
Bitcoin's mining difficulty has increased by 41.9% over the last 30 days - arnauddri
https://kaiko.com/statistics/difficulty
======
mrb
Nobody on HN pointed out who is behind the increase... This is BitFury who
just launched a 40 megawatt data center filled up with their new 16 nm chips
which reportedly achieve approximately 0.06 joule per gigahash. They also use
immersion cooling which gives them an insane PUE of 1.02. So the mining
capacity of this DC alone is ~650 Phash/s! We saw an increase of ~200 Phash/s
in the last 30 days, so presumably they are at only operating at 1/3rd of
their capabilities so far:

40e6 (watt) / 0.06 (joule/gigahash) / 1e6 (petahash/gigahash) = ~650
petahash/second

BitFury's immersion cooling tech:

[http://datacenterfrontier.com/immersion-cooling-
bitcoin/](http://datacenterfrontier.com/immersion-cooling-bitcoin/)

[https://www.youtube.com/watch?v=uV7MDhqNyXE&t=0m42s](https://www.youtube.com/watch?v=uV7MDhqNyXE&t=0m42s)
(shows the fluid boiling - starts at 0m42s)

[https://www.businesswire.com/news/home/20151211005837/en/Bit...](https://www.businesswire.com/news/home/20151211005837/en/BitFury-
Launch-Energy-Efficient-Immersion-Cooling-Data)

BitFury's 16nm chips:

[http://www.businesswire.com/news/home/20151216005453/en/BitF...](http://www.businesswire.com/news/home/20151216005453/en/BitFury-
Announces-Mass-Production-Fastest-Effective-16nm)

~~~
sanswork
So less than half of one datacentre entirely owned by one company is enough to
commit a 51% attack. I get that they say they are going to work on
distribution these chips to ensure they don't end up in that position but
let's be honest they just destroyed any claim that the network is powerful
enough to avoid malicious control by one miner now. They've not even raised
that much money.

~~~
sowbug
Malice isn't enough. The only special power of a 50% miner is to consistently
resolve double-spend attempts in its favor. If this happened, it would surely
lower the value of Bitcoin. This, an attacker must be not just malicious but
also irrational enough to forfeit the $800,000 in Bitcoin that it creates
daily by virtue of its 50% control of the network. (6 blocks/hour x 24
hours/day x 25 bitcoin/block x $450/bitcoin x 50%)

~~~
geofft
Stupid question: if control of 50% of the hash power is so unimportant, why
does Bitcoin rely on hash power anyway? Why not simply have a consensus system
without proof-of-anything?

~~~
ozmbie
If you remove proof-of-work, then the question then becomes: what else do you
measure consensus by? A few other crypto currencies have tried other metrics
but they all aim to for the same thing: removing the need for human trust.

------
web007
Slightly-more-available link
[https://bitcoinwisdom.com/bitcoin/difficulty](https://bitcoinwisdom.com/bitcoin/difficulty)

Hash rate has increased by 41.9% over the same period, so the difficulty has
kept the time-to-generate relatively fixed - just the way it's supposed to
work.

The real news is that someone or someone(s) have added ~200PH/s worth of
processing power to the network in the past 30 days. This is probably from
some high-power ASIC miner being released, or from some consolidated mining
concern going live.

------
HappyTypist
The billion dollar question is how we can have completely decentralised (and
not merely distributed) consensus without proof of work. It's a difficult
question, and various proposals like Proof of Stake (not secure) and Consensus
Ledger (not secure, not decentralised) have all failed technically and on the
market.

------
mwilcox
[https://www.businesswire.com/news/home/20151211005837/en/Bit...](https://www.businesswire.com/news/home/20151211005837/en/BitFury-
Launch-Energy-Efficient-Immersion-Cooling-Data)

~~~
twic
40MW! For bitcoin! This is nuts!

~~~
urbanarson
For comparison, how much power does Visa, Mastercard, the Federal Reserve (and
its printing presses), banks, and all of the buildings and employees that work
in the traditional financial sector use? Now think about that in every single
country on this planet. It's a lot more than 40MW. The Bitcoin network is a
steal by comparison.

~~~
homogeneous
You're comparing the microscopic bitcoin economy to the financial
infrastructure that services the entire planet; it's a ridiculous comparison.

How would bitcoin's power consumption stack up if it were tasked with
servicing tens of millions of transactions per second?

