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tl; dr: Each Anti-Pirate bond has a face value that starts at 1 BTC and decays by 7% (multiplicatively) every week. If Pirate defaults, the bonds will be purchased back for twice their face value. Bondholders have the right to sell bonds for their face value at any time. The asset is currently inactive.

Asset page: https://glbse.com/asset/view/ANTI-PIRATE

Introduction. For the past several months, forum member pirateat40 (https://bitcointalk.org/index.php?action=profile;u=35827) has offered the recently renamed Bitcoin Savings and Trust (https://bitcointalk.org/index.php?topic=50822.0) program (website (https://btcst.com/)), allowing investors to deposit funds and receive insanely high interest payments in return. The program is widely suspected to be a HYIP (http://en.wikipedia.org/wiki/High-yield_investment_program) scam, though it has still attracted much interest from investors who believe that, even if the program will eventually default, they will make back their investment by then.

No doubt there are other people who believe that default is imminent and wish to take the opposite side of the bet. So far there hasn't been an effective way to do this. One possibility that comes to mind is borrowing pass-through bonds such as PPT (https://bitcointalk.org/index.php?topic=76594.0) and selling them, but there is no standard platform for this, and this is made cumbersome by the terms of the specific offerings.

The Anti-Pirate bonds offer a streamlined method to short BTCST, and are equivalent to depositing a negative amount in the program (where the payment for the bond acts as collateral, much like when selling on margin). If you believe that investment in BTCST has a net negative expected value, then an Anti-Pirate bond, bought at an appropriate price, will have a net positive expected value.

Method of operation. Bonds will have a face value which starts at 1 BTC and will be sold at a price which is somewhat higher than the face value. The face value of all Anti-Pirate bonds will decay by 7% per week (at 03:30 UTC on Tuesday), multiplicatively (after X weeks, the face value will be 0.93^X BTC). The bond represents a perpetual obligation by the issuer to be bought back, if the BTCST program defaults, at a price equal to the maturity value, which is twice its face value at the time of default. The faster Pirate defaults, the higher will be the return on investment; conversely, if Pirate never defaults or only after a very long time, the investment will be lost entirely.

The issuer is also obligated to buy back bonds at any time, at the request of a bondholder, for their face value at the time. Taking all this into account, buying Anti-Pirate bonds with total face value of 1 BTC is completely equivalent to the following:

1. Depositing (-1) BTC in Pirate's BTCST program at the 7% weekly interest tier;
2. Instead of receiving 1 available BTC, depositing 1 BTC as collateral;
3. Each week, withdrawing 7% of the balance (making the negative balance closer to 0), and correspondingly withdrawing 7% of the collateral;
4. Paying an advance, non-refundable fee for the service equal to the difference between the traded price and the face value. For bonds bought from the issuer, the fee represents a compensation for the risk in offering this bond.

This is because depositing 1 BTC creates a profit of 7% per week, where a default causes a loss of 1 BTC; while buying Anti-Pirate bonds causes a loss of 7% per week (represented as a depreciation in the face value of the owned bonds), a default would cause a gain equal to the negative balance, the scale of investment is reduced by 7% unless new bonds are purchased, and the position can be closed at any time allowing withdrawal of the collateral.

The pricing of any future bonds offered will take into consideration the reduced face value. The asset can be used indefinitely, but requiring ever growing quantities for a given value.

Details on the current face value of bonds is available at http://bitcoinantipirate.com/. This website is informational only and is in no way binding.

Determining a default scenario. The contractual payment in the scenario of a BTCST default will require a community consensus that a default has taken place. A partial default will count as a default for this purpose; on the other hand, a single person claiming he is unable to withdraw funds is not sufficient evidence. The time of default for the purpose of determining the effective face value is the time that real evidence first comes to light, which in retrospect will lead to a conclusion of default. Any isolated incident will not count for the purpose of locking the face value.

The issuer can also choose at any time to buy back the bonds at the maturity value (equal to twice the face value), even if there is no default.

Timing. The issuer will keep as reserves, in either a local machine or a GLBSE balance, an amount of bitcoins equal to at least the face value of all outstanding bonds. Should any loss or theft of the reserves occur, the issuer will make a best effort to quickly replenish them.

