ASICMINER: Entering the Future of ASIC Mining by Inventing It

[deltanine]

If dividends stay stable I'll eat my hat. Or I'll buy a hat and eat it, as appropriate.

Define what you would accept as stable dividends.  Within ___% for _____ months.

What sort of hat will you eat?  Baseball cap?  fedora?  Cowboy hat?  Some may be harder to get down than others.

The four-week MA must stay within 25% of the trailing 167 day average (the full history as of today, 32.63% APR) for 6 months.

To be honest I was thinking more along the lines of a fruit hat. You've caught me.

LOL!  That made me laugh almost as much as your suggestion that AM should have started up a Bitcoin exchange.

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[Rebelution]

We invested in AM to invest in a company that produces ASIC miners to mine bitcoins.  I want my bitcoins to fund MINING.  If I wanted to invest in an exchange, then I would have invested in an exchange.

There is a direct logical contradiction to claiming that AM is a "growth company" and that bitcoin mining suffers from the tragedy of the commons.  I see that thinking is difficult for you, so I will break it down:

A growth company is a company with rapidly expending revenues and rapidly expanding costs.  Every dollar invested will return more than a dollar but not immediately.  As a result a growth company typically requires additional capital and cannot pay out dividends. If bitcoin mining truly suffers from the tragedy of the commons, then each dollar invested will return less than one dollar.  In this situation no mining company could possibly be a growth company.

AM's revenue is very much capped by bitcoin's scheduled release and the demand for bitcoin mining hardware.  As a result AM has likely come close or already achieved to its maximum revenue (revenue is not equal to profit).  Revenues may very well slowly decline or stagnate but that is fine.

Investing in 130 nm devices to invest in bitcoin mining was an AMAZING investment when AM launched.  It was genius and the shareholders profited enormously.  That is no longer the situation and AM has to operate in a changing industry.

By the way, bitcoin mining is not even close to a "tragedy of the commons" situation.  Tragedy of the commons also doesn't really apply when the resource cannot be exhausted.  You are mis-applying the concept but I understand your point so I originally ignored this point.

[Jutarul]

It IS dissapointing. What if Microsoft or Apple had gotten to 5x their IPO, then said "OK, we made our shareholders happy!", converted to 100% dividends, and stopped growing?

The generated cashflow of a company is tightly connected to the utility of the products they offer. In case of mining, it's likely the expected nominal yield of the hardware. However, the economics of mining is still not settled. It can range from profit mining to subsistence mining to defensive mining. Defensive mining results from an environment where the utility of mining is not capped by the nominal yield, but by he ability to govern the bitcoin. In such an environment the utility of the produced hardware is greater than the expected nominal yield and should allow companies to demand a higher price than the naive economic calculus would suggest.

I sympathize with your sentiment that it would be disappointing if a growth company would stop to innovate. For that reason it is important for ASICMINER to closely watch the needs of the mining community and respond in a timely manner. As far as Microsoft and Apple goes, they pursued very different strategies and were blessed with the necessary luck. Unfortunately there is no standard recipe for entrepreneurial success, except to be responsive. That said - what do you think would be the next big move for a company like ASICMINER?

[Vycid]

We invested in AM to invest in a company that produces ASIC miners to mine bitcoins.  I want my bitcoins to fund MINING.  If I wanted to invest in an exchange, then I would have invested in an exchange.

There is a direct logical contradiction to claiming that AM is a "growth company" and that bitcoin mining suffers from the tragedy of the commons.  I see that thinking is difficult for you, so I will break it down:

A growth company is a company with rapidly expending revenues and rapidly expanding costs.  Every dollar invested will return more than a dollar but not immediately.  As a result a growth company typically requires additional capital and cannot pay out dividends. If bitcoin mining truly suffers from the tragedy of the commons, then each dollar invested will return less than one dollar.  In this situation no mining company could possibly be a growth company.

AM's revenue is very much capped by bitcoin's scheduled release and the demand for bitcoin mining hardware.  As a result AM has likely come close or already achieved to its maximum revenue (revenue is not equal to profit).  Revenues may very well slowly decline or stagnate but that is fine.

