Should I start Diablo Mining Company, a 1M BTC startup?

[DiabloD3]

The plan is to issue 1 million shares (no additional shares or bonds forever, although splits might happen if/when GLBSE supports it) at 1 BTC each..

Poll is set to show results after 7 days, poll will only run for 7 days.

Contract: https://bitcointalk.org/index.php?topic=77469.msg861305#msg861305
Plan: https://bitcointalk.org/index.php?topic=77469.msg867837#msg867837

[rjk]

The plan is to issue 1 million shares (no additional shares or bonds forever, although splits might happen if/when GLBSE supports it) at 1 BTC each..

Poll is set to show results after 7 days, poll will only run for 7 days.

Contract: https://bitcointalk.org/index.php?topic=77469.msg861305#msg861305
Plan: https://bitcointalk.org/index.php?topic=77469.msg867837#msg867837

I think you ought to be able to do it. And it isn't as expensive and difficult as building a Tier 4 datacenter, since you need no power backup (except maybe generators) and little to no redundancy (except maybe on the internet connection).

[OneMINER]

What does 1M ($5,000,000) BTC buy and are there ANY intermediate steps you could take besides going for the entire amount in one shot?

[DiabloD3]

What does 1M ($5,000,000) BTC buy and are there ANY intermediate steps you could take besides going for the entire amount in one shot?

Nope. Any step that doesn't involve minimizing the operating cost is a step in the wrong direction. I think this is a shit or get off the pot moment for Bitcoin. Either we can float startups that are small by silicon valley standards, or no one will take Bitcoin seriously.

I honestly think this is the right time for Bitcoin to finally take off. A lot of us, including me, have put a lot of hard work and effort into making Bitcoin, and I think everyone would like to see that hardwork finally pay off.

BTW, the implications are, by this time next week, we could be looking at Slashdot and Hacker News headlines of "Company IPOs with $5m using BTC alone". I imagine BTC prices would double or triple with the news.

[Sukrim]

I would invest only if your shares were valued in USD at the time of selling the BTC you get from me, not BTC.

This could be done via Bit-pay for example. 1 share = 1 US cent, I send you x BTC and you get 140.98 USD for these BTC. As soon as the amount is confimred by BitPay, I get 14098 shares out of the 500 000 000.

[xkrikl]

Well if you expect the price to rise a lot then you need to make sure to change the BTC to USD only after that change ... or whole this thing will be inferior compared to any new company coming afterwards.
Consider - you rise 1M BTC - convert to $5M to use for buying all you need - then BTC jumps to $10 - your investment of 1M BTC has value of only 500k BTC. Anyone who starts new company with 500k BTC now gets the same amount of money to start his - but he'll generate the same income - so he would get to double ROI (in BTC) compared to you.

[highlevelminer]

Assuming of course you're finances are in order and this operation will not come at dear cost I would advise yes.

The current price index of the bitcoin has seen a steady increase and hold which indicates a large demand for new bitcoins.

If you mine a significant sum of these and hold on to your margins you may see a further spike in the price of the bitcoin as well as more demand for lending.

You can either trade in the bitcoins for cash, goods, or services or decide to lend them to lend/donate them to supporters for profit or aesthetic.

[Matthew N. Wright]

Count me in old bean. Full disclaimer: I support Vladimir's initiative as well.

[P4man]

If you have to ask, Id say the answer is no.
But dont let me or anyone stop you from starting a mining company and see how far you get.

[Sukrim]

If you mine a significant sum of these and hold on to your margins you may see a further spike in the price of the bitcoin[...]

...which would (as explained above) bring down the value of any asset of the company that is paid in USD or any other "official" currency out there. I still fully support having a 5 million USD company, paid for in BTC if you want to, that does what Diablo (who even wrote his own bitcoin miner!) described in his thread. If I would expect the value of bitcoin to crash, I would vote for having this company in BTC of course, since then you would buy hardware + stuff for 5 million USD that might be worth 5 million BTC if the value drops. If you expect it to rise though, it makes really no sense to spend BTC on shares that will hold assets paid in USD.

