PayCoin Finally Takes Its Correct Place on CoinMarketCap

I've been meaning to write about this for the past week or two, but CoinMarketCap has been discriminating quite heavily against PayCoin since the coin first launched. Well, they have apparently decided it's time to change their tune.

Up until now, CoinMarketCap has been using only the publicly mined portion of PayCoin when calculating the market capitalization, with a double asterisk denoting that there was a "significant premine". Note that the vast majority of PayCoin was put into the hands of HashPoint owners and miners ten days ago, so CoinMarketCap has been very slow to change their stance. What's ironic is that you could make that same case against many other coins, including coins that weren't mined at all (e.g. NXT, Ripple, MasterCoin, etc.) but the total number of coins in existence is still used for those. But I can't really blame them for being at least a bit cautious.

The net result is that instead of 12.325 million XPY multiplied by the current price, only 0.325 million was being used, resulting in XPY being ranked down around #20 (or lower) instead of in the top five. Now, however, the total circulation of XPY has been bumped up to 12,325,674 on CoinMarketCap, and with a current price of over $12 that puts PayCoin... right into the number three spot, surpassing even Litecoin. In fact, the market cap of PayCoin is now about 1.5X that of Litecoin. Wow!

This is, by far, the most successful launch of any coin seen to date. Within weeks of public availability, PayCoin has overtaken Litecoin, and let's be honest: Ripple isn't really in the same category as other cryptocurrencies. So effectively, PayCoin is now the number two cryptocurrency for market capitalization, and PayBase still hasn't come online yet. (But soon, my precious, soooon....)

Ironically, even now the current numbers on PayCoin are still incorrect, as there are 12,375,676 XPY in circulation (so CoinMarketCap is off by 50,000). I'm not sure that matters too much, and perhaps the charts are only updated a few times per day. With the number three spot secured (number two if you don't include Ripple), the next hurdle is a quite a bit further off. PayCoin is still only about 21% of Ripple's market cap, and more importantly Bitcoin is valued at roughly 27X PayCoin. But we're looking at 17 days old vs. nearly five years, so let's just wait and see.

Market cap isn't the only area where PayCoin is thriving either. Looking at trading volume -- and again, this is before PayBase is even fully launched -- PayCoin is ranked number four overall. In trade volume, LTC is still #2 with Ripple #3. What's interesting is that Bitcoin is only about 16X the trade volume of XPY, and with features like PaySave we could easily see the trading volume on PayCoin shoot up. It's going to be an interesting week, regardless!

HashProfit Update: DDoS and Hacking?

If you're curious about why I'm cautious with HashProfit, the answer can be found in the past 12 hours. Starting some time last night, there was supposedly a DDoS (Distributed Denial of Service) attack on their server(s). I don't know if that's true or not, but the site was giving a 502 error earlier this morning when I checked. The site is now back online, but payouts didn't happen last night that I can see, and what's more you get news posts like this one. The English translation is so poorly done that it's worth quoting here (and I wouldn't be surprised if the site disappears in the near future):

Attention! There is highly coordinated and massive DDoS attack on Hash Profit service taking place right now.
27.12.2014 15:18

Site and infrastructure of Hash Profit is under unprecended massive DDoS attack right now.

Attackers spreading the word of panic about collapse of our service and other nonsence with only one main target - to provoke mass panic.

Many users neglecting common safety or being unaccurate has compromented their accounts and that has led to availability of malefactors to sell 15% of their hashrate for PFC and sell these coins via the exchange service, which in turn led to downgrade of PFC exchange rate.

All this is happening right now because lead companies of this market has understood the threat from HP service for their place in the market and they're doing everything possible to drown the company.

Right now HP team is working hard to reflect all the types of threats and the most important is defending of keeping and payout system - that's the main target of attackers.

Also our email is overcrowded with spam and rubbish from hacked users' mails, and that makes fast responses to real users questions very hard.

Main help from our service's users in solution of this difficult problem:

1. Don't panic.
2. Do everything possible to defend your own accounts - mails, BTC-wallets and computers.

We've succesfully deflected serious threats and attacks on our service earlier and we're sire that together we can do this even in a situation this hard.

The gist of the message is pretty clear -- "Hash Profit is fine, don't worry!" The problem is that I've seen and heard that same story so many times in the cryptocurrency world that it's practically a chorus. Basically they're claiming some users have had their accounts hacked, but it's only because those users "neglected common safety", not because of any error on the side of Hash Profit. The only way this would be true is if the users in question didn't set up any two factor authentication (2FA) and if they used the same password on multiple sites.

Assuming that actually happened (again), shame on the users for being stupid. More likely however is that the site itself was hacked and they're just trying to pass the buck. Or perhaps the site was a scam since the start and this is just part of the scam. The hack has supposedly allowed the hackers to sell hashing power for Profitcoin (PFC), which has then been dumped on the open market resulting in a massive crash in the price of PFC -- it's down to around 0.00077 BTC per PFC now, less than a fourth of the price just a few days ago.

Here's the real question: can Hash Profit recover and continue to mine and pay out BTC users? Or is this really just a big ponzi scheme that is now imploding and they're making a story as part of their exit strategy? "Sorry, we got hacked. Sucks to be us, and we lost all your coins. Dasvidaniya!" That's the worst case scenario right now, but it's a real possibility and in fact quite likely; hence I can't recommend anyone buy any more hashing power or PFC right now.

If you like to gamble a bit, there's a potential bright side. Let's say Hash Profit really hasn't lost a ton of money, they're not a ponzi scheme, and they still have a bunch of hardware that can happily hash away and make money for them. Their profits to date have been rather suspect -- no other site really is paying out as well as they have, and their "proprietary SmartMining algorithm" sounds like a bunch of hot air. Anyway, if you were to exchange 1BTC into PFC right now and then buy SmartMining KH at 11 KH per PFC, a single Bitcoin could buy about 14000 KH/s. 14000 KH at the current rate of payouts (assuming those continue) would pay for itself in roughly ten days. Ha!

You know the old saying: if it sounds too good to be true, it probably is. I will be very surprised at this stage if payouts continue at the previous rate, or even if they pay out at all. In fact, until I see more BTC paid out (e.g. tonight), Hash Profit has a huge red flag waving in the breeze. I'll update this post as things develop. Hopefully I'm just being overly pessimistic, and I stand to lose a moderate chunk of BTC if the site ends up being a scam, but worse things have happened to me with cryptocurrencies already.

Update, 12/27/2014 @ 11:32 PM PST: My BTC balance at Hash Profit has updated, and so have the balances of at least two friends that I checked with. The problem now is that the automated payouts haven't happened in well over 24 hours. Oh, and the PFC price temporarily rebounded and then took a further tumble. ROI time is now a ludicrous six days, but there's no way they can sell this amount of hashing power (income) at such low prices. Until I see otherwise, my suspicion is that all BTC at Hash Profit will remain at Hash Profit.

Dasvidanya, Hash Profit, 12/28/2014 @ 10:30 AM PST: The site is offline once more, payouts didn't happen, and some users have reported receiving email responses but nothing that's worth anything. LTCGear imploded in a similar fashion not too long ago, and it looks like today it was Hash Profit's turn. It's looking more and more like the days of profitable cloud mining are over... except for GAW, which continues to do well. Let's hope they at least can buck the trend.

BTC: Up, Up and Away!

It's interesting to see patterns start to emerge with Bitcoin, and right now after more or less stagnating for the past three or four months, Bitcoin looks to be rebounding. How high will it go this time? I have no idea, but it sure would be awesome if it could break the previous top from last December! I have been hoping something like this would happen, and right on schedule (two weeks before Thanksgiving) we're starting to pick up steam. So here's the question: do you buy BTC now and speculate, or just sit back and watch?

Thankfully, I'm in the position of having some BTC already, so I'm just hanging onto it and seeing where things go -- I'm in this for the long haul at this point. However, I'm also in no hurry to dump thousands of dollars into BTC in hopes that it goes even higher after the investment. Sadly, I just don't have that sort of disposable income hanging around. For those who do, however, I think if you can just dump a few thousand (or a few tens of thousands) into Bitcoin and then turn a blind eye for a couple years, this is about as good a time as any to take that chance -- actually, it was a better time last month when we were at $300 or so, but whatever.

The fact is, more and more businesses are starting to adopt Bitcoin, and I think some of them are going to start saying, "Hey, instead of cashing out 100% to guarantee our profits, we ought to hang on to at least a few percent and see where things go." Can you imagine what would happen if places like Newegg decided to hold just 3% of all Bitcoins they receive? I don't know what sort of BTC volume they're doing, but it's definitely more than zero, and over months they would likely end up sitting on thousands of Bitcoins. If more companies take that same approach -- a calculated risk, so to speak -- supply and demand dictates that there will be fewer Bitcoins in circulation, and thus price will trend up.

It's important at times like this to remember: there will only ever be 21 million Bitcoins. The same coins can be used again and again with no deterioration in quality, yes, but more importantly if big companies start using Bitcoins -- and this is already starting to happen -- then a place that does millions of dollars in business per day will certainly cause some ripples by supporting BTC. In another year, we could easily be looking at five digits for Bitcoin.

