ASICMINER: Entering the Future of ASIC Mining by Inventing It

[asnonmous]

If they are paying just the right amount, it makes no difference whether we sell or mine.

People are not going to pay the right amount though. So far it's clear they are are willing to far pay more for a Blade than it's likely to earn over the device life time - even if they get it within a few days of ordering.

So you think our customers are stupid then?

[1713531744]

1713531744

[Rodyland]

If they are paying just the right amount, it makes no difference whether we sell or mine.

People are not going to pay the right amount though. So far it's clear they are are willing to far pay more for a Blade than it's likely to earn over the device life time - even if they get it within a few days of ordering.

So you think our customers are stupid then?

I take your to mean that you are joking, but neither you nor organofcorti are the first to say those words, and I just want to get this off my chest:

Why do people have such a hard time coming to terms with the fact that value is subjective?

Just because they valued a 10GH/s blade at BTC75 (or whatever) doesn't mean that if that device doesn't mine more than BTC75 that they are stupid.  Maybe they don't believe BFL will deliver, maybe they think Avalon will be late on all fronts, and maybe they are willing to gamble on that?

Or maybe they have bitcoins to burn, and want to help distribute hashing power around the network?

Or maybe they just value the bragging rights of having one of the first publicly sold blade mining asic units in the world? 

Their reasons are their own, and for you to label them as stupid is insulting to everyone.

[TiuraZ]

If they are paying just the right amount, it makes no difference whether we sell or mine.

People are not going to pay the right amount though. So far it's clear they are are willing to far pay more for a Blade than it's likely to earn over the device life time - even if they get it within a few days of ordering.

So you think our customers are stupid then?

I take your to mean that you are joking, but neither you nor organofcorti are the first to say those words, and I just want to get this off my chest:

Why do people have such a hard time coming to terms with the fact that value is subjective?

Just because they valued a 10GH/s blade at BTC75 (or whatever) doesn't mean that if that device doesn't mine more than BTC75 that they are stupid.  Maybe they don't believe BFL will deliver, maybe they think Avalon will be late on all fronts, and maybe they are willing to gamble on that?

Or maybe they have bitcoins to burn, and want to help distribute hashing power around the network?

Or maybe they just value the bragging rights of having one of the first publicly sold blade mining asic units in the world? 

Their reasons are their own, and for you to label them as stupid is insulting to everyone.

Or maybe they have free electricity and don't care how long it takes to the device to pay its purchasing price.

[organofcorti]

If they are paying just the right amount, it makes no difference whether we sell or mine.

People are not going to pay the right amount though. So far it's clear they are are willing to far pay more for a Blade than it's likely to earn over the device life time - even if they get it within a few days of ordering.

So you think our customers are stupid then?

I take your to mean that you are joking, but neither you nor organofcorti are the first to say those words, and I just want to get this off my chest:

Why do people have such a hard time coming to terms with the fact that value is subjective?

Just because they valued a 10GH/s blade at BTC75 (or whatever) doesn't mean that if that device doesn't mine more than BTC75 that they are stupid.  Maybe they don't believe BFL will deliver, maybe they think Avalon will be late on all fronts, and maybe they are willing to gamble on that?

Even if difficulty did not ever increase from what it is today, it would still take ~ five months to return the initial cost. If the network increases only by the amount ASICMiner has promised, it will be enough to make it very unlikely that they'll get a return on their investment.

Or maybe they have bitcoins to burn, and want to help distribute hashing power around the network?

Or maybe they just value the bragging rights of having one of the first publicly sold blade mining asic units in the world?  

Their reasons are their own, and for you to label them as stupid is insulting to everyone.

Maybe so.

My statement wasn't a value judgement on the choice to pay more per Ghps than a device is likely to earn, just that this seemed to be happening - and not just with Blade customers either. I'm certainly not saying that the decision to buy was stupid, just that the choice was apparently not motivated by profit. So in the short term, selling hashrate will be far more profitable than mining with it.

[Rodyland]

My statement wasn't a value judgement on the choice to pay more per Ghps than a device is likely to earn, just that this seemed to be happening - and not just with Blade customers either. I'm certainly not saying that the decision to buy was stupid, just that the choice was apparently not motivated by profit.

Either that, or they have different assumptions about the likely future income of such a device than you or I or others do. 

