Gigamining / Teramining

[burnside]

Was considering investing, but I see that most peeps calculate out the payback at ~1 - 1&1/3 years and as far as I can tell the payout's gonna get cut in half in 6 months.  Since the first chunk of the payout has to go to cover the power bill, that means that what's left for investors is going to be far less than half of what the payout is now.

Hope that makes sense.  So what's the endgame?  Everyone still gets 5Mh/s, dividend drops to nothing, shares drop to nothing, you buy them back?

Or am I missing something?

[friedcat]

... as far as I can tell the payout's gonna get cut in half in 6 months.  

The block reward will get cut in half in 6 months, but some miners will close their operations, making difficulty down, so the payout won't necessarily drop so much.

Since the first chunk of the payout has to go to cover the power bill.

The essence of mining bond is that the coupon equals to exactly the declared MH/s will get, no more, no less, no electricity fee reduced from it. The issuer pays the electricity fee him/her-self.

So what's the endgame?  Everyone still gets 5Mh/s, dividend drops to nothing, shares drop to nothing, you buy them back?

It's basically the consideration between whether you long mining/short bitcoin or you long bitcoin/short mining. If you believe that the dropping speed will be very fast, you could short mining bonds or simply hold your bitcoins. If you believe the otherwise, just buy.

[P4man]

Or am I missing something?

Yep. THe fact that asics will push up difficulty into the stratosphere, rendering those 5MH even more worthless.
If anyone thinks Im wrong and wants to lend me these bonds for 6 - 12 months, pm me.

[PatrickHarnett]

stuff up to the interesting point

If you buy the bond at 1 (par) .....

Lol - par values went out with the dinosaurs and is not relevant (and it wasn't 1 anyway, and for most instruments would not have been 1).

Perhaps the recent 2.4M difficulty is in people's minds (15Th network speed) and with block reward changing, that is equiv of 4.8 or 1/3rd of current yield.  Yes, the perpetual bond pays, but what value is assigned to it will be interesting, especially if other assets promise higher returns.  It is an uncertain future and there was also the interesting post earlier that did mention the buyback clause, but that might just mean people trade at an inflated value to protect their investment.

[piotr_n]

Or am I missing something?

Yep. THe fact that asics will push up difficulty into the stratosphere, rendering those 5MH even more worthless.
If anyone thinks Im wrong and wants to lend me these bonds for 6 - 12 months, pm me.

Of course it will happen. ASICs are there already and they will be getting cheaper and faster - month by month...
Having the new money gigamining will obviously buy a new and more efficient hardware - so for the current investors "growing" of the company makes sense only if the promised 5MH also keeps growing, along with the total number of shares...
If the 5MH/bond stays fixed forever, the dividends will get lower and lower and the bond price will eventually go down to zero - it's only a question of when.

And @ some of you guys, the big mr economists: you may be well educated on the field of economy, but you suck in basics of a logical thinking.

[friedcat]

Of course it will happen. ASICs are there already and they will be getting cheaper and faster - month by month...

As far as I know, ASICs for Bitcoins are still in the designing phase and no actual chips are mining now. Could you point URL to me to support "are there already" please?

If the 5MH/bond stays fixed forever, the dividends will get lower and lower and the bond price will eventually go down to zero - it's only a question of when.

Anyone buying it are aware of this. They are all betting that the dropping of dividends will be slow enough to let the cover the initial price. You are just the one who bet on the opposite. If you are so confident about your bet, you could short the bonds.

[piotr_n]

Of course it will happen. ASICs are there already and they will be getting cheaper and faster - month by month...

As far as I know, ASICs for Bitcoins are still in the designing phase and no actual chips are mining now. Could you point URL to me to support "are there already" please?

AFAIK, the butterfly labs hardware is based on ASICs.
And moreover, if anyone else is working on his own chip, he doesn't want to disclose this information.
There is a lot of money on stake here and turning an FPGA solution (which do exist) into a much cheaper ASIC is relatively easy nowadays.

If the 5MH/bond stays fixed forever, the dividends will get lower and lower and the bond price will eventually go down to zero - it's only a question of when.

Anyone buying it are aware of this. They are all betting that the dropping of dividends will be slow enough to let the cover the initial price. You are just the one who bet on the opposite. If you are so confident about your bet, you could short the bonds.

