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Author Topic: ASICMINER: Entering the Future of ASIC Mining by Inventing It  (Read 3917661 times)
Rival
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July 04, 2013, 10:00:34 PM
 #9381

Currency has much in common with the schrodinger cat. It is is a state of being neither alive nor dead until you open the box.

Currency is an abstraction of value, not value itself. It only achieves value once spent.

This is why deflation is not a boggyman to be feared. Suppose I were to spend BTC to buy a home. I live in the home for 5 years, and keep up on it so that is in the same condition 5 years later. I sell it for BTC, and receive a smaller number of BTC. One could argue that I have lost, but that is simply an illusion. I have simply traded the opportunity cost of holding the BTC for a home for 5 years. I took one house worth of BTC, traded it for a house, 5 years later I traded one house for one house worth of BTC. I broke even. The deflating currency has harmed me not a bit.

Now granted, when purchasing things which are consumed the story is different. You must measure the opportunity cost of consuming something today against saving and consuming later. You will determine whether that is a fair trade off as an individual when you choose to consume or to save. At least it is you who are making the choice and not having it made for you by people who change the rules when it suits them.

Resources are deflationary by nature. The first barrels of oil from a well are the cheapest and easiest to get, just like bitcoins. Every day that passes, it costs more to obtain more. Holding a barrel of oil from the beginning instead of consuming it brings forth a profit. I would posit that deflationary currencies are more in tune with the nature of the world than the inflationary ones.
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July 04, 2013, 10:28:48 PM
 #9382

Currency has much in common with the schrodinger cat.
...

Very nice post, interesting thoughts! Especially this, powerful statement:

I would posit that deflationary currencies are more in tune with the nature of the world than the inflationary ones.

Monero's privacy and therefore fungibility are MUCH stronger than Bitcoin's. 
This makes Monero a better candidate to deserve the term "digital cash".
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July 04, 2013, 10:37:12 PM
 #9383

Currency has much in common with the schrodinger cat. It is is a state of being neither alive nor dead until you open the box.

Currency is an abstraction of value, not value itself. It only achieves value once spent.

This is why deflation is not a boggyman to be feared. Suppose I were to spend BTC to buy a home. I live in the home for 5 years, and keep up on it so that is in the same condition 5 years later. I sell it for BTC, and receive a smaller number of BTC. One could argue that I have lost, but that is simply an illusion. I have simply traded the opportunity cost of holding the BTC for a home for 5 years. I took one house worth of BTC, traded it for a house, 5 years later I traded one house for one house worth of BTC. I broke even. The deflating currency has harmed me not a bit.

Now granted, when purchasing things which are consumed the story is different. You must measure the opportunity cost of consuming something today against saving and consuming later. You will determine whether that is a fair trade off as an individual when you choose to consume or to save. At least it is you who are making the choice and not having it made for you by people who change the rules when it suits them.

Resources are deflationary by nature. The first barrels of oil from a well are the cheapest and easiest to get, just like bitcoins. Every day that passes, it costs more to obtain more. Holding a barrel of oil from the beginning instead of consuming it brings forth a profit. I would posit that deflationary currencies are more in tune with the nature of the world than the inflationary ones.

I'm going to work through this cluster paragraph by paragraph.

Currency has much in common with the schrodinger cat. It is is a state of being neither alive nor dead until you open the box.

This doesn't actually match up with your next sentence:

Currency is an abstraction of value, not value itself. It only achieves value once spent.

Then it's valueless before being spent, as per your assertion. It's not a superposition of both value and no value.

I disagree with that assessment anyway. If it's valueless before being spent, then nobody would ever sell their real goods for currency. The fact that people do sell real goods for currency demonstrates that it has value before it is spent.

Onto the next paragraph:

This is why deflation is not a boggyman to be feared. Suppose I were to spend BTC to buy a home. I live in the home for 5 years, and keep up on it so that is in the same condition 5 years later. I sell it for BTC, and receive a smaller number of BTC. One could argue that I have lost, but that is simply an illusion. I have simply traded the opportunity cost of holding the BTC for a home for 5 years. I took one house worth of BTC, traded it for a house, 5 years later I traded one house for one house worth of BTC. I broke even. The deflating currency has harmed me not a bit.

