I've got to commend Bitfury, the Levi's of bitcoin.
Just as in every gold rush, it is a much more blessed position to be the one selling the blue jeans and shovels than to be the one attempting to sift and mine.
According to this calculator [0], in one month, you can expect to earn $20,724.53 dollars (ignoring price changes, difficulty changes, and operating costs). This seems too good to be true, however. Invoking the old adage, "In a gold rush, sell shovels."
I wonder what effect all this has on the Bitcoin economy. If everyone begins doing this, then it will become extremely difficult to mine any Bitcoin without any sort of gear. Feathercoin [1] appears to try and stop this, although I am not sure how effective it is.
in one month, you can expect to earn $20,724.53 dollars
They were selling the kit for $22,000, so it'll take at least 5 weeks for the ROI, probably longer given there will be at least 2 difficulty resets in that time frame.
I looked at investing in one but I couldn't come up with the funds. Instead I have pre-orders out for gear due in October.
If everyone begins doing this, then it will become extremely difficult to mine any Bitcoin without any sort of gear
This is already the case. I'm mining at about 250GH/s with 3 Avalons and I earn on average about 1.2 BTC per day per machine. A month ago is was closer to 2BTC per machine per day. Right now, GPU mining is dead. It's literally cheaper to buy a bunch of USB sticks that mine at 350MH/s for $100 each than to buy a bunch of video cards as the USB sticks are more power efficient. Even so, depending on the difficulty, those USB sticks could take a year to earn back the 1BTC.
As you can see from http://bitcoindifficulty.com/ the difficulty is growing exponentially. It seems to be doubling every 8 weeks or so. If you get your 400GH/s rig at the end of the month you might not even break even.
I like the calculator at http://mining.thegenesisblock.com/ better. Using the defaults for network and all that it seems to give around $23,000 profit for the year.
How does investing engineering effort in designing mining ASICs and spending dollars to purchase what is essentially a currency generating machine help us as a community?
I wish we were just as enthusiastic and race to solve other problems too -- like spreading education, finding out ways to purify water, or maximizing agriculture throughput in famine, or predicting when the next hurricane, tsunami, or earthquake is coming our way.
I already know how to purify water. I go to Walmart and buy a replacement filter for my Britta pitcher. As for fixing famine, that I have no clue where to start.
However, I do know how to write code, and if I can take some of the money I've earned to buy one of theses "useless" devices which can also make me some money, maybe one of the engineers at that company can spend his paycheck to send his daughter to college, where she can study ways to fix these other problems you mentioned.
In other words, read up on the economic theory called "guns and butter".
How does investing engineering effort in designing mining ASICs and spending dollars to purchase what is essentially a currency generating machine help us as a community?
It's supposed to help said currency become more solidly established, and therefore more useful to more people.
I wish we were just as enthusiastic and race to solve other problems too -- like spreading education, finding out ways to purify water, or maximizing agriculture throughput in famine, or predicting when the next hurricane, tsunami, or earthquake is coming our way.
I'm pretty sure people are enthusiastic about those things, and probably quite a lot more people than are into bitcoin. They're just less visible, since those aren't the cool new shiny thing (and aside from the weather/earthquake predictions, they're probably not heavy enough on software to be considered of interest here).
The obvious answer is incentives. Bitcoin mining has real financial rewards. It is hard to make a profit off of ending famine. That is the point of things like XPRIZE. It attaches a capitalistic incentive behind technological advancements that benefit society.
Who's to say that some of the tech developed to mine bitcoins won't find other applications. Or perhaps the expertise developed by people trying to optimize bitcoin mining, or bitcoin commerce infrastructure could end up helping them change the world in other ways.
I'm totally not saying the two are equivalent, but look at the non-obvious ways that NASA has helped all of us: http://www.wtfnasa.com/
A P2P currency might help people allocate resources more effectively (to solve problems like the ones that you mentioned). Right now much of our wealth is flushed down the toilet when stolen through taxes and inflation and given to bankers and other government corporate welfare recipients.
There's no technical reason there couldn't be a cloud version of this, but of course it makes absolutely no sense as a cloud service, which make me wonder what's going on here.
An exchange of money for a thing usually means that the buyer wants the thing more than they want the money, and the seller wants the money more than they want the thing, but in this case the seller is selling ... money?
There are "mining bonds" that are essentially cloud Bitcoin mining. As you said, they tend to not be worth buying. One exception is ASICMiner which has paid very nice dividends to their shareholders.
