Topic: [BTCT][BFMINES] - Mining Contracts Now Available - Bonus Divs First Months - page 5. (Read 26395 times)

This is written in the contract. The funds are in an escrow account and will be returned (sans the exchange trading fee) if the miner fails immediately and/or is not delivered.

As for when the IPO funds will be returned, I haven't set a fixed date in that yet. However, to mitigate the risk of this happening, I'm working on alternative sources of hash power so if Metabank announced that they are significantly delayed, we can still start mining.

The risk of that is carried by yours truly.

This actually reminds me that I'm going to post a motion to make an ammendment to the contract. This motion will not technically be required, as the contract clearly states no voting rights, but I'd like to improve the terms in favor of investors. I'll post more information next week.

.b

Vast majority of bitcoin mining investments to date have made a loss for investors.  Bitcoin is still around.

It's a bit like asking if gold-mining was unprofitable would gold survive?  

When you think about the answer to that you should realise that mining being being unprofitable has absolutely no detrimental effect on Bitcoin - one of four things happen (or a mix):

The price rises so it becomes profitable.
Some miners stop mining and it becomes profitable for the rest.
Miners are too stupid to realise they're making a loss.
Miners sell shares to idiots - passing the losses on - and carry on mining making a profit themselves anyway.

Numbers 3/4 happen all the time anyway.

What happens if the mining equipment is never delivered?

Or if it is significantly later to be delivered (like BFL)? At what point will you return the IPO money to investors, if at all?

Like I said, that number isn't really relevant in terms of comparing mining assets which was the point of that article. The number is relevant in terms of evaluating mining investments as a whole only.

I continue to avoid speculating on when or how much the increase will be, but I've said several times that it is likely we reach 1-1.5PH more than we have now before mining again becomes too marginal to make huge investments interesting. At 2PHs, BFMines, TAT.VM, and your own DMS.Mining still yield a return that beats NASDAQ composite by at least 200%, so how you can say that it is a horrible investment is beyond me.

And to answer your question about the fourth mining company; Metabank must ship, of course. They put a cap on sales at less than 400 units. That's a whooping 50THs, or roughly one AM's worth of mining.

KnC? No idea about how many units they will manage to sell, but they're now competing with the next batch of Bitfury based machines.


Of course it will. The prices of securities will also drop. This is explicitly stated in the contract. It is not ignored anywhere.

However, this isn't going to be a revolution one day, where KnC or Metabank announces they're cutting their prices by 95%. The market needs to buy first to create the income to make larger orders and smaller chips possible.

We're already preparing for 28nm. At 20nm, we have to start competing with the development resources of Intel to get smaller. KnC still hasn't shown a single working chip. Bitfury's chips (at 55nm) were massively underperforming (but are on time so far at least). BFL has struggled for a year to get their 65nm chips out. 100th is over a month late and needs to get more funds from investors. Even Avalon at 110nm are having major issues and as of a couple of hours from now are joining the ranks of those officially late on their estimates.

AM seems to be virtually the only company to get stuff out more or less on time, and even they have yet not fulfilled their estimates of having 62TH online (they're right now at roughly half of that) by late March 2013.

And yet you're confident we'll just keep having prices drop like rocks. I don't share your confidence. I think prices will fall, just not now and just not yet.


And if all Bitcoin mining investments are unprofitable, do you then think that Bitcoin will survive?

For a rise in BTC/USD to counter just holding coins as opposed to mining, mining returns must be massive. For mining returns to be massive, we need a high difference between mining difficulty and BTC/USD. However, if your stated assumption of a higher and higher difficulty comes true, mining investments of any kind will be a loss, so mining will either cease, or leave investors with vastly lower yield. For any investor to accept lower yield, the risk must be reduced, and that in turn requires better confidence in the profitability of development of new technology.


You're begging the question here by assuming the answer you want as an assumption for your argument. Mining contracts are unprofitable because they are unprofitable.


I don't see it that way. I do believe in the asset I have created, and I believe it will be profitable for investors. It will not rise in price, it will not yield 500% returns, but with a reasonable risk it is likely to return a reasonable reward. You may evaluate that risk differently, which is fine. I'm not bashing DMS.Selling for never being able to return 100% ROI or predict that mining will stop after 800ths leading DMS.Selling investors to lose money. They are simply different bets; you and your investors place your bets, I and my investors place mine.

I have also, to hopefully put an end to that discussion, never claimed that mining contracts are more profitable than investing in and operating your own hardware, just like no sane person would claim that investing in Exxon is more profitable than buying and operating your own oil field, or that buying shares in Ford is more profitable than building and operating your own car company.

