The end of the ASIC

[Adrian-x]

I think it is somewhat similar to Q3 2010 where an exponential increase in difficulty drove market participants to move the price 2 orders of magnitude higher. Only this time the reword is half and there are more participants. (Call it demand noise with fewer coins)

Already ACIC USB's have dropped from BTC2 to BTC0.17. If it is a repeat of 2011 then Bitcoin will look like a failed experiment when ASIC manufacturers stop producing for lack of demand and the difficulty stabilizers. (Not my most probable scenario but an option)

I think there are lots of ASIC investors who invested hundreds of Bitcoin for just a few GHs that will take over 5 years to earn back, and they will save every coin.

They are in all likelihood the ones with the hard learned lesson holding is the best long term strategy.

What I want to know is, are they buying XBT to cover the loss or are they waiting for it to drop while new market participants are holding up the price. There is still a lot of profit to be made if you can limit your XBT capital outlay.

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[johnyj]

This has nothing to do with ASICs, given 3600 coins a day and more and more miners join the game (I guess more than 40000 now), each person's average coin income should be less than 0.1 bitcoin per day if all of them have access to the same technology

That's an intended design from Satoshi. Manufacturing of money should be the same as any other business, when it is too difficult to manufacture money, people should work to provide goods/services in exchange for money, thus raise the value of money, but if too many people are producing goods/services to compete for a limited supply of money, the money's value will rise, thus make manufacturing of money profitable again. In this way, people either manufacturing money or manufacturing goods/services, they always have some thing to do, thus 100% employment is reached

So, until we see the exchangeable goods/services/even fiat money for bitcoin grow by a large extent, the bitcoin's mining profitability will keep dropping due to more and more people joining the mining industry

[DoomDumas]

BFL is one case..

Indeed the ASIC scene is still pretty young.. We've just seen an intro..

[crumbs]

This has nothing to do with ASICs, given 3600 coins a day and more and more miners join the game (I guess more than 40000 now), each person's average coin income should be less than 0.1 bitcoin per day if all of them have access to the same technology

That's an intended design from Satoshi. Manufacturing of money should be the same as any other business, when it is too difficult to manufacture money, people should work to provide goods/services in exchange for money, thus raise the value of money, but if too many people are producing goods/services to compete for a limited supply of money, the money's value will rise, thus make manufacturing of money profitable again. In this way, people either manufacturing money or manufacturing goods/services, they always have some thing to do, thus 100% employment is reached

So, until we see the exchangeable goods/services/even fiat money for bitcoin grow by a large extent, the bitcoin's mining profitability will keep dropping due to more and more people joining the mining industry

I'm not sure what you mean by "more miners join[ing] the game."  There's more hashpower coming online, but that doesn't translate into more miners -- it's *fewer* miners with ASICs.  The gamerz hashing with their boxen are pretty much out of the bitcoin game already, and mining at a loss with a USB stick & Rpi is ... well, more fun than watching paint dry.  There is nothing to "hack" on those USB sticks -- the novelty wears off pretty quick, you'd have more fun hacking a thumb drive.

Mining is becoming a real business, with *scores* of ASIC chip manufacturers *with no product to their name* offering pre-orders, lulzy IPOs & bizarre hybrid mining/ASIC manufacture offerings (i have nothing but respect for the guys on the tech side).

Why do people buy into these IPOs?  Because profit. 
They're buying into the second-highest tier of a pyramid scheme.  As long as they keep their mouths shut, and let the IPO issuers manage the hype machine, they will profit. 
It's morning, wake up. 
 

[johnyj]

I'm not sure what you mean by "more miners join[ing] the game."  There's more hashpower coming online, but that doesn't translate into more miners -- it's *fewer* miners with ASICs.  The gamerz hashing with their boxen are pretty much out of the bitcoin game already, and mining at a loss with a USB stick & Rpi is ... well, more fun than watching paint dry.  There is nothing to "hack" on those USB sticks -- the novelty wears off pretty quick, you'd have more fun hacking a thumb drive.

Mining is becoming a real business, with *scores* of ASIC chip manufacturers *with no product to their name* offering pre-orders, lulzy IPOs & bizarre hybrid mining/ASIC manufacture offerings (i have nothing but respect for the guys on the tech side).

