ASICMINER: Entering the Future of ASIC Mining by Inventing It

[Vycid]

4) Satoshi is great. He solved one important technical problem. But, trust me, he doesn't know how money works. Why should we encourage hoarding? Why should we punish those who is spending? We, as bitcoiners, would someday come to a conclusion that let the total number of bitcoins increases 3% every year and make the mining a sustainable career.

Because BTC is opposite to FIAT money and that's exactly what FIAT is NOT doing - it's punishing hoarding and rewarding spending. Satoshi wanted something different.

This is a terrible argument, sorry. A kneejerk "we should do the opposite" because "fiat is bad, mmkay" is not compelling. Even if you took as axiom that fiat is bad, you're still on the hook for demonstrating why punishing hoarding and rewarding spending is a bad thing.

Economists - yes, including the Austrian ones like Hayek and von Mises - agree that you need to penalize hoarding and encourage spending to boost the velocity of money and create a healthy economy. This is the primary reason why deflation is viewed more negatively than inflation.

It is clear that Satoshi wasn't an economist.

Whoa, whoa there. You mean economist like Keynes agree that you need encourage spending to create a healthy economy. And that's just plain wrong (on which Hayek and von Mises agreed).

http://en.wikipedia.org/wiki/Deflation

Nobel laureate Friedrich Hayek, an Austrian Economist, stated of deflation during the Great Depression:
I agree with Milton Friedman that once the Crash had occurred, the Federal Reserve System pursued a silly deflationary policy. I am not only against inflation but I am also against deflation. So, once again, a badly programmed monetary policy prolonged the depression.
Interview with Diego Pizano (1979)[23]

...

They are therefore rewarded by holding money. This "hoarding" behavior is seen as undesirable by most economists, as Hayek points out:
It is agreed that hoarding money, whether in cash or in idle balances, is deflationary in its effects. No one thinks that deflation is in itself desirable.[24]

Once Crash occured deflationary policy was wrong. High inflation and high deflation are wrong. Right, I agree. But Bitcoin's programmed deflation after adopton is lower (created only by lost coins, otherwise is BTC inflation/deflation neutral) than current 3-5% annual US dollar inflation. Bitcoin wins.

And if you think that Bitcoin's deflationary nature is bad than I don't see a point of you staying invested in bitcoin business.

This is a common misconception: deflation is more than how much money is being created. If your economy is growing 3% every year, that demands a 3% larger money base every year; so you should be creating 3% more currency to to maintain the same price level.

In other words: in a healthy economy, 0% inflation means printing money (or, the more modern method: the central bank buys bonds).

And Bitcoin will see much faster than 3% growth as new users come on board. It will probably be strongly deflationary. Already, people selling goods denominated in bitcoins peg them to the USD/BTC exchange rate. www.bitcoinstore.com is an example.

[velacreations]

Ahhhh... I see the problem, here. You assume that for all 7 hours of sunlight, the power output will be at the maximum possible. This is false, of course. The workaround is to use insolation times area times external quantum efficiency.

no, I'm not making that assumption.  I am at a similar latitude as he is, and that is based on a daily average.  Now, he may have less, because of cloudy days, but we average about 7 hours of full power a day. We have sunlight for 10-12 hours most of the year, but you only get peak power for 4 hours, 1/2 power for another 4, 1/4 power for the other 4.

When you actually live on solar power, you learn how it really does in a real world situation.

Also, you add a tracking array, and you can gain an extra 25% of power per day.  There are other methods for gaining efficiency, like MPPT controllers, etc, but I won't go into that too much here.

You said $0.5/W, so we'll stick with that; the cost of the panel is $166/panel in bulk, for a cost of $0.72/W;

yeah, because you are paying Canadian markup, shipping to Canada, etc.  Buying in bulk in China is considerably cheaper.  And when you are talking a data center, you are talking serious bulk.  That price is for 20 panels, which would be great for a house or 2, but not for a data center.  Now, imagine buyng 2,000 panels straight from the factory in China.

For a system like this, you want grid-tie, to avoid needing batteries, so at night, you pull from the grid, and in the day, you feed to the grid.  It is a standard installation, and even in China, you can get it done quickly and professional at little cost.

If you are seriously interested in this stuff, PM me, but I won't clog this thread anymore with solar talk.  I'm just saying it is certainly possible, and his ROI is lower than the figures you are using.

[Rival]

Although for accounting purposes, we like to look at a chart and or ticker and say that asset X is worth Y. Unfortunately, it is far more complicated than that. The first thing to understand is the difference between gambling and investing. In gambling, your odds of success are either certain or guessed, and then an event happens. Once the event occurs, the results are tallied and you move on to the next event. Investing is different in that you as an individual decide when the event has ended. What that means in a nutshell is that until you sell an asset, the profit or loss has not been determined. You may hold an asset for months or years, with the spot value rising dramatically and crashing spectacularly a dozen times, but all that matters is the value the day you sell. This has a direct affect on the hoarding of BTC.

Currency is not worth anything at all until the day that you exchange it for goods and services.

There are those who will argue that it can be used as an investment vehicle, and that it has potential value if it rises or falls against other currencies. This is true, however, the end of the investing event is still the day you spend (convert) it. The value of currency is never inherent, it only expresses it's value when it is accepted for goods and services. Marx knew this quite well, it seems many seemed to have forgotten this.

Consumers do not want dollars, they do not want gold, they do not want BTC. They want what they can exchange currency for on the day of THEIR CHOOSING. A boat, some cheese, some petrol for their car. No one wants to die and be burred with their BTC. The currency is a means to an end, not an end in itself. BTC, like any other currency, is designed to be spent. The larger the ecosystem grows, the more it will be spent.

