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It's quite clear that the majority of people buying mining bonds, haven't got a clue what they are actually buying, otherwise they wouldn't be paying such ridiculous sums.

Look at TAT.VIRTUALMINE going for 0.00518 BTC. It's currently paying 0.00002600 BTC per day per share. At that rate, it would take 200 days to mine 0.00518 at a constant difficulty.

If we assume a 10% difficulty increase per round, then the daily dividends for the next 10 successive rounds look like the following:

Round 1 = 0.00002364 BTC
Round 2 = 0.00002149 BTC
Round 3 = 0.00001954 BTC
Round 4 = 0.00001776 BTC
Round 5 = 0.00001615 BTC
Round 6 = 0.00001468 BTC
Round 7 = 0.00001334 BTC
Round 8 = 0.00001213 BTC
Round 9 = 0.00001103 BTC
Round 10 = 0.00001003 BTC

Those 10 rounds will take just 12.7 days each, so say 13 days of dividends at that rate for each round. So, over those 130 days, a total of 0.00207722 BTC would be mined. In fact, with a constant 10% difficulty increase each round, over the next 57 successive rounds (next 2 years), only 0.00336580 BTC would be mined.

If you're looking into mining bonds, you should be looking at the short term profits over each difficulty round.

TAT.VM was still around 0.007 BTC per share at the beginning of this difficulty round. Assuming a full 14 days per round (no difficulty increase), then the maximum amount mined per share for the current round would be 0.00036406 BTC. If we assume TAT.VM would sell at 0.005 BTC per share at the end of this difficulty round, then that would be a net loss of -0.007 + 0.005 + 0.00036406 = -0.00163594 BTC. In order to make a profit, TAT.VM shares would have to sell for more than 0.00663594 BTC (ignoring trading fees) at the end of the round.


As you can clearly see, the current prices for these mining bond are insanely overpriced. Personally, I wouldn't pay more than 0.002 BTC per Mh/s.

In general, with a daily dividend D and a fractional difficulty increase per readjustment of X (so X = 0.1 for a 10% increase), the total dividends (or: mining revenue if you mine yourself) you will ever get from your investment is:
14 * D / X
(the full derivation is somewhere in the DMS-securities thread).

That means that with a 10% increase per readjustment, you will receive 140 times the daily dividend over the lifetime of the asset. If you pay more than 140 times the daily dividend, you will make a loss in this case. If you pay slightly less, it will still take a very long time to recover your investment.

Well, that is not limited on mining bonds, but includes pretty much everybody who bought USB Asics or other overpriced mining hardware in order to make profit...

I like TF's post about this

This is why I'd really like to be able to short securities on BTCT.

Before Deprived comes running in, you CAN do this with DMS.SELLING/MINING - that's the entire point of the security!

But I'd also like straight shorts, as well  ;D

I owned this stock for a week, then sold for a little more than what I payed for it. I have been kicking myself for selling so early....until now. I didnt even notice this price drop. The dividends are not worth it, and you will lose more than what your divs will pay in the long term.

It's not about a specific stock, it applies to all mining bonds. People are grossly overestimating the value of them or simply not understanding what they're paying for.

yeah got to understand it the hard way..
Be it DMS or TAT.. any PMB isnt worth investing.. you WILL end up losing money if your not careful..

Welcome back to last year's discussion on PMB (http://polimedia.us/trilema/2012/the-problem-with-pmbs-ie-perpetual-mining-bonds/)s.

PMBs are not generally bad investments, it's all about the buying price. Like Mabsark rightly pointed out, about 0.002 BTC per Mh/s could be a price where an investment could be profitable.

To calculate the current rate of return of a perpetual mining bond I am applying the perpetuity formula with growth (see http://www.financeformulas.net/Present_Value_of_Growing_Perpetuity.html where in our case the growth is negative).

P: Current stock price or present value
D: Dividend per 2 weeks
r: Rate of return
g: Growth

P = D/(r-g)

That transforms into

r = D/P + g

So for example in the case of TAT.VM if we assume difficulty will rise by 10% every 2 weeks (so g = -0.1), then at the current price I come up with:

r = 0.000364/0.0035 - 0.1 = 0.004

So r would currently be 0.4% for the 2 week yield.