I've mined and sold a lot of BTC over the past few years, but I'm glad that I've finally reached the point where I don't need to sell BTC to cover expenses. That means I can join the ranks of the true believers and simply sock away everything I earn going forward. I won't be surprised if 20-30 years from now when I'm retired, most of my retirement savings consist of BTC that I can live off for the remainder of my days. Now if I can just get universities to accept BTC for tuition, I might have my kids' education paid for as well in the coming months.

Predicting Difficulty, ROI, and Price of BTC

If you read that title and your first thought was, "Anyone that can do those three things accurately is guaranteed to make a ton of money!" Well, you're absolutely right... and your next thought was probably something along the lines of, "Too bad most of that stuff boils down to pseudo-science and lame charts that are wrong 90% of the time," again, you're right.

One of my recent posts basically had a couple of people call me out and say something to the effect of, "But you're not even factoring in the increasing difficulty of BTC mining for your calculations, so they're all wrong!" To which I responded, effectively, "Yes, and I didn't factor in price either."

Of course course the difficulty of mining BTC -- or any other cryptocurrency -- changes the ROI prospects. The price of the target cryptocurrency likewise changes ROI prospects. Factoring in both of these is basically... well, at best it's just pure guesswork, and so I've stopped bothering. At this point, we should all know that difficulty and pricing for cryptocurrencies change regularly, but there's no telling what they'll actually do.

I've said before that difficulty follows price, but that's only part of the equation. Difficulty follows price as well as hardware efficiency, with other less significant factors also playing a role. BTC has had steadily increasing difficulties every cycle for so long that everyone seems to have forgotten that at one point, the difficulty actually plummeted! It did so right after the first big crash from $30 to $2. At some point it will almost certainly happen again, so if you're really smart you'll sell all of your Bitcoin right before the next big crash and then buy back in at the bottom so you can make tons of money. (Good luck doing that, by the way.)

So again: difficulty basically follows price as well as the efficiency of the hardware, and unless you can predict both accurately, any guess at difficulty is just that: a guess. Let me give you some great examples.

If we look at April to October 2013; the average increase in difficulty for BTC was 22% per cycle (a bit less than every 12 days). Then if we look at the next six months, October 2013 to April 2014, the increase per cycle averaged 25% (with a few instances where it jumped more than 40%). Wow, difficulty never stops increasing, right? But then we go the the past six months (April 2014 to October 2014) and the average increase is now only 12.5%. More importantly perhaps, look at just the last month where difficulty only increased 7% per cycle -- or the last two increases of 1% and 3%!

The reason the difficulty increases have fallen is that the price of Bitcoin has trended down lately (about the lowest it's been since a year ago), coupled with the fact that there's not really any more efficient SHA256 ASIC hardware coming online right now. As I've pointed out previously, the best SHA256 ASICs are doing something like 0.5W per GH, and in the not too distant future (~3 months?) we might see 0.25W per GH... but the next bump after could be much further out and eventually we might only get 0.1W per GH before we basically are stuck following Moore's Curves. That means the efficiency will be very difficult to improve without a process technology shrink, those only come every two years or so now, and in many cases a process shrink only improves efficiency by 30% (or maybe 50%).

We might see some other "tricks" where companies focus on making truly efficient ASIC designs and get a boost without a process shrink (e.g. look at NVIDIA's recent GM204 launch, where they increased performance and reduced power use while staying on the same 28nm process technology), but given SHA256 hashing isn't really all that complex I wouldn't expect major breakthroughs going forward.

Short summary: difficulty increases in Bitcoin are going to slow down, and at some point we'll even see difficulty decrease. That will happen when the price and difficulty make it unprofitable to continue mining for a bunch of ASICs, at which point they get shut down (just like my AntMiner S2 ASICs are now resting peacefully). The only thing that will get those ASICs turned back on is higher BTC prices to compensate for their power use. And if we see a massive jump in Bitcoin prices to $10,000 or whatever, you can bet that difficulty will skyrocket as well.

I of course make no claims of being able to accurately predict the future difficulty or price of Bitcoin, so when I say "best-case, the current ROI for buying a Hashlet Prime is 429 days", that means that if you buy a Hashlet Prime at $34 from the Hash Market and Bitcoin stays at $338 with difficulty also staying static (which means the payouts stay at 0.0003 BTC per MH, plus 50% for Double Dipping), you'd need 429 days to break even. If the payouts drop the time to ROI will increase, and if the price of BTC goes up the time will decrease.

Hopefully that clears things up.

Hash Profit: Free 200KH/s Test

So here's an interesting one for you: Hash Profit is claiming that through a variety of coin mining algorithms, they're able to pay a whopping 0.00698 BTC per 1000 KH per day. What's more, there's an option to get a free 200 KH/s for seven days as a trial. And since it's free, I figure why not give it a try?

There are a couple options. One is that they've misplaced a decimal point (which would be crazy, since this should be based on running some calculations and automatically generating a figure, not manually updating a field). The other is more likely: they're not talking about Scrypt MH/s or any number of other algorithms, so in fact their 0.00698 "MH/s" rate is some apparently arbitrary number that they've come up with.

I'll report back tomorrow with the actual daily returns. It looks like the free 200 KH for seven days will net you about 0.01 BTC by the end of the week at the current rates. So basically, for signing up you get a free $3.50 or so of Bitcoin; I suppose there are worse ways to spend your time. :-)

In the meantime, if you're wondering, the price for 1 MH/s (1000 KH/s) is currently 1.28457 BTC, which explains the apparently crazy returns per MH. See, if you're earning 0.00698 BTC per day off of a 1.28457 BTC investment, you're time to ROI is 184 days. Six months to hit ROI would be great on most investments, but in the world of cryptocurrencies there are far too many companies that don't last that long.

Still, if you're interested in something other than GAW or LTC Gear, you could give Hash Profit a shot.

Farewell, MintPal? The Alt-Coin Apocalypse Continues

I haven't been doing much on most of the exchanges lately. With the alt-coin apocalypse, so many of the coins that have been traded quickly became more or less "worthless", so I consolidated all of my holdings primarily into BTC and called it a day. I'm also basically done with GPU mining, as the best returns only just pay for power and may a bit extra.

Anyway, I just saw today that MintPal, one of the more well-known cryptocurrency exchanges (and by no means one of the best, as they've had hacks/problems in the past) is apparently going away. Well, maybe not quite, but the managing company is filing for bankruptcy and they've "sourced a new management team" for the site. There have apparently been some additional problems with missing/lost balances over at MintPal, and if that's the true I can see how that could quickly lead to closing shop at this stage.

On that note, with so many alt-coins basically dying and becoming worthless, I suspect we'll see something similar happen with many of the exchanges that primarily deal in alt-coins. Again, I've pulled my coins off of all of the exchanges (well, except for coins that are basically worthless -- the exchanges can keep those if they'd like), and I'd strongly suggest others do likewise.

For that matter, if you're in Bitcoin for the long haul, you might want to just move your coins into cold storage rather than trusting Coinbase or any of the other big names with your holdings. I haven't gone that far yet, mostly because I still do things with my Bitcoins (like buying Hashlets, ASICs and other goods), but better safe than sorry. And if a company you're doing business with seems to be acting a bit crazy, perhaps it's because they are?

Does the Bitcoin Network Waste Lots of Power?

One of the big complaints about Bitcoin -- and cryptocurrencies in general -- is that they're using "tons" of power and not really accomplishing any "useful" purpose. While it's certainly true that all of the ASICs out there hashing away to secure the Bitcoin network (and mine coins in the process) use power, it's important to put things in perspective. Let's start with a rough estimate of the power used by all the systems connected to the Bitcoin network.

At present, the total hash rate of the Bitcoin network is around 240,000 TH/s, though of course that changes on almost a daily basis -- you can check the current approximate hash rate any time at BitcoinWisdom (or any number of other sites). The most efficient Bitcoin ASICs right now can do around 3 TH/s while drawing 2000 W (give or take), while upcoming ASICs may be as much as two to four times as efficient (e.g. around 3 TH/s while drawing only 600 W). Obviously not every ASIC currently hashing on the Bitcoin network is going to be the most efficient option (side note: I finally shut down my AntMiner S2 ASICs as their hash rate to power is no longer profitable), but let's just estimate that most ASICs today are averaging a 1:1.5 ratio of TH to power.

What that means is that our 240,000 TH/s of hash rate is using 360,000 kW. (By way of comparison, if every current ASIC was a KnC Neptune doing 3 TH per 2000 W, the Bitcoin network would only use 160,000 kW.) 360,000 kW becomes 360 MW, and 24 hours per day means the Bitcoin network is using around 8640 MWh (Megawatt Hours) each day, and 259,200 MWh per month. So how does that compare with the power used for other tasks?

According to Wikipedia, the total power consumed in the US per month was 2,183 TWh, or 2,183,000,000 MWh. That means the total power used by the entire Bitcoin network is approximately 0.012% of the US energy use. But Bitcoin isn't just a US phenomenon, so we really need to look at the entire world. In 2008 the worldwide approximate power use was 143,851,000,000 MWh, or 11,823,000,000 MWh per month. It's likely power use has increased since then, but let's just stick with that number for now. That means the Bitcoin network "waste" of power accounts for a whopping 0.0022% of all energy consumed in the world.

Let me put that figure in different terms. The average power draw of a US household is 10,837 kWh per year, or 29.7 kWh per day. That's the same as a continual power draw of around 1250W from all the lights, appliances, computers, etc. in your home. 0.0022% of the average power used by an American home would equal 0.0275 W. Or in other words, shutting down all Bitcoin related hardware in the world would be like the average American home cutting their power use by $0.00008 per day.

