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A Bitcoin miner in every hand (medium.com/21dotco)
167 points by zmanian on May 18, 2015 | hide | past | favorite | 118 comments

Instead of spending $1 on something, you can burn $5 of electricity! Suppliers figure you're more likely to waste some energy than you are to type in a credit card number, so they say go for it.

And as the big ASIC miners get more efficient, your device will generate even less revenue. In two years, you'll be running at a small fraction of the chip's original mining rate, but still wasting just as much energy!


I'll pass, thanks.

More like spend 5 millionths of a cent's worth of electricity to receive a transaction token that trades for 1 millionth of a cent. But that token (1 satoshi) has much more utility than as just a store of value and has been loaded onto your personal device without you having to do anything. And can be used by software on your personal device to give you extra functionality without again you having to do anything. Or even really understanding how it works or what is going on at the technical level.

People walk around with extra apps on their phones consuming battery life all the time. If a user was presented with an option to turn on some hardware in their phone that gave them all sorts of interesting additional functionality and at the same time were warned that it would decrease the battery life of their phone by 1 or 2 percent then I think you have a viable proposition.

But provided a Satoshi has a magical value beyond as a way to make transactions, why not spend 2 millionths of a cent where electricity is less valuable (i.e., before it's been converted in a lossy fashion many times and stored in my pocket where it's worth a lot more) and just transfer that Satoshi to a wallet on the phone?

This play only makes sense if someone is extracting the actual currency value of a Bitcoin somewhere along the line.

If that value is going to me as the consumer, it's a terrible trade because it's taking the electricity that's gone through the most conversion losses from me in the place where it's most valuable. I might as well buy Bitcoin elsewhere. If some of that value is going to the chipset manufacturer or a middleman like 21, it's a straight up scam where somebody is stealing the electricity I put into my phone.

An HSM for Bitcoin wallets in a phone makes a small degree of sense to me, a mining ASIC makes none whatsoever.

> This play only makes sense if someone is extracting the actual currency value of a Bitcoin somewhere along the line.

I would think that's the very point. And it's not like there wasn't a precedence in the physical world already.


I still remember when stamps were occasionally used as a fractional currency. You could order small things over mail and send payment as stamps.

This phenomonenon was even used by Terry Pratchess as a minor plot detail in Going Postal, and subsequently in Making Money. The idea was dead simple: stamps had real value. Eventually, someone would need to spend it to actually mail things, but until then people could use them as a form of microcurrency. So a single unit might be "spent" several times in unofficial transactions before getting used for its intended purpose. The stamps weren't any more valuable as such, but their added utility made them useful in a wider setting.

There's some talk about the history in [0], and slightly better researched in [1].

0: http://message.snopes.com/showthread.php?t=16067

1: http://en.wikipedia.org/wiki/Fractional_currency_%28United_S...

EDIT: one more, this time something recent and still practiced - pre-paid call time as currency: http://www.economist.com/news/finance-and-economics/21569744...

"And can be used by software on your personal device to give you extra functionality without again you having to do anything."

Without you having to do anything but pay for and power a dedicated chip. If the utility of having a tiny amount of BTC on device is so high, and the cost so low, why not just have the device manufacturer pre-load a lifetime supply on the device (purchased or mined in a giant wind powered data center)? Seems the cost of this buying this chip is much higher than just buying the BTC outright for the user.

Worthless, unless you want to be beholden to 21's mining pool. The minimum block-chain transaction size is 546 Satoshis.

Why not have a background app that periodically purchases a satoshi now and then?

I guess an important (not to say THE) feature is that you get paid services without setting up any payment method like a credit card/paypal etc.

Because that would imply spending actual money. People don't usually see electricity as money.

>> all sorts of interesting additional functionality

I'm not sure I see the value proposition in paying 5 times over the odds for the smallest possible amount of bitcoin....

Imagine if someone made the opposite of this device, an energy generating device which could supply you with revenue [after the subsidy is paid off] and was not restricted to any particular currency ecosystem.

It'd be like putting a tiny solar panel on your retail consumer grade router, one that degrades very rapidly over time, and generates electricity at a higher cost than to simply buy it (from industrial grade dedicated solar parks), in a world where you can send energy as easily as sending email, or for that matter, bitcoin.

It's ridiculous. I'm curious about the bigger picture because they have a stellar team, backing, board and bank account right now.

"Hang on, I just rode my bike to the office, let me plug it into my parking spot so I can discharge the capacitor and get paid for the ride up here and I'll come up to your office."

We're having fun at this, but I think you may have just found a way to better gamify wellness initiatives...

Bicycle riders only produce a few hundred watts, while an average kilowatt/hr is worth 12 cents.

It's kilowatt-hour, not kilowatt/hour. Multiply, not divide.

It's kilowatt*hour not kilowatt-hour. Multiply, not subtract.

Haha, thought the same.

Exercise bikes that mine bitcoin. Hey Tesla, who needs batteries if you can store energy as monetary value.

As with commodities trading, the actual product has to exist somewhere.

Reminds me of The Calorie Man which is quite good if disturbing.


So where does the energy to move the bike come from?

You mean something like solar panels?

run the excess energy into a bitcoin farm instead of batteries?

Can't solar panel owners sell their excess energy back to the grid for USD?

Seems more cost effective than to buy, run, and cool depreciating mining hardware.

It seems more cost effective to just use batteries

The graph you linked is very old. The hashrate is plateauing[0].

0 https://blockchain.info/charts/hash-rate?showDataPoints=fals...

Oh good. The one I linked was just what showed up first on Google. Still, I doubt hashrate will level off entirely.

And if 21 is successful (I hope not...), they'll continue to drive it up further than it would have gone otherwise.

> And as the big ASIC miners get more efficient, your device will generate even less revenue.