If the price were to fall to, say 0.002 then it would be more like 8.2%.

So I guess I could compare that against a G.ASIC for example, but I have no idea what growth rate to apply there so let's just take the most recent div payment and assume it won't grow at all. The last one was 0.01810108 and they pay out weekly so that would be 0.03620216.

So the 2 week yield under those assumptions would be:

r = 0.03620216/3.16 = 0.01145637974684 = 1.146%

Now if I were to apply a 2 week growth rate of only 1% r would already be 2.146%

If we wanted to calculate a maximum price that TAT.VM would be worth paying for we could use that conservative G.ASIC yield and plug it into the initial formula:

P = 0.000364/(0.02146 - (-0.10)) = 0.002997

So 0.002997 may be a ceiling for TAT.VM given the current conditions.

Note that the recent G.ASIC div was unusually low so to come up with a floor you could just use a bit more optimistic G.ASIC numbers which would then give you some kind of reasonable trading range for TAT.VM

(By the way ... how are we so certain that the decline rate will be around 10%? I remember in 2011/12 there were periods when it barely changed or even declined for a while. But I think that was after a huge and sustained drop in the Bitcoin price.)

I have written about this for almost a year now and guess what - idiots are still dumping money to perpetual mining turds (bonds? LOL!).
Brilliant!

Yes...old idiots dead, then new idiots come in..

I am once a idiot too...but soon realize it.

We aren't. In fact, it is highly unlikely that a 10% growth per 2 weeks can keep up for very long. This is the perpetual proportional growth theory, which assumes that by February 2014, and assuming there aren't any incredible revolutions in mining technology just around the corner, the community would have invested another $200 million in hardware (or around $700K every single day) by February 2014. Keep it up until 2016, and we're looking at $2.7 billion, all to capture a market that has a cap of a third of that.

I wrote briefly about the perpetual growth theory here:
http://coin.furuknap.net/are-perpetual-mining-bonds-scams-not-really/

I do intend to write another article, though, to further elaborate on pricing versus difficulty.

.b

Come ,again???? how about your PAJKA bond??

I don't think anyone expects the difficulty to continue to grow at 10-20% every difficulty increase for the next 3 years. If it continues for even one year the difficulty will increase tenfold, which will already make all PMBs unprofitable at their current prices. You're also assuming that the market cap of Bitcoin will stay the same by 2016; it is over $1 billion now and by 2016 there will be 3 million more coins which adds  $300 million even if the price stays the same (which is unlikely given Bitcoin's history) and the cap would be $3 billion or more if it doubled or more in price which is certainly a possibility in 3 years.

I think you underestimate the markets ability to price PMBs (or mining contracts as I prefer to call them; thei are neither perpetual nor bonds). Prices on mining contracts have dropped in response to the recent difficulty climb already.

I'm in the process of IPOing a new mining contract at 0,004, which I believe is fairly priced. With a 10% monthly increase, that contract will return its IPO value in a year and over three years (with 10%/mnth growth) return 147% for a total of around 16% per year. If difficulty 'just' rose for one year and then flattened out, the return would be around 243% or just under 50% per year.

I have no idea what scenario is most likely, but I don't think the pessimistic idea that mining will keep being so insanely profitable that everyone will get 50% on every dime they throw in will continue. A more modest but still profitable middle ground is more likely.

The question is, however; from where is all this additional mining power going to come? We have a fairly good overview of who is building ASICs and we're fairly good at calculating future deployments. I don't see anyone who could reasonably come up with 9PH/s over the next three years, which would be the result of 'just' having 10% growth.

Remember, we need new technology to go below 28nm, which is very expensive and takes a lot of time, and even Intel and the big boys (who sells hundreds of millions of chips) is struggling to go below 22nm. At 28nm, which is what KnC is currently researching, 9PH/s will cost $2 billion. Even if you get that at half price (and three years isn't really that far off), we're still talking about someone or the community combined willing to invest $1 billion to capture the mining market. That mining market, remember, halves in 2016.

