ASICMINER: Entering the Future of ASIC Mining by Inventing It

[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).

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[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.

[Vycid]

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.

[Factory]

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.

[stripykitteh]

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.

[Vycid]

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.

[101111]

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.

[Vycid]

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.

[phantastisch]

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

[stripykitteh]

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.

[empoweoqwj]

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]

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

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

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

[Vycid]

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]

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)

[freedomno1]

True enough back to speculation have to spam the link once in a while
https://bitcointalk.org/index.php?topic=235763.0

[TiuraZ]

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

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

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]

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. 

[101111]

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.

It's not false contextualization; your context is simply too narrow-minded. A mature company? Maybe in your world. Easy to value? Do you have access to financial reports? Have you and friedcat chatted about business, product and marketing strategy?  No I didn't think so. Your jumping to conclusions based on simple metrics.

[Vycid]

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.  

I own dozens of these options at price points similar to the one I've just described. Suffice to say: the BTCT options are generally enormously overpriced.

It is true that my Black-Scholes calculation is quite a bit out of date; it should come as little surprise that all of my options were purchased prior to the events of the past few days.

Seeing that the events of the past few days were probably manipulation, and that I've already reached a satisfactory options portfolio, I am not motivated to raise my premium. If nobody is interested, that's okay, but the offer stands.

[Lohoris]

Look at those guys in the loan section of this forum. They are going to bankrupt. Lending an deflation money is a Ponzi scheme!!!

Bullshit

Let's suppose we're now using a currency with 10% deflation. Joe wants to lend Bob 100 currency units. In order to make a 5% profit, this means Joe must lend at -5% APR.

Wait - that doesn't work! Bob could borrow 100 units, sit on them for a year, and return 95. Joe has made a 5% profit, but Bob has actually come out ahead!

So Joe could simply sit on his currency for a year, and make 10% profit instead of the 5% he'd make from a loan with 5% inflation-adjusted APR. In the inflationary scenario, Joe would have been willing to lend out his money at 0% inflation-adjusted interest just to avoid losing money from inflation!

It's easy to get confused by deflationary economies: you must think the other way around.

Since I can sit on my money and be happy, I will obviously ask for something more if you want a loan.
Let's say I factor in 2.5% default risk plus 2.5% profit, I'll still ask you a 5% interest on your loan.

People should stop thinking that "deflation is magic": it isn't. Absolute values don't matter: what matters are how much you are rich relative to other people... if money deflates for everyone, then it's not an issue. And since people want to try to get richer, they will still try to invest them, hoping to get more than they would get just thanks to the deflation.