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Thursday, June 19, 2014

Piggycoin 2.0: How Far Can a Good Wallet Take You?

I'm not going to do a full deep dive on Piggycoin right now, but Piggycoin has so many similarities to other coins that I felt it was worht a discussion at least. You see, recently the original PIG was converted into PIGGY (at 1:1 trading), switching from Scrypt PoW to X11 with Proof of Stake. CAI/CAIx basically pioneered this sort of "bait and switch", and it worked... well, it more or less worked, but CAIx isn't exactly the hottest cryptocurrency right now. (DRK or XMR on the other hand...but those are topics I cover in my newsletter so I won't spoil them here.) Anyway, here are the quick specs for the two versions of Piggycoin, starting with the initial release:

Piggycoin 1.0 Specifications (6/19/2014)
Launch Date2014-02-25
Proof of WorkScrypt
Starting Difficulty0.000244 (ugh)
Block Time2 minutes
Block Reward4,000
Premine1% (21 million)
Difficulty AdjustmentEvery 120 blocks initially
KGW from block 2000
Reward AdjustmentNever? (Changed to 62500 at some point)
Max Coins2.1 billion at ~729 days
Forum ThreadsBitcointalk (Old Thread!)
Block ExplorerYes (Alternate)

Note that the block explorers for PIG may shut down in the future. Also, the block reward was changed at one point, but then it appears it changed back, as blocks 62500 through 62827 have a reward of 0. My guess is there's a group of users that want to stay on the original PIG, but I don't see it going anywhere as all of the exchanges have converted to PIGGY. Anyway, the original design seemed a bit...lacking, and the code was changed a few times in the early going, so when it was altered most felt it was for the best. Here's the new version.

Piggycoin 2.0 Specifications (6/19/2014)
Launch Date2014-06-10
Proof of WorkX11
Starting Difficulty0.00024414
Block Time1 minute
Block Reward23,700 for PoW
15% for PoS
Proof of Stake8 hours minimum staking age
Unlimited maximum stake age
Premine1% (265,353,096 added to previous 21M in block 3)
Difficulty AdjustmentEvery block
Reward Adjustment10,000 PoW blocks before PoS
Max Coins500 million at ~7 days
+75 million per year indefinitely
Forum ThreadsBitcointalk
Block ExplorerOfficial

Honestly, there's still not a whole lot that would make me look at PIGGY and say, "Wow! There's a coin that's going places!" But here's the thing: they've done a decent amount of work on the GUI wallet to make it more useful, and they also have an Android wallet app, as an added bonus. So how much is that worth? I have no idea really, but right now the price of around 30 satoshi seems rather low. I mean, DOGE doesn't have much going for it these days and there are already 83+ billion DOGE, each worth twice as much as a PIGGY.

And let's not forget the cute piggy bank. Will this coin really teach children anything about investing? Probably not, but I figure I can keep my PIGGY and earn 15% per year -- as long as the network keeps going. When my two year old enters college in 16 years, I will have about ten times as many PIGGY as I do right now. Which means if I currently have the equivalent of about 0.066 BTC of PIGGY, the $40 I "save" today could be worth a whopping $400 in sixteen years. Good luck finding a college that costs less than that! There's also the Piggycoin Foundation, which is undertaking charitable goals. Right now they're gathering PIGGY to buy bikes, but what that usually means is they take PIGGY, convert it to BTC, then convert that to fiat, and then donate the fiat.

Let's just hope that the price doesn't collapse -- and perhaps even goes up. And let's hope the network keeps going. And let's also hope the exchanges keep accepting PIGGY and don't forget about it as hundreds of new coins flood the network. Need I go on?

In truth, my outlook for PIGGY isn't too promising. Other than the improved wallet (see above), there's little to differentiate it from all the other PoW->PoS coins. 15% is at least a decent interest rate, but there's a very real chance the price of PIGGY will fall more than 15% per year. Restarting as a new coin also doesn't lend me confidence in the developers -- will Piggycoin 3.0 switch to a new PoW algorithm in a few more months? Let's hope not!

