I agree, they should just do a batch revision in the interim after shipping what they now have and then offer an upgrade for people who bought the 60. Maybe upgrade them to 80 or 90 and then resell the 60's to other customers as a separate SKU.

It would suck to get a rig and one month later end up with a dead chip(s). That would be pretty hard to fix and there would be almost no workaround for that. (RMA's and the confidence hit wouldn't be worth it)

Explain?

Well, sorta true. But one would hope it would take you up to your investment capital being recovered and then some profit before Gen 2.

Edit: In pragmatic sense, the purpose of the profit should be to generate enough profit to cover the A) cost of Gen 1 B) cover the cost of a Gen 2 device and then C) a significant extra to gain some material benefit of some kind. Otherwise your profits just end up going into your vendors pocket in a sort of flowing pyramid scheme. You always have to walk away with some kind of real material benefit besides being able to buy each successive generation.

But lets say Gen 2 comes along and they do indeed offer an exchange program. What should be the price of Gen 2?

2000 USD or more? (Keep in mind customers of BFL hardware do not want any price cuts while they attempt to recover the cost of their units.)

What should happen to the price of Gen 1 at the intro of Gen 2?
What is the trade in value for a [used] Gen 1 module? (How much of the original price is respected? 400$ for a Single SC? 1299$? 800$? What about for a Jally? 25$? 75$? 150?

---------------------------

And finally, what should BFL sell a 60Gh/s system for 10 months down the road when it produces (or is worth) alot less in terms of income?

Right now, a 60Gh/s system is supposed to make a ton of BTC/cash. Well according to some (it's possible). Though, what would BFL sell it at when difficulty is high and a 60Gh/s is no longer bringing in the volume of BTC/Cash?

Doesn't the price of a product normally go down in such scenarios?

If so, then what is the trade-in value vs the cost of a Gen 2 system?
10%?
40%?
100%?

---------------------

Should a Gen 2 system cost alot more than a Gen 1?
Should there be a price freeze on a Gen 1 unit until people can sell them off (or just recover their costs)?
There are tons of questions I can think up. None of them are too convenient for both the buyer or the vendor.

Perhaps it is time to headlock a vendor employee  of your choice and get them to give you a written agreement that the device will be price protected at trade in. Otherwise you might get pennies on the dollar for that trade-in.

If Nothing is written, then there is no legal binding agreement. (Make sure an employee is authorized to make such a deal of behalf of their Vendor. So that there is a Vendor Level Agreement and not just an Emloyee agreement whom can be fired at any point.)

If the employee backs out or becomes evasive, then you know what you are actually getting promised in that trade-in.

It shouldn't as far as I know. But BFL has stated 1 watt per GH. So there you go? (??)

If they (BFL) go to 72, they will start coming dangerously close to the red zone. (Easy Heat Death for their chips. They stated before when they go to 60GH/s they can have up to 25% higher clocks)

The question is, is the company over confident in a good way or a bad way?

They might choose a route where they take a hit in profit to provide extra hardware.
They might choose a route where they over clock their chips to their maximum rating and thereby increase RMA returns in March. ($$$ lost)
They might choose a route where they give away relatively cheap nick knacks...but this is unlikely to make most customers happy.

They might choose to upgrade their second batch and have an upgrade program (very likely and is the cheaper option). (Aka the 30, 60, 90 program?)

They might choose to offer a second device to cover the difference. (Possible, but cost ineffective)

etc.

Talking big in an overconfident tone might keep their customers around. (That's what real Vendors do anyway!) It may also just as well signal that they have no painless plan in place and need to talk big to cover for that inability.

One guy on their forums is about to switch his investments from BFL to bASIC at a cost to BFL of 8,000 dollars.

https://forums.butterflylabs.com/jalapeno-single-sc-support/427-basic-33%25-hashrate-increase-3.html#post5999

BFL is also now deleting threads from customers with content which is not unexpected nor even offensive considering they invested in the company as a paying customer. I just left a thread open in my browser this morning  and refreshed it....poof, it is gone.

The censoring has apparently begun on their forums (IMO).

Is it safe to say "the Avalon device is no where near its maximum performance at the current 66Gh/s"?

Is there still quite a lot of headroom to play with?

Any idea of when the next email update (#5)  may occur?

I will get back to your in a bit.

So far it looks like we have two emerging camps. One states that we will be filthy rich on ASIC in no time.