I think that the period where plain bitcoin was seen as a mere store of value is about to end. We are entering a more exciting period which is the "bitcoin as protocol" stage, where sub-currencies (like Colored Coins, BitShares, etc) will be more valuable than bitcoin itself. And for this, tiny amounts of btc suffice.

This is why I think that Balaji and his team are taking the right direction. The goal is trying to make the system as much autonomous and frictionless as possible.

The first key here is autonomy: IBM has already forked Ethereum for its IoT with SmartContracts (ADEPT) [0], where for instance fridges could detect when you're running low of X and place an order for you. Generating your own tokens gives you greater autonomy and makes you relatively independent of the big mining operations/pools.

The second key here is friction: the current state of UX in bitcoin-world (and crypto in general) is extremely horrible and preventing the big adoption everybody in the space is aiming for. So building and integrating a chip that generates tokens w/o the user intervention is one way of bypassing this huge UX flaw. Maybe is not the most efficient way but it's the first serious take we've seen.


Why should a user have to configure an account so your browser can generate/read http requests/responses? The same way, it makes sense being able to generate/read crypto tokens. The value of those tokens are not in the current (or future) stock valuation of bitcoin, but in the valuation of the objects that the tokens will be associated with: financial tools, real estate, legal contracts, etc

[0] https://www.theprotocol.tv/adept-demo-ibm-samsung/

PS: btw I think Ethereum and distributed PoW/PoS is a more efficient use of the blockchain tech.

The perpetual SHA256 hashing machine...

Did anybody tell 21 that pure proof-of-work hashing was just an experiment and could go the way of the dinosaur?

Ethereum, Nxt and other cryptocurrencies are already using proof-of-stake or some other hybrid process...

Ethereum isn't using proof-of-stake quite yet, that's planned for a later version in a year or so. They're starting out with a proof-of-work algorithm that's designed to be ASIC-resistant. (It's heavy on memory bandwidth, which is already optimized in GPUs.)

Not that this makes any difference to your point, of course.

Are you sure?

Yes. Here's the forum on ethereum mining: https://forum.ethereum.org/categories/mining

And a blog entry from half a year ago that describes their plans: https://blog.ethereum.org/2014/12/17/ethereum-dξv/

dagger hashimoto

I am extremely glad that most comments here see the inherent craziness of this idea. I am a hardware designer who participated heavily in mining since Jan 2011, and gave up completely on Bitcoin in summer of 2014.

The big problem that Balaji is completely ignoring is that SHA256 cores implemented in silicon have extraordinarily high power consumption relative to their size (mm2). This is due to the incredibly high signal switch rate inherent to implementing avalanche-style ciphers [1] in hardware. Perversely, most modern semiconductor processes optimize for static (leakage) power, since modern silicon designs are more vulnerable to this than to dynamic power. No rational semiconductor maker will want to include this IP on chip, because it will drastically complicate the power distribution metal layers. Additionally, it will require more expensive packaging, since you will need many more power and ground pins to source/sink the required current. I know this first hand after building a mining ASIC myself. I would venture a guess that most SoC chips would cost significantly more due to the extra engineering time and packaging cost needed to include this IP.

This entire concept is a non-starter for me.

[1] http://research.neustar.biz/2012/02/02/choosing-a-good-hash-...

Out of curiosity: what made you give up on Bitcoin? (I'm still bullish on crypto-economies in general, but am concerned that the electricity costs of PoW creates a downward price pressure that's unsustainable.)

Why would that be? The maximum PoW can depress the price is the inflation rate. Nobody will pay $1 for electricity to generate <$1 of bitcoin. And the inflation rate of bitcoin is set to drop below that of any large currency like dollars, euros, yen.

In other words, the money supply that causes inflation (downward price pressure of currencies) is by design lower than fiat currencies. It's one of the key things supposedly we're not ought to be concerned about with bitcoin, so far I see no reason to think otherwise.

> Nobody will pay $1 for electricity to generate <$1 of bitcoin.

Hobbyist miners are convincing themselves that <$1 of Bitcoin will be worth >$1 the future. Major miners seem to have question business models as well, where they are either losing money or have something shady going on with their cost of electricity. BTC still seems to be very prone to pump-and-dump schemes, so major miners may be able to pump the price enough to sell their coins profitably before the next crash.

No not really. If you believe $1 of X will be more than $1 in the future, you buy it for $1, you don't pay more than $1 for the manufacturing or mining of $1 of X, it makes no sense from a financial perspective, especially considered the time, effort and substantial risks in purchasing and running mining hardware.

The argument that you mine to hold to invest, while mining and selling right away is unprofitable, doesn't really hold when you can just buy and hold instead for cheaper and less hassle & risk.

The exception is of course when buying coin isn't an option, but buying electricity & hardware is. Which is why you may see shady operators mine above cost in China, because purchasing bitcoin in bulk in China can't be done easily anymore, a substantial premium cost.

But generally speaking, mining expenses approach mining revenues and top out there, as with virtually every other market. There are some caveats sure but they're not the rule.

Beyond that though, electricity isn't very relevant. At the end of the day if you have 1 million bitcoins, and the annual mining rewards are 50k bitcoins, the most coins that can be sold is 5%. Regardless of electricity prices, the new supply is 5%. Whether it ends up in the hands of miners or others, that's the inflation and the amount of downward pressure. It's true if electricity is expensive and margins are tight, miners sell more quickly. But in the long-run, the supply on the market is still averaging 5%, there's no magic way to go above that number. You could see miners sell 0% the first half of the year and then the entire 5% the second half of the year when margins are tight and miners sell to get cashflow, but it's still 5% a year, regardless of electricity prices.

So 5% is just a hypothetical number, but the reality is that by design it's set to go to 0%, again regardless of whether electricity is cheap or expensive. Which is why I contest the earlier statement by the guy I replied to that electricity prices is something to worry about.

