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Author Topic: ASICMINER: Entering the Future of ASIC Mining by Inventing It  (Read 3896704 times)
zefir
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July 06, 2014, 02:32:05 PM
 #21261

AM franchised mining: an insight


Shareholders, miners, and bitcoiners,

catching up the last few pages of this thread I realise that there is a growing interest for franchised operations - along with a bunch of inaccuracy and speculation. To reduce that noise and add some facts to the topic, I herein want to give some insight into my past franchised mining operation.

About
When AM rolled out its mining farm and quickly surpassed 30% network share, in the board we discussed options on how to resolve the existing fear of AM approaching majority power. At that times I already had some experience with lending mining rig for a shared mining profit and proposed that model that later became AM's franchised mining. The idea was pretty simple: instead of growing own mines to disruptive powers, we lend rig to self-managed entities for a pre-defined share of mining income.

As one of the initial testers of blade based franchised mining I want to share some of my experience with those interested in franchising, or shareholders just wondering how that component contributed to dividend payments in the past.

Please note that all the information provided here is about past mining operations and not about those planned for BE200 and later franchising. Also, basically everything described is information publicly available (from blockchain) which I am only connecting the dots to.

The AM franchised mining model

The established model aims to get large volumes of hashing power operational out of AM's direct control but with a guaranteed and high share of mining income at zero risk. Zero risk is achieved by requesting for collateral that covers the manufacturing and shipping costs - which can be either as a deposit of BTC at escrow, or with direct AM shares.

High share of mining income was defined as 80/20. Income is accounted at nominal values, e.g. one blade is assumed to hash with 10GHps and to consume 100W. Furthermore, it is accounted based on theoretical values, that is: for one blade AM receives the mining income of 8GHps mining 24/7 (80%PPS), remainder goes to franchisee. This gives the franchisee full control over risk/reward balancing, i.e. he could try to squeeze out the most of the blades through over-clocking to get a higher share for himself - at the same time he is in charge for loss of income of any kind, e.g. pool DDOSed, power outage, theft, whatever. Failure to pay the regular franchising fees will ultimately result in the forfeiture of your collateral and termination of franchising agreement.

Use case: AM rev1 blades franchised mining
My first installation were 30 blades that during the first difficulty cycle mined as follows:
Code:
Difficulty period 121 (243936-245952) @ difficulty=21335329
Duration 986438 seconds (from 1372515725 to 1373502163)
Period earnings 100PPS per GH: 0.2691
Period earnings  80PPS per GH: 0.2153
Period franchise payment for 300 GH: 64.5895

https://blockchain.info/tx/cdc52c9906a984ac7c8c5ef0b7213aff92d71533049e34670377f9abd60965bc
No, you are not dreaming: it is less than a year that 300GHps mined you 80BTC in one difficulty cycle Sad

Four months later, I had my full capacity of 292 blades up and running. Notice how the 10x higher hashrate earned only 57% of what the first 30 blades made over a difficulty cycle.
Code:
Difficulty period 131 (264096-266112) @ difficulty=267731249
Duration 828484 seconds (from 1381925788 to 1382754272)
Gross mining income 100PPS per GH: 0.01801214
Expenses at y=4.17e-07 in USD per GH: 0.34547783
Exchange rate USD/BTC: 174.283
Expenses in BTC per GH: 0.00198228
Net earnings 100PPS per GH: 0.01602986
Franchise earnings  80PPS per GH: 0.01282389
Franchise payment for 2920 GH: 37.4458

https://blockchain.info/tx/e0b7dd60cc7bb6728f1f0b485300e631e30f69fb225cef41885d0d9777428ed7
Another fun fact: setting up those blades in a 80qm facility took 6 weeks installation time (customising shelves, power distribution, networking, blade set-up) and required a 30kW facility - which today is available at a desktop PC sized plug-and-mine product at 3kW.

Initially, electricity costs were negligible, but after 4 months became significant and were added to the fee calculation formula. The above output is generated by this script I wrote that calculates the franchising payments based on the agreed formula.


Finally, rev1 blade franchising became unprofitable in April 2014:
Code:
Difficulty period 147 (296352-298368) @ difficulty=6978842649
Duration 1055529 seconds (from 1397755646 to 1398811175)
Gross mining income 100PPS per GH: 0.00088037
Expenses at y=4.17e-07 in USD per GH: 0.44015559
Exchange rate USD/BTC: 451.720
Expenses in BTC per GH: 0.00097440
Net earnings 100PPS per GH: -0.00009403
Franchise earnings  80PPS per GH: -0.00007522
Franchise payment for 2920 GH: -0.2196

Bottom line
  • mining 292 blades generated 762.138 BTC mining income for AM
  • blades were mining profitable for 10 months
  • franchisee made less than 160BTC in mining, which were sold to pay operation costs for an average BTCUSD rate of ~$300 and hardly covered expenses


Future

Franchised mining will remain a core strategy for AM. Alas, with the mining profitability marginalizing down, it became restricted to those who
a) do it on large scale
b) have enough funds / shares to provide collateral
c) have access to cheap electricity


Hope this retrospective gave you some insight and a better idea on AM's franchising model.

