Avalon batch #3 approaching "NO ROI" point

[Rampion]

When I saw the steep increase on Avalon's batch #3 price compared to batch #2 I was upset, and I had a public argument with Yifu. Here go a couple of excerpts:

Love when people throw around numbers like "3 month" randomly without any math.

the current difficulty is a little below 5,000,000, which a three module Avalon will produce ~6 BTC a day under these conditions.

Let's see how "3 month" ROI actually looks like.

If difficulty raises to 30,000,000 each three module Avalon will produce 1 BTC a day, enabling a break-even in 90 days.

So yes, if you think we are going to get a 6x difficulty increase between now and May, let's even say June! then by all means, please don't purchase Avalon, because I wouldn't.

I just don't think that difficulty will be 10,000,000 when the batch #3 units will reach the customers. Two questions:

- can you guarantee batch #3 delivery not later than May?
- wouldn't the difficulty reach at least 15,000,000 once all your 1,500 units are deployed? Wouldn't be much higher if ASICminer/BFL customers also start deploying more units?

- Yes, but I think this question can be answered based on how fast we ship batch #2.
- not really, the current diff already includes majority of batch #1's hashing power. but I also don't believe diff will only be 10,000,000 but like I said, it should take at least 1 month of ROI, realistically best case 1 month, regular projection of 3 month, which is about diff 30,000,000 which is more reasonable if BFL ships.

Oh also, expect a newsletter soon.

I thought: OK, we will get our unit in May, thus a 10/12 million difficulty is reasonable. You will remember that Yifu set the batch #3 price doubling the difficulty we had at that time (slightly less than 5 million), which gave a 30 days ROI for a batch #3 unit priced at 75BTC (Avalon expected difficulty to be around 10 million when we were going to receive our batch #3 units). I accepted that explanation as an honest proposal. Avalon was disappointed by the fact that some of his batch #1 customers were selling their units on Ebay with a huge mark-up, while Bitsyncom was probably still in red, so they made batch #3 customers to pay the profits for the other batches too. That was very OK to me if the units were delivered in May as promised. One month delay is acceptable too in this crazy ASIC world. But I'm afraid batch #3 customers still have a looooong way before receiving their units (July? August perhaps?), thus I'm afraid that ROI is gone for good.

Unfortunately everything happened upside down: batch #1 customers looked at the biggest potential profit, but they were charged less than any other customer because nobody was sure if Avalon was going to be able to deliver ASIC. As soon as they proved to be legit, batch #3 customers were charged a very hefty price that made ROI possible only if all the promises (delivery date basically) were kept, but they were not - therefore, batch #3 customers will very likely mine at a loss.

And by the way, difficulty is going to go x6 between end of March (when the above argument was held) and June (see bolded part). I would say it's not Yifu's fault, in fact I admire his work for having delivered the first ASICs to consumer hands, and that was greed (not his greed, but everybody's greed in this market) what set Avalon's batch #3 price tag. Nevertheless, we are approaching very fast the point in which mining will be a very competitive endeavour, where ROI is only achieved by saving every penny on electricity/storage, and where a 5% decrease in the exchange rate really shakes the miner's business plan. Making a long story short, we're going back very quickly to the same point we had just a few months ago (pre-bubble) with GPUs.

[Wayne_Chang]

Some guy's behavior is killing the whole economic environment of Bitcoin.
Shall we change to Litecoin or some other coin which do not have such disgusting thing?

[cedivad]

Shall we change to Litecoin or some other coin which do not have such disgusting thing?

Only to be forced to go across the same path in the future? no, thanks.

I think that you will receive your batch 3 units during the next month, they started delivering in mass and said that they would be able to ship 50 units/day once they reached that point... With a 1500 units on backlog, that's 30 days.

What you should be angry for is us finally having proof of them mining with our units.

[Amph]

asic chip cost already too much, they should be halved in price, difficulty is rising very fast

[titomane]

It seems that the delay is because of this:

https://bitcointalk.org/index.php?topic=236348.0

[Rampion]

Some guy's behavior is killing the whole economic environment of Bitcoin.
Shall we change to Litecoin or some other coin which do not have such disgusting thing?

