Topic: [BTC-TC] ET.DIFF: Future to speculate on next difficulty change - page 2. (Read 19054 times)

"ETOPS" is the account that will exchange PURCHASE, correct?

Edit: I meant 'FUTURE"

Yes, finally. We'll start tomorrow (Tuesday) at 4 p.m. UTC.

We're live.

Only 1 more YES vote needed. If we get approved before tomorrow (Monday) 4 p.m. UTC, we'll start at this time!

Thanks for your feedback.

In the Risk section the contract says:


This covers most points you described, except the last point (that any further fees are paid from management fees, not proceeds of sales). But to make it most clear and transparent for investors, I replaced my paragraph with yours.

Overall, I am in favor of this security. However, you only briefly mentioned holding the proceeds from the sales of ET.DIFF.FUTURE. Since you are responsible for shareholder's money, I would like to see more details the contract -- something like this, perhaps:

Thank you Kate! 

Does anyone know under which stone the other BTC-TC mods are sleeping? If we don't get enough YES votes until the next difficulty change (looks like sunday morning UTC at the moment), we'll have to wait another 10-12 days, as I don't want to start in the middle of a difficulty period.

Thanks to Rannasha, Deprived and you Eltopo for clarifications; very helpful.

Rannasha: Fair point about the formula being mathematically correct, but personally I like to ensure absolute clarity.

Deprived's comment really clinched it for me though; the investors have ample opportunity to slowly build trust in the issuer, and in the long run the issuer will make more by operating the security than by scamming.

I shall change my vote to "Yes" as soon as I'm reunited with my phone (left it at home this morning so no 2FA :$).

Kate.

Thanks for the words, Deprived.

While I understand the caution investors have against a new security and issuer (I do the same with other securities), in the end it comes all down to upfront trust the investors need to have when investing in new securities. If I don't trust a new issuer, I stand at the sideline and wait a few weeks until the issuer proved to be trustworthy and capable of managing the security. Especially as there are no real options to prevent a scammer from running with the funds.

I just could say that I'll try my very best to manage the asset (and I will), but so would a scammer say, too.

I see this security as a pretty low-risk one (from a scamming perspective) anyway.

It's clear where issuer's profit comes from - 2% management on turnover.

As there's a full reset every difficulty change, the most he could steal would be the cash from one cycle.

If investment increases each cycle (as trust in him grows) then he'd make more from being honest (but over a longer time-frame) than from stealing.  Which is the single biggest factor I look at when assessing CP risk - if someone's making a nice profit by behaving honestly then there's (in general - there ARE exceptions) no rational reason for them to steal even if they were dishonest by nature.

I don't know eltopo particularly well - other than that he's been an active participant in DMS (both in the thread and in trading - I see his name plenty of times on transfers).  But at least I'm confident he understands how to run the security, how mining difficulty works and isn't penniless.  Not all of which are true for some of the mining operations being IPOed recently.

Reason I don't like it is that it gives a false sense of security.  Scammers can still scam just they get something to hide behind that the naive might believe prevents them from scamming.

With securities like this one it's pretty much impossible to prevent scamming at an exchange level - though you CAN make it more obvious when they're trying.  One easy way to steal all the funds would be:

1.  Do forced buyback on all shares at 1 satoshi.
2.  Transfer some shares out to alt account
3.  Do dividend payment which gives out all funds to the alt.

Transfer of shares, dividends and forced buybacks are necessary for operation of the securities - so can't be blocked.

I can immediately think of less obvious ways - but fact is that without logic in place to check whether transactions are valid (or manual approval of them) scamming/theft can't be prevented.  And if it can't be prevented then there's no benefit in pretending that it has - as that just makes life easier for scammers by giving them a means to obtain credibility without actually stopping or majorly hindering them.

I'm all for anyhting which stops scamming/theft - but it needs to actually do so not just make it slightly harder.  Or the downside (making it easier for scammer to gain trust) outweighs the benefits (making it slightly easier for honest people with little reputation to gain investment).

True, but if Burnside is willing to implement the concept of having accounts with varying degrees of lockdown, it would make securities like this be forced to choose the levels of lockdown appropriate to their cause, and thus prevent certain problems, and remove certain trust requirements.

Of course I'm not sure what amount of lockdown is achievable without fully scripting all aspects, and at that point Burnside might as well just offer sets like these himself and take issuers out of the picture.

I'm not sure an account lock can be done in such a way as to stop fraud anyway.

People who think blocking withdrawals/transfers of cash prevents it are wrong.  Eltopo could just buy shares then transfer those to a different account.  Funds could even be transferred using his own shares.

I don't think it's worth the bother as all it does is add a few minutes to the time needed to steal (and some cost making it less efficient) - it in no way prevents it.

Contract has been updated in the first post and on BTC-TC (formula changed on dividend payments).

The third post has been updated with a payout scheme of dividends.

