Bitcoin Forum

... that means...

($13.50 - $10.50) / $10.50 = 28.5%
$30,000 * 28.5% = $8,550

...you have lost $8,550 of potential bitcoin capital gains, or that a BFL ASIC Rig would have cost you $8,550, or that had BFL keept ASIC Rig customers' preorders in bitcoin, it would have owed each of them $8,550 by now.

... Is this in any way relevant?

Not really. You can't judge past purchases on the exchange rate at the time. As far as I'm concerned, I didn't "lose money" in any purchase, whether it was at $2.5 or $15 / BTC. I made a decision to buy something for a certain number of coins, and at the time thought it was a good idea, and there's nothing I can do about it now. You can't go to a seller and say "I think the exchange rate will be 3x what it is today, so I'm only going to pay you 1/3 of what you're asking". Sure that's what happened in the market between then and now, but back then you didn't know anything for certain.

What if the price goes back down to $3 like it was a year ago? BFL gonna ask you for the rest of you coins? (yes, I know BFL doesn't touch the coins, but w/e).

If you want to hold onto your coins and wait till the price hits $25 before you purchase anything, be my guest. But in the mean time, BTC is a currency, meant to be traded and used to purchase things, so that's what most people will do with them.

Just my 2 bitcents. 

Another brainless topic...

By putting in your 2 bit cents now, they are only worth a fraction of what they would be in the future.

I kid, but anyway, I see both sides. One of bit coins biggest problems is proper valuation. How do you run a business when you can't hold the currency you are transacting in, because it can double or halve in a couple months time?
Just suck it up, or cash out to fiat I guess. You gotta roll with the punches sometimes.

But the point people are making is that taking money from people months in advance of product existence has cost those people money. They could have simply taken a deposit as promise against the full cost when product was ready (which is standard).

So both sides have merit.

I guess the main point is that, in hindsight, it was a poor decision, based on BFL's overly optimistic delivery date claims. Regardless of whether they deliver ASICs in the future, their claims have already cost people a lot of unrealized money, and that's  :-[ (granted, it could've gone the other way as well, but Bitcoin up! Up! UP! and all that, plus the rise w/ reward drop was somewhat predictable)

BTW, I would have been in the same boat, originally planning to preorder in early September, but I was surprised, and prevented from doing so, by severe limits on bank transfer amounts ($5k at a time), which, combined with 3 to 7 day waiting periods, meant it wasn't until late October until I had enough BTC to preorder, and by that point, I figured I might as well just wait to order when they come out (so my $30k of BTC is just sitting there, mining capital gains). I.e. THANKS overly restrictive, over-regulated, obnoxious, fiat currency banks!  ;D

Don't spend pre-order money you can't lose, lol.

My calculator must be broken, it shows something different.
I think you mean ($13.50 - $10.50) / $10.50 = 28.5%

At the time I preordered my BFL units,BTC was @ $6.30.No,I didn't "lose" anything.

As crazy said,if the tables were turned & BTC were @ $3.00 now,would it mean BFL would ask for the difference  ???

BTW,if your "holding" coins,they aren't really worth anything until you cash them in,whatever the market price is what they are worth at that time  ;)

Heck,the $$$$ has lost ground since then too,maybe Newegg should ask for the difference on that 7970 I bought back in March  :D

umad

 :D Not in the least  :D

I wish my units were on thier way,but stuff happens   ::)

Oh, but you did. If you bought a Single, you spent rougly 200 BTC for a place in line, and when BFL starts shipping, they'll go through all pre-orders pretty quick. Someone ordering today will get their rig at nearly the same time, but it'll only cost them 100 BTC. BFL suckered you into giving them an extra 100 BTC for nothing.

I wouldn't be so sure of that.  BFL started shipping FPGA Singles in March, and only finally caught up the order backlog now in November.

At today's difficulty, 12 days at 60Ghps would make up the 100 BTC difference.

Now if another ASIC maker ships a month or more before BFL, the effect will be a lot less pronounced.

That's an interesting (albeit somewhat harsh) way of looking at it. So is an early pre-order spot worth 100+BTC? I wonder...

Assuming that BFL can put out about 21THash / week (their claim), you would need to be roughly within the first 2 batches to go out for it to be worth the 100BTC hole you start out with, assuming that BFL ships first, and capacity goes online in discret 21THash chunks/week, rather than continuous addition as they suggest they will do after first batch of ?? Thash. Or in other words, it would be cost-effective to cancel your spot in the pre-orders and re-order today if you are later than that in the pre-order list and originally paid with bitcoin.

Does Tom suffer from this same issue?

_{#s wise, the third batch only makes roughly 96BTC back before the late order comes online. This is of course subject to a great deal of supposition regarding timing of orders, and rate of fulfillment}

That won't help. No matter how many BTC you sent them, you'll get 100 BTC back today if you cancel. Early pre-order people are screwed.