I really think we are in the middle of a mining bubble that will burst very soon. Just look at the hashrate chart:



I see a lot of people entering the mining business like there's no tomorrow, blinded by the promise of profits like those that Avalon batch #1 customers and ASICminer shareholders had. This people just do not realize that difficulty is going up like crazy, and they are making their calculations at current difficulty, without even understanding what "yearly profitability decline" means. In fact, I see myriads of noobs (and "hero" members auctioning their units) that just leave the "0.61" that comes by default in the "yearly profitability decline" variable at http://bitcoinx.com/profit

That's so much failure, because it would mean that difficulty won't even double in the 12 months following the deployment of their mining equipment. I can just LOL at how wrong is that assumption.

There's a huge amount of people that do not realize that mining is ultra-competitive, ROI is not easy and that you really have to look at your power and storage costs in order to be able to mine at a small profit. In most of the cases, just buying and holding BTC is more profitable unless you pay nothing for storage and a small price for power. As I said earlier, we're going back to the point we had in 2012 with GPUs and FPGAs. Only the most competitive will survive and will only make a tiny profit, the huge return days are gone for good.

[cedivad]

I don't think that this bubble will "burst" any time soon. Also, it will not stop from inflating, anytime soon... If the btc price drops to 30$, that will only stop new hardware from coming online, but existing asic miners will stay still.

[Rampion]

I don't think that this bubble will "burst" any time soon. Also, it will not stop from inflating, anytime soon... If the btc price drops to 30$, that will only stop new hardware from coming online, but existing asic miners will stay still.

Yeah, you are right. A "bubble burst" would imply a lot of hashrate leaving the network, which won't happen. With "bubble burst" I just meant the end of exponential increase and the resuming of linear increase, probably with a smallish drop in hashrate as we had in 2011. This obviously is not a bubble burst from a technical point of view, but in any case the final outcome will be quite similar: a lot of people burnt because they spent more money they could afford to lose just because they were blinded by a promise of golden profits that will never happen.

I know you agree, you have been preaching that ROI was dead for Batch #2 since months ago

[pikeadz]

With "bubble burst" I just meant the end of exponential increase and the resuming of linear increase, probably with a smallish drop in hashrate as we had in 2011.

Well of course.  Nothing can grow exponentially forever.   

[pajak666]

isn't it actually the same situation when CPU->GPU change was made?

[crazy_rabbit]

Some guy's behavior is killing the whole economic environment of Bitcoin.
Shall we change to Litecoin or some other coin which do not have such disgusting thing?

I really think we are in the middle of a mining bubble that will burst very soon. Just look at the hashrate chart:



I see a lot of people entering the mining business like there's no tomorrow, blinded by the promise of profits like those that Avalon batch #1 customers and ASICminer shareholders had. This people just do not realize that difficulty is going up like crazy, and they are making their calculations at current difficulty, without even understanding what "yearly profitability decline" means. In fact, I see myriads of noobs (and "hero" members auctioning their units) that just leave the "0.61" that comes by default in the "yearly profitability decline" variable at http://bitcoinx.com/profit

That's so much failure, because it would mean that difficulty won't even double in the 12 months following the deployment of their mining equipment. I can just LOL at how wrong is that assumption.

There's a huge amount of people that do not realize that mining is ultra-competitive, ROI is not easy and that you really have to look at your power and storage costs in order to be able to mine at a small profit. In most of the cases, just buying and holding BTC is more profitable unless you pay nothing for storage and a small price for power. As I said earlier, we're going back to the point we had in 2012 with GPUs and FPGAs. Only the most competitive will survive and will only make a tiny profit, the huge return days are gone for good.

The difference this time however is people won't be turning their ASIC's off like they did with GPU's. These machine do but one thing- and users aren't going to let them sit idle.

[Rampion]

isn't it actually the same situation when CPU->GPU change was made?

I think it's going to be similar to the "mining rush" that happened during the 2011 bubble. Everybody hopped on the bandwagon expecting huge returns to then bitterly realize that without almost free power and no storage costs (some miners do not mine home but rent spaces to host their operations) it was very difficult to make any money at all. In fact we had a drop in the hashrate because mining was quite a big loss for many folks.

I expect the same situation to happen just now. The big winners were Avalon batch #1 customers and ASICminer first shareholders, the ones coming behind will just "pay for their party", unless until a new very superior technology arrives to the market.

