Like many of you I'm very excited about the new possibilities ASIC chips can bring to Bitcoin. But at the same time, I'm worried about this whole thing and how it can turn out.
You see, I know some things about business and the way the world works. As of now, we have
no wild ASIC chips... we have only the high
expectation of them. Butterfly Labs (BFL) looks poised to be the #1 ASIC vendor, and I see that TONS of people here have already pre-ordered from them. As much as I'd love to be one of the first people to get an ASIC chip or two mining, I'm not going to pre-order. And why? I'll tell you...
#1)
Who on earth is Butterfly Labs?Until I got into Bitcoin I'd never even heard of this company. Now, I'm sure the guys at BFL are all well-to-do folks that mean no harm, and they deserve some credibility for the working products they've already released... But... they are a small and mostly
untested company. I don't know who the founders are, who their executives are or any details about the company (I need to look into this, as a matter of fact). As such, I cannot neither vouch for nor deny the competence of BFL insiders. And I'm sure that 80% of the people who have already pre-ordered did so without doing their "homework"... they did it because other people did and they wanted the ASIC chips. In my opinion, pre-ordering a chip is a bigger risk that buying stock in an obscure company you know nothing about -- it could bring a tremendous return, it could be "dead money" or it could be a 100% loss. Without doing the homework we simply have no idea... Note that I'm NOT trying to raise questions about BFL's credibility or trustworthiness... I'm simply being realistic...
#2)
BFL's "ethics and morals" ::I'm new to these forums, and yet I've already seen a great number of posts in which people elude to some past event(s) which call BFL's ethics and morals into question. I have no idea what people are talking about, but it gives me cause for concern... What are people talking about? It also seems there are a large number of "what if" posts where people seem to have reasonable doubts that working ASIC chips are even going to be shipped... WTF? When I start hearing stuff like that it gets me worried... If a game developer promise some uber-awesome video game and was selling pre-orders, but a large number of people questioned whether or not the game was even real or able to be delivered I don't think I'd risk the pre-order... Could anyone tell us about these past ethics/morals issues with BFL? Or this "catch" someone eluded to about their currently available FPGA products?
#3)
China ::It is my understanding that BFL is not fully manufacturing their own ASIC products, but instead are out-sourcing to a Chinese company. In my opinion, this is one of the biggest causes for concern. China is a country torn between communism and capitalism, currently undergoing HUGE changes to their society, government and economy. The Chinese government is infamous for corruption and organized crime, and Chinese business is nowhere near as safe as business in the western world. It's not because Chinese people are bad but because China is a "WIP" -- the stability and safety that exists in western economies simply has not grown up and matured there yet. So anytime you're dealing with China you're taking a big risk. The Chinese government/laws also tend to turn a blind eye to fraud and scams when it hurts Americans or Europeans. For example, it's technically illegal yet China seems to care little about intellectual property theft, counterfeiting and patent/copyright/trademark infringement against western companies. Laws and business regulations are so full of loopholes and catches that it's not uncommon for Chinese criminals to get away with very sophisticated frauds. And all of us are probably aware of how big of a problem Chinese hackers and con artists are...
I dunno who BFL is dealing with in China, and that makes me even more afraid... If I
knew who they were dealing with and was able to see some verifiable track record for their Chinese partner(s) that would alleviate much of my concern. But until then, I'm scared... too scared... Too many times in the business world I've heard stories about a US company making some big investment or deal with a Chinese company and then that Chinese company and all the money simply disappears off the face of the earth... My personal experience with the Chinese government is also
not good. A couple years ago some Chinese hackers tried to attack a website and server I was operating. I was able to withstand the attacks, but then they just made an exact mirror-image of our website with their own server to try to steal customer information. I contacted Google, Microsoft and other US companies about this -- Microsoft and Google were
exceptionally helpful and they even blocked the Chinese spoof site from their search listings and put out warnings, foiling the hackers' plans. After some investigation I was able to figure out more or less who the hackers were and even
where they were. I tried to notify the Chinese government so the hackers could be stopped. But let's just say they were less than helpful and had very little sympathy for American business... and those hackers are still running free...
Based on my personal experience and what I know, I would not be surprised if BFL got screwed by their Chinese partner(s) and were totally unable to recover their losses... and losses will be passed on to everyone who pre-orders, if such a thing were to happen...
