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Bitcoin - Environmental Impact, and Introduction To Pool Mining

This video is Jörn Loviscach’s talk on Bitcoin mining given at a workshop in September during the Gesellschaft für Informatik 2012 conference.  He describes the environmental impact of Bitcoin.

His numbers do show how CPU mining is roughly an order of magnitude less efficient than GPU mining.  He confirms how GPU mining too is rougly an order of magnitude less efficient than the technology for FPGA mining.  Presumably because there is no ASIC hardware shipping yet his analysis didn’t consider ASIC mining but ASIC hardware too is likely somewhere in the range of being an order of magnitude more efficient than its FPGA predecessor.

The challenge that Mr. Loviscach didn’t quantify was the ratio of current mining that is performed by each type of technology.  Without being able to estimate that ratio, any estimates about any electrical consumption can vary (by over-estimating consumption) nearly 10X from the actual consumption.

For some of today’s miners, including many of the larger ones, nearly 100% of all hashing is performed on the more-efficient FPGA hardware.  However many of those mining who pay little for electricity have been adding GPU capacity, especially since they can absorb the used GPU castoffs at a lower purchase price.   The plurality of miners are individuals running a GPU or two on an existing computer and most haven’t yet switched over to FPGA, though when ASICs start shipping that hardware may obsolete their GPUs in an instant.

An educated guess might come up with a ratio of nearly two-thirds of mining is still done with GPUs (though a small amount of that includes CPU mining yet, including that performed by botnets) and FPGAs are responsible for the remaining third of mining today.  Thus the power consumption results provided are possibly 30% too high, and half a year from now total power consumption for the entire network may drop well below current levels thanks to the one-two punch of the block reward subsidy drop plus initial ASIC shipments that could force nearly every GPU into retirement.

There was another point made in the talk that needs clarification.  Mining activity is nearly the same no matter how many Bitcoin transactions are made.  So more transactions do not require additional mining and thus no noticeable difference in electrical consumption.  Calculating the energy cost today on a per-transaction basis and then extrapolating that out to cover all  transactions produced for all commerce simply results in some ridiculous total power consumption number that has no bearing with how the technology works.  It is like calculating the cost of electricity per passenger for a subway trip at midnight (which transports a total of nine passengers) and then use that result (e.g. $25 worth of electricity per-passenger) to calculate how much power the subway would consume during rush hour when the same subway is packed with several hundred passengers.  It just doesn’t work that way.

Length: 24 minutes.

Previous Posts - Twitter: @BitcoinMiner

BitForce Single ‘SC’ - Preliminary Renderings
David Perry (@KJ6CCZ), who recently interviewed Butterfly Lab’s Sonny Vleiside, published a rendering of a circuit board that could be the first ASIC to reach the Bitcoin mining market. 
There are now no fewer than five different attempts to perform SHA2 hashing using ASIC technology but if claims by Butterfly Labs (BFL) pan out they will find themselves at the head of the pack.
When payments for pre-sales of BFL’s ASIC product line were first being accepted in June, the shipping date was estimated to be possible in October, however Josh from BFL spoke at the recent Bitcoin 2012 conference in London and referenced a November target, and even the words “before Christmas” were emitted as well.
[Disclosure: This blog contains paid ads from BFL.
The author of this blog wishes to shares the opinion that while ASIC technology will radically alter the Bitcoin mining environment, investment in that technology through means of pre-payment or buying shares of mining-related concerns should be deemed as carrying extreme risk.
The risk factors include the unknowns such as the future BTC/USD exchange rate when these ASICs do begin to ship, the amount of hashing capacity that ships and when that capacity comes online.  The timing is particularly important as mining revenue is set to drop by half (in terms of BTCs produced per-day) around the end of November.]
Previous Posts - Twitter: @BitcoinMiner

BitForce Single ‘SC’ - Preliminary Renderings

David Perry (@KJ6CCZ), who recently interviewed Butterfly Lab’s Sonny Vleiside, published a rendering of a circuit board that could be the first ASIC to reach the Bitcoin mining market. 

