Transcript Is Mining Money Possible? Tel Aviv Special Bitcoin Meetup, July 2014 Dr. Marco Krohn CFO Genesis Mining.

Is Mining
Money Possible?
Tel Aviv Special Bitcoin Meetup, July 2014
Dr. Marco Krohn
CFO Genesis Mining
AGENDA
1. What is a good form of money?
2. What is mining? And why do we need it?
3. What are Altcoins?
4. Genesis Mining: Large scale mining / Multi-pools
PAYMENT SYSTEM & CURRENCY
Bitcoin vs. USD / Credit Card
VS
Source: Wikipedia
Source: Wikipedia
Keynes
Austrian School
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WHAT IS SOUND MONEY?
Can Numbers Have Value?
GOLD
BITCOIN
Very high: Gold is an element that is nearly indestructible
Very high: Bitcoin are an electronic form of money and with
backups in electronic or paper form are very durable.
Portable
High: Gold has a high value to weight ratio.
Very high: any amount of Bitcoin can be moved on a piece
of paper or be memorized.
Fungible
Yes.
Yes.
Divisible
High. However, dividing gold requires work (e.g. melting).
Very high: Bitcoin can be broken up into 100 million of
smaller units (“Satoshis”).
Scarce
Limited supply, however, no one knows the upper limit.
More gold reserves are discovered all the time.
There can never be more than 21 mn Bitcoins (ensured by
mathematics).
Recognizable
It requires effort to tell if Gold is real or fake (Tungsten)
Securely recognizable by software.
Durable
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WHAT IS THE VALUE OF BITCOIN?
An Expensive Pizza
May 2010: Laszlo buys two pizzas ~25$
He paid with Bitcoin!
 Bitcoin became valuable!
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TRACKING THE OWNERSHIP OF FUNDS
Bitcoin: a Distributed Ledger
Source: “How Bitcoin Works in 5 Minutes” (youtube)
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TRACKING THE OWNERSHIP OF FUNDS
What is a Transaction?
by the rightful account owner
 but when?
Source: “How Bitcoin Works in 5 Minutes” (youtube)
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TRACKING THE OWNERSHIP OF FUNDS
Cryptographic Hash Function
Main properties:
• it is infeasible to generate a message that has a
given hash
• it is infeasible to modify a message without
changing the hash
• (it is easy to compute the hash value for any
given message)
Source: Wikipedia
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WHAT IS MINING?
Reaching Consensus the Hard Way
•
Bitcoin is a decentralized system!
•
Problem: How to reach consensus about the state of the system?
Or: where are the coins? (double-spending)
•
Solution: Mining is a distributed consensus system!
•
How does it work?
–
Miners select "unconfirmed" transactions  "Block"
–
The block also contains a free parameter, called "nonce"
–
calculate the hash ("sha256") of the block
–
task: select the nonce of the block such that the
hash of the block is below a given threshold ("difficulty")

the only way is to check many combinations
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THE BLOCKCHAIN
No Double-Spending Allowed
CRYPTOGRAPHIC HASH FUNCTION
sha256( Prev. Block
sha256( Prev. Block
sha256( Prev. Block
sha256( Prev. Block


+
+
+
+
HASH
Current Block
Current Block
Current Block
Current Block
NONCE
+
+
+
+
122 )
23 )
545 )
107 )
= 1023 < 100?
= 198 < 100?
= 72334 < 100?
= 35
< 100?




no
no
no
yes!
Nonce = 107 solves the block  let everyone in the network know about it
How difficult is it? 125,000,000,000,000,000 H/s
Link to previous block  Blockchain
What if two solutions are found at the same time?
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WHAT IS MINING?
Reward and Difficulty
•
•
•
•
Mining is a hard problem  counterfeiting blocks is also hard  "51% attack"
On average a Bitcoin block is found every 10 minutes (difficulty is re-adjusted)
 difficulty increases
Reward? New coins (25 BTC) + Transaction fees
Bitcoin hashrate is growing exponentially!

take this into account if you
want to directly mine Bitcoins!
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EVOLUTION OF BITCOIN MINING
hashrate, hashrate, hashrate
•
•
More hashes per second  higher probability to find the block
25 BTC a 500 USD  12,500 USD every ten minutes
~100x
CPU
~2x
GPU
~100x
FPGA
ASIC
Source: Meni Rosenfeld
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WHAT ARE ALTCOINS?
Litecoin
OCTOBER 7, 2011

„A coin for the homebrew miner“

Uses scrypt algorithm

ASIC proof (at least people thought so)

Faster Transaction time

A copy of Bitcoin, but somewhat different

An Alternative to Bitcoin

An Altcoin!

Can we do it again?
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WHAT ARE ALTCOINS?
Indexing 317 coins
Yes, we can.
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WHAT ARE ALTCOINS?
Increasing Generations of Altcoins

1st Generation: sha256
Bitcoin, Namecoin, Peercoin, ...

2nd Generation: scrypt
Litecoin, Dogecoin, Infinitecoin, …

3rd Generation: adaptive n-scrypt
(the final and always ever ASIC-Proof Coin generation?)
Vertcoin, Pandacoin, Rotocoin, ...

And more:
X11, X13, X15, …
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GENESIS MINING
Large Scale Mining
Small private rig at home
Genesis Mining Facility I (Europe)

Electricity Consumption  Cooling

Contracts with Power Plants  Long-term vs. short-term

Security (cameras, alarm system, insurance companies)
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GENESIS MINING
User Friendly Interface

Mine the Altcoin of your choice
 or use the multi-pool

Hashrate available at the time of purchase
(no waiting time)

100% Uptime guarantee

Mine various types of money
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GENESIS MINING
Multipool
Miner

CU
Altcoins
Mine the most profitable Altcoin?
It is not that simple: (i) market depth (ii) overhashing
 mine the most profitable Altcoin portfolio

Trading strategies
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GM
Trader
Users
Wallet
Summary
“You can practically put a bank in your pocket.
That is pretty amazing!”
-- Gavin Andresen --
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