Miners, Consumer Protections (UCC), and Pre-orders

[Blueberry408]

I don't see the time since order 1 as unreasonable in the slightest. Others in the industry would tend to agree, especially given that bfl ain't exactly a multinational all in one house.
IMHO.

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[minternj]

Forgive me as I am a layman, but how can you establish that any "profit" is lost. I say this because mining for bitcoin is not a guaranteed undertaking. If someone purchased a 5 ghz miner from widgetco and tried to solomine, it is almost certain he would,never mine any bitcoin. did widgetco ever promise their products to make you bitcoins? Widgetco only promises the chance to, and that chance is not at all established as there are many variables.

If widgetco sold shovels, and didn't deliver can you sue them for  lost of profit on crops, gold, constructin( etc various uses of a shovel).

I'd be very curious to follow any of these case if they ever come to fruition.

[minternj]

To add to my train of thought, I'd like to add this. Whenever someone not bitcoin savy asks me about bitcoin mining, I tell them that its very much like buying a lottery ticket. They more hash rate you hold, the more tickets you have.

So, question is, if you were in a lottery pool, and you gave person A money every month to buy tickets, and you find out a year later he never did. What are you entitled to? The price of the tickets, or the lottery jackpot for every jackpot missed?

[drlukacs]

To add to my train of thought, I'd like to add this. Whenever someone not bitcoin savy asks me about bitcoin mining, I tell them that its very much like buying a lottery ticket. They more hash rate you hold, the more tickets you have.

Couple of ways of proving damages.

First of all, there are many Pay-per-Share (PPS) pools, such as 50BTC or deepbit. There, you are being paid exactly based on the number of shares that you submit [which is in direct proportion to your hash power], and not based on your or the pool's luck.

Second, as I mentioned earlier, the proof has to be only on balance of probabilities, not beyond reasonable doubt. So, especially if we are talking about a length period of many months, the Central Limit Theorem (http://en.wikipedia.org/wiki/Central_limit_theorem) does provide a high probability estimate of the sum of the wins/loses.

Membership in a large pool significantly decreases the variance (standard deviation) as well.

I warmly recommend the paper by Meni on the various pool reward systems, which also explains these issues from a probabilistic point of view: https://bitcoil.co.il/pool_analysis.pdf

So, question is, if you were in a lottery pool, and you gave person A money every month to buy tickets, and you find out a year later he never did. What are you entitled to? The price of the tickets, or the lottery jackpot for every jackpot missed?

Neither. What you are entitled to (if there were sufficiently many draws during the time that the person failed to buy tickets, and so the Central Limit Theorem applies), is the expected value of this process: It is the sum of the probability to win on a given draw times the amount that one can win on that given draw.

A much better example would be loss of use of a taxi or a (self-employed) lawyer's inability to work for a month due to an accident. While one cannot exactly predict how much money they would have made, their historic income/revenue can be and is often used to approximate that, if there is no other reason to believe that their income would have been different.

[minternj]

So you say that in the lotto case damages are defined/quantified as " the sum of the probability to win on a given draw times the amount that one can win on that given draw." If this is true then the probabilities to win the coin are horrendous for non pool mining. I couldnt see that netting a very large income stream lost using that as a measure.

Lets say we can quantify bitcoin mining earnings as income. However in the case of the taxi driver or lawyer, they are performing a service industry job that has a standard pay scale(for the most part).  A Bitcoin miners' future income with all things staying constant will drop over time through reward halving, difficulty rises, maybe even changes in bitcoin code.

BTW, is there precedence for using central limit theorem in a case involving damages for lost income? If so please post the case. i'm  interested how it would be argued/defended and decided.

[drlukacs]

So you say that in the lotto case damages are defined/quantified as " the sum of the probability to win on a given draw times the amount that one can win on that given draw." If this is true then the probabilities to win the coin are horrendous for non pool mining. I couldnt see that netting a very large income stream lost using that as a measure.

The probability over a short time is low, indeed. But the expected value is the same whether or not you participate in a pool. What pools do is they decrease the variance if your mining capacity is much smaller than the pool's. On other words, pools make the income stream more even. But they do not substantially alter the expected value (average) of the BTC. Again, I strongly suggest that you read Meni's paper on this, if you have the background to understand the math.