We're rapidly approaching a point where even ASIC mining won't be very profitable. My asset already sells for less than AM's Block Erupter blades (which are priced at 0,005/mh) so they are unprofitable already, if my asset is. Pretty quickly, investments won't make sense and thus difficulty growth will stop and difficulty may even go down.


I don't speculate in difficulty and I would never speculate in price, especially not with billions of dollars. Those that gambled, say $140 dollars for a Bitcoin just a few weeks ago has lost almost 30% of that already. You won't convince someone to invest a billion dollars in the hope that prices will go up by 8x in three years.

.b

Not really.  Avalon sold ASICs at $20/GH/s.  Mining bonds are going for $700 / GH/s.

Arguing that people might profit because bitcoin goes up makes no sense.  A security has to offer a gain above the currency it is traded in to be worthwhile.  Holding bitcoin would be more profitable than buying your bonds.

I would note that buying bitcoin and holding it was also a better choice than buying mining hardware, unless you are one of the few dozen folks who bought Avalon round 1 machines and hit the jackpot.

They aren't turds... they are scat bonds.  The buyers are asking to be shit upon.

I'll just leave this here:

http://coin.furuknap.net/why-investing-in-mining-is-always-a-bet-that-prices-will-drop/

.b

Again ,people do not listen this guy ,this guy tried convince me to hold PMBs...if i listen to him , I will lose half of my fund by now...

This guy is a evil, he try to convince everyone that PMBs is a good investment..and once you believe that ,he might can sold his shit PMBs contracts to you.

Please check PAJKA bond past one month trend you would understand , Why , I stated this guy is a evil ~~!

Do not listen to this liar...He is stupid , but he try to convince you to do a stupid things as him.

The problem with that is this:

1.  Rises in difficuly early on have a much larger impact than ones later.
2.  Your bond doesn't start mining for months - i.e. AFTER the most important rises.
3.  10% rise per month (NOT per change) seems rather unlikely - given the rise when your miner and others from same manufacturer wil ship will far exceed that just on its own.

Your bond pays 20% extra for first 6 months after starting, supposedly to make up for not mining already.  But a 20% bonus for 6 months in the future is at best 1.25 months at current difficulty IF difficulty didn't rise at all.  As you can't mine without difficulty rising (as your miner can't even exist without increasing difficluty) that means it's actually far worse than 1.25 bonus at current difficulty.  So if comparing yours to ones already mining investors need to be aware that even with the bonus it represents significantly less payout than 1 MH/S mining already.

None of which says it'll never make a profit - it just looks exceedingly unlikely to do so in the sort of time-frames you quoted.

Mining is marginally profitable - any markup of more than 10-25% on cost of hardware is rarely going to make a profit (often selling at cost will make a loss).

Your math is fine - your assumptions aren't.  With avalons arriving, their chips due soon, BFL starting to ship, ASICMINER aorund and (if yours is ever to do anything) KNC (or whatever they're called) also shipping expecting rises of only 10% per month (i.e. under 5% per change) in the short-term is pure fantasy.  And that's without the scammier other manufacturers where one or more might turn out to be real.

I missed that part.  This is hilarious.

He buys hashpower from KNC at $20 / GH/s, and then he tries to sell it to the public for $400 / GH/s.

As the title says:  Mining Bonds, Stocks For People Who Can't Do Basic Maths

Anyone who supported creation of this stock on BTCT should be ashamed of themselves.

+1  Ashamed of themselves , Those issuers are devils....

The only thing that would separate my bond from any other mining investment would be item 2 on this list. 100TH announced that they will start rolling out next week, and those are the exact same chips I'm using. 'Not mining for months' may be true still, but it is more likely that Metabank manages to deliver in August when the exact same chips start mining in July.

In fact, rather than the overly pessimistic and ambiguous 'for months', it is equally likely that the miners arrive in just a few weeks, before BFL, Avalon, and KnC. If that is the case, that bonus is going to be worth more.