Why do people buy into these IPOs?  Because profit. 
They're buying into the second-highest tier of a pyramid scheme.  As long as they keep their mouths shut, and let the IPO issuers manage the hype machine, they will profit. 
It's morning, wake up. 
 

The difficulty rally has not really started yet, you will see the real rally in a few months. Most of the miners will eventually upgrade their gaming GPUs to ASIC devices. Some of them did it long time ago when BFL announced their plan last year, that's all those mini-rigs that coming online now. But I think most of the miners start to purchase ASICs from BFL since Avalon delivered their first rig and the bitcoin price skyrocketed, the order number at BFL is now estimated to be at least 30000

[Kaiji]

Can the difficulty reach such a high level that current tech is unable to produce a decent number of coins? I mean what's the point of having expensive equipment like ASICs and be able to produce only 1 coin a month for example? What would this scenario result in.

[Adrian-x]

Can the difficulty reach such a high level that current tech is unable to produce a decent number of coins? I mean what's the point of having expensive equipment like ASICs and be able to produce only 1 coin a month for example? What would this scenario result in.

It'll result in: Distribution and an increase in demand, = currently undervalued.

[johnyj]

Can the difficulty reach such a high level that current tech is unable to produce a decent number of coins? I mean what's the point of having expensive equipment like ASICs and be able to produce only 1 coin a month for example? What would this scenario result in.

It has nothing to do with technology, 3600 coins per day fixed. It means that you better buy coins instead of mining if there are too many people in the mining camp

Today, you spend $1000 to buy 10 coins. With mining, at 20% difficulty increase for each period, you get maximum 5X income of your first preriod income, for a BFL 25G you get 4 coins for current difficulty period. If you start to run it from current difficulty, you get 20 coins maximum, but if you start to run it in September, you will get maximum 10 coins, any time after that will be less than 10 coins total

Return for each difficulty period at 25Gh/s
4
3.2
2.56

2.05
1.64
1.31

1.05
0.84
0.67

0.54
0.43
0.34

0.27
.
.
.

If more people are switching from mining to purchasing, that will lift the price for some degree, which will also help improve the USD investment return, but for those who invest with bitcoin, it will almost never ROI

[ISAWHIM]

The biggest thing to note is this...

Value is not increasing proportionally to the money spent to mine with advanced mining costs. That, and the fact that the volume of trades is reaching the points where BTC was, when it was selling for $10 and lower... is an indicator that eventually the trade-volume will simply die, because at these "worthless to mine prices", the coins still are not trading. No-one wants to pay for them, no-one can afford to mine them, and asking price from those holding, will never become "realized" in the future.

Those who saw this coming, months ago, left with minimal loss. Those still in denial, will take the brunt of the fall.

BTC has turned from gold, into tin-foil. It will eventually turn into paper, as worthless as any other "in game currency" that is generated from nothing, and requires zero effort to create.

Sorry, but that is just a fact. The complexity and poor design, along with greed, is what killed the coin. Welcome to Zimbabwe!

[johnyj]

The biggest thing to note is this...

Value is not increasing proportionally to the money spent to mine with advanced mining costs. That, and the fact that the volume of trades is reaching the points where BTC was, when it was selling for $10 and lower... is an indicator that eventually the trade-volume will simply die, because at these "worthless to mine prices", the coins still are not trading. No-one wants to pay for them, no-one can afford to mine them, and asking price from those holding, will never become "realized" in the future.

Those who saw this coming, months ago, left with minimal loss. Those still in denial, will take the brunt of the fall.

BTC has turned from gold, into tin-foil. It will eventually turn into paper, as worthless as any other "in game currency" that is generated from nothing, and requires zero effort to create.

Sorry, but that is just a fact. The complexity and poor design, along with greed, is what killed the coin. Welcome to Zimbabwe!

Totally upside down, it is the fiat money requires zero effort to create, you need electricity/hardware/software to mine bitcoin. Fiat money's value is a very complex plot, in theory it should worth nothing, but it does worth something, why? no one knows, because they have no other choice when they were born into such a system

[crumbs]

The biggest thing to note is this...

Value is not increasing proportionally to the money spent to mine with advanced mining costs. That, and the fact that the volume of trades is reaching the points where BTC was, when it was selling for $10 and lower... is an indicator that eventually the trade-volume will simply die, because at these "worthless to mine prices", the coins still are not trading. No-one wants to pay for them, no-one can afford to mine them, and asking price from those holding, will never become "realized" in the future.

