6 ms·

Inside the Race to Build the World’s Fastest Bitcoin Miner

46 points by esalazar 14y ago

rootedbox 14y ago
Because they are literally selling you a machine that just sits around and 'makes' money. If the amount of profit from using these machines was greater than the profit from selling the machines.. then the company selling the machines wouldn't sell them to you..
- misnome 14y ago
  Or, they could make money.... ignoring the price of electricity for generating said money.
- baddox 14y ago
  There are companies that manufacture and sell everything else that people use to make or earn money, so I don't see why this would be any different.
- Anderkent 14y ago
  >If the amount of profit from using these machines was greater than the profit from selling the machines.. then the company selling the machines wouldn't sell them to you Unless they couldn't make the machine without you paying for it first. Or they don't want to break the system by reaching >51% of the network (after which the value of btc plummets down immediately, thus making the machines worthless).
  - gknoy 14y ago
    Why would the value of BTC plummet if you reach 51% of the network?
    - ufo 14y ago
      If a single group controls more than 51% of the mining power they can cheat the system (double spending, things like that). If such a monopoly was created people might lose their trust on Bitcoin and try to leave the system.
- DanBC 14y ago
  They need money to buy the components to build the machine. They take pre-orders for one batch of machines. They build that batch of machines. They soak-test those machines, and then start sending them out. Now, with the money from the pre-orders and from the soak-test bitcoins, they can build a second batch which they keep.
- sliverstorm 14y ago
  A lot of people will tell you, "Think of the upfront costs" and that sort of thing. My opinion however is that it's nothing we haven't seen before. Maybe the customer makes money in the long run. Maybe it takes 6 months for the unit to pay for itself. The manufacturer on the other hand gets their profit up front. They don't have to wait 6 months, and they don't have to worry about whether the value of bitcoins will crash. Certain profit today, vs. less certain profit of greater magnitude tomorrow. Seems familiar.
- Nursie 14y ago
  There is only a certain amount of BTC to be had every hour. If they brought these in by the bucketload they could dominate the mining utterly. They would then also effectively control the network people may lose trust, BTC value could tank etc etc.
ck2 14y ago
15 bitcoins in 20 hours. Whoa. You could make a fortune at the factory just doing the burn-in test for 24 hours. In fact I am curious why they would even ship them from China, you'd lose money the weeks on the boat, just plug them in at the factory...
- gwern 14y ago
  In a recent interview (the one that photo is drawn from), that CEO guy acknowledges that from a purely selfish standpoint, shipping the ASICs at all has a high opportunity cost, but http://motherboard.vice.com/blog/engineering-the-bitcoin-gold-rush-an-interview-with-yifu-guo-creator-of-the-first-asic-based-miner http://motherboard.vice.com/blog/engineering-the-bitcoin-gol... it was more honest to ship: > This is an obvious question, but why aren’t you mining your own chips? > Like I said, the current reality is vastly different from what we originally had planned. We always figured we would be late to the party. Butterfly Labs and bASIC (another ASIC developer that ultimately failed to launch) were supposed to launch in succession. But due to various complications and delays, it didn’t work out that way. > . If they had delivered on their promises, they would have shipped months before our first batch. We wanted to start selling chips so people could make their own units, providing a hedge from a single entity becoming too powerful, and then move onto a new project. That was our main goal. We wanted to prevent this potential monopoly. As it turned out, we became the monopoly we tried to prevent. > You aren’t doing any mining at all? > Nope. Fun fact: none of the Avalon team have their own mining units (outside of test units)... We’ve had plenty of opportunities, such as keeping the technology to ourselves and simply mining, but that was never our intention. So how much is that trust worth? We think it’s worth $5000 by itself. Beyond that, the calculation is based on the current difficulty rate so that break-even point occurs in a month. Which, by the way, as an investment vehicle is a fairly unique proposition. It should be mentioned also that the cost of the batch two was also 75 bitcoins. That the exchange rate has moved is out of our control. And in the end, this was never what we wanted. If we wanted to maximize our profit, we could charge much more. For us, this has always been an ideal-oriented problem, not a business-oriented one. This is one of the primary reasons we aren’t clearly in the black. We’re lucky that we held onto the second batch of bitcoins because if it weren’t for the appreciation, we would be very, very deep in the red, which ultimately still isn’t that big of a deal. (And presumably, they're airmailing the components. Why risk a boat?)
