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Author Topic: ASICMINER: Entering the Future of ASIC Mining by Inventing It  (Read 3914547 times)
blackswan
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August 08, 2013, 02:54:54 PM
 #10881

I have been considering an interesting scenario lately, and thought I would post this for comment. I think Avalon is really going to get the $200 million investment. Yifu has been incommunicado for nearly a month, and now he has "just gotten off the plane" and will make a "big announcement tomorrow". I know the WSJ article has been "debunked" but that is exactly what I would expect to have happen to leak when the parties are under NDA. I think it is a done deal, and Avalon will be pushing ahead with 28nm chip manufacturing. $200 million will certainly get them there, leaving pretty much everyone in the dust.

This was almost certainly going to happen sooner or later. ASIC development and sales are so red hot that it was only a matter of time before a mega investor saw an opportunity to position itself as the industry leader.

Friedcat has been very quiet lately himself. If this deal was indeed going through I find it unlikely FC did not hear whispers about it. Is it possible FC is courting a major VC deal as well? If the Avalon thing comes to pass, even the mightly FC might find his back against the wall.

I have no doubt real Wall Street money is looking hard at the opportunities for entry into the ASIC space. It has grown exponentially and shows no signs of slowing. I think the ASIC space will be almost unrecognizable 6 months from now. Things are changing so fast I can barely keep up with my own investments.
I've been considering a similar scenario myself.  While I obviously hope this isn't the route we end up on, in the meantime we're all essentially taking shots in the dark with these IPOs.

Only time will tell, but I'm eagerly awaiting an update from Friedcat.  If large investors have jumped into scene, I doubt he wouldn't have heard about it.

For those interested, this is the announcement he's referring to: https://bitcointalk.org/index.php?topic=269950.0

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August 08, 2013, 02:57:16 PM
 #10882

not this bullshit again..

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August 08, 2013, 02:57:25 PM
 #10883

I have been considering an interesting scenario lately, and thought I would post this for comment. I think Avalon is really going to get the $200 million investment. Yifu has been incommunicado for nearly a month, and now he has "just gotten off the plane" and will make a "big announcement tomorrow". I know the WSJ article has been "debunked" but that is exactly what I would expect to have happen to leak when the parties are under NDA. I think it is a done deal, and Avalon will be pushing ahead with 28nm chip manufacturing. $200 million will certainly get them there, leaving pretty much everyone in the dust.

This was almost certainly going to happen sooner or later. ASIC development and sales are so red hot that it was only a matter of time before a mega investor saw an opportunity to position itself as the industry leader.

Friedcat has been very quiet lately himself. If this deal was indeed going through I find it unlikely FC did not hear whispers about it. Is it possible FC is courting a major VC deal as well? If the Avalon thing comes to pass, even the mightly FC might find his back against the wall.

I have no doubt real Wall Street money is looking hard at the opportunities for entry into the ASIC space. It has grown exponentially and shows no signs of slowing. I think the ASIC space will be almost unrecognizable 6 months from now. Things are changing so fast I can barely keep up with my own investments.

anyone that has $200M to invest in ASIC tech would have done enough research to realize that AM is the industry leader and has the best track record, thus makes for the best place to put your money.  And, as I recall, AM is already developing the next gen of chips, so it makes sense to invest in AM over Avalon.

But, I don't think there is $200M of VC money trying to find it's way into the ASIC market.  

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August 08, 2013, 02:59:24 PM
 #10884

I think Avalon is really going to get the $200 million investment. [...] I think it is a done deal, and Avalon will be pushing ahead with 28nm chip manufacturing. $200 million will certainly get them there, leaving pretty much everyone in the dust.

I must be missing something here..

Why would any experienced investor give $200 million to a small ASIC startup? With that massive sum of money, you could start your own company, hire some of the best chip developers in the world, tape out at 22nm, and fund a small, personal datacenter to secure/run it all.

I don't doubt that high level investors are looking at options, but I do doubt they're making moves in such a massively volatile environment.

anyone that has $200M to invest in ASIC tech would have done enough research to realize that AM is the industry leader and has the best track record, thus makes for the best place to put your money.  And, as I recall, AM is already developing the next gen of chips, so it makes sense to invest in AM over Avalon.

But, I don't think there is $200M of VC money trying to find it's way into the ASIC market. 

This ^^

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August 08, 2013, 03:00:43 PM
 #10885

I think Avalon is really going to get the $200 million investment. [...] I think it is a done deal, and Avalon will be pushing ahead with 28nm chip manufacturing. $200 million will certainly get them there, leaving pretty much everyone in the dust.

I must be missing something here..