What I'd like to see from PIGGY right now is a better integrated ABE-styble block explorer, that shows difficulty, block reward, value, transactions, etc. instead of just some raw hashes. And if you really want to take things to the next level, integrate a way for users to trade PIGGY for BTC directly in the wallet -- have an internal exchange that runs on top of the network and doesn't require any intermediaries! That would be sweet, though I'm not sure how you tie that in to BTC exactly, and more likely than not you'd have hackers compromise the network at least a few times before everything worked properly.

Anyway, good luck my little PIGGY -- I expect big things of you, and we'll see if my children are actually able to use you when they hit college in 15 or so years. And if you'd like to donate to their PIGGY college fund, I promise I won't move the coins anywhere: pWf3PEfPuxRwed5dNtutrWndUZckXYdP8r

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Friday, June 6, 2014

Dogecoin Specifications

Coin number four in my list of coin specifications is something I've talked about before, so I'm not going to beat a dead horse too much. No, I'm going to beat a dead dog instead! Dogecoin (DOGE) is near the top of the total market cap for cryptocurrencies, and it was at least "fairly mined" -- which is why I've skipped NXT and Ripple for now. But "fair" is somewhat relative, and the biggest claim to fame for DOGE is that what started as a joke on an Internet meme became big money. At one point I think the total hashing power dedicated to DOGE actually surpassed LTC, but that's no longer the case -- it's not even close, as LTC has over 6X more hashing power these days. So, sanity is at least prevailing in that sense, and DOGE is generally not as profitable to mine as LTC now.

So what's the real problem with DOGE? Quite simply: it was a joke, and there are too many coins, too fast, for the market to sustain prices. The DOGE/BTC has been on a slow but steady decline for months now, and even the drop in block rewards has only slightly delayed things. Where will it finally settle? That's a difficult question to answer, but I'd be surprised to see DOGE go back over 100 satoshi. There are simply so many other -- often more sensible, serious -- coins around. But here's the quick summary:

Dogecoin Specifications (6/6/2014)
Launch Date2013-12-07
Proof of WorkScrypt
Starting Difficulty0.000244140625
Block Time1 minute
Block Reward~500,000 (1-1 million, random) initially
250,000 static from block 145000
Difficulty AdjustmentPrior to block 145,000: 240 blocks
After block 145,000: DigiShield
Reward AdjustmentHalving every 100,000 blocks (~69 days)
Minimum reward: 10,000
Max Coins~100 billion at 1.5 years
+5.25 billion per year indefinitely
Forum ThreadsBitcointalk - no longer updated regularly
Reddit - the usual chaos of Reddit
Block ExplorerOfficial with many alternatives

General Points of Interest:

DOGE hearkens back to an earlier time in cryptocurrencies, before multi-pools were online and coin hopping was only something the really dedicated miners really bothered doing. As such, the starting difficulty and block adjustment times were both rather conservative, but even so it only took about two days before things were more or less sensible -- at least, as sensible as anything could be with DOGE. After a slightly slow start, the meme caught hold and people started going crazy. Anecdotally, some of the early miners were able to make several BTC off of relatively modest GPU mining configurations. Once DOGE showed up on some exchanges, things started to level off, but it was still about 2-3X the profitability of mining LTC for quite some time.

As the mining scene developed, DOGE was hit pretty hard by multipools dumping coins, jumping on and off the "bandwagon", pools cherry-picking the most profitable blocks, etc. You see, the block reward was supposed to be truly random, but I'm not sure that was always the case, and evidently the developers didn't feel the long-term prospects of random block rewards were working out. The core code was eventually changed, and starting at block 145,000 the block reward became static (250,000 DOGE, halving every 100K blocks) and the difficulty adjustment algorithm was changed to DigiShield so that it adjusts every block.

Other changes have occurred as well, but after a major pump and dump that took the price to around 280 satoshi before it started dropping, DOGE has quieted down a lot. Many other coins have tried to copy DOGE's early success, but most have turned into abject failures -- EMU, PANDA, and many others have come and (mostly) gone now. Everyone had fun with DOGE and it got carried into the range of profitability and never really let go of that, but the copycats are not meeting with the same level of success and the problems with the core design are becoming more obvious.

First, there's the number of coins being created. Prior to DOGE, most cryptocurrencies tended to have a maximum number of coins somewhere south of 100 million, or perhaps 1 billion. DOGE tosses that out the window and goes for over 100 billion coins in just one year! What's more, with no ultimate cap on the number of DOGE that will be created through mining, the long-term prospects become even worse. 5% "inflation" per year generally isn't sustainable for a fiat currency, and it's certainly not working for DOGE right now.

