Bitcoin Forum

The plan is to issue 1 million shares (no additional shares or bonds forever, although splits might happen if/when GLBSE supports it) at 1 BTC each..

Poll is set to show results after 7 days, poll will only run for 7 days.

Contract: https://bitcointalk.org/index.php?topic=77469.msg861305#msg861305
Plan: https://bitcointalk.org/index.php?topic=77469.msg867837#msg867837

I think you ought to be able to do it. And it isn't as expensive and difficult as building a Tier 4 datacenter, since you need no power backup (except maybe generators) and little to no redundancy (except maybe on the internet connection).

What does 1M ($5,000,000) BTC buy and are there ANY intermediate steps you could take besides going for the entire amount in one shot?

Nope. Any step that doesn't involve minimizing the operating cost is a step in the wrong direction. I think this is a shit or get off the pot moment for Bitcoin. Either we can float startups that are small by silicon valley standards, or no one will take Bitcoin seriously.

I honestly think this is the right time for Bitcoin to finally take off. A lot of us, including me, have put a lot of hard work and effort into making Bitcoin, and I think everyone would like to see that hardwork finally pay off.

BTW, the implications are, by this time next week, we could be looking at Slashdot and Hacker News headlines of "Company IPOs with $5m using BTC alone". I imagine BTC prices would double or triple with the news.

I would invest only if your shares were valued in USD at the time of selling the BTC you get from me, not BTC.

This could be done via Bit-pay for example. 1 share = 1 US cent, I send you x BTC and you get 140.98 USD for these BTC. As soon as the amount is confimred by BitPay, I get 14098 shares out of the 500 000 000.

Well if you expect the price to rise a lot then you need to make sure to change the BTC to USD only after that change ... or whole this thing will be inferior compared to any new company coming afterwards.
Consider - you rise 1M BTC - convert to $5M to use for buying all you need - then BTC jumps to $10 - your investment of 1M BTC has value of only 500k BTC. Anyone who starts new company with 500k BTC now gets the same amount of money to start his - but he'll generate the same income - so he would get to double ROI (in BTC) compared to you.

Assuming of course you're finances are in order and this operation will not come at dear cost I would advise yes.

The current price index of the bitcoin has seen a steady increase and hold which indicates a large demand for new bitcoins.

If you mine a significant sum of these and hold on to your margins you may see a further spike in the price of the bitcoin as well as more demand for lending.

You can either trade in the bitcoins for cash, goods, or services or decide to lend them to lend/donate them to supporters for profit or aesthetic.

Count me in old bean. Full disclaimer: I support Vladimir's initiative as well.

If you have to ask, Id say the answer is no.
But dont let me or anyone stop you from starting a mining company and see how far you get.

...which would (as explained above) bring down the value of any asset of the company that is paid in USD or any other "official" currency out there. I still fully support having a 5 million USD company, paid for in BTC if you want to, that does what Diablo (who even wrote his own bitcoin miner!) described in his thread. If I would expect the value of bitcoin to crash, I would vote for having this company in BTC of course, since then you would buy hardware + stuff for 5 million USD that might be worth 5 million BTC if the value drops. If you expect it to rise though, it makes really no sense to spend BTC on shares that will hold assets paid in USD.

Also if you say "well, then buy your stuff at an online store that allows you to pay in BTC!" - that's not useful either until these prices are completely stable and decoupled from the USD. Otherwise it would be even worse, should the BTC price rise.

I am not exactly sure what you're point is because I was advising him to mine and then hold on to his bitcoins in case the price continued to rise or at the very least stayed the same.

To simply dump a large amount of bitcoins into the market would be unwise in any situation because the rapid influx of any currency results in the rapid decline in value.

For the record, no, I wouldn't sell all million at once, that would be insane and suicide. It may take me an entire year to sell it all in the absolute worst case.

Then I have to ask you, if you really think that it is possible for this company to mine even close to >2 million BTC (1 million stays with the company, 1 million = dividend)?

Especially considering:
* Adding hashrate increases difficulty
* block reward halves every 4 years, next time already ~December 2012
* FPGAs can be outperformed by ASICs
* 1KW of solar panels takes ~8-10 m² of roof space. Also I'm not sure if Maine is the perfect place for solar energy anyways... it might be better to invest into a solar farm in New Mexico if you want to feel better about energy consumption. This won't help you in case of a blackout in Maine though.
* many Bitcoiners might not like the idea of giving anyone 1 million BTC. If you had that many coins, crashing Mtgox and doing some great deals there would give you far more BTC than you could ever realistically expect to mine.
* an initial investment is suggested that would cost 10 000 investors 100 BTC each. Do you think GLBSE could even handle the load just from the visitors? There are more practical limitations and also theoretical ones like: there are ~20k hosts connected to the network probably - this would mean every single one of them would need to pay 50 BTC to this venture, just to visualize the size to you.
* GLBSE is highly unregulated, has terms of service that wouldn't stand a chance at most courts and has not been used for anything even remotely that size.

Anyways: Most operations on GLBSE are too small to have currency conversion as a real factor (though on GLBSE 1.0 some people REALLY got stung by that, look up "DISHWARA" or "SIN" when the bitcoin prices crashed and they needed money...), this one would be by far too large to ignore it. Again, Dollar denominated, paid in BTC (via BitPay, MtGox codes, directly, whatever) would be completely fine with me and I really would support Diablo going forward with that. 1 million BTC however is in my opinion doomed to fail, as it won't mine enough BTC to even break even. Ever.

