Topic: [BTC-TC] Deprived Mining Speculation (DMS) - page 68. (Read 198958 times)

It's not possible at present - API feed from BTC.TC doesn't show the identity of who transferred so there's no way to find who to send back to.  In theory it could be done by screen-scraping or by running a logged-in session and parsing the returned page data.  But it's just not worth that much hassle.  Once the API gets updated will look at it again.

MINING had its drop earlier - PMBs are just losing price now to achieve similar value.  The impact of difficulty changes is far more obvious in DMS so has been priced in much earlier.  And MINING's price was initially depressed (relative to PMBs) because those liking SELLING could ALL sell MINING and push the price down.  With PMBs noone can sell the price down (other than operator) without realising a loss (and investors in general are reluctant to realise a loss even when they wouldn't buy at or slightly below the price they refuse to sell at).

Was any progress ever made on the automated transfer bot mentioned several pages back?

If that were true that would be fine.  But in fact you HAVE speculated about difficulty - but only on the scenario that most suits your targetted conclusion - that mining difficulty FALLS by 50%.

And your other point, that the example shows MINING doesn't behave like PMBs is NOT proven by your example (at least not in the way you hoped it would).  Had you compared the behaviour of MINING to the average of a pool of PMBs - half of which lost their hardware and defaulted and half of which flourished then the conclusion would be rather different.

Comparing MINING to PMBs in more realistic scenarios is, indeed, tricky.  In general terms where MINING ceases to behave like PMBs is when difficulty stops rises fast.  The problem is that, as we saw last time that happened, PMBs also stop behaving like PMBs then - and a significant portion of them default as the operators can no longer make a profit operating them.  Difficulty stopping rising happens BECAUSE it isn't profitable enough to mine for more people to want to do so (and the new ones that there are get balanced by existing ones dropping out).  A lot of PMB operators (most) have no disclosed assets able to continue supporting their obligations if mining becomes unprofitable.

And that's where furuknap's article flirts with outright lying.  He attempts to conflate "Mining being profitable" with "PMBs being profitable" when in fact the two things are in no way linked.  PMBs are at their best (if the contract is honoured) when mining is UNPROFITABLE - as that's what leads to difficulty stopping rising or even falling.  Any time mining makes any significant profit people will continue buying more hardware and difficulty will rise.

Furuknap's argument is in essence that when mining STOPs being profitable MINING will close.  And he's right about that.  But so in all likelihood will his own PMB.  It's one of the specific defined situations in which he'd close it :

"2. The overhead of operating the contracts becomes greater than its profits"

Furuknap appears to be claiming there's some mythical scenario in which difficulty isn't rising AND mining is profitable.  That doesn't exist - if difficulty isn't rising and mining is profitable then people WILL buy more hardware and more mining companies WILL start - and by doing so they break the condition.  In practice difficulty will stablise when it's not profitable to buy new hardware to mine with - at that point mining with existing gear may well still make more than it costs for many people (but not by a lot) but it actually isn't profitable when taking into account capital costs.

The lack of understanding of this is shown best in the following paragraph:

"However, the situation that may make mining profitable is a stop in the rise of mining difficulty. If that happens, all mining assets suddenly becomes vastly more profitable and thus prices will rise rapidly."

What scenario does he envisage where difficulty stops rising whilst mining is "vastly more" profitable?  Why is noone buying more hardware if it's "vastly more" profitable?  If the profit from mining repays capital costs in a short period of time then why aren't people buying more hardware?  If it doesn't repay capital costs then it isn't profitable at all - let alone "vastly more" so.

It's as though he just hasn't looked at what the situation was when that precise situation actually happened.  Did PMB prices rise massively?  Of course not - as by then the dividends were miniscule compared to the prices paid for them.  And most mining itself wasn't making money as fast as the value of hardware was being lost - which led to PMBs in particular being unable to continue operations.  Luckily (for PMBs) ASICs then arrived and bailed them out.

History WILL at some point repeat itself in that respect.  At that point DMS WILL close (precisely when depends on SELLING's judgement).  Some PMBs will buy out, some will continue paying, some will default.  But that time is still some while off - and the dividends before it's reached will be many years of the dividends after it's reached - so the difference between the expectation for MINING and PMBs is only a small percentage of actual long-term returns.

I'd just like to hear how furuknap believes mining can be profitable AND difficulty not rising - yet there's no significant interest in buying more mining gear.  Because somehow that's a scenario he bases part of his case on - and it doesn't exist.  Difficulty stops rising when mining is UNPROFITABLE if capital costs are taken into account (those with ASICs already continue mining as the capital cost is sunk and resale value becomes low).

