Topic: The mining market balance - page 5. (Read 6691 times)
Ok, I've read what this project is about, I've mis-read at first.
It's not what I propose. It's not about making a cooperative to buy ASIC from manufacturer, but to manufacture ASIC through a cooperative. The cooperative build the ASIC and sells them, and doesn't mine with them.
Still, I wish you good luck with your project!
Hi there,
I've been talking to one of the members for which I have a great respect (if he wants to reveal himself, its his choice) about the ASIC/BFL/mining/apocalypse situation, and maybe there's a solution, or more a direction that the community can take.
The problem:
The problem with ASIC is not a technology problem, it's a market problem. Mining is tied to Bitcoin price/difficulty ratio, that's the market of mining. Everybody knows the price, everybody knows the difficulty, after that, it's only about managing the costs of doing it. In the CPU-GPU era, the prices of the manufacturers are independant of Bitcoin mining. A 300$ Radeon card is aimed at the gamer market, and miners usually worked around it. FPGA were aimed at Bitcoin miners, but the prices of it were still tied to another market. A Spartan6 is not priced depending on the mining market, but depending on the FPGA market.
But today, a wild ASIC appears!
ASIC development cost are high, really high. But the production cost is low. For the manufacturer, it give a lot of freedom for the price. You can price it really high, or really low, and it's possible to still make profit. So, the goal is to find the highest price possible to sell the most. The thing is, the manufacturer knows the mining market data. It simply have to calculate the price/difficulty ratio, and it gives him a good idea of how much it can price the ASIC. The price will be adjusted so the miners can get an interesting ROI. But if the miners buy and mine, the difficulty goes up, and so the ROI goes down. The manufacturer can play this game again, adjust the prices so the miners get an interesting ROI, miners buy, difficulty goes up, and the loop is created.
If miners quit the market and the difficulty goes down? Same thing, manufacturer can adjust the price again, and we have the same result. Why do we have this situation? Because the manufacturer AND the miners are fighting for the same profit. Those two groups profits from the price/difficulty ratio and every for-profit organization wants to maximize the profits. Since the mining data is public, miners have no leverage on the manufacturer. They can't make ASIC, they can't use alternative products, and they can't go for another market. Yeah, there is the electricity cost, but it will stay irrelevant as long the manufacturer can move the price up and down. It will matter again only when the ASIC price will be fixed (like the lowest possible without any possibility of going up again).
I'm saying manufacturer, and not BFL, because the same problem will happen either there is one, two or fifteen manufacturers. As long the manufacturers are for-profit organization, they will try to maximize their profits. If we have many manufacturers, two phenomenon could occur. We could have a price war, that will race the ASIC prices to the bottom, and could be interesting for miners. We could also see the manufacturers just follow each other with their prices (similar to what it's happening with gasoline), and the problem stay the same. I doubt for the price war, because they need to pay back the ASIC development.
Are we doomed?
No. Outside of mining, I doubt it will be a problem in a short-term perspective. It's not in the interest of the manufacturers to endanger the network, because their product is viable only for Bitcoin mining. The network needs to be in top shape to make profit. The miners though will be stuck on a leash. Their profit will depend directly on the manufacturer, and it certainly create a bad relationship. The network will be secured, but I don't think that giving that much power on a couple of entities is that great for the network. Having mining decentralized but with an enormous influence from the manufacturers, is, IMHO, probably worse than a 51% attack. Manufacturers could influence indirectly 100% of the mining network. I don't what could happen, but to know that "oh, those 5 business sell hardware for miners, have all control on the prices and can influence the profits of the miners", I'm not sure if it's that great to have.
The counter-attack
Yeah, for every strength, weaknesses exist. The problem will exist only if in the presence of for-profit organization, because they have too much power over the profit pie. If we remove the for-profit in organization, we solve the market problem.
From my knowledge, there is two options:
-A real non-profit organization, like a foundation or something. I don't think that with the current technology needs, it will be really appropriated. I don't vouch for this one.
-A cooperative. <---- Oh yeah!
What's a cooperative? It's a business owned by the members. Every member have an equal share in it. To be part of the cooperative, you usually pay a social share (like 5$), and you become a member. Members have a rebate to products of the cooperative, and, at the end of the year, profits are redistributed to members. So, a cooperative is not about who have the biggest capital, but who is a member. The most member a cooperative have, the better its health.