Also if you say "well, then buy your stuff at an online store that allows you to pay in BTC!" - that's not useful either until these prices are completely stable and decoupled from the USD. Otherwise it would be even worse, should the BTC price rise.

[highlevelminer]

I am not exactly sure what you're point is because I was advising him to mine and then hold on to his bitcoins in case the price continued to rise or at the very least stayed the same.

To simply dump a large amount of bitcoins into the market would be unwise in any situation because the rapid influx of any currency results in the rapid decline in value.

[DiabloD3]

For the record, no, I wouldn't sell all million at once, that would be insane and suicide. It may take me an entire year to sell it all in the absolute worst case.

[Sukrim]

I am not exactly sure what you're point is because I was advising him to mine and then hold on to his bitcoins in case the price continued to rise or at the very least stayed the same.

Then I have to ask you, if you really think that it is possible for this company to mine even close to >2 million BTC (1 million stays with the company, 1 million = dividend)?

Especially considering:
* Adding hashrate increases difficulty
* block reward halves every 4 years, next time already ~December 2012
* FPGAs can be outperformed by ASICs
* 1KW of solar panels takes ~8-10 m² of roof space. Also I'm not sure if Maine is the perfect place for solar energy anyways... it might be better to invest into a solar farm in New Mexico if you want to feel better about energy consumption. This won't help you in case of a blackout in Maine though.
* many Bitcoiners might not like the idea of giving anyone 1 million BTC. If you had that many coins, crashing Mtgox and doing some great deals there would give you far more BTC than you could ever realistically expect to mine.
* an initial investment is suggested that would cost 10 000 investors 100 BTC each. Do you think GLBSE could even handle the load just from the visitors? There are more practical limitations and also theoretical ones like: there are ~20k hosts connected to the network probably - this would mean every single one of them would need to pay 50 BTC to this venture, just to visualize the size to you.
* GLBSE is highly unregulated, has terms of service that wouldn't stand a chance at most courts and has not been used for anything even remotely that size.

Anyways: Most operations on GLBSE are too small to have currency conversion as a real factor (though on GLBSE 1.0 some people REALLY got stung by that, look up "DISHWARA" or "SIN" when the bitcoin prices crashed and they needed money...), this one would be by far too large to ignore it. Again, Dollar denominated, paid in BTC (via BitPay, MtGox codes, directly, whatever) would be completely fine with me and I really would support Diablo going forward with that. 1 million BTC however is in my opinion doomed to fail, as it won't mine enough BTC to even break even. Ever.

[DiabloD3]

I am not exactly sure what you're point is because I was advising him to mine and then hold on to his bitcoins in case the price continued to rise or at the very least stayed the same.

Then I have to ask you, if you really think that it is possible for this company to mine even close to >2 million BTC (1 million stays with the company, 1 million = dividend)?

Especially considering:
* Adding hashrate increases difficulty
* block reward halves every 4 years, next time already ~December 2012
* FPGAs can be outperformed by ASICs
* 1KW of solar panels takes ~8-10 m² of roof space. Also I'm not sure if Maine is the perfect place for solar energy anyways... it might be better to invest into a solar farm in New Mexico if you want to feel better about energy consumption. This won't help you in case of a blackout in Maine though.
* many Bitcoiners might not like the idea of giving anyone 1 million BTC. If you had that many coins, crashing Mtgox and doing some great deals there would give you far more BTC than you could ever realistically expect to mine.
* an initial investment is suggested that would cost 10 000 investors 100 BTC each. Do you think GLBSE could even handle the load just from the visitors? There are more practical limitations and also theoretical ones like: there are ~20k hosts connected to the network probably - this would mean every single one of them would need to pay 50 BTC to this venture, just to visualize the size to you.
* GLBSE is highly unregulated, has terms of service that wouldn't stand a chance at most courts and has not been used for anything even remotely that size.

