8 ms·

So what do they want with the fraction of that as an investment? Is it a political play?

Alex3917 8y ago
> Is it a political play? Given that it's mathematically impossible for BTC to succeed until they change their POW, this doesn't make sense as a political play. Most likely Sequoia is just paying for BTC in advance to get a deeper discount than they'd normally get for buying in volume. It's also possible that they're just selling the BTC as they go and hoping for a short payback period, but while this makes sense financially it's unclear how it would relate to their overall portfolio strategy.
- JumpCrisscross 8y ago
  > It's also possible that they're just selling the BTC as they go and hoping for a short payback period Sequoia's China team is has more bankers than Sequoia's U.S. team. The investment may have been made with cash-yielding convertible debt.
  - charlesdm 8y ago
    Or their LP agreement might not allow them to invest in crypto directly, only in companies (generating crypto)
- icelancer 8y ago
  >> mathematically impossible for BTC to succeed until they change their POW Citation desperately needed, and not random rantings, please.
  - asdionio 8y ago
    4 transactions per second is not very many. 8 gigawatts is a lot.
    - wmf 8y ago
      But that's an artificial limit that has nothing to do with POW.
      - asdionio 8y ago
        So you move to Bitcoin Cash, which can do 60 transactions a second. Big deal. It's still orders of magnitude slower than it has to be to be useful. Blockchains don't scale. Period. If you know of a way to make them scale, publish it and you'll find instant fame and fortune. The power consumption will continue to increase, and that is purely the fault of POW.
        wmf 8y ago
        Blockchains don't scale. Period. If that's your position then changing the POW won't help. (I know no one cares, but there could be a pragmatic scaling path where you increase on-chain throughput while you do sharding/layer 2 research.)
        Jommi 8y ago
        Can you elaborate?
        icelancer 8y ago
        The Lightning Network is one such initiative for BTC.
        icelancer 8y ago
        >> Blockchains don't scale They don't need to scale linearly with off-chain transmissions acting as a secondary transmission network.
    - constantlm 8y ago
      Does segwit and (eventually) lightning not solve the TX shortcoming?
  - Alex3917 8y ago
    > Citation desperately needed, and not random rantings, please. It's just math. The amount of electricity needed to secure the network is directly proportional to the price (or more technically, the profitably of mining). This is because if you don't arbitrage out the profitability of mining, then the network is open to a 51% attack because the marginal cost of adding more hash power makes it profitable to keep adding more miners until you have control of the network. Basically the way the current POW is designed, BTC is only secure as long as it isn't obvious in advance whether or not mining at scale will be more profitable than buying BTC after it's been mined. So given that for BTC to become a successful reserve currency it would need to be worth at least 100x what it's worth today, that means it would need to use at least 100x as much electricity. But that's more electricity than currently exists, and there's no way it would be feasible for BTC to even use a fraction of that. This means that BTC can't actually ever reach those price levels, because if it did then it would no longer be secure, so would need to immediately drop back down in price in order to account for (and mitigate) the security risk.
    - AndrewBissell 8y ago
      > But that's more electricity than currently exists This is not a variable that will remain constant once it starts becoming profitable to invest in power generation solely for the purpose of bitcoin mining.
      - dboreham 8y ago
        Ahh... the Dyson Sphere is nigh...
        jacobush 8y ago
        This is why we can’t have nice things.
        wmf 8y ago
        I don't know; Dyson spheres are pretty damn cool.
andrestan 8y ago
Most likely credibility, publicity, connections and mentorship that major VCs provide.
- dopamean 8y ago
  What kind of mentorship would the management of a company that is doing $4B/year in sales need? I don't mean that sarcastically. I would have thought, "clearly these people figured it out."
  - justicezyx 8y ago
    I randomly speculated that this might help them evade some of the financial control inposed by the government?
  - wmf 8y ago
    It's funny you should say that. Bitmain has dealt very poorly with western miners and developers and repeatedly blamed those "misunderstandings" on "cultural gaps". In the short term they don't need to solve this problem, but one day I expect the pitchforks to catch up with them.
  - andrestan 8y ago
    A great example of an executive who has led the rapid development of a business but drastically needed more mentorship would be Travis Kalanik formerly of Uber. Running a large and successful company well is much, much more than just generating revenue and valuation.
    - johnmorrow 8y ago
      Didn't Sequoia invest in them too? You might be right but this is not the best example lol
      - joering2 8y ago
        Second that. Outside of HN an average person, or probably north of 95% Uber riders, neither heard nor care/cared about internal problems at Uber. None of those problems really reflected on qualty of services they provide to the final consumer.
rebelidealist 8y ago
For when bitcoin mining cease to be profitable. Bitcoin mining rewards halves ever so often.
- trophycase 8y ago
  Bitmain sells a lot of mining hardware. Bitcoin, Litecoin, Dash, and many others.
- bertil 8y ago
  I would think of their hardware as cryptographic rather than exclusively currency related: even without cryptocurrencies around, you might need that hardware to operate strong encryption, either on your laptop or as a service. I’m not very clear on what are the next requirement and algorithm coming, but it sounds like a reasonable area to invest in. If you look at it slightly differently: this is a company who was able to be successful in the cut-throat B2B hardware integration business. Even if some of the key aspects of that hardware might not be relevant, they have demonstrated agility at scale, which is valuable. Every company with the same scale in China has been able to negotiate full pivots repeatedly: maps become platform, search engines conversation agents, integrators turn into high-street brands, etc.
- thinkmassive 8y ago
  The block reward halves approximately every 4 years, and it's currently halfway through the 12.5 BTC reward period. Based on this schedule there will be a mining reward until the year 2140. In addition to the block reward, the miner who finds each block also gains a fee from every transaction in that block. Ideally this fee stays low, but it depends on network congestion (and what miners are willing to accept, since they choose the transactions that make it into each block). The transaction fee has already hit the equivalent of $50 per transaction, back in late 2017. Even with improvements such as batching, segwit, and lightning, there is still likely to be sufficient returns to incentivize miners for the foreseeable future.
21 8y ago
Maybe they need cash to pay for electricity and hardware, so that they don't spend bitcoin now when it's down.
- sgspace 8y ago
  They most likely went short on Bitcoin when the price was high. This is Bitmain they are not just guessing what the price will be they certainly have projections and they know what a crypto bear market is like. Its a very safe position to short Bitcoin when you have the Bitcoin to cover the shorts if the price goes up.
  - rspeer 8y ago
    Maybe there's some subtlety I'm missing. If you have a lot of Bitcoin and you want to short Bitcoin, isn't that just called "selling Bitcoin"?
    - goldenkey 8y ago
      They most likely are underwriting rolling options, most of which expire unused.
      - KMag 8y ago
        Can you currently buy puts on Bitcoin where your counterparty risk isn't highly correlated to the price of Bitcoin?
        goldenkey 8y ago
        Wouldn't that be the case for the above if the option underwriter is guaranteeing possession of the underlying bitcoin?
        KMag 8y ago
        That is only the case for call options, which isn't the case where you're concerned about counterparty risk correlation with the underlier. For put option, they'll need to guarantee enough cash (or cash equivalents) on hand to pay you out if Bitcoin reaches zero. The carrying cost (or at least opportunity cost) is high for holding large inventories of cash, so it's not very attractive from a business perspective to do so unless there's either a market or regulatory demand to do so.
rajacombinator 8y ago
Definitely a political play and a smart one too.
hanniabu 8y ago
Expand mining operations. Miners have cash flow issues do and often resort to loans

