Catch up on stories from the past week (and beyond) at the Slashdot story archive

 



Forgot your password?
typodupeerror
×
China Bitcoin The Almighty Buck

How China Took Control of Bitcoin (nytimes.com) 165

Slashdot reader Rick Zeman quotes the New York Times: In its early conception, Bitcoin was to exist beyond the control of any single government or country. It would be based everywhere and nowhere... Yet despite the talk of a borderless currency, a handful of Chinese companies have effectively assumed majority control of the Bitcoin network. They have done so through canny investments and vast farms of computer servers dispersed around the country...there are fears that China's government could decide, at some point, to pressure miners in the country to use their influence to alter the rules of the Bitcoin network. The government's intervention in 2013 suggests that Bitcoin is not too small to escape notice.
This discussion has been archived. No new comments can be posted.

How China Took Control of Bitcoin

Comments Filter:
  • by JustAnotherOldGuy ( 4145623 ) on Sunday July 03, 2016 @03:36PM (#52439935) Journal

    It's been days since we had a Bitcoin story, I was growing nostalgic for one, and whaddya know, one pops up like a gift from Heaven.

    • by Anonymous Coward

      Obligatory: Haha, /. Bitcoin shills. We're not going to buy your overpriced tulips.

      • Re: (Score:3, Funny)

        by JoshuaZ ( 1134087 )

        We're not going to buy your overpriced tulips.

        Tulips at least look pretty. And gold is shiny. Bitcoin has all the same problems and doesn't even have anything nice to look at.

        • We're not going to buy your overpriced tulips.

          Tulips at least look pretty. And gold is shiny. Bitcoin has all the same problems and doesn't even have anything nice to look at.

          Both tulips and gold suck big time if you need to send them instantly* across the globe.

          *(plus pseudonymously, and independent of any business or government, but I guess you could do with tulips or gold too)

          • by Anonymous Coward

            So much for Bitcoin being independent of any government . . .

          • by TroII ( 4484479 )

            Both tulips and gold suck big time if you need to send them instantly* across the globe.

            Contracts, futures, and options seem to work pretty well for gold, oil, and other commodities. They'd work just fine for tulips too if anyone was still trading them in such volume. We solved that problem a long time ago, hardly anyone ever takes possession of the physical goods anymore. Same goes for dollars, nobody (legit) is sending around enormous piles of $100 bills.

            • Wait... you think that "solved" something ? Only if you ignore the whole host of problems it caused.
              Number one: massive fraud. The total amount of gold bullion in the world ever mined is about a cube the size of a tennis court.
              The total gold bullion that there are gold certificates for ? Is roughly 3 times that vollume.

              In other words - every bar of gold in the world has been sold to at least 3 different people who can all legally prove they own it ! Every gold certificate in existence has been fraudulently

          • by dbIII ( 701233 )
            I find it really funny that bitcoin enthusiasts go on both about the blockchain providing a record of transactions and how it's an anonymous currency.
            Hey kids, I've got dollar bills with RFID chips on them to sell you along with that bridge you are stupid enough to buy.
            • I find it really funny that bitcoin enthusiasts go on both about the blockchain providing a record of transactions and how it's an anonymous currency. Hey kids, I've got dollar bills with RFID chips on them to sell you along with that bridge you are stupid enough to buy.

              I never said anything about "anonymous" in my post. The word I used is "pseudonymous". The analogy with dollar bills is quite apt, though -- it's like tracking by serial numbers, which is only useful if you can establish a connection between a person and the number. With Bitcoin this is even harder, because it's easy to create throwaway addresses.

            • by Burz ( 138833 )

              I've been telling enthusiasts (who apparently only skimmed the main bitcoin sites briefly, if at all) for years that if bitcoin does rise in utility, then bigger and bigger institutions will come in and swamp the small players -- or force them into their own cartel.

              They want a currency created by mathematics, but refuse to look at the logical conclusions it engenders.

  • Not surprising (Score:5, Insightful)

    by somenickname ( 1270442 ) on Sunday July 03, 2016 @03:53PM (#52440015)

    Bitcoin as an idea is very interesting but, in actual function, it's a scam. I wanted to learn more about it a year ago and so bought some mining ASICs. It doesn't take long before you realize that your magic money printing device was sold to you at a cost that means you will invariably lose money. Which makes sense. If I have a magic money printing device, why the hell would I sell it to you instead of running it myself?

    At the time when I bought my ASICs, the Chinese companies that were making them started changing directions and were moving towards a model of letting you rent ASICs that they would host. It's kind of a brilliant plan because it means they can reduce the costs of ASICs by creating WAY more than people will ever buy and then just renting people as many as they want. The rent more than pays for the electricity and manufacturing costs so, no matter what happens, the ASIC manufacturers always win. Unfortunately, they are the *only* people that win.