#4)
Development Issues ::Have you ever been excited about a new video game coming out? Sure you have! The developers say it will be released in September, so everyone is very excited. September comes around and then an announcement is made: there are so bugs and many important features are not yet finished, so the release date is being pushed back another 6 months. AGAIN?! They've already pushed it back THREE times!?
The same scenario can apply to chip/hardware development... in fact, it can be even worse! Bitcoing mining ASIC chips are a new technology. No one has them, no one has tested/seen them (other than developers) and we know very little about them. First they were coming out in December 2012, then January 2013... now some say it will be 60 days, several months, or ...? Who knows? One thing I've learned is to never place your bets on when some new technology or software will be mature enough for release!
#5)
Technical Issues ::It's very common for new technologies to experience technical problems. After all, it's new! I would not be surprised at all if these chips are shipped and then some ugly design flaw, bug, technical issue or other problem surfaces. Then what? It could be so bad that all the chips have to be returned to be fixed or replaced. You might just be out of your money. We just don't know! Just remember that we're dealing with something very new, very complex and very cutting-edge... problems are bound to rear their heads...
#6)
Supply & Production Issues ::Computer chips are made of silicon, various metals and a range of plastics. They are also very complex. Most manufacturers don't totally build them from scratch. They usually buy pre-fabricated components and parts to build their boards. The manufacturing of tiny transistors and very complex, small electrical components can be susceptible to supply and production issues. What if the supply of some expensive alloy or plastic becomes disrupted? What if a source country has a trade disagreement with China? What if another company in the supply chain goes bust or has some major production/supply issue? I can tell you what will happen... the effects will be felt along the entire chain until it reaches and directly effects YOU.
Even big, established manufacturers like Intel, nVidia and AMD are not immune to such problems. In fact, I've made plays on those aforementioned stocks with supply/production issues. Since we're dealing with a small, private company and have little or no experience with them we simply don't know what to expect! And that is yet another thing that deeply troubles me...
How well is BFL prepared to deal with such issues should they arise? What if their foreign partner(s) or a chunk of their supply chain is knocked out? These are questions I cannot answer...
#7)
Fraud ::Some people have even called into question the very existence of these ASIC chips or whether they'll ever be delivered at all... And when I see that sort of talk it REALLY troubles me. Now this is something I know
nothing about... I dunno anything about BFL or their history... But I don't think people would be worried about this if Intel was making these ASIC chips. Why are people afraid BFL is ripping them off?
It's not outside the realm of possibility. I've seen some CRAZY things in my life... What if these guys are some sophisticated swindlers who built some cheap FPGA chips to win our trust and get hundreds of thousands (possibly millions) of dollars worth of ASIC pre-orders and then vanish? That might seem like "too much work" or "too complicated", but there have been frauds/scams even MORE sophisticated than that... Just watch a few episodes of "American Greed" on CNBC after-hours...
Again, I'm NOT saying BFL is shady/untrustworthy, I'm simply reiterating concerns/questions others have brought up that trouble me...
Conclusions ::There is a LOT which could potentially go wrong, and many points of failure. And ASIC miners are a new, unexplored frontier; thus it involves inherent risks. I will not be pre-ordering any ASIC equipment. The main reasons are because I dunno how long I'd be out of my money and not mining, I dunno if these chips are going
work as promised, I dunno who BFL is or how trustworthy they are and no one has any idea if they're even worth the investment... If everyone and his uncle has an ASIC chip, mining difficulty will go through the roof and mining will be incredibly expensive with low margins... So I'm going to wait and see before I make a decision.
If I had to make a "forecast" or "prediction" about what's going to happen, I would say this:
ASICs actually won't be out for at least another 6 months to
1 year. And then when they
do come out there are going to be some problems with them that need fixing... so another 1-2 years before the technology is matured and 100% viable. When they first come out there's going to be a HUGE rush to get them and build insane mining rigs, and difficulty will go through the roof. Then people are going to start giving up and jumping ship, trying to sell their rigs on eBay. Prices are going to drop, and ASICs will start getting much cheaper. The size of the mining community will shrink, but eventually it will be a better business for those who stick around. I think FPGAs will still be worth running for their decent speeds and tiny power consumption. They will also get cheaper, and more people will start building them -- they'll get better and better. In the next 1-2 years there could also be huge advances in GPU technology that make GPU-based mining feasible again...who knows? I could be wrong about all of this, but I like to keep my expectations realistic so I don't go overboard with something and end up disappointed and out of a lot of MONEY!
Regards,
--ATC--
