Topic: I know it's too late, but aren't we shooting ourselves in foot by buying ASIC? (Read 4007 times)

1+

ASIC's are good.  Bitcoin was designed to make the free market flourish.  I'm sure Satoshi is proud.

Well its not exactly against common good. In a 6 months time all the miners will go to ASIC, most of them will earn back the money, we will be "greener" since it consumes less power. It is a process, even evolution.

At what point in human history have common good and money been united for any length of time?  Still...a nudge in the right direction.

First movers will always have a leg up when it comes to new technology. Once the pack catches up, there will be something new and shiny to move on to. These first movers took a risk though -- remember when ASICs were first announced, and people thought it was a scam? Those that plunkered down the cash/coins took a risk, and it in this case it paid off.

I look at it this way....I spent $1000 on equipment ( I've spent more on toys with NO possible ROI) and its running in a space (data center) where I get free electricity and AC.  It's more for fun then anything else but if the value of the few BTC I'm mining increases in the next 10 years ( and I think it will) then I'll be happy.

Bill

I just moved on to litecoin. Seems to have more potential for profit anyway. I would also wager it is gaining users at a faster clip then bitcoin too right now. Yes asics may come to litecoin but not anytime soon. It is like 2011 all over.

Btc mining community is a group of noble gentleman with goal to increase Internet money amount by buying specially designed air heaters. Nobody is doing this for profit, no way. And you dare to call them a parasite? We must help them, go get new ASIC for yourself.

FIFY

asic should die in hell, and old vga farm should rise again

So you admit that spending 11 BTC for a product that will produce 10 BTC is a bad idea.

At 100 million difficulty and a 6.5% growth rate per difficulty adjustment, a Jalapeno will not earn back the BTC you could have had at today's exchange rate.

That assumes that Avalon, Bitfury, and KNCMiner do not deliver anything further. 60,000,000 difficulty is just BFL's known order book.

Yes, if no other company besides BFL delivers ASICs, you will profit from buying a BFL unit today.
Use this mining calculator on expert mode: http://www.coinish.com/calc/#

I would not take that bet. Since people are still pre-ordering and ignoring the math, I believe that they will overshoot profitability by quite a bit. Also, second generation ASICs will have a lower price point, higher performance, and run more efficiently. People can still buy those and add to the hash rate long after first generation equipment is no longer profitable to purchase (but while running might earn more than they cost in electricity for quite some time).

If you are banking on a rise in BTC/USD to enhance your profitability, you should just buy BTC and hold it.

Consider the following counter-question:
If you spend 11 BTC ($1,200) to buy a device that will produce 1,000 BTC ($100 after a huge market crash), will you make any profit?

That's why I assume no change in exchange rate, and why I look at profit in terms of USD and not BTC.

Anyway, assuming no change in value, I don't see how a BFL ASIC ordered now would NOT turn a net profit eventually (in both BTC and USD), unless there are additional delays beyond their projection of shipping all current preorders by September.  But I wouldn't buy one right now, BECAUSE of the potential for additional delays.  And because I already have too much investing in BTC and BTC-related investments already.  I need to diversify more.

But, back to the profit.  Let's say that you are correct, that difficulty is 60,000,000 by the time you receive your shiny new 50GH/s BFL miner.  You spent 24 BTC on it.  The miner, at 60,000,000 difficulty, makes 12.74 BTC/month.  Also have to assume that difficulty is continuing to rise, and I'm not going to do the calculus, but just assume that difficulty went up 25% and you manage to pull out 10 BTC of the first month.  Next month, same thing - difficulty went up 25% over the course of the month, and you get another 8 BTC.  Etc, etc, making 6.5 BTC, 5 BTC, 4.5 BTC in the following months.  After just the first 3 months, you've already recovered your original BTC amount.

The only reason difficulty would continue to go up is if people continued to buy miners.  The only way people would continue to buy miners is if they deem it to return a reasonable profit.  Do you think 4.5 BTC/month (and potentially declining) on a 24 BTC purchase is a reasonable profit?  I do, but many people certainly don't - not in the volatile world of Bitcoin, anyway.  So people like would start dropping out of purchases of miners when the singles start only making 6 BTC a month, or 4.5 BTC a month, or whatever number you want to use.  But that still leaves the people who did buy them a net profit after 6 months or less, and it means difficulty would largely stagnate and stop increasing.

I would even wager on a bet that a BFL SC Single would eventually pay itself off in either USD or BTC, electric costs included, if purchased today.