>No not really. If you believe $1 of X will be more than $1 in the future, you buy it for $1, you don't pay more than $1 for the manufacturing or mining of $1 of X

I know you read /r/bitcoin so I know you know that there are a lot of people who stupidly don't think about it that way even just in that subreddit. There are also a lot who think their tiny collection of miners is contributing to the hash rate and helping the network even if they are losing out.

Also with all the delays in shipping miners there are a lot of people mining with obsolete hardware just because they don't have to feel completely scammed so if they mine something they can convince themselves it was worth it.

The reason it puts downward pressure is because large scale miners are forced to sell all their BTC almost immediately, if not pre sell future mined coins at a locked price (Hedgy.co solving this issue for them) So if people are forced to mine and sell every bitcoin instantly it applies heavy downward market pressure on the exchanges. Look at the volume in China, most of this comes from miners.

If electricity wasn't too bad, and/or the price was significantly hire per BTC the pressure to liquidate and pay bills wouldn't be there as much, leading to less (immediate) downward pressure on the markets/price.

You missed my entire point, perhaps because the electricity bit wasn't really relevant and I should've left it out.

Say there's $100 today, and the max you can mine is $1 worth of coin per year. Even if it cost you a billion to mine that $1 coin, the worst that could happen is that you sell the $1 immediately to recoup your costs (as you said).

Alright fine so the max extra supply is just $1. That doesn't depress the price much, it's just 1% inflation.

And if you look at bitcoin, by design, those numbers are such that inflation goes to 0% over time, and drops below currencies like the dollar or euro or any other fiat one really, not far from now.

In other words, there's no real worry of price depression linked to electricity.

The reason I mentioned it is because if we assume you can gain $1, we must assume that people will spend up to $1 to make it. Even if you could make $1 of bitcoin with 1 penny of electricity today, over time competition would drive that to $1. It's totally expected and part of bitcoin's design. Saying 'if electricity wasn't too bad' like you do, implies that its price has anything to do with anything. It doesn't. Miners compete in a zero sum game, so they'll expend as much energy up to the price of a single bitcoin. (some foolish miners go a bit above, as in any market where poorly informed actors make bad buying decisions, but the market in general is expected to go up to the price of bitcoin in hardware+electricity expenses).

Beyond that, even if electricity prices are 0 or 1 billion, we expect miners to sell. At least in general, in a rational market. After all, if miners hold on to coin because they expect a price increase, they would do so regardless of whether they mined the coin, or simply bought it. Holding coin as an investment is a decision that is mostly (though not completely) separate from mining. It's true there is more pressure to sell if cashflow is tight due to tight margins, but this doesn't magically increase average long-term supply beyond the inflation rate of bitcoin, which is fixed, only whether there are spikes in supply in the short term from a buildup of unsold mined supply (of which you could say, would've been bought and held anyway if this particular miner was interested in holding as an investment).

Which adds to the argument that electricity costs don't play a huge role in whether the price gets depressed or not on average over the long term, it simply always does, up to the point of the money supply, which is fixed by design and designed to go to 0%.

The most electricity prices can do is direct the moment that new supply that's already been created is unleashed on the market. But unleashed it will, anyway, it's already in the market and in the hands of people who may choose to keep it as opposed to sell it. But as any market, especially relatively efficient ones like a global bitcoin trade, mining costs will approach mining revenues, leading most miners to sell immediately, which leads to relatively stable downward pressure at the rate of inflation of the money supply which again, is set to go to 0%. it's actually relatively high today (like 10%ish), but when talking about bitcoin in a longer term context, is set to disappear essentially.

At the end of the day miners do not control supply with electricity prices. They're simply the first 'buyer' of bitcoin's fixed supply (fixed, whatever electricity prices are) and buy this coin with electricity-dollars. When or how much of this they sell later, then, has very little to do with downward pressure. The downard pressure originates from the fixed supply of bitcoin whether electricity is cheap or expensive, it doesn't matter.

> Nobody will pay $1 for electricity to generate <$1 of bitcoin.

Nobody would willingly, deliberately do so. There are plenty of cases of cryptocurrency mining software being installed on unsuspecting users' machines, causing them to spend a large amount of energy generating a tiny amount of Bitcoin/Litecoin/whatever that gets sent to the attackers.

Notably, this has happened to a number of EC2 customers. If you accidentally leak your AWS secret key (by unwisely checking it into version control, or through a buggy deployment process, for example) then more likely than not, you'll very quickly find your account being used to spin up a bunch of expensive GPU instances.

True -- but completely irrelevant to my point that even if every single coin that was mined was immediately sold, the limit would be the supply of new bitcoins which is by design lower than that of other currencies like dollars/euros.

I know it's not an actual mining asic/HW module, but didn't some SoCs support sha256 hw acceleration at least 3.75 years ago?


There are many degrees of freedom in chip design: speed, power, real estate, slew rate, clock rate, etc. The core can have more moderate power density (trading off real estate and speed) if that's what is needed in the application. Probably the figure of merit that is most important is energy/hash, not circuit density or speed.

Perhaps power density could be "fixed" by padding out the circuit to take more area. This would obviously increase cost, but probably less than changing the overall chip design.

This makes no sense. This is what a current Bitcoin mining operation looks like.[1] It looks like a low end data center. Few cables, because the miners only need to communicate when they find a block or are getting new starting points. Power and cooling costs are a huge issue in Bitcoin mining. Most profitable Bitcoin mines are in cold places. This one is in Sweden. There are bigger ones in China. There's no way a small, low-powered Bitcoin miner can make money today. That era ended years ago.

The way Bitcoin mining works, you don't get anything unless you win an entire block. That happens about once every 10 minutes over the whole Bitcoin ecosystem. If they're talking about "a constant stream of satoshis", they mean you're a slave of their mining farm, working for them and maybe getting paid some pittance by them.

