Very interesting. The trouble is there is no way he can compete with someone using obsolete XBT mining equipment for space heating, where the effective cost of electricity becomes negative, regardless of the price of electricity.
Making POW useful requires nothing more a than changing the mindset. There are many situations where the heat produced has more value than the electricity consumed. Ever used electricity to produce heat? If the objective is to use electricity to produce heat, then POW mining of crypto currency becomes simply a way to reduce costs.
Once and for all, you are irrefutably rebutted:
We will re-use the PoW as a heater
First, reusing work is always a smart idea; second, humans do need heat. Third, such an arrangement is highly conducive to Bitcoins goal (of achieving a Bittorrent-like resistance to coercive manipulation).
However, what is the effect on the MC and MR? Instead of an expected ($100 BTC) per x hashes, wed move to ($100 BTC) + ($5 worth of heat) per x hashes. If $100 were previously being spent (at the hardware-efficient frontier), spending would be drawn upward toward $105 (eventually Bitcoins difficulty would adjust). Inefficient miners (those who didnt use their waste heat) would be put out of business, but the total spending would still equal $100 (producing $95 BTC + $5 Heat).
The Mining Heater is just another increase in hardware-efficiency, resulting in a higher difficulty and an increase in ( energy_used / block ).
Proof-of-Work as Space Heaters Belies Economics of SpecializationSpecialization enables economies-of-scale.
An example of an erroneous posited caveat[4] that proof-of-work mining resources would not become power-law distribution centralized due to the posited high electrical cost of dissipating heat in centralized mining farms coupled with the posited free electricity cost of using the waste heat of ASIC mining equipment as space heaters, is (in hindsight) incorrect because:
- Two-phase immersion cooling is 4000 times more efficient at removing heat from high-power density data centers[5], reducing the 30 - 50% electricity overhead to 1%[6].
- Electricity proximate to hydroelectric generation or subsidized electriciy costs approximately 50 - 75% less than the average electricity cost.
- Heating is rarely needed year-round, 24 hours daily, at full output. Not running mining hardware at full output continuously renders its purchase cost depreciation much less economic because the systemic hashrate is always increasing and (because) ASIC efficiency is always increasing[7]. The posited purchase of obsolete mining equipment[8] is incorrect because `MR = MC` so a combination of increased demand for obsolete mining raising its price and weighted profit at the margins increasing thus increasing the mining difficulty so that savings due to waste heat is offset. Closer to home, to make it profitable enough to be worthwhile (to justify the pita of jerryrigging a space heater for equipment not designed for the purpose) requires running so many 10s or 100s of kWH of relatively much less efficient (i.e. obsolete) hardware generating more heat than can be typically utilized (unless infernos are in sufficient decentralized demand).
[4]
https://blog.ethereum.org/2014/06/19/mining/[5]
http://www.allied-control.com/immersion-cooling[6]
http://www.allied-control.com/publications/Analysis_of_Large-Scale_Bitcoin_Mining_Operations.pdf#page=9[7]
https://www.reddit.com/r/Bitcoin/comments/335107/i_am_thinking_of_using_a_bitcoin_miner_to_heat_my/