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H Y D R O M I N I N G
E X P L O I T T H E E N E R G E T I C P O T E N T I A L
Michele Mostarda michele.mostarda@inbitcoin....
O U T L I N E
• What is Bitcoin
• Wallets
• Altcoins
• Exchanges and volatility
• Cryptocurrency Mining
• Hydro Mining
• B...
W H AT I S B I T C O I N
• Decentralized (no central authority, no single point of failure).
• Pseudo anonymous.
• Complet...
B I T C O I N N E T W O R K
T H E B A S I C E L E M E N T S
Full node
with mining capabilities
Full node
with mining capab...
B I T C O I N PAY M E N T S
H I S T O RY O F A T R A N S A C T I O N
• App Wallet: mobile device / desktop app for
wallet management. Ex: Mycelium.
H O W T O M A N A G E Y O U R C O I N S
• H...
A LT C O I N S
W H A T C RY P T O C U R R E N C I E S R E P R E S E N T F O R T H E F U T U R E O F T H E
E C O N O M Y O ...
A LT C O I N S
M A R K E T C A P I TA L I Z A T I O N
https://coinmarketcap.com - Q1 2016
E X C H A N G E S ( 1 / 2 )
H O W T O C O N V E R T C RY P T O C U R R E N C I E S
• Exchange: web
app for
cryptocurrency/...
E X C H A N G E S ( 2 / 2 )
F L U C T U AT I O N O F B I T C O I N VA L U E S I N C E 2 0 1 0
H O W T O C O N V E R T C RY...
B I T C O I N V O L AT I L I T Y
W H A T M A D E T H E B I T C O I N VA L U E V O L A T I L E
http://cointelegraph.com/new...
C RY P T O C U R R E N C Y M I N I N G ( 1 / 4 )
W H A T U P H O L D T H E B I T C O I N N E T W O R K ? W H A T I S M I N...
C RY P T O C U R R E N C Y M I N I N G ( 2 / 4 )
W H A T U P H O L D T H E B I T C O I N N E T W O R K ? W H A T I S M I N...
C RY P T O C U R R E N C Y M I N I N G ( 3 / 4 )
W H A T U P H O L D T H E B I T C O I N N E T W O R K ? W H A T I S M I N...
C RY P T O C U R R E N C Y M I N I N G ( 4 / 4 )
W H A T U P H O L D T H E B I T C O I N N E T W O R K ? W H A T I S M I N...
M I N I N G T Y P E S
D I F F E R E N T A P P R O A C H E S T O D I F F E R E N T P R O B L E M S
Different cryptocurrenci...
M I N I N G P O O L
J O I N I N T O A C O N S O R T I U M T O I N C R E A S E P R O F I T
A Mining Pool is a virtual conso...
M U LT I P O O L
D I V E R S I F Y T O S P R E A D R I S K
A Multi Pool is a Mining Pool with performs mining on different...
S O F T / H A R D F O R K S
H O W C RY P T O C U R R E N C I E S E V O LV E
Bitcoin and other cryptocurrencies are subject...
W H Y H Y D R O M I N I N G
E N A B L E E N E R G Y P R O D U C E R S T O B E C O M E F I N A N C I A L P L A Y E R S
Mini...
W H Y H Y D R O M I N I N G
E N A B L E E N E R G Y P R O D U C E R S T O B E C O M E F I N A N C I A L P L A Y E R S
• Re...
H Y D R O M I N I N G ( 1 / 3 )
T H E C R I S I S O F I N D U S T R I A L C O N S U M P T I O N A S A N O P P O R T U N I ...
Mining is suitable to the absorption of energy
overproduction because it can be activated on
demand and provides a guarant...
Miners can be directly installed in plant
environments exploiting the large volumes to then be
operated completely by remo...
P R O F I TA B I L I T Y M O D E L
B U S I N E S S M O D E L R E L A T E D T O C RY P T O C U R R E N C Y M I N I N G
Coin...
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P R O J E C T E D G A I N I N 2 4 M O N T H S I N B I T C O I N M I N I N G
Mining farm of 280TH/s (...