Is this thing a hoax? They're on Reddit, Twitter, and Medium. They have a web site with no useful information. (https://21.co/) They claim to have a development kit, but have no pictures or specifications. There are no numbers about this, just PR blithering. It looks like another Bitcoin-related scam. It's been only few months since the last big one, Paycoin.[2]

[1] http://www.datacenterknowledge.com/archives/2014/07/10/massi... [2] https://bitcoinmagazine.com/20050/death-paycoin-employee-vid...

It's not a Hoax, they're the real deal with very solid co founders, top ranking VC backing and a top of the line board. All mainstream stuff. For example their CEO, or one of their backers in Andreessen Horowitz.

The whole mining idea is complete rubbish. I have no clue how these two facts are compatible but they are.

It's very very strange. I can see how a hardware wallet on a dedicated chip is important, and how blockchain authenticated devices with unique private keys has use cases. But you don't need mining for that. It's still a mystery to me what the idea is.

The founders should be here explaining their company? I'm not sure what they are trying to accomplish; even after looking at the Job posting qualifications. I have a vague idea, but still confused.

I know it's difficult to explain new technology, but just give it a shot? Maybe they don't know they don't know they are on HN, or I just got conned out of an email address?


2. VC MONEY!!!!11!!

3. ??


Yeah it's a bit of a mystery to me.

The blog post goes a long way in hinting here and there, but leaves lots of unanswered questions. I'll give it a shot for you if you'd like.

The underlying idea is interesting. At its core mining bitcoin represents an opportunity to earn money for proof of work, and work is done by electricity going into hardware. If everyone has hardware, then that means you can run a payment system on electricity. And that's hugely powerful and exciting. Want to your fridge to stock some Chicken? Well it's plugged into the socket, just turn electricity into money, and let your IoT fridge order chicken, an Amazon drone will deliver it, all paid for with bitcoin, automatically, without humans involved.

It's a slightly crude example but it hints at interesting opportunities. Have a lightweight computer at home and want to render a 3d model? Simply turn electricity into digital money, and pay a cloud computer to do it.

Electricity as a payment channel. Anyone you have power, you have access to internet and financial networks.

But that's kind of where it all breaks down. The economics make very little sense. You can't have local consumer grade mining hardware mine bitcoin to pay for cloud computing, without at the same time living in a market in which these cloud computers can mine the bitcoin themselves, much cheaper, with industry grade hardware and access to cheap electricity rates and cheap cooling in places like Iceland.

Mining is a zero sum game. Every 10 minutes 1 person wins the lottery, and the amount of lottery tickets depends on how big your hardware is, and how efficient it is in turning electricity dollars into tickets. Because industry grade hardware is more efficient and electricity is cheaper for industrial purposes, the professional miners mine at below average costs, the consumers at above average costs.

It follows then that it's cheaper for a consumer to simply source or license mining power in the cloud, or indeed, simply purchase bitcoins from professional miners, for less than it'd cost them to mine them themselves.

And it's no surprise this has been exactly the way of bitcoin for the past few years since professional mining took over in full.

And if bitcoin is ever to become truly mainstream - if not, this entire venture of putting chips in millions of devices is irrelevant to discuss - then purchasing and using bitcoin should be as easier or easier than sending an email. Making it trivial to finance your IoT devices with bitcoin without having to mine it, too. Indeed already using Circle you can instantly buy bitcoins at 0% commission, not much harder than signing up with Gmail.

And this is just one of the various fundamental issues. The other one is that mining very rapidly increases in scale. If you'd have had a smartphone that had a mining chip in 2011 that used bitcoins to get service, it'd now be defunct as its mining output dropped by a factor of a million or some crazy amount like that. Mining output and difficulty is unpredictable, yet constantly growing. It's as if you had a smartphone charger that charged 80% less a year later. It's not practical.

Beyond that, the whole idea of discounting consumer devices to recoup revenues in mining requires serious technical challenges to be solved. i.e. forcing devices to mine continuously after purchase, and worse, forcing humans to charge and turn on their devices long enough to spend their electricity on paying back the proverbial debt on their discounted purchase. It's a business model which is not quite a no-brainer.

Lots of unanswered questions. There's genuine IoT potential and it's very interesting to think about, but so far only in the realm of sci-fi ideas whose economics make little sense.

Ignoring the mining bit for a moment, you're left with bitcoin wallets on IoT hardware that happen to not mine, but that can receive and spend money.

And that's hugely exciting. Send your router or PC $10 and it'll automatically add small pieces of bitcoin to http requests and you could create a different payment model besides ads and subs. Send your driverless car $100, and it'll drive to the nearest charging station at night and charge itself, then while driving on the highway while late for a meeting, pay $1 to any driverless cars configured for 'not-in-a-hurry- in front of it to move out the way, creating a real-time market based VIP lane for you that more efficiently dedicates scarce lane space to priority users. (it has flaws, but it's an enticing example).

I'm hoping they're looking to spearhead this and that the mining bit isn't as big as it's made out to be.

Examples like that can't be done through traditional banking systems like ACH or SWIFT. You want digital payments, even creditcards are slow to clear. Paypal could work, but it's proprietary, similarly we don't like to run the internet on proprietary protocols and platforms, either. Bitcoin is an open protocol and can be built on top of with fast or slow transactions, cheap or expensive etc. It's a unique platform to make global, plug & play, open-2-all IoT platforms possible.

