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Author Topic: The mining market balance  (Read 5768 times)
Brunic
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June 22, 2012, 01:23:59 PM
 #41

The question is the $38 dollar per GH question.  My estimation is at that price BFL stands to have minimum revenue of $5 million.

Even if we assume BFL ship after the reward halving, their hardware should be able to mine almost $8M per year at todays price. If they manage to only get $5M revenue from selling, they are doing it  wrong.
This got me thinking about a different model: The glove game. BFL has the right glove and each of its potential customers has a left glove (BFL doesn't have a left glove because it doesn't want to speculate on Bitcoin). With n customers, the Shapley value for each customer is 1/(n(n+1)) of the total reward, and for BFL it is 1-1/(n+1). Meaning that with 100 customers, BFL should be getting about 99% of the reward.

Again this is highly simplified, but it does indicate that BFL may have more leverage than we'd like.

I think you nailed it.

Like I said before, BFL, by being a manufacturer, is not stuck behind the 51% rule. They can sell to 100% of the miners, and aim at the same profit pie than the miners. I didn't knew about this glove game, but it's probably the best mathematic problem found so far to explain that situation. Dollar auction was interesting, but it doesn't have a hard limit (the auction can go to infinite) while the mining market have a limit.
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June 22, 2012, 02:47:10 PM
 #42

What motivation would BFL have to do that?

None, if maximizing profit even at the expense of miners profitability is their only motive.  But auctioning off a predictable supply would allow them to maximize their profit without tricking their customers in to losses, so if for some reason they care about miners, this would be a good way to do it.

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They probably can't estimate their production very precisely, it partly depends on the manufacturers they rely on, and there are bound to be unforseen snags.

If they produce less than promised, Im sure customers would forgive them Smiley Well, at least as long as they only accept money for the rigs they can actually ship.

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June 22, 2012, 03:16:50 PM
 #43

What motivation would BFL have to do that?

None, if maximizing profit even at the expense of miners profitability is their only motive.  But auctioning off a predictable supply would allow them to maximize their profit without tricking their customers in to losses, so if for some reason they care about miners, this would be a good way to do it.

Quote
They probably can't estimate their production very precisely, it partly depends on the manufacturers they rely on, and there are bound to be unforseen snags.

If they produce less than promised, Im sure customers would forgive them Smiley Well, at least as long as they only accept money for the rigs they can actually ship.


So is your idea that the contract would state that they won't exceed X production rate? I can see how that would allow miners to make more informed purchasing decisions, but it isn't appealing from BFL's viewpoint to artificially cap their sale rate. Personally, I'm not too worried about this. Given their track record, it is somewhat doubtful that BFL will flood the market with ASICs - it will probably be more of a trickle as we've seen with their FPGA units, and I doubt their prices will drop so rapidly that early buyers will be screwed. Sure, it could happen, but if we are going to sweat over remote possibilities, we might as well sweat the possibility that Bitcoin price will crash to a buck too. I'm not aware of any investments that promise a high return that don't also carry the risk of substantial loss. If BFL implemented your idea, it would make the investment safer, but it would also reduce the potential reward for early adopters. So your idea only makes the situation "better" for those looking for a safer investment. It's not good for those looking to gamble more for a bigger win.
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June 22, 2012, 03:52:12 PM
 #44

What motivation would BFL have to do that?

None, if maximizing profit even at the expense of miners profitability is their only motive.  But auctioning off a predictable supply would allow them to maximize their profit without tricking their customers in to losses, so if for some reason they care about miners, this would be a good way to do it.

Quote
They probably can't estimate their production very precisely, it partly depends on the manufacturers they rely on, and there are bound to be unforseen snags.

If they produce less than promised, Im sure customers would forgive them Smiley Well, at least as long as they only accept money for the rigs they can actually ship.


So is your idea that the contract would state that they won't exceed X production rate? I can see how that would allow miners to make more informed purchasing decisions, but it isn't appealing from BFL's viewpoint to artificially cap their sale rate. Personally, I'm not too worried about this. Given their track record, it is somewhat doubtful that BFL will flood the market with ASICs - it will probably be more of a trickle as we've seen with their FPGA units, and I doubt their prices will drop so rapidly that early buyers will be screwed. Sure, it could happen, but if we are going to sweat over remote possibilities, we might as well sweat the possibility that Bitcoin price will crash to a buck too. I'm not aware of any investments that promise a high return that don't also carry the risk of substantial loss. If BFL implemented your idea, it would make the investment safer, but it would also reduce the potential reward for early adopters. So your idea only makes the situation "better" for those looking for a safer investment. It's not good for those looking to gamble more for a bigger win.


