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Author Topic: Butterflylabs Huge SCAM  (Read 375392 times)
ZenInTexas
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October 09, 2012, 05:03:43 AM
 #121

It's a "law of demand" problem.  If they were keep the chips for their own mining purposes, eventually some other company will start selling ASIC devices.  It would be a huge risk on their part to spend so much money on R&D, with the variables of increasing block difficulty, the volatile BTC/USD exchange rate and a sure certainty that the BTC reward will drop to 25BTC per block.  The only near perfect way for them to make money from spending on R&D is to release their product before anyone else does.

As it is, the competition will probably release a similar product within a month or so of the updated BFL Novemeber 2012 release date.

I don't know what they have spent so far on the fabbing the sASIC, PCB board design, PCB runs, case, power supplies, cables, fans, heat sink, etc but I would imagine it's fairly high to be sitting on all those costs.  I am sure they want to clear the interest & debit they ran up in the design process and turn the pre-orders from a deferred item on the books to booked sales, so it shows up on the bottom line.  There is a saying, a booked sale is better than the possibility of a future loss.

Summary: Bitcoin mining & payment acceptance/currency exchange are the only legitimate revenue generating opportunities.  If you mine, invest in ASICs and go big to ensure profitability.  The long term viability of all other pure bitcoin businesses is questionable both from a legal and profitability outlook.
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Richy_T
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October 09, 2012, 01:49:11 PM
 #122

Yeah, one might as well ask why Ford bothers selling cars when they could just run them as Taxis.

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Jutarul
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October 09, 2012, 11:35:54 PM
 #123

Yeah, one might as well ask why Ford bothers selling cars when they could just run them as Taxis.
Like the arms industry, in the long run it is more beneficial to sell weapons to all parties. However, there is a short time when it may be more profitable to use those new powerful weapons you just developed and raid some countries**. Just saying...

** of course, in bitcoin the raid is performed on the mining community as a whole.

The ASICMINER Project https://bitcointalk.org/index.php?topic=99497.0
"The way you solve things is by making it politically profitable for the wrong people to do the right thing.", Milton Friedman
farlack
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October 10, 2012, 05:52:44 PM
 #124

I didn't read the entire thread, but did anyone put into play the fact that they're doing math on current day specs, when they should be doing math with the equation there will be... 10x mined every day, and put up for sale?

BitcoinINV
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October 10, 2012, 05:54:41 PM
 #125

I know for a fact they were contacted by the Dept of Justice, they are going to have to start giving up info soon.

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October 10, 2012, 06:38:46 PM
 #126

I know for a fact they were contacted by the Dept of Justice, they are going to have to start giving up info soon.

Please provide references to back this up. This is bigger accusation than any forum member's post.


noob_jul11
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October 10, 2012, 07:30:58 PM
 #127

Josh from Butterfly Labs @ Bitcoin Conference 2012   

          http://youtu.be/bT-smMzg54k

I'm sure you can find alot of videos of Bernie Madoff saying things along the lines of "We wanna get the ASICs in as many people's hands as possibly can to secure the network ..." or "We want to make everyone a rich man like myself".


Latest update from BFL for those of you that invested
https://forums.butterflylabs.com/showthread.php/104-Shipping-in-2-3-weeks
SgtSpike
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October 10, 2012, 07:46:00 PM
 #128

Josh from Butterfly Labs @ Bitcoin Conference 2012   

          http://youtu.be/bT-smMzg54k

I'm sure you can find alot of videos of Bernie Madoff saying things along the lines of "We wanna get the ASICs in as many people's hands as possibly can to secure the network ..." or "We want to make everyone a rich man like myself".


Latest update from BFL for those of you that invested
https://forums.butterflylabs.com/showthread.php/104-Shipping-in-2-3-weeks

And for those of you who do not want to read through that whole thread:

Quote from: BFL_Josh
So for an update on shipping times... As you might imagine, we get this question a lot. It seems like it would be a simple question to answer, but it's not. Let me describe the process so people can better understand why.


If you look at the current FPGA board in a Single or MiniRig, you'll see lots of capacitors, resistors, etc... about 350 little tiny parts attached to the board. Contrary to some of the conspiracy theories out there, all our boards are completely custom made, they aren't purchased from another manufacturer, etc... they are designed by us and made for us and us alone. As such, we are required to volume source every single part that goes on the board.


The ASICs are similar in so far as they also have nearly 350 components on each board. With the FPGAs, we sourced parts in the hundreds or low thousands at a time. For some of the ASIC parts, we are sourcing hundreds of thousands at a time which requires direct ordering & lead time dependancy from the respective manufacturers. However, for this first batch, we're mostly able to depend on available distribution stock from places like Mouser and DigiKey. Shortly after we get the first batch of everything in, we'll have our larger mega stockpiles arrive from other vendors and/or direct from the distributors, it's just the first batch that's going to be rough.


