Topic: [BTCT][BFMINES] - Mining Contracts Now Available - Bonus Divs First Months - page 8. (Read 26395 times)

Like I've said on several occasions, both in this thread and elsewhere, I am hesitant to provide predictions on difficulty. If you asked someone six months ago to predict the difficulty today, you'd have answers all over the board (including such from 100TH who said a minimum of 600TH on June 1). Trying to predict six months into the future now is as futile as it was then.

The price and earnings of mining contracts depend greatly on the difficulty evolution over time. If you believe in the perpetual proportional growth theory, you shuld not invest in any form of mining, mine included.

If you believe that suppliers will not be able to keep up proportional growth in the deliveries, then investing in mining makes sense, mine included. I lean towards this scenario far more than I lean towards the perpetual growth theory.

Keep in mind that for example BFL's or Avalon's effects on mining is also proportionally smaller with the same deliveries when difficulty grows. What seemed like a complete marketbreaker when BFL announced their minirigs at 1,5TH is now merely a Meh! Deliveries need to keep up with difficulty growth for the growth to continue. Has Avalon increased their predicted deliveries by 700% since February? If not, their predicted deliveries will now have a 700% smaller impact on the difficulty growth when they arrive. The 100TH mine was more than five times the total network hashrate when announced; now it's around 40% and dropping.

In short, I believe the difficulty growth will slow down over the next few months. How much is beyond my abilities to predict. Anywhere between those two scenarios, and it's a much more complicated question and those predictions tend to be all over the place again.

.b

You claim to have answered the questions I've asked, but I can't find those answers. So could you give us a summary. I'd like to know the following:

How much would I have received in dividends by the end of the year according to your predictions?
What do you expect the share price to be at the end of the year?

Thanks for your input again, I believe I have responded to these comments already, so I'll leave your characteristics for others to evaluate.

.b

I've been mining since 2011 and have no problem maintaining my own hardware. I also have ASICs on order. You try and make it sound like running a miner is difficult, but it isn't. It's no more difficult than running a PC. If you think that is worth 360 BTC then you are quite clearly insane.

I'm not comparing raw materials to a finished product at all. That's completely ridiculous. You are buying a finished product for x and trying to sell it for 10x, so stop trying to obfuscate this fact by talking nonsense.

If you believe that your stock will make a profit selling at 0.004 BTC when your miner wont even be online till August at the earliest, then you are obviously delusional. Why would anyone buy your stock when they can buy the exact same offering from your competitors at a lower price?

Thanks for your questions (and to everyone who witnessed it, sorry about the sniping fire yesterday),

1. I still hold PAJKA shares, but I also bought and sold some shares in the meantime (so far with a profit). I have held some shares for a long time, and rebought immediately after they were bought just over a month ago. Like many investors, the first thing I do after I buy any asset is put them up for sale at the price I would sell them. In my case, someone came in a couple of months after I bought and bought those shares at that price.

Whether I make a loss is stil to be decided, I'm in no rush to sell them, but I realize that with the latest difficulty changes and the new assets on the market, that prices have dropped.

2. I'm still hesitant to predict difficulty changes, but I've been pretty open about the fact that I'm far less pessimistic on behalf of mining investments than seems to be the case for a lot of investors. I specifically think that the perpetual proportional growth theory is bullshit.

3. When I did my initial calculations during the design of this contract in late May, I estimated a total network hashing power of 250TH/s on August 1. That included the addition of 100TH plus a 10% growth per month, which may have been too low. I'm still hesitant to speculate in difficulty :-)

4. I believe dividends paid out will exceed any IPO funds by a reasonable amount, which is why I made this asset the way it is and have no problem selling this to long-time friends who want to get on board.

The most comparable and competitive asset on the market right now is TAT.VM, which has fallen to about the same level as BFMines since I announced this asset. Obvioiusly, and like I've written in previous articles, the most important thing in evaluating a mining contract is price, but I also believe that competition is vital to a fair pricing, like I wrote in the announcement blog post. I believe this asset will make a profit for investors, and thus I also hold the same opinion for TAT.VM at these levels.

It may have gotten lost in yesterday's distractions, but the other comparatively priced asset DMS.Mining behaves like a mining contract in terms of dividends but not in terms of pricing. I don't see that as a directly comparable asset due to this as it requires a more hands-on management from investors and carries more risk of price swings than straight mining contracts. As such, for investors that want an exit possibiity, DMS.Mining is a more risky proposal.

