Topic: [GLBSE] DEEPBIT Miner Variance Protection - page 2. (Read 5228 times)
You should be able to edit your OP and add a poll but better yet you might put it up as a vote on the asset itself on GLBSE. At any rate I would vote for the longer payout period since it is a lot of book keeping with the current frequency.
I've had a request to reduce the frequency of payouts in order to reduce bookkeeping. Does anyone have a preference? Unfortunately I'm not sure I can add a poll to an existing topic, so just post your preferences here.
MEI.DEEPBIT.B will IPO on 14th July 2012 at 0:00 UTC, and start paying claims after block 189503.
MEI.DEEPBIT.A and B will run on alternating Difficulty periods.
100 bonds will insure approximately 1.40 Ghps in a 1:1 ratio at the current estimated next Difficulty.
It has been an difficult Difficulty period for DeepBit.net miners so far, and holders of insurance are doing much better than they would have under a proportional payout.
MEI.DEEPBIT.A Coupon 5 claim:
DeepBit's mean round length for the period was 1.071551 x Difficulty, resulting in a coupon payment of 0.01071551 Btc per bond, 107.1% of expected.
MEI.DEEPBIT.A coupon 4 claim: 0.01071551 Btc / bond (+ 7.1 %)
MEI.DEEPBIT.A average claims paid / bond: 0.10214772 ( + 2.04 %)
MEI.DEEPBIT.A and B will run on alternating Difficulty periods.
100 bonds will insure approximately 1.40 Ghps in a 1:1 ratio at the current estimated next Difficulty.
It has been an difficult Difficulty period for DeepBit.net miners so far, and holders of insurance are doing much better than they would have under a proportional payout.
MEI.DEEPBIT.A Coupon 5 claim:
DeepBit's mean round length for the period was 1.071551 x Difficulty, resulting in a coupon payment of 0.01071551 Btc per bond, 107.1% of expected.
MEI.DEEPBIT.A coupon 4 claim: 0.01071551 Btc / bond (+ 7.1 %)
MEI.DEEPBIT.A average claims paid / bond: 0.10214772 ( + 2.04 %)
MEI.DEEPBIT.B will IPO on 14th July 2012 at 0:00 UTC. MEI.DEEPBIT.A and B will run on alternating Difficulty periods to
The next MEI.DEEPBIT.B will start paying claims after block 189503.
100 bonds will insure approximately 1.25 Ghps in a 1:1 ratio (this will vary with difficulty and pool hashrate)
MEI.DEEPBIT.A Coupon 4 claim:
DeepBit's mean round length for the period was 1.022654 x Difficulty, resulting in a coupon payment of 0.01022654 Btc per bond, 102.3% of expected.
MEI.DEEPBIT.A coupon 4 claim: 0.01022654 Btc / bond (+ 2.3 %)
MEI.DEEPBIT.A total claims paid / bond: 0.0402127 ( + 0.53%)
The next MEI.DEEPBIT.B will start paying claims after block 189503.
100 bonds will insure approximately 1.25 Ghps in a 1:1 ratio (this will vary with difficulty and pool hashrate)
MEI.DEEPBIT.A Coupon 4 claim:
DeepBit's mean round length for the period was 1.022654 x Difficulty, resulting in a coupon payment of 0.01022654 Btc per bond, 102.3% of expected.
MEI.DEEPBIT.A coupon 4 claim: 0.01022654 Btc / bond (+ 2.3 %)
MEI.DEEPBIT.A total claims paid / bond: 0.0402127 ( + 0.53%)
MEI.DEEPBIT.A Coupon 3 claim:
DeepBit's mean round length for the period was 1.056887 x Difficulty, resulting in a coupon payment of 0.01056887 Btc per bond, 105.7% of expected.
MEI.DEEPBIT.A Coupon 3 claim: 0.01056887 Btc.
DeepBit's mean round length for the period was 1.056887 x Difficulty, resulting in a coupon payment of 0.01056887 Btc per bond, 105.7% of expected.
MEI.DEEPBIT.A Coupon 3 claim: 0.01056887 Btc.
