Concern Grows Over Possible Avalon ASICS Scam

This is a developing story which may be updated periodically.

UPDATE 3 (June 18, 2013): Yifu responded on bitcointalk.org to complaints of people receiving “burned in” (used) miners, saying “complaints will just lead into refunds, since clearly people are not happy with Avalon ASIC… personally I’d love to issue these refunds so these people can go find the next thing to complain about and I can get some peace n quiet.”

UPDATE 2 (June 17, 2013): Avalon has begun shipping mining units. However, as reported by CoinDesk, Avalon has been accused on the Bitcoin Forum of mining with customer ASICs and shipping used, dusty machines. The news was broken by Redditor MrTuber in this post.

UPDATE 1 (June 6, 2013): Yifu Guo (BitSyncom) provided a response on BitCoinTalk.org:

somebody called and woke me up in the middle of the night for this, so I’ll keep it short.

 

1a. see the conference video, I thought that’s an update; for the lazy http://www.youtube.com/watch?v=LY1xgGiejIc

 

1b. also got cornered after the panel and somebody took this : http://www.youtube.com/watch?v=UtVx26LlNXA

 

2. an update incoming in < 1 week, pretty exciting.

 

3. we fully understand there is problems with orders ( no way?! )

- we can not address these issues IF WE DO NOT SOLVE OUR PRODUCTION ISSUE then we can not DELIVER at all.

 

- so until that happens, get all your information ready and bump the ticket if it makes you feel better, or just wish to complain and blow off some steam. ( please do not create new ones though, usually looking at the support system ticket insolvency merging at least 5-6 other ones first… ).

 

4. this forum is a giant waste of time, get back to coding, go outside, hug your mother, do something,

 

lastly, food for though:

 

who says we control that address in the first place?

Concern is starting to grow over the possibility that Avalon ASIC may be a scam. According to a post by BitcoinTalk.org member “photon,” the company’s lack of communication in light of multiple delays and unresolved orders raises some suspicion:

Here’s what we know as of today [June 6, 2013]:

 

- Batch 1 Avalons still not all delivered, no response from Bitsyncom
https://bitcointalk.org/index.php?topic=157856.0

 

- Batch 1 badly damaged Avalon, Bitsyncom replied to say “that’s unfortunate, we will work out a solution to ship this one back and send you another.” and then no follow-up or response from Bitsyncom for over 50 days and counting.

https://bitcointalk.org/index.php?topic=178168.0

 

- Batch 2 Avalons significantly delayed and still not all delivered, no response from Bitsyncom

https://bitcointalk.org/index.php?topic=167726.1200

 

- Batch 3 Avalons not delivered at all, no updates from Bitsyncom

https://bitcointalk.org/index.php?topic=203745.60

 

- Avalon ASIC chip purchases started over 7 weeks ago and no sample chips in sight, no updates from Bitsyncom despite Avalon website stating “30 sample chips will be provided 4 weeks into ordering per 10,000 chips.”

 

Of all the Avalon ASIC chip group buys, no one has heard a single word from Bitsyncom about the sample chips

 

- Zefir’s Batch 8 Avalon ASIC chip purchase issue has not be resolved or even addressed by Bitsyncom, resulting in ~$93,000 of the community’s money being received by Avalon but no confirmation of the order given by their order system. No response from Bitsyncom for over 6 weeks.

https://bitcointalk.org/index.php?topic=177827.660

 

At this point, there is no good excuse for the lack of communication on his part, especially considering the amount of money this community has spent to purchase his goods. These aren’t technical support issues, either.

 

For all the sensitivity there is now to potential scams whenever an ASIC company pops up, why isn’t Avalon under the same scrutiny? They’ve shipped a small number of units, but so has BFL. Is there any way to confirm with TSMC that they are actually having chips made?? So many developers are awaiting those samples.