So, we've got he myriad distributors shipping thousands of little pieces to us, the PCB manufacturer sending us the bare PCBs, the HSF manufacturer sending the HSFs to us, the PSU manufacturer sending the PSU's to us, the case manufacturer sending the cases to us and most importantly, the fab sending the ASIC chips to us. All of these must arrive on time and as expected for everything to go off without a hitch. So far, so good.


When we made our announcement for shipping dates, we padded in some extra weeks in case of delays, and as we try to herd all these cats into one corral, our padding is slowly eaten up with mostly minor problems, but they all add up. With the bump in specs, we spent some time ensuring the power subsystem is over powered to accommodate the new and future power requirements - our chips are capable of higher speeds than what we initially intended to send out in the first batch, and they still have quite a bit of headroom; We decided to go ahead design the power subsystem to handle the maximum theoretical load of the chips. This means we can now crank the board up with some minor tweaking. Each chip is theoretically capable of operating at 1 GHz, we are running them at 500 MHz with the new specs... we will likely never see 1 GHz operations, simply because of heat density issues and a few other factors, but we have at least another 25% of headroom we can play with, if not more. Again, we built in a lot of padding into the specs, just in case something went wrong. We have basically padded everything we could in terms of estimates and that padding is what has allowed us to bump specs on short notice and keep our shipping times in line even in the face of delays.


Ok, so we have the cats herded, the specs staked out, now we have to actually build these things. As many of you know, we've purchased SMT machines to allow us to manufacture our own boards - and I have mentioned this before, but many have not heard it - we will not be using the SMT equipment to process our first batch of boards; we will be using the same house that did the pick and place for our previous generation products, which means we're still at the mercy of someone else for our first batch shipments. There has been some delays at that stage, but we have the padding, so it's not been a critical issue. There has also been some delays at the foundry, but again, we have padding, so it's not been a critical issue. We are also paying for an expedited run at the foundry (which does not come cheap) to keep our timeline up. All these things have to work out perfectly and our timeline is still looking good. However, if something does not work out perfectly, our timeline is going to slip, plain and simple. We've used up most of our padding at this point and we are still ironing out a few little wrinkles here and there. This has been a long explanation for a simple answer: I would like to tell you we are still on time or pretty close to it, because we are. However, I would also like to tell you that we are going to slip a couple weeks or so if anything goes wrong, and given the complexity of the issues facing us, I would say it's almost inevitable something will crop up between now and the beginning of November that we are not expecting; What that is, I don't know yet, but I would rather error on the side of caution, say the timeline is going to slip a little bit and then surprise everyone with an early delivery than promise an early delivery and not meet that promise. So that's what I'm doing and there's your answer. When I have more information, I'll let people know as soon as I can.
sun_tzu
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October 10, 2012, 10:15:19 PM
 #129

There are a lot of "legit" reasons why they do not mine with their own product.

1. They have capital investments, and that means they have capital investors that need returns at specific risk profiles. Building then using $10 million worth of machines is a HUGE risk to have for a company. Yes, it might work out, but it's not nearly as liquid as preselling machines for a price that reflects only a 7%-10% return when factoring the increase in difficulty rating and lowering of block sizes (to 25). They are probably locking in 40% on building and selling these things, and their investors are practically already paid for their (relatively) risky investment into a new venture.

2. "Competition risk": If you have the largest farm in the world, someone is going to try and copy/beat you. If that happens, the value of the BTC mined, as well as the ASIC's made would fall due to supply increases. By pre-selling these machines and not using them, they lock in their profits at a respectable level and have to put no more work into it.

3. Energy/Equipment/Land: These costs could be prohibiting them from producing a decent profit on the ASIC platform. I can bet you that their profits/KWH are higher just building and selling than mining and selling coins

4. Insurance: You have $10 million of breakable, unprotected ASIC chips clustered together to mine BTC. One bad accident can destroy the entire investment, and it is also probably very expensive to insure such items.

5. Taxes: If you sell ASIC platforms via bitcoins, they can be transferred anywhere in the world before being converted into currency. That's a great way to deposit funds into tax shelters to me (if you do it right). Plus, there is obfuscation of profits on items sold for any international currency (They can write off "losses").

6. Exchange rate risk: Just like gold, bitcoins are basically a reserve currency. They can be instantly traded into any other currency without having to worry about Forex/international shifts of the host. Imagine selling $10 million usd of ASIC's to find out that the currency of your home company has just gained 20% over the dollar overnight. In order to repatriate your income, you have to take an automatic 20% cut off the top... or wait until the possibility that the currency regains value. That's a huge risk, and all international companies have to take this into account if they are to be successful.

SgtSpike
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October 10, 2012, 11:23:56 PM
 #130

There are a lot of "legit" reasons why they do not mine with their own product.

1. They have capital investments, and that means they have capital investors that need returns at specific risk profiles. Building then using $10 million worth of machines is a HUGE risk to have for a company. Yes, it might work out, but it's not nearly as liquid as preselling machines for a price that reflects only a 7%-10% return when factoring the increase in difficulty rating and lowering of block sizes (to 25). They are probably locking in 40% on building and selling these things, and their investors are practically already paid for their (relatively) risky investment into a new venture.

