Bitcoin Miners Debate Risks and Rewards at Las Vegas Convention
This week, the first-ever conference aimed at bitcoin miners, mining companies and those with an interest in the sector kicked off amid the glitz and glamour of downtown Las Vegas.
Hasher’s United, hosted this year at The Tuscany Hotel and Casino from 9th to 11th October, included panels focused on a number of practical and conceptual topics and brought together speakers like venture capitalist Tim Draper, GAWMiners CEO Josh Garza and BitAngels co-founder and chairman Michael Terpin. A number of companies in the space including China-based manufacturer Bitmain, cooling technology specialist Green Revolution Cooling and more were also in attendance.
Many in the 100-strong crowd were small- or medium-sized bitcoin and altcoin miners, most of whom have been mining for at least the past year-and-a-half. As some told CoinDesk, the event provided an avenue for miners to both interface with companies in the space and learn new ideas to apply to their existing strategies.
Opening talk on crypto’s future
The first panel, which included Draper, Garza and Terpin, cast a wide net by asking a simple question: where is crypto headed today?
Though focused primarily on the technological advancements made possible using digital currency, the panel members – as well as many others on the first day of the event – found their way back to one of the industry’s hottest topics: the price of bitcoin.
Draper noted that he may have been “too conservative” about his prediction of $10,000 per bitcoin in three years. He remarked that miners who exchange their bitcoins for fiat currencies are a significant part of the selling pressure we’re seeing on the markets today.
Draper explained that this dynamic should reverse in the future, saying:
“[Miners are] a force-selling component and nobody’s buying. But as these companies evolve and all of these businesses allow us to use bitcoin for more and more purposes, that will be what drives the price up.”
Terpin polled the crowd by asking how many sell a certain percentage of their bitcoins for fiat currencies like the dollar. One only miner raised their hand when Terpin asked if they sold 100% of their bitcoin for dollars, and about one-third of the crowd indicated that they don’t sell any of their generated bitcoins.
Garza voiced the least concern regarding the price, saying that ultimately, the value of bitcoin is underpinned not so much by the consumers and merchants who use and accept digital currency but by the miners who facilitate the whole network.
“Miners believe in the currency the most,” he said.
Garza later drew applause when he said that GAWMiners pushes strongly for acceptance within its business-to-business dealings, saying that his company has told others that “if you won’t accept our bitcoins we won’t do business with you.”
The panel also discussed how the future of digital currency usage will see a rapid increase in the development and deployment of smart contracts. Draper said that he is currently exploring options for use in his venture capital dealings, adding that the legal and accounting professions risk being upended by smart contracts or programmable transactions.
Terpin argued during the panel that, as far as the US is concerned, the move toward digital currency adoption won’t be as smooth as Draper was predicting. The problem, he said, was that American bitcoin users haven’t been presented with a viable use case for the technology.
“I don’t think there’s a killer app in the US beyond investing if you have a bank account,” Terpin concluded.
The panel also spoke briefly on the topic of the underbanked and bitcoin in emerging markets. All three participants touched on the potential of bitcoin-powered remittances, but acknowledged how the infrastructure isn’t quite yet in place for emerging market use of bitcoin to take off.
“The question is: how do you get bitcoin to all these people?” Draper asked.
Industry dives deep
Following the broad opening panel, the first day of Hasher’s United featured a plethora of talks and discussions on some of the issues facing miners today, potential revenue sources and strategies for maximizing efficiency and profits.
There were also a series of presentations made by companies in the space, including one by Genesis Mining which saw the unveiling of Project X, a new product that enables cross-coin mining without the need to purchase separate contracts. Several altcoin developers, including litecoin creator Charlie Lee and the teams behind ultracoin and unbreakablecoin also held demos and exhibitions during the event.
Lifeboat Foundation advisor and CoinDesk contributor Hass McCook led a talk on the business foundations of bitcoin, breaking the digital currency mining and services sectors down to their basic structural elements. He argued that some miners do themselves a disservice by not adopting more formal business practices, a problem that, in some ways, holds back the broader industry.
He explained that the market fundamentals remain solid, providing a unique opportunity for miners to create value-added services based on the creative demands of their customer base.
“There are so many things that bitcoin can do for us, we don’t know 90% of what it can do for us yet. These [use cases] will come out as smart people continue developing products.”
Predicting that “95% of bitcoin startups will fail," McCook offered his vision for the future crypto-economy. He predicted that, owing to the homogenous nature of bitcoin hardware and the general trends we’re seeing in the industry today, the digital currency market ten years from now will be characterized by greater consolidation, the creation of so-called “super-services” and the proliferation of block chain technology in a number of key industries.
He acknowledged that the process won’t be simple, and that further price discovery will likely occur. On the other hand, McCook said that events such as the notorious 'bearwhale' may become less frequent as usage ignites and major players hold less bitcoins overall.
Mining’s behavioral challenges
One of the more notable panels of the day centered on the topic of game theory and the question of how this area of research can be applied to bitcoin mining and the wide-ranging security vulnerabilities facing the sector today.
The talk included insights from Cornell University researcher Emin Gun Sirer, Princeton University assistant professor Arvind Narayanan, University of Maryland PhD candidate Andrew Miller and Sean Bowe, creator of model development platform SimBit.
Miller, who shared his research on the types of attacks centered on bitcoin mining pools, including so-called vigilante attacks that essentially sabotage the act of collective mining.
He offered a series of potential changes to the reward structure, including changing the dynamic nature of block rewards to encourage less malevolence. At the same time, Miller suggested that the consensus-base nature of bitcoin development and the technology’s history could prevent otherwise worthwhile fixes from being integrated:
“Any time there will be a consideration in the future of a possible change, there will be some kind of complicated tug-of-war over the tradeoffs and the prior investments that might be affected by it.”
Sirer, co-author of a controversial paper on a mining network vulnerability known as selfish mining, opined that the mining sector itself isn’t the simplest ecosystem to map out and analyse from theoretical and behavioral perspectives.
“It’s difficult to model what miners want,” he offered.
Narayanan argued that game theorists who work in the bitcoin space need to do a better job of interfacing with other parts of the ecosystem in order to obtain more reliable data.
“What I think is that the theorists and academics working on bitcoin need to work out to the community, the miners, and have a firm grasp of some of these strategies’ implications in order to input into the game theory models.”
Sirer disputed this, offering examples of how his team reached out to both community members and the bitcoin core development team. Bluntly acknowledging the “pushback” he experienced following the release of the selfish mining paper, Sirer thanked the core team for being open to the eventual development of a fix to the vulnerability.
During a question-and-answer session after the panel, one miner asked about the risk of 51% attacks on the network given the rise of large mining pools in the past. The participants stated that, ultimately, there is little to do in a distributed system like bitcoin mining beyond community outreach to keep mining conglomerates honest.
“There is nothing to push it back except social pressure,” Sirer concluded.
A full recording of the first day of Hasher's United can be found below:
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