Gigamining / Teramining

[jamesg]

Regarding the paid upgrade option, my interpretation of the above is that 0.29 BTC ($3.90 at today's rates) gets a Gigamining holder an additional 11 Teramining contracts over the 4 offered by the free path. 11 contracts at 9Mhps apiece is 99Mhps.

Consider a BFL Little Single SC. It hashes at 30,000Mhps and sells for $650. 99Mhps is 0.0033 the hashrate of the SC. 0.0033 of $650 is $2.15. But the paid Teramining upgrade is $3.90 ... a premium of 81% over the actual hardware cost (nearly double). And it ends after just 6 months. Of course some premium is to be expected (hosting facility, utilities, insurance, time, risk) but I find it difficult to justify an 81% markup... even more difficult knowing that the contract ends after 6 months.

So 3 options for Gigaminers to consider are (a) do nothing and accept the 1:4 free upgrade; (b) pay 0.29 BTC/share for the 1:15 upgrade; or (c) put their 0.29 BTC/share towards the purchase of an actual Single (which can likely be re-sold for its full purchase price after 6 months, given BFL's track record of a full-value trade-in program).

I do understand that some people are willing to pay a high premium for not having to worry about the effort of maintaining a physical miner, but I think it is worthwhile to go through the exercise.

Giga, for transparency, would you be willing to provide an itemized list of your (anticipated and/or estimated) operating costs, non-recurring costs, and operating income during the 6-month Teramining period? It would help Gigaminers better judge the value of both the free and paid upgrade paths on offer and help with their decision. My feeling is that a 0.2BTC/share upgrade (26% markup) may be more reasonable than the 0.29BTC (81% markup) proposed ... but without actual numbers to back either one of these, there is nothing to say that one is more reasonable than the other.

Also, for those who no longer wish to continue with Gigamining or Teramining, what options are available to sell their shares? Would you consider a buy-back of some of these yourself and, if so, for what price?

Hi Epoch,

First, thanks for taking the time to write up your response.

Gigamining/Teramining is not for anyone who wants to run their own bitcoin mining equipment and deal with all of the issues that arise. If this was the target market, there wouldn't be a business.

As for the premium, Gigamining sold at a 100% premium to the cost of the equipment so 81% seems a bit low.

For operational costs, there is hosting the equipment, paying for 24/7 support and having an internal employee fret over making sure everything is working correctly. That's about $6k/mo with healthcare, taxes, etc. This also does not include the pool VPS is developing nor the "bitcoin mining analytics" software we are developing to help run the business. And there isn't just the costs of the equipment, there are "use tax" payments to be made for different states the equipment will be running in that are usually around 6% of the purcahse price.

We can consider a buy-back of Gigamining similar to what Meni has mentioned. I believe he said:

I will continue paying coupons of 1MH/s per bond for a while. When the ELE (extrapolated lifetime earnings with current difficulty) was about 1 BTC the bond traded around 0.4 BTC (40% of the ELE), so when I eventually do a buyback (likely after ASICs have stabilized) I think a fair price will be 50% of the ELE at that time (this is subject to change).

Does anyone have an issue with what I quoted above? EDIT: This buyback would only pertain to Gigamining, not Teramining.

Best,
James

[1713886764]

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[1713886764]

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[pieppiep]

Another way to look at it is,

The free path
1 old contract = 4 new contracts
1 old contract + 0.29 BTC = 15 new contracts
so
0.29 BTC = 11 new contracts
1 new contract = 0.29 BTC / 11 = 0.02636364 BTC
so
1 old contract = 4 new contracts = 0.10545456 BTC

My conclusion,
If you think an old contract is worth more than 0.10545456 BTC you're better off paying for the upgrade.
If you think an old contract is worth less than 0.10545456 BTC you're better off with the free upgrade.

[BrimStone]

Just to throw more gas on the fire, how about an option to buy MORE shares at that .29 price if you are already a bondholder?  I would be willing to double up at that price.