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Equilux
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July 06, 2014, 02:40:24 PM
 #21262

AM franchised mining: an insight


Great info


Thanks for this!

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July 06, 2014, 02:44:07 PM
 #21263

Zef,

Did AM send you additional equipment, to keep you abreast of difficulty?
Or, was it at the level of your increasing collateral?
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July 06, 2014, 02:56:18 PM
 #21264

AM franchised mining: an insight


This is very good information.  Thanks for posting it.  It  gives a good insight into AM franchises.
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July 06, 2014, 03:56:56 PM
 #21265

AM franchised mining: an insight


Shareholders, miners, and bitcoiners,

catching up the last few pages of this thread I realise that there is a growing interest for franchised operations - along with a bunch of inaccuracy and speculation. To reduce that noise and add some facts to the topic, I herein want to give some insight into my past franchised mining operation.

About
When AM rolled out its mining farm and quickly surpassed 30% network share, in the board we discussed options on how to resolve the existing fear of AM approaching majority power. At that times I already had some experience with lending mining rig for a shared mining profit and proposed that model that later became AM's franchised mining. The idea was pretty simple: instead of growing own mines to disruptive powers, we lend rig to self-managed entities for a pre-defined share of mining income.

As one of the initial testers of blade based franchised mining I want to share some of my experience with those interested in franchising, or shareholders just wondering how that component contributed to dividend payments in the past.

Please note that all the information provided here is about past mining operations and not about those planned for BE200 and later franchising. Also, basically everything described is information publicly available (from blockchain) which I am only connecting the dots to.

The AM franchised mining model

The established model aims to get large volumes of hashing power operational out of AM's direct control but with a guaranteed and high share of mining income at zero risk. Zero risk is achieved by requesting for collateral that covers the manufacturing and shipping costs - which can be either as a deposit of BTC at escrow, or with direct AM shares.

High share of mining income was defined as 80/20. Income is accounted at nominal values, e.g. one blade is assumed to hash with 10GHps and to consume 100W. Furthermore, it is accounted based on theoretical values, that is: for one blade AM receives the mining income of 8GHps mining 24/7 (80%PPS), remainder goes to franchisee. This gives the franchisee full control over risk/reward balancing, i.e. he could try to squeeze out the most of the blades through over-clocking to get a higher share for himself - at the same time he is in charge for loss of income of any kind, e.g. pool DDOSed, power outage, theft, whatever. Failure to pay the regular franchising fees will ultimately result in the forfeiture of your collateral and termination of franchising agreement.

Use case: AM rev1 blades franchised mining
My first installation were 30 blades that during the first difficulty cycle mined as follows:
Code:
Difficulty period 121 (243936-245952) @ difficulty=21335329
Duration 986438 seconds (from 1372515725 to 1373502163)
Period earnings 100PPS per GH: 0.2691
Period earnings  80PPS per GH: 0.2153
Period franchise payment for 300 GH: 64.5895

https://blockchain.info/tx/cdc52c9906a984ac7c8c5ef0b7213aff92d71533049e34670377f9abd60965bc
No, you are not dreaming: it is less than a year that 300GHps mined you 80BTC in one difficulty cycle Sad

Four months later, I had my full capacity of 292 blades up and running. Notice how the 10x higher hashrate earned only 57% of what the first 30 blades made over a difficulty cycle.
Code:
Difficulty period 131 (264096-266112) @ difficulty=267731249
Duration 828484 seconds (from 1381925788 to 1382754272)
Gross mining income 100PPS per GH: 0.01801214
Expenses at y=4.17e-07 in USD per GH: 0.34547783
Exchange rate USD/BTC: 174.283
Expenses in BTC per GH: 0.00198228
Net earnings 100PPS per GH: 0.01602986
Franchise earnings  80PPS per GH: 0.01282389
Franchise payment for 2920 GH: 37.4458

https://blockchain.info/tx/e0b7dd60cc7bb6728f1f0b485300e631e30f69fb225cef41885d0d9777428ed7
Another fun fact: setting up those blades in a 80qm facility took 6 weeks installation time (customising shelves, power distribution, networking, blade set-up) and required a 30kW facility - which today is available at a desktop PC sized plug-and-mine product at 3kW.

Initially, electricity costs were negligible, but after 4 months became significant and were added to the fee calculation formula. The above output is generated by this script I wrote that calculates the franchising payments based on the agreed formula.