.b

I think you've made a trap for yourself furuknap - and risk losing all credibility for the sake of making some profit on effectively reselling your hardware.  The following quote from your news post on BTC-TC pretty much sums it up :

"Also, I don’t speculate in difficulty changes as a policy, but I’ve chosen to account for 15% per month for the next two months when comparing the numbers. This may or may not be right but regardless, it shouldn’t affect the comparison of assets too much, only mining investments in general."

I can see no rational basis for assuming a 15% rise per month in the next 2 months for difficulty.  Even a quick look at current trends shows that in recent months the rise is consistently around double that.  That's with only 3 companies providing ASICs - and one of them (BFL) only just really getting going.

By the time your hardware arrives there MUST be a 4th company shipping hardware - as yours comes from them.  Yet somehow you believe the rate of increase is going to halve?

Claiming the rate of increase whilst other bonds mine and yours doesn't is somehow not important in comparisons is just ludicrous.  It's the second most important factor when calculating the relative competitiveness your offering to PMBs already mining (the most important, of course being price per MH/s).  The faster difficulty rises, the harder it is for your offering to ever make up for the dividends it missed before your hardware arrived (perhaps, more accurately, the greater the margin yours has to be cheaper by to represent equal value).  That's true regardless of how you model difficulty AFTER your hardware arrives.

And, of course, if you're blatantly underestimating short-term difficulty rises then it has to be considered likely you're doing the same on long-term ones when you confidently predict profitability for investors.

For your 15% per month prediction to be correct just for this month (without ANY KNC deliveries) would mean zero new ASICs added to the network for the remainder of the month.  It smells very much like you pulled out a figure that matched the results you wanted rather than looking at what's actually been happening.  And that's where you've gone wrong.  If you'd just acted like most other PMB issuers - and kept your mouth shut about what your bond would do - then if (more likely when tbh) it became apparent that investors would never make their money back at least you wouldn't have misled them.  But now you have a thread and various posts in which you attempt to argue the indefensible - that current rate of difficulty increase will drop in the short-term (next few months) despite a new manufacturer HAVING to enter the fray (for you bond to even come to life) with no apparent reason beyond the fact that you'd like it to be true because it makes your bond look better value were it the case.

The argument you've made a few times about difficulty having to stop rising because of the cost of hardware ignores three things:

1.  The price of hardware WILL fall - and massively so.  Current prices are a massive markup on cost (after NRE has been recovered) and will inevitably drop through competition once supply becomes reliable and demand becomes somewhat satiated.
2.  If the price of Bitcoin rises then that immediately allows more hardware to be added without problem.  Long-term the price of Bitcoin has to rise or it will stagnate and die (the cause/effect is actually the other way round).
3.  All the time people can sell unprofitable bonds/shares to the public they'll continue buying hardware and selling shares in it.  That it isn't rational for investors to buy their crap doesn't make it irrational for them to sell it - and it will continue even if mining is unprofitable before the issuers have taken their own (risk-free) cut.

You've put your credibility on the line for a very small sum - I hope that works out well for you.

Of course difficulty will go up. Of course prices will go down as difficulty rises. This is even explicitly written in the contract. Nobody doubts this. What you are saying is essentially that "the Sun will rise again and at that time the time you have left in your life is less". You're stating the very, very obvious. Again and again.

If the miner arrived right now, BFMines returns almost 200% per year. If the difficulty rises 1000% and we pass 2PHs, the return is still 20% per year (or, using the numbers I published in the comparison, 16.4%). At that time, growing the network another 10% will require the same investment per month as the entire world's Bitcoin mining investments up to now, every month. If you believe that is a likely scenario, you should not invest. 

Your error in your previous statement is this; even if you 'just' get 15% return on your investment, you still get return on your investment. There's no reason to assume that prices will drop at that point. Any investment that can produce 15% return over time will keep its value.

The market has already priced in the expected rise in difficulty, otherwise this would have sold out in seconds. Same thing with AM; the market has already priced in the expected growth, which is why the market is paying 10x more for AM hash power than for BFMines.

You've made your position and bet known. I'm still not sure what your continued reiteration of the same statements are adding, but like I said, just don't buy the contracts if you think they will lose money.

