Running some ASIC numbers...

[siggy]

Just running some numbers here..
 
Avalon batch 1:  20 Thash
Avalon batch 2:  40 Thash
Avalon tradins:   20 Thash (trade ins are not part of batch 2.)
 
Total Avalon by May:  80 Thash
 
BFL --  with the pictures that were recently posted of the BFL (non-asic-populated) boards, I'm now in the camp that I believe BFL will be shipping a product that at least comes close to their stated goals of 7.5 Ghash per chip.  Having said that, I've seen batch numbers ranging from 15K chips to 100K chips..  At this point the most plausible I've seen are an initial batch of 15K, followed closely by another 15K followed by a 35K batch...  Going with a gut feeling partially based on all the BFL adds I'm seeing, and how active their forums are, I'm thinking they have all 3 batches sold.  So, allowing for some defects, and rounding I'm guessing:
 
BFL batch 1:  100 Thash
BFL batch 2:  100 Thash
BFL batch 3:  220 Thash
 
Total BFL by may:  420 Thash
 
Soo..  the way I see it, there is already 500 Thash of existing paid for pre-orders.   Factoring in existing FPGA's, free electric GPU's, Goliath, other ASICs, aliens from Omnicron, and what-not, it looks to me like if you were to order an ASIC right now, the difficulty would be at least 75MM by the time you got it.  
 
Using the profitability calculator over at bitcoinx.. and figuring another 4x rise in difficulty over the following year, I get a ROI of 250 days..  and a net profit over 2 years of around $500.  
 
Figuring only a doubling in difficulty for each subsequent year gives a 190 day ROI and a 2 year profit of $1750.  
 
Now, the question is:  After the pre-orders are all filled, will the ASIC vendors reign in production (only 2x)? or will they keep pumping out units (4x plus)?    I'm leaning towards thinking they'll keep pumping them out, even if that means they have to lower the prices to do it....
 
Going with that 250 day ROI.. In just about every other business in existence, a 250 day ROI would be absolutely orgasmic...  Whats different about this?  Well, one must keep in mind that mining returns are not linear (unlike most other businesses).. The vast majority of your returns will be front loaded.  If you assume that the ASIC companies will do what it takes (lower prices) to keep selling units, your residual income after you hit ROI is going to be minimal.
 
Conclusion:  I haven't already ordered an ASIC, I'd be better off just buying bitcoins instead.  
 
Note:  I purposefully did not factor in the possibility of BTC gaining in value vs. $$.  I figure that any such gain (or loss) would be offset 1:1 when comparing mining BTC vs. outright buying BTC.

Now, what am I missing?
 
Sigg

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[Dalkore]

If Bitcoins continue to appreciate then that keeps miners profits higher and could offset the huge increase in difficulty.  Once all that capacity comes online, Difficulty will be around 65 million.

[cedivad]

If they want to keep selling the asics, they will need to lower the price.
This is a cicle that will end when you can buy 1TH at 1000$ and the biggest cost of the TCO will be the eletric energy.

When this happens, I will buy.

[siggy]

If they want to keep selling the asics, they will need to lower the price.
This is a cicle that will end when you can buy 1TH at 1000$ and the biggest cost of the TCO will be the eletric energy.

When this happens, I will buy.

Yeah.. this is kinda what I was thinking also..  With current GPU mining, there is a balance between cost of hardware and electricity.. With the current state of ASIC, that balance is gone.  The only way that balance will be restored is for the cost of ASICs to nosedive.  That nosedive is going to cause all kinds of ROI pain for anyone (except early, existing orders) that purchase at current ASIC prices.  If you aren't already in line, to late.  Best to just sit things out, get a big tub of popcorn, and watch the blood flow. 

Once things are back in balance, we'll be back to the historical "mine if your cost of electric is 25 cents or lower"  At this point, I'll be looking to pick up a bunch of 2nd hand ASICS at serious discount prices.+

Sigg 

[siggy]

If Bitcoins continue to appreciate then that keeps miners profits higher and could offset the huge increase in difficulty.  Once all that capacity comes online, Difficulty will be around 65 million.

If Bitcoins continue to appreciate then that keeps miners speculators profits higher.   In the "buy ASIC" vs "buy BTC" debate, I see appreciation as irrelevant.  In both cases, appreciation means profit. 

The only point to buying ASICs and mining, is if you get more profit than just bying BTC directly.

(OK, yeah, there is that whole secure the network thing..  at 500Thash I think that is safely covered already)

Sigg

[Deafboy]

The only point to buying ASICs and mining, is if you get more profit than just bying BTC directly.

But what about the fun? Mining is FUN! I enjoyed the braindamage caused by noise as much as I could in the good old GPU times. ASICs kinda starts the game from the beginning again.
+ you have a collection of strange devices which purpose is unknown to most of the regular humans.

