Topic: [BTCT][BFMINES] - Mining Contracts Now Available - Bonus Divs First Months - page 10. (Read 26471 times)

Valid point. I designed the post-release reward to compensate at least some of the lost income, conservatively one month, positively around 6 weeks, and at best (we know the miner delivers 120GH/s, but may like other ASIC hardware perform above that) perhaps as much as two months (of the miner can reach 132GH/s for example).

Of course, this depends on timing again. Dividends in two months will be lower than today. However, I believe that the rebate from current options combined with that bonus should compensate approximately for the lost dividends if the miner is delivered within August.


The accurate number of months is defined in the contract in the pre-release terms:


Because the pre-release terms will be removed on release date, I left the 'first months' as undefined. However, I see that this will be relevant to investors in the bonus period too, so I will update the contract with the exact number of months everywhere.

The exact statement about percentage is uncertain because the performance of the miner is not determined. It is rated at 120GH/s and a certain power cost, but neither are known accurately.

.b

I very much agree, I would like to call it something else, but bond is the closest thing available as a definition.

I believe the term PMB is beginning to take on a life of its own and its meaning becomes more clear as the marrket matures and understanding grows. This is also why I included a link to the article where I described how it worked in the contract and also added the bullet points for those too lazy to read that full article.

I would prefer something along the lines of 'mining contract' or something like that. It would be a clean break from the PMB moniker. Not sure how the market would categorize it, though, or if one would need to include 'contracts' as an asset option, for example on BTCT.


That's another good point. However, like everyone else, I cannot predict accurately the difficulty.

What I do know, and have argued in a follow-up article (http://coin.furuknap.net/are-perpetual-mining-bonds-scams-not-really/), is that perpetual proportional growth isn't possible.

We see a meteoric rise now for the past few months of around 400% since February. If extrapolated, this would mean a quadrupling of difficulty every four months, and would mean network hashing power reaches 600 TH in September, 2.4 PH/s in December, and 9.6 PH/s in February.

To put that into perspective, the most powerful miner on the horizon now, the Jupiter from KnC, runs at 350GH/s and costs $8,000. KnC would need to sell 28,000 such devices to reach such a number, which would cost the market US$220 million. That's the absolute lowest number using current technology, and that number must be invested to get to a market which is US$131 million per year (at $100 per BTC). With equipment lifespan of 2 years tops, that means a massive investment with huge risks for a possible 8.5% yield per year, and even this assumes that difficulty rise stops in February, which is far kinder than a lot of the predictions the fear-mongerers claim. Go another four months with the doom-and-gloom predictions and you're at a point where you write June 2014 and the market would need to invest four times any possible return to keep the difficulty growth up.

Of course, technology can advance but we also know that the KnC miner is already at 28nm and it's limited how small you can go. Costs also rise massively when you reach those sizes and with a fairly limited market, you'll find fewer companies willing to risk investing with the fixed return that Bitcoin mining can give. Three years from now when block reward halves, that risk is doubled, so any company must invest now or effectively lose half their potential income.

In short, perpetual difficulty growth won't happen. It will slow down. When and by how much is what a bet on mining (hardware or PMB) currently is.

.b

Still traveling, will respond to comments tonight Central America time.

.b

Thanks for the analysis, Deprived. I hadn't considered the effect of a fall in the price of BTC when thinking about the upcoming to-be-released hardware.

I always like to get other's views and opinions on my thoughts, so I'm fortunate to have both you and TAT give your opinions on the matter.

PMBs can't sell anywhere near what they believe to be the break-even point or they're no longer guaranteed that they'll make a profit.

Despite pretending to be a bond (where the issuer bears the vast majority of risk and investors don't) most PMBs are actually making sure to price themself so that the investor has all the risk (in some cases to where it's guaranteed investor will make a loss).

That's also why you don't see PMBs trying to actually be bonds and guaranteeing return of at least initial investment by a certain date.

There is also risk in relying on difficulty rising a lot for quite a while when pricing.  Most such assessments rely on assuming other manufacturers, with no hardware yet, will reach market.  It wouldn't take too much of a fall in the price of BTC for some of those to no longer get to production - as they'd no longer be able to recover initial production costs from mining or sales whilst competing with those (ASICMINER and Avalon, maybe BFL) who have already recovered their NRE so can sell at a much lower margin.  People also look at the recent massive rises and ignore the earlier long, much flatter periods - forgetting that once a certain saturation point is reached growth will slow down again.

It's as dangerous to overestimate difficulty changes as to underestimate it - but PMB issuers in general make sure to overestimate by a TON so whatever happens they do well and maybe there's a slim chance investors will get back most of what they paid.