The difference this time however is people won't be turning their ASIC's off like they did with GPU's. These machine do but one thing- and users aren't going to let them sit idle.

No, they will just resell them for peanuts if they are unprofitable to run. Many people (most of people) cannot afford to mine at a loss.

[crazy_rabbit]

isn't it actually the same situation when CPU->GPU change was made?

I think it's going to be similar to the "mining rush" that happened during the 2011 bubble. Everybody hopped on the bandwagon expecting huge returns to then bitterly realize that without almost free power and no storage costs (some miners do not mine home but rent spaces to host their operations) it was very difficult to make any money at all. In fact we had a drop in the hashrate because mining was quite a big loss for many folks.

I expect the same situation to happen just now. The big winners were Avalon batch #1 customers and ASICminer first shareholders, the ones coming behind will just "pay for their party", unless until a new very superior technology arrives to the market.

The difference this time however is people won't be turning their ASIC's off like they did with GPU's. These machine do but one thing- and users aren't going to let them sit idle.

No, they will just resell them for peanuts if they are unprofitable to run. Many people (most of people) cannot afford to mine at a loss.

I agree, but I think think time around there are far more garden variety miners then institutional miners. The institutions that have a large setups are probably already by and large up and running (or will be soon). It's the rest of us home-miners that probably make up the vast bulk of the ASIC sales. These individuals are more likely in my opinion to mine at a loss simply because they aren't mining from a rational background in the first place. They are mining because they think one day they will be more valuable, and they are willing to keep sinking more money into their investment for the same reason people keep gambling when they are losing at the table.

[johnyj]

I hope that we could quickly reach the stage that ASIC devices are barely breakeven, so that development in bitcoin will again become more stable and healthy

It takes only 36000 ASIC devices to make each devices's daily return drop to less than 0.1 bitcoin, or 100 mbtc 

[KS]

I hope that we could quickly reach the stage that ASIC devices are barely breakeven, so that development in bitcoin will again become more stable and healthy

It takes only 36000 ASIC devices to make each devices's daily return drop to less than 0.1 bitcoin, or 100 mbtc 

On average. My ASIC is better than your ASIC anyway, so I'll make at least 0.2 while won't even make 0.1 :p

[markyminer]

I hope that we could quickly reach the stage that ASIC devices are barely breakeven, so that development in bitcoin will again become more stable and healthy

It takes only 36000 ASIC devices to make each devices's daily return drop to less than 0.1 bitcoin, or 100 mbtc  

Actually this will only apply to the least power efficient ASIC's, which currently is everything not manufactured by BFL.

If no one creates a ASIC chip less then BFL's 65nm using less power only BFL ASICs will be left hashing the network as all others will be forced to mine at a loss, go bust and be forced to stop.

Avalon's , ASICminer self pool, their blades and usb sticks, will all be forced to quit as no commercial enterprise has free power.

Right now the smart choice is nothing to do with quick delivery, it's the quickest delivery for the lowest power consumption. This is why I have orders with BFL until someone produces a working competitive product that is proven to use less power. Then I will order that at that point.

I did not order my BFL until the first working jalepeno was on youtube showing it hashing @ 5G/H for under 30w.

M

[byronbb]

So we are quickly reaching the point where even making a sizeable investment in bitcoin would involve purchasing coins or running a service.

[TheSwede75]

I hope that we could quickly reach the stage that ASIC devices are barely breakeven, so that development in bitcoin will again become more stable and healthy

It takes only 36000 ASIC devices to make each devices's daily return drop to less than 0.1 bitcoin, or 100 mbtc 

Why u no can math? What is a "ASIC device" for a damn unit?

[SGExodus]

You have nothing to worry if you pay less than 2BTC/GHs (in the case of batch 3 Avalon).

Even with the difficulty rising, you should still have no problem making at least 120BTC in the life span of the machine.   

I don't know what other investment can give you that kind of ROI these days.

[Rampion]

You have nothing to worry if you pay less than 2BTC/GHs (in the case of batch 3 Avalon).

Even with the difficulty rising, you should still have no problem making at least 120BTC in the life span of the machine.   

I don't know what other investment can give you that kind of ROI these days.

Mmm... What kind of delay are you considering? If it arrives with difficulty above 35 million it won't break even. That difficulty will arrive in a few weeks.