"What's that strange noisy silver/black box you have here?"
"This? Not a big deal, they are just sitting there protecting the largest distributed P2P network in the world... and creating money."

Somthing like this: http://fc03.deviantart.net/fs70/f/2012/185/7/3/the_internet_by_surlana-d261zl2.jpg

[firefop]

You guys are thinking about this all wrong.

It's not really about ROI or even about rate of return.

It's about creating wealth in a form that isn't taxable.


If you were given the choice between bitcoin mining with under a year ROI (and that's all in bitcoin)... vs a typical investment where you pay capital gains tax... Which would your prefer?

Nevermind that bitcoin mining is going to spank the rate of return of any traditional investment.

At the place you're talking about (where the asic market is saturated, and it comes down to power consumption) then all you've got is a tax evasion plan... not an investment.

[Vladimir]

ASIC's are quite different from ALL previous generations of mining hardware. The major new factor is that the manufacturers will be able to produce huge quantities of chips at very very low price per chip. I will tell you now that this basically guarantees that for a typical mining server it's price will asymptotically approach 2x cost of its auxiliary components (case, PSU, control boards etc).

I.e fully packed analog of the the avalon box will be sold for something around 300$. The price will be higher of course for new generations of more powerful mining chips.


BTW OP is quite reasonable.

[gmaxwell]

It's about creating wealth in a form that isn't taxable.
If you were given the choice between bitcoin mining with under a year ROI (and that's all in bitcoin)... vs a typical investment where you pay capital gains tax... Which would your prefer?

Sadly, Bitcoin isn't a magical anti-tax fairy. When you sell those coins for something else, you'll owe taxes on them and in all likelihood you won't even be able to enjoy preferable tax treatment (e.g. capital gains tax) for it.

Perhaps you're planning on breaking the law and not paying taxes on your income— well, okay, but Bitcoin isn't special there, you can do that just as easily if you're paid in cash— but this is insanely foolish at least in the US— tax collection is insanely powerful and the deck is not stacked in your favor.

[siggy]

ASIC's are quite different from ALL previous generations of mining hardware. The major new factor is that the manufacturers will be able to produce huge quantities of chips at very very low price per chip. I will tell you now that this basically guarantees that for a typical mining server it's price will asymptotically approach 2x cost of its auxiliary components (case, PSU, control boards etc).

I.e fully packed analog of the the avalon box will be sold for something around 300$. The price will be higher of course for new generations of more powerful mining chips.

OK.. so currently, a GPU + supporting hardware for the slot will come in at ~$450, and consume ~150 watts. This is basically a 3:1 ratio ..  Assuming auxiliary components on BFL products are comparable to Avalon, that means that BFL should also settle in at around $300 per 100 watts, also a 3:1 ratio ...

Or in other words, if your electricity costs are such that you could make a decent amount mining now with purchasing GPU's, just wait a year or two and you'll be in the exact same position, only with ASICs.

I'd also like to thank you for the " 2x cost of its auxiliary components " figure.. I knew there had to be a floor, but I had no idea where it was.

Sigg

[johnyj]

From GPU to ASIC
25 TH to 500TH
difficulty rise 25X
efficiency also increase by 25X (same investment for 50GH ASIC used to buy 2GH GPUs)
so basically for same investment it is still the same return, with less power consumption. BTC per user per day decreased due to reward halving, but price appreciatiion countered that effect

[Puppet]

Now, what am I missing?
 

What you are missing is that in june, august, october and the next years,  BFL and avalon will still want to sell boxes, as many as they can. The only way to do that, is lower prices. Lower prices will shorten the apparent break even time on new devices, while indirectly lengthening it on all existing boxes. Im pretty sure for most ASICs, the break even time will be stretched so often and so far it will approach infinity.

[Vladimir]

It's about creating wealth in a form that isn't taxable.
If you were given the choice between bitcoin mining with under a year ROI (and that's all in bitcoin)... vs a typical investment where you pay capital gains tax... Which would your prefer?

Sadly, Bitcoin isn't a magical anti-tax fairy. When you sell those coins for something else, you'll owe taxes on them and in all likelihood you won't even be able to enjoy preferable tax treatment (e.g. capital gains tax) for it.

Perhaps you're planning on breaking the law and not paying taxes on your income— well, okay, but Bitcoin isn't special there, you can do that just as easily if you're paid in cash— but this is insanely foolish at least in the US— tax collection is insanely powerful and the deck is not stacked in your favor.

It is simple, never sell your bitcoins . Then there is no tax to pay. Instead use them as a collateral for loans just like Oracle's Larry Ellison does with his Oracle shares. Unfortunately, one might have to wait until Bitcoin's "market cap" hits 10 billion USD for "stock loans" to become available.

