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Title: Two proposed securities- LNG and SHRT Post by: rxw on August 11, 2012, 08:02:16 PM Hey guys, I had this idea while I was on break at work. I was thinking how to create a way to short mining securities. This doesn't accomplish that exactly, but it's similar. I'm hoping a post here will help gauge interest, and hopefully garner some constructive criticism. Here's the plan:
LNG LNG would be a competitive 1 MH/s security. As I'm writing this, the best deal you can get for 1 MH/s is .1 bitcoins per MH/s. I'm thinking I would offer LNG at .05 bitcoins per MH/s. It would pay dividends weekly. However, there would be some caveats: -LNG expires after 26 dividends, which is 26 weeks, which is about 6 months. A holder of LNG hopes to make more in dividends in those 6 months than the price he bought in at. Returns of 1 MH/s at current difficulty would be .09 bitcoins in dividends over 6 months. The bonds will not be bought back- they will become worthless -There would be a maximum amount of dividends a share could earn, equal to the price of 1 SHRT share at IPO. -Dividends are guaranteed- there is no mining hardware to fail -Investing in SHRT is solely for returns- doesn't help secure the network like a regular mining company SHRT Each SHRT share would fund one LNG share. The price would include a administrative fee to help me cover the cost of IPOing two funds. SHRT would pay exactly 1 dividend in 26 weeks, equal to the IPO price of SHRT plus the IPO price of LNG minus the amt of dividends payed per LNG share. I think a fair price would be .15 bitcoins per share, plus a .005 admin fee, totalling a .155 IPO price. Thoughts? Is 26 weeks too short or too long? (lol) Do the prices seem right? Thank you Title: Re: Two proposed securities- LNG and SHRT Post by: Meni Rosenfeld on August 11, 2012, 08:13:47 PM Yes, that's one of the basic ways to offer mining shorting. The main problem with this is that it doesn't account for the time value of money. There are some fairly safe deposit programs offering 1%-2% per week. An investor in SHRT will have to tie up his funds for 6 months and not get anything for it. Remember also that the amount tied should be pretty high to guarantee that it's sufficient for the difference.
You could reflect the time value in the price, and actual invest the raised funds to complement the profit, but then you run into fuzziness about what is the actual time value. If the time spanned is shorter this becomes less of a problem, but then it's much more of a hassle to use the asset. This is still viable, but not very elegant. The proper way of course is to have a market which allows selling mining bonds on margin. This way you can exactly mirror the bonds, and you can get pretty good leverage (a larger position per money tied up). Title: Re: Two proposed securities- LNG and SHRT Post by: rxw on August 11, 2012, 08:31:25 PM Yes, that's one of the basic ways to offer mining shorting. The main problem with this is that it doesn't account for the time value of money. There are some fairly safe deposit programs offering 1%-2% per week. An investor in SHRT will have to tie up his funds for 6 months and not get anything for it. Remember also that the amount tied should be pretty high to guarantee that it's sufficient for the difference. You could reflect the time value in the price, and actual invest the raised funds to complement the profit, but then you run into fuzziness about what is the actual time value. If the time spanned is shorter this becomes less of a problem, but then it's much more of a hassle to use the asset. This is still viable, but not very elegant. The proper way of course is to have a market which allows selling mining bonds on margin. This way you can exactly mirror the bonds, and you can get pretty good leverage (a larger position per money tied up). Investing the funds seems like it could be a good way to increase their value. It does introduce some risk, which I'd like to keep as low as possible- but I'd also like these to be worthwhile investments. Which programs would you say are "fairly safe"? Ultimately it would be up to investors, I guess 6 months may be too long... I'll have to think about it- Time moves faster in the Bitcoin world :] Title: Re: Two proposed securities- LNG and SHRT Post by: rxw on August 12, 2012, 08:24:16 PM bump- Would anybody else be interested in this?
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