Although I agree with other sentiments - if a device is deemed to be worth more to asicminer as a miner rather than as a sale unit, then we should mine with it.  However that assumes we have the ability to deploy all our units - and given that that's not the case, as I understand it, selling them seems wise from a shareholder's perspective.

[organofcorti]

My statement wasn't a value judgement on the choice to pay more per Ghps than a device is likely to earn, just that this seemed to be happening - and not just with Blade customers either. I'm certainly not saying that the decision to buy was stupid, just that the choice was apparently not motivated by profit.

Either that, or they have different assumptions about the likely future income of such a device than you or I or others do. 

Although I agree with other sentiments - if a device is deemed to be worth more to asicminer as a miner rather than as a sale unit, then we should mine with it.  However that assumes we have the ability to deploy all our units - and given that that's not the case, as I understand it, selling them seems wise from a shareholder's perspective.

If ASICMiner only adds 100Ghps to the network over say the next 100 days and the network hashrate remains the same forever after, a Blade would take ~550 days to pay for itself, assuming constant uptime. So the Blade is worth far more as a sale unit than a mining unit, if people are willing to spend more than the device is likely to earn over a lifetime.

[ex-trader]

The optimum strategy would be to get to circa 45% of the network as fast as possible, since speed is the key. Then sell any chips that can be sold, but keep enough to ensure that the capacity can be maintained at 45%.

In terms of chip value, clearly in BTC they will only go down over time as the coins they can mine going forward decreases and the price they'll achieve at volume sales is unclear. However if BTC keeps going up then the profits in USD can keep increasing.

[organofcorti]

The optimum strategy would be to get to circa 45% of the network as fast as possible, since speed is the key. Then sell any chips that can be sold, but keep enough to ensure that the capacity can be maintained at 45%.

In terms of chip value, clearly in BTC they will only go down over time as the coins they can mine going forward decreases and the price they'll achieve at volume sales is unclear. However if BTC keeps going up then the profits in USD can keep increasing.

I think people will be less likely to pay extravagant sums for a Blade if the hashrate has been significantly increased. You're better off selling hashrate until it's no longer quite as profitable, then start mining.

[JaredR26]

My statement wasn't a value judgement on the choice to pay more per Ghps than a device is likely to earn, just that this seemed to be happening - and not just with Blade customers either. I'm certainly not saying that the decision to buy was stupid, just that the choice was apparently not motivated by profit.

Either that, or they have different assumptions about the likely future income of such a device than you or I or others do.  

Although I agree with other sentiments - if a device is deemed to be worth more to asicminer as a miner rather than as a sale unit, then we should mine with it.  However that assumes we have the ability to deploy all our units - and given that that's not the case, as I understand it, selling them seems wise from a shareholder's perspective.

If ASICMiner only adds 100Ghps to the network over say the next 100 days and the network hashrate remains the same forever after, a Blade would take ~550 days to pay for itself, assuming constant uptime. So the Blade is worth far more as a sale unit than a mining unit, if people are willing to spend more than the device is likely to earn over a lifetime.

Not sure how you got that.  Using those numbers I get that a Blade pays for itself in 148 days.  Obviously unrealistic since everyone knows that more TH is going to come online everywhere.

The problem also comes down to scale.  If AM could sell all of its chips at 71 BTC/blade, every single blade, that would be pretty cool.  But you're not going to be able to find a buyer that will drop 450,000 BTC to buy AM hardware.  Or even 1000 buyers at 450 BTC each- Not a lot of them will pay 71 BTC/blade.  We could, however, be able to mine with as much as we want.

I think we should sell a moderate percentage of the units as long as buying prices remain higher than some value that Friedcat & co(or perhaps the board) will need to calculate that represents what we can get from the blade ourselves, minus the opportunity cost of not having the cash on hand immediately.  There is definitely a formula that can be worked out to maximize profit here.

[organofcorti]

My statement wasn't a value judgement on the choice to pay more per Ghps than a device is likely to earn, just that this seemed to be happening - and not just with Blade customers either. I'm certainly not saying that the decision to buy was stupid, just that the choice was apparently not motivated by profit.

Either that, or they have different assumptions about the likely future income of such a device than you or I or others do.  

