Why are people cheering that ASICMINER will bring 800-1000TH online this year?

[TsuyokuNaritai]

I only have issues with the former, which is a ponzi.

You keep using that word. I do not think it means what you think it means.

[Bitcoinorama]

Quite an accusation. Care to back it up? Because I have two blades on my desk, that doesn't fit in your ponzi claim.

I back it up by watching his percentage continually grow.  I never said he wasn't sending people what they paid for.  Those are two seperate issues.  I only have issues with the former, which is a ponzi.  I wouldn't care that he is selling overpriced equipment if he wasn't using the funds to grow his own operation.  Nobody should deal with a big hardware development company that mines on anything but testnet if you care about keeping mining independent and in as many hands as possible.  Mining with what is developed on such a grand scale will lead to centralization.

Would you trust Bitcoin if the Federal Reserve was doing the same thing?  Like bank loan products based on a fractional reserve system, you are being sold products that actually hurt you.  Every loan devalues your own purchasing power that much more.  In this case it is hashrate.  You are getting screwed twice.  Once with high prices and second devaluation of your own hashrate worth by the same guy selling you the shovels he is using for himself.

The Federal Reserve has the luxury of printing their own dollars that are used against you to enrich themselves.  The same thing is happening here if the term dollars is replaced with hashrate.

It boggles my mind that people can't understand why this is a problem.

May I ask, why did you care to pay so much for blades?  Or did you get them second-hand?  The latter would be better.  The former helps him grow and screw you over.

Why not seek safety in numbers? Noh! I say NO. Disperse so that every one needs to pay more for electricity! That is the way to do it! And with the same deal, waste more time managing your hardware. Double the expense, with less profit! Disperse I say! Off you go.

What is a waste of time is paying for overpriced blades for the sole benefit of the creator to increase their operation to continually screw you over with each adjustment.  Unless you bought for cheap second-hand, you are paying for your mistake twice over.  It's like taking out a loan at the bank to buy something and getting charged interest on debt notes that were given to you.

FYI, I have no problem with group buys.

Why you are not a doctor? That is terrible. Everyone should be a doctor. If you can't be a doctor, then be a nurse. If not, at least be a patient. But don't you be coming here to fund our operation, because people with resources can't talk to people with out them and collaborate. Don't you dare. Communism good, capitalist baaad!

Your analogy doesn't work.  I am making comparisons to the financial industry.  Not a health care service sector where plenty of competition exists.  Health "insurance" actually causes prices to rise along with your premiums but that is a different topic.

Please, tell one thing in this world that is profitable, where people are not collaborating via shares to distribute risk and to reduce costs (labor/time/energy)? Aka creating companies. One. Just one.

You are confused.  Re-read what I said.  Now I'm not even sure why I replied to your post to begin with because you don't seem to understand the concern, at all.

+1 very well articulated. ASiCminer is also powerful enough to manipulate BTC market pricing now by suppressing the price offloading coins they harvest 25% the total of.

[DeathAndTaxes]

ASICMiner is in the position they are in right now because their competition is so incompetent.

This.  If Bitcoin never gets any bigger then it doesn't really matter what ASICMiner share is but if/when Bitcoin rises significantly in valuation the global mining revenue will bring in new players with deeper pockets.  Global mining revenue is ~$130M annually today.  That is the pie that ASIC developers are fighting over.  It doesn't matter if a company is building hardware for internal use, or selling that hardware to the public the potential revenue (either by directly mined BTC or from hardware sales) come from that same pool of $130M/yr of potential revenue.

Now like I said if Bitcoin doesn't get larger then all this is just a tempest in a teacup.  Does it really matter who is the king of the anthill?  Without continual growth and improvement, Bitcoin will be an experiment that limps along and eventually is replaced by something superior. Under that scenario it doesn't matter if ASICMiner goes bankrupt or runs 100% of the network.  

However lets say (over some period of time, months, years, decades) global mining revenue increases by an order of magnitude.  Suddenly ASIC developers are fighting over $1B potential revenue.  That is going to bring in companies with deeper pockets.  Today the potential revenue is (relatively) low and the risk is high but the longer Bitcoin continues without dying, the more regulatory issues get ironed out, and the higher the valuation the more it shifts the risk vs reward to one where larger players are interested. 

Forget AMD/Intel there are dozens of companies which make specialized ASICs for all types of industries who already have the expertise, staff, and industry contracts to roll out SHA256 ASIC and do so in a streamlined efficient manner (think shrinkwrapped build quality, ease of use, support, and distribution you would expect from say a home router).  However a slice of $100M at very high risk is simply not something they are interested in yet.  $1B+ potential revenue at a lower risk well that is a different story.

