Topic: The mining market balance - page 4. (Read 6710 times)

They could, that's the problem. They will be in a position to do it, without consequences. We could try to guess all day if they will do it or not, but that's not the point. The point is, because of that technological shift, an exclusive group can achieve complete dominance over another group. And that happens in the heart of the security system of Bitcoin.


Maybe, maybe not. I'm not in a crusade against BFL. I hope their project succeed, because they worked for it. I'm only looking to create a balance of power in the mining market.

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I don't see that it's as bad as you make out. We know that Bitcoins will be mined at the same rate over time regardless of the speed of the network. Setting ASICs and FPGAs aside for the moment, let's assume someone buying a $1300 GPU rig today could have it paid off in 12 months. How did they do that? By getting a small share of the coins mined over that time period, essentially determined by their share of the total hashing power of the network over that period. Let's say this miner goes for another 12 months after the rig is paid off, earning $700 over the cost of the rig. Net profit=$700 (I'm not including income from selling the rig since you can't sell ASIC rigs except to other miners). Now let's suppose ASICs come out 24 months from now and this same person decides to spend $1300 on an SC BFL single. Many others will be doing the same, so the difficulty will skyrocket. But this miner also has 40 Gh/s now. Why can't this miner pay off the new rig, and keep going to make a profit? Maybe it will take longer than 12 months, or maybe it will take less if this miner gets the ASIC rig early in game before very many others pile in. The difficulty will skyrocket, but this person's hashing power has also skyrocketed. I see no reason to think this person's fractional share of the network hashing power can't be enough to eventually pay off the rig and get into profitable territory. Obviously I have hypothetically supposed ASICs won't be out for 24 months, but this is a thought experiment, so that isn't relevant. If GPU mining can be profitable now, I don't see why ASIC mining can't be in the future. The difficulty will increase dramatically, but so will the hashing power/$ ratio. I'm not really committed to this line of reasoning, but I don't at the moment see where it goes wrong - would like to know why you think ASIC mining is a losing proposition. The analogy to the dollar auction was just too loose for me to figure out what you are thinking.      

No, the cooperative is a business. It needs to make profit.

The difference is, where miners lose their profit in the hands of a for-profit organization, miners will lose their profits towards a cooperative that they own. Overall, the profit they lose while mining goes toward the pockets of the cooperative, that they own and manage. It will still be the war out there between the miners, but that's what we want. We want a decentralized network where there's no monopoly, open to everybody.

With a cooperative, miners can be a manufacturer. If a miner doesn't want to, he's not forced either. He can still buy from BFL or other companies. It's only to give another choice.


No, again, it's important for people to make their money back. It's not a charity. I'm interested only on the balance of power in the mining market. We are going to shift toward a market where only the manufacturer holds the market. Miners will be similar to puppets.

Overall, I don't see the point of having a so wonderful decentralized currency that no ones control, when in one of the most important function of the currency, the mining, manufacturers hold the miners by the balls. Even if it's only for a while, it can still be a long moment. What if the manufacturer decides that the ROI on its product should be 2 years? And price them accordingly? What are you going to do? Cry? Make a shitstorm on the forum? I mean, since BFL started pre-order on Singles, we saw everything here. Is the shipping really faster? Do BFL hold their promises of 4-6 weeks? What about a non-paypal refund?

With Singles, we still had the choice. We could buy Icarus, x6500, Radeon 7970, Ztex, etc.

Now, when BFL decides next year that its trade-up program is 25% of the value, what are you going to do? Threaten them to go elsewhere? Complain? Shitstorm? Bring a lawyer? Even if there is competition, manufacturers only have to keep the same price range, split themselves the market, and profit each other like oil companies are doing.

There is no leverage of power, and we can't have a superior entity to supervise the market(like a government). I really don't see that as a positive thing for the network. Like I said, the problem is not the ASIC, it is who control the ASIC production.