Thanks! I found out a little bit about the founder(I think)--forget his name, but he seems legit. He's a founder of vagabond.something, and was a player in Skype. I listened to his podcast, and he was pretty grounded in reality. I heard he was given 5 million a few years ago to get this thing started; which doesn't seems like enough to manufacture your own chip? After every job posting, the company is offering a Mac book pro retina as an incentive to join the company. For some reason I started to laugh, but you need a laptop to work, and why not a Mac book pro retina? What I got out of the podcast is the TV show Silicon Valley just might be a documentary. I guess I didn't realize just how important Silicon Valley has become, and seems akin to an amusement park in some ways. No wonder rents in the Bay Area are beyond staggering. The podcast I watched was about vagabond.someting--not this company.

Never heard of Vagabond before. If you want to know his background a little bit, this is a good start:


As for Skype... the company is backed by VCs like Andreessen Horowitz and Peter Thiel who all invested in Skype. Don't know any other connection to this company.

As for your comments about Silicon Valley, yeah it's pretty crazy. The basic idea is that companies like Google, Apple or Facebook have millions or even billions of customers/users and are some of the biggest companies in the world. Meanwhile they have very few employees because their product is mostly software, and 1 guy can code a program that a billion people use, unlike say a barbershop where 1 person can only cut a few thousand people's hair. Which means that the potential reward for the very best programmers (a small team of whom can build products used by millions) can go through the roof in a free market.

Which is why you get wages of $100-200k for solid programmers. And something like a free Macbook Pro then is not a big deal. It costs $1500, it's used for 3 years, so the cost is $40 a month, peanuts for someone whose wage is already $10k a month. It makes sense to spend an extra 0.4% for one of the best laptops available allowing your employees to be productive anywhere anytime they want.

And if a $50 gym membership & free lunch makes people happier, more productive and absent due to illness, to the extent they're only 5% more productive, you get an additional 5% of $10k of 'work', or $500, so it makes sense to give employees free gym memberships that cost you $50.

If you run a private bus service with wifi for employees and pay $500 for a private bus driver for a day moving around 100 employees who don't have to take a crappy bus, and those 100 employees are 5% more productive because they can get to work sooner (or leave home later and more rested), and work on the bus because it has wifi and is spacious etc, or because they can have breakfast on the bus, that 5% productivity gain nets $50k in total for the 100 employees, and costs a fraction of that.

etc etc. That's the kind of reasoning going into making it an amusement park. It makes a lot of economic sense to spend a lot of money to make employees a bit happier, more productive, less absent and reduce employee turnover, when these employees already cost $200k and in small teams build large software products. It also makes sure talent is attracted to work at your company specifically, and is less inclined to leave once they get there.

All of which can make for some amazing working environments, and also very silly outcomes (as well as friction in communities where people live that don't have any of those benefits but work just as hard, and have to see things like awesome private buses for some citizens, while they have to take shittier public transport, for example. There's been quite a bit of controversy in Silicon Valley about stuff like this the past few years)

Well here's my take. Although they said 'cloud computing' I don't think they mean spinning up an AWS instance to do computation on your device. Rather what they want is the client to 'power' both sides of a computation. So you build bitcoin into the http and use the power in your battery for your device and to pay the server costs at the same time.

Sure it'll be cheaper to preload with bitcoin but at least you can always burn your battery to get access to whatever site you want.

Yes, they are a legitimate company. They showed up on the Bitcoin radar back in Nov 2013 [1]. They started as a private mining consortium with their own chip design, and now presumably they want to pivot into a consumer-facing business.

[1] https://bitcointalk.org/index.php?topic=334759.0

In other words, their own mining is no longer profitable, so they'd rather sell snake oil to the easily-duped Bitcoin community.

From what I gather, the Bitcoin mining is really just a way to incentivize device and chip makers to include 21's tech, in the short term.

I can think of two longer term benefits that only kick in once they actually get their tech widely distributed:

1) A low-power hardware wallet in your smartphone, smartwatch, etc, allowing people to make Bitcoin transactions from anywhere to anyone without needing to go through a middleman. Finally, true digital cash.

2) A Bitcoin private key on every Internet of Things device, which means that you'll be able to use some sort of fancy multisig side-chain algorithm (I'm no expert here) to verify ownership of all of your "stuff." This will disincentivize theft in a big way.

It's worth noting that, to make mining a viable way to bootstrap this whole thing, they need to be at the cutting edge of Bitcoin ASIC tech for multiple iterations of Moore's Law. Which is probably why they raised so much money.

I hope you're right, there _must_ be other components to their business model to warrant $116m in investment capital. At face value this all appears beyond foolish, though I'm rooting for them to make me eat my words down the road.

"21 Inc., formerly 21e6, announced it had raised US$116m in venture capital, the largest investment yet accumulated by a startup in the digital currency industry. 21 Inc.'s lead backers include American Andreessen Horowitz and RRE Venture, Chinese Yuan Capital, as well as strategic investor and chipmaker Qualcomm Inc."


I'd wager a decent fraction of their $116m is being held in Bitcoin. If Bitcoin could magically go to mass adoption that would stimulate a price in the range of $10-50k/BTC. Holding a few million $ of Bitcoin now and "doing stuff" that makes the Bitcoin more valuable has a higher expectation than trying to build sustainable business model around the Bitcoin ecosystem.

I think your second point is getting closer to where 21 is actually going. If you look at some of Balaji's tweets from a few weeks ago he was talking about 4-factor authorization. Financial fraud is hugely expensive, a huge market opp for a solution. Maybe 21 is working toward a bullet proof system/gadget that will eliminate fraud. Maybe BTC chips in every device is part of that solution.

I by no means would call myself an expert on Bitcoin, but I did coauthor a book about Bitcoin.

All I do when reading stories about 21 Inc is parse every sentence very slowly saying to myself "What is it I'm missing that turns this from a terrible idea into a good one?"

I have yet to discover such a sentence... I hope I'm wrong and will still read it at some point.

That's what I was thinking. I've been pretty into cryptocurrency for a good while now, out on some pretty distant frontiers at times. And the mining aspect of this makes no sense at all to me. I don't get it.

