Weekly loss of N% guaranteed - Enjoy perpetual loss with fixed Mh/s mining turds - page 6.

MPOE-PR

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Quote

Bonds are usually good for preserving your capital and earning you a fixed income from dividends. If you think about it, mining turds offer you none of the previously mentioned benefits. At the moment, dividends do not cover the depreciation of your invested capital. Sorry, but this applies to all the mining turds out there.

I just wrote a piece elaborating on that. Hadn't seen your (very well thought out) post, smickles pointed it out tho.

P4man

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Quote from: conspirosphere.tk on August 12, 2012, 10:55:39 AM

Can anyone pull out a formula to calculate the "proper" value of 1 Mhs PPS according the difficulty?

1 MH/s = ~1000000 / 2^32 shares per second
1 share = 50 / difficulty bitcoins (soon 25)

so 1MH/s = 1000000 * 50 / (2^32 * D) btc per second.
or 0.000000005314 btc per second
or 0.013773062 btc per month.

conspirosphere.tk

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Can anyone pull out a formula to calculate the "proper" value of 1 Mhs PPS according the difficulty?

Ideally I'd like a sort of the mining calculatur by bitcoinx.com for mining bonds, to estimate depreciation and dividend earnings in a given period under different assumptions on the future difficulty.

organofcorti

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Quote from: P4man on August 12, 2012, 08:38:15 AM

Quote from: cuz0882 on August 12, 2012, 08:11:16 AM

A lot of gpu's will be turned off because of reward drop. The difficulty should drop a decent amount unless ASIC's get delivered.

So you are betting that difficulty will actually go down over the next 12 months? Good luck with that. Not only is it a crazy bet, the rewards are almost non existent should you somehow be right.

Shhh P4man!

cuz0882, I want to make a bet with you .... Wink

But as far as the thread topic goes, who could not have known the pros and cons of mining bonds? Even if ASICs could not have been predicted, it is and always was clear that 1 Mhps would always vary in terms of both btc and usd. If you's bought mining rigs and paid for electricity, you'd be in just as much trouble. Bond purchasers should have worked out whether it would be cheaper to buy bonds or a mining rig. For me, it was cheaper to buy bonds given the price of electricity here. My strategy didn't work out as well as I'd liked - so what? At least I don't have a chunk of unsellable technology on my hands.

Does everyone just joyfully buy everything and hope for the best? Does no one do due diligence and develop a strategy to deal with future possibilities?

P4man

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Quote from: cuz0882 on August 12, 2012, 08:11:16 AM

A lot of gpu's will be turned off because of reward drop. The difficulty should drop a decent amount unless ASIC's get delivered.

So you are betting that difficulty will actually go down over the next 12 months? Good luck with that. Not only is it a crazy bet, the rewards are almost non existent should you somehow be right.

cuz0882

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Quote from: P4man on August 12, 2012, 02:18:50 AM

Quote from: cuz0882 on August 11, 2012, 07:47:18 PM

Why would returns drop in half? When the block rewards drops to 25, are you expecting not a single person is going to stop mining with their gpu's?

Oh, Im expecting a few gpu's to be turned off, but only because of minirigs and asics being turned on. And no, I dont expect a single FPGA or Asic to be turned off, for the simple reason that electricity cost is only marginal compared to the investment. Even if some of those FPGAs will have no more hope to earn back their investment, keeping them running will at least reduce the loss for quite some time.

Quote

Difficulty is rising because payouts are increasing. Difficulty has not been keeping up with the price increases.

All the more reason to expect further increases in difficulty. If you think difficulty will be lower in January than it is now, I will gladly take a bet.

A lot of gpu's will be turned off because of reward drop. The difficulty should drop a decent amount unless ASIC's get delivered.

FreeMoney

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This thread really bothers me.

Lets bet on your false title.

You pick N, if the price of GIGA drops N% each of the next 4 weeks you win, else I win. I'll give you 2-1 odds.

P4man

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Quote from: cuz0882 on August 11, 2012, 07:47:18 PM

Why would returns drop in half? When the block rewards drops to 25, are you expecting not a single person is going to stop mining with their gpu's?