D I F F I C U LT Y
D I F F I C U LT Y G R O W T
Difficulty trend from
November 2014 to
October 2016
Difficulty growth rate...
D I M E N S I O N I N G
D I M E N S I O N I N G E X A M P L E O F A M I N I N G FA R M
Depending on the availability of en...
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T E C H N I C A L I S S U E S R E L A T E D T O M I N I N G A C T I V I T I E S I N E N E R ...
M I N I N G VA R I A N T S
M I N I N G V S H O S T I N G V S H O U S I N G
• Mining: profit is derived directly from the o...
N E X T F U T U R E A P P L I C AT I O N S F O R M I N I N G I N
I N D U S T RY
A LT E R N A T I V E S C E N A R I O S : C...
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C RY P T O C U R R E N C Y S TAT U S I N Q 1 2 0 1 6
I N I T I A T I V E S R E L A T E D T O T H E S P R E A D O F C RY P ...
G L O S S A RY
U S E G U L T E R M S
• Bitcoin: the first cryptocurrency, proposed by Satoshi Nakamoto.
• Blockchain: open...
U S E F U L L I N K S
T O T H E U N D E R S TA N D I N G O F C RY P T O C U R R E N C I E S
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Hydro Mining - Mining Bitcoin and other Cryptocurrencies with hydroelectric power

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This presentation introduces the basic concepts around Bitcoin and the main Cryptocurrencies, focusing on the opportunity of mining for small/medium sized producers of hydroelectric power.

Published in: Economy & Finance

Hydro Mining - Mining Bitcoin and other Cryptocurrencies with hydroelectric power

  1. 1. H Y D R O M I N I N G E X P L O I T T H E E N E R G E T I C P O T E N T I A L Michele Mostarda michele.mostarda@inbitcoin.it Marco Amadori marco.amadori@inbitcoin.it v1.3enInBitcoin - http://inbitcoin.it
  2. 2. O U T L I N E • What is Bitcoin • Wallets • Altcoins • Exchanges and volatility • Cryptocurrency Mining • Hydro Mining • Business model based on Mining • Q1 2016 Analysis and global initiatives • Useful links
  3. 3. W H AT I S B I T C O I N • Decentralized (no central authority, no single point of failure). • Pseudo anonymous. • Completely transparent. • Semi realtime transactions. • Enable intelligent money applications. T H E FA T H E R O F C RY P T O C U R R E N C I E S The Bitcoin is a digital currency enforced with cryptographic techniques (and so called Cryptocurrency), which is electronically generated, hold and exchanged. Anybody controls it, it can be generated by everybody using software which solve mathematical problems.
  4. 4. B I T C O I N N E T W O R K T H E B A S I C E L E M E N T S Full node with mining capabilities Full node with mining capabilities Full node Full node with mining capabilities Full node Wallet Wallet Transaction See the entire network at https://bitnodes.21.co/
  5. 5. B I T C O I N PAY M E N T S H I S T O RY O F A T R A N S A C T I O N
  6. 6. • App Wallet: mobile device / desktop app for wallet management. Ex: Mycelium. H O W T O M A N A G E Y O U R C O I N S • HW Wallet: custom HW device for wallet management. Ex: Trezor. WA L L E T S • Web Wallet: online wallet management (usually with no control on keys). Ex: Coinbase
  7. 7. A LT C O I N S W H A T C RY P T O C U R R E N C I E S R E P R E S E N T F O R T H E F U T U R E O F T H E E C O N O M Y O F S C A L E ? Altcoins are alternative cryptocurrencies originated after the Bitcoin success. Usually they offer extensions to the Bitcoin functionalities, emphasizing the improvement of some specific aspects of the latter.
  8. 8. A LT C O I N S M A R K E T C A P I TA L I Z A T I O N https://coinmarketcap.com - Q1 2016
  9. 9. E X C H A N G E S ( 1 / 2 ) H O W T O C O N V E R T C RY P T O C U R R E N C I E S • Exchange: web app for cryptocurrency/ EURO/USD trade: Bitstamp, Kraken. • Direct Trade: web app to F2F coin exchange: LocalBitcoins.