You did not break even. You have less units of currency than you started out with, regardless of their purchasing power. If you had not purchased a house, you'd have more units of currency. Obfuscating the situation with the utility of owning a house doesn't change the situation, as I can demonstrate easily:

Let's suppose instead the situation is instead both non-deflationary and non-inflationary; the purchasing power of money doesn't change. You buy the house, live in it for 5 years, and sell it for the same amount of money as you originally put in (which has the same purchasing power as the money reclaimed in the deflationary case).

Once again, you've received the utility of living in the house. But there is ZERO opportunity cost in doing so; holding onto your money would have provided no benefit; but you clearly received utility from owning the house, since otherwise you would have had to pay rent. So, for the deflating currency you broke even on your investment, and for the neutral currency you actually made money, although it's invisible.

Let's consider this thought experiment: you own enough deflationary currency to buy a house, AND enough non-deflationary currency to buy a house. What will you do? Simple - you'll buy a house with your non-deflationary currency, and sit on the deflationary currency, since otherwise there would be an opportunity cost. Acting as though deflation doesn't affect you because you own real goods is naive.

Now granted, when purchasing things which are consumed the story is different. You must measure the opportunity cost of consuming something today against saving and consuming later. You will determine whether that is a fair trade off as an individual when you choose to consume or to save. At least it is you who are making the choice and not having it made for you by people who change the rules when it suits them.

As I mentioned already, that has to be considered for non-consumables as well, since there's an opportunity cost associated with not holding currency. You could rent now and buy a house later.

Resources are deflationary by nature. The first barrels of oil from a well are the cheapest and easiest to get, just like bitcoins. Every day that passes, it costs more to obtain more. Holding a barrel of oil from the beginning instead of consuming it brings forth a profit. I would posit that deflationary currencies are more in tune with the nature of the world than the inflationary ones.

"More in tune with the nature of the world" is some serious voodoo economics, not to mention that you're cherry-picking; yes, oil gets more expensive with time, and meanwhile the cell phones being manufactured today will cost half as much to make in a couple of years.

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July 04, 2013, 10:43:15 PM
 #9384

You're discussing the fundamentals of bitcoins on an unrelated topic, and honestly, if you don't agree with the fundamentals, why are you even investing twice or more (in bitcoins then in a bitcoin security mining bitcoins)?

I assume you're talking to me.

You should ask Rival why he made the first post, then; I simply responded.

As for the fundamentals; I believe deflationary currencies like Bitcoin have a place, just like gold does, but I don't think it will displace inflationary fiat.

And I've sold my AM shares. I now own exclusively puts - I'm playing the downside. Many people in real-world markets have contrarian opinions about stocks, so I'm not sure I understand your confusion.

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July 04, 2013, 10:45:04 PM
 #9385

Since we've gone off at a tangent to the thread topic there's something I'd like to know. What's this "growth" inflationary believers keep pointing at and saying "you must print more because of this"? It sounds like they're saying we make new stuff so we must print more to account for it but that equals printing the profits and no one says we must un-print for everything scrapped, dumped or gone up in smoke. Maybe I'm missing something obvious but its not making a whole lot of sense.

Industrialization, new technologies, and more people in the workforce increases net productivity, which manifests as GDP growth.

That's why developed countries have much slower GDP growth than developing ones; industrialized countries have already done all the "easy" growth.

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July 05, 2013, 12:41:36 AM
 #9386

You're discussing the fundamentals of bitcoins on an unrelated topic, and honestly, if you don't agree with the fundamentals, why are you even investing twice or more (in bitcoins then in a bitcoin security mining bitcoins)?
/\ this


You should ask Rival why he made the first post, then; I simply responded.
Don't feed the trolls.

Thank me in Bits 12MwnzxtprG2mHm3rKdgi7NmJKCypsMMQw
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July 05, 2013, 01:01:05 AM
 #9387

So many weak hands, so much free money laying around and I have to be sleeping during all of that  Angry

+1! I can't believe i slept through a dip like that.