At present, DOGE is nearing the 50 satoshi mark, and the market capitalization is only about 10% of LTC (after being nearly equal at the height of DOGE mania). LTC meanwhile is about 4% of the market capitalization of BTC. What that means is all of the DOGE currently available -- which is a rather large number at over 81 billion and counting! -- is only worth about 0.35% of the total BTC currently available. Now add to that the fact that there are over 6300 times as many DOGE in existence as BTC (and where BTC is now over five years old, DOGE is only six months old) and you have to wonder why DOGE should ever recover. Every day we get around 3600 more BTC mined, compared to generating 180 million DOGE -- or the rate of DOGE creation is 50,000 times higher than the rate of BTC. Until DOGE finally hits the 10K block rewards -- which will be in another six months -- I expect the value of DOGE to continue to drop.

Long-term prospects for DOGE are pretty weak, and the only thing that might save the coin is all the Scrypt ASICs coming online. They can't all mine LTC, can they? Well, actually they could, but they won't -- some SHA256 ASICs are still used for alternate cryptocurrencies, after all. I don't think DOGE will ever hit the point where it's valued at less than 1 satoshi, and in fact 10 satoshi is probably a reasonable minimum, but with the number of coins and the rate of blocks being so much higher than BTC and LTC, the market is flooded and this joke has run its course. Trying to turn that joke into something serious isn't funny either, so I'm pretty much done with DOGE now -- I just have to sell off my final 150K.

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Scrypt ASICs Update

I want to revisit the topic of Scrypt ASICs. The reason for this is two-fold: first, mining income from Scrypt mining with GPUs is basically at (or just above) the break even point right now for most of the major coins, and that's only if you happen to have someone inexpensive power. Second and perhaps more importantly, Alpha Technologies sent out an email stating they are now entering the final 60 days of development on their Scrypt Viper ASICs, and thus the call has come for the final 70% payment from those that pre-ordered. As I mentioned a while back, I went in 50-50 with a good friend on one of the then-25MH Viper ASICs, and while I was nervous I figured it was worth the chance.

The payment request is sort of a good news/bad news scenario, unfortunately. The good news is that the ASICs are nearly done, right? The bad news is that some of the stuff surrounding the final couple of months is sounding all too familiar to me. I remember the Butterfly Labs fiasco, and while they did eventually ship the products and they delivered the expected/promised performance, it took so much longer to ship that even the somewhat early orders basically got hardware that hardly mattered on arrival. Today, 5GH of SHA256 hashing power is practically worthless, and even with power requirements of "only" 40W or so (which is a far cry from their earlier target of <5W), at the current difficulty level you would net around $2 per month.

The reason I mention Butterfly Labs is that, despite better communication, Alpha Technologies is basically unproven as far as cryptocurrency mining hardware is concerned. And what really makes me nervous is that they've gone from 25MH to 90MH (5 to 18MH on the lesser Viper), and now they've pushed the limits of credibility by promising 250MH (50MH for the small Viper)! I don't want to look a gift horse in the mouth, but we're now talking about a 10X increase in performance over the initial specs, all "due to increased competition". The competition of course comes from various places: KnCMiner, a company that has at least proven capable of delivering SHA256 ASICs in quantity, is offering 300MH for $10000. That's good but other companies are already shipping, including Gridseed (from various sources), Innosilicon, and Zeusminer.

While it's possible that A-Tech has managed to improve performance dramatically, much of the increase comes from trimming "extra" features like an integrated LCD display and doubling the number of ASICs instead -- all with a higher power requirement and a larger chassis of course. Ultimately they are giving away a lot of "free" extra performance to batch one customers. If they deliver that will generate a lot of good will, but there's a second possibility. Let's assume you have a bunch of preorders, and you've been paid a lot of money but still have costs and you need to get more money to finish the project. What do you do? Well, you can't really tell your customers, "Oops...we underestimated our initial costs; please pony up so we can finish!" So instead you tell them that you're "nearly ready to ship -- please remit the final 70% of your payment." And to further entice everyone to pay as quickly as possible, you then nearly triple the promised performance of a product where you already increased performance by 3.6X!