MEI.DEEPBIT.A Coupon 2 claim:
DeepBit's mean round length for the period was 0.89105 x Difficulty, resulting in a coupon payment of 0.0089105 Btc per bond, 89.1% of expected.
DeepBit's mean round length for the period was 0.89105 x Difficulty, resulting in a coupon payment of 0.0089105 Btc per bond, 89.1% of expected.
MEI.DEEPBIT.A Coupon 1 claim results:
DeepBit's mean round length for the period was 1.051 x Difficulty, resulting in a coupon payment of 0.01051 per bond, 105.1% of expected.
DeepBit's mean round length for the period was 1.051 x Difficulty, resulting in a coupon payment of 0.01051 per bond, 105.1% of expected.
Halfway through the first coupon period and average round length is 1.183 * expected. Bad luck for Deepbit so far.
Block 187487 has been solved, so the variance protection is live. First coupon to be paid in approximately 1.4 days..
Well, we're up to block 187319, and we're waiting on block 187487 to start. So only a day or so to go before we start the insurance and another day or two (estimated 1.4 days) before the first coupon payment.
I'll update here with results and show how much a miner would have earned with and without the insurance. Anyone have any preferences as to how I should do this?
Also, I'm considering recalling unsold shares at IPO and have replacements sold at 0.9*IPO price as soon as the first coupon has gone out, at 0.8*IPO price when the second coupon has been paid, etc. Do any of my current investors have an opinion about this?
I'll update here with results and show how much a miner would have earned with and without the insurance. Anyone have any preferences as to how I should do this?
Also, I'm considering recalling unsold shares at IPO and have replacements sold at 0.9*IPO price as soon as the first coupon has gone out, at 0.8*IPO price when the second coupon has been paid, etc. Do any of my current investors have an opinion about this?
I wanted to report on organofcorti's character. I don't mine and foolishly bought a few shares of this bond, and I PM'd corti about it with some more clarifying information and eventually I realized this wasn't for me. I asked him for a buyback and he agreed to take them back from me. He should be sending my bitcoins back soon! Many thanks! I'm sure this insurance bond has real utility for his target audience 
Anyways, it looks like, I buy your issue for say 0.1, and I then receive ten payments of 0.01 -- based on the variance of a set of variables. That's what I didn't really understand -- what those variables were. I guess I'll keep an eye on it and see how it works for now, it does sound interesting.
The variable is Deepbit's luck in finding blocks. Only miners at Deepbit have any reason to buy this bond, anyone else is simply not the target market.You did make a good point though:
Why should people buy your fund versus ... diversifying across pools?
If miners diversified across pools, they'd have much less need for insurance like this.
Ok, I deleted the nasty post but your post advertising you services in some else's thread is still there.
I understand you are completely within your rights to start a business like this, but I wish people on the whole would stop issuing new securities just to offer insurance or shorting/etc. on just one security. To get around polluting the namespace as such I created an insurance company which insures miners, account holders, and so on, and we write contracts on a security by security and customer by customer basis. This way we have one company offering a single service. It also helps us avoid an 8BTC listing fee each time we write a contract.
Do we really need three or four tickers for each security? One to issue, one to play long, one to play short, and one for insurance?
I think there must be a better way to approach this.
Do we really need three or four tickers for each security? One to issue, one to play long, one to play short, and one for insurance?
I think there must be a better way to approach this.
Yours is a good idea, but not for me. I know about probability and variance in Bitcoin mining. I'm not an investment expert. I don't offer investments, I don't offer insurance for investments. All I do is offset the variance in pool earnings that miners experience. I know my skillset and I'm not going to risk other people's coin doing more than I know how to do.
So let me make this plain:
MEI.DEEPBIT.A is not a mining company. MEI.DEEPBIT.A doesn't invest in mining companies. MEI.DEEPBIT.A does not hedge against changes in btc value. No company I solely run will invest in mining companies, or anything else where the risk is not completely and utterly defined beforehand..
I would have liked to have been able to offer insurance without using GLBSE, but I lack the skillset to do so.
