Bitcoin Forum

Why do companies sell Bitcoin miners, like ASIC?

Surely if they can make money from mining, they would keep it themself.

The only other option is that they make more from selling it, than they would make from mining with it.

It's definltely not some charitable gift to the people.

So, what do you all think?

Winner!

Or they mine with them, then sell them once they can't earn as much.

Exactly what they do and its the best business you can own in Bitcoin.

Right... but, according to minr.info... there is an ASIC that makes $397.40 per day, and takes 26 days to break even... After that, you would make $397.40 per day in pure profit.... and the total price of the ASIC is $ 9,995.... so... within a few weeks after break even, you would have made more than the total price itself....

So, I can only assume that by then, mining difficulty has increased so much that you're no longer making $397.40 per day...

Is this right?

So let's make an ASIC factory.

This is what they are probably doing, or what I would do if I were them at least.

1. You build a bunch of new ASIC miners.
2. Start using the new ASIC miners to mine.
3. Put them for preorder on your website.
4. Start developing better ASIC miners.
5. Once you've created the upgraded ASIC miners, replace the old ones and sell them
6. Go back to 2. and repeat forever!

Essentially, they build their own top of the line equipment, and use it to mine.  Once their old equipment is outdated sell it for profit.  You've already profited from the mining, now they profit again from the selling, and they are probably selling for much higher than the cost of manufacturing them in the first place.  They are probably making so much money.

Well this is very possible. This would work.

This is correct. If they were able to be more profitable using them themselves, they wouldn't be selling them in the first place

Basically your "Fancy ASIC" miner will be obsolete with the exponentially increasing difficulty of mining. Your profit of mining bitcoins is diminished when you add in electricity and other cost to run your "mining rig" Then ASIC manufacturing do a little thing called tweaking and making faster chips that mine twice as fadt but cheaper than before but you don't break even for a while or even at all. Irony buying something that is suppose to make money when in reality you more likely to lose it.

You folks are forgetting that your can mine other alt sha256 coins with these ASIC miners to remain profitable.

Just point the ASIC miner to one of those sha256 multipools and you making money if you got big ass hash rates. Or mine a new sha256 coin before it comes onto cryptsy....

They just sell their running miners because they made giant miner.
When other people run giant miner, they will run huge miner farm.

This is how world moves. :D

You could ask the same question about all manufacturers.

Why does a company sell super-computers when it could do all the computing itself?
Why does a company sell construction equipment when it could build buildings, bridges, roads, and houses itself?
Why does a company sell airplanes when it could be an airline?

For the same reason it was much more profitable to sell pans and shovels during the gold rush. 

When the price of a miner is more than the expected pay-out it makes sense to just sell them enthusiasts.
They have no maintenance costs and with the difficulty rise it's always a bit gambling.

What kind of question was that?!?

I swear this place kills a few of my braincells every time I read a thread like this.

Sometimes I relate Bitcoin ASIC companies to Lamborghini.

Ferruccio Lamborghini sold farming equipment even though in the 50's farming was very profitable. So using the wealth he got from selling farming equipment, he was able to start up Automobili Lamborghini.

A good amount of the time selling equipment makes more than the market that the product is being produced for.

 ::) This is just like asking "If apple's computers are so good, why would they bother selling them. Shouldn't they just keep all of them for themselves"

Absurd no?

They are the first movers in this space, each company is battling to become the Microsoft, Apple, (or even Standard Oil) of Crypto Mining.

Simples!!!!Where theres a need, theres a market. Where theres a market there's $$$$$$$$$. Plus it certainly costs them shit tons less to make these things than they sell them for so it's a no brainer! "In a Gold rush it is much wiser to sell tools to the miners, than to get on your hands and knees and prospect"

OK... I got a response from XtremeMiners support team, as to why they sell ASIC miners...

We actually don't use the machines to mine for ourselves because it would destroy the bitcoin concept if one company has too much power over the currency (that's why butterflylabs and other companies sell as well) and also, we are all about spreading the idea of bitcoins, we want people to use them, and make bitcoins popular, to support the bitcoin project. That's why we provide them with miners.

Personally, I think that this is their BS excuse, rather than telling me that you're simply not going to make much money from this, if at all.... and that they make mores selling the ASIC than they would make from mining.

What does everybody think?

because people with guns would come in and take the stuff if they didn't sell it.


OBVIOUS

Why are there so many songs about rainbows?

I agree that it is a BS response, but that is irrelevant.

It doesn't make sense to buy an ASIC miner for more than it will ever mine, yet people do it all the time. It is difficult for anyone to make a profit from mining because there are so many people that are willing to mine at a loss.

It is not the fault of the manufacturers that miners lose money. People are lining up to buy their equipment regardless of the price, even knowing that they will lose money. If you don't want to lose money mining, then don't buy the equipment. If that means that you don't mine, then don't mine.

What was last said is correct. Some people are willing to mine at a loss. I have mined for years, from when a gpu was worthy. I don't have a huge setup, but I still mine. Not loosing yet as I exchange monthly energy cost every month.

