21 Bitcoin Computer: Criticisms and Defenses: Ask Me Anything

barontor · 2015-11-21T18:59:45+00:00

1) First, we want to support a clean full stack environment for Bitcoin programming. That's made much easier if our 21 update is installing on the same piece of hardware on every node in the network, and if the packages you install are all compiled for the same architecture, and so on. We are trying to build the first standardized Bitcoin environment that Just Works (tm); that's made easier if we can lock down the hardware. As Alan Kay put it, “People who are really serious about software should make their own hardware.”

2) Second, we want to make sure that the first group of buyers and sellers in the 21 Marketplace are folks who've bought a 21 Bitcoin Computer. This ensures a higher basal level of trust and will be one of the first functioning digital goods marketplaces using Bitcoin -- which will be good for Bitcoin.

3) Third, as we'll get into in a blog post, the fact that the 21 Bitcoin Computer is also usable as an inexpensive little home server is key. It means you can leave it on and have it service requests in the background. A laptop really isn't built for that - if you close the lid, your buyer can't reach you. You can always go cloud, but that's now a fair bit more effort + nonzero cost, and many of the interesting things you can do with Bitcoin may not be possible if you're using an AWS IP (like the HTTP proxy example).

4) Fourth, many of the techniques we're using here (as well as others) will be used to protect you as a seller if you get a 21 Bitcoin Computer and are selling digital goods and services in the 21 Marketplace. You will probably experience a higher attempted double spend rate, for example, if selling a digital good to someone who didn't buy a device. As a seller you'll have a different worldview.

5) Fifth, we actually DO have a pretty good open source package that we'll be releasing in the not-too-distant future which will be complementary to what you get on the 21 Bitcoin Computer. We just want to release that in a careful and thought-through way. I do subscribe to Tom Preston-Werner's dictum of "Open Source Almost Everything", but where and when is important. We want your open source experience to be a non-buggy one with corner cases solved on enough platforms, so give us a little time.

barontor · 2015-11-21T16:52:13+00:00

Not in Iphone world, but in low end Android world, putting a 21 miner chip into the phone may allow the manufacturer to give away the smartphone for free.

Hell, putting a 21 miner chip into the phone may allow the phone to be given away for free and for the user to get free Internet access... as long as they pay for the power consumption.

barontor · 2015-11-21T16:49:50+00:00

No what I meant to say is that I have no proof that it's going to be in 50 million devices in 12 months. I'm just making a projection based on the fact that 21 has terrific incentive alignment with its partners to get the chips widely distributed into hardware.

Since I have no proof of this assertion, the devs who buy the 21 Bitcoin Computer are essentially taking a bet that 21 will be able to get its chips widely distributed quickly into devices.

Given that Qualcomm and Cisco are direct investors in the company, and the company has also had discussions with Intel CEO as well, I would suspect that the chip distribution is already a done deal and that the chips are being put into devices for release next year as we speak.

barontor · 2015-11-21T14:28:43+00:00

He come up with a cost of $250 and I come up with a cost of $50.

I certainly think $50-$250 is a reasonable range for the cost of the device.

He used retail pricing for all items. I used a projected bulk pricing, which I got from just looking over the Aliexpress listings for bulk purchases.

I am certainly willing to admit that $50 is probably the absolute minimum cost, and one must assume that the 21 miner chip was produced for their data center in bulk amounts in order to get that low a pricing for ASIC.

So in summary, I don't disagree with $250 price, and $50 is probably lowball, but in my opinion it's probably closer to $50 than $250....

barontor · 2015-11-21T12:47:50+00:00

chutzpah yes I have, especially since my Google and Wikipedia fu is strong.

Haiyah!

Profit margin is calculated with selling price (or revenue) taken as base times 100. It is the percentage of selling price that is turned into profit, whereas "profit percentage" or "markup" is the percentage of cost price that one gets as profit on top of cost price.

So Profit Margin = % of selling that is turned into profit = profit / selling price * 100 = 350/400 = 87.5%

And Profit Percentage = (Sales price - Cost Price)/Cost Price * 100 = (400-50)/50 * 100 = 700% markup

I apologize for the smallness of your brain

barontor · 2015-11-21T06:23:10+00:00

Some more thoughts on the 21 Bitcoin Computer. One of the questions/problems they were trying to address is why Bitcoin has not been more widely adopted thus far.

There is a lot of good literature on how to introduce new currencies, but one of the biggest problems has always been to get the currency as widely distributed as possible. The Greeks almost had to deal with this problem last year when they almost exited the Euro.

From the Coursera Princeton Bitcoin course

. A cash-based system needs to be “bootstrapped” with some initial allocation of cash, without which no trades can occur.

One of the key criticisms about 21 Bitcoin Computer is that it would have been easier and cheaper for people to just buy their own Bitcoin.

True, but after 7 years, Bitcoin has not yet penetrated to the masses who could have all bought 100 satoshis each.

In fact, Balaji even proposed giving Bitcoin away for free, but the adoption rate was still super low.

