Topic: [GLBSE] DEEPBIT Miner Variance Protection - page 3. (Read 5228 times)

No, although with the plethora of mining bonds available I can see why you'd think so. This is insurance, pure and simple. It pays like a PPS based on DeepBit's round statistics. The number of rounds for the bond's life time is selected so that the bond will pays coupons every one tenth of the lifetime round of the bond.

The amount the bond pays is dependant on the number of shares per round / Difficulty . The greater this number - the worse the pool luck - the more I pay. The expected value for the lifetime of the bond is 0.1 btc, but the return can be much greater if the pool has bad luck. Conversely if the pool has good luck the bond will pay less than 0.1 .

After DeepBit has completed the estimated two weeks worth of rounds and all 10 coupons have been paid, the bond expires and a new one is issued.

An example: DeepBit's average weekly hashrate at IPO is 3170 Ghps, giving an expected number of rounds for two weeks of 510 rounds. Difficulty for the round is 1750000 and an IPO price of 0.1016.

Every 51 rounds I add all submitted shares and divide by (difficulty x number of rounds). I multiply this result by 0.01 and this is the coupon payout for those 51 rounds.

I simulated a life time of rounds below. Each number is calculated using total simulated shares / 1750000 / 51.


Each coupon payout would be:


The total payout would be 0.11166 . The return for this bond (including actual IPO price of bond) would be:

(0.11166-0.1016)/0.1016*100 = 9.9%

This would offset the loss the miner would experience from DeepBit's "bad luck", and is in effect a PPS based payment.

If the round lengths were short, the miner would have earned more (being a proportional miner) and the lifetime value of the coupon would be less than 0.1

I hope this answers your questions, Sukrim.

Where does the money for the dividends come from? Actual mining done by you directly or via contract or some other means (*coughpiratecough*)?

Also - as this lead to some issues in the past - what's your policy on issuing more shares/bonds/"floaters" and how will they be priced? If they are priced differently than at IPO time, how will you handle buyback?

In the end what I think you do is selling a mining contract for 10 difficulty periods that is dependent on deepbit's hash rate. Is this assessment correct?

I agree. I wanted to try it on the pool with the largest number of miners first, and at a 1.7% fee instead of the 10% fee deepbit charges, so miners from Deepbit would still benefit.

But I'm open to suggestions and if there are miners who do want me to offer insurance for their pools, I'll be happy to oblige.

Interesting idea indeed. But Im not sure you picked the right pool for it; monthly variance on a pool as big as deepbit would be quite low anyway. If you would offer it for some of the smaller pools like bitminter, it might be a lot more interesting.

OP updated with more information, fewer charts and an IPO date - 28/6/12 at 0:00 UTC. The insurance bonds will be on sale for approximately one week until block height 187487, when the bond will start paying coupons.

This is not a mining bond. This is insurance for miners, equivalent to a PPS payout at a very low fee.

Please post or message me if you have any questions or would like to buy bonds in advance of the IPO.

I'm not completely certain that the public data from P2pool is accurate, and the long term longer than expected round lengths gives a very high probability that the expected round length is longer than average.

I wouldn't want to offer insurance to p2pool miners until I'm confident that the published pool data is accurate, and then the artificially longer average round length would have to be estimated. I'm keen to include p2pool, but only after any teething issues with the other insurance bonds have been fixed and I can spend some time on a p2pool specific insurance bond.

As a sidenote, I can only insure miners at pools that publish reliable and accurate statistics.

Interesting idea. Any plan of offering the insurance for p2pool?

Pool insurance or miner insurance?

hmm
can pools buy insurance too?
<.<
>.>

tl;dr: Low fee PPS for proportional DeepBit miners

This service provides earnings insurance for Bitcoin miners who want some of the benefits of Pay-Per-Share without changing pools or paying a large Pay-Per-Share fee.

Bitcoin miners on DeepBit who prefer a non Pay-Per-Share payment method often post on the forum with concerns about variance affecting their earnings - especially if they are new miners, mine with a low hashrate, or are dependant on their short term mining earnings in some way. Orphaned blocks are of course paid in a coupon claim.

GLBSE link: https://glbse.com/asset/view/MEI.DEEPBIT.A1  - active
Unfortunately some MEI.DEEPBIT.A bonds were not returned so I created a new ticker with a new contract. MEI.DEEPBIT.A1 is available now will start paying coupons from blockheight 191520 for 488 DeepBit rounds, at intervals of every 122 rounds, at 0.1016 per bond. It is also properly callable, with a return of one satoshi for each bond on expiry. 100 bonds will cover 1450 Ghps in 1:1 ratio.

If you wish to purchase any bonds after activation you will need to place a bid. If anyone wants to find out what I will accept for a bid at any point, please PM me.


GLBSE link: https://glbse.com/asset/view/MEI.DEEPBIT.B - inactive

Those people buying and selling MEI.DEEPBIT.A bonds and MEI.DEEPBIT.B bonds, please cease trading. This bond has expired and will pay no more coupons. Please send me your bonds so I can retire the security.


General information:
Ticker: MEI.DEEPBIT.A1 and MEI.DEEPBIT.B

GLBSE link: https://glbse.com/asset/view/MEI.DEEPBIT.A1
GLBSE link: https://glbse.com/asset/view/MEI.DEEPBIT.B

Company name: Miner Earnings Insurance

Short description: A bond insuring against miner earnings shortfalls on DeepBit.net. The holder of this bond will be paid 10 coupons at regular intervals for the lifetime of the bond.

The holder of this bond will be paid an amount divided into up to 10 coupons at regular intervals for the lifetime of the bond.

Expiration:
The number of rounds for which a bond will be active is based on a pool's previous week's average hashrate to provide an estimated two weeks of operation before expiry.

Depending on how close DeepBit's actual hashrate is to the estimated hashrate, the coupon may expire sooner or later than the fourteen day estimate. This does not affect the value of each coupon or the total coupon amount over the life of the bond.

DeepBit.net does not publish the total round shares for orphaned blocks, so this is estimated from the duration of the round and the average pool hashrate for the coupon cycle.

Expected value:

The expected value of each bond is 0.1, and the expected value of each coupon is the expected value of the bond divided by the number of coupons to be paid. For example, if 10 coupons are paid and the bond's expected value is 0.1, the expected value of each of the 10 coupons is 0.01 btc.

% Probability of lifetime bond values earning more than listed amount, by hashrate:



Coupons:
Coupons will be paid up to 10 times during the lifetime of the bond. The exact number will be published  at the forum link prior to sale. The nth coupon of k coupons will be paid after the pool completes n/k * lifetime rounds. The expected value of a coupon is 0.1/k .

% Probability of coupons earning more than listed amount, by pool hashrate:




IPO Price:
The initial price of the bond varies by pool hashrate. The lower the pool hashrate, the greater the bond price. This is to help manage the greater variance expected in miner payments over lower number of rounds.


Calling:
This bond is callable, in which case I will pay:
If called after expiry, I will pay one satoshi per bond.

Please note that this is not approved by or executed in conjunction with DeepBit.net, and data for calculating the coupon amount is obtained from publicly available information only.

I welcome any comments, suggestions or requests.