Yes, adding hashrate DOES increase difficulty. In this case, one third.

Block reward halves, but value of BTC potentially increases.

Solar panel roll out would take an acre of land. Maine is not the worst part of the United States for solar. Although, I've been rolling around the idea of seeing if I can privately own a large scale wind turbine. A 5MW turbine generating at least 1.5MW on average would, oh, be about 10 times more power than we need. And I wasn't looking for solar for green reasons, I was looking for solar to be able to mine no matter what BTC is valued at. No power cost means I can mine even when BTC is 0.01.

Yes, many Bitcoiners would probably not trust a nobody. I am not a nobody. I was a very early adopter, and I would like to see Bitcoin succeed.

GLBSE is not the only stock exchange.

And I'm not sure if I want to see investors using USD. It sort of defeats the purpose of building this company in the first place.

Edit: Apparently large turbines like that, total installation cost is about $1m per MW. That really isn't that bad, we only need about 200 kw of constant power and I'd like to be selling power more than buying it to keep operating costs low.

http://www.renewableenergyworld.com/rea/news/article/2006/02/5-mw-wind-turbines-headed-onshore-and-off-43241


Good luck with that in your backyard... ;)
Also wind power stations are one of the noisiest ways to generate electricity. They are as well no "fire and forget" solutions, even a big array of solar panels would peobably keep you on your toes quite a bit. Your power costs would be the costs for obtaining and keeping a license as well as repairs. It might be the case that in total these costs are higher than what you would pay for industrial electricity off the grid.

Using USD:
Either you hold on to BTC as long as possible (as you say, they will rise in value it makes sense to keep them) --> then you don't start mining fast enough.
Or you sell as many BTC as quickly as possible, then you might loose out on conversion profits later on.

By issuing 1 million shares you also more or less guarantee there won't be any way to earn through increased stock price for quite some time - only through dividends. To even get started you project a few hundred thousand dollars are needed, so you'd need to sell quite a bit more shares than the current total volume of all trades so far on GLBSE 2.0 (and probably 1.0 too) just to get an empty hall. You are not nobody, but I haven't seen your current mining operation either... being able to write code or having time to moderate these forums won't make you an expert in keeping FPGAs alive and running.


Can you clearly state the purpose of building this datacenter and why using USD to fund it is defeating it? I actually couldn't really find it from the posts in the other thread.

If you are serious about this why would you build it on the East coast? Build it in Washington state or Oregon where you have access to cheap hydro power. Just because you are located in Maine doesn't mean Maine is the ideal location for your startup.

Thinking about a 1M BTC funded startup is a fun thought exercise but I don't think the market could fund such a thing at this point. I hate to tell you to aim lower but, without sourcing traditional VC capital AND having a solid business plan, $5M USD is a SERIOUS sum of cash. You might have better luck in the $100k USD to $500k USD, prove the concept works and go for a second round of funding. This isn't like you are pitching a web startup in a VC environment with a proven track record of successful exits. Here, any VCs interested in funding a mining operation has a year or two of experience and no previous examples to judge future performance on..

By insisting on BTC for funding, it could very well pump the market up a lot, because then investors would have to invest in BTC in order to invest in this company. The eventual result would be a lot more than $5m, because of the projected market rise. There isn't any reason to cash out right away and build something, it could all be done gradually. Starting with an enclosure (building) and other infrastructure (power, cooling) would take a relatively small portion of the proceeds that needs to be paid in cash, but many other parts could even be bought for BTC instead of converting to USD.

So as the funding comes in, the buildout could continue. If DiabloD3 doesn't raise all 1m BTC right away, that's fine too, the farm would just be smaller.

You could raise 1K, 2K or 5K BTC first to get your hands on real mining first. Then if you are doing well, it could naturally expand magnitudes by magnitudes. The possibility of its finally growth to the 1M BTC scale is also not deniable.

But why do you have to throw out frightening numbers like 1M BTC on the start? Is the idea of "get big immediately or go home" so attractive? Why are incremental plans so bad for you? For successful businesses like Apple, their yearly income's errors are larger than the current whole Bitcoin economy. They did not start with as much as (1MBTC*5$/BTC=5M$) anyway.

By starting small, you will be:

1. More adaptable to technology change.
2. Having more immediate returns to attract larger investments.
3. proving yourself really qualified for managing more and more funds.

And if you insist your current plan, you will not be taken very seriously by some of the potential investors.

People arguing that it would be screwed if bitcoins went up a lot in vas you had bought gear priced in dollars do not seem to have thought of how many shares might have been sold by that time. If there are only ever 1 million shares, and they all sell for only one bitcoin each regardless of how much fiat one bitcoin happens to be selling for on markets at that time, then people who buy shares while bitcoins are cheap should be gaining if bitcoins skyrocket due to having gotten shares cheap compared to people who have to buy bitcoins at much higher fiat prices to buy shares with.

Sure the existing hardware would only be worth as much, or less, in fiat than the early buyers paid for their shares, but they are getting one millionth of whatever the end total will end up being come some hypothetical date when the initial one bitcoin each shares have finally, eventually managed to get sold.

So I do not think it is quite as simple as look how much hardware their initial fiat bought; rather, one would look at how impressive the resulting operation is compared to how much bitcoins themselves are worth.