Investing in 130 nm devices to invest in bitcoin mining was an AMAZING investment when AM launched.  It was genius and the shareholders profited enormously.  That is no longer the situation and AM has to operate in a changing industry.

By the way, bitcoin mining is not even close to a "tragedy of the commons" situation.  Tragedy of the commons also doesn't really apply when the resource cannot be exhausted.  You are mis-applying the concept but I understand your point so I originally ignored this point.

AM fit the description of a company with "rapidly expanding revenues and rapidly expanding costs" up until very recently, did it not? Its decision to pidgeonhole itself into mining, pursuing a fixed number of bitcoins with a growing amount of competition, is why it has ceased growing, despite the fact that it is valued like the growth company it so recently was.

Growth companies are supposed to grow. AM is the first "growth" company I have ever seen that has managed to shrink its revenue. I only consider it a growth company because it is priced like one.

--

It IS dissapointing. What if Microsoft or Apple had gotten to 5x their IPO, then said "OK, we made our shareholders happy!", converted to 100% dividends, and stopped growing?

The generated cashflow of a company is tightly connected to the utility of the products they offer. In case of mining, it's likely the expected nominal yield of the hardware. However, the economics of mining is still not settled. It can range from profit mining to subsistence mining to defensive mining. Defensive mining results from an environment where the utility of mining is not capped by the nominal yield, but by he ability to govern the bitcoin. In such an environment the utility of the produced hardware is greater than the expected nominal yield and should allow companies to demand a higher price than the naive economic calculus would suggest.

I sympathize with your sentiment that it would be disappointing if a growth company would stop to innovate. For that reason it is important for ASICMINER to closely watch the needs of the mining community and respond in a timely manner. As far as Microsoft and Apple goes, they pursued very different strategies and were blessed with the necessary luck. Unfortunately there is no standard recipe for entrepreneurial success, except to be responsive. That said - what do you think would be the next big move for a company like ASICMINER?

This is a great question, and I don't have the answer, just ideas.

My hypothetical vision of the most valuable company in Bitcoin-land is not just a mining company, but instead a company that really capitalizes on Bitcoin as a PLATFORM instead of a currency - for example, enabling USD->BTC->USD transactions for significantly less than credit card fees. Then we are talking about a company with the potential to be worth many billions USD, AND with the potential to create miner fees that will help synergistically fuel its mining business. Why sit around and wait for transaction fees that may not materialize before your competition erodes all your market share - why not create the infrastructure to make Bitcoin accessible to the wider market?

In order to establish this kind of business, there are a lot of core components - a trusted currency exchange, a bitcoin bank, a USD-denominated Bitcoin wallet.

Who is more trusted and better funded to have done all this than AM?

[Rebelution]

We invested in AM to invest in a company that produces ASIC miners to mine bitcoins.  I want my bitcoins to fund MINING.  If I wanted to invest in an exchange, then I would have invested in an exchange.

There is a direct logical contradiction to claiming that AM is a "growth company" and that bitcoin mining suffers from the tragedy of the commons.  I see that thinking is difficult for you, so I will break it down:

A growth company is a company with rapidly expending revenues and rapidly expanding costs.  Every dollar invested will return more than a dollar but not immediately.  As a result a growth company typically requires additional capital and cannot pay out dividends. If bitcoin mining truly suffers from the tragedy of the commons, then each dollar invested will return less than one dollar.  In this situation no mining company could possibly be a growth company.

AM's revenue is very much capped by bitcoin's scheduled release and the demand for bitcoin mining hardware.  As a result AM has likely come close or already achieved to its maximum revenue (revenue is not equal to profit).  Revenues may very well slowly decline or stagnate but that is fine.

Investing in 130 nm devices to invest in bitcoin mining was an AMAZING investment when AM launched.  It was genius and the shareholders profited enormously.  That is no longer the situation and AM has to operate in a changing industry.

By the way, bitcoin mining is not even close to a "tragedy of the commons" situation.  Tragedy of the commons also doesn't really apply when the resource cannot be exhausted.  You are mis-applying the concept but I understand your point so I originally ignored this point.

AM fit the description of a company with "rapidly expanding revenues and rapidly expanding costs" up until very recently, did it not? Its decision to pidgeonhole itself into mining, pursuing a fixed number of bitcoins with a growing amount of competition, is why it has ceased growing, despite the fact that it is valued like the growth company it so recently was.