Lets say we can quantify bitcoin mining earnings as income. However in the case of the taxi driver or lawyer, they are performing a service industry job that has a standard pay scale(for the most part).  A Bitcoin miners' future income with all things staying constant will drop over time through reward halving, difficulty rises, maybe even changes in bitcoin code.

You are confusing loss of past income with loss of future income. In the case of bitcoin, if someone was unable to mine in March 2013, we know exactly what her/his losses are per lost Gh/s mining capacity, because we know who much the average reward is (either in PPS or in a reasonably large mining pool), the same way we know the lost past income of a taxi driver whose cab breaks down.

Lost future income is far more tricky for BTC. So, it is quite possible that one may be able to obtain compensation only from the required date of delivery to the date of judgment, and a judge may refuse to award damages for future lost income. But that also depends on the details of the case.

BTW, is there precedence for using central limit theorem in a case involving damages for lost income? If so please post the case. i'm  interested how it would be argued/defended and decided.

You may want to look up Benford's Law. It is a statistical principle for detecting forensic fraud, in a way quite similar to the central limit theorem. As far as I know, it was used in numerous court cases as evidence of fraud.

[k9quaint]

Calculating expected past performance in BTC of a mining device should be trivial. A 5GH/s device will produce a low variance stream of diff 1 shares. Each difficulty time period is discrete and one need only multiply the expected shares for that time period times the PPS rate for that period. PPS rates are based on difficulty and the fee charged by the pool, so it should be easy to generate them for any difficulty time period. In fact one could probably just ask BTCGuild and get the history of PPS rates for that pool over the last 8 months.

It sounds like the simplest consequential damages from Widgetco would be the BTC that would have been mined. BTC are readily obtainable, so it shouldn't be an issue to ask for them as damages.

[drlukacs]

BTC are readily obtainable, so it shouldn't be an issue to ask for them as damages.

This is one thing that I am not sure that I agree with. "An eye for an eye, a tooth for a tooth" is no longer how courts work. But it is certainly reasonable to be asking for the dollar equivalent of the amount of bitcoin that one could have made during that period. The only question is what exchange rate should be used. (But this issue can arise also in the case of a contract in a foreign currency, and each jurisdiction has its way of dealing with conversion of damages to local currency.)

[Biomech]

If you were unhappy with your pre-order not making you any money between then and now, you could have asked for a refund.

 With all due respect, and I know you have done a great job in running the Twitter feed and keeping the community up-to-date, you are a shill. A paid-for-and-bought shill. Tell Ivan I say "Hi."

 Forgive me for adding you to my ignore list. I would recommend you return to the safety and sanctity of your Butterfly Labs shout-box and continue to drink the koolaid with it's participants.

Regardless of the merit of the above statement, grnbrg is correct. The court would only award damages from the time of actual delivery, as substantiated by other deliveries. My wife is a lawyer, so I asked.

[drlukacs]

Regardless of the merit of the above statement, grnbrg is correct. The court would only award damages from the time of actual delivery, as substantiated by other deliveries. My wife is a lawyer, so I asked.

I am afraid you got something wrong. No reasonable person would expect damages for the time after it was delivered.  So, I am not sure what you mean by "time of actual delivery" in this context.

[Biomech]

Regardless of the merit of the above statement, grnbrg is correct. The court would only award damages from the time of actual delivery, as substantiated by other deliveries. My wife is a lawyer, so I asked.

I am afraid you got something wrong. No reasonable person would expect damages for the time after it was delivered.  So, I am not sure what you mean by "time of actual delivery" in this context.

I hurt my hand, so it's hard to type. Tried to be brief and failed. You cannot compute the damages specifically until the units actually are being delivered unless the mfgr. actually GUARANTEED a delivery date. From the point they actually start delivering, you could. If they breached the contract with you then that would be a reasonable starting point for your computations.

Now you might be able to infer damage due to lost opportunity prior to that, but it would be a separate issue.

I need speech to text, dammit. This hurts

[minternj]

You are confusing loss of past income with loss of future income. In the case of bitcoin, if someone was unable to mine in March 2013, we know exactly what her/his losses are per lost Gh/s mining capacity, because we know who much the average reward is (either in PPS or in a reasonably large mining pool), the same way we know the lost past income of a taxi driver whose cab breaks down.