I've already accounted for 100TH coming online in my numbers above, where I've expected a network hash rate of 250TH on August 1.

Finally, my asset doesn't pay 20% bonus, it pays any excess after expenses. Because we don't know the final specs, but it seems a common patterns that devices like these can be safely overclocked around 10% or perform naturally above specs, that bonus may be higher. If 10% above spec is the result, the bonus may be 50% higher than anticipated.

.b

You lied to me, then now you start a big project? you want to cheat entire BTC community by issuing you own PMBs????

This good, people with right mind will cursed you ,you will going to hell....

I was just going by what your CONTRACT says :

"The bond is backed by miners that have yet to be released. The scheduled release is September 2013."

It's now June.  September is 3 months away.  That's months.  If your contract states something then I'm perfectly entitled to quote it when discussing your contract.  Expecting an ASIC manufacturer to ship ahead of schedule flies in the face of all past experience.  The closest was Avalon who sent a couple of prototype machines on time and pretended that was shipping.

What's your source for ASICMINER, BFL and Avalon not shipping anything else before then?

And why, if your own figures suggest a jump to 250TH by August 1st are you then predicting that the rise will immediately drop to 10% per month?  Seems rather strange that you think there'll be a massive jump in July then everyone will stop shipping so your investors can do OK.

I'm sure you would like to offer evidence about where I lied.

.b

You ask me to hold PAJKA bond, which I did not listen to you .

Look back the one month trend of PAJKA bond, just a perfect evidence to proving you are a liar.

Uhm.. I'm not sure how that constitues evidence. Where, exactly (feel free to post the link) did I ask you to hold PAJKA?

.b

You wrote a article trying to convince me what is PMB, and ask me do not worry about PAJKA bond and explain balabla benefit of holding it..

I just a liar , people can find out the story by last month price trend of PAJKA bonds, and needless to refer back what you say before , because I am too lazy to doing it ...

The story is more than essay to understand by anything, if I listen to you , I lose half of my fund now..

So, your evidence of me lying is that you read an article I wrote, an article that first of all states:


...and that is a lie? What part of that is a lie?

Here's the simple truth: You got pissed off that the issuer of PAJKA didn't want to give you more money by increasing dividends. I tried explaining this to you, at which point you threw a fit and sold all your holdings, driving the price down to 0.6. I bought a lot of those shares and later sold at a higher price.

I also sold you some of the shares you initially bought when you had no clue about what you were doing.

In short, you're pissed at me becuase I earned money off you being a blithering idiot with your investments. Now you have a personal vendetta in which you post blatant lies about me. It's easily refuted, though, because your claims need backing and you aren't able to provide that.

.b

 Even a single BTC going to your account will be absolute lose its value ..of course ,once contracts got approved on BTCT.CO , I sure that there will be some naive newbies buying it...What I am doing is trying to smaller this number of newbies become hurt by your contract.

Any less BTC going to you pocket will be a victory of what I did today .

Are you sure? You made profit ?Since I sold my contracts , the price never above what I sold... The only thing you can confirm you earns money from me is that you can sold it above what your purchased from me ...as long as I see, you are not ...the price is around 0.5, you are loss half of your fund..

You are victim of PMBs, but you realize that then you issuing other PMB , is that you trying to cover what you loss on PAJKA by issuing this PMB?

Very Smart move, but I will try my best to prevent innocent people hurt by your defect PMB.

...and more lies.


Of course, since then, the price has been above this point several times, so yeah, it would be pretty easy to earn money off your stupidity.


Victim? I'm not a victim here, except of your blatant lies and libelous slander.

.b

+1. according to today DMS.MINING price ,that 1 M/hash is worth 0.003 BTC. Furuknap , you are issued asset at 0.004 and mining a month later, and you call this not a cheating ?

And you sell's your future order for 20x than now...you really think people are stupid ????

I really hope that BTCT.CO could do something to stop that...
Below is my transaction of selling PAJKA bond. I only sold a little amount of my contracts at what this liar stated above.