Admittedly one could consider simply buying and holding bitcoins if one expects them to go up in value, but how much does one expect them to go up in value if no efficiencies-of-scale sized mining operations manage to get started? Might this operation itself enhance the value of coins, resulting in their now appreciating as much if this thing is not done?

-MarkM-

The bitcoin trading price is not influenced by mining - mining is influenced by the bitcoin trading price!

If you hope for later investors to invest 10 USD per share for the same output that you invested 5 USD in earlier, this is not far from one of these pyramid games that were popular on the forums half a year ago. It can by the way even turn upside down - see old GLBSE 1.0 threads, where early investors bought shares @ 1 BTC (@20 USD), the operator didn't sell right away and suddenly had to take loans or dilute shares to even buy another GPU.

Bottom line for my argumentation: The company will spend mostly USD and generate BTC - so it makes sense imho to fund it with USD and get your profits in BTC.

Yes I'm aware maintenance is a large issue. This thing will become a full time job for me until the day I die. I have no problems with this.

And yes, I'm aware, multi-MW turbines are extremely tall, need especial licensing, you have to fight the NIMBY crowds, etc. HOWEVER there ARE wind turbines popping up in Maine here and there. Clearly, some people DO like the idea.


Or I can promise not to dip the value below $5 and split sales across all the USD exchanges by volume.


Assembling the farm and keeping it running is the least of my worries. Any competent rack monkey can do this.

I don't disagree with your analysis on initial cost, however.


Because if everyone buys more BTC to invest in this then BTC prices go up which means its easier to sell the BTC to go invest it.

I am, however, hoping I can just buy from ZTEX and BFL as a one time large purchase directly in BTC. This would solve many problems.

Property in Maine is cheaper, and moving would be yet another expense that I really don't want to tack on. When you only have $5M, and every dime needs to count, then I will avoid it as long as possible. Washington and Oregon also have wetter weather which means I have to invest more in air conditioning (just to condition it, not cool it flat out for about half of the year give or take).

I agree, $5M is a serious sum of cash. However, if I was an investor on this, I wouldn't care if the guy had a track record of successful startups: none of them were denominated in BTC. In fact, we have NO people like that, no one has ever tried this in the BTC community. There are no BTC startup superstars. Someone has to be first.

This.

If I issue multiple sets of assets, then I'm making it harder for early investors to exit, and I'm also not treating both early investors and later investors equally. It WILL cap share price to 1BTC for some time, but once that cap is gone, the share price is free to taxi to the runway and take off.

I don't need all 1M BTC on day one, but I do need it eventually. Buying a building, not dealing with green power until a year or two later (again, to cut down operating costs just in case BTC prices plummet or diff spikes), and putting a single FPGA in it is in no way cost efficient, so obviously there is going to be a minimum funding level before I can do anything of value.

5k is too small to deal with. I wouldn't even consider even starting until the first 100k of the funding rolled in.

Its not that I'm saying go big or go home, but for this to be profitable and worthwhile for the community I have to think of the long term over the short term. Short term thinking is what got the world in trouble over the past 5 years with the banking system and such. I have to plan for every possible outcome, and one of those outcomes involves something happening to make it difficult to profit: even that I must consider a way to keep mining in the face of that.

Its not easy, but I think it can be done. It will just be very expensive up front.

So either you wait for a long time until you have ~800k BTC or you fix the exchange rate with them to ~5 USD per BTC  (they likely won't agree to a higher rate of let's say 10 USD per BTC) for the whole contract and burn through USD value if the price really rises? ??? Somehow I don't get what this should accomplish.

You won't be able to sell an FPGA you bought for 200 BTC for the same amount of BTC later, if BTC prices double. It BTC prices rise, it makes it more and more attactive to buy in USD instead.

Still you didn't mention what you want to accomplish for the community with an operation like this. What is the purpose and vision of this company?

To iterate:
You buy your stuff in USD (or in USD converted to BTC, in the case of FPGAs)? [ ] Yes [ ] No
BTC prices are going to change (potentially a lot)? [ ] Yes [ ] No
Share holders are going to be paid in BTC, not USD or USD converted to BTC? [ ] Yes [ ] No
You ran and managed a mining operation or datacenter all on your own that consumed 10 kW/h or more? [ ] Yes [ ] No

You made the case more eloquently than I could. This is exactly what I've been trying to say.

This is also why I did the bulk of the calculations in USD: most of the community still thinks in fiat. I believe a large scale operation like this can increase the value of Bitcoin, otherwise I wouldn't be trying it to begin with. What people should look at is what the proper balance of "raw compute power", "future proofing", and "difficulty spiking/BTC price dropping".

My plan seems to tackle all three equally, I buy a lot of power efficient raw compute power early on, half of the company profits go to increasing the size of the company (which tackles the future proofing aspect since I can just buy more efficient FPGAs or if ASICs come out, those), and green power drives the operating cost down which makes it harder for a difficulty spike or BTC price drop from wiping us out.

If people think buy and hold is superior to this plan, then by all means, vote no and do what you intend to do. I don't personally think that buy and hold is the best plan available, you can't make value out of nothing.

If you look at small scale operations that do less than 1 thash, then yes, what you said is true. However, adding ~4 thash of mining power when the global rate is only ~10 thash, that will cause the difficulty to spike causing a large number of GPU miners to quit.