  10. 10. E X C H A N G E S ( 2 / 2 ) F L U C T U AT I O N O F B I T C O I N VA L U E S I N C E 2 0 1 0 H O W T O C O N V E R T C RY P T O C U R R E N C I E S • Current value (Q4 2016): 
 ~ $640 • Reached spike of ~$1000 in Christmas 2013
  11. 11. B I T C O I N V O L AT I L I T Y W H A T M A D E T H E B I T C O I N VA L U E V O L A T I L E http://cointelegraph.com/news/bitcoin-growth-in-2016-show-us-your-numbers
  12. 12. C RY P T O C U R R E N C Y M I N I N G ( 1 / 4 ) W H A T U P H O L D T H E B I T C O I N N E T W O R K ? W H A T I S M I N I N G ? W H A T I S A P O O L ? In traditional currencies governments (via central banks) print money. In virtual currencies there have been introduced mechanisms where nodes sustaining the transactions network receive rewards. The first reward type is block discovery. Block discovery is time limited and has been designed to promote the network bootstrap. The second reward type are transaction fees. These will fully replace block discovery in the long term.
  13. 13. C RY P T O C U R R E N C Y M I N I N G ( 2 / 4 ) W H A T U P H O L D T H E B I T C O I N N E T W O R K ? W H A T I S M I N I N G ? W H A T I S A P O O L ? The distributed transaction list on which Bitcoin relies to exist is periodically revalidated (every ~10min) to avoid malicious operations. This revalidation foreseen the search of a solution for a cryptographic problem based on the current status of the network.
  14. 14. C RY P T O C U R R E N C Y M I N I N G ( 3 / 4 ) W H A T U P H O L D T H E B I T C O I N N E T W O R K ? W H A T I S M I N I N G ? W H A T I S A P O O L ? The Bitcoin network node with solves first the validation problem is rewarded with the creation of new money. Such operation of continuos implementation of safety is called Mining and it is performed by dedicated energy-intensive HW called Miner.
  15. 15. C RY P T O C U R R E N C Y M I N I N G ( 4 / 4 ) W H A T U P H O L D T H E B I T C O I N N E T W O R K ? W H A T I S M I N I N G ? W H A T I S A P O O L ?
  16. 16. M I N I N G T Y P E S D I F F E R E N T A P P R O A C H E S T O D I F F E R E N T P R O B L E M S Different cryptocurrencies can be mined applying different algorithms which require different HW performances. Some performances can be satisfied by a CPU, other by a GPU (CPU resistant), other only by dedicated HW (GPU resistant). Dedicated HW implement only a certain type of algorithm. A miner with dedicated HW can mine only cryptocurrencies compatible with its own HW. C RY P T O C U R R E N C Y E N C RY P T I O N F U N C T I O N B I T C O I N S H A 2 5 6 ( D E D I C AT E D H W ) E T H E R E U M E T H A S H ( G P U ) N A M E C O I N S H A 2 5 6 ( D E D I C AT E D H W ) L I T E C O I N S C RY P T ( D E D I C AT E D H W ) D O G E C O I N S C RY P T ( D E D I C AT E D H W ) R I P P L E E C D S A ( C P U ) C RY P T O C U R R E N C Y M I N I N G B Y H W T Y P E
  17. 17. M I N I N G P O O L J O I N I N T O A C O N S O R T I U M T O I N C R E A S E P R O F I T A Mining Pool is a virtual consortium of Miners which coordinate their workload on the basis of their computational power distributing also profit. • Plug&play: it is possible to join a pool in few seconds • Guaranteed return on the provided computational power
  18. 18. M U LT I P O O L D I V E R S I F Y T O S P R E A D R I S K A Multi Pool is a Mining Pool with performs mining on different Crypto- Currencies. The Multi Pool periodically determine profitability of a set of supported Cryptocurrencies and coordinates a redistribution of computational power to maximize profit and minimize risk. • Plug&play: it is possible to join a Multi Pool in few seconds • Guaranteed return on the basis of Multi Pool policy and provided computational power • Return is optimized extracting different Crypto-Currencies • Multi pools support only a certain mining algorithm
  19. 19. S O F T / H A R D F O R K S H O W C RY P T O C U R R E N C I E S E V O LV E Bitcoin and other cryptocurrencies are subject to evolution. This evolution aim the improvement or fix of certain issues and also the addition of new functionalities to enable new applications. There are two types of changes to a cryptocurrency protocol, one that is backward compatible and one that isn’t. • Soft fork: restrict block acceptance rules. Forward compatible. • Hard fork: expand block acceptance rules. No forward compatible. Old transactionsNew Transactions New transactionsOld Transactions
  20. 20. W H Y H Y D R O M I N I N G E N A B L E E N E R G Y P R O D U C E R S T O B E C O M E F I N A N C I A L P L A Y E R S Mining allows energy producers to position in the market spaces currently occupied by ordinary financial institutions. Hydro mining (mining from hydroelectric power) is the big challenge for producers in Alpine Europe.