The issuer will maintain bids on the GLBSE platform for the bonds, at a price equal to at least their face value, in a quantity which is expected to be sufficient for the demand to sell back bonds. If the bids are executed, the issuer will make a best effort to place new bids quickly, which will usually take no more than 2 days. Contacting the issuer can help expediting this.

The issuer is not obligated to keep in immediately available reserves the due payment for a case of BTCST default. However, the issuer has more than enough assets to be able to cover the obligation, and these will be liquidated as necessary to fulfill the obligation. Said liquidation is expected to take several days.

Trustworthiness. I, Meni Rosenfeld, am issuing the Anti-Pirate GLBSE asset, and committing to fulfilling the terms of the bond as described. I am a veteran of this forum and other Bitcoin communities, and own a Bitcoin business. I am using my real name which can be linked to my identity via my extensive online presence, and I have verified my identity with GLBSE.

The only way I can conceive not honoring the terms is if a malicious cracker hacks into my GLBSE account and issues new bonds on my behalf. The obligation thus created is arbitrarily high and there is no way to commit to it (of course, if the damage is within reason I will absorb the losses). I am using a strong password for GLBSE and keeping my computing environment reasonably secure, but cannot absolutely preclude this scenario. Do not buy newly issued shares unless I announce them on the forum, and in case of suspicious activity you would do well to verify via additional channels. Going forward I will look for robust ways to limit the plausibility of this scenario.

(reserved)

The above is still a concept; I have not made a final decision whether I would like to offer these bonds. I am writing this to hear any thoughts about the idea and learn if anyone would be interested in buying such bonds.

A face value equal to half the maturity value was chosen mainly because this leads to an effective interest rate equal to the decay rate, which is intuitive. A greater maturity value can be used, which will allow making an investment with a lower collateral (essentially a higher margin ratio), but this will mean that the decay rate needs to be higher for a given effective interest rate, which is less robust.

The asset as described can be cleanly equated to a negative deposit against collateral. There is an alternative offering I am considering: Dropping the right to sell the bonds at face value (and replacing it with a compensation clause for a scenario that the BTCST program changes materially without defaulting). This allows more flexibility with the pricing, but makes it harder to compare directly with BTCST deposits, except for the fact that this is a bet on an imminent default. Opinions on the preferred variant are also welcome.

Update: No longer just a concept. For now I went with the sell option, 200% maturity variant.

Yes, this was announced in principle two days ago and is now trading on MPEx.

To piggyback you have to be faster and more decided than that.

What will your anti-pirate bond do in the event of a change in interest rates offered?

Can you call it "Ninja insurance"? 8)

I don't get the MPEx spam lately - paying 20 BTC just for signing up is a big no-go for me personally. Until you earn THAT amount of money back, you need a lot of time and effort - not showing volumes in BTC but in amounts of shares sold also gives me personally the impression that it shall be viewed more liquid than it actually is. You can maybe show how many PPT-insurance shares I need to buy on MPEx with a 20 BTC signup fee but a 2% trading fee (that I don't have to pay on GLBSE either as buyer) to have better conditions there. I guess it's a quite large amount...

I beg your pardon?

I'm assuming you're referring to this (http://polimedia.us/bitcoin/mpex.php?mpsic=B.PPTAPR.SYNTH).

Even if this was announced two days ago as you say I had no knowledge of this when I devised the asset being offered, or when I wrote this post.

More importantly this is completely different. You have basically copied the PPT bond, which is a positive Pirate deposit, and merely stated that it can also be sold short. My offering is the exact opposite, each bond represents a negative investment, in a way which is original (maybe similar instruments exist in the financial world at large, but I have not seen anything like it here). It is much more streamlined and easier to use than any short position that can be taken utilizing PPT or your copy of it.

All that said, both our offerings are valid and investors can choose which they prefer, if any. I just wish my competitors would have a bit more sportsmanship.

In the bond described in the OP, this will have no effect. If investors believe this is indicative of a different default risk (likely reduced), they can react by exercising the right to sell bonds, or to refrain from buying more bonds. And I will also take this into consideration when pricing any newly issued bonds.

Edit: It is also possible that the interest rates would become so low that the bond no longer makes sense; in this case, no new bonds will be issued, and bonds that are not sold back will decay peacefully until they are forgotten. A new type of bond may be offered with a lower effective interest rate.