~~~
CyberDildonics
> How would bitcoin's power consumption stack up if it were tasked with
> servicing tens of millions of transactions per second?

It would stay almost the same since the hashing power is not connected to the
number of transactions.

Also by the way, no one does tens of millions of transactions per second, visa
does something like 40,000 at their absolute peak.

~~~
gritzko
No, no, no.

The amount of power wasted by BitCoin indirectly depends on the monetary
turnover of the system. Because if somebody can spend $1mln to perform 51%
attack and move around $1bln, that will likely be done. Hence, the power
wasted is proportional to the turnover of the system. Otherwise, it does not
work.

Also, when a bank charges me 1% for a wire transfer, they pay salaries from
that money and some people buy food. The power burnt by BitCoin is actually
literally immediately irrecoverably physically _wasted_.

~~~
CyberDildonics
You seem adamant about something that you clearly do not understand.

> Because if somebody can spend $1mln to perform 51% attack and move around
> $1bln, that will likely be done.

Then why hasn't it been done? The answer is that bitcoin doesn't even remotely
work like this. You would have to sign a transaction, then double spend it to
yourself, then BY CHANCE mine enough blocks to satisfy the person giving you
whatever you are buying before they see the double spend.

That is not going to happen. Someone receiving a million dollars will not give
over a briefcase of cash the second they see the transaction, and that's the
only way something like this would work. If you are taking money out of an
exchange, the exchange would never even credit your account, let alone send
you money. They would see the double spend transaction and if by some chance
(0.015625%) you managed to mine the next 6 blocks or so, they would just wait
longer since there is a double spend out there. By the time they might
actually send you money, the chances of you mining all the blocks up until
that time is practically zero. So you would then be gambling your million
dollars against enormous odds.

You might not want to believe that bitcoin works, and it might seem counter
intuitive that the proof of work is important and useful, but this isn't about
how you wish the world works, it is about how the world ACTUALLY works, and
that is why bitcoin actually works.

~~~
gritzko
You are focusing on a single scenario of an individual double-spender. Why
don't you consider some other scenario, e.g. a hacker getting control of a
major BitCoin mining facility to disrupt things just for a laugh? I've seen a
lot of that happening. There are tens of possible scenarios. Mining capacity
is highly centralized these days and that trend will likely develop further
(see the subj). The mental model of "one malicious node against all the honest
nodes" is totally bogus.

So far, my observation is that BitCoin can't run cheaply on the reasons
already mentioned. I will only buy your argument if you'll show me a graph of
power consumption vs turnover and it will happen to be sub-linear.

~~~
CyberDildonics
If a miner gets hacked, then their blocks will go to the attacker, or they
won't be mining. Blocks will be mined more slowly and transactions may take
longer for the same number of confirmations until the miner comes back. If a
bank gets hacked, people steal money enormous amounts of money by directly
changing their ledgers. I don't see this as some sort of a loss for
cryptocurrencies.

I'm not sure what you mean by turnover although you might want to learn more
about bitcoin before you rail so hard against it.

~~~
gritzko
Turnover: the amount of business transacted during a given period of time. How
much BitCoins change hands in a month, for example. Actually, plotting that in
dollars is even more correct, as electricity costs are not paid with BitCoins.

Ultimately, that is a graph of dollars moved vs dollars wasted. (I explained
the difference of "spent" and "wasted" in a different comment.)

------
forrestthewoods
Bitcoin feels a bit like the gold standard. Massive mining operations dumping
huge volumes of resources and energy to acquire some thing that is only mildly
useful. It seems quite wasteful.

~~~
nemild
There's a pretty good writeup about this issue in the Stanford/Princeton
Cryptocurrency Class:

[https://drive.google.com/uc?id=0B4-bDFu_72Beelkxd3VlbXoyd0E&...](https://drive.google.com/uc?id=0B4-bDFu_72Beelkxd3VlbXoyd0E&export=download)

Excerpt: According to our estimates then, the whole Bitcoin network is
consuming maybe 10% of a large power plant’s worth of electricity. Although
this is not an insignificant amount of power, it's not yet a large amount of
electricity compared to all the other things that people are using electricity
for on the planet.