Now, that's an astute statement.  And the reason why I hope these threads are educating everyone to the risks in hopes that they take pause when/if presented with an alternative.

How about communism?

Satoshi Nakamoto <=> Vladimir Ilich Ulyanov Lenin
his "White Paper" <=> collected works of VIUL
Gavin Andresen <=> Comrade 1st Secretary of the Central Comitee
opression by Fed and banks <=> oppression by factory and land owners

Nassim G of BFL <=> Lavrentiy Beria of NKVD
Luke-Jr <=> Leon Trotsky
Erik Voorhees <=> Maxim Gorky

<=> Animal Farm
<=> Boxer horse from A.F.

The analogies just write themselves. I had to censor myself to avoid being too offensive. I'm quarter-literate in Russian, and I can understand some of the humour on the Russian board below. Those guys there have a wicked sense of humor; e.g. if there's talk in the core development team of changing SHA-256 to something else BFL could hire killers, put a contract on Gavin & Luke or have them extradited to Sweden for alleged rape.

Ive been looking for a good analogy to help explain this, like something in game theory, but I havent found anything. Its really a quite interesting situation by itself, and I cant believe its unique, but the closest analogy one Ive found, is the well known dollar auction; its quite different in many aspects, but the parallel is that in both cases, there is a large potential profit to be made, yet anyone participating in the game, even rational actors, are forced to behave in way that is irrational and leads to individual losses for everyone, except the seller who makes a windfall profit.

Now if everyone truly understood this, BFL would hardly sell anything. But the reality is that a lot, if not most potential customers dont fully understand this, and price/difficulty will be determined by those that understand this least. And heck, even if everyone understood it, there would be some willing to bet they were one of very few taking the risk and therefore think they will still come out on top. Seeing how many gamblers we have, thats probably a LOT of people .

Yes, this is true.  My question is, why should miners drive off a cliff if they know one is approaching?

It is possible, however unlikely, that miners cooperatively protect their interests (this is not a "feel good commy thing" lol) by planning and taking necessary action to form a cooperative rather than selling out in a big way to BFL.

There is a big difference between what vladimir said he was planning (something I never took very seriously btw, and still dont), and what BFL is doing. One, if it was serious, really posed a potential threat to bitcoin, the other, if you put aside the tin foil hattery of hidden backdoors and what not, is only a risk to people buying in to it. Since no one forces you to become or stay a (for profit) miner, I dont see the big problem.


I will probably also stop mining, and not give my money to BFL. Not because I particularly loath them or anything, just because I dont think its a rational investment. So what? No one is going to miss my few GH (or that of any other current miner)

Now its possible these miners will look for something else to mine with their hardware; like litecoin. But will that spur litecoin adoption? I dont see that. It will just push up litecoin difficulty to the point where its equally unprofitable to mine as bitcoin or anything else.  The same would happen to a bitcoin fork. It would be worth almost nothing initially and likely have a comparatively gigantic hashrate, making it unprofitable almost the moment its forked. So why push for that?

Nah, I think bitcoin will be okay for quite some time. Some people are poised to earn a lot of money, some are about to lose significant amounts of money. Thats all.

You really think you could sell $100-500K worth of stuff that can not make a profit? I highly doubt that. People may be very vocal about issues like these, but when push comes to shove, I doubt you will raise much more than a few thousand dollar for an non profit venture with an unclear raison d'etre.

BTW, you would face similar issues as BFL, like, who gets the first ones?

I hope you are right, but my point was more about people freaking out that BFL and Vladimir had cornered the ASIC market, not just freaking out about ASICs in general. A lot of people seem to have the attitude that they would rather stop mining than give any business to BFL, and these people might find the idea of a fork very attractive, even if it only delays the inevitable. Hopefully sanity will prevail, but sanity and BFL don't seem to be great companions on this board.

I still think some type of co-operative can work to at least provide reasonable competition and possibly get devices into more people's hands.