It's not quite as simple as selling money, since the amount of money that the box will print depends on various factors like the difficulty, exchange rate, and delivery date. So it's really a question of whether the customer's risk analysis is better than the vendor's (which is doubtful given the information asymmetry; see also Goldman Sachs). And the delivery date is definitely not guaranteed; most vendors are shipping late.
It requires some work to set up and use and, probably more importantly, there's substantial risk involved. The $/year this thing can produce is not a fixed quantity, both because the BTC/$ exchange rate is not fixed, and because the BTC/hash rate is not fixed. If the $ made over the lifetime of the unit exceeds its cost, then the buyer wins, and the manufacturer could have theoretically made more money by hanging onto it and running the units themselves. However, that's not guaranteed, and it could be a net loss.
In essence, they're selling a risky bet. It's like a lottery ticket, except more dependent on external factors. The buyers get to make a bet that might pay off, and the seller gets more concrete payment in exchange. It's sort of a physical embodiment of a financial instrument.
I gotta say, am I the only one who see's the numbers and then immediately goes to the Bitcoinx calculator to see how much "money" I could make in a day if I bought one of these rigs? On paper it seems like some of these things could pay for themselves in relatively short order if you could actually get your hands on one and run it day and night...and liquidate your mined coins asap at the current prices. A lot of ifs. Has anybody met somebody who's managed to pay off a big rig in short order? I'd really like to see a "success story" with Bitcoin mining.
http://blockchain.info/charts/hash-rate -- This graph shows the total network hashing power, a.k.a. mining competition. As ASICs are finally being released/shipped on a noticeable scale, the network hash power is massively increasing and will probably increase 1-2 orders of magnitude more. Mining profits will most likely be driven to almost zero.
EDIT: another thing to consider is that the ASIC companies have had much trouble shipping on schedule, affecting ROI calculations
This needs to be repeated every time btc ASICs are discussed: ASIC economics don't work like most physical products, and instead work more like software. For high-performance asics, the costs of design and masks completely overshadow the costs of actually making chips unless your volume is in the millions. To make the first chip costs many millions, to make the next chip costs $15. The most valuable assets they have are the masks. One of the least risky ways of bootstrapping an ASIC venture is to presell enough chips to pay off R&D, and when you can make them for cheap, keep the rest.
None of the 8 persons who replied to you have the correct facts. They are planning to mine with the chips.
The complete story is that the chips are developped in a 50/50 partnership between Leszek Rychlewski (aka "tytus"), and "bitfury" (a group of investors and engineers mostly from eastern europe):
- Tytus set up a company to launch a project known as 100TH-Mine that will deploy a farm running 100 Thash/s of these chips in Wenatchee, WA: https://picostocks.com/businessplan/19
- Bitfury is very discrete and was, as far as we know, merely planning to mine for themselves.
But over time, both entities realized they would be able to generate a lot more predictible revenues if they sold chips and/or fully assembled devices. So Tytus partnered with Megabigpower.com and BFSB as distributors is US and Europe. And the Bitfury group partenered with MetaBank to resell chips and devices in Russia.
They probably are for awhile, then selling them. Hence the delay. Riding out some mining, then slowly releasing them.
I'm thinking if someones smart enough to built a specialized piece of hardware like this, they are smart enough to write up an algorithm that tells when to sell the hardware once the commodity hits peak level.
A mass dump of these would too quickly devalue the market since the increase in new Bitcoins would cause inflation.
edit: Ha, obviously they know it by taking Bitcoins and charging €700 difference in the price of one chip between a July & October delivery.
Basically, there's an ideal balance of running it themselves and selling them, and I'm sure they've calculated out the maximum profit strategy and are executing it.
Because they know that doing so would spike the difficulty and dramatically lower the expected value of bitcoins mined per unit. They can sell them for $20k a pop now, claiming that you can make that $20k back in a month of mining - but if they sell out and all their customers start mining back their $20k immediately, it'll take far longer. In the meantime, Bitfury already collected their money and are laughing on the way to the bank.
They've probably plugged a few in, increasing the difficulty in the time that they're shipping them. That way they get most of the benefit of plugging them in, and also get the benefit of selling them.
I wonder when BitCoin will reach the stage at which mining is not economically viable because the expended electricity is more expensive than the amount of BC gained. It is my understanding that such a point should be eventually reached due to the mathematical nature of BCs.