Hi Kate,

please read what Rannasha wrote, he got it 100% right (Thanks for answering, Rannasha).

It seems most investors prefer a formula with a cap at 0% at the bottom and 50% at the top (like Deprived suggests). The formula would look like this:

Dividend ET.DIFF.LONG = ((current difficulty - last difficulty) / last difficulty) / 100 * 4

The dividend formula for ET.DIFF.SHORT would stay the same (0.02 - dividend for ET.DIFF.LONG).

I will change the contract this way. As soon as difficulty stops rising, I will change it back to a formula that takes descreasing difficulty into account (this contract change will of course be announced on BTC-TC and bitcointalk forums at least 3 days before they take effect).

Concerning account lock, we'll have to wait on burnside and check if it's possible to lock withdrawal and transfer-out of BTC, but not locking transfer of assets as it is needed for operation.

Almost, but there are still some inaccuracies.

• I purchase 500 ET.DIFF.FUTURE @ 0.0204 BTC (10.2 BTC total) (2% mgmt fee)
• I transfer all 500 ET.DIFF.FUTURE back to you
• You issue me with 500 ET.DIFF.SHORT and 500 ET.DIFF.LONG (each FUTURE corresponds to 1 unit of both SHORT and LONG)
• I sell all my ET.DIFF.SHORT and perhaps purchase some additional ET.DIFF.LONG
• At the end of the 12 day window difficulty has risen by 25%; ET.DIFF.LONG pays out a dividend of 0.015 then is bought back at 0.0 (Payout with current formula is 0.01 + twice the fractional increase divided by 100)

This might be just me being a pedantic mathematician, but the two expressions are equivalent. Division and multiplication have equal priority, so these operations are executed in order from left to right. So x / 100 * 2 is computed by first dividing and then multiplying. No brackets needed.

Dividend = (C - L) / L / 100 * 4
This caps out at a 50% increase (all money goes to holders of LONG) and at difficulty stagnation (all money goes to holders of SHORT).

Hmm, yes I see what you mean. It is indeed not fair to compare you to a stock/company IPO. Also, the investors / market can make up their own minds how much to trust you by dipping their toes in.

I do perhaps sometimes overly fret about people doing a running with the funds; it would be so easy for this to happen, especially on this sort of security where there is little to show for the investment such as work to date, a functioning Web site, purchase receipts or a portfolio manifest.

I am conflicted in my position as a moderator since I don't know how much I should be doing to try protect the investors.


Thank you for the patient explanation, I understand now. I think I rushed reading the original contract! To summarise so that I can be sure I have understood, say I want to bet that difficulty is going to be higher than expected (this is a realistic scenario in my case since I'm heavily in mining and may wish to hedge my risk):

• I purchase 500 ET.DIFF.FUTURE @ 0.02 BTC (10 BTC total)
• I transfer all 500 ET.DIFF.FUTURE back to you
• You issue me with 250 ET.DIFF.SHORT and 250 ET.DIFF.LONG
• I sell all my ET.DIFF.SHORT and perhaps purchase some additional ET.DIFF.LONG
• At the end of the 12 day window difficulty has risen by 25%; ET.DIFF.LONG pays out a dividend of 0.01025 then is bought back at 0.0

First, step 5 appears wrong. I calculated that using your formula, but it is actuall ambiguous due to precedence:


I think you meant:


Second, I agree with Deprived that it does not make sense to assume difficulty might fall. I think you should re-engineer this so that the SHORT/LONG equilibrium mid-point is set at what the market, on average, thinks is going to happen. In the event of zero difficulty change the LONG divi should be 0.0 and the SHORT 0.02. I'm not sure how best to achieve that though!


That's a commendable move, well done! As Progressive said though the lock would have to be on internal transfers also. This would not prevent you from embezzling funds of course (you could sell a personal account shares in something at a non-market price or move options around), but it would be a positive step in terms of engendering trust.

I think that in order for Burnside to agree you would have to make a commitment to him that you'd never make a withdrawal without a motion or something like that, to reduce his workload.

Regardless, I'm much happier about this overall now. I've moved to abstain while you get back to me.

Kate.

I asked burnside to answer in this thread, let's wait what he tells us.

I answered Deprived's post above and asked for more opinions about this. I don't have a problem with this change. If investors like it, I like it too 

I would disclose my identity to Burnside if that helps.

The lock needs to be on transfer of BTC also - otherwise you could transfer the BTC to another account and withdraw from it.
If burnside locks both withdrawals and BTC transfers then I will have no trust issues (Rannasha has a good point).

The points mentioned by Deprived are very interesting, I didn't think about this:
Eltopo, what about the change Deprived proposed?

EDIT: Eltopo, would you mind disclosing your identity? Either publicly or to some trusted party (burnside, John K.).

Burnside has not answered yet. I suppose the lock has only an affect on BTC withdrawals out of BTC-TC, and not transfers or other things needed for operation.