The Coinsman offers a look inside a Chinese bitcoin mining operation
A Chinese hashing center. Image source: http://www.thecoinsman.com/2014/08/bitcoin/inside-chinese-bitcoin-mine/
Bitcoin-industry blogger Jason “The Coinsman” Smith recently posted a revealing look inside an industrial-scale bitcoin mining operation in northeastern China. Although understandably light on the specifics, perhaps in part due to the Chinese government’s ongoing hostility to cryptocurrency in general, the photo essay shed some light on just how global the bitcoin community is. While hashing centers in the U.S. have gained considerable attention in the IT and bitcoin media, the barebones nature of the Chinese center is no less relevant to the growing digital currency infrastructure.
Smith wrote of the experience:
The first thing you notice as you approach the warehouse is the noise. It begins as soon as you step out of the car, at which point it sounds like massive swarm of angry bees droning away somewhere off in the distance. It becomes louder and louder the closer you get to the building, and as you step through the doors it becomes a deafening and steady roar; a combination of tens of thousands of tiny ASIC chips hashing away, and dozens of large industrial fans serving to cool down the “workers”.
According to Smith, even with all of those fans running the temperature was a constant 105° F, a situation even hobby miners can easily imagine. Littered with old, now-useless Avalon mining hardware, the former factory houses 2,500 machines, each “hashing away at 230 GH/s.” The power bill? Around $60,000 per month.
Smith calls the three operators of the hashing center the “heroes that keep our precious bitcoin network safe,” and clearly has a great deal of respect for the operation itself. The original post is well worth taking a look at, offering a glimpse into a side of bitcoin rarely considered, even by most miners.
Does Dogecoin’s new merged mining with Litecoin signal the start of alt-coin consolidation?
Image source: Doge assets
The alt-coin mining world has been abuzz this week after the recent announcement by the Dogecoin development team that the Scrypt-based crypto would be introducing auxiliary proof of work (AuxPoW) in the next core update. While many of the discussions have been about the impact of a hard fork on a coin that is already experiencing a decline in network power, many have focused on the upshot: Merged mining with other Scrypt-based coins, such as Litecoin.
Although AuxPoW won’t directly connect LTC and DOGE, it does enable a single miner to hash away on a variety of Scrypt pools at the same time, significantly increasingly the odds of seeing some kind of reward. This is great for ailing blockchain networks like Dogecoin’s, providing incentive for miners to contribute and pushing back the threat of a 51% attack.
This does, however, beg the question: If all of these AuxPoW-enabled coins are mining together, isn’t this a step towards alt-coin unification?
Are we seeing the first steps towards a new crypto paradigm aligning the major flavors of Scrypt coins into a new, more powerful network that is AuxPoW-Scrypt-coin in all but name? Could this de facto network actually make a viable mechanism for all those proposed, non-currency blockchain-using startups? Will this rising mega-alt-coin network compete with the bitcoin network, or complement it?
For established coins like LTC and DOGE, this may not be a bad thing. Although both have established niches (China and tipping, respectively), neither has gained ground against the juggernaut that is global bitcoin adoption. As Litecoin creator Charlie Lee told CoinDesk, the Dogecoin network’s adoption of AuxPow means that the community “can focus on what dogecoin does best (tipping, donations, wow) instead of worrying about defensive mining and network security.”
GHash.io claims nearly $250 million in BTC mined in first year
It may seem strange, given its now-significant impact on the bitcoin mining community, but BitFury-backed mining pool GHash.io launched only a year ago. In that time, the pool has drawn both immense praise (for providing a stable payout system, top-notch merged mining and modern mining dashboard) and severe criticism (for unapologetically seizing the majority of the bitcoin network, crashing the price and creating unambiguous proof that a 51% attack was possible). Love them or hate them, there’s no ignoring the force that GHash has become.
A new post on the official blog of GHash parent company CEX.io puts the pool’s impact on the bitcoin network into terms almost anyone can understand: Dollars and cents. Since its launch on August 3, 2013, GHash has created over 413,750 BTC, or just under $250 million.
By any measure, that’s a lot of bitcoin. For perspective, that’s 382,760,564,258,698,078,191,616 hashes, solving over 150,000 blocks and confirming over 6 million transactions. All that hashing has taken its share of electricity, consuming 159,519,788 kilowatt hours in the process. No matter how you look at it, GHash,io is a behemoth.
Who is doing all that mining? If you’re reading this post, it may well include you. The pool claims to have over 220,000 registered users.
After testing, Bitmain reduces hashing power estimate for S3
Mining hardware maker Bitmain found themselves in an embarrassing situation recently, as hashing power estimates for their much-anticipated Antminer S3 had to be lowered by nearly 8% following pre-shipping tests. The company had claimed that the new generation of their popular ASIC line would deliver a very respectable 478 GH/s, but testing revealed that not all of the S3’s DC/DC modules were stable enough to deliver that speed.
