Topic: Seeking Discussion - GLBSE bonds for web hosting upgrades. - page 2. (Read 3576 times)

Yeah, I like that one.  Seemed to be well thought out.

That's a good idea.  I could setup something like TEEK.  Problem is that whatever I do, I do not want to be exposed to the Pirate ecosystem.

There is one mining bond with a difference on glbse and that is MOORE which offers growth in the value of the mhs/$ every week. Its remained fairly stable in price as a result whereas other bonds will continue to lose value.

I would suggest finding a way to get bitcoin income and then selling shares in it. Even if you use half the fund to purchase bitcoin income earning shares or bonds on glbse and the other half to invest in your USD company.

I don't see a historic difficulty chart on there.  (sometimes I'm half blind, heh.)

Found it here tho: http://bitcoin.sipa.be/

And here: https://bitcointalksearch.org/topic/m.31405

The difficulty has increased so fast that both graphs are logarithmic. 

Just check it out on Blockexplorer/blockchain.info...

Doh, then I stumbled on this later in the thread:


I didn't realize that you'd been updating the original post.  So what was difficulty at when you originally offered up the bond in Feb?

Hey, nice work, I didn't realize that you pioneered the perpetual mining bond.

Probably weren't expecting the crazy computing leaps so quickly.

I may be wrong, definitely wouldn't be the first time.  ;-)  And I see that difficulty hasn't changed much since Feb.

I still have a pretty strong feeling the bonds are going to take a beating in the next 6 months tho.

Depends on which of the 3 options you want to have.

A simple loan bond backed by pure trust would be Tygrr.bond-b (former Tygrr-bank) where goat gets loans from anonymous lenders and pays interest. TEEK bonds would fall into that same category.
Something more sophisticated are several mining companies, even up to the point where you can request actual hardware (in the case of "BFLS") in exchange for shares.
Then there are some shares that put up some collateral and pay small interests (GOLD, SILVER etc. - these are backed by these commodities, but not actively trading them or being denominated in them), up to a point where recently someone wants to put up his house as collateral for a loan/bond.

Some other ventures either still have to take off (hello Twitter-ad-network "FZB", CPA, REBATE...), are operating in a little bit shady corner of the internet (TCC, BITCOINTORRENTZ) or were cancelled.

All in all the largest assets by far on GLBSE are currently: Pirate pass throughs ( + their ecosystems, including insurance funds + dividend distribution assets for one big group of pirate investors), X MH/s deterministic mining bonds, funds investing in GLBSE assets and/or giving out loans and "mining companies". There are however some small gems, even including a (in the mean time put on hold) way to invest in parts of the earnings of a race horse in the US.

I may have jumped the gun a little there, but I'm happy to give my reasoning. 

I'm an electrical engineering major turned systems administrator turned systems engineer turned hosting company owner/operator.  As such, I've been using computing to deliver services for most of my life.  I have yet to see technology and cpu related computing improvements stand still for anything but the briefest of times in the worst financial situations.  As such, selling a fixed asset, pegged to a fixed computing unit, is bound to follow the same valuation curve as servers do in my business.  That is, you buy it shiny and new at a huge premium, and you recycle it 3 years later, as by then it's no longer worth the cost of power to keep it operating.  The CPU miners have been through this.  The GPU miners are going through this right now.  Eventually the FPGA and ASIC miners will too.  It's inevitable.

So as an investor, looking into one of these mining bonds, I have to make sure that the dividend payout covers the cost of the bond -before- it is essentially worthless.  If you look at the google doc I posted above, you'll see that none of the current dividend payouts cover the entire cost of the bond in under 6 months.  The best right now is PUREMINING with a 220+ day payoff.  How much do you think a 1Mhash share is going to be worth when the difficulty is 10x what it is now, AND the payout has been cut in half?  Special bonus to the mining operator, "The issuer can buy back the bond at a price equal to 1.2 times the highest price the asset was traded on GLBSE over the prior 744 hours."  So when people realize that the dividend on a 1MH bond is going to drop through the floor and the bond value plummets, the mining operator buys it back up and continues on his merry way.  Put simply, a 10x difficulty increase, triggered by ASICs roughly equals a 10x reduction in value on 1MH bond.  And I think 10x is relatively conservative.

Thus, to me, making an investment in a fixed computing unit makes no sense whatsoever.  This is especially the case with the huge jumps ASICS are bringing.  Might as well have invested in 486's after the pentium had already been announced, benchmarked, and slated for delivery.

The way out for the mining operators and investors in their bonds would be to modify the contract to increase the MH output of a given bond 10x.  However if I were an investor shorting the bond, this is the point at which I file a lawsuit against the mining operator for violating the contract.

Am I missing anything?  This is off topic, but I've been meaning to ask about this stuff for a while now.  ;-)  I'll read through that thread you posted asap.

Care to explain? If you read the thread were mining bonds were invented (OP and preferably some of the comments), you'll find that a lot of thought has been put into the concept. The real goal is a perpetual hashrate market, but for now bonds are a superior model to companies.

In a nutshell, it allows investors to focus on the value of hashrate, without bothering with the particular technical details of how to obtain it, while shifting risks to those in the best position to evaluate them.

Whether it's "better" for investors or issuers is mostly a matter of the price, and that is determined by the market.

One of those things only time will tell.  And when it does it'll probably be via CNN. 


Very good point.  Are you familiar with most of the securities on GLBSE?  Or anyone subbing this... what securities would be in the same category as what I'm contemplating?  It'd be good to make a list and compare.

Agree on the first half.  

I'm trying to be different regarding the second half.  Break the mold, so to speak.