This will drive BTC value up (as they revert to buy and hold tactics) and increase the value of BTC.

In addition, the news of someone trying a 1m BTC startup will drive BTC prices up as people start taking Bitcoin seriously.

Also, BTC<->USD is a two way road. People can just convert their USD to BTC just so they can invest. I imagine there will be larger investors doing this just to invest in the new generation of companies that (hopefully) Diablo Mining Company is the first of.

Are you sure about that? Vladimir is already doing that, has been covered by a few major news streams, and I don't see the price shooting up.

I think you misunderstood. If someone handed me 1m BTC today and I tried to sell them all, this would crash the BTC market and we would never recover. If I put a safety margin in (ie, don't convert to USD below $5), then the market doesn't crash.

Buying FPGAs directly in BTC means that I don't have to deal with the inefficiency of converting BTC back to USD. Since BFL and ZTEX's biggest markets are the Bitcoin community, it makes sense to ALSO accept BTC. Its up to them, however.

Yes, I will never be able to sell an FPGA for what I bought it, but not because of BTC value doubling: its because of depreciation. I do not intend on selling FPGAs that still function unless they become a liability (ie, 45nm node size when 12nm is coming out to replace 28nm, or ASIC comes out, or something along these lines). Running hardware until it dies over a 5-10 year period seems to be the most cost effective.

If BTC value doubles, obviously I'm no longer looking at a $5m USD plan, its a $10m USD plan. Likewise, if it plummets, I can adjust accordingly the same way. I am merely trying to find the most efficient and most fail-proof way of getting things done, my plan seems to be able to adjust to the situation the most.

If someone has what they think is a better plan, please, IPO with it. I would like to see it happen.

So, if BTC drops to $4.99 and stays there for a year, you'll never get any USD out and won't ever be able to buy a place to house your hardware.



I don't see how this fits in with the statement above.

My thoughts exactly, also somebody announcing a startup valued at 100 billion USD (still far less that 1/21th of all USD in circulation) will be rather seen as delusional than getting the USD on par with let's say the Euro.

No, you just put a cap on the market for probably 1 month, I understand that.

Yes, but they will rate the price of their FPGAs in USD (or Renminbi or Carrots or whatever they need to pay to their subcontractors...). Either you say at the beginning "I will buy in total 4000 of your FPGAs in BTC and 1 FPGA shall be worth 200 BTC for this deal" or you say "I'll buy FPGAs from you, please tell me the price each time and I pay in bitcoin". In the first case, you have ~5 USD per Bitcoin fixed rate, as you said you could get one of these FPGAs for ~1000 USD too. In the second case, if BTC prices double over time you might get far more than 4000 FPGAs but you bear the risk of price fluctuations.

Depreciation is additional to currency loss, not instead. You could see currency loss as a part of depreciation though.

Vladimir already did. ~2 years ago.

If BTC drops to $4.99 even though I'm holding 1/8th of all Bitcoins, the alternative I suspect would have been much worse.

As for it not fitting, realize what I'm purchasing: a building and hardware to go in it: I can size how much hardware I have depending on how much money I have left. If I have more than a planned, I buy more than I planned, if I have less than I planned then I buy less than I planned. Scaling it over a magnitude more or less mostly works, but if I go down too far I end up with an empty building.

Vladimir isn't trying to launch a $5m company.

Also, I mostly agree with your assessment of the exchange rate of BTC to FPGAs, however that illustrates a much bigger issue than just this: this is why a lot of merchants don't want to accept BTC, because the exchange rate is too volatile. BTC is risk for a merchant that has a low profit margin, thats just the way it is; although I still support ZTEX and BFL doing sales in BTC along with USD.

But yes, if BTC goes up more than I anticipate, I end up with a bigger mining farm. I agree with that assessment 100%.

After you've voted in the poll in the OP, you can head over to the GLBSE prediction market and vote on whether you think this thing will take off:

http://predict.glbse.com/markets/46802

I voted, it said most people think probably. :D

ok, I voted for it, but, a couple thoughts...

have you done any research into what kind of breaks you can get putting up the turbine or solar or whichever way you end up going?

With the big push of our gov't for green, it wouldn't suprise me if the incentives for that would be substantial.

Also, it may be a better idea to just do an initial IPO for just the first round of costs you'd incur, and instead of holding onto the remaining BTC for so long, then do an SPO later on to bring in more funding later.

Could be a gamble either way. Full IPO now, hold onto the excess, and BTC goes up, netting youmore buying power later... or, IPO and later SPO, only to find that the BTC price has gone down instead...

Oh, and one more thing... have you put any thought into where you are going to be trading at yet? Got it down to a few choices? A big part of my decision to invest my meager amount of BTC would be based in a large part, of what exchange is involved too.

Anyways, wish ya lukc, and if you do this, I'll toss in a few BTC out of my 12 total :)

-- Smoov

There are Federal and State rebates for various green power setups for both residential and commercial setups.

http://www.epa.gov/greenpower/pubs/incentives.htm click on Maine

Efficiency Maine (our local program) will pay up to $4000 for qualifying new installations, in addition to loaning at 1% APR up to $35,000 for energy conservation setups (although I doubt that would apply to DMC since we're going as green as possible from the get go), and other program incentives.

There are probably even more grants and other things depending on how this unfolds, however I have not included them in the original plan because they can disappear at any moment or the government can just refuse to pay out citing some badly interpreted rule in the process and it will cost too much to fight them in court.