Why would any experienced investor give $200 million to a small ASIC startup? With that massive sum of money, you could start your own company, hire some of the best chip developers in the world, tape out at 22nm, and fund a small, personal datacenter to secure/run it all.

I don't doubt that high level investors are looking at options, but I do doubt they're making moves in such a massively volatile environment.
+1

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August 08, 2013, 03:02:55 PM
 #10886


Why would any experienced investor give $200 million to a small ASIC startup? With that massive sum of money, you could start your own company, hire some of the best chip developers in the world, tape out at 22nm, and fund a small, personal datacenter to secure/run it all.


Why does anyone buy a company when they could just start their own?
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August 08, 2013, 03:11:25 PM
 #10887

If I had $200 million to invest in bitcoin I'd be spending on infrastructure like exchanges, payment services, wallets with new features, etc. Basically things that are needed to make bitcoin useful to the other 99%.

Mining only has a small 'moat'. The barriers to entry are not all that high, as we have seen. You can only distinguish mining players based on execution, and incumbents can stumble and fall. So why spend so much to fight for a pie that is not getting any bigger at the moment?

 
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August 08, 2013, 03:14:00 PM
 #10888

$200 million, so 20% of bitcoin's market cap?
Right.

Exactly, they may be able to make more than 20% of the market cap back if they
take (a lot of) orders in other currencies, but if most of it is in BTC how long do
you think a ROI for that investor will take?

If I had $200 million to invest in bitcoin I'd be spending on infrastructure like exchanges, payment services, wallets with new features, etc. Basically things that are needed to make bitcoin useful to the other 99%.

Mining only has a small 'moat'. The barriers to entry are not all that high, as we have seen. You can only distinguish mining players based on execution, and incumbents can stumble and fall. So why spend so much to fight for a pie that is not getting any bigger at the moment?

Also, investing in infrastructure will only make the rest of the market as a whole
more lucrative. They'd be smart to invest just $10-20 million in mining prospects
and $80-90 in infrastructure.

e: Also it seems people are sliding over this. I think for $200 million any current mining operation would simply sell.
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August 08, 2013, 03:17:47 PM
 #10889

now, I just need $200M to invest...

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August 08, 2013, 03:22:14 PM
 #10890

Agreed. If you have $1bn+ then you are not interested in taking $200M and attempting to make 2-3x your money in a risky investment. You are interested in making 10X your money in an investment which will nearly guarantee you the return of capital at the worst.

A replacement for paypal using bitcoin could make billions. A mining company (without the massive appreciation of bitcoin) will never do this. Avalon could be getting an investment but it's not going to be for more than $20m - that's my prediction. Even that is high, since you could start your own company for less than half of that.

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August 08, 2013, 03:23:38 PM
 #10891

The market cap of mining is much higher than it first appears. You have the capital invested in shares of companies, the capital invested in pre-orders, capital invested in secondary ventures (board manufacturers awaiting chips, etc). Add all of that up and you have a huge pie, irrespective of the current market cap of BTC. And it is getting larger every day. The two may be tethered, but they are not interdependent.

Most investors invest in what they understand. Many understand manufacturing. It's a known wheelhouse, with numbers they can crunch quite easily. Other types of infrastructure improvements don't necessarily model easily when you are looking for specific profit metrics. Manufacturing chips is proven. Building an exchange or a better wallet, not so much. It is an ideal entry point.
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August 08, 2013, 03:24:41 PM
 #10892

Again please...


Where do I buy - ASICMINER Block Erupter Blade  ?
At a good price? Cheesy


any reliable source?

amlt.coinfirm.io - The token of compliance by Coinfirm
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August 08, 2013, 03:25:58 PM
 #10893

Let's say we agree that mining makes sense as an investment. Is there anything that suggests $200m would be a real number to use? What would you do with it - make diamond encrusted mining hardware?

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August 08, 2013, 03:28:23 PM
 #10894

Pretty much. Good analogy as, for you to profit above the $200 million investment,
 it would be as likely as you would if you spent it on diamond-encrusted miners.
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August 08, 2013, 03:30:46 PM
 #10895

Let's say we agree that mining makes sense as an investment. Is there anything that suggests $200m would be a real number to use? What would you do with it - make diamond encrusted mining hardware?

You could have the whole world mining on your hardware.
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August 08, 2013, 03:31:13 PM
 #10896

Again please...


Where do I buy - ASICMINER Block Erupter Blade  ?
At a good price? Cheesy


any reliable source?

Click link in my sig.


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August 08, 2013, 03:34:03 PM
Last edit: August 08, 2013, 03:44:34 PM by DeathAndTaxes
 #10897

I must be missing something here..

