Still waiting for that BFL MiniRig? In a little under a week, serious miners will be able to host Terahashes of ASIC mining power from Oregon-based Alydian – but only in large quantities.
The Californian company is preparing to host ASIC mining equipment for its customers, using yearly contracts. Its launch day pricing was $65,000 per Terahash, and mining hosting contracts are only available in 5 and 10 Th/sec blocks. So, if you're thinking of running a miner in your basement, you are not its target market.
Alydian will be going after institutional-level investors that want to move large amounts of money into bitcoins. The question is, how is it getting the capacity so early, and what will it mean for everyone else?
Alydian is the first portfolio company from Washington-based CoinLab, which is itself the brainchild of Peter Vessenes, who stepped down in July as executive director of the Bitcoin Foundation. It will be using 65 nm chips.
The company and its incubator are capitalizing on being first. ASIC capacity is hard to come by, and aside from a couple of vendors who are trickling out boxes and boards, many vendors won’t ship until next month at the earliest.
Alydian’s $65,000 per TH/sec rate only applies to its 10 TH/sec tier. At $350,000 for a year’s worth of 5TH/sec mining, its prices are equivalent to $70,000 per TH/sec, or $70 per GH/sec. Comparatively, pricing from KnCMiner – calculated by dividing the cost of the box by its hash rate – equates to around $19 per GH/sec.
Butterfly Labs is currently trickling out miners using ASICs developed to the same 65nm process node sizes as Alydian’s. Its units offer $45-55 per Gh/sec. That’s still cheaper on paper than the Alydian solution.
But Vessenes says that to be fair, we should consider time in addition to the cost of a box when calculating the cost per Gigahash.
“Not only is there a time value of money, (mining now is worth more than waiting to mine), but also there is a calculation you must do about your terahashes,” he says. “What percent of bitcoins mined will they on average earn? Both of these, and the USD-BTC price play into the mining calculations, which is one reason it's hard to price and understand.”
Because hash rates are increasing all the time, and because network hash rate is directly related to difficulty, Vessenes believes that today’s hashes are worth more than tomorrow’s. “At 2%/day growth rates [he's talking about the network hash rate], an October 31 delivery from KnC at $19/GH equates to $62/GH on August 29,” he says (1.02 * 61 days = 62) “And that still leaves someone with two extra months of mining, plus of course the reduction in power costs.
He may be overestimating a couple of things, such as KnC’s delivery wait times. The Swedish firm plans to start delivering kit approximately one month, not two, after Alydian flips its own switch.
To be fair, we should also factor in electricity costs for home-operated miners. BFL’s systems run at around 5 watts per GH. If you operated one in California, which has horrendous residential energy costs, this would equate to around $7.67 per year, per GH/sec. That pushes it closer to Alydian’s pricing on a per-GH/sec basis, but assuming you got your BFL MiniRig this month and time wasn’t a factor, you’d still be churning out bitcoins for less than you’d be paying Alydian.
Vessenes suggests that these prices are a moveable feast – he is cutting deals for hash rates, he says. He adds that the premium is partly to do with convenience. “We want to provide a turnkey solution for institutional investors who don’t want to worry about it, and don’t want to go manage 72 Bitfury boxes.”
Supply chain expertise
Time is of the essence for Alydian. Will it make its deadline to fit its 65 nm chip onto boards and into boxes? Vessenes claims the chip is faster, and with a lower power consumption than its competitors. Hans Olsen, the company’s CEO, has experience in semiconductors, and Vessenes says that supply chain management is the firm’s forte.
“Hans and his team are super experienced in hardware and supply chain,” he said. “So when I look at the history of bitcoin mining firms, most of them drop the ball on the supply chain side. I think we'll see that this fall again.”
Alydian isn’t giving too much away about its backend operation. It won’t reveal its foundry, and is keeping quiet on any exchange partners. It has MSB licensing with FinCEN, but it isn't saying anything about any state-level licensing.
Assuming it makes its August 29th deadline, what happens next? Alydian is bringing 5 and 10TH/sec blocks of hosted ASIC capacity online this month, followed by 25 TH/sec in September, and 100 – 1000 TH/sec in October (that's one Petahash). Right now, the entire network’s hash rate is hovering around half a Petahash.
All this is going to push up network difficulty, and will no doubt make those who have ASIC miners currently on order a little nervous.
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