I think that's most probably because other PMBs were overvalued. One can speculate about current MINING price, but who are those crazy people who were buying TAT and other PMBs at 4 BTC/GHps last week?! 

I am not, as you very well know. With that argument, I am trying to show that DMS.Mining is not a mining asset and, unlike what your statements would have us believe, do not work as one except in situations where the bet against it is leading the race. In a rational market, a slowing of rise or drop in difficulty would cause mining assets to rise rapidly in value whereas DMS.Mining would at best rise slightly and at worse drop to below pending dividends and payout.

Let's simulate this with an example, and I'm being extreme again for the sake of this example. This is a silly scenario for anyone that doesn't understand it.

If I announced today that BFMines would be expanded to retain its current network share indefinitely and thus pay around 200% ROI per year based on current selling prices, how do you think the price would behave compared to DMS.Mining?

This would be the exact effect of a stop in mining difficult rise local to BFMines only, and I'm wildly guessing that BFMines would shoot through the roof because it would now effectively act like an expanding mining company (like Cognitive or BASIC) where price per mhs is currently 8-10x higher.

Would 400 days of dividends from DMS.Mining cover the increase in price of BFMines? I highly doubt that. I doubt that even if DMS.Selling voted to close right now and DMS.Mining would get 3x the current selling price that this would be enough to get a BFMines equivalent of hash power.

.b

Specifically, difficulty continues to rise, and dividends on MINING has dropped to about half. Other PMBs decrease in value as dividends fall, but for some reason not MINING. Could this be because compared to other PMBs MINING was undervalued? Or are there other explanations?

Note also that his argument is that DMS.MINING can never win.

Which is strange - and obviously false.  Both MINING and SELLING can ONLY 'win' the combined cost of them.  With SELLING trading at a higher price it's rather obvious that SELLING's max profit is actually lower than MINING's (both in absolute terms and as a percentage).

SELLING can only 'win' the whole pot if difficulty immediately rises to near infinity.
MINING can 'win' the whole remaining pot if, at any time, difficulty stops rising by more than about 2-4% per change (precise value depends on the performance of investments).

Whilst MINING can't ever gain more than the value of SELLING in profit (plus investment gains) that's still well over a 100% profit all the time MINING is cheaper than SELLING and it would ALL be given in a very short time-span compared to PMBs.  SELLING can't possibly make a 100% profit at current prices - yet his focus is on how MINING can't make a profit.  Very strange - or it would be were he not trying to sell a PMB.

And it's the fast nature of the final profit that is the other element he fails to address.  Whilst it's true that MINING's max profit is capped and PMBs isn't (provided the issuer has provision to continue paying out after the hardware backing it fails and needs replacing - which few have) there are definite advantages to getting a final payment fast rather than having to get slightly more over a period of years.  You no longer have the CP risk and can reinvest the profits to end up with more.

Obviously that doesn't work if godzilla gos around stamping on all mining hardware that doesn't belong to PMBs - but outside furuknap's article that seems unlikely.

Indeed you're right, and I'm assuming that all ASICs taste the same so Godzilla would likely eat them all without discrimination :-)

The purpose of the somewhat silly example is to show that DMS.Mining doesn't behave like a mining asset unless difficulty keeps climbing. If it doesn't (regardless of whether Godzilla is real), other mining assets will likely rise whereas DMS.Mining would stand still. If this change is large enough or the market gets too excited, DMS.Mining will lose money as a mining asset (because it isn't one) regardless of whether DMS.Selling votes to close down.

I may or may not agree about the possibility of difficulty evolutions, but I also need to consider that the facts are rapidly changing and may look completely different in a few months or a couple of years from now, when the article will still be current but our current assumptions about the likelihood of certain movements are not. As such, I've refrained from speculations about difficulty completely, as I usually do.

.b

The main thrust of the article considers a scenario where half of mining power vanishes.

It then compares the behaviour of DMS.MINING to a fictional PMB.  And that fictional PMB is generously assumed to have mining power that wasn't in the half that vanished.  When of course there''s a 50% chance it now has no hardware with which to back its operations (or if you assume losses were spread evenly has only 50% of the hashing power it previously had).

Rather obviously if you compare A and B in a disaster scenario and then assume B is immune to all the down-sides then B will come off the better.  So yeah - if you assume godzilla is careful only to stamp on mining hardware that is NOT owned by PMB operators then furuknap's conclusion makes sense - and those scared that godzilla may have a grudge against ASICs should avoid DMS.  If you believe he wouldn't avoid PMBs then you have to value PMBs based on 50% of their hardware having vanished.  At which point you're looking at defaults with some PMBs being worth 0 if the past is anything to go by (exception being any who have proven non-mining assets from which dividends would be paid if godzilla stamps on their rigs).

