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Author Topic: [ANN] A public company will build a huge Bitcoin Mining Operation (ASIC).  (Read 25210 times)
catfish
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April 09, 2012, 07:50:35 PM
 #221

Will there be an opportunity for small time investors to get in on this?

We are talking with legal bods about this. This is our goal to allow "small time investors" in. At this stage it is not possible. We are in talks with a number of "funds" some of which are considering using GLBSE. We will do what we can to allow small investors to participate, but it is neither simple nor quick process.

Vlad, I mined with you back in the MMC days. I always remember the 'I wanna be the first bitcoin billionaire SO BAD' tagline Wink

However, I work in the investment management industry. I've got a couple of questions.

1. You need investors to take you on trust that you actually have a technical solution that works to the claimed specification, right? I presume you know that a PLC is significantly different to a normal limited company that can get away without audits (and how auditors will account for BTC 'profits' is unknown)? BFL suffered from this, big claims up-front to get *fiat* investment;

2. What sounds questionable is *fiat* investment with the prospect of *fiat* dividends, when the hashpower potentially gathered could, as mentioned repeatedly on this thread, reduce the value of the BTC. Mining all the blocks will put you as the main seller on the exchanges, and knowing that will help traders drive your price down. I'd invest if divvies were paid in BTC because you'd clearly be maximising the effectiveness of the economy. Accepting fiat and extracting fiat sounds like draining the value of the BTC economy dry, and there's not enough value in that economy to give a useful ROI on the numbers required for ASIC development (AFAIK);

3. What is the first Bitcoin REIT? The acronym means 'real estate investment trust'. These invest capital in property, and distribute the rental income to the investors. The REIT always has a residual value if the income collapses since the property can be sold. Custom ASICs would leave investors with no return of capital if the income stream dries up;

4. I suspect that you'd only be able to operate as a hedge fund, and given today's 'risk-on' - 'risk-off' volatility, you'd have to restrict withdrawals from investors in a BIG way to have a chance of survival. If the capital invested could be returned (i.e. no collapse of BTC economy, ASIC licenses sold, etc.) then investors would be more reassured. As it is, it sounds risky as hell;

5. Investors expect a yield commensurate with the risk they take. Mad risks demand insane yields. The only way I can see an 'insane yield' is if your plan takes the entire current value of the BTC economy and redistributes it to the investors. That's not good for BTC, you know that.

The legality of the fund is equally complex, and the up-front cost of establishing a PLC (minimum turnover required... where's that coming from?) as opposed to a normal LTD, plus the legal fees, plus the fund setup advice, etc. - you're going to need a LOT of capital. If you're very rich and you're putting it all up yourself, fair enough. But after Madoff, you're not going to fool the UHNW crowd and the institutional fund-of-hedge-fund crowd either.

Of course, if you really meant 'Limited Company' rather than PLC (think about that turnover limit again), then you can be gone as soon as the investments roll in. And I never thought that of you, so what *really* is the master plan here? I'm interested as an investor, simply to hedge my moderate FPGA investments... most of my savings Smiley Hey, high risk, high reward....

...so I give in to the rhythm, the click click clack
I'm too wasted to fight back...


BTC: 1A7HvdGGDie3P5nDpiskG8JxXT33Yu6Gct
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April 09, 2012, 08:18:45 PM
 #222

Isn't the correct play for vlad to take his ASIC farm up to 25-35% of total mining power (ie, just under the range where the community really starts to freak out), and then start selling ASIC hardware at huge markup to everyone else? He can tightly control the supply of his high-margin sold-to-the-public ASICs while bringing on a like quantity of his cheap production-cost ASICs in his own farm to maintain that 20-30%. I think if we assume that vlad is a rational actor, this will be the play (assuming the mining efficiency of his ASICs really is a few orders of magnitude better than current tech).

Bitcoin is the first monetary system to credibly offer perfect information to all economic participants.
But Bitcointalk & /r/bitcoin are heavily censored. bitco.in/forum, forum.bitcoin.com, and /r/btc are open.
Best info on Casascius coins: http://spotcoins.com/casascius
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April 09, 2012, 11:11:36 PM
 #223

Isn't the correct play for vlad to take his ASIC farm up to 25-35% of total mining power (ie, just under the range where the community really starts to freak out), and then start selling ASIC hardware at huge markup to everyone else? He can tightly control the supply of his high-margin sold-to-the-public ASICs while bringing on a like quantity of his cheap production-cost ASICs in his own farm to maintain that 20-30%. I think if we assume that vlad is a rational actor, this will be the play (assuming the mining efficiency of his ASICs really is a few orders of magnitude better than current tech).