But that said. I would mine at a loss to an extent. I would also mine at a loss and exchange some till that extent is met. Not because I am seeking to be rich. But Bitcoin is a very useful method. It actually has saved me money with international purchases. It also has in my time made me upset based on how many I sold when it was stunning it hit 50$ , then again at 250$.

Had I just saved all the BTC I sold... but that is not the reason to do it. Despite what some people think. Yes some profit is nice. You are a business when your mining. Your supporting a system. If it covers your cost, so be it, If you make a little, great.

Also while the response is claimed to be BS , it has some true aspect. If one company took over. Or One pool took over. It could lead to a huge fall really fast.

You answered your own question.  They make more money selling it, and a lot quicker at that.


When you buy a minning rig take into consideration how many days/weeks/months  it takes you to break even.  Now consider a company selling that rig made a profit in every single purchase. They don't have to wait months for their rigs to start producing profits, they can get the profits in one single swoop.

Also worth noting that quite a few mining manufacturers do also mine on the side.  But yes selling them is more profitable.

Morning  ;D

Bad comparison. Computers don't earn money, miners do.

if your business is making hardware, you probably assembled a team that`s good at developing hardware. doesn`t mean those people are any good in anything related to maintaining a massive mining farm.

example, knc is making 1200 neptunes in total i believe. what do you think it would cost if they wanted to run all of them for themselves.

you`d need to build or rent a huge business complex that allready has very big and expensive infrastucture to supply the electricity and internet acces.

you`d have to fit the complex with racks or shelves or something to setup the machines, hire a company to distribute and connect the electricity safely, hire a company to setup the network and also rent or buy expensive network hardware to support 1200 individual nodes, and hire IT and networking specialists to keep it running.

you need employees to set up the machines when they are ready, and a team to maintain it and trouble shoot once it is all up and running.
you have to train all new people every time your new product is reaching the production stage or keep them on as staff fulltime the whole year.

you`d have to do this while keeping investors happy (the upfront cost for this is masive) and hide it for the public. Because when your customers ever find out that you are doing business like that, nobody would ever buy from you again.
also with the amount of different people you need to pull this off, somebody is gonna let the cat out of the bag eventually, or simply blackmail you.

you have to hide it from the network. if suddently  1200 x 3ths = 3600 ths popped up on the network out of nowhere, people are gonna notice.

do i have to  go on?

at that point your not a hardware manufacturer anymore..
once everything is done and paid for, the profit margin also probably isn`t as big anymore.

i am sure they will run a decent amount for "testing purposes" long before any customer wil get their hands on the product. and maybe keep a decent amount from the first batch for themselves and sell them off when the rest of the stock is sold out. or maybe just keep them anyway.
it probably still is a decent amount of the income they generate on a yearly basis

once you have reached the amount of units your infrastrure and recourses can support, its not worth the time, money and hassle to expand. your better off just selling the units and invest that money in r&d for your new product .

They are selling them at a price more than they can mine back, that's why

Think about it this way. While you wait to get your mining equipment they can mine and earn. Then sell you equipment and earn even more. Anyway when there was a real gold rush who do you think earned more people selling the equipment to mine (and taking no risk) or people hoping they find some nugget of gold.

Yes, history has shown that during the California Gold Rush, the average merchant made significantly more than the average prospector (especially as the gold rush died down). However, interesting tidbit, the majority of those who were in the top 5% of earned profits were prospectors.

Nonetheless, if history can show us anything, it is that the sellers of equipment are usually better off than those using the equipment.

It surprises me how naive some people are in relation to these issues...

Nlsupernova - In regards to KnC go and have a look at this video:

http://www.gp.se/nyheter/sverige/1.2276893-datorhall-for-bitcoin-byggs-i-boden.

There is no hiding, and the cat is already out of the bag... It is completely open to everyone what is happening.

There is also no hiding on the network, these companies are the elephant in the room!  ::)

It is the perfect business. You mine with the new miners while they are still the most profitable and when it starts to become more marginal you ship them to your customers. You then develop the next generation miners and the process repeats itself...

So I suppose everyone will stop buying ASIC miners from KnC now that I have "let the cat out of the bag"!? :o ;D

Best answer so far.

It obvious really why they sell. If you are a company that has manufactured lets say 1000 mining machines you have two choices in this scenario:

1) sell them for 1k USD each
2) mine with them to make 1.5kUSD >per machine< over 6 months.

With option 1 you have realised 1 Million USD within the time it takes to sell out - lets say 1week. So after 1week you have 1Mill in the bank and you can put half of that that money towards creating new hardware strightaway and keep the other 500k USD as profit.

With option 2 you have 1.5Mill but you get that progressively over 6months so you can't after 1week put 500k USD towards making new hardware. You will have to wait maybe 2months before you have 500k to spend on new hardware which is quite a delay over 1week. Also with option 2 you need to hire premises for the 1000 machines and you need to pay for electrical  installation work at the new farm and pay staff to run it. After all that is paid for you could be waiting 3 months to generate 500k USD in profit. If your business intends to keep manufacturuing new hardware and chips this wait time is not feasible. So after rental costs for your farm (plus staffing, insurance, rates etc) your total earnings from 6months of mining the 1000 machines would be closer to the 1Mill you would have made from selling them 6months earlier.

