FTC shuts down Butterfly Labs,

The mining equipment company failed to deliver tens of thousands of computers, and delivered others so late they were obsolete

There was skepticism around Butterfly Labs from the beginning.

Like most bitcoin companies, the Missouri-based startup sprang up out of nowhere. In late 2011, there were rumors of a leap in the technology for mining bitcoin. This technological leap had the potential to create massive profits for miners, as well as massive profits for those selling the new equipment to miners. It was the old selling-pickaxes-during-the-Gold-Rush strategy.

Except Butterfly Labs added a twist. They didn’t sell pickaxes. They sold preorders for pickaxes.


Mining is an essential part of bitcoin. It rewards people for using their own computer power to maintain the network. Since Bitcoin has no central processing authority, it relies on the crowd to record transactions, check each others’ math, and keep things secure. This is all built into the bitcoin software: miners don’t have to actually do anything other than set up a computer and run the program.

Back in 2009 when bitcoin first appeared, anyone could run the mining software on an ordinary laptop and crank out 50 bitcoins in a day. As bitcoin became more popular, mining got more competitive. Soon miners started using more powerful graphics cards to mine bitcoin. Then serious miners began to devote racks of computers, like small personal data centers. Because there were so many miners chasing after the same bitcoins, mining got more and more expensive and the returns on investment got smaller and smaller. The bitcoin protocol is also designed to increase the difficulty of mining as time goes on, which further cut into miners’ profits.

In June of 2012, Butterfly Labs became one of the first pop-up companies to announce a breakthrough in mining technology: application-specific integrated circuits, or “ASICs,” designed specifically to mine bitcoin 1,000 times faster. At least two other companies cropped up, promising similar machines. Miners rushed to place preorders. Some became loyal to certain sellers; others hedged their bets by ordering from all three. Whoever got their machines first would reap a windfall in mining profits before the rest of the mining world caught up.

Butterfly Labs promised their customers that preorders would ship as soon as possible. But they soon became evasive, issuing a series of shifting dates. At the time, the company told The Vergethat the first ASICs would ship by December. Instead, by most accounts, the first shipments started trickling out in April.


While some customers received their ASICs — Wired magazine got one — many more started complaining about delayed shipments. Some wondered if the products really existed. Others suspected Butterfly Labs had decided to use the machines to mine bitcoins for themselves. Some forum users claimed to have received their orders; others accused them of being paid by Butterfly Labs. It came out that one of the company’s alleged cofounders was on probation after pleading guilty to mail fraud in a lottery scam.

Soon, Butterfly Labs was arguably the most controversial company in the bitcoin world after Mt. Gox, the bitcoin exchange that filed for bankruptcy. But while Mt. Gox was merely incompetent, Butterfly Labs may have been malicious. (Plus, they were dicks.) Customers all over the world began lodging complaints with the US Federal Trade Commission.

According to the FTC, more than 20,000 customers had received nothing by September 2013 — more than a year after customers’ placed their first orders — despite paying upfront for products that ranged from $149 chips to $29,899 machines. That means customers were ripped off for at least $3 million, and that’s a low, low estimate, since many customers reported buying the more expensive units, and more orders were placed after September 2013. Update: In total, Butterfly Labs collected between $20 million and $50 million in pre-orders, according to the FTC.

Customers who did receive their orders found they were obsolete. A Butterfly Labs representative said the delayed machines were only useful as a “room heater,” according to the FTC.


Despite widespread failure to deliver, Butterfly Labs began offering new products and services in 2013: an even more powerful bitcoin miner and a remote mining service. The FTC says the company failed to deliver those, too.

Butterfly Labs did not immediately respond to a request for comment. In the past, the company has said delays were due to various manufacturing complications.

The company has now been shut down pending a court case. “We’re pleased the court granted our request to halt this operation, and we look forward to putting the company’s ill-gotten gains back in the hands of consumers,” Jessica Rich, director of the FTC’s Bureau of Consumer Protection, said in a statement today.

UPDATE, 4:12PM: Butterfly Labs has released a statement:

Butterfly Labs is disappointed in the heavy-handed actions of the Federal Trade Commission. In a rush to judgment, the FTC has acted as judge, jury and executioner, contrary to our intended system of governmental checks and balances. The FTC’s current actions are negatively impacting our thousands of customers and our dozens of employees. Their current media campaign should only further alarm a knowing citizenry and raise questions as to why the FTC wouldn’t simply let this case play out through the judicial system. That is what Butterfly Labs intends to do.