I used to have 440 PAJKA Contracts in total .... he continued use this minority amount of selling as a sample to convince I made huge loss...
anyone please check below

[2013-06-07 21:25:34   PAJKA.BOND   sell   16   0.06   0.00192   0.95808
2013-06-07 21:25:33   PAJKA.BOND   sell   4   0.0605   0.000484   0.241516
2013-06-07 21:25:32   PAJKA.BOND   sell   4   0.061   0.000488   0.243512
2013-06-07 21:25:31   PAJKA.BOND   sell   15   0.07   0.0021   1.0479
2013-06-07 21:25:29   PAJKA.BOND   sell   1   0.072   0.000144   0.071856
2013-06-07 21:25:25   PAJKA.BOND   sell   1   0.072   0.000144   0.071856
2013-06-07 21:25:23   PAJKA.BOND   sell   3   0.0721   0.0004326   0.2158674
2013-06-07 21:25:22   PAJKA.BOND   sell   10   0.073   0.00146   0.72854
2013-06-07 21:25:22   PAJKA.BOND   sell   6   0.073001   0.00087601   0.43712998
2013-06-07 21:00:38   PAJKA.BOND   sell   1   0.089631   0.00017926   0.08945173
2013-06-06 21:19:23   PAJKA.BOND   sell   10   0.095   0.0019   0.9481
2013-06-06 21:19:21   PAJKA.BOND   sell   8   0.095   0.00152   0.75848
2013-06-06 11:48:31   PAJKA.BOND   sell   10   0.101   0.00202   1.00798
2013-06-06 06:55:26   PAJKA.BOND   sell   1   0.101   0.000202   0.100798
2013-06-06 04:52:51   PAJKA.BOND   sell   25   0.099   0.00495   2.47005
2013-06-06 04:52:49   PAJKA.BOND   sell   10   0.0991   0.001982   0.989018
2013-06-06 04:52:48   PAJKA.BOND   sell   1   0.099101   0.0001982   0.09890279
2013-06-05 22:38:36   PAJKA.BOND   sell   1   0.106001   0.000212   0.10578899
2013-06-05 18:06:01   PAJKA.BOND   sell   1   0.10897   0.00021794   0.10875206
2013-06-05 04:56:28   PAJKA.BOND   sell   5   0.10897   0.0010897   0.5437603
2013-06-05 01:41:59   PAJKA.BOND   sell   26   0.10897   0.00566644   2.82755356
2013-06-04 00:11:39   PAJKA.BOND   sell   10   0.099   0.00198   0.98802
2013-06-04 00:11:37   PAJKA.BOND   sell   20   0.099   0.00396   1.97604
2013-06-04 00:11:34   PAJKA.BOND   sell   2   0.0991   0.0003964   0.1978036
2013-06-03 23:29:36   PAJKA.BOND   sell   1   0.109498   0.00021899   0.109279
2013-06-03 22:45:04   PAJKA.BOND   buy   2   0.109499   0.00043799   0.21943599
2013-06-03 21:25:22   PAJKA.BOND   sell   100   0.102   0.0204   10.1796
2013-06-03 21:25:14   PAJKA.BOND   sell   21   0.102001   0.00428404   2.13773695
2013-06-03 21:25:09   PAJKA.BOND   sell   5   0.1035   0.001035   0.516465
2013-06-03 21:25:05   PAJKA.BOND   sell   25   0.105   0.00525   2.61975
2013-06-03 21:25:01   PAJKA.BOND   sell   1   0.105   0.00021   0.10479
2013-06-03 21:24:56   PAJKA.BOND   sell   1   0.105   0.00021   0.10479
2013-06-03 21:10:22   PAJKA.BOND   sell   13   0.1084   0.0028184   1.4063816
2013-06-03 21:10:19   PAJKA.BOND   sell   10   0.1086   0.002172   1.083828
2013-06-03 21:10:18   PAJKA.BOND   sell   4   0.10861   0.00086888   0.43357112
2013-06-03 21:09:42   PAJKA.BOND   sell   9   0.1087   0.0019566   0.9763434
2013-06-03 21:03:39   PAJKA.BOND   sell   21   0.109   0.004578   2.284422
2013-06-03 21:03:35   PAJKA.BOND   sell   9   0.109   0.001962   0.979038
2013-06-03 19:50:47   PAJKA.BOND   sell   40   0.1098   0.008784   4.383216
2013-06-03 19:45:05   PAJKA.BOND   sell   1   0.1098   0.0002196   0.1095804

As you see above , I made all sell at average about 0.094 ~~does PAJKA BOND anytime above this ????