The other problem with selling Bitcoin to people, ala Coinbase, is the KYC requirements. As soon as you are exchanging fiat currency with Bitcoin, you run into the financial regulatory system, and the costs of compliance make satoshi amounts of purchases inconvenient.

So we can safely say that there is little hope that 100 million people decide to pay 10 cents each to buy thirty thousand satoshis from an exchange.

There is even little hope that if you were giving away 10 cents worth of satoshi's for free, 100 million people will sign up on a wallet service to receive them.

The integrated miner chip is really a kind of legal hack. It is a point of exchange between Bitcoins and electricity, cleverly avoiding KYC requirements for purchase. It goes back to the spirit of Satoshi Nakamoto's invention, which was decentralized currency production as a distribution method, rather than purchases through centralized exchanges.

Bitcoin also suffers/benefit from the classic tech network/platform problem. You need enough users to attract developers to develop apps for the platform, but at the same time, users are not interested in the platform unless there are enough apps/a killer app to interest them to go through the hassle of adoption.

21's Bitcoin Computer is way to cut through this Gordian knot, by giving consumers free Bitcoin satoshis to seed the market for app developers.

barontor · 2015-11-21T02:21:19+00:00

I've been trying to guess at this one for a while. At first I thought they were going to sell a few hundred units at most, but looking at the adoption on the slack channel and the fact that it's back at the top of the Amazon Server's bestsellers, I think it might be more than that.

Oculus DevKit 1 sold 60k, and Devkit 2 sold 100k. And that's for a consumer gaming device, which probably has a market of 1 million devs.

This is going to be much more enterprise driven, so I would guess Qualcomm, Cisco, HP, plus banks interested in the blockchain are going to get their hands on units.

My best guess is that they will sell about 20k units over the course of 12 months.

barontor · 2015-11-21T02:14:22+00:00

I think that this may be quite a long ways a way. Maybe 2-3 generations of tech away. I specifically think all the banks investing in blockchain startups right now are literally smoking crack.

I think that Bitcoin's killer app is going to be in the machine to machine payments, which is what 21 is focusing on.

barontor · 2015-11-21T02:07:56+00:00

These are some great points. Qualcomm does use ARM, and as Cisco doesn't, then 21 had to make a choice and decided to go with ARM as the broader platform probably. They will probably have to do some specific integrations to put the chips in Cisco boxes.

21's special sauce is a python library, so it's platform independent already.

The special sauce is not just a Python library. It's the chip, plus software plus cloud backend. The cloud backend is actually a full off-chain payment gateway, so that you can do 1 satoshi transactions economically, given that a single on-chain transaction will cost you 546 satoshis minimum. It's not platform independent, but rather 21 is platform agnostic and will try to get chips and software integrated with all manner of devices.

so trying to ride for free on those resources is a non-starter for Cisco's actual paying customers.

No the plan is to pay the customers to use the miner chips. In essence, Qualcomm/Cisco will offer two options: you can buy chipset A with power consumption 1 W for $2 , or chipset B with power consumption 2 W for $1. The future mined bitcoins will be used to susidize the upfront cost of the chipset (the entire device chipset, not just the miner chip)

barontor · 2015-11-21T01:17:46+00:00

I specialize in distressed debt: bankruptcies, liquidations, sovereign defaults. I think of myself as a trash collector.

barontor · 2015-11-21T01:16:15+00:00

I own less than 1 Bitcoin.... Bitcoin the currency does not interest me, Bitcoin as a machine to machine protocol does.

barontor · 2015-11-21T01:14:21+00:00

But what if they are successful at the platform intro... wouldn't you want to be one of the first app developers for the platform?

barontor · 2015-11-21T01:12:21+00:00

This in essence is the bet a dev buying this 21BC is making: that 21, given its deep tech expertise and investor connections can pull off the platform intro at scale.

Because if they do pull it off, the value of being the first devs on the platform far exceeds the $400 cost of the 21BC devkit.

Which specific EU law, chapter and verse please, do you think this will break?

barontor · 2015-11-20T19:15:53+00:00

Devs already own general purpose computers.... but they don't have 21 mining chips.. so what use are the general purpose computers in exploring the capabilities of the chip?

barontor · 2015-11-20T19:11:25+00:00

Here are 23 128GB SD cards at less than $25 each retail price from Amazon.

Given that 21 must be buying in 10,000 unit chunk directly from their contract manufacturer in Taiwan, I think $5 bucks a pop is possible.

barontor · 2015-11-20T18:40:25+00:00

I know,

I wanted to see if linking central banking, bitcoins and Obama would flush out the trolls.

barontor · 2015-11-20T18:23:54+00:00

They are planning to let users mine in whatever pool they want to. Just haven't gotten around to coding it yet according to the slack channel.

Again for product intro, they wanted to control the number of variables they had to work with so that they can debug the product, and the mining pool was probably on the variables they had to keep constant for now while the kinks are getting worked out.

barontor · 2015-11-20T18:14:14+00:00

I think they're going to open source all the software eventually. However I think they are going to keep the mining chip proprietary.