    It's not surprising at all that China controls the bitcoin market. They *are* the market. All the ASICs come from China and if they don't sell the ASICs, they make a profit by running them. If they do sell the ASICs, they make more profit by selling them at an inflated price that speculators will pay. It's a hell of a racket.

    • Re:Not surprising (Score:5, Insightful)

      by cfalcon ( 779563 ) on Sunday July 03, 2016 @04:02PM (#52440049)

      I mean, this shouldn't be overly surprising. If it is a gold rush, the money is in making shovels. The same is mostly true even if it is a scam gold rush...

      • Agreed. But, it's not something you realize until you've bought your shovels. I did it as an experiment so, I didn't mind losing some money to learn about the industry but, I'd like to educate potential miners: The magic money printing machine you bought was sold to you because the people who made it thought it was more profitable to sell it to you than to run it themselves.

      • by PRMan ( 959735 )
        Therefore, gold is a scam. It's all clear now...
        • by dbIII ( 701233 )
          Indeed a lot of stuff around gold mining in various gold (and silver) rushes were scams. Claim salting and a lot of more subtle things. A lot has been written but I'd say bits of Mark Twain's mostly autobiographical "roughing it" sums it up better than most.
          Hence the words "gold rush mentality" applied to shiny new things where you know a lot of the players are going to crash and burn before it's over (dotcom crash, shale mining, etc).
      • The problem with this often misused analogy is that you can only make money by making shovels if you're the only one doing it. Otherwise you create a shovel rush which is even worse since the maximum size of the market is significantly smaller for shovels than it is for gold.

        It's a fun analogy but no one ever got rich from selling shovels unless they were the only ones, or had a very unique shovel.

    • Re:Not surprising (Score:5, Insightful)

      by khallow ( 566160 ) on Sunday July 03, 2016 @04:23PM (#52440125)

      It doesn't take long before you realize that your magic money printing device was sold to you at a cost that means you will invariably lose money. Which makes sense. If I have a magic money printing device, why the hell would I sell it to you instead of running it myself?

      No, what happened is that the cheap bitcoins went away. A cursory examination of the dynamics of the thing would have revealed that mining bit coins increases in computational/electricity cost over time. So as long as value of bit coins exceeds the electricity cost of mining them, then there will be massive computational resources thrown at them.

      There's no such thing as a free lunch.

      • No, what happened is that the cheap bitcoins went away. A cursory examination of the dynamics of the thing would have revealed that mining bit coins increases in computational/electricity cost over time. So as long as value of bit coins exceeds the electricity cost of mining them, then there will be massive computational resources thrown at them.

        This is wrong. You have to take into account the cost of the mining rig as well. If a $1000 mining rig is generating enough bitcoin to pay the electricity bill (which is non-trivial) then you have to look at how long it will take to pay back that $1000. Bitcoins are highly volatile so, today it might seem like it will repay itself in a few weeks. Tomorrow, it might literally look like centuries.

        I stand by my statement that the only people that make money from bitcoin mining are the people that make the

        • by khallow ( 566160 )

          You have to take into account the cost of the mining rig as well.

          I was operating under the assumption that the cost of electricity over the lifetime of the machine would be much greater, but doing the math, I don't think that is the case.

          I stand by my statement that the only people that make money from bitcoin mining are the people that make the mining equipment.

          Do you also stand by your statement that the makers are deliberately selling their product "at a cost that means you will invariably lose money". My point is that even in the face of sincere manufacturers, the costs of bitcoin mining will stabilize a bit below the expected return in bitcoins.

      • You mean the free coins are going away. The bitcoins allocated to miners as rewards is drying up rapidly. And all the hypothesized infrastructure that would keep them mining hasn't materialized. So, I'd guess that there is a publicly visible countdown til bitcoins become practically untradable.

        • by khallow ( 566160 )

          And all the hypothesized infrastructure that would keep them mining hasn't materialized.

          That infrastructure has been baked into bitcoins from the beginning. Every transaction requires computation which can be done by bitcoin miners.

          • Right, it requires bitcoin miners. The bitcoins for mining are running out. There was supposed to be an infrastructure that paid miners from each transaction in a block. It has not materialized yet.

            • by khallow ( 566160 )

              Right, it requires bitcoin miners. The bitcoins for mining are running out. There was supposed to be an infrastructure that paid miners from each transaction in a block.

              It's already there and has been there since the beginning.

        • There were never any free bitcoins, just cheaper ones.

