Company Asks Bankruptcy Judge to Set Jan. 8 Deadline for OffersOfficials at Alydian want to begin taking offers for their new 36 bitcoin-mining rigs, which rapidly fell behind the technological power of competitors who are also trying to make money by unlocking the virtual currency.
In papers filed in U.S. Bankruptcy Court in Seattle, Alydian officials asked a judge to set a Jan. 8 deadline for offers on the company's bitcoin-mining rigs, which calculate algorithms for users trying to find the 3,600 bitcoins that are released into the currency's system each day.
The Bainbridge Island, Wash., startup said it has spent roughly $4 million on developing the mining technology. Alydian's mining rigs are occupying space within three Washington data centers, which have access to the electricity and powerful cooling systems that prevent the equipment from overheating.
Alydian officials didn't directly state a price for the mining rigs but said that the technology "may be sold for a minimum bid" of $2,000 per terahash, which is a measurement of a system's speed. Alydian said it has about 200 terahashes for sale, according to court papers.
Managing director Peter Vessenes said in court papers that the price of mining is falling, likely because of the recent drop in price for bitcoin itself.
"Market prices have dropped from $70,000-80,000 per [terahash] to $40,000 per [terahash] in the last few weeks," he told the court.
Under the proposed sale rules, buyers would be able to pay for their purchases using cash or bitcoins. Officials asked Bankruptcy Judge Karen Overstreet to look over the proposal to make sure that the deadlines are fair enough to promote competition.
Bitcoin miners check the time stamp of bitcoin transactions to make sure people aren't using the coins more than once or are spending bitcoins they don't have. The miners are rewarded with bitcoins that they come across in the process.
Last year, Alydian officials began building a large bitcoin-mining operation and found customers who offered to buy the bitcoins that would eventually be mined.
Yet, its fresh technology quickly became outdated. Alydian officials were surprised as competitors' speedier mining systems outpaced their technology, according to court papers.
Alydian also had to face more competition from bitcoin miners who cropped up as the currency grew in both value and acceptance. Some merchants now take bitcoin as payment.
In a November court document, Alydian said it had only mined about 3,041 bitcoins—not enough to fill customer orders. Officials told a judge they couldn't afford to buy bitcoins outright to give to customers because the price has risen so dramatically.
Bitcoins traded above $800 apiece on one index on Thursday morning, while Alydian had promised one customer that it could buy 5,000 bitcoins for about $7.36 each, according to court papers. Another signed up for 13,468 bitcoins at $7.42 per coin.
Alydian filed for Chapter 11 protection on Nov. 1 to try to get out of its customer contracts. Bankruptcy protection allows companies to break legally binding contracts with a judge's permission.
The bankruptcy filing caught the attention of the bitcoin community for its ties to CoinLab, which owns 65% of Alydian. CoinLab has won credibility with some venture capitalists who decided to invest in it.
CoinLab leader Peter Vessenes, who signed Alydian's bankruptcy petition, is also chairman of the Bitcoin Foundation. The foundation is a nonprofit trade group that has gained attention in recent months for promoting bitcoin and supporting new rules aimed at making it more widely accepted.
Write to Katy Stech at
katherine.stech@wsj.comhttp://online.wsj.com/news/articles/SB10001424052702303345104579282600553585842
