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Author Topic: ASICMINER: Entering the Future of ASIC Mining by Inventing It  (Read 3914548 times)
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July 05, 2013, 02:07:11 AM
 #9401

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.
Even in the event that an attacker gains more than 50% of the network's computational power, only transactions sent by the attacker could be reversed or double-spent. The network would not be destroyed.
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July 05, 2013, 02:52:00 AM
 #9402

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
 #9403

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
 #9404

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
 #9405

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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July 05, 2013, 04:43:28 AM
 #9406

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
 #9407

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
 #9408


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
 #9409


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
 #9410


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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July 05, 2013, 08:08:44 AM
 #9411


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.

False contextualization. The potential mining revenue for a bitcoin-denominated company can already be fully realized (and already is for AM). Sure, it's hard to predict what will happen to Bitcoin, but it's really not so hard to analyze what happens to the mining 'industry'. There's a fixed number of coins, very clear barriers to entry for competition, and lots of information about anticipated deployment timelines (like the half million Avalon chips that are due in a couple of weeks).

If we were talking about Coinbase, or Bitpay, or whatever, I'd agree 100%. We're not - we're talking about a much simpler business model that has no more growing to do. In other words, this is a mature company; it's just the economy that's immature.

Mature companies with simple business models are not so challenging to value.

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July 05, 2013, 08:09:57 AM
 #9412

Competition is not sleeping : https://bitcointalk.org/index.php?topic=250249.0;topicseen

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July 05, 2013, 08:11:37 AM
 #9413

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.


I think the price of AM has gone up for a number of reasons, much of it has to do with the fact they have shown themselves to be capable and to tend to underpromise and overdeliver, plus lack of alternatives for investment. The hype surrounding them is a result of their excellence.

I am not that interested in the current valuation. Perhaps you are right; I honestly don't care. It won't affect their chances of long-term survival.

 
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empoweoqwj
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July 05, 2013, 08:29:31 AM
 #9414


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.

False contextualization. The potential mining revenue for a bitcoin-denominated company can already be fully realized (and already is for AM). Sure, it's hard to predict what will happen to Bitcoin, but it's really not so hard to analyze what happens to the mining 'industry'. There's a fixed number of coins, very clear barriers to entry for competition, and lots of information about anticipated deployment timelines (like the half million Avalon chips that are due in a couple of weeks).

If we were talking about Coinbase, or Bitpay, or whatever, I'd agree 100%. We're not - we're talking about a much simpler business model that has no more growing to do. In other words, this is a mature company; it's just the economy that's immature.

Mature companies with simple business models are not so challenging to value.

Wrong wrong wrong. "already fully realized for AM" - give us a break:

1) Yes, a fixed number of coins, but we don't know, nor does AM, nor does its competitors know what % AM will mine. That is unknown.
2) Transaction fees. Again, complete unknown. Could be very small or very large in a few years time.
3) Hardware sales. Again, unknown in future.
3) "Lots of information about anticipated deployment timelines" from competitors - yep, been hearing them for the last year now.

There is nothing simple about the business or the business model, only your evaluation of it. Of course its risky, we all agree on that. Its your "I can predict the future renveue of AM with great accuracy" line that is the only bogus thing around here.
empoweoqwj
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July 05, 2013, 08:31:23 AM
 #9415


Well they wouldn't be competition if they were sleeping would they  Grin

What's with this "we can only ship to EU" from them about?
Vycid
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July 05, 2013, 08:47:28 AM
 #9416


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.

False contextualization. The potential mining revenue for a bitcoin-denominated company can already be fully realized (and already is for AM). Sure, it's hard to predict what will happen to Bitcoin, but it's really not so hard to analyze what happens to the mining 'industry'. There's a fixed number of coins, very clear barriers to entry for competition, and lots of information about anticipated deployment timelines (like the half million Avalon chips that are due in a couple of weeks).

If we were talking about Coinbase, or Bitpay, or whatever, I'd agree 100%. We're not - we're talking about a much simpler business model that has no more growing to do. In other words, this is a mature company; it's just the economy that's immature.