Also, are you really offering earnings insurance on round lengths for pooled bitcoin mining? I couldn't find mention of it on your thread or website - can you post a link?
Quote
All that being said; this does not look like insurance, because it has no backing. It looks like a hedge. Which causes me to wonder how you are making money on this. As you said yourself the variance is your risk. What is your reward? Assuming the difficulty goes up, I suppose you would keep a certain amount of the bond issue by not paying out as much. The problem with this strategy is that your reward is not commensurate with your risk. Simply investing the money in a miner would pay much more. Even if the difficulty rises 10% a month from here on in which I don't think is too likely, you could still make more money investing in other things.
MEI.DEEPBIT.A is is not exposed to variations in Difficulty.
Quote
Also, one bad month will wipe you out as this appears unbacked. Your risk is huge for such a little profit.
It's not huge and it's exactly quantifiable.Quote
If you made 10% and sold 10,000 shares, that's not even 100 BTC profit. But if the market were to move against you the losses could be equally great. What will you do if the market moves against you and you find yourself having to pay out 500 bitcoins to cover the hedge?
How can the market move against me - did you read the OP? Insurance expires after two weeks and I pay coupons that have an expected value of the cost of the bond minus my fee. If DeepBit is unlucky, I pay more; if DeepBit is lucky I pay less. Coupon payments mimic PPS, and the insurance is only useful for non-PPS miners to offset their variance. The value of the bond during it's two week life is also exactly quantifiable beforehand. Paying more or less for the bond than it's worth at a given point in time might happen, but since this is not an investment it doesn't affect coupons or my business model.
I can think of a way to describe it without using an example other than insurance against earnings variance in pooled bitcoin mining. Perhaps it is a hedge, but I'm not hedging against anything other than the unluckiness of a pool in terms of pooled mining round lengths - not the price of bitcoin, or the value of a market. Because I think this service is most similar to employment insurance I describe it as such.
As far as backing goes, I concede your point. There is no public indicator that I can pay for variance when the pool is unlucky, and I can't expect people to take my word for it. I'll remedy that soon and place a known amount of coins in a low risk and liquid investment.
Quote
The other major issue with this is that there is never any incentive to buy your hedge. If I invest 100 BTC in your company all I can expect to get out is less than 100 BTC if the difficulty rises;
You really didn't read the OP before posting, I think. Long term Difficulty changes cannot affect the insurance paid. Most of the lifetime of the bond is in one difficulty period, and if D does change it doesn't affect coupon payments. Read the OP. If the difficulty skyrockets there'll be just the same complaints about variance as there are now and were when D was an order of magnitude lower than it is now. It's why pooled mining exists - to reduce variance in mining earnings.
Quote
but in any case, investing 100 BTC in a mining company is very likely to have a long term positive return, even considering the coming wave of ASICs and the block reward cut in December.
That's a non sequitur if you understand what the insurance does. The bond is not affected by ASICS (unless the ASIC owners use pooled mining in which case they'll be customers), and there is no "long term positive return" and I can show you exactly what the lifetime return probabilities are.
I am grateful you posted and brought up these questions - I'm sure others have thought the same thing probably due to the fact that I had to designate these as a bond rather than an insurance premium. I want to reiterate that the insurance does nothing that a Pay Per Share payment doesn't do - at a much lower fee. It's not an ongoing investment, just insurance against DeepBit's bad luck if you mine there. And also thanks for the heads up about publicly held backing.
So unless you're a miner you shouldn't buy this bond? Basically, for shareholders to ROI, what are they to bank on?
Yes, that's right. This is for miners at DeepBit, and also DeepBit's pool operator (since they are also also a PPS pool, bad luck for the pool means extra payouts for him).
This is a bond not a share, and expires within two weeks after all coupons have been paid.
So unless you're a miner you shouldn't buy this bond? Basically, for shareholders to ROI, what are they to bank on?
DeepBit Miner Earnings Insurance bonds are available now, for 0.10155 btc at IPO. They will be valid for 530 rounds, and pay coupons every 53 rounds, starting from block height 187487.
