since these things really only execute one type of function over and over, I don't see how that could be done.
Basically, they've given up all pretense of general computing on these devices to dedicate the silicon to doing one function over and over as fast as possible. A true application of the Engineering tenet, "Good, Fast, Cheap... pick two," only in this case, "good" has been substituted for "flexible".
I'm sure there's some physicist somewhere that's trying to figure out how to do his research using hash equations :^). Would save him a TON of time and money using Crays and IBM big iron.
November 18, 2013, 1:04 pmmesocyclone:
Thanks for a truly fun Forbes article! BitCoin is an amazing phenomenon, no matter how it all ends up.
November 18, 2013, 4:10 pmGil G:
Or Is it proof that whatever you offer as currency others will then produce more of it ("counterfeiting") to become rich than simply use the currency as a measure of trade?
November 19, 2013, 4:00 ammarque2:
There will only be 21 million bit coins. The people mining are actually getting paid for doing transactions that help the whole system. It is their system of transaction fees. Once the pool runs out, transaction costs will go up to cover the cost of computing the bitcoins.
November 19, 2013, 5:17 ammarque2:
Do Cray's still exist?
November 19, 2013, 5:19 amMatthew Slyfield:
Yes.
http://www.cray.com/Products/Computing.aspx
November 19, 2013, 8:35 amPegr:
"If purchased today would be delivered sometime in February..."
Ok...?
"...means throwing out all one's existing capital assets and buying expensive new stuff.
I think I found the angle!
The bit coin miner you buy to be delivered in February is the old stuff! And if you had a bit coin miner that is worth something now but worthless in February, of course you would keep it until then. So what fools are buying bit coin miner futures?
November 20, 2013, 4:49 pmPegr:
I guess I should have read the article frist. Disregard.
November 20, 2013, 5:00 pmMorven:
It doesn't matter how much the resources cost if you're obtaining them fraudulently, now, does it? The question is: is it worth the effort to defraud a cloud service provider to use compute time you're never intending to pay for?
November 30, 2013, 1:48 pm