Mature companies with simple business models are not so challenging to value.

Wrong wrong wrong. "already fully realized for AM" - give us a break:

1) Yes, a fixed number of coins, but we don't know, nor does AM, nor does its competitors know what % AM will mine. That is unknown.
2) Transaction fees. Again, complete unknown. Could be very small or very large in a few years time.
3) Hardware sales. Again, unknown in future.
3) "Lots of information about anticipated deployment timelines" from competitors - yep, been hearing them for the last year now.

There is nothing simple about the business or the business model, only your evaluation of it. Of course its risky, we all agree on that. Its your "I can predict the future renveue of AM with great accuracy" line that is the only bogus thing around here.

Cool. Sell me some puts, then. I'm beating the dividend APR by quite a bit.

Strike: 3.5 BTC
Premium: 0.32 BTC
Exp: ~90d

But if you want my thoughts about 1-4:

1) AM targets 20%, and can't go higher than 50% without destroying trust in bitcoin.
2) A dramatic increase in tx fees is showing no signs of materializing, and there is no real reason to believe that it will before AM stagnates and is out-competed - and so AM valuation shouldn't have the expectation of high tx fees in the future priced in like it does.
3) It's really not unknown. The number of BTC that can be mined is fixed, so there's no motivation for people to spend more than they already do on hardware, and the profit margin per unit MUST go down as AM's monopoly is broken. There's not much room for argument there.
4) You've been hearing that from BFL. There are now many competitors, and acting like NONE of them are going to deliver is probably a bad position to take.

AMuppInTime
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July 05, 2013, 09:00:36 AM
 #9417

Cool. Sell me some puts, then. I'm beating the dividend APR by quite a bit.

Strike: 3.5 BTC
Premium: 0.32 BTC
Exp: ~90d

a 90 day put is unreasonable when we saw the market dip from 4.7 to 3.6 just yesterday.

Regarding your already calculated valuation of AM - You should proceed to act in accordance with your beliefs and sell whatever you own. Then buy when it is all below market price. Right now, you're spreading FUD - these days everyone has a hidden agenda right? I mean this belongs in the speculation thread, and I really think we should take it there to stop the CLUTTER that the last few pages have been.

(even though I agree regarding  issues in the current valuation I'd like to remind everyone that AM can sell hardware continuously and can provide continuous divs - we are not limited by the total # of BTCs, or TX fees to value the company. This is the beauty of Bitcoin, the network recycles itself yet autoregulates worth-wise: less coins circulating = more worth)
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July 05, 2013, 09:05:27 AM
 #9418

True enough back to speculation have to spam the link once in a while Smiley
https://bitcointalk.org/index.php?topic=235763.0
TiuraZ
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July 05, 2013, 09:36:32 AM
 #9419


Well they wouldn't be competition if they were sleeping would they  Grin

What's with this "we can only ship to EU" from them about?

Totally wrong threat for this, but I answer anyway. I think it's because they are based in Finland and keeping the business inside EU is just so much easier. No hustling with customs or VAT or "declared values of packages" or anything like that. http://en.wikipedia.org/wiki/Single_market
DrGregMulhauser
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July 05, 2013, 09:48:44 AM
 #9420

Cool. Sell me some puts, then. I'm beating the dividend APR by quite a bit.

Strike: 3.5 BTC
Premium: 0.32 BTC
Exp: ~90d

Without jumping into the rest of the to-ing and fro-ing, just a point of interest: this option would be severely undervalued relative both to pricing based on historical volatility and to other options currently up for grabs on BTCT. Assuming for the sake of argument a dividend yield of 30% and 5% cost of capital, this comes out to around 80% implied volatility. By contrast, most of the options available on BTCT run into triple digits -- 250%, 300% or more. In other words, if you were to persuade someone to sell you these options, you would, theoretically, be getting a great bargain.

To be fair, nearly all options pricing I've noticed on the exchanges has bordered on ludicrous. Maybe a realistic level would be somewhere between the bargain you've suggested and the nosebleed levels seen on the exchanges.  Undecided

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