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

On the A bond 3% was the rough target.  I was trying to counter inflation essentially making this a "savings account" that would not move backwards as most bank savings accounts do.

On the B and C bonds it's not so clear cut because they're based on company revenue, which has been growing reliably at 8%/yr.  Sure, the first year is 4.9%, but year two is higher, year three is higher, and so on, till year 15 it's more than triple that.  Only reason I was willing to even consider those ones long term was because I was anticipating buying some back as time went on.  (Not forcefully, just at market rate when cash flow is good.)

I completely understand that next to the pirate bonds, this looks crazy.  I took what I'm getting now with the brick and mortar bank and tried to make it worth my time to offer something up on the GLBSE and as a couple of people hit on earlier, it just doesn't seem to make sense right now.  People on the GLBSE aren't looking for a safe long-term investment, they're all looking for 6%/wk.

I may still offer this up, just to see what happens.  Having it on the board when (if) pirate tanks might pay off, and the B and C bonds it may actually make sense to be used as an employee benefit.  I'd give everyone in the company some shares, then everyone has an incentive to help the company bump up revenue.

At least he admits taking this crazy train off the rails for two days.  

Bringing this thread back on topic, since this is not a mining bond, nor comparable to one.

@burnside- you are proposing a bond issue that is heavily slanted in your favor.  GLBSE is the perfect place for this.  

Looking at your proposal:

 

I take it that's 3% Annually (APR) so .25% monthly.  That's lower than what I pay on my 30 year mortgage and less than I earn on some tax-free muni bonds.  I have publicly traded stocks (MREITs) currently yielding 5x that (check out AGNC), and have loaned money to larger more stable entities at even higher rates.

If you succeed in borrowing at that rate under the terms you propose, I will jump in right after you.



So we're talking $1MM * .3% = $3k and $3k/100,000 shares = $.03/share per year.  At current exchange rates thats .03/6.5 = .0046 BTC  Yielding .0046/.25 = 1.85%/year.  

1.85% APR for a junk bond.  I can get more than that in an FDIC-insured 5-year bank CD.  If you pull it off you will have to stop the web hosting biz and run an investment bank, CEOs from all over will beat a path to your door wanting to borrow at such low rates too!


Same math as above with .8% gives us $.08/share per year and 4.9% APR.  That's a little better.  But I can still beat it at 7% staying in USD with JNK or HYG.


So why should I convert my dollars to bitcoins, for you to turn around and convert them back to dollars, so you can buy servers and advertising (or whatever) for a business that will only pay well below market on that debt?


Some music comes to mind: burnside's goin' off the rails on the crazy train...

Right, that's what happens when I hijack the thread for 2 pages

For what you're doing I think putting a fixed USD or BTC value on the buyback price would be best.

I was looking at it from the perspective of this thread and the bond in the hosting company.  You may be right that it doesn't work out for the issuer on a mining bond.  The perpetual mining bonds have a level of complexity far and above what I was trying to tackle with the hosting company bond.  I really appreciate all your input though, it's a lot to absorb!

As I explained, this is not fair for the issuer. The best would be a standard buyback price based on market value, but with lower and upper bounds based on extrapolated lifetime earnings. Though if you want it simpler, you can just make it based on extrapolated lifetime earnings, but it's difficult to do it without any distortion.

I like that, seems pretty fair to both sides.

I could probably have been clearer.  It is most definitely a security by most anyone's definition.  However in my research I came across the list of requirements for the situations in which you have to register with the SEC.  In general it seems that you do not have to register until the security exceeds a certain value, as long as you are not wide open to the general public.  In the few places I read, I did not find reference to an exact definition of private vs. public and many people seem to feel like it was worded fairly generally on purpose to be relatively lax.

1 MH/s is the value of the bond. It's not zero, and I won't sell it for less than what 1 MH/s is worth for me.

Selling bonds takes time, people shouldn't be expected to put a bid in advance.

The equivalent BTC (or USD) value of the bond decays by its nature, why would I put a USD-denominated lower limit on the buyback price?

