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Author Topic: The mining market balance  (Read 5760 times)
Brunic
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June 20, 2012, 08:07:04 PM
 #1

Hi there,

I've been talking to one of the members for which I have a great respect (if he wants to reveal himself, its his choice) about the ASIC/BFL/mining/apocalypse situation, and maybe there's a solution, or more a direction that the community can take.

The problem:
The problem with ASIC is not a technology problem, it's a market problem. Mining is tied to Bitcoin price/difficulty ratio, that's the market of mining. Everybody knows the price, everybody knows the difficulty, after that, it's only about managing the costs of doing it. In the CPU-GPU era, the prices of the manufacturers are independant of Bitcoin mining. A 300$ Radeon card is aimed at the gamer market, and miners usually worked around it. FPGA were aimed at Bitcoin miners, but the prices of it were still tied to another market. A Spartan6 is not priced depending on the mining market, but depending on the FPGA market.

But today, a wild ASIC appears!

ASIC development cost are high, really high. But the production cost is low. For the manufacturer, it give a lot of freedom for the price. You can price it really high, or really low, and it's possible to still make profit. So, the goal is to find the highest price possible to sell the most. The thing is, the manufacturer knows the mining market data. It simply have to calculate the price/difficulty ratio, and it gives him a good idea of how much it can price the ASIC. The price will be adjusted so the miners can get an interesting ROI. But if the miners buy and mine, the difficulty goes up, and so the ROI goes down. The manufacturer can play this game again, adjust the prices so the miners get an interesting ROI, miners buy, difficulty goes up, and the loop is created.

If miners quit the market and the difficulty goes down? Same thing, manufacturer can adjust the price again, and we have the same result. Why do we have this situation? Because the manufacturer AND the miners are fighting for the same profit. Those two groups profits from the price/difficulty ratio and every for-profit organization wants to maximize the profits. Since the mining data is public, miners have no leverage on the manufacturer. They can't make ASIC, they can't use alternative products, and they can't go for another market. Yeah, there is the electricity cost, but it will stay irrelevant as long the manufacturer can move the price up and down. It will matter again only when the ASIC price will be fixed (like the lowest possible without any possibility of going up again).

I'm saying manufacturer, and not BFL, because the same problem will happen either there is one, two or fifteen manufacturers. As long the manufacturers are for-profit organization, they will try to maximize their profits. If we have many manufacturers, two phenomenon could occur. We could have a price war, that will race the ASIC prices to the bottom, and could be interesting for miners. We could also see the manufacturers just follow each other with their prices (similar to what it's happening with gasoline), and the problem stay the same. I doubt for the price war, because they need to pay back the ASIC development.

Are we doomed?
No. Outside of mining, I doubt it will be a problem in a short-term perspective. It's not in the interest of the manufacturers to endanger the network, because their product is viable only for Bitcoin mining. The network needs to be in top shape to make profit. The miners though will be stuck on a leash. Their profit will depend directly on the manufacturer, and it certainly create a bad relationship. The network will be secured, but I don't think that giving that much power on a couple of entities is that great for the network. Having mining decentralized but with an enormous influence from the manufacturers, is, IMHO, probably worse than a 51% attack. Manufacturers could influence indirectly 100% of the mining network. I don't what could happen, but to know that "oh, those 5 business sell hardware for miners, have all control on the prices and can influence the profits of the miners", I'm not sure if it's that great to have.

The counter-attack
Yeah, for every strength, weaknesses exist. The problem will exist only if in the presence of for-profit organization, because they have too much power over the profit pie. If we remove the for-profit in organization, we solve the market problem.

From my knowledge, there is two options:
-A real non-profit organization, like a foundation or something. I don't think that with the current technology needs, it will be really appropriated. I don't vouch for this one.
-A cooperative. <---- Oh yeah!

