
Butterfly Labs mined Bitcoins on customers’ boxes before shipping - suprgeek
http://arstechnica.com/tech-policy/2014/09/feds-butterfly-labs-mined-bitcoins-on-customers-boxes-before-shipping/
======
GigabyteCoin
As someone heavily involved in the bitcoin mining scene, this is not news.

Reports of dusty, obviously used machines were shipped to many a a BFL sucker.

It's a legal grey area at best... companies should indeed test their products
before shipping them to consumers.

The problem here is that BFL tested them for "too long" before they arrived in
the consumer's hands according to some, but not according to butterfly labs.

~~~
ollybee
If they wanted to test they should have mined on testnet.

~~~
whyenot
Why? Using "real" net a manufacturer can test their equipment and make some
money at the same time. That on it's own doesn't seem unethical or shady to
me. The potentially shady part is using the machines for straight mining
before shipping them to customers.

~~~
yebyen
You don't see anything unethical about competing with your own customers when
you promised them that you wouldn't? Cause that's exactly what happened.

~~~
TheLoneWolfling
Honest question here: did they promise that they wouldn't?

~~~
yebyen
The closest I've found so far is this person[1] Transisto asserting that they
specifically said this. I remember hearing it and I have no reason to doubt
Transisto; he is clearly a person you can trust (and at least in this forum
thread, nobody came and said he was wrong.)

[1]:
[https://bitcointalk.org/index.php?topic=110290.msg1202262#ms...](https://bitcointalk.org/index.php?topic=110290.msg1202262#msg1202262)

~~~
TheLoneWolfling
Ok, good to know, thanks!

~~~
yebyen
Here is at least one statement to this effect, directly from the main BFL
employee who represents them in the forums, BFL_Josh:

[https://forums.butterflylabs.com/archive/index.php/t-52.html](https://forums.butterflylabs.com/archive/index.php/t-52.html)

It is linked in the pre-sales FAQ in the archive, post is only two years old
(number 13):

[https://forums.butterflylabs.com/archive/index.php/f-4.html](https://forums.butterflylabs.com/archive/index.php/f-4.html)

This is not the promise I remember, there was a much stronger statement issued
at some point that I remember where they stated that they would _never_ be in
the mining business for themselves, but I can't find it. Still, this is pretty
clear, he says 24 hours and testnet. Not two weeks and "into our pockets."

------
mullingitover
If their boxes were true money printing machines, it's confusing to me why
they'd bother selling them at all.

~~~
Zikes
Quickest means to high starting capital. They had to get as many machines as
possible up and running before everyone else did, so they used customers'
money like an investment.

~~~
mullingitover
That's what I've heard. It just seems weird that given the glut of VC money
these days, they'd have to resort to skulduggery to raise capital for a Sure
Thing™.

~~~
bri3d
Raising capital from a VC for a real Sure Thing would generally be scamming
yourself - it would be cheaper to raise a loan in almost all Sure Thing
situations. Obviously Bitcoin is a bit different since it's not the kind of
real thing you could get a loan for.

Anyway, I don't think it's weird at all. Pre-order suckers grant money on much
more favorable terms than even a loan, much less a VC. Doubly so if you're
scamming them the whole time.

------
themoogle
What people don't understand is that when BFL mined with the hardware they
sold, they effectively made the difficulty of the block chain rise stupidly
fast, thus lowering the value of the system. Any advantage customers (like me)
would have had was thrown out the door.

It is essentially the equivalent of a car dealer selling you a car claiming it
is new when in fact they drove it 150,000 miles.

I was told by a BFL employee that my order would have been shipped before the
end of july 2013... I didn't get my units till 11/4/2013

During that time I watched what could have been my returns fly out the door.

To read the one skype chat log makes me sick

------
kolev
Again and gain, Bitcoin doesn't seem to attract the purest minds...

~~~
kolev
A friendly warning to all! Don't say _anything_ negative about Bitcoin here or
on /r/Bitcoin as you'll get gang-downvoted. A lot of people have a lot of
built-up aggression by the ever-declining Bitcoin price and want you to pay
for their loss in some sick weird way!

~~~
maxerickson
I downvoted this comment because it is completely pointless.

I almost downvoted your first comment because (setting aside the problems with
the very idea of "purest minds") there basically isn't any human activity that
manages to only attract said "pure minds".

