Eps 1: Bitcoin miner heatstrokes in his sleep
— Case 1
Bitcoin is looking increasingly naïve as a currency; with a very expensive computer churning away at an overclocked speed you can create 'money' you can spend in very few places for only the cost of the electricity - and the risk of brain damage.
Bitcoin is a problematic economic proposition - and not just because US authorities are cracking down on the sites that allow you to buy drugs with bitcoins.
There's a built-in incentive to destroy other bitcoin wallets; if you 'lose' a bitcoin, the value of all the other bitcoins goes up.
Host
Justin Horton
Podcast Content
If the sole purpose of buying a bitcoin miner is to heat a room, then that person will want to run the miner all year round to greatly increase the time return. If people want Bitcoin to succeed, mining will crash, and the distribution of the cost of electricity for mining and keeping space warm is only one way to break even as quickly as possible.
The miner dutifully produces more than half of the total bitcoins ever mined, but not enough to power its computer.
The mining industry is facing turbulence as two major changes are expected, which happen entirely by chance at the same time.
The rising price of bitcoin has attracted new miners to China, where electricity is cheaper, and the network's total output has expanded significantly. At the time, Carlson's mine alone accounted for a quarter of the world's bitcoin mining capacity. The increasing computing power also caused mining difficulties to skyrocket. It rose a thousand-fold in just a few months, forcing the miner to expand even faster.
By mid-2014, Carlson said, he had quadrupled the number of servers in his mine and seen the so-called "mining speed" increase a thousand-fold. Miners began using GPUs, normally reserved for games, to mine bitcoin at a much faster rate. If there are more miners, that's good for Bitcoin, because no one can override its security measures, according to the Bitcoin Foundation, the world's largest bitcoin mining organization.
The trick, however, is to find a location where cheap electricity can be used. Those who wanted to stay in the game had to invest in new equipment, and some needed existing buildings, because in the days when Bitcoin was traded for a few dollars, you couldn't afford to build anything new.
It needs a place that can process enough electricity to light a few hundred homes, and it needs powerful cooling systems to keep the heat from melting the computer chips needed to process the trillions of calculations needed to fuel bitcoins. When you're done, you'll be equipped with hundreds of high-speed servers that together consume just over a megawatt of electricity, and will theoretically all be able to produce up to 80 bitcoins a month.
Carlson himself will not be a miner; his company Giga-Watt will operate the pods as a hosting site for other miners. By summer, they expect to have 24 pods here that can track Bitcoins and other cryptocurrencies, most of which use a cryptographically secured protocol called blockchain. Currently, blockchain technology's main application is to maintain a growing electronic register of all bitcoin transactions ever made.
In theory, the financial incentive should be enough to keep miners in the black, but in practice, there are other factors, such as the amount of computing power available to miners, that complicate the equation. Eventually, block rewards will disappear altogether, miners will be compensated with higher transaction fees, and bitcoins will be mined.
At today's price, miners produce only about 550 bitcoins every eleven minutes, and speculators who buy and sell the currency have pushed the price up several times. The total number of people mining Bitcoin is unknown, though it is likely to be more than 20,000. This is because miners are the biggest investors in currencies, but also because of the high price of bitcoin and the lack of a clear market cap.
There are miners spread across the globe, but many large companies are centralized due to the following variables. Many of the electricity costs associated with mining have to do with cooling the mine chips. Add the cost of equipment and electricity and many miners are under water in terms of profits.
As computer users, we all know that loud fans keep the CPU cool, but what about the other side of the coin?
Carlson's idea was to skip the basement phase and go straight into the commercial bitcoin mine, which is huge. As long as miners cool the environment and electricity costs do not play a role, cooling costs will become a secondary issue.
Carlson's first mines were a mix of rigged ventilation with HVAC fans cut into the walls. One, the mysterious creator of the currency, or creator known as Satoshi Nakamoto, has programmed the network to periodically halve the number of Bitcoins that are rewarded for each block of mined currency. Here, bitcoin miners like Carlson would be faced with the fact that bitcoin is meant to make life harder for miners over time.