Now, it's entirely possible I screwed up on the math somewhere. Maybe I'm even off by a factor of 1000, but I'm pretty sure that's not the case. I've checked things multiple times and I think I've got it reasonably close, understanding that this is merely an estimate and I could easily be off by a factor of 2-4X on a few guesses (e.g. maybe the average efficiency of ASICs is much lower than my estimate). Still, if you spot an error, by all means let me know.

The bottom line is that the amount of power being used globally for the Bitcoin network is pretty tiny as a percentage. When you think of all the other things out there consuming power -- lights on empty roads and parking lots, computers that sit idle at large corporations, etc. -- there are far worse ways of using power. Inherently, people and businesses consume power because they find it to be a good use of their money -- cost vs. benefit. There's no need to try and halt the use of power by cryptocurrencies as they'll eventually reach equilibrium on their own.

Bitcoin hashing might be consuming 360 MW (which is still about one fourth of the infamous 1.21 Gigawatts number from Back to the Future), but how much power is consumed by all of our financial institutions? I'm absolutely sure it's far more than 360 MW, so by that token the Bitcoin network is actually a much more efficient way of doing things.

PayPal (Finally) Offers Bitcoin Support

The history of PayPal and Bitcoin has been a bit rocky up until now; I remember several years ago when PayPal actively took steps to prevent people from using their service to purchase Bitcoins. Quite a few accounts were banned, some for apparently minor infractions – basically, PayPal didn't want anything to do with Bitcoin, perhaps seeing it as too much of a competitor to their established business practices. Today PayPal has announced that they are partnering with BitPay, Coinbase, and GoCoin to allow merchants to accept Bitcoin, marking a clear change in attitude from their earlier stance. What's more, this comes just a few weeks after an earlier announcement that Braintree users would be able to accept Bitcoin.

So why is PayPal willing to work with Bitcoin now and not last year, or even two or three years ago? I think the inability to roll back purchases made via Bitcoin posed a serious risk, especially for fraud. Just imagine complaints like, "Hey, I bought this $2000 product with Bitcoin and the merchant never shipped it!" PayPal would have been forced to either refund the money from its own pockets, or perhaps worse the user would end up being scammed. With companies like Coinbase and BitPay now providing services that help mitigate some of these risks, plus successful adoptions of Bitcoin by many other resellers, it looks like PayPal is finally ready to hop on the Bitcoin bandwagon. All I can say is that it's about time!

The support for Bitcoin will come via integration into the PayPal Payments Hub, and unfortunately it will only be supported for merchants in North America for the time being. There are other qualifications to using Bitcoin with PayPal as well, as the blog notes: "To be clear, today’s news does not mean that PayPal has added Bitcoin as a currency in our digital wallet or that Bitcoin payments will be processed on our secure payments platform. PayPal has always embraced innovation, but always in ways that make payments safer and more reliable for our customers. Our approach to Bitcoin is no different. That’s why we’re proceeding gradually, supporting Bitcoin in some ways today and holding off on other ways until we see how things develop."

Of note is that this comes at a time when the mining phase of Bitcoins and other virtual currencies has largely moved beyond GPUs and onto dedicated SHA256 and Scrypt ASICs. That's good news for gamers and graphics gurus, though I suspect the GPU vendors may not sell as many new GPUs – and certainly not at such inflated prices – as they did last year. Then again, I really, really want to see what a GeForce GTX 980 (or GeForce GTX 970) can do with mining – not that I'm willing to spend $549 to start mining with one, but given the improvements in efficiency it could actually do okay at mining Cryptonight, X11, X13, etc. Of course I suspect the GPU vendors will also have fewer RMAs over the coming year – I know between myself and a friend, we've had at least two R9 290X GPUs and four HD 7950 cards go out due to the strains of 24/7 cryptocurrency mining (and overclocking certainly didn't help).

Wrapping things up, PayPal also notes that PayPal has worked with merchants selling cryptocurrency mining hardware but refuses to support pre-orders, which is a stance I wholly support having now been more or less burned by Alpha Technologies. And while the announcement today is more of a baby step as opposed to wholesale acceptance of Bitcoin, the closing comments suggest that this is merely the tip of the iceberg: "PayPal is excited about all the innovations taking place in payments these days. More choices in how people create value, share it, buy, sell and trade it – that’s exactly what PayPal is all about. And we believe Bitcoin offers unique opportunities as more people and businesses experiment with it. We are excited to work with businesses and business models that allow us to offer new experiences and the trusted service our customers expect. We hope to do more with Bitcoin as its ecosystem continues to evolve."

I've now successfully used Bitcoin to purchase quite a few goods, from graphics cards on Newegg.com to the games in the latest Humble Bundle, and more and more places are beginning to get onboard. For example TigerDirect and Overstock now accept Bitcoin as a viable method of payment, and you can use services like Gyft or eGifter to purchase a gift card with Bitcoins that can be used at numerous other locations (including Amazon.com). They might be a bit late to the part, but it looks like PayPal has decided to join the club.

While there are still naysayers when it comes to Bitcoins and cryptocurrencies in general, this is great news for Bitcoin proponents. Integration with PayPal literally opens the doors for thousands of small shops to easily begin accepting Bitcoin. It's one small step for PayPal, one giant leap for Bitcoin.

Welcome to the End of GPU Mining

It's been a long, slow decline, but outside of a major jump in cryptocurrency prices we have finally reached the end of the road for GPU mining. That's not to say that people won't continue to mine with GPUs, but based on the cost of electricity and the current price of Bitcoin combined with the alt-coin exchange rates...well, you get the point. GPU mining is "dead". Let's quickly run some figures to give you an idea of where we stand.

The best-case mining opportunity right now (as far as I can tell -- there are so many coins that it's possible I'm missing some "secret" coin that's highly profitable) would be GPU mining of Monero, one of the Cryptonight coins. With the current difficulty, block reward, exchange rate, and price of BTC, a rig with three R9 280X GPUs might mine around 1.5 XMR per day, which would equal about $1.90. That same rig will draw about 450W of power, and at $0.10 per kWh you'd spend $1.08 per day in electricity. Factor in wear and tear on the GPUs and the net profits of $0.80 per day probably isn't worth your time, but that's about the best option for GPUs right now.

Okay, that's XMR and Cryptonight, but what about some of the other proof of work algorithms that can't be run on an ASIC? We have X11, X13, X15, Keccak, and maybe a few others as potential PoW options. There are a few others as well, but let's just stick with those for now.

X11 was made famous with Darkcoin, which is currently averaging a difficulty of around 3300 with a block reward of 4 DRK being typical. If your hash rate is 12000 KH/s for X11 (which is about right for three 280X GPUs), and your power draw is only 450W, you'd still be in the red. You might mine 0.3 DRK per day, worth about $0.90, with a power cost of $1.08. Even R9 290X wouldn't be much better: 16 MH/s for three 290X GPUs and at a power use of 500W you'd basically break even. CANN is about the same right now, so is URO, and basically we're looking at best-case breaking even or making pennies per day per GPU.

Actually, your best bet is often to just go with leasing your hash rates on a service like NiceHash -- let others do the work of figuring out which new alt-coins to mine, let them take the risk, and you just get paid directly in BTC. Or go with a multi-pool like BlackcoinPool, MultiPool, WafflePool, etc. The current best rates for X11 are around 0.0003 BTC per MH per day, so three R9 290X could make about $1.90 per day, with a power cost of $1.25 (give or take). That's "profitable", but not enough that I'd seriously invest time and effort into it. So X11 is out, unless prices go up, difficulty goes down, or hash rates can be increased without using more power.

X13 and X15 really aren't much different in concept from X11, just with lower hash rates thanks to the additional hashing algorithms. X13 you might make a bit more per MH (currently looking like 0.00037 BTC/MH/day, give or take), but with lower hash rates in general it's less profitable (or more unprofitable). X15 is paying less than X11 and X13 with even lower hash rates, so obviously that's out as well.

If you're after really high hash rates, you could look to Keccak, but just because it has high hash rates (450MH for a 290X?) doesn't mean it's profitable. The going rate is about 0.0000023 BTC/MH/Day, or $1.25 per day for 3x290X. Nist5 is another "faster" hashing PoW, but it's only about three times the hash rate of X11 and it's paying about 10% of X11, so that's a dead end as well.

The net result is that across the current list of coins and PoW algorithms, there's really nothing out there that can even hit a 2:1 ratio for value vs. power. The best I can currently find is Monero, which gives about a 1.7:1 ratio of income vs. electricity. If you were to use a $300 R9 280X GPU, not accounting for the rest of the PC, you would need to mine Monero for over two years straight just to break even. And let me tell you, my personal experience is that running a GPU 24/7 at 100% load (which is what you do with cryptocurrencies) could very well kill the GPU before two years pass -- or at least the GPU fans will likely need to be replaced.

If you're wondering why I've become so pro-ASIC (or pro-Hashlet), this is the answer. All of my GPUs are now powered down, and I for one welcome the blessed silence. Maybe I'll fire them back up to help heat my house as it gets colder, or maybe prices will shoot up again and make GPU mining profitable. Until one of those things happen -- or something else comes along to make me want to mine with GPUs -- I'm going to be investing my time and energy elsewhere. Anyone interested in buying some GPUs?