sgpl 14y ago
At the current exchange-rate, it seems counterproductive for Avalon to sell their units instead of running them in-house to recoup the cost of production (in a couple of days), and then continue to generate profits. Also, since they are the only game in town (plus BFL & private players probably), they could take advantage of their position in the short term, before the difficulty increases by another order of magnitude.
- icebraining 14y ago
  But Avalon has pre-sold them, presumibly to fund the development & construction. To keep the machines, they'd need investment money, which they might not have.
- smackfu 14y ago
  I'm not sure if they're actually selling new ones, or just shipping preorders from 6 months ago. And the reason they took preorders was to get the capital to fund the production in the first place. It does seem like it would be awfully tempting to delay those preorder deliveries a little bit and use the machines first.
- monkeypizza 14y ago
  Yes. Luckily, Avalon has a philosophical committment to improving the bitcoin transaction network. Other suppliers which haven't established this idea can be accused of receiving orders and just running them locally for a while before sending them out.
- notaddicted 14y ago
  Avalon prices their hardware in bitcoins, so the higher the exchange rate the higher the price: http://launch.avalon-asics.com/ http://launch.avalon-asics.com/.
- nobodysfool 14y ago
  Currently the supply is limited to 3600 per day, so if they did take all their orders and 'premine' for a day, they could at a maximum make about a half a million dollars a day (at the current trading rate). Note that if they started selling half a million dollars a day worth of bitcoin, they'd see the prices drop to less than $10, making their daily profits to around 50k. At that point, it may be more profitable just to ship their product. If you did buy one of these ASIC miners, most people don't realize that as soon as customers get ahold of them, the difficulty is going to go way up, since the hard limit of 3600 coins would be reached earlier in the day if it didn't. So, if they had 1000 customers, the most each customer could get in a day would be 3.6 coins... which at today's rate is $468 per day. Not too bad, but what would it cost to get that kind of hashrate? If it's $10k, then you'd have to mine for 21 days nonstop just to have it pay for itself. That's assuming the difficulty level would stay the same, which it probably wouldn't since the other players (BFL, etc) would release their products, thus decreasing your daily haul. Also, if everyone who mined coins sold, you'd look at a depreciating value for the currency, so your 3.6 coins might only be worth half as much.
gesman 14y ago
Yifu Guo also was the first supporter to donate toward development of Bitcoin Payments plugin for wordpress: http://wordpress.org/extend/plugins/bitcoin-payments-for-woocommerce/ http://wordpress.org/extend/plugins/bitcoin-payments-for-woo...
zwieback 14y ago
This is really perverse. Some of the best talent got sucked into making people click on ads and now this.
- sliverstorm 14y ago
  Bitcoin mining is essentially just "make-work" used to determine allocation, correct?
  - codeulike 14y ago
    An outcome of mining is that it also powers the distributed transaction engine of bitcoin as a whole
    - sliverstorm 14y ago
      Are you sure? I was pretty sure that miners and wallets were distinct, and wallet programs are the ones that participate in the distributed transaction engine.
      - codeulike 14y ago
        I'm not totally sure, and would be interested to hear other views. Here's what I was told before: https://news.ycombinator.com/item?id=5548219 https://news.ycombinator.com/item?id=5548219
      - Geee 14y ago
        Mining verifies all transactions in the network. That's the whole point of the system, making sure that transactions can't be faked. In order to fake a transaction, you would need to control 51% of the total hash rate of the Bitcoin network, which is impossible.
        Nursie 14y ago
        Sure, but I'm pretty sure that the only reason you need to keep adding and adding ever more capacity is to prevent someone else coming along and doing the 51% attack, right? Other than that, adding capability doesn't benefit the network, it burns a lot of power as people effectively just burn electricity to try to increase their share of a fixed payout.
deleted 14y ago
[deleted]
andrewcooke 14y ago
are there checks based on electricity consumption to detect cannabis growers in the usa (or elsewhere)? if so, how long before a miner is raided?
- ChuckMcM 14y ago
  Except that miners aren't actually breaking any laws. But more importantly will be to see what how quickly the market floods with new coins and the impact that has on collectors.
