People keep repeating this meme. But in this case, setting up a mining business is trivial. If these devices will have a payback period of ~10 days in the near future, it does not make sense at all to just sell them to end-users.
I fully expect that they will start mining themselves as soon as they fulfill all the existing orders.
A peculiar feature of the ASIC market is that unless you are making really a lot of chips, it's entirely reasonable to assume that the marginal cost of creating one more chip is zero. If your production volume is below tens of thousands, almost all of your costs are going to be masks and design. In that way, selling an ASIC is like selling software -- at first you need pay huge sums for development, and then you can duplicate your product at (almost) no cost.
So what probably happened is that Butterfly labs realized a market opportunity, but they didn't have the money to exploit it. So, the presold some millions of dollars worth of hardware, used that money to design it and make the masks, and then delivered the first few batches to fulfill those orders. And at the end of the day, they don't just have whatever profit they made on the miners, they still have the masks, and can now make more miners for peanuts.
> But in this case, setting up a mining business is trivial.
Not exactly. I'm not exactly sure on the up front cost to develop ASICs, but it's definitely well into 6 figures. BFL sold millions of dollars in pre-orders 12 months ago to fund the design and development of the devices. Everyone in the bitcoin world knew where it was going technology-wise last year, but only 2-3 companies have successfully developed ASIC miners 12 months later.
There are many people who pre-ordered devices from BFL over a year ago and still haven't received them. It seems like BFL would be guaranteed a lawsuit if they started mining on their own before fulfilling those year old orders.
If you look at the market depth (the V-shaped plot at coinlab.com and elsewhere), you can see that ~$1M is sufficient to shift the price of BTC, which has a ~$1B capitalization by ~10%. Thus, if you wanted to make more than ~$1M from BTC, it would have to happen by doing something other than selling BTC itself, lest you crash the market.
The price is supported by speculators (like me; I've bought a little to play with) who think that the value of BTC at some time in the future is at least $100. If it were priced at its utility, at least in my simpleminded picture of things, a shift of 10% in the price should come only with a sale of ~10% of its capitalization.
Diminishing returns: The amount of mine-able bitcoins decreases overtime, as well as the amount of reward decreasing as the hashing power of the network increases. Assuming the price of Bitcoins does not increase accordingly, the amount of money gained will go down.
Bitcoin Collapse: If Bitcoins collapse, you now have a bunch of worthless miners. Compare this to a quick sell it and done.
God forbid you gain a significant amount of network control, because you have a problem. Miners will probably begin to reject your transactions for the sanity of the network, because you could double-spend, and virtually create infinite bitcoins.
Also, how is setting up a business like this trivial? I imagine that a huge part of it (initial investment, buying power, and maintaining all these devices) could be problematic, although I could be wrong.
The more centralized mining is, the less bitcoins will be worth. They could have accidentally killed it, if they acquired too much hashing power. A mystery why the payback period is set so generously though.
My completely uninformed guess is that they are. If I were the one selling these things, you'd better believe that I'd have a room full of them mining bitcoins, and my room would take priority over sales. But I'd also sell them, because why not?
However, those that get the richest are in fact always the mining companies.
The top miners of bitcoins have gotten radically richer than those selling mining tools ever will. In this case the mining will run out, the bitcoins will remain and grow more valuable due to supply / demand (assuming bitcoin succeeds longer term).
There are far more $5+ billion mining companies, than there are $5+ billion mining tools companies.
Go down the list of the top 20 mining or natural resource extraction companies. The tools business is always radically smaller by comparison. eg: BHP Billiton, $156b market cap; Rio Tinto, $76b market cap; Vale $68b market cap. And of course the oil industry is far more dramatic.
Selling tools like the bitcoin mining boxes is foolish, unless you're selling lemon tools that won't recoup their investment (people will stop buying them quickly), or unless you're betting bitcoin won't thrive long term. If you think bitcoin will thrive, it's far better to mine each coin yourself and own it long term, and ride that extreme appreciation. The return would be far beyond any margin you could earn on boxes.
Hindsight is 20/20: It also could have happened that bitcoin prices are down to $1 right now and then BFL and other shovel sellers would vastly outperform dedicated miners.