Oh, Im expecting a few gpu's to be turned off, but only because of minirigs and asics being turned on. And no, I dont expect a single FPGA or Asic to be turned off, for the simple reason that electricity cost is only marginal compared to the investment. Even if some of those FPGAs will have no more hope to earn back their investment, keeping them running will at least reduce the loss for quite some time.

Quote

Difficulty is rising because payouts are increasing. Difficulty has not been keeping up with the price increases.

All the more reason to expect further increases in difficulty. If you think difficulty will be lower in January than it is now, I will gladly take a bet.

cuz0882

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Quote from: P4man on August 11, 2012, 05:22:04 PM

Quote from: conspirosphere.tk on August 11, 2012, 04:03:42 PM

On the other hand, lower prices are increasing the yield: at current price YABMC is paying >3% weekly.

3% per week for a few more months. Then its 1.5% even we would assume asics dont materialize and somehow difficulty would stop skyrocketing. Even with zero growth and no asics, it would take a year for the bond to pay back its investment. Anyone buying equipment or bonds that takes a year to pay for itself at current difficulty, is.. well, gonna lose money over that year. A lot of it. Even as it is, difficulty is going up faster than 3% per week, and you aint seen nothing yet.

Why would returns drop in half? When the block rewards drops to 25, are you expecting not a single person is going to stop mining with their gpu's? Difficulty is rising because payouts are increasing. Difficulty has not been keeping up with the price increases. You can see the increased returns per mhash on http://bitcoinx.com/charts/. If there is some kind of skyrocket at the end of the chart, its some kind of glitch today.

cuz0882

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Quote from: odolvlobo on August 11, 2012, 03:44:10 PM

Quote from: cuz0882 on August 11, 2012, 12:54:15 AM

Quote from: odolvlobo on August 10, 2012, 11:09:50 PM

Mining bonds are turds, even when priced in $. Let's say you and I had 100 BTC ($450) 6 months ago. Then, you invest in a mining bond and I don't. Now, after 6 months, the value of the bond has dropped 50% to 50 BTC but has paid 26 BTC in interest. We both cash out our BTC at $11, and you have $836 and I have $1100. That bond is a turd even when priced in $ because if you did not invest in the bond, you would have more money (in both $ and BTC).

That's not accurate at all. If you had purchased a bonds six months ago, it would be the same as purchasing mining equipment. Except your paying a initial fee for not operation it. The btc price of the bond is not important. Bonds and mining equipment have all paid out well so far. If you math is showing that miners are taking loses right now, your not doing it right.

We are talking about the bonds, not the equipment. Maybe I wasn't clear. Let's use a real bond as an example. Let's say that we both had 100BTC ($650) in June. Then, you used your 100BTC to buy 333 shares of YABMC @ .30BTC/share, while I kept my 100BTC. Today, you sell your YABMC shares for .12BTC and you have only 53BTC (40BTC plus 13BTC from dividends). Converting back to $, you now have only $583, but I have $1100. In 2 months, that bond lost you 47% in BTC and 11% in $ and that is why it is a turd (according to EskimoBob).

Your HYDRO.BONDS bonds are similar (dropping from 2BTC to 1.5BTC, and not paying enough dividends to make up for the loss), but you are promising to upgrade to ASICs and boost the Mh/s per bond, and I think that makes your bonds a good deal right now.

You shouldn't compare bonds to investments in btc. If you just put your money in btc a month ago, you would have made a good return. Yet your risk factor was high. If you had purchased my bond when I started, and then sold it today. You would have the same amount of dollars + dividends earned. I'm selling the bonds for less btc now because btc is worth more. Your counting losses where there are none. If the btc drops in half, I will be charging twice the btc price for the bonds.

P4man

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Quote from: conspirosphere.tk on August 11, 2012, 04:03:42 PM

On the other hand, lower prices are increasing the yield: at current price YABMC is paying >3% weekly.