What's a cooperative? It's a business owned by the members. Every member have an equal share in it. To be part of the cooperative, you usually pay a social share (like 5$), and you become a member. Members have a rebate to products of the cooperative, and, at the end of the year, profits are redistributed to members. So, a cooperative is not about who have the biggest capital, but who is a member. The most member a cooperative have, the better its health.

A cooperative is a business and is managed like a business. The only difference is that every member decides, every member have only one vote. With a good group of members, it can be competitive against many big businesses. For example, here in Quebec, a cooperative named Desjardins is currently owning the banking sector in the province. It's been kicking the ass of real banks and big banks for more than 100 years, and as a result, banks are really kind and almost lost their shark-teeth.

An ASIC cooperative will give the possibility for miners to become a part of the manufacturer. Instead of fighting against manufacturers for the profit pie, they will be on both sides of the fence. If the cooperative sells well and makes profit, miners will get a share of it. It will not be a fight of manufacturers against miners, but miners against miners. The fight will refocus on getting the lowest mining cost again.

A cooperative doesn't prevent for-profit business from entering the market. But an effective cooperative can change the paradigm of the market, since the cooperative is a for-members business, and not a for-profit business. Also, every member can access the financial data of the cooperative, decide, vote and work in the cooperative. The model is a lot more similar to how Bitcoin was envisioned first.

When are you launching it?
I don't know, I'm only here to start a discussion about it. There's like 60 000 members on this forum, I'm pretty sure we have enough human capital to make something worthwhile. I have interest in mining, but I can sell tomorrow if I think the market is poisoned.

I also think that it's probably the only way to launch an ASIC after BFL. If some organization here thinks it can launch their ASIC 6 months after BFL and make profits...I really think it's going to be hard. The market is small, and there's a capital limit on it. You can't make more profit than it exist, and BFL can probably take a good chunk of it in the month where you're not there.

If there's only for-profit manufacturer, I'm probably out of mining. But if a ASIC cooperative comes by, I'm ready to take the risk for it to succeed. Either the miners fight an already lost war against for-profit manufacturer, either they take back the market through a cooperative.

I'm going to monitor this topic, and I don't know if the cooperative model is really popular around the world. So if you have any questions about cooperative, just ask.

And if you can build ASIC and you are interested in this business model, well, it's the time to become bigger than Jesus and Elvis. Grin

*EDIT*
Mods, I know this topic could probably be better categorized in Economy, but since the shitstorm is here and is about miners, I think it's better here.
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June 20, 2012, 08:09:00 PM
 #2

https://bitcointalk.org/index.php?topic=88008.0

Brunic
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June 20, 2012, 08:12:12 PM
 #3


Ok, I've read what this project is about, I've mis-read at first.

It's not what I propose. It's not about making a cooperative to buy ASIC from manufacturer, but to manufacture ASIC through a cooperative. The cooperative build the ASIC and sells them, and doesn't mine with them.

Still, I wish you good luck with your project!
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June 20, 2012, 08:15:24 PM
 #4

We need people with writing talent Cheesy. Please read the IPO description and give us your thoughts.


Brunic
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June 20, 2012, 08:18:40 PM
 #5

We need people with writing talent Cheesy. Please read the IPO description and give us your thoughts.


Yeah, I've edited my message after reading carefully your IPO. Here's the esssence:
Quote
It's not what I propose. It's not about making a cooperative to buy ASIC from manufacturer, but to manufacture ASIC through a cooperative. The cooperative build the ASIC and sells them, and doesn't mine with them.
P4man
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June 20, 2012, 08:50:39 PM
 #6

Sympathetic as I may be to the idea, Im not sure I understand how this would solve the problem, in so far there even is one.

The "problematic" period happens when market price is very far above marginal cost. As you point out, that allows the asic vendor to lower prices constantly and faster than its customers can get a return on their investment, thereby potentially preventing them from achieving a ROI. But even with just 1 company, that situation will come to pass relatively quickly. BFL will want to keep selling, and thereby keep increasing difficulty and lowering prices until they reach near marginal cost and it no longer makes sense for them to lower prices, even if it means hardly any sales.  I would guess this takes a few years at most, assuming bitcoin price remains +-stable.