Edited for clarity.

[bigbeninlondon]

ASICMiner is in the position they are in right now because their competition is so incompetent.

This.  If Bitcoin never gets any bigger then it doesn't really matter what ASICMiner share is but if/when Bitcoin rises significantly in valuation the global mining revenue will bring in new players with deeper pockets.  Global mining revenue is ~$130M annually today.  That is the pie that ASIC developers are fighting over.  If they build hardware to mine themselves or build hardware to sell it doesn't really matter.  The pool of potential profit is $130M annually. 

Now like I said if Bitcoin doesn't get larger then all this is just a tempest in a teacup.  Bitcoin will be an experiment that limps along and eventually is replaced by something else.  Under that scenario it doesn't matter if ASICMiner goes bankrupt or runs 100% of the network.  However lets say Bitcoin increases by an order of magnitude in value.  Suddenly ASIC developers are fighting over $1B potential revenue.  That is going to bring in companies with deeper pockets.  While ASICMiner can maintain both high ROI% and high marketshare fighting the incompetent competition of today it is improbable they can against better run and capitalized companies.  Forget AMD/Intel there are hundreds of companies which make specialized ASICs for all types of industries who already have the expertise, staff, and industry contracts to roll out SHA256 ASICS.  However a slice of $100M at very high risk is simply not something they are interested in yet.  $1B+ well that is a different story and if Bitcoin is still around in a year or two the risk of it failing will be lower so higher reward and lower risk = more competitors.

Exactly this.  Competition will always be possible in the bitcoin realm.  The more valuable it gets, the more sophisticated the competition will get.  As long as governments don't come along and force monopolies by imposing multi-million dollar entry fees regulations, competition will always have the opportunity to compete.

[DeathAndTaxes]

+1 very well articulated. ASiCminer is also powerful enough to manipulate BTC market pricing now by suppressing the price offloading coins they harvest 25% the total of.

Well ASICMiner is a "company" (maybe not in the legal sense of the word but in practical application) a large portion of the coins mined are returned to shareholders in the form of dividends.  If those shareholders independently choose to sell coins how is it any different than someone with their own (owned) hardware choosing to sell coins?

As the number of coins climb and the block subsidy declines the influence of new coins on price will also decline.

Today there are ~11.4 million BTC and daily only 3600 or 0.03% of total are being produced.  The number of coins traded daily on the major exchanges (~50,000 BTC) already significantly dwarfs these new coins (even if 100% of them are sold as soon as they are mined).  By the time of the next subsidy cut there will be ~15.8 million BTC and the daily generation rate will have declined to 1,800 or ~0.01% of total. 

Nobody said ASICs are disruptive but if it wasn't ASICMiner it would be someone else and without ASICs increasingly the odds would be on the "someone else" being a hostile actor. 

[mrb]

I am more worried that they will kill the price of BTC.

Why are you worried? Their very existence depends on BTC having value. If they kill BTC they would kill themselves! Your worry makes no sense.

[DeathAndTaxes]

I am more worried that they will kill the price of BTC.

Why are you worried? Their very existence depends on BTC having value. If they kill BTC they would kill themselves! Your worry makes no sense.

Yup it is just as likely as Barricks Gold (worlds largest gold ore miner) doing something to undermine the confidence in gold bullion. 

[Paladin69]

I only have issues with the former, which is a ponzi.

You keep using that word. I do not think it means what you think it means.

If you can't see the pyramid of growing a personal operation by selling suckers overpriced equipment, I think you are the one who lacks the notion what it means.

[Paladin69]

Quite an accusation. Care to back it up? Because I have two blades on my desk, that doesn't fit in your ponzi claim.

I back it up by watching his percentage continually grow.  I never said he wasn't sending people what they paid for.  Those are two seperate issues.  I only have issues with the former, which is a ponzi.  I wouldn't care that he is selling overpriced equipment if he wasn't using the funds to grow his own operation.  Nobody should deal with a big hardware development company that mines on anything but testnet if you care about keeping mining independent and in as many hands as possible.  Mining with what is developed on such a grand scale will lead to centralization.

Would you trust Bitcoin if the Federal Reserve was doing the same thing?  Like bank loan products based on a fractional reserve system, you are being sold products that actually hurt you.  Every loan devalues your own purchasing power that much more.  In this case it is hashrate.  You are getting screwed twice.  Once with high prices and second devaluation of your own hashrate worth by the same guy selling you the shovels he is using for himself.

