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and most of the people that i know who ever mined jumped in when it was 50,
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i knew one guy who was finding blocks by himself with just his computer cpu. this is probably back in 2009.
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that was how little bitcoins were worth at the time.
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and if you were thinking short term back in the day, when it was kind of feasible to mine bitcoins as an individual,
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everybody would just be going for the bitcoins really, and it would lose its purpose.
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it's never really profitable in the short term to mine,
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3.842105
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4.684211
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Female
and so the people who got into it for fascination, especially early on, had the side effect if they held onto their bitcoins.
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Unknown
of having the chance to basically speculate on bitcoin really early on. and that's what paid off for them.
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originally, you asked adam about, was i still mining?
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and that was one of the only all coins that was available at the time.
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i built a computer with a couple of graphics cards
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and a lot of them burned out in the process probably cause i wasn't cooling it effectively because the power supply was not quite matched to what the computer needed
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3.730769
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amateur miners make, but it was really fun. it was just, it was fun to participate in that and just see how it worked.
H
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i made enough light coin to pay off the investment that i made in building this computer,
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Female
but also with a lot of electricity, i'm not sure that i broke even on the electricity.
H
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it was basically like increasing my power bill quite a bit.
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but i guess maybe at one point i had some hope or illusion that maybe i would make a profit, but that wasn't really how it turned out.
U
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so i you're actually you've reminded me the one time that i did mind besides that was the proton shares launch, which originally was built if you remember, as the cpu minable thing. so it was the thing that was going to
N
5.555556
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5.555556
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Male
return an equal spread, a distribution that didn't take into account the big asic manufacturing ownership and all that jazz.
O
5.2
4.4
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Male
and then by day four or five, it was too tough that i stopped doing it because it was just bothering my computer and i didn't want to have it on anymore.
D
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Male
yeah. in fact didn't well, at the time they were invictus, but didn't dan larimer,
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Female
frodo shares. but then by the time they actually received them, they were basically obsolete because someone had kind of cracked the algorithm and it wasn't worth it anymore.
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it wasn't that anyone who cracked the algorithm, it's just that there's this really hard problem
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between having something that's easy to mine and having something that doesn't scale well for a single person who has some money. i mean, that's the issue is that
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regardless of whether it's asics or cpus or whatever,
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it's about the amount of money that you can throw at the problem really much more than anything else.
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stephanie, i remember you did an interview with a new miner, actually. gosh, this must have been about a year ago.
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yes, and he was mining on knc minor hardware, which at the time that was really,
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but yeah, he bought these expensive machines. he paid like $10,000 for two machines.
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he was really thrilled about that, but it wouldn't have happened if the bitcoin price had not gone up.
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right. i mean, there's that huge variable of luck. i mean, you described it as a lottery ticket, even beyond the lottery ticket element of just winning the race and getting the bitcoin,
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there's also this other thing where the price is just completely out of your control, and if it had gone the other way, then he would have had a very negative experience, but-
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yeah. and in fact, i think he may have even said that he took out credit.
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he paid for those machines with credit cards that didn't have interest for a year or something like that.
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adam, you were talking about the lottery ticket aspect of mining,
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then what you're trying to do is a really herculean task. it's like finding a needle in a haystack.
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you're using your machine to compute these hashes
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and hoping that you get one that comes out in the correct way that will fulfill the requirements to solve the block.
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so if you're a solo minor and you get a block yourself, let's say you win the lottery, you get a block yourself.
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the reason mining pools exist is because people want to spread out that risk a little bit. so what they do,
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or you may get lucky and get it the next day, but if you're solo mining, you're always taking that risk of how long are you going to have to play the game before you hit the jackpot,
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even though you keep the whole reward yourself versus joining a pool
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and having that sort of guaranteed, okay, if i put in this much power, i'm going to get this many block rewards back out the other side and it's more of a sure thing.
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so bitcoin mining is sort of predictably unpredictable. it's kind of what it sounds like. yeah.
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but you have no idea when it will actually fall. it's like flipping a coin, like statistically, you should know how it's going to wind up, but
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cloud miners add like another layer of abstraction on top of that, separating people who are thinking of themselves as miners from the actual work of mining.