It appears the FTC has decided to go to war on bitcoin overall, and is starting with Butterfly Labs. Butterfly Labs is being portrayed by the FTC as a bogus and fake company. To the contrary, Butterfly Labs is very real. As pointed out in court filings Butterfly Labs made last night, Butterfly Labs has shipped more than $33 million in products to customers and voluntarily granted refunds approximating $17 million to customers for cancelled orders. Butterfly Labs was literally is in the midst of shipping out completed products to fulfill the remaining millions of dollars of orders on our books and issuing requested refunds, when the FTC effectively closed the doors of Butterfly Labs without any chance to be heard in court.


At this time, Butterfly Labs is cooperating fully with the Temporary Receiver appointed by the Court. A hearing is set for September 29 and Butterfly Labs has asked the Court to allow it to present testimony from key witnesses for the company. Butterfly Labs intends to defend our business and our nascent and promising industry. The government wants to shut Butterfly Labs down, and we are not going away without a fight to vindicate bitcoin, our company, and our employees. Our continued focus is our customers and finding a way to continue to deliver products and processing refunds for those who have requested them.

Elon Musk says self-driving car technology

The reason, Musk told The Journal, is that Tesla — and others — are still trying to crack the code of helping computers recognize objects. Current systems rely on radar, cameras, and other sensors to see what’s around them and make decisions. Some of those systems have gotten smaller, better, and less expensive, though they still require software that can identify objects and make the right decisions.


Many other companies are currently trying to perfect just that process, including Google which is running virtual simulations of California roads to train the cars used in its self-driving car project. For its part, California this week issued the first group of permits to let Google, Mercedes, and Audi legally begin testing self-driving cars on roadways, with other companies expected to follow.

The two major promises of self-driving cars are safety and convenience. Computer-controlled cars promise to react to things faster, and could open up certain sections of roadways to higher speeds given the extra reaction time — speeding up long distance car travel. “They will be a factor of 10 safer than a person [at the wheel] in a six-year time frame,” Musk says. For convenience, a car that drives itself would allow passengers to focus on other things besides maneuvering around roadways and other drivers.

Musk’s estimates for Tesla are not that far off from other automakers, which hope to have fully-autonomous cars on the road by 2020. Last August, Nissan said it planned to have multiple modelsavailable by then, with an estimated price increase only of $1,000 per car. Others, like GM andstartup Cruise are aiming to deliver souped up versions of cruise control that will let the car drive itself on highways, just with a human still behind the wheel.


Google buys maker of smart spoon

Google has purchased the biotech startup Lift Labs, the makers of an electronic spoon that helps people with Parkinson’s to eat by making small movements to compensate for tremors. The startup will be joining Google X, and it’ll continue to sell its current product, known as Liftware. A fork, soup spoon, and keyholder were all in the works prior to the acquisition, and it sounds as though work on them will continue. “We’re especially excited to work with the Google team to scale our operations and reach even more people who could benefit from using tremor-canceling devices,” Lift Labs writes.

At Google X, the team will be investigating how the technology used in Liftware could be applied in other ways to help manage tremors from diseases like Parkinson’s. That’s not the traditional interest that you’d expect from Google, but it’s increasingly an area of focus. Google has also backed the company Calico, which hopes to extend human life and even partnered to build a pharmaceutical research center recently. Google clearly wants to expand the scope of its business, and Lift Labs is a small but clear sign of what it has in mind. “Their tremor-canceling device could improve quality of life for millions of people,” Google writes in a post announcing the purchase. No price was given for the acquisition.


Here’s what’s inside the Moto 360

By now you’re likely very familiar with the Moto 360, and we’ve shown you all the engineering that went into the first circular Android Wear smartwatch. But what does Motorola’s sleek product look like after it’s been forcefully broken apart and splayed across a table? As usual, iFixit has your answer. Today, the teardown experts have focused their attention on the Moto 360 — and despite best intentions, the project got ugly pretty fast. It’s nearly impossible to get the thing open without breaking it, so this isn’t something you’ll want to try at home. But if you’re itching to see every component that makes up the Moto 360, here’s your chance to do so without destroying your own $250 smartwatch. One oddity of note: the battery that iFixit found inside the Moto 360 is 300mAh, which is less than the 320mAh capacity Moto has been advertising.


James Dyson puts his futuristic robot to the test in Tokyo

James Dyson was in Tokyo tonight to showhis company’s first robot vacuum cleaner to the world. At an event held right under Tokyo Tower, Dyson spoke of his emotion on launching the 360 Eye in Japan, the country where his first vacuums were sold. But how does it perform?