Lost future income is far more tricky for BTC. So, it is quite possible that one may be able to obtain compensation only from the required date of delivery to the date of judgment, and a judge may refuse to award damages for future lost income. But that also depends on the details of the case.

BTW, is there precedence for using central limit theorem in a case involving damages for lost income? If so please post the case. i'm  interested how it would be argued/defended and decided.

You may want to look up Benford's Law. It is a statistical principle for detecting forensic fraud, in a way quite similar to the central limit theorem. As far as I know, it was used in numerous court cases as evidence of fraud.

drlukacs, i was actually referring to future income in the case that the company never delivers. I did meld those two scenarios together though. Excuse me, as I tend to type freely on forums as thought come to mind, and rarely proofread.

I'm still not sold on the ability to demonstrate that bitcoin mining is a guaranteed income that is quantifiable. I have quite a few ways to argue against that.

Thanks for the reference,  I'll look into Beford's law when i get some time.

[drlukacs]

I hurt my hand, so it's hard to type. Tried to be brief and failed. You cannot compute the damages specifically until the units actually are being delivered unless the mfgr. actually GUARANTEED a delivery date. From the point they actually start delivering, you could. If they breached the contract with you then that would be a reasonable starting point for your computations.

You probably missed the discussion about what the UCC says on delivery times.

It really boils down to whether the delay is within what a judge/jury will view as reasonable.

In the case of a contract, the delivery is guaranteed. You cannot make a contract and accept payment for an uncertain delivery, unless the contract explicitly sets out the conditions in which you do not have to deliver or do not have to deliver within a reasonable amount of time.

When you promise to deliver, say, by October, that is part of the terms of the contract. So, damages start on November 1, and certainly last until they deliver the item.

If there is no delivery at all, that is a bit different question. In terms of the market value of the item, the price for which such items are sold speaks to that too:

http://www.ebay.com/itm/261224738700?ssPageName=STRK:MEWAX:IT&_trksid=p3984.m1423.l2649

[Biomech]

I hurt my hand, so it's hard to type. Tried to be brief and failed. You cannot compute the damages specifically until the units actually are being delivered unless the mfgr. actually GUARANTEED a delivery date. From the point they actually start delivering, you could. If they breached the contract with you then that would be a reasonable starting point for your computations.

You probably missed the discussion about what the UCC says on delivery times.

It really boils down to whether the delay is within what a judge/jury will view as reasonable.

In the case of a contract, the delivery is guaranteed. You cannot make a contract and accept payment for an uncertain delivery, unless the contract explicitly sets out the conditions in which you do not have to deliver or do not have to deliver within a reasonable amount of time.

When you promise to deliver, say, by October, that is part of the terms of the contract. So, damages start on November 1, and certainly last until they deliver the item.

If there is no delivery at all, that is a bit different question. In terms of the market value of the item, the price for which such items are sold speaks to that too:

http://www.ebay.com/itm/261224738700?ssPageName=STRK:MEWAX:IT&_trksid=p3984.m1423.l2649

You're right, I did miss some of it. Thought I had read the entire thread Ah well, live and learn.

[pizza]

You do realize that was not "Hur, hur, hur, get a refund, then!", right?

You were talking about calculating your potential earnings from November 2012 to the present.  My point is that you could have asked for a refund at any time within that period, but didn't.  So I don't think you would be entitled to "damages" within that timeframe.  And that those damages would be zero in any respect.  I suspect that earnings calculated for a 12 month period after you would have received your orders would still be quite substantial, and are a much more justifiable target for damages.

And lastly (and as a non-lawyer), while I personally think BFL probably has the legal right to act as they have, it was a shitty thing to do, and they should not have.  But on the other hand, you appear to have worked very hard to make it happen.



grnbrg.

PS:  Ivan says "Hi." back.  Or something like that. 

Ohh look its Grnbrg the penis taker of BFL, finally made an account here instead of bashing every naysayer on bfls forums.

[drlukacs]

pizza: While we may not all agree with the views presented here, the goal if this threat is to have a discussion without any ad hominem.

[leopard2]

so from that auction it looks like a 5Gh Asic miner today, is worth 30 times its original price in USD

I believe the Avalons sold for 30 grand or so. Any discussion about mining revenue is irrelevant, Asic miners are worth their weight in gold.  