> Is it a political play? Given that it's mathematically impossible for BTC to succeed until they change their POW, this doesn't make sense as a political play. Most likely Sequoia is just paying for BTC in advance to get a deeper discount than they'd normally get for buying in volume. It's also possible that they're just selling the BTC as they go and hoping for a short payback period, but while this makes sense financially it's unclear how it would relate to their overall portfolio strategy.

JumpCrisscross 8y ago
> It's also possible that they're just selling the BTC as they go and hoping for a short payback period Sequoia's China team is has more bankers than Sequoia's U.S. team. The investment may have been made with cash-yielding convertible debt.
- charlesdm 8y ago
  Or their LP agreement might not allow them to invest in crypto directly, only in companies (generating crypto)
icelancer 8y ago
>> mathematically impossible for BTC to succeed until they change their POW Citation desperately needed, and not random rantings, please.
- asdionio 8y ago
  4 transactions per second is not very many. 8 gigawatts is a lot.
  - wmf 8y ago
    But that's an artificial limit that has nothing to do with POW.
    - asdionio 8y ago
      So you move to Bitcoin Cash, which can do 60 transactions a second. Big deal. It's still orders of magnitude slower than it has to be to be useful. Blockchains don't scale. Period. If you know of a way to make them scale, publish it and you'll find instant fame and fortune. The power consumption will continue to increase, and that is purely the fault of POW.
      - wmf 8y ago
        Blockchains don't scale. Period. If that's your position then changing the POW won't help. (I know no one cares, but there could be a pragmatic scaling path where you increase on-chain throughput while you do sharding/layer 2 research.)
        Jommi 8y ago
        Can you elaborate?
        icelancer 8y ago
        The Lightning Network is one such initiative for BTC.
      - icelancer 8y ago
        >> Blockchains don't scale They don't need to scale linearly with off-chain transmissions acting as a secondary transmission network.
  - constantlm 8y ago
    Does segwit and (eventually) lightning not solve the TX shortcoming?
- Alex3917 8y ago
  > Citation desperately needed, and not random rantings, please. It's just math. The amount of electricity needed to secure the network is directly proportional to the price (or more technically, the profitably of mining). This is because if you don't arbitrage out the profitability of mining, then the network is open to a 51% attack because the marginal cost of adding more hash power makes it profitable to keep adding more miners until you have control of the network. Basically the way the current POW is designed, BTC is only secure as long as it isn't obvious in advance whether or not mining at scale will be more profitable than buying BTC after it's been mined. So given that for BTC to become a successful reserve currency it would need to be worth at least 100x what it's worth today, that means it would need to use at least 100x as much electricity. But that's more electricity than currently exists, and there's no way it would be feasible for BTC to even use a fraction of that. This means that BTC can't actually ever reach those price levels, because if it did then it would no longer be secure, so would need to immediately drop back down in price in order to account for (and mitigate) the security risk.
  - AndrewBissell 8y ago
    > But that's more electricity than currently exists This is not a variable that will remain constant once it starts becoming profitable to invest in power generation solely for the purpose of bitcoin mining.
    - dboreham 8y ago
      Ahh... the Dyson Sphere is nigh...
      - jacobush 8y ago
        This is why we can’t have nice things.
        wmf 8y ago
        I don't know; Dyson spheres are pretty damn cool.