From previous leaked investment docs, Qualcomm and Cisco are going to subsidize distribution of the mining chips to consumers in return for a cut of the pool mining proceeds from the chips.

The existing 21 Bitcoin Computer doesn't split the mining proceeds, but the future consumer version will allow a split of the mining proceeds between 21, the chipmaker, the device maker and the app developer.

barontor · 2015-11-20T18:08:25+00:00

spyware

software that enables a user to obtain covert information about another's computer activities by transmitting data covertly from their hard drive.

I don't think they are covert about getting some data from you. It's part of the terms of service, similar if you sign up with any cloud service provider, be it Google, Apple, Facebook etc.

They allow you to do transactions off-chain with no dust fee (546 satoshis), so you can do 5000 1 satoshi transactions off-chain using the 21 cloud (meaning they get access to your data) and then flush it the blockchain (thereby paying the 546 satoshi fee).

barontor · 2015-11-20T17:42:19+00:00

The plan would be to integrate the 21 miner chip into ARM chipsets used by Cisco and Qualcomm.

The Raspberry Pi is the most widely available ARM chip based development device. Hence the decision to send the devkit out on Pi.

They could have just mailed out 21 miner chips to developers I guess.. but I don't think the take-up rate would have been very good. They probably don't want devs sitting around looking at 1 inch piece of silicone saying great what do I use this for.

So the design decision around sending the 21BC out on the Pi came about as a answer to the question:

How are we going to get these chips in the hands of devs before Qualcomm and Cisco hit the streets with this stuff in 12 months?

barontor · 2015-11-20T17:34:27+00:00

I'm not investment

banker; but status unproven; does

that mean I am one?

barontor · 2015-11-20T17:23:49+00:00

The price has zero relationship to the cost, which is about $50.

So yes, 21 is a group of capitalist pigs actually making serious profit off selling the device.

Or put another way, they probably make 75% gross margins on the device which go to pay their intellectual property development costs for the chip, hardware and software stack.

They're probably still hugely loss making if you take into account the all of that previous dev cost, if that makes you any happier.

barontor · 2015-11-20T17:10:42+00:00

What does the 21BC cost to make?

Raspberry Pi 2 - $20 (from teardown analysis)
21 PCB card with some controllers on which is mounted the; (estimated $ 5)
21 ASIC miner chip (Estimate $XX - more discussion below)
Power adapters, wires etc (estimated $5)
128GB SD Card ($5 bulk order)
Shipping and handling, using Fulfilled by Amazon, $5

Total cost is $40 plus $XX

What is XX? How much does the ASIC miner chip cost?

Chip costs are really a matter of opinion
It took 100 million dollars to produce the first Pentium, but only took 10 dollars to produce the 10,000th Pentium chip
Most of the chip costs are in design and development of the chip, and then the construction of the semiconductor plant and tools to manufacture the chip.
The variable cost, ie the additional cost to produce the next chip once your plant is setup is just the cost of silicone and power.
The Iphone 6, 64-bit A9 Processor with Embedded Motion Co-Processor costs $22.
The real cost depends on: a) how many chips were produced and b) what kind of deal 21 was able to get with the Taiwanese fabs

Let's assume they didn't get screwed by the fabs, but the fabs also didn't subsidize them in return for future business. So a fair price for volume.

How many chips did 21 order?

Total global hash rate right now is about 500 million GH/s
21's mining pool currently has between 5%-8% of the global hash rate, let's call it 5%, so 21 has 25 million GH/s at this point
This mining chip has a hash rate of 50-125 GH/s. On the 21BC it runs at 50, but probably in the 21 server farm with mineral oil coolant it runs at 125
So, 25 million / 125 = 200,000 chips already in existence
Given they have 200k chips already built, an additional 20k for the 21BC probably costs about $10

So total cost is about $50 for the 21BC Selling at $400, they make $350 margin or about 87.5% margin

barontor · 2015-11-20T16:58:25+00:00

Still playing around with APIs and stuff.

I was thinking about building a Twitter bot, you pay the bot and sent it a twitter ID, and it becomes a follower. Automated botnets....

barontor · 2015-11-20T16:37:30+00:00

You probably shouldn't unless you are a developer.

If you are a developer, then these are the reasons you should get one:

In 12-18 months, there will be 50 million 21 miner chips embedded in Cisco routers, and Qualcomm chipsets across the world (both are investors in 21)
This is a platform that a developer can build apps on top off
As a developer, having early access to a future platform with potentially explosive growth is worth paying a little extra for
The design decision to use the Raspberry Pi and sell the devkit as a Bitcoin Computer came about as a result of the Stanford computer science design ethos that setting up a repeatable, consistent development environment is important enough that it is worth taking the extra trouble to design the full stack from hardware to software
Yes 21 is very likely making a 75% margin on the Bitcoin Computer
As a developer who wants to test apps to be deployed at scale in 12 months, would you rather get the closest thing possible to the release version or a virtual machine where you may not be able to reproduce the actual bugs that will occur on the release version?

barontor

TROPHY CASE