The other states that difficulty will climb and you will be saddled with debt in the form of an ASIC.

Two opposing camps. One is good news (everyone can use that) and the other is pretty grim news.

-----

Place your bets folks, if you fall into the great news camp, put your money down, in a short time you will make tons of BTC or cash.

Others with a more critical eye of the situation, sorry for the bad news.

When I see people getting their invested money in three months...then I will hop the fence into the Good news camp. Either way, it's bad. You can't have both good and bad news at the same time in this situation.

If as you say, even with a jally you can make 3 times it's price in no time, then people should listen to you. Cause it means I can make back the cost of a 66Gh/s ASIC in even less time than that.

That was like a year ago, whats up with the GPU rigs today?

I see alot of people commenting that they aren't going to be buying any [more GPU's] considering they can't make back their investment....in 90 days? (And this is without ASICs in the BTC network)

Now we have spokespeople for one vendor who says some devices may not make it back in 2 years....(that is not insane??)

How do you square that away?

---------------------------

What is a rough estimate for a 55 to 60Gh/s unit? Around 1 year? (2014?)

[DISCLAIMER: This post is nothing but pure speculation on what may happen in the ASIC market]

I don't want to get in between your spat but this is how I see it.



If you look at the basic graphic above, these are all number I pulled out of thin air. But they should approximate the gradually decreasing returns. (This is why it may take up to 2 years for ROI, or less if you use a higher end rig.)

Lets say you earn $100 in January. The longer you keep the rig, the more profits you make. What most people realize so far is that they gradually reap less benefits from the device each additional month (due to increasing difficulty). Short of some miraculous events, this is pretty normal and predictable.

Each month that a person owns a rig, they make back some of their invested cash. It isn't until they come out even (made back all the cash that they spent) that they will begin to draw out profits from the device.

Lets go through a few simple scenarios:

A) Lets say a vendor wishes to introduce a "GEN 2 ASIC" in September 2013.*

Problem of the Vendor: They have to lower their [GEN 1 ASIC] price in order to sell it. Otherwise, they must sell Gen 2 at an even higher price. (possible but unlikely) This is problematic for current owners of GEN 1 equipment. While their equipment(s) value is logically going down the longer they own and use it. Their resale value is also going down.

Prospective buyers in the gray market (Bitcointalk.org for example) are not going to be willing to pay 100% of the purchase price. Logically, prospective are going to want to pay 90% for a $1299 mining rig in January. Lets say 75% in March. 55% in June. 40% in August.

The valuation of an ASIC GEN 1 mining rig will (extremely likely) not be $1299 in September Probably less than $500 or less if an owner is unlucky.. It will probably have devalued enough that the only people who will want to buy it form current owner are the ones who are willing to sell their rigs at dirt cheap prices. (Keep in mind, a rig in september 2013 is producing alot less $$ than a rig in Janurary 2013 due to difficulty and hashing power on the BTC network. So its value is much lower by then.)

So people who want their cash back fast and don't want to wait another year while the investment pays off will have to Sell it to someone else very cheaply.

---------------------------

What happens though if some Vendor cuts their price on their current GEN 1 stock?

Example? : https://forums.butterflylabs.com/pre-sales-questions/354-bfl-price-guarantee-4.html

Well, that forces the hands of current owners of ASIC GEN 1 equipment. Say the price is cut from $1299 to $499. They (individual sellers) will have to sell at an even lower price than they originally intended in the Gray Market. They won't make back their investment. They will actually lose money in the process.

Note: Why would a Gray Market buyer...buy used equipment at near retail price from an individual seller trying to offload their rig? (They won't)

If they want to buy Gen 2. They will have to take the loss and pull even more cash out of their pocket to pay for the GEN 2 rig. (Assuming it is priced at $1299....)

So CoinHoarder is making a pretty (as he said) obvious point. It is not rocket science.

The only people who will make positive returns are the people in the Gray Market who short change the average seller whom will want to get rid of their (marginal profit) rigs.

As they pick them up cheaply, they can hoard rigs and scale it to make a profit at a steep discount. (these folks will effectively resolve "the price problem" of ASICs.)

Well, either way, the result is either alot of people are going to be very thankful that low end devices have a two year long profit. (Unlikely IMO)

Or they will be disgruntled when they begin to realize it. Either way, I don't have to deal with the customer service, the demands, the irate phone calls etc. So I feel unaffected about it.

