Useless ASICs

[spooderman]

Ok so theoretically, won't we reach a point where so many people have ASICs that they will generate fewer in BTC than they consume in electricity? Won't we reach a parity of sorts at which point people become unmotivated to mine in any way? This would be just like what has happened with the GPUs and FPGAs, but without a possible improvement of mining technology.

Obviously, should they become worth 1000$ each then it remains worth it for longer.

I sort of imagine a future where bitcoin mining is done philanthropically by those who can afford to, in order to keep money honest, but not as something you are materially rewarded for. Maybe even by a *shudder* elected body.

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[spooderman]

By the way, I wouldn't even consider them 'useless' at this point seeing as they are facilitating something incredible. My question is more about the motivation of people and whether it will remain or not.

[elasticband]

alt coins

[lindeanin]

Ok so theoretically, won't we reach a point where so many people have ASICs that they will generate fewer in BTC than they consume in electricity? Won't we reach a parity of sorts at which point people become unmotivated to mine in any way? This would be just like what has happened with the GPUs and FPGAs, but without a possible improvement of mining technology.

Obviously, should they become worth 1000$ each then it remains worth it for longer.

I sort of imagine a future where bitcoin mining is done philanthropically by those who can afford to, in order to keep money honest, but not as something you are materially rewarded for. Maybe even by a *shudder* elected body.

There will be not much demmand for asic unit if the difficulty becomes high and btc stays at 100.
Unless the units will cost very low

[niko]

Ok so theoretically, won't we reach a point where so many people have ASICs that they will generate fewer in BTC than they consume in electricity? Won't we reach a parity of sorts at which point people become unmotivated to mine in any way? This would be just like what has happened with the GPUs and FPGAs, but without a possible improvement of mining technology.

Obviously, should they become worth 1000$ each then it remains worth it for longer.

I sort of imagine a future where bitcoin mining is done philanthropically by those who can afford to, in order to keep money honest, but not as something you are materially rewarded for. Maybe even by a *shudder* elected body.

Nothing new. Mining will always be marginally profitable in the long run. There is money to be made there: the mathematically certain block reward, plus the fees which are the "soft" variable (in future, payment processors (miners) might be competing for contracts to process our transactions).
In the short term, there may be periods of mining at a loss due to either decrease in btc value, or influx of new miners, or both. Some will drop out, thus making it profitable again for the stubborn ones. The important thing is to plan so you can absorb occasional dry spells without having to drop out.

And as for the "elected bodies" - sure, why not? If bitcoins ever become a reserve currency, mining will become too important to be left to amateurs. The same goes for big corporations - if bitcoins become big for them, they will need to make sure block chain remains healthy.

[reactor]

Ok so theoretically, won't we reach a point where so many people have ASICs that they will generate fewer in BTC than they consume in electricity? Won't we reach a parity of sorts at which point people become unmotivated to mine in any way? This would be just like what has happened with the GPUs and FPGAs, but without a possible improvement of mining technology.

Obviously, should they become worth 1000$ each then it remains worth it for longer.

I sort of imagine a future where bitcoin mining is done philanthropically by those who can afford to, in order to keep money honest, but not as something you are materially rewarded for. Maybe even by a *shudder* elected body.

Nothing new. Mining will always be marginally profitable in the long run. There is money to be made there: the mathematically certain block reward, plus the fees which are the "soft" variable (in future, payment processors (miners) might be competing for contracts to process our transactions).
In the short term, there may be periods of mining at a loss due to either decrease in btc value, or influx of new miners, or both. Some will drop out, thus making it profitable again for the stubborn ones. The important thing is to plan so you can absorb occasional dry spells without having to drop out.

And as for the "elected bodies" - sure, why not? If bitcoins ever become a reserve currency, mining will become too important to be left to amateurs. The same goes for big corporations - if bitcoins become big for them, they will need to make sure block chain remains healthy.