Assuming that a 50% chance doesn't apply is reckless and not a reasonable assumption to make - it isn't some remote possibility that can be ignored for all practical purposes.  By furknap's definition it's going to apply half the time so MUST be factored in when drawing conclusions (assuming that godzilla is a metaphor for some mining catastrophe such as ASICs dieing after X months of use or whatever - rather than based on some specific information he has that it will apply to some locations not hosting PMBs' hardware).

In the short-term the drops in price SHOULD occur on the securities that actually get the dividends.  The value of ANY security immediately after it receives a dividend IS lower than the value immediately before the dividend by precisely the amount of the dividend (ignoring any minor adjustment for CP-related reasons).

In the longer term the rational explanation for it would be if those buying MINING believe dividends to SELLING will slow down to a near halt before they exceed the excess NAV over the value of MINING (i.e. difficulty will stop rising rapidly in the not too distant future).  They then make a decent profit quickly when DMS closes and they get a lump sum - or more slowly if SELLING choose not to close quickly and hope difficulty starts rising fast again.

A less rational reason is that the price of MINING is linked to the price of PMBs (in conditions of fast-rising difficulty it has very similar expectation and value to them) so its price tends to get maintained by people buying it because it's cheaper.  People who don't have any particular view of likely medium to long-term scenarios for mining difficulty can buy MINING knowing that at least in the short-term it will be better value than PMBs (costing less for the same dividends) and that acts to stabilise its price a bit.  They don't guarantee themselves a profit doing that but DO ensure that in most (NOT all) scenarios they end up better off than if they'd invested same amount in more expensive PMBs.  And in the scenarios where PMBs perform better in any reasonable time-scale (years not decades) they're pretty much guaranteed a profit from MINING (those scenarios are ones where difficulty stops rising quickly and DMS closes with MINING getting nearly all the funds and SELLING very little).  This is a less rational reason because those buying in this manner are doing so BECAUSE they haven't attempted to work out likely future behaviour - which is irrational (as they haven't considered the possibility that even at the price of MINING, PMBs aren't going to give a worthwhile return).

Different people buy for different reasons - the market price reflects a sort of average of their expectations/beliefs/guesses.  It isn't possible to give an exact reason why the price is at a specific point.  The drops, however, are completely expected if the initial market valuation before them was 'correct'.

I just posted an article to attempt to explain how DMS works.

http://coin.furuknap.net/understanding-dms/

I know Deprived is skeptical about the lack of current calculations and has comments on the article, but I'm guessing this place is as good a place as any to have that discussion in the open.

.b

I'm trying to figure out how this works and which one I might want to invest in. One thing I can't figure out is why MINING has had lower dividends but the price is the same, while the other funds are dropping in price with higher dividends?

True 

Technically, both sides are gambling. The difference is that one side expects a positive return, and the other side also expects a positive return.

We're on the house/bank/investment side, not the gambling side.

Why are you gambling coins

Sold   327
Swapped   0
Total   327
Price   0.039514
Total   12.921078
Less Fee   12.89523584
Man Fee   0.386857075

BTC Balance (BTC-TC)    1,385.05183112
11417 LTC-ATF.B1    114.17000000
Coinlenders CD 29/7    202.94451305
Coinlenders CD 13/8    100.48358161
Just-Dice Balance    157.79185920
TOTAL ASSETS    1,960.44178498
   
Outstanding MINING   49949
Outstanding SELLING   49949
Outstanding PURCHASE   2062
Effective Units   52011
   
Block reward   25
Difficulty   26,162,876
Hashes per MINING   5000000
   
Daily Dividend    0.00009611
50 days (Min Liquid)    0.00480554
100 days (Forced Close)    0.00961107
365 days (Buyback)    0.03508041
405 days (IPO)    0.03892484
400 days (Post SELLING div)    0.03844428
410 days (Pre SELLING div)    0.03940539
   
NAV Post MINING Div    1,955.44297085
NAV/U Post MINING Div    0.03759672
Days Dividend Post Div   391.18
SELLING Dividend    -         
NAV Post SELLING Div    1,955.44297085
NAV/U Post Selling Div    0.03759672
PURCHASE selling price    0.03947656
PURCHASE buy-back price    0.03684478
   
J-D House profit at report   -523

LTC-ATF.B1 dividend received.  After conversion back to BTC we received 0.6965398 BTC.

Yeah I can add that in (it'll be at bottom) - though if a whale is playing at the time I take value it may not match (investment and house profit are changing multiple times per second).  But in most situations it should be pretty accurate as a base-line for working out whether we're up or down since previous report.

House was at about -878 when today's was produced (we're very slightly down from when I grabbed our value now with house at -880).