Butterfly Labs COO responds to detractors amid company struggles

Processor manufacturer Butterfly Labs (BFL) has recently been taking a bashing in the press and on the Bitcoin Forum due to delays in deliveries and the release of the its new 28nm processor, the Monarch. CoinDesk contacted Butterfly Labs' chief operating officer (COO), Josh Zerlan, to talk about the delays, the Monarch ASIC and Bitcoin Forum complaints.

Butterfly Labs

, one of the most prominent producers of bitcoin mining technology, currently ships hundreds of units of 65nm chips per day. However, the Kansas-based firm has recently struggled to keep up with demand as it is currently manufacturing more units per day than it can dispatch and verify, which has led to frustration for those customers still awaiting delivery of their ASIC miners and who are concerned at the diminishing return on their investment.

CoinDesk put this concern to BFL COO, Josh Zerlan, who expressed his sympathy and understanding for the frustrating situation in which his customers find themselves, both from a consumer perspective and as a former miner himself. Zerlan reported that the company is very aware of the problem and is focusing on increasing its manufacturing capacity, refining its processes and working to improve shipping rates. "If there was physically any way we could ship faster, we would be. We have and are doing everything we possibly can to get these orders out the door as quickly as possible," Zerlan said.

According to Zerlan, some of BFL's previous production difficulties had arisen as a result of an initially strained relationship with Global Foundries, the foundry BFL uses to produce both its 28nm and 65nm process chips.

"The problem you have when dealing with large foundries is they don't want to talk to you, especially when you're starting out," Zerlan said. "They get a lot of people with big ideas but no follow-through so they leave it up to brokers, who purchase time in giant chunks and then sell them to the smaller customers at a mark-up.  This leads to a lot of delays and miscommunication issues. Once you get big or well-known enough, the foundry is willing to talk and work with your engineers directly. This greatly enhances communication and speed of things getting done."

However, since BFL started to work directly with the Global Foundries (rather than through a broker), a rapport has developed between the two firms and there may be cause for optimism as manufacturing is now said to be running more smoothly.

Dispensing with the middlemen has also enabled BFL engineers to work directly with foundry personnel and pass on technical details on matters such as chip design, which BFL does in-house. It should also mean that BFL is better able to predict timelines on the wafers and have more leverage in how and when chips are created and shipped out.

In a further bid to speed things up, BFL is looking at outsourcing some of its production needs to a local, US-based company, which will assemble the Jalapeno 5GH/s miner line. What's more, it will add extra staff to its shipping department and customer service team. Finding suitable candidates for the latter  has proved particularly challenging as, in addition to the typically desired skills of good communication abilities and attention to detail, hires for the customer service team need at least a rudimentary understanding of bitcoin, which is no small ask.

The Butterfly Labs COO was also keen to clear up confusion about the availability of its new mining card, the 28nm Monarch ASIC, the release of which generated controversy amongst those still awaiting delivery of their longstanding 65nm-based products.

Zerlan stated that there are several months to go before "we see the actual chips in hand" because the 28nm chips are still on the tape-out process but revealed that BFL are set to do what he described as a "bullet run", which will produce a limited number of chips in 24 days (versus the normal 75-90 days required for a typical foundry run). This will not only enable Butterfly Labs to verify that the chips are working as expected but would also allow a small volume of customer orders to be shipped sooner than initially anticipated.

However, the amount of advanced chips Butterfly Labs can generate via bullet run production is constrained by both the high cost of such an exercise and also because Global Foundries only operates a limited number of bullet run slots. According to Zerlan, the additional cost incurred by bullet run production would be borne by BFL and not by consumers.

"The bulk run of chips should take place a few weeks after the bullet run, which is where many of the later orders will come from. That is expected to start shipping sometime in late January or early February 2014. As I get more information, I intend to keep everyone updated as much as possible," Zerlan told CoinDesk.

When asked if any prototypes of the 28nm process chips had been produced, Zerlan said there had not been any. He pointed out that, whilst every other vendor is working on their first-generation product, this would be BFL's second-generation ASIC and therefore the simulation models are likely to be far more accurate, making prototypes less relevant.

"Unfortunately with our first-generation FPGA product, the simulation models were way off in terms of power and hash rate. However, with the lessons from that exercise, the second-generation FPGA simulation models have been much better and our second-generation FPGA product has actually outperformed the simulation."

The question then is whether the steps being taken by BFL will do anything to assuage the dissatisfaction expressed by its customers, some of which has led to heated exchanges between Zerlan and a number of participants of the Bitcoin Forum. Zerlan dismissed some of BFL's detractors on the Forum as "known trolls" who were seeking to portray BFL in a bad light whilst he claimed that others were trying to encourage people to cancel their orders so that they would move up in the shipping queue. "BTC mining, being a zero sum activity, makes it viable and profitable to get as many people to cancel their orders as possible, so your position improves," said Zerlan. "That's really the crux of it: the less people mining, the more money you make as a miner."

The Bitcoin Forum has also been the scene of a more controversial exchange surrounding allegations that BFL's VP of product information, Sonny Vleisides, has a criminal record. Addressing the issue, Zerlan said: "Sonny tried to start a thread to answer questions but it devolved rapidly into a troll fest. As a result, it was decided that trying to answer questions rationally was a pointless endeavour and he has since stopped responding there... The fact that we've delivered two generations of FPGA products and one generation of ASIC products should be fairly indicative that BFL is not a scam."

Zerlan described the Vleisides issue as "wholly immaterial" in terms of its relevance to and impact on BFL's performance. If the Monarch proves to be a success and customers start to receive their processors in a more timely fashion, he should be proved right and the company will be garnering a more positive reception in the press and from the wider bitcoin community. Until then, it seems like the company has a lot of customer faith to regain.