If Vlad and Co produce an ASIC, I would not expect them to have a monopoly for long, and I would anticipate that the follow-up fabs (assuming he is even first to market) could well be more optimized.

From: http://marginalrevolution.com/marginalrevolution/2010/01/estimating-soviet-production-speed-for-a-nuclear-weapon.html
==============
In the mid 1940s he and his colleagues were commenting on how quickly the Russians would get the bomb – most of his colleagues put it to 20-30 years. He however amazed them with his estimate 5 years. His reasoning was they they would be much more effective and focused in their research , since they knew it *can* be done. This is the key thing in research be it purely for science or military.

In two years the Soviets had the bomb and it’s all history after this.
==============

Raoul Duke
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April 10, 2012, 12:10:31 AM
 #224


In two years the Soviets had the bomb and it’s all history after this.


yet it were the Americans who blew that bomb...

Something for you to think about, Vlad...

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April 10, 2012, 02:38:31 AM
 #225

1. You need investors to take you on trust that you actually have a technical solution that works to the claimed specification, right? I presume you know that a PLC is significantly different to a normal limited company that can get away without audits (and how auditors will account for BTC 'profits' is unknown)? BFL suffered from this, big claims up-front to get *fiat* investment;

This matter of existence of technical solution and specific details will be discussed privately and covered by NDA's where required.

How auditors would account for BTC? I suppose exactly the same as they would account for potatoes. Imagine a company which pays dividend in potatoes that it grows. These are open questions how BTC's will be accounted for, whether there will be dividends payable in Bitcoins or not, and it is for accountants to figure out.

2. What sounds questionable is *fiat* investment with the prospect of *fiat* dividends, when the hashpower potentially gathered could, as mentioned repeatedly on this thread, reduce the value of the BTC. Mining all the blocks will put you as the main seller on the exchanges, and knowing that will help traders drive your price down. I'd invest if divvies were paid in BTC because you'd clearly be maximising the effectiveness of the economy. Accepting fiat and extracting fiat sounds like draining the value of the BTC economy dry, and there's not enough value in that economy to give a useful ROI on the numbers required for ASIC development (AFAIK);

"Accepting fiat and extracting fiat" for me sounds as neutral. I am discussing with advisers our options of having both fiat and Bitcoin dividends. This is not a trivial matter considering dividend taxation and VAT. It was also suggested that it would be bad idea to commit to a fixed dividend schedule as this would put the company and shareholders at disadvantage and it would be difficult to react to changing market conditions. We do not know yet how exactly the company will be structured, there are no investment prospectus prepared yet. It is complicated. We are working on it.

3. What is the first Bitcoin REIT? The acronym means 'real estate investment trust'. These invest capital in property, and distribute the rental income to the investors. The REIT always has a residual value if the income collapses since the property can be sold. Custom ASICs would leave investors with no return of capital if the income stream dries up;

REIT is a pipe dream for now. Not going to happen before the company is listed on main market of LSE, and this in turn would not make any sense unless the company is wildly successful and Bitcoin's market cap is measured in billions. Even if it would be accepted that racks of ASIC mining gear is a new sort of "real estate".

However, it is rather rare than companies that are less than 3 years old are listed on public exchanges. Considering how quickly Bitcoin is developing, the future is uncertain. Should it happen that in 3 years time Bitcoin will be in mass adoption stage already, the best time to start thinking about being the first Bitcoin company that goes public is now.

The legality of the fund is equally complex, and the up-front cost of establishing a PLC (minimum turnover required... where's that coming from?) as opposed to a normal LTD, plus the legal fees, plus the fund setup advice, etc. - you're going to need a LOT of capital. If you're very rich and you're putting it all up yourself, fair enough. But after Madoff, you're not going to fool the UHNW crowd and the institutional fund-of-hedge-fund crowd either.

I do not think that this is a fund. This is a company that operates Bitcoin mining hardware on large scale. There is no requirement for minimum turnover for a PLC in UK, to the best of my knowledge. You perhaps mean a listed PLC when you refer to turnover requirements. If so, then we talk about different things.

Of course, if you really meant 'Limited Company' rather than PLC (think about that turnover limit again), then you can be gone as soon as the investments roll in. And I never thought that of you, so what *really* is the master plan here? I'm interested as an investor, simply to hedge my moderate FPGA investments... most of my savings Smiley Hey, high risk, high reward....

No, I do not mix private and public, plc and ltd, (they are both limited) , I founded quite a few of ltd's and do know the difference. However, plv vs ltd matter is being discussed behind the closed doors and there are good arguments for both routes.