.b

Hello furuknap,
I have a few questions for you:

1) I remember that you defended the PAJKA.BOND several days ago (at the time it was cca 0.08 for 3 MH/s share), are you still holding the shares? Or did you managed to sell them with profit or loss?

2) What is your estimate of avarege difficulty rise in 3-12 months?

3) What is your estimate of difficulty rise from now to August when you start mining?

4) What do you think is the probability that the amount you can gain from IPO would be bigger than the total amount paid in dividends? (the price of share will fall unless the difficulty drops, which is almost impossible with ASICs arriving).

You are, of course, free to buy a miner yourself, host it, maintain it, replace it if it fails, leave aside buffers for unforeseen maintenance, and essentially commit yourself to always be online during difficulty changes for as long as the bond exist. You must also always leave a buffer large enough to pay for at a minimum one week of dividends, which will be around 30BTC. Your estimates are way low, but of course this is turning a profit for me. Do you think I would give it away at cost and work for free just to be a nice guy?

You'll need to find someone willing to sell, of course, who would be fine with accepting that paying for a pre-order with the risks involved (remember, I paid for this before the chips were done and anyone knew whether they would work at all) will not yield a reward. Investors could have accepted that risk when they had the chance, but they didn't.

Of course, you are comparing raw materials to finished product. You must feel cheated when you buy a car that is made of $1000 worth of aluminium and you have to pay 20x that much. After all, car manufacturers are trying to make an obscene amount of profit for themselves.

What you are arguing is that investing in a potential gold mine is a waste of time because the mine owner should just sell the mine once gold is discovered for the rate he himself paid. The risk the mine owner assumes by buying a license, not knowing whether there is gold or crap in the ground, should not have any upside, according to you.

But the final argument is really this: If I believe this mine will turn a profit at 0.004, why on earth would I sell it for less? I would give money to investors that I would otherwise mine for myself.

So, your opinion and objection is duly noted, in public, and I believe investors are capable of both reading and making informed decisions based on your arguments and mine.

.b

Like I said, I don't believe that difficulty will increase 10% each round, especially later in the year. It was just a simple model to show what profits could be expected under those circumstances if you were paying dividends right now. If those 10 rounds began in August, they'd make about 0.001 BTC.

There's plenty of profit to made, even if difficulty did increase 10% each round. You just have to stop trying to make obscene amounts of profit for yourself. A Metabank BitFury provides 120 Gh/s for 2,160 USD. You'll be offering 100,000 shares at 0.004 BTC for a total of 400 BTC.

You paid no more than 35 BTC for a Metabank BitFury. You're trying to make 360 BTC in profit from 40 BTC (including the listing fee) while claiming you're not trying to rip people off. You can quite clearly afford to lower that price and still make a decent profit, which would in turn allow investors to make a profit as well. Instead you insist that your price is fair, even though dividends wont start paying till August at the earliest and that there is already a cheaper PMB on the market. I just don't see things working out for you.

Of course they will be smaller with difficulty increases. However, the asset pays around 15% per month assuming a network hashrate of 220TH and delivery on August 1 (100TH claims to be ready next week, those are the same chips used for this miner).

A 30% drop will still make this very profitable, at above 100% per year (15%*0,7 = 10.5%/month = 130% per year). Keep in mind, NASDAQ composite yields somewhere around 5-7% per year. Exxon pays dividends to the tune of around 3% per year.

Difficulty can go up by quite a lot before you lose money.

A sustained 30% growth, however (15%+ per change), will put every Bitcoin miner out of business, so that is an equally unlikely scenario as a zero growth scenario. Even a 10% per change growth is extremely unlikely over time and assumes either incredible advanced in chip design (think 10x more efficient chips than today). More likely, the growth will slow down. It may flatten out. It may even drop. It will not continue on at this pace. Physics prevent that and barring some billionaire being tired of seeing so many numbers on his bank statement, nobody is going to invest 10x what they can possibly get in return.

Like I've said, I try to refrain from speculating in difficulty.

.b

Difficulty doesn't need to increase for such a long time to deplete your asset. If we'd have another few weeks with difficulty increasing 15%+ each change, it doesn't matter if it normalises afterwards to e.g. an average 5% increase. The asset will be exploited already (meaning dividend and price will be much smaller).