Oh really, they send you back the equivalent exchange rate amount of coins rather than the number of coins you paid? That's a shame. Then yeah, nevermind. Some people will do ok, some people will be boned. Guess it's good that they have a "you win some you lose some" attitude.

Thanks. My boss walked in and interrupted me as I was writing that out (had the result on my calculator) and I got distracted half way through the formula. OP fixed.

By that reasoning,noone would spend BTC for fear of it rising,like it has & losing money  ::)

I lost nothing....I paid with my digital currency & helped the BTC economy.

I see what your saying,but your not seeing it from a "realistic" point of view...........

It's as realistic as it gets. Opportunity cost is still a cost and had BFL shipped in October you'd be sitting pretty right now with a paid off ASIC, but they screwed you on that one too. Don't worry though it wasn't their fault, it was those damn clock buffers.

I did purchase BLFs by selling BTC at ~6$ because I had all of my money invested into BTC.

There's always a cost in having money tied into something, This time the lost opportunities are MASSIVE !

When you do your profitability calculation for mining hardware you need to denominate in BTC, not in USD. The question is: how long does it take the hardware to generate the amount of bitcoin (ROI break even) you'd spend at that time for the hardware purchase. This is exchange rate independent.

Now - the reduced profitability (longer ROI break even) due to all the delays in delivery are a completely different story...

You don't get it,do you..........I have lost nothing,I spent my BTC at the time I needed to spend it.For all you knew,BTC could have decreased in value,then what "haha,we got one over on BFL,they got ripped off by the lower BTC prices",no they would not have.The value at the time is just that  ::)

It's an investment,my product will arrive when it arrives & I will profit from it...... & you won't,haha ;)

+1

What If I bought BTC at $15? how much would I have lost?

And my family went on vacation while BTC was $30 last summer. By all accounts, I lost $20,000 by being away from home when I could have sold.

It kills me to agree with Jutarul, but this is actually a pretty good way to measure it.  The whole "If you bought BTC instead of XXXX device in YYY time, you would have made ZZZZ" is ludicrous and goes to show that the person making that argument does not understand how money works.  I know it's already been said, but the value of BTC could have just as easily gone down and you would have made out ahead.  Unless you have a crystal ball, saying "You would have made ZZZZ" after the fact is nothing but rhetoric.  Sure, I can say that about ANY financial transaction that involves the exchange of money... if I had known AUD would have dropped so much since 2008, I would be a millionaire right now... however, I didn't know the USD would lose value as quickly as it did against AUD.  Hindsight is great for making financial predictions, you are always 100% right.

Now you go apply that to the real world and see how you make out.

Thank you for the flowers. I learned it the hard way myself. I started mining when the price of BTC was ridiculously low, thus I paid a significant amount in opportunity cost, even though all the cards eventually broke even USD wise.


In the spirit "everything has been discussed before - somehow":
https://bitcointalk.org/index.php?topic=121624.msg1313267#msg1313267

The graphs in the linked post tell you something about the intrinsic bitcoin generating power for the first ASICs, which seems to be around 1000-2000 BTC per 100 BTC invested (at $13 exchange rate and a 4x increase in difficulty). However that figure will go down fast with the date of the delivery. The good news is that it will take a significant amount of hash power to push the profitability down to less than 100% (>40x). Thus ASICs in 2013 could be considered a safe investment - given that your concern is the accumulation of bitcoin.

Caveat emptor.

So in other words, if you think the value of something wil go up, you should be more careful about trading it away and if you think the value will go down, you should be more ready to trade it away.  Are you a wizard or something?

I would recomend a book Data Analysis & Decision Making with Microsoft Excel. By Albright, Winston and Zappe.
Seems to me a good investment if the asic s comming out on time
https://bitcointalk.org/home/killerbee/Arbeitsfläche/Screenshot at 2012-12-08 21:21:35.png

"Hindsight" wasn't my argument. BFL converts all BTC to USD, thus avoiding all currency risk. Buyers on the other hand preorder with BTC, and have their spent BTC sit in limbo until the product they purchase is finally delivered. True, BTC could have fallen instead of risen, which would have made those who have preordered much better off (and BTC did fall from $12 to $10.50 for a time), but this currency risk is taken on entirely by the customers. The decision to preorder a long time ago, which resulted from a huge opportunity cost, turned out to be a bad decision, but the main reason that decision was made to begin with was because BFL claimed that the delivery date was only a couple months away, i.e. BFL claimed that the currency risk would be smaller than it turned out to be. In the end, BFL was not affected, since it is not affected by BTC fluctuation due to holding USD, those who have preordered a long time ago have experienced a huge opportunity cost, and BFL is to blame. (If you think opportunity cost isn't a real cost, the extra $3,000USD worth of BTC that I have and that you don't says otherwise).
Now, I'm not saying that this is something that BFL needs to repay to those who have preordered. Currency exchange risk is often unpredictable, and something those who preordered (maybe) likely expected. I'm just pointing out that delays that happen when dealing with two currencies that fluxuate against each other do have very real costs, begin just annoyed customers and whining on forums.