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cloud miners are essentially paying to be exposed to a profit generated by mining company machines.
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but as someone buying cloud mining, you don't actually own or control the machines yourself.
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so if you have one of these, so if cloud mining operation become successful,
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it actually seems to me that it represents just about the truest point of centralization in the bitcoin ecosystem
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that one can imagine because unlike a standard pool, it's actually quite difficult for a miner to leave.
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andreas, last year, i really got concerned and a little obsessed about the decentralization problem as i saw it
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with bitcoin. i'm wondering like is decentralization something that's even necessary in this system?
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it is necessary in this system because consensus attacks can be more easily created.
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so when you centralize mining power, what you're doing is you're vesting trust
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in a narrower and narrower part of the system.
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then the trust that they have to not double spend transactions,
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to not delay blocks or create restrictions on transactions and blocks,
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that comes from the fact that they don't have the power concentrated in just a few hands.
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the disincentive is that if you don't play by the rules, those who do will be in greater numbers and will actually gain the system.
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if you concentrate power in fewer hands, then you have to vest with trust,
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and effectively what you've done is you've recreated paypal. you've recreated visa. you've created a centralized clearinghouse organization,
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just like you do in a centralized environment like visa and paypal. then on the other extreme you have-
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personally, i definitely see the point of why satoshi built this algorithm in a distributed decentralized way.
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the idea that the power and trust should not be concentrated in the hands of one or a few, but as many as possible.
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at what point are we basically just saying, "well, everyone might as well like weave their own shirts out of cotton that they grow in their backyards and grow all their own food"?
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at what point are we ignoring the division of labor thing?
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when i was a litecoin miner, in my short career as a litecoin miner,
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i stopped. i was burning out my graphics cards.
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i was creating all this heat. i couldn't keep it cool. i couldn't keep the thing on. i had to keep rebooting it. it was inefficient.
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these people who have these large warehouses where they're cooling it with the arctic cold
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somewhere in scandinavia or in the north pole even, and they're hooking up their machines correctly so that they don't burn out their cards.
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whereas i didn't know what i was doing and i had to learn those mistakes the hard way,
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they're more efficient at doing that than me. so why not have a little bit of division of labor here
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so that the whole process can be a little more efficient? there are costs to decentralization too.
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absolutely. decentralized systems are far more costly than having a centralized clearinghouse
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in the labor of the clearinghouse, but that's a compromise that's most of the people who are in bitcoin are willing to make,
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and the reason they're willing to make that is because when you concentrate power in a clearinghouse, it's more efficient.
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but then the clearinghouse has enormous power and they tend to abuse it.
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they use that power in order to establish monopolies.
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so you end up paying for that efficiency and externalities in the system.
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so let's look at a couple of case studies. i mean, there have been points in the past where some of the bitcoin mining pools have gotten close to the theoretical scary number of 51%.
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that is having more than 50% of the network hashing power
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that they could then use to initiate double spends
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or to do other nefarious things that could mess with bitcoin.
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there was the pool ghash.io
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and they did actually get over 51% for a time, right? then people started to leave the pool, i guess, concerned
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bitcoin miners who do want that pool to have more than 51% because they feared it would ruin bitcoin or negatively affect bitcoin probably justly so.
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people left it until it got smaller.
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it happened with a couple of other mining pools in the past.
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i can't remember the first time it happened, but it was one of these early mining pools and now i'm just forgetting their name. do either of you guys remember?
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there's btc guild in the old days.
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it happened with btc guild where they were approaching 51% as well,
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where they got close to 35, 40, 45% of the network power.
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i guess that was because they were a good mining pool because they figured out how to serve their customers, which are the people who are contributing power to the mining pool,
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and it became popular because you want a cheap mining pool where they got the best rewards or [inaudible]
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service. but then that became a double-edged sword because people started to leave as they became scared of that 51% potential.
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there has not yet been an instance where a mining pool had so much hashing power and they decided to abuse it.
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but there have been those instances in altcoins.
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actually, that happens quite frequently because, speaking of bitcoin mining, a lot of people have invested in bitcoin mining hardware, which is now pretty much worthless for bitcoin.
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