I think that's the bit where they're selling snake oil to the lower quartile of VCs. You and I know it's completely ridiculous, but they don't.

Look at tweets by Balaji https://twitter.com/balajis I think there may be some hints in there.

I guess their plan is to convince third parties that this is a great idea? Lazy businesses wanting to get into Bitcoin can be immensely more profitable than Bitcoin itself.

My comment for a similar thread about Intel manufacturing Bitcoin mining chips (https://news.ycombinator.com/item?id=9537691):

I think you just landed on the "Free" version of future electronic devices. Imagine a terrible reality, not unlike today's videogame market, where every device, charger, lamp, TV, and box fan comes in "Free" and "Pay" versions - most manufacturers will have a mail back program, so you can return a broken "Free" item for a brand-new "Free" item. The "Free" items will mine Bitcoins and return all profit to the manufacturer.

Meanwhile "Pay" items will still be widely available from numerous online vendors. These devices will require you to enter your personal Bitcoin address, so they can credit you with their mining.

And thus the world will continue to be dominated by Whales, so named for the size of their bank accounts. The rich will be able to keep the entirety of their revenue, while the poor must subsist not only on the charity of the State, but also the charity of the Corporation.

I don't want to be overly dismissive -- I'm sure this is a huge engineering achievement -- but I just don't get it. A mobile phone, where battery life is precious and a big differentiating factor between devices, seems like the absolute last place you'd want to mine bitcoin. Manufacturers have spent years optimizing for battery life - why would they want to shoot themselves in the foot? What consumer in their right mind would buy a phone advertised as, "your battery will die much sooner, but hey, you don't have to use your credit card as much"?

Perhaps I'm wrong, and I'd love to be corrected. But I don't see the point.

This is absolutely insane. You're basically getting $0.00000001 USD for cutting your phone battery life significantly.

I can't see how this make sense. Even if you assume that it's useful for a device to have some bitcoins available, it seems much more efficient to either supply them when the device is created or download them on demand. The cost of building a mining chip into the device plus the expensive power consumption plus the difficulty of maintaining a network connection to access the mining pool seems way more than the cost of just providing the device with bitcoins.

A key point from the article is: "Crucial to this is the idea that bitcoin generated by embedded mining is more convenient — and hence more valuable — than bitcoin bought at market price and manually moved over to the site of utility." I just don't see that, especially if you assume bitcoins mined on the device are going to be much more expensive (because of less efficient mining and because of 21's overhead.)

I would love to see an analysis of how much BTC a user could generate in a day on his/her cell phone with only a 10% impact to battery life. I'm imagining that it's pitifully small today, and it will only be 10% of that number a year from now. Any more than that, and I don't see users accepting the trade-off.

An iPhone 5 battery is about 5 watt hours, ten percent of this is 0.5 watt hour. [0]

The most efficient mining chip I could find information about is the BM1384, which consumes 2.058W at the lowest power bracket. [1]

We would exhaust our 10% allotment in 15 minutes.

In those fifteen minutes our speed would be 8.25 gigahash per second, which would produce 0.000003542 BTC per day [2].

Our total income for 15 minutes of mining would be 0.00000003689583 BTC. [3][4]

At $237.7/BTC our 10% iPhone 5 battery life has been exchanged for $0.000008770 USD.

Assuming 0.17 USD power cost in the United States, the power cost would be 0.000085 USD. [5]

[0]: https://en.wikipedia.org/wiki/IPhone_5

[1]: https://www.bitmaintech.com/files/download/BM1384_Datasheet_...

[2]: https://bitcoinwisdom.com/bitcoin/difficulty

[3]: This number isn't even representable in Bitcoin, which maxes out at 8 decimal places of precision.

[4]: The reward halves in 62 weeks though.

[5]: https://en.wikipedia.org/wiki/Electricity_pricing#Price_comp...

Following your example of using the most efficient miner available and ignoring heat, size, etc. restrictions:

Average cost of electricity for U.S. households is $0.12/kWh [0]

0.05 Wh = $0.000006 average cost

Net Profit = $0.0000008801 - $0.000006 = -$0.000005120

Net profit margin = -581.7%

[0] http://www.npr.org/sections/money/2011/10/27/141766341/the-p...

The author states in the article he's more interested in expanding the use of the blockchain as a ledger (as opposed to a store of value).

Which is strange given their cost-savings examples using bitcoin mining.

This might work for authentication, but they shouldn't sell it as "bitcoin-subsidizing devices for the developing world".

And in 2 years of continuous mining it could generate $0.62 of bitcoin. Seems simpler to just ship it with the bitcoin preinstalled.

That makes is pretty clear to me. They are not generating actual Bitcoins. Read the article again.

"we are less concerned with bitcoin as a financial instrument and more interested in bitcoin as a protocol" 

Many of their hypotheticals selling their solution involve bitcoin mining to create cost savings:

>For example, one could build an internet-connected device that shared some portion of mined bitcoin between the user, the retailer, the handset maker, and the carrier — thereby reducing costs and/or increasing margins throughout the entire supply chain.

I think they will, is just that their devices will not be sold for making profit, but for messaging and authentication.

After the gold rushes were long gone, people still offered to let people rent a shovel, a pan, and buy a map to go try to find their treasure by panning in a river where most everybody knew there was absolutely no balance to the time+effort:value ratio. But, come they did.

> Bitcoin-subsidized devices for the developing world.

Let's take advantage of vulnerable people by ripping them off with hidden energy charges! Viva Bitcoin!

... and energy in the developing world is much more expensive and dirty than it is in developed nations, making it doubly dicey.

The Internet of Things-That-Are-Secretly-Robbing-You

This sounds like a really evil item. Are the devices going to be labled as "subsidized by Bitcoin" or is Qualcom going to secretly include it with every SoC? Are we going to be able to turn that thing off?