If I can use them, fine, if I can't, its not a huge loss. Also, a lot of programs ended before 2012 due to budget cuts and other government idiocy, so probably by the time DMC gets sorted out many of these programs will also have ended.

As for BTC prices going up or down, that is just something I'll have to deal with when I get there.

As for which exchange, I don't know. GLBSE is the largest exchange, and this is where I was originally going to IPO, however there is at least two other exchanges that will be opening soon that have also both shown interest in my IPO.

I'm afraid GLBSE just won't be able to handle doubling or tripling its daily volume, and I know the GLBSE owner is subscribed to this thread, so it'd be nice if he chimed in on this ;)

One "green" program that is designed for new installations and not retrofits is LEED certification. I don't know whether they offer incentives of any kind though, or whether it is just a sticker or a plaque saying that you meet the guidelines.

I've updated the plan to further cover green cooling and power generation further.

tl;dr: Reducing operating costs is good, alternate income sources are also good, state and federal incentive programs are good as well.

Have you considered utilizing the heat output for something useful? I realize we're talking about FPGAs, but there still must be some useable heat by-product, especially if you have complete control over your building designs. We're not talking more than a concrete pad (maybe, concrete loses a lot of heat...) and a metal building with specially designed ductwork.

I have been brainstorming phase-change subterranean heating systems for greenhouse, poultry-house and barns using excess heat output from bitcoin mining. For half the cost of one of your proposed buildings, you should be able to incorporate a more sustainable business by raising local food products. Maine is a hotbed of such activity with Eliot Coleman being based there. You may find someone local willing to take over the growing and marketing operations.

You might consider the trifecta that integrated Poultry Aquaponics can bring: Fish, garden produce and chicken products and fertilizer.

Food prices, especially for healthy, locally produced items are only going up correspondingly with demand. Food feeds humans, and good food helps people. With an operation of the size you're talking about, you should have a leg up on everyone.

I want to do exactly this here as I already have the property but no capital, buildings, mining gear, etc. :-)

-p

Thats the funny thing. A geothermal heat pump array is going to lose heat into the field, the more the closer it is to the surface. If I pumped enough heat into it I could theoretically put a green house on top and capture the heat.

Phase-change subterranean heating works by forcing warm air inside the greenhouse under the ground during the day with fans. At night the process is reversed with warm air stored inside the ground keeping the air in the greenhouse a moderate temperature.

You'd only need to pipe fan-blown air from the mining house to the greenhouse floor and let the subterranean Heating Cooling system fans take care of moving it underground. You use drainage tubing buried 4-5 feet in the ground to disperse the air in the soil.

Fans don't use much electricity, are relatively cheap to purchase/replace, and people are already using the non-heated version of this system effectively in cold climates. If you add a "free" heat source on top of it you will be growing year round at full output, guaranteed. It's a market producer's wet dream. ;-)

-p

After the block reward decrease in early December, you will produce 413910 coins a year assuming 1/3 of all GPU miners quit and no other new production than yours come online.  This is 0.4139 BTC per share, assuming 1M shares and full set of 4200 FPGAs.  Half of it will cover operating costs, leaving 0.2 coins for dividend.  At best, if you get this up really quick before block reward decreases, investors will have back what they paid for their shares after five years.  Then block reward halves again and profit, if any, will come really slowly.

And all this changes for the worse if less than 1/3 of current miners quit or other new production comes online.

I can't see how this could possibly be profitable.  The only factor which make your calculations work out to the positive is your assumption of doubling exchange rate.  To take advantage of that it would be safer to just buy coins.

I didn't vote.  It is up to you to decide what you want to do.  I'm just not going to invest in it unless I did the math wrong.

Its not that you did the math wrong, its that your valuation of coins has remained constant. Investing looks much more attractive in inflating fiat currencies, but Bitcoin isn't a fiat currency. What people are investing in here is a very large scale mining farm whos sole purpose is to drive the cost of mining down in a way that benefits everyone going forwards.

Lets say it takes them 5 years to get the investment back counting in BTC (not including any profit made from large scale green power generation exceeding overall power usage), BTC valuation might have doubled or tripled by then, partly driven by DMC. Not only that, they are guaranteeing themselves future profits which they may be unable to get themselves by mining by themselves due to residential power costs and the high cost of FPGA.

In addition, the DMC shares themselves might go up greatly in value if I can swing power generation profits far enough in our favor to make it an important part of the company and not just a way to stave off ever rising power costs (but thats a very long term outlook). Dividends don't solely have to be generated by mining alone if we're already investing heavily in green power.

If the value of the coins go up, then the investors should have just held on to the coins instead of invest in the company.

Also, why would BTC valuation be driven in part by DMC?

One, the news of a $5m Bitcoin startup gracing the front page of every tech and financial news site would be worth its weight in gold; two, for those months that power generation profits exceed total operating cost I have to buy BTC to send them back out as dividends and at least some of that money is going to stay as BTC and not be converted back out; three, the aforementioned news of a $5m Bitcoin startup is going to bring a certain level of legitimacy to Bitcoin and is also going to attract more companies to bring their business here and start supporting it.

I honestly do think that someone investing into DMC is going to end up with a higher profit margin than if someone just bought and held 1m BTC alone. If I didn't think that, I wouldn't have bothered placing the plan in front of the community for their input to begin with.

