I don't deny there is a market value. I propose that there is no consensus. Personally I value it to USD 1000 per coin, others value it to 0. No consensus.

At least their third claim, consensus that bitcoin is valueable, is false. There is no such consensus.

“…such governance is already emerging, that it will take the form of the governance of an open source project (in the sense that leaders cannot take actions contrary to the interests and will of the community without naturally losing legitimacy) and that the emergence of formal governance structures will ultimately subject Bitcoin itself (and not merely particular players) to influence by government regulators around the world.”

“Bitcoins have value by consensus and by virtue of the ability to use them to purchase goods and services. But Bitcoin is more than just a currency; it is also a distributed algorithm which must function correctly in order for the currency to operate… The successful operation of these algorithms relies in turn on assumptions that participants in the system will cooperate in certain ways.
…
Ultimately, Bitcoin relies on three types of consensus. Participants must maintain consensus (1) on the rules to determine validity of transactions, (2) on which transactions have occurred in the system, and (3) that the currency has value. The three forms of consensus are connected, in the sense that the failure of any one will unravel the other two.”

"Each of these forms of consensus depends mutually on the other two. For example, it is hard to agree on the history without agreeing on the rules. And it is hard to believe in the value of a Bitcoin if participants cannot even agree on who owns which Bitcoin.
…
Consensus about the rules is a social process. Participants must come to a common understanding of what is allowed, so that the rules can be encoded into the software that each participant uses.
…
Consensus about state is a technological problem in distributed systems design. Each player can see part of the state and the players need to cooperate, in large numbers and across a potentially unreliable network, to achieve a consistent understanding of the global state. Technological consensus must be achieved despite the possibility that some players will deviate from the published rules.
…
Finally, consensus that Bitcoins are valuable is the same sort of consensus necessary for any fiat currency. Such value is often modeled as a focal point in a coordination game (because players need something to use as a medium of exchange and a unit of account, they choose a local currency because it is available).”

“…because mining resources must currently be purchased with currencies other than Bitcoin, the value of the mining reward V fluctuates with the exchange price of Bitcoin. Thus, if the Bitcoin price falls substantially, so too does the incentive to mine. This leads to the possibility of a death spiral in which loss of confidence in Bitcoin could cause the Bitcoin price to go down, a falling price lowers the incentive to mine and the equilibrium mining rate, lower mining rate leads to the currency being easier to subvert, and this leads to a further loss of confidence in the currency.
…
Such a death spiral reflects the perceived loss of consensus in the value game; we observe that it can happen even when consensus in the other games is functioning (as in an exchange rate crash) but that loss of consensus for the rules or for the game state contribute directly to the loss of consensus for value.”

“None of the rules of Bitcoin are self-executing; any rule can be ignored by users. Consider, for example, the rule requiring that a transaction carry valid digital signatures from the owner of every input coin. Everyone can use cryptography to detect a violation of the rule. But the rule will only be enforced if players ignore transactions that do not carry a cryptographically valid signature. Cryptographic rules and other technical rules are like all other rules, in that they exist only as words on paper and therefore will be followed only to the extent that players have incentives to follow them.”

“Each miner chooses a strategy… A strategy is a function that maps the block chain structure … (up to the current round) to a choice of which branch to mine on (that is, which block will be the parent of the newly-mined block if the player wins).
…
The payoff for each miner is their expected return from the mining reward for the block mined in each round. However, that reward is only valuable if the newly-mined block ends up on the long-term consensus chain.
…
The longest-chain strategy, as specified in the Bitcoin documents, is monotonic [(function between ordered sets that preserves given order)]—if the longest chain is extended by one block, it remains the longest chain. However, there are infinitely many monotonic strategies.”

“In this sense, no monotonic strategy is better than any other… We suggest that the choice of strategy is a tacit coordination problem and thus the solution which seems most attractive serves as a focal point. Miners chose the longest-chain strategy initially because it was used in the reference Bitcoin implementation. As new mining capacity has entered the system, that choice has proved stable.”