The bond's value is the prospect of getting coupons.

I can't buy them back for less than they're worth. If the mining conditions change and the bond value decreases, it means the investors have lost whether I buy them back or not.

Again, the USD value of the bond is changing. If it's 2 USD now doesn't mean it will be 2 USD forever.


I'm feeling we're going in circles, and this is off-topic for this thread anyway...

And exactly that is a problem in my opinion.

If you were truly open to any price, you'd issue new bonds at 1 Satoshi each and pre-announce it, so the market can build it's own price in a bidding war. In reality you have some minimum price per MH/s when issuing a 1 MH/s bond (probably at least the price for the hardware + electricity for a year or so) that you can sell at. You don't set a lower limit to the price of buying back though, so the advantage is one-sided on your side.

1 MH/s in itself is not used to determine the value of a bond (the value is 0 according to your post I think) but only the dividends. People don't buy the bonds for their value but the possibility of having a ROI through dividends. Still you will not sell them at any price but can buy them back at any price, even if that would mean a net loss for people buying the bonds from you initially.

A more sophisticated  buyback clause could also be "1 bond can be bought back at (0.3 BTC - dividends per share since IPO) * 1.2 (if this gets negative, this is assumed to be 0) or 2 USD converted to BTC at the 24h average market value, whatever is higher" - if your minimum price is something a bit below 2 USD per MH/s.
This means you can still get very low buyback prices, but not arbitrarily low ones, will always have to pay up a proper amount for the debts you sold and it also tells that you initially priced your bonds in USD, as mining equipment is priced in USD as well (hence the not arbitrarily low IPO price).

With traditional bonds, what is called "the face value" isn't how much it was issued for, it's how much it is bought for at the end of the term. The face value doesn't change - if it's $1 then I'll get $1 for it at the end of the term, whether I buy it today or last year (that's why the face value is chosen as a round number). The traded price however constantly changes - the bond can be issued for $0.839, then traded at $0.927541 and then I can find someone on the street and sell it to him for $0.509172.

Same for mining bonds. Instead of "face value is 1 BTC, to be paid on January 12 2014", we have "face value is 1 MH/s to be paid to eternity". The issue price and traded price can vary (and there can be multiple issues at different prices), but the bond always has the same face value. As it happens, if there is a need for a buyback a Bitcoin price must be placed on it, and despite some shortcomings, relying on recently traded price fits the role.

Once again, if a mining bond is issued at 0.4 BTC, it does not still have a "face value" of 0.4 BTC 10 years afterwards.

I presume the "private investor" part simply means you didn't solicit the investor and that there was a prior substantive relationship.  As far as bonds not being equities and thus that affecting the requirement to register with the SEC, I believe that might be an inaccurate statement.

- http://bit.ly/voMtiX

Obviously for a business that operates online, locating it to a jurisdiction with lax securities regulations becomes a greater and greater opportunity.

I would argue that *the dividends depend on* 1 MH/s but the face value is the price at IPO.

Even if the face value were 1 potato, you could at least hand me 1 potato to buy it back. Something that is a process and not a good can not be stored or transfered. I lack the correct financial terminology, but I guess you get the point. Something that might be close to what you imagine would be electricity markets, where you can buy/sell electricity in bulk. I don't know of any "1 kwh bonds" but on the other hand electricity doesn't generate money on it's own for dividends, mining does however.
Probably a better equivalent would be selling bonds with a face value of 1 hour of sunshine on 1 m². Depending on solar panels etc. you can "mine" a certain amount of electricity and sell it on the market for a certain amount of money. Still you cannot control some external factors like the weather and would have to factor these in. Honestly I still don't think that an immaterial face value is any good - and that it can NOT be measured in money by taking a trade price point of the last few days.

Of course.  (see my sig)

Have you considered providing your services for bitcoins? Maybe you could find more "bitcoin" investors for your company that way.

He isn't profiting from the buyback clause. He's profiting from his successful short position on mining, buyback or no buyback.

Despite being completely far-fetched, this is a good point, and I guess in this situation the relevant price would be the last traded price.