Very well, if Dyson’s staged demos are to be believed. The 360 Eye managed to pick up far more detritus from a smooth floor than an unnamed rival, and acquitted itself well in a simulated living room environment, bobbing under tables and traversing the transition from flooring to carpet with ease. The design impresses, too — the chassis is much smaller than I’d imagined, and there are unmistakable Dysonesque notes like the transparent elements and purple tank tracks.

Of course, it’s far from a real-world test, and it probably doesn’t give much indication of how Dyson’s offering competes against the latest from the likes of iRobot and LG. Samsung announced a high-end model of its own today, too. But in a vacuum? The 360 Eye looks pretty compelling.

Scroll down to see some photos from the Tokyo event.


Microsoft just teased Windows 9 by mistake

Microsoft is currently aiming to hold a press event to introduce Windows 9, currently known as Windows Threshold, on September 30th. This date may change, but a Technology Preview of the operating system will be distributed to developers and enterprise users in late September or early October. The early Technology Preview should provide a first look at the new mini Start Menu, the removal of the Charms bar feature, and several UI changes to the way the desktop operates with Windows 8-style applications. Future versions are expected to include a version of Cortana, alongside other new features that Microsoft is working to complete ready for release in spring next year.

Update 7AM ET: article updated to confirm the Windows 9 logo that Microsoft used is simply a mockup.


Fujifilm’s high-end X30 compact

Fujifilm has announced the X30, a premium compact camera that follows in the line of the X20and X10 before it. The X30 features the same 12-megapixel 2/3-inch sensor and 28-112mm-equivalent f/2.0-f/2.8 lens as its predecessor, but much else has changed.

The magnesium alloy body has been given a sleek redesign with a refashioned grip and control ring around the lens; the optical viewfinder has been replaced with an OLED electronic panel that Fujifilm says offers a bigger view than an entry-level DSLR’s; and the bigger, sharper 3-inch 920,000-dot screen now tilts. The X30 also features improved battery performance, Wi-Fi connectivity, and a new “Classic Chrome” film simulation mode with “muted tones and deep color reproduction.” Classic Chrome will come to other Fujifilm cameras as well.

classic chrome fuji

Camera makers have been focusing on premium compact models more and more in recent years as the overall point-and-shoot segment declines. Sony’s RX100 line gets the most attention in this space, with its large 1-inch sensor producing great results from a tiny body. Although the X30’s 2/3-inch sensor is bigger than most compacts’, the RX100’s is significantly larger and higher in resolution. Fujifilm probably won’t be able to match Sony in terms of pure image quality here.

Instead, Fujifilm is prioritizing the overall shooting experience by including a comfortable viewfinder and lots of physical controls as part of an attractive design. Could it be worth sacrificing sensor size for a camera that’s more fun to use? It’ll be up to you to decide what’s more important when the X30 goes on sale toward the end of next month for $599.95.


YC-Backed ShipBob Helps Small Business Owners

Unless you are a philatelist or have a strong tolerance for boredom, standing in post office lines is a pain. This is especially true if you have to do it over and over and over again for your job. ShipBob, a startup backed by Y Combinator, wants to help small business owners and online sellers with a service that not only takes items to the post office, but also handles packaging and tracking.

Before starting ShipBob, which is currently available in Chicago and plans to launch in San Francisco next, founders Dhruv Saxena and Divey Gulati ran a small e-commerce company called SnailMailPics, which meant they spent a lot of time preparing packages and waiting in the post office.

“Shipping was the most time-consuming and completely manual process of the entire online transaction cycle,” says Saxena.

Sensing a business opportunity, the two stood outside post offices in downtown Chicago and surveyed over 500 people.

“The 30 seconds from the parking lot to the post office was our pitching ground,” says Saxena.

“We realized that people are willing to pay a small fee if someone packages and ships their items, and that is exactly what ShipBob does,” he adds. ShipBob’s services cost $5, which covers up to five packages, and can be ordered online or through iOS and Android apps. The startup promises to pick up items within 30 minutes.

Saxena says that each month, over 1.3 billion packages are sent in the U.S. He believes “a huge portion” of them will eventually be shipped using a service like ShipBob, citing a DHL study that found real-time services and “convenience logistics” will have a significant impact on the shipping and logistics industry over the next five years.

Part of the challenge of being a on-demand service startup is scaling up when there is so much manpower required. Like HomeJoy, a startup that offers relatively affordable housecleaning services, ShipBob uses a proprietary tech platform to automate its system and keep prices down. It tracks each package when it enters and leaves ShipBob’s warehouse.

