[Server-sky] Bitcoin mining

Luke Parrish lsparrish at rationalsites.com
Mon Apr 16 22:51:28 UTC 2012

This is an idea I had recently. For quick ROI, especially on early
"prototype" sats that nobody trusts with their valuable data, one could
start by mining bitcoin.

Bitcoin is a digital commodity that behaves like a currency. There are
entire startups based around it. If you have bitcoins in your account, you
can transfer to someone else's by publishing a transaction that only you
can create. To make sure transactions are valid, instead of having a single
third party verify them, a peer to peer system is used to allow everyone
with a processor to check the transactions, over and over.

The creator's original goal was for it to employ CPU power so there would
be easy entry and everyone could just check a box on their PC for a few
starter bitcoins. However since the SHA256 hash was chosen, which is highly
parallelizable, use of GPU (graphical processing unit) cards turned out to
be massively more cost-effective. Currently the only energy-efficient ways
are high end GPU cards and FPGAs, and these are employed by people ranging
from hardware hobbyists to sophisticated server farms. Verification is
known as "mining" because it rewards verifiers with bitcoins.

Bitcoins are distributed (at a rate of one block of 50 per 10 minutes, with
difficulty automatically adjusted to keep the rate constant), to whoever
solves the block (finds a qualifying, i.e. low numbered hash) first. It's
like a race. The more computing power the whole network has, the lower the
probability of getting a block per unit hashing power -- which translates
to joules of energy depending on the hardware. If you can beat everyone
else by using a much more efficient system or a cheaper power source, they
eventually have to stop because their hardware no longer able to pay for
the electricity it uses.

So on to my speculation: As long as blackbody cooling and cheap solar are
sufficient to overcome the disadvantages of launch costs and custom
manufacturing, space-based thinsats optimized for bitcoin mining (computing
SHA-256 hashes) should be able to outcompete ground-based server farms.
Thus miners who want to stay in the mining business will be forced to sell
some of their bitcoins for dollars (or borrow against them) and purchase
their own space-based thinsat rigs. Eventually, the profits and empirical
results obtained from doing this should be useful enough to create more
general-purpose thinsats and branch into robust data storage and general
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