Any payment system requires energy and electricity. With traditional currency,
lots of energy is consumed guarding and moving gold bullions around, running
ATM machines, coin sorting machines, cash registers, and payment processing
services, and transporting money in armored cars.

Some people say Bitcoin wastes energy because the energy expended computing
SHA-256 hashes doesn’t serve any apparent purpose. But you could make this
same argument for traditional currency as well — there’s a lot of energy being
wasted and it doesn't serve any purpose besides maintaining the currency
system. So, if we value Bitcoin as a useful currency system, then the energy
required to support it is not really being wasted.

That said, we can ask if there’s a way to do better ...

~~~
gritzko
I believe that most of money consumed by the financial system actually goes
back into the economy. Some bankers buy sushis, then sushi chefs buy gasoline,
then oil drillers... and so on.

BitCoin tends to waste energy irrecoverably.

Apples-to-apples comparison is a challenging task, but the modern financial
system hardly has that feature of burning more for the sake of burning more.

~~~
exo762
> I believe that most of money consumed by the financial system actually goes
> back into the economy. Some bankers buy sushis, then sushi chefs buy
> gasoline, then oil drillers... and so on. BitCoin tends to waste energy
> irrecoverably.

Bitcoin is best technical solution we have for an existing societal problem.
As soon as better technical solution will be created (e.g. proof-of-stake
which can be relied upon), Bitcoin will be modified to use it. And Bitcoin
will continue to operate with lower costs - burning less energy.

------
LAMike
Once the 16nm chips become a commodity, it will make sense that the hashing
power would get more distributed.

I hope figures out how to get a solar powered, interchangeable bitcoin miner
in a box at a positive ROI. It may seem impossible now, but solar prices are
falling faster than expected.

~~~
maaku
Why would you expect hashing power to become more distributed? Mining is a
race to the bottom/thin margins, and the differentials in power rates far
exceed normal miner profit margins. It would still only be profitable to mine
at scale in a few select locations in the world.

~~~
ZenoArrow
> "Why would you expect hashing power to become more distributed?"

[http://www.businesswire.com/news/home/20151216005453/en/BitF...](http://www.businesswire.com/news/home/20151216005453/en/BitFury-
Announces-Mass-Production-Fastest-Effective-16nm)

"Valery Vavilov, CEO of BitFury, said: “We are very excited to launch mass
production of our super 16nm ASIC Chip. The final results of our hard work
have fully met our expectations. We understand that it will be nearly
impossible for any older technology to compete with the performance of our new
16nm technology. As a responsible player in the Bitcoin community, we will be
working with integration partners and resellers to make our unique technology
widely available ensuring that the network remains decentralized and we move
into the exahash era together. BitFury warmly welcomes all companies
interested in joining our integration and reseller program.”"

~~~
maaku
That doesn't address any of the concerns I raised.

~~~
ZenoArrow
Yes it does. If the article is correct, the 16nm BitFury chips will be sold to
interested parties, so new mining capacity won't be dominated by a single
company, thereby ensuring newly mined BitCoins can be distributed throughout
the network.

If your concerns were about something other than distribution, please clarify.

~~~
maaku
They will be sold to interested parties.. and hosted in the same data center.
Back to square one.

It takes a price per kW-hr differential of about $0.03 before it makes sense
to put miners on a plane. That's far less than the power differentials one
would expect, so those miners will stay put. Just paper ownership will change
hands.

~~~
ZenoArrow
> "and hosted in the same data center."

This is why we're disagreeing, I can't see any indication that the chips will
not be used in other data centres. Where are you getting this information
from?

------
jegutman
An interesting though exercise:

Does the new capacity make a bitcoin more valuable or less valuable?

Intuitively seems like more valuable, but the average cost in energy to mine
the marginal block has gone down (otherwise the new miner wouldn't be mining)
and that's often though of as the floor on BTC value.

Seems like having a stronger network is a net plus, and since they're probably
not near the 50%+1 threshold it probably is in fact a stronger network.
Although maybe they will get close if marginal miners are forced to turn off
if the price of XBT drops and BitFury is enough more efficient.