I really don't like the direction technology is going. It all looks scary and downright depressing.

> Towards that end, our team of PhDs in EE from MIT, Stanford, and CMU has built not just a chip, but a full technology stack around the chip — including reference devices, datasheets, a cloud backend, and software protocols.

This is pure marketing fluff. They should be embarassed by this.

Plus, there are tons and tons of capable PhDs and non-PhDs from lots of other schools.

Moreover, as others are saying, it doesn't make sense to waste electricity to mine bitcoins in small quantities.

edit: Given that it doesn't make sense, does anybody know what they are really doing?

> edit: Given that it doesn't make sense, does anybody know what they are really doing?

I'm guessing they're chasing after the vague idea that money, energy, and computation are all somewhat interchangable and building chips that offer low-level features to trade between these, so that a device can exchange any of these three for the others, i.e. "I'll do this computation for you for 0.0001 bitcoins" or "I'll give you 5 watts of power if you calculate this for me" etc etc.

Still not a very convincing idea.

Looking at their admittedly bad website, I am thinking the following:

Let's assume that the next big thing is not centralized services, but distributed ones. We've already gone through periodic waves of P2P mania. Even Bittorrent got a fair amount of VC. I think it is not unreasonable to gamble that in the next 10 years distributed systems and protocols will dominate and client/server will fall into disuse.

Of course it might not happen, but if it did, where would you need to position yourself in order to be able to profit massively from it? There are several major problems with P2P applications. For example, you need coordination, authentication and resistance to bad players.

Bitcoin has a reputation for having solved many of these problems for its domain. Although it might not be the best way to solve all of these problems (specifically proof of work may not be optimal for many problems), imagine that you are trying to sell your idea to a VC company. Can you come up with a convincing story about how this technology can be used to solve most of these problems? Even on HN there are a large number of people who think that the Bitcoin implementation of a block chain is the solution to practically every distributed authentication/coordination problem.

Now imagine building a chip that would enable the use of this technology in every day equipment. You could look at it as the modern day equivalent to the FPU or GPU. It is distributed authentication/coordination hardware acceleration. As such, if the world does go to a distributed model of communication/computation, it will practically be required. As the defacto standard, every single device on the planet will need to include your chip.

Are they really thinking to mine bitcoins? There are some potential applications, perhaps. For example back in the day Microsoft proposed that there be a "postage fee" for email. This would make it expensive for people to spam freely. Imagine a "postage fee" for distributed services, like authentication, whatever. The fee needn't be large and the idea is that the device could mine enough BTC to pay for average usage. Anybody who wanted more would have to pay for it. But Bitcoin does provide a convenient method for doing these kinds of really micro payments.

Note: I think it's an absolutely stupid idea that can't work due to the nature of service fees once new BTC runs out, but I can well imagine a VC company completely overlooking this detail.

In any case, I can totally see the potential for $100 million or so investment. I think the web page may intentionally have a lot of fluff -- things that are really improbably or impossible but are there because some key stakeholders expect to see it there. I think the challenge for them is that they are walking into an arena very early where there is a total vacuum of applications that are currently being used. What they will need to do is not only build the hardware infrastructure but also convince a lot of people to write applications of the infrastructure so that everybody wants it. Probably this is one of those instances where you are better off being second or third to the market (like, for example, the Apple Newton).

Thanks for your thoughts.

If there is some advantage to devices having a few satoshis, it would be easy to just send them a few satoshis. (Or install a private key that lets them draw a few satoshis from an account you set up for that purpose.)

In other words, you don't need the device itself to do the mining.

And it's always going to be cheaper to produce satoshis in massive mining farms than to do it in tiny chips in embedded devices---so you would always economically prefer to give satoshis to devices, not make them mine the satoshis themselves.

It's funny to me that I had to scroll to the actual last comment to find what I suspect is the right answer.

The company is named after the max amount of bitcoins so I think the VCS would get that bitcoins are limited.

How do you get people to invest in such an idea and write such excited statements? Almost nothing they say makes sense. Mining on battery powered devices. Abusing the block chain as a database. Making other people pay for you.

These comments remind me of the crapping-on uBeam took on HN after a few people decided, upon a cursory glance, that it was theoretically impossible and ridiculous.


We still can't be 100% sure if it's ridiculous or not, but all signs are pointing to not. So assuming Balaji et al are acting in good faith and aren't scamming their investors (one of whom Balaji is a partner in so that would be weird) this is cool and I can't wait to see what it does and where it goes.

These comments reminded me of the crapping-on Colour took on HN, not even on the grounds of theoretical impossibility of the product but simply the buzzword-laden me-too nature of their pitch. Turns out the naysayers were right: whilst the team weren't intentionally scamming the VCs that backed their remarkably large pre-product fundraising efforts, the world's first stealth social network might as well have been a scam for all the traction it achieved.

I'm having to hedge my scepticism on the basis that I know I know barely any more about bitcoin mining technology than the average layman, and VCs can bring in highly skilled specialists for their due diligence, especially for investments of this magnitude. But when a press release fails to acknowledge the level of technical breakthrough they'd need to have achieved for their product to be viable, and instead launches straight into a series of theoretical monetisation strategies of varying degrees of plausibility, I think the cynicism is entirely warranted.

If they actually have a team of engineers that could develop chips with far more computational power in relation to their size and energy requirements than anything else on the market, you'd have to wonder why they'd think persuading consumers to put Bitcoin miners in their pocket was the most promising avenue to monetise.

> If they actually have a team of engineers that could develop chips with far more computational power in relation to their size and energy requirements than anything else on the market, you'd have to wonder why they'd think persuading consumers to put Bitcoin miners in their pocket was the most promising avenue to monetise.