But the face value of a mining bond is 1 MH/s. Nobody can place a fixed BTC price on it, this is determined by the market and is constantly changing - if I buyback the bonds 10 years from now I don't want it to be based on the original issue price, but rather on their value at the time.

All that said, I agree it would be best to introduce a deterministic "extrapolated lifetime earnings" metric (which I introduced elsewhere but called it "projected") and assume that the bond value is roughly a constant multiple of it, and base the buyback price on it (with or without consideration to the market price). I'll probably do that if I create a new bond series.

Actually there is, and I brought it up numerous times:
There is no way to verify 100% someone really has the hashing rate in hardware they sold. It is even argued, that this is not a necessary assumption in the first place and profits could come from anywhere, as long as they are paid.

With a crash in bond prices it is very well possible to profit from these clauses.
Initial price: 1 BTC
Dividends until a crash to 0.1 BTC: 0.1 BTC
Highest price taded after the crash: 0.2 BTC
Buy back for 0.24 BTC and be happy about it.

Also, if it wasn't traded for 744 hours, you buy back for 0.0*1.2?

This is why I'm now a strong supporter of "bonds have a certain face value and can only be bought back for that face value + slight premium". This is much fairer for both people holding bonds (they don't have to check every 744 hours if they can be screwed over) and bond issuers, who according to some contracts out there, would have a VERY hard time to reduce their debts.

By definition someone should buy. If nobody buys (or purchases an upgrade), the difficulty increase you speak of will not happen, meaning buying would be profitable after all. There's an equilibrium.

Because the determinism of the bond is important. When someone invest in an abstract commodity it shouldn't be affected by the specifics of the issuer's hardware choices or the quality of his mail service.

An upgrade plan would also be manipulable. I can say that I'll upgrade when the equipment arrives, but then keep it a secret for a few days collecting the profits. The first few days are critical.

I want people to buy bonds the next time on the grounds that I do exactly what I stated in the contract, not on the grounds that I offer bonuses on a whim.

Very good insight.  I hadn't thought about it like that.
[/quote]

It occurred to me, traditionally people trying to short the bond would be bondholders at various stages of the shorting process.  Not sure if that plays into it at all or not.

First off, thank you for your input.


Not sure... that's not my spreadsheet, and it auto builds using real-time data from GLBSE.


I kind of feel that way right now... that nobody should buy.  Not that anyone would listen.  It's MAD... mutually assured destruction... all the miners are going to compete each other out of existence. 


That is indeed the conundrum.  However we already know that some portion of the miners are getting "free" upgrades, so why shouldn't that be extended to the bond holders?  Yes, I realize that only half the cost of the upgrade is covered, however the resulting hash rate of the trade is 10x, which means the miner gets 8x for "free".  Normally I'd take the side of the miner and say a contract's a contract, but part of offering up bonds is PR.  You want people to be willing to purchase next time you offer up a bond.



Very good insight.  I hadn't thought about it like that.

Right. This is exactly the decision faced by someone wanting to purchase mining equipment - he wants his revenue from mining to cover the cost before his equipment depreciates. There's no magical way around it. If he believes it will cover it he invests, if not not. If everyone is afraid to buy equipment the difficulty will drop, increasing the profit for those who do invest. Mining bonds allow to make the same investment, but without the physical hardware purchase and operation. Meanwhile it allows the issuer to do the physical operation, without the risk of the investment. The raised funds go directly towards hardware purchase.

As said this is purely a function of the bond price. The price is determined by the market and it's ok to argue that they're overvalued. If you think they are, you shouldn't invest in them and should consider shorting them.

I think your numbers are a bit off, PureMining is currently the most expensive bond per MH/s.

Not much, and the same applies to anyone who invests in hardware. The one exception is BFL's trade-in program, which is an anomaly not accounted for in the design. It also should be a once in a lifetime event.

The same applies to mining companies too - they raise funds and use it to buy hardware. If the hardware devalues, so does the company.