The company keeps on top of tracking numbers by sending customers emails when their items are picked up and after they have shipped, with an invoice and tracking information. ShipBob’s platform integrates carriers like FedEx, UPS, and USPS) to give customers real-time updates about where their package. Saxena says that all of ShipBob’s software was developed in-house during Y Combinator.

For pickups, ShipBob uses Uber and Lyft. The ShipBob employees who do item pickup and packaging are called “Ship Captains” and undergo a background check before they start working for the startup. They are paid for each pick-up that they complete.

The combination of ShipBob’s tech platform, use of car-calling apps, and Ship Captains has “enabled us to scale up very quickly as this infrastructure already exists in cities and we do not need to re-create it for every city we expand to,” says Saxena.



The Seven Constants Of Game Design, Part Two

Editor’s note: Tadhg Kelly writes a regular column about all things video game for TechCrunch. He is a games industry consultant, freelance designer and the creator of leading design blog What Games Are. You can follow him on Twitter here.

Last week I discussed how video games are both unbounded and bounded by “creative constants”, by which I mean inescapable factors that simultaneously limit and empower the game designer. I discussed the first three – Fascination, Imperfection and Urgency – and promised more to follow. So let’s continue:

4. Naturalism

The rules of soccer are few. The goal of the game is to trade a ball token for points by placing it in an opponent’s net, with the primary restriction being that you can’t handle the ball. You can kick, head, chest and so on (except for the limited circumstance of the goalkeeper), must keep the ball in-bounds and in-time, and there are a variety of fouls. The result is a marvelous game, the most popular sport in the world.

Many game designers look at soccer or other simple games like Chess or Tetris and think them neat but with room for improvement. To make a video game of Mega-Super-Soccer (for example) they might add many elements like super-kicks and powerups, bringing more elements onto the pitch (mines, laser beams), changing the scoring conditions away from simple trading maybe to something more exotic like having multiple kinds of goal, or two balls. Maybe the changes would make Mega-Super-Soccer a very cool game, but it would run the risk of devolving into a big mess. There could easily be too much happening on screen, too much craziness, and for the player who likes soccer the overall game might just be too weird.

Weird can be exciting and cool, but weird can also be incomprehensible and opaque. That’s not so good. Games that become opaque lose the player. So this constant sounds like it’s advocating for elegance, but it’s not that easy. Complex games can be opaque, but so can simple games. In addition many complex games (such as massive multiplayer games) can work really well even though they are heavy. The real difference is less about how elegant a game is and more about how natural it is.

By “natural” I mean that the actions and and rules of your game need to be physically and naturally relate-able to the player, something that they can intrinsically understand. They have to be able to understand the basics of what they’re supposed to do and what to expect for results, otherwise they simply feel lost.

Designers who understand naturalism tend to work from the starting position of fingers and thumbs because those are the root appendages that most players use to play. Ultimately it is from that starting point that the entire of the game is subsequently defined. So the control designs that lean into easy presses of fingers that players naturally use in circumstances that feel right (example: pull a trigger to shoot) tend to require less abstract learning from them. They just get it and can subsequently store that skill and focus on play rather than interface.

So naturalism implies a need for predictability. If I hit X intending to hit something and suddenly my character starts spouting dialogue instead, that gets pretty confusing. If a game includes different actions resulting from the same input that’s unnatural design. Conversely if a game includes multiple compound inputs for basic actions that’s generally pretty bad too because it then becomes gesturally abstract rather than intuitive. Furthermore if a complex game’s controls don’t seem to follow a natural logic (such as placing all building options within one menu) then it becomes weird.

You can’t break the naturalism constant but that doesn’t mean you can’t play with it. Sometimes it’s good to be weird. To play the web game Frog Fractions, for example, is to be lost in a wondrously weird space where nothing makes anything like what the regular player might consider “sense”. But it runs with its weirdness and is amazing as a result. For many more cultured players (folks who play indie games, for example) the sensation of the weird is a large part of why they like to play games at all, so if that’s your crowd by all means play into them.

Lastly, please don’t confuse naturalism with conservatism. None of the constants are in any way about the content, tone or culture of video games, nor trying to say that your game should conform to certain cultural norms. I mean naturalism solely in terms of biology and cognition and process. If you want to make games that transgress norms, do so (please do, many of us are bored with white-dude video games). Just understand that if you want to bring players along for the ride, it’s important to ensure they can naturally understand what’s going on.

