Bitcoin Miners: Unboxing and Explanation

If you haven't heard about Bitcoin, I completely understand. If you have, and you don't get the appeal, I completely understand. My interest is in the economics behind the system, and maybe a little bit of interest in what the potential is overall. Regardless, this is kind of how the process has gone for me.

Way back in April, I ordered a couple of the new ASIC (application specific integrated circuit) Bitcoin mining machines from Butterfly Labs. These were really intended to be more educational than investment, so I'm not really going to go into the relative value of the investment more than to say that if I'd simply bought Bitcoin with the money I paid for the machines, I'd be far more wealthy now than with a pair of miners. The quick napkin math would have put me at a rough 450% profit had I simply purchased the coins when I purchased the machines. No matter what your own personal opinion is of Bitcoin, there are people out there who value it, and there are businesses that accept it as payment. That makes it a currency. Its scarcity drives its value. Imagine if pogs were easily traded over the internet, had a limited number printed, and couldn't be counterfeit. That, in a nutshell, is Bitcoin.

At any rate, the two miners I ordered came in over the last month, and it's been kind of excited to see them hashing away.

Currently my machines hash at a combined 42-47.5 GH/s, which would be considered underperforming. The culprit is the Single, which has been plodding away at 35-40 GH/s instead of its intended 50. I have an RMA in to Butterfly Labs for it, but I'm not holding my breath. So what do these things do?

Mining machines spend their days rapidly hashing away, building the Blockchain (the transaction log that makes Bitcoin extremely problematic to counterfeit) and validating network transactions. Once every 10 minutes, 25 Bitcoins are awarded to a miner on the network, rewarding people for their efforts. Because this is the only way Bitcoins can enter the system, and the awarding of Bitcoin for mining shuts off in 2040, there will be a maximum of 21,000,000 Bitcoin. Ever. Once 21 million Bitcoins have been distributed, mining machines earn a portion of all Bitcoin transactions, elegantly building incentive for miners to continue validating network transactions, even after the last Bitcoin has been allocated.

Bitcoin, and almost everything associated with it is like the wild west. There's a lot of theft. There's not much regulation. People love being "free" to use it as they wish, but hate that there's not much recourse if they have their coin stolen. The people making the most money aren't the ones mining, they're the ones selling the miners the equipment. New technology is rapidly outpacing the old, in an arms race of epic proportions.

But it's really interesting, and it's crazy to have watched something take off so much over the last couple of years. There's no shaking the simple fact that if you'd invested 11 dollars to buy a bitcoin a year ago, that same bitcoin would be worth $450 as of this article's creation, which is a gain of roughly 40x. 

Signing Up For Healthcare Under the ACA

For as much crap as the Affordable Care Act has gotten (and a lot of it rightfully so), I was able to sign up in 20 minutes for a plan that costs $55 a month. While it's not the best coverage, it's also not the worst, I get to keep the old doctor I had when I was insured through Trion, and is infinitely better than "Did you get sick or injured? Too bad, sucker." 

So, that's pretty decent, I guess.

The entire process took just about 20 minutes. The user flow wasn't great, and the response waiting for information from the server wasn't particularly great either, but California's implementation is certainly better than anything that existed previously.

Microsoft's War for the Living Room

John Gruber, on Microsoft's Console Losses
"If it’s true that Xbox is losing billions of dollars per year, it certainly puts Sony’s and Nintendo’s console struggles in a different light. It’s hard to compete against a rival that is willing to lose billions year after year after year."

It sure is, but the video game industry already knew that. Microsoft surprised Sony last generation with the Xbox 360 pricing. Which is why Sony reversed the tables on them with the pricing for this generation. Microsoft was willing to lose a lot of money getting hardware out the door, because they were able to see the value of being in everyone's living room. 

I'm not entirely sure that they're losing as much money as the analyst Rick Sherlund believes, though. Actually, I'm almost entirely certain that they're not. 360 hardware isn't the loss-leader that it was for the first year or two after launch, and Microsoft makes a handy amount on every game title sold (usually anywhere from $6-10). Additionally, Microsoft's attach rate for the 360 has been extremely high.

With the Xbox One ("lovingly" referred to as the XBone) being priced at $499, Microsoft has made the conscious decision to not subsidize their hardware sales. We'll see how that works out for them, especially given the PS4's price point at $100 below.

 

When Congressional Anarchists Threaten Finance

Business Groups See Loss of Sway Over House G.O.P.

An article in today’s New York Times takes a look at how business is starting to view their chosen party, and it’s not pretty.

"…frustration has grown so intense in recent days that several trade association officials warned in interviews on Wednesday that they were considering helping wage primary campaigns against Republican lawmakers who had worked to engineer the political standoff in Washington."

