Topic: The mining market balance (Read 6716 times)

There are many ways to do this and it needs to be pursued. The biggest question/ hurdle seems to be how quickly can we develop s competitive ASIC product before BFL floods the market.

I personally don't believe they have any shot at fulfilling these orders in any quantitiy by december 2012 based on their previous track record. Also, if they had this legit VC funding behind them, why the hell do they need full pre-orders instead of simply deposits to help them measure demand.

Once again the bitcoin mining community is so obsessed with profit they are eager to fund someone's project interest free and tie up their funds for months on end. How much more could be done with this money if it were spent or utilized to fund bitcoin related business and services?

Are the people in this community just so ignorant about standard business practices that they can't see this is a long con ?

I like a combo co-operative mining effort that everyone can benefit from and also allows co-op members to buy discounted equipment as well. i could see the first large units being used to simply mine on behalf of the co-op members to repay the initial investment which would then allow for reasonable sale prices to co-op members moving forward.

If we could get 4-5 1 TH up and running before any of the BFL units hit the market we could get the initial dev cost back in no time and then be able to sell cheap units to co-op members and effectively put BFL out of business or at least force them to start acting as an ethical business in order to stay in this market.

I could raise probably $50,000 toward this project if someone could show me a way that we could get a custom ASIC by December 1st. I believe that would be AT LEAST one month before BFL could deliver any of their units, save maybe those coffee warmers.

I think we could have raised over 1 million if we had put this together before BFL announced their pre-orders, but don't think for a second they didn't do that as part of their plan to lock up the community's money in order to kill any project like this.'

Once they saw companies like enterpoint entering the game they knew they had to craft a plan to stall FPGA orders and screw every competitor over.

I really like this concept and think it would be an excellent contribution to the community. This goes along with the "credit union" model that many people are familiar with.

In my opinion this would be a true COOP unlike an ASIC based GLBSE offering. In that scenario it is really just another mining investment using newer technology that you are helping purchase. Your idea caters to the need of people that still want to actually do the mining and not just invest. A members mining pool could also be an option for something like this. The ability to get discounted mining gear is great bonus as well.

The possibilities are endless. Imagine if the COOP was also in the Lending business and members could vote on which loan requests to approve and for what business ventures while evaluating risk/reward as a group.

Nice work Brunic......sub.

While it's possible BFL could keep slashing prices and make it difficult for miners to break even, it's also possible they'll maintain a relatively stable price.  Perhaps the benefit to them would be more consistent sales to miners.

A track record of keeping ASIC prices stable would encourage more first time purchases and additional sales to miners wanting to add more hashing power.

If the price becomes unstable, they may benefit in the short term, but their customer base would be more limited to big risk takers.

Of course if there's an ASIC competitor, all bets are off.  Only time will tell.

 Its just  a matter of at what price. But even at the given price, if somehow BFL doesnt sell anything like the equivalent of 6000 singles and they do not lower price, those things will pay them selves back in a few months, and if that is the case, you can bet some people will order a racks full of them, just like they did with the GPU rush. FWIW, currently the network is made up of the equivalent of ~40.000 GPUs.

edit: also interesting, this post:
https://bitcointalksearch.org/topic/m.990263

This is correct, we're shipping about 50 singles and 1.5 mini rigs a day at current rates.

BTW, the reason I think 1 year ROI is far too dangerous, is that its unlikely bitcoin difficulty and therefore price/difficulty and therefore asic $/GH is even predictable within an order or magnitude over a period of 1 year. With GPUs or FPGAs you could be relatively sure the price per GH of the hardware wasnt going to collapse dramatically.

I used 50 instead of 25 because it does not affect difficulty. It does obviously make more sense to use 25 though since at most we will only see a few months of 50 with new hardware.  I do like your numbers being much more conservative than mine on what an acceptable ROI would be. That will of course vary a bit from individual to individual.

Now the thing with the 6100 units. It's not that I think they would have any issue producing 6100 units(can bet they have an on-demand type contract with the chip foundry.) Its that the market demand is not there from miners for 6100 units. That could be very good for the early buyers or it cold be very bad if it forces BFL to lower prices sooner to encourage more buyers. I suspect many will wait until first release so we can calculate some more accurate ROI numbers. One thing I am certain about is that it will be fun to watch and speculate on for some time. =)

Not sure I follow, why do you use 50BTC block reward to guestimate difficulty target when those asics will be mining almost exclusively when block reward is 25 BTC? I also dont think anyone aiming for 1 year ROI is smart in the asic era, but lets go with that anyway.

