Darn. If only you or someone else had listened to me 8 months ago .
Can you give an order of magnitude of NRE involved? I found that pretty impossible to find out.


Well, I share your doubts and would put my money on 90 or 130nm, but do keep in mind, even if you are competitive with BFLs chip in all metrics, including cost, coming to market 6, 9 or more months later may prove absolutely deadly. By that time, the market may already be  saturated with per GH prices plummeting to the point where it might prove very tough to recover your investment.

I hope you will focus -more than BFL would have- on total cost of the device, putting as much on the asic as possible to keep your variable costs as low as possible when going large scale. Thats the only fighting chance you may have, and Im not betting on it, but good luck nonetheless.

As I understand, no matter how many fpga's you send back to BFL, you have to place an asic order that is 2x bigger than the value of your fpgas. IOW, you have to double your bet. Its not an easy decision to make, certainly not at this point with so many unknowns, but at least my willingness to invest in your company would depend very much on your perspective on spending money on ASICs.


BTW; why did you buy those FPGAs in the first place? With nearly free electricity, it would take an eternity to become more profitable than your gpus, no?

I think people will make widely different estimates of what that hardware will be worth in 6 months, Im sure some will think pre 7xxx GPUs will be worth only very little as gpu farms sell out left and right, and its clear as mud how popular fpga singles will become to use as "credit" towards an asic purchase, but FWIW, your estimate seems relatively accurate to me.


Thats low indeed

Have you any thoughts on what you would do if/when difficulty increases by 5x or 10x? Do you intend to keep mining with those gpus as long as its marginally profitable, or sell ? Any thoughts on getting in to asics?

Nice to see you selling shares, rather than bonds.
However, in order to make an assessment, it would be good if you gave some more info. Specifically Id like to hear about what hardware you are running (gpu or fgpa and which kind) and how low your electricity cost really is.

One more thing on this. If BFL wanted to play "fair" and make sure its customers dont get shafted, what they could do is auction off their hardware in public auctions (heck, ebay) and sign a contract that clearly states how many devices or TH they will produce per month and per year.  That would allow fair bidding and customers could at least guestimate their ROI, assuming no competitor would emerge.

OTOH, if BFL wants to maximize their profits, they should still auction off their hardware but in a silent auction, one at a time, delay shipment as much as possible, and not say how many they are selling or will sell. This would pretty much guarantee that every buyer gets hosed.

No, I cant see why that wouldnt work. In fact, if I had a chip development ongoing, thats precisely what I would do, let Nzang and the others build boards and solutions around it, but compared to the development of the asic itself,  the problem you are solving here is rather minuscule.


Again, IM not sure I see the point. Say I plunged a few million dollar on making that maskset, and Im struggling to recover my investment. Why would I let you run a few wafers? Even if I did, and charged you an arm and a leg for it, since you have to run them through the same fab as me, its really the same thing as selling you the processed wafers, and assuming you dont want to duplicate the costs for testing, packaging etc, you would really just be buying my chips.

You will have to define the problem first.

If your problem is that BFL is poised to make a killing, then, no, I dont see a "solution".
If your problem is that miners will get shafted, then its easy, dont buy in to those asics.
If your problem is BFL having a near monopoly on mining hardware for the foreseeable future; assuming BFL are sincere in their projections, then any real solution to that should have gotten started ~6 months ago. Perhaps largecoin or vladimir or someone else will surprise us, but if no one is well underway by now, then, nope, I dont see a solution.  I had hoped some kind of s-asic or gate array chip would be more competitive, but apparently thats not the case.

And whats the benefit of doing so, to anyone? The RTL we already have (well, more or less), anything beyond that like the synthesis and  place and route will be covered by NDAs, but even if they werent, it would only be useful at one specific fab using one particular process and its usefulness would be limited to someone nearly doubling the NRE by ordering pretty much the exact same maskset. If this chip arrives 6+ months after BFL, I would be surprised if they could recover the costs of one design and maskset, anyone trying to do the same another 6 months later is completely out of his mind. "Opensourcing" stuff like PCB design is almost equally pointless, the PCB will be utterly tied to the asic.

I think many people here would like to see BFLs bitstream and have people improve on it, and therefore think opensource hardware is somehow good, but that only works for FPGAs. Once this asic has taped out, any brilliant idea anyone might have to improve on it will be useless.

Anyway, I dont think this is the biggest hurdle this project has ahead of it. Im my mind, Ive started making a list of "bitcoin tops and flops of 2012", and I fear this project will feature in the latter list, along with Diablo's $1M Mining corporation, Vladimirs "huge" asic mining company, Pirates mega Ponzi and a few other pies in the sky. But I guess we'll see.