In the no-sell variant, it is likely that any material change any BTCST will offer bondholders a temporary right to sell bonds. This variant is more flexible wrt pricing, so whatever the new interest rate is, it can be issued at a price that makes sense with the predefined decay rate.

There's a very simple path to sportsmanship: Announce your foregoers so that they do not have to do it for you.

I don't know what kind of bubble you live in, but people don't go daily to check Mpex. Bitcointalk announcement or it didn't happen. I did browse this forum and GLBSE to make sure nobody has made a similar suggestion. You announced this here after my own post. When I saw it I thought about giving it a mention, but decided against it because there was no real innovation in your offering - you can do with it exactly what you can do with PPT. And I did mention PPT.

If you must know, I came up with the idea while driving to the train station on my way to work yesterday. Of course, the rigorous mathematical modeling had to wait until I got home. If you are suggesting that I did in fact have knowledge of your own offering while I was making this post, then you are calling me a liar, and I will not tolerate such accusations.

Once again, you are not my foregoer. PPT offered a timed positive bond, you offered a timed positive bond, I offered a perpetual negative bond.

If you must take credit, it is true that I was somewhat inspired by your recent comments in the BTCST thread predicting a default.

Meni can you create a negative MPEx bond instead? That is, a bond allowing us to short the continued existence of MPEx. I would invest heavily in such a bond

If your defense is "oh but I didn't know cause I don't read the forums or mpex or go on IRC or anything else" that means YOU are the one in the bubble. Good luck with that.

I read the forum plenty, please direct me to a place where you announced your offering prior to my own proposal, preferably in a relevant section.

You may be right that I am missing out on IRC, but it doesn't seem like a very productive medium to me. I can usually be found in #bitcoin-il though.

I don't follow mpex closely, nor do I see a reason why I should.

That's... Interesting, I guess.

https://bitcointalk.org/index.php?topic=76594.msg855299#msg855299

And you can tell the sockpuppet above that provided he manages to get an OTC rating of any weight or otherwise makes a deposit he can easily borrow MPOE shares to sell short on MPEx.

Yeah, I see how that could pass for an announcement. But you did not even mention then that you intended for this to be used as a vehicle for other people to short. All you said is that you would offer a naked issue comparable to PPT as a way for you personally to short.

For all I know, you only added a comment about the possibility to short your asset after I suggested that there is demand for this.

Edit: And by the way, sportsmanship also means not making a scene when your competitors don't offer you free advertising. I know I didn't waltz in to every mining bond thread and demand they pay tribute to PureMining.

I'm really not trying to provoke you or anything, I think the thread has been hijacked enough. I just wish you to be a bit more civil.

So, if, say, pirate decreases rates to 5% per week, the face value of these anti-bonds will still decay at 7% per week?

Yes. See also my edit to my previous answer.

The point is that the decay rate does not need to correspond to pirate's interest rate. In principle, the effective interest rate is (ry)/(1-y), where r is the decay rate and y is the ratio between the face value and the maturity value. In the no-sell variant, the "face value" does not need to be predefined and is de facto determined by the traded price. In this case the price can change to match whatever pirate's interest rate is.

Subscribing.


MPOE-PR,

You are trying to run and business yet your attitude on these forums is a bit, well, shit. I would like to suggest that your reputation on these forums will be a key factor in whether your MPEx venture is successful or not.

As it stands now, your attitude is pretty much dooming you are your business from any real success.

Meni is correct that your offering is nothing like what he has stated in his OP.

Best,
gigavps

So this offering, if does happen, is an indirect statement that you believe pirateat40 will not default, right?

We agree on that, in the sense that what he has stated in his OP is not an offer. However, it purports to (maybe, one day) be what the MPEx offer actually is, hence the contention.

Yes, offering this bond lengthens my Pirate position. But that doesn't mean I can't seek ways to hedge this risk.

Ok, now I know you're just trolling.

As far as I understand it, you are betting that it will take less than 10 weeks for pirate to default. (0.93^10 = 0,483982307)
If it takes longer, you would've been better off keeping your BTC - if it takes shorter, you make a profit.

Sorry, the "you" in my question was Meni :) I just wanted to clarify that I understood the motivations for this offering, as they seem to be different from Mircea's (not that I fully understand his, either).