40GH=40.000 MH/s. If I tap that in using 25 BTC block reward, I get 1 year break even at difficulty ~34M.
network hashrate= D * 2**32 / 600
= 34M * 7.158.278
= 243 TH
= ~6100 single SCs

Thats a sizable quantity, but not exactly something you cant produce and ship in a whole year (plus a 4-6 month ramp). Its roughly the number of discrete videocards amd and nvidia ship each and every hour.

Bitcoin has some fundamentals, and by this COOP suggestion, I'm looking for a way to stay in line with those fundamentals. It's also a way to keep Bitcoin value.

If the COOP would mine instead of selling mining products, it would centralize mining.  By selling mining products, it encourages decentralization. It's the same reason as to why I want to make a COOP manufacturer, it is to encourage decentralized ownership of ASIC production. I want miners to have control over the production and the sales of ASIC.


It's a COOP, it is not a corporation. You can only have one share, so even if the COOP is ultra-profitable, by owning only one share, you're not going to make a lot of profit anyway. The COOP is about other advantages like, for example, simple discount of ASIC products(Get 20% rebate if you are a member!). Also, the voting power for decisions is a democratic one (1 person, 1 vote), not a capitalist one (1$, 1 vote). An interesting use of that could be to let the miners decide the selling prices of the ASIC. You make one vote every 4 months, you put a maximum price variation (like 20%) and so, as a miner, you can project long-term for your ROI, without having surprises from a closed company. You also have precise informations about production and shipping(unlike....you know who), and if you're not satisfied, you are in a position to help the process, since you own the COOP.

I think this could be a lot more interesting for miners than simply making dividends.


I completely agree with this. I've started this topic to help create a discussion, and how people view this idea. For now, I don't have any ASIC manufacturers, and I don't have the technical skills to make any ASIC anyway so I can't start this project. I simply think that, all this ASIC talk will attract competitors, and maybe one of those will consider a COOP instead of a corporation, and contribute to grow this project.

https://bitcointalksearch.org/topic/buy-your-bfl-bitcoins-back-from-bitpay-89757

At least 46k bitcoin .....

Not I, homey. ;p  I'd rather not mine than support them. But, yea it really makes me believe the VC thing is a bunch of bullshit.

Plain simple Explantation:

U and all their valued customers == VC

that was my point. we agree on this point I believe. My point in the bottleneck was that it is the only thing that would slow down onlining of more hashpower. That is that rate at which BFL is willing to slash prices.  And my math is very, very rough. I tried to point out some of the things it does not include and that it is a lot of speculation of which units make up the bulk of online units. Not including currently hasing hardware, etc etc. And mosre importanty a lack of BFL's first run production numbers makes any math guess work.

I do look forward to seeing any other speculations on the math though. The more angles on it the closer we will get to the actual imho.

cheers

edit' Yea, just reread the part where you said they could potentially do it before the first unit ships. I have to agree there as well. It would seem on pre orders alone they have likely covered a good protion of their NRE costs. So, what exactly ar the VC's paying for? coffee imported to keep them all working?

Ill check your math later, but this needs a rebuttal first:


You seem to forget BFL can price these units almost arbitrarily. If demand slows down too much because the ROI becomes too long, BFL can easily slash prices by 50%, 90% or more. ASICs cost next to nothing to produce, and Id be surprised if any of the other components in the miners would. So slashing prices wont really hurt BFL, their gross margin would go from say 10000% to "only" 5000%;  it would only really hurt previous BFL customers if it spurs another gold rush. BFL can play that game over and over, and they might even begin it before they ship their first unit.

I agree with this statement as well.  The retail buying will be the strongest at the halving.

Your take on it is very valid. It would really come down to what the members of said coop would want from it. The coop's primary objective would be to function profitably. But how much profit would we need to squeeze from it? Delivering a unit to market versus keeping it solely for mining until it is no longer profitable may be what some members would prefer. I personaly enjoy owning my own equipment even if it is slightly less profitable than what a coop could produce. I would imagine I am not alone. Again, with a coop there will be very many reasons why people would become members. The coop would be obligated to function the way that the majority voted.

Plus the selling of hardware gives that many more options to bond holders. Members could either share the profit from mining and sales or cash in their bonds towards hardware. I like choices even if the optimum structure would be to solely mine and dump when done.