Although BitFury is probably not a bad actor, technically a 50%+1 attack is
not obviously illegal (IANAL), although a government might step in ironically
enough. It seems to me these types of more centralized setups do introduce
some tail risk to the system.

~~~
brianpgordon
There's an interesting book on the economic underpinnings of Bitcoin-

[https://s3-us-
west-2.amazonaws.com/chainbook/The+Anatomy+of+...](https://s3-us-
west-2.amazonaws.com/chainbook/The+Anatomy+of+a+Money-
like+Informational+Commodity.pdf)

> we now know that there is a near precise model that describes the cost of
> running and maintaining the network. The way the cost estimate is determined
> is through how Bitcoin acts as a decentralized waste heat creator that
> activates and deactivates heat generation based on market participation and
> pricing signals. What do the randomizations necessary for cryptography and
> the waste heat produced by computing devices have in common? One word:
> “exergy,” a term of art describing the maximum useful work possible during a
> process that brings a system into equilibrium with a heat reservoir. Exergy
> is always destroyed in the seigniorage hashing process - for example - if a
> token's value increases to $1,000, this means that at most $1,000 worth of
> waste heat will be generated somewhere in its creation.

From my reading of the text, it's not so much the additional hash power that's
valuable, it's the additional money spent building and operating the ASICs. In
theory, the market cap of a proof-of-work system should approach its total
cumulative cost to secure. The more watts you see being dumped into the
environment calculating hashes, the more you should value Bitcoin.

If Bitcoin is worth less than its cost to mine, no rational miner will mine
(if they want BTC they'll just use their electricity budget to buy it on the
market), so the competition (and therefore the cost) to mine each block goes
down. If Bitcoin is worth more than its cost to mine, mining becomes
profitable to anyone willing to put up the capex, so the competition (and
therefore the cost) to mine each block goes up. There's an equilibrium where
the value of Bitcoin is equal to its cost to mine.

The actual price of bitcoin as seen by the average consumer is insulated from
the cost to mine because of effects like speculation, perceived future
movement, and the value provided by ease of spending / anonymity, so the
economic theory isn't really accurate, but that's why it's a theory!

------
blencdr
No one is afraid of the ecological cost of crypto currencies ?

We are in a world where the energy has a frightening ecologic cost and people
to spend it in gigantic quantities just to create a virtual money...

~~~
nanny
>No one is afraid of the ecological cost of crypto currencies ?

I am. But this is a drop in the bucket compared to financial sectors that deal
with "real" money. Really, isn't nearly all modern money "virtual"? Nevermind
the fact that a lot of money only exists electronically, modern money doesn't
actually physically represent anything. Therefore: virtual.

~~~
blencdr
The problem is not the virtual character of the money, but the energy involved
to create it.

The idea behind it is that you need energy to gather money (metalic money for
example). but this is pointless for bitcoin, it's just wasted without any
utility.

------
rpwverheij
looking at the chart there are plenty of places there was more increase in
difficulty in 30 days. In the whole 2014 difficulty seemed to have multiplied
40 times! I understand the magnitude is a whole different story now though..

------
aurizon
More powerful miners beget higher work needed to mine. A small cadre of people
with ultrpowerful mining gear have pushed a more difficult task on the rest of
us.

~~~
escherize
... by simultaneously facilitating a large ratio of bitcoin's infrastructure.

~~~
woah
Not 100% sure, but from your tone it sounds like you think they are performing
some kind of service. This is not true. Miners do not increase the number of
transactions the network can handle. An infinitesimal amount of the
electricity going into mining is actually goes to process transactions. A
raspberry pi in a shoebox running mySql is capable of processing more
transactions than the entire bitcoin network, liquid nitrogen and all.

All that mining does is give the person with the most hashrate more voting
power in which transactions will be accepted. Innovation in mining hardware
and data centers does not in any way increase bitcoin's security.

~~~
jnbiche
> All that mining does is give the person with the most hashrate more voting
> power in which transactions will be accepted. Innovation in mining hardware
> and data centers does not in any way increase bitcoin's security.

This is completely wrong. The higher the difficulty, the harder it becomes to
attack the network, which is a critical feature. If anyone who rented a data
center could attack Bitcoin at this point, it would be even less stable (much
less!) than it has been already.

~~~
woah
No. Read what I said. "Innovation in mining hardware and data centers does not
in any way increase bitcoin's security."

If everyone can use technology to push a higher hashrate, then what has
changed? The people who can get their hands on new mining chips first have an
advantage for a little while, but in the end it's a zero-sum game. The pie is
100% of hashing power/block validation power. How can you divide a pie into
more than 100%?

