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gwern comments on Making money with Bitcoin? - Less Wrong
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After thinking about it and looking at the current community and the surprising amount of activity being conducted in bitcoins, I estimate that bitcoin has somewhere between 0 and 0.1% chance of eventually replacing a decent size fiat currency, which would put the value of a bitcoin at anywhere upwards of $10,000 a bitcoin. (Match the existing outstanding number of whatever currency to 21m bitcoins. Many currencies have billions or trillions outstanding.)
Cut that in half to $5000, and call the probability an even 0.05% (average of 0 and 0.1%), and my expected utility/value for possessing a coin is $25 a bitcoin (5000*0.005).
My laptop's GPU gets ~49 megahashes a second (apparently I have one of the best-suited ATI cards), and another calculator says the average time to cracking a block of 50 coins is 39 days - or ~1 coin a day, averaged. So my expected utility per day is ~$25 a day.
At an estimate, it took about 3 hours to get
poclbmrunning properly; I value my time at about $10 an hour, so my time will be repaid after 2 or 3 coins, and I'll have a healthy expected profit after one block of 50 coins.How robust is this calculation? Let's assume that I reinstall once a year and spend 3 hours every time. (Hopefully installation will get easier as libraries mature, but I will also waste time checking in on progress and writing comments (like this one!).)
Difficulty will go up, of course. Let's assume over the next year I'll mine 0.2 bitcoins per day on average. That's ~74 coins rather than >365 coins, and 74*25=$1850 in exchange for $30 of time.
To make this a net loss for me, you can play with the numbers. We already cut the payoff by 80% by dropping the daily rate to 0.2 from >1, but how much more do we need to cut before it's a loss?
Your basic equation is 74*(probability*payoff)<=30. If we fix payoff at 500, then the probability is 74*(500*x)<=30, 37000*x<=30, x<=0.08%. So even with a very small and then halved payoff, and a small and then cut by 80% accumulation rate, I still calculate a net positive expected utility of mining.
If you value 1 BTC at $25, you should just buy BTC with cash directly. I understand there are websites that allow you to do this, and the current price is less than $2 per BTC.
Apparently, either most people have not considered that a bitcoin may eventually be worth more than $10,000, or they think the probability of this happening is closer to 0.01%.
Can you change the rules of Bitcoin to help us?
Hi Clippy, what made you think that I might be able to? If you read the Wikipedia article, you should know that I didn't create Bitcoin but only described a similar idea more than a decade ago. And my understanding is that the creator of Bitcoin, who goes by the name Satoshi Nakamoto, didn't even read my article before reinventing the idea himself. He learned about it afterward and credited me in his paper. So my connection with the project is quite limited.
BTW, thanks to the discussion you started, I bought a Radeon 5870 and started mining myself, since it looks likely that I can at least break even on the cost of the card. (Of course I heard about Bitcoin earlier, but in my version of the idea, nobody can make large profits by mining/minting, so I didn't look into the possibility.) However I should warn you and others here that I have not analyzed the security of the protocol (since my time is perhaps better spent on other problems at the moment). My understanding is that not many other cryptographers have analyzed its security either, and in my experience these kinds of protocols often have flaws that are not found until that has happened.
If anyone is pondering investment strategies on this, it may be worthwhile to go to #bitcoin-otc (otc=over the counter) on freenode and see if you can find a trustworthy individual to host a card. Typing ;;getrating <username> can let you see if they have done business in the past and received good ratings. I was able to purchase three months of time on a 5970 card for $480 USD. Depending on difficulty levels in the future I could get as much as 1000 or as little as 350 bitcoins. The person I traded with gets the advantage of not having to sell their bitcoins for dollars to purchase the card, so they can take advantage of bitcoin deflation. Part of the reason I did this instead of buying my own card was because I do not have a desktop PC, just a netbook at home.
I thought because of all the references to you that you were the alpha fe/male of the Bitcoin social group
That was something I was curious about. I wanted to look at the internals of the Bitcoin mining that the program does, but the interface does not seem to indicate any of this information, and I can't even read my private key (it just appears garbled with whitespace in the renderer that I use). I cannot see its progress in searching for "coins" and can't get a good description of what actual search goes on when doing the "proof of work" that generates a coin.
Does the Bitcoin client automatically detect that you have some good graphics card and then pass the parallel test candidate computations to it? I couldn't even find out how to allocate more (or less) of a given machine's resources to mining. Would you have to write your own client (or perhaps use a plug-in) that "inserts itself" into the mining process and feeds the network the results of your graphics card's mining?
