Topic: . - page 19. (Read 67488 times)

They don't need to, but it doesn't affect the numbers, because they have to pay it out if pirate defaults. You can strike out the line (which I did in the quote above) and just compare the 2 cases. Instead of selling 3000 shares at 1.038, they should instead invest 960 btc with pirate because the profit would be greater with the same loss if pirate defaults.

If what you are saying is that they should do case 1 AND case 2 at the same time, then that means if pirate defaults they will lose 1920 bitcoins. Then in that case, why not just put 1920 btc with pirate instead?

Not relevant to the existence of positive profits or negative profits. (Certainly relevant to the amount)

As for your second paragraph, see my above post. (We're leapfrogging a bit)

Fair enough. Let me respond to your original post again.


Effective interest rate affects how much PPT makes. So how is it "not really relevant in regards to PPT's profits"?

As for your second statement, I already showed that for this round of PPT.A even when pirate does not default, they effectively lose money. In other words, they don't make as much as they could have by not selling the bonds.

Perhaps I am missing something, but nowhere can I find the statement that they must actually hold .32 BTC per bond in a wallet instead of in investments or in Pirate himself. All that is stated is that they will pay 0.32 BTC per bond if Pirate defaults.

No sane person would purchase a bond above 1.28, ergo I concluded it was unnecessary to include that possibility in my calculations.

Technically you are certainly correct, but we could bring up any number of extremely improbable conditions and discuss this subject endlessly to no end whatsoever. However, for the sake of your appeasement, I have edited my post to reflect this extremely remote possibility.

I didn't say anyone paid 1.32. I was responding BinaryMage saying that no matter at what price the bond is sold, PPT will lose money if pirate defaults. I was just showing that if the bond was sold above 1.32, PPT makes money either way.

At 1 btc per bond, it's as if they put .32 on the side and paid .68 for the bond.
.96 return (1.28 - .32) on a .68 investment is 41%.
.96 / .68 = 1.41

Their gain equals your loss. Because instead of selling the share at 1 btc, you could have instead invested .32 of your PPT.DIV capital with pirate directly. Here's the math assuming no compounding interest:

Case 1 - Selling a bond at 1 btc
  no default: PPT makes nothing.
  default: PPT loses .32

Case 2 - Investing PPT.DIV's .32 with pirate
  no default: PPT makes .32 * .28 = .0896
  default: PPT loses .32

So if pirate defaults, your loss is the same. If pirate does not default you are effectively losing .0896 per share because that's the money you otherwise would have made if you put the insurance money with pirate.
And your effective loss is the exact same as what the buyer of your bond gained. Here's that math:

Case 1 - Buyer buys PPT at 1 btc
  no default: buyer makes .28
  default: buyer loses .68

Case 2 - Buyer invests .68 directly with pirate
  no default: buyer makes .68 * .28 = .1904
  default: buyer loses .68

The effective gain of the buyer is .28 - .1904 = .0896
See how that's the same as what you (the PPT bond sellers) effectively lost? The math works out beautifully.
Bottom line, if you sell shares for less than 1.07, it is a losing proposition. (assuming no compound interest)
With compound interest, the break-even value is a bit lower than that.

P.S. I went to MIT

What?

No one has paid 1.32, and we have 0.32BTC per bond in a secure wallet earning zero to cover the event of default. 

We "pocket" the difference between the 1.00 and average price and that compensates for having 4k BTC tied up and goes to the PPT.DIV payouts.

That's wrong. If you paid 1.32 for a bond, PPT only puts 1 btc with pirate to make the 1.28 btc needed at the end of 4 weeks. They pocket the .32 if pirate doesn't default. If pirate does default, they don't lose money because they pay your the .32 they pocketed.

Thanks for looking and thinking about this.  The point you've demonstrated is that there is a benefit, and it's materially above 1.02.

BTW I used 1.07^4 to make the comparison more realistic.

also, as a question, how did you get 41% return for someone investing at 1.00 and receiving 1.28?

Effective interest rate is not really relevant in regards to PPT's profits.

If Pirate doesn't default, they make money. If he does, they lose money. This is true regardless of whether the bonds are bought at 1.0 or 1.25; the amounts change but the fact of it does not.

EDIT: This is assuming no one buys the bonds for above 1.28, which would be vastly improbable.

Wow, at 1, the effective interest rate is 41.2%
You guys are losing money this way. Even doing compounding, you can only make 31.1% interest from pirate. You may need to rethink how low you are willing to buy your bonds at.

I replied to the main pirate thread, but I think this should also be posted here:


Your calculations are wrong. For case 1, if pirate defaults, you get 33.536 coins back because you had 104.8 bonds at .32 each.
By my calculation, break-even is 1.07 when your uninsured investment is non-compounding pirate rate of 28% return in 4 weeks.

Case 1:
107 coins to buy 100 PPT bonds at 1.07
  no default: 100 * 1.28 = 128
  default: 100 * .32 = 32

Case 2:
Keep 32 coins on the side and use 75 coins to invest in an uninsured 28% pirate program
  no default: 32 + 75 * 1.28 = 128
  default: 32 + 0 = 32

I think I got in at the last minute at 1.05 did have the, at 1.085 and decided to change a minute before.

Wow, I overpayed. Looks like they went down to almost 1.0 with this issue. Someone got a good deal.

I agree (and had been wondering about that.  Plus on the market charts it's going to be additive, so the 30-day totals are going to look weird too.)

not sure if better to post here or on the GLBSE thread but https://glbse.com/asset/view/PPT.A the price & volume charts show info from about 24 April to 15 May, perhaps from the original PPT-A, anyway it makes it confusing - I imagine especially for newbies

Answer A: 1.28
Answer B: My identity is pretty easy to determine, as are some of the others - would you like to meet me face-to-face?

So, in the first scenario, are the bonds redeemed for 1 BTC or 1.28 BTC?

Also, have you and your other partners revealed your real life identities? Where?