The Federal Reserve has the luxury of printing their own dollars that are used against you to enrich themselves.  The same thing is happening here if the term dollars is replaced with hashrate.

It boggles my mind that people can't understand why this is a problem.

May I ask, why did you care to pay so much for blades?  Or did you get them second-hand?  The latter would be better.  The former helps him grow and screw you over.

Why not seek safety in numbers? Noh! I say NO. Disperse so that every one needs to pay more for electricity! That is the way to do it! And with the same deal, waste more time managing your hardware. Double the expense, with less profit! Disperse I say! Off you go.

What is a waste of time is paying for overpriced blades for the sole benefit of the creator to increase their operation to continually screw you over with each adjustment.  Unless you bought for cheap second-hand, you are paying for your mistake twice over.  It's like taking out a loan at the bank to buy something and getting charged interest on debt notes that were given to you.

FYI, I have no problem with group buys.

Why you are not a doctor? That is terrible. Everyone should be a doctor. If you can't be a doctor, then be a nurse. If not, at least be a patient. But don't you be coming here to fund our operation, because people with resources can't talk to people with out them and collaborate. Don't you dare. Communism good, capitalist baaad!

Your analogy doesn't work.  I am making comparisons to the financial industry.  Not a health care service sector where plenty of competition exists.  Health "insurance" actually causes prices to rise along with your premiums but that is a different topic.

Please, tell one thing in this world that is profitable, where people are not collaborating via shares to distribute risk and to reduce costs (labor/time/energy)? Aka creating companies. One. Just one.

You are confused.  Re-read what I said.  Now I'm not even sure why I replied to your post to begin with because you don't seem to understand the concern, at all.

+1 very well articulated. ASiCminer is also powerful enough to manipulate BTC market pricing now by suppressing the price offloading coins they harvest 25% the total of.

Thank you.  I've been avoiding mentioning what you did because I have no proof.  But yes, if he is selling for fiat it would explain why the spot has been doing a lot of bed-shitting lately.  the price has been slowly dropping around the same time ASICMiner really started to grow.

I won't travel down that path without proof, but it certainly is suspect.

I don't really care personally if people sell...the movement is a natural market force.  But, yeah, it does suck.  People investing in ASICMiner are getting screwed three ways then instead of two.

#1 Overpriced equipment (don't really care so much as people can do what they want)
#2 High prices being used for personal reinvestment in their own mining operation.  (this is the biggest issue.  A USB stick of 330 MH could be increasing his own network speed 4x greater for all we know)
#3 Selling what he has, reducing everyones value.  (Long-term this doesn't matter if BTC survives, but it does suck short term for independent guys that would like to buy hardware at a higher spot)

The nature of Bitcoin doesn't allow me to prove #3 so I tend to avoid that issue.

[Kushedout]

I only have issues with the former, which is a ponzi.

You keep using that word. I do not think it means what you think it means.

If you can't see the pyramid of growing a personal operation by selling suckers overpriced equipment, I think you are the one who lacks the notion what it means.

I can't see the link between selling suckers overpriced equipment and Ponzi scheme.

btw, I bought does overpriced USB sticks, first batch, sold them for twice as much.

[k9quaint]

I only have issues with the former, which is a ponzi.

You keep using that word. I do not think it means what you think it means.

If you can't see the pyramid of growing a personal operation by selling suckers overpriced equipment, I think you are the one who lacks the notion what it means.

A ponzi scheme pays new investors dividends with their own money or money from subsequent investors, the scheme itself is not profitable and requires that more and more money be "invested" in order to continue to function. If ASICMiner is forced to do this, that means their mining operation is neither profitable nor sustainable. If ASICMiner is a ponzi scheme then it will eventually unravel and you need not worry about them taking over the Bitcoin mining world.

The only way for ASICMiner to be a threat to Bitcoin is if they can continue to grow and reinvest actual profits from their mining activities. Actual profits precludes them from being a ponzi scheme.

[Paladin69]

I only have issues with the former, which is a ponzi.

You keep using that word. I do not think it means what you think it means.

If you can't see the pyramid of growing a personal operation by selling suckers overpriced equipment, I think you are the one who lacks the notion what it means.

I can't see the link between selling suckers overpriced equipment and Ponzi scheme.

btw, I bought does overpriced USB sticks, first batch, sold them for twice as much.

If you were a middle-man who consistently did that, you would be part of the pyramid below him. 

I probably shouldn't be giving people any ideas who care about their own greed over Bitcoin.

[DeathAndTaxes]

I only have issues with the former, which is a ponzi.