Bitcoin Prices: Deja Vu All Over Again

Newcomers to the world of Bitcoin and cryptocurrencies might be wetting their pants right about now, depending on when they decided to get on the bus. We've gone from a high of around $660 in July to the current price of just over $400, with dips as low as $375 (give or take). The early hype stages of Bitcoin are now clearly over and it's time for things to slide into oblivion... or at least that's the pessimistic view of things. But you know what's interesting about pessimists? They've been predicting the demise of Bitcoin for well over three years now, and so far they've been wrong every time.

Yes, we've had ups and downs, some bigger than others, and there have been a variety of reasons for the spikes and valleys. Major accounts have been hacked and dumped, exchanges and other services have evaporated into thin air with large numbers of Bitcoin, China has jumped on -- and then been pushed off -- Bitcoin. But even without some of those events, Bitcoin like all markets is going to have upward and downward trends. And right now, we're clearly in a downward trend, but here's the question: how low will we go, and when the inevitable rebound occurs, how high will we climb?

2013 was, by all accounts, a very exciting year for Bitcoin. It took a while, but we finally eclipsed the previous high of June 2011... and kept on going! Around early April, Bitcoin reached a then unheard of high of around $260, at which point there was a major sell-off and some other stuff like the MtGox fiasco that caused a crash back to the $50 range. Then we went back to $170, down to $80, up to $130, and then there was a downward trend to about $66 again. The naysayers were out in full force, as you might guess, and then things started to pick up around August.

Bitcoin went up to $130 or so again, and basically hovered around that mark for a bit. There was a big dump to $85 in late September (I think that might have been an exchange getting hacked or something similar), and then we started to jump up in prices. The first plateau was back to $200, and I'll admit I cashed out of quite a few Bitcoins at that point. Over the next month I just had to shake my head as we repeatedly set new highs, eventually topping at over $1150.

After such a rapid climb, the fall-off was almost as dramatic, but it was far more seesaw in nature. Slowly but surely we've been heading down again, but we're still at more than three times the prices of last September.

Now, I'm not going to guarantee anything with Bitcoin right now, especially not on any short-term time frame, but what I will say is that this downward slump is nothing new. I suspect we'll even go as low as $300 or even $200, though that's a gamble if you're going to sell now and try to buy back in, but mark my words: Bitcoin is going to go back up again.

My take is that the holiday season is about to kick into full swing, and when people start buying lots of gifts and other products, companies start looking like they're doing well and stocks go up. Bitcoin most definitely isn't a stock, but there are many investors that play the stock market and they're now playing Bitcoin, so it's often treated like a stock. That being the case, the end of this year and the start of 2015 could be as exciting as last year, perhaps even more so.

Personally, I'm hanging onto all the Bitcoins I can get my grubby little hands on right now, and my Zen Hashlets are helping me accumulate more at a nice steady rate. Long-term, I think the next major spike in Bitcoin prices will eclipse $2000, and possibly go as high as $5000, and then we'll see the usual collapse again as prices consolidate around a new high that will very likely be over the $1000 mark. If you sell now, you might become yet another one of those "weak hands being shaken out", though as long as you're not selling at a loss I suppose that's fine. Just remember: the real winners are the people that successfully play the long ball.

Come talk to me again in 2015 and let's see how my prediction pans out. Again, no guarantees, but I think we're going to see a major upswing some time between now and January 2015. That's where I'd place my bets at least, if I were a betting man. And since Bitcoin is almost like gambling, maybe in this sense I am a betting man.

BitMain AntMiner S4 - 2TH Coming Soon, ROI Estimates

I mentioned this in the last post, so I suppose it's worth going into a bit more detail on the upcoming AntMiner S4 from BitMain. The long and short of it is that we really don't know much about the AntMiner S4, but it will apparently be on sale this week and will ship before the end of the month. That means the hardware must already be validated and running, so that's good to hear, but there are two major things we're still missing.

First, we need to know roughly how much power the AntMiner S4 will use. The previous generation AntMiner S3 is a 28nm chip, but it's only moderately efficient -- 441GH at 340W, or 0.77 W/GH. The AntMiner S4 might simply be the equivalent of five of S3 blades slapped into a single chassis, clocked lower and running at a lower voltage to improve efficiency. If that's the case, we might see 0.6 or even 0.5 W/GH.

The other item we don't know is the price, and given the above speculation I'd say it's likely we'll see the price in the neighborhood of $2000. Anything higher than that is obviously a bad investment -- you can buy a 10GH Hashlet Genesis for $8, basically, so that's the starting point I'm working off. Maybe BitMain will be kind to their customers and drop the price as low as $1500, but that's about the minimum I'd expect to see. We also need to know if it includes a power supply or if you need to provide your own, but the image at least suggests it will be a fully "plug and play" affair.

ROI Estimates and Early Forecasts

Considering we have a reasonable idea of the hardware and price, I can at least do a quick estimate of ROI potential. Let's start with the worst-case estimate: you pay $2000, it uses 1000W, and BTC difficulty increases an average of 20% every two weeks; power cost will be a reasonable $0.10 per kWh. We'll guess that you get the hardware in 14 days and start mining immediately. If this "worst-case" happens to be anywhere close to reality, you'd basically spend $2000 and your new ASIC would be too power hungry to keep running in about a third of a year (115 days, give or take). Assuming BTC price stays where it's at, the forecast would be pretty bleak: you'd lose around $1550 (with free shipping no less)!

Okay, that's too grim a proposal, as I think 20% difficulty increase is way too high. But if we take the same core values for price, power draw, and start date we can figure out what the average rate of increase needs to be for you to break even... and it's no less grim! If BTC difficulty only goes up 5.29% each cycle, a 2000GH ASIC for $2000 starting mining in two weeks will basically break even, but that won't happen until early 2016.

I don't think anyone would be willing to buy the S4 at that price, so let's try again and be more optimistic. Let's guess that they can get power draw down to 750W instead of 1000W, and the price is only $1500. Using our more than generous estimates from above (5.29% difficulty increase) you would hit ROI in about six months. A less optimistic forecast of difficulty going up 7.9% on average would leave you with a break even investment in one year.

That's still not looking very good, so let's try once more. What if the AntMiner S4 only costs $1000 and uses 500W? Now we're talking: at 5.29% you'd make ROI in just three months (~95 days), and long-term you could end up earning $1665 off of your $1000, though it would still take the better part of two years. 60% (or more) annual interest would be pretty awesome, so at these (nearly fantasy land) estimates the S4 would be worth buying. Of course a more likely 10% average increase in Bitcoin difficulty would drop you to hitting ROI in four months (~130 days) and after a year your total profit would only be $343.

If you can't tell, we're getting awfully close to the end of the road for Bitcoin ASIC mining investments. If you have one already and it's still profitable, you keep running it, but buying new hardware is looking sketchy at best. The days of purchasing a $500 GPU and having it pay for itself in just a month or so of mining are long past, so short of a major spike in BTC prices we're likely hitting a BTC difficulty plateau that will last a long time and only inch upward slowly as new process technology is developed.

BitFury Group's Upcoming ASIC: More Efficient SHA256 Hashing

Earlier this week, the BitFury Group issued a technology roadmap update for their ASICs. What's interesting about BitFury is that unlike many of their competitors, they've apparently put a lot more work into designing a custom ASIC. I'll get to what this means in a moment, but first we need to take a step back and discuss general microprocessor design principles.

Designing a CPU, GPU, SoC, ASIC, etc. can be done in many ways, but from a high level there are two general approaches. One is to use machine algorithms to optimize and lay out the transistors, and the other is to basically design the logic circuits and do the layout "by hand". There are pros and cons to either approach, of course.

The machine algorithms can do a great job of testing and validating the design and basically get you up and running a lot faster than if you were to have a human (many humans) perform the same work. What's more, there are many companies that now sell functional blocks of compute logic, so you can integrate these functional blocks into your chip a lot easier if you let the machines do the legwork. The drawbacks to machine layouts are that they typically use more area and they tend to be less power efficient. These aren't necessarily inviolate rules, but that's the basic idea.

Doing the layout by hand is basically the reverse of the above: it can take much longer to complete the design, validation, testing, etc. However, a human can generally see the big picture better than a machine and so they can optimize better for die area as well as power. This can in turn lead to potentially higher performance, which can be very important for high performance (or low power) microprocessors.

The above is a low-level discussion of processor design, but one of the interesting ideas is the use of ready made functional blocks. If you've ever wondered why it took a while to see the first SHA256 (Bitcoin) ASICs and then suddenly there was an explosion of competing designs from several companies, it's because once there was a tested and validated solution available, many other companies were able to license/buy the basic design and then just place more chips on a board to improve performance.

There are still multiple Bitcoin ASIC designs of course. The earliest ASICs were built on 90nm or even 130nm process technology (because it was cheap, mature, readily available, and easier to use), but as the competition heated up things shifted to newer and smaller process nodes. Today, the fastest and most efficient ASICs are manufactured on 28nm process technology, and 20nm designs will probably come out within the next year (the 20nm fabrication facilities are busy making things like Apple's A8 and the new Qualcomm Snapdragon cores, so they would cost a lot more to use). However, even 55nm ASICs can still be efficient enough to earn a profit -- or at least, the power cost of running them is lower than the value of BTC they generate.