By the way, it could have been MUCH worse if BFL had kept all their customer preorder funds in BTC instead, because if people asked for a refund, had BTC lost value, they could refund BTC, and had it gained value, sell it for the USD price equivalent and just return the USD, netting the BTC gains for themselves. It would have been an almost risk-free investment for them.

BTW, did BFL mention whether they are still keeping customer's preorder funds in a separate account? Because until they start shipping products, that money is still technically Unearned Revenue, and does not belong to them. I'm assuming that's what they are doing, since they are an LLC, will have to file taxes, and will have to declare it as such, lest they bring the wrath of IRS auditors upon their heads.

I guess I'm not understanding why/how you are applying this opportunity cost to only one side of the transaction, which then results in an unbalanced transaction.  Yes, BFL is late and the opportunity cost is real, but it applies to both sides of the transaction (and thus cancels out).  Saying BFL was not affected is the fundamental problem here - BFL is only not affected if the transaction is unilaterally applied to the customer and not BFL, which is not the case (as you point out in a later paragraph).  BFL would have to hold on to the BTC and then issue refunds in USD for that to apply, and that is not what's happening.  The opportunity cost that affects the customers also affects BFL.  If we had held on to the BTC, we could have gained quite a bit (again, as you already pointed out).  So yes, the opportunity cost is real in so far as "if someone had held on to the BTC, they'd have more USD value than they did before," but again that's only valid with hindsight, not with future predictions.  If BFL had known that BTC was going to rise, BFL should have kept the BTC instead of the USD.  Anyway, I'm rambling at this point... the take away from this is that the potential opportunity cost applies to both the customer and BFL and thus cancels each other out as providing an advantage to one party over another.

To answer your question, yes we maintain preorder funds separate from expenditure funds.

One would think the preorder funds were needed to be expended to develop the new product...

According the some of the 'Business Scholars' in this forum, invested money floats around in Imagination land acquiring profits and dancing with the fairys.

O.o

Yeah, sorry, I was kinda rambling a bit with that long post. Was too tired when I posted it.
I guess from BFL's perspective, they have USD costs for the devices and USD denominated revenues, so their business makes the same USD based profits from the sale of devices regardless of what BTC does. For buyers who paid with BTC that's not the case. But you're right, it's not very relevant. Maybe I'm just feeling guilty that I missed my chance to preorder due to stupid banking restrictions, and thus managed to realize those BTC gains entirely due to dumb luck.

R&D at BFL was paid for by venture capitalists. All deposit money's are safe. Been documented for long time.

But in the interest of fairness, you have a good point. Diversified investing is always a good idea and miners should also be encouraged to purchase and trade BTC. IMHO

Being "documented" suggests that there is some hard evidence somewhere, which there is not (at least not for public consumption). A more accurate phrase would be that it has been "stated" for a long time.

Why collect 100% of the cost of pre-order units so many months in advance then? Why not a 10 - 20% earnest deposit? That would've given the company an accurate measure of demand and protected them from unfunded commitments. Are these funds just sitting under a mattress or collecting interest somewhere? The whole thing is just shady and unprofessional, and yes I'm aware other companies have done this too, though I do not believe any of them have sat on other people's money for such an extended time frame.

IMHO people who pre-ordered ASICs from BFL should be considered share holders of the company given they basically funded the entire development process with their pre-order funds.

The fact that it has been about 6 months and nothing has been delivered to customers, and also that people likely have lost "value" in their holdings in BTC if they paid in that method, says people/customers with ASIC preorders are entitled to be shareholders in the company.

But then again the agreement with BFL is not retroactive as I would hope.

Some people are just too stupid to realize that BFL had their own interests in mind and will continue to have them in mind for the foreseeable future.

"jump off a cliff because someone tells you there is gold at the bottom that will make you rich. But you can't jump off the cliff unless you pay them...all the while knowing you will die when you get to the bottom if you don't have the proper equipment for jumping off a cliff (i.e. parachute, hand glider, etc.). "

then it would be much easier for people to jump ship or pre-order something else

bfl has the best business strategy, get your money the earliest

FTFY. It's called a lock-in. The same thing happens in marriage.

...and ending it means someone gets half your sh1t. :'(

Not really lock-in if anyone can request and receive a refund anytime they want.

Yes it is a lock-in. Because you have to give up on the FULL amount and cannot use that to place orders elsewhere. Otherwise I could place pre-orders for a larger number of units and/or place orders with competitors.