EDIT:

Catfish, I have one question for you.

Do you think that Bitcoin mining will be confined to the "garage" stage forever?

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April 10, 2012, 02:57:44 AM
 #226

Why all the closed door stuff? Isn't it about time that someone --ANYONE-- were a little more open about things like this? When I hear things like FPGA and ASIC, things that spring to mind are insanities such as multi-thousand dollar costs for nothing more than a bit of software that can make the things work, engineering fees that far exceed the cost of the time and materials expended, and on and on and on. It is a pathetic shame that the industry has such a strangle hold on the hardware development that every detail must be kept under wraps.

A prime, shining example of a useful open hardware design is that of OpenSPARC T1/T2 - relatively modern processors with a completely open architecture (http://www.opensparc.net/). Take also for example the kernels used for video card mining - open source. Many minds can find optimizations that may never have been considered before, and everyone benefits. Even if you refuse to share your IP, there is no reason to be secretive about the other plans, since there isn't a whole lot anyone can do without both the IP and the investment money.

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April 10, 2012, 05:40:49 AM
 #227

Why all the closed door stuff? Isn't it about time that someone --ANYONE-- were a little more open about things like this? When I hear things like FPGA and ASIC, things that spring to mind are insanities such as multi-thousand dollar costs for nothing more than a bit of software that can make the things work, engineering fees that far exceed the cost of the time and materials expended, and on and on and on. It is a pathetic shame that the industry has such a strangle hold on the hardware development that every detail must be kept under wraps.

A prime, shining example of a useful open hardware design is that of OpenSPARC T1/T2 - relatively modern processors with a completely open architecture (http://www.opensparc.net/). Take also for example the kernels used for video card mining - open source. Many minds can find optimizations that may never have been considered before, and everyone benefits. Even if you refuse to share your IP, there is no reason to be secretive about the other plans, since there isn't a whole lot anyone can do without both the IP and the investment money.
1.  It can cost several million dollars to develop a new ASIC.
2.  If you want an open-source ASIC, you have to find a group of engineers willing to work for free.
3.  If a company or investment group spends millions of dollars on a new ASIC, they would be fools to give it away for free.
4.  What else do you need to know?

Sure, it'd be great if someone developed a free and open-source ASIC for Bitcoin mining.  But it's probably not going to happen.  Why?  Because the software and personnel needed to do the job aren't free.

And if you need a reason for companies to not release too much detailed information early on in a project, just look at Matthew announcing the Bitcoin Magazine.  He had plans, those plans didn't come to fruition as quickly as he had anticipated, and his reputation is suffering because of it.  Obviously, vlad doesn't have all the details of his plan worked out, and doesn't want to share any information about it to avoid raising people's expectations.

It can also be a competitive advantage to keep corporate strategies a secret.  The more you know about a competitor, the better you can compete against them.  The counter to that is making sure your competitors know as little about you as possible.
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April 10, 2012, 06:15:44 AM
 #228

Making an ASIC to mine Bitcoin is not really very innovative. Everyone (with the money) can do that.

It's like buying a $1 million machine to dig a whole in the ground and spending another $1 million to start digging for a while (operating cost, manpower, electricity/fuel, etc).
 
If you are lucky you'll find some gold or diamonds. If you're out of luck, somebody gets there first or people move on to something else than gold or diamonds.

That's why everyone wants other people to send them their millions. Including Vlad (using investors) and LargeCoin (by virtue of getting escrow and secured financing). BFL in principle does the same, but a bit different. They want their customers to send them the money up front to build FPGA mining hardware. They are not willing to take the risk and use their own money for it (or they simply don't have money).

Vlad goes a bit further than the other "ASIC developers", he wants to keep it for himself and move to an expensive penthouse.
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April 10, 2012, 06:21:01 AM
 #229

Vlad goes a bit further than the other "ASIC developers", he wants to keep it for himself and move to an expensive penthouse.

that's why i like vlad
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April 10, 2012, 07:44:04 AM
 #230

Vlad goes a bit further than the other "ASIC developers", he wants to keep it for himself and move to an expensive penthouse.

that's why i like vlad


What is there so much to like about greed and the desire to confine all the rest of the "garage" miners to get out of the game Huh
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April 10, 2012, 08:59:26 AM
 #231

Vlad goes a bit further than the other "ASIC developers", he wants to keep it for himself and move to an expensive penthouse.

that's why i like vlad


What is there so much to like about greed and the desire to confine all the rest of the "garage" miners to get out of the game Huh

what's not to like about such an ambitious nature?
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April 10, 2012, 09:04:43 AM
 #232

There is no requirement for minimum turnover for a PLC in UK, to the best of my knowledge.
It's my understanding that there's no minimum turnover unless the PLC seeks listing on a stock exchange. However, to form a PLC there must be a minimum of £50,000 allotted shares.
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April 10, 2012, 12:11:31 PM
 #233

Why all the closed door stuff? Isn't it about time that someone --ANYONE-- were a little more open about things like this? When I hear things like FPGA and ASIC, things that spring to mind are insanities such as multi-thousand dollar costs for nothing more than a bit of software that can make the things work, engineering fees that far exceed the cost of the time and materials expended, and on and on and on.