Growth companies are supposed to grow. AM is the first "growth" company I have ever seen that has managed to shrink its revenue. I only consider it a growth company because it is priced like one.

Dude, just take a moment to think.  Could AM's revenues continued to expand?  I think most rational people would say no.  It could not gain a greater share of the network hashrate, nor could it realistically sell significantly more hardware.  Thus it transformed from a growth company into a mature company.  That is just a natural progression for all industries that can't be prevented without creating barriers to entry that are not cost.  There is nothing wrong with that, and mature companies can still be very profitable.

Now think about investing.  I give friedcat 100 dollars to build a farm and mine bitcoins.  He then earns 3 bitcoins, then I want him to return me the 3 bitcoins or invest in more mining equipment!  I don't want to him to go investing it in random, unrelated fields that prove to be far less profitable or even fail to generate a return.  As an investor I wanted to invest in MINING.  Now add to the fact that friedcat has already stated that exchanges are more heavily scrutinized in China, then the exchanges would actually bring substantial risk to our mining operation.  That is an even worse result! 

I think you are greatly underestimating the value a company in a mature industry that has comparative advantages.  It can continue to operate indefinitely at a profit.  That is an extremely valuable company.

[Vycid]

We invested in AM to invest in a company that produces ASIC miners to mine bitcoins.  I want my bitcoins to fund MINING.  If I wanted to invest in an exchange, then I would have invested in an exchange.

There is a direct logical contradiction to claiming that AM is a "growth company" and that bitcoin mining suffers from the tragedy of the commons.  I see that thinking is difficult for you, so I will break it down:

A growth company is a company with rapidly expending revenues and rapidly expanding costs.  Every dollar invested will return more than a dollar but not immediately.  As a result a growth company typically requires additional capital and cannot pay out dividends. If bitcoin mining truly suffers from the tragedy of the commons, then each dollar invested will return less than one dollar.  In this situation no mining company could possibly be a growth company.

AM's revenue is very much capped by bitcoin's scheduled release and the demand for bitcoin mining hardware.  As a result AM has likely come close or already achieved to its maximum revenue (revenue is not equal to profit).  Revenues may very well slowly decline or stagnate but that is fine.

Investing in 130 nm devices to invest in bitcoin mining was an AMAZING investment when AM launched.  It was genius and the shareholders profited enormously.  That is no longer the situation and AM has to operate in a changing industry.

By the way, bitcoin mining is not even close to a "tragedy of the commons" situation.  Tragedy of the commons also doesn't really apply when the resource cannot be exhausted.  You are mis-applying the concept but I understand your point so I originally ignored this point.

AM fit the description of a company with "rapidly expanding revenues and rapidly expanding costs" up until very recently, did it not? Its decision to pidgeonhole itself into mining, pursuing a fixed number of bitcoins with a growing amount of competition, is why it has ceased growing, despite the fact that it is valued like the growth company it so recently was.

Growth companies are supposed to grow. AM is the first "growth" company I have ever seen that has managed to shrink its revenue. I only consider it a growth company because it is priced like one.

Dude, just take a moment to think.  Could AM's revenues continued to expand?  I think most rational people would say no.  It could not gain a greater share of the network hashrate, nor could it realistically sell significantly more hardware.  Thus it transformed from a growth company into a mature company.  That is just a natural progression for all industries that can't be prevented without creating barriers to entry that are not cost.  There is nothing wrong with that, and mature companies can still be very profitable.

Now think about investing.  I give friedcat 100 dollars to build a farm and mine bitcoins.  He then earns 3 bitcoins, then I want him to return me the 3 bitcoins or invest in more mining equipment!  I don't want to him to go investing it in random, unrelated fields that prove to be far less profitable or even fail to generate a return.  As an investor I wanted to invest in MINING.  Now add to the fact that friedcat has already stated that exchanges are more heavily scrutinized in China, then the exchanges would actually bring substantial risk to our mining operation.  That is an even worse result!  

I think you are greatly underestimating the value a company in a mature industry that has comparative advantages.  It can continue to operate indefinitely at a profit.  That is an extremely valuable company.