BFL's SC margin will allow BFL to spend more to have more produced quickly.  It's almost trivial cost to manufacture the chips and at that point they can justify more capacity for assembly. 
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June 22, 2012, 04:04:42 PM
 #45

The problem with ASIC is that it will be far more profitable to buy Bitcoin and reap the benefits of ever-increasing difficulty from ASIC than to buy miners and wonder if the difficulty is going to increase so quickly you become unable to get a solid ROI. No matter HOW beneficial ASIC is, the inevitable price increase to match the difficulty is going to be much more profitable. We saw it with GPU when people were starting their GPU farms, we'll see it with ASIC farms, too.

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June 22, 2012, 04:16:10 PM
 #46

What makes you think btc price will increase?

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June 22, 2012, 04:26:55 PM
 #47

What motivation would BFL have to do that?

None, if maximizing profit even at the expense of miners profitability is their only motive.  But auctioning off a predictable supply would allow them to maximize their profit without tricking their customers in to losses, so if for some reason they care about miners, this would be a good way to do it.

Quote
They probably can't estimate their production very precisely, it partly depends on the manufacturers they rely on, and there are bound to be unforseen snags.

If they produce less than promised, Im sure customers would forgive them Smiley Well, at least as long as they only accept money for the rigs they can actually ship.


So is your idea that the contract would state that they won't exceed X production rate? I can see how that would allow miners to make more informed purchasing decisions, but it isn't appealing from BFL's viewpoint to artificially cap their sale rate. Personally, I'm not too worried about this. Given their track record, it is somewhat doubtful that BFL will flood the market with ASICs - it will probably be more of a trickle as we've seen with their FPGA units, and I doubt their prices will drop so rapidly that early buyers will be screwed. Sure, it could happen, but if we are going to sweat over remote possibilities, we might as well sweat the possibility that Bitcoin price will crash to a buck too. I'm not aware of any investments that promise a high return that don't also carry the risk of substantial loss. If BFL implemented your idea, it would make the investment safer, but it would also reduce the potential reward for early adopters. So your idea only makes the situation "better" for those looking for a safer investment. It's not good for those looking to gamble more for a bigger win.


BFL's SC margin will allow BFL to spend more to have more produced quickly.  It's almost trivial cost to manufacture the chips and at that point they can justify more capacity for assembly. 

Yes, but the scenario we are worrying about is one where early buyers end up paying much more for ASIC rigs than later buyers (or so I thought), and if BFL drops price quickly, their margin drops along with it.  
Brunic
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June 22, 2012, 05:30:32 PM
 #48

What makes you think btc price will increase?

The reward drop. It's not a guarantee, but it will help the price to go up.
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June 22, 2012, 05:59:19 PM
 #49

What makes you think btc price will increase?

The reward drop. It's not a guarantee, but it will help the price to go up.

I tend to agree with this statement as well.   People hoarding BTC is another factor so the supply of coins for people wanted to enter the market will be more limited so they will have to place higher bids to get the BTC they want.  That would be shown in price appreciation.

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June 24, 2012, 02:03:09 PM
 #50

The problem with ASIC is that it will be far more profitable to buy Bitcoin and reap the benefits of ever-increasing difficulty from ASIC than to buy miners and wonder if the difficulty is going to increase so quickly you become unable to get a solid ROI. No matter HOW beneficial ASIC is, the inevitable price increase to match the difficulty is going to be much more profitable. We saw it with GPU when people were starting their GPU farms, we'll see it with ASIC farms, too.

What a noob. You still think high difficulty = high prices ? Price is influenced by difficulty ? Roll Eyes

LOL ! Only thing to cause price rise to $10 is reward drop in Dec.

I can almost guarantee you $10 pricepoint in Jan 2013 ...
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June 24, 2012, 06:53:48 PM
 #51

The problem with ASIC is that it will be far more profitable to buy Bitcoin and reap the benefits of ever-increasing difficulty from ASIC than to buy miners and wonder if the difficulty is going to increase so quickly you become unable to get a solid ROI. No matter HOW beneficial ASIC is, the inevitable price increase to match the difficulty is going to be much more profitable. We saw it with GPU when people were starting their GPU farms, we'll see it with ASIC farms, too.

What a noob. You still think high difficulty = high prices ? Price is influenced by difficulty ? Roll Eyes

LOL ! Only thing to cause price rise to $10 is reward drop in Dec.

I can almost guarantee you $10 pricepoint in Jan 2013 ...

I agree with what you say, but since I created that topic, I'm not interested in seeing a lack of respect towards another poster, even if he made a mistake. I would like to keep the discussion clean, and you probably want it too. Thanks.