Now if I understand you correctly, you would want to accelerate this by developing an asic and selling it straight away at close to marginal cost? even if that means you will not be able to recover your investment? Whether as cooperative or for profit business, development is going to cost a fair chunk of money. Are coops immune to bankruptcy ? Smiley. Or do you expect its members to eat the losses?

More over, accelerating this trend will cause a bigger bloodbath among existing miners. I dont know if thats so desirable. If anything, I would hope for miners that no competitor to BFL emerges, because for them it would make a bad situation a lot worse.

This might have been a good idea 6 or 12 months ago, but unless BFL is pulling off a giant bluff, it seems too late now. Difficulty will explode, and BFL will be able to exploit that and make a very nice profit. If you cant get a product to market around the same time, there is nothing you can do about that.

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June 20, 2012, 09:17:12 PM
 #7

i think the manufacturers will have more profit by not selling to anyone but mine with there asics. at least for a while Wink
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June 20, 2012, 09:28:26 PM
 #8

P4man's concerns seem pretty much right to me. BFL, unless they are lying in a really egregious way, are way ahead of the curve compared to actual or potential communal-feel-good ASIC projects (including the open ASIC project that has been puttering along for a while now). Frankly, I'm just glad that BFL is at least roughly at the same point in the curve (maybe even a little ahead) compared to Vladimir's project, since he has no intention of sharing the technology. So, we may have to deal with the "evil" BFL (actually I don't think they are all that bad), but that's better than nothing. It may be pretty difficult for those behind the curve, even if they are non-profit, to catch up. The thing I'm most worried about is bitcoin forking. If BFL and Vladimir corner the ASIC technology market, I wouldn't be surprised to see a call for a move away from sha 256, even if it isn't really necessary security-wise (but of course this will be the "official" justification for it). If that happens, bitcoin will probably fork and lose a lot value no matter which fork one decides to travel. I will probably keep mining regardless, but the second I get a wiff of the break from sha 256, I'll probably start selling my coins as I mine them rather than holding. One thing for sure, there's lots of drama in bitcoin's future that will make the drama we've had till now look like nuthin.  
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June 20, 2012, 09:42:59 PM
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Im sure some people will call for a fork, or even go for it, but I cant see it gathering any real traction. Whatever other algorithm you decide upon, it can be accelerated by another ASIC, so its going to happen again at some point. Will you keep forking and changing the protocol? It makes no sense, its gonna happen, so it may as well be now. I think most people will understand that and not follow a fork which only purpose is cutting off the legs of the first vendor(s) who invested heavily in to bitcoin.

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June 20, 2012, 09:58:17 PM
 #10

I still think some type of co-operative can work to at least provide reasonable competition and possibly get devices into more people's hands.

Maybe even just focusing on 10 GH/s devices and selling thousands of them. If you could make those available for around $100 I'm not sure people would care if they ever really made their money back. If the ASIC production after initial development cost is really extremely low, maybe these devices can be manufactured for $50. If you sell 10,000, well you've got $500,000 to pay off the development cost.

The co-op could simply put up money as a bond possibly to fund the development and then get a payback of their initial bond investment + maybe 5% interest like a municipal bond. If the organization is a non-profit and incorporates as one, this would be no problem.

I'm sure there are plenty of great minds involved in bitcoin who would donate their services/skills to development and administration. I would certainly be willing to help with administration and any business aspects for no payment.

The idea wouldn't be to screw any private vendors, just simply ensure there is some competition and preserve the decentralization of mining for the health of the network.

We might even find some pretty heavy private donors in the tech sector if members of the community have the right connections. We could then pay an annual membership fee as suggested to explore other projects which could help bitcoin's growth and development like funding bitcoin business start-ups, etc.
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June 20, 2012, 10:03:03 PM
 #11

Im sure some people will call for a fork, or even go for it, but I cant see it gathering any real traction. Whatever other algorithm you decide upon, it can be accelerated by another ASIC, so its going to happen again at some point. Will you keep forking and changing the protocol? It makes no sense, its gonna happen, so it may as well be now. I think most people will understand that and not follow a fork which only purpose is cutting off the legs of the first vendor(s) who invested heavily in to bitcoin.