3% per week for a few more months. Then its 1.5% even we would assume asics dont materialize and somehow difficulty would stop skyrocketing. Even with zero growth and no asics, it would take a year for the bond to pay back its investment. Anyone buying equipment or bonds that takes a year to pay for itself at current difficulty, is.. well, gonna lose money over that year. A lot of it. Even as it is, difficulty is going up faster than 3% per week, and you aint seen nothing yet.

conspirosphere.tk

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On the other hand, lower prices are increasing the yield: at current price YABMC is paying >3% weekly.
At that rate, getting back the whole capital invested as dividends in a few months, before the halvening, while ASICS are still a pie in the sky, does not seems so unlikely to me.

odolvlobo

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Quote from: cuz0882 on August 11, 2012, 12:54:15 AM

Quote from: odolvlobo on August 10, 2012, 11:09:50 PM

Mining bonds are turds, even when priced in $. Let's say you and I had 100 BTC ($450) 6 months ago. Then, you invest in a mining bond and I don't. Now, after 6 months, the value of the bond has dropped 50% to 50 BTC but has paid 26 BTC in interest. We both cash out our BTC at $11, and you have $836 and I have $1100. That bond is a turd even when priced in $ because if you did not invest in the bond, you would have more money (in both $ and BTC).

That's not accurate at all. If you had purchased a bonds six months ago, it would be the same as purchasing mining equipment. Except your paying a initial fee for not operation it. The btc price of the bond is not important. Bonds and mining equipment have all paid out well so far. If you math is showing that miners are taking loses right now, your not doing it right.

We are talking about the bonds, not the equipment. Maybe I wasn't clear. Let's use a real bond as an example. Let's say that we both had 100BTC ($650) in June. Then, you used your 100BTC to buy 333 shares of YABMC @ .30BTC/share, while I kept my 100BTC. Today, you sell your YABMC shares for .12BTC and you have only 53BTC (40BTC plus 13BTC from dividends). Converting back to $, you now have only $583, but I have $1100. In 2 months, that bond lost you 47% in BTC and 11% in $ and that is why it is a turd (according to EskimoBob).

Your HYDRO.BONDS bonds are similar (dropping from 2BTC to 1.5BTC, and not paying enough dividends to make up for the loss), but you are promising to upgrade to ASICs and boost the Mh/s per bond, and I think that makes your bonds a good deal right now.

cuz0882

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Quote from: odolvlobo on August 10, 2012, 11:09:50 PM

Mining bonds are turds, even when priced in $. Let's say you and I had 100 BTC ($4500) 6 months ago. Then, you invest in a mining bond and I don't. Now, after 6 months, the value of the bond has dropped 50% to 50 BTC but has paid 26 BTC in interest. We both cash out our BTC at $11, and you have $836 and I have $1100. That bond is a turd even when priced in $ because if you did not invest in the bond, you would have more money (in both $ and BTC).

That's not accurate at all. If you had purchased a bonds six months ago, it would be the same as purchasing mining equipment. Except your paying a initial fee for not operation it. The btc price of the bond is not important. Bonds and mining equipment have all paid out well so far. If you math is showing that miners are taking loses right now, your not doing it right.

odolvlobo

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Part 2
I think that EskimoBob's best points are these:

The value of mining bonds are dropping faster than the dividends are being paid, therefore they are currently bad investments. The real question is, "why are the values of mining bonds dropping"?

The answer is not that values are dropping because the dividends are falling. The dividend rate is falling because of the rising total hash rate, but since it is falling the same amount for all bonds, the values of the bonds should remain constant. The value of a perpetual bond is the coupon rate divided by the "discount" rate (times the principal), and the value should remain the same since both the coupon and discount rates are falling.

The answer is supply and demand. The supply of mining bonds is increasing, and (more importantly) the demand for the bonds is decreasing.
Demand is decreasing because:
- Investors are flocking to pirate bonds and BTCST deposits, leaving less money to invest in mining bonds.
- Investors are anticipating a huge increase in the hash rate once the ASIC rigs come online and miners that don't upgrade won't be able to compete.
- Momentum -- investors are avoid mining bonds because the prices are falling, causing the prices to fall even more.

In reality, "perpetual" mining bonds will not pay forever. It is more likely that the operator will close up shop one day and the investors will lose all their money because the equipment is worthless. The solution is for the operators to depreciate their equipment so that the sum of the equipment value and the cash from depreciation is constant, and agree to pay that value to bondholders if they cease operations.

Operators that:
- don't depreciate equipment and back the value of the bonds with equipment and cash from depreciation, or
- take a cut of mining proceeds for upgrades without actually upgrading (or using it to back the bonds), or
- simply don't back the value of the bonds
are ripping off the bondholders (intentionally or not).