Ok, those are fair answers to my questions.

Unfortunately there's a big difference between a $5M startup and a startup that's asking for $5M.

Yes, I will not deny this. I am hoping that the entire Bitcoin community will support me in my venture. We're all going to have to band together to get this one done, I think.

After a discussion on #bitcoin-assets I would like to make something clear.

Mining bonds and shares that have a fixed output value DO NOT WORK.

I have seen bonds that pay 1mhash forever. When the hardware fails, the owner has to, essentially, go out and sell more bonds and use that to replace the failed hardware, which ends up leading to a situation that you have zero mining company growth because essentially 100% of the profits are being paid out to bond holders and the only way to grow at all is triggered by hardware failure and new bonds are greatly diluted by old bonds. This is a pyramid scheme.

I've also seen companies that pay 100% company profits out as dividends. I'm going to say the same exact thing, hardware fails, zero company growth, sells new shares for more hardware, but this time, old shares don't dilute new shares, its the opposite, it screws old investors in favor of new ones and thats STILL a pyramid scheme.

These models are unsustainable, and I wish people would quit requesting that I change the contract to fit these models. This is why the contract makes shares have a non-binding voting mechanism, because this is probably the first thing that would be attempted to be voted on.

In addition, due to the perpetual growth model of my plan, dividend output can go up. Yes, thats right, it can go UP. Those figures in the plan? That is calculated for the original generation of hardware only. 0.21 BTC (post December) per share dividend annually means 0.21 BTC also goes to the growth fund. After two or three years, the size of the mining hardware installation can be doubled. And two or three years after that? Doubled again. If after five or six years I've managed to greatly out pace the growth of the network, then we could very easily be looking at 0.42 BTC (post December) per share (which also means people might be buying shares from the first generation of investors for twice what they were originally purchased for).

There is no other company on GLBSE that has a model that can sustain continued growth, every single company will be dead in the water within two or three years.

I think you've ignored the buyback clauses in the existing mining bonds. There's also the whole time value of money business that explains why it can be profitable to sell perpetuities.

Calling these things pyramid schemes and saying they're doomed to fail is not going to make you any friends. And I hate to say it, but if you want to raise money, you need to try to avoid pissing people off.

Oh, don't get me wrong, telling the truth has NEVER made friends in the history of the world. But people have repeatedly attacked my plan without any logical reasons, pointing at the rest of the GLBSE companies and say that they're better structured, and I think I have a right to defend my plan and rationally explain why those companies can never succeed over the long term.

If I'm going be asking for a million BTC, I better be damned sure I have the best possible plan available, and it has to be geared for long term survival.

I don't think I agree with this, the only time GLBSE starts to groan is when there is an IPO selloff, and everyone starts hitting the server trying to snipe each other.

I think volume on GLBSE would have to increase by 50-60x to start having an effect on speed.

Even with things as they currently are without any changes at all we could handle 30x the current volume.

Start small. Get a better idea of maintenance and other costs.  

For wind turbines you need to research the power capacity factor.   Wind power is proportional to the speed cubed, so it is far harder for the typical property owner to use it efficiently than solar is.

The NREL did a survey of most of the United States regarding where the best locations for turbines are.   In Maine they are probably off-shore or on mountain ridges.  Unfortunately I couldn't find it when I looked, but this is a mapping site that I made that uses the data set (that does not include off-shore): http://www.energyjustice.net/t=ora340

redirect the heat to a water heater, or maybe a snow-melt system for the sidewalk/driveway...

hot air popcorn popper? sell the popcorn?

-- Smoov

Yes, I'm aware of how wind power works. However, it is not only off shore, it also includes near shore areas. There is no way you're getting a 10MW on shore turbine, but as I've said, its not like we NEED 10MW. As long as we're tall enough, we're avoiding most of the efficiency problem.

And we are straight into another problem with your calculations.  You keep mixing USD and BTC at rates picked out of thin air.  Everything kan be made looking profitable with enough invented numbers.

To compare buying 1 share at 1 BTC to just keeping the BTC, you need to do all those calculations in BTC.  The price development of BTC will decide if both are profitable.  If you can deliver more BTC back than I pay for the share, your model will be more profitable than just keeping the money.

Continuing investment in new mining technology is a valid point, but it makes the constant difficulty assumption even less valid.  Even the valuation of BTC if you grow to much, because you could pull off a 51% attack.  Even if growth beyond your initial 1/3 of the hashrate would only be stupid unless difficulty increases, because at that point you mainly compete with yourself.  Your share of the blocks will increase slower and slower the higher percentage of the total hashrate you get, and you will push difficulty higher.  Many GPU miners, like me, don't need to mine for profit.  It is enough to get about 2/3 of my power costs back, and it is still the cheapest heating system around.  If price per block and difficulty remains constant, as you assume, GPU mining will never become unprofitable.

Green power isn't always profitable.  Especially in the US where coal is heavily subsidised.

Is this a plan for organizing a 51% attack for profit? If so, sign me up.

Or is there no business model here? If so, why invest in this?

Oh, and some "companies" on GLBSE already put 40-50% of earnings aside to be used for expansion, it's not like they all pay out everything.