  21. 21. W H Y H Y D R O M I N I N G E N A B L E E N E R G Y P R O D U C E R S T O B E C O M E F I N A N C I A L P L A Y E R S • Renewable energy with low production cost. • Production available 24h. • Discontinuous value (related to the compensation of power production with other thermal energy that cannot be modulated).
  22. 22. H Y D R O M I N I N G ( 1 / 3 ) T H E C R I S I S O F I N D U S T R I A L C O N S U M P T I O N A S A N O P P O R T U N I T Y F O R D I V E R S I F I C A T I O N Mining is an activity relying on dedicated parallel processing hardware which differ from standard processing hardware in power requirements (x5 in respect of a normal server) and low Internet connection band. Energy prices correctly applied in traditional data centers are therefore not affordable.
  23. 23. Mining is suitable to the absorption of energy overproduction because it can be activated on demand and provides a guaranteed conversion between
 electric power ⬄ computational power ⬄ gain H Y D R O M I N I N G ( 2 / 3 ) T H E C R I S I S O F I N D U S T R I A L C O N S U M P T I O N A S A N O P P O R T U N I T Y F O R D I V E R S I F I C A T I O N
  24. 24. Miners can be directly installed in plant environments exploiting the large volumes to then be operated completely by remote. H Y D R O M I N I N G ( 3 / 3 ) T H E C R I S I S O F I N D U S T R I A L C O N S U M P T I O N A S A N O P P O R T U N I T Y F O R D I V E R S I F I C A T I O N
  25. 25. P R O F I TA B I L I T Y M O D E L B U S I N E S S M O D E L R E L A T E D T O C RY P T O C U R R E N C Y M I N I N G Coin Price (Exchange cost of currency ) Energy Cost Cost of electric power Difficulty Index of difficulty imposed by the network in the search for a solution HW Cost Dedicated HW cost Mining become very lucrative for those who control the energy cost and/or the HW cost
  26. 26. P R O J E C T I O N S P R O J E C T E D G A I N I N 2 4 M O N T H S I N B I T C O I N M I N I N G Mining farm of 280TH/s (€48k) x 24months projection gain Value conversion chain: (at day 0):
 14THs x 24h ≈ 1.3KWh x 24h ≈ 0.015BTC/24h ≈ €20/24h ≈ €0.64/KWh HW Cost: 14THs ≈ €2400 Available online: https://goo.gl/kvyq9T
  27. 27. D I F F I C U LT Y D I F F I C U LT Y G R O W T Difficulty trend from November 2014 to October 2016 Difficulty growth rate from November 2015 to October 2016
  28. 28. D I M E N S I O N I N G D I M E N S I O N I N G E X A M P L E O F A M I N I N G FA R M Depending on the availability of energy, dimensioning starts from a minimum of 140KW/h, which corresponds to an occupancy of 15sqm, to be housed in an environment with a volume or cooling system compatible to the disposal of the heat produced (140KW/h). The model scales linearly with an initial yield of about 0.58EUR/KWh gross. 1MW installation occupies 110sqm at the same efficiency.