If Meni invests the proceeds from sale of anti-pirate bonds into pirate, he will come out ahead so long as default doesn't happen in the next 5 or 6 weeks.

If he manages to sell another few thousand PUREMINING shares @0.4 or even higher instead (by buying mining hardware or mining bonds with the anti-pirate income), he might make much more than investing in Pirate... ;)

I have finally figured out what PR stands for.  It is "Pretty Rude".  Am I correct?

Basically yes, but that's not accurate. You need to consider this with respect to a complete model of the default time probability distribution.

If I believe that Pirate has a probability of p to default, and that the time of the event in this case is exponentially distributed with mean m, then the expected amount I will have to pay per 1 BTC face value worth of bonds is

\[ 2p \int_0^{\infty} (1/m)\exp(-t/m)(1-r)^t dt = 2p / (1 - m\ln(1-r)) \]

Mircea's offering is basically just like PPT, but with some tweaked terms, some more precise description of terms, and where they are issued without being backed by actually depositing funds in BTCST (which is relevant only for the issuer, not for investors).

The main difference with Anti-Pirate is that they are exact opposites. PPT are positive, Anti-Pirate is negative. Buying Anti-Pirate can be compared to selling PPT, and vice versa. MPOE-PR has made a big deal in this thread out of the fact that these can be sold, borrowing as necessary.

The issuer of an asset always takes the opposite position of a buyer of an asset; if his desired position is neutral, he will have to seek an alternative means to take the same position as buying the bond. For mining bonds this is generally buying hardware; for PPT this is depositing funds in BTCST; etc.

The 2nd difference is that Anti-Pirate is perpetual while PPT has a set time. As the one who first mentioned the term "perpetuity" in the PureMining thread you can surely appreciate that, but anyway think what would it be like if instead of offering PureMining I would offer PureMining.March, PureMining.April, PureMining.May...

Finally, Anti-Pirate is an original (individually at least, globally until shown otherwise) methodology to provide perpetual negative bonds. Not that the idea is groundbreaking, just a correct application of some concepts to the issue at hand.

EDIT: I'm not sure you can deduce my personal motivation for (considering) offering the bond, since its place in my entire investment portfolio needs to be considered.

I will not comment on whether I did or will invest funds into Pirate. I will say however that availability of funds is not really much of a problem as far as such investment is concerned, only default risk (and possibly, lack of storage demand).

One issue I encountered when I was trying to work through the details of writing CDSes was trust. How do you plan on preventing a pirateat40 sockpuppet (not saying he would create one, but just hypothetically) from buying insurance against himself, thus increasing his own incentive to default.

This is extremely difficult, if not impossible.

We'll find a BTCST-PR poking around on the forum, soon :)

Thats even funnier then when someone said burt=shakaru :)

Come on, with all this respect, at the very least you could use my name...

Is the failure mode Pirate offering such bonds, or buying them?

Assuming he plans to default, by buying bonds he is essentially encouraging me to effectively invest funds into his program. There's some profit to be made here but this doesn't seem catastrophical to me. I doubt anything can be done to prevent this.

If he's issuing bonds, I don't think he has any advantage over anyone else issuing bonds without intending to fulfill his obligations. Obviously whoever is issuing the bonds should be trustworthy.

My words exactly. (imagines self as Pirate) Wow.

Ask anyone who has met me in NYC or Prague (or in Israel for that matter) if I look anything like a pirate. :)

I was asking about pirate posing as someone else and buying these contracts, thus adding to his incentive to default.

I don't really think it'll happen, but given that the people buying these at least have some degree of uncertainty about him, it's conceivable that some people might be worried about it.

What do people think about renaming from Anti-Pirate to Antimatter? Less descriptive, but way cooler. :)

The people buying these bonds will want Pirate to have additional incentive to default.

The "classical" antagonist to a pirate is still a ninja! (http://knowyourmeme.com/memes/pirates-vs-ninjas)

Alternatively you could be the http://en.wikipedia.org/wiki/East_India_Trading_Company (see "Pirates of the Caribbean")... ;)

They will? I assumed they would primarily be used as part of a hedging strategy. I guess it then incentivizes pirate lenders to buy up all the bonds to prevent pirate's sockpuppet account from doing it first, lest he have perverse incentives :)

That's not a likely use case. Every Anti-Pirate bond negates an equivalent pirate investment. People who invest in both will make no returns and will just have to provide collateral and a fee for the privilege of getting nothing.