Why would any experienced investor give $200 million to a small ASIC startup? ...

You aren't missing anything it makes absolutely no sense (for anyone with independent critical thinking skills).

However I would phrase the question more broadly. Why would anyone invest $200M into bitcoin mining (or bitcoin mining hardware)?  It would be like there is some niche disease treatment which potentially could result in $100M in global revenue so a biotech company decides to spend $8394208309483249328 quadrillion to develop a treatment.  Even if you win, you lose.

Remember people this is a market where the combined global miner revenue is ~$130M.  That doesn't mean $130M in miner profit or even $130M in mining hardware sales, that is $130M in global mining revenue.  Some portion of that is going to be electricity so lets say $30M of it.  The price of ASICs are far more elastic than the price of electricity so I am being generous but you can look at it this way:

GLOBAL GROSS MINING REVENUE = AMMORTIZED HARDWARE COSTS + ELECTRICAL OPERATING COSTS + LABOR/TIME + PROFIT

Lets assume all miners value their time at $0 and they are all so stupid as to paint themselves into a corner where profit is $0.  Likewise lets generously assume that only $30M of the $130M is electrical costs. 

So that means ~$100M in ammortized hardware.  Say the average ASIC is economcially viable for 18-24 months (due to Moore's law and more efficient units).  This means the annual market for hardware is maybe $50M a year in hardware sales.  So $50M?  Yes (as an upper limit) but that is gross revenue not profit.  Even if you could hold margins at say 30% we are talking maybe $15M in profit.  For the record I am again being generous.  Intel who is pretty much the best semiconductor company on the planet, and one in which the barriers to entry are massive (estimated cost to develop a competitive CPU architecture is on the order of $1B to $5B) has net profit margins in the 15% to 20% range.

Nobody (who is smart enough to have $200M) dumps $200M into a venture that AT BEST worth $15M in profit.  Remember this is assuming 100% global marketshare, generous to the point of being rediculous variables, and taking all profit from miners).   People that do stupid things like that tend to not end up with $200M

Lastly there is no NEED for $200M.  While maybe Avalon (or ASICMiner, or xyz) is getting some deep pocketed VC in the near future they wouldn't even know what to do with $200M.  There is a reason that companies tend to go through various growth stages (seed financing, round A, round B, IPO, etc).  I mean $20M would be a ton of operating cash.  Sure there is the NRE and you need to pay salaries, it likely will take some time to tape out, prototype, and test a 20nm design but it doesn't take take $200M.

Note: before someone "correct" the numbers the point isn't to calculate down to the Satoshi the exact amount of global profit.  Who cares.  Much like an interview question "how many windows are their in NY city?" the point is to do some quick back of napkin math and say "$200M? is that even within one magnitude of making sense?"  The answer is a resounding no.  $2M invesment = highly plausible.  $20M investment = maybe but we are starting to push it.  $200M = stupid.
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August 08, 2013, 03:34:12 PM
 #10898


Also, investing in infrastructure will only make the rest of the market as a whole
more lucrative. They'd be smart to invest just $10-20 million in mining prospects
and $80-90 in infrastructure.

e: Also it seems people are sliding over this. I think for $200 million any current mining operation would simply sell.

I think that this is the right track. If a wealthy investor latched onto bitcoin as the NEXT BIG THINGTM then I could see creating a $200m fund. Take this fund and spread it around:

- buy or fund a hardware operation
- buy or fund infrastructure companies (payment gateways, exchanges, etc)
- buy or fund a retail online store that sells stuff for bitcoin
- buy some bitcoin

I'd still say that $200m is too much, but hey maybe I'm not thinking big enough.

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August 08, 2013, 03:37:11 PM
 #10899

Let's say we agree that mining makes sense as an investment. Is there anything that suggests $200m would be a real number to use? What would you do with it - make diamond encrusted mining hardware?

You could have the whole world mining on your hardware.

I don't see how that really helps - bitcoin won't rise in value because 1 firm dominates the hardware industry. Without a rise in bitcoin value, there's no way to make the $200m back. Bitcoin needs investments in a half dozen areas for it to truly succeed and mining (network hashrate) is only one part of the picture.

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August 08, 2013, 03:43:47 PM
 #10900

It is rare that an investment opportunity arrives where one can completely dominate an exponentially growing market. Microsoft, Apple, Google, Amazon... the list goes on. Will Avalon or ASICminer be on that list next year? It all depends on who can attract the deepest pockets. $200 million is chump change for a shot at being on that list. If you believe bitcoin will succeed, you know it is inevitable that someone will be on that list. And they will be getting help from Wall Street to get there.
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