[siggy]

It is simple, never sell your bitcoins . Then there is no tax to pay. Instead use them as a collateral for loans just like Oracle's Larry Ellison does with his Oracle shares. Unfortunately, one might have to wait until Bitcoin's "market cap" hits 10 billion USD for "stock loans" to become available.

Sooo...  this works if you have a FIAT income large enough to cover the loan payments.. but I don't see how it helps if you actually want to use your bitcoins to say.. _pay off_ a mortgage...  you'd just be substituting one loan for another.  Maybe you could get a better interest rate, but prolly not much.  And its not like you can just default on the BTC loan, as any unpaid balance becomes unearned income for tax purposes. 

The only way I can see this working, is if you have enough bitcoins that you can continually roll the Principle & Interest payments into new loans.  If you kept this up till you died, then repayment is no longer your problem     Unfortunately, there are very few with Ellison like reserves of collateral.

Seems to be a recuring theme of mine in this thread...  What am I missing here?

Sigg

[solex]

Sigg - if you think ASIC mining is unprofitable medium/long term then consider the situation where everyone agrees with you.

The difficulty will stay lower and people will stick with existing graphics cards to make money. But then someone decides to get an ASIC going and makes a lot of money because no-one else is doing it.

Any market (as well as a mining market) is made of hundreds or thousands of people with graduations of opinion, the market finds a balance. Some will mine, some will invest.

[siggy]

Sigg - if you think ASIC mining is unprofitable medium/long term then consider the situation where everyone agrees with you.

The difficulty will stay lower and people will stick with existing graphics cards to make money. But then someone decides to get an ASIC going and makes a lot of money because no-one else is doing it.

Any market (as well as a mining market) is made of hundreds or thousands of people with graduations of opinion, the market finds a balance. Some will mine, some will invest.

Or.. I could have already ordered several rigs and am just trying to convince everyone else not to, maximizing my mining income.  

Umm..  seriously..  I think we are quickly approaching (or have already reached) the overshoot where buying ASICs _at the current price_ will no longer be profitable..  I'm basing this on the amount of Ghash I think has already been ordered and paid for.  This would be the medium term.  

In the long term, Once ASICs bottom out in price (2x ancilary component cost) I think mining will once again be very worthwhile.  This assumes that one's cost of electric is <25 cents.  As is now with GPUs, $/Mhash is going to reach an equilibrium with $/Kwh.  When that happens, I'll be jumping back in with both feet.  The longer I think about it, the happier I am that the Avalon batch #2 was such a cluster I was prevented from ordering.

So yes, I am in violent agreement with everything you said.  The only question is which side of the mine/invest decision is most profitable medium term.  

Sigg

[solex]

Your main point about the ASIC price steadily being forced downward is undeniable, especially when the known batches are considered.

Further, in the long-term electricity can be sourced almost for free, after the cost of solar panels are paid down. There has been a glut on the market in the last couple of years reducing the price per watt...

http://www.ecodirect.com/Suntech-STP250S-20-Wdb-250W-30V-PV-Panel-p/suntech-stp250s-20wdb.htm

An inverter would be needed too, and a feed-in tariff available by your powerco. So power is sold to the grid during the day offsetting the mining rig's overall power consumption.

[JWU42]

I haven't been following as closely - but how does ASICminer fit into this?  How many TH/s from them by the May timeframe?

[Tomatocage]

Just running some numbers here..
 
Avalon batch 1:  20 Thash
Avalon batch 2:  40 Thash
Avalon tradins:   20 Thash (trade ins are not part of batch 2.)
 
Total Avalon by May:  80 Thash
 
BFL --  with the pictures that were recently posted of the BFL (non-asic-populated) boards, I'm now in the camp that I believe BFL will be shipping a product that at least comes close to their stated goals of 7.5 Ghash per chip.  Having said that, I've seen batch numbers ranging from 15K chips to 100K chips..  At this point the most plausible I've seen are an initial batch of 15K, followed closely by another 15K followed by a 35K batch...  Going with a gut feeling partially based on all the BFL adds I'm seeing, and how active their forums are, I'm thinking they have all 3 batches sold.  So, allowing for some defects, and rounding I'm guessing:
 
BFL batch 1:  100 Thash
BFL batch 2:  100 Thash
BFL batch 3:  220 Thash
 
Total BFL by may:  420 Thash

Does anybody know if these estimates are fairly accurate?

[JWU42]

On the BFL side it depends on their product mix.  A Jalapeno is 1 chip but not their "standard" 7.5 Gh/s per chip...

All the talk on the BFL forums is the initial release will be 6K chips -- WORST case that is 45 Th/s.  The 2nd release will also be ~6K chips so again another 45 Th/s WORST case.

I believe the next lot could be upwards of 75K chips and again WORST case that is 562.5 Th/s.

All said, the 420 Th/s number might not be too far off at the end though it could be nearer 500 I suppose.