I have to admit I did not quite read all the posts (lazy me), but why the need to solve a mathematical puzzle of who to receive it first and pay what when you are forming a COOP

As I did read before the problem basically comes down to (and we saw that in the halfhearted answer from BFL) either you believe in Bitcoin and think that mining will yield the most money, or you believe in selling Bitcoin products for fiat money and then you do what BFL does.

Starting a COOP by Bitcoin fanatics one would believe that they think mining BTC will yield the most (they are willing to invest in developing a mining product that they then want to buy from the company), so why sell any of the mining products ? Surely the reasoning must be that you make a better return by actually give nothing to the community but just mine the heck out of it before any competitors come to market.

Only when your own mining has become less profitable then selling your 'heavily discounted' ASICs to unsuspected miners at an above ROI price, you stop mining and get into the selling business.

So setup a COOP to develop an ASIC (BFL's ones are probably 6 months away), get 100 - 200 TH/s online, start mining centrally and give all the COOP shareholders a payout based on their shareholdings. Dividends are based on mined BTCs until the point where mining has become unprofitable (a point which might be years away if you are the first to mine) and then start selling ASICs en masse, giving COOP shareholders their second means of generating dividends

Just my 2 cents

I second that.

I belive they could solve the 'who gets one first' scenario buy mining with the produced hardware until nUnits are ready to ship or nTime worth of orders are ready to ship. And by paying out those eanrings to the coop members. Then shipping the things as closely together as possible. Atleast for the first big ordering round.

The OP's proposal of a production+mining cooperative is one that appeals to me and one towards which I'd be willing to contribute a good chunk of cash. This is partly because I think it'd work, and partly because I really like cooperatives as a species of legal entity, and partly because I want some alternative to lining BFL's pockets and if it takes funding an ASIC design then by gum I'll help fund an ASIC design.

(Of course, the organization would have to be spearheaded by someone I could meet personally and in whom I could build some personal confidence. But that probably goes without saying when entrusting someone with this kind of money!)

I would think that there would be a healthy secondary market for these devices considering the lengthy failure rates and promise of better ROI with a used unit.

I should add to that, the benefit to miners is with lower demand for their products at the release price that it is unlikely they will sell enough units to reach this theoretical difficulty(71.1mil) of mine until something changes to further drive demand.

Current orders at about 500, if all 40GH units, if all actually available for release will put the difficulty at about +2.8mil above current at time.

edit; for previous post. I should also add that for ease of calculating I did not consider anything mining besides the newly onlined 40GH per unit asics. Adding in older hardware that will be online in my scenario should not change the overall numbers much.

aye, that was exactly what I said. Market demand will be the bottleneck for BFL.. ;p

Math;
First a link showing the difficulty with ~12,700 40GH units in action. Calculated by punching in the total hash of those units and adjusting difficulty until 7200BTC per day is produced.
http://tpbitcalc.appspot.com/?difficulty=71167701.5592&hashrate=509440000.00&exchangerate=6.30&bitcoinsperblock=50.00&rigcost=1300&powerconsumption=15&powercost=0.12&investmentperiod=355
Second a link showing 40GH at this new difficulty and 50BTC block reward. paypack time 368 days.
http://tpbitcalc.appspot.com/?difficulty=71167701.5592&hashrate=40000.00&exchangerate=6.30&bitcoinsperblock=50.00&rigcost=1300.00&powerconsumption=15.00&powercost=0.10&investmentperiod=355
Third a link showing the same at 25BTC block rewards. It's at this point we see the ROI has become what many would consider unreasonable.
http://tpbitcalc.appspot.com/?difficulty=71167701.5592&hashrate=40000.00&exchangerate=6.30&bitcoinsperblock=25.00&rigcost=1300.00&powerconsumption=15.00&powercost=0.10&investmentperiod=355
Fourth link showing that cutting the price of the 40GH unit in half brings ROI back to ~1 year. It does not account for new sales further increasing that time by increasing difficulty.
http://tpbitcalc.appspot.com/?difficulty=71167701.5592&hashrate=40000.00&exchangerate=6.30&bitcoinsperblock=25.00&rigcost=650&powerconsumption=15.00&powercost=0.10&investmentperiod=355


edit; I first arrived at that difficulty by punching in 1 40GH unit at $1300 and pushing the difficulty up until it was over 1 year ROI at 50BTC block.