BitFury is a prime example of this last case, as up until now they have been using 55nm process technology. The key to staying competitive even with an older process node is that BitFury uses their own custom logic (i.e. it's not licensed from another company), and they apparently put a bit more effort into optimizing for power and efficiency. Or more likely, they run at lower clocks and they're not really performance competitive right now -- the current BitFury ASICs can hit 3.5 TH/s at 2800W (give or take), but the power use is likely the limiting factor.

The latest announcement is basically BitFury Group saying that their 28nm custom logic ASIC is nearly ready. With the smaller process node and additional time spent optimizing for power efficiency, BitFury is claiming that they will have ASICs capable of running at 0.2 J/GH (essentially 0.2 W/GH) by the end of 2014, most likely late December. They're also working on an even more efficient design that will use 0.1 J/GH (W/GH, assuming 0.1 J/s) in mid-2015. That doesn't really tell us a lot in a vacuum, though, so let's compare those power numbers with some existing ASICs.

BitFury's own 3500BF I mentioned above delivers 3500 GH/s at 2800W, so it's doing about 0.8 W/GH. It also uses 1320 BF864C55 chips, which can run at a voltage range of 0.5V to 1.2V depending on your desired efficiency, with 0.5 J/GH being the maximum efficiency while 3.8 GH/s is the maximum performance -- but you have to choose one or the other. (Ever wonder why you can overclock ASICs? It's because you're just trading efficiency for higher performance, so if you have an older ASIC that's pulling 420W at the wall and you drop the clocks 10%, you'll likely end up improving efficiency by more than 10%.)

The KnC Neptune is currently targeting 3500 GH/s at 1950W, so it's slightly more efficient than the 3500BF (0.56 W/GH), but it's already on 28nm. Butterfly Labs' Monarch is more like existing chips, as it's capable of 700 GH/s at 490W (0.7 W/GH). Bitmain has their AntMiner S3 that's also around 0.78 W/GH, though the Antminer S4 is "coming soon". Looking at a list of other ASICs, those figures are pretty similar to the other "state of the art" designs.

Since I've been on a Hashlet's kick, I might as well toss out the Hashlet Genesis as well. GAW isn't saying how much power the Genesis actually uses, but the cost to run it (hosting included) is $0.02 per 10 GH. Doing the math at $0.10 per kWh, that would mean GAW is basically charging you at a rate equivalent to roughly 0.83 W/GH.

Basically, if we look at most of the currently shipping Bitcoin ASICs, the best you might get out of them is 0.5 W/GH, so BitFury Group is claiming they will more than double the hashing efficiency, and by the middle of next year they'll double it again. It's not just about efficiency of course -- the initial price will also largely determine whether or not a new ASIC is worth buying, so keep that in mind.

As I've said in the past, the real money makers in the whole Bitcoin Gold Rush are the people selling the mining hardware -- or other services as the case may be. You can't expect them to give the stuff away, obviously, but they're taking a healthy profit in most cases and hitting ROI is sometimes difficult (especially when the manufacturers mine with the hardware for a month or two before shipping to customers). Hopefully the 28nm BitFury parts get to end customers sooner rather than later, as we're getting close to the point where many of the current ASICs are going to have to be retired. Anything worse than about 3 W/GH is now breaking even on power, but really you'd want to be below 1.5 W/GH to keep mining viable -- and if you pay more for electricity (like $0.30 per kWh), you'd be breaking even at just 1 W/GH!

Anyway, for those thinking the current levels of efficiency were the end of the road for Bitcoin ASICs, there's still plenty of room left for optimizations. The first wave is now over (and probably the second and third as well), and the focus is now on refining designs rather than just getting them out the door. It's going to be interesting to see what sort of pricing we get on the next generation of ASICs, but we're still a few months away it looks like.

Urocoin: Real or Scam?

The past 24 hours saw Urocoin (URO) go from just another alt-coin into being the heaviest traded alt-coin at several exchanges (Bittrex and Mintpal), totaling thousands of BTC worth of trading during the day. It looks like a classic pump-and-dump, but there are still people defending the coin as being legit. So what exactly is it that URO is supposed to offer?

The big "hurrah" this time is about linking a cryptocurrency directly to a commodity, and in this case it's Urea. Never heard of it? It's basically fertilizer. Why would they need to use a cryptocurrency instead of, say, regular money? (Answer: they wouldn't.) But I digress; the announcement post says 1 URO will be worth 1 metric ton (tonne if you prefer) of Urea, and there will be a total of 1 million URO. Okay, how much is 1 MT of Urea worth then? How does $300 strike you?

So let's get this straight: company (Green Earth Systems in Australia, with offices in Hong Kong, India, Pakistan, and a few other locations) is going to create a new cryptocurrency, have no premine, and they're going to back it with the value of Urea? Yeah, that's the gist of it, which means the earliest miners were finding blocks of 12 URO in a matter of seconds that would "one day" be worth $3600 or more. And to help all this happen, URO has...a completely vanilla wallet that could have been copied from any number of X11 alt-coins. Hmmm....

AltCoinHerald has already posted much of what I would have said, so let me just add a few comments. First, notice that I'm totally not anonymous, and also note that I posted the following in the AltCoinHerald article: "If altcoinherald isn't correct in his assessment -- which matches mine -- I will close shop on HolyNerdvana.com as well. We've seen this same story with a bit less panache several times now. Guarantcoin (GTC) is one example." Yes, that's me putting my web site on the line to say that this is a scam. Why would I do such a thing? Am I just trying to get in on a lower buy price for URO? Nope -- I do it because I'm a blogger and thus traffic benefits me, and by publicly showing I'm right about this (and many others are right as well), maybe I can get a bit more respect/traffic. And if this totally backfires, I guess I'm just not cut out for looking at alt-coins any longer.

Rather than rehash AltCoinHerald, though, I decided to try something more interesting. Archive.org has old copies of the information on GreenEarthSystems.com.au, so I looked for details there. That also brought me to GESCommodity.com, a related site which hasn't been updated lately. Since Urea is a commodity, I checked the Contact Us page, which of course is quite different from the current Local Offices page at the "main" site. Note that all of the email addresses have been changed, so instead of sales@greenearthsystems.com.au they are now [country]@greenearthsystems.com.au, but there are no phone numbers listed. Anyway, I decided to try calling those old phone numbers from the GESCommodity pages; any guess as to what I found?

The two numbers for Australia gave me a disconnected line and a "no one is available" voice mail after 15 seconds of ringing. All of the other numbers I tried were disconnected, except for Germany where I was able to talk with a nice gentleman for a few minutes. He used to work with Green Earth Systems (apparently as a local consultant/point of contact), but he has not done anything with them since February 2014. He does not know what the company is doing now, but I gather that he didn't do too much with them earlier either. More than anything, his attitude was curiosity: "What is Green Earth Systems doing that makes you want to talk with me!?" So, the one phone number that I was able to speak with someone basically confirmed that the information on their web pages is at best woefully outdated.

All of this points to the company having gone kaput, letting their domains sit idle, and along comes a group of ne'er-do-wells who are able to grab the old domain (but perhaps not GESCommodity.com yet, though it appears that domain was just updated July 7 so it's not likely to be far behind if the scam continues) and perpetrate a huge scam. Looking at the main site's domain registration, it was apparently last updated in April 2014 by "IMPACT INVESTIGATIONS AND SECURITY PTY LTD". The Twitter account meanwhile was virtually dead until June of this year, right before URO came into being.

In short, this looks ever more like an elaborate scheme by pump and dumpers (and alt-coin designers) to create a coin with a huge amount of hype and then cash in on it. All we need now is a hidden premine or something to that effect, but at least there's no indication that happened. What I do know is that I called at least six of the countries listed on the GES Commodity contact page, and either had a disconnected line or no answer for Australia, RSA, Hong Kong, Fiji, the UK, and I think Jordan as well; Germany answered and is no longer working for the company.

I've seen less elaborate scams (GTC and AC come to mind), but bottom line is that if this were true, some company would be looking at investing $300 million into a new alt-coin (in order to cover 1 million URO that are each worth $300 of Urea). Why would a company think that making a new coin and funding it with that much money would be better than, say, using Bitcoin? Why would farmers in India and other locations want to buy Urea with URO instead of fiat? Occam's Razor basically points to this being a scam, as the alternative (i.e. that it's real) requires far more assumptions and uncertainty.

Feel free to start calling the phone numbers if you'd like to verify my story, but please be kind to the German gentleman and don't call him again -- let a couple alt-coin sites call him, if they want (and tell him I'm sorry for starting this phone calling business!), but if individuals start calling he's going to have a hundred out of country calls in a day, and that would be horrible. UK and Australia's phone numbers appear dead, so those are easy enough to confirm. And if you can prove that this isn't a scam... well, give me a number listed on the Archive.org web page that actually works. Yeah, that can probably be done as well given enough incentive.

It looks like the bubble is already mostly past so I don't think much more will happen. We'll see small volumes of trade as the price goes up, then big volumes going down as anyone still holding tries to get out. A see-saw pattern downwards is going to be the order of the day for URO is my bet. Good luck if you want to bet against me, and if I'm wrong... well, I'll stop posting about alt-coins on HolyNerdvana and find something else to do with my time.

