A Message to Bitmain and Innosilicon

Mining
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Currently the Equihash ASICs that you manufacture are the most profitable miners on the market, and it’s likely there’s already heavy demand for the next batch. While BTC mining, along with most other altcoin mining, is quickly becoming unprofitable, ZEC mining is flourishing again and has the potential to be very profitable for both your companies and the community at large. However, one thing needs to be stressed: Equihash miners are your golden goose.

If your companies decide to flood the market with Equihash ASICs much like what was done with other altcoins (DASH, LTC, SIA), it will be the equivalent of killing the golden goose. You can’t get the golden eggs by killing the goose. You need to be patient and allow the ASIC supply to grow at a gradual rate, one that will allow the customers who purchased your ASICs to make a ROI in a reasonable timeframe (~8 months). This way I guarantee you will have recurring customers who will buy additional machines down the road.

The alternative is to try to squeeze every dollar out of the customers who want an Equihash ASIC right now and flood the market with as many units as you can manufacture. This will have two primary effects, neither beneficial to your companies. First, the network hashrate will skyrocket to a point where your machines will never see any ROI. Second, all of the customers who purchased your ASICs and lost money will never buy any of your products again.

While you may be able to make a large initial profit selling tens of thousands of units this month, you’ll be killing off Equihash mining just as you did with other algorithms and destroying any hope of recurring customers. You’ll also find out quickly that while ASIC customers represent a large percentage of the Zcash community and currently don’t support an ASIC-resistant fork, they won’t stay supportive of ASICs should they not recoup their investments.

An ASIC-resistant fork will almost certainly occur if ASICs destroy Equihash profitability entirely, as nothing could be worse for the security of the network. I know that @zooko and the Zcash Company has stated that their development resources are dedicated to other network upgrades, but there are many talented developers, myself included, that would gladly take up this task should the community show support for such a fork.

2 Likes
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I agree, bitmain should probablyb spread out their batches.

I’d like to know how many have been made so far.

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It was clear from beginning that this will happen even more and faster after more producers offer their asics on the same algo, just logical. 3 known producers so far with eventually some more coming online/available soon.

In my opinion that’s the whole problem with POW and not limited to Asics or GPU. As long as a given project coin is profitable more and more units get produced and sold. With asics the process of making it not long profitable is just a bit faster than with GPU’s.

That’s how things work. Limiting the amount of mining hardware isn’t realy fair either. It would mean that only the first buyers are obligated to make profit or to mine a given coin/algo?

Means, if let’s say Bitmain, whoever, limits their units to 10.000 it would be a shitstorm and than people crying a river that only a group of miners have/had access to mining hardware. While it’s absolutly understandable that every miner wants to have it’s business as long profitable as possible to ROI and make profit, it would be a limitation which at least in my opinion would raise another aspect of centralization.

We private miners, no matter if gpu or asic, anyway are coming to an end with POW, just a question of time if it takes some 3 months more or some 12 months. Nobody can compete with big mining farms, easy as that.

If there are still some hardcore POW mining believer that think they will make a buck the next year, good luck, lol. Everything will be limited short time profit from now and the industralization of producing special mining hardware and the whole facilities using this hardware.

Not even talking about the shifting that the end of year/next year sh*tload of projects going to POS, making it even harder as that mining power has to go somewhere where POW mining is still possible.

Totally forgot. The main problem in this message to Bitmain & Innosilicon is that they are competitors. While there would be a chance to make some kind of “deal” with 1 producer i doubt this will work with 2+ producers as when 1 producer is sold out the other will take immediate advantage of this and sell/produce more units.

There are more aspects and arguments why this won’t work out and to be honest, even shouldn’t work out for good reason.

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It’s not really about being “fair”, it’s about protecting the profitability of mining vs. flooding the market and making mining unprofitable for everyone. Bitmain made a commendable attempt at fair distribution for the Z9 mini when they were limiting orders to one per person, but even that is probably impossible to strictly enforce.

What they can control, however, is whether or not they release enough miners to double the network hashrate in 1 month. It would be short sighted and absolutely foolish to do this given how profitable Equihash mining is right now. Instead of releasing 10,000 units (which is actually a lot), they should release them in batches of 2,500 every month so that miners can actually see a return and order new units. That way the whole ecosystem profits and the miners will return to Bitmain to buy more units in the future, everybody wins.

The alternative is to release a huge batch 10,000-20,000+ of miners next month and double the network difficulty before customers can even mine for one month. Not only will Bitmain and Innosilicon be destroying mining profitability for themselves, they’ll also be burning hundreds of customers and creating enemies in the process. I don’t believe either Bitmain or Innosilicon will survive if they don’t stop treating their customers like suckers, it’s just not a viable business model.

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I totally agree with you, but the problem is that this is in theory. I reality, while i agree that Bitmain makes at least some affords, none other does. And even than, it won’t work for several reasons:

  • A new player can show up and again produce who amounts and just be sure neither Bitmain nor Innosilicon will watch this happen NOT selling their units after that.
  • Big purchases by mining farms that just don’t go public. Let’s say a mining farm purchases 2.500 Units privately. No way a producer is not going after that. Actually Innosilicon admitted that they have such practice and hosted them even for a big customer (cryptonite asics).
  • You can’t correct/limit a free market in general.
  • What would be the sanction if one of the producers doesn’t follow the rules in case they agree? Forking away and sanctioning the producer that followed the rules as well? There is no mechanism to sort the honest from the dishonest and hurt only the dishonest.
  • How would you control a producer’s own facilities? Obelisk for example keeps 20% of their units for selfmining. Every producer could increase that instantly and silently.
  • Actually thinking about it, it would even enforce the producers to keep more units for themself than selling them IF they stay for long way more profitable or eventually mine way longer secretly/testing/.

As said, in theory i absolutly agree with most, expect the free market point, but than again, that’s theory, in reality it just won’t work, sadly. Just my 2 cents.

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To clarify, I’m not arguing for any imposed limitations to the free market, but rather I’m arguing for something akin to Nash Equilibrium as illustrated in the movie A Beautiful Mind (YouTube clip).

In the case of Equihash ASICs, I believe it closely resembles the movie scene above where the group of men all wish to court the same blonde girl. If all men act in a strictly self-serving manner, then the blonde chooses none of them and they all go home empty handed, much like what will happen to Equihash mining should the market become oversaturated with new ASICs coming to market. However, if the men act in a manner that not only serves their own individual interests, but also the collective interests of the group as a whole, then every man goes home with a girl. It’s actually self-serving to not flood the market with ASICs, because not only will ASIC manufacturers still be able to profitably pre-mine their machines, but their customers will also profit and return as repeat customers.