5. Time

All games are designed in loops. The player does something, something happens and the state of the game updates such that she can do something else, and around and around it goes. There are essentially four kinds of loop, defined by dependence and presence. By “dependence” I mean whether the actions of the player require input from other players or not (Dependent: yes. Independent: no.), and by “presence” I mean whether the game requires players to simultaneously be in the same space (Present: yes. Absent: no.). Both are related to time.

I occasionally get into trouble in game design circles for saying that the greatest invention of the video game era was – and continues to be – “single-play”. Most games (board games, sports, etc.) prior to video games were multiplayer. Nowadays you can play all by yourself against the computer, and that fact is why the industry basically exists. Without single-play the games industry would be about 1/100th of its modern size. But why? The answer is that single player loops (and by extrapolation, the games based on them) are independent and absent. Other, more plainly, the player can play on her own time.

If single-play is the combination of independence and absence, “multi-play” is the opposite. Multi-play needs players to all be on the same pitch, in the same room, seated at the poker table or logged onto deathmatch arena. Whether co-operative or competitive, multi-play doesn’t work well unless all are present so that the dependent mechanics it uses (pass a ball, shoot a dude) work. This makes multiplayer video games most sensitive to the vagaries of time. Players disconnecting, players in different time zones, players with laggy network connections and more all affect multi-play more severely than any other kind of game, and these can be very heavy design constraints. And, interestingly, a side effect of multi-play’s problems is that multiplayer games tend to be the ones most likely to attract “hardcore” cultures.

However there are two other types of loop. There’s the loop that requires dependence but not presence. This is “serial-play”, the loop of the turn-based game that you can play for long periods of time against opponents all around the world, but take your turn as you like. In an older form serial-play was the root of the play-by-mail game and in modern times it updated a little with email. However in the last few years, especially since smartphones and cellular-enabled tablets have emerged, serial-play has become much more usable. Words With Friends, for example, is an enjoyable serial game that works because everyone’s got a mobile phone. Serial-play was also a common feature of social games. All those friend requests asking for you to act to unlock your friend’s next level? Serial loops each and every one.

Then the other kind is the loop that requires presence but not dependence, otherwise known as “parallel-play”. Massive multiplayer games are mostly parallel, for example. All players are on the same server(s) and experiencing a shared game state. They may interact with one another, whether socially or through gameplay. They may co-operate to try and take down a dungeon or overthrow a rival corporation (at this point probably verging more into multi-play). The game needs them to be there in order to fill out the world and make it fun for everyone, but players can just carry along as they like. The same is true of games like Journey, of pervasive games like Foursquare or Geocaching and of most transmedia games and gamification that uses player comparison to drive play.

Time is often a natural barrier to game design. Multiplayer games tend to favor players with lots of spare time like teenagers and students, for example, but creating a multi-play based game for suburban moms is would probably be a non-starter because they wouldn’t have the time to get into it. On the other hand time can be a very powerful mechanic. Remember all those stories your Facebook friends used to tell about waking up at 4am to harvest their FarmVille corn? That’s an example of a game that leaned into the idea of the long-time loop, creating an “appointment” mechanic that could be used for good or evil purposes.



Amazon Stands Up To FTC Demands For More Parental Controls

Amazon is refusing to comply with a request from the Federal Trade Commission to implement stricter controls that would prevent children from making in-app purchases.

The FTC is demanding Amazon implement a “consent” model similar to the one Apple conceded to earlier this year, according to a letter Amazon to the FTC Tuesday. Amazon believes it already has implemented effective parental controls consistent with the model the FTC settled on with Apple, and it says it refunded customers who complained of children making in-app purchases without their permission.

“In-app purchasing was and remains a new and rapidly evolving segment, and we have consistently improved the customer experience in response to data,” wrote Amazon’s lawyer Andrew DeVore in the letter.

The FTC is threatening to take Amazon to court if it does not create a model like Apple’s to control children’s in-app purchases, according to Devore.

Apple reached a settlement with the FTC in January that required the company to refund $32.5 million to 37,000 customers whose children made purchases on their iPad or iPod without permission. It also changed its billing practices to ensure that customers give expressed, informed consent for purchases before they are charged in the mobile store.

Previously, if users entered their password to make one purchase, they were able to make unlimited purchases for the next 15 minutes.

Currently Amazon gives parents the option of requiring a PIN for every in-app purchase. In his letter, DeVore said the company leads the industry in parental controls with Kindle Free Time, and Amazon says it is willing to take its fight to court.

It seems the FTC’s decision to throw these demands at Amazon now could be proactive. The company is sure to have more in-app purchases with its first venture into smartphones, the Fire Phone.