Maybe even just focusing on 10 GH/s devices and selling thousands of them. If you could make those available for around $100 I'm not sure people would care if they ever really made their money back. If the ASIC production after initial development cost is really extremely low, maybe these devices can be manufactured for $50. If you sell 10,000, well you've got $500,000 to pay off the development cost.

The co-op could simply put up money as a bond possibly to fund the development and then get a payback of their initial bond investment + maybe 5% interest like a municipal bond. If the organization is a non-profit and incorporates as one, this would be no problem.

I'm sure there are plenty of great minds involved in bitcoin who would donate their services/skills to development and administration. I would certainly be willing to help with administration and any business aspects for no payment.

The idea wouldn't be to screw any private vendors, just simply ensure there is some competition and preserve the decentralization of mining for the health of the network.

We might even find some pretty heavy private donors in the tech sector if members of the community have the right connections. We could then pay an annual membership fee as suggested to explore other projects which could help bitcoin's growth and development like funding bitcoin business start-ups, etc.

Im sure some people will call for a fork, or even go for it, but I cant see it gathering any real traction. Whatever other algorithm you decide upon, it can be accelerated by another ASIC, so its going to happen again at some point. Will you keep forking and changing the protocol? It makes no sense, its gonna happen, so it may as well be now. I think most people will understand that and not follow a fork which only purpose is cutting off the legs of the first vendor(s) who invested heavily in to bitcoin.

P4man's concerns seem pretty much right to me. BFL, unless they are lying in a really egregious way, are way ahead of the curve compared to actual or potential communal-feel-good ASIC projects (including the open ASIC project that has been puttering along for a while now). Frankly, I'm just glad that BFL is at least roughly at the same point in the curve (maybe even a little ahead) compared to Vladimir's project, since he has no intention of sharing the technology. So, we may have to deal with the "evil" BFL (actually I don't think they are all that bad), but that's better than nothing. It may be pretty difficult for those behind the curve, even if they are non-profit, to catch up. The thing I'm most worried about is bitcoin forking. If BFL and Vladimir corner the ASIC technology market, I wouldn't be surprised to see a call for a move away from sha 256, even if it isn't really necessary security-wise (but of course this will be the "official" justification for it). If that happens, bitcoin will probably fork and lose a lot value no matter which fork one decides to travel. I will probably keep mining regardless, but the second I get a wiff of the break from sha 256, I'll probably start selling my coins as I mine them rather than holding. One thing for sure, there's lots of drama in bitcoin's future that will make the drama we've had till now look like nuthin.  

i think the manufacturers will have more profit by not selling to anyone but mine with there asics. at least for a while

Sympathetic as I may be to the idea, Im not sure I understand how this would solve the problem, in so far there even is one.

The "problematic" period happens when market price is very far above marginal cost. As you point out, that allows the asic vendor to lower prices constantly and faster than its customers can get a return on their investment, thereby potentially preventing them from achieving a ROI. But even with just 1 company, that situation will come to pass relatively quickly. BFL will want to keep selling, and thereby keep increasing difficulty and lowering prices until they reach near marginal cost and it no longer makes sense for them to lower prices, even if it means hardly any sales.  I would guess this takes a few years at most, assuming bitcoin price remains +-stable.

Now if I understand you correctly, you would want to accelerate this by developing an asic and selling it straight away at close to marginal cost? even if that means you will not be able to recover your investment? Whether as cooperative or for profit business, development is going to cost a fair chunk of money. Are coops immune to bankruptcy ? . Or do you expect its members to eat the losses?

More over, accelerating this trend will cause a bigger bloodbath among existing miners. I dont know if thats so desirable. If anything, I would hope for miners that no competitor to BFL emerges, because for them it would make a bad situation a lot worse.

This might have been a good idea 6 or 12 months ago, but unless BFL is pulling off a giant bluff, it seems too late now. Difficulty will explode, and BFL will be able to exploit that and make a very nice profit. If you cant get a product to market around the same time, there is nothing you can do about that.

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