The CoinDesk Mining Roundup: Hot Issues, Lawsuits and Eco Mining

Plagued with delays and rising costs, how will the mining industry appease customers and issues related to power consumption?

AccessTimeIconMay 4, 2014 at 12:30 p.m. UTC
Updated Feb 21, 2023 at 3:38 p.m. UTC

A bit of good news came from FinCEN recently, when it ruled that cloud mining services do not have to register as money transmitters.

This is good news for consumers who wish to stay out of purchasing mining equipment for themselves and merely rent hashing power in some remote data centre – especially given the struggles that some manufacturers are having.

On that subject, as the ASIC mining market is still in its early stages, it has created an environment where many vendors struggle with shipping on time.

Logistical issues stemming from the creation of a new industry practically overnight is part of the problem, but heated rivalries mean that each major player needs to promise customers a great deal in order to secure that vaunted preorder.

With that in mind, here is what has been going on in mining since the last roundup.

A hot problem this summer?


The Wall Street Journal's Michael J. Casey examines an interesting issue that may come about in the northern hemisphere this summer. If the price of bitcoin doesn't rise, it's entirely possible that some miners will have to take some units offline in order to combat the electricity price and heat consumption that may be generated from rigs.

The hash rate, which is currently 60 times more powerful than it was last autumn, might drop as summer arrives. The reason for this is that, in addition to the power required by mining rigs, operators will need to also fork out on electricity to cool their mining gear as well.

That's why manufacturers such as CoinTerra are looking to sell water-cooled units that operate more efficiently than air-cooled models.

Some vendors are also hawking the idea of immersion cooling, however others believe that the mineral oil used to cool the boards in this process makes such outfits too complex to administer over time.

Spondoolies-Tech working on next-gen products

The 5.4TH/s SP30 Yukon ships in August. Source: Spondoolies Tech
The 5.4TH/s SP30 Yukon ships in August. Source: Spondoolies Tech

Israel-based Spondoolies-Tech has seemingly found a niche market in building mining units that focus on low power consumption. The company, which has been backed by Israeli venture capital firm Genesis Partners, currently is selling two 1.4 TH/s 1,250W units for $7,995.

The company says it has been shipping since early March and had grand plans for its next generation of frugal data-center units.

Spondoolies-Tech expects its second-generation RockerBox to run at 0.34W per GH/s, while the third-generation PickAxe is anticipated to operate at 0.1W per GH/s. Although these numbers are projections, given ever-present issue of electricity costs, they could be a very worthwhile products.

The company says it will also be working on a scrypt mining product once it has released its second-generation SHA-256 model. Pre-orders for the second-gen SP30 Yukon are going for $20,995 in a package of three 5.4 TH/s machines for a total of around 16 TH/s with nominal power consumption of 7,500W.

Trouble at Butterfly Labs


Ars Technica has written a lengthy piece regarding the history of Butterfly Labs' co-founder who has been involved in some rather unscrupulous business practices. The article profiles a man named Sonny Vleisides, who remains on probation for his involvement in a mail fraud scam, and discusses BFL's issue with delivering products on time.

Butterfly Labs' COO Josh Zerlan has talked to CoinDesk in the past about the company's challenges getting its hardware designed and to market in such a short time and in a hyper-competitive mining hardware industry.

In February, the company was reportedly facing a $5 million lawsuit due to an unfulfilled order. Its troubles do not stop there, however.

In March, the company announced that it would have to delay delivery of its 28nm Monarch product, which has 600 GH/s of power at 350W for $2,196.

The company is also now facing a class-action lawsuit that includes a number of US customers who allege they did not receive their bitcoin miners from BFL in a timely manner.

When the miners pack up their gear


O'Reilly's Jim Stogdill offers some interesting perspective about bitcoin mining after finding through research that average transaction cost is $23 on the bitcoin network. He also discovered that the average transaction size is 7.25 bitcoins, which is approximately $3,300 based on recent pricing.

Stogdill believes that the transaction numbers will eventually explode, making it worthwhile for miners to continue to operate their rigs and thus reaping fees. However, it's also quite possible that transactions will move off-block chain instead, which is a popular plan with many consumer-focused digital currency companies.

It is for this reason that there might be a future scenario where cryptocurrency businesses such as exchanges have a vested interest in getting involved with bitcoin mining in order to protect their interests as a whole.

If should come a time when transactions alone can no longer support miners, they may pack up their gear and force major players to support the underlying network.

KnCMiner's two-for-one deal


Sweden-based KnCMiner is offering a deal: customers that have an outstanding order for a first- or second-generation Neptune miner will receive a third-gen model for free. "We will be over-delivering again on all orders," said KnC's CEO Sam Cole in a prepared statement.

Since the Neptune is a 3 TH/s product, customers who have already pre-ordered one of the as-yet-shipped machines will effectively get 6 TH/s of power – double the original amount.

Like many mining hardware manufacturers, KnCMiner has not been without logistical problems that have angered its customers. In March, the company started offering a 'Plan B' programme in order to appease customers in case of Neptune delays.

Furthermore, the company had begun shipping out a 'Super Jupiter' stopgap while the company worked out the issues with delays in the company's next-gen Neptune units. Currently, however, it is dealing with a separate issue whereby customers have been receiving Super Jupiter units that arrived broken.

Charlie Lee promotes merged mining

dogecoin - to the moon
dogecoin - to the moon

Merged mining is a complex subject, but it basically breaks down as a way to mine more than one coin at the same time. Charlie Lee, the creator of litecoin, has been proposing that dogecoin and LTC should join forces in order to protect both coins from the coming onslaught of scrypt-based ASIC miners.

Jackson Palmer, the co-creator of dogecoin, recently chatted with Lee in front of an audience and believed that merged mining is not the answer to the problems facing doge, although he conceded he doesn't know what the solution is, either.

The issue at hand is that the block rewards for dogecoin will be lessened by the end of this year after the majority of coins will be mined. Lee believes that in order to protect doge's network from miners moving to other coins for profit that the two should join forces – and took the time to do a reddit AMA (ask me anything) to explore the ideas behind merged mining.

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