I have yet to see a mining company balance sheet or P&L. It's ok to mine for a hobby, but IMHO if you have a business with investors then it needs to be run as a legitimate business. Investors must insist on basic accounting and reporting if they really want to have a hope of making any money.

nimda

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0xFB0D8D1534241423

Quote from: sarpar on August 09, 2012, 04:49:27 AM

Quote from: EskimoBob on August 09, 2012, 01:34:53 AM

I just hope people realize what a greedy fuck you actually are and stay clear form your next snake-oil deal. I guess this greed shit runs in your blood. LOL...

Careful with the unfair latter statement!

But I also advise investors to read contracts carefully. Fair play is not to be expected with Meni Rosenfeld - you might get fucked already by design!

A true business venture worth to invest in creates a win-win situation for receiver and donor of the funds. In other words those issuing should be convinced to invest themselves in their asset if they had enough cash available. Not the case here. There is practically no risk for Rosenfeld with very high return (which is per se a contradiction). Rosenfeld sticking to his contract contrary to others shows that his venture didn't just unintentionally turn this way. Be warned there is nothing virtuous about sticking to deceitful contracts - true the price might stabilize when ASIC hit the market for a short time but already so low that it would make no sense not to buy them back. Subsequent technology shifts are also up to come with similar devastating effects (doesn't matter whether there are buy back programs or not).

Attacking Meni is not ok. It does not give you credibility or make your case any less false. Meni Rosenfeld is well respected as a contributor to Bitcoin itself, and frankly, you look like an idiot when you say otherwise.

Free market, supply and demand, invisible hand, fools and their money, caveat emptor, capitalism and competition, due diligence and all that. Fixed MH/s bonds are bonds denominated in MH/s. They have use cases from hedges to diversification to betting on a DDoS of mining pools. All I hear in this thread are people whining about their poor investment choices and blaming it on other people. If you're so smart, why don't you start shorting mining bonds? Alternatively, liquidate your turds ( Wink

) and place some nice low bids for them. Surely they are worth more than one week's dividend? Place your bids there. Again, supply and demand etc.

odolvlobo

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Part 1
Despite my previous post, I disagree with EskimoBob on a few points. I think he is just trolling now, but I'm going to take the bait.

The statement that bonds return the principal is not strictly true. According to Investopedia:
Quote
Definition of 'Perpetual Bond'
A bond with no maturity date. Perpetual bonds are not redeemable but pay a steady stream of interest forever. Some of the only notable perpetual bonds in existence are those that were issued by the British Treasury... http://www.investopedia.com/terms/p/perpetualbond.asp#ixzz23CwCJy7f
Mh/s is not a depreciating asset. A depreciating asset loses value over time because it must eventually be replaced. While a mining company must replace its equipment (and therefore must depreciate it). It doesn't have to replace its Mh/s.
A mining bond's varying dividend is not unusual. While most bonds have fixed coupon rates, some bonds (e.g. TIPS) do not. Furthermore, bond mutual funds pay varying dividends.

odolvlobo

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Quote from: racerguy on August 10, 2012, 09:09:04 AM

How do you fail to understand mining bonds aren't "turds" when priced in $? Using that logic I've been ripped off in every transaction from everyone in the last six months because anything priced in bitocins was 100% more expensive 6months ago compared to now.

Mining bonds are turds, even when priced in $. Let's say you and I had 100 BTC ($450) 6 months ago. Then, you invest in a mining bond and I don't. Now, after 6 months, the value of the bond has dropped 50% to 50 BTC but has paid 26 BTC in interest. We both cash out our BTC at $11, and you have $836 and I have $1100. That bond is a turd even when priced in $ because if you did not invest in the bond, you would have more money (in both $ and BTC).

racerguy

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Also way to be a whiny bitch about something you're in no way compelled to buy for any reason.

racerguy

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How do you fail to understand mining bonds aren't "turds" when priced in $? Using that logic I've been ripped off in every transaction from everyone in the last six months because anything priced in bitocins was 100% more expensive 6months ago compared to now.

Topic: Weekly loss of N% guaranteed - Enjoy perpetual loss with fixed Mh/s mining turds - page 6. (Read 14714 times)