The price of electricity varies by location. I expect within 9 months Bitcoin mining will only be profitable for people with the cheapest electricity. Essentially there will be three phases: first, ASICs will get more efficient as they move from 130 nm to 28 nm (this is in progress with KnC and HashFast), then profit margins will reduce from 90% down to ~10%, and finally there will be an endgame where even a 28 nm ASIC sold at cost won't be profitable unless you have super-cheap electricity.
I think in order for those products to be profitable they need to sell them very very quickly (because of the ever increasing difficulty of the bitcoin mining), so maybe they didn't take the time to design an enclosure and decided to start selling them as soon as they had something working.
Very expensive hardware with a very short shelf life, it must be quite interesting (and stressful) to design.
Gh/s means gigahash/second. 1 billion "Bitcoin hash" per second. With 1 hash defined as SHA256(SHA256(80-byte block header))
I don't have my notes with me but these Bitfury chips run around 150-250 MHz individually. There are 256 of these chips in the 400 Ghash/sec device. Each spits out about 10 hashes per clock cycle.
[+] [-] simonsarris|12 years ago|reply
Just as in every gold rush, it is a much more blessed position to be the one selling the blue jeans and shovels than to be the one attempting to sift and mine.
I wonder if Bitfury accepts bitcoin as payment. I suspect they do not. EDIT: You can totally pay with bitcoin - http://www.bitfurystrikesback.com/checkout/
[+] [-] tinco|12 years ago|reply
[+] [-] anderspetersson|12 years ago|reply
[+] [-] 9ac345a5509a|12 years ago|reply
I wonder what effect all this has on the Bitcoin economy. If everyone begins doing this, then it will become extremely difficult to mine any Bitcoin without any sort of gear. Feathercoin [1] appears to try and stop this, although I am not sure how effective it is.
[+] [-] Osiris|12 years ago|reply
They were selling the kit for $22,000, so it'll take at least 5 weeks for the ROI, probably longer given there will be at least 2 difficulty resets in that time frame.
I looked at investing in one but I couldn't come up with the funds. Instead I have pre-orders out for gear due in October.
If everyone begins doing this, then it will become extremely difficult to mine any Bitcoin without any sort of gear
This is already the case. I'm mining at about 250GH/s with 3 Avalons and I earn on average about 1.2 BTC per day per machine. A month ago is was closer to 2BTC per machine per day. Right now, GPU mining is dead. It's literally cheaper to buy a bunch of USB sticks that mine at 350MH/s for $100 each than to buy a bunch of video cards as the USB sticks are more power efficient. Even so, depending on the difficulty, those USB sticks could take a year to earn back the 1BTC.
[+] [-] javert|12 years ago|reply
It already is and has been for a long time
> Feathercoin [1] appears to try and stop this, although I am not sure how effective it is.
IMHO, Feathercoin should not be taken seriously.
[+] [-] BocceBaal|12 years ago|reply
[+] [-] cgi_man|12 years ago|reply
[+] [-] ultimoo|12 years ago|reply
I wish we were just as enthusiastic and race to solve other problems too -- like spreading education, finding out ways to purify water, or maximizing agriculture throughput in famine, or predicting when the next hurricane, tsunami, or earthquake is coming our way.
[+] [-] derekp7|12 years ago|reply
However, I do know how to write code, and if I can take some of the money I've earned to buy one of theses "useless" devices which can also make me some money, maybe one of the engineers at that company can spend his paycheck to send his daughter to college, where she can study ways to fix these other problems you mentioned.
In other words, read up on the economic theory called "guns and butter".
[+] [-] tbrownaw|12 years ago|reply
It's supposed to help said currency become more solidly established, and therefore more useful to more people.
I wish we were just as enthusiastic and race to solve other problems too -- like spreading education, finding out ways to purify water, or maximizing agriculture throughput in famine, or predicting when the next hurricane, tsunami, or earthquake is coming our way.
I'm pretty sure people are enthusiastic about those things, and probably quite a lot more people than are into bitcoin. They're just less visible, since those aren't the cool new shiny thing (and aside from the weather/earthquake predictions, they're probably not heavy enough on software to be considered of interest here).