I suppose a bitcoin asic would be relatively simple to design, and so you might find some hobbyists (or pro's with free time) willing to collaborate on a design; but the one thing that REALLY costs money when making an ASIC, is the mask set, and there is no way around that. Depending on process, you are looking at at least $500.000 to a high multiple of that. Opensource or not wont make that go away. And I imagine someone risking that kind of money on a bitcoin specific chip to not want to inform potential competitors too early.

That said, I think ppl are getting a bit too excited over Vlad's announcement just yet. Ill get excited when I see a demo of working hardware. All I see so far is plans to start a 'HUGE' company doing who knows what using who knows what. If he is planning to build his own chips as he suggested, and particularly if he is new to that field as he seems to be, he might be in for a few very unpleasant surprises.

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April 10, 2012, 12:40:20 PM
 #234

Why all the closed door stuff? Isn't it about time that someone --ANYONE-- were a little more open about things like this? When I hear things like FPGA and ASIC, things that spring to mind are insanities such as multi-thousand dollar costs for nothing more than a bit of software that can make the things work, engineering fees that far exceed the cost of the time and materials expended, and on and on and on.

I suppose a bitcoin asic would be relatively simple to design, and so you might find some hobbyists (or pro's with free time) willing to collaborate on a design; but the one thing that REALLY costs money when making an ASIC, is the mask set, and there is no way around that. Depending on process, you are looking at at least $500.000 to a high multiple of that. Opensource or not wont make that go away. And I imagine someone risking that kind of money on a bitcoin specific chip to not want to inform potential competitors too early.

That said, I think ppl are getting a bit too excited over Vlad's announcement just yet. Ill get excited when I see a demo of working hardware. All I see so far is plans to start a 'HUGE' company doing who knows what using who knows what. If he is planning to build his own chips as he suggested, and particularly if he is new to that field as he seems to be, he might be in for a few very unpleasant surprises.
This.  I had a friend who works at a company doing ASIC design and he offer me space on one of their test wafers as they sometimes have a few free spots.  But then you still need to test and package, etc.  That was the best deal I could get and it was still very expensive and I would only get a few test chips out of the deal anyway.  I did talk to my boss about just doing it through the company I work for and they did look at it but then balked when we got to and could not answer the questions:  What is our projected volume?  How are we going to make back our NRE?  How long will it take to get back our NRE?  How many total customers can we project?  What is the price of BTC going to be in one year?  How many miners are there today?  How many will there be in one year?  two years? Etc. etc.

Basically it is impossible to make any kind of buisniess case for investing this kind of money.

BUT, if you guys can really come up with the money we would be glad to do it for you!  PM me.  Worldwide ASIC design company with offices in China, access to fabs, we can do the verification work, etc.

Our family was terrorized by Homeland Security.  Read all about it here:  http://www.jmwagner.com/ and http://www.burtw.com/  Any donations to help us recover from the $300,000 in legal fees and forced donations to the Federal Asset Forfeiture slush fund are greatly appreciated!
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April 10, 2012, 01:00:12 PM
 #235

I know damn well the cost of a mask set and packaging, and the engineers still need their salary. But I was asking why must there be a "competitive advantage"? I'll bet that even if the thing were crowdfunded, that the one making it would still demand secrecy, just because that is the way it has always been done.

When I put on my investor's hat, I start running scared because of the potential cost and devastation to the entire economy to be running this operation. When I put on my miner's hat, I see a concentration of power that could have been spread to keep the network secure, instead all working under the thumb of one group of investors, some of whom may not have the positive motivations that I am sure Vladimir has. And when I put on my end-user's hat, I see the rich getting richer and the poor getting poorer, just like the failed world of today.

Maybe as a peon myself, I don't understand what it's like to be rich, and why the rich must continue to become more rich. Perhaps if I had a larger discretionary income, I wouldn't be preaching about this, and would be demanding NSA-level secrecy about my organization, my investors, my product, and my vision of the future. But I'd like to think not, and I'd hope that others would feel the same way.

