Why Butterfly Labs (BFL) might be a Ponzi scheme

[crazyquark]

Hello fellow miners,

According to my limited info on ASIC building, it can cost at least 250k $ to make one of these units but they are selling them at 274$!

Now FPGA mining made a lot more sense - sensibly priced hardware, mass produced, programmable for custom purpose - power consumption - not so great.

My point simple: given how much it costs to build ASIC chips(no matter how brilliantly efficient they might be) they probably only gathered enough funds to manufacture a portion of the ones ordered.

So they will ship a couple of units every week to appease the masses. In the mean time, people will continue pre-ordering(all sales final!); they will keep up this rhythm until they hit their profit target or they get bored or the supply drops  - at that point, after having smartly moved their profits to offshore accounts along the way they can file from bankrupcy and skip town, not delivering one more single unit.

Call me paranoid, but this scheme makes sense and I see no reason why they could build ASICs for only 274$ - unless they have their own factory??

[ma_rine_sa]

i think the consensus is that you are giving bfl too much credit by saying they managed to conjure up a ponzi scheme...

incompetent yes, but not a ponzi scheme.

[piit79]

I'm not saying BFL is definitely not a ponzi but I think it's certainly possible to build the mining rigs that cheap on a large scale.

As far as I know the greatest expense by far when dealing with ASICs is the design process. (Amounts in the order of $1M were mentioned.) Once that is done the mass produced chips can be cheap as, well, chips

[r3animation]

Hello fellow miners,

According to my limited info on ASIC building, it can cost at least 250k $ to make one of these units but they are selling them at 274$!

Now FPGA mining made a lot more sense - sensibly priced hardware, mass produced, programmable for custom purpose - power consumption - not so great.

My point simple: given how much it costs to build ASIC chips(no matter how brilliantly efficient they might be) they probably only gathered enough funds to manufacture a portion of the ones ordered.

So they will ship a couple of units every week to appease the masses. In the mean time, people will continue pre-ordering(all sales final!); they will keep up this rhythm until they hit their profit target or they get bored or the supply drops  - at that point, after having smartly moved their profits to offshore accounts along the way they can file from bankrupcy and skip town, not delivering one more single unit.

Call me paranoid, but this scheme makes sense and I see no reason why they could build ASICs for only 274$ - unless they have their own factory??

I think you're mixing up developing and producing.

[Wepp]

imagine it like a printing press. it takes hundreds of thousands of dollars and lots of time to build and lay out the press, but the pages it prints - the chips - are cheap and quickly produced from the expensive machine. what happened was they spent the huge amount of investment money that it takes to begin fabricating chips only to discover after receiving the first batch that they run too hot. so hot, in fact, that they basically melt the surrounding materials on the board.

i'm not making this up. there was a wired article posted with an interview of josh from bfl.

[crazyquark]

Understood. But do you think they will be able to cover their production costs while shipping all the requested units?
Can you link that wired article?

[Wepp]

Understood. But do you think they will be able to cover their production costs while shipping all the requested units?

No idea beyond speculation at this point.

Can you link that wired article?

Sure! Here it is:
http://www.wired.com/wiredenterprise/2013/04/bitcoin-mining-rigs/

[maqifrnswa]

Understood. But do you think they will be able to cover their production costs while shipping all the requested units?
Can you link that wired article?

It think your estimates are a bit off in the original post:

The marginal cost of each chip is probably ~$1-5. They PCB boards, assembled, are probably $20-30. Enclosures, $10-20. Power supply, fans = $10-20. Box = $1-5.

So a Jally cost around $60 to make (marginal cost, probably throw some assembly labor on that as well). They are selling for $274. Their profit margin might be around 400-500% per jally. The cost of making the little single/single is only slightly more (orders of 10s to 200 dollars but they charge 1000 more) - so you can see close to 1000% profit margins. That's what they can use the recoup their initial investment

[minternj]

When i woke up i said to myself i wish someone would post another bfl is a scam thread. And hey i got my wish.

[centove]

When i woke up i said to myself i wish someone would post another bfl is a scam thread. And hey i got my wish.

Kinda a no brainer? Other easily fulfilled wishes.. I wish someone would post yet another 'bit coin is gonna crash' or 'Bitcoin is flawed!'

[Phinnaeus Gage]

When i woke up i said to myself i wish someone would post another bfl is a scam thread. And hey i got my wish.

It's called "Keeping up with the Avalons".

Which begs the question, how long before BFL starts selling only the chips?

[Luno]

Their latest picture of the Jalapeño boxes on a trolley is sad in the sense that they have wasted time and money putting nice graphics on them. Like taking an expensive empty machined housing with fans to an electronics fair!

[Phinnaeus Gage]

Their latest picture of the Jalapeño boxes on a trolley is sad in the sense that they have wasted time and money putting nice graphics on them. Like taking an expensive empty machined housing with fans to an electronics fair!

I'm willing to bet that the graphics on the boxes for the now defunct MiniRigs is totally awesome.

I'm curious as to what the content consist of on the Jalapeno's boxes.