There are now no fewer than five different attempts to perform SHA2 hashing using ASIC technology but if claims by Butterfly Labs (BFL) pan out they will find themselves at the head of the pack.

When payments for pre-sales of BFL’s ASIC product line were first being accepted in June, the shipping date was estimated to be possible in October, however Josh from BFL spoke at the recent Bitcoin 2012 conference in London and referenced a November target, and even the words “before Christmas” were emitted as well.

[Disclosure: This blog contains paid ads from BFL.

The author of this blog wishes to shares the opinion that while ASIC technology will radically alter the Bitcoin mining environment, investment in that technology through means of pre-payment or buying shares of mining-related concerns should be deemed as carrying extreme risk.

The risk factors include the unknowns such as the future BTC/USD exchange rate when these ASICs do begin to ship, the amount of hashing capacity that ships and when that capacity comes online.  The timing is particularly important as mining revenue is set to drop by half (in terms of BTCs produced per-day) around the end of November.]

Previous Posts - Twitter: @BitcoinMiner

Landlords Focus On The Electric Bill
The purpose of Bitcoin mining is to ensure the integrity of the publicly visible distributed transaction ledger (blockchain) without the existance of a central authority.  The Bitcoin protocol achieves this by requiring that miners complete of a proof of work computation which, at its essence, sends electrons through the gauntlet and in exchange the miner receives a cash award.
Never before has there been a cottage industry that simply monetizes electricity.  Mining consumes power in a manner in which it can nearly directly be converted  to cash.
All miners compete for a relatively fixed amount of bitcoins produced which are worth roughly $1.4 million each month using the current BTC/USD exchange rate of about $6.40 USD.
As a result of this competition, mining for profit is generally only viable in certain situations that are available only to certain individuals.  This situation specifically refers to those who either build massive operations and enjoy the resulting economy of scale or, increasingly so, to those who aren’t directly paying for the cost of electricity.
There haven’t been enough FGPAs for mining shipped yet to knock the GPU off its pedestal as the technology responsible for the vast majority of hashing that occurs today.
Other than the hobbyist-level mining that occurs, success at mining commercially has meant the procurement, deployment and administration of large amounts of GPU equipment.  Because of the noise, heat and physical accommodations necessary to support such a mining operation, only a relatively small number (perhaps in the low hundreds) of these operations exist.  An even fewer number are enjoying  the benefit where electricity is included in the lease agreement.
That is about to change.

The arrival of specialized hardware, such as the Bitforce single from Butterfly Labs (BFL) and Enterpoint’s Cairnsmore1 put out much less heat (each about the same as a light bulb) and noise so they are more suitable for use in a residential home-office setting or college dorm even.  Details on ASIC designs promised by BFL have not yet been released but they too might become suitable for use at your home office desk.
Faced with the competition from these more power-efficient methods, GPU mining has not been shutting down but instead has been shifting.  Mining operators paying for electricity at average or above average utility rates (e.g., $0.15 per kWh or higher) have been selling off their GPU equipment and buying FPGAs.  There is still a healthy market for this used GPU hardware from those operators whose electric costs are much lower and from those whose power consumption is included in their residential or commercial lease.
This in effect transfers much of the cost of mining to the landlords who receive none of the benefit except, perhaps, in the greater likelihood that the mining operator pays the rent on time.
Most landlords who include power in the rent only know power consumption levels for the entire property and not on a per-unit basis.  While smart meters provide landlords with the technical ability to do utility submetering, rent controls and housing regulations often prohibit the use of submetering.
Bitcoin mining has not even been discovered by most landlords as being a contributor to utility expenses so there aren’t even clauses in most residential lease agreements which prohibit consumption of power for non-residential purposes.
That doesn’t mean landlords are not taking action to lower their electric costs.  Sustainability consultants and regulators promote a green lease to landlords and building owners as a tool to help share the burden for improving energy efficiency with the aim of reducing consumption.
Because Bitcoin mining is a 24/7 operation, it can easily represent half or more of a residence’s power consumption.  It is only a matter of time before the landlords that have been unwittingly subsidizing these commercial endeavors notice an increase in power consumption and begin to investigate.
Before investing significant amounts in mining equipment those operators who rent and plan to take advantage of utilities being included might wish to review the lease documents to become aware of any “commercial use” exclusions.  Also they should be aware of the potential that a month-to-month lease could suddenly change where utility submetering or other cost transfer might be imposed.
As far as those who mine using GPUs and pay directly for the electricity themselves?  Unless the electric rate billed is well below the average rate, now might be a good time to start thinking of where a better home might be for those inefficient GPUs.
Previous Posts - Twitter: @BitcoinMiner