If you expand that selling vrs mining scenario into a 5 year business plan you would quickly see how selling machines builds up a larger business over a shorter time so long as the business keeps reinvesting in new hardware production.

Remember when you sell the miner to a customer all the costs associated with keeping that miner on a farm (rent, staff insurance) are bourne by the customer too.

If you introduce the per-order side into this industry then option 1 becomes even more profitable.

Now do you feel stupid when you read post above yours?

No there is also another option:

1. Sell the miners before they exist and request pre-payment to fund the development cost.
2. Mine with them for several weeks/months to make $1,5k (as per your scenario).
3. Ship them to the customers who already paid $1k upfront.

This way you get to both eat the cake and have it.

Minerpart - I urge you to actually read the post just above yours before posting next time, and yeah do watch he video too...   ::)

here's my plan.  buy an expensive 2 TH/s miner, mine 1 block, and then sell it for the same price that i paid for it

No not atall can you explain why I should?

I wasn't talking about KnC or any real world company I was describing a non-specific scenario that explains why selling can make more for a company over a shorter time than mining.

If you read the first post on this thread you will see that my post is a direct reply to the OP's  question. My reply in no way suggests that companies like KnC don't mine with their own machines......does it??

I might be getting the wrong end of the stick here as I'm not 100% what you mean by should I feel stupid.

My point exactly. Those who mine take a greater risk then those who sell the equipment. If bitcoin became useless at one point most hurt by it would be miners, then makers of equipment.

Well I took a while writing my post as I was watching some TV at the same time so it wasn't there when I started typing. And when I read it after trying to post it didn't seem relevant to my reply to the OP in the slightest. Still doesn't.

EDIT - my scenario is simplified but it is also accurate in the real world. Mining is long-term gain, selling is instant gain - that is the central point.

Now that doesn't mean a manufacturer will never mine their own hardware. There are cases where it would and one situation would be that they have already raised enough capital from selling machines to fully meet the cash demands of designing and creating the next generation of miners. In that case they have no need to instantly realise the profit tied up in the rest of their unsold machines and can thus mine with them to generate more than the retail value over say the next 6months. I mentioned a firm who had 1000 machines at 1k each with a total asset value of 1Mill USD. Obviously KnC are way beyond that level so they have what you could call 'excess capacity' in their machine stock. ie they don't need all the capital these machines represent right away. So they can afford to wait for the cash which means they can afford to mine.

When KnC first set up in business they could not afford to mine so they had to sell all the machines they made for immediate reinvestment capital. They are basically in a tier above a firm that still needs to sell everything for instant profit - the '1000 machine companies'.

months ago, I sold a 10.7 ghs miner for 550 bucks. now it is worth 120 bucks buy it now on ebay.

they probably use theminers or make them because they know how and they like making these types of things.

Well there is always comparative advantage..  IF you are focusing energy on mining you don't have as much to push forward R&D so you risk falling behind competition and production.  Thinking about our comparative advantage we have cheap energy and fine climate so it doesn't make sense for them to mine.

why shouldn`t they be allowed to build their own center to use their equipment long term? if they build that just to mine for a few weeks with customers equipment and then shut it down again when units are sold i still doubt if there is a decent margin.

things arent always what they seem to be. just because you can cheat your customers, doesn`t mean that you will.
but having the faccility in place allready for long term mining does make it easier and cheaper to scale if they wanted to do it.

For profit?

Is this really a question ? Why does any company sell anything?

They are usually pre order when the time you get your miner the bitcoin diff have already went up

The problem of industrial farm is already here ...

http://imageshack.com/a/img853/2251/fyt9.jpg
(bro, stop this idiot redirection of image ...)

The mining asic companies are kind of a scam in my opinion.
Their prices are not based on their costs like any other product, those ASICs could cost much less.

They calculate how much bitcoin you may hypothetically farm in a period of about 6 months.
Supossing that in 6 months you may farm 1BTC , so 1BTC is exactly what they will charge for the equipment. If you manage to make anything after 6 months, that's your small profit.

By selling it to you they get the full, or near full minning profit IN ADVANCE FROM YOU. That's why they sell the equipment.

Well i guess they make a lot selling them in thousands and they might not be into bitcoin that much.

Because making ASICs is a different business than mining bitcoins. Its like saying, why do tool companies sell 6-axis CNC machines when those machines can generate more than their own value in less than a year in machine work. It's two different businesses.

Also, you are neglecting the energy cost problem. The biggest mining cost is not the equipment, its the electricity. Most profitable miners are only profitable because they steal electricity or for some reason have access to cheap or free electricity.

Selling miners completely offloads the risk to the miner instead of themselves.

Just like the real gold rush of the 1920s. The makers of the shovels made out well, because once they sell the equipment they already made their profit. If the miner wielding that shovel goes out in search of gold and comes up empty, the shovel maker could care less. This is why some ASIC makers both sell rigs and mine too to diversify the risks.

Selling miners is no different than selling anything else for them. There is demand, and they are supply.