A cooperative is a business and is managed like a business. The only difference is that every member decides, every member have only one vote. With a good group of members, it can be competitive against many big businesses. For example, here in Quebec, a cooperative named Desjardins is currently owning the banking sector in the province. It's been kicking the ass of real banks and big banks for more than 100 years, and as a result, banks are really kind and almost lost their shark-teeth.
An ASIC cooperative will give the possibility for miners to become a part of the manufacturer. Instead of fighting against manufacturers for the profit pie, they will be on both sides of the fence. If the cooperative sells well and makes profit, miners will get a share of it. It will not be a fight of manufacturers against miners, but miners against miners. The fight will refocus on getting the lowest mining cost again.
A cooperative doesn't prevent for-profit business from entering the market. But an effective cooperative can change the paradigm of the market, since the cooperative is a for-members business, and not a for-profit business. Also, every member can access the financial data of the cooperative, decide, vote and work in the cooperative. The model is a lot more similar to how Bitcoin was envisioned first.
When are you launching it?
I don't know, I'm only here to start a discussion about it. There's like 60 000 members on this forum, I'm pretty sure we have enough human capital to make something worthwhile. I have interest in mining, but I can sell tomorrow if I think the market is poisoned.
I also think that it's probably the only way to launch an ASIC after BFL. If some organization here thinks it can launch their ASIC 6 months after BFL and make profits...I really think it's going to be hard. The market is small, and there's a capital limit on it. You can't make more profit than it exist, and BFL can probably take a good chunk of it in the month where you're not there.
If there's only for-profit manufacturer, I'm probably out of mining. But if a ASIC cooperative comes by, I'm ready to take the risk for it to succeed. Either the miners fight an already lost war against for-profit manufacturer, either they take back the market through a cooperative.
I'm going to monitor this topic, and I don't know if the cooperative model is really popular around the world. So if you have any questions about cooperative, just ask.
And if you can build ASIC and you are interested in this business model, well, it's the time to become bigger than Jesus and Elvis.
*EDIT*
Mods, I know this topic could probably be better categorized in Economy, but since the shitstorm is here and is about miners, I think it's better here.
I've been talking to one of the members for which I have a great respect (if he wants to reveal himself, its his choice) about the ASIC/BFL/mining/apocalypse situation, and maybe there's a solution, or more a direction that the community can take.
The problem:
The problem with ASIC is not a technology problem, it's a market problem. Mining is tied to Bitcoin price/difficulty ratio, that's the market of mining. Everybody knows the price, everybody knows the difficulty, after that, it's only about managing the costs of doing it. In the CPU-GPU era, the prices of the manufacturers are independant of Bitcoin mining. A 300$ Radeon card is aimed at the gamer market, and miners usually worked around it. FPGA were aimed at Bitcoin miners, but the prices of it were still tied to another market. A Spartan6 is not priced depending on the mining market, but depending on the FPGA market.
But today, a wild ASIC appears!
ASIC development cost are high, really high. But the production cost is low. For the manufacturer, it give a lot of freedom for the price. You can price it really high, or really low, and it's possible to still make profit. So, the goal is to find the highest price possible to sell the most. The thing is, the manufacturer knows the mining market data. It simply have to calculate the price/difficulty ratio, and it gives him a good idea of how much it can price the ASIC. The price will be adjusted so the miners can get an interesting ROI. But if the miners buy and mine, the difficulty goes up, and so the ROI goes down. The manufacturer can play this game again, adjust the prices so the miners get an interesting ROI, miners buy, difficulty goes up, and the loop is created.
If miners quit the market and the difficulty goes down? Same thing, manufacturer can adjust the price again, and we have the same result. Why do we have this situation? Because the manufacturer AND the miners are fighting for the same profit. Those two groups profits from the price/difficulty ratio and every for-profit organization wants to maximize the profits. Since the mining data is public, miners have no leverage on the manufacturer. They can't make ASIC, they can't use alternative products, and they can't go for another market. Yeah, there is the electricity cost, but it will stay irrelevant as long the manufacturer can move the price up and down. It will matter again only when the ASIC price will be fixed (like the lowest possible without any possibility of going up again).
