Butterfly Labs Asset Seizure Spurs On Mining Industry Competition

Amid the FTC injunction of Butterfly Labs additional insight was gleaned about the operations of the company. Butterfly Labs (BFL) sells high-performance computers that are designed solely for mining Bitcoin. BFL operated primarily on a pre-order basis that meant customers knew they would be ordering a product that would not be ready for some time – but customers were not forewarned of the wait time which according to the FTC would include ‘delays ranging from from six months to one year.’ In the world of mining, time of delivery is one of the crucial factors that miners consider before deciding to invest their hard earned money in mining equipment at any price point.
The nature of the Bitcoin network makes mining rig delivery time such an important factor for mining investments because the Bitcoin difficulty level, or total mining processing power of the Bitcoin payment validation network, determines how easy it will be for miners to compete for bitcoins among other prospectors. Receiving mining equipment with processing power and power efficiency as advertised – and receiving the equipment as quickly as possible – is key in successful mining ventures. If mining equipment is received late, the investor could incur considerable losses because the mining difficulty level of the Bitcoin network goes up exponentially as more high-powered miners come online – thereby making older, less-powerful mining equipment nearly obsolete and unprofitable.

This post was published at Bitcoin Magazine on OCTOBER 9, 2014.