Bitmain has reduced that estimate down to 441 GH/s, which is claims the chips are stable enough to deliver consistently. The company has also said that it will be possible to overclock the S3, allowing for the previously advertised hashrate, but has yet to release details for doing so.
The S3 is currently priced at 0.64 BTC, and those who pre-ordered the units are being offered a 7.7% refund or a 10% discount on their next order.
In response, many miners have noted that the S3’s power use, while an improvement over many current-generation ASICs, may not actually be as cost efficient as simply undervolting the S1. With a new S3 priced at roughly $375, and two used S1s selling for the same price or less, Bitmain’s biggest competitor might end up being its own product’s secondary market.
ScryptGuild closing down, BTC Guild may be next
Image source: https://www.flickr.com/photos/brownpau/
Earlier this week, popular auto-switching alt-coin mining pool ScryptGuild announced it will be ceasing operations on September 27. While not one of the larger pools in the scrypt-mining community, the group has a significant user base, many of whom expressed shock and disappointment at the closure. Pool administrator “eleuthria” gave little explanation for the closure, noting simply that the pool’s code was “running suboptimally” and “not sustainable,” and that the time needed to rewrite the code to automatically switch to newer and more-profitable alt-coins was significant.
Users will be able to withdraw their current account balances in BTC until September 20.
It’s hard not to read between the lines in the announcement, which suggests that the pool had become less profitable since its launch in February. Alt-coins in general have struggled relative to bitcoin in the last several months, and a new generation of powerful and expensive Scrypt algorithm-specific ASIC miners may be discouraging hobbyist miners from entering the marketplace.
In related news, major bitcoin mining pool BTC Guild also hinted that it might be closing in coming months due to restrictions imposed by the “BitLicense” regulations proposed New York Department of Financial Services (NYDFS). BTC Guild’s operators issued a statement last week noting compliance with the rules would be “impossible to do legally without obtaining significant personal information on all users” and would impose “significant financial costs which would exceed the amount of money the pool has generated since inception.”
BTC Guild is one of the largest bitcoin mining pools, and currently accounts for over 7% of the total network hashrate. The effects of its closure would be difficult to predict, although it is likely that most of its current miners would join smaller pools. BTC Guild has since retailed legal counsel in preparation for the NYDFS’s final version of the rules.
Publicly traded mining operation DigitalBTC claims it is already profitable
Image Source: https://www.flickr.com/photos/105644709@N08/
As one of only a handful of publicly traded cryptocurrency businesses, Australian bitcoin mining company DigitalBTC is a glimpse at a possible, perhaps even likely, future for the digital currency industry. In its first quarterly report as a public company, DigitalBTC claimed that it was already turning a profit.
Considering the significant $4 million investment the company made earlier this year in BitFury miners, that’s no small feat. DigitalBTC Executive Chairman Zhenya Tsvetnenko told CoinDesk that the purchase “proved to be a wise decision,” and that they had already paid off their equipment costs. According to their quarterly report, the company made over $2.1 million in bitcoin sales this year.
DigitalBTC made headlines in the mainstream news earlier this year when it announced that its reverse-takeover of Macro Energy Limited, enabling the rebranded company to be listed on the Australian Securities Exchange (ASX). Although DigitalBTC does operate a small exchange, the company’s business model is still firmly rooted in bitcoin mining.
With “hashing center” mining on the rise, an increasing number of mining companies reaching a size where corporate models make logistical sense, and a growing interest in bitcoin mining in the corporate sector, the DigitalBTC story may soon have parallels outside of Australia.
Mysteriously low bitcoin difficulty growth projected, again
Image source: https://www.flickr.com/photos/zcopley/
On July 12, the bitcoin mining community was able to breathe easy for the first time in over a year. The all-important difficulty rate, which had been climbing by massive amounts since May of 2013, grew a measly 3.08%. While this didn’t mean that mining profits would be going up, at least the pressure to perpetually adding new hashing power in the mining arms race was off for another 2016 blocks.
The next difficulty increase is expected on Saturday, and while it may not be as small as the last one, current projections make it debatable if it will cross into double-digit territory. According to some projections, the difficulty increase might be as low as 9.1%, rising to 18,916,156,267.
As welcome as this news is, one lingering question remains: With all of the new, high-powered, low-cost ASICs hitting the market, and massive industrial mining infrastructure coming online in record amounts, why isn’t the difficulty growing more rapidly? The network hashrate is currently 126,584,248 GH/s, up nearly 2.5 PH/s from the last increase, and well worthy of a 9% increase in difficulty. But with new mining hardware in the 2 TH/s range currently hitting the market, why isn’t the hashrate exploding? Is this a reflection of hobby miner fears that newer rigs won’t pay for themselves, or is it more an indication that large amounts of less-efficient equipment are being replaced with smaller orders of more powerful machines?