Landlords Focus On The Electric Bill

The purpose of Bitcoin mining is to ensure the integrity of the publicly visible distributed transaction ledger (blockchain) without the existance of a central authority.  The Bitcoin protocol achieves this by requiring that miners complete of a proof of work computation which, at its essence, sends electrons through the gauntlet and in exchange the miner receives a cash award.

Never before has there been a cottage industry that simply monetizes electricity.  Mining consumes power in a manner in which it can nearly directly be converted  to cash.

All miners compete for a relatively fixed amount of bitcoins produced which are worth roughly $1.4 million each month using the current BTC/USD exchange rate of about $6.40 USD.

As a result of this competition, mining for profit is generally only viable in certain situations that are available only to certain individuals.  This situation specifically refers to those who either build massive operations and enjoy the resulting economy of scale or, increasingly so, to those who aren’t directly paying for the cost of electricity.

There haven’t been enough FGPAs for mining shipped yet to knock the GPU off its pedestal as the technology responsible for the vast majority of hashing that occurs today.

Other than the hobbyist-level mining that occurs, success at mining commercially has meant the procurement, deployment and administration of large amounts of GPU equipment.  Because of the noise, heat and physical accommodations necessary to support such a mining operation, only a relatively small number (perhaps in the low hundreds) of these operations exist.  An even fewer number are enjoying  the benefit where electricity is included in the lease agreement.

That is about to change.

The arrival of specialized hardware, such as the Bitforce single from Butterfly Labs (BFL) and Enterpoint’s Cairnsmore1 put out much less heat (each about the same as a light bulb) and noise so they are more suitable for use in a residential home-office setting or college dorm even.  Details on ASIC designs promised by BFL have not yet been released but they too might become suitable for use at your home office desk.

Faced with the competition from these more power-efficient methods, GPU mining has not been shutting down but instead has been shifting.  Mining operators paying for electricity at average or above average utility rates (e.g., $0.15 per kWh or higher) have been selling off their GPU equipment and buying FPGAs.  There is still a healthy market for this used GPU hardware from those operators whose electric costs are much lower and from those whose power consumption is included in their residential or commercial lease.

This in effect transfers much of the cost of mining to the landlords who receive none of the benefit except, perhaps, in the greater likelihood that the mining operator pays the rent on time.

Most landlords who include power in the rent only know power consumption levels for the entire property and not on a per-unit basis.  While smart meters provide landlords with the technical ability to do utility submetering, rent controls and housing regulations often prohibit the use of submetering.

Bitcoin mining has not even been discovered by most landlords as being a contributor to utility expenses so there aren’t even clauses in most residential lease agreements which prohibit consumption of power for non-residential purposes.

That doesn’t mean landlords are not taking action to lower their electric costs.  Sustainability consultants and regulators promote a green lease to landlords and building owners as a tool to help share the burden for improving energy efficiency with the aim of reducing consumption.

Because Bitcoin mining is a 24/7 operation, it can easily represent half or more of a residence’s power consumption.  It is only a matter of time before the landlords that have been unwittingly subsidizing these commercial endeavors notice an increase in power consumption and begin to investigate.

Before investing significant amounts in mining equipment those operators who rent and plan to take advantage of utilities being included might wish to review the lease documents to become aware of any “commercial use” exclusions.  Also they should be aware of the potential that a month-to-month lease could suddenly change where utility submetering or other cost transfer might be imposed.