To that point, any mining investment, hardware or security, would suffer exactly the same fate.

Keep in mind that 10% perpetual increase per change is insanely huge. In fact, if you extrapolate that, the network will reach 240+ PH/s by the next halving. Assuming that would be bought with the most efficient hardware scheduled today (KnC Jupiters) at a 50% discount, that would mean mining investments of $2.7 billion dollars, for an economy that is barely a third of that.

In fact, if you just account for 20% monthly increase over the next 12 months, you'll need $200 million worth of Jupters in fresh investments, or just over $15M per month. That will completely dwarf any mining investments so far. Even the 10K USB miners that AM spend 2 months not selling completely would be a drop in the ocean (20K BTC = $2M). You would need to sell the cash equivalent of 3,000 AM Erupter Blades per month for 12 months for that to happen.

Also keep in ming that a lot of the growth we see now has been sold months and years ago. Even combined, the entire natural growth of the network was wiped out when AM went down for service for a few hours.

I've previously argued against the perpetual growth theory in this article:
http://coin.furuknap.net/are-perpetual-mining-bonds-scams-not-really/


That will be your choice, and others will make their choices based on what they think is reasonable. Again, if you believe in the perpetual proportinal growth theory, stay away from any mining investments, hardware or assets.

.b

If we assume a 10% difficulty increase per round, then the next 10 rounds will take just 12.7 days each, so say 13 days of dividends for each round. So, over those 130 days, a total of 0.00207722 BTC would be mined. In fact, with a constant 10% difficulty increase each round, over the next 57 successive rounds (next 2 years), only 0.00336580 BTC would be mined.

I don't think that's a good way to predict difficulty myself, but it highlights the point I'm making. It's going to take a very long time, if ever, to make 0.004 BTC from a 1 Mh/s miner which starts mining at the beginning of the next difficulty round, never mind in a couple of months time. Sure, you can resell the share, but how much will they be going for 4 months later? How much will they be going for 2 years later?

A reasonable price right now would be around 0.002 as that should actually allow investors to make a profit. If you insist on that 0.004 BTC share price, then all you are going to do is waste 5 BTC on the listing fee.

Hi,

Thanks for your comment and challenge. I believe I have responded to the question on profitability already and why I'm hesitant to provide scenarios for profitability. However, I can tell you that I've run the numbers based on the same analysis model I did with 100TH (http://coin.furuknap.net/can-100th-really-be-the-next-asicminer/) and used that to design the asset to be fair to investors, with a reasonable chance of reasonable profit.

Obviously, if investors believe in the perpetual proportional growth theory, they should not invest in anything mining-related; there is no way for any mining investment to ever make a profit, including assets like ASICMiner (they won't have enough BTC income to pay off new investments in roughly 2 years, unless BTC/USD price reaches $1000).

.b

Why are you wasting your time and money trying to push this through at 0.004 BTC per share?  No investor will make a profit at that price at the current difficulty, never mind future difficulties. So, why would someone buy shares in your stock when they can already get better value right now from DMS?

Do you traders not understand anything about mining? By setting the value for these bonds at idiotic prices, all you are doing is trying to rip off your investors. You can compare your stock to TAT.VM and claim that you offer a competitive value, but that's just ignoring the fact that TAT.VM was insanely overpriced to begin with.

I challenge you right now to show how an investor could make a profit from your stock at 0.004 BTC per share.

Update: Escrow Details and IPO Process

BFMines is now just one Yes vote short of IPO, so I would like to prepare everyone to avoid any rushes or fears of being left behind.

Once (and assuming) the final Yes vote comes in, I will announce a date and time no less than 48 hours ahead when the IPO shares will be put on the market. I will announce this time on the offical web pages, the Bitcointalk thread, and on the BTCT news feed.

When that time happens, I will place an ASK order (meaning I sell) 100,000 shares at the announced price of 0.004BTC/share. Once that ASK has been placed, trading can commence.

Note that if burnside agrees and the platform can do so, you can pre-bid for the IPO any time after the final Yes vote and up until the announced IPO date by placing a BID order (meaning you want to buy) for any amount of shares. Those BIDs, up to the 100,000 shares offered, will be automatically filled if they are at 0.004 (or above, but don't do that unless you want to give me extra money). This allows you to get in line without having to fear being left behind if you are unable to attend the IPO time exactly.