I'm not commenting specifically on this one's pricing BTW - just on what's generally been the case.

Thanks for the analysis TAT, I was wondering if that was what those on the other side of the coin (so to speak) were thinking.

Seeing AM's increase in hashing capability this past week plus BFL's actual shipping of hardware leads me to think that a 15% increase is conservative and 20% is more likely the minimum we'll see for readjustments, especially if even half of the mining HW from Avalon, KnC, etc. actually ships.

Looks like I'll just enjoy betting my side of the market 

Would be very dangerous. If difficulty stalled or slowed for a long enough period you could be hurting. You'd also get miners selling off their hardware to buy your PMB, self-fulfilling your worst nightmare of diff not increasing.

That's why I priced TAT.VM above the cost of the cheapest hardware on the market.

I'm not sure what's stopping anyone from setting up a 1 MH/s equivalent PMB with a price like BTC.002 and still making a killing. Even at 20% growth per period, the ROI for the next 9 months will only be around 65%...

Maybe I'm just on the bullish side for future difficulty increases, but nothing's come so far to make me think otherwise....

Furuknap doesn't worry about semantics in contracts

So you bought a 120GH/s device from metabank.ru too.  

If you think you can sell more than 100,000 units are you going to buy more hardware (my understanding was that batch 1 was closed) or buy more hashing power from other device owners?

If you're going to do comparisons you need to do them based on what they'd be charging when your hardware arrives.

Either that - or compare your price to their price minus the dividends they'd have paid whilst you waited for delivery.

Also this needs clarification :

" To compensate for this, the first months of operation will give approximately 20% higher coupons/dividends."

How many months?
Replace approximately with an exact definition.  It's a contract not a vague statement of general intent.

You may want to consider NOT calling it a bond - if you call it a bond it'll definitely make it harder for you to get moderator approval.

That's because it is NOT a bond - nowhere is there mention of returning capital at the end.  A few moderators will vote NO on anything that isn't a bond but calls itself one - as it gives the misleading impression that capital is secure and will be returned ('real' bonds have a face vaue that doesn't change - and which in nearly all cases eventually gets repaid).  Yeah I've heard the arguments that it IS a bond but is denominated in hashes - which fails the smell test immediately when the selling price isn't defined in hashes.

I'm staying out of the argument on price as, right now, I have no interest in defining, determining or arguing over what a fair price for PMBs is.  I AM pretty satisfied that furuknap isn't intending to scam.

Maybe a prediction of what you believe difficulty (and hence dividend) will be at expected delivery date would help make the value of this obvious?

You would put your hope to better use if you hoped that mining would begin ASAP.

This will be profitable, I hope it get accepted asap.

And I quite welcome it :-)


I'm not sure why you've understood that I've attacked ASICMiner on a perpetual proportinal growth theory. In fact, my estimates are far, far below what any 25% forever growth will mean, which I think I've made clear on numerous occasions.


Very true, which is why the bond is designed with a discount and a bonus dividend for investors, which will happen in the period when the bond is most profitable.

If the bonus dividend is at 16% for six months, that effectively means the bond pays dividends for 1.16mh/s in those first critical months. In fact, and for the sake of an example only, if the difficulty remains steady for the next six weeks and Metabank delivers in a best-case scenario, this means the yield is almost 1% per day (based on TAT.VMs current divs at 0.00003223 per day multiplied by 1.16 and a price of 0.004).

You're right, though, we both (and investors too) know that this isn't going to be the case, but it is the other extreme from the scenario where everything grows proportionally forever.


AMC is a company so it's not really comparable. I don't compare this to AM either. 100TH is technically the closest and best option today, but due to recent events, I'm not considering it a reasonable asset anymore, despite it being one of my previous favorites.

Honestly, I think PAJKA is the most competitively priced asset outside this, with TAT.VM as a second.


What I'm saying is eactly what I wrote. It doesn't make change to change that statement when you're quoting it :-)


I concur; do not hold TATs arguing against him as petty squabble from a competitor. TAT is a great guy with good arguments and we've been discussing this both public and in private. I welcome his debate because it allows me to argue my case for why I believe this is a much better priced PMB than anything else on the market. I value his opinions and it has greatly influenced how I designed this asset, especially the pre-release terms.