“…we observe that a cartel can change any rules which are enforced by consensus and players who are not in the cartel will likely be obliged to follow. For example, a cartel can choose any strategy in the mining game. Players who continue to use the old strategy risk having their newly-mined blocks ignored as forks of the consensus branch and thereby risk losing the mining reward payments associated to those blocks. Thus, if the cartel announces its mining strategy, it can shift the equilibrium chosen by the non-cartel players.
…
The cartel can choose to ignore any transaction it does not want appended to the log. Further, the cartel can choose to treat any blocks appended by others to the log as forks which it will not attempt to extend. Thus, other players will naturally also abandon these transactions, possibly even consciously if the cartel announces that certain transactions (or transactors) are disfavored.”

“Such an agreement can be modeled as a prisoner’s dilemma: the miners would benefit from cooperation but cannot agree not to defect; users may wish to leave a tiny transaction fee to make sure the miners will process a transaction, but the user gets no benefit from offering a larger fee—doing so simply gives up value without any compensating gain.
…
As a result, we expect an equilibrium in which users leave small, nonzero transaction fees, and miners collect those fees. Indeed, this is what we observe: the expected total mining reward sans fees in a day is 3600 BTC, while the average total daily transaction fee take is only about 50 BTC.”

“First, a government or institution might want to block Bitcoin transactions, to enforce the law, deter money laundering, or achieve some other institutional goal. Second, a non-state attacker might seek to gain some political or social goal, perhaps as a form of social protest… Third, an attacker might seek an investment gain, for example by taking large short positions in Bitcoins so as to profit if the value of Bitcoins is diminished.”

“Contrary to claims that Bitcoin is ungovernable and relies on fixed rules laid down at its founding, the rules can be and have been changed by consensus. A governance structure for Bitcoin must inevitably emerge and is already emerging.”

“Other challenges to the system’s health and viability may also emerge, perhaps due to issues of scaling or security. Some sort of governance will have to emerge in order to cope with these. Although it may be informal and not enshrined in any constitution or charter, the Bitcoin community will need to have a way to reach consensus decisions and act on them.”

“Arguably, a governance structure is already emerging through the management of the Bitcoin reference implementation. The lead developers of this software are respected in the community and their opinions tend to carry weight. Because putting into practice any rule changes requires changing the reference software (and because the reference software is widely deployed), the lead developers have their hands on the levers of power, such as they exist. They seem to be the natural leaders of the community.
…
[T]he dynamics of Bitcoin’s rules governance are similar to those of open-source software governance, with an emerging set of leaders who make decisions on behalf of the community and whose power is constrained by the possibility of a fork.”

As a thank you to our customers for being patient with us as we move towards fulfilling our shipping we are instituting a chip credit program for all pre-orders prior to April 1st, 2013 (Including orders already delivered). This program will allocate a $25 discount per chip up to the number of chips you currently have on order. For example, if you have a Single SC on order, you will receive a $25 credit per chip for 16 chips (Meaning 16 chips can be purchased for $50 each). The chip count for each unit is as follows:

5 GH/s / Jalapeno: 2 chips
25/30 GH/s Miner: 8 chips
50/60 GH/s Miner: 16 chips
500 GH/s Miner: 128 chips
1.5 TH Minirig: 384 chips

Every customer with a current pre-order dated prior to April 1st, 2013 will receive a chip credit for the number of chips/units they have pre-ordered. What this means is that you will be able to purchase raw chips from us for $50 instead of $75 per chip, up to the number of chips you have credit for. We realize that not all of our customers are interested in or have the desire to make use of the chips themselves. To that end, you will be able to sell your chip credit to other people who may be interested in or have the ability to make use of the chips directly.

For our very earliest customers, the first three months of orders (June 23rd to September 23rd orders) will receive 2x the value of the chip credits. For example, a 60 GH/s miner will be worth 32 chips in credit, a Jalapeno will give a 4 chip credit.

You should see your chip credit code(s) in your account shortly, and you may do with them as you wish at that time.

There is a 100 chip minimum purchase, so if you are acquiring codes, please be sure to understand that you will need to order a minimum of 100 chips.

