BFL Power efficiency argument fallacy

[hardcore-fs]

Everyone knows by now that BFL has more power efficient ASICs than their competitors (or at least, they think they do). Therefore people say they will be profitable for longer, which is true.

However, I'm not sure that this is as big a deal as people claim. I don't think that most people are taking into account 2nd generation ASICs.

BFL, and other ASIC manufacturers, are going to see sales diminishing as difficulty rises throughout the year 2013. They will be looking for a way to increase or maintain profit. One of the most obvious ways of doing this will be to release 2nd generation ASICs.

If BFL puts a cutoff date on trade ins for 2nd generation ASICs (lets be honest, what company would not put a cut off date on such a thing?), like they have on the 1st generation, then all BFL customers will need to pay more capital to trade in their ASICs for the 2nd generation unless they want to quit mining, or be stuck with a previous generation ASIC.

The sooner they announce/preorder/deliver 2nd generations ASICs, the less important 1st generation power consumption rates will be because you will have less time to reap the benefits of the lower power consumption and you will need to spend more money to upgrade.

I'm just thinking aloud here...  whats your opinion?

1.Sorry who is this "everyone"....?
I don't know such a thing , because I have not seen the spec, manufacturer OR internal design of their product.

Please consider:

"Many people know the hearsay that BFL has more power efficient ASICs than their competitors ".


2. An ASIC design is ONLY as good as its internal design, so you may well have the shit-hottest process in the WORLD!!!
Consider that Xilinx FPGA's are manufactured on 22nm/32nm/45nm and yet we see in the case of the XUPV5 that it is only capable of about 120MH/s (ok I'm at 210MH/s but thats another story)
This tells us that it is the ROUTING and resource allocation within the design that can have a FAR MORE CRITICAL impact that physical size of the die/process.

3. "BFL, and other ASIC manufacturers, are going to see sales diminishing as difficulty rises throughout the year 2013."

Analysis, based on what, quote/site references?

4. "The sooner they announce/preorder/deliver 2nd generations ASICs, the less important 1st generation power consumption rates will be because you will have less time to reap the benefits of the lower power consumption and you will need to spend more money to upgrade."

Sorry.... again there are some very creative ways to save power and get it for FREE LEGALLY, making such discussions moot.



Instead of arguing "fallacies" with such weakly made points you could  make perhaps better use of your time...

[1715369520]

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[CoinHoarder]

1.Sorry who is this "everyone"....?
I don't know such a thing , because I have not seen the spec, manufacturer OR internal design of their product.

Please consider:

"Many people know the hearsay that BFL has more power efficient ASICs than their competitors ".

Ok.. whatever... here you are nitpicking my wording trying to make a point. It's cute but just because you believe we never landed on the moon, doesn't mean we didn't. Anyways, I adressed your concerns at the end of that sentence, if you would have read the whole thing: "Everyone knows by now that BFL has more power efficient ASICs than their competitors (or at least, they think they do)." 

2. An ASIC design is ONLY as good as its internal design, so you may well have the shit-hottest process in the WORLD!!!
Consider that Xilinx FPGA's are manufactured on 22nm/32nm/45nm and yet we see in the case of the XUPV5 that it is only capable of about 120MH/s (ok I'm at 210MH/s but thats another story)
This tells us that it is the ROUTING and resource allocation within the design that can have a FAR MORE CRITICAL impact that physical size of the die/process.

This has nothing to do with my OP

3. "BFL, and other ASIC manufacturers, are going to see sales diminishing as difficulty rises throughout the year 2013."

Analysis, based on what, quote/site references?

Common sense... let me spell it out since you're a couple clowns short of a circus:
1. People order ASICs
2. Difficulty goes up because people order ASICs
3. Less people buy ASICs because they are less profitable
4. ASIC manufacturers sales decrease
5. ASIC manufacturers improve their products and release 2nd generation to maintain/increase profit.

It's not rocket science...

4. "The sooner they announce/preorder/deliver 2nd generations ASICs, the less important 1st generation power consumption rates will be because you will have less time to reap the benefits of the lower power consumption and you will need to spend more money to upgrade."

Sorry.... again there are some very creative ways to save power and get it for FREE LEGALLY, making such discussions moot.

That was my whole purpose of the OP... power consumption is a moot point. What the hell are you smoking?

Not for the reasons you state though, because I guarantee you most people on here pay for power. It is a moot point because 2nd generation ASICs will be here
sooner than most people would like, and you will need to upgrade or be left with an older model.

Instead of arguing "fallacies" with such weakly made points you could  make perhaps better use of your time...

Instead of failing to write a proper rebuttal, making tin foil hats, and making yourself like an idiot, maybe you can go jump off a cliff?

