Topic: [Havelock] Bitcoin Difficulty Derivative (BDD) - page 60. (Read 290235 times)

That means you get the arbitrage portion, then! 

I started trading B.Mine and B.Sell because I noticed that B.Exch was cheaper than the pair.   I was buy B.Exch, sell the parts and end up with a noticeable profit.   I did this for about 100 shares and then there wasn't any profit left.   At that point I started using the B.Exch to buy B.Mine cheaper than I could otherwise buy B.Mine.   Those opportunities don't last, but it got me started.   

The fact that DMS and BDD are NOT just about betting on the increase, calculating a range of likely outcomes once and then executing that plan is what I anticipated and liked about DMS back then and BDD now. "Inefficienties" in the market like having to check wether buying at a certain price is really cheaper than buying EXCH and selling the other or wether buy-back conditions are true are added fun for me.

I didn't anticipate from the beginning that the effect of buybacks would be that huge! Or for example back when DMS was running Deprived put up a wrong EXCH price, and only very few lucky ones even noticed and arbitraged. knockonwood

I'm definitely in favour of keeping oddities like this as they are. For plot-twists and lulz!

Very true - this was something that I neglected to mention in one of the previous posts - not only is there the .6% of EXCH provided to the NAV/U, there is also the difference between the Period NAV/U and the Daily NAV/U that goes to the Fund.

I'd prefer that people pay as close to the NAV/U as possible, but yes, it's just more for SELL (assuming that Difficulty continues to rise). I haven't ignored your previous post, by the way, I'm just rolling it around in my head at the moment-

The last-round (Day 10+) B.EXCH buys are what really add to the NAV/U - this added value just gets paid to SELL holders at the end of every round though as the fund's excess capital is bled off though, correct?  So really, the issue is only an intra-round concern and not a round-to-round anomaly.  If people want to buy B.EXCH rather than purchase lower-priced MINE and SELL on the open market, why bother to regulate this?  SELL shareholders ultimately benefit as this type of action re-fills the fund to the 200 day required reserve - anything in excess less the 2% mgmt fee is just gravy for SELL holders.

Good questions! If the daily NAV/U rose substantially over the period NAV/U, I probably wouldn't change anything. Though I have my catch-all in the contract (everything will be done in the spirit of the contact, etc, etc.) there's technically no reason that I would have to change anything.

People would be free to purchase 'cheap' shares of B.EXCH and sell them back at the higher price, netting them a profit. They could do this until the B.EXCH price and the Daily NAV/U less 2% converged.

It would be similar to the times when the bids on MINE/SELL get too high - people buy EXCH and sell the market down until there's no profit to be made - it's a remarkably self-regulating system.

Regarding selling EXCH at the Period NAV/U instead of the Daily NAV/U - this is really just a matter of convenience and feasibility for me as the manager. I'm around most days to issue the report around Noon (something that I wasn't intending to do every day from the get-go, but I see why people want it). However, some days I'm out of the office / house and I wouldn't have a chance to change the EXCH price at Noon.

If I missed it, then there would be the issue of some people having paid too much for EXCH, etc. etc. In a perfect world, I prefer for it to change this way, but it's just not feasible within the bound of Havelock's system. Deprived, who ran DMS, did it this way (he also had to pay divs manually) and there were constantly issues because everyone just can't be at the computer at the same time every day.

TS,

I've noticed the aforementioned situation too regarding the additive effect on the NAV/U caused by the volatility in outstanding shares.  With all due respect, the model works quite well as-is because the potential to earn simply by holding both B.Mine and B.SELL is a third type of bet in the system.  You should keep this mechanism within the game because it gives incentive to earlier entrants, adding an additional factor of time back into the game.  

To illustrate the example - in effect, the fund pays interest to early entrants who hold B.EXCH in the same way as an unfunded social security system pays returns to successive generations of entrants in the workforce.  To continue to drive the buyback/exchange mechanism, its essential to have successive "generations" of entrants which mimic new entrants into the mining space (analogous to an expanding labor force or analogous market i.e. corporation issuing additional equity post-IPO or buying equity back).

The number of participants in the market isn't static - in order to continue to expand the number of participants (or simply the number by proxy of outstanding shares), you should continue to provide this type of incentive (its not a certain return, either...in essence its a bet in and of itself that people will over- or under-value B.MINE or B.SELL).

Shoots, I made a mistake.

I assumed the buy-back period NAV/U -2% for the buy-back price instead of the daily NAV/U -2%. So now I understand period NAV/U is just for the period's ask/sell price, not the buy-back basis.

So period's NAV/U+3% for SELL and daily's NAV/U-2% for BUY-BACK.

Well that changes EVERYTHING in my spreadsheet.

Okay a test then. If the daily NAV/U rises substantially above the period NAV/U, would you change the price of the B.EXCH to the higher NAV/U + 3%? Why wouldn't the sell price be based on the daily and not the period's as it is now?

Math Time

I'm using 6/21 - 7/21.