I hope you are right, but my point was more about people freaking out that BFL and Vladimir had cornered the ASIC market, not just freaking out about ASICs in general. A lot of people seem to have the attitude that they would rather stop mining than give any business to BFL, and these people might find the idea of a fork very attractive, even if it only delays the inevitable. Hopefully sanity will prevail, but sanity and BFL don't seem to be great companions on this board.
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June 20, 2012, 10:07:25 PM
 #12

I still think some type of co-operative can work to at least provide reasonable competition and possibly get devices into more people's hands.

Maybe even just focusing on 10 GH/s devices and selling thousands of them. If you could make those available for around $100 I'm not sure people would care if they ever really made their money back.  If the ASIC production after initial development cost is really extremely low, maybe these devices can be manufactured for $50. If you sell 10,000, well you've got $500,000 to pay off the development cost.

You really think you could sell $100-500K worth of stuff that can not make a profit? I highly doubt that. People may be very vocal about issues like these, but when push comes to shove, I doubt you will raise much more than a few thousand dollar for an non profit venture with an unclear raison d'etre.

BTW, you would face similar issues as BFL, like, who gets the first ones?

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June 20, 2012, 10:26:23 PM
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I hope you are right, but my point was more about people freaking out that BFL and Vladimir had cornered the ASIC market, not just freaking out about ASICs in general.

There is a big difference between what vladimir said he was planning (something I never took very seriously btw, and still dont), and what BFL is doing. One, if it was serious, really posed a potential threat to bitcoin, the other, if you put aside the tin foil hattery of hidden backdoors and what not, is only a risk to people buying in to it. Since no one forces you to become or stay a (for profit) miner, I dont see the big problem.

Quote
A lot of people seem to have the attitude that they would rather stop mining than give any business to BFL, and these people might find the idea of a fork very attractive, even if it only delays the inevitable. Hopefully sanity will prevail, but sanity and BFL don't seem to be great companions on this board.

I will probably also stop mining, and not give my money to BFL. Not because I particularly loath them or anything, just because I dont think its a rational investment. So what? No one is going to miss my few GH (or that of any other current miner) Smiley

Now its possible these miners will look for something else to mine with their hardware; like litecoin. But will that spur litecoin adoption? I dont see that. It will just push up litecoin difficulty to the point where its equally unprofitable to mine as bitcoin or anything else.  The same would happen to a bitcoin fork. It would be worth almost nothing initially and likely have a comparatively gigantic hashrate, making it unprofitable almost the moment its forked. So why push for that?

Nah, I think bitcoin will be okay for quite some time. Some people are poised to earn a lot of money, some are about to lose significant amounts of money. Thats all.

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June 20, 2012, 10:33:53 PM
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Sympathetic as I may be to the idea, Im not sure I understand how this would solve the problem, in so far there even is one.

The "problematic" period happens when market price is very far above marginal cost. As you point out, that allows the asic vendor to lower prices constantly and faster than its customers can get a return on their investment, thereby potentially preventing them from achieving a ROI. But even with just 1 company, that situation will come to pass relatively quickly. BFL will want to keep selling, and thereby keep increasing difficulty and lowering prices until they reach near marginal cost and it no longer makes sense for them to lower prices, even if it means hardly any sales.  I would guess this takes a few years at most, assuming bitcoin price remains +-stable.

Now if I understand you correctly, you would want to accelerate this by developing an asic and selling it straight away at close to marginal cost? even if that means you will not be able to recover your investment? Whether as cooperative or for profit business, development is going to cost a fair chunk of money. Are coops immune to bankruptcy ? Smiley. Or do you expect its members to eat the losses?