As a final thought, there are many saying, "But BTC isn't backed by anything and it continues plugging along. Doesn't that mean all cryptocurrencies are a scam!?" The problem with that reasoning is that Bitcoin never promised to be anything more than Bitcoin -- 1 BTC is worth 1 BTC, and if you trade it for something else than the market will determine how much it's worth, be that $1, $32, $260, $1250, or the current $625. URO is claiming to be tied to 1 ton of Urea, but if you can't actually redeem your URO for Urea then it becomes a scam. 1 URO is worth exactly 1 URO, and however much that is worth is up to the markets to determine. Not surprisingly, URO reached a peak price of 0.035 (give or take) and has now dropped to 0.007 -- and it continues to fall. In a few months it won't be that difficult to collect 12500 URO, but good luck redeeming that for $3,750,000 worth of Urea!

Proof of Stake Interest Scaling: WYSINWYG!

So I've bagged on Proof of Stake "minting" before, and I've said numerous times that I don't expect much to happen. Blackcoin has 1% nominal annual interest, but other coins are promising much higher rates. What if I told you that the actual interest you'll receive may be far less than the stated PoS interest rate? You'd probably think, "That's terrible -- there's no reason to hold any PoS coin unless you're simply speculating!" Well, it appears after further review that this is exactly the case with some of the PoS coins out there! Case in point: Piggycoin 2.0 (PIGGY).

Let me give you an example of what I previously thought was happening, then some numbers that prove this is absolutely not the way it works. (I've been digging through the source code, and frankly it's tough to follow so I have not yet quite figured out where things "go wrong".) Let's start with something simple: 15% annual interest.

If you have $1000, at the end of the year if it's compounded yearly, you'll have $1150. With PoS I assumed things would function in a similar manner, but with more frequent compounding, and that seems to be the way most people expect it to work. So if you have 1000 coins and the PoS rate is 15% yearly, then if your coins hit a PoS block and their coin age is 1 day, you'd receive (1000 coins * 0.15 /365) coins from PoS daily on average, which would be ~0.411 coins. What happens if you don't hit a block for a day is that your coins continue to age, so if they don't hit a PoS block for 10 days then their coin age is 10, so you'd get 10X the PoS reward -- 4.11 coins every ten days. Thus, in theory at the end of a year you'll average out to the 15% figure -- and if you hit a block every day, you're effectively getting compounded daily interest, so slightly more than 15% yearly.

Here's the problem with PIGGY: that's not actually what's happening! I know this because I mined about 212K PIGGY, and I talked about the features of the wallet. PIGGY is basically yet another alt-coin, with the biggest claim to fame being that it has a somewhat more advanced/useful wallet. (It has things like an integrated block explorer, a Statistics page, and even a chat client.) My analysis is that, despite the improved wallet, I just don't see PIGGY going anywhere. Naturally, the staunchest PIGGY supporters think I'm an idiot/jerk/[insert derogatory name]. I posted my "review" in their ANN thread, which obviously doesn't help much, but here's where things take a turn for the worse.

One of the users said something to the effect of, "I just bought 500K PIGGY and I should be getting around 205 PIGGY every day from PoS, but I'm not. What's going on?" Someone tried to explain what was happening ("The difficulty of PoS blocks is higher now!"), but their explanation didn't make sense. Then I looked at my wallet, and what do you think I found? I mined PIGGY initially on IPOminer and then transferred 212,192.5036 PIGGY to my personal wallet at 2014-6-19 12:12:43 (feel free to look that up in the block explorer). On 2014-6-19 23:53:10 I hit my first PoS block, which means according to my previous understanding I should have seen a PoS block reward of 42.42033355. (The 212K coins had accrued precisely 0.486458 days of coin age, and with 15% annual interest that would be 0.019991% interest for the time elapsed.) My actual block reward from that first "minted" block after just under half a day: 2.06481019 PIGGY. The rewards are about 5% of what I was expecting to see, or off by a factor of 20X, just like the other user!

I dug through the source code at this point and still didn't come up with a clear understanding of what's going wrong, but since we have coins that have been doing PoS minting for a while, I figured I'd go check one of those. Enter Asiacoin. (Why Asiacoin? Well, it's 100% annual interest, and the block explorer shows the number of outstanding coins quite clearly.) Let's start first with the end of the PoW phase, at block 20160. The total number of AC mined in the PoW phase is 171370113.067912, and that was on 2014-05-01 06:47:30. Asiacoin was created by a complete scammer, but the PoS transition went more or less smoothly and so the first PoS block of 20161 came at 2014-05-01 07:53:44. The block reward from PoS? A whopping 3.562109 AC from 137.55704 AC that was mined/transferred in on 2014-04-17 04:44:56 -- so it had a coin age of around 14 days. 100% * 14 / 365 = 3.83%, so I would have expected 5.27616 for the PoS block reward. The returns get worse as time goes by, unfortunately.

Asiacoin launched at 2014-04-16 16:00, and the PoS phase has been going on for around 9.5 weeks now. During that time, the total number of AC has increased from 171,370,113 to 182,981,295 (at the time I write this we're on block 114262). That represents an increase in the total number of coins of just 6.77%, and 9.5 weeks (slightly more) represents 18.2% of the year. So, even if only half of coins are staking (which is possible) the returns from PoS minting are less than one half of the stated 100% nominal annual interest. That's actually not bad if we were dealing with fiat where the value is more or less static, but that's not the case with cryptocurrencies obviously. AC was still valued at over 500 satoshi after the scam was discovered, back on May 13. Today, AC is valued at roughly 150 satoshi (give or take 10 satoshi). So even if you were getting 100% returns annually, in just one month the value has dropped by by half, fully offsetting (and then some!) any returns from interest.

Let's do another example with AC, though. Here's an address with 1.945 million AC. The AC was added after being purchased from MintPal, it appears, in two large chunks of 1.25M and .45M. Since then, the wallet has mostly been offline, with only a couple online sessions to get some of the coins due from staking. On 5/30, the 1.25M AC staked and became 1.34M AC. The next time that chunk of coins staked was on 7/5 when the 1.34M AC became 1.43M AC. Looking at that second transaction, 35 days had passed so the interest should have been 9.59%; the actual interest was 7.14% -- it's not off by a massive amount, but again it's still not giving the expected 100% annual returns (plus compounding interest).

I strongly suspect if I were to take the time and check on the dozens of other PoS coins I'd find similar problems with many of them. After all, many of these coins are simply taking an existing coin, cloning the source, modifying a few parameters, setting up some seed nodes (and a premine), and calling it a day. If the original source has some bad logic, all of the clones inherit those flaws.

Bottom line on PoS coins: it's definitely not at all about the PoS interest -- that's basically worthless on most coins to begin with (hello 1% Blackcoin, 2% Whitecoin, etc!). What will make PoS coins profitable is if they somehow become useful. That's not really happening with any that I can really see -- BC is doing "okay" perhaps, but it's one of the best examples and it's not even really healthy in my book. NXT is pretty much a joke as far as I'm concerned, and everyone holding NXT hoping it will increase in value would be better off trading it and figuring out ways to get more places to accept NXT for goods/services. But wait...why would you want to accept NXT if you could just accept BTC, LTC, or any number of other cryptocurrencies instead? Hmmm.... What's really driving the price on all of these PoS coins seems to be pure speculation more than anything, not to mention market manipulation.

Again, I want to note that not all PoS coins have problems with the amount of interest they're generating. Blackcoin seems to be on target, and CAIx looks right as well. HBN scales the PoS rewards, but it's clearly visible in the code and it's part of the specifications. If someone wants to figure out precisely why the returns from PoS on AC and PIGGY are broken and drop me a note about where in the source code it's happening, I'll be happy to update this. Personally, I feel if a coin promises 15% interest yearly, that's what it needs to deliver -- let the market dictate the price, but the interest rate should be set in stone -- WYSIWYG (What You See Is What You Get). This business of scaling interest rates without publicly stating how the scaling happens is just one more shady practice that will result in people getting burned.

Vertcoin Introduces Stealth Addresses

It seems like forever ago that I was talking about Vertcoin (VTC), and sadly the coin has been slowly fading away -- in terms of mining profitability, coin value, and the amount of discussion oriented around the cryptocurrency. Certainly VTC is far from being dead, but with all the (empty) hype around the various PoW->PoS coins during the past couple of months, not to mention things like X11 and X13 proving to be far more popular than Scrypt-N (they're not as hard on the hardware or power bill, and hash rates are higher which some people take as being "better"), the original Scrypt-N coin has been languishing.

That all changes as of today (yesterday technically, depending on your time zone), with Vertcoin's introduction of Stealth Addresses. What exactly are Stealth Addresses, and how do they work? Well, that's where things get interesting. Let's start with a screenshot:

First things first, there was a typo (it says "Monocle" rather than "Vertcoin") in the first version of the client to support Stealth Addresses; it was fixed with an updated binary later in the day, and as the devs work on both Monocle and Vertcoin this isn't really a problem (plus they did the initial testing of Stealth Addresses on Monocle). Now, what exactly is a Stealth Transaction?

Some have erroneously labeled Stealth Addresses as just a form of transaction mixing, but that's not accurate. Put simply, there is now a new type of transaction that can take place, which uses a Stealth Address instead of a regular address, and others will not be able to see all of the transactions going into/out of these Stealth Addresses. They'll be able to see the transaction on the block chain, but they will not be able to link up the address to any specific user.