2. "Competition risk": If you have the largest farm in the world, someone is going to try and copy/beat you. If that happens, the value of the BTC mined, as well as the ASIC's made would fall due to supply increases. By pre-selling these machines and not using them, they lock in their profits at a respectable level and have to put no more work into it.

3. Energy/Equipment/Land: These costs could be prohibiting them from producing a decent profit on the ASIC platform. I can bet you that their profits/KWH are higher just building and selling than mining and selling coins

4. Insurance: You have $10 million of breakable, unprotected ASIC chips clustered together to mine BTC. One bad accident can destroy the entire investment, and it is also probably very expensive to insure such items.

5. Taxes: If you sell ASIC platforms via bitcoins, they can be transferred anywhere in the world before being converted into currency. That's a great way to deposit funds into tax shelters to me (if you do it right). Plus, there is obfuscation of profits on items sold for any international currency (They can write off "losses").

6. Exchange rate risk: Just like gold, bitcoins are basically a reserve currency. They can be instantly traded into any other currency without having to worry about Forex/international shifts of the host. Imagine selling $10 million usd of ASIC's to find out that the currency of your home company has just gained 20% over the dollar overnight. In order to repatriate your income, you have to take an automatic 20% cut off the top... or wait until the possibility that the currency regains value. That's a huge risk, and all international companies have to take this into account if they are to be successful.
Good points.  I have one more to add:

7. They could not mine more Bitcoins than are produced per day on a sustained basis.  The sustainable amount of Bitcoins to be mined, by the time they have the ASICs ready to mine with, will be 3600/day.  But, they can't take 100% of that, because there are other miners.  Say they can take 90% of it.  Ok, 3,240 Bitcoins/day then.  That's about $1.16M/month.  Sounds all rosy and great, right?  Well, no.  If they had 90% of the hashing power of the Bitcoin network, and people knew that they did, the price would drop like a rock.  Suddenly, those 3,240 Bitcoins/day might only be worth $100/month.  So, they have a maximum percentage that they can mine, safely, without causing a confidence issue in the people buying Bitcoins.  I'd say they could mine no more than 25% of them without causing some serious confidence loss.  Now they're down to 900 Bitcoins/day, or about $324,000/month.  And they have a capital investment to recover, potentially up to $10M.  It'll take them almost 3 years to recover that capital investment at that rate, and that's assuming other players don't also come in to try and eat up a share of those profits.  Bottom line is, BFL attempting to mine is very risky, and doesn't look financially viable at all when you drill down to the details, despite it looking good on paper.
farlack
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October 11, 2012, 11:27:12 AM
 #131

You guys are still calculating math on current time prices. You're not adding to the table if there are 10x more coins for sale the price will drop, today you can get 11k for 1k bitcoins, after this launches, you might get 2k for 1k bitcoins.

FLHippy
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October 11, 2012, 11:28:53 AM
 #132

You guys are still calculating math on current time prices. You're not adding to the table if there are 10x more coins for sale the price will drop, today you can get 11k for 1k bitcoins, after this launches, you might get 2k for 1k bitcoins.

If thats what actually happens I'll be buying up those cheap coins like a madman.
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October 11, 2012, 11:44:44 AM
 #133

Quote
If thats what actually happens I'll be buying up those cheap coins like a madman.

+1

You and me both kid!
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October 11, 2012, 12:25:44 PM
 #134

You guys are still calculating math on current time prices. You're not adding to the table if there are 10x more coins for sale the price will drop, today you can get 11k for 1k bitcoins, after this launches, you might get 2k for 1k bitcoins.

That's not how it works. Difficulty adjusts to maintain a steady minting rate.

I'm just going to keep repeating "it's an Altera HardCopy" because I haven't the slightest clue what I'm talking about.
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October 11, 2012, 01:05:49 PM
 #135

Haters gon hate
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October 11, 2012, 04:17:23 PM
 #136

You guys are still calculating math on current time prices. You're not adding to the table if there are 10x more coins for sale the price will drop, today you can get 11k for 1k bitcoins, after this launches, you might get 2k for 1k bitcoins.
Difficulty will adjust so that the supply is still steady at 7200 (soon 3600) coins per day.  There will be a temporary influx in supply as ASIC miners come online, but no greater than we've already seen in the past.

It has been speculated that people will sell more of their coins to pay off their ASICs, though that is simply speculation as well.
HolyScott
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October 17, 2012, 09:17:16 PM
 #137

Guess we all find out the truth in a few weeks.
firefop
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October 18, 2012, 01:22:25 AM
 #138

Guess we all find out the truth in a few weeks.

That's probably the truest statement in this whole thread.
 Roll Eyes

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October 18, 2012, 01:36:36 AM
 #139

I'm with OP here, I think they may ship some ASICs but not most of them.

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October 27, 2012, 04:46:19 AM
 #140

I'm with OP here, I think they may ship some ASICs but not most of them.
i bet they ship 1/3rd of them!
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