Finally, rev1 blade franchising became unprofitable in April 2014:
Code:
Difficulty period 147 (296352-298368) @ difficulty=6978842649
Duration 1055529 seconds (from 1397755646 to 1398811175)
Gross mining income 100PPS per GH: 0.00088037
Expenses at y=4.17e-07 in USD per GH: 0.44015559
Exchange rate USD/BTC: 451.720
Expenses in BTC per GH: 0.00097440
Net earnings 100PPS per GH: -0.00009403
Franchise earnings  80PPS per GH: -0.00007522
Franchise payment for 2920 GH: -0.2196

Bottom line
  • mining 292 blades generated 762.138 BTC mining income for AM
  • blades were mining profitable for 10 months
  • franchisee made less than 160BTC in mining, which were sold to pay operation costs for an average BTCUSD rate of ~$300 and hardly covered expenses


Future

Franchised mining will remain a core strategy for AM. Alas, with the mining profitability marginalizing down, it became restricted to those who
a) do it on large scale
b) have enough funds / shares to provide collateral
c) have access to cheap electricity


Hope this retrospective gave you some insight and a better idea on AM's franchising model.


This is a nice summary Zefir.  I would add one thing

d) are willing to work for nothing, and gain nearly nothing from their invested capital
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July 06, 2014, 04:39:39 PM
 #21266

Oh, good to know, that Bitmine is child of ASICminer, now competitor with own chips and still boardmember.

With so many umbrella companies and companies divided from original ASICminer, AM seems like tunneled Swiss cheese.

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July 06, 2014, 04:58:58 PM
 #21267

I spoke with friedcat about being a franchise..and even with my extremely low power costs and large hosting space I did not see any profit.  He wants basically .2BTC per 150 GH...been buying mass ant miner S1's for less. 
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July 06, 2014, 05:27:48 PM
 #21268

He wants basically .2BTC per 150 GH...been buying mass ant miner S1's for less. 

That's only collateral?

I'm curious about how/when franchise contracts end? After a defined period of time and/or do you have to send hardware back to friedcat?

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July 06, 2014, 05:49:48 PM
 #21269

Yes that was for a deposit...leaving me with all the risk and then some.  The gear is not worth those prices unless I bought direct, but even then why would I franchise?  I do not wish to buy shares in AM just to run gear for them...oh well.  I guess if you already own shares in AM the franchise might be worth it, but definitely not to a non investor.
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July 06, 2014, 06:54:39 PM
 #21270

Yes that was for a deposit...leaving me with all the risk and then some.  The gear is not worth those prices unless I bought direct, but even then why would I franchise?  I do not wish to buy shares in AM just to run gear for them...oh well.  I guess if you already own shares in AM the franchise might be worth it, but definitely not to a non investor.

shares also yield dividends
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July 06, 2014, 06:58:03 PM
 #21271

Yes that was for a deposit...leaving me with all the risk and then some.  The gear is not worth those prices unless I bought direct, but even then why would I franchise?  I do not wish to buy shares in AM just to run gear for them...oh well.  I guess if you already own shares in AM the franchise might be worth it, but definitely not to a non investor.

shares also yield dividends

And yeah... this is a shareholder thread...   Roll Eyes 

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July 06, 2014, 07:10:38 PM
 #21272

Well what dividends?  Also I understand this is a shareholder thread...but If I were mining for AM I think that would apply to you guys...
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July 06, 2014, 07:29:49 PM
 #21273

Judging by the remarks last week and before that FC is selling for near or at cost, it seems he may have addressed the issues of past franchisers not making much of a return.  While it is unfortunate that some may not have profited, we all knew difficulty was going through the roof all the time, right?  Mining has always been a risk, a bet on the future of mining.  Anyone who got into it and did not know that... well sorry to hear that.

Seems like that 6 week deployment time is what killed things. Cutting deployment down by even 1/6 of that would have been a big difference in profit.

It will be interesting to see if the DataTank solves the deployment issue by providing a solution where all you need to do is plug it in and add the fluid.

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July 06, 2014, 10:49:05 PM
 #21274

The shares look like they are just going to be an 'deposit' for large miners in order to start franchising.  AM side companies will be making all the money.
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July 07, 2014, 02:24:26 AM
 #21275

Yes that was for a deposit...leaving me with all the risk and then some.  The gear is not worth those prices unless I bought direct, but even then why would I franchise?  I do not wish to buy shares in AM just to run gear for them...oh well.  I guess if you already own shares in AM the franchise might be worth it, but definitely not to a non investor.

Unless I'm misunderstanding something, where's the risk? Are you talking about BTC/USD risk? The gear may not be worth 0.2BTC but isn't that irrelevant since it's only a refundable deposit?