(I run a farm of my own and know what the TRUE costs are)

-BrimStone

[jamesg]

Just to throw more gas on the fire, how about an option to buy MORE shares at that .29 price if you are already a bondholder?  I would be willing to double up at that price.

(I run a farm of my own and know what the TRUE costs are)

-BrimStone

Hi BrimStone,

First, thanks for pointing out that there are definitely more intangible costs to running a mining farm. My wife can certainly attest to all of the time I spend looking at my phone to make sure things are up while she has something important to say to me.

I do appreciate your offer, but no. The offer will stay as-is.

Best,
James

[MPOE-PR]

As for the premium, Gigamining sold at a 100% premium to the cost of the equipment so 81% seems a bit low.

OTOH,
- Gigamining was fully insured against any equipment defects or other problems, 5Mh no matter what. Terramining doesn't seem to be (maybe I've not read all this carefully enough).
- Gigamining was (advertised as) perpetual.
- Gigamining was a BTC deal, not a fiat deal, which is what Terramining is (cleverly disguised as this fact may be).
- (most importantly) GLBSE-era nonsense & silliness is over.

As revised, this is a simple "dedicated server" deal, available from pretty much any datacenter/ISP: you pay us 100% mark-up on equipment for a year, we provide connectivity, power, cooling and floor space. The principal difference is that the end product of servers (mostly web presence) is not really commodified, whereas the end product of mining rigs (hashes, obviously) is. (And unabashedly so. In fact hashes are the very definition of a commodity, or at any rate the one thing so far created in this world that comes closest to that theoretical notion.)

As far as hosting goes there's some incentive for a thin midmarket sliver to pay for this type of deal, but the bulk of that market is either buying shared servers (which is what "cloud" is, ftr) or colocating their own equipment. The economic rationale for someone buying into something like this eludes me: if they just want a few hashes they can buy a few hashes on gpumax' successors, if they actually want to mine competitively they can buy the gear themselves. Unlike the use of a car, a vacation cottage or an airplane, which are things people may want for themselves, a lot of hashes are intrinsically about as appealing as a large pile of potatoes or bearing balls.

Obviously the absence of a credit card payment method is easily explained by the operator's desire for discreetly outsourcing all the BTC exchange risk upon "investors", but with all the talk of NDAs and whatnot I fail to see why anyone on the buying side would forego the use of a payment method which'd allow the safety of easy chargeback three months down the road if (when?) the deal doesn't play out as projected. This combination of fiat contracts and BTC payments piles things a little too much on one side.

As to the earnings projections offered: I don't think those presented - or any other such copy for that matter - hold any water whatever. In the words of Buffett (a noted manager of commodified businesses),

Specifically, sellers and their representatives invariably present financial projections having more entertainment value than educational value. In the production of rosy scenarios, Wall Street can hold its own against Washington.

So, for example, if you have 1000 Gigamining contracts the paid upgrade path would cost 1000 x 0.29 = 290 BTC or about $3,900

Personally, I plan to spring for the paid upgrade path as I believe it will most likely be very profitable.

I'll bet you 100 BTC that by the end of this year you will not have received 290 BTC from this investment through the ordinary distributions.

In case anyone's wondering, this isn't an impeachment of James Gibson personally. The case is simply that antiquated (that is to say, fiat) arrangements do not work for Bitcoin.

This isn't through some fault of whoever is trying to implement them, although frustration has occasionally led people on this forum and off to call him a scammer and so forth.

This is simply because fiat is too shitty to work. Giga finds himself in the unenviable position of trying to deliver pizza in present day New York through the services of an old, horse drawn buggy.

It's great that someone is trying (in the sense it's great someone's trying to prove you can't grow taller by pulling your own ears) but the blindness of frustration mentioned afore also guarantees it's suicide.

[jamesg]

- Gigamining was fully insured against any equipment defects or other problems, 5Mh no matter what. Terramining doesn't seem to be (maybe I've not read all this carefully enough).

The expected output should still be 100%. VPS has strategies in place to make sure defective equipment does not adversely effect the contract, it is just not explicitly guaranteed.

- Gigamining was (advertised as) perpetual.