For those of you thinking that Deepbit's variance wouldn't be a problem for miners, atm its not good:
If you had miner earnings insurance, I'd be paying you 181.5% of the usual coupon for that day and a half. For pools with low variance, when bad luck does occur miners seem to feel it even more - they're not used to it.
Quote
Average in last 24 hours: 3134145 (+81.5%)
If you had miner earnings insurance, I'd be paying you 181.5% of the usual coupon for that day and a half. For pools with low variance, when bad luck does occur miners seem to feel it even more - they're not used to it.
The difference is variance, and my risk. Some bonds will cost me, and some will pay me. If bonds cost 0.1 btc at IPO I'd have to manage the variance myself, but by charging 0.1015 I'm able to build up a buffer against variance. If I don't have the reserves available I'll buy more coin with which to pay them.
If a substantial number of shares are sold I will be investing them with PatrickHartnett while for the duration of the bond. I'll be abe to reduce the next IPO price if I can do this.
Since some bonds will last more than one Difficulty period, having an "A" bond and a "B" bond mean that I can re - IPO one while the other finishes paying off. There will only be MEI.DEEPBIT.A and MEI.DEEPBIT.B. The same goes for other pools, once I IPO bonds for them, for example MEI.SLUSH.A and MEI.SLUSH.B.
If the bonds don't sell at IPO I had assumed that it would be cancelled and I would wait until the next Difficulty period. I think your suggestion is much better though. If GLBSE allows it (and I'm a GLBSE virgin, so I'm not sure) I would just decrease the cost of the bonds based on the number of coupon payments that would have been paid * IPO price * 10 :
Bought before: cost of the bond
1st coupon IPO price
2nd coupon 0.9 * IPO price
3rd coupon 0.8 * IPO price
4th coupon 0.7 * IPO price
5th coupon 0.6 * IPO price
6th coupon 0.5 * IPO price
7th coupon 0.4 * IPO price
8th coupon 0.3 * IPO price
9th coupon 0.2 * IPO price
10th coupon 0.1 * IPO price
This is a completely new category of bond, so I'm expecting lots of questions and perhaps a slow start. But I think it's a worthwhile service and once I'm able to offer it for smaller pools I think insurance bonds will be very useful in reducing variance for miners.
Edited to include IPO price in above table.
If a substantial number of shares are sold I will be investing them with PatrickHartnett while for the duration of the bond. I'll be abe to reduce the next IPO price if I can do this.
Since some bonds will last more than one Difficulty period, having an "A" bond and a "B" bond mean that I can re - IPO one while the other finishes paying off. There will only be MEI.DEEPBIT.A and MEI.DEEPBIT.B. The same goes for other pools, once I IPO bonds for them, for example MEI.SLUSH.A and MEI.SLUSH.B.
If the bonds don't sell at IPO I had assumed that it would be cancelled and I would wait until the next Difficulty period. I think your suggestion is much better though. If GLBSE allows it (and I'm a GLBSE virgin, so I'm not sure) I would just decrease the cost of the bonds based on the number of coupon payments that would have been paid * IPO price * 10 :
Bought before: cost of the bond
1st coupon IPO price
2nd coupon 0.9 * IPO price
3rd coupon 0.8 * IPO price
4th coupon 0.7 * IPO price
5th coupon 0.6 * IPO price
6th coupon 0.5 * IPO price
7th coupon 0.4 * IPO price
8th coupon 0.3 * IPO price
9th coupon 0.2 * IPO price
10th coupon 0.1 * IPO price
This is a completely new category of bond, so I'm expecting lots of questions and perhaps a slow start. But I think it's a worthwhile service and once I'm able to offer it for smaller pools I think insurance bonds will be very useful in reducing variance for miners.
Edited to include IPO price in above table.
I'd still like to know where the 0.11166 - 0.1016 = 0.01006 BTC per share from your example are actually coming from. Also I'd still like to know what you will do if these bonds don't sell at IPO or if you can issue additional bonds in the same time frame (it seems you might want to have MEI.DEEPBIT.A, MEI.DEEPBIT.B, ...).
Jump to: