Analysis

Former Qualcomm Principal Engineer: 21 Inc's Bitcoin Mining Plans Make No Sense

by Kyle Torpey -

There has been a lot of excitement in the Bitcoin community regarding 21 Inc over the past few months, mainly due to the $116 million in funding they announced earlier this year. 21 holds the record for the largest funding round for any Bitcoin company up to this point, but the big names behind the company, such as Andreessen Horowitz and Qualcomm Ventures, are the source of most of the fascination around this startup. It also hasn’t hurt that the company has been rather secretive when it comes to exactly what they intend to do in the Bitcoin space.

Peernova Vice President of Software Architecture Dave Hudson runs one of the most popular bitcoin mining blogs at hashingit.com, and he was recently interviewed by Epicenter Bitcoin on everything having to do with mining and the future of Bitcoin in general. Hudson also happens to be a former Principal Engineer at Qualcomm, which made him an interesting individual to ask about 21’s plans. It appears that Hudson is not bullish on 21’s plan to put bitcoin mining chips in various household appliances. During his recent interview, Hudson bluntly stated:

“I have no idea what Qualcomm were doing. I actually know a bunch of people at Qualcomm who were really interested in Bitcoin for various reasons, but none of them -- as far as I’m aware -- were involved in those discussions either.”

When Epicenter Bitcoin Co-Host Brian Fabian Crain asked if Hudson saw any way that 21’s plans could make any sense, Hudson responded, “I keep trying. I haven’t found one yet, but good luck to them if they can find a way of doing it.”

It should be noted that 21’s entire playbook is not available to the general public, so it’s quite possible that they’ve already found solutions to the problems outlined by Hudson in the interview. Hudson’s comments should be taken in regards to the general idea of the mass distribution of bitcoin mining chips in consumer appliances.

Decentralized Hashing Doesn’t Make Sense from an Energy Perspective

Dave Hudson appears to have a long list of issues with what 21 is trying to do with the mining industry, but the first one he pointed to was the cost of energy. If 21’s mining chips are operating all over the world, it’s likely that they’d be used to mine bitcoins in locations that don’t exactly have the cheapest energy costs. Hudson explained:

“When you actually start to run the numbers, I don’t think it adds up from an economic perspective, and I don’t think it adds up from an energy perspective. The energy in people’s homes is usually pretty expensive. It’s not like the hashing would be free. It’s not like a by-product of something else that’s happening already. I think from a global energy perspective that doesn’t make any sense.”

Bitcoin mining has already started to centralize around areas of the world with the cheapest energy costs. Hudson’s point appears to be that an American housewife using an iron with a 21-branded mining chip would be at a huge disadvantage when compared to a mining facility in Iceland or China.

21 Inc Would Make Mining Centralization Worse

Another point Hudson was quick to make in regards to 21’s grand scheme is that it would be a step backwards when it comes to mining decentralization. Although it’s true that the hashing power would become more decentralized, the reality is that 21 would have to operate a gigantic mining pool for all of their chips. Hudson explained why this would be a move in the wrong direction:

“I can’t see how the model where 21 provide the chips that go into all these embedded things -- I can’t see how that’d work economically in anybody’s interest anyway (apart from 21 potentially). In order for them to gain any transaction fees or gain any mining fees from that, they’re going to have to act as a huge pool. So, 21 suddenly become the biggest pool in the network, which doesn’t seem like it’s actually decentralizing anything. They’ve decentralized the hashing and centralized the control of that hashing, so that doesn’t make sense either.”

A Usability Issue Involving Wi-Fi Access Points

There are many different moving parts that have to work perfectly in order for 21’s master plan to work, and Dave Hudson pointed out that Wi-Fi routers could be another unforeseen point of failure:

“I used to work in Wi-Fi design, and there’s an awful lot of Wi-Fi access points out there that will fall over if you put too many clients on them. So, your toaster can be one device too far, and suddenly your network stops working. That’s not a great end-user experience. You know, you put them in your refrigerator. Well, your refrigerator is usually somewhere inaccessible. It probably doesn’t have great Wi-Fi coverage either.”

Hudson then went on to note that putting the mining chips in routers actually seems like a good idea at first, but he then pointed out that adding those chips would completely change the thermal architecture of those devices. More expensive enclosures and other addons would need to be tacked onto these devices. Hudson added, “Not only does it cost you more energy, but it costs you more up front as well.”

What Would Make Sense?

Although Dave Hudson doesn’t seem to understand 21’s line of thinking, he did concede that there may be niche cases where it makes sense to put bitcoin mining chips in household appliances. He noted:

“If you have something which already takes electricity and needs to generate heat, then that would make some sense. I think another one I heard somebody suggested was like greenhouse heating, things like that for growing things. Those make sense because you’re already turning electricity into heat in the first place. ASICs aren’t the most efficient way of doing that, but at least there is some value there because the intent was originally to burn energy to actually generate heat in the first place.”

This is a concept that Bitcoin Core Developer Gavin Andresen has mentioned in the past, although Andresen was crying out for a bitcoin-mining electric blanket. 21’s actual plan of attack still seems rather unclear at this point, but it should be fascinating to see what kinds of products and services they release over the next few years.

Kyle Torpey

Kyle Torpey

Kyle is a freelance writer who has been interested in bitcoin since 2011. His work has been featured on Business Insider, VICE Motherboard, Let's Talk Bitcoin, RT's Keiser Report, and many other media outlets. Follow the author on Twitter @kyletorpey

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