I wouldn't worry. We will see sub BTC3 per share soon. Far too much uncertainty for ASICMINER to be valued this high right now.
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July 05, 2013, 01:16:19 AM
 #9388


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July 05, 2013, 01:26:54 AM
 #9389

So many weak hands, so much free money laying around and I have to be sleeping during all of that  Angry

+1! I can't believe i slept through a dip like that.

I wouldn't worry. We will see sub BTC3 per share soon. Far too much uncertainty for ASICMINER to be valued this high right now.

         +-------------------+             .:\:\:/:/:.            
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         |  FEED THE TROLLS  |           :=.' -   - '.=:          
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July 05, 2013, 01:48:34 AM
 #9390

Apologies if this been posted before, relevant for next week's (and several weeks after I suspect) dividends:

From https://www.btcguild.com/index.php?page=store
----------
The first 1,000 units have been shipped to customers. Additional inventory of 1,300 units are expected to arrive between July 5th and July 9th.

Sales will remain open beyond the 1,300 units currently ordered, but new inventory cannot be ordered until July 10th due to supplier limitations.
---------
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July 05, 2013, 02:07:11 AM
 #9391

Apologies if this been posted before, relevant for next week's (and several weeks after I suspect) dividends:

From https://www.btcguild.com/index.php?page=store
----------
The first 1,000 units have been shipped to customers. Additional inventory of 1,300 units are expected to arrive between July 5th and July 9th.

Sales will remain open beyond the 1,300 units currently ordered, but new inventory cannot be ordered until July 10th due to supplier limitations.
---------
Sorry, that's an on-topic post. Please take it to the economics, politics, speculation, solar power, plagues and diseases, alien invasion, grammar and pedanticism, or war and pestilence threads.
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July 05, 2013, 02:52:00 AM
 #9392

ASICMiner- Letting the cat out of the bag.

Recent analysis has led me to some interesting conclusions. I would like to present them to the community for discussion. Feel free to shoot holes in it as you desire.

In the early 1990's, Microsoft made a huge investment in their direct competitor, Apple. Apple was failing, and common wisdom dictated that this was done to keep from getting impaled by anti-trust lawsuits. I would suggest that it was nothing of the sort. I believe they were just doing it to grow the market, so that the value of their share would increase. Witness AM. AM has demonstrated a capability to completely dominate the entire global hash if they so desired. I don't think this is conjecture, but rather a demonstrable fact. But unlike Microsoft, they had to deal with a very important restraint: they could not ever under and circumstances breach 50% of market share. This placed a practical limit on their growth. They could never grow to more than 50% of the current hash. So what is the obvious solution? Increase the hash that they do not control, and the easiest way to do that is to supply their competitor (Joe and Jane miner) with devices that could hash. AM, in order to grow, increased the hash of their competition by selling them hardware that they could have easily put into their own farm. AM effectively put themselves into the catbird seat by not only profiting from their own farm, but from hardware sales as well. The tertiary profit came from increased hashrate allowing them to expand even further. They raised the value of the cap.

I have no doubt that many have realized this strategy already, in fact, there have been several posts that have alluded it to it. What I think most have missed however is much more complicated.

As specialized hardware is required to make any sort of profit, the actual number of miners has been decreasing. The costs of obtaining the latest hardware continue to increase leading to only one conclusion: That eventually no individual will be able to own hardware capable of hashing a profit. We will eventually reach a point where there exist only a handful of companies with the resources to purchase and operate the hardware required... and instead of owning hardware, we will all own shares in farms. Just as the wildcat oil-drillers gave way to Standard Oil. But Friedcat has a trick up his sleeve, there will be no Standard Oil. Friedcat appears to have embarked on a strategy that pays attention to history. He knows the result of a monopoly, and knows it is poison to bitcoins. He welcomes the competition. he encourages it, and above all else, he profits from it. He knows he needs it. So he ensures it exists.

Where will this lead? The obvious conclusion is a system wherein Friedcat runs the bitcoin mining ecosystem in the same manner the federal Reserve manages dollars. A total domination on almost every level. Avalon kicking up the hash? Excellent, we can just increase to match, and sell even more block erupters to everyone who is trying to keep up. More profit for shareholders. BFL actually delivering? Pop the cork, we can now bring another 10 Terrahash online and sell even more USB miners! More profit for shareholders!