Those who saw this coming, months ago, left with minimal loss. Those still in denial, will take the brunt of the fall.

BTC has turned from gold, into tin-foil. It will eventually turn into paper, as worthless as any other "in game currency" that is generated from nothing, and requires zero effort to create.

Sorry, but that is just a fact. The complexity and poor design, along with greed, is what killed the coin. Welcome to Zimbabwe!

Totally upside down, it is the fiat money requires zero effort to create, you need electricity/hardware/software to mine bitcoin. Fiat money's value is a very complex plot, in theory it should worth nothing, but it does worth something, why? no one knows, because they have no other choice when they were born into such a system

Let's factor out fiat, fiat's an entirely irrelevant can of worms.  Fiat's welfare is irrelevant to ASICs, other than a few tangential lulfests where disappointed buyers are jumping on CC & PayPal to charge back their purchases from BFL.  Let's assume the mining gear is being bought with BTC.

Let's look at the present scenario, where a whole bunch of ASIC hopefuls are are promising outrageous amounts of hashpower, each funding production (and, likely, R&D) with pre-orders & IPOs.

Considering the legal clusterfuck of Belize-registered US exchanges trading shares of Belize-registered US-based companies issuing illegal-in-US and otherwise lulzy financial instruments, what do you predict the outcome of all of this to be, taking into account the current sentiment re: BFL & Avalon, the companies currently delivering on the ASIC promise?

[ISAWHIM]

Fiat requires zero effort to create! What!

You know printers that do micro-printing for free, do auditing and serialization for free, and handle tracking and counterfeit detection for free, places that do quality-control and distribution for free... Let me in on your "free money printers". (Not to mention insurance for "held bills". Which no coin offers.)

But I digress... lol.

I believe it costs over $3 to print a $1 bill, and over $0.05 to make a penny. (But that penny earns more than $3.00 in taxes as it passes through multiple peoples hands. Yet is is worth less than a penny, physically, in value.)

The point still is...

Trading/use of BTC is lower than what it was, when people could afford to pay for it, to use it. Thus, they are no longer giving-up $$$ for BTC. Thus, places are no longer accepting it, because they can't exchange it for $$$. Turning BTC into a coin that has everyone holding it, and less and less having the ability to use it for anything. If it was not for mining, "coins from nothing", then there would be no value. That "loss" from investment and electricity is no longer rewarding anyone with gains... Thanks to ASIC's.

Remember, the people making the ASIC's are also mining with them. They used your money to build themselves the golden-goose, and gave you the black-swans. Even if they loose, they win. In the end, they will stop mining and making them, selling you the golden-goose, when the goose stops laying eggs... leaving you with the old crippled goose.

This coin is now worse than any fiat. No fiat is worth converting to a coin that is constantly falling in value. Not rising to adjust for losses is the same as falling. If BTC flat-lined, that is falling. No-one gains, it is all losses. Even to those getting the THs machines.

Notice that no matter what the hash-rate of the network, everyone still holds the same volume, as a percentage, of the network. EG, they just got more debt from buying more miners, and that yields zero more coins. Increased debt, and no-one willing to pay for it, by buying BTC for $$$ from them. We were the ones paying, (the GPU miners), and we all left, because we were pushed out. Now, the ASIC owners, the few that exist, have to trade among themselves.

There is no more "economy" in BTC... just banks buying each others debt. ASIC banks buying loan-debts from one another.

[EmperorBob]

Trading/use of BTC is lower than what it was, when people could afford to pay for it, to use it. Thus, they are no longer giving-up $$$ for BTC. Thus, places are no longer accepting it, because they can't exchange it for $$$.

Do you have any evidence to support your assertion that merchants no longer accept BTC? Because I have not seen that. Adoption is slowing a bit, but that's because it's not in the news anymore.

[DeathAndTaxes]

Trading/use of BTC is lower than what it was, when people could afford to pay for it, to use it. Thus, they are no longer giving-up $$$ for BTC. Thus, places are no longer accepting it, because they can't exchange it for $$$.

Do you have any evidence to support your assertion that merchants no longer accept BTC? Because I have not seen that. Adoption is slowing a bit, but that's because it's not in the news anymore.