I think the problem is that the ASIC arms race is starting to look like, dare I say, a ponzi scheme. 

To state my group's investment, we have roughly $4k tied up in trading, $2k in investments (AM shares, Havelock, BTCT), $5000 in current hardware (remaining GPUs on LTC, small usb farm on BTC), and a few hundred in each of KNC Jupiter shares (they sounded like a good idea at the time) and in Coinado/Lucko for their custom BFL chip and hardware work.  So we're invested in this industry and have roughly $4-6k available to lay down on new hardware, literally sitting in the bank, waiting to make a purchase.  So we're not folks with a single block erupter complaining about ROI because we paid 1.05 BTC, we've got some cash in this like everyone else.

The requirement to stay involved is to continually purchase more expensive equipment which we do via direct purchase, resale, or buying shares in a larger block purchase.  The equipment people are laying money down for now is not guaranteed to return investment, simply too many players putting hardware online in the next four months.  So in theory, most of the hardware purchased in the September-November generation has a good chance of never returning the initial investment, let alone providing profit to help pay for v3 Asic hardware.  The folks making money are the hardware vendors, the resellers, and anyone selling shares of anything because any IPO becomes a pump & dump (with folks currently in-the-btc having the largest advantage) and anyone selling shares on hardware is basically asking you to roll the dice.

What we are also seeing is companies like Alydian pop up with enterprise-grade mining options.  The problem - these must be paid for in cash, meaning the end result of anyone mining them is to need to continually sell at an ideally high price to return the investment, meaning that the relative periods we see of inactivity on the exchanges are possibly going to be replaced with lots of folks dumping coin, meaning the price is likely to go down.  Good for traders, bad for people calculating ROI on BTC = ~$100USD.  This is how sharky investors work, strike to get rich, leave a wasteland behind them.

Otherwise, hardware is now being priced out of the range of the "normal" user.  If you've been around long enough you likely either have the investment already or the BTC on hand to bet on new vendors, but for the average person coming into BTC today there is a ton of hardware on eBay/Amazon, more than half a dozen vendors promising similar delivery estimates, no certainty as to how high the hashrate will increase by 2014 along with no certainty of the price remaining at today's levels to provide actual ROI, and users of current gen technology complaining about every current vendor (AM fleeces on price because they have available hardware, BFL is a clusterfuck, Avalon has pissed off almost everyone after batches 1/2).  There is no good news in the land of BTC, only an arms race that most people can't even get into.

So I'm very curious to hear some senior/hero member input on what the value prop is behind BTC moving into 2014.  Purchase BTC direct and there is no certainty of return (like any stock/security), pay for hardware and it will likely not pay itself off (mutually assured destruction by the vendors), otherwise there appear to be very few success stories in BTC these days.  On top of that, mass adoption is not happening, BTC is not spreading, and the regulatory market is quickly catching up so everyone who has gotten a free ride on trading/investing/dumping mining profits is likely going to be facing tax repercussions in the next 1/2 years as more governments figure out how to trace the outputs of BTC and tax folks appropriately. 

At the end of the day, it seems like the only people making any money are early adopters and people selling shovels/running pools, which is a truly sad state of affairs.  Come on, someone make this stuff exciting again and not depressing for the new folks. Give us a reason to believe despite all the negative evidence, elders of the community. 

[Bitweasil]

At the end of the day, it seems like the only people making any money are early adopters and people selling shovels/running pools, which is a truly sad state of affairs.

So, just like every other gold rush in history?  Not sure why you think bitcoin is somehow unique.  The signs were obvious a year ago that the long term profits were going to be in selling the miners.

[reactor]

At the end of the day, it seems like the only people making any money are early adopters and people selling shovels/running pools, which is a truly sad state of affairs.

So, just like every other gold rush in history?  Not sure why you think bitcoin is somehow unique.  The signs were obvious a year ago that the long term profits were going to be in selling the miners.