I'm also curious as to what the UL, FCC, and CE labels look like attached to machines not sent out as dev units. I'm sure those look awesome as hell.

I just checked again the FCC website, and still nothing resembling BFL, or the like, has grace their labs.

Amazing how I can get an SR22 for three years because a woman falsely claims I pulled out in front her, yet a felon is able to continue breaking the law without suffering any repercussions.

[mojod]

Their latest picture of the Jalapeño boxes on a trolley is sad in the sense that they have wasted time and money putting nice graphics on them. Like taking an expensive empty machined housing with fans to an electronics fair!

I'm willing to bet that the graphics on the boxes for the now defunct MiniRigs is totally awesome.

I'm curious as to what the content consist of on the Jalapeno's boxes.

I'm also curious as to what the UL, FCC, and CE labels look like attached to machines not sent out as dev units. I'm sure those look awesome as hell.

I just checked again the FCC website, and still nothing resembling BFL, or the like, has grace their labs.

Amazing how I can get an SR22 for three years because a woman falsely claims I pulled out in front her, yet a felon is able to continue breaking the law without suffering any repercussions.

https://plus.google.com/u/0/photos/110174663470490530041/albums/5870611557972117729

Completely absent. Now you can call the FCC ID police on them.

[Phinnaeus Gage]

Their latest picture of the Jalapeño boxes on a trolley is sad in the sense that they have wasted time and money putting nice graphics on them. Like taking an expensive empty machined housing with fans to an electronics fair!

I'm willing to bet that the graphics on the boxes for the now defunct MiniRigs is totally awesome.

I'm curious as to what the content consist of on the Jalapeno's boxes.

I'm also curious as to what the UL, FCC, and CE labels look like attached to machines not sent out as dev units. I'm sure those look awesome as hell.

I just checked again the FCC website, and still nothing resembling BFL, or the like, has grace their labs.

Amazing how I can get an SR22 for three years because a woman falsely claims I pulled out in front her, yet a felon is able to continue breaking the law without suffering any repercussions.

https://plus.google.com/u/0/photos/110174663470490530041/albums/5870611557972117729

Completely absent. Now you can call the FCC ID police on them.

To be fair, I'll consider the dev units may not need them, albeit possibly a grey area in the eyes of the FCC, but nevertheless.

But as soon as one regular customer shows similar images of their unit sans labels, I'll make contact with the FCC and show the best proof possible that I did such.

[mojod]

Their latest picture of the Jalapeño boxes on a trolley is sad in the sense that they have wasted time and money putting nice graphics on them. Like taking an expensive empty machined housing with fans to an electronics fair!

I'm willing to bet that the graphics on the boxes for the now defunct MiniRigs is totally awesome.

I'm curious as to what the content consist of on the Jalapeno's boxes.

I'm also curious as to what the UL, FCC, and CE labels look like attached to machines not sent out as dev units. I'm sure those look awesome as hell.

I just checked again the FCC website, and still nothing resembling BFL, or the like, has grace their labs.

Amazing how I can get an SR22 for three years because a woman falsely claims I pulled out in front her, yet a felon is able to continue breaking the law without suffering any repercussions.

https://plus.google.com/u/0/photos/110174663470490530041/albums/5870611557972117729

Completely absent. Now you can call the FCC ID police on them.

To be fair, I'll consider the dev units may not need them, albeit possibly a grey area in the eyes of the FCC, but nevertheless.

But as soon as one regular customer shows similar images of their unit sans labels, I'll make contact with the FCC and show the best proof possible that I did such.

And on that day I will call you a boner biter.

[Minor Miner]

Their latest picture of the Jalapeño boxes on a trolley is sad in the sense that they have wasted time and money putting nice graphics on them. Like taking an expensive empty machined housing with fans to an electronics fair!

I'm willing to bet that the graphics on the boxes for the now defunct MiniRigs is totally awesome.

I'm curious as to what the content consist of on the Jalapeno's boxes.

I'm also curious as to what the UL, FCC, and CE labels look like attached to machines not sent out as dev units. I'm sure those look awesome as hell.

I just checked again the FCC website, and still nothing resembling BFL, or the like, has grace their labs.

Amazing how I can get an SR22 for three years because a woman falsely claims I pulled out in front her, yet a felon is able to continue breaking the law without suffering any repercussions.

Well they sent one over to Wired for him to review, why not just email the reporter all your concerns and let him do the job he is paid to do and investigate?

[MPOE-PR]

Well they sent one over to Wired for him to review, why not just email the reporter all your concerns and let him do the job he is paid to do and investigate?

Paid by whom?

[Minor Miner]

Well they sent one over to Wired for him to review, why not just email the reporter all your concerns and let him do the job he is paid to do and investigate?

Paid by whom?

The reporter that is reviewing the product is on WIRED's (it is a magazine) payroll.   He is not a freelancer.

[MPOE-PR]

Well they sent one over to Wired for him to review, why not just email the reporter all your concerns and let him do the job he is paid to do and investigate?

Paid by whom?

The reporter that is reviewing the product is on WIRED's (it is a magazine) payroll.   He is not a freelancer.

Cool story bro.