Here’s the thing that I don’t think the new Republicans understood: the US government is a really big economic engine. Really, really big. Bigger than any other in the world. When the US government spends money, most of the time, it’s going directly to the pockets of people who are going to spend that money inside the US.*

When those people stop having that money, they stop spending it. When they stop spending it, other companies go out of business. This kind of impact is extremely far-reaching. There are about 4.1 million federal employees. Most of those have not been furloughed, but some 800,000 have. Another million or so are working without pay, and still have to conserve as much money as possible. Those people are now no longer making purchases that feed the rest of the economy. Local restaurants won’t be getting normal customers. Online & local retailers won’t be getting purchases. Grocery stores will make fewer & smaller sales. Entertainment expenses will be curtailed. Financial companies don’t get 401k contributions, and those contributions aren’t reinvested in American companies. The loss of pay for 1.8 million Americans has disastrous effects on the rest of American business.

Even if you hate the idea of big government, you absolutely must concede this point if you’re going to be considered a functionally competent and astute citizen. The way to smaller government (which I tend to agree with) is through careful planning and staggered reduction, not via shock and awe style tactics. When you employ those, you’re also going to anger another segment of the business world - the financial sector. Financial turmoil may be great for day traders, but abysmal for the overall health of the economy.

If there’s one sector that Washington traditionally hates to disappoint, it’s finance. They directly influence elections through large campaign contributions, and the sway between having financial considerations switch parties significantly impacts election maps.

Conservatives are described by their desire for moderate to low modifications to society and business. They favor slow and steady over radical change. Increasingly, it has become clear that the new Republican party is no longer conservative - they are radical idealists with an inability to reason. The new Republicans want drastic change, and they want it now.

They’ve forgotten their way, and they’re neglecting their constituents. However, this time, the constituents they’re neglecting aren’t you and I, they’re big business, and corporations have a very, very long memory.

* Certainly, there are exceptions. We spend a lot on foreign aid. We house and maintain foreign military bases, where soldiers spend money abroad. Certain government programs end up offering subsidies that benefit foreign interests through shell company shenanigans. Etc.

Diversity to Divison

"No. No. Not that I know of." - Slate article on the Scalia interview.

This is a really interesting read on the Scalia interview. 

"She [Jennifer Senior] can’t believe this man (or any man in 2013) has grandchildren who still think homosexuality is morally wrong. He can’t fathom that she’s never met anyone who believes in the devil.”

"…the overlap between our worlds is almost nonexistent. It explains why the left and the right both responded so enthusiastically to this piece. Each side sees its own view, affirmed. One sees a monster and the other sees a hero. It’s extraordinary, actually. The O’Reilly constituents think he’s speaking sense; the Jon Stewart vote thinks virtually everything the guy says is nuts."

It’s a remarkable thing that in a world so filled with information in our daily lives, we’ve managed to segregate ourselves into such polarized ideologies. I think it’s worth questioning whether there are some aspects of technology, particularly related to search, that might be making this worse, instead of better.

Search Google enough as a conservative, and the results you’ll start to find are all conservative sources, and the opposite is true as well. In an era of ubiquitous information, we’ve somehow managed to shield ourselves from anyone who might offer a dissenting view. The places where we do end up marginally forced to interact with opposing political and religious world views are actually social networks.

Diversity is healthy, so maybe there’s some room to let others in.

The Blame Game

http://www.hulu.com/watch/543223

Last night on the Daily Show, Jon Stewart found a clip of Boehner having a deal with Harry Reid on the budget, but he and House Republicans decided not to honor it because they still don’t like the Affordable Care Act.

In this instance, it’s not “both sides”. I can be sympathetic to taking a principled stand, but if you’re going to make a principled stand… Own up to it. Otherwise, you just look like a dick. Though a principled stand against all US citizens having healthcare - provided through private companies - seems like an odd place to make a stand.

If you’re going to make a stand against Obama’s administration, do it on NSA spying (which they probably won’t do, because it’s in their interests too), or on drones (which they probably won’t do, because they’re happy with drones), or on just about transparency (which they probably won’t do because… oh hell, because they’d be just as opaque). There are significant issues to object to with Obama’s policies. Providing healthcare through private companies that compete in a marketplace is not one of those things. 

Honestly, there’s just about nothing more American than providing services (healthcare) in a marketplace filled with private enterprise where competition forces companies to lower their costs to customers.

Bitcoin Trending vs. Value

Every now and then, I see something trending in the media, and I wonder just how much influence has been exerted. It’s very rare to be able to have data on that sort of thing, as without concrete facts, you can’t really gauge public opinion without extensive polling data. Even then, you’re still subject to quite a bit of bias. But with something like Bitcoin, we have a very easy way to compare media attention with value.

In the last two months, Bitcoin value has been skyrocketing. Since the beginning of March, the value has gone from $33 USD to $90 USD.

Data via bitcoincharts.com.

I was pretty intrigued by why this was the case. There have certainly been a lot of news articles about Bitcoin recently. So I decided to do a quick Google Trends search, and cross reference the results with the value of Bitcoins.

Google Trends data for Bitcoin, August 2010-Present

So, in April-June of 2011, we saw a spike in the search traffic, and articles. We saw another brief spike in the search traffic in January of 2012. Another spike in September of 2012, and recently, a huge trend on the topic. Keep all that in mind.

Now look at the value of Bitcoins from August 2010 to the present.

Data via bitcoincharts.com.

What this should show you is just how easily a small market cap commodity can be driven (or manipulated) by media attention.