I'm saying manufacturer, and not BFL, because the same problem will happen either there is one, two or fifteen manufacturers. As long the manufacturers are for-profit organization, they will try to maximize their profits. If we have many manufacturers, two phenomenon could occur. We could have a price war, that will race the ASIC prices to the bottom, and could be interesting for miners. We could also see the manufacturers just follow each other with their prices (similar to what it's happening with gasoline), and the problem stay the same. I doubt for the price war, because they need to pay back the ASIC development.
Are we doomed?
No. Outside of mining, I doubt it will be a problem in a short-term perspective. It's not in the interest of the manufacturers to endanger the network, because their product is viable only for Bitcoin mining. The network needs to be in top shape to make profit. The miners though will be stuck on a leash. Their profit will depend directly on the manufacturer, and it certainly create a bad relationship. The network will be secured, but I don't think that giving that much power on a couple of entities is that great for the network. Having mining decentralized but with an enormous influence from the manufacturers, is, IMHO, probably worse than a 51% attack. Manufacturers could influence indirectly 100% of the mining network. I don't what could happen, but to know that "oh, those 5 business sell hardware for miners, have all control on the prices and can influence the profits of the miners", I'm not sure if it's that great to have.
The counter-attack
Yeah, for every strength, weaknesses exist. The problem will exist only if in the presence of for-profit organization, because they have too much power over the profit pie. If we remove the for-profit in organization, we solve the market problem.
From my knowledge, there is two options:
-A real non-profit organization, like a foundation or something. I don't think that with the current technology needs, it will be really appropriated. I don't vouch for this one.
-A cooperative. <---- Oh yeah!
What's a cooperative? It's a business owned by the members. Every member have an equal share in it. To be part of the cooperative, you usually pay a social share (like 5$), and you become a member. Members have a rebate to products of the cooperative, and, at the end of the year, profits are redistributed to members. So, a cooperative is not about who have the biggest capital, but who is a member. The most member a cooperative have, the better its health.
A cooperative is a business and is managed like a business. The only difference is that every member decides, every member have only one vote. With a good group of members, it can be competitive against many big businesses. For example, here in Quebec, a cooperative named Desjardins is currently owning the banking sector in the province. It's been kicking the ass of real banks and big banks for more than 100 years, and as a result, banks are really kind and almost lost their shark-teeth.
An ASIC cooperative will give the possibility for miners to become a part of the manufacturer. Instead of fighting against manufacturers for the profit pie, they will be on both sides of the fence. If the cooperative sells well and makes profit, miners will get a share of it. It will not be a fight of manufacturers against miners, but miners against miners. The fight will refocus on getting the lowest mining cost again.
A cooperative doesn't prevent for-profit business from entering the market. But an effective cooperative can change the paradigm of the market, since the cooperative is a for-members business, and not a for-profit business. Also, every member can access the financial data of the cooperative, decide, vote and work in the cooperative. The model is a lot more similar to how Bitcoin was envisioned first.
When are you launching it?
I don't know, I'm only here to start a discussion about it. There's like 60 000 members on this forum, I'm pretty sure we have enough human capital to make something worthwhile. I have interest in mining, but I can sell tomorrow if I think the market is poisoned.
I also think that it's probably the only way to launch an ASIC after BFL. If some organization here thinks it can launch their ASIC 6 months after BFL and make profits...I really think it's going to be hard. The market is small, and there's a capital limit on it. You can't make more profit than it exist, and BFL can probably take a good chunk of it in the month where you're not there.
If there's only for-profit manufacturer, I'm probably out of mining. But if a ASIC cooperative comes by, I'm ready to take the risk for it to succeed. Either the miners fight an already lost war against for-profit manufacturer, either they take back the market through a cooperative.
I'm going to monitor this topic, and I don't know if the cooperative model is really popular around the world. So if you have any questions about cooperative, just ask.
And if you can build ASIC and you are interested in this business model, well, it's the time to become bigger than Jesus and Elvis.
*EDIT*
Mods, I know this topic could probably be better categorized in Economy, but since the shitstorm is here and is about miners, I think it's better here.
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