Topic: Weekly loss of N% guaranteed - Enjoy perpetual loss with fixed Mh/s mining turds - page 10. (Read 14714 times)

Sukrim said "shares" because that's the term usually used for units on GLBSE, he knows they are not company shares.

Issuing new PDMIs (or traditional bonds for that matter) doesn't affect their returns, but that doesn't mean it doesn't affect their traded price. Increasing supply reduces price since there is only a limited number of people willing to pay the higher prices.

Technically yes, but investors who bought at that price were compensated so the effective IPO price was 0.28 BTC, and the highest I ever offered it is 0.4 BTC (the highest it was ever traded is 0.7 BTW).

They are NOT SHARES. Creating extra bonds should have virtually zero  impact on their price.  The only reason these bonds lose value is diminishing coupon payments caused by increasing difficulty. Well, that, and perhaps some people waking up and smelling the coffee, and selling to cut  their losses.


And a better "investment" it is. Ill take a ~1% per year loss over a >30% per year loss any day .


Yes, I agree, they are currently still way overpriced. Now gigamining is a special cause  because it has an ASIC upgrade path. Its something giga didnt have to do, and he is offering one deal for free, which would boost the price, even though the upgrade will only add insult to injury IMO.

So lets look at a bond without freebee upgrade path, and keep in mind Ive warned for this months ago, but my stand is that they are still overpriced today, so even if they had made a profit so far, that wouldnt disprove my point, the bubble is still firmly inflated. You can call me out in 6 or 12 month if was wrong.

Bitbond. IPOd at 0.6 BTC,  currently valued at 0.36 after earning 0.15 in coupons. Close, but no cigar
YAMBC. IPO'd at 0.35 BTC, currently valued at 0.126 after earning 0.067 in coupons. Ouch.
Puremining, not sure what IPO price was, but seems like 0.5. Currently valued at 0.1501 after earning 0.084. Double ouch.
DMC. IPO at 1BTC, currently valued at 0.31 after yielding 0.026. Triple ouch.

Admittedly the latter doesnt really belong in the list as its supposedly a share, not a bond, even though DMC  only owns bonds and pays coupons as if its a bond.


Just copy paste the dividend payout table in oo calc and sum it.


I intended to:
https://bitcointalksearch.org/topic/rfc-virtual-mining-bond-and-toxic-mining-betting-against-mining-bonds-88496

But Benitio and someone else promised me an easier solution, I havent seen it yet tho :/.


Meh. I dont see what the difference is between a mining ponzi and a miner just running off with your coins. Wether or not he has the hashrate to back up his bonds is of little importance.

It does, because if he only has to pay 1 BTC to buy another GH/s he can issue a LOT of new shares and dump the current prices (the main concern of the OP is not the dividend return or a mining ponzi but that bonds loose value quicker on the market than they pay out dividends). Just look at what Obsi did as soon as BTC prices went up - completely crashing the market of his 1MHS "bonds", because he could.

Also I'd like to see your math skills on current bank book rates that are below inflation... Still people are investing billions of fiat money in these.

GIGAMINING has in total paid ~35 Bitcents or more (I just did quick estimates) to date, so the price is currently not too far away from "IPO_price - dividends" so far. Again I'd like to challenge you to release a script that calculates profits/losses individually from mining assets on GLBSE (both dividends and on paper) so you can really verify if you were trading at a loss so far or not.

If you really think it's such a good idea to sell mining bonds without backing (no mining hardware), then do so please! You can even undercut current assets, as you have 0 costs besides dividends. Actually a mining ponzi scheme is something that I still fear to happen and since a LOT of "miners" don't disclose anything, I think there are already a few on GLBSE right now... I see this as a much larger threat to people's money than losses on paper by not selling the mining "bonds" they have right now for cheaper prices than they bought.

My turds don't always float, so it's an analogy that doesn't even work in the first place. 

So what? You dont own shares in a mining company, you own bonds. Does it matter what gigavps pays for electricity or his hardware?  Does it matter whether he mines on GPUs, FPGAs, or a solar powered desktop calculator? Does it even matter how many GH he has? Not a damn thing.  Anyone could issue such bonds, even without any mining hardware backing it.  You seem to confuse owning shares in a mining company with owning fixed MH bonds.  All the bond issuer owes you is a perpetually diminishing coupon payment thats function of difficulty. Nothing else.

Now, lets do the math. Gigamining bonds currently sell for 1.11 BTC for 5MH (down from 1.5BTC IIRC).  Im not picking on gigavps btw,, its just the biggest one out there. Coupon payments on that would currently be 0.075 BTC per month. Even at constant difficulty, that means ~0.3 BTC until December when block reward halves .  From then on  it would be 0.038 BTC per month, or another 24 months or so before coupon payments would exceed the cost of the bond.  That is, if somehow difficulty wouldnt go up one tiny bit.  

Even if difficulty just followed Moore's law it would outpace your coupon payments with ease. In reality asics  will cause a  10 fold increase at the very least and your 24 months will become 240 months.  Small problem, in 24 months block reward will halve again. And again and again. Not in a 1000 years will these bond earn more in coupons than they costs.


I have no doubt! At current prices I will gladly sell you perpetual mining bonds too.  The investor risk is not in the mining company going bust, its in the mining revenue per MH collapsing, and that is pretty much a given. Miners who sold you those bonds are not idiots, most of them saw precisely what was coming. Even without the looming shadow of ASICs,  moore's law applied to GPU and FPGAs alone made these things very risky investments from day 1.  And it didnt take a lot of genius to anticipate ASICs at some point in the future.

Mining equipment, mining electricity and rent for the space where this is housed as well as internet connections etc. are all denominated in USD or other fiat currencies.

