Businessweek reports that Balaji Srinivasan, the former Stanford professor and serial entrepreneur who preached about "Silicon Valley's Ultimate Exit," has cofounded a "secretive startup" that sells machines for high frequency bitcoin mining. Because even a "peaceful exit," as Srinivasan prefers to calls the act of leaving luddites behind, requires its own currency.
According to a Form D filing, Srinivasan's startup, which is named 21e6 ("a reference to the maximum of 21 million bitcoins"), has already raised $5,050,000 in equity from 55 investors. The company, says Businessweek, is "believed to be backed by some of the wealthiest people in Silicon Valley."
Each Bitcoin has to be verified on a virtual ledger of all the Bitcoins ever circulated. Anyone can download some software and get a copy of this ledger, but to add to it, you must become a Bitcoin miner. That means you set your computer to work performing cryptographic calculations to decode elements of the currency system and confirm the validity of transactions, which then get added to the main record. The reward for this work is about 25 Bitcoins. The catch: Only one person every 10 minutes earns this prize, by solving the calculations before anyone else.
The practice has gotten increasingly competitive and expensive, pushing out "Bitcoin's working class," as the Verge reported last year. It began with the introduction of a special chip that sped up the mining process called application-specific integrated circuits, or ASICs. The chips may even have been tied to the Bitcoin price surge in March.
Businessweek says that Srinivasan's startup will be part of a "second wave of designers" using cutting-edge techniques. Where early ASIC manufacturers were self-taught or DIY, 21e6 sounds like a more sophisticated operation. On the Bitcoin Talk forum, one commenter pointed out that a few of the individuals named on the filing happen to be integrated circuit experts:
3 of these 5 persons come from a company (PDF Solutions) that "offers solutions that are designed to enable clients to lower costs of IC design and manufacture, enhance time to market, and improve profitability by addressing design and manufacturing interactions from product design to initial process ramps to mature manufacturing operations".
On Twitter, Ashlee Vance, who wrote the Businessweek article said 21e6 intended to use their expertise to benefit their powerful backers:
@kevinroose from what i understand, they are trying to suck up a lot of bitcoin for the valley elite through super fast hardware
— Ashlee Vance (@valleyhack) November 15, 2013
"All of the mining manufacturers are currently making Application Specific Integrated Circuits (ASICs). I suppose it's possible [Srinivasan's startup is] a private mining operation for SV elite, but seems more plausible they'll just sell the mining equipment. They could do both, which a group called ASICMINER does."
As you might expect from the Silicon Valley subset who gloat over the shutdown and think of government as merely a barrier to techno-utopia (for
all some), this technology will only benefit the first people that are able to get their hands on it, reports Businessweek:
The latest and greatest equipment from these companies should begin arriving in December, kicking off what the startups hope will be a massive spending spree by Bitcoin miners. "It really is an arms race," says David Kanter, a chip analyst and consultant. "If you're one of the first people to get one of these, then boom, you will make some real money. But once everyone has one, it's back to square one." Individual miners who get outspent by larger groups will end up with basically worthless hardware unless they can pool it into something larger, he says. As he says about BitFury, "I am sure he made more money from the hardware than the morons who bought."
Out there in Bitcoin Country, it's every libertarian for himself.
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