Venture-Backed Bitcoin Miner Startup Can't Deliver On Time, Gets Sued 120
mpicpp (3454017) points out this story illustrating the problem of betting on the differential between the price of deliverable bitcoin-mining hardware and the price of bitcoin itself: Yet another Bitcoin miner manufacturer, CoinTerra, now faces legal action for not fulfilling an order when it originally promised to. CoinTerra is the third Bitcoin-related startup to face litigation for breach of contract and/or fraud in recent months. The CoinTerra lawsuit was filed in late April 2014 by an Oakland, California-based man seeking to be the lead plaintiff in a proposed class-action lawsuit. Lautaro Cline, the suit alleges, purchased a TerraMiner IV in October 2013 for delivery by January 2014. The company promised, he claims, that this miner would operate at two terahashes per second and would consume 1,200 watts of power. It did neither. However, Cline's suit also claims that CoinTerra did not deliver the miner until February 2014, and it "operated well below the speed advertised and consumed significantly more power than CoinTerra represented, causing Plaintiff to suffer significant lost profits and opportunities."
Why do people believe that? (Score:5, Insightful)
It's a bit like those crystal ball con artists. Know the kind? That tells you the lotto numbers of next week?
I always wonder the same that I wonder in this case: If that actually worked, why do they tell you (or, in this case, build it for you) instead of simply using it themselves? It's not like you need to invest a lot of work or have to have intimate know-how that the maker of the item doesn't have to mine bitcoins. It's basically "pump electricity in, take hashes out". If I could build such a "miner" that produces more bitcoins than it costs in electricity, why would I be so stupid and sell it to you instead of renting a rack somewhere and let it do it for me?
Re:How did he ever hope to make all that money bac (Score:2, Insightful)
The real profit to be found are with the people selling these ASICs. The best analogy I've seen compares it to people selling shovels during the gold rush.
Re:Best Lawsuit Ever. (Score:5, Insightful)
Re:Why do people believe that? (Score:5, Insightful)
Because it is a risk. The company making the machines gets an upfront sale with a good profit margin. The risk taker is hoping that bitcoins stay above some value and hydro does not go up, and he does not spill coffee on his server, and, and, and.
Theoretically, both ventures had (could of had) a good profit margin and were worth undertaking, and the people who undertook the machine building had machine building skills and most likely more aversion to risk, while the miner had skills more suited to that and more propensity for risk.
better analogy (Score:2, Insightful)
I think a better analogy for comparing bitcoin mining to gold mining would be: Imagine if I were to sell you an automated power shovel and promised it would dig 10 tons of dirt per hour with fuel consumption of 50 gallons per hour. If my device didn't live up to those advertised specs, you would have a valid complaint. Reasonable damages would be derrived from difference between what you made and could have made. If in actuality you were able to shovel 5 tons of dirt per hour while still consuming 50 gallons per hour, then it's likely reasonable that you should have found twice the amount of gold you actually did.
I think this is a very valid case (assuming the device was used in accordance with specifications, and other factors have been ruled out)
It's an investment (Score:4, Insightful)
"Your honor, the free money generation machine the plaintiff promised me did not generate NEARLY enough free money!
Every investment is, in one way or another, a "money generation machine". This is exactly how an investor thinks about their investment, minus the "free" part because they subtract the opportunity cost of investing in that thing instead of in something else.