"Hoarding" is often used as a derogatory term for saving. Saving is certainly a good thing, we were all taught the fable of the ant and the grasshopper. BTC rewards savers (and investors) by being deflationary. However, it also rewards spenders. The burden of legions of banking employees, and massive buildings, and electronic substructures no longer need by subsidized by the consumer nor the producer. There is no need for ATM fees, maintenance fees, yearly fees, all of the incredible number of fees stripping billions and billion from producers and consumers and redistributing it to stockholders and subsidizing millions of jobs that can be replaced by little boxes mining away quietly in the night spread all over the world.

The currency may well be deflationary, but by replacing current systems it provides the efficiency to incentivize and reward every user everywhere, saver or spender alike.

[Vycid]

Although for accounting purposes, we like to look at a chart and or ticker and say that asset X is worth Y. Unfortunately, it is far more complicated than that. The first thing to understand is the difference between gambling and investing. In gambling, your odds of success are either certain or guessed, and then an event happens. Once the event occurs, the results are tallied and you move on to the next event. Investing is different in that you as an individual decide when the event has ended. What that means in a nutshell is that until you sell an asset, the profit or loss has not been determined. You may hold an asset for months or years, with the spot value rising dramatically and crashing spectacularly a dozen times, but all that matters is the value the day you sell. This has a direct affect on the hoarding of BTC.

Currency is not worth anything at all until the day that you exchange it for goods and services.

There are those who will argue that it can be used as an investment vehicle, and that it has potential value if it rises or falls against other currencies. This is true, however, the end of the investing event is still the day you spend (convert) it. The value of currency is never inherent, it only expresses it's value when it is accepted for goods and services. Marx knew this quite well, it seems many seemed to have forgotten this.

Consumers do not want dollars, they do not want gold, they do not want BTC. They want what they can exchange currency for on the day of THEIR CHOOSING. A boat, some cheese, some petrol for their car. No one wants to die and be burred with their BTC. The currency is a means to an end, not an end in itself. BTC, like any other currency, is designed to be spent. The larger the ecosystem grows, the more it will be spent.

"Hoarding" is often used as a derogatory term for saving. Saving is certainly a good thing, we were all taught the fable of the ant and the grasshopper. BTC rewards savers (and investors) by being deflationary. However, it also rewards spenders. The burden of legions of banking employees, and massive buildings, and electronic substructures no longer need by subsidized by the consumer nor the producer. There is no need for ATM fees, maintenance fees, yearly fees, all of the incredible number of fees stripping billions and billion from producers and consumers and redistributing it to stockholders and subsidizing millions of jobs that can be replaced by little boxes mining away quietly in the night spread all over the world.

The currency may well be deflationary, but by replacing current systems it provides the efficiency to incentivize and reward every user everywhere, saver or spender alike.

TIL: Putting money in a Ponzi scheme would be investing, but buying a bond and waiting until maturity is gambling.

[sunnankar]

Maybe it's possible to have both inflationary and deflationary currencies running side-by-side within one economy.

Then people can chop and choose which one they use and eventually a self-sustaining equilibrium will be achieved.

And that is the heart of the issue: The separation of State and Currency and Bank.

The State's interference in the currency market has led to inflation and deflation messes like the Great Depression and the 1970's Stagflation. It has allowed the infringement on civil liberties and privacy with things like Anti-Money Laundering legislation with Know Your Customer duties for banks, PRISM, and empowered the State to engage in confiscation through inflation which is a form of taxation without representation.

The US Constitution was clear on the issue of separating State and Currency and Bank. There were tens of thousands of competing currencies in the United States prior to the Civil War. What is needed to empower the economy to heal and the remove the gross infringements on civil liberties is a free market in currencies. That single change would fix almost all the ills we have in society as a result of the State's diabolical behavior. And Bitcoin being censorship resistant moves the market and society in that direction.

As Mises wrote:

It is impossible to grasp the meaning of the idea of sound money if one does not realize that it was devised as an instrument for the protection of civil liberties against despotic inroads on the part of governments. Ideologically it belongs in the same class with political constitutions and bills of rights.

Almost all of the ills in society can be traced directly back to the State and what has largely funded the State is their control over the currency markets. Just listen to Dr. Vieira, the leading scholar on American monetary jurisprudence, on the topic.

[Rival]

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.

[binaryFate]

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.

[Vycid]

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.

[Vycid]

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.

[Vycid]

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.

[Adrian-x]

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.

[TheSwede75]

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

+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.

[statdude]

[Franktank]

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

+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.

         +-------------------+             .:\:\:/:/:.            
         |   PLEASE DO NOT   |            :.:\:\:/:/:.:          
         |  FEED THE TROLLS  |           :=.' -   - '.=:          
         |                   |           '=(\ 9   9 /)='          
         |   Thank You,      |              (  (_)  )            
         |       Management  |              /`-vvv-'\            
         +-------------------+             /         \            
                 |  |        @@@          / /|,,,,,|\ \          
                 |  |        @@@         /_//  /^\  \\_\          
   @x@@x@        |  |         |/         WW(  (   )  )WW          
   \||||/        |  |        \|           __\,,\ /,,/__          
    \||/         |  |         |          (______Y______)          
/\/\/\/\/\/\/\/\//\/\\/\/\/\/\/\/\/\/\/\/\/\/\/\/\/\/\/\/\/\/\/\/\
==================================================================

[empoweoqwj]

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.
---------

[101111]

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.

[luv2drnkbr]

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).

[stripykitteh]

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.

[mithrandi]

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).

[stripykitteh]

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.