Xian's loss amounts to roughly 25-30 times what he paid originally (around 4000$?) so he is looking at over 100k in damages - I can understand that he is upset. His tone towards BFL was not acceptable, that is clear, but the question is: why did BFL not warn him before cancelling his orders, knowing that this would be the equivalent of a 100k penalty.  

And I can't believe there are people out there saying that he got his money back, where is the problem ...

[drlukacs]

so from that auction it looks like a 5Gh Asic miner today, is worth 30 times its original price in USD

I believe the Avalons sold for 30 grand or so. Any discussion about mining revenue is irrelevant, Asic miners are worth their weight in gold.  

Both factors are relevant: both the current market value of ASIC miners and also the lost revenue are relevant for determining damages.

Xian's loss amounts to roughly 25-30 times what he paid originally (around 4000$?) so he is looking at over 100k in damages - I can understand that he is upset. His tone towards BFL was not acceptable, that is clear, but the question is: why did BFL not warn him before cancelling his orders, knowing that this would be the equivalent of a 100k penalty.  

The warning makes no difference. Unacceptable tone is not one of the few legally acceptable reasons for not performing a contract.

[kuzetsa]

Xian's loss amounts to roughly 25-30 times what he paid originally (around 4000$?) so he is looking at over 100k in damages - I can understand that he is upset. His tone towards BFL was not acceptable, that is clear, but the question is: why did BFL not warn him before cancelling his orders, knowing that this would be the equivalent of a 100k penalty.  

The warning makes no difference. Unacceptable tone is not one of the few legally acceptable reasons for not performing a contract.

Missouri Revised Statutes Chapter 400 Uniform Commercial Code  Section 400-002.106

Definitions--"contract"--"agreement"--"contract for sale"--"sale"--"present sale"--"conforming" to contract--"termination"--"cancellation".
400.2-106. (1) In this article unless the context otherwise requires "contract" and "agreement" are limited to those relating to the present or future sale of goods. "Contract for sale" includes both a present sale of goods and a contract to sell goods at a future time. A "sale" consists in the passing of title from the seller to the buyer for a price (section 400.2-401). A "present" means a sale which is accomplished by the making of the contract.

(2) Goods or conduct including any part of a performance are "conforming" or conform to the contract when they are in accordance with the obligations under the contract.

(3) "Termination" occurs when either party pursuant to a power created by agreement or law puts an end to the contract otherwise than for its breach. On "termination" all obligations which are still executory on both sides are discharged but any right based on prior breach or performance survives.

(4) "Cancellation" occurs when either party puts an end to the contract for breach by the other and its effect is the same as that of "termination" except that the cancelling party also retains any remedy for breach of the whole contract or any unperformed balance.

I'm really not sure what it means:

"agreement"

Does it mean that a warning or threat is an agreement?

If not, then I agree:

--- snip --- (see below)

"I don't like your attitude" is not a valid reason to terminate or cancel a contract under the laws (Missouri) which apply to BFL's offices. (not sure if kansas allows this)

Edited to add:

I don't believe there was any contract saying "buyer must not say things using a tone which we arbitrarily decide is offensive"

If that sort of language was in the contract / original purchase agreement, then BFL has every right to cancel.

I'm not aware of any relevant language in the purchase agreement or contract, so there was no breach.

Edited again:

Guess I was wrong.

BFL is located in Leawood, Kansas.

It confused me because the BFL staff occasionally makes generic references to kansas city (but they ACTUALLY meant Leawood, Kansas... which is a suburb of Kansas City right on the state line... kansas city itself is in Missouri, but for jurisdiction purposes these things matter so much they might as well be in canada or something. Kansas laws are nowhere near as easy to make sense of as Missouri law)

[centove]

Guess I was wrong.

BFL is located in Leawood, Kansas.

It confused me because the BFL staff occasionally makes generic references to kansas city (but they ACTUALLY meant Leawood, Kansas... which is a suburb of Kansas City right on the state line... kansas city itself is in Missouri, but for jurisdiction purposes these things matter so much they might as well be in canada or something. Kansas laws are nowhere near as easy to make sense of as Missouri law)

Kansas City is in both Kansas and Missouri.
https://maps.google.com/maps?q=kansas+city+kansas&ll=38.505191,-94.449463&spn=6.567067,9.063721&hnear=Kansas+City,+Wyandotte,+Kansas&gl=us&t=h&z=7