And so, we end up with AM ensuring no entity ever gets 51%, protecting the bitcoin system, and rewarding shareholders with an almost endless stream of dividends. It almost looks like it is all tied up with a pretty bow. When you read it like this, it is hard to wonder if Friedcat and Satoshi might be in some way... related.

Oh, well, off to bed. It was a good bedtime story if nothing else. Please deposit the tinfoil hats in the bin as you leave.

Sorry but the foundational premise of this post is completely wrong.  Microsoft shares can go up indefinitely, but bitcoins will still be minted every 10 minutes no matter how large or small the network is.  Your whole premise thus falls apart, unless you have evidence that bitcoins go up in value with higher network hashrates (which may indeed be true).

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July 05, 2013, 04:13:54 AM
 #9393

Sorry but the foundational premise of this post is completely wrong.  Microsoft shares can go up indefinitely, but bitcoins will still be minted every 10 minutes no matter how large or small the network is.  Your whole premise thus falls apart, unless you have evidence that bitcoins go up in value with higher network hashrates (which may indeed be true).

Au contraire, there is no fundamental limit to the fees that can be generated by the network. That is the long-term promise of mining. Whether they will be or not is a different question.

 
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July 05, 2013, 04:34:06 AM
 #9394

Sorry but the foundational premise of this post is completely wrong.  Microsoft shares can go up indefinitely, but bitcoins will still be minted every 10 minutes no matter how large or small the network is.  Your whole premise thus falls apart, unless you have evidence that bitcoins go up in value with higher network hashrates (which may indeed be true).

Au contraire, there is no fundamental limit to the fees that can be generated by the network. That is the long-term promise of mining. Whether they will be or not is a different question.
However, the fees that can be generated by the network have nothing to do with the amount of available hash power; and in general, bitcoin miners are not involved in getting more people to use bitcoin (and thus generating more transaction fees through transacting).

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July 05, 2013, 04:40:55 AM
 #9395

Sorry but the foundational premise of this post is completely wrong.  Microsoft shares can go up indefinitely, but bitcoins will still be minted every 10 minutes no matter how large or small the network is.  Your whole premise thus falls apart, unless you have evidence that bitcoins go up in value with higher network hashrates (which may indeed be true).

Au contraire, there is no fundamental limit to the fees that can be generated by the network. That is the long-term promise of mining. Whether they will be or not is a different question.
However, the fees that can be generated by the network have nothing to do with the amount of available hash power; and in general, bitcoin miners are not involved in getting more people to use bitcoin (and thus generating more transaction fees through transacting).

I was responding to luv2drnkbr's contention that, unlike Microsoft shares which can go up indefinitely, AM and other mining companies are limited by competing in a fixed-reward system. My comment had nothing to do with hash power.

 
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Vycid
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July 05, 2013, 04:43:28 AM
 #9396

Sorry but the foundational premise of this post is completely wrong.  Microsoft shares can go up indefinitely, but bitcoins will still be minted every 10 minutes no matter how large or small the network is.  Your whole premise thus falls apart, unless you have evidence that bitcoins go up in value with higher network hashrates (which may indeed be true).

Au contraire, there is no fundamental limit to the fees that can be generated by the network. That is the long-term promise of mining. Whether they will be or not is a different question.
However, the fees that can be generated by the network have nothing to do with the amount of available hash power; and in general, bitcoin miners are not involved in getting more people to use bitcoin (and thus generating more transaction fees through transacting).

I was responding to luv2drnkbr's contention that, unlike Microsoft shares which can go up indefinitely, AM and other mining companies are limited by competing in a fixed-reward system. My comment had nothing to do with hash power.

The point, I believe, is that unlike Microsoft, which is participatory in the mechanisms of its own growth, ASICMiner can do nothing to increase its profit except hoping real hard that lots of people start paying Bitcoin transaction fees. It has already reached its target share of the hashrate.

If that sustained growth in transaction fees does not materialize, AM will become irrelevant as other companies start manufacturing ASICs just as cheaply - and putting them in regions with even cheaper electricity - as AM struggles to maintain profitability.

