Topic: realy curious about something (Read 1552 times)

thanks for the info everyone :-)

Neither are "proper companies".  There are legal hoops you have to jump through to become a company.  Both MPOE/MPEX and SatoshiDice are "virtual companies" like all the rest and state as much in their contracts... 

Where they differ is that they've shown a decent return, where most others have not.  No small feat.

Precious metal funds are very popular. The second largest ETF in the world is SPDR Gold Trust (GLD). There are a few reasons to invest in gold funds here (specifically GOLD on BTC-TC and LGT on LTC-GLOBAL):

• Increased liquidity. Shares can be traded whenever the exchange is operating.
• Lower fees and overhead. Typically, buying and selling physical gold incurs steep premiums, especially when dealing in small amounts. The fees for trading shares of the funds are extremely low.
• A convenient way to accumulate gold bullion. A person can periodically buy small numbers of shares, and then later exchange the shares for physical gold bullion.
• A way to hedge against drops in the values of LTC and/or BTC.

No, you pretty much got it. The corps that made gains for their investors so far in BTC history are MPOE, SDICE and their respective passthroughs. *

*Possibly exluding a few < 1000 BTC generators which might as well be set-ups at that level and lack of transparency.


Seems so.


Well, S.MPOE went from ~2000 satoshi a share to ~60,000 satoshi a share. S.DICE was constantly stable (3x0,000) for months but it recently popped and it's not clear where it stabilizes. It can happen.

First off, you're pretty correct so far in your assumptions. Gornick's and Deprived's responses are generally pretty spot on as well. I'll see if I can add anything to the conversation..


It really depends on two things (from my perspective): 1) the type of company or fund, and 2) effective management.
As I'm sure you've seen, there are tons of different mining securities out there. Some have been going for a while, still generating revenue and paying investors proportionally...others may have overestimated their aspirations and ended up going under because they weren't able to pay their investors properly...or their idea was terrible to begin with because they didn't think it through.


Yes and No. Based on what I've seen, certain mining companies tend to favor the operator more so than the investors, specifically those where you purchase MH/s or GH/s per share. Mining companies that issue bonds are generally in the same boat, given investors money is being pooled to purchase equipment which will (in the end) still generate money for the operator after the bonds are paid back. Personally, I've never been quite comfortable with either model given it puts the operator above everyone else. That's why I've created a Note (essentially a smaller bond) fund to purchase equipment, which will then be rolled into stock for my investment company after the note holders are paid back. This way all investors benefit from a pooling of their bitcoins, instead of just the operator (me).

As for "Passthru" funds..I've got mixed feelings about them as well. Pooling everyone's money for one particular company amplifies risk since there isn't any diversification. However, with the right company being invested in, payouts can be quite nice.




Satoshi Dice has been a pretty decent investment in the past..as I consider most casino based games given the house always has the advantage (so statistically it always makes money).

As for why people make more companies that fail...I don't know. It's a mix of "I hope I can do this right this time around" from the owner's perspective, and "Gosh, they're back again so must know how to do things right this time" from the investors perspective. I'm all for the mantra "Try, try again", but only if you're working with your own money and not someone else's.

It's always confused me a bit as well - can only assume their main targets are:

People who can't afford enough to be able to buy it in the 'real' world (too little cash to buy minimum quantity on sale),
People who want to buy it bit by bit (again, in amounts too small to buy in the real world)
People who want to speculate on the price (but the spreads - where they even exist - on these assets tend to be too wide for that anyway).
In theory also people who want to buy at rates discounted by bulk-purchase by the fund operator (a lot of funds aren't exactly transparent on pricing however).

Most such funds have no recognisable liquidity (only way to withdraw is in physical metal - which defeats the object as you could just buy it locally and save postage/counter-party exposure).

Unsurprisingly there doesn't seem to be huge demand for using these funds - though plenty of people who want to run them.

On your first post, majority of mining companies will never make a profit for anyone other than the operator (there ARE exceptions - but they're definitely exceptions).  Mining is a marginally profitable activity (any time it's more profitable than just marginal, more people start to mine - as the barrier to entry is very low both in terms of capital and in terms of required expertise).  Take a marginally profitable activity then slap on that a fee for the operator that's typically a hefty percentage of turnover (NOT profit) and it becomes unprofitable.

Most investors think mining is more profitable than it actually is - so assume mining companies must be profitable.  Big mistake - but very wide-spread.  There's a reason most mining securities' prospectuses say a LOT about what hardware they're going to get, what MH/s they'll aim for etc but go very quiet when it comes to producing projections of profit.

Obviously long-term investing (either personally or via a fund) in such assets won't be profitable overall (investors with good timing CAN make a profit - but it's at the cost of bigger losses to those with worse timing).  Running a fund can, of course, be profitable for the operator - as, same as with mining companies, most tend to take their cut on dividends rather than on profit.  A poorly run fund will, of course, lose money faster than just investing in mining yourself - your money is still going in the same rubbish (again, there ARE exceptions) just now there's 2 operators taking a cut of gross instead of 1.

Add to that various scams, websites with just an idea and no business plan or even clear view of how to monetise etc and you have the vast bulk of what was listed on GLBSE.  Oh - and companies that lend to people investing in the above or in ponzis and pass-throughs to companies of the afore-mentioned types.

Bitcoin mining was at one time a "safer" way to invest in bitcoin.   Your purchase of a mining rig would still have value no matter what direction the future Bitcoin exchange rate goes.  

If the exchange rate goes up:  Of course, you would have been better off buying BTCs in that scenario but at least you didn't lose anything.
If the exchange rate stays about the same: You get both the bitcoins mined and retain the resale value of the hardware at the end.
If the exchange rate drops though, you win big (compared to the investor that bought BTCs): You get the full resale value of the hardware, you get the coins you've mined, and you get a lower difficulty, presumably, as marginal miners drop out.

Another type of investment in mining is a mining bond -- a purchase of shares where you only earn the right to the proceeds of the hashes.  This also would pay off if difficulty were to either drop or to not increase much over a period of time.   For the mining operators who raised funds through investment and used those proceeds to buy ASIC hardware, it is yet to be seen how well that turned out.   Another reason investment in mining is a way to put in coins from one source and getting an amount of coins back, gradually over time -- like a combination mixing service with the potential to profit rather than a guaranteed loss using a fee-based mixing service.

Now with FPGAs and ASICs, your used hardware has limited resale value.  FPGAs had the benefit though of being much more efficient than the technology they are a substitute for (GPUs).   And ASICs have the benefit of being cheaper and being much more efficient than the technology they are a substitute for (FPGAs and GPUs).

So the whole strategy of mining and investments in mining is different going forward than how it looked just six or eight months ago.


Also, each time you buy physical you pay a little over spot, and each time you sell you generally get less than spot.    When holding paper, conversion costs are pretty minimal.  GoldMoney.com, for instance, charges 1% to 2.5% over spot (depending on the amount purchase), but lets you cash out at spot.  They also have a small storage fee/

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Your analysis is correct.

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