1Bs49wsYJLUP9Xcj5hPKcvub9vUAe2GF1F
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July 07, 2014, 02:36:08 AM
Last edit: July 07, 2014, 02:49:46 AM by hdbuck
 #21276

Yes that was for a deposit...leaving me with all the risk and then some.  The gear is not worth those prices unless I bought direct, but even then why would I franchise?  I do not wish to buy shares in AM just to run gear for them...oh well.  I guess if you already own shares in AM the franchise might be worth it, but definitely not to a non investor.

Unless I'm misunderstanding something, where's the risk? Are you talking about BTC/USD risk? The gear may not be worth 0.2BTC but isn't that irrelevant since it's only a refundable deposit?

seems it is a refundable deposit. i dont see why you have to pay your hardware being a franchisee.
plus S1s are 0,4BTC, which is double (for a used piece of hardware that wont ROI if not last more than 2 months: mine got burnt within that timeframe..)

edit: that makes me think, hasnt the global hashrate settle down a little @120Ph since the last 3weeks? wouldnt that be old used hardwre unplugging/breaking rate compensating for new devices out?
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July 07, 2014, 04:06:38 AM
 #21277

What makes you think that's a scam?  Looks like a real piece of hardware built off of a specific design AM published a month or so ago as open source...  Remember?  The sexy one with the amazing heatsink design that everyone wanted just for looks.  Hell... I want one just to put on a shelf, fuck if it makes ROI!


this their official site: http://www.edentech.org.cn/

Do you think a normal commercial company would use a domain (org.cn) like this?

Why don't they show us some videos rather than only ONE blurry and small photo?

Besides, I think you might agree that PRE-order is almost means a SCAM in this industry.

btw, I have some shares of AM. That's to say, if this company do exists and is using chips from AM, it will be a good news for us all.
The sales of this company said the device was desinged by AM, they just sell it.
He also said FC will approve it tomorrow, just waiting.
Their devices are based on BE200 X-24 design. And they indeed have collaboration to us and bought a large number of BE200 chips.

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July 07, 2014, 04:29:33 AM
 #21278

What makes you think that's a scam?  Looks like a real piece of hardware built off of a specific design AM published a month or so ago as open source...  Remember?  The sexy one with the amazing heatsink design that everyone wanted just for looks.  Hell... I want one just to put on a shelf, fuck if it makes ROI!


this their official site: http://www.edentech.org.cn/

Do you think a normal commercial company would use a domain (org.cn) like this?

Why don't they show us some videos rather than only ONE blurry and small photo?

Besides, I think you might agree that PRE-order is almost means a SCAM in this industry.

btw, I have some shares of AM. That's to say, if this company do exists and is using chips from AM, it will be a good news for us all.
The sales of this company said the device was desinged by AM, they just sell it.
He also said FC will approve it tomorrow, just waiting.
Their devices are based on BE200 X-24 design. And they indeed have collaboration to us and bought a large number of BE200 chips.
Smiley FC is coming, where is dividends?
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July 07, 2014, 04:48:10 AM
 #21279

What makes you think that's a scam?  Looks like a real piece of hardware built off of a specific design AM published a month or so ago as open source...  Remember?  The sexy one with the amazing heatsink design that everyone wanted just for looks.  Hell... I want one just to put on a shelf, fuck if it makes ROI!


this their official site: http://www.edentech.org.cn/

Do you think a normal commercial company would use a domain (org.cn) like this?

Why don't they show us some videos rather than only ONE blurry and small photo?

Besides, I think you might agree that PRE-order is almost means a SCAM in this industry.

btw, I have some shares of AM. That's to say, if this company do exists and is using chips from AM, it will be a good news for us all.
The sales of this company said the device was desinged by AM, they just sell it.
He also said FC will approve it tomorrow, just waiting.
Their devices are based on BE200 X-24 design. And they indeed have collaboration to us and bought a large number of BE200 chips.

  While you all were sleeping.....  Grin
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July 07, 2014, 04:49:43 AM
 #21280

What makes you think that's a scam?  Looks like a real piece of hardware built off of a specific design AM published a month or so ago as open source...  Remember?  The sexy one with the amazing heatsink design that everyone wanted just for looks.  Hell... I want one just to put on a shelf, fuck if it makes ROI!


this their official site: http://www.edentech.org.cn/

Do you think a normal commercial company would use a domain (org.cn) like this?

Why don't they show us some videos rather than only ONE blurry and small photo?

Besides, I think you might agree that PRE-order is almost means a SCAM in this industry.

btw, I have some shares of AM. That's to say, if this company do exists and is using chips from AM, it will be a good news for us all.
The sales of this company said the device was desinged by AM, they just sell it.
He also said FC will approve it tomorrow, just waiting.
Their devices are based on BE200 X-24 design. And they indeed have collaboration to us and bought a large number of BE200 chips.

This is great news.  Another confirmed company that has purchased BE200 chips.
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