As far as those who mine using GPUs and pay directly for the electricity themselves?  Unless the electric rate billed is well below the average rate, now might be a good time to start thinking of where a better home might be for those inefficient GPUs.

Previous Posts - Twitter: @BitcoinMiner

Mining With GPUs - The Bitter End?
Though the recent rally in the exchange rates has caused mining profitability to rise to the highest level seen since February, many mining operators are planning for the future and liquidating their inefficient rigs, as shown in this post’s photo.
In less than six months, block 210,000 will be reached and with that event the block reward will drop by half, to the level of just 25 BTC.  Thus instead of 7,200 BTC targeted for issuance per-day, only 3,600 BTC per-day will go to those mining.
Because it can’t be known what the exchange rate and mining difficulty level will be at that point in time, mining operators are preparing by either switching over to more efficient mining equipment or are liquidating operations outright — oftentimes due to the higher capital requirements needed to acquire the modern forms of mining hardware (FPGA and ASIC).
But one mining operator’s pain is another’s gain.  Those operating where electric rates are a fraction of their competitor’s rates are still able to compete while mining with GPUs due to the comparatively lower cost of GPU hardware.  Lower cost, maybe, but they still aren’t cheap.  Even though the GPUs from this post’s photo are offered for sale as being used previously for mining (presumably for many months) they still have a relatively high market value compared to the price when they are purchased brand new.  The HD 6950s in this instance, are offered at only a 25% discount versus the current price from NewEgg.
The seller, in this instance, is not leaving mining but instead “restructuring” his mining operation to use far less power to be compatible with the operation’s new solar power source.  “I’m in a position to buy enough solar panels at an amazing price that I’ll never need to buy electricity again” writes forum member AmpEater.
So while there likely won’t be less GPU mining occurring in total, there will be a rotation of hashing equipment.  GPUs are being decommissioned where power is expensive and those same cards remain a valued commodity to those with access to power that is relatively cheap.
If the exchange rate continues to rise faster than the difficulty does, even with the block reward drop these mining operators using GPUs yet might come to find their strategy paying off handsomely.
Previous Posts - @BitcoinMiner

Mining With GPUs - The Bitter End?

Though the recent rally in the exchange rates has caused mining profitability to rise to the highest level seen since February, many mining operators are planning for the future and liquidating their inefficient rigs, as shown in this post’s photo.

In less than six months, block 210,000 will be reached and with that event the block reward will drop by half, to the level of just 25 BTC.  Thus instead of 7,200 BTC targeted for issuance per-day, only 3,600 BTC per-day will go to those mining.

Because it can’t be known what the exchange rate and mining difficulty level will be at that point in time, mining operators are preparing by either switching over to more efficient mining equipment or are liquidating operations outright — oftentimes due to the higher capital requirements needed to acquire the modern forms of mining hardware (FPGA and ASIC).

But one mining operator’s pain is another’s gain.  Those operating where electric rates are a fraction of their competitor’s rates are still able to compete while mining with GPUs due to the comparatively lower cost of GPU hardware.  Lower cost, maybe, but they still aren’t cheap.  Even though the GPUs from this post’s photo are offered for sale as being used previously for mining (presumably for many months) they still have a relatively high market value compared to the price when they are purchased brand new.  The HD 6950s in this instance, are offered at only a 25% discount versus the current price from NewEgg.

The seller, in this instance, is not leaving mining but instead “restructuring” his mining operation to use far less power to be compatible with the operation’s new solar power source.  “I’m in a position to buy enough solar panels at an amazing price that I’ll never need to buy electricity again” writes forum member AmpEater.

So while there likely won’t be less GPU mining occurring in total, there will be a rotation of hashing equipment.  GPUs are being decommissioned where power is expensive and those same cards remain a valued commodity to those with access to power that is relatively cheap.

If the exchange rate continues to rise faster than the difficulty does, even with the block reward drop these mining operators using GPUs yet might come to find their strategy paying off handsomely.

Previous Posts - @BitcoinMiner