The buyback clause was the devil in the details. Nothing is perpetual.

- Gigamining was a BTC deal, not a fiat deal, which is what Terramining is (cleverly disguised as this fact may be).

Teramining will be paid in BTC.

- (most importantly) GLBSE-era nonsense & silliness is over.

Completely agree. Things will never be the way they were and it is probably for the best.

As revised, this is a simple "dedicated server" deal, available from pretty much any datacenter/ISP: you pay us 100% mark-up on equipment for a year, we provide connectivity, power, cooling and floor space.

This is right. Teramining is a contract giving the recipient access to both the Bitcoin network and the specialized data processing equipment. There is of course, more to it than just that, but that is the essence of the contract.

As to the earnings projections offered:

They are exactly that, just projections. This is why I asked for others to make their own assessment of the situation.

In case anyone's wondering, this isn't an impeachment of James Gibson personally. The case is simply that antiquated (that is to say, fiat) arrangements do not work for Bitcoin.

Well, when the real world meets Bitcoin more head on, I believe that having "antiquated" arrangements will be the only thing to save all parties from eventual regulation / laws / etc that will be placed over the payment system.
 

It's great that someone is trying (in the sense it's great someone's trying to prove you can't grow taller by pulling your own ears) but the blindness of frustration mentioned afore also guarantees it's suicide.

That is your opinion and you are welcome to it.

[jamesg]

To all Gigaminers:

The VPS website has been updated to allow for verified claimants to easily upgrade to Teramining. I am waiting on Quentin to provide the terms of service before we can officially begin the upgrade process.

If you have not sent in your claim yet, please do.

Best,
James

[jamesg]

To all Gigaminers:

Effective immediately, the price to upgrade to Teramining is being dropped to .25 BTC per Gigamining unit upgraded.

BurtW has also been kind enough to help to test the VPS system with a live upgrade and he was able to successfully complete the process.

Best,
James

[BrimStone]

I don't see the option for the upgrade after logging in with my userid.  Is this turned on for everyone now?

[jamesg]

I don't see the option for the upgrade after logging in with my userid.  Is this turned on for everyone now?

Hi BrimStone,

I am still waiting on the TOS for the site from Quentin. As soon as it's ready, the process will go live.

Sorry for the confusion.

Best,
James

[johnlu]

I sent my info along with 1 question well over a month ago & have forwarded it again a few times but have had no acknowledgement or reply from either Carlos or James.

Yes, I sent an email to the lawyer and gigavps almost two moths ago, no one responded neither.

Otoh's question was promptly answered once I had learned that Quentin had not responded. johnlu, please email me directly and I will reply in the morning.

I will be working all day tomorrow to first, get out payments to those who have sent in their information and have been verified, then to setup the upgrade process to Teramining within the VPS web system.

We are getting very close to the arrival of ASIC. Please, if you have not received a response, email me again straight away.

My plans include ALL gigaminers.

james at gigamining dot com

Best,
James

gigavps, I wrote to you on 27 november, I'm forwarding the same message I sent to you and Quentin. Now I'll PM you with my email address to make you know that this is me.

[2GOOD]

To all Gigaminers:

Effective immediately, the price to upgrade to Teramining is being dropped to .25 BTC per Gigamining unit upgraded.

BurtW has also been kind enough to help to test the VPS system with a live upgrade and he was able to successfully complete the process.

Best,
James

That's more or less a good news for the ones with access to their shares. I'm still waiting for the digital signature option.

What about the 6/9/12 month !?

[jamesg]

That's more or less a good news for the ones with access to their shares. I'm still waiting for the digital signature option.

What about the 6/9/12 month !?

Hi 2GOOD,

I do not recommend that you wait. The claims process will stay open but Gigamining cannot be automatically upgraded to Teramining. So if you are interested in Teramining, I would not wait.

Best,
James

[2GOOD]

Hi gigavps
Thank you for the reply. What do you think is there a chance that for you to extend the contract for 12 months? Please understand me well I must pay around 4-5 BTC to get my ~20 gigamining bonds. Tomorrow will ask again for a cheaper service but still it's a bit unfair for non US citizens.