Well why on earth would anyone new get into Bitcoin?  The value prop is disappearing.  And the people selling the hardware pretty much know they are screwing folks on the receiving end because of the big black void of difficulty vs. BTC value.

[baloo_kiev]

Electricity burnt by miners can be recycled. IBM stated in one of their reports (not sure I can recover a link) that is some years, large datacenters will be integrated with central heating systems.

[Bitweasil]

Well why on earth would anyone new get into Bitcoin?  The value prop is disappearing.

The mining goldrush is ending.

There is, however, still strong reasons to get involved in bitcoin as a value store, and method of value transfer.

[MikeMike]

At the end of the day, it seems like the only people making any money are early adopters and people selling shovels/running pools, which is a truly sad state of affairs.

So, just like every other gold rush in history?  Not sure why you think bitcoin is somehow unique.  The signs were obvious a year ago that the long term profits were going to be in selling the miners.

Well why on earth would anyone new get into Bitcoin?  The value prop is disappearing.  And the people selling the hardware pretty much know they are screwing folks on the receiving end because of the big black void of difficulty vs. BTC value.

"Estimated mining power by October:

Minimum: 100TH AM + 100TH Avalon + 300TH Avalon chips + 200TH Bitfury + 300TH BFL = 1PH
Realistic: 300TH AM + 100TH Avalon + 500TH Avalon chips + 500TH Bitfury + 1PH BFL + 500TH KNC = 3PH (actually up to 5 or 6 with all upcoming hardware)

Revenue per GH per day: from 1 to 4 mBTC

Lifetime revenue:
The very best case (totally unrealistic) scenario: 1PH by October and 10x growth per year after that: 0.6 BTC/GH
Much more realistic case: 3PH by October and 100x growth per year after that: 0.1 BTC/GH
The worst case: 6PH by October and 1000x growth per year after that: 0.03 BTC/GH"

OK so seems like you've got some educated opinions on BTC and mining.
So I ask again:
How can someone new to BTC makes sense of these numbers posted above for the GB:

[wormbog]

OP is right, the end is in sight for mining profitability. The next big opportunity will be launching services to make bitcoin usable by the non-geek masses. The more people competing for a fixed supply of coins, the more the exchange rate will grow.

Anyone mining now should be basing their decisions on what they think bitcoin will be worth 3-5 years from now, not what it's worth currently.

[DeathAndTaxes]

At the end of the day, it seems like the only people making any money are early adopters and people selling shovels/running pools, which is a truly sad state of affairs.

So, just like every other gold rush in history?  Not sure why you think bitcoin is somehow unique.  The signs were obvious a year ago that the long term profits were going to be in selling the miners.

Well why on earth would anyone new get into Bitcoin?  The value prop is disappearing.  And the people selling the hardware pretty much know they are screwing folks on the receiving end because of the big black void of difficulty vs. BTC value.

"Estimated mining power by October:

Minimum: 100TH AM + 100TH Avalon + 300TH Avalon chips + 200TH Bitfury + 300TH BFL = 1PH
Realistic: 300TH AM + 100TH Avalon + 500TH Avalon chips + 500TH Bitfury + 1PH BFL + 500TH KNC = 3PH (actually up to 5 or 6 with all upcoming hardware)

Revenue per GH per day: from 1 to 4 mBTC

Lifetime revenue:
The very best case (totally unrealistic) scenario: 1PH by October and 10x growth per year after that: 0.6 BTC/GH
Much more realistic case: 3PH by October and 100x growth per year after that: 0.1 BTC/GH
The worst case: 6PH by October and 1000x growth per year after that: 0.03 BTC/GH"

OK so seems like you've got some educated opinions on BTC and mining.
So I ask again:
How can someone new to BTC makes sense of these numbers posted above for the GB:

Your numbers are well simplistic.  While your Oct numbers may be realistic assumming that growth will continue up to 1000x year over year is "kinda" (and I use that term to be nice) unrealistic.  Within 6 months into 2014 Bitcoin mining would use more computing power then the entire rest of the world combined.  By the end of 2014 Bitcoin mining would use nearly $1B a year in electricity.  By the end of 2015 Bitcoin mining would nearly 30% of the energy used by the human race.  By the end of 2016 it would use enough energy to send a small probe to the nearest star.

