Hashing Power Digital Hardware Rental Service
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Hello again Feathercoin community. It’s been a while since I’ve posted here, when I last contemplated the idea I am now in the process of putting into action. In this thread I am looking for advice, critique, and/or any other helpful comments you may have on what I describe. TL:DR I will probably summarize at the bottom.
Without any further adieu, my name is Nick and I am a Silicon Valley investor and startup entrepreneur. I became interested in Bitcoin/crypto-currencies last summer when I read a news article on the subject. It is my belief that these forms of currency will be widely accepted and popular in the future, for reasons that I’m sure you all know better than I do.
In light of this, I began to think about a potential business surrounding the mining process of these coins. In essence, this business would involve owning a very large base of mining hardware, and thus hashing power, and renting it out on a per-hashrate per-time basis to consumers. I think this type of service would be beneficial to the business owner, the consumers, and the crypto-currency community in general.
The reason this can be beneficial to everyone is because of a risk-reward analysis from both parties. The business owner would have to take a net loss on the hashing power rented out, so that it makes some sense to consumers. Think of it this way:
The consumer pays a certain amount in USD (or BTC, LTC, FTC, etc.) for an amount in hashing power than will generate more value in a crypto-currency than the initial investment. As such, by renting the power and not building their own rig, they make more of a profit.
But how does this make sense to the business owner? By accepting payment in USD (or converting BTC/LTC/FTC payments into USD immediately following the transaction) he or she avoids the fluctuation and volatility of the crypto-currency market. Basically, the business owner takes a reduced-risk and reduced-reward business model, whereas the consumers are given the opportunity to accept a slightly higher-risk but also higher-reward option. It is equitable to both sides as they both get what they want, either more risk or more reward.
I think that as time goes on more and more businesses will be founded that are involved with the development and implementation of crypto-currencies as a payment medium. As a result of this, the crypto-currency communities are benefitted. The more legitimate businesses there are in a market the more potential the market has to grow. I want to help this market grow through this service.
This would also benefit the c-currency community by allowing people who would otherwise not be able to pay for mining hardware of their own get involved in the process of mining. Not only does this improve the security of the network as a whole, but it also widens the demographic of people who are involved with c-currencies. It’s pretty low-risk for a person who is new to this to pay $20 and rent some hashing power for a day to get involved. Of course the other option would be simply buying coins then selling them at a profit, but this service also allows a net gain.
I have a few concerns surrounding this idea, however, that I would value all your insights on.
First, in some preliminary research I have been doing I found a company called Butterfly Labs who are advertising a similar service on their website. However, it differed from what I am talking about in that it locks consumers into a year-long contract and only allows the mining of Bitcoin. Also, I read that Butterfly Labs is perhaps an illegitimate company with a fraudulent owner. What do you guys think about this company? I am not interested in doing business with or similar to an exploitive company. I like to protect the rights of my target demographic and make legal, honest, and fair deals.
Second, I’m somewhat worried about the imbalance of hashing power something like this could create within the overall mining pool of a c-currency, specifically FTC, which is my #1 focus right now (in other words, if I am going to go into one currency, it will be this one). If one business has too much hashing power, it increases the mining difficulty and makes it harder for individual miners to make a profit. I wouldn’t want to hurt a community of miners by having too big a share of mining power. Of course, this is mitigated to an extent by the fact that the hashing power is really in the hands of the renters, the consumers, which is kind of a checks and balances system. What are your thoughts surrounding this?
So, tell me what you guys think. Right now this isn’t in a development phase yet, and is really just something I am drafting ideas upon. I haven’t yet built a team to execute a plan, and may not do it if it isn’t feasible enough. This is why I have come here to ask you guys, the experts. If there is one thing I have learned in investing in technology, it is that the user-base always knows more than I think I know. Would something like this be good for you guys, the Feathercoin community, or would it harm you? I think this might help Feathercoin come to more of a forefront position like BTC and LTC have now, by just giving it more of a backing.
Thanks for any help you guys might have. If you think this is a good idea and my investment contacts do also, I will be looking for an expert in this field to hire as a consultant. If this interests you and you are in the Silicon Valley let me know. Good day everyone.
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There’s two reasons why these types of operations fail.
1. As soon as a mass market forms for mining, people jump on board which has the consequence of driving difficulty up resulting in lower returns. As a result, ROI is always less than what’s projected over the long term simply because people tend to project linear growth, and it’s almost always exponential.
2. Technology advancements move faster than year-long cycles, resulting in a contract that is obsolete before it expires. For example, ASIC’s will likely kill GPU mining this year, leaving GPU holders with no more than 6 months of viable time to mine before being pushed out.
Your idea of ‘pay as you go’ has merit, but it puts all the risk back on the host, because at any time people can not renew their contract, leaving the host with a ton of underutilized hardware and hosting space.
Butterfly Labs isn’t a scam company, they just grossly, and continuously underestimated their ability to deliver before taking people’s money, and as the difficulty rose and prices of BTC soared, what seemed like a good deal 1 year ago turned out to be the worst possible move ever in the history of speculative investing. They didn’t set out to defraud people, they simply disenfranchised them with their horrible customer service and 900% longer than expected delays. They’re still producing viable products, and as of today their backlog is cleared and they’re shipping product.
Now if you want a business that has legs, you should PM ChrisJ. Him and I are on the verge of building something that may be of interest to you.
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[quote name=“Kevlar” post=“51310” timestamp=“1389397402”]
Now if you want a business that has legs, you should PM ChrisJ. Him and I are on the verge of building something that may be of interest to you.