  - ArikBe 14y ago
    I'm not sure I follow, Bitcoins are mined at a rate of one block every 10 mins (on average). The difficulty setting adjusts based on how much processing power is thrown at the problem. Supply is constant.
    - eterm 14y ago
      If the difficultly increases after the coins are mined, then it would always be playing catch-up and actually a flood could occur. It is my understanding (but I could be mistaken, there is a lot of FUD around BTC) that someone could in theory mine 500 hashes in a ten minute window then 'retire' having boosted the mining rate. This would not only net them a lot of bitcoins immediately but also restrict others supply of bitcoins. Supply is roughly constant given a slowly increasing mining pool, supply isn't shock resistant.
  - maxerickson 14y ago
    I think the point was that they are (potentially) using lots of electricity.
    - rozap 14y ago
      I imagine they use a decent amount, but not nearly as much as would be required to run a cluster of computers to mine a comparable quantity. I think with an ASIC, electricity costs are negligible compared to the output.
rrowland 14y ago
Keep in mind that your return is based on the current net hash rate of all mining computers, everywhere. Combined with the 6+ month wait time, you can buy a $20,000 rig that would mine you $500/day today but by the time you get it the hash rate will have risen so high that you'll be lucky to out-mine the cost of your power consumption. I wouldn't be surprised if these companies were using each rig for a couple months in their prime before shipping them out.
- wmf 14y ago
  ...using each rig for a couple months before shipping them out. Looking at the global hash rate it's clear that this is not happening. (Before anyone asks, you cannot hide mining.) http://bitcoin.sipa.be/ http://bitcoin.sipa.be/
mrb 14y ago
I am surprised the article does not mention that Avalon, in addition to ready-to-use devices, just started selling bare mining chips to OEM manufacturers last week. And they already sold $5M worth of them (500 thousand chips) in the past 8 days alone! This equates to 140 Thash/s (twice more power than the current network). Lead time is 9-10 weeks. Manufactured on-demand at TSMC. https://bitcointalk.org/index.php?topic=181982.0 https://bitcointalk.org/index.php?topic=181982.0 http://store.avalon-asics.com/?product=avalon-asic-chips-10000 http://store.avalon-asics.com/?product=avalon-asic-chips-100...
- Nursie 14y ago
  Unless I've interpreted BTC wrong - this means that as soon as they go live, the current miners are going to see their returns drop by 2/3? And if many are already at the edge of profitability in terms of electricity/BTC, they'll drop off the network? The BTC network may be utterly dominated by ASIC players within a few weeks. Are they any more energy efficient than racks of GPUs?
  - jacquesm 14y ago
    > Are they any more energy efficient than racks of GPUs? Vastly. GPU's are space heaters compared to ASICs and FPGA's.
  - mrb 14y ago
    A decent GPU would still be plenty profitable even after a 3x difficulty increase. For example the HD 7970 (about $400) currently mines $130/month, with electrical costs around $15/month assuming a worldwide average rate of $0.10/kWh, making a $115/month profit. After a 3x diff increase, this would turn to $45/mo revenues and $30/mo profits. However this 140 Thash/s of Avalon chips is just a fraction of what is about to hit the network. All ASIC vendors combined, plus future Avalon deliveries will push the difficulty far more than 3x higher in the next 4-6 months. Current ASICs do 150-200 Mhash/Joule (at 12V). Much better than GPUs topping out at 3-4 Mhash/Joule (at 12V).
  - notaddicted 14y ago
    Yeah. My estimate of the total amount invested in pre-ASIC hardware is 60 million, not counting power. The key questions to predict ASIC mining profitability is: - how much will be invested in ASIC hardware - future prices of bitcoin - how long will it take for the ASIC hardware to roll out The only "easy-money" I see here is if you have access to ASIC mining hardware _right now_.
snake_plissken 14y ago
So how many did they setup for themselves in the 6 month delay period?
- jacquesm 14y ago
  Either very little (easy enough to check for) or none at all if you believe them.
  - maxerickson 14y ago
    How would you rule it out? I would think they are sophisticated enough that they could have a parameter for their client specifying a target hash rate and slowly ramp it up (over weeks/months), looking more or less just like other sorts of hardware coming online. It would take some work to hide in a pool or whatever, but I don't think it would be a big problem.
    - jacquesm 14y ago
      You can't hide it to the point where you'll be able to mine at a rate high enough to make back the investment on the hardware development unless you do it openly. It's an economic argument, not a technical one.