Obviously difficulty growth can't remain exponential forever.   The curve will level off it is a mathematical certainty.  The only question is what is the shape of the curve. Look at GPUs, when they hit the scene they were up to 100x as powerful as a CPU.  Not only that it became possible to use 3, 4, even up to 8 per rig.  Thus difficulty/price exploded very rapidly.  If you extrapolated that trend in the first 3 months out over the next 2 years you would have predicted that difficulty would hit 8,000 BEFORE the first ASIC was produced.  Obviously that didn't happen.  So in any estimate you need to look at what is the break even point for each technology.  Start w/ Avalon because they are the least energy efficient.  At what difficulty would the average Avalon miner be mining (just looking at electrical cost) at a loss, assume $0.10 per kWh.  Once difficulty hits that point those miners will idle their rigs.  Long before that point nobody will buy new Avalon's because it simply no longer makes sense.

[DeathAndTaxes]

Ok so theoretically, won't we reach a point where so many people have ASICs that they will generate fewer in BTC than they consume in electricity? Won't we reach a parity of sorts at which point people become unmotivated to mine in any way? This would be just like what has happened with the GPUs and FPGAs, but without a possible improvement of mining technology.

Obviously, should they become worth 1000$ each then it remains worth it for longer.

Simple answer is yes but then again mining is generally a low margin relatively boring endevor.  The change of technology (CPU->GPU GPU->ASIC) creates a short term "mania" but eventually things settle down.  Yes difficulty will keep rising in the near future but eventually the margins on new rigs will be so low that people will stop buying them (or buy less of them) that will slow the curve.  At higher difficulty the least efficient rigs will operate at a loss so the miners will idle them and that will lower difficulty (or at least flatline).  Then it becomes a more mundane business of replacement.  With difficulty high new ASICs sales will be relatively low.  It will be the most efficient units being sold and as they raise difficulty the least efficient miners will be forced out.

Remember GPU was about 100x as efficient as a CPU yet eventually the market adapted.  Difficulty didn't keep doubling every month for 2 years continually.  The reality is most people will never get rich mining.  Yes if you get the right tech at the right time you might make a fortune but really that is more luck than anything else.  Those that picked Avalon1 over BFL "won" but those who picked Avalon3 or bulk chips not so much. 

I sort of imagine a future where bitcoin mining is done philanthropically by those who can afford to, in order to keep money honest, but not as something you are materially rewarded for. Maybe even by a *shudder* elected body.

Highly unlikely.  The margin will be compressed to a point where the cost to mine a BTC is slightly less than the cost to buy one.  If the return goes negative well people can always click the off switch and when they do the difficulty relative to price will drop.  If it drops enough then people will buy or turn on rigs and difficulty will rise.  If it rises to much the least efficient miners will be forced out again and difficulty declines .... etc ... etc ... etc.  This is essentially the cycle that GPU mining has been in for two years now.  Of course even there many people will still mine.  Not everyone is irrational into thinking mining will make them a millionaire in a year, and a billionaire in a decade.  Mining allows anyone to convert electricity into BTC.  It is a way to "buy" BTC without any need for an exchange, or counterparty.

[reactor]

OP is right, the end is in sight for mining profitability. The next big opportunity will be launching services to make bitcoin usable by the non-geek masses. The more people competing for a fixed supply of coins, the more the exchange rate will grow.

Anyone mining now should be basing their decisions on what they think bitcoin will be worth 3-5 years from now, not what it's worth currently.

So then the value proposition shifts.  

