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Monday, May 25, 2015

Processor cycles as currency

Andreesen Horowitz partner Balaji Srinvasan posted a coming-out manifesto for his new company, 21, which is developing a chip tailored to bitcoin mining.

I have no idea if, on balance, their product plans make sense. Obviously if these chips use too much power they'll be useless. 21 night have no good answer for that, but the team seems to think they do, and they are a credible bunch.

My bigger concern is that it's very hard to say how valuable mining will be in the long term. I don't understand the blockchain well enough to even see the boundaries of that question.

But the value, if they can make the product work, is that any source of electricity, be it the grid, cell battery, solar in a village, etc. could be turned into a steady stream of money in an internet-accessible account.

It means that powered processor cycles could be a currency, a currency created wherever they happen, and convertible into any other currency or able to be used to purchase online content or services.

Of course it might be that you have to use $1.25 of energy to do $1 of mining, and where that multiple seems headed matters a lot. But even so, it would still have promise because there would be no storage costs once you convert powered processor hours to bitcoin.

So you could have homesteaders like my aunt, whose solar panels often produce more power than they can use, and whose batteries leak power all night, turn their unused power into bitcoin easily. You could have autonomous balloons or drones, which power themselves with solar or wind, and use their bitcoin to buy parts and repair services. As with so many discussions of bitcoin's possibilities, the speculative examples feel forced and unconvincing. But this may be a function of how great the conceptual leap is; who imagined Twitter when the iPhone was announced?

Just the ability to bill things to your mobile phone service has been widely useful. You pay for it, but not in a way that requires much banking. It might be useful to be able to bill things essentially to your electric service, your solar panel, your car battery, etc.

This direction also might mean the end of unmetered electricity, like hotels and colleges provide. Already there's been an issue at my coworking space where a guy turned a one person office intro a bitcoin mining farm and was eating up power. At least now, only people sophisticated enough to buy or build efficient machines and install the right software are doing that.

This would bring up a whole new category of questions of etiquette... "He crashed on my couch, and plugged in his phone, and then I saw his phone tweet that it just completed its $2000th dollar of mining... WTF, I pay for that power!"

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