[PuertoLibre]

3. "BFL, and other ASIC manufacturers, are going to see sales diminishing as difficulty rises throughout the year 2013."

Analysis, based on what, quote/site references?

Common sense... let me spell it out since you're a couple clowns short of a circus:
1. People order ASICs
2. Difficulty goes up because people order ASICs
3. Less people buy ASICs because they are less profitable
4. ASIC manufacturers sales decrease
5. ASIC manufacturers improve their products and release 2nd generation to maintain/increase profit.

It's not rocket science...

[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.)

[Unacceptable]

3. "BFL, and other ASIC manufacturers, are going to see sales diminishing as difficulty rises throughout the year 2013."

Analysis, based on what, quote/site references?

Common sense... let me spell it out since you're a couple clowns short of a circus:
1. People order ASICs
2. Difficulty goes up because people order ASICs
3. Less people buy ASICs because they are less profitable
4. ASIC manufacturers sales decrease
5. ASIC manufacturers improve their products and release 2nd generation to maintain/increase profit.

It's not rocket science...

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 $1299 to $499. They 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.

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.

Bravo,you & CoinHoarder are spot on !!!

Please keep posting your thoughts,hopefully everyone will get the point & stop buying into this ASIC/mining game 

I think if you look back when GPU's were starting to hit the mining scene,the same mantra was being brought up 

[PuertoLibre]

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?)

[Unacceptable]

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?)

GPU's still make money,it depends on how much your power is........opps,I let that slip didn't I.Those with low power consumption/prices make more,opps there it goes again,dang it  

If ASIC's WEREN'T coming,I'd be buying more vid cards & FPGA's,well more FPGA's because of the LOWER power consumption.But would still keep my vid cards running.

Who said 2 year ROI    he's an idiot...............maybe with a Jalapeno,but with 60 GH,I figure 2-4 months MAX    Unless thier power consumption is like 2-5 or more watts per GH.

Yes,by late next year,with the network at full bore (400-500 TH),ROI may very well take 2 years,but that's your fault for not being an "EARLY ADOPTER"  

BTW,in most financial markets/buissness's,ROI is as long as 10 years   So 2 years still isn't bad..................

Awesome,BFL advert on the calc site,oooo,that'll tweak em some more  

http://www.alloscomp.com/bitcoin/calculator

[SLok]

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?)

It's not even about making back their investments in any period, it is loosing money soon (@3x today's difficulty) even running them! Even a jalapeno will give a roi in 4-6 months, with a 10x difficulty increase and 25btc reward/block at a $/btc ratio as today's.

2 vidcard $800 -  1600 Mh/s - 600W incl.host pc = $60 power
                 Coins    Dollars
per Day      ฿0.48   $5.61
per Week   ฿3.34   $39.29
per Month  ฿14.52   $170.64  7.5 month roi after power, no roi/loss running @3x difficulty

jalapeno $149 - 4500Mh/s - 120W incl.host pc = $12 power
                 Coins    Dollars
per Day      ฿1.34    $15.79
per Week   ฿9.40     $110.51
per Month  ฿40.84   $479.91  10 days roi after power, no roi/loss running @40x difficulty.

Single $1299 - 60000Mh/s -180W incl.host pc = $18 power
                Coins        Dollars
per Day   ฿17.91   $218.37
per Week   ฿125.40   $1,528.62
per Month   ฿544.59   $6,638.57   6 days roi, profit even running @200x difficulty

Mmm, did I miscalculate somewhere, or should I order some more Singles?

[PuertoLibre]

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.

[creativex]

Can't it be a bit of both? Surely if I had an ASIC or two just now I'd be reeling in some major BTC. Even after block halving those that get their ASICs first will make bank.

[Unacceptable]

YOUR NOT GOING TO GET FILTHY RICH BY MINING !!!!! UNLESS YOU GO VERY BIG,1.5 TH OR MORE !!!!!!!!!!!!!!

But,your not going to lose your ass either,you'll make what is made today,3 GH = .9 BTC @ diff of 3,368,767....... 30 GH= .9 BTC @ diff of 30,368,767.






    

[organofcorti]

Power consumption is crucial in places where the cost of electricity is high. It can be the difference between breaking even and not. If you're not paying for electricity, then it won't matter. If you're paying US$0.1 for kWh it probably still wont matter a great deal. But if you're paying US$0.3 or even 0.2 per kWh then it matters greatly.