          And if you weren't in on the ground floor, yes, you missed the easy money. Now mining is only an exercise in value speculation.

          • They were "free" in that the bitcoins were unclaimed by anyone, and mining a new block earned you the bitcoins. Those unclaimed bitcoins are of finite number and running out. Hence, the point is rapidly approaching where there is no incentive to mine because there is no bitcoin reward. In theory, there was supposed to be an infrastructure where people paid to have their transactions' verified. But, that hasn't grown into a thing, and time is running out.

            • Free as in electricity to run your average PC.

              And fees are pretty much required to get your transaction processed.

              You get out much?

              • I never said free as in beer. I said free as in unclaimed.

                The transaction fees are too low to be sustainable right now. They are being subsidized by the free bitcoins.

                It's unclear if, once the fees rise to the level to encourage mining once the unclaimed bitcoins run out, bitcoins will lose popularity.

                • It looks, upon casual examination, that the max bitcoins (roughly halfing every 210k blocks) is about 21 million. We know of about 14.5+ million minted, and it will likely take until 2033 to get near 20.75 million, unless some massive (2 orders of magnitude) increase in mining activity occurs, given the current mining growth predictions.

                  Maybe someone will go to work trying to reclaim lost coins. That's an interesting proposition.

                  Technically, not all possible coins will be minted, due to rounding issues. Be

                  • The max bitcoins, by spec, is supposed to be 16M. Which makes peak bitcoin pretty darn soon. Even with the rewards recently halving in size.

                    "Reclaiming lost coins" sounds like "stealing coins" in many ways that are indistinguishable if bitcoin is supposed to be an asset you can store under a rock for later.

    • It's a completely open-source scam. If you don't like or understand it, just keep using proprietary alternatives.

      The "understanding" bit involves doing your homework when it comes to mining profitability. If you expect Bitcoin value to increase in the future, it's much easier to buy some directly. If not, then maybe there's not much point in mining either.

    • Re:Not surprising (Score:5, Interesting)

      by Gorobei ( 127755 ) on Sunday July 03, 2016 @08:18PM (#52440911)

      Bitcoin as an idea is very interesting but, in actual function, it's a scam. I wanted to learn more about it a year ago and so bought some mining ASICs. It doesn't take long before you realize that your magic money printing device was sold to you at a cost that means you will invariably lose money. Which makes sense. If I have a magic money printing device, why the hell would I sell it to you instead of running it myself?

      Um, because of reality? In this case, cost of capital:

      If I can make a machine for $900 that generates $100/year forever, I get an 11% return on capital.
      If I can sell it for $1000, I get an immediate return of $100, and can build another machine and repeat the process. At one per day, I make $36,500 in my first year.

      If the risk free interest rate is around 3%, the second plan is worth 10x as much as the first plan.

      • But, that's not how it works at all. It probably costs less than $100 to build the ASICs and their planned obsolescence is measured in months. So, they will sell you a mining rig that *might* pay for itself in a year. But, they are taking the money you paid and building more efficient mining rigs. The more powerful rigs, once in use, increase the complexity of computing the bitcoins and, pretty quickly, the cost of running your mining rig doesn't cover the electricity costs of running it.

        It really is th

    • by ET3D ( 1169851 )

      Bitcoin wasn't designed as a scam, it was just too optimistic. The concept isn't one of a magic money printing device; the miners do valuable work which keeps the currency functioning. It was originally mined on CPU's then GPU's, so was initially truly the 'people's coin'. It wasn't until ASIC's mining arrived that things started going downhill in this respect.

      That's indeed a problem with cryptocurrencies in general, but it's a more serious problem with bitcoin because it uses a relatively simple function,

  • And this is why I did not bother with Bitcoin. That currency value is way too high for its own good and was bound to attract the greedy Chinese speculators once it started gaining 'value.' It is seriously hyper-inflated. I do better with mining and selling gems and mineral samples.

    • Greedy communist speculators: How droll.

      • by dbIII ( 701233 )
        Maybe funny in 1975 but you should have worked out a bit more about China since then :)
        • China is actually a perfect example of late-stage communism. Most people don't know this but Eastern Europe in 1985 and China today are virtually indistinguishable and they took identical paths about 20 years apart.
          Communist countries (and here I am using the term as it was used of the soviet union and such - more correctly called Bolshevism, none of the other versions) were fantastically productive economies, in fact they are wonderful at making things - much better than capitalist countries actually. They

          • by dbIII ( 701233 )
            China is a perfect example of China. Drawing parallels with Albania or wherever is a mugs game. Communism is a patina on top and doesn't tell much of the story at all.
            • Except that you deliberately chose the worst possible example while I generalized over a region that included the Soviet Union and East Germany - both major production centres in the past. And if you think communism is a thin patina on top in China - then what you're failing to realize is that from about 1970 onwards that's exactly how it was in the Soviet Union. The communism you know from American movies and propaganda never actually existed.