B.EXCH Starting Price 6/21: 0.03847462

MINE Dividends Paid 6/21 - 7/21: 0.00522894
SELL Dividends Paid 6/21 - 7/21: 0.00854093
Current Buyback Value: 0.02625510

Total Divs Paid + Buyback Value - Starting Price = 0.00155035

0.00155035 / 0.03847462 = 0.040295436 = 4.0295436%

So, yes, I take issue with your math.

You keep saying 'hold short term, not long term' and I'm not sure if you're being sarcastic / facetious or not. Because, as evidenced by the earlier math, both have been profitable (inception to now, or 30 days to now).


That's the whole point here. 'Worrying' about the Difficulty is the basis of the whole Derivative here - no one knows exactly where it is going, of course, but certain tools are awfully helpful at giving clues in the short term.

EDIT: I see that you deleted part of your post - don't worry, I quoted it

Who knows where difficulty is going? And why worry about it anyhow? We are trading your fantasy stocks after all. There are advantages in your game not applicable to playing the bitcoin market or the miner market.

One has to pay attention to B.SELL as this is part of your game and we are playing it.

My point was that holding B.EXCH long term actually is profitable, though in theory I would not want it to be.

Also, 30 Days is still short-term for a speculation of this type.

Right, don't hold B.EXCH long time. Buy/Sell short term. Someone who did just this would have gained 8% ROI over the past 30-days buying and selling.

SIMPLE MATH.

Adults are welcome as well 

Thank you I have seen the light now. I did not realize this was a child's game; I thought this was investing to see a return. Well I have had some good returns on B-Sell in the past so I'm most definitely not complaining; I just thought it would be continuous. I did not know it was all just a game. So I sold some of my shares and invested into other funds on Havelock Investments that are for real investments and not a child's game. I got in a different game. 

Math Time!

I've been putting this off for a while, but the two of you bring up an interesting point regarding holding B.EXCH.

Ideally, it should not be profitable for people to hold B.EXCH (1 MINE and 1 SELL) long-term. The reason for this is that people could simply buy EXCH and sit on it, contributing nothing to the Derivative - it's modeled after a zero-sum game, after all.

However, if you bought B.EXCH on the first day and held it until today, you would actually show a 4.69% profit on paper.

B.EXCH Starting Price: 0.24310363

MINE Dividends Paid 1/31 - 7/21: 0.07526082
SELL Dividends Paid 1/31 - 7/21: 0.15300023
Current Buyback Value: 0.02625510

Total Divs Paid + Buyback Value = 0.25451615

There have been few, if any people, that have bought and held both MINE and SELL from the beginning, so this applies to a very select few. However, the theoretical issue remains.

The reason for this is that there are two ways to add to the NAV/U - by new shares of EXCH being sold (remember that .6% goes to the Fund) and buybacks (which are issued at 98% of the NAV/U, resulting in a 2% premium going to the fund as well).

The addition to the NAV/U, in absolute terms, was also bolstered by the large (~180 BTC) sale that was made a few months ago and then mostly bought-back, resulting in somewhere around 3.5BTC added to the fund from the new sales premium and buyback premium.

I can't change anything about the formula now, but it's something I'll consider for the next Round (whenever that is) - possibly eliminating the premium on new sales of EXCH and/or figuring out how to disincentivize buy-backs without adding to the NAV/U.

Cheers-

I haven't seen your spreadsheet but if "You will get a Monthly ROI of 8.155% " is your result then yes, you have probably made an error. Unless there was a dividend calculation error on twentyseventys part (which I don't think there has and I've been following it pretty closely) then the ROI on b.exch should be very close to 2%.


Nobody would buy and hold b.exch. That is not how you play the game. You buy b.exch and sell either b.mine or b.sell depending on which one you think is overpriced.

There were no dividends for b.sell because the last difficulty increase was less than 6% meaning no leftover change when adjusting the b.mine "daily dividend fund" back to 200 days.


What you "subsume" as statistical analysis I call astrology. Please buy a usb miner or something and get a better idea of how the whole mining process works because you seem pretty ignorant on the subject.


Can you make money observing?

The entire point of the derivative is predicting the future and getting paid for it.


It doesn't matter if b.sell receives a dividend the next jump or not (highly unlikely it doesn't as bitcoinwisdom is estimating 12% in 4 days).

98% of the money put in to the derivative will be given back as dividends regardless of the difficulty.

Everyone here is familiar with the fact that Havelock was purchased a while ago by The Panama Fund; I work closely with Havelock and see no issue with this. Please take any political discussions elsewhere.

Also, people should watch the Difficulty, not B.SELL - if you know where the Difficulty is going, then you know where SELL is going as well.

Period 15, Day 8 Report - July 21, 2014

Balance Post Divs: BTC 330.94826618

Total Units: 12353

NAV/U: BTC 0.02679092

Why bother predicting? OBSERVE INSTEAD.

If B.SELL misses more dividends in a row, that's the signal to exit all positions while there are still weak hands in the game.

Hmmm ... OK maybe you're right. So when will the next B.SELL dividend be?