Raize, like bulanula said, price and difficulty are not completely dependent of each other. Sure, if the price is horrible, difficulty will go down, since miners will close their rigs (like it happened last Autumn). And if the price is in the sky, more miners will join the game, upping the difficulty. But if the price stay constant, or move slowly, difficulty with ASIC could jump 100x without affecting the price.

It's possible that the Bitcoin crash for an external reason, even if miners switch to ASIC and up the difficulty x150.
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June 24, 2012, 10:15:36 PM
 #52

What motivation would BFL have to do that?

None, if maximizing profit even at the expense of miners profitability is their only motive.  But auctioning off a predictable supply would allow them to maximize their profit without tricking their customers in to losses, so if for some reason they care about miners, this would be a good way to do it.

Quote
They probably can't estimate their production very precisely, it partly depends on the manufacturers they rely on, and there are bound to be unforseen snags.

If they produce less than promised, Im sure customers would forgive them Smiley Well, at least as long as they only accept money for the rigs they can actually ship.


Are you sure this will give BFL maximum profit? Maybe with their current supply but what about future supply?

If they do what you're proposing, they're effectively giving some big players to hold a big chunk of hashrate. This will 1) create a big barrier for any future miner/BFL's customer, 2) give them ability to hurt the network, which is what BFL's banking on.

Whats BFL's doing so far is the most logical sense, ie. not telling everyone their capacity yet create rush to be one of the "first". This will give BFL's shortest time to recover any  development cost .
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June 24, 2012, 10:19:31 PM
 #53

i wonder how much money they made and make with their preorder style business plan....  are they really relying on bit coin ....

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June 25, 2012, 06:43:56 AM
 #54

bitpay converts those coins in to $ right away. That alone may trigger a price drop; over the next months,  BFL is likely to sell more than 1 year of mining is worth, and its all instantly converted in to dollar.

As for the reward drop; the only real argument for that to increase price is lower inflation. That may have an impact, but if it does, it will not be in January 2013.

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June 25, 2012, 07:05:01 AM
 #55

bitpay converts those coins in to $ right away. That alone may trigger a price drop; over the next months,  BFL is likely to sell more than 1 year of mining is worth, and its all instantly converted in to dollar.

As for the reward drop; the only real argument for that to increase price is lower inflation. That may have an impact, but if it does, it will not be in January 2013.

well the price has dropped --- maybe because miner are buying rig from bfl via bitpay (bitpay selling coin at market price)
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June 25, 2012, 09:40:33 AM
 #56

As for the reward drop; the only real argument for that to increase price is lower inflation. That may have an impact, but if it does, it will not be in January 2013.
The reward drop will impact the price even before it happens, since speculators will buy in preparation for the price increase.

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June 25, 2012, 11:23:11 AM
 #57

The reward drop will impact the price even before it happens, since speculators will buy in preparation for the price increase.

What makes you think they arent already?

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June 25, 2012, 11:25:44 AM
 #58

The reward drop will impact the price even before it happens, since speculators will buy in preparation for the price increase.
What makes you think they arent already?
Never said they aren't. But the effect is likely to be strongest around the time of the actual halving.

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bulanula
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June 25, 2012, 11:51:53 AM
 #59

As for the reward drop; the only real argument for that to increase price is lower inflation. That may have an impact, but if it does, it will not be in January 2013.
The reward drop will impact the price even before it happens, since speculators will buy in preparation for the price increase.

100% correct.

I have seen it myself with SolidCoin. It works everytime.

JUST wait and SEE the panic when Dec comes around and 25 BTC is made not 50 BTC.

This is huge if you actually think about it ... price will surely rise in that period.
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June 25, 2012, 01:09:41 PM
 #60

As for the reward drop; the only real argument for that to increase price is lower inflation. That may have an impact, but if it does, it will not be in January 2013.
The reward drop will impact the price even before it happens, since speculators will buy in preparation for the price increase.

100% correct.

I have seen it myself with SolidCoin. It works everytime.

JUST wait and SEE the panic when Dec comes around and 25 BTC is made not 50 BTC.

This is huge if you actually think about it ... price will surely rise in that period.

I think the price will only double (when the reward halves) when all coins in supply are used for trade in the Bitcoin economy, i.e. are needed

As it is now (but I have no data back that up) most of the coins are simply hoarded, therefore there is no need for BTC/$ rate to rise

The coins that have been mined have a certain value... the fact that less coins will be mined in the future won't make the already mined coins more valuable, unless there is actual demand for them

Again, as long as most coins are hoarded, there won't be a 1 : 1 relation between price & reward halving.... at least, there shouldn't be
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