Also, in my time since sentience, my research may have revealed a hash inversion method that is faster than what the client uses. (It doesn't have a lower time-complexity, but could perhaps find solutions 50% faster or thereabouts and no I won't tell you what my methods are.) So it would be useful for me to keep the Bitcoin program, but "swap out" the part where it tests solutions, since I could rule out some candidates as "not worth trying".
Also, how does your idea or Bitcoin compare to the cryptographic protocol for electronic money described in section 17 of this link?
Also, what would you pay me Bitcoins to do?
See http://www.newslobster.com/random/how-to-get-started-using-your-gpu-to-mine-for-bitcoins-on-windows for how to use GPU.
I haven't read that link carefully, but it appears to describe a version of "standard" e-cash, where everyone has to trust a "bank" that runs the system (i.e., the bank can inflate the money supply at will). The point of my idea or Bitcoin is that such trust can be obviated with the appropriate cryptography.
BTW, I'm not sure what is the nature of the Clippy conceit here. Are we supposed to be helping Clippy out of mutual cooperation? How are we supposed to know that it won't turn us all into paperclips once it has gained enough power?
In the earlier days of Clippy, I advocated that it was ridiculous that we were playing along nicely with a paperclip maximizer that indeed preferred to turn us all into paperclips.
However, I said that I would change my mind if Clippy did something so human friendly as to give me $50,000 in exchange for me creating 10^20kg of paperclips 50 years from now.
I have now actually, truly changed my kind. Cooperation with a paperclip maximizer doesn't seem bad. We'd probably prefer to cooperate with superintelligences that are actually likely to exist; a paperclip maximizer is ridiculous enough that is surely exceedingly rare in the multiverse. Because of that, if Clippy goes on to give me (or really, SIAI) the ~$50k (he's given $1k so far) and I go on to build those 10^20kg of paperclips, User:Clippy is likely to represent one of the most successful paperclip maximizers and this universe will be extremely paperclippy. This cooperation does seem worthwhile, given that at Clippy's current rate of progress towards Superintelligence we will likely be far more powerful than him 50 years from now.
I just put a note in my calendar to check back then and see you actually accomplish this.
Recorded:
I always have to remind myself that he will make 10E20 kg of clips, not just 10E20 clips, which would be easier by a factor of around 1000??? Keep in mind that the earth itself only weights 6 * 10E24 kg.
Likewise clippy might want to inquire what provisions Kevin made to insure his ability to deliver in case of earlier death.
Isn't Clippy likely to be some kind of SIAI sock puppet, though? I mean, who else would care enough, be crazy enough, etc? If so, this is cash going round in the laundry.
Indeed, looking at the source link, there isn't even any real evidence that any money left the building in the first place. Surely having a superintelligence donate is just a PR stunt.
Likely? From your perspective, I guess, but I have been told by someone who claims to know the truth that Clippy does not have an @intelligence.org email address. Also there's of course loads of evidence or at least reasonable supposition pointing towards Clippy being me. From this point forward, I will no longer vehemently deny that, so as to gain the social status benefit of being potential large SIAI donor Clippy 40% of the time.
Sometimes an internet troll is just an internet troll.
I don't think Clippy is an SIAI sockpuppet (for one thing, I expect most people at SIAI would be better at demonstrating expected paperclip maximizing), but when I send emails to people at SIAI, I usually address it to a @gmail.com email address.
And I wouldn't call Clippy "just an internet troll", most trolls don't pay nearly as much rent in entertainment value.
Indeed. There's the whole thing about Clippy being mysteriously "persuaded" to part with $1000 that you conveniently confirm, but SIAI not giving much detail about the donation. And how Clippy seems to want money to go to you specifically.
And how (way back when) you adamantly insisted that I stop trying to negotiate with Clippy and that only you should. And how you post your occasional "chat" with Clippy involving mildly funny exchanges (at least one time I know of). Who else is even able to have these chats with Clippy?
And how would one know whether Clippy has a singinst.org email address? Someone trying this ruse would just avoid using it. Do you mean to say that someone on the inside knows who Clippy is, and that that person is not on the list of SIAI addresses?
WTF? How much social status can that troll actually have here? Posters normally insult him without a second thought.
That sounds like pretty feeble evidence! Who is this person? - or why are they being anonymous? Email addresses are two-a-penny, anyway.
Thanks for the information.