It's a stretch, but maybe it can be used to move up a Pirate tier, or enable other special Pirate offerings. For example someone who wants to risk only 1500 BTC with Pirate, can deposit 2000 BTC and buy 500 BTC face value worth of anti-pirate bonds. The increased interest rate just might be able to compensate for the costs.

The intended use case is for people who really want to be short on Pirate.

Not a fan, but will consider this.

Fair enough :) Sounds like something Mr. Popescu would really like to have, then ;)

I liked the idea at first.

But now it sounds like Pirate could default, run away with all of the deposited funds and make extra money from the options (held by a collaborator or fake account).

Now I think this is a very bad idea as it encourages default.

The currently intended scale of the offering will be such that the additional incentive, compared to Pirate's existing holdings, is negligible. If Pirate isn't planning to default now, it is highly unlikely that buying this bond will convince him to do so.

But that's not even the main point, there's something much more basic that you're missing. Suppose I want to take a long position of X BTC on Pirate. I can do this by either depositing in his program or by offering X BTC worth of bonds. Assume the worst case that Pirate buys them all. Then this increases his incentive to default by X BTC, and if I deposited in his program I would also have increased his incentive by X BTC. So choosing to offer these bonds has no effect on the incentive to default, and that's assuming the worst case - if people other than Pirate buy bonds, his incentive to default decreases (when compared to the case that I obtained my position by depositing).

What you're really saying is that depositing in Pirate's program is a very bad idea as it encourages default. Which may be true, but has nothing to do with this. This bond allows people to deposit negative amounts which discourages default, unless pirate deposits a negative amount in his own program which makes this neutral.

Let me point out to you, Meni Rosenfeld, that throughout this thread I have been speaking as to facts. You have been speaking as to persons.


Exactly. A very well run scam, benefiting from the naivite of a circlejerk made out of people who misrepresent (especially to themselves) both their skills and their reach. This is in fact a texbook case of how a well run Ponzi goes.


From the everhelpful wikipedia (http://en.wikipedia.org/wiki/Affinity_fraud)


Yes, a negligible initiative to pretend like it's doing what it's not, all the while accomplishing the exact opposite. You should be in politics.

I think you'll find that most of your posts in this thread contain personal attacks, including the first and the latest.

A number of people have suggested that your behavior is unacceptable. There are two possibilities, either we're all wrong and you should stop wasting your time on us, or you're wrong and you should stop wasting our time.

You are no longer welcome in this thread.

Creating assets on GLBSE requires planning. I wrote the OP when I was ready to write the OP, not when I was ready to create the asset. If all goes well it should be a matter of days.

Rest assured that MPOE-PR's objections are not holding me back.

This is another very interesting offer! But one thing doesn't seem quite right...
If you make the buy-back price 200% of face value, there will be no need for people to trust that you will not buy back the bonds just in advance of a default.

Your provision regarding "substantiated suspicion" sounds reasonable, but it won't feel very satisfactory to the few outliers who are convinced the default is about to happen then lose their bonds for 160%. At 200%, no-one can complain.

This makes sense, I'll think about this.

I don't understand your reasoning and would appreciate a better explanation  (I'm not saying you are wrong, just that I'd like to understand your arguments better). 

In my mind, what you are doing is creating a new market for Pirate. Previously he had to rely upon people investing (a decision that he doesn't control), but now he can take action himself (either by an internet proxy/fake identity or an accomplice) and make money off of you.  I guess so long as this is a small amount of money it won't exercise a big influence on his decisions, but I also really don't know what kind of sums either party is dealing with.

Now when you and other people (the pass-through bond for instance) create new markets for Pirate you are creating new inflows that allow the Ponzi scheme to grow larger - this will probably allow it to last longer, get larger, and hurt more people when it collapses.

If I didn't offer the bonds, it is likely that I would have instead invested funds in BTCST. He is "making money off me" due to the fact that I chose to take a long position, but he is not making any more money due to the fact that I obtain this position by offering bonds rather than investing. In fact he will be making less money because he has to pay a fee on top of the face value. All of this is of course under the assumption that he does in fact have malicious intents.