I really, really hope that they aren't going to disappear into the night with all the money from their customers, but let's be real: it wouldn't be the first time something like that happened in the world of cryptocurrencies! The size and power requirements of course have jumped, so what was going to be a 1U 25MH system became a 4U 90MH system, and now it will apparently be something like an 8U 250MH system... and it will require nearly 2000W (via three 750W PSUs last I heard)! It's a gamble still, as are all of the other non-shipping Scrypt ASICs, and if I lose it will hurt -- but thankfully income from other cryptocurrencies has basically got me covered.

Now with that all out of the way, let's talk about the performance and cost of running these Scrypt ASICs compared to standard GPU mining. This is why Scrypt GPU mining is about to die (assuming the ASICs are actually delivered). We'll start with my standard mining rig (3xR9 280X), then look at the ASICs from Gridseed, Innosilicon and Zeusminer (these are shipping; Gridseed is readily available, and the other two are both shipping as well now), and wrapping up with Alpha-Technologies and KnCMiner (not shipping yet).

Graphics Mining (3x280X):
Hash Rate: ~2.1MH
Power: ~750W
Price: ~$1500 for a complete system
Efficiency: 2.8KH per Watt
Daily Income: $2.60 (LTC)
Power Cost: $1.80

Gridseed Specs:
Hash Rate: ~70KH per chip, 300KH per "mini USB miner"
Power: ~1.3W per chip, ~7W for mini USB (~60W if hashing 9GH SHA256 as well)
Price: $1079 for a 5.2MH 80-chip blade that draws 140W
Efficiency: 37KH per Watt
Daily Income: $6.47 (LTC)
Power Cost: $0.34

Innosilicon A2:
Hash Rate: 86MH
Power: ~550W (?)
Price: ~$12000 for a complete system
Efficiency: 156.4KH per Watt
Daily Income: $107 (LTC)
Power Cost: $1.32

Zeusminer Thunder X3:
Hash Rate: ~28MH
Power: ~1050W
Price: ~$3100 (no PSU?)
Efficiency: 26.7KH per Watt
Daily Income: $35 (LTC)
Power Cost: $2.52

A-Tech Viper (250MH):
Hash Rate: 250MH
Power: ~1900W (?)
Price: ~$10000 for a complete system
Efficiency: 131.6KH per Watt
Daily Income: $312 (LTC)
Power Cost: $4.56

KnCMiner Titan:
Hash Rate: 300MH
Power: Unknown? (1500W?)
Price: $10000 (no PSU)
Efficiency: 200KH per Watt
Daily Income: $373 (LTC)
Power Cost: $3.60

So first things first, in terms of efficiency even the Gridseed ASISs are about 13x what you'll get from a good GPU mining rig. The Zeusminer is actually the least efficient ASIC and it's still 10X what you'll get from GPUs. Move to the Innosilicon and A-Tech and we're looking at around 50X better efficiency, while if my power guess on the Titan is accurate we're talking over 70X more efficient mining compared to GPUs. When these ASICs arrive en force, GPU mining for Scrypt basically dies, and it will die fast. The only "good" news is that the initial ramp up in production means it will take a bit longer before things really escalate, and as I've mentioned in the past, GPUs can still be used for other algorithms -- Scrypt-N, Scrypt-Jane, X11, X13, etc.

There's another aspect we need to discuss, of course: how long to recover your investment with these ASICs? Well, assuming income remains constant (which is way better than any realistic best-case scenario), we're looking at nearly six months for the Gridseed, 113 days for the Innosilicon, 95 days for the Zeusminer... and if it really delivers, only 32.5 days for the Viper 250MH! KnC Titan would be the best result of course, given it's the highest hash rate, paying you back in around 27 days, but we're still likely three or more months away from the Titan shipping. Of course, by the time the Viper and Titan ship, I suspect profitability of Scrypt mining might be down another 50% or more, but even if it's 60 days to break even I'll be quite happy.

The only problem is whether or not the darn things actually ship in July (or 2014 if they pull a Butterfly Labs). Let's just hope that doesn't happen.... And if you didn't take a chance on a Scrypt ASIC six months back, now you can be sad... and glad at the same time that you're not out $10,000 and wondering whether you'll actually receive the promised hardware -- on time or perhaps ever.

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