Please know that a lock-in is not necessarily a bad thing. It protects the manufacturer from getting an inflated pre-order list.

In September when the price was bouncing around $10-$11, i pre-ordered bASICs when there was a spike up to $12.6. I was happy because it dropped back down to $11ish shortly after. probably was the best time to buy into the first batch of bASIC preorders

First press release.

where?

It's relevant if you ever expected to get a BTC refund  ;)

This could be said for anything really. If you bought a house in August instead of buying bitcoins then you also lost out on the capital gain. Or if you kept your money in the S&P instead of bitcoin, then you lost on those gains. It's just nonsense to try to make BFL look bad for your decision.

At the same time, you can't expect hardware vendors to act as hedges for bitcoin investors. If BFL gave refunds in btc, then it would just make sense to purchase a ton of hardware with btc. Then if the btc price goes down, you still have the value of the hardware. If the btc price goes up, you request a refund and get all the gains with no risk. It's selfish and makes no sense to ask for such a thing from a hardware vendor.

Only applicable if you bought a house in August and you're sleeping on a park bench in December. Otherwise the BTC invested in the house were well spent protecting you from exposure.

The difference is that when you buy those things, you get a product. It's an even exchange at the time, and you have the chance of your product either making you money, or growing in value itself. That's how exchange rate risk is avoided: quick exchange. Here, people paid for the product, but got nothing in return. The decision was bad, but it wasn't "yours." It was a decision influenced by BFL with their delivery claims, and the opportunity cost to the buyers is entirely their fault.

I wonder how many people would have preordered back in August if they knew that ASICs would come out in January, WAY after the block reward halving, and the expected rise in BTC value? I'm sure more than a few people were also expecting to get at least a few weeks of 50BTC/block mining as well.

I know I was expecting some 50 blocks.  Now I just don't see the ROI working out.

It could still be okay for BFL pre-orders even if Avalon's first batch beats them to the punch, which BFL_Josh seemed to be preparing his customers for with recent posts. However if both Avalon and BTCFPGA beat BFL out the door I think their customers could be in for a lengthy ROI period.

At any rate the clock is ticking and the premium paid by BFL customers that paid for products months in advance is rapidly losing value.

This really is not the difference you are making it out to be, but if you think this is that important, imagine putting a large contribution towards an Ouya (http://www.kickstarter.com/projects/ouya/ouya-a-new-kind-of-video-game-console/posts/339520) or any number of kickstarter projects.

The problem here is treating bitcoin strictly as an investment, when it is more functional as a currency. I have an ASIC preorder from the first day, meaning I took $800 in fiat that I had sitting in my Mt Gox account and converted it to bitcoins and then bought an upgrade. At that time, I guess I could have bought $800 in bitcoin and sat on it and I'd have over $1600 now, but I really didn't have plans to buy more bitcoin. If I did have such plans, I would have bought the SC upgrade and bought some bitcoin. Fundamentally, though, buying bitcoin as an investment and buying a miner are different actions and it doesn't make sense to comingle their finances any more than comingling the cost of an Ouya with bitcoin.


I agree with this. Really, it was delivery after the halving that dealt the largest blow to profitability because no matter how many other ASICs were out there, everyone was still getting twice as much.

Though I see what you are saying, I disagree. But first I will say that I expect your situation doesn't apply to what was being suggested by the OP (they can correct me if I'm wrong). Taking fiat, exchanging to coin, then purchasing an ASIC is basically buying the ASIC in fiat, you simply used bitcoin as an electronic exchange medium, the same as if you used a credit card. If someone has already gained bitcoin, either through mining, or trading, and has been floating the coins around, for whatever purposes, and used those coins to secure an ASIC order, that is more akin to use as a currency (as you hold dollars in your wallet, until it is time to use them, rather than holding Gold doubloons).

Now on to the separate idea. One of the primary motivations behind investment is the idea (fact?) that your fiat tomorrow will be worth less than it is today. To push fiat out the door in the form of investment, purchase, whatever, is supremely logical, as you will not see such a great return ever again. If you can see potential for your money to be worth more in the future, it only makes sense to save it.

Whether you invest in an Ouya, a house, a prostitute, you are secure in the fact that you made a wise decision buying now rather than later. Bitcoin, clearly not so much, be it an investment, or as currency, the valuation fluctuates wildly such that it is difficulty to know what the wisest course of action is. So in this radically different situation, placing coin down on something now, with the expectation of return later, is not wise as it is with fiat investment. You either need to be using it as you said, as an investment (so in this case it was a poor investment), or as a currency (whereby you receive product for your purchase). As to whose fault it is, I don't know that I can say it is BFLs fault, aside from missed target dates.

The part that I agree with however, is that you *did* make an investment, and a poor one, which has cost you, had you plunked down bitcoin on a promise.