Instead of spending $1 on something, you can burn $5 of electricity! Suppliers figure you're more likely to waste some energy than you are to type in a credit card number, so they say go for it.
And as the big ASIC miners get more efficient, your device will generate even less revenue. In two years, you'll be running at a small fraction of the chip's original mining rate, but still wasting just as much energy!
More like spend 5 millionths of a cent's worth of electricity to receive a transaction token that trades for 1 millionth of a cent. But that token (1 satoshi) has much more utility than as just a store of value and has been loaded onto your personal device without you having to do anything. And can be used by software on your personal device to give you extra functionality without again you having to do anything. Or even really understanding how it works or what is going on at the technical level.
People walk around with extra apps on their phones consuming battery life all the time. If a user was presented with an option to turn on some hardware in their phone that gave them all sorts of interesting additional functionality and at the same time were warned that it would decrease the battery life of their phone by 1 or 2 percent then I think you have a viable proposition.
But provided a Satoshi has a magical value beyond as a way to make transactions, why not spend 2 millionths of a cent where electricity is less valuable (i.e., before it's been converted in a lossy fashion many times and stored in my pocket where it's worth a lot more) and just transfer that Satoshi to a wallet on the phone?
This play only makes sense if someone is extracting the actual currency value of a Bitcoin somewhere along the line.
If that value is going to me as the consumer, it's a terrible trade because it's taking the electricity that's gone through the most conversion losses from me in the place where it's most valuable. I might as well buy Bitcoin elsewhere. If some of that value is going to the chipset manufacturer or a middleman like 21, it's a straight up scam where somebody is stealing the electricity I put into my phone.
An HSM for Bitcoin wallets in a phone makes a small degree of sense to me, a mining ASIC makes none whatsoever.
> This play only makes sense if someone is extracting the actual currency value of a Bitcoin somewhere along the line.
I would think that's the very point. And it's not like there wasn't a precedence in the physical world already.
Stamps.
I still remember when stamps were occasionally used as a fractional currency. You could order small things over mail and send payment as stamps.
This phenomonenon was even used by Terry Pratchess as a minor plot detail in Going Postal, and subsequently in Making Money. The idea was dead simple: stamps had real value. Eventually, someone would need to spend it to actually mail things, but until then people could use them as a form of microcurrency. So a single unit might be "spent" several times in unofficial transactions before getting used for its intended purpose. The stamps weren't any more valuable as such, but their added utility made them useful in a wider setting.
There's some talk about the history in [0], and slightly better researched in [1].
"And can be used by software on your personal device to give you extra functionality without again you having to do anything."
Without you having to do anything but pay for and power a dedicated chip. If the utility of having a tiny amount of BTC on device is so high, and the cost so low, why not just have the device manufacturer pre-load a lifetime supply on the device (purchased or mined in a giant wind powered data center)? Seems the cost of this buying this chip is much higher than just buying the BTC outright for the user.
Imagine if someone made the opposite of this device, an energy generating device which could supply you with revenue [after the subsidy is paid off] and was not restricted to any particular currency ecosystem.
It'd be like putting a tiny solar panel on your retail consumer grade router, one that degrades very rapidly over time, and generates electricity at a higher cost than to simply buy it (from industrial grade dedicated solar parks), in a world where you can send energy as easily as sending email, or for that matter, bitcoin.
It's ridiculous. I'm curious about the bigger picture because they have a stellar team, backing, board and bank account right now.
"Hang on, I just rode my bike to the office, let me plug it into my parking spot so I can discharge the capacitor and get paid for the ride up here and I'll come up to your office."
> And as the big ASIC miners get more efficient, your device will generate even less revenue.
I think that the period where plain bitcoin was seen as a mere store of value is about to end. We are entering a more exciting period which is the "bitcoin as protocol" stage, where sub-currencies (like Colored Coins, BitShares, etc) will be more valuable than bitcoin itself. And for this, tiny amounts of btc suffice.
This is why I think that Balaji and his team are taking the right direction. The goal is trying to make the system as much autonomous and frictionless as possible.
The first key here is autonomy: IBM has already forked Ethereum for its IoT with SmartContracts (ADEPT) [0], where for instance fridges could detect when you're running low of X and place an order for you. Generating your own tokens gives you greater autonomy and makes you relatively independent of the big mining operations/pools.
The second key here is friction: the current state of UX in bitcoin-world (and crypto in general) is extremely horrible and preventing the big adoption everybody in the space is aiming for. So building and integrating a chip that generates tokens w/o the user intervention is one way of bypassing this huge UX flaw. Maybe is not the most efficient way but it's the first serious take we've seen.
Extrapolating:
Why should a user have to configure an account so your browser can generate/read http requests/responses? The same way, it makes sense being able to generate/read crypto tokens. The value of those tokens are not in the current (or future) stock valuation of bitcoin, but in the valuation of the objects that the tokens will be associated with: financial tools, real estate, legal contracts, etc
Ethereum isn't using proof-of-stake quite yet, that's planned for a later version in a year or so. They're starting out with a proof-of-work algorithm that's designed to be ASIC-resistant. (It's heavy on memory bandwidth, which is already optimized in GPUs.)
Not that this makes any difference to your point, of course.
And as the big ASIC miners get more efficient, your device will generate even less revenue. In two years, you'll be running at a small fraction of the chip's original mining rate, but still wasting just as much energy!
http://media.coindesk.com/2013/09/bitcoin-difficulty-graph.p...
I'll pass, thanks.