46 points by esalazar 14y ago

Because they are literally selling you a machine that just sits around and 'makes' money. If the amount of profit from using these machines was greater than the profit from selling the machines.. then the company selling the machines wouldn't sell them to you..

misnome 14y ago
Or, they could make money.... ignoring the price of electricity for generating said money.
baddox 14y ago
There are companies that manufacture and sell everything else that people use to make or earn money, so I don't see why this would be any different.
Anderkent 14y ago
>If the amount of profit from using these machines was greater than the profit from selling the machines.. then the company selling the machines wouldn't sell them to you Unless they couldn't make the machine without you paying for it first. Or they don't want to break the system by reaching >51% of the network (after which the value of btc plummets down immediately, thus making the machines worthless).
- gknoy 14y ago
  Why would the value of BTC plummet if you reach 51% of the network?
  - ufo 14y ago
    If a single group controls more than 51% of the mining power they can cheat the system (double spending, things like that). If such a monopoly was created people might lose their trust on Bitcoin and try to leave the system.
DanBC 14y ago
They need money to buy the components to build the machine. They take pre-orders for one batch of machines. They build that batch of machines. They soak-test those machines, and then start sending them out. Now, with the money from the pre-orders and from the soak-test bitcoins, they can build a second batch which they keep.
sliverstorm 14y ago
A lot of people will tell you, "Think of the upfront costs" and that sort of thing. My opinion however is that it's nothing we haven't seen before. Maybe the customer makes money in the long run. Maybe it takes 6 months for the unit to pay for itself. The manufacturer on the other hand gets their profit up front. They don't have to wait 6 months, and they don't have to worry about whether the value of bitcoins will crash. Certain profit today, vs. less certain profit of greater magnitude tomorrow. Seems familiar.
Nursie 14y ago
There is only a certain amount of BTC to be had every hour. If they brought these in by the bucketload they could dominate the mining utterly. They would then also effectively control the network people may lose trust, BTC value could tank etc etc.

ck2 14y ago

15 bitcoins in 20 hours. Whoa. You could make a fortune at the factory just doing the burn-in test for 24 hours. In fact I am curious why they would even ship them from China, you'd lose money the weeks on the boat, just plug them in at the factory...

gwern 14y ago
In a recent interview (the one that photo is drawn from), that CEO guy acknowledges that from a purely selfish standpoint, shipping the ASICs at all has a high opportunity cost, but http://motherboard.vice.com/blog/engineering-the-bitcoin-gold-rush-an-interview-with-yifu-guo-creator-of-the-first-asic-based-miner http://motherboard.vice.com/blog/engineering-the-bitcoin-gol... it was more honest to ship: > This is an obvious question, but why aren’t you mining your own chips? > Like I said, the current reality is vastly different from what we originally had planned. We always figured we would be late to the party. Butterfly Labs and bASIC (another ASIC developer that ultimately failed to launch) were supposed to launch in succession. But due to various complications and delays, it didn’t work out that way. > . If they had delivered on their promises, they would have shipped months before our first batch. We wanted to start selling chips so people could make their own units, providing a hedge from a single entity becoming too powerful, and then move onto a new project. That was our main goal. We wanted to prevent this potential monopoly. As it turned out, we became the monopoly we tried to prevent. > You aren’t doing any mining at all? > Nope. Fun fact: none of the Avalon team have their own mining units (outside of test units)... We’ve had plenty of opportunities, such as keeping the technology to ourselves and simply mining, but that was never our intention. So how much is that trust worth? We think it’s worth $5000 by itself. Beyond that, the calculation is based on the current difficulty rate so that break-even point occurs in a month. Which, by the way, as an investment vehicle is a fairly unique proposition. It should be mentioned also that the cost of the batch two was also 75 bitcoins. That the exchange rate has moved is out of our control. And in the end, this was never what we wanted. If we wanted to maximize our profit, we could charge much more. For us, this has always been an ideal-oriented problem, not a business-oriented one. This is one of the primary reasons we aren’t clearly in the black. We’re lucky that we held onto the second batch of bitcoins because if it weren’t for the appreciation, we would be very, very deep in the red, which ultimately still isn’t that big of a deal. (And presumably, they're airmailing the components. Why risk a boat?)

