Topic: Mining Bonds, Stocks For People Who Can't Do Basic Maths. - page 3. (Read 4456 times)

+1  Ashamed of themselves , Those issuers are devils....

I missed that part.  This is hilarious.

He buys hashpower from KNC at $20 / GH/s, and then he tries to sell it to the public for $400 / GH/s.

As the title says:  Mining Bonds, Stocks For People Who Can't Do Basic Maths

Anyone who supported creation of this stock on BTCT should be ashamed of themselves.

The problem with that is this:

1.  Rises in difficuly early on have a much larger impact than ones later.
2.  Your bond doesn't start mining for months - i.e. AFTER the most important rises.
3.  10% rise per month (NOT per change) seems rather unlikely - given the rise when your miner and others from same manufacturer wil ship will far exceed that just on its own.

Your bond pays 20% extra for first 6 months after starting, supposedly to make up for not mining already.  But a 20% bonus for 6 months in the future is at best 1.25 months at current difficulty IF difficulty didn't rise at all.  As you can't mine without difficulty rising (as your miner can't even exist without increasing difficluty) that means it's actually far worse than 1.25 bonus at current difficulty.  So if comparing yours to ones already mining investors need to be aware that even with the bonus it represents significantly less payout than 1 MH/S mining already.

None of which says it'll never make a profit - it just looks exceedingly unlikely to do so in the sort of time-frames you quoted.

Mining is marginally profitable - any markup of more than 10-25% on cost of hardware is rarely going to make a profit (often selling at cost will make a loss).

Your math is fine - your assumptions aren't.  With avalons arriving, their chips due soon, BFL starting to ship, ASICMINER aorund and (if yours is ever to do anything) KNC (or whatever they're called) also shipping expecting rises of only 10% per month (i.e. under 5% per change) in the short-term is pure fantasy.  And that's without the scammier other manufacturers where one or more might turn out to be real.

Do not listen to this liar...He is stupid , but he try to convince you to do a stupid things as him.

I'll just leave this here:

http://coin.furuknap.net/why-investing-in-mining-is-always-a-bet-that-prices-will-drop/

.b

They aren't turds... they are scat bonds.  The buyers are asking to be shit upon.

Not really.  Avalon sold ASICs at $20/GH/s.  Mining bonds are going for $700 / GH/s.

I think you underestimate the markets ability to price PMBs (or mining contracts as I prefer to call them; thei are neither perpetual nor bonds). Prices on mining contracts have dropped in response to the recent difficulty climb already.

I'm in the process of IPOing a new mining contract at 0,004, which I believe is fairly priced. With a 10% monthly increase, that contract will return its IPO value in a year and over three years (with 10%/mnth growth) return 147% for a total of around 16% per year. If difficulty 'just' rose for one year and then flattened out, the return would be around 243% or just under 50% per year.

I have no idea what scenario is most likely, but I don't think the pessimistic idea that mining will keep being so insanely profitable that everyone will get 50% on every dime they throw in will continue. A more modest but still profitable middle ground is more likely.

The question is, however; from where is all this additional mining power going to come? We have a fairly good overview of who is building ASICs and we're fairly good at calculating future deployments. I don't see anyone who could reasonably come up with 9PH/s over the next three years, which would be the result of 'just' having 10% growth.

Remember, we need new technology to go below 28nm, which is very expensive and takes a lot of time, and even Intel and the big boys (who sells hundreds of millions of chips) is struggling to go below 22nm. At 28nm, which is what KnC is currently researching, 9PH/s will cost $2 billion. Even if you get that at half price (and three years isn't really that far off), we're still talking about someone or the community combined willing to invest $1 billion to capture the mining market. That mining market, remember, halves in 2016.

We're rapidly approaching a point where even ASIC mining won't be very profitable. My asset already sells for less than AM's Block Erupter blades (which are priced at 0,005/mh) so they are unprofitable already, if my asset is. Pretty quickly, investments won't make sense and thus difficulty growth will stop and difficulty may even go down.