I see people saying things like, "AM will pay back its share price in a few years!" Realistically, that statement is extremely optimistic.

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July 05, 2013, 05:02:38 AM
 #9397

This is the total profit one can expect for 1 share of ASICMiner in the next 20 years.

I'm going to go out on a limb and say that extrapolating figures for a company 20 years into the future is quite silly- let alone a company in an industry that is only a few years old.
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July 05, 2013, 05:58:31 AM
 #9398


The point, I believe, is that unlike Microsoft, which is participatory in the mechanisms of its own growth, ASICMiner can do nothing to increase its profit except hoping real hard that lots of people start paying Bitcoin transaction fees. It has already reached its target share of the hashrate.

If that sustained growth in transaction fees does not materialize, AM will become irrelevant as other companies start manufacturing ASICs just as cheaply - and putting them in regions with even cheaper electricity - as AM struggles to maintain profitability.

I see people saying things like, "AM will pay back its share price in a few years!" Realistically, that statement is extremely optimistic.

luv2srnkbr's contrasting Microsoft's shares that "can go up indefinitely", with mining stocks (that he apparently believes cannot), presents a false dichotomy. That was my point, which you have not contradicted. Therefore, I infer you agree with me. Thank you, we agree on something.

Microsoft might be able to to grow their own markets now, but in their early days you couldn't accuse them of that. First they provided software for hobbyists, then they had the extraordinary good fortune (and the skill to recognize the opportunity) to partner IBM on providing MS-DOS for the first generation of PCs. The explosive growth in the value of Microsoft occurred after that. We cannot predict what products or services a mining company may provide 20 years from now, and anyone who suggests otherwise is begging to go down in history as being proven wrong.

 
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July 05, 2013, 06:53:17 AM
 #9399


The point, I believe, is that unlike Microsoft, which is participatory in the mechanisms of its own growth, ASICMiner can do nothing to increase its profit except hoping real hard that lots of people start paying Bitcoin transaction fees. It has already reached its target share of the hashrate.

If that sustained growth in transaction fees does not materialize, AM will become irrelevant as other companies start manufacturing ASICs just as cheaply - and putting them in regions with even cheaper electricity - as AM struggles to maintain profitability.

I see people saying things like, "AM will pay back its share price in a few years!" Realistically, that statement is extremely optimistic.

luv2srnkbr's contrasting Microsoft's shares that "can go up indefinitely", with mining stocks (that he apparently believes cannot), presents a false dichotomy. That was my point, which you have not contradicted. Therefore, I infer you agree with me. Thank you, we agree on something.

Microsoft might be able to to grow their own markets now, but in their early days you couldn't accuse them of that. First they provided software for hobbyists, then they had the extraordinary good fortune (and the skill to recognize the opportunity) to partner IBM on providing MS-DOS for the first generation of PCs. The explosive growth in the value of Microsoft occurred after that. We cannot predict what products or services a mining company may provide 20 years from now, and anyone who suggests otherwise is begging to go down in history as being proven wrong.


Yes - agreed, ASICMiner's share prices could ostensibly reach any level for any reason. Hell, they could expand into other businesses BESIDES mining and become successful there. Anything is possible and none of us has a crystal ball.

But, unlike Microsoft, the explosive growth in valuation of AM has occurred before the sort of luck that permits unbridled growth. Instead the valuation is based on short-sighted optimism that the current return will continue.

And the risk is not fully appreciated either: the estimated APR if AM manages to maintain its proportion of the hash rate and hardware sales is about ~25%, right? Well, check out the APR for loaning bitcoins:

https://www.coinlenders.com/interest

Markets are hard to predict short-term. But, long-term, I am very confident that the current valuation, based on the current value and potential for growth, is unreasonable.


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July 05, 2013, 08:01:43 AM
 #9400


Markets are hard to predict short-term. But, long-term, I am very confident that the current valuation, based on the current value and potential for growth, is unreasonable.

Really good to have someone on here who can predict the long term outlook of a speculative startup in a nascent disruptive technology and thus the various competitive landscapes of the associated businesses that will be launched within the context of a crazy and rapidly evolving global economic/financial system.
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