Consider the following question:
If you spend 11 BTC to buy a device that will produce 10 BTC in its lifetime, will you make any profit?
Or, you could look at it another way:
Is there any exchange rate by which you will profit more by spending 11 BTC to get 10 BTC than you would by just keeping the 11 BTC?

Well, no one told me we were looking at profitability with regards to BTC.    That's a whole different ballgame, and all bets are off if you look at it that way!  If the price drops drastically, you could see a net profit in BTC quite easily while maintaining a net loss in USD, but if the price increasing drastically, you'd likely never see a profit on your investment vs just investing in BTC directly, while your USD profit would be through the roof.

To earn a profit, mining equipment must first earn back the sunk capital costs involved in buying the equipment.
BFL equipment ordered today will be delivered in mid September (according to Josh).
All of BFL's current order book will be mining before you get your unit.
Potentially all of Avalon's chip sales will be mining.
Potentially all of Bitfury's first batch will be mining.
ASICMiner will add some unknown amount of hash rate.
Potentially even some of KNCMiners products will be mining
You will start mining somewhere north of 60,000,000 difficulty.
At that rate, there is a real risk that BFL products ordered today will never earn back in BTC what one could buy from MT Gox for the same price. That makes them unprofitable.


If those 50GH/s Singles are each earning a dollar a week, it would take 2500 weeks (48 years) to earn back the cost of buying those 50GH/s Singles.
After running them for 48 years (with no difficulty increases) you will earn your first dollar of profit. Free electricity is only cool up to a point. 

What you consider a reasonable profit and what a large scale mining operation with cheap electricity in another country consider a reasonable profit are completely different.

If your SC Single is only making a dollar a week, is it profitable for you? Probably not, but it might be for someone else who has 10,000 singles running for nearly free electricity.

Sure, I agree with you - people will only continue to buy them while they produce a reasonable amount of profit.  But my point still stands - people will stop buying them when they produce an unreasonable profit.  Which means they will always make a reasonable profit, notwithstanding improvements in the technology that give lower costs or more efficient mining.  Even with newer technologies, these older ASICs would likely still be profitable, just not reasonably profitable.

An SC Single need only generate 1.5BTC per year to break even on electricity costs, but that is not why people would stop buying it. If an SC Single can't generate more Bitcoin than you could buy with the money you spend on the SC single, then people will stop buying the Singles.

If second generation ASICs coming online that do 300+ GH/s actually deliver, the hash rate is going to grow rapidly for the next 6 months. 100M+ difficulty makes an SC Single unprofitable (vs buying bitcoins). If you ordered one today, you would not receive it until late September (after 100TH/s of Avalon Klondikes have hit the market, and 200TH/s of BFL product has been delivered). That puts the difficulty over 60M before you even get your SC Single.

That is a small window and it is getting smaller. If KNCminer or Bitfury actually deliver...

ASICs are AWESOME for bitcoin.

Think of what we had before... anyone with a reasonable amount of money, whether it be an individual, corporation or government could buy up GPUs and 51% attack the network.

Now if someone wanted to, they would have to spend a lot of money researching and developing their own ASIC just to have a chance. They could not buy enough commercial ASICs right now to do so and by the time they've developed their own ASIC the difficulty will be so high that even that might not be enough. Right now we are secure from everyone except maybe the NSA. And we've just made it significantly harder for them too.

Trees grow higher to get more sun.
This causes other trees to get less sun, and they grwo higher to compensate.
This continues until investing into growing even higher isnt profitable anymore.
And the only thing that whole process is good for: bushes will never ever threaten to cut the trees off from sunlight.

Part of the profitability debate results from the lack of information from the rise/decrease in btc in the future.  If you buy a miner right now, you're betting BTC will be > 100 in the future (e.g. like $500 or 1,000 USD for a BTC).  At 100 a BTC, mining won't be profitable into 2014.

Hopefully you can achieve that soon so you can create your own definition of "logical thought" in your new kingdom.

We all have different goals and I don't have a problem with that.  Just because someones goals are different from yours doesn't make it illogical.

Live long and prosper.

Why should one bother about common good? If ASIC will generate some profit even with the worst predictions - why not?

My personal Goal
"Is to use the bitcoin miners to buy an Island far far away from morons that are incapable of logical thought....."

Why do I need to redo my calculations?  If there's something wrong with them, please point it out.

It depends on what your personal goal is.  If you want to be a big time miner and mine more than everyone else and rake in big profits then you need to pay the price by investing in that mining hardware no matter what it is at the time.

If you want to mine to contribute hash's to the network for the sake of Bitcoin then ASIC's are the way to go since they consume a fraction of the power of CPU/GPU's and create less waste heat and they can be had for a cheaper price than GPU's, unless, you want to be a big time miner, that is.