~~~
lmm
If a dedicated data center is more effective than a commodity data center then
that increases bitcoin's security, because it means a greater proportion of
the hashrate resides with people who have an expensive long-term commitment to
bitcoin and it's more expensive for an outsider to match that.

------
kushti
Some alternatives.
Permacoin([http://cs.umd.edu/~amiller/permacoin.pdf](http://cs.umd.edu/~amiller/permacoin.pdf))
has mostly the same security properties, but effectiveily non-outsorceable,
and work done is useful. We made the first open-source implementation of that
[https://github.com/ScorexProject/Scorex-
Lagonaki/tree/master...](https://github.com/ScorexProject/Scorex-
Lagonaki/tree/master/scorex-perma) .

I also have paper draft about better Proof-of-Stake protocol, and would like
to share it with people from academias to get a feedback. Please write me (
kushti at protonmail dot ch ). I also have half-written paper draft about
PoW+PoS hybrid chain.

------
module17
What broke?

~~~
Kinnard
It doesn't mean anything is broken.

The recent rise in price justifies bringing miners online or shifting them
away from other cryptocoins.

Halving day is coming soon too.

~~~
Mandatum
It's predicted to happen mid-2016, 70% of all coins to ever be mined have been
so.

This has been a really interesting tech to watch over the years.

~~~
austinjp
What happens when we reach 100%?

~~~
jonknee
We re-learn why a deflationary currency is an awful idea.

~~~
CyberDildonics
Like precious metals? Deflationary currencies have been used successfully for
over 1000 years.

The only people it is bad for are governments. Throughout history there is a
patter of promising, spending, and becoming insolvent.

The idea that an individual wouldn't choose a deflationary currency is
ludicrous. Inflationary currencies are what you want everyone else to use.

And by the way, the cat is out of the bag. Cryptocurrencies are here, bitcoin
or not. When people can choose to use any currency they want, will they choose
one that inflates? I doubt it.

~~~
maaku
Yes, like precious metals. The history of precious metal economies is pretty
bad -- decades-long recessions and wars triggered by fluctuations in the
commodity markets. Deflationary currency is not a good thing, and bitcoiners
will eventually realize this.

(Note I work on Bitcoin Core and co-founded Blockstream, a prominant bitcoin
company. The value of Bitcoin is not the currency, but rather what censorship-
resistant, distributed global consensus gives us.)

~~~
lmm
> (Note I work on Bitcoin Core and co-founded Blockstream, a prominant bitcoin
> company. The value of Bitcoin is not the currency, but rather what
> censorship-resistant, distributed global consensus gives us.)

You can get that while being less deflationary though, e.g. Dogecoin.

~~~
maaku
Or Freicoin, which I co-authored with another Blockstream founder. But neither
has the network buy-in and security of Bitcoin.

------
jgalt212
What a colossal waste of electricity. Great, they've created a general ledger
and currency formed by individual untrusted participants, but who in the
aggregate are trusted.

What about this: Why not just diversify your risk by doing transactions or
investing in currencies/assets across a diversified set of untrusted
counterparties? Same net effect, and a lot less electricity wasted.

~~~
ikeboy
Huh? How does this "diversifying risk" idea let you do any of the major
bitcoin applications? (For example, how would your idea that has the "same net
effect" as bitcoin allow anonymous markets?)

~~~
jgalt212
Bitcoin is not anonymous. The entire ledger history is exposed. Through
network analysis you can figure out who the original anonymous holder is. And
as soon as that holder tries to convert to a fiat currency their identity will
be exposed. It's precisely because Bitcoin is way more traceable than cash,
the US government has not tried to shut it down despite a lot illegal activity
being paid for via bitcoin.

As soon as Satoshi tries to convert any of his coins into dollars or any other
legacy currency everyone will know who he is.

~~~
ikeboy
This is wrong. Plenty of people have converted to fiat and not been caught,
there are ways of mixing coins.