You've just called a ~year old company whose competition hasn't even started launching products yet "mature".

Expanding is a very risky move for a young company, but young companies are risky 100% of the time. Focusing on core competencies is important, but if Google JUST licensed their search engine and never said "hey, we should start doing this advertising thing!", where do you think they'd be?

Follow the money.

(To pre-empt your "it IS mature!" argument - no, it's not. http://pages.stern.nyu.edu/~adamodar/New_Home_Page/littlebook/maturecompanies.htm)

[Rebelution]

So are you saying that is a "growth" company?  Again you are contradicting yourself.  Your whole initial argument was that the initial returns are not sustainable and can't be maintained--YOU ARE RIGHT.

Yes, companies / industries can mature very quickly and things move very fast in the technology and bitcoin world. Your link just shows your stupidity and your complete lack of understanding of companies' life cycles.  Let's go through the points:

1 - check
2 - check
3 - check(exactly the type of competitive advantage I have been describing)
4 - does not apply to bitcoin securities as they cannot issue debt
5 - check, and is why friedcat is paying dividends
6 - check

So yes, thanks for posting the link.  You are correct, it is mature.

The companies with huge market caps are not the only companies that have generated amazing returns for their shareholders.  As an investor you are concerned about return.  It doesn't really matter if the company becomes a household name or is only B2B and the average american doesn't even know exists.  Both can bey very extremely profitable.  Good night.

[dhenson]

http://blockchain.info/block-index/408762/000000000000002661e7868b26511a32259d595d20bc056b87e6ca1e00a7bf11

For those that think being poorly connected doesn't matter.  First AM block found in 7 hours and it's an orphan.

[Vycid]

...

your complete lack of understanding of companies' life cycles.  Let's go through the points:

1 - check
2 - check
3 - check(exactly the type of competitive advantage I have been describing)
4 - does not apply to bitcoin securities as they cannot issue debt
5 - check, and is why friedcat is paying dividends
6 - check

So yes, thanks for posting the link.  You are correct, it is mature.

Let's ACTUALLY go through them, yeah?

1: Revenue growth is approaching growth rate in economy.

Hell, we don't even KNOW the revenue growth rate, because the financials aren't published (pretty mature, right?). But it's pretty clear that whatever the revenue growth rate is (positive or negative), it surely hasn't stabilized to the growth rate of the wider economy. It is currently dictated by the rate of increase in the difficulty rate, something completely external to AM and not at all "stable".

2: Margins are established.

I can't fucking believe you just said "check" for this one. Did you read it at all? This was the core of my argument that you actually agreed with. "Another feature shared by growth companies is that they tend to have stable margins". Hurp durp.

3: Competitive advantages?

The advantage is having a product. That's called the "first-mover advantage" and is NOT a hallmark of mature companies for reasons I really, really hope I don't need to explain.

4: Debt capacity

Uh, they could issue bitcoin bonds, no trouble... but AM has no reason to have ever attempted to do so, so this one is sorta irrelevant.

5: Cash build up and return?

This one I agree with, AM fits the bill.

6: Inorganic growth

WTF? What inorganic growth has AM seen?

Please get your head out of your ass.

[Mausini]

My hypothetical vision of the most valuable company in Bitcoin-land is not just a mining company, but instead a company that really capitalizes on Bitcoin as a PLATFORM instead of a currency - for example, enabling USD->BTC->USD transactions for significantly less than credit card fees. Then we are talking about a company with the potential to be worth many billions USD, AND with the potential to create miner fees that will help synergistically fuel its mining business. Why sit around and wait for transaction fees that may not materialize before your competition erodes all your market share - why not create the infrastructure to make Bitcoin accessible to the wider market?

I also believe the biggest mistake friedcat made was not to build cars and sell them. Cars could well be sold for bitcoin (as a PLATFORM instead of a currency), you know. Billions of dollars!!! Many transaction fees! Synergistically fuel its mining business!

You just disqualified yourself. What are you smoking? Thank you for shutting up.