Anyways: sturle seems to have gotten my point: I don't care about profits in USD, as long as this company is not profitable in BTC it is NOT profitable at all! Think of a company in Zimbabwe Dollars instead of US Dollars: Even if you started it with 1 million dollars and it now makes Billions per day, the conversion rate eats it all. As you said yourself: You are hoping for press coverage of a 5 million USD Bitcoin startup, not a 1 million BTC Bitcoin startup.

Anyone who invests in this with Bitcoins is (in my opinion) at least not thinking it through. The press you'd get for this (if any) would be probably also in this direction, I doubt many would buy shares if you cannot explain this (other than "Price for BTC in USD will double!!!111"). It might be fine just to get publicity though.

Doing the calculations in BTC is impossible because BTC prices change too quickly. Yes, I'm well aware that collecting 1m BTC may end up with a $3 or $7 million dollar IPO instead because of this, the plan is flexible enough to deal with that. However, until I can buy property and FPGAs in Bitcoins and pay taxes in Bitcoins and go to the corner store and pay with Bitcoins, what you're saying is wishful thinking... I look forward to the day that I can, but Bitcoin isn't there yet.

USD is a factor and we can't ignore that; otherwise we end up with another 10k BTC delivery pizza.


If the global hash rate is 10 thash, that doesn't mean that a 51% attack is 5... it means its ANOTHER 10. And even then, its not guaranteed (ask gmaxwell sometime on the exact numbers, its pretty difficult to reliably perform the attack even with that 10 thash).

That said, yes, I will purposely back off if we get close to 50% because, frankly, its insane and its bad for investors. However, increasing diff to price out most GPU users IS good for investors. Nvidia and Radeon 4xxx have already crossed the points of no return, it is only time for even the most efficient GPU setups to fall behind, even without DMC. Being aggressive for a large scale mining operation isn't a bad thing.

As for GPU mining becoming unprofitable, all you're doing is calculating cost of heating into your total operating cost math. Which, don't get me wrong, thats pretty smart... for the 2-5 months your part of the world calls Winter. The other months you're turning the A/C and/or shutting mining off. That is not something a large scale mining operation should do.

Diff and BTC price are not constant. Given the entire history of Bitcoin, on average, diff is going up quickly and BTC price is not significantly increasing. For DMC, or any mining operation, worst case scenarios must be planned for. Even paying for electricity at industrial rates (2 cents kwh) is a liability.


Its not unprofitable either. For us, we would have two income streams. Green power would be reducing our total operating costs, whatever is left is then sold to the grid: we can't keep it, the overhead of operating a battery array would just be too expensive. The other income stream would be the mining operation itself.

Coal is heavily subsidized because it is expensive to operate. We're in orbit around a gravity fed highly efficient fusion reactor that outputs more power in a second than Humanity has used in its time on Earth. Solar and Wind are the only power generation techniques that are cheap to deploy, cheap to run, and will never run dry.

It would be insane not to take advantage of this any way we can.

No, there is no 51% attack here.

There is a business model, its been linked to from the op post.

Yes, but from what I've seen, most don't. Most of these companies have no fiscal responsibility. Its like watching the Dot Com bubble all over again. I don't want anything to do with that.


Conversion rate doesn't eat the profit, and I'm not sure why you think it would. Lets say, in the far future, the single wind turbine and a few solar panels have turned into a large scale wind farm and solar thermal + graphite storage plant... to issue dividends, Bitcoins would have to be purchased at market prices to pay them out. Ergo, Bitcoin volume increases and the trend of Bitcoin prices turn to a more upward direction than normal.

I am hoping for press coverage, but it is only a perk. It is not required by the plan. It is, however, something I foresee happening as a result of a successful DMC IPO.

So the more successful you get with this, the fewer dividends will be paid, since it becomes more expensive to buy the coins for them. You have to build twice the solar capacity if the price doubles to pay the same dividend. How is this not "eating profits"?!

Also I'm really not convinced that all that "green power" stuff should be in the focus of the company. Either you mine or you produce electricity and maybe even offer housing for FPGAs at low rates instead of buying them yourself. I know from Europe that green electricity is subsidized (you get a fixed rate for selling your green power to the grid for quite a few years guaranteed), no idea about the situation in the US.

Because, for one, DMC does not pay a fixed dividend. It pays 50% of the profits. Green power generation exists to get rid of the largest operation cost mining has: electricity.


Lowering operation costs is the focus of the company. Green power is a way of doing this. Green energy is subsidized in various ways in the US, I detailed this in the 4/27 update to the plan. There is no reason why DMC can't do both mining and green energy, since green energy lowers the operating costs of the company.

So far, I haven't heard any substantial arguments against the plan, other than ones that can be explained away with "we can't predict conversion rate, difficulty rate, etc", and I am OK with that. Where do I invest?

What about:
* poses real risk of centralisation by creating a hash rate for a single person that can compete even with deepbit in the suggested configuration.
* Diablo has not disclosed any previous work experience with either energy generation (a few m² are nice and might get subsidies - but if you start talking about several kWh it gets tricky and expensive) or mining farm administration.
* Investments will be in USD, Shares will be valued in BTC - as soon as BTC prices rise, your investment has gone bad. Profits will be in USD (electricity) and BTC (mining), both sources of income can (and probably will) be squashed by USD<-->BTC conversion rate and Bitcoin's internal difficulty mechanisms.
* To earn back your investment, this "company" has to generate at least 2 million Bitcoins either through mining (gets more and more diffficult --> Moore's Law, reward cut every 4 years) or electricity (valued in USD, paid in BTC --> currency risk). This is NOT realistic from a current point of view.
* It is suggested to use FPGAs - even though these are powerful mining machines, ASICs are potentially faster and save more power. Also: hardware doesn't last forever. Written off for 5 years, it means that they cost ~200 USD a piece per year additionally to electricity costs.
* others (as an example: Vladimir) have more experience, plan more realistically, don't get cought up in dreams about self sustainability with solar power but focus on their job and have already industry partners as well as a registered company (...and are known by their real name!). They also deal in fiat currency mainly, which after all isn't that volatile usually. You'd still get out the same amount of BTC but buying a second share from the IPO will cost roughly the same as the first share.