sgpl 14y ago

At the current exchange-rate, it seems counterproductive for Avalon to sell their units instead of running them in-house to recoup the cost of production (in a couple of days), and then continue to generate profits. Also, since they are the only game in town (plus BFL & private players probably), they could take advantage of their position in the short term, before the difficulty increases by another order of magnitude.

icebraining 14y ago
But Avalon has pre-sold them, presumibly to fund the development & construction. To keep the machines, they'd need investment money, which they might not have.
smackfu 14y ago
I'm not sure if they're actually selling new ones, or just shipping preorders from 6 months ago. And the reason they took preorders was to get the capital to fund the production in the first place. It does seem like it would be awfully tempting to delay those preorder deliveries a little bit and use the machines first.
monkeypizza 14y ago
Yes. Luckily, Avalon has a philosophical committment to improving the bitcoin transaction network. Other suppliers which haven't established this idea can be accused of receiving orders and just running them locally for a while before sending them out.
notaddicted 14y ago
Avalon prices their hardware in bitcoins, so the higher the exchange rate the higher the price: http://launch.avalon-asics.com/ http://launch.avalon-asics.com/.
nobodysfool 14y ago
Currently the supply is limited to 3600 per day, so if they did take all their orders and 'premine' for a day, they could at a maximum make about a half a million dollars a day (at the current trading rate). Note that if they started selling half a million dollars a day worth of bitcoin, they'd see the prices drop to less than $10, making their daily profits to around 50k. At that point, it may be more profitable just to ship their product. If you did buy one of these ASIC miners, most people don't realize that as soon as customers get ahold of them, the difficulty is going to go way up, since the hard limit of 3600 coins would be reached earlier in the day if it didn't. So, if they had 1000 customers, the most each customer could get in a day would be 3.6 coins... which at today's rate is $468 per day. Not too bad, but what would it cost to get that kind of hashrate? If it's $10k, then you'd have to mine for 21 days nonstop just to have it pay for itself. That's assuming the difficulty level would stay the same, which it probably wouldn't since the other players (BFL, etc) would release their products, thus decreasing your daily haul. Also, if everyone who mined coins sold, you'd look at a depreciating value for the currency, so your 3.6 coins might only be worth half as much.

gesman 14y ago

Yifu Guo also was the first supporter to donate toward development of Bitcoin Payments plugin for wordpress: http://wordpress.org/extend/plugins/bitcoin-payments-for-woocommerce/ http://wordpress.org/extend/plugins/bitcoin-payments-for-woo...

zwieback 14y ago

This is really perverse. Some of the best talent got sucked into making people click on ads and now this.

sliverstorm 14y ago
Bitcoin mining is essentially just "make-work" used to determine allocation, correct?
- codeulike 14y ago
  An outcome of mining is that it also powers the distributed transaction engine of bitcoin as a whole
  - sliverstorm 14y ago
    Are you sure? I was pretty sure that miners and wallets were distinct, and wallet programs are the ones that participate in the distributed transaction engine.
    - codeulike 14y ago
      I'm not totally sure, and would be interested to hear other views. Here's what I was told before: https://news.ycombinator.com/item?id=5548219 https://news.ycombinator.com/item?id=5548219
    - Geee 14y ago
      Mining verifies all transactions in the network. That's the whole point of the system, making sure that transactions can't be faked. In order to fake a transaction, you would need to control 51% of the total hash rate of the Bitcoin network, which is impossible.
      - Nursie 14y ago
        Sure, but I'm pretty sure that the only reason you need to keep adding and adding ever more capacity is to prevent someone else coming along and doing the 51% attack, right? Other than that, adding capability doesn't benefit the network, it burns a lot of power as people effectively just burn electricity to try to increase their share of a fixed payout.

deleted 14y ago

[deleted]

andrewcooke 14y ago

are there checks based on electricity consumption to detect cannabis growers in the usa (or elsewhere)? if so, how long before a miner is raided?