"Mining bond" issuers only sold their assets cheaper when the BTC price went up, so they would still be able to keep their end of the bargain.

Instead of offering me a negative interest rate on BTC, you could offer me 1% interest per week on USD, backed by BTC trades/mining if you dare going long on that...

You really have to keep bitcoin price out of it. Bonds are denominated in btc and pay out in btc. What btc does compared to fiat is irrelevant.  Otherwise I can offer you a negative interest rate on your BTC and you could still  "make money".
Difficulty is what matters:


People still buying bonds at current prices either have no clue, or they must expect the above trend to reverse pretty dramatically somehow, assume ASICs will never materialise and pretend reward halving will not happen.

No, the amount of money earned  per mhash is up in general. 100/mhash earns about 54 cents a day right now. It was below 30 cents earlier this year.

Mining bond dividend yields have been increasing % wise because the prices have been falling.

That's pretty much what I said. I don't think its all that clear what earnings will be though. They could drop a especially if there is no ASIC upgrade plan. Although this year bond returns have been increasing despite increases in difficulty. 

Ahm. No.
Bitcoin price has very little to do with it. Mining difficulty has everything to do with it at its been going up by almost 10% per month, and thats before the ASICs and before reward halving.  It doesnt take a lot of genius to predict what will happen with those bond yields, and therefore, their value.

You have not pointed out any flaws. You basically claim mining bonds are garbage because they are worth less in btc when the bitcoin prices increases. Some how, equipment is suppose to be worth more in dollars when the bitcoin price rises. That's just not practical. Unless you hold your investment in bitcoins its not going to increase with the value of bitcoins.

When it comes to calling them bonds, shares or contracts its just a matter of opinion. All the properties in mining bonds are used in real world bonds as well. No one is doing anything misleading by calling them bonds. There is no reason to assume it's safer because its a bond. A lot of unsafe bonds like High Yield Bonds are around. If someone is purchasing bonds on glbse without reading the contracts that is their own negligence.

That would have been great if that's what the OP was doing. But he's too focused on his witchhunt on the concept of perpetual deterministic mining instruments (or PDMIs) to discuss in any reasonable way the factors that go into their valuation.

FWIW I think I have clarified in every possible way in the PureMining OP that it does not have a fixed BTC-denominated face value, it does not have fixed BTC-denominated returns, it is affected by block reward halving and hardware advances, and that the investor should consider this.

Right but I was replying to littleshop.

A PDMI is going long on mining profitability. It correlates with changes in BTC price because of the lag between price and difficulty, so in a way it is longer on BTC than USD but not as long as BTC. But mining profitability is its own thing, affected by hardware developments and such so it can't be equivocated with holding either USD or BTC.

I've spent some thought on how to do an anti-PDMI, and I don't think there's a very elegant solution. If it doesn't have to be elegant it's easy to do.

No, that would be 100% going long on BTC - mining is a combination of going short (by buying stuff in USD) and a little bit long (by generating + paying out BTC). Anti-mining would need to go long (by holding BTC) and a bit short (maybe selling an amount equal to mining output on an exchange?).

Maybe one could put it like this:
Sell shares for 1000 BTC. Then on dividend day, calculate how many USD these would be and pay out 0.1 USD (converted to BTC) per share or so from the raised capital. I don't really see how this model can be in any way attractive though, since you could just invest into a non-mining fund (e.g. lending operations) etc. or just hold BTC yourself.

I like the "contract" because it sets no specific characteristics for the issue and issuer can write it up as he likes.

"10 Mh/s mining contract" actually makes sense and it's up to issuer to define the details - risk, reward, coupon, etc.

cuz0882, Rosenfelds post in this matter only makes sens to you because you have no idea what bonds really are, how they work and are used/issued in the real world. Hes last rant here is a good example of demagoguery.

I understand, you do not like me because I asked some questions and/or pointed out some of the flaws in a typical "mining contract".
Put your personal feelings aside and move on. You have learned something, you did not know last week.
And for fuck sake, stop trolling.

Sorry Meni, I don't think logic is going to work on bob.

An anti mining contract would just hold BTC.

Isn't a contract something that is negotiated and signed between 2 (or maybe even more) parties? Mining shares/bonds/contracts/floaters/... on GLBSE though can be transferred and sold on a secondary market at will.

"Solar power bonds" also do exist, though from a quick google search I only found some that are paying fixed interest rates as opposed to a portion of the real earnings. This could be done as well here, but I doubt many ppl. would be interested in a "mining bond" that pays <10% per year fixed rate but for 5 years or so. Might be interesting to try out though!

Shorting the current issues on GLBSE is also possible, as ciuciu demonstrated, though you need a partner who trusts you with their shares. Alternatively I'm sure there's a way to create "anti-mining" contracts, there seems to be already some demand for it.

I agree, a new name, that will not give investors a false sense of security, stability and hints low risk, is a right step in right direction.


+1


 
 

I can see the OP's point; however, the issue is not that mining bonds are fundamentally flawed. There is nothing wrong with offloading the mining difficulty risk to investors. Its just that whoever is buying doesnt seem to understand the mining market and are bidding these up to ridiculously high prices.

Part of the reason why they do that may be due to not understanding the instrument and confusing it with a more traditional bonds, staring themselves blind on the high yields. Ive seen investors ask questions like "why did coupon payments go down this month" while difficulty is skyrocketing. Part of it may be ignorance about the impact reward halving and ASICs will have. An ignorance thats still shared even by many miners Im afraid.

Anyway, I dont think it hurts to point out these issues like the OP does because clearly, investors didnt and dont really understand what they are buying. But I also dont think it makes sense to blame the issuers or the instrument itself for such investor myopy. If these bonds are "turds" right now, its only because they cost far too much.

Ive said this months ago, and Im saying it now. I wish I could easily short these bonds.