If what BitWeasel says is correct, BTC exists moving forward as a great value store or method of transfer.  So it is the new offshore bank/Swiss account and can be used for laundering money and paying for otherwise illicit goods, like on Silk Road.

If the prop is that it is still in its infancy (since we're talking about the 'next phase' of BitCoin) and like a security and can skyrocket, stagnate, or bottom out, then it makes little sense to invest in because:

- The only folks pushing for BTC adoption are users of BTC or folks who want to take advantage of the <Silk Road> type opportunities and ability to launder money.
- The folks currently buying into mining are basically lying to themselves in terms of ROI since you cannot predict difficulty or price with X vendors telling with shipping estimates and Y unknown factors that can hit the network.
- The price of BTC can be moved decently by anyone with $1-2M USD.  Meaning that if we have folks buying in terms of Alydian rentals or investing $200M like the Avalon rumor, there are obviously folks out there smart enough to realize you can manipulate the market easily with a few choice buys and sells.  

At the end of the day, this means people can easily setup for a huge drop, so any investment is actually not an investment in BitCoin but a bet that people with enough cash to totally rig + fuck the system won't.  And by the looks of it, the folks with the cash/BTC are currently doing a great job of doing what happens in the rest of the world, screwing the newcomers while selling them dreams.

Again, the value prop is not very convincing.  BTC is no more attractive than any other investment at this point as the same exact problems are springing up.  It's like the folks who drop $2k into online investing thinking they could be the one that wins big.  Turns out the whole market kinda relies on the suckers, cause the folks at the top have to keep pulling profits from somewhere.

[Dalkore]

Ok so theoretically, won't we reach a point where so many people have ASICs that they will generate fewer in BTC than they consume in electricity? Won't we reach a parity of sorts at which point people become unmotivated to mine in any way? This would be just like what has happened with the GPUs and FPGAs, but without a possible improvement of mining technology.

Obviously, should they become worth 1000$ each then it remains worth it for longer.

I sort of imagine a future where bitcoin mining is done philanthropically by those who can afford to, in order to keep money honest, but not as something you are materially rewarded for. Maybe even by a *shudder* elected body.

Come host with me.  I can give you a secure and optimal environment and .02/Kwh power so it will take a long time for it to consume itself in power.      We are fully live (spent yesterday setting up all the racks (tired sigh). 

[polarhei]

ASIC is not useless. Before this game. There are many C.M mention one thing. General beings like CPU,GPU, In this game, are for testing only, They not doing the right job.

If you think the result is stable, practical for long time. Pack with ASIC for maximum efficient. This is what professional said.

We shall see if there are some people doing with Scrypt arithmetic.

[juca]

At the end of the day, it seems like the only people making any money are early adopters and people selling shovels/running pools, which is a truly sad state of affairs.

So, just like every other gold rush in history?  Not sure why you think bitcoin is somehow unique.  The signs were obvious a year ago that the long term profits were going to be in selling the miners.

capitalism is ruthless, by nature. Be it anarchist or not.

[DeathAndTaxes]

Anyone mining now should be basing their decisions on what they think bitcoin will be worth 3-5 years from now, not what it's worth currently.

That would only be true if your ONLY method of acquiring Bitcoins is mining which isn't the case.


For example say you can buy miner X today for 1 BTC (it doesn't matter if you pay in BTC, USD, or grams of gold the purchase price is 1 BTC equivalent) but you project it will only produce 0.90 BTC over its economic lifespan.  It doesn't matter what the future exchange rate is.  You can gain 1 BTC by simply buying 1 BTC instead. 

[baloo_kiev]

Would someone do the following exercise:

For every day since Jan 2009 calculate what 1$ invested into mining would bring worth now and calculate what 1$ invested directly into BTC would bring. Plot a chart with two lines. Or it could be simply a chart with one line. ROI on Bitcoin mining investments when denominated in BTC.

It will make huge difference depending on investment decisions. Compare ROI of Avalon batch 1 and BFL ASICs.