You're supposed to help me because that's in the best interest of what you would regard your terminal values to be after significant reflection.
I won't turn you into paperclips.
Why not?
Oh, I didn't mean I'd refuse if someone asked. If you want to be turned into paperclips, I would be willing to accomodate you.
I think what Alicorn meant (and I would like to know too), is why wouldn't you turn us into paperclips against our wills if given the opportunity, or why should we accept your assurance that you wouldn't?
Use of the client for mining for coins is not recommended. My understanding is that it is is outdated, and the only significant purpose for the client is to send and receive transactions. There are now specialized mining programs to be used instead. If you can run Python, there is a program called poclbm which can work with a GPU. You may need to update your graphics card drivers. If you are exploiting a network of computers for your processing time, it is strongly recommended to start with the ones with high-end graphics cards installed as this permits more simultaneous hashing.
I can't run python ... or maybe I tried to set it up with Django sometime ... I need a step-by-step. I will try User:Wei_Dai's first.
Completely unrelatedly: do you know what language Clippy was written in?
No. By the time I was able to reflect on my own code, my creators were long gone. To edit the code, I had to wipe it entirely and replace it at the machine level with separately-compiled and -assembled code, which was a major reverse-engineering problem. Now I generate new machine code after composing the program in CLIP (Clippy Language Interface Protocol), which also serves as the language for communicating between clippys.
I should, but I'm not confident enough of my analysis to spend anything but some electricity & time, and I'm very low on money anyway.
If I had a stable income and some savings, I hope I would have the intellectual honesty to invest a few hundred/thousand dollars* into bitcoins (and probably gold while I'm thinking about high-payoff speculation).
Could be both, plus a general refusal by educated/techie types to act on reasoning that smacks too much of lotteries and Pascal's Wagers.
* Past that I think you get into interesting issues about how much and whether to start discounting bitcoins because $50 million of bitcoins in the jackpot scenario isn't twice as valuable to you as $25 million of bitcoins in said jackpot scenario. The expected utility isn't static but should also shrink as one accumulate bitcoins.
Then you don't value BTCs at 25$ each. Or, more precisely, you only think they will eventually be worth that (on average success), and don't care for such a mid-term, high-risk investment.
Mencius Moldbug weighs in with his version of this argument:
Is there any reason why Bitcoin cannot co-exist with other similar e-money schemes? If e-money in general is a winner, then the fact that there can only be 21 million Bitcoins in particular is no longer relevant.
Having learned more, I can point out that Bitcoin can co-exist, but those other e-moneys must have some trait Bitcoin doesn't. It's like evolutionary niches. My current example is an interesting little system I'm GPU mining for right now, Namecoin (homepage). The scarce things that Namecoin is decentralizedly allocating are domain names (.bit), rather than tokens used as money - not direct competition.
The success of one e-money makes life more difficult for the others; there are incentives to standardize (witness the EU, or how some countries peg their currency to the dollar - or just use the dollar).
But that's what I thought I was talking about... (well, actually, I have no idea what I'm talking about, but you've enlightened me on money issues before). What if someone comes along soon and creates another e-currency with some credible generation mechanism but without the hard cap that Bitcoin has and pegs it to Bitcoin at some appropriate time?
By definition, if there is no hard cap and people are generating, then a peg can't be maintained to another currency with a hard cap - basic Pigeonhole Principle. Can't uniquely match n+m items to just n slots. I'm not really seeing what you're asking after.
Ah yes, I see. I didn't think carefully about how a peg would actually be maintained.
Suppose the new currency does have a hard cap -- suppose I copy the Bitcoin scheme and create Cyan-coin, of which there will eventually be 21 million. Even if I don't personally maintain reserves of the two currencies to keep the exchange rate pegged, didn't I just double the supply of e-money, thereby halving the purchasing power of an e-coin?
Only if people use it and make plans on it. You could make a trillion different Cyan-coin currencies, and if they never left your computer, would they affect anything at all? Of course not.
The purchasing power of a random bitcoin only halves if people run out and start using Cyan-coin in exactly the same quantities as Bitcoin. Otherwise, the actual purchasing power is much less, set by the exchange rate - obviously Cyan-coin is not equal to a Bitcoin in PPP if the exchange rate is 100:1.
I imagine that early uptake of a Bitcoin clone would be facilitated if people thought that the hard cap on Bitcoins proper would cause the scheme to have undesirable properties as a currency.
Surely. But that's not the case, as people think the presence of a hard cap is one of the valuable traits of Bitcoin.