Positive bonds such as PPT.X, on the other hand, do allow more cash to flow into Pirate, but I still believe the effect is small.

This is happening. Get your Anti-Pirate bonds (initially 500 at 1.1 BTC) on Tuesday, 24 April 2012 at 03:45 UTC.

IPO page: https://glbse.com/ipo/26

So the million dollar question seems to be...

Will Bitcoin Savings & Trust default? (http://betsofbitco.in/item?id=349)

Does Pirate really have that much in deposits? ;)

I had a thought about doing this asset in the form of a prediction market (note: betsofbitco.in is not a prediction market), but what I have here is much more inline with the underlying.

I wish it were :( please make us a prediction market!

Nefario said he would add prediction market functionality to GLBSE, and advised against using the current functionality for this (though I have had quite a few ideas how to do the latter). If neither Nefario nor anyone else do this in a timely manner, I will seriously consider becoming involved in a project to create a Bitcoin prediction market platform (both using Bitcoin for payments and being rich in Bitcoin-related predictions).

Looks like 10 bitcoins say no :) Who wants yes?

Maybe you can collaborate with him on that even, I'm not sure if a prediction market is the real main issue on GLBSE right now - if they do some serious work with some HCI people on the interface, they might get more money flowing than adding another complexity to the mix atm. If they release an extensive API soon or allow you to work with them somehow maybe, it could work side by side though. :)

About the bet:
It's not defined how a "default" looks like - even MPOE shares are worded more strictly! :-\

I think there will be plenty of noise if anything remotely close to a default happens, so I doubt we'll have to resort to technicalities in describing it. betsofbitco.in clearly seems to think they have enough information to go on in judging. I wonder if whoever submitted the original statement (OgNasty?) can amend it, though.

+1

EDIT:  It is literally the textbook definition of what a "default" looks like...

Meni, you need to cite your sources.  Who invented shorting?

Joking aside, I was thinking of offering an asset like this.  I even emailed nefario asking if it was OK to offer this kind of asset but he never contacted me back.  I figured since he was going to install some kind of prediction market on GLBSE that my offering would be voided after that, which was my reason for contacting him.  I see a slight problem with your asset but you can find out when I create my own  :P

Clearly there are various ways to bet on or against Pirate. Predictions on the probability of a default in a given timeframe (which sounds like what you were trying to do) are certainly a possibility, but are too artificial. The currently offered Anti-Pirate bond, and the yet-to-exist publicly traded perpetual pass-through bond which pays weekly dividends, are commensurable with the underlying instrument of investing in BTCST.

But if you think there is something wrong with my offering, please do share.

GLBSE prediction market launched (https://bitcointalk.org/index.php?topic=77859.0)

500 bonds are now being offered for 1.1 BTC each.

Asset page: https://glbse.com/asset/view/ANTI-PIRATE

That was fast. But two major problems:

1. "a prediction market for GLBSE events." What's that about? It should be a prediction market for any event, or perhaps any Bitcoin-related event.
2. Apparently this uses Inkling which 'uses an "automated market maker" to control trading.' I don't know if I like this, we should have the possibility to place bids and asks. (Well, at least the algorithms were inspired by Robin Hanson who is pretty cool.)
3. Why is the currency $?

Looks like Nefario's goals with this are completely different from what I had in mind.

Thanks for pointing that out, I totally missed what algorithm it is using.  From the Inkling site:


I replied to one of nefario's posts linking to this paper: A Practical LIquidity-Sensitive Automated Market Maker. (https://encrypted.google.com/url?sa=t&rct=j&q=a%20practical%20liquidity%20sensitive%20automated%20market%20maker&source=web&cd=1&ved=0CCYQFjAA&url=http%3A%2F%2Fwww.cs.cmu.edu%2F~sandholm%2Fliquidity-sensitive%2520market%2520maker.EC10.pdf&ei=OSyWT9yiEoPG2wWPu-iODg&usg=AFQjCNG-Qg6M0YcV5gHDa6OkGPPSD7EGUg)

In the paper it states:


It goes on to state:


I was waiting for the bond buyback feature and the contract changes to come into effect on GLBSE before making my type of insurance bonds.  I was also hesitant because GLBSE was going to make its own speculative market.  The GLBSE speculative market does not look viable and I think I could go with my plans. 