You run a business, you should do what makes financial sense for your business. You have no obligations to your bondholders other than whats in the contract. That asics are about to render those bonds almost worthless is not your "fault" or responsibility, and frankly there isnt much you can do about it even if you wanted. Buying asics yourself or not doesnt change a thing, because someone else will anyway.

What I was responding to, was just your enthusiasm about getting asics later, it sounded as if gigaminers were supposed to be happy about that; shareholders might be (but IMO shouldnt),  but any rational bond holder will feel the exact opposite.

As for what to do; heh, thats obviously your call. Ive posted a gazillion posts already why I think buying asics is something in between russian roulette and certain suicide, that was my position when BFL announced minirigs and I feared and predicted this would happen; but you already have a significant investment in BFL FPGAs, that does change things. The BFL trade up program will put FPGA owners like you in the uncomfortable position of having to chose between doubling their bet (and a bet that  I think is more than just risky, unless you get some special treatment and/or guarantees from BFL) or eating the losses on those mini rigs.

If I where you, Id do neither, and try to sell all my BFL gear to someone willing to play russian roulette with those asics;  but hey, thats just me. If you decide the other way, I just hope I will be able to short bonds by then

Speaking of which, GeoRW , how exactly did you short those bonds?

So you are pegging your hopes on gigavps' consideration of voluntarily and partially compensating you for the massive loss of value that your bonds are about to suffer. I can see how you would get excited by that.

Dont get me wrong, whats about to happen is of course not giga's fault and if he does offer a below market price upgrade to larger bonds, thats certainly laudable, but it doesnt change the fact that any current mining bond holder should not exactly get excited by the prospect of ASICs making their entry.

How do bond holders benefit from you -or anyone else- acquiring several terrahash? AFAIK you dont sell shares, but bonds who's value is directly and inversely related to difficulty. Your 4 minirig SCs alone would push down your bond holders value by some 20%.

Didnt realize that. Well, not sure if doubling would be fair, I dont think every fpga owner will double his investment. The above will more likely result in mini rig buyers getting shafted big time.

Food for thought.
If you tally the current publicly known orders  of mini rigs :

13 minirigs here: https://bitcointalk.org/index.php?topic=76916.0
IIRC gigavps has 8 minirigs on order?

If so, thats 21 minirigs, and Im sure there are many more we dont know about. Traded in for half as many SC minirigs, thats ~10 minirig SCs or 10TH.

Then lets look at known singles:

https://bitcointalk.org/index.php?topic=77796.0
422 singles that we know about, and Im guessing that thread doesnt even contain half of them, neither GigaVPS nor Inaba's farm are listed.
But even so, traded in for half that many single SCs thats another ~8TH.

So you are looking at, at the very least 18TH that will come online without anyone spending a dime buying those asic, just from trading in already ordered FPGAs. (If you think those fpgas will be scrapped or mothballed you can deduct 10% of that).

!

Its time for a reality check; if you have yet to select a fab and process, you cant even have taped out yet, much less have a maskset. What you do have is an FPGA design that might be ported to a process, but that still needs to be done, the analog part probably still needs to be done, the design must be tested, characterized and validated for that process,  then you have to order the maskset, wait for it to be produced, then you have to order the wafers, wait for wafer processing, you have to get the chips cut, packaged and tested, design and order and test the PCBs, do Q&A, software, etc.

IOW, you are as far as BFL would have been 9 (or more likely 12) months ago. How in the world do you expect to beat them to market?

No offense Gusti, but by your own admission you have no experience in the semi conductor industry and you seem to be treating this as the purchase of a car or something, asking around quotes and expecting to place an order and be done with it. Even for a structured ASIC it wouldnt be quite that simple, but the development process of a custom asic is a lot more complicated than that, and I would feel a lot more confident in the outcome of your project if someone was involved that has any experience designing, producing and bringing to market a digital design of any kind. I know thats not you, nor Jason, so I would urge you to bring someone on board who has that experience. Now you could outsource all of that (prepare for a shock when you get the quote and tentative planning) but then you wouldnt be negotiating with fabs like you say you are.

As for the business aspect of this; you may call it opensource or community driven, but what does that even mean if you are simply a company that will fund the NRE to develop and sell another asic? I fail to see the big difference with BFL.  If the community aspect of this will be the funding, good luck raising the $1+M you would need to come to market with a product that will start a price war with BFL (and potentially others) who will already have recovered their NRE and because of their early sales, will have pushed up difficulty to a point where your asics will be worth only a fraction of what they could be worth today.

I may be missing something, and I hope Im wrong, but I just dont see how this is going to fly.