I don't speculate in difficulty and I would never speculate in price, especially not with billions of dollars. Those that gambled, say $140 dollars for a Bitcoin just a few weeks ago has lost almost 30% of that already. You won't convince someone to invest a billion dollars in the hope that prices will go up by 8x in three years.

.b

I don't think anyone expects the difficulty to continue to grow at 10-20% every difficulty increase for the next 3 years. If it continues for even one year the difficulty will increase tenfold, which will already make all PMBs unprofitable at their current prices. You're also assuming that the market cap of Bitcoin will stay the same by 2016; it is over $1 billion now and by 2016 there will be 3 million more coins which adds  $300 million even if the price stays the same (which is unlikely given Bitcoin's history) and the cap would be $3 billion or more if it doubled or more in price which is certainly a possibility in 3 years.

Come ,again? how about your PAJKA bond??

We aren't. In fact, it is highly unlikely that a 10% growth per 2 weeks can keep up for very long. This is the perpetual proportional growth theory, which assumes that by February 2014, and assuming there aren't any incredible revolutions in mining technology just around the corner, the community would have invested another $200 million in hardware (or around $700K every single day) by February 2014. Keep it up until 2016, and we're looking at $2.7 billion, all to capture a market that has a cap of a third of that.

I wrote briefly about the perpetual growth theory here:
http://coin.furuknap.net/are-perpetual-mining-bonds-scams-not-really/

I do intend to write another article, though, to further elaborate on pricing versus difficulty.

.b

Yes...old idiots dead, then new idiots come in..

I am once a idiot too...but soon realize it.

I have written about this for almost a year now and guess what - idiots are still dumping money to perpetual mining turds (bonds? LOL!).
Brilliant!

To calculate the current rate of return of a perpetual mining bond I am applying the perpetuity formula with growth (see http://www.financeformulas.net/Present_Value_of_Growing_Perpetuity.html where in our case the growth is negative).

P: Current stock price or present value
D: Dividend per 2 weeks
r: Rate of return
g: Growth

P = D/(r-g)

That transforms into

r = D/P + g

So for example in the case of TAT.VM if we assume difficulty will rise by 10% every 2 weeks (so g = -0.1), then at the current price I come up with:

r = 0.000364/0.0035 - 0.1 = 0.004

So r would currently be 0.4% for the 2 week yield.

If the price were to fall to, say 0.002 then it would be more like 8.2%.

So I guess I could compare that against a G.ASIC for example, but I have no idea what growth rate to apply there so let's just take the most recent div payment and assume it won't grow at all. The last one was 0.01810108 and they pay out weekly so that would be 0.03620216.

So the 2 week yield under those assumptions would be:

r = 0.03620216/3.16 = 0.01145637974684 = 1.146%

Now if I were to apply a 2 week growth rate of only 1% r would already be 2.146%

If we wanted to calculate a maximum price that TAT.VM would be worth paying for we could use that conservative G.ASIC yield and plug it into the initial formula:

P = 0.000364/(0.02146 - (-0.10)) = 0.002997

So 0.002997 may be a ceiling for TAT.VM given the current conditions.

Note that the recent G.ASIC div was unusually low so to come up with a floor you could just use a bit more optimistic G.ASIC numbers which would then give you some kind of reasonable trading range for TAT.VM

(By the way ... how are we so certain that the decline rate will be around 10%? I remember in 2011/12 there were periods when it barely changed or even declined for a while. But I think that was after a huge and sustained drop in the Bitcoin price.)

PMBs are not generally bad investments, it's all about the buying price. Like Mabsark rightly pointed out, about 0.002 BTC per Mh/s could be a price where an investment could be profitable.

Welcome back to last year's discussion on PMBs.

yeah got to understand it the hard way..
Be it DMS or TAT.. any PMB isnt worth investing.. you WILL end up losing money if your not careful..

It's not about a specific stock, it applies to all mining bonds. People are grossly overestimating the value of them or simply not understanding what they're paying for.