andrestan 8y ago

Most likely credibility, publicity, connections and mentorship that major VCs provide.

dopamean 8y ago
What kind of mentorship would the management of a company that is doing $4B/year in sales need? I don't mean that sarcastically. I would have thought, "clearly these people figured it out."
- justicezyx 8y ago
  I randomly speculated that this might help them evade some of the financial control inposed by the government?
- wmf 8y ago
  It's funny you should say that. Bitmain has dealt very poorly with western miners and developers and repeatedly blamed those "misunderstandings" on "cultural gaps". In the short term they don't need to solve this problem, but one day I expect the pitchforks to catch up with them.
- andrestan 8y ago
  A great example of an executive who has led the rapid development of a business but drastically needed more mentorship would be Travis Kalanik formerly of Uber. Running a large and successful company well is much, much more than just generating revenue and valuation.
  - johnmorrow 8y ago
    Didn't Sequoia invest in them too? You might be right but this is not the best example lol
    - joering2 8y ago
      Second that. Outside of HN an average person, or probably north of 95% Uber riders, neither heard nor care/cared about internal problems at Uber. None of those problems really reflected on qualty of services they provide to the final consumer.

rebelidealist 8y ago

For when bitcoin mining cease to be profitable. Bitcoin mining rewards halves ever so often.

trophycase 8y ago
Bitmain sells a lot of mining hardware. Bitcoin, Litecoin, Dash, and many others.
bertil 8y ago
I would think of their hardware as cryptographic rather than exclusively currency related: even without cryptocurrencies around, you might need that hardware to operate strong encryption, either on your laptop or as a service. I’m not very clear on what are the next requirement and algorithm coming, but it sounds like a reasonable area to invest in. If you look at it slightly differently: this is a company who was able to be successful in the cut-throat B2B hardware integration business. Even if some of the key aspects of that hardware might not be relevant, they have demonstrated agility at scale, which is valuable. Every company with the same scale in China has been able to negotiate full pivots repeatedly: maps become platform, search engines conversation agents, integrators turn into high-street brands, etc.
thinkmassive 8y ago
The block reward halves approximately every 4 years, and it's currently halfway through the 12.5 BTC reward period. Based on this schedule there will be a mining reward until the year 2140. In addition to the block reward, the miner who finds each block also gains a fee from every transaction in that block. Ideally this fee stays low, but it depends on network congestion (and what miners are willing to accept, since they choose the transactions that make it into each block). The transaction fee has already hit the equivalent of $50 per transaction, back in late 2017. Even with improvements such as batching, segwit, and lightning, there is still likely to be sufficient returns to incentivize miners for the foreseeable future.

21 8y ago

Maybe they need cash to pay for electricity and hardware, so that they don't spend bitcoin now when it's down.

sgspace 8y ago
They most likely went short on Bitcoin when the price was high. This is Bitmain they are not just guessing what the price will be they certainly have projections and they know what a crypto bear market is like. Its a very safe position to short Bitcoin when you have the Bitcoin to cover the shorts if the price goes up.
- rspeer 8y ago
  Maybe there's some subtlety I'm missing. If you have a lot of Bitcoin and you want to short Bitcoin, isn't that just called "selling Bitcoin"?
  - goldenkey 8y ago
    They most likely are underwriting rolling options, most of which expire unused.
    - KMag 8y ago
      Can you currently buy puts on Bitcoin where your counterparty risk isn't highly correlated to the price of Bitcoin?
      - goldenkey 8y ago
        Wouldn't that be the case for the above if the option underwriter is guaranteeing possession of the underlying bitcoin?
        KMag 8y ago
        That is only the case for call options, which isn't the case where you're concerned about counterparty risk correlation with the underlier. For put option, they'll need to guarantee enough cash (or cash equivalents) on hand to pay you out if Bitcoin reaches zero. The carrying cost (or at least opportunity cost) is high for holding large inventories of cash, so it's not very attractive from a business perspective to do so unless there's either a market or regulatory demand to do so.

rajacombinator 8y ago

Definitely a political play and a smart one too.

hanniabu 8y ago

Expand mining operations. Miners have cash flow issues do and often resort to loans