Venture-Backed Bitcoin Miner Startup Can't Deliver On Time, Gets Sued

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."

How did he ever hope to make all that money back?

[Joe Gillian]

According to the article, the TerraMiner IV had a pricetag of $13,999, which the filer of the lawsuit clearly paid. A single bitcoin is (and correct me if I'm wrong here) around $500. For this guy to break even, not counting the power that thing drains, he would need to mine at least 28 BTC. From what I understand, mining that kind of BTC, even with an extremely high-powered miner, is not an easy task. It seems like he would've lost money even if the machine had performed at the specifications listed by the company.

Re:Best Lawsuit Ever.

[CanHasDIY]

Right.

Kinda like how if I promised to build you a fence for X dollars by Y date, and fail to meet the agreed upon pricing and schedule, well, that's your fault for trusting me, now isn't it?

Re:Why do people believe that?

[ClioCJS]

Why do you think it came late? They probably had it running by the promised date, realized they'd make more money keeping it, kept it, then tried to sell it once it couldn't provide ROI. Of course they deserve to be sued.

Breach of Contract

[Darth Muffin]

They had a contract with the buyer and did not fulfill their half. Of course the buyer's recourse in this should probably be limited to the price of the machine, not any "missed opportunities".

Buyers should ask themselves why anyone would sell a money printing machine. If it was profitable they're going to use it for themselves, or use it until the bitcoin difficulty gets just to the point where it's marginal and sell it.

Re:How did he ever hope to make all that money bac

[ShaunC]

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.

The fun part is that a lot of these miracle mining rig builders are suspected of using those new rigs themselves for awhile before finally delivering them. So it's kind of like people selling used outdated beat-up shovels during the gold rush. The scam seems to be:

• Pre-sell insanely powerful mining rigs
• Use pre-sale money to order hardware and build rigs
• Mine for a month or two with awesome rigs while delaying delivery to buyers
• !!!PROFIT!!!
• Newer, faster hardware becomes available
• Pre-sell rigs built with this month's even better hardware
• Finally ship last month's batch to the buyers
• Repeat

Just another pyramid scheme and there are still suckers falling for it.

Re:How did he ever hope to make all that money bac

[Anonymous Coward]

At current difficulty, (13.4Bil) a 2TH miner consuming even 1500W, would generate about 0.0747BTC/24 hours. Even at 15.4Bil (~15% increase?) you're still looking at 0.0650BTC/24 hours. Back in January, the market was more like ~2Bil difficulty, which the same device would have brought in ~0.5029 BTC/day. (or a ~2 week ROI!) Now I don't agree with the guy really, Feb was up to ~2.5-3Bil, which at the worse end was still ~0.3353 BTC/day. (still only ~31 days break-even!)

At the next current difficulty, and assuming you're expecting the price of BTC to stay the same, (and at current prices, $6300 is ~10.5BTC) you're looking at ~161 days to break even. This is going to be extended every ~two weeks as difficulty goes up, but will likely still hit break-even around ~350-400 days. (assuming ~1500W@10cents/W)

ALL this assumes you're buying it to mine on till break even. Most people mine the profitable period, then sell the hardware for 90% of the purchase price. Mine for 2-4 weeks, make ~1-2BTC, then unload the hardware for $5500, buy out ~9 - 9.25 BTC with the proceeds, and now suddenly you're up to ~11.25BTC on a 10.5BTC investment. ~7% doesn't sound too bad to most people!