  29. 29. T E C H N I C A L I S S U E S T E C H N I C A L I S S U E S R E L A T E D T O M I N I N G A C T I V I T I E S I N E N E R G Y P R O D U C T I O N S I T E S • Distribution of energy (surplus) production along the 24h. • Voltages and wattages available and dissipable in site. • Problems of heat disposal. • Problems of electromagnetic interference.
  30. 30. M I N I N G VA R I A N T S M I N I N G V S H O S T I N G V S H O U S I N G • Mining: profit is derived directly from the operations of mining (+ risk, - operating expenses, 0 marketing). • Housing: profit is derived from third-party hosting miner and charging the electricity consumed (- risk, + operating expenses, + marketing). • Hosting: profit share is derived by renting computational power (- risk, ++ operating expenses, ++marketing).
  31. 31. N E X T F U T U R E A P P L I C AT I O N S F O R M I N I N G I N I N D U S T RY A LT E R N A T I V E S C E N A R I O S : C O M B I N E M I N I N G W I T H I N D U S T R I A L P R O C E S S E S A miner is a machine that consumes electricity and produces heat (other than digital money). It is possible to speculate on scenarios where industry is currently using large amount of heated air (greenhouses, drying plants) produced with electricity. Costs of production would be dampen by mining revenue. It also plausible to imagine the replacement of cheaper non- renewable energy sources for air heating with electricity based “mining heaters” which compensate their higher supply costs through the generation of digital money and green certificates.
  32. 32. P O L I T I C A L VA L U E O F M I N I N G I M P L I C A T I O N O F M I N I N G I N P O L I T I C A L P E R S P E C T I V E • Mining means possibility to apply weight in cryptocurrency regulation via the sponsorship or opposition to a certain soft/ hard fork. • A tax authority could implement an institutional mining pool and claim mining power as provision of tax services. • Mining power means possibility to apply different priorities on transactions based on taxation criteria. • Implement a set of fiscal tracking and enforcing. • Realize digital consensus services.
  33. 33. C RY P T O C U R R E N C Y S TAT U S I N Q 1 2 0 1 6 I N I T I A T I V E S R E L A T E D T O T H E S P R E A D O F C RY P T O C U R R E N C I E S Source: http://www.coindesk.com/state-of-blockchain-q1-2016/
  34. 34. G L O S S A RY U S E G U L T E R M S • Bitcoin: the first cryptocurrency, proposed by Satoshi Nakamoto. • Blockchain: open and distributed infrastructure which persists the public list of Bitcoin transactions. • Altcoin: alternative cryptocurrency. • Fiat Currency: traditional currency. • Mining: activity to secure the Blockchain that leads to the generation of new money. • Miner: parallel hardware machine dedicated to cryptocurrency mining. • Difficulty: auto-adaptive difficulty index which imposes the minimal length of a solution sought by miners for the safety of the Blockchain. • Exchange: service for cryptocurrency / fiat currency exchange. • Pool: service for the coordination of mining activities in order to have a guaranteed gain based only on the available computational power. • Multi Pool: pool dedicated to the mining of multiple crypto-currencies. • SHA256: cryptographic function securing operations in the Blockchain. • Scrypt: cryptographic function securing operations in several Altcoins.
  35. 35. U S E F U L L I N K S T O T H E U N D E R S TA N D I N G O F C RY P T O C U R R E N C I E S • Bitcoin introductory video: https://www.youtube.com/watch? v=Gc2en3nHxA4 • The Bitcoin vision: https://www.youtube.com/watch?v=YIVAluSL9SU • The .org coordinating development and adoption of Bitcoin: https:// bitcoin.org/ • Main news site about cryptocurrency: http://www.coindesk.com/ information/ • Original paper describing the Bitcoin architecture: https://bitcoin.org/ bitcoin.pdf

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