[Vycid]

My hypothetical vision of the most valuable company in Bitcoin-land is not just a mining company, but instead a company that really capitalizes on Bitcoin as a PLATFORM instead of a currency - for example, enabling USD->BTC->USD transactions for significantly less than credit card fees. Then we are talking about a company with the potential to be worth many billions USD, AND with the potential to create miner fees that will help synergistically fuel its mining business. Why sit around and wait for transaction fees that may not materialize before your competition erodes all your market share - why not create the infrastructure to make Bitcoin accessible to the wider market?

I also believe the biggest mistake friedcat made was not to build cars and sell them. Cars could well be sold for bitcoin (as a PLATFORM instead of a currency), you know. Billions of dollars!!! Many transaction fees! Synergistically fuel its mining business!

You just disqualified yourself. What are you smoking? Thank you for shutting up.

Gosh, I see how silly I am, now. I might as well have said "cars", since cars are obviously just as adjacent a market to bitcoin mining as a bitcoin exchange would be!

If you don't know what I mean by "platform", look up the difference between "bitcoin" and "Bitcoin".

[superduh]

yes! Friedcatmobile - coming in two week (tm)

[Vycid]

09:00 (S) 2 @ 3.50500000 ASICMINER-PT
09:00 (S) 2 @ 3.50500000 ASICMINER-PT
09:00 (S) 1 @ 3.50600000 ASICMINER-PT
09:00 (S) 8 @ 3.50700000 ASICMINER-PT
09:00 (S) 2 @ 3.51000000 ASICMINER-PT
09:00 (S) 1 @ 3.55000000 ASICMINER-PT
08:59 (S) 15 @ 3.56000000 ASICMINER-PT
08:59 (S) 1 @ 3.56200000 ASICMINER-PT
08:59 (S) 1 @ 3.57000000 ASICMINER-PT
08:59 (S) 1 @ 3.58000000 ASICMINER-PT
08:58 (S) 3 @ 3.58100000 ASICMINER-PT
08:58 (S) 1 @ 3.58200000 ASICMINER-PT
08:56 (S) 2 @ 3.60000000 ASICMINER-PT
08:56 (S) 5 @ 3.60000000 ASICMINER-PT
08:56 (S) 10 @ 3.60100000 ASICMINER-PT
08:56 (S) 2 @ 3.60100000 ASICMINER-PT
08:56 (S) 3 @ 3.60200000 ASICMINER-PT
08:56 (S) 2 @ 3.60200000 ASICMINER-PT
08:56 (S) 2 @ 3.60300000 ASICMINER-PT
08:56 (S) 1 @ 3.60400000 ASICMINER-PT
08:56 (S) 2 @ 3.60500000 ASICMINER-PT
08:56 (S) 2 @ 3.60600000 ASICMINER-PT
08:56 (S) 1 @ 3.60800000 ASICMINER-PT
08:56 (S) 1 @ 3.60900000 ASICMINER-PT
08:56 (S) 10 @ 3.60900000 ASICMINER-PT
08:56 (S) 1 @ 3.61000000 ASICMINER-PT
08:56 (S) 1 @ 3.61000000 ASICMINER-PT
08:56 (S) 1 @ 3.61000000 ASICMINER-PT
08:56 (S) 6 @ 3.61100000 ASICMINER-PT
08:56 (S) 1 @ 3.61100000 ASICMINER-PT
08:56 (S) 5 @ 3.61200000 ASICMINER-PT
08:56 (S) 2 @ 3.61300000 ASICMINER-PT
08:56 (S) 1 @ 3.61700000 ASICMINER-PT
08:56 (S) 2 @ 3.62000000 ASICMINER-PT
08:56 (S) 1 @ 3.62100000 ASICMINER-PT
08:56 (S) 1 @ 3.62100000 ASICMINER-PT
08:56 (S) 1 @ 3.62500000 ASICMINER-PT
08:56 (S) 1 @ 3.64000000 ASICMINER-PT
08:56 (S) 1 @ 3.67100000 ASICMINER-PT
08:56 (S) 1 @ 3.67200000 ASICMINER-PT
08:56 (S) 1 @ 3.67300000 ASICMINER-PT
08:56 (S) 4 @ 3.68000000 ASICMINER-PT
08:56 (S) 1 @ 3.68100000 ASICMINER-PT

Thar she blows...

There's now a 0.2 bid/ask spread. MMs must be having a good time.