I wrote a couple of posts on this which I won't rehash here. I'll just link to them, and show you some pretty charts. Please read the posts if you're going to reply.

http://organofcorti.blogspot.com/2012/11/91-asic-choices.html
http://organofcorti.blogspot.com/2012/11/92-asic-choices-update-2nd-november.html
http://organofcorti.blogspot.com/2012/11/93-more-on-asic-choices.html

Chart 1: In order to read this group of charts, find the intersection of a percentage ROI and number of difficulty periods (eg. % ROI after one year is at ~ 26 difficulty periods). The colour of the tile is an indicator of the exchange rate required to meet this %ROI after the given number of difficulty periods. The faint white line along the middle of each plot indicates the break even point. Click on a chart for enlargement.

Chart 2:  Profitable mining limits as a function of exchange rate and mining Difficulty.

The chart below shows the profitable mining limit for four ASIC devices for which I was able to obtain hashrate and power consumption estimates. It can be used to find the maximum difficulty at which an ASIC device can profitably mine. For example, at an electricity cost of USD$0.20 per kWh and an exchange rate of USD$20 / btc, the BFL Single SC plus a 100 W computer will be still profitable at a difficulty of 750 million, but not at a difficulty of 1 billion.

Chart 3: Profitable mining duration as a function of exchange rate and time since purchase.

The chart below shows a comparison between the four devices listed (an additional 100 W added for the attached computer). The chart facets are groups according to assumed D when mining on the device started and the electricity cost. Pick a column closest to your local electricity cost, a row closest you the D at which you think you'll be mining, then if you agree that the average percentage increase in D per difficulty period is 5% you can determine for how long the devices are likely to be profitable.

[Cablez]

Can't it be a bit of both? Surely if I had an ASIC or two just now I'd be reeling in some major BTC. Even after block halving those that get their ASICs first will make bank.

This is the fallacy that is going around by the hopeful.  There may be bigger returns by early investors in ASIC but it is only going to last a few days before more shipments reach their destination and that difficulty shoots up 4X at a time for a while.

Mining was never envisioned as anything more than a marginal profit business. Those that do well are doing so at the expense of others (The BTC pie idea).

[creativex]

Seems like you called it a fallacy and then agreed with me. Just a few days at anything near current difficulty would just about cut ROI in half, and as you said it will scale.

[molecular]

just one comment: If difficulty rises exponentially (let's say it doubles every 2 weeks) a mining rig will make 50% if its lifetime profits within the first 2 weeks.

It used to be like that (sometime around Mai/June/July 2011) and I think it might be like that again.

[abeaulieu]

just one comment: If difficulty rises exponentially (let's say it doubles every 2 weeks) a mining rig will make 50% if its lifetime profits within the first 2 weeks.

It used to be like that (sometime around Mai/June/July 2011) and I think it might be like that again.

I think an exponential trend can only be sustained for finite period of time. (Unless the price per BTC goes up with a compelling trend as well).

[CoinHoarder]

Ah... finishing my cup of Joe for the morning. My apologies for being so hostile last night hardcore-fs.

However, you must understand when you speak to people like this:

Instead of arguing "fallacies" with such weakly made points you could  make perhaps better use of your time...

That it will not bring out the best in them. 

I'm up for a debate, but lets play nice.

[CoinHoarder]

organofcorti makes some good arguments for the pro power efficiency crowd.

I could see how power consumption could be a big deal for someone paying .2 or .3, but I don't think that most people pay that much, especially in the US.

I guess I am spoiled paying .08, and that is where part of my opinion on this matter stems from.

[molecular]

just one comment: If difficulty rises exponentially (let's say it doubles every 2 weeks) a mining rig will make 50% if its lifetime profits within the first 2 weeks.

It used to be like that (sometime around Mai/June/July 2011) and I think it might be like that again.

I think an exponential trend can only be sustained for finite period of time. (Unless the price per BTC goes up with a compelling trend as well).

True, a finite period of time... but (kind-of by definition) that will be a time when a lot of people buy their rigs, so it's relevant to many. Just wanted to drop this in here anyway.

[punningclan]

Who would lose if Bitcoin went to $100 today?
Why nickel and dime the miners who are the machine or detract from the immense power and possible impact of this protocol and system. Perhaps miners will have to wait until a government crackdown before they can reach anything like the profitability of the early adopters since their increased risk will mandate higher prices?

Many miners are selling at near cost into an ecosystem that's using them to propel impossible industries, this must be a godsend for the up and coming Bit Barons. Hopefully the miners selling out will wise up.

If mining is a marginal industry then Bitcoin is, and always will be, marginal.

[MrTeal]

Who would lose if Bitcoin went to $100 today?
Why nickel and dime the miners who are the machine?

Early people who preordered mining hardware would be screwed if BTC jumped to $100, unless they paid with fiat. People who just recently purchased pre-order hardware would be doubly screwed.