Please stop lie to people ,and try to cheating their money!!! God will punish you, of course , you will delete what I posted here , because I am ruin your plan to cheating people !

I think I mentioned this previously, but I don't want to overpromise by saying August. Metabank has said August, so I'm going to not promise anything more than that to account for possible delays.

You're right, though, and it could be even worse if the miner is delayed. That risk was, in my opinion, reduced considerably today when 100TH announced they would start rolling out next week.

.b

I suggested a jump to 250 TH by August to account for 100TH coming online sometime during July, possibly sooner. However, since 100TH does not grow, the growth of the network must be attributed to the remaining deployments and thus from around 150TH. A growth of 25TH per month is actually 16.6% of 150TH so the estimate is higher than the 10% it looks like.

.b

Edit: Bah, head isn't working. 25 of 150 is 16.6%

Again ,this liar is ask you to spend 20 times more to buy over his pre-order  , and if metabank delaying this order, He make profit on this 20x selling, if metabank delivery before September , then He can execute by his contract, start mining without giving dividend to those stupid people who bought his contracts.



Very very smart move !~~

Uhm... You held 440 then 500? Or was it the other way around? Or was this just another 'math never lies' thing?

I used the extract from the quoted post to show that your claims about nobody selling higher than after you paniced is also a lie.

.b

You still have not offered even a shred of evidence, except you reading an article of mine, that would indicate, much less prove, that I have lied to you.

.b

Shit , did you understand what means by about? please go back and study with this basic English.

I'll just leave this here.

.b

Yes , it will be wise that  you leaves this forum.

Check the Mining profit per difficulty adjustment here

http://btc.re/?t=miningcalc

Good job, I suggest if you can adding calculation shows how long does PMB will pay it back will be great.
 ;D ;D

Funny enough some of these PMB's are still highly profitable (40%+ APR) in the meantime, but if the price crashes prematurely then it's hopeless. That could be due to BTC crashing, or posts like this.. but once it does, it's a fight to see who can get out with that profit (most wont because most panic and don't wait it out to sell back at their initial cost).

Thanks, that can be estimated in "Accumulated Coins" column

The accumulated coins column is only count in one years time.....So far the best calculator is  http://mining.btcfans.com/

You could use it , but this is in Chinese...this calculator tells user exactly how long time does PMB pay it back, and given the option of how much did you pay for this hashrate...

Yap, added now with input btc price/hash and return of investment date

This great ,no more people will be hurt because they did not use the right calculator .
Great Job!

Good one, but if you specify the BTC price per 1 MHash/s then there's no need to specify Hash rate (MHash/s) as it has no effect on calculations.

Ha? Hashrate and price per hashrate is different

Of course, but it has no effect on profitability. It's like specifying how many miners I bought or how many PMBs. Just change the hash rate field and you'll see that it has no influence on investment return.

Yes true, not in the investment return computation, number of MHash is for miners to see their mining profit based on their hashrate.

Nope, they are not highly profitable, they give out good divididends until the next difficult adjustment.
Selling them before is not "panicing", it's hoping that someone else is stupid enough to still pay more than they are worth.

Aren't you the scammer stealing everyone's LTC with the comparatively much more retarded "buy clay ovens"? At least mining gear turns the heat into Bitcoin, which is closer to Bitcoin than etsy shit will ever get.

You are the poster child for "scammer trying to act like he's giving advice".

Why are you quoting my post for this? It doesn't defend PMBs.

Just Ctrl-C and Ctrl-V, Forget to modified on it. It been changed now.

*crickets chirp*

Comedy gold, that :D

How's the ART scam going?