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April 10, 2012, 03:22:12 PM
 #236

I know damn well the cost of a mask set and packaging, and the engineers still need their salary. But I was asking why must there be a "competitive advantage"? I'll bet that even if the thing were crowdfunded, that the one making it would still demand secrecy, just because that is the way it has always been done.

When I put on my investor's hat, I start running scared because of the potential cost and devastation to the entire economy to be running this operation. When I put on my miner's hat, I see a concentration of power that could have been spread to keep the network secure, instead all working under the thumb of one group of investors, some of whom may not have the positive motivations that I am sure Vladimir has. And when I put on my end-user's hat, I see the rich getting richer and the poor getting poorer, just like the failed world of today.

Maybe as a peon myself, I don't understand what it's like to be rich, and why the rich must continue to become more rich. Perhaps if I had a larger discretionary income, I wouldn't be preaching about this, and would be demanding NSA-level secrecy about my organization, my investors, my product, and my vision of the future. But I'd like to think not, and I'd hope that others would feel the same way.
Why must there be a competitive advantage?  Well, so that a company can remain competitive!  If they don't remain competitive, they may not be able to make back their initial investment.

It'd be like spending $1B on a new medication, then handing out the formula to anyone who wants it.  If a company did that, they just wasted $1B, and will never be able to make that money back from sales of the medication, as they'll have to compete with everyone else for sales.
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April 10, 2012, 03:47:13 PM
 #237

Cornering 100% of the market is highly improbable because to do so you would have to drive everyone else out.  Even cornering 70% of the market is very difficult.

The only way a monopoly can survive and make monopolistic (above-average) profits is to have barriers to entry in the market.  In this case the barrier to entry is the development cost for an ASIC. 

What is unknown is whether the bitcoin economy can support the development of one, two, three, or more ASICs.  One possibility is that if there is one ASIC effort it will be profitable, but if there are two ASIC developments then they will both lose money.  In this case, an investor/developer would have to decide the probability that they would face competitors, how many competitors they might have, and whether the risk was worth it.

So Vladamir is advertising an effort to develop an ASIC to reduce the probability of competition and thus increase his probability of profit.

Where it could get interesting for miners is that if ASIC developers lose money on their overall project they are likely to still over run the mining industry as their marginal cost of production will be very low.

I expect the emerging of a large ASIC industry (if it happens) will lower the value of bitcoin by reducing the number of miners and thus the number of participants and the size of the bitcoin economy. 

Don't day trade.
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April 10, 2012, 04:06:09 PM
 #238

I expect the emerging of a large ASIC industry (if it happens) will lower the value of bitcoin by reducing the number of miners and thus the number of participants and the size of the bitcoin economy. 
That's the one concern I have with this as well.  A lot of the people currently interested in Bitcoins are interested because they are mining them "for free".  Take away that "free" income, and those people are just going to disappear.
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April 10, 2012, 04:58:17 PM
 #239

Cornering 100% of the market is highly improbable because to do so you would have to drive everyone else out.  Even cornering 70% of the market is very difficult.

The only way a monopoly can survive and make monopolistic (above-average) profits is to have barriers to entry in the market.  In this case the barrier to entry is the development cost for an ASIC. 

51%-ing the network to capture 100% of profit is a barrier to entry that would produce monopolistic profits. You don't need ASICs, 5970s will do. Txn fees would also be increased under the 51% monopoly. The monopolist is a price-maker and has the luxury of choosing appropriate fees for the user base.

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April 10, 2012, 06:08:55 PM
 #240

Cornering 100% of the market is highly improbable because to do so you would have to drive everyone else out.  Even cornering 70% of the market is very difficult.

The only way a monopoly can survive and make monopolistic (above-average) profits is to have barriers to entry in the market.  In this case the barrier to entry is the development cost for an ASIC. 

51%-ing the network to capture 100% of profit is a barrier to entry that would produce monopolistic profits. You don't need ASICs, 5970s will do. Txn fees would also be increased under the 51% monopoly. The monopolist is a price-maker and has the luxury of choosing appropriate fees for the user base.

And the customer gets to choose the currency in a free market. With fiat currency that isn't always as straightforward, but with a community based open currency the user can choose to evade the tyranny of the monopolist by exercising their right to choose a competitive currency. Right now there's no viable alternative to bitcoin, but if there's an opportunity and demand for it (like if the terms of the monopolist become unacceptable) there will be another crypo-currency. The new currency would be able to build on existing bitcoin infrastructure; if a merchant already accepts bitcoin, it's easy to add yet another crypto-currency and capture a greater market share.

So I'd think one has to be careful to assess these risks when building a monopoly.


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