Tuesday, 13 November 2018

Cryptocurrency’s positive and negative: The need for electricity

Fintech wannabes, think inside the box: a seemingly magical 40-foot electrical box that will make money anywhere you take it and plug it in.

That, in essence, is what an Estonian company called NordCoin is pitching with something it calls a “Mobile Mining Container.”

The devices are 40-foot shipping containers filled with high-powered computers and portable energy supplies to keep them running. The idea is to create a single, self-contained unit that can earn the user money through the process of “mining” cryptocurrency, an increasingly difficult task because it requires high-powered computers that eat up energy.

It all has to do with earning fractional amounts of cryptocurrency by helping it get transacted on a blockchain. As conduits for exchanging cryptocurrencies, blockchains are digital ledgers that rest not in a central location like a bank (which can be hacked) but distributed across a multitude of computers.

At its core are countless transactions, each of which must be duly noted as unique to ensure complete fidelity of the system. To do that requires the issuance of a random code known as a “hash.” It’s a cryptographic, time-stamped signature produced by a computation known as a “miner,” thus “forming a record that cannot be changed without redoing the proof of work.” So wrote the individual or collective known as Satoshi Nakamoto, the still-undiscovered creator of the financial blockchain, in the seminal 2008 white paper on the subject.

Those who mine for the token of the realm get a piece of the action. The more you mine, the more you get—at present, bitcoin miners earn 12.5 bitcoins, or $85,000 based on the recent unit price of $6,800.

But it takes massive amounts of computer power to spit out so many random codes. To better compete, miners have pooled their resources, setting up “mining farms” around the world. And with such a concentrated need for energy, the farms have drained local power systems.

The cryptocurrency energy drain is raising concerns about who should get to use energy. More and more local and federal governments, a recent story in Forbes noted, are banning crypto miners for plugging in. “Bitcoin’s need for electricity,” the story opined, “is its Achilles heel.”

And for the miners that celebrate the crypto world’s total independence from central banks, it’s a million-volt irony.

The creators of NordCoin’s container claim, in essence, that they’ve found a way of getting on the gravy train by getting off the grid.

On its website, the company says it avoids relying on governmental or utility company restrictions by offering a system that has sufficient computing power and the juice, up to 300 kw per hour, enough power to keep a juggernaut like the Bitmain Antminer L3+ cranking out the random codes.

But whether the juice is worth the squeeze depends on the value of the crypto being mined, mathematical physics expert Steve Omohundro tells BAI.

“For each coin, a miner is competing with all other miners of that coin,” says Omohundro, a scientist, professor author and entrepreneur who focuses on natural and artificial intelligence. “To see how valuable a given hash rate is, you have to see what the hash rate of all the other miners is.”

NordCoin’s trailers aren’t purchased; space and electricity in them are rented. Based on the mining computer, that runs anywhere from about $2 to $6 per day. But NordCoin isn’t the only container game in Cryptotown. A Latvian company called Power Mining offers a container system it claims has 50 percent more of the mining capability than NordCoin, says company CEO Kristaps Mors.

Yet while these companies debate profitability, they don’t talk much about security—and mining farms may be just as vulnerable to cyberthieves as bitcoin exchanges and accounts.

“If an attacker can access the network and the mining software that distributes payouts, then the potential for theft exists,” says Randi Eitzman, senior threat pursuit analyst at the FireEye cybersecurity firm. “When asked what their protocol is in the event of a network breach, the NordCoin team confirmed that it would be a ‘very unfortunate situation,’ but followed by saying, ‘As the [ethereum] blockchain is public, we can trace the movement of tokens and potentially restrict using stolen tokens.’”

Note the key word: potentially. Long before some newbie company has started to trace token movements in a reactive mode, it’s entirely possible that resourceful hackers in the proactive mode plotted countless cyber escape routes. That said, the NordCoin team confirmed with Eitzman that private keys are kept offline, an important security measure.

She also sees, if you will, the electrical power of positive thinking.

“The idea of a mobile mining pool is an intriguing concept,” Eitzman says, “especially if the mining rigs were set up in less democratic countries. If political pressures effectively drove out their mining operations, they could just pick up and move to a more democratic location or country.”


By Howard Altman
source: bai.org 
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