              • by dbIII ( 701233 )

                then what you're failing to realize is that from about 1970 onwards that's exactly how it was in the Soviet Union

                What makes you think I fail to realise that? The underlying culture of that nations is very different, as show with the tensions between the USSR and China.

                • >What makes you think I fail to realise that? The underlying culture of that nations is very different, as show with the tensions between the USSR and China.

                  What's that got to do with their economies ? Which is the subject I was discussing.

                  • by dbIII ( 701233 )

                    What's that got to do with their economies ? Which is the subject I was discussing.

                    A vast amount. Centuries of merchants versus centuries of serfs. Go speak to someone old from China and it's a very strong bet that they were quietly chasing after profit even while Mao was around.

    • Sure one can for example smuggle some drugs and weapons to the nearest star system and make good profit, but Bitcoin is a way to diversify one's investments, and goes well with the risk seeking personality.

      • Sure one can for example smuggle some drugs and weapons to the nearest star system and make good profit

        Hello. Out of curiosity, can you point me towards those star systems? I've got a few bars of gold plated latinum for you, if you would be so kind...

    • I think it's an interesting concept and technology. I got a little mining setup, just a cheap one, as a toy. Interesting, but a basic understanding of economics is enough to see why it's inherently a very unstable currency at any time scale.

      I learned two things from my miner: That they can run really fast when you immerse them in silicone oil, and that only a fool invests in bitcoin mining at anything less than mass-scale.

    • by AmiMoJo ( 196126 )

      Actually, if you look at the history of Bitcoin the Chinese are the good guys.

      Early Bitcoin mining was with western developed software, first on CPUs, then GPUs, then FPGAs and finally on ASICs. A number of western companies appeared offering ASICs, but failed to deliver any working hardware and mostly just stole people's money.

      Some Chinese companies then started making actual working ASIC hardware and selling it at reasonable prices. They met the market demand in a way that western companies had completely

  • How much of all our generated electricity is being thrown into this pit?

  • we're pissed (Score:5, Interesting)

    by slashmydots ( 2189826 ) on Sunday July 03, 2016 @04:22PM (#52440121)
    If you're wondering how OG bitcoin enthusiasts that have been with bitcoins from late 2009 feel about it (aka me) we're PISSED! Every last person thinks China can go straight to hell. People threw parties when one of the major bitcoin mining facilities in China burned to the ground. I hope they all burn down in fact. Fuck those greedy, lying, ASIC-hoarding, patent-stealing, rip-off artist assholes and their control of the bitcoin network and manipulation of its price on a daily basis.
    • by Anonymous Coward

      Yeah right, you bought Bitcoins in 2009 and you're pissed? Why? Because you're a multi millionaire and evil Chinese speculators made it possible?

      • Re: (Score:3, Interesting)

        by Anonymous Coward

        My guess is that he is one of the guys that was sitting on about 20000 of them in 2009/2010 and got bored with it and sold them for a 100 bucks. That would sting.

        • by PRMan ( 959735 )
          This seems to be the case every time with people that hate on bitcoin this much.
        • by AmiMoJo ( 196126 )

          Maybe he invested a small fortune in mining equipment, which back then would have been fast CPUs and then GPUs. I remember people paying insane amounts of money for certain high end Radeon cards that had the best power/hashes ratios, and then building PCs with multiple PCI-e expanders and 1000+W power supplies to run them all.

          Now all that gear is worthless because a single $10 ASIC is an order of magnitude more powerful. It went from being a hobby that individuals could excel to to being a commercial enterp

        • $5 actually because I needed the money to open a computer repair shop.
      • I lost out on over a million by selling about 6 months after a major crash when it finally recovered to around $5.25.
    • Every last person thinks China can go straight to hell.

      They sound like likely Trump voters.

    • If you're wondering how OG bitcoin enthusiasts that have been with bitcoins from late 2009 feel about it (aka me) we're PISSED!

      I wasn't. And that you're "PISSED" just makes me laugh at your self entitlement. (And at your ignorance.)

      Anyone with a clue has seen this coming for years.

    • by Tom ( 822 )

      They are exploiting a design flaw in the Bitcoin network. One that was known pretty much from the start. One that was obvious as being a breaking point. As soon as Bitcoin becomes important enough for national governments to worry, you really thought this wouldn't happen? If the USA wants to destroy Bitcoin, they wouldn't turn on the NSA supercomputers as miners for a few days and be done with it? Please.