Although I agree with other sentiments - if a device is deemed to be worth more to asicminer as a miner rather than as a sale unit, then we should mine with it.  However that assumes we have the ability to deploy all our units - and given that that's not the case, as I understand it, selling them seems wise from a shareholder's perspective.

If ASICMiner only adds 100Ghps to the network over say the next 100 days and the network hashrate remains the same forever after, a Blade would take ~550 days to pay for itself, assuming constant uptime. So the Blade is worth far more as a sale unit than a mining unit, if people are willing to spend more than the device is likely to earn over a lifetime.

Not sure how you got that.  Using those numbers I get that a Blade pays for itself in 148 days.  Obviously unrealistic since everyone knows that more TH is going to come online everywhere.

That was total back of the envelope stuff. Using a larger envelope and a better pencil, I got a slightly better result:

The estimate is for a linearly increasing hashrate from 75 to 175 Thps over 100 days, and then 175Thps from then on starting at 75Thps on day 1.. That means about 8.5btc in the first 100 days, and then 0.2 btc per day thereafter. 76btc in 440 days. What did you get for each section?

The problem also comes down to scale.  If AM could sell all of its chips at 71 BTC/blade, every single blade, that would be pretty cool.  But you're not going to be able to find a buyer that will drop 450,000 BTC to buy AM hardware.  You would, however, be able to mine with as much as you wanted.

So you sell the Blades until the price approaches what you think you could mine with it over the device lifetime. Then you mine.

If you sell for more than the device is likely to ever earn, then of course it's better than mining.

[organofcorti]

Many people forget that some people would much rather mine their BTCs then buy them with fiat.

No denying that. It's a fun pastime, and if you have BTC to spare why not? It also means ASICMiner has the chance to make a bunch more btc than they would mining - even if you ignore the costs involved in running a mining operation.

[furuknap]

If you sell for more than the device is likely to ever earn, then of course it's better than mining.

The number will be lower than the expected lifetime revenue. You need to account for risk (and at AM level, 0.01% hardware failure or downtime means a lot), opportunity cost (as mentioned, 1 BTC in the blockchain...), and expected ROI for customers (nobody is going to buy ฿100 in profit for ฿100).

In other words, because AM is more efficient at mining than Average Joe, if we are approaching the treshold of sale/mining, I think AM should hold on to units rather than sell.

.b

[JimiQ84]

If you sell for more than the device is likely to ever earn, then of course it's better than mining.

The number will be lower than the expected lifetime revenue. You need to account for risk (and at AM level, 0.01% hardware failure or downtime means a lot), opportunity cost (as mentioned, 1 BTC in the blockchain...), and expected ROI for customers (nobody is going to buy ฿100 in profit for ฿100).

In other words, because AM is more efficient at mining than Average Joe, if we are approaching the treshold of sale/mining, I think AM should hold on to units rather than sell.

.b

What about marginal cost of deploying. Let's say that new datacenter has power capacity for 12TH/s. Is it cheaper to give up part of revenue due to unit selling or give up part of revenue due to new datacenter?

[organofcorti]

If you sell for more than the device is likely to ever earn, then of course it's better than mining.

The number will be lower than the expected lifetime revenue. You need to account for risk (and at AM level, 0.01% hardware failure or downtime means a lot), opportunity cost (as mentioned, 1 BTC in the blockchain...), and expected ROI for customers (nobody is going to buy ฿100 in profit for ฿100).

In other words, because AM is more efficient at mining than Average Joe, if we are approaching the treshold of sale/mining, I think AM should hold on to units rather than sell.

.b

I agree - but at 7.6 btc / Ghps you're not approaching that limit yet.

[furuknap]

In other words, because AM is more efficient at mining than Average Joe, if we are approaching the treshold of sale/mining, I think AM should hold on to units rather than sell.

What about marginal cost of deploying. Let's say that new datacenter has power capacity for 12TH/s. Is it cheaper to give up part of revenue due to unit selling or give up part of revenue due to new datacenter?

Well, that actually why I would love to see AM reduce the dividend payout significantly. I know everyone is concerned with the 2016 halving of income, but that's exactly why AM needs to be better prepared for the future, and you don't get that by giving away all your income.

I would, for example, much rather have AM turn dividends down to 10% and keep the rest for future development. Future development may mean building their own datacenters, which can yield new sources of long-term revenue, develop new chips, which can be a step on the path towards energy efficient mining after 2016 and even shorter term competitiveness, and so on.