Think of it this way: if I write you a check, you can see my account number; if you write me a check, I can see your account number. However, neither of us is able to see the balance, deposits, and withdrawals that are in the account because we don't have the appropriate key. This is basically what Stealth Transactions are trying to do with Vertcoin.

The way it works is that when you create a Stealth Address and someone sends coins to that address, your client generates a one-time normal VTC address but the transaction gets tagged as a Stealth Transaction (SX). Embedded in the transaction is a marker that flags it as an SX, and your client can scan these SX to see if any match one of its Stealth Address; if they do, it can use the locally stored private key to retrieve the coins.

If you prefer a slightly more technical explanation -- understanding that this is currently closed-source code, so we don't actually know the specifics of how Vertcoin is doing things -- there is some information avaialble here. The short summary is that each Stealth Address is associated with two private keys, a Private Scan Key and a Private Spend Key. Presumably (though this isn't entirely clear), the counterpart Public Scan/Spend keys are embedded within the Stealth Address. When someone generates a Stealth Transaction using a Stealth Address, a Public Ephem Key is generated along with the standard Vertcoin address, and this becomes part of the block transaction. Using the Public Ephem Key, Private Scan Key, and Public Spend Key a receiving wallet can test a transaction to see if the Vertcoin address belongs to one of the wallet's Stealth Addresses; if it does, the Public Ephem Key, Private Scan Key, and Private Spend Key allow the wallet to retrieve the coins.

In terms of how it works with Vertcoin, at present coins from SX don't just show up in your wallet -- you have to manually tell your wallet to scan for any SX that belong to you. A future client update might make scanning for SX automatic, or something that runs every few minutes; I'm actually not quite sure what the purpose is to not have them show up automatically right now, but I think it's an effort to reduce the load on servers and exchanges. The good thing with Stealth Addresses and Stealth Transactions is that all the regular block explorer tools still work. This is in contrast to Darkcoin's DarkSend and things like Ring Signatures -- go look at the "awesome" block explorers for Monero for example and you'll find they're not particularly useful.

[Update: After redownloading the block chain, I was able to properly retrieve the SX. The text below has been edited.]

Let's walk through an example set of transactions, just to make things a bit easier to understand. I went ahead and sent a Stealth Transaction to a test address (vJmtKDHvgLV5SD1KQ2a9BhUeZaBBNhhSrkrCvfTy7cZ16pjEAnEGii1kL35FzGGeGy6g64BCErHGbczfExwcADZU43n8Y44fCGT9H9 if you're wondering). The coins disappeared from my wallet, so that went well, and I can now see the "real" one-time VTC address they were sent to (VoehMYgeLy8UAAj5TQh17fv5iRQNkSu2Ep):

So far so good; now let's see if I can find the transaction on the Vertcoin block explorer. It actually took a bit longer than I was expecting, but about 30 minutes later (ten blocks later) it showed up:

It took some time to sort things out (basically my initial block chain was somehow corrupted and I had to download it again), but once the transaction is visible on the block chain I was able to then press the "Import Stealth Address Transactions" button to collect the coins.

The first time you press this button, it appears your wallet has to scan the entire block chain looking for any matching SX; it took a couple minutes on a Core i7-4800MQ, but subsequent runs are much faster (nearly instant). And if you're wondering, the "Reset Private Keys Status" button is used to reset the scan index for SX back to the default (block 0?), but normally there shouldn't be any need to use that. One issue that remains is that there's no progress indicator or any form of feedback when you press the Import... or Reset... buttons, so hopefully that gets addressed in a future wallet update.

You'll notice that on the receiving end, it shows the original Stealth Address along with the one-time address. Interesting to note is that while my Stealth Address listed above may no longer appear very "stealthy", having that address be public knowledge still doesn't allow others to see the actual SX associated with it! Others could send me coins (donations always welcome!), but each new SX will generate a new one-time VTC address, so unless I go out of my way to publish those, no one can see what's happening inside my wallet.

Ultimately, despite a small hiccup along the way, I like the option to do these Stealth Transactions. It doesn't make things truly anonymous, but I'm not sure most people really want that level of anonymity. Right now, the SX implementation in Vertcoin is certainly better than some of the cryptic and user unfriendly stuff that needs to be done with CryptoNote coins. Could this mark a change in the global ranking of various coins? Will we see VTC valuation continue to rise while some of the other alternatives like DRK and XMR drop? I don't think that's really likely, especially considering the difficulty of mining Scrypt-N (it's simply more demanding on your GPUs and consumes more power than X11 and Cryptonight), but at least right now VTC is looking better than it has for the past couple weeks.


If you like reading these blog posts but don't want to subscribe to my thrice-weekly newsletter, please consider making purchases through my Amazon Affiliate links!

Mining CryptoNote Coins with NVIDIA - Settings and Performance

[Update: You can also just use Nicehash, with there auto-switching NiceHashMiner. That's what I'm doing these days, and it pays out in BTC.]

I'm going to assume most people are already aware of the AMD GPU miner for CryptoNote coins, so I'm not going to discuss that for now -- though it's probably worth its own post in the near future. Instead, I want to look at mining CryptoNote coins with NVIDIA hardware, since we now have an open source (thanks TSIV!) version of ccMiner for just that purpose. First things first, grab the Windows binaries (or if you're doing Linux, use the source code and compile it). But now that you have the executable, how do you get it running?

The good news is that all of the CryptoNote coins that I've looked at where you can use a pool just rely on your wallet's address. As Monero is currently the most profitable of the coins (AFAICT), I'm going to use that as my example, but other CryptoNote coins should be similar in practice. Before you can get mining, you'll need the wallet, and you'll want to download and sync with the blockchain. For Monero, that means grabbing the latest files and then running them. Assuming this is your first time running, do the following:

1. Download the wallet and daemon files and extract them to an appropriate folder (e.g. C:\Mining\Monero).
2. You'll save yourself a lot of time by downloading the partial blockchain that's available on the main thread -- get the appropriate chain for Windows, OS X, or Linux (64-bit only), or else you'll just need to run the daemon and wait for it to finish syncing (which can take hours the first time). For Windows, put the blockchain.bin file in %AppData%/bitmonero; on Linux/OS X put the blockchain.bin in ~/.bitmonero.
3. Now start up the bitmonerod.exe daemon and wallet; I use the batch file below to accomplish this. If you want this to auto-start when you boot up the PC, create a shortcut to the batch file and put it in C:\ProgramData\Microsoft\Windows\Start Menu\Programs\StartUp

@echo off
tasklist /FI "IMAGENAME eq bitmonerod.exe" 2>NUL | find /I /N "bitmonerod.exe">NUL
if not %ERRORLEVEL% == 0 (
  echo Starting node...
  start /MIN /LOW bitmonerod.exe
) else (
  echo Node already started.
)

tasklist /FI "IMAGENAME eq simplewallet.exe" 2>NUL | find /I /N "simplewallet.exe">NUL
if not %ERRORLEVEL% == 0 (
  if exist wallet.bin.keys (
    echo Starting previous wallet...
    start simplewallet.exe --wallet wallet.bin
  ) else (
    echo Starting new wallet...
    start simplewallet.exe --generate-new-wallet wallet.bin
  )
) else (
  echo Wallet already started.
)

At this point, you should have a wallet, which really is just an EXE that talks to the daemon and can send certain commands. The daemon is in charge of downloading the blockchain and staying in sync with the network, while the wallet holds your coins and had a key (which is password protected, so you need to input the password each time you start the wallet).

To get mining, you need to know your Monero address, so go to the wallet window and type in "address" (without the quotes). Other commands you can use are available by typing "help", and thankfully there are only a few commands you need to know. Now take that address and go to one of the Monero pools -- I'd suggest monero.crypto-pool.fr as the best candidate, though you're free to use others. With that address in hand, and a pool (or two or three) selected, it's time to start mining.

For mining, you now have three options: CPU, AMD GPU, or NVIDIA GPU. The basic settings are similar for each -- you use the miner with the pool address and your wallet address. For CPUs, use the number of CPU cores you have (real cores without Hyper-Threading is usually best on Intel, while for AMD you can use all available cores). For AMD, there's no real configuration to speak of right now -- fire and forget, with the knowledge that you're donating 5% of coins to the developer (Claymore), at least until an open source version becomes available. For NVIDIA, you can just run with the defaults as well, but my whole reason for this post is to tell you not to do that! The default syntax is as follows:

ccminer.exe -l 8x64 -o stratum+tcp://mine.moneropool.org:80 -u 48JM22E3ZfPSoFCukcizpSR2hCsBnAExT4ACvrpYx5czFgEyR12LWwK9JpgYRZKjsRHp8ynDcQegbhCspvjHd7gaL8qbzYy -p x

Okay, the addresses are really long, but the real item you want to pay attention to is the "-l [threads]x[blocks]" setting. Here's what I know: the default setting is 8x40, and on most NVIDIA GPUs that I've tried it absolutely sucks. That may be a bit harsh, but basically it's not doing any sort of tuning so you're going to get anywhere from decent to mediocre to terrible performance, but very likely not optimal performance. On one GPU (GTX 860M), the defaults gave me 50 H/s, but with fine tuning I got up to nearly four times that hash rate. So how do you tune the settings?