Terms: While we do not have the facilities or the ability to facilitate chip transfers directly, the chip credit codes are transferable from one person to another and we do not limit the resale or transfer of the chip credit codes. The customer is responsible for doing their due diligence when buying, selling or trading the codes, so please be sure to only trade with trusted, verified individuals. Codes can not be refunded, returned or canceled once they have been used or transferred. Butterfly Labs will not be responsible for what a user does with their codes and we are only providing the discount to verified, paid pre-existing pre-orders. Once codes have been redeemed and the payment process has begun, if you do not complete the payment, the codes will be invalid and can not be refunded or returned.

I think m-of-n transactions would work well here: the end-user (client) would deposit their BTC to an m-of-n address belonging to three bitcoin addresses: the client's, the 3rd party service provider's (1st escrow), and a trusted mediator's (2nd escrow). Two of the three bitcoin-address owners would need to sign to spend any inputs to the m-of-n address.

The code and the blockchain are what matters, not the speculation of Internet slackers.

“Before a user can use a service, he or she makes a digital payment to the provider. This is done via the Bitcoin network and does not require interaction with the provider yet. The amount required before service can be used will be specified by the service provider. Each provider can set his or her own level of deposit. Moreover, different users can be required to make different deposits (e.g. a new user will have to make a large deposit, while a returning user will make a lower deposit). The payment is made in the Bitcoin network and is tied to the user’s public key, V K.”
...
“Once a payment has been made, the user contacts the service provider to initiate a service. The user provides the public key that was used to make the payment (or the service provider could have cached a key for returning users). The V K will be later used by the service provider to verify messages sent by this user – V K is essentially an identifier that ties the user to the payment.”
…
“Upon receiving a request, the service provider needs to make sure the payment, i.e. the deposit, has been made. The provider checks with the public Bitcoin blockchain to see if the transaction of the required amount has been made to the provider. If such transaction has been recorded, the user has made a payment. The provider can use the blockchain to also check that the public key, V K, provided by the user matches the one in the Bitcoin blockchain.”

“Once the user’s payment and public key have been verified with the Bitcoin network, the service can be run… The service provider needs to monitor the user’s actions and detect any attacks or abuses… If no attack or abuse was detected, the user is repaid back their amount of the deposit.”

“The value of the deposit is a subjective quantity that needs to be determined by the service provider. Large deposits may detract some users, while deposits that are too small will not be effective.”
…
“Our proposed scheme relies on users and service providers exchanging small amounts of digital money. The BitDeposit scheme actually repays the users less than they paid because of the transaction costs. While the costs are very small, they are non-zero.”
…
However, when the scheme is used with any service that requires or obtains information about the user (e.g. user’s friends’ e-mail addresses that they use to communicate with) the service learns some information that can be potentially used to break the pseudonomity. This breaks the pseudonomity of the public keys in the Bitcoin network for the user.”
…
A related issue which also concerns the public keys of a user is the key reuse. To be able to tie the transactions to a user, the same key used in the Bitcoin network needs to be used to sign messages later sent to the service provider.
…
An unanswered challenge is also how to make sure the service provider eventually returns the deposit (if there was no attack or abuse). For large service providers, reputation could be used so users would likely know that it is a good provider and that their deposit will be returned.”

“The bitcoin system serves as a functioning application of memory. Every peer on the bitcoin network stores a complete copy of all past transactions, similar to the public ledger Kocherlakota (1998) terms memory. Moreover, the bitcoin protocol effectively checks new transactions against this ledger prior to authorization. Unlike the theoretical construct, where past transactions are attributed to a particular agent, the bitcoin system records transactions by account. Given that an agent might possess several accounts and cryptography is used to obscure one’s identity, it is difficult to get a full picture of the past transactions of a particular agent. In other words, the unit of analysis in the bitcoin system differs from that of the theoretical construct. Nonetheless, it is reasonable to describe the bitcoin system as memory”

    “Having contended that bitcoin resembles an imperfect form of memory, we next consider whether recent experience with bitcoin is consistent with the theoretical literature on memory. In particular, we consider the following three implications:

        Both money and memory might facilitate exchange.
        If memory is imperfect and money is costly to store and/or verify, equilibria exist where both money and memory are employed.
        3. As the expected cost of storing and/or verifying money increases, memory is more likely to be used.

    …It is rather straightforward to show that the bitcoin experience is consistent with the first two implications of the theory. As described above, bitcoin is used to facilitate exchange in a variety of contexts. Cyber security, web domains, and leisure activities—just to name a few items—can be (and have been) acquired with bitcoin. In these contexts, bitcoin works in much the same way as traditional monies. At the same time, it is certainly not the case that bitcoin has replaced traditional monies entirely. Rather, bitcoin is often one of many payment options. In other words, since bitcoin is an imperfect form of memory and traditional monies are costly to store and/or verify, both are employed to facilitate exchange. Recent experience in Europe provides some evidence that, as the expected cost of storing and/or verifying traditional monies increases, bitcoin is more likely to be used.”

yes "it" is but in both senses-metaphysical and physical. I was attracted to bitcoin because of the possibility of transference of autonomy over oneself from "others" to oneself alone.

leaving religion and politics aside for now uniquely bitcoin returns autonomy over the physical expression of their fiscal assets to individuals, to themselves alone.

wittgenstein struggled with private and public language but it seems to me that if you conceive an idea but never express it (he argued for thoughts that can't be expressed linguistically) you have sole autonomy over that. it (the idea) cannot be taken from you. however if you express that idea in any way viz; language. art,music,algorithm then it is in the public arena and can and has been taken from you and used to benefit or disadvantage others.primarily through social structures such as religion,political and financial categories.

I do not think you can separate the metaphysical from the debate. When I first was attracted to bitcoin I stated that its strength is the fact it does not exist in reality and therefore cannot be taken away from any individual.  I was dismissed from the forum as a troll!.

fundamentally everything originates as a concept (Bacon argued there were only concepts) but I agree that the materiality of the protocol is profound for civilisation. It is true that the subjectivity of the concept means there are as many interpretations of bitcoin as there are minds to think about it!.

However I view that as a deep lake from which we can fish for ways to enable the concept to endure for the benefit of all. certainly discuss the practical and social implications of signifiers and signified but please do not divorce from the original concept. reg.

I think Dion makes an interesting point about the Stamp Act.  It's something I hadn't considered before.  Still, it seems an ivory tower stretch without any real-world grasp to it.  I can't imagine the DOJ trying to revive the Stamp Act to prosecute any BTC user unless he tries to pass off BTC as USD.  Most of the federal judges I know would look at them cross-eyed. 

...but he didn't discuss miners as issuers or payors.  Strange.  I'd think it would be fertile ground.

He got the exchanges-as-regulated-bodies-issue, and spent pages talking about the well-worn definition of a security.  Still, I can't believe he talked about Securities Regulation without hitting the most important issues in that area: mining contracts, "stocks" and "IPOs" like ASICMINER traded for BTC on unregulated markets.  He didn't address how utterly illegal this stuff is.  Missed opportunity!

"The Constitution reads: “No state shall… emit Bills of Credit; make any Thing but gold and silver coin a Tender in Payment of Debts…” and that, “[t]he Congress shall have the Power… To coin Money, regulate the Value thereof, and of foreign Coin.” This has been interpreted to mean that states do not have the power to issue their own forms of legal currency because this power is reserved for the federal government.”

The United States has a robust set of counterfeiting laws that prohibit almost any form of legal tender imitation. The statutes expressly punish those who falsely make, forge, or counterfeit “any coin or bar in resemblance or similitude of any coin of a denomination higher than 5 cents or any gold or silver bar coined or stamped at any mint or assay office of the United States …” The counterfeiting statutes are broad and do not simply punish those who attempt to create imitation currency, but also those who attempt to “utter or pass, any coins of gold or silver or other metal, or alloys of metals, intended for use as current money…
…
The counterfeiting statutes are concerned not just with undue wealth creation, but competition with U.S. legal tender that could, in aggregate, do damage to the value of the U.S. dollar and American monetary policy. This principal is particularly true in a world where governments have fiat currencies—floating currencies whose value is derived relative to each other and their own purchasing power. Thus, it is illegal for an individual to make or pass currency “whether in the resemblance of coins of the United States… or of original design.”

“Beginning in 1998, the National Organization to Repeal the Federal Reserve Act and the Internal Revenue Code (NORFED) produced gold and silver coins as well as gold-backed dollar bills which it called “Liberty Dollars.” The organization was based in Evansville, Indiana and used a private mint to circulate, according to its claim, $20,000,000 in currency. The advertisements for Liberty Dollars referred to it as “real money” and “currency.” The bills contained inscribed terms such as “Liberty,” “Dollars,” “Trust in God,” and “USA,” and the coins contained images such as the Torch of the Reserves, the Statue of Liberty, and the Bill of Rights.”
 …
“In March 2011, Liberty Coin creator Bernard von NotHaus was convicted of conspiracy and two counts of counterfeiting. According to von NotHaus, during the trial, prosecutors compared the similarity of Liberty Dollar coins to U.S. coins and successfully made clear the possibility of confusion between the two. In response, the FBI released a press release stating, “It is a violation of federal law for individuals, such as von NotHaus, or organizations, such as NORFED, to create private coin or currency systems to compete with the official coinage and currency of the United States.”

“For the purposes of enforcement, the differences between how Bitcoin and Liberty Dollars derive their value are even more important. Liberty Dollars were backed by specie stored in warehouses. Thus, when the FBI seized the specie in the warehouses, the bills lost their value. However, Bitcoins are backed by no specie. Although mining the Bitcoins requires computing power, their value is derived completely by supply and demand— they have no inherent value. Thus, even if a compelling argument could be made that the counterfeiting statute applies to all private currencies, the logistics of seizing Bitcoins becomes extremely problematic.”

This issue extends to prosecution–there is no de facto figurehead. And to seal the deal, Dion notes that “[f]inally, prosecutors must consider the fact that Bitcoins are not the only digital currency… [and] prosecutors should avoid destroying the technological and economic possibilities of e-currency in a zealous attempt to topple Bitcoin.”

“Whoever makes, issues, circulates, or pays out any note, check, memorandum, token, or other obligation for a less sum than $1, intended to circulate as money or to be received or issued in lieu of lawful money of the United States, shall be fined under this title or imprisoned not more than six months, or both. [18 U.S.C. § 336 (2006)]”

What’s the feasibility of utilizing this statute against Bitcoin? Despite the fact that it is not often used, the Stamp Payments Act could be revitalized to attack Bitcoin. The leading question is whether Bitcoin directly competes with U.S. dollars: “if one takes a more comprehensive view of the term “coin” as part of a collective monetary system, the argument that Bitcoin diminishes the value of the dollar as a whole becomes more palpable.”

“The act punishes those who issue, circulate, or pay out prohibited tokens. For enforcement persons, it is unclear who “issues” Bitcoin. The most likely candidate is Satoshi Nakamoto. It would be a difficult argument to claim that those who solve block chains are issuing Bitcoin. However, those who solve block chains are aiding in the circulation of the coins. This would implicate anyone who has downloaded the Bitcoin program. Furthermore, Bitcoin exchanges could be found in violation of the Stamp Payments Act for “paying out” cash for Bitcoins.
 …
“If the government were to choose to regulate Bitcoin through the Stamp Payments Act, it would have to consider the peer-to-peer nature of the currency. Bringing a case against one actor in the Bitcoin system, even a significant one like Mt. Gox, will not bring an ultimate end to Bitcoin trading. However, if the government’s concern is competition with “greenbacks,” removing large trading houses and making the entire system less liquid will discourage all but the most ardent of Bitcoin advocates.”

“By trading Bitcoins for other currency, exchanges are potentially engaged in securities trading, and thus fall within the purview of the Securities and Exchange Comission (SEC)… The Securities Act prohibits an individual who “with intent to defraud, passes, utters, publishes, or sells, or attempts to pass, utter, publish, or sell, or with like intent brings into the United States or keeps in possession or conceals any falsely made, forged, counterfeited, or altered obligation or other security of the United States.” As the statute stands, the Act applies to notes, stocks, investments, and commodities.”

“Bitcoins do not fall within the category of “notes”—there is no promise to pay for Bitcoin, though some are willing to trade for them. Nor can Bitcoins be considered a commodity, which refers to tangible goods rather than intangible objects [**btcgsa note: I disagree with this**]. There are more similarities between Bitcoins and stocks—for the more [hashing power] an individual invests in solving block chains, she receives a proportional amount of Bitcoins. However, Bitcoin, of course, lacks the organization of a corporation, and there are no “voting rights” associated with owning more Bitcoins.
…
However, Bitcoins themselves seem to fail under [the definition of investments] as well. First, an investment presumes a return in the future. Individuals trading Bitcoins for U.S. dollars are not necessarily looking to eventually cash out their coins for traditional currency, perhaps they merely want to enjoy Bitcoins. Secondly, even if they were, attempting to ride a currency market to the top should hardly be considered a “common enterprise.” But where the securities laws may fail to regulate Bitcoins themselves, they can be used to regulate Bitcoin exchanges.”

“Bitcoin exchanges bring together willing buyers and sellers. More importantly, they have a virtual trading floor, which was a crucial distinction in a case like [Bd. of Trade of City of Chi. v. SEC, 923 F.2d 1270, 1272 (7th Cir. 1991)]. Unlike the computer program Delta, the Bitcoin exchanges behave in ways “generally understood” to be a currency exchange.”

“Were the exchanges to fall under the purview of the securities laws, they would be forced to make a number of changes. First of all, an exchange would have to register with the SEC. It would also have to file a number of public reports which could have a double benefit—informing potential investors on the full reality of Bitcoin investment, while providing the government with useful information that it previously had lacked. Most importantly, the exchanges would be liable for instances of fraud. This would force them to invest in self-policing mechanisms.”

“Because Bitcoin exchanges trade from U.S. dollars (and other currencies) to Bitcoin and back, they are currency exchanges. Thus, they are subject to the requirements of the Bank Secrecy Act. FinCEN has released a recent press release specifically stating an interest in regulating all money service businesses, including Bitcoin, whether they are U.S. companies or not.310 Specifically, Bitcoin exchanges are required to report exchanges greater than $10,000, register with FinCEN, and begin self-policing for instances of fraud.”

“Using the weight of the Money Laundering Acts, the government can leverage the exchanges into keeping a record of their transactions, policing suspicious trades, and making the necessary reports to regulatory agencies. In so doing, it must consider the success story of PayPal over the relative failure of e-Gold.
…
In the long run, the Bitcoin exchanges should fall within the purview of the SEC. They should be forced to report large transactions and be subject to the rigorous accounting standards of the Financial Accounting Standards Board. They should be subject to the securities laws, which help to eliminate opportunities for fraud. Like other financial institutions, the exchanges should face rigorous audits by the IRS and be compelled to supply their traders with information to file Form 1099(b).
…
Where these attempts fail, prosecutors can also rely on the federal wire fraud statute, which has a broad purview and could be used to prosecute just about any scheme, scam, or fraud committed within Bitcoin.”

Are you theorizing the blockchain as a semiotic discourse? If so, how would you define the signifier and signified in this particular context? I have my response to this, but I want to be sure I understand your correctly before stating it.

“What proves crucial in our view about the semiotics of Bitcoin is the embracement of a monetary pragmatics: Bitcoin enthusiasts make the move from discourse to practice in their insistence that privacy, labor, and value are ‘built into’ the currency’s networked protocols. This semiotics replays debates not just about privacy and individual liberty, but about the nature of money, as a material commodity or chain of credits.
...
We characterize Bitcoin’s semiotics as a ‘practical materialism’, which in turn is expressed via a digital metallism. We borrow these terms from the theorist of money Geoffrey Ingham’s (2004) coinage ‘practical metallism’. Ingham uses this phrase to refer to the discursive work of commodity money theories in “naturalizing the social relations of credit that constitute money.” The discursive politics of Bitcoin involves a similar foregrounding of materiality and backgrounding of credit relations. Despite the supposed immateriality of digital bits of information (Blanchette 2011), matter itself is very much at issue with Bitcoin, both in how it is conceptualized and in how individual Bitcoins are ‘mined.’”

“Inside the operations of the Bitcoin code lies a sociality of trust that is alternately expressed and obscured by a practical materialism with two components: concerns about privacy and concerns about value. Bitcoin’s practical materialism allows the chatter in the code, the proof of work, the materiality of the machines humming and whirring in mining rigs to be simultaneously backgrounded and foregrounded. This is not simply commodity fetishism. The code and the labor are backgrounded when Bitcoin adherents become latter-day goldbugs… From this perspective, Bitcoin represents a promise like any other money form, but a promise underwritten and backed by an algorithm and its manifestation in a digital peer-to-peer network.”

“In detecting in Bitcoin an economic argument about the money supply, inflation, government, and the inherency of value, enthusiasts again trace the outlines of a practical materialism, in which the meaning of Bitcoin can be found hardwired into its code. That which makes Bitcoin meaningful– that is, its value — is specifically that which is intrinsic to it.”

“Bitcoin is meaningful and valuabe not so much as an actual complementary or alternative currency, but instead as an index of much broader discussions over the nature of money, credit and capital in the world today. The monetary value of Bitcoin rests as much in the future potential that its users imagine for it as on its current, relatively limited capacity to act as a medium of exchange. Similarly, its semiotic value grows out of the aspirations of Bitcoin adherents.”
...
“The point is not whether Bitcoin ‘works’ as a currency, but what it promises: solidity, materiality, stability, anonymity, and, strangely, community. Indeed, in its endeavor to cut out intermediaries with the capacity to direct or limit the flow of funds among users and instead build a networked world of individual nodes able to exchange directly and ‘freely’ with one another, Bitcoin combines a practical materialism with a politics of community and trust that puts the code front and center.”

Ok, so after seeing the almost incessant carrying on about Jalapenos being shipped before Little Singles/Singles/Minirigs/the kitchen sink as well as people complaining that it has taken so long for BFL to deliver anything, I've decided to write this blog entry in the hope it might get a few more people to understand why we are at the point we are today.

First up, I work(ed) in IT, doing all sorts of things from helpdesk to business analysis and project management. I have worked as a coder, designer, script following helldesk monkey, 2nd/3rd level support and resolution, system architect and a whole pile of other things. I have managed projects that have gone well, and projects that have been complete disasters. I have applied what I have learned to how I've seen things progress at BFL and below is what I think has caused the delays and issues we have seen. These are my own opinions, based largely on what I've seen on these forums, in the shoutbox, on grnbrg's twitter feed and on IRC.

First up, we have the product. Development of a dedicated device using non standard parts to mine bitcoins faster than anything else that currently exists while using less power than anything that has come before it to do the same task. BFL has had some experience doing similar, develping a dedicated device that mines bitcoins using an FPGA as the core processor. Faster and more efficient than a GPU, but really little more than a cut-down developer board for the same chip that many other devices use in the world. Requires development of a nifty little case, custom board and some firmware to run the thing. Total requirements: Engineer to make the box, electrical engineer and/or computer scientist to work on the FPGA, firmware and board design. Potential risks of supply are minimal, risks of the FPGA being unsuitable are minimal as it can be reprogrammed easily. SHA-256 engine design can be purchased from 3rd party, further minimising timeframe.

Lets now look at the ASIC. Also requires a nifty case (easy). Requires redesign of engines to take full advantage of ASIC design and minimise power consumption while maximising hashing output (difficult). Requires board to host ASICs, which is dependent on design of the ASIC itself and can not really be done beforehand. Requires firmware to run the whole thing (easy) however this requires at the very least an idea of the board design and ASIC specifications.

Critical path: develop ASIC, develop board, develop firmware.

This is what BFL has pretty much done. The original timeline for the project may have been about four or so months, assuming preorder was when the project kicked off. Where things became unstuck was when things went wrong.
ASIC and board design can to an extent be run in parallel, once you know the physical shape and number of pins on the ASIC, as well as what the pins will do (power, data, ground). This would have been going along just fine, until it turned out that QFN packaging was unsuitable for the ASIC that had been designed due to overheating. I'd guess a crisis meeting would have taken place which would have discussed options on how to proceed, such as:
cancel orders, refund everything and stop the project
proceed with QFN design of ASIC and lose the targets on power consumption and hash rate
replace QFN design with something else (BGA) that will overcome the physical constraints.
design a whole new ASIC that will work with QFN packaging.