More over, accelerating this trend will cause a bigger bloodbath among existing miners. I dont know if thats so desirable. If anything, I would hope for miners that no competitor to BFL emerges, because for them it would make a bad situation a lot worse.

This might have been a good idea 6 or 12 months ago, but unless BFL is pulling off a giant bluff, it seems too late now. Difficulty will explode, and BFL will be able to exploit that and make a very nice profit. If you cant get a product to market around the same time, there is nothing you can do about that.


Yes, this is true.  My question is, why should miners drive off a cliff if they know one is approaching?

It is possible, however unlikely, that miners cooperatively protect their interests (this is not a "feel good commy thing" lol) by planning and taking necessary action to form a cooperative rather than selling out in a big way to BFL.
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June 20, 2012, 10:52:38 PM
 #15

Yes, this is true.  My question is, why should miners drive off a cliff if they know one is approaching?

Ive been looking for a good analogy to help explain this, like something in game theory, but I havent found anything. Its really a quite interesting situation by itself, and I cant believe its unique, but the closest analogy one Ive found, is the well known dollar auction; its quite different in many aspects, but the parallel is that in both cases, there is a large potential profit to be made, yet anyone participating in the game, even rational actors, are forced to behave in way that is irrational and leads to individual losses for everyone, except the seller who makes a windfall profit.

Now if everyone truly understood this, BFL would hardly sell anything. But the reality is that a lot, if not most potential customers dont fully understand this, and price/difficulty will be determined by those that understand this least. And heck, even if everyone understood it, there would be some willing to bet they were one of very few taking the risk and therefore think they will still come out on top. Seeing how many gamblers we have, thats probably a LOT of people Smiley.


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June 20, 2012, 11:35:10 PM
 #16

Ive been looking for a good analogy to help explain this, like something in game theory, but I havent found anything. Its really a quite interesting situation by itself, and I cant believe its unique,
How about communism?

Satoshi Nakamoto <=> Vladimir Ilich Ulyanov Lenin
his "White Paper" <=> collected works of VIUL
Gavin Andresen <=> Comrade 1st Secretary of the Central Comitee
opression by Fed and banks <=> oppression by factory and land owners

Nassim G of BFL <=> Lavrentiy Beria of NKVD
Luke-Jr <=> Leon Trotsky
Erik Voorhees <=> Maxim Gorky

Huh <=> Animal Farm
Huh <=> Boxer horse from A.F.

The analogies just write themselves. I had to censor myself to avoid being too offensive. I'm quarter-literate in Russian, and I can understand some of the humour on the Russian board below. Those guys there have a wicked sense of humor; e.g. if there's talk in the core development team of changing SHA-256 to something else BFL could hire killers, put a contract on Gavin & Luke or have them extradited to Sweden for alleged rape.

Please comment, critique, criticize or ridicule BIP 2112: https://bitcointalk.org/index.php?topic=54382.0
Long-term mining prognosis: https://bitcointalk.org/index.php?topic=91101.0
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June 20, 2012, 11:48:18 PM
 #17

Yes, this is true.  My question is, why should miners drive off a cliff if they know one is approaching?

Ive been looking for a good analogy to help explain this, like something in game theory, but I havent found anything. Its really a quite interesting situation by itself, and I cant believe its unique, but the closest analogy one Ive found, is the well known dollar auction; its quite different in many aspects, but the parallel is that in both cases, there is a large potential profit to be made, yet anyone participating in the game, even rational actors, are forced to behave in way that is irrational and leads to individual losses for everyone, except the seller who makes a windfall profit.

Now if everyone truly understood this, BFL would hardly sell anything. But the reality is that a lot, if not most potential customers dont fully understand this, and price/difficulty will be determined by those that understand this least. And heck, even if everyone understood it, there would be some willing to bet they were one of very few taking the risk and therefore think they will still come out on top. Seeing how many gamblers we have, thats probably a LOT of people Smiley.