However, now I really must go. I'm in the process also (as you would expect) of writing an article to present the various sides of the issue. If you'd like to read my current articles on PMBs, feel free to pick up your free complimentary copy right here:

http://coin.furuknap.net/understanding-mining-bonds/

http://coin.furuknap.net/are-perpetual-mining-bonds-scams-not-really/

.b

I have no problem with competition, it would be foolish for ANY mining asset to think they will be the last, or the most dominant one. I just think you have earned the same scrutiny you provide to everyone else


Belittle the projections all you like, but you and I both know difficulty is poised to raise by the range I noted, this is accepted across the mining industry, not some bit of paranoia. You have preached to no end about the impending hash onslaught while claiming gloom and doom to ASICMINER shareholders. Now you are joining the fray, welcome!

Also you don't have to mask your comparisons in coughs. TAT.VM pays its holders, and has been for weeks, BFMINES is selling promises on a moving calendar. There is no comparison, until you are actually hashing at least...


Untrue, there are other mining assets charging less for future hashes (AMC is a great example, and they even pay divs in the interim, using mining equipment they have already)


So, what you're saying is, don't buy this asset unless you think difficulty will stop going up? Sound advice.

For those of you that don't know, Furuknap and myself have had some lively debates over IRC, it's mostly just sparring, and I hope I don't look too petty giving him a hard time here, but in the end what he is selling is not deceptive or unethical (just overpriced! bazinga!) It's also not lost on me that I also sell a PMB, but I created mine partially to make it harder for people to overcharge for PMBs, including ones that seem more inexpensive.

Thanks for reaching out, TAT, I was expecting the competition to rear its head :-)


Bitfury's chip has gone well so far but you are right in that the shipping delay of two weeks caused the bet to fail. However, he's already promised to reimburse the Yes-voters if the chip performs as expected and as his initial tests show. He was a bit optimistic and had expected the chips two weeks ago, but now they're here :-)

Keep in mind this is the first 24 hours, roughly, of a new chip design, but from what I'm reading in the thread at https://bitcointalksearch.org/topic/ann-bitfury-is-looking-for-alpha-testers-of-first-chips-free-money-here-228677, it looks very promising.

In any case, this is not something investors need to fear as in case the chips do not work, their funds will be returned.


...and then the beanstalk will grow so high it will reach Mars!

Like I've said, in a worst case scenario, this is not as luxurious as in a better or best case scenario, but regardless it is already priced at close to half of other *AHEMTAT.VMCOUGH* PMBs, so for those that do not subscribe to "OMG Bitcoin mining is dead in two months, the difficulty is killing us all!" they at least get 50% of their investment back if they sell those other assets and subscribe to this.


Several reasons;

• This is far better priced and has a discount compared to options available today.
• Investors receive a bonus dividend of estimated 15-20% for six months after release.
• For investors that wish to bet against the perpetual mining difficulty growth theory, this is their best price on the market.

For the record, I'll be traveling for the next couple of days and may need a few extra hours to get back with any further questions. In summary, however:

• If you believe in the perpetual proportional mining growth theory, don't by this PMB (or any PMB or mining equipment for that matter)
• If you think that mining difficulty at some pint must flatten out and you think mining will remain profitable long enough to reap a reward, this PMB is the most competitively priced asset on the market

.b

Not sure your dates and calculations are correct, but you may be right that the price isn't competitive in a worst case scenario of perpetual 20% growth. However, there are many reasons why this isn't sustainable (keep in mind, a percentage increase is proportional, which will eventually mean the difficulty must rise by close to infinite per 10 days).

In a better case scenario, the price is already discounted enough from current options to make this highly competitive, and in a best case scenario, this pricing beats anything out of the water.

.b

Hasn't the manufacturer of these miners already lost 100btc on a bet due to a missed milestone? I'm also reading that the rough initial testing of the chips didn't go well.

Even if they are luckier that most people before them, and don't miss anymore milestones, the mining difficulty is likely to be 3x-8x higher by the time these are delivered to you. This is compounded by the fact that when/if they do ship these, another large chunk of hashing will go online, increasing difficulty even further.

It's extremely likely that by the time these bonds are hashing, 1mh/s will be worth only 10-20% of what it is today.

Also, why would someone want to leave their coins dormant in escrow with you for 3 months? That is an opportunity cost, and one could easily out that coin into another stock or bond that pays 1%+ per month "guaranteed". Maybe you should have forgone the escrow and provided an interest rate?

0.004 is competitive now, but definitely not in 2 or 3 months time.

If difficulty continues to increase at 20% every 12 days for the next 10 weeks then the current value of a PMB should decline by around 67%.

Taking DMS.MINING at your figure of .0052 BTC/MHs currently, the value at the time of your IPO should be down to .0017