Basically, if they've got the tech to do this, they could get rich just by selling that tech, and not screwing around with Bitcoin

It's not so much a matter of deciding it's ridiculous. It's that the numbers for the mining part are off by several orders of magnitude.

For that to work at all, they'd have to have some technology that revolutionized bitcoin mining at the most fundamental of levels, and they haven't indicated that they do.

That's what's so weird about this.

None of their bullet points seem to make sense. I guess their "secret" is "Crucial to this is the idea that bitcoin generated by embedded mining is more convenient — and hence more valuable — than bitcoin bought at market price and manually moved over to the site of utility." I don't know whether that will turn out to be true.

A somewhat more thorough asking of the same good question: http://www.reddit.com/r/Bitcoin/comments/36e8by/21dotco_a_bi...

I'd like to see this answered in some forum. It's very hard to get a more concrete sense of the vision without it being answered.

I don't know if it's even possible to answer such questions concretely. Everything hinges on transaction fees, and future fees depend on both the rate of transactions (which they propose to increase greatly) and the block size (which is being hotly debated right now). The case where their chip doesn't even mine enough satoshis to pay its own transaction fees isn't out of the question.

Related discussion from last week:


Maybe we can have "smart" electrical outlets that steals back any Bitcoins you mine off of someone else's electricity.

I can't believe they actually believe in the 'device that pays for itself' type of scenarios. Are they that stupid or outright lying?

>This means any vendor can take a chip performing a normal function (say video decoding or networking), add 21’s BitShare technology, and thereby enable the chip to continuously generate revenue simply by being connected to power and internet.

I'd be interested in any estimates they have for how much this would generate if, say, included in a wireless router, or nest thermostat.

Also, the deal is either: you pay extra for a router that also mines you bitcoin, or you pay less for a router that mines bitcoin for someone else. In the first case, you have to then sell the bitcoin -- causing a lot of friction for a not-so-technical person to get a few bucks. In the second case, your device isn't your own -- you have a section you're not allowed to access.

make it like a mail in rebate, I bet something like half of those never get sent in so people who got the 'paid' version but don't claim the coins after X days have them sent off to the company anyway.

What if they actually planned this and fine tuned their ASICs so that they would never be able to actually generate enough satoshis to go above the dust limit? They could tell their users: you've generated 1 satoshi this month, just 5459 more to go ... that's only 454 years :). "Honestly, we want to pay you your share, but the Bitcoin network won't allow it because it's below the dust limit ... trust us, you'll get paid in 454 years".

So they can make them mine fast enough to make a difference in terms of hash rate but slow enough to never actually reach the payout limit - so they could constantly owe their users very small (unpayable) amounts.

If the idea is to mine slowly, it can be done on a CPU. Most smartphones also have a GPU on board, so they could mine faster than a CPU. And the chips are already in there, you wouldn't have to buy a new phone/chip for this.

Finally, people seem to misunderstand how mining works ... you can't mine a single satoshi, you either find a block or you don't, so you either get the 25 BTC (currently) reward + transaction fees or you don't. The pool distributes the load and the reward, so there would still be a "funding" transaction from the pool to the user - it's not like their ASIC can generate 1 satoshi on board, it can lend its hashing power to the pool and receive 1 satoshi (actually 5460+ satoshis, see above) for their effort from the pool.

It's rather annoying that the mining conversation always gear towards profits.

mining centralization/decentralization is the importance here.

What I rather worry about is will you be able to control which pools these chips will be allowed to be pointed to, do the users have control over these matters?

personally I rather have 1b+ small chips all over the place in devices than a few $10m mining farms spread around the world.

Basically what I'm reading is it probably would have been more prudent just to light the 116 million dollar investment on fire and not waste everyone's time.

These are terrible ideas.

No don't burn it, we should piss it away...

You see my idea is to install hydro turbines inside men's urinals at major corporations. Then everyone will piss on them generating free electricity... that electricity powers work computers during non-office hours to mine bitcoin.

It's sort of like the enterprise version of this idea. Maybe I should start talking to VCs to raise $200 million? B2B startups are hotter than consumer-facing ones right now - so I should ask for more.

This would require a significant overlap between 'smartphone' owners and 'people not so good at math'. They may be on to something.

It's be interesting if, instead of Bitcoin, 21 planned for these chips to be used to create a new cryptocurrency.

Perhaps to provide an authentication a security layer for IoT...this sounds like a story you could raise 100M with. See also Vernor Vinge and the SHE

That is the only part that makes sense. The mining makes zero sense but having a secure wallet in everything sounds like a good idea.

Here is some rumor I found that rings true but is really disappointing (if real)


The tldr is that Balaji and 21e6 have done nothing more interesting than use millions of dollars of opm to build a huge mining pool out of custom silicon that performs so well the 70M it took to build it just makes financial sense on its own, netting in the low eight figures currently.

Now the followup strategy is to give away free mining chips for embedded systems to 1) mine more coins using other people's power (21 keeps 75%) and 2) stabilize the long the term value of their massive BT holdings by promoting consumer adoption of bitcoin (by bribing people with free coins mined by their own gadgets)

Reading this I really didn't get the impression the chips would be generating actual bitcoins. Just currency-like tokens for doing resource management and proving that something occurred.

If you're going to create custom hardware but not going to mine actual BTC it seems like it would be much easier and more energy-efficient to use something like trusted-computing-based proof of existence.

And the end-users's motivation for ever purchasing anything with is... off-setting short term costs with long term costs that make payday loans look like a fair deal?

I would like to remind everyone of hn's policy against negativity and by extension of negative posts. Or does that only apply to YC related posts?

HN's policy is against "gratuitous negativity".

It's OK to be critical of an inefficient idea.

I really find the phrase "embarrassingly parallel" obnoxious; nice to find out (on the Wiki link) that I'm not alone.

Is bitcoin relevant any more? The hype level seems to have crashed from former heights.

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