But it doesn't need to be like this.
As the business is growing, thus buying more efficient equipment, I see no reason why the promised 5MH could not grow along with it.
Otherwise new mining companies will appear, offering a better hashing power for a lower share price - while Gigaminig will end up dead.

[burnside]

Anyone buying it are aware of this. They are all betting that the dropping of dividends will be slow enough to let the cover the initial price. You are just the one who bet on the opposite. If you are so confident about your bet, you could short the bonds.

How?  Is GBLSE setup to allow for shorts?  I don't see this working out for the little guy.

[friedcat]

AFAIK, the butterfly labs hardware is based on ASICs.

Not yet. Their current Singles are FPGA-based. See here: https://bitcointalk.org/index.php?topic=79825.0
Their Mini Rigs are probably made with the same kind of FPGA like bitfury's.

And moreover, if anyone else is working on his own chip, he doesn't want to disclose this information.
There is a lot of money on stake here and turning an FPGA solution into a much cheaper ASIC chip is relatively easy nowadays.

This is possible. But turning FPGA to ASIC is not cheap (the initial capital cost), and I don't know if it's very profitable given the current tiny market cap of the whole Bitcoin economy.

But it doesn't need to be like this.
As the business is growing, thus buying more efficient equipment, I see no reason why the promised 5MH could not grow along with it.
Otherwise new mining companies will appear, offering a better hashing power for a lower share price - while Gigaminig will end up dead.

I hate to advertise in other people's thread. So I will PM you about my business which is a little more similar to what you want.

[stochastic]

Of course it will happen. ASICs are there already and they will be getting cheaper and faster - month by month...

As far as I know, ASICs for Bitcoins are still in the designing phase and no actual chips are mining now. Could you point URL to me to support "are there already" please?

AFAIK, the butterfly labs hardware is based on ASICs.
And moreover, if anyone else is working on his own chip, he doesn't want to disclose this information.
There is a lot of money on stake here and turning an FPGA solution (which do exist) into a much cheaper ASIC is relatively easy nowadays.

If the 5MH/bond stays fixed forever, the dividends will get lower and lower and the bond price will eventually go down to zero - it's only a question of when.

Anyone buying it are aware of this. They are all betting that the dropping of dividends will be slow enough to let the cover the initial price. You are just the one who bet on the opposite. If you are so confident about your bet, you could short the bonds.

But it doesn't need to be like this.
As the business is growing, thus buying more efficient equipment, I see no reason why the promised 5MH could not grow along with it.
Otherwise new mining companies will appear, offering a better hashing power for a lower share price - while Gigaminig will end up dead.

Why would it grow?  You bought a debt obligation that will pay out whatever 5 MH/s makes.  That is like purchasing a bond that pays out 5% per year and hoping they increase it to 6% instead.

[piotr_n]

Why would it grow?

I already told you why: so Gigamining would not end up dead. Otherwise it will - despite of "growing"

[stochastic]

Why would it grow?

I already told you why: so Gigamining would not end up dead. Otherwise it will - despite of "growing"

It is a bond, not a share, the bond issuer wants their debt to end up dead.  Doesn't everyone?

[friedcat]

Anyone buying it are aware of this. They are all betting that the dropping of dividends will be slow enough to let the cover the initial price. You are just the one who bet on the opposite. If you are so confident about your bet, you could short the bonds.

How?  Is GBLSE setup to allow for shorts?  I don't see this working out for the little guy.

You could manually and privately borrow shares from someone else.

Or you can just bet that the difficulty will rise with someone else.

[piotr_n]

Why would it grow?

I already told you why: so Gigamining would not end up dead. Otherwise it will - despite of "growing"

It is a bond, not a share, the bond issuer wants their debt to end up dead.  Doesn't everyone?

Well, that's a good point
But GIGAMINING is not only a bond - it's also a business and a mark.
I was just thinking that GIGAMINING would maybe prefer to stay alive on GLBSE - having a reputation would make a further business easier.
Instead of just dying and re-appearing as GIGAMINING2, that gives 10MH/bond - which would make the business harder, because of the reputation

[burnside]

You could manually and privately borrow shares from someone else.

Or you can just bet that the difficulty will rise with someone else.