[/quote]Now there’s a good sentence to spice up my curiosity… any glimpse you can share? :)
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[quote name=“Thytos” post=“51318” timestamp=“1389399844”]
[quote author=Kevlar link=topic=6783.msg51310#msg51310 date=1389397402]
Now if you want a business that has legs, you should PM ChrisJ. Him and I are on the verge of building something that may be of interest to you.
[/quote]Now there’s a good sentence to spice up my curiosity… any glimpse you can share? :)
[/quote]One of the major problems with crypto-currencies is the price volatility, for both merchants and consumers. We’re gonna solve that. And since the Twitter Bot isn’t needed any more because someone already did it (MEGA PROPS!!! LOVE IT), that frees me up to think about this instead. So this weekend is gonna be catch up on the Link back log… and then… well, wait and see.
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Once the (various) volatility’s of the initiation network creation phase dies down, it will be easy to see whether such a business will be viable. for instance ASIC prices will stabilise.
Because of the self financing nature of cryptographic currency implementation and the previous experience of how Bitcoin develops, it should be possible with some study to get a good estimate of the risk of the various potential out comes.
Obviously, we believe in it and are trying to help get alternate currencies going. With this being so early, your action can effect how successful alternative currency will eventually be. Or more importantly, how quickly and how well their power is distributed.
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It’s always good when someone shows a interest to invest into technology, but according to me always investments need to come together with improvement and in best case with innovation.
My thoughts about your proposal for investment:
Rental service for Hashing power - This is nothing new. Yes, maybe economy model is quite better than the current solutions but doesn’t offer any improvement or innovation.
I hope you have read this while you was investigating about bitcoin protocol:
[url=http://www.mail-archive.com/cryptography@metzdowd.com/msg09959.html]http://www.mail-archive.com/cryptography@metzdowd.com/msg09959.html[/url]
According me the most important thing in the paper and the abstract is the following sentence: “As long as honest nodes control
the most CPU power on the network, they can generate the longest chain and outpace any attackers.”
With innovation of the mining pools there is always the fear of huge hashing power concentrated into one node. ( Not just 51% attack is dangerous one, also and 35% could do some damage… )At this moment every cloud hashing solution takes responsibility to be honest on itself. But is this right and correct?
From my point of view future cloud hashing services need to support:
1. (improvement): User has freedom to choose mining pool by his own. Hashing provider gives the user detailed info about mining pool from the mining aspect.2. (innovation in case hashing power is really huge): Hashing service plays the role of mining pools aggregation service ( and their quality auditing tool ) and dispatching service for the users/miners to the third party mining pools. In this way provider protects the network=>protects the miners.
At the end there are a lot of possibilities and different approaches and forum post def. isn’t enough to go in deep with on the topic.
Cheers!
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[quote name=“Kevlar” post=“51310” timestamp=“1389397402”]
1. As soon as a mass market forms for mining, people jump on board which has the consequence of driving difficulty up resulting in lower returns. As a result, ROI is always less than what’s projected over the long term simply because people tend to project linear growth, and it’s almost always exponential.
[/quote]Thanks for the tips. Is there a source anywhere where I can see the historical difficulty increases for various cryptos? Analyzing such a source would help to predict growth and potential profit.
[quote author=Kevlar link=topic=6783.msg51310#msg51310 date=1389397402]
2. Technology advancements move faster than year-long cycles, resulting in a contract that is obsolete before it expires. For example, ASIC’s will likely kill GPU mining this year, leaving GPU holders with no more than 6 months of viable time to mine before being pushed out.
[/quote]I’m seeing online that a company called Alpha Technology has developed ASIC’s for sCrypt (although I’m sure this is old news to you all). The sensible business decision would be to only establish a hashing power base using these systems. How much faster have ASIC’s for Bitcoin gotten as they have developed? If what Alpha is coming out with is fast enough to compete with future models, they may be enough to pull a profit for a couple years. Purely speculation, again, it depends on the difficulty.
[quote author=wrapper0feather link=topic=6783.msg51325#msg51325 date=1389403435]
Once the (various) volatility’s of the initiation network creation phase dies down, it will be easy to see whether such a business will be viable. for instance ASIC prices will stabilise.Because of the self financing nature of cryptographic currency implementation and the previous experience of how Bitcoin develops, it should be possible with some study to get a good estimate of the risk of the various potential out comes.
[/quote]
You’re correct. The only problem is, without any sort of risk, there cannot be any great gain. We could sit here and analyze the profitability of Bitcoin in retrospect over the last few years, but if we found it to be positive, we would have already missed the opportunity. If the data I’m able to gather before the fact suggests that a net gain could be achieved, I may go for it.
[quote author=slavco link=topic=6783.msg51327#msg51327 date=1389404461]
snip
[/quote]Very good ideas slavco. I like your insight.
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[quote name=“TawClaw” post=“51346” timestamp=“1389415890”]
[quote author=Kevlar link=topic=6783.msg51310#msg51310 date=1389397402]
1. As soon as a mass market forms for mining, people jump on board which has the consequence of driving difficulty up resulting in lower returns. As a result, ROI is always less than what’s projected over the long term simply because people tend to project linear growth, and it’s almost always exponential.
[/quote]Thanks for the tips. Is there a source anywhere where I can see the historical difficulty increases for various cryptos? Analyzing such a source would help to predict growth and potential profit.
[/quote]
The reason I ask is because I have no idea what the difficulty growth curves for mining these currencies are. 2x/year? 3x? 10x? 100x?
Just doing some quick/cheap math here, based on the advertised hashrate on Alpha Technology’s scrypt ASIC’s, even if the difficulty of mining FTC triples, one would still see a significant enough return on investment to justify mining using their hardware in the next year. Although this is useless if the difficulty increases by more than that, it was a completely random guess.