Now, that's an astute statement.  And the reason why I hope these threads are educating everyone to the risks in hopes that they take pause when/if presented with an alternative.
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June 21, 2012, 12:57:07 AM
 #18

Now if I understand you correctly, you would want to accelerate this by developing an asic and selling it straight away at close to marginal cost? even if that means you will not be able to recover your investment? Whether as cooperative or for profit business, development is going to cost a fair chunk of money. Are coops immune to bankruptcy ? Smiley. Or do you expect its members to eat the losses?

No, the cooperative is a business. It needs to make profit.

The difference is, where miners lose their profit in the hands of a for-profit organization, miners will lose their profits towards a cooperative that they own. Overall, the profit they lose while mining goes toward the pockets of the cooperative, that they own and manage. It will still be the war out there between the miners, but that's what we want. We want a decentralized network where there's no monopoly, open to everybody.

With a cooperative, miners can be a manufacturer. If a miner doesn't want to, he's not forced either. He can still buy from BFL or other companies. It's only to give another choice.

Quote
Maybe even just focusing on 10 GH/s devices and selling thousands of them. If you could make those available for around $100 I'm not sure people would care if they ever really made their money back.

No, again, it's important for people to make their money back. It's not a charity. I'm interested only on the balance of power in the mining market. We are going to shift toward a market where only the manufacturer holds the market. Miners will be similar to puppets.

Overall, I don't see the point of having a so wonderful decentralized currency that no ones control, when in one of the most important function of the currency, the mining, manufacturers hold the miners by the balls. Even if it's only for a while, it can still be a long moment. What if the manufacturer decides that the ROI on its product should be 2 years? And price them accordingly? What are you going to do? Cry? Make a shitstorm on the forum? I mean, since BFL started pre-order on Singles, we saw everything here. Is the shipping really faster? Do BFL hold their promises of 4-6 weeks? What about a non-paypal refund?

With Singles, we still had the choice. We could buy Icarus, x6500, Radeon 7970, Ztex, etc.

Now, when BFL decides next year that its trade-up program is 25% of the value, what are you going to do? Threaten them to go elsewhere? Complain? Shitstorm? Bring a lawyer? Even if there is competition, manufacturers only have to keep the same price range, split themselves the market, and profit each other like oil companies are doing.

There is no leverage of power, and we can't have a superior entity to supervise the market(like a government). I really don't see that as a positive thing for the network. Like I said, the problem is not the ASIC, it is who control the ASIC production.
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June 21, 2012, 01:31:26 AM
 #19

Yes, this is true.  My question is, why should miners drive off a cliff if they know one is approaching?

Ive been looking for a good analogy to help explain this, like something in game theory, but I havent found anything. Its really a quite interesting situation by itself, and I cant believe its unique, but the closest analogy one Ive found, is the well known dollar auction; its quite different in many aspects, but the parallel is that in both cases, there is a large potential profit to be made, yet anyone participating in the game, even rational actors, are forced to behave in way that is irrational and leads to individual losses for everyone, except the seller who makes a windfall profit.

Now if everyone truly understood this, BFL would hardly sell anything. But the reality is that a lot, if not most potential customers dont fully understand this, and price/difficulty will be determined by those that understand this least. And heck, even if everyone understood it, there would be some willing to bet they were one of very few taking the risk and therefore think they will still come out on top. Seeing how many gamblers we have, thats probably a LOT of people Smiley.