I just extended the registration on 30+ domain names.  namecheap still took my "worthless" BTC.  Interestingly they credited my account instantly (6 months ago when I paid w/ BTC it required 6 confirmations).

ASICs are disruptive so I expect the amount of doom & gloom, FUD, and hyperbole to ramp up as fast as difficulty over the next 3-6 months.  When the FUD bubble reaches its peak and breaks we can expect that people have gone through the stages of grief (for the loss of their easy money printers) and can move forward.

[jgarzik]

I just extended the registration on 30+ domain names.  namecheap still took my "worthless" BTC.  Interestingly they credited my account instantly (6 months ago when I paid w/ BTC it required 6 confirmations).

Many vendors are figuring out that zero-confirmation transactions are just fine... for order flows where the actual product delivery takes longer than an hour or so.  i.e.  "accept" the zero-conf transaction, then check it again at a later time when product delivery starts.  For places such as BitcoinStore.com, this works because a bitcoin transaction will have many confirmations by the time they are putting an order in the mail.  Similarly, namecheap can just yank the domain control away from you, if the bitcoin transaction gets double-spent, making "accepting" zero-conf transactions just fine.

ASICs are disruptive so I expect the amount of doom & gloom, FUD, and hyperbole to ramp up as fast as difficulty over the next 3-6 months.  When the FUD bubble reaches its peak and breaks we can expect that people have gone through the stages of grief (for the loss of their easy money printers) and can move forward.

Indeed.

[johnyj]

Fiat requires zero effort to create! What!

You know printers that do micro-printing for free, do auditing and serialization for free, and handle tracking and counterfeit detection for free, places that do quality-control and distribution for free... Let me in on your "free money printers". (Not to mention insurance for "held bills". Which no coin offers.)

But I digress... lol.

I believe it costs over $3 to print a $1 bill, and over $0.05 to make a penny. (But that penny earns more than $3.00 in taxes as it passes through multiple peoples hands. Yet is is worth less than a penny, physically, in value.)

Lol... you know that FED is creating 48 Billion dollar per month. Based on this reasoning, the FED must be paying 144 Billion dollar to mint factory, and the mint factory is paying 96 Billion dollar to its suppliers, 2x amount of QE3 money went to printing money. Wait, since there are only 48 Billion dollars added to economy each month, where are those 96 Billion dollar come from  

[Adrian-x]

Fiat requires zero effort to create! What!

I believe he is saying the cost of printing money is detached from the economic value so it is almost free, and whatever it costs its utility value is similar to that of the junk mail you may occasionally get in the mail, which you tend to think of as free.   

[EscrowBTC]

I thought i'll not hear this anymore.

Now people realized that simple mining rigs were good.

The technology was overvalued but they got their money.

[FlyingSpocks]

Fiat requires zero effort to create! What!

You know printers that do micro-printing for free, do auditing and serialization for free, and handle tracking and counterfeit detection for free, places that do quality-control and distribution for free... Let me in on your "free money printers". (Not to mention insurance for "held bills". Which no coin offers.)

But I digress... lol.

I believe it costs over $3 to print a $1 bill, and over $0.05 to make a penny. (But that penny earns more than $3.00 in taxes as it passes through multiple peoples hands. Yet is is worth less than a penny, physically, in value.)

Lol... you know that FED is creating 48 Billion dollar per month. Based on this reasoning, the FED must be paying 144 Billion dollar to mint factory, and the mint factory is paying 96 Billion dollar to its suppliers, 2x amount of QE3 money went to printing money. Wait, since there are only 48 Billion dollars added to economy each month, where are those 96 Billion dollar come from  

The Fed doesn't actually print money. The QE program is implemented by changing values in accounts electronically, not actually printing bills. People call it "printing money" because it can have similar effects.

[desired_username]

I thought i'll not hear this anymore.

Now people realized that simple mining rigs were good.

The technology was overvalued but they got their money.

This is not true. If you didn't steal electricity GPU mining were as much a gamble as ASIC mining now. Most people (newbies) doesn't understand this and complain constantly.

On the other hand, we have the biggest peer to peer network which ever existed.

ASIC mining is the way forward and is very good for bitcoin. Only the fools who bought hardware for the wrong price and at the wrong time have regrets.

Also, don't think that the "fruits" of badly timed purchases will rot in a drawer. People will buy them up from the "losers" of the game.