At the IPO time and after the first ASK order has been placed, burnside, who has agreed to escrow the IPO funds, will lock the account so that funds that come in will remain in place until the equipment has been delivered and put into operation (the release date).

Until then, the holdings of the BFMines portfolio will be publicly visible through the URL https://btct.co/portfolio/gb80Dg==

Once the equipment is delivered, there will be a period until we can fully test, verify, and optimize the equipment. During this time, the operation will produce BTC from mining, although this is expected to be a small amount. However, if the equipment works and the mining commences as per the contract, these funds will be paid out as an added dividend during the first days of operation.

To recap what will happen over the next days (assuming final Yes vote comes in):

1. Announcement about IPO date with minimum 48 hour lead time.
2. IPO date with release of 100,000 shares at 0.004
3. Lock down of account and trading commences

.b

I won't comment on the voting issue because I feel it's of a more general nature than related to this asset, but I'd like to address the question of profitability in particular.

First off, I have so far decided to avoid giving specifics or even scenarios. The question of profitability requires an understanding of topics that are complex for investors to understand, and especially in understanding whether to believe claims made by someone with a vested interest in selling an asset.

The more important question that nobody has asked so far, however, is: If I believe this is profitable, why would I list the asset at all rather than mining and keeping the proceeds myself?

It's not like this is a production where my ability to consume the output is limited. Selling a car made built from cheap raw materials makes sense because your ability to drive multiple cars are limited. That doesn't mean car manufacturers don't believe that buying a car isn't profitable to their customers. In the case of an asset like this, however, I can consume as much output as I can possibly produce, and the question would then be why I would give that away.

The answer to this question, at least from me, is time. I spend a lot of time learning, researching, calculating, and monitoring the asset markets, forums, websites, people, and so on. I believe that with that effort, I am able to reap a greater benefit from having cash at hand.

For a normal or casual investor, spending that time to be on top of everything all the time may not be an option. For those investors, I believe this asset will yield a reasonable to good return, depending on difficulty evolution, without having to add substantial time and risk to the picture.

So, I believe the asset will be profitable. I base this belief on my belief that difficulty growth will slow down and maybe even flatten out in the not-too-distant future. I've argued for this previously and I stand by those arguments still. I may very well be wrong and I cannot guarantee that I'm right.
 
I prefer to sleep good at night, not fearing meeting an angry investor who feels I've tricked them. I do everything within my reasonable power to ensure this is a fair asset and that everybody understands the risk and how to evaluate that risk. I promote the complexity of the profitability question long before I speculate in profitability or lack thereof.

.b

lol, you guys!

Maybe just make a case with figures n stuff that shows potential for profit?

The comment on the "no" vote in question is: "This asset in almost guaranteed to be a loser for investors. Priced too high for the risk. Probably should wait until the equipment has shipped, then reapply."
(The emphasis is mine.)

Given the statement that the voter believes it's too high for the risk, they obviously believe there is a potential for profit, or they would have omitted that part entirely - their own value judgment has them believing that the security is not worthy of their own investment because the risk to the investor comes from the delivery timeframe of the hardware, not in the ability of the issuer to perform. If the voter believes there is a potential for profit, then the first sentence is a statement on the risk/reward proposition, and not on the fact that there is no chance for profit like you're making it out to be. The last sentence solidifies the idea even more: They encourage the issuer to reapply later - not because the believe the issuer is unable to execute on the contract, but because the subjective risk assessment makes them believe the security will not start returning a profit to investors in the timeframe they believe will provide a suitable return. Clearly, the voter is basing the decision on their own personal risk/reward calculations, not on "does this have zero chance of profit, and thus should be considered a sham?"

I must assume you think I'm being obtuse, and so you're returning the favor by trying to be cute/coy/whatever. I am not. I've hopefully made myself more clear with my last statement.