I suggest starting by trying to find a good thread setting; anything between 6 and 12 is potentially good, so start with 6x64 and then try 7x64, 8x64, etc. up to 12x64. Find whichever setting gives the best starting performance. Then start trying different values for the blocks setting. I started at 32 and then tried 48, 64, 80, 96, 112, and 128 -- so basically increments of 16. You'll likely find that many of these result in similar performance, but somewhere in that range you should see better results. Choose the two highest results and then try a thread settings half-way between those, and continue narrowing things down until you find what appears to be an optimal setting. It doesn't need to be an even number either, so just give it a whirl. Note that the first score you get will probably be a bit lower than your average hash rate, but it's consistent so if you get 150 H/s and then things level off at 180 H/s, a starting score of 180 H/s will likely reach an average speed of 210 H/s (give or take).

So far everything is simple enough, but there are a few final items to note. First, on most systems running the ccMiner for CryptoNote makes the system useless for doing much else -- it becomes extremely laggy. The exception is if you have a laptop with NVIDIA Optimus, as the Intel iGPU can still happily run the Windows code and stay responsive while your GPU gets pounded. But laptop GPUs are slower, so I don't really recommend that route -- I suppose a desktop with the display connected to the Intel port would also work similarly.

The second item to note is that on most systems I've tried, the NVIDIA drivers will "time out" and give you a crash message. This is Windows basically detecting that the drivers haven't responded properly for a while, and so it stops them and of course your mining quits as well. You can usually get around this via a registry edit, but in some cases even that may not work all the time so be prepared to fiddle around a bit. The registry hack is easy enough:

1. Run "regedit.exe" from the Start Menu.
2. Navigate to "HKEY_LOCAL_MACHINE\SYSTEM\CurrentControlSet\Control\GraphicsDrivers"
3. Right-click on the right panel and create a new 32-bit DWORD value.
4. Name the key "TdrDelay" and assign it a value of anywhere from 10 to 30 (decimal -- 0A to 1E hex).
5. Reboot and you should be set.

I've found that not all systems give the same hash rates, even with the same clocks, and there's certainly more investigating to be done. Here's what I'm running so far along with the approximate hashing rate, if you're interested. This is listed in order of increasing performance.

1. GT 750M: -l 8x64 = ~56 H/s
2. GTX 860M: -l 8x32 = ~200 H/s
3. GTX 870M: -l 8x63 = ~205 H/s
4. GTX 780M: -l 7x71 = ~210 H/s
5. GTX 780M #2: -l 8x72 = ~225 H/s
6. GTX 880M: -l 8x64 = ~245 H/s
7. GTX 770: -l 8x72 = ~280 H/s (probably can do better with more tuning)
8. GTX 780: -l 8x96 = ~380 H/s

As you can see, there's no clear rhyme or reason to what settings will work best, so you'll need to use some trial and error to figure it out. There are also some real oddities, for example the GTX 780 is rocking along at 380 H/s but I can't get anywhere close to that with the GTX 770 -- in theory, the 780 is only about 25% faster, but here I'm seeing a 35% increase. Maxwell also does reasonably well on the laptop side of things, bringing in 200 H/s despite being in theory quite a bit slower than GTX 870M and 780M.

What's interesting is that for desktop GPUs, most people are talking about getting around 260-280 H/s with the GTX 750 Ti, a Maxwell GPU with 640 cores running at 1020 MHz. The GTX 760M by comparison is the same 640 cores at a similar clock speed, but I can't get the same level of performance. The faster desktop VRAM (5.4GHz vs. 5GHz) might help some, but unless people are doing some decent overclocking to hit 260+ H/s I don't know why there's such a gap.

Obviously, TSIV and others are going to continue to improve performance over time, so I don't expect things to end at the above results, and I also suspect we'll see some auto-tuning implemented at some point. In the meantime, just know that for many of the GPUs I've played around with, specifying a launch configuration isn't just helpful, it's absolutely necessary.

Donations are welcome:

XMR: 48JM22E3ZfPSoFCukcizpSR2hCsBnAExT4ACvrpYx5czFgEyR12LWwK9JpgYRZKjsRHp8ynDcQegbhCspvjHd7gaL8qbzYy
BTC: 153qS9Ze32hnV3fwirZLWNka4wBAowc21E


If you like reading these blog posts but don't want to subscribe to my thrice-weekly newsletter, please consider making purchases through my Amazon Affiliate links!

Piggycoin 2.0: How Far Can a Good Wallet Take You?

I'm not going to do a full deep dive on Piggycoin right now, but Piggycoin has so many similarities to other coins that I felt it was worht a discussion at least. You see, recently the original PIG was converted into PIGGY (at 1:1 trading), switching from Scrypt PoW to X11 with Proof of Stake. CAI/CAIx basically pioneered this sort of "bait and switch", and it worked... well, it more or less worked, but CAIx isn't exactly the hottest cryptocurrency right now. (DRK or XMR on the other hand...but those are topics I cover in my newsletter so I won't spoil them here.) Anyway, here are the quick specs for the two versions of Piggycoin, starting with the initial release:

Piggycoin 1.0 Specifications (6/19/2014)
Symbol	PIG
Launch Date	2014-02-25
Proof of Work	Scrypt
Starting Difficulty	0.000244 (ugh)
Block Time	2 minutes
Block Reward	4,000
Premine	1% (21 million)
IPO	No
Difficulty Adjustment	Every 120 blocks initially KGW from block 2000
Reward Adjustment	Never? (Changed to 62500 at some point)
Max Coins	2.1 billion at ~729 days
Forum Threads	Bitcointalk (Old Thread!)
Block Explorer	Yes (Alternate)

Note that the block explorers for PIG may shut down in the future. Also, the block reward was changed at one point, but then it appears it changed back, as blocks 62500 through 62827 have a reward of 0. My guess is there's a group of users that want to stay on the original PIG, but I don't see it going anywhere as all of the exchanges have converted to PIGGY. Anyway, the original design seemed a bit...lacking, and the code was changed a few times in the early going, so when it was altered most felt it was for the best. Here's the new version.

Piggycoin 2.0 Specifications (6/19/2014)
Symbol	PIGGY
Launch Date	2014-06-10
Proof of Work	X11
Starting Difficulty	0.00024414
Block Time	1 minute
Block Reward	23,700 for PoW 15% for PoS
Proof of Stake	8 hours minimum staking age Unlimited maximum stake age
Premine	1% (265,353,096 added to previous 21M in block 3)
IPO	No
Difficulty Adjustment	Every block
Reward Adjustment	10,000 PoW blocks before PoS
Max Coins	500 million at ~7 days +75 million per year indefinitely
Forum Threads	Bitcointalk
Block Explorer	Official

Honestly, there's still not a whole lot that would make me look at PIGGY and say, "Wow! There's a coin that's going places!" But here's the thing: they've done a decent amount of work on the GUI wallet to make it more useful, and they also have an Android wallet app, as an added bonus. So how much is that worth? I have no idea really, but right now the price of around 30 satoshi seems rather low. I mean, DOGE doesn't have much going for it these days and there are already 83+ billion DOGE, each worth twice as much as a PIGGY.

And let's not forget the cute piggy bank. Will this coin really teach children anything about investing? Probably not, but I figure I can keep my PIGGY and earn 15% per year -- as long as the network keeps going. When my two year old enters college in 16 years, I will have about ten times as many PIGGY as I do right now. Which means if I currently have the equivalent of about 0.066 BTC of PIGGY, the $40 I "save" today could be worth a whopping $400 in sixteen years. Good luck finding a college that costs less than that! There's also the Piggycoin Foundation, which is undertaking charitable goals. Right now they're gathering PIGGY to buy bikes, but what that usually means is they take PIGGY, convert it to BTC, then convert that to fiat, and then donate the fiat.

Let's just hope that the price doesn't collapse -- and perhaps even goes up. And let's hope the network keeps going. And let's also hope the exchanges keep accepting PIGGY and don't forget about it as hundreds of new coins flood the network. Need I go on?

In truth, my outlook for PIGGY isn't too promising. Other than the improved wallet (see above), there's little to differentiate it from all the other PoW->PoS coins. 15% is at least a decent interest rate, but there's a very real chance the price of PIGGY will fall more than 15% per year. Restarting as a new coin also doesn't lend me confidence in the developers -- will Piggycoin 3.0 switch to a new PoW algorithm in a few more months? Let's hope not!

What I'd like to see from PIGGY right now is a better integrated ABE-styble block explorer, that shows difficulty, block reward, value, transactions, etc. instead of just some raw hashes. And if you really want to take things to the next level, integrate a way for users to trade PIGGY for BTC directly in the wallet -- have an internal exchange that runs on top of the network and doesn't require any intermediaries! That would be sweet, though I'm not sure how you tie that in to BTC exactly, and more likely than not you'd have hackers compromise the network at least a few times before everything worked properly.

Anyway, good luck my little PIGGY -- I expect big things of you, and we'll see if my children are actually able to use you when they hit college in 15 or so years. And if you'd like to donate to their PIGGY college fund, I promise I won't move the coins anywhere: pWf3PEfPuxRwed5dNtutrWndUZckXYdP8r


If you like reading these blog posts but don't want to subscribe to my thrice-weekly newsletter, please consider making purchases through my Amazon Affiliate links!