It will make customers even more disgruntled if any Vendor lowers it's price while they (the customer)  tries to offload it and get their money back. But I could be wrong....this may never happen.

I know of at least one vendor whos main motto is about never leaving their customer high and dry. They will never do them wrong [supposedly]. Of that I am sure...

Edit: By the way, in any market there is a way to the top. Even when things go to hell in a hand basket. If you can buy up all the hardware at very discounted rates. That is truly the only way I see anyone making their profits quickly and easily. Buying up the hardware at a virtual fire sale.

You might jeer me and think I am spouting the absurd, but I would not be the least surprised if there are other astute individuals thinking about how they are going to enter the Gray Market and snatch up rigs at cheap prices. If a person can get the rigs at a discounted price, then this will ameliorate the issues to some degree. (Over both the long and short term.)

This has already been discussed openly at BitCoinTalk.org several times. This is not news to anyone. A vendors price is just as important as the difficulty and combined hashing power on the network.

All I do know is I am not going to be buying them up at a loss for other folks. It is very easy to lose money on BitCoin mining.

Deja Vu!

BFL is still late at delivering even with more experience....1.5 years later....thank you for the continual consistency?

Let us all hope they are ready to ship [in volume] in about 5 days. If not, oh well, you won't know about it until just the day before...of course...

Okay, enough with the banter, I got it out of my system.

---The past is a disturbing repeat of the present. <Shrug>

If the ASIC vendors can make smaller daughterboards that are alike and can be hosted on an internal bus or something like a mini-PCIe board, then that would cut costs in manufacturing the device.

http://en.wikipedia.org/wiki/PCI_Express#PCI_Express_Mini_Card

Consider for example the BFL Single. Like you said, it is a square box with a PCB board with a heatsink. Imagine if you only had to produce 1 motherboard and had vertical mounts (like the old BTCFPGA design). This would make it a bit cheaper to produce quantities of add-on boards.

With fabs, with quantity there are discounts. There are also less processes to go through to put one together than say a BFL single which should have a higher overhead because it brings lots of components like the case and power supply.. The metal box is one piece and it has to be created n number of times how many boxes you want.

With add-on daughter card(s) it should be simpler, cheaper and easier to populate a rig with identical daughter cards (as needed).

If I am not mistaken, the BFL mini-rigs are modules but they are separate by connective cabling. They have to be professionally assembled as opposed to an end-user just popping the case open and adding more processing power into one of many east to install slots.

As to the cryptocurrencies, there are already merged mining pools, so all the bitcoin forks do not need to covered by vendors, and the non doubleSHA256s can't work alongside bitcoin for ASICs as needs no explanation.
[/quote]

@ SloK

The biggest risk in this plan is that BFL lowers their price in March when people have had time with their ASIC devices and report back their experiences.. I expect this to be negative due to the difficulty level.

If buyers of First Gen ASICs begin selling off their hardware to prospective buyers whom don't have to wait for batches and parts....I suspect that BFL may crush the Gray Market by lowering it's prices significantly. Something which BFL customers have asked for a guarantee against. (Which has been denied)

Unhappy buyers can squash any extra profits for the Vendors if they sell their hardware in droves. Why get a bASIC or BFL Single at 100% the purchase price if you can find it at 75% in the Gray market on this forum?

@ Slok

Thank you for your thorough answer. Feel free to ask me any questions beyond this one so you understand my view and general assumptions.

I have not yet commented on the Avalon thread on this topic. I assume that the Avalon device was originally rated higher than the conservative 60Gh/s and the Avalon team was likely targeting the DeepBit 80Gh/s system and not BFL's Single SC (@ 40Gh/s) at the time they formulated the Avalon Device.

I presume in reality they will have a final Gh/s rate of somewhere around 70 to 75Gh/s. (Currently they are at 66Gh/s)

I believe they will ultimately offer a lower GH/s rate than they "probably can" because of power requirements and what other vendors are aiming for. I believe they will come out at somewhere around 200 to 250 watts (at worst). (160watts at best)

You may ask what the basis is for that idea. The answer is that they never seemed to be aiming for BFL and their hardware seems to be stylized in the same manner and concept as DeepBits design rather than that of BFL.

-----------------------------

To be truthful though, they are caught by the same malady we have been talking about for the last few pages. The difficulty and the wide availability of ASIC devices is what will make rigs unprofitable as a source of income.

To mitigate this issue, I am going to privately make graphs in the background that will tell me what the actual value of a device is at any point in time. (Vendor specific)

I will only hold out in selling the Avalon device when a few specific thresholds are reached.

A) The devaluation of First Gen ASIC hardware on the basis of what price it can be sold at from week to week. (Devaluation is very important to setting a resale value in the "Gray market".) <--- At a discount.
B) The rate of rising difficulty from a week to week basis and how it affects returns.
C) The rate of new/old customers wishing to purchase new or extra ASIC devices which add hashing power to the BitCoin Network.
D) The present feel for what the ASIC community will bear vs recouped costs (to date).

With all these in mind, I will then sell the device at a discount if it is seriously unprofitable and allow someone else to take on the burden of risk. Then wait until Gen 2 and repurchase the hardware.

---------------------------

My understanding is that many members buying ASICs will be lulled into staying with their hardware for too long because they do gradually recover their costs. The issue will be when people keep the ASIC devices to the point of severe devaluation and when the Grey market does not want first gen ASIC devices at any discounted cost.

At that point it will be too late to get your investment out of harms way and anyone left in that boat will be in it for the long haul. Having been stuck with over priced hardware and dwindling returns, I expect that Gen 2 will come out in about 6 months and most will not want to splurge for a second Gen device considering they are still not covering the costs of the first.

So it is best to offload it just before the gray market turns sour and people realize the lemons in the lemonade.

I expect Gen 2 will probably be a little lower in price than Gen 1. It will probably also be more advanced and hopefully faster. If that is the case, Gen 2 is probably where you want to put your cash.

If you over invested, it is unlikely you will be able to offload a large quantity of units without a significant discount.

I don't intend to cancel. I hope that someone has come up with a better plan or that the undisclosed features of the Vendor I chose is adequate enough to justify holding on to it for a few months longer.

At the moment the only problem with the Avalon device is it's electrical use. That alone won't bother people much if you sell it at the beginning when the rate of return and resell value is high.

This won't be a viable sell though if I wait too long to and the margins shrink.

I hope this answered your questions.

@ thoughtfan

I do not know who you are, but you have earned my respect with you insightful. helpful and community building advice. Many thanks to you and yours on this Holiday weekend.

We need more folks like you!

Sir, I did not "duck the question" anymore than you ducked mine. I can answer your question perfectly well. I just ask that you answer mine as well.

As for you making it sound like it is my job to inform others, you are sadly mistaken. It is not my job to inform the community.

Do you want me to answer your question first and then you can answer mine, or do you not intend to answer my questions despite my efforts to answer yours?

Like I said, it is a "give and take" community.

And please stop with the name calling. It's not going to convince either of us.

Finally! Someone who gets it....!

Exactly.

The vendor who figures out a way to modularize their components and add (cheap) upgrade-ability will be the one to succeed. The upgrade path will have to exceed firmware and simple overlcocking changes.

They should also diversify the support for various cyrptocurrencies. So you don't have all your eggs in one basket.

That you are spot on.

What you just described is basically a money pit. All the money goes out of your pocket and into the ground (the money pit). In order to recoup your loss you'd have to figure out a way to pass the loss on to someone else who is hopeful and naive.

If you don't, then the only one making all the money in this is the vendor. The only way out of this is by the vendor selling second gen hardware that is several times more efficient than the first gen. At which point you can recoup the money.


-----------------------

But...

Then it becomes a Chicken and the Egg situation. Everytime they sell better hardware, they make the difficulty increase at a faster rate. So you will probably never beat this game. Only if there is exclusivity do you make back your money quickly and then profit.

Exclusivity therefore is the major problem....

Difficulty is just a secondary problem.

---------------------------------

Best you can hope for is that a vendor implodes and takes out a big chunk of the competition with it. Thereby increasing the exclusivity and lowering the difficulty.

A manufacturing defect is good enough. Or bad vendor policy. Whichever comes first.

There you go folks, straight from the mouth of the people who sold you a lemon...I mean a Jalapeno.

About 2 years to get back a mere $150~ (plus or minus shipping costs) is not "insane". You heard it here first.

P.S. Yes, it is true of other vendors if they did the same. So far none have a lower end product like BFL. (BTCFPGA does have a 27Gh/s system but those orders were upgraded to 54Gh/s systems. They also cost less than a BFL Single.

But I might as well not pinch pennies in my arguments/debates.