Right now, it seems like there is a rush from investors looking to get their money back, not realizing that as we approach 2016 without a profitable business based on half the current revenue, falling share prices will quickly eat up any dividends paid.

.b

EDIT: Another example would be to build the coveted stock exchange that friedcat has wanted. Not only will it give future income at a more stable rate, it will give BTC more flexibility in terms of securities trading. I'm actually not that keen on diversifying too much from core business, but if AM has decided a stock exchange is needed, then hold back dividend for two weeks and pay someone to do it.

[JimiQ84]

In other words, because AM is more efficient at mining than Average Joe, if we are approaching the treshold of sale/mining, I think AM should hold on to units rather than sell.

What about marginal cost of deploying. Let's say that new datacenter has power capacity for 12TH/s. Is it cheaper to give up part of revenue due to unit selling or give up part of revenue due to new datacenter?

Well, that actually why I would love to see AM reduce the dividend payout significantly. I know everyone is concerned with the 2016 halving of income, but that's exactly why AM needs to be better prepared for the future, and you don't get that by giving away all your income.

I would, for example, much rather have AM turn dividends down to 10% and keep the rest for future development. Future development may mean building their own datacenters, which can yield new sources of long-term revenue, develop new chips, which can be a step on the path towards energy efficient mining after 2016 and even shorter term competitiveness, and so on.

Right now, it seems like there is a rush from investors looking to get their money back, not realizing that as we approach 2016 without a profitable business based on half the current revenue, falling share prices will quickly eat up any dividends paid.

.b

EDIT: Another example would be to build the coveted stock exchange that friedcat has wanted. Not only will it give future income at a more stable rate, it will give BTC more flexibility in terms of securities trading. I'm actually not that keen on diversifying too much from core business, but if AM has decided a stock exchange is needed, then hold back dividend for two weeks and pay someone to do it.

I agree. Also, stock exchange can be updated to currency exchange. I would also like if AM would create own mining pool.

[organofcorti]

My statement wasn't a value judgement on the choice to pay more per Ghps than a device is likely to earn, just that this seemed to be happening - and not just with Blade customers either. I'm certainly not saying that the decision to buy was stupid, just that the choice was apparently not motivated by profit.

Either that, or they have different assumptions about the likely future income of such a device than you or I or others do.  

Although I agree with other sentiments - if a device is deemed to be worth more to asicminer as a miner rather than as a sale unit, then we should mine with it.  However that assumes we have the ability to deploy all our units - and given that that's not the case, as I understand it, selling them seems wise from a shareholder's perspective.

If ASICMiner only adds 100Ghps to the network over say the next 100 days and the network hashrate remains the same forever after, a Blade would take ~550 days to pay for itself, assuming constant uptime. So the Blade is worth far more as a sale unit than a mining unit, if people are willing to spend more than the device is likely to earn over a lifetime.

Not sure how you got that.  Using those numbers I get that a Blade pays for itself in 148 days.  Obviously unrealistic since everyone knows that more TH is going to come online everywhere.

That was total back of the envelope stuff. Using a larger envelope and a better pencil, I got a slightly better result:

The estimate is for a linearly increasing hashrate from 75 to 175 Thps over 100 days, and then 175Thps from then on starting at 75Thps on day 1.. That means about 8.5btc in the first 100 days, and then 0.2 btc per day thereafter. 76btc in 440 days. What did you get for each section?

Now I have my retina screen envelope and electronic clutch pencil so I don't have to try and use log tables from memory, it's 33.9 btc for the first 100 days and 0.2btc per day thereafter - or a total of 76btc in 310 days.

Much better, but still not fantastic. Especially since the chances of the hashrate only increasing by 100Thps and then maintaining 175 Thps from then on is pretty remote.

[BlackLilac Jordan]

No update yesterday?

I see that we're up to 7,770 GH/s on BTCguild.   

[John (John K.)]

No update yesterday?

The hashrates are climbing quickly as we speak here - it's 7,705.90 GH/s currently. Friedcat is indeed adding in new hashrates fast! 

[BlackLilac Jordan]

No update yesterday?

The hashrates are climbing quickly as we speak here - it's 7,705.90 GH/s currently. Friedcat is indeed adding in new hashrates fast! 

I'll take that over an update any day.