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Just on a brief look at BitCoin the question I have is generating blocks of bitcoins which requires computational power earns 50 bitcoins. Firstly that seems fa

Just on a brief look at BitCoin the question I have is generating blocks of bitcoins which requires computational power earns 50 bitcoins. Firstly that seems fairly arbitrary but secondly, what would happen if the currency became commonly used and a large company with a lot of computational power decided to get involved i.e google / facebook / microsoft. Wouldn't they end up monopolising a large portion of the bitcoins?

corin_ 15y ago
A good description of why that won't happen comes from a comment made on HN a week ago by Construct. "Meanwhile, hardware enthusiasts all over the internet are rushing to buy GPUs to dedicate to mining. They don't seem to realize that the bitcoin system automatically adjusts to keep the bitcoin generation rate constant at 50 BTC per 10 minutes. As the mining market becomes flooded with new 'miners' the difficulty will climb rapidly, until it becomes unprofitable to run a GPU if you have to pay for electricity." http://news.ycombinator.com/item?id=2501154 http://news.ycombinator.com/item?id=2501154
- contactdick 15y ago
  Sounds like it's already happening - to quote construct "Some quick research shows a handful of big players in the mining market who have invested heavily in high-end GPUs for dedicated bitcoin mining, some with over 50 GPUs running 24/7 for months now. These guys are bound to have huge quantities of bitcoin they are eager to unload when the price is right. Meanwhile, news coverage is driving exploding popularity, which appears to be pulling the exchange rate sky high. On paper, many of these guys have become overnight millionaires just by running a bunch of computers 24/7."
  - corin_ 15y ago
    I believe the idea is that mining was a solution for launching BitCoin, and that as BitCoin has become more popular, the value of mining has gone down, meaning that at some point (I don't know if it's already happened or not), mining won't be worth the returns.
    - dfox 15y ago
      mining has to be worth the returns, because without mining the network will not work. It is not about generating BTC, but about estabilishing verifiable historical record of performed transactions. It is expected, that when value of one block will go down, miners will make profit from transaction fees.
    - lutorm 15y ago
      This is one thing that does seem to make sense: If mining isn't worth the return, then people will stop, and the returns will go up. It should adjust itself to whatever return people think is necessary to bother.
Tichy 15y ago
Bitcoins are only generated every 10 minutes (on average), so it would probably not be worth it for a company to dedicate a huge cluster of computers to it. At most they could earn 50 BTC/10 minutes, no matter how much computing power they'd throw at it. It get's more interesting if a company could calculate blocks faster than all the other nodes combined. Then that company could forge the complete chain of transactions. I think there are even numbers floating around in the BitCoin forums as to how much it would cost to build such a server farm atm. So yeah - with enough money you could ruin BitCoin, but why would you be motivated to do so? Also, it gets harder every day, as the network of nodes grows.
- contactdick 15y ago
  well the motivation to make money is a fairly strong one for a lot of people - many worse things are done every day because of it.
  - Tichy 15y ago
    Yes, but destroying BitCoin would not make you any money. At least I don't see how.
    - aredington 15y ago
      Destroying BitCoin provides you lots of value if you have a vested interest in some thing that BitCoin threatens the value of.
      - Tichy 15y ago
        Fair point.
  - Seth_Kriticos 15y ago
    Yes. Though it would be hard to just out-compute the hashes without the community noticing. Just to put it into perspective: currently the network is crunching away at 16344 TeraFLOP/s ( http://bitcoinwatch.com/ http://bitcoinwatch.com/ ).

corin_ 15y ago

A good description of why that won't happen comes from a comment made on HN a week ago by Construct. "Meanwhile, hardware enthusiasts all over the internet are rushing to buy GPUs to dedicate to mining. They don't seem to realize that the bitcoin system automatically adjusts to keep the bitcoin generation rate constant at 50 BTC per 10 minutes. As the mining market becomes flooded with new 'miners' the difficulty will climb rapidly, until it becomes unprofitable to run a GPU if you have to pay for electricity." http://news.ycombinator.com/item?id=2501154 http://news.ycombinator.com/item?id=2501154

contactdick 15y ago
Sounds like it's already happening - to quote construct "Some quick research shows a handful of big players in the mining market who have invested heavily in high-end GPUs for dedicated bitcoin mining, some with over 50 GPUs running 24/7 for months now. These guys are bound to have huge quantities of bitcoin they are eager to unload when the price is right. Meanwhile, news coverage is driving exploding popularity, which appears to be pulling the exchange rate sky high. On paper, many of these guys have become overnight millionaires just by running a bunch of computers 24/7."
- corin_ 15y ago
  I believe the idea is that mining was a solution for launching BitCoin, and that as BitCoin has become more popular, the value of mining has gone down, meaning that at some point (I don't know if it's already happened or not), mining won't be worth the returns.
  - dfox 15y ago
    mining has to be worth the returns, because without mining the network will not work. It is not about generating BTC, but about estabilishing verifiable historical record of performed transactions. It is expected, that when value of one block will go down, miners will make profit from transaction fees.
  - lutorm 15y ago
    This is one thing that does seem to make sense: If mining isn't worth the return, then people will stop, and the returns will go up. It should adjust itself to whatever return people think is necessary to bother.

Tichy 15y ago

Bitcoins are only generated every 10 minutes (on average), so it would probably not be worth it for a company to dedicate a huge cluster of computers to it. At most they could earn 50 BTC/10 minutes, no matter how much computing power they'd throw at it. It get's more interesting if a company could calculate blocks faster than all the other nodes combined. Then that company could forge the complete chain of transactions. I think there are even numbers floating around in the BitCoin forums as to how much it would cost to build such a server farm atm. So yeah - with enough money you could ruin BitCoin, but why would you be motivated to do so? Also, it gets harder every day, as the network of nodes grows.

contactdick 15y ago
well the motivation to make money is a fairly strong one for a lot of people - many worse things are done every day because of it.
- Tichy 15y ago
  Yes, but destroying BitCoin would not make you any money. At least I don't see how.
  - aredington 15y ago
    Destroying BitCoin provides you lots of value if you have a vested interest in some thing that BitCoin threatens the value of.
    - Tichy 15y ago
      Fair point.
- Seth_Kriticos 15y ago
  Yes. Though it would be hard to just out-compute the hashes without the community noticing. Just to put it into perspective: currently the network is crunching away at 16344 TeraFLOP/s ( http://bitcoinwatch.com/ http://bitcoinwatch.com/ ).