~~~
jgalt212
Actually, we're both wrong. Just because you have not been caught does not
mean there hasn't been loss of anonymity. And if you mix enough coins you can
decrease the chances of being pinpointed exactly as the source, but you cannot
definitively remove yourself from the bucket of suspects.

~~~
ikeboy
>And if you mix enough coins you can decrease the chances of being pinpointed
exactly as the source, but you cannot definitively remove yourself from the
bucket of suspects.

Not in my understanding. I have some coins X that are tainted. I send them to
you, Y. You, Y, happen to have other coins completely unrelated to the address
I sent my X coins to, and you send them to me at address Z. There's no
blockchain link between X and Z.

I suppose physically tracking you down, assuming you keep logs, could hurt me,
but if I trust you not to keep logs then I'm safe after you delete the logs.

~~~
jgalt212
This is what I mean about reading the whole ledger. If wallet X is a target,
then anyone who transacts with X is a target (which includes Y (anyone with a
direct link to X) and Z (anyone with an indirect link to X)). We are dealing
in probabilities here, but we definitely don't have untraceable transcations.
The authorities have a finite number network paths/leads they can track down.

Of course, the more washing transactions you do with dirty coins the harder it
is to track down the original wallet. That being said, the blockchain is
somewhat self limiting in how many transactions it can processes per unit of
time and thus the its obfuscating capabilities are diminished.

~~~
ikeboy
But Y might be over Tor, or might not keep logs. There's no mechanism I can
see for getting past wiped logs after the fact. If everything is done in RAM,
and the machine is rebooted every few days, there's pretty much nothing you
could do afterwards.

If all you need is a finite number of leads, then trivially the number of
humans/bitcoin users is finite. I don't think that makes a difference.

~~~
jgalt212
Regardless of whether or not Y is over TOR, it cannot serve as a cut out. All
the transactions are stored on the blockchain. So if Y tries to convert to
dollars, then they have him. Or if Y's proxy Z tries to convert to dollars,
they have Z (and by extension Y).

For these reasons, I cannot figure out why they don't know who stole the MtGox
bitcoins. The only way to hide is to forever keep your booty in bitcoins.
Whenever the thief tries to convert his/her bitcoins to money or goods, the
veil of anonymity will be pierced. And given the amount money involved in
MtGox, it would be blow wide open.

As an aside, this has to be one of the deeper HN threads that has not devolved
into a flame war. kudos to us.

~~~
ikeboy
It doesn't matter if they catch Y, as long as he didn't keep logs. Nobody, not
even Y, knows who Z is, so Z can safely use his coins.

>For these reasons, I cannot figure out why they don't know who stole the
MtGox bitcoins.

When you don't understand something, something might be wrong with your model.
([http://lesswrong.com/lw/if/your_strength_as_a_rationalist/](http://lesswrong.com/lw/if/your_strength_as_a_rationalist/)
comes to mind).

The exact addresses of the Gox stolen coins aren't known AFAIK. Even if they
were, to cash out you only need to get someone to accept them without
verifying ID. I can send coins to an exchange, and have them send me other
coins in a different cryptocurrency, and send those to another exchange, then
convert back to btc. If the intermediate currency is something like Monero,
then the chain analysis must stop there.

I'm not saying most mixing happens through alts, but it is a fairly foolproof
method for anonymity, at the cost of not supporting volume and high fees.

Also, you can sell to people for cash, so any investigation hits a dead end.
There are probably dozens more ways to cash out anonymously.

~~~
jgalt212
> as long as he didn't keep logs.

It doesn't matter who keeps the logs, the blockchain is the log. I really
think you are the one who is missing something. Because the blockchain has the
entire history, everyone knows every transaction wallets X, Y, Z and any other
wallet has ever done.

> A block chain is a transaction database shared by all nodes participating in
> a system based on the Bitcoin protocol. A full copy of a currency's block
> chain contains every transaction ever executed in the currency. With this
> information, one can find out how much value belonged to each address _at
> any point in history_.

[https://en.bitcoin.it/wiki/Block_chain](https://en.bitcoin.it/wiki/Block_chain)

~~~
ikeboy
You don't understand how mixing can work. I send money to your right pocket,
you send me money back from your left pocket. At no point were your right and
left pockets connected. As soon as you destroy your logs of what your pockets
were, there's no way to identify which pocket was which.

Do you understand the concept of taint in block chain analysis, and how mixing
can produce untainted coins?

~~~
jgalt212
I'm talking about tainted wallets, not coins. When a tainted wallet tries to
transact outside the bitcoin system, then you're busted.

------
Kinnard
This is a strong indication that a light show is coming.

~~~
johndevor
What?