I'm not sure about that.  If you look here:

https://docs.google.com/a/buffalo-studios.com/spreadsheet/pub?key=0Ai_uEhrsiYu0dHdObDIwbEFKcXJlX1ZLV3VRSjlycWc&single=true&gid=0&output=html

Via process of elimination, in a 5 year plan:

+ The company's bonds would likely come out ahead of all of them with a "days to even out costs" greater than 1825. (365 x 5)
  + Of those remaining, the company's bonds would most likely also come out ahead of all of the 'perpetual mining bonds'.  (with a few exceptions, like possibly MOORE.)
    + Of those remaining, ~80% would be PPT or PPT backed.  Maybe good now, not sure how stable those are?  Do you trust they won't collapse in under 5 years?
      + Those remaining would be our competing bonds.  And looking at what is left there, I suspect the company's bonds would compete favorably.


I'm doing that with my personal funds.    Not sure I'm ready to commit company funds to that yet.
  - Pirate and the surrounding ecosystem are too Madoff-ish to be risk the company's stability. (IMHO)
  - The perpetual mining bonds are poorly thought out.  (from an investors perspective!  I think the mining co's are making out pretty good.)
  - Half of the mining companies actually offering up real shares don't have hardware yet.  (heh, "it's ordered, no idea when it will arrive.")
  - And of course, less than half of the securities on GLBSE are verified.

Brings me back to this:


Is that what GLBSE is trying to be?  Or are they trying to be more than that?  I was under the impression that they were trying to legitimize things more, not just be a p2p loan op.

In case you're unaware, any deposit/bond you see with >4% weekly interest rate is a pirate pass through, "Pirate" being pirateat40's Bitcoin Savings and Trust program. They explicitly state that they forward all funds to the program, and do not offer any guarantee in case he defaults. By calling them "legitimate" I mean that they will live up to their end of the deal - pay interest, and return principal on demand, as long as Pirate doesn't default.

What Pirate is doing with the funds is anyone's guess. And trust me, many people have guessed.

As for deposits unrelated to Pirate - they are used for mining, Bitcoin businesses, short-term loans, market arbitrage, and so on. Most are very open about what they're doing.

A GOLD security caters to a specific market - those who think the value of gold is going to increase. A fixed-interest bond needs to compete with others in the same category.

Somewhat off topic, but as a relative noob, Where do you think the gains are coming from?  The mining securities and their gains make a certain amount of sense to me, none of the other operations do.  (Though if you're buying bonds based on MHash/bond there's nowhere to go but down.)  With no underlying 'work' or 'product' to back them up, I'm a little confused as to where the 6%/week is coming from.  The only thing I can think of is that it's coming from USD and other currencies buying into the Bitcoin market, and in that case we should be seeing the exchange rate going up, not returns on BTC investments?  Definitely would appreciate any insight on this.


I'm not sure I agree with that.  I noticed that there are 'GOLD', 'SILVER', and 'USD' securities.  The latter of the bunch especially highlights the market I would be trying to reach.  I suppose that instead of offering shares backed by deposits in a bank account, these would be bonds backed by a company and it's assets.


That definitely makes sense.  Thank you.  I'm still very much on the fence, but my enthusiasm is starting to align more with reality.   

^ This.

Try to think of the bonds on GLBSE as uncollateralized personal loans.  As such they have rates comparable to payday loans, pawn shops, etc. 

If you can get money from a real US bank at a single digit APR, you are way ahead of the GLBSE bond issuers (all of them).

Consider leveraging up with the bank and putting that money in to high-rate GLBSE bonds instead!

I'm very confident the vast majority of the popular Bitcoin-related deposits are legitimate, in the sense that they will pay back every last satoshi of deposited principal.

I'm moderately confident that the interest rates which are unthinkable in traditional banking terms will stay with us for a while. Bitcoin is a whole new world, in rapid growth, full of real and perceived opportunities which honest people wish to act on. The rates might go down to the 1% weekly range and there may be a few defaults which give people pause, but there will still be very lucrative offers.

It doesn't make sense to make an offer now that is less lucrative in comparison, on the grounds that "eventually there will not be high-interest opportunities". When the opportunities dry up you can try your luck, right now people have no reason to choose you.

Members of the Bitcoin community don't have the collection infrastructure of established banks in your country, so most would not put too much weight on your company's history. So you should not expect to receive low interest rates for the smaller perceived risk.

That is one direction it could go.  There are a few different spins on it.

If you bought into it by buying BTC with USD (or another currency) then you're not out anything with respect to USD.

The person holding Bitcoin right now and wondering if things are going to go south in December would have a relatively safe place to put their coins through what could be a pretty wild ride.

Per my original post, I am not really convinced the rate of returns on many of the current GLBSE entities are sustainable.  If I thought they were, I would be dumping all of the company's cash into BTC and paying for improvements with the returns.  Too risky.  There are too many things still up in the air with Bitcoin, and it was that doubt that led me down this path.

Maybe I'm in the minority, feeling like there is room for some more stable, traditional securities?

If BTC price goes up your bonds will degrade. As bitcoins supply will halve at the end of the year, that will very likely happen. So unless someone wants to short bitcoin he will not buy your bonds. It really does not matter what company you have and what dividends you will pay, your bond holders will lose much more money if your bond price plunges which is very likely to happen.

I like that, that's way better.


Secrecy with respect to records and revenue?  That's a fair perspective.  I guess I just haven't wrapped my brain around all the implications of making that information public.  Beyond the SEC issues and the requirement for investors to be private, the company itself is private and there needs to be a pretty compelling reason to share publicly that which could easily be limited to involved parties.