 

(Source: https://bitcointalk.org/index.php?topic=227103.0)

In the same post, BitcoinTalk.org member Tehfiend points out that the 1FGAftzSTztFSB8LMwsrdCKTyqGY6zr3sU bitcoin address appears to be the payment address for Avalon bulk chip orders, with 59 transactions and a current balance of 67,185.1 BTC worth over $8 million at the average current exchange of about $120/BTC.

Address 1FGAftzSTztFSB8LMwsrdCKTyqGY6zr3sU, which appears to hold payments for Avalon bulk chip orders, now holds 67,185.1 BTC which is worth over $8 million @ $120/BTC. With the lack of info coming out of Bitsyncom, I’m very curious what exactly is going on over there. With the additional delays in batch 2 since the April 15th update, something obviously is not going according to plan and I am surprised the bulk chip funds have not been touched considering the first orders were made over 7 weeks ago with a supposed lead time of 9-10 weeks. If they have placed all of these chip orders with the foundry, I wonder how they are paying for them. Any theories out there?

(Source: https://bitcointalk.org/index.php?topic=227103.0)

Avalon ASIC is a 4-man company founded in April 2012 by Yifu Guo to compete with Butterfly Labs in the bitcoin mining machine market. Yifu appeared as a guest speaker at the Bitcoin 2013 conference (video above) to explain the delayed delivery of its first batch of ASIC miners, citing supplier delays and a potential sabotage by its shipping provider as a couple of the reasons.

Supplier delivery times doubled and multiple units from Batch 1 were delivered with cracked corners on the aluminum cases, which would require the boxes to be dropped from “several stories,”  according to Yifu. The shipping company was unable to provide a satisfactory explanation, so Avalon decided to switch its shipping provider.

With regards to the poor communication and customer service, Yifu says that only about 20% of the emails received on any given day are actual issues; the other 80% are demoralizing questions about shipping delays. Lacking a customer service department, Yifu and his team decided to shift their focus away from responding to emails and towards producing and delivering their second batch of miners in order to continue research and development on the third batch.

Now before grabbing the pitchforks and shovels, there is a very reasonable possibility that Avalon is simply overwhelmed by demand for its high-end mining machines. In his address at the Bitcoin 2013 conference, Yifu divulged the fact that at one point during its development of Batch 1, Avalon had produced a tray of ASIC chips that could output approximately 25% of the total hash rate on the entire bitcoin network.

With great hashing power comes great responsibility. Avalon had developed one of the world’s first processor chips designed specifically for mining bitcoin, and Yifu had underestimated its power. Ultimately, Yifu and his team had to choose between selling the machines to the public or hoarding their proprietary processing power to mine bitcoins for themselves. Fortunately, they chose to sell their chips at a time where they had the computational potential to overrun and disrupt the bitcoin network with their unrivaled ASIC chips.

BTCBible believes there is reasonable doubt against a claim that Avalon is running a scam, and that delivery delays and the subsequent PR problems endured by Avalon (and Butterfly Labs) is emblematic of bitcoin’s infancy as an industry. Avalon developed a technology that could have severely disrupted and overwhelmed the bitcoin network, but instead decided to distribute its powerful technology to the public. Avalon’s decision to distribute its technology was almost an homage to the bitcoin protocol, and earns them the benefit of the doubt – for now.

Batch 2 Avalon ASIC deliveries are being tracked here: https://bitcointalk.org/index.php?topic=146451.0

SIDENOTES:

  • Redditor turdovski makes an alarming observation about the potential safety and security of Yifu Guo:

The scariest thing I can think of is that the whole world knows who yifu is and what he looks like. They also know he has access to over 8 million dollars of untraceable currency. people have been offed for way less… especially in China. I hope these guys have armed bodyguards and triple protection for their coins.

Please read the above [terms] carefully, as with all things Bitcoin one should treat this as an investment and make the decision best for you based on the liquid-able funds available at the moment when placing an order.

  • Alec Liu published an extensive interview with Yifu Guo. The interview can be viewed here.
  • BTCBible has reached out to Yifu Guo for comment, and will update this article if a response is received.