Anyways: Most operations on GLBSE are too small to have currency conversion as a real factor (though on GLBSE 1.0 some people REALLY got stung by that, look up "DISHWARA" or "SIN" when the bitcoin prices crashed and they needed money...), this one would be by far too large to ignore it. Again, Dollar denominated, paid in BTC (via BitPay, MtGox codes, directly, whatever) would be completely fine with me and I really would support Diablo going forward with that. 1 million BTC however is in my opinion doomed to fail, as it won't mine enough BTC to even break even. Ever.

Yes, adding hashrate DOES increase difficulty. In this case, one third.

Block reward halves, but value of BTC potentially increases.

Solar panel roll out would take an acre of land. Maine is not the worst part of the United States for solar. Although, I've been rolling around the idea of seeing if I can privately own a large scale wind turbine. A 5MW turbine generating at least 1.5MW on average would, oh, be about 10 times more power than we need. And I wasn't looking for solar for green reasons, I was looking for solar to be able to mine no matter what BTC is valued at. No power cost means I can mine even when BTC is 0.01.

Yes, many Bitcoiners would probably not trust a nobody. I am not a nobody. I was a very early adopter, and I would like to see Bitcoin succeed.

GLBSE is not the only stock exchange.

And I'm not sure if I want to see investors using USD. It sort of defeats the purpose of building this company in the first place.

Edit: Apparently large turbines like that, total installation cost is about $1m per MW. That really isn't that bad, we only need about 200 kw of constant power and I'd like to be selling power more than buying it to keep operating costs low.

[Sukrim]

A 5MW turbine generating at least 1.5MW on average would, oh, be about 10 times more power than we need.

http://www.renewableenergyworld.com/rea/news/article/2006/02/5-mw-wind-turbines-headed-onshore-and-off-43241

[...]the prototype, with a tower height 120 meters to the hub, rotor diameter at 126 meters, rated power at 5,000 kW[...]

Good luck with that in your backyard...
Also wind power stations are one of the noisiest ways to generate electricity. They are as well no "fire and forget" solutions, even a big array of solar panels would peobably keep you on your toes quite a bit. Your power costs would be the costs for obtaining and keeping a license as well as repairs. It might be the case that in total these costs are higher than what you would pay for industrial electricity off the grid.

Using USD:
Either you hold on to BTC as long as possible (as you say, they will rise in value it makes sense to keep them) --> then you don't start mining fast enough.
Or you sell as many BTC as quickly as possible, then you might loose out on conversion profits later on.

By issuing 1 million shares you also more or less guarantee there won't be any way to earn through increased stock price for quite some time - only through dividends. To even get started you project a few hundred thousand dollars are needed, so you'd need to sell quite a bit more shares than the current total volume of all trades so far on GLBSE 2.0 (and probably 1.0 too) just to get an empty hall. You are not nobody, but I haven't seen your current mining operation either... being able to write code or having time to moderate these forums won't make you an expert in keeping FPGAs alive and running.

And I'm not sure if I want to see investors using USD. It sort of defeats the purpose of building this company in the first place.

Can you clearly state the purpose of building this datacenter and why using USD to fund it is defeating it? I actually couldn't really find it from the posts in the other thread.

[Gomeler]

If you are serious about this why would you build it on the East coast? Build it in Washington state or Oregon where you have access to cheap hydro power. Just because you are located in Maine doesn't mean Maine is the ideal location for your startup.

Thinking about a 1M BTC funded startup is a fun thought exercise but I don't think the market could fund such a thing at this point. I hate to tell you to aim lower but, without sourcing traditional VC capital AND having a solid business plan, $5M USD is a SERIOUS sum of cash. You might have better luck in the $100k USD to $500k USD, prove the concept works and go for a second round of funding. This isn't like you are pitching a web startup in a VC environment with a proven track record of successful exits. Here, any VCs interested in funding a mining operation has a year or two of experience and no previous examples to judge future performance on..

[rjk]

If you are serious about this why would you build it on the East coast? Build it in Washington state or Oregon where you have access to cheap hydro power. Just because you are located in Maine doesn't mean Maine is the ideal location for your startup.