All options would have had their drawbacks. Cancel orders and refund everything would probably have meant the end of BFL, if not at the time in the future when competitors developed working designs. Not to mention the loss of reputation. Proceeding with the QFN design would allow a product to market sooner, however it would be well below promised spec (cue class actions, refunds, whinging, mayhem, etc). Replacing the QFN design would require a rework of the current wafers (if even possible) and a complete rework of the board design. Any existing boards would be useless and money would be lost on any parts that could no longer be used, as well as requiring additional time to repeat the development processes. Designing a whole new ASIC to use the existing QFN packaging would take even longer, have no guarantee of success and might not have even been possible with the technology available.

BFL proceeds with the change in chip design. Existing board design is thrown out the window and started again, although many chunks could be reused. New boards need to be ordered from the supplier, and new chips need to be fabricated. Decision needs to be made on how to test the modified/new wafers, testing before cutting and mounting will cost an entire wafer, but will be faster than waiting the whole time for the foundry to do its thing. Foundry and other external suppliers already have existing commitments and will only go as fast as they choose to, no matter what BFL does. Time progresses and finally after almost having to restart the project from scratch (or at least half way through), a product is finally built. It gets tested, but doesn't perform to spec. Power requirements are a lot higher than predicted for the promised hashrate. This is bad news for the Jalapeno line which is suppose to be USB powered.

Further crisis meetings occur, except this time for the boards. Testing shows the USB powered jalapeno will not work, it just pulls too much power. Parts of the board are getting hotter than they should and nobody can figure out why without doing even more testing, all of which takes more time. The USB powered jalapeno is scrapped and the little single external powered design is used instead, just with fewer lower spec chips. This will cost more but at least it will work. Boards are reworked to suit
Little Single, Single and MiniRig designs are determined to require a redesign of board to support more chips run at lower clock rate. (Not having more information available, I'd guess this is to do with inefficiencies and heat generation when running the ASICs at the highest possible speed). This means yet another board redesign, not to mention further fabrication, sourcing and all that is involved with essentially making a whole new product.

Instead of the original four month timeline, the project has now blown out by a factor of two with the board and ASIC redesign. Add to that delays with the production of the chips (at least another month) and discovering the end product still did not meet original design specifications (a month or more on trying to get the power issue under control). Doubling the project timeframe brings us to February 2013, adding two and a half more months, to April/May 2013. Now add the discovery that a whole new board is needed (add another month, the longboard looks like two shortboards stuck together so redesign should be faster) and you get to June 2013. The Jalapenos, while no longer USB powered, fundamentally work at the hashrate promised. BFL is now way over their original timeframe.

What do they do?

Left, right and center you have people, customers and competition calling you a scam. Customers are asking for refunds or completed products. There is only one way out of a situation like this if you want to survive and that is to deliver what you have got, even if it isn't the whole end product. Therefore, BFL starts shipping Jalapeno units, even though the LS/S/MR aren't ready yet. The competition is already shipping product and new competitors are on the horizon, so it is the only way to claw back market share and restore some semblance of customer faith. By shipping the Jalapenos you silence the people screaming scam, and also put a product out to market that will attract more customers, as higher order numbers ensure you can order larger batches from suppliers and get them more quickly. It also ensures that customer complaining is tempered by those who now have devices to hash with. While proceeding with Jalapeno production and shipping, continue work on the MR as higher priority (as cancelled orders of these will hurt a lot more), followed by Single then Little Single.

Contacted.

EDIT: That was quick. He responded.

Hi guys,

Cyrus Farivar here with Ars Technica. We're working on two stories about BFL from two angles. My colleague Lee Hutchinson is doing the hardware side (yes, we have a Jalapeño! and yes, we're sorry that those of you that paid actual money for it haven't gotten one yet!).

See: We?ve got a Butterfly Labs Bitcoin miner, and it?s pretty darn fast | Ars Technica

I'm working on a story about the business side of things. I've spoken with some of the BFL execs and a few other related folks and am working on a piece about BFL as a company. I'd love to hear from folks that have put in orders, have received orders, are considering ordering, whatever. Anyone who has anything to say about the company.

Email me:

cyrus.farivar@arstechnica.com

Thanks!

-C