See points in RED above.

For this argument you conveniently don't assume difficulty to remain constant any more.  You assume your added hashpower to add to the current 10 Thash/s, and not replace it as you argued earlier (otherwise the difficulty would increase, and all your profit calculations are wrong).

If you believe your hashpower will add to the current total hashpower, you must also assume the difficulty to change accordingly.  If you think your haspower will replace existing haspower, making difficulty and total hashpower constant, then 5 Thash/s is enough.

You are constantly changing your basic assumptions to make your numbers look better than they are.  Now I don't think you should start this business because you won't do realistic calculations.
If you assume difficulty to change that much, and still believe in increasing Bitcoin price, buying coins is clearly the best investment.
Speak for yourself.  I need heating all year.  I don't think anyone around here even have A/C.  Mean temperature in mid August is 14 °C.  Maximum temperature last year was 23.1 °C.  Mean temperature in mid February is about 0 °C, so the temperature variation from winter to summer is low for a northern climate.  There isn't much temperature variation during the day either.

＠DiabloD3, I have been drafted a plan which also related about green mining almost at the same time with your plan. My estimated kick-start budget was around 1000 to 1500 btc for a workable prototype which should be a small project compare with yours.

Some individual views: Since investors usually more like to see some physical demonstrations before they invest their money, a prototype or model might be a nice start before a large scale operation. Beside, if choose a right place/country for the full scale operation the differences could be huge for the advantages of their renewable energy policies.

Many possibility and details can be discussed further. I think your plan would be quite promising. The big thing need not to be fast. Time will gradually mature for it.

um... 50% goes to dividends? that seems pretty damned high...

hit a couple/few months of lousy returns and increased expenses (say, for hardware replacement, repairs to the green, etc) and you're in big trouble.

I'd suggest something more like, 10% of profit cash on hand, per period. it would scale over a longer period of time, keeping more of an emergency fund available. If you have a good run with low expenses and low costs, that 10% after about 10 or so months in that condition, would be the equivalent of paying out 100% of that period's profits to dividend, while still keeping the remaining 90% of the cash on hand for emergencies, and next period's dividend cut.

Also, don't make business/financial decisions based on the dividend. The business' sustainability and health comes first, and once it is going and profitable, then, and only then, address the dividend.

I've seen too many companies fail on the net, because they prioritized their dividend, instead of their company. After all. What good is focusing on a dividend when you don't have enough cash on hand left to conduct business?

-- Smoov

rjk pretty much covers it.

However, ASIC are on the table. So are 28nm FPGA if they come out before ASIC do. Just because I can't buy them yet doesn't mean I wont. And if they come out before DMC is finished launching? I buy them as first gen hardware. Its just that, at the moment, those ztex quads are the best bang for our buck. In fact, if they were to make 8 FPGA boards that took nothing but a pci-e 6 for power, that'd be even better.

Also, solid state hardware does last quite awhile. The fans might not last 10 years (although I intend on buying these without the ZTEX HSF and use higher air flow fans plus redundant fan setups so hardware doesn't fry if a fan fails (ie, typical HA enterprise computing overkill)), but I would be very surprised if most of the FPGAs died around the 5 year mark. I have no interest in shutting off hardware that can still mine; combined with green power generation, older hardware can keep mining when it'd be unprofitable for everyone else.

Its not that I dream about self-sustainability, but our largest operating cost is electrical power. Anything that can be done to lower or eliminate that MUST be considered. No one knows if diff will suddenly shoot to 10 times what it is now, or BTC prices drop to 10 times less than they are now. It would be irresponsible of me not to plan for these outcomes even if they are unlikely.

Also, its spelled "caught".

No, thats what a 51% attack is. Its when you're 51% of the global network. It has nothing to do with difficultly. If global hash rate is 10 thash, I need to bring 10 thash online from start to finish to perform 51% attacks. It has nothing to do with profitability, it is a statement on how the attack works.

If it ever gets to the point where DMC can perform one, we stop expanding otherwise it could collapse the Bitcoin network.

Yes, 50% is high, but a lot of potential investors have been demanding 100%, and I have refused to raise it that high.

I agree with a lot of what you're saying, however, and this is what I've been trying to tell people: the survival of the company is more important than profit. As it stands, short term operating costs will be taken out of BOTH dividends and payments into the growth fund. If anything happens that requires not paying dividends that month to keep the company running, then that is what will happen.

I am only interested in the long term survival of the company for the most part. DMC is not a Wall Street bank nor Enron. After the initial build out, the growth fund can be left to grow for a year or more in anticipation for ASIC or unforeseen equipment failure or damage.

Poll is over, 49 for, 64 against. So, we're going to do another vote: https://bitcointalk.org/index.php?topic=78919.0