[Mausini]

My hypothetical vision of the most valuable company in Bitcoin-land is not just a mining company, but instead a company that really capitalizes on Bitcoin as a PLATFORM instead of a currency - for example, enabling USD->BTC->USD transactions for significantly less than credit card fees. Then we are talking about a company with the potential to be worth many billions USD, AND with the potential to create miner fees that will help synergistically fuel its mining business. Why sit around and wait for transaction fees that may not materialize before your competition erodes all your market share - why not create the infrastructure to make Bitcoin accessible to the wider market?

I also believe the biggest mistake friedcat made was not to build cars and sell them. Cars could well be sold for bitcoin (as a PLATFORM instead of a currency), you know. Billions of dollars!!! Many transaction fees! Synergistically fuel its mining business!

You just disqualified yourself. What are you smoking? Thank you for shutting up.

Gosh, I see how silly I am, now. I might as well have said "cars", since cars are obviously just as adjacent a market to bitcoin mining as a bitcoin exchange would be!

If you don't know what I mean by "platform", look up the difference between "bitcoin" and "Bitcoin".

I already didnt get what you mean with "growth". Does that have something to do with http://en.wikipedia.org/wiki/Superpower in combination with http://en.wikipedia.org/wiki/Alice_in_Wonderland? I suppose wonderland is the platform? You genius!

[JimiQ84]

What I don't understand is why is vycid trying to convince anyone about anything. If you don't believe in AM then don't buy shares.

[Vycid]

My hypothetical vision of the most valuable company in Bitcoin-land is not just a mining company, but instead a company that really capitalizes on Bitcoin as a PLATFORM instead of a currency - for example, enabling USD->BTC->USD transactions for significantly less than credit card fees. Then we are talking about a company with the potential to be worth many billions USD, AND with the potential to create miner fees that will help synergistically fuel its mining business. Why sit around and wait for transaction fees that may not materialize before your competition erodes all your market share - why not create the infrastructure to make Bitcoin accessible to the wider market?

I also believe the biggest mistake friedcat made was not to build cars and sell them. Cars could well be sold for bitcoin (as a PLATFORM instead of a currency), you know. Billions of dollars!!! Many transaction fees! Synergistically fuel its mining business!

You just disqualified yourself. What are you smoking? Thank you for shutting up.

Gosh, I see how silly I am, now. I might as well have said "cars", since cars are obviously just as adjacent a market to bitcoin mining as a bitcoin exchange would be!

If you don't know what I mean by "platform", look up the difference between "bitcoin" and "Bitcoin".

I already didnt get what you mean with "growth". Has that something to do with http://en.wikipedia.org/wiki/Superpower in combination with http://en.wikipedia.org/wiki/Alice_in_Wonderland? I suppose wonderland is the platform? You genius!

Your failure to understand does not constitute a logical inconsistency.

Neither do your straw man arguments.

What I don't understand is why is vycid trying to convince anyone about anything. If you don't believe in AM then don't buy shares.

I'm short via an options position, obviously. That position alone is not the motivation, though, as I don't think I really have much leverage in influencing the price level. It's got a lot more to do with my interest in AM as an apparent violation of rational markets theory.

[Elokane]

What I don't understand is why is vycid trying to convince anyone about anything. If you don't believe in AM then don't buy shares.

This is a discussion forum where people exchange opinions and information.

[Mausini]

Your failure to understand does not constitute a logical inconsistency.
Neither do your straw man arguments.

I'm short via an options position, obviously. That position alone is not the motivation, though, as I don't think I really have much leverage in influencing the price level. It's got a lot more to do with my interest in AM as an apparent violation of rational markets theory.

There are no arguments in my statements. Arguments would just trigger more bullshit from you. Again, I can only laugh at your "being short" explanation.

[Vycid]

There are no arguments in my statements. Arguments would just trigger more bullshit from you.

Spoken like a man with no arguments to make.

[stripykitteh]

I'm short via an options position, obviously. That position alone is not the motivation, though, as I don't think I really have much leverage in influencing the price level. It's got a lot more to do with my interest in AM as an apparent violation of rational markets theory.

Vycid, are you selling calls or buying puts? (I'm not an options guru btw, if you respond, ELI5 thanks).