I don't own bitcoin and fairly regularly post antagonistic comments about it
here. They usually get no votes, or maybe one or two upvotes.

~~~
kolev
Pointless how? As we're all data nerds here, try posting negative comments
when price is going up (maybe they are too busy doing what I mention later) -
you won't see much downvotes unlike when it's going down. I'm sorry, but the
Bitcoin community is just disgusting! With "VIPs" like Charlie Shrem, Mark
Karpeles, and the likes, it's doomed to fail! When PayPal announcement
temporarily spiked the price, you can read comments like "I just jizzed in my
pants" over at CoinDesk. This is the kinda human material that's building the
Bitcoin community, unfortunately! Computer scientists made Bitcoin possible,
but it's all in the wrong hands now, so, we should rather embrace things like
Stellar now (I was a fan of Ripple, first, as a great piece of technology, but
Stellar doesn't have much of the Ripple baggage)!

------
mtmail
I don't see a problem with this burn-in process. EMC sells harddrives which
they ran for two weeks in both a freezer and hot room (based on a company tour
I took ages ago). They just want to make sure the hardware components they
ship won't fail under heavy long-endurance load. I see that as a service to
the customer.

~~~
yebyen
You might think that, having never been a customer of BFL, but I can tell you
I bought BFL hardware on pre-order at a point when they were telling their
customers they would never be a mining company, but only a hardware company,
and they were not ever going to mine bitcoins with customer equipment.

It's not a service to the customer. The most valuable time spent mining with
new mining hardware is the first week to two weeks. The next two weeks are
going to be at an average of 10-20% reduced efficiency as the difficulty
increases every two weeks or less. The next two weeks after that will have
reduced efficiency by a similar amount again, until you reach the "break-even
point" where each watt-hour of electricity you buy and pump through the mining
equipment is going to yield an amount of bitcoins equivalent in value to the
energy you put in. And then, you hope, the price of the coins increases or at
least remains stable, and the difficulty levels off.

(Protip[0]: it doesn't seem to be leveling off yet, and my first-gen ASIC
hardware is already well underwater.)

[0]
[https://bitcoinwisdom.com/bitcoin/difficulty](https://bitcoinwisdom.com/bitcoin/difficulty)

~~~
sixothree
Additionally the FTC argues there is a specific network for testing that does
not incentivise prolonged "burn-in".

~~~
yebyen
Yes. I can confirm they did tell us customers they would use the testnet and
not the live net. There is no excuse for this. For anyone who is not "in-the-
know" of Bitcoin, that testnet is absolutely a thing and reversing their
position on that promise is absolutely a violation of trust.

As a customer of a company that sells mining equipment, you don't ever want
your supplier to be in the mining game. When you own 1st-gen equipment, you'd
like it if the 2nd-gen equipment is delayed as long as possible because when
it comes out, your equipment is almost immediately going to be made irrelevant
as new investors have 10x equipment with significantly reduced marginal
(electricity) cost. Some manufacturers I'm sure are forthright about their
conflict of interest because they do mine (openly, like I believe KnC does),
so their customers shouldn't be shocked to find out.

If they tell you they won't, that's a benefit to you because you, the
fulfilled customer, are usually incentivized to give up some of your profits
to get the next generation of hardware, to protect yourself from irrelevancy
in the coming years. You are trusting that your order will be delivered in the
order of purchase and that the company does not have incentives to delay your
shipment.

Owning 2nd-gen hardware, I always knew that the arrival of the 3rd-gen (28nm
Monarch) would signal the end of my operation if I couldn't secure one. After
the horrible experience of waiting for my 2nd-gen hardware to arrive, I was
not biting again. It's been clear to anyone with a stake in the game that
there has been something fishy at BFL and that most people were getting
screwed, even when their equipment was finally delivered.

When I heard that Vleisides was involved in a "multi-million dollar lottery
scam" pyramid scheme before, pled guilty to mail fraud, and was barred by
court-imposed restrictions from any business that "solicited funds through
pre-order"[1], I knew it was time to start getting the popcorn ready.

[1]: [http://arstechnica.com/tech-policy/2014/04/digging-for-
answe...](http://arstechnica.com/tech-policy/2014/04/digging-for-answers-the-
strong-smell-of-fraud-from-one-bitcoin-miner-maker/)