There is no way for the issuer to profit from the buyback clause. If the price declines to the point where the buyback is cheaper than the original issue, it means the normal obligation of the bond has already decreased. Also, the money was already spent on purchasing hardware to back up the obligation, the issuer doesn't profit from the decrease in mining profitability, the whole point was that he's indifferent to it. The buyback exists only to deal with emergencies, and there must be such a clause - "forever" is a long time.

Then nobody should buy mining hardware. They can go ahead, I'll enjoy mining 7000 BTC per day on my CPU.

And they will use magic to increase the hashrate of their hardware?

The issuer's obligations are to bondholders, not shorters. He has the right to do better than stated in the contract.


Fixed hashrate bonds emulate hardware purchase. An increasing hashrate bond doesn't emulate anything and can't be backed by anything, it's a purely speculative investment not only for investors, but also for the issuer.

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.

Very good points.  If (big if) I were able to convince GLBSE to build a "message broadcast" mechanism, then registration on a per-bondholder basis would not be necessary.  I'd broadcast a new login/password to the portal at some regular interval.  No need for the company to know to whom the message is being delivered.

I don't like this part. I'd rather have a buyback price that is pegged to the initial value of these bonds.
This can be priced in USD:
Let's say I buy 1 bond for 1 BTC - you get 6 USD for that.
You can buy back the bond any time for 8 USD converted to BTC - even if that means you only pay 0.1 BTC (if Bitcoin bubbles up to 80 USD per coin) on GLBSE.

Otherwise you have a high motivation to bring down bond prices for 5 days (have sock puppet accounts tell you're broke and don't respond or something), buy back and take the profits. I don't want to check more than once every week(!) if my investment is still good...

Also I don't really like the secrecy aspect - if you need that you might be better off elsewhere, as far as I heard there are several P2P loan websites available/popping up.

Bear in mind that a sizeable chunk of the potential investor population will want to remain anonymous. There are a few reasons for this; that's just the personality Bitcoin attracts (given it's properties as a currency), investing with/in Bitcoin is illegal / legally untested in the country of residence of the investor, exposure as an investor in Bitcoin / Bitcoin businesses would damage the reputation of the investor ...

I would certainly aim to ensure that investor registration of any kind is not required, or accept that requiring such will limit the volume and rate of investment.

I would personally consider investing in an asset which did mandate investor registration, however, I would expect additional reward for the higher risk that accompanies limiting the investor demand for that asset.

Of course, much of the reasoning for investors wanting to remain anonymous is equally applicable to asset issuers, however, again, I think it appropriate that investors expect additional reward to compensate for the higher risk that generates too.

Definitely appreciate the input.


Precisely why I think something like what I'm offering is needed.  It's only a matter of time before that house of cards comes tumbling down.  I expect a lot of people out there know this at some level.


Not too worried about that.  People have been trusting their online business to our company for well over a decade.  Documentation is easy to find and verify.


I guess I'll have to make a case with GLBSE for a messaging mechanism.    Somehow all the companies on the NYSE and NASDAQ know where to find their stockholders.  Seems somewhat necessary to operate a security.


It mostly boils down to lowering our interest rate a point or two.  I've explored some other options that attempt to cut out the banks and this seems to be one of the better ones.

If you're concerned about the currency risk of accepting a BTC loan with USD expenses, you can take a leveraged long BTC position. I don't think bonds tied to USD will be popular.

You'd need to pay about 2% weekly interest (280% annualized) to compete with other offerings.

Getting people to trust you with 25000 BTC won't be trivial.

I don't think GLBSE currently has a feature to message all bondholders, but they might add it sometime. I doubt it will allow you to know whether anyone is still holding their bonds.

All in all I'd say that as long as you can get loans from your bank, you'd need very good reasons to go the GLBSE route.

It just occurred to me that I could fulfill the private investor SEC requirement by managing my own authentication mechanism into the portal where the company sales numbers would be available.  Anyone prudent and wanting to invest would need to register with the site to gain access.  

Not sure how I'd tell if they ever sold their shares though.  Anyone have any backend experience with operating a security on GLBSE?  What tools do they provide?

Future FAQ... ?