Wow. Completely useless algorithms then.


On the other hand, it looks like one of Nefario's goals is similar to one use case I have for prediction markets.

Here is a link to a quick and easy synopsis to the automated market maker paper that I linked to earlier.

http://www.bayesianinvestor.com/blog/index.php/2010/06/21/an-improved-automated-market-maker/


I was really sad to see that GLBSE put in a pre-made prediction market from some 3rd party.  Not only is it not viable but make some modifications to their code could potentially create vulnerabilities in the system to hacking.  Hopefully something better will come out of this as it is only a test.

stochastic, using Inkling (who I've known since they launched) was a very efficient use of my time, I'm still hacking away on the next update to GLBSE, but this gets the ball rolling for working out what will and won't work and what is useful.

A week has passed since the IPO, and not a single bond was sold, officially making this a spectacular failure.

Judging by the demand so far, handling the bond will not be worth the trouble, and hence I have retracted the ask orders and discontinued the offering indefinitely.

If anyone wishes me to reinstate this offering or a similar one, they are welcome to contact me.

I didn't buy in because I rather have some more calculable risk with fewer income % (mining bonds and shares for example) than betting on something where I have barely insight in how this stuff is run (pirateat40 owns GPUMAX and his "trust" - whatever it's called now). While quite a few things seem to indicate that it is a Ponzi scheme, it could also be that he's just laundering money big time for silkroad and these people are willing to pay these premiums? To make sure I gain something from buying anti-pirate bonds, I'd need to investigate and potentially give an anonymous tip to the police in whatever country he's living in within a few weeks... or he needs to default quickly (unlikely, considering the 2k BTC he gets at least per week from the PPT.X bonds alone).

All this to earn ~50 USD worth of "internet funny money"? Nah...

Hope it's clearer now on why at least I didn't invest as a consideration for people that want to give out similar bonds in the future.

Yes I would have a difficult time investing in a mining operation based on the upkeep alone.

With the costs of individual mining so high its almost hard to understand how popular mining is as it is.

Oh look, nobody really wants to short pirate at all ;D

Where are you, terrytibbs/popescu?

I believe there is still enough momentum to keep the scheme up for a while.

When I first invested in pirate, I figured that I'd get my principal back in interest in just over three months, so anything after that is then risk-free profit.

That dynamic makes pirate hard to short. You may be right about him defaulting, but if you are out with your timing, you could still lose--unless you keep doubling-down as time goes by--but the Ponzi may last longer than you stay solvent.

Thus, the most rational thing to do for someone who thinks Pirate's a scam is to just watch from the sidelines.

A perfect Bayesian agent would have a probability distribution over the time of default. For mere humans this information can be approximately condensed into a single "typical time of default" value.

For a person who believes the typical default time is 9 months (and is ok with supporting whatever Pirate is doing), the expected payout from investing in Pirate outweighs all other factors, and so he should invest at least some amount.

For a person who believes the typical default time is 1 months, the expected payout from investing in Anti-Pirate outweighs all other factors, and so he should invest at least some amount.

For a person who believes the typical default time is 3 months, the expected payout from investing in Pirate is close to zero, and is outweighted on one hand by the variance in investing in Pirate, and by the variance, fee, collateral, and counterparty risk with myself in investing in Anti-Pirate, and so he shouldn't invest in either.

I think the conclusion is there aren't people who have sufficient confidence there will be a default in the 1-2 months timeframe.

I'm not sure what this is a reply to.

It's discontinued...

Dude, you are like 2 weeks late to the party. Fortunately, MPOE-PR seems to have dried up and blown away for the most part.

Doesn't mean there can't still be interesting discussion of it. Or a future reinstatement announcement.

I think they are simply honoring my request not to further comment on this.

I think there's enough interest in this now to reinstate the bond if you've a mind to, Meni.

I would certainly be interested in reinstating this, but I'm just too busy at this particular point in time, and anyway I wanted to design the model more than I wanted to be publicly associated with these affairs. If someone else wants to offer his own bonds after this model I don't mind. If there's demand (which I'm not really sure) maybe I'll do this too.

One thing that could make the bond more attractive is, instead of taking a fee and keeping the raised funds as reserve for bids, keep only a partial on-call reserve, invest the rest in some safe program, and offer the bonds at exactly face value.