Hash rate is irrelevant, it really is.

So pick, your own personal good or the good of the network.  I've made my choice.  I could really care less about being the big dog on the network.

Attempting to be the big dog by trying to stop hardware improvements helps no one and, as you stated, is impossible at this point.
Sam

That's BS.  

Plenty of people have bought stuff for mining and either never cared about making a profit or were incredibly naive

but you need to redo your calculations in any case


then you'd buy it for market price, not usb trash or 5ghash garbage

This is textbook Prisoner's Dilemma.

Totally!

If / when 0.001 BTC = (say) $100+, as Satoshi invisaged, then the OP will hopefully not be looking back on this post saying 'hindsight is a wonderful thing'.

I'm one of the few people who knows what thats really like, although I guess I did help to kickstart Bitcoin in my own way.

One of the reasons I'm back is that things are just starting to get interesting again imho.

Was investing in multiple GPU's a good / fully sensible prospect way back when: http://newlibertystandard.wetpaint.com/ (Not that GPU mining was even concevable till a bit later on though).

First 2009 Exchange Rates: http://newlibertystandard.wetpaint.com/page/2009+Exchange+Rate      

Not my site btw, but I was on the forum back then. I sometimes wonder just how many peoples wallets the Bitcoins I mined are in? Probably more than Satoshi's curently.

So, still don't want to buy that ASIC ? Yes, Bitcoin will end someday. You can only get on the train at the station you are standing at. Do it for the journey!

*Sings* The Proudhon Song https://www.youtube.com/watch?v=A7TuFy0fcuw and dreams about the wonderful things that could of been achieved in a world full of technology with no capital...

You are confusing the common good to be a "oh noes i wont profit from mining anymore" rather than the actual common good of securing the entire bitcoin network and keeping the transactions churning out.

Now tell me which is more important? Advancing tech means more hash which means more security.

if we don't buy them, someone else will. There is no stopping this train, either get onboard or sit in the station.

No, it's not really right, for a number of reasons.

How do you define common good?

ASIC miners secure the network against... someone making ASIC miners and destroying/overthrowing the network (what is happening now on a limited scale). That seems like a common good.

There is not much 'common good' in the way the hashrate is currently distributed, something on the order of 60% of the hashing power is controlled by 5-10% of miners. (There are posts with better estimations that I don't want to look for now).

ASIC manufacturers benefitting from developing a bitcoin exclusive product is bad how exactly? Currently AMD is making some extra pocket money from bitcoin, is that somehow better for everyone? I personally prefer to see industrious individuals with know-how and energy succeed from bitcoin interest.
In fact, a demonstration of a bitcoin exclusive industry being built from the ground up, can be potentially leveraged into a good case for more businesses building around bitcoin. Another common good.

If at the end of the day, the mining landscape is the same as it is today, except that people are using ASICs instead of GPUs, I don't see that as a problem, except for those few foolish ones who thought dropping $30,000 on an early miner was a sound investment. But that is an individuals own decision to make, and doesn't really relate to the common good in my view.

Yes that's absolutely correct. The reason people want to get in on the asic act is that if you're the first in with the hardware before the difficulty has plateaued, you stand to make a killing, and that's precisely what's happening at this time with anyone who has one. However it's a gamble whether you can get one early, and if you pay massive amounts to secure one now (like ASICMINER hardware), you are getting ripped off and missing the big picture since it will not be profitable till long after the diff has plateaued, potentially never.

You're wrong.

People will stop buying new miners when new miners stop being profitable.  But as I calculate it right now, it would take 818,325 of BFL's SC Singles to be in use before mining becomes unprofitable at $0.08/kwh, not taking into account any unit depreciation.  Given that BFL only had 75,000 chips produced in their first run, and that those 75,000 chips would only be enough to produce 4,687 SC Singles, I'd say that we're quite far from that happening even when taking all the other ASIC vendors into account.

Sure, we're moving away from the prospect of making ridiculous daily amounts of Bitcoin from one device, but we are still very far above the level of a reasonably sane return on investment.

Buying ASIC miners goes against the common good. It give an individual the upper hand for a while until most miners upgrade to ASIC. By that time, a 5Ghps miner will give the same a amount of bitcoins as a 200Mhps GPU miner gave 6 month before.

In the long term, we all loose and the only winners are the ASIC manufacturers.

This is a fine example how group behavior eventually goes against the common good.

But I guess it's too late for that now... the hash rate snow ball is rolling faster and getting bigger by the minute.