Regards
2GOOD

[jamesg]

Hi gigavps
Thank you for the reply. What do you think is there a chance that for you to extend the contract for 12 months? Please understand me well I must pay around 4-5 BTC to get my ~20 gigamining bonds. Tomorrow will ask again for a cheaper service but still it's a bit unfair for non US citizens.

Regards
2GOOD

Hi 2GOOD,

While I definitely understand your concern regarding creating legal documents, there is really no other way around this. I am still considering extending the contract, but have not made a decision.

Best,
James

[Naelr]

Giga,

So unless I missed it you never said what happens, after we upgrade, after 6 months is up?  If I read the contract right and understand what your trying to do we upgrade from gigamining to teramining paid or otherwise, hope we make more btc then we paid in, then??? the contract is fulfilled and no more shares for us?  we start over? are we hoping for some kind of share trading ?  What is the future of teramining after 6 months?

I sent in my claim so I am almost ready to make a decision I just want to know what is next ... after the 6 months.


Naelr

[jamesg]

Giga,

So unless I missed it you never said what happens, after we upgrade, after 6 months is up?  

Hi Naelr,

Sorry if I didn't answer this before. Teramining ends after the term of each individual contract has received 6 months of payments. While we are still waiting for the TOS from Quentin, I have been contemplating making the term longer.

If I read the contract right and understand what your trying to do we upgrade from gigamining to teramining paid or otherwise, hope we make more btc then we paid in, then??? the contract is fulfilled and no more shares for us?  

The mining contract is over after the term.

we start over?  

I will probably not be making any more offers after Teramining.

are we hoping for some kind of share trading ?  

You absolutely cannot trade your Teramining contracts as this would classify the contract as something that would need to be registered with a bunch of 3 letter agencies.

I sent in my claim so I am almost ready to make a decision I just want to know what is next ... after the 6 months.  

Thank you for sending in your claim.

Best,
James

[Naelr]

So then what happens to those that choose to not upgrade?  You will obviously retain all the mining hardware.. do those guys just keep getting hashing power until you decide to turn off the rigs?  This just looks like you upgraded thousands of dollars worth of hardware for just 6 months of hashing... for us that is ... you obviously will keep the rigs running and be mining BTC for as long as it is still profitable for you.  Bravo on making out like a bandit on the hardware ... but that is it... no more anything? 

Naelr

[jamesg]

So then what happens to those that choose to not upgrade?  You will obviously retain all the mining hardware.. do those guys just keep getting hashing power until you decide to turn off the rigs?  This just looks like you upgraded thousands of dollars worth of hardware for just 6 months of hashing... for us that is ... you obviously will keep the rigs running and be mining BTC for as long as it is still profitable for you.  Bravo on making out like a bandit on the hardware ... but that is it... no more anything? 

Naelr

Hi Naelr,

I have been saying for months now that without a buyback clause, there is no way to offer Teramining as a perpetual agreement. I have never been willing to offer any ownership in either equipment or company, this has not changed.

I am offering both a free and paid upgrade path for those who want ASIC. I have also lowered the upgrade price.

Please tell me what you think Teramining should be and we can discuss it.

Best,
James

[boonies4u]

So then what happens to those that choose to not upgrade?  You will obviously retain all the mining hardware.. do those guys just keep getting hashing power until you decide to turn off the rigs?  This just looks like you upgraded thousands of dollars worth of hardware for just 6 months of hashing... for us that is ... you obviously will keep the rigs running and be mining BTC for as long as it is still profitable for you.  Bravo on making out like a bandit on the hardware ... but that is it... no more anything? 

Naelr

Hi Naelr,

I have been saying for months now that without a buyback clause, there is no way to offer Teramining as a perpetual agreement. I have never been willing to offer any ownership in either equipment or company, this has not changed.

I am offering both a free and paid upgrade path for those who want ASIC. I have also lowered the upgrade price.

Please tell me what you think Teramining should be and we can discuss it.

Best,
James

That didn't answer his question. What happens to people who choose not to upgrade?