That's not at all what I said. At the risk of repeating myself too many times, the vote in question was based on the subjective application of *value*, which should not be the case in voting for securities for approval on any exchange, (unless the exchange fancies themselves to be NYSE back in the mid 20th century when the name of the exchange influenced investors' willingness to buy a stock, and therefore correlated directly with market capitalization/value of the securities). Value is determined by the market; suitability for the exchange, based on the reasons I've stated earlier, should be the only thing the voters determine. I see no logical conflict with my position when that difference is understood. I'm open to correction, though - if the argument is based on what I actually said: Voting for approval to be listed on any exchange shouldn't be based on risk/reward assessments; they should be made on suitability to the exchange and to weed out obvious shams, scams, pyramids, etc. A potential loss is not in itself a sham investment, but a guaranteed loss is.

But that's my point.  I read the NO vote as being that whoever made the vote (and I've no idea who it is) believed this investment would never make a profit.  In which case you must agree the vote is valid.  Whether you believe they're correct in that conclusion or not is irrelevant - you've accepted that if someone believes an investment is definitely not going to make a profit they should vote NO.

Or do you believe it's only right if YOU believe there's no chance of something making a profit?  If so, maybe all moderators should be told to PM and check with you before voting ...

You can't say voting for X reason is right - but then claim that a particular instance of voting for X reason is wrong just because YOU say so.  It's what the voters think that matters - that's why there's a bunch of them and not just you.

The vote explicitly says "This asset in almost guaranteed to be a loser for investors.".  None can ever be more sure than "almost guaranteed" - as with ANY asset there's always the chance of a profit if the issuer decides to hand out money for free.  If he's wrong then it doesn't make his reason for voting wrong - just the math he used to reach the conclusion.  And furkuknap OR yourself can easily disprove him if you want.  If an issuer doesn't explain how investors WILL (or CAN) make a profit then it's not fair to complain if people do the math themself and then reach a conclusion the issuer maybe doesn't like.  It's the issuer's job to sell the asset - to moderators then to investors.

I don't know where you got the enforcement idea, but I think it's very overstated. Guidelines != rules, they're suggestions akin to "keep this in mind when voting, as the purpose of the vote is to (insert guidelines here)". Kinda like just giving voters a reminder, "hey, please don't ruin this for everyone else just because you're feeling stingy today."

The first part of that is most of my point - it may not be an investment that's attractive to you, but that's not a reason enough to prevent others from taking the risk.

That's EXACTLY what I meant by "good for the exchange" - if it's never going to be profitable for investors under any circumstances, that's a bad faith issuer, and that's not good for the exchange, as the risk of loss is pretty much guaranteed except to those who can convince someone else to hold the bag, and the exchange will start to be seen as a haven for scams and pyramid schemes. But if the security is something that's not personally attractive to a voter but that still could be profitable to investors, the fact that it's not personally attractive to the voter isn't itself a good reason to vote "no". Think about a speculative venture that is not backed by guaranteed assets at the time of issuance - like starting a literal real-world goldmine. If there is gold in the ground, it could succeed, but if there is no gold in the ground, it would certainly fail. You can't know until you start digging, so the contract cannot possibly guarantee a return on investment of any kind. It's a classic high risk/high reward scenario. If the issuer has a reasonable track record of profitably running goldmines, one's personal feeling about their own willingness to invest should not impact their vote on whether the security should be issued - the vote should be based on the reputation of the issuer, the clarity and terms of the contract, and the voter's opinion on whether or not the contract could reasonably be executed. It should NOT be based on the personal risk assessment of the voter, as it's up to the individual investor to assume risk. The goal of an exchange should not be to guarantee returns - it should be to provide a place for issuers and investors to meet, and to screen out obviously bad issuers from the system to protect the reputation of the exchange - not to protect the investors from their own informed decisions. A lack of return does not necessarily mean the issuer is bad - it could simply mean there was no gold in the ground after all, despite the good faith belief of the issuer.

I see voting as a safeguard against outright scams and immature/incapable issuers - not as a safeguard against what might be considered "risky" investments. A well informed market will price risk appropriately. Some will win, some will not. And that's OK. Case in point: ASICMiner. High risk for investors - too high of a risk for some at the beginning. But if it had hypothetically been listed at BTCT-CO at the beginning, would some of those potential voters have been correct to vote no because the risk was too high for them personally? Not at all - not unless they had information that led them to believe it was a scam or that the issuer was incapable of performing on the contract. But without adequate guidelines as to the reason for voting, they may very well have voted it down. And that's why I think the voting guidelines should be made more explicit.
Great point.