I doubted that these ASIC rigs would ship any time soon. Wouldn't it be more profitable for the vendors to simply to delay/cancel orders and run the rigs 24/7 themselves?
The profitability of ASICs is going to decrease at a rapid rate once they start shipping to consumers. Additionally, in a few months the market is going to be flooded with cheap ASICs.
From BFL's perspective if they don't release first they're dead in the water. They don't know where their competitors are compared to them but they recognize it's a winner take all situation. The natural thing to do would be to take pre-orders to fund the manufacturing and start realizing profits now. Also, if your competitors are offering pre-orders you should be too.
The evolution was CPU -> GPU -> FPGA -> ASIC. Now that we're at the ASIC stage growth is going to slow considerably. There's no longer order of magnitude gains to be made.
>at the ASIC stage growth is going to slow considerably
Yes, buy these are 110nm v1 designes, it looks like they will be able to squeeze something like 10x per watt by moving to better process and iterating on design. And probably additional 10x in cost by ordering more than current quantities that are in the ballpark of the smallest possible order.
Right now entire network runs at speed equal to all hardware in first two Avalon batches (300 and 600 units). When batch 2 and 3 and BFLs hit in the future, everything else is going to be wiped out. But then it will be wiped out again by the next iteration.
Difficulty adjusts week-to-week. Being the only guy with an ASIC is like a license to print money. Being the 10,000th person with an ASIC will be like trying to mine with a netbook today.
Supply will always be constant however how it's divided changes -- people who previously enjoyed lack of competition are now having their feet held close to the fire.
I see it as a futures contract on the value of the BTC. Selling a mining ASIC locks in profit for the seller, betting that this will exceed the time-value generated from the rig itself. Buying a rig locks in a loss, betting that it will pay for itself. We can't be certain whether the BTC will be at US$1,000 or US$1 a year from now. You could make a case for either side, that's why the contract exists.
Which, by the way, doesn't mean they are betting against BTC. They just elected to take sure profit up front, over less certain profit of potentially greater value long-term.
> I doubted that these ASIC rigs would ship any time soon. Wouldn't it be more profitable for the vendors to simply to delay/cancel orders and run the rigs 24/7 themselves?
Only if they're "long BTC". What makes you think they are? They're just providing shovels & tools to "miners in a gold rush". Historically, such providers have always done phenominally well.
At least they get the rigs at production cost to run them---selling them for good ol' USD may just be a hedge or sideshow, only time can tell.
There is energy expended during the process though. I imagine if this continues 'banks' of the future will be data centers. Also might be a way to make money on idle servers at data centers.
If anything this is an extremely interesting time in currency experimentation. Side effect of this is massive energy cost, another awesome side effect is hardware/supercomputer miniaturization and evolution. Great for really hard problems like verification (as in mining here) and maybe brain research/processing or other really hard data crunching problems.
I'm amazed that there hasn't been a scandal with some Googler or Microsofty or Appler or academic finding a way to use some fraction of their unused cycles for mining.
Their competitor Avalon sells the units for "the first 30 days profit of the device". So whatever the current price of Bitcoins and mining difficulty affects the price.
I'm sure the same thing was said during the gold rush days and it was the store owners that sold prospecting equipment that made some very stable money.
what makes you think they aren't doing just that? they could start shipping them out and make a profit on the machines just as the difficulty rate picks up and there is more profit to be made in selling miners rather than mining.
Part of the value of Bitcoin (if any) is that it's decentralized. It should be more profitable to sell the miners out than to hoard them because if they're distributed the cryptographic safety of Bitcoin is greater.
Decentralization boosts miners' profits by making bitcoin sounder, and therefore making its price higher.
Miner's profits have to do with the stability of the network and the demand for bitcoins. At high bitcoin prices, their return is better than when the prices are low, other things (thing, mining difficulty) being equal. It's much like gold mining: it has become much more profitable of late because the difference between extraction price ($250 to $400 per ounce in most places) and sale price (roughly $1,500 per ounce) is how much the miner takes home.
Decentralization increases this price because it makes bitcoin sound. If there's no one door to knock down, or one person to subpoena, the cyberpunk currency can robustly survive losses in its network and still have enough computing power trained on it to prevent attacks.
From what I understand these devices started shipping right after the BitCoin peaked... Maybe the vendors kept "testing" them for just a bit longer than they expected?
How can one litigate against an entity beyond the jurisdiction of the US court system, e.g. say the rig manufacturer was the crook and not in the United States? What are the options there?
The options are to sue them in their foreign country or sue them in the United States. If you sue them in the US, you face jurisdictional issues (do they have sufficient contacts in the US to make a lawsuit here fair?) as well as judgment recognition issues (you would probably have to attach the damage award to a contract they have with someone in the US to collect if the foreign country court system doesn't recognize the US judgment).
Liquidation: Corporate governance issues are a matter of the country where the defendant is organized. So if the law there allows them to do it, they can. I'm less familiar with the process of chasing the money. Trying to remember back to law school here: In the US, the debt doesn't just disappear. It would either attach to the old entity (which would have to be paid a fair price for the acquisition of its assets) or the new entity (which acquired its assets and liabilities per the acquisition agreement). So if it has no assets to begin with, it's possible. If it has real assets, it's more difficult to do. Not impossible, just more difficult.
Why would anyone wants to sell the goose who lays golden eggs while gold cost more than the goose?
They'll pile up cash from "preorders", mine bitcoins and when time is right - will dump outdated devices to customers.