  • by Connor Davis ( 4635491 ) on Sunday July 03, 2016 @04:48PM (#52440203)
    From a purely futuristic perspective, the altcoin CURE (aka CureCoin) prevents mining silos ... and even if China took over mining/folding of CURE, it benefits the entire global community since the only way to mine it is through protein folding research (ok 80% is folded, and 20% is still SHA-256). But if you're feeling patriotic, or slightly xenophobic ... the research being done is seeded by the NIH and NSF. Food for thought.
  • there are fears that China's government could decide, at some point, to pressure miners in the country to use their influence to alter the rules of the Bitcoin network

    The Chinese miners can't change the rules of the bitcoin network, because the bitcoin network uses cryptography to see if anyone is breaking the rules. The Chinese government could attempt to pressure miners into using their influence over the bitcoin world, but Chinese miners only have influence because the rest of the world does not currently view them as anti-bitcoin. However, if Chinese miners suggested, for example, that the supply limit be changed to something other than 21 million, they would be seen

    • by PRMan ( 959735 )
      The rules are whatever client the vast majority of bitcoin miners are running. If they get past 75%, they can change the rules to whatever they want, but then bitcoin would probably become a Chinese currency only, which would dump the price drastically.
      • If coinbase.com, bitpay.com, circle.com, etc. do not change their bitcoin software, then anyone who uses those sites will still be operating on the old network...even if the miners on the old network only account for 25% of the hash power.
        • If the miner of the new network have 75% of the hashing power, they can spare 2/3 of it to launch an attack on the old network without any fear of reprisal. Depending on how evil they want to be they could:

          1. Effect a DDos by producing empty blocks. All transactions would grind to a halt
          2. Commit a double spend
          3. Create a longer fork in private for several days, and then publish it, causing all of the transactions within that time period to roll back and completely destroying the faith of those invested in
          • Those attacks would not change the rules of the old network, which was my original point. Also, there is defense [blogspot.co.uk]. However, even if that defense fails, then all that means is that the attacks will damage faith in both the old and new networks. After all, if the old network can be attacked successfully, who is to say the same thing won't happen to the new network in the future when there is another disagreement? This uncertainty lowers the value of bitcoin as a whole, which means these attacks would be suicid
            • That defense is a pretty handwavy answer. You can't sum up the high priority transacations(whatever that is... based on bitcoin days destroyed, I guess??) against hashpower without assigning weights to each, so what are those weights? And even then, you're simply trading one type of security, hashpower, for another, high priority coin ownership. It's a risky idea, by closing one avenue of attack, you open up another, only you're not familiar with the second. Computer programmers have the nasty habit of assu
              • Bitcoin has always been based on that notion, "the moral majority will have the most hashing power"

                Yes, that's true. And, if the majority of miners use their hashing power to attack the old network, then they will be proving that notion false, which will destroy faith in bitcoin and ultimately hurt those same miners. People hold bitcoin because they believe 1) their money will be safe, and 2) the fundamental rules won't change. If miners successfully attack the old network, then they will have proven at least one of those beliefs to be false, which means that many users (myself included) will dump their

                • You might as well be talking about the miners as royalty who rule over a village. "Yes, the rulers have the power to change the rules anytime they want to. But if they were to do that, then the citizens would revolt, and take away all their power. See, so we're free after all!"

                  You may think everyone would revolt. You may also think the people would demand autonomy over the currency they are invested in, but no one has tested that so far. There are no longer just purists like yourself invested in Bitcoin, bu
                  • You may think everyone would revolt.

                    Actually, I see bitcoin as the revolution, and if the rebels turn on each other, then the revolution stops. In other words, if the bitcoin world goes to war, then that creates a climate of uncertainty that drives the average investor away.

                    It's true that the businessmen probably outnumber the purists. However, businessmen like certainty, and certainty is especially important when you're buying something that is supposed to rival the certainty of owning a hard asset like gold. If the 75% network starts attack

    • but no amount of computing power would give them the ability to change the rules (because cryptography).

      That depends.

      If you have more than half the hashing power then you can unilaterally make the rules tighter. Blocks contining transactions that do not satisfy your rules will not be used as a base to mine on by your miners and so will be quickly forked off. For example you could require a transaction fee of a minimum percentage of the transaction value or you could require that all bitcoin addresses were registered in a govrnment database.

      On the other hand you cannot unilaterally make the rules looser withou

  • by account_deleted ( 4530225 ) on Sunday July 03, 2016 @09:13PM (#52441097)
    Comment removed based on user account deletion

Truly simple systems... require infinite testing. -- Norman Augustine

Working...