ChuckMcM 14y ago
Except that miners aren't actually breaking any laws. But more importantly will be to see what how quickly the market floods with new coins and the impact that has on collectors.
- ArikBe 14y ago
  I'm not sure I follow, Bitcoins are mined at a rate of one block every 10 mins (on average). The difficulty setting adjusts based on how much processing power is thrown at the problem. Supply is constant.
  - eterm 14y ago
    If the difficultly increases after the coins are mined, then it would always be playing catch-up and actually a flood could occur. It is my understanding (but I could be mistaken, there is a lot of FUD around BTC) that someone could in theory mine 500 hashes in a ten minute window then 'retire' having boosted the mining rate. This would not only net them a lot of bitcoins immediately but also restrict others supply of bitcoins. Supply is roughly constant given a slowly increasing mining pool, supply isn't shock resistant.
- maxerickson 14y ago
  I think the point was that they are (potentially) using lots of electricity.
  - rozap 14y ago
    I imagine they use a decent amount, but not nearly as much as would be required to run a cluster of computers to mine a comparable quantity. I think with an ASIC, electricity costs are negligible compared to the output.

rrowland 14y ago

Keep in mind that your return is based on the current net hash rate of all mining computers, everywhere. Combined with the 6+ month wait time, you can buy a $20,000 rig that would mine you $500/day today but by the time you get it the hash rate will have risen so high that you'll be lucky to out-mine the cost of your power consumption. I wouldn't be surprised if these companies were using each rig for a couple months in their prime before shipping them out.

wmf 14y ago
...using each rig for a couple months before shipping them out. Looking at the global hash rate it's clear that this is not happening. (Before anyone asks, you cannot hide mining.) http://bitcoin.sipa.be/ http://bitcoin.sipa.be/

mrb 14y ago

I am surprised the article does not mention that Avalon, in addition to ready-to-use devices, just started selling bare mining chips to OEM manufacturers last week. And they already sold $5M worth of them (500 thousand chips) in the past 8 days alone! This equates to 140 Thash/s (twice more power than the current network). Lead time is 9-10 weeks. Manufactured on-demand at TSMC. https://bitcointalk.org/index.php?topic=181982.0 https://bitcointalk.org/index.php?topic=181982.0 http://store.avalon-asics.com/?product=avalon-asic-chips-10000 http://store.avalon-asics.com/?product=avalon-asic-chips-100...

Nursie 14y ago
Unless I've interpreted BTC wrong - this means that as soon as they go live, the current miners are going to see their returns drop by 2/3? And if many are already at the edge of profitability in terms of electricity/BTC, they'll drop off the network? The BTC network may be utterly dominated by ASIC players within a few weeks. Are they any more energy efficient than racks of GPUs?
- jacquesm 14y ago
  > Are they any more energy efficient than racks of GPUs? Vastly. GPU's are space heaters compared to ASICs and FPGA's.
- mrb 14y ago
  A decent GPU would still be plenty profitable even after a 3x difficulty increase. For example the HD 7970 (about $400) currently mines $130/month, with electrical costs around $15/month assuming a worldwide average rate of $0.10/kWh, making a $115/month profit. After a 3x diff increase, this would turn to $45/mo revenues and $30/mo profits. However this 140 Thash/s of Avalon chips is just a fraction of what is about to hit the network. All ASIC vendors combined, plus future Avalon deliveries will push the difficulty far more than 3x higher in the next 4-6 months. Current ASICs do 150-200 Mhash/Joule (at 12V). Much better than GPUs topping out at 3-4 Mhash/Joule (at 12V).
- notaddicted 14y ago
  Yeah. My estimate of the total amount invested in pre-ASIC hardware is 60 million, not counting power. The key questions to predict ASIC mining profitability is: - how much will be invested in ASIC hardware - future prices of bitcoin - how long will it take for the ASIC hardware to roll out The only "easy-money" I see here is if you have access to ASIC mining hardware _right now_.

snake_plissken 14y ago

So how many did they setup for themselves in the 6 month delay period?

jacquesm 14y ago
Either very little (easy enough to check for) or none at all if you believe them.
- maxerickson 14y ago
  How would you rule it out? I would think they are sophisticated enough that they could have a parameter for their client specifying a target hash rate and slowly ramp it up (over weeks/months), looking more or less just like other sorts of hardware coming online. It would take some work to hide in a pool or whatever, but I don't think it would be a big problem.
  - jacquesm 14y ago
    You can't hide it to the point where you'll be able to mine at a rate high enough to make back the investment on the hardware development unless you do it openly. It's an economic argument, not a technical one.