.b

Your prospectus states "The scheduled release is September 2013. This could be any time between Sept 1st and Sept 30th) At the time you launched your IPO and started selling shares that was ~60-90 days out. We have been seeing difficulties getting recalculated every 10-12 days for the last 4+ difficulty periods. So let's give you the benefit of the doubt and call it 12 days. That leaves us 5-7.5 difficulty increases between now and your guaranteed HW ship date. (I initially used 10 days, to come up with the estimated 6-9 difficulty increases. ("~" means approximately.)

As an aside it looks like the next difficulty increase is going to be around 20%, and it is widely expected that the following 5+ changes will also be difficulty increases of 10-20% http://bitcoindifficulty.com/.

-helixone

P.S. - If you honestly think this isn't a bad investment for buyers of your security, and aren't trying to rip people off, you *really*, *really* need to do your homework. (They ARE going to lose money.)

The running your own hardware versus investing in a mining operation has been discussed to death already so I'm not going to go over it again. I'm sure you and other investors are perfectly capable of reading through a thread before you or they make up your mind.

However, if you're comfortable with that, I don't understand why you bought into 100th, which is essentially exactly the same investment as BFMines.

BTW, I'm sure those who have been waiting for Avalons and BFLs for months will be thrilled you are now able to announce they will get their equipment in August. The likelihood of this, however, has also been discussed to death, so really, your post is just a repeat of old arguments and contains nothing new.

.b

Furuknap, you asked for discussing it here.
Most people think your offer is just a ripoff.
It's an offer for those who can't count.

It is 0.004 BTC for 1 MH/s, so it is 4 BTC for 1 GH/s.

For 4 BTC one can buy, for instance, one BFL 5 GH/s miner - shipping end of August.
Or one can buy something from the second table here: http://decentralizedhashing.com/bitcoin-mining-equipment-table/, getting up to 10 GH/s - shipping planned in August.

Better: the KnCMiner Jupiter model has a ratio 0.25 BTC for 1 GH/s - sixteen times better than yours.
There are many group buys or bonds for this device, for instance: https://bitcointalksearch.org/topic/group-buy12-kncminer-jupiters-15-sold-closed-jupiter-pool-226319.

For the 120 GH/s device (the same as yours) there are such initiatives too: https://bitcointalksearch.org/topic/closed-asics-group-buy-by-pidobir-224332
And new ones are starting...

So, you think that it is five months until October.

I'm sure you trust the numbers you come up with, so you should just avoid buying these contracts. If those are your expectations, as I said, there's no point in you gambling against those expectations.

.b

The point is that a fixed hash PMB has to be bought below a certain point to have any chance of even breaking even. With ~6-9 difficulty rises expected between now and the promised start of mining, it's highly unlikely investors will make much more than HALF their money back if they pay the IPO price.

-helixone

Yes, I'm basing the IPO of BFMines on the Metabank miner. What comes later is not defined yet, but I'm working on a few alternatives. I don't want to put all my eggs in one basket, despite what mr. Buffett says.

.b

Like I said, I will pay out what the miner produces. I don't have a forumla based on a fixed mining reward. It will never be less than the block reward, but it can be higher.

I asked TAT wbout it and he confirmed that he does not pay out transaction fees, so I guess that gives BFMines a slight advantage over TAT.VM and possibly other mining contracts. Of course, at the moment, it's a percent or something, so it's not really making a huge impact.

Now, let's cheer for Bitcoin adoption and hope everyone starts using it massively!

.b

I stand corrected then, if you do pay out transaction fees then I think your security is the only PMB that does so.

Why wouldn't he get that? This is a physical miner that does real mining work; any income from the miner will be distributed, regardless of whether it is block rewards or transaction fees.

You bring up a good point, though. I'm not sure how TAT.VM handles this as a virtual mine; his contracts only states the block reward as basis for reward. I'll ask him.

BFMines, however, pays out what is actually mined.

.b

The contracts don't work differently from buying a miner in that respect. If difficulty goes up, the revenue from mining per mhs goes down, regardless of whether that miner is a phyiscal device you buy or a contract.

.b

And you don't get any transaction fee money either.

How will you deal with the difficulty?

If i get 12 btc of bonds so 3 ghs miner in one week I will produce 0.50 btc,that's ok for now but if the difficulty keep going up with my 3ghs miner I won't do much.So that means that  I should be getting more bonds if I want to keep producing a decent number of BTC.

Nope, you keep it forever or until the asset closes for one of the reasons outlined in the contract. In short, as long as I'm alive (or I die and someone takes over) and as long as the contracts produce a positive cashflow (meaning mining minus expenses is positive), the contracts remain.

.b

for how long will I be having it?is there a deadline?

What if I want to sell the stocks I got?is there a risk I will be getting less then how much I paid for?