Thinking about a 1M BTC funded startup is a fun thought exercise but I don't think the market could fund such a thing at this point. I hate to tell you to aim lower but, without sourcing traditional VC capital AND having a solid business plan, $5M USD is a SERIOUS sum of cash. You might have better luck in the $100k USD to $500k USD, prove the concept works and go for a second round of funding. This isn't like you are pitching a web startup in a VC environment with a proven track record of successful exits. Here, any VCs interested in funding a mining operation has a year or two of experience and no previous examples to judge future performance on..

By insisting on BTC for funding, it could very well pump the market up a lot, because then investors would have to invest in BTC in order to invest in this company. The eventual result would be a lot more than $5m, because of the projected market rise. There isn't any reason to cash out right away and build something, it could all be done gradually. Starting with an enclosure (building) and other infrastructure (power, cooling) would take a relatively small portion of the proceeds that needs to be paid in cash, but many other parts could even be bought for BTC instead of converting to USD.

So as the funding comes in, the buildout could continue. If DiabloD3 doesn't raise all 1m BTC right away, that's fine too, the farm would just be smaller.

[friedcat]

The plan is to issue 1 million shares (no additional shares or bonds forever, although splits might happen if/when GLBSE supports it) at 1 BTC each..

Poll is set to show results after 7 days, poll will only run for 7 days.

Contract: https://bitcointalk.org/index.php?topic=77469.msg861305#msg861305
Plan: https://bitcointalk.org/index.php?topic=77469.msg867837#msg867837

You could raise 1K, 2K or 5K BTC first to get your hands on real mining first. Then if you are doing well, it could naturally expand magnitudes by magnitudes. The possibility of its finally growth to the 1M BTC scale is also not deniable.

But why do you have to throw out frightening numbers like 1M BTC on the start? Is the idea of "get big immediately or go home" so attractive? Why are incremental plans so bad for you? For successful businesses like Apple, their yearly income's errors are larger than the current whole Bitcoin economy. They did not start with as much as (1MBTC*5$/BTC=5M$) anyway.

By starting small, you will be:

1. More adaptable to technology change.
2. Having more immediate returns to attract larger investments.
3. proving yourself really qualified for managing more and more funds.

And if you insist your current plan, you will not be taken very seriously by some of the potential investors.

[markm]

People arguing that it would be screwed if bitcoins went up a lot in vas you had bought gear priced in dollars do not seem to have thought of how many shares might have been sold by that time. If there are only ever 1 million shares, and they all sell for only one bitcoin each regardless of how much fiat one bitcoin happens to be selling for on markets at that time, then people who buy shares while bitcoins are cheap should be gaining if bitcoins skyrocket due to having gotten shares cheap compared to people who have to buy bitcoins at much higher fiat prices to buy shares with.

Sure the existing hardware would only be worth as much, or less, in fiat than the early buyers paid for their shares, but they are getting one millionth of whatever the end total will end up being come some hypothetical date when the initial one bitcoin each shares have finally, eventually managed to get sold.

So I do not think it is quite as simple as look how much hardware their initial fiat bought; rather, one would look at how impressive the resulting operation is compared to how much bitcoins themselves are worth.

Admittedly one could consider simply buying and holding bitcoins if one expects them to go up in value, but how much does one expect them to go up in value if no efficiencies-of-scale sized mining operations manage to get started? Might this operation itself enhance the value of coins, resulting in their now appreciating as much if this thing is not done?

-MarkM-

[Sukrim]

The bitcoin trading price is not influenced by mining - mining is influenced by the bitcoin trading price!

If you hope for later investors to invest 10 USD per share for the same output that you invested 5 USD in earlier, this is not far from one of these pyramid games that were popular on the forums half a year ago. It can by the way even turn upside down - see old GLBSE 1.0 threads, where early investors bought shares @ 1 BTC (@20 USD), the operator didn't sell right away and suddenly had to take loans or dilute shares to even buy another GPU.

Bottom line for my argumentation: The company will spend mostly USD and generate BTC - so it makes sense imho to fund it with USD and get your profits in BTC.