I'm relatively new to Bitcoin.  I've jumped into the fray recently, doing some small scale mining, and more importantly, I've spent the last couple of weekends coding support for Bitcoin into our website.  

While doing this, and while figuring out the most productive places to put my newly mined BTC to use, I stumbled upon GLBSE.  So here are my thoughts.  Hopefully you all can comment and help me figure out if any of this makes sense.

My company has been in business for ~15 years now.  Until now, I have never sought investment.  I have always funded growth via what was available to me at the local banks.  The debt load for the company is like a seesaw, we incur debt to expand, we spend a few years paying it off, then we incur more debt to expand again.  Thus far this has proven a fairly prudent approach, and we've never bit off more than we could chew.  It occurred to me, as I was looking at the various securities on the GLBSE that maybe issuing bonds would be a better way to approach the company's funding needs.

I've researched the legality of offering up bonds in the US.  It seems legal, at least on the surface.  Small fry's are allowed to offer up bonds to private investors without having to register with the SEC.  So I just have to make sure that at some level my bond investors are "private".  I would thus define the potential pool of private investors in my bonds by saying our bonds are only available to those in the GLBSE Bitcoin Club, (aka, registered members of the GLBSE)  or something of the sort...  However... I'm not really sure if this would pass the test of an actual US courtroom or not.  The definition of a "private investor" seems somewhat vague.

I've researched the various payout strategies and approaches to the various securities.  I know for instance that with our current corporate structure, I cannot offer stocks.  That seems to really only leave bonds.  I've also thought a lot about the risk involved and it seems like most of the risk to the company stems from the volatile and unpredictable nature of the exchange rates.  For example, the company has to operate based on USD, which means revenue comes in in USD, and bills get paid in USD.  

Some of my ideas for bonds are:

COMPANY.BND.A - Initial offering of 100,000 shares at 0.25 BTC/ea.  Bond to mature at 5 years.  Company converts all 25000 BTC to USD, ends up with some amount USD, call this $VALUE.  Company pays interest at 3% of $VALUE, minus the USD->BTC transaction costs at monthly intervals.  Company reserves right to buy back bonds at 1.5x the 5 day average at any given time.  At maturity, company buys back all bonds at $VALUE USD, converted to BTC at that time.  

COMPANY.BND.B - Initial auction of 100,000 shares starting at 0.25 BTC/ea.  Bond to mature at 5 years.  Each share is a coupon entitled to 0.000003% (total offering value = 0.3%) of the company's actual revenue, currently a bit north of $1 mil/yr and growing at ~8% annually.  Company converts all BTC to USD, ends up with some amount USD we will call $VALUE.  Company pays dividends monthly based on company's actual revenue.  Company reserves right to buy back bonds at 1.5x the 5 day average at any given time.  At maturity, company buys back all bonds at $VALUE USD, converted to BTC at that time.

COMPANY.BND.C - Initial auction of 100,000 shares starting at 0.25 BTC/ea.  Bond to mature at 15 years.  Each share is a coupon entitled to .000008% (total offering value = 0.8%) of the company's actual revenue, currently a bit north of $1 mil/yr and growing at ~8% annually.  Company pays dividends monthly based on company's actual revenue.  Company reserves right to buy back bonds at 1.5x the 5 day average at any given time.  At maturity, company buys back all bonds at $0.01 USD, converted to BTC at that time.

All of these options would be extremely stable from a USD perspective and would bring additional stability to the GLBSE.  The last bond feels like the most risk to the company, but it seems to accomplish nearly the same thing as a stock offering.  If growth follows the established pattern, in 10 years 0.8% of the company's revenue would represent a pretty significant gain.

If we do move forward of course all the relevant records and numbers necessary to achieve transparency would be made available to bond holders.  I was trying to figure out a way to authenticate bond holders somehow... It'd have to use the GLBSE site somehow to distribute a new password to the site every 6 months or something.  Does the GLBSE currently have a mechanism for privately emailing or messaging all bond holders?

Thoughts?  Does this seem like a security anyone would be interested in?