Appreciate the feedback.  I went and did some digging and discovered that GLBSE doesn't do it yet.  Stumbled across several deals in the works.  Unfortunately I'm not really the type to borrow stuff from peeps I don't know.  Maybe when GLBSE supports it I'll take another look.

[piotr_n]

AFAIK, the butterfly labs hardware is based on ASICs.

Not yet. Their current Singles are FPGA-based. See here: https://bitcointalk.org/index.php?topic=79825.0
Their Mini Rigs are probably made with the same kind of FPGA like bitfury's.

OK - then I was wrong, sorry.
There is no SHA256 computing ASIC yet, that we would know of.

And moreover, if anyone else is working on his own chip, he doesn't want to disclose this information.
There is a lot of money on stake here and turning an FPGA solution into a much cheaper ASIC chip is relatively easy nowadays.

This is possible. But turning FPGA to ASIC is not cheap (the initial capital cost), and I don't know if it's very profitable given the current tiny market cap of the whole Bitcoin economy.

So you know the stuff.
And you can confirm that, if you have enough money (like a million dollars, or so) you can turn any FPGA application into a silicon - which takes how long... about a month?
And then you can manufacture your chips in millions, for less than a dollar each - right?
And this is the moment which, as you nicely phrased it, gets the difficulty into the stratosphere - and makes all the non-adjustable mining bonds worthless.
It may as well happen tomorrow

[friedcat]

And you can confirm that, if you have enough money (like a million dollars, or so) you can turn any FPGA application into a silicon - which takes what... about a month of time?
And then you can manufacture your chips in millions, for less than a dollar each...
Right?

Yes. ASIC consumes a lot of initial capital, but the cost of mass production is negligible. So the question is when will the Bitcoin economy be large enough for people to make a large commitment at once.

[friedcat]

And you can confirm that, if you have enough money (like a million dollars, or so) you can turn any FPGA application into a silicon - which takes what... about a month of time?
And then you can manufacture your chips in millions, for less than a dollar each...
Right?

Yes. ASIC consumes a lot of initial capital, but the cost of mass production is negligible. So the question is when will the Bitcoin economy be large enough for people to make a large commitment at once.

What I want to add, is that it will still need time for the difficulty to rise as crazy after ASICs are mass produced. Because the producers of ASICs will not price them based on the cost, they will control the supply and find a optimal price to maximize their profits. And the replacement of hardware will make many old miners quit and hence lighten the increase of difficulty for a while.

[piotr_n]

What I want to add, is that it will still need time for the difficulty to rise as crazy after ASICs are mass produced. Because the producers of ASICs will not price them based on the cost, they will control the supply and find a optimal price to maximize their profits. And the replacement of hardware will make many old miners quit and hence lighten the increase of difficulty for a while.

Unless the guy doesn't sell his first million of chips, but just use them to mine himself.
Though, logistically this would be pretty much of a challenge
But quite doable for a big company, like IBM or Samsung.

[P4man]

What I want to add, is that it will still need time for the difficulty to rise as crazy after ASICs are mass produced. Because the producers of ASICs will not price them based on the cost, they will control the supply and find a optimal price to maximize their profits.

IM sure they will; but that doesnt change a whole lot, because maximizing revenue for BFL will mean initial high prices followed by endless price drops to keep selling hardware. And even those high initial prices may not deter all that many miners, I bet a lot of people will be lured by the better GH/W rating even if BFL prices them on par with FPGAs per GH. A few months worth of "pre orders" may be all that it takes to get this snow ball rolling and once it does, there is no stopping it.

Now I dont know when those things will hit the market,other than BFLs stated "sooner than you may think",  but a few months later it will basically be game over for gpu and fpga miners - not too mention, bond holders. Oh, and people buying those asics wont be off much better, because unless BFL artificially limits their sales volume, early customers are gonna get caught in the same avalanche as everyone else.  At least the smart ones will sell bonds so that gullible GBLSE investors will be the ones left holding the bag.

And the replacement of hardware will make many old miners quit and hence lighten the increase of difficulty for a while.

Likely a drop on a hot plate. Unless BFL come out with something very disappointing and/or a shared mask solution, you are looking at something with a silicon production cost significantly bellow $1 per GH.  This will make the switch from cpu to gpu look positively benign, and how long did that take?

IOW, someone come up with a good way to short all these mining bonds, and Ill pour all my bitcoins in it.