I don't see that it's as bad as you make out. We know that Bitcoins will be mined at the same rate over time regardless of the speed of the network. Setting ASICs and FPGAs aside for the moment, let's assume someone buying a $1300 GPU rig today could have it paid off in 12 months. How did they do that? By getting a small share of the coins mined over that time period, essentially determined by their share of the total hashing power of the network over that period. Let's say this miner goes for another 12 months after the rig is paid off, earning $700 over the cost of the rig. Net profit=$700 (I'm not including income from selling the rig since you can't sell ASIC rigs except to other miners). Now let's suppose ASICs come out 24 months from now and this same person decides to spend $1300 on an SC BFL single. Many others will be doing the same, so the difficulty will skyrocket. But this miner also has 40 Gh/s now. Why can't this miner pay off the new rig, and keep going to make a profit? Maybe it will take longer than 12 months, or maybe it will take less if this miner gets the ASIC rig early in game before very many others pile in. The difficulty will skyrocket, but this person's hashing power has also skyrocketed. I see no reason to think this person's fractional share of the network hashing power can't be enough to eventually pay off the rig and get into profitable territory. Obviously I have hypothetically supposed ASICs won't be out for 24 months, but this is a thought experiment, so that isn't relevant. If GPU mining can be profitable now, I don't see why ASIC mining can't be in the future. The difficulty will increase dramatically, but so will the hashing power/$ ratio. I'm not really committed to this line of reasoning, but I don't at the moment see where it goes wrong - would like to know why you think ASIC mining is a losing proposition. The analogy to the dollar auction was just too loose for me to figure out what you are thinking.      
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June 21, 2012, 02:06:33 AM
 #20

I don't see that it's as bad as you make out. We know that Bitcoins will be mined at the same rate over time regardless of the speed of the network. Setting ASICs and FPGAs aside for the moment, let's assume someone buying a $1300 GPU rig today could have it paid off in 12 months. How did they do that? By getting a small share of the coins mined over that time period, essentially determined by their share of the total hashing power of the network over that period. Let's say this miner goes for another 12 months after the rig is paid off, earning $700 over the cost of the rig. Net profit=$700 (I'm not including income from selling the rig since you can't sell ASIC rigs except to other miners). Now let's suppose ASICs come out 24 months from now and this same person decides to spend $1300 on an SC BFL single. Many others will be doing the same, so the difficulty will skyrocket. But this miner also has 40 Gh/s now. Why can't this miner pay off the new rig, and keep going to make a profit? Maybe it will take longer than 12 months, or maybe it will take less if this miner gets the ASIC rig early in game before very many others pile in. The difficulty will skyrocket, but this person's hashing power has also skyrocketed. I see no reason to think this person's fractional share of the network hashing power can't be enough to eventually pay off the rig and get into profitable territory. Obviously I have hypothetically supposed ASICs won't be out for 24 months, but this is a thought experiment, so that isn't relevant. If GPU mining can be profitable now, I don't see why ASIC mining can't be in the future. The difficulty will increase dramatically, but so will the hashing power/$ ratio. I'm not really committed to this line of reasoning, but I don't at the moment see where it goes wrong - would like to know why you think ASIC mining is a losing proposition. The analogy to the dollar auction was just too loose for me to figure out what you are thinking.      

Let's suppose buying a 1300$ ASIC rig could be paid off in 4 months. Me, the manufacturer, I know that you're going to pay it off in 4 months, because I just calculate it using the price/difficulty ratio. So I decide, because of the crazy demand, to up its price to 3900$. Now, your ROI is 12 months, and I make a lot more money. It's still a good ROI, but you, the miner, take all the risk. If the Bitcoin price crash after 4 months, I don't care, and your ROI become 14 or 15 month.

If you're angry at me for tripling the price like that, why should I give a fuck? You can't buy better anyway, because a 3900$ investment with a ROI of 12 months is better than a 400$ investment with a ROI of 80 months.

If, after a couple of months, the ROI on my products become 24 months, and they are selling less, I could just reduce the price. I decide to sell them at 1950$, the ROI become 12 months again, and I start selling again. You bought them at 3900$ 2 weeks ago? Tough luck buddy, deal with it. My marginal cost is 100$ anyway, so I can play with the price like that to maximize my profit.

You can complain if you want, I don't care. You can go see another manufacturer, it's still the same game. The manufacturer-B will calculate the same way as the manufacturer-A, because he wants to maximize its profit. I don't believe a business who come and say "oh, I'll leave some profit on the table, I'm here for the good of the network". It's simply bullshit so you buy from them, and they maximize their profits.
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