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.
What gives?
What gives?
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.
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.
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.
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.