Why hasn't bitcoin mining been scaled / wouldn't that ruin the concept?

I'm just learning/getting started with bitcoin and one thing that's obvious straight away, is that the more computational power you can throw at it (with the cheapest energy possible), the more coins you can make.

Lots of people mining coins (myself included) just appear to be hobbyists - maybe with some nice equipment, but nonetheless, not 'industrial-scale'.

So why aren't there companies investing millions in solar panels and ACIS machines to mine bitcoins? Wouldn't someone that invested a few million (or more) in a setup like that monopolize bitcoin, in a manner of speaking? (Until people investing equally large amounts?). It'd raise the difficulty beyond what hobbyists could afford to make BTC profitable for them to mine.

Maybe millions isn't enough, what if someone spent BILLIONS doing this? Would it have the effect I suspect?

Anonymous

Posted 2013-07-31T10:49:52.800

Reputation: 413

possible duplicate of Relationship between Hash-Rate and Difficulty

– Stephen Gornick – 2013-07-31T23:49:54.977

recent stories eg in NYT show that indeed there is a shift to professional or industrial/large scale type mining & that hobbyist mining is verging on not profitable. however, the "economy of scale" can only bring down cost somewhat but not nec dramatically (unless there are various innovations/breakthroughs). – vzn – 2014-03-03T01:02:34.973

Answers

The Bitcoin network automatically adjusts "difficulty" to produce a block every 10 minutes on average. As the difficulty rises it takes many more hashing attempts to find a block, so no matter how many exaflops in the network (we are already over 1) the number of coins will still be around 3600 daily (until the reward halves again.)

The only advantage to scaling is if you can scale faster and cheaper than the other miners, and even they you will only see an earning advantage until the difficulty changes and/or the competition steps up and matches their increase.

Technical Explaination of the mechanism: https://en.bitcoin.it/wiki/Difficulty

More detailed and descriptive link for newcomers: http://coin.furuknap.net/understanding-bitcoin-mining-difficulty/

CoinEnablers

Posted 2013-07-31T10:49:52.800

Reputation: 685

1Please don't use the word 'flops' when referring to Bitcoin mining - it does exactly 0, as flops are floating point operations, and hashing consists binary/integer operations. Originally, this comparison made sense by estimating how many flops the network would do, if the hardware used for it where converted to other purposes. The more specialized hardware appears - in particular ASICs - the less relevant this number becomes (as Bitcoin ASICs cannot do any flops either). – Pieter Wuille – 2013-08-01T17:19:15.420

Good point, I had just read an article that equated it to FLOPS. Someone needs to do a MIPS calculation instead so we can have a godawful big number that is accurate :) – CoinEnablers – 2013-09-07T17:04:28.400

Now we reach ASICs, even MIPS becomes a meaningless indicator for computing speed, as these ASICs cannot be repurposed anymore for other integer-based computations. – Pieter Wuille – 2013-09-11T05:14:17.010

The proceeds of mining are the 3,600 BTC daily (at current levels, which will drop to 1,800 BTC per-day in late 2016). All miners combined, no matter how many exist, are competing for these 3,600 BTC.

This sets an upper limit to how much mining can occur at a profit.

If someone wishes to expand by putting "billions" into mining going beyond the equilibrium where mining is no longer profitable, they will certainly displace others. But it is not economically prudent.

Stephen Gornick

Posted 2013-07-31T10:49:52.800

Reputation: 26 118

Digging for gold was not a business in the early days, it was left to lunatics. Only later mining companies were started.

The previous answers about the difficulty and upper limits in profits are good, but one should not forget how volatile bitcoin is. Most business owners wish to minimize risk to protect their capital. Mining bitcoins with serious capital should be considered extremely risky which very few sane people are willing to endeavor today.

Filip

Posted 2013-07-31T10:49:52.800

Reputation: 206