You keep using that word. I do not think it means what you think it means.

If you can't see the pyramid of growing a personal operation by selling suckers overpriced equipment, I think you are the one who lacks the notion what it means.

I can't see the link between selling suckers overpriced equipment and Ponzi scheme.

btw, I bought does overpriced USB sticks, first batch, sold them for twice as much.

If you were a middle-man who consistently did that, you would be part of the pyramid below him. 

I probably shouldn't be giving people any ideas who care about their own greed over Bitcoin.

It is called price discovery.  Someone believes the price is too low, someone believes it is too high.  The trade occurs where the market will bear it.  If USB stick miners are overpriced the price will drop (IIRC it already has once).  No reason one of the people buying chips in bulk (~$7 ea IIRC) couldn't build competing single chip USB stick miners. If the price is too high then someone will to scoop up that easy profit.

It seems you don't believe or are afraid of free markets.  Nobody "needs" to buy an ASIC miner.  They do so because they believe it is in their best interest.  Now personally I believe a lot of potential miners are for lack of a better word, delusional and thus demand drives prices up.  Eventually reality will hit and it will drive prices down.  If nothing else as profits get harder to eek out I would expect to see a lot of used ASIC gear for sale at 50% to 80% off the purchase price.

[dogie]

...First mover advantage is a big one.  But there's no barrier to entry.  I am making money mining right now.  Maybe not much...

And when he makes the market 10x the size? You now earn 10% what you did, and you'll never, ever pay back the costs of buying hardware when you didn't manufacture it.

[Syke]

I like how Asicminer is going business. I won't buy any of their hardware simply because the price is outside my comfort zone on ROI. They did good this generation. But there's a new generation right around the corner that will obsolete them unless they upgrade.

[ScaryHash]

I really do not see why you guys are complaining about someone upping their hash rate by a factor of 10x.

You got people on the forums buying up hundreds of Avalon chips and other group buys, probably raising their hash rate by a factor of 10 or more. Nobody seems to be complaining about that.

AM is not going to take over the network and kill their business in the process. They aren't stupid.

Hash rate is going to increase by at least a factor of 10. That's just technology progressing. Anybody that is not adding hash rate at the same rate is going to be left in the dust. End of story.

Full disclosure: my personal hash rate went up by a factor of 2 in the past month, and will continue to do so for the immediate future.

Why should I be surprised that a company with far larger resources is doing the same thing? I'm not.

[Loredo]

btw, I bought does overpriced USB sticks, first batch, sold them for twice as much.

You're right.  Flipping inflated-price, fundamentally worthless things is the stuff of bubbles, not of Ponzi schemes.

Your comment is iconic of the fundamental problems with bitcoin, and with the mining hardware industry.  There is no bitcoin economy.  Sure, there's some gambling, some economic innovation, some daytrading, some flipping of promises or the rare and wonderful gadget, occasionally a chance to buy a pizza or something at some points in time, but, by and large, nothing. 

Real capital is not going to go into bitcoin with the current levels of volatility in real terms.  So bitcoin gets Sonny Vlesides, scammers, and a couple groups of young guys who had the right university-days contacts and the right juice in the right shops to get some chips made.  That's what ASICminer is; that's what Avalon is.  I'm not dissing them; they've done well, as entrepeneurs.  As businesses, though, they both suck.

The guys who are asking themselves if there is a business here will have the following as the first question: 

what if some day soon, because of Emperor's Clothes phenomenon, or because of the concentration, or because of the inability to do any meaningful mining in private any longer, a critical mass of people decide whatever they came to bitcoin for is gone, and a couple of entities are holding a third of the inventory?  What then?

Beyond the terms Ponzi, Pyramid, Scam, Fraud, and Bubbles, there's another term that's potentially relevant to bitcoin today: Musical Chairs.

[smoothie]

Epic! I love a thousand words via a picture. Two important ones...FRIED and CAT....

Only this is BBQ CAT. Lol

[erk]

The greedier ASICMINER gets, the less profit they make on each coin, that's because their energy costs rise as fast as they add gear. At some point they wont be able to pay a dividend as all their revenue will be going into running the bloated ASIC farm, for roughly the same number of coins each week. Then there is a good chance they will have to close up shop, leaving a  lot of worthless shares, but also that means 1,000TH/s+ suddenly disappears from the BTC net hash rate, and confirmation times blow out until ridiculous, effecting everyone.

[PeZ]

Based on the dividends per share, I suspect they are hoarding a great number of coins and will jump onto the next virtual coin bandwagon before Bitcoin collapses.