Bitcoin Mining Makes Its Way to CES

Bitcoin mining: Who's doing it, and where is it headed?

Jan 18, 2014 at 12:30PM

The Fool headed out to Vegas to check out the 2014 International Consumer Electronics Show. With more than 3,200 exhibitors, including 88% of the top retailers in consumer electronics, the CES is the place to be to see what's coming up in tech.

Bitcoin is everywhere, and CES 2014 is no exception. The Fool stops by the Butterfly Labs booth to check out some Bitcoin mining chips and find out who's using them and what makes them tick.

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A full transcript follows the video.

Eric Bleeker: Hey, Fools. I'm Eric Bleeker from the floor of CES. No doubt you've watched Bitcoin's explosion across the past year, and CES is ground zero as well for this.

Butterfly Labs is here; you guys actually create mining tools for Bitcoin, among other areas. Let's talk about the products that you're showing off here. You've got a couple of Bitcoin miners -- it looks like one for more heavy-duty applications and one more for maybe a consumer angle.

Butterfly Representative: Yes, we have a wide range of products. What we see on every side of us here -- there are miners everywhere -- this is our newest card here; it is what's called our 28-nanometer ASIC.

We're actually kind of designing it for everybody. It's intended to potentially be put in a data center in a bunch of racks -- so you'd have hundreds of them somewhere -- but you can also use it outside of a computer, and plug it in via USB to your laptop or your tablet, or what have you. It's kind of an all-in-one unit, for the big guy and the little guy.

Bleeker: Fantastic. Could you talk a little bit about the demand you've seen? We've all seen the roller coaster that Bitcoin's been on -- obviously a revolutionary technology. People, though, of course, are worried about it being a bubble, with the kind of price appreciation we've seen. Where has the demand been coming from, across the past year, in terms of your customer base?

Butterfly Representative: It primarily started from the garage user, the hobbyist user, and everything.

The demand seems to be shifting more to the professional arena, to the professional miner, to the companies that that's all they do -- they are a mining company -- and then to some larger merchants. They want to mine for themselves, that sort of thing, to maybe not have to pay their transaction fees, or for whatever reason. They are starting to come to us and talk to us about what we may be able to do for them.

Bleeker: When you're looking at buyers in this market, what's their main consideration? Obviously, the areas that we've seen ... Quartz, a major website on business, had done an analysis where the cost to mine Bitcoin, in electricity, was several times over what you were getting out from Bitcoin at this point. What would you have to say about that? Does that lead to power efficiency being the killer app that users are looking for?

Butterfly Representative: Absolutely. The end result of Bitcoin mining will always be the power efficiency. As we've seen the explosion of Bitcoin over the past year, power efficiency hasn't been that big of a focus because the rise in Bitcoin has far outstripped any efficiency or lack of efficiency in the chips.

As we move forward, Bitcoin will probably still continue going up for ... who knows? The sky's the limit on that. Power efficiency will still be important, but not as important as it will be when Bitcoin starts to stabilize. At that point, it will be the absolute most important thing.

Bleeker: Got you. Do you mind talking about some of the components within your devices? I assume you're going for massively parallel computing here. Are you going with NVIDIA (NASDAQ:NVDA)? ATI? Do you have a preferred graphics vendor?

Butterfly Representative: No, we actually custom design the chips. We custom design everything, so the ASIC chip was custom designed by our facility. Each chip has a 64-core double round SHA256 engine in it, and they're all parallel, so we basically have 128 cores on this card, and they all run in parallel.

Bleeker: Wow. Could you talk about, are your competitors using off-the-shelf stuff from major companies like NVIDIA or AMD (NASDAQ:AMD)? Is this a competitive advantage for you, to design it yourselves? Why did you go that route?

Butterfly Representative: No, actually, all of our competitors are all custom designed, because while AMD and NVIDIA, their GPU chips were what was primarily used a year and a half ago or so, they just don't have the power efficiency, so we've moved into the era of, this is all they do, that's what they do. Everyone's pretty much going down some form of that route.

Bleeker: Awesome. Really fascinating there, entirely custom within the industry, it looks like. Some of the more general-purpose GPUs have gotten pushed out as we've moved toward more customization.

Do you have any final thoughts about the market, maybe, as we head into 2014, or some areas that really excite you?

Butterfly Representative: Well, you know, the whole Bitcoin market, I think we haven't seen anything yet in terms of growth and acceptance. I think we're just seeing the very tip of the iceberg, and I think 2014 is going to go down as something huge in Bitcoin-land.

Bleeker: Awesome. Thanks for tuning in. Remember for all your CES news, check back to fool.com. Fool on.

Eric Bleeker, CFA owns shares of NVIDIA. The Motley Fool recommends NVIDIA. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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