They burn in their minirigs, which to be fair, is what youd expect anyway. You know, testing. But its not done on testnet.
Now their current hardware doesnt have a significant impact on the network, but these asics will change that. Whether or not they will mine for profit; who knows? But they sure wont tell you if they do. Nor will they tell you who gets those rigs first.

I would definitely argue your numbers. If by "full custom" you mean, standard cell asic (full custom stricto sensu is absolutely pointless), and assuming an affordable process, like 90 or 130nm, you are off by at least an order of magnitude. No way anyone  would plunge $30M in to a bitcoin specific chip anyway, the potential to break even on that simply isnt there.

To all the people doing the math on ROI;  redo your math assuming your minirig sc arrived as late as your fpga single, and see what happens.
 The first ones to get their hands on these might indeed see a good return, but the first ones who will get their hands on these, are...
BFL.

I meant dependent on market conditions, so at a price of x% above marketprice, just like any other mining bond. I would have to do that to allow me to cut my losses in case dividends would keep going up instead of down. If anything, that should attract investors, because they know I will have to buy them back at a premium if it starts going up too much.

Well,  I actually own higher hashrate than many bond issuers on GLBSE, but I fail to see what difference that makes. If Im acting in bad faith, I can run off with the money with or without having a farm. Its not like any bond issuer is giving his farm in escrow. 

As for a buy back clause. Which bond doesnt have that? If you are issuing a perpetual bond, there has to be one, no one lives forever.

And why wouldnt they? I know it looks ironic to be selling something you assume will generate a loss, but the terms would be at least as favorable as all the other bonds. At least Im honest about it . Most miners selling mining bonds wouldnt be selling if they were confident they could earn more by mining.

Hey all,

Im strongly convinced mining bonds on GLBSE are currently way overpriced;  the typical price for these bonds seems to be 12-18 months of coupon payouts (ie, mining revenue at current difficulty), which I think is totally absurd considering difficulty has been rising by ~8% monthly for the past 6 months, block reward is about to half and ASICs will probably arrive in the next 6 months. I cant see how these bonds will make a profit over the next ~12 months. Even at the current trend, so before the asic and block reward halving, difficulty is increasing faster than coupon payouts.

Since there is no obvious way to short these bonds, Im considering the following:

1.
Set up a virtual mining bond that is not necessarily backed by any hashing power (I actually do have some, but thats besides the point). These bonds will pay coupons based on difficulty, like any other mining bond; I would sell these bonds at prices slightly below current mining bonds to make sure they are more attractive (or as I see it, less toxic) than the other bonds out there. Dividends will be paid out of my pocket and from the bitcoins raised from selling these bonds.

Yes, I know how that sounds, but this wouldnt be a ponzi scheme; I would keep enough BTC at hand to buy back my bonds at any point in case my bet goes wrong. If people dont trust me enough for that, I may even put that in escrow somewhere. Now I would obviously run the risk that prices for such bonds will not drop, or not fast enough to offset the coupon payments, so I could very well lose money on it, which is obviously okay, the whole point is that I am betting the other way. I would not issue more bonds than I can easily afford to buy back at a predefined price.

Bond holders would risk no more than they would with any other mining bond, they would only risk that difficulty will go up faster than they expected, causing their bonds  to lose value faster than dividends make up for. Any mining bond carries that same risk (which I estimate to be huge). The fact that this bond would not be backed by actual hashing power is no extra risk, when you buy a bond, you dont own the mining hardware anyway, its not a share.


2.
Now I assume Im not the only one who believes that over the next ~12 months, these mining bonds will depreciate faster than coupon payments will compensate for, so I would also like to set up another asset where people can buy shares in this venture  (tentatively called Toxic Mining) . The capital raised from these shares would be used as collateral to issue more virtual mining bonds without creating extra risk to bond holders (the extra BTC from the share sale allow us to keep more BTC on hand to pay coupons or buy back bonds even if our bet goes the wrong way).

This asset would not make a profit and therefore not earn any dividends until our bet pans out and we can start buying back bonds at prices that are substantially lower than the original price + coupon payments, Investors in these shares will take the same risk I would, and therefore risk losing part of their investment, or potentially even all of it if something extremely unlikely happens (like difficulty decreasing by a factor 3 or so over the next 12 months) but they stand to earn substantially if we win our bet and difficulty explodes in the next 6 to 12 months.

This would also be a convenient way for miners to hedge their risk. If you are about to order ASICs, but are unsure if a large difficulty increases will kill your ROI, you could buy shares in this company to hedge against it.

Anyway, Im not much of a gambler, so I am not going to go all in on this, but im willing to put 100 or so BTC aside as guarantee for a first batch of virtual mining bonds to kickstart this; I would love to hear what other people think, both potential bond holder and share holders. I guess I could also use a hand formulating the contracts.