As GHash tweets for miners to leave pool, P2Pool crosses 1 Petahash
Image source: https://www.flickr.com/photos/moia/
Yesterday, controversial mining pool GHash announced it would limit its share of the overall bitcoin hashrate to no more than 39.9%. It took less than a day to put that claim to the test, as GHash’s percentage began to steadily creep above 36% late last night. What was the mega-mining pool’s response to the very situation it had vowed to prevent?
Dear users, we are approaching 39.99% of the BTC hashrate. Please, move your mining hardware to other pools. Thank you for understanding!
If that response seems a little lackluster to you, you’re not alone. Even GHash’s own Twitter followers mocked the move, which did nothing concrete to encourage miners to leave the admittedly profitable pool. Many suggested that GHash take actual action, perhaps implementing a graduated fee schedule based on the current hash rate.
GHash’s miners have little incentive to leave the pool under the current arrangement, as a large percentage of the hashing power virtually guarantees consistently high payouts. It’s widely suspected that GHash and its partner organizations (such as BitFury and MegaBigPower) directly control a huge amount of hashing power, and could easily point their own hardware at a different pool. To enforce their promise not to exceed 39% of the hashing power, they may have to do exactly that.
At the same time, it appears that many miners are now implementing the community-proposed solution to the 51% problem. Today, the P2Pool network crossed the 1 Petahash per second threshold, an important milestone for distributed mining system. Although still a small fraction of the overall 137 Ph/s network hashrate, P2Pool does offer a viable solution to the 51% issue without requiring any changes to the Bitcoin Core code. It’s not known why the P2Pool hashrate has surged upward in the last day, although one likely cause is mining collective PetaMine redirecting their machines at the network following a vote to leave GHash last month.
Bowing to pressure, GHash agrees to limit share of hashrate to 39.9%
Image source: https://www.flickr.com/photos/gastev/
As a bitcoin miner, it’s hard not to have mixed feelings about GHash.io. On one hand, the pool’s massive amount of the total network hashrate means consistent and generally high payouts. The pool’s operators have clearly invested considerable resources in creating a powerful, easy-to-use dashboard and user experience. It’s a well-made, zero-fee system that works exactly as advertised.
On the other hand, the pool also blindly drove over the 51% cliff last month, crashing profits and making even non-miners worried about the security of the overall network from a true 51% attack. The 51% scenario could have been avoided easily simply by pointing some of the pool’s own miners elsewhere. GHash seemed to be asleep at the wheel, letting their own pool members take the hit when the price took a nose dive.
It’s hardly surprising that so many miners and smaller pools, like PetaMine, flee GHash in the hopes of keeping the network — and the exchange rate — stable.
GHash appears to have gotten the message. At a meeting of bitcoin mining bigwigs during Coinsummit London, the pool announced it would cap its operation to “not exceed more than 39.99% of the overall Bitcoin hashrate.” Although that’s still a huge amount of hashing power, and there’s no guarantee that GHash won’t effectively control far more simply by splitting up its hashrate among smaller pools, it is a start.
GHash, the Bitcoin Foundation and other related parties also committed to looking for a trustless, code-based solution to the 51% problem.
Industrial-scale bitcoin mining booming
Is bitcoin mining about to become big business? Until recently, the massive warehouses filled with thousands of ASICs and roaring fans struggling to cool them off seemed like the exception to the rule. Companies like MegaBigPower seemed more like the exception than the rule.
For most of bitcoin’s history, mining operations have been relatively small, both in terms of physical size and financial investment. Even a full-time professional miner might only have $20,000 or $30,000 worth of equipment.
In the last six months, however, large-scale bitcoin mining has become very serious business, with tens of millions of dollars being spent on creating massive new “hashing centers” across the country. According to a report on Data Center Knowledge, a trade publication for data center technology, the costs of converting a warehouse to a bitcoin mining facility is a fraction of the expense of building a Google or Facebook-like server farm.
“To build out one of these (warehouse) data centers isn’t as expensive,” Butterfly Labs COO Josh Zerlan told the publication. “You can put in $10 million instead of $100 million for this kind of facility.”
What’s more, although the power consumption can be quite high, with the proper cooling arrangement a hashing center can have an extremely dense and efficient layout.
Bitcoin mining servers can pack as much as 1 megawatt of equipment into 1,000 square feet of space, according to Eric Doricko, a veteran of Exodus Communications who now helps Bitcoin businesses find data center space. That’s a big change from the 8,000 to 12,000 square feet of space for 1 megawatt of traditional IT space.
Will this boom in industrial-level bitcoin mining squeeze out the hobbyist miner? Or will it encourage many of those miners to test out the cloud-based operations many of these data centers are experimenting with?