[+] [-] slg|12 years ago|reply
[+] [-] CodeCube|12 years ago|reply
I'm totally not saying the two are equivalent, but look at the non-obvious ways that NASA has helped all of us: http://www.wtfnasa.com/
[+] [-] icelancer|12 years ago|reply
[+] [-] richcollins|12 years ago|reply
[+] [-] mjs|12 years ago|reply
An exchange of money for a thing usually means that the buyer wants the thing more than they want the money, and the seller wants the money more than they want the thing, but in this case the seller is selling ... money?
Is, uh, the delivery date guaranteed?
[+] [-] wmf|12 years ago|reply
It's not quite as simple as selling money, since the amount of money that the box will print depends on various factors like the difficulty, exchange rate, and delivery date. So it's really a question of whether the customer's risk analysis is better than the vendor's (which is doubtful given the information asymmetry; see also Goldman Sachs). And the delivery date is definitely not guaranteed; most vendors are shipping late.
[+] [-] mikeash|12 years ago|reply
In essence, they're selling a risky bet. It's like a lottery ticket, except more dependent on external factors. The buyers get to make a bet that might pay off, and the seller gets more concrete payment in exchange. It's sort of a physical embodiment of a financial instrument.
[+] [-] cantankerous|12 years ago|reply
[+] [-] dwaltrip|12 years ago|reply
EDIT: another thing to consider is that the ASIC companies have had much trouble shipping on schedule, affecting ROI calculations
[+] [-] DigitalJack|12 years ago|reply
[+] [-] wmf|12 years ago|reply
[+] [-] jgeerts|12 years ago|reply
[+] [-] Tuna-Fish|12 years ago|reply
This needs to be repeated every time btc ASICs are discussed: ASIC economics don't work like most physical products, and instead work more like software. For high-performance asics, the costs of design and masks completely overshadow the costs of actually making chips unless your volume is in the millions. To make the first chip costs many millions, to make the next chip costs $15. The most valuable assets they have are the masks. One of the least risky ways of bootstrapping an ASIC venture is to presell enough chips to pay off R&D, and when you can make them for cheap, keep the rest.
[+] [-] mrb|12 years ago|reply
The complete story is that the chips are developped in a 50/50 partnership between Leszek Rychlewski (aka "tytus"), and "bitfury" (a group of investors and engineers mostly from eastern europe):
- Tytus set up a company to launch a project known as 100TH-Mine that will deploy a farm running 100 Thash/s of these chips in Wenatchee, WA: https://picostocks.com/businessplan/19
- Bitfury is very discrete and was, as far as we know, merely planning to mine for themselves.
But over time, both entities realized they would be able to generate a lot more predictible revenues if they sold chips and/or fully assembled devices. So Tytus partnered with Megabigpower.com and BFSB as distributors is US and Europe. And the Bitfury group partenered with MetaBank to resell chips and devices in Russia.
[+] [-] EwanToo|12 years ago|reply
We build 50, plug them in, make $500,000 in 3 months We build 50, sell them all, make $250,000 in 1 month
But I'm sure they'll have a couple they keep for themselves, and plug in at the same time as the early deliveries arrive.
[+] [-] wcfields|12 years ago|reply
I'm thinking if someones smart enough to built a specialized piece of hardware like this, they are smart enough to write up an algorithm that tells when to sell the hardware once the commodity hits peak level.
A mass dump of these would too quickly devalue the market since the increase in new Bitcoins would cause inflation.
edit: Ha, obviously they know it by taking Bitcoins and charging €700 difference in the price of one chip between a July & October delivery.
[+] [-] lifeformed|12 years ago|reply
[+] [-] tomku|12 years ago|reply
[+] [-] astrodust|12 years ago|reply
If you don't double down, someone else will, and your hardware will be worthless. Therefore you need to keep spending to keep mining.
[+] [-] jeffasinger|12 years ago|reply
[+] [-] TsiCClawOfLight|12 years ago|reply
[+] [-] eliben|12 years ago|reply
[+] [-] wmf|12 years ago|reply
[+] [-] astrodust|12 years ago|reply
[+] [-] simias|12 years ago|reply
Very expensive hardware with a very short shelf life, it must be quite interesting (and stressful) to design.
[+] [-] twentysix|12 years ago|reply
400 Giga Cycles/s makes more sense, unless I am missing something.
[+] [-] mrb|12 years ago|reply
I don't have my notes with me but these Bitfury chips run around 150-250 MHz individually. There are 256 of these chips in the 400 Ghash/sec device. Each spits out about 10 hashes per clock cycle.
[+] [-] unknown|12 years ago|reply
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