The analysis of a failure : Asicminer

Asicminer is the company to have brought ASIC Bitcoin miners from fiction to fact.ⁱ This is a serious engineering undertaking, and if one compares the enormity of the task to the modesty of means arrayed against it the accomplishment is nothing short of breathtaking. I, for one and for what that's worth am certainly impressed. Operationally Asicminer is certainly a success, and one from which poorly run, inept wannabe ventures such as those Graham&co still hopelessly finance to this day would stand to learn. A lot.

Then there comes the financial side.

First mistake. Asicminer was born out of a public offering worth 20`000 Bitcoinⁱⁱ and conducted exactly in the MPEx manner. Nevertheless, Asicminer management made the serious mistake of listing their asset on the meanwhile defunct GLoBal Scam Exchange. This resulted in a litany of difficulties for the issuer, such as for instance spending a chunk of 2012 unlisted, illiquid and marred with the general scam brush. Months spent scrambling to somehow settle claims of disenfranchised shareholders and generally trying to sort the mess resulting from the GLBSE implosion aren't anyone's idea of fun, and certainly wouldn't be favoured by a team evidently stronger in the technical and operational fields. To this day these problems are not completely resolved, in the sense that while most Asicminer shares were alloted to their rightful owners a relatively small chunk is still being disputed.

Second mistake. After their failure to correctly select a venue, Asicminer management made the strategic decision to create their own stock exchange. This effort stole a few more months worth of time that'd have been more productively spent taking a vacation, rather than trying to re-invent the wheelⁱⁱⁱ, and ultimately cost them a little bit of public embarassment as that project had to be scuttled.

Third mistake After their failure to create their own venue, Asicminer management was amenable to listing properly, but refused to actually make a contract. At the time this seemed to me as a probable indication of some sort of fraudulent behaviour coming down the line, because who exactly refuses to put a promise in writing and sign off other than he who does not intend to keep it ?

Meanwhile, further research into the Chinese legal and political environment^iv would seem to indicate credible concerns that actually making such a contract would expose them significantly may well have been at the root of that refusal.

On the balance of these considerations, while I have expressed mild concerns as to the probity of the Asicminer team during the Spring and Summer, I must say that I don't currently think there's much weight to that. They strike me as fundamentally honest people struggling to make the best of a complex situation with numerous constraints and a lot of novel problems.

This third mistake has given rise to a very pernicious state of affairs, as follows : Asicminer was relisted on the various play exchanges as PTs, which is to say exactly in the manner of GLBSE.^v

The inflow of legitimate dividends coming from Asicminer through the mediation of the various PTs has helped create the illusion of success in the stunted minds of the amateurs running these play exchanges, which in turn has wreaked the havoc it customarily wreaks on the recent lottery winner. Consequently they have ballooned their fundamentally educational and otherwise worthless^vi existence into legitimizing an entire swath of outright scams and generally causing the exact sort of trouble for which the original Scam Exchange had to be done away with.

On the other hand, the naive expectations of a particular crowd^vii - the usual motley crew of lifelong Internet HYIP scam victims, Internet marketeers and generally frustrated if universally ignorant youth - together with the dysfunctional nature of the play exchanges has managed to push the Asicminer stock into a corner. Trading as high as 5 BTC earlier this month^viii, it has fundamentally failed to realise ownership transfer^ix. What's worse, the process has failed to price the asset.

To sum it all up :

This third one was perhaps a forced mistake on the part of the Asicminer team. In any case the solid argument can be brought that the welfare of Bitcoin, wholly dependant on the soundness of Bitcoin finance as it may be, is nevertheless in no way their problem : they just mine the coins.

Still, as far as the financial discussion goes Asicminer is a sad failure, composed out of a string of smaller but just as sad failures. Perhaps unavoidable, perhaps necessary. Sad nevertheless.

1. Arguably the erratically managed Avalon delivered units before, but never in the sort of volume that'd change trends. [↩]
2. 200`000 shares put on the market of the 400`000 total. [↩]
3. In the words of the ever-quotable MPEx PR department,

   A willingness to move away from the core mission, a cavalier attitude towards incurring costs and foregoing benefits all work together to paint a very unflattering picture in the eye of the discerning investor (If these people have any confidence in their business, why are they working on moving away from it to do something else? If they have the capital to pursue reinventing the wheel, why do they need my investment? If they're not interested in cashing in now why should I expect they ever will get my shares dividends?) and rapidly the convergence effects become very strong indeed.

   [↩]

4. Of which I was ignorant as a newborn babe five years ago, I must confess. [↩]
5. If you've been paying attention, Pirate's "modest proposal" was listed as a number of pass-throughs by at the time popular, meanwhile disgraced members of the community such as goat, Kludge or Patrick Harnett. [↩]
6. Worthless in terms of security as an easy example, but equally worthless throughout. [↩]

7. Aug 19 16:34:05 gecko_x8 but.. so if you are poor, you should never attempt to fix that by trading?
   Aug 19 16:34:14 gecko_x8 how about jesse livermoore then?

   [↩]

8. Which'd imply a 2mn BTC valuation for a company that hopefully has not already mined and distributed half of the Bitcoin it ever will mine and distribute. [↩]
9. This is an important point - the way financial instruments work in this context is that risky ventures are underscribed by a certain type of investor, with a certain profile of risk tolerance. That investor then sells out for a significant profit once the venture matures, or realises a loss as his venture goes to shit. [↩]