Bitcoin Forum

For anyone interested, mircea_popescu posted some information on stock/bond offerings for his options emporium on his blog (and on IRC) yesterday:

http://polimedia.us/trilema/2012/sa-ne-jucam-de-a-investitiile-n-bitcoini/#comment-78745

The arrangements do seem a little uncommon, so I'd be interested to see what people think of them. I've told him about this post, too, so he'll probably be following as well, although I don't think he has a forum account yet.

If you're wondering about trust, his WOT account is http://bitcoin-otc.com/viewratingdetail.php?nick=mircea_popescu&sign=ANY&type=RECV? and he has a GPG-signed statement from the WOT identity at http://polimedia.us/bitcoin/mpoe_sign.txt

Trustworthy guy.

That's a pretty crazy structure. I'd love to invest, because there's definitely money in it and a great need for a derivatives market (I loved playing on bitoption when it was around). But the risk reward equation for that structure is all out of whack.

For the stocks, you have no way of knowing beforehand how much of the company you are buying and how much you are paying. It seems more like an annuity. I think it should be offered through a bookbuild structure.

The bonds has limited upside and potentially unlimited downside. Usually the stockholders take a loss in full before the bond holders make any loss. In that case, I would invest. As it is, the most I can make is 2%. The most I can lose is 100%.

Actually it says your risk is zero as far as losses:

"Their owner(s) are not responsible for any net loss resulting from MPOE activity, but are entitled to a fraction of the net profit of each month equal to the fraction of total stocks they hold."

Don't buy any champagne in the winter months.

That's for the stocks. Your liability is limited to your initial investment. The problem with the stocks is even if I can value them, there's no way to be able to know what their value will be before the IPO. You can buy and hope not many other people do and it may be worth it. But if 1000 all put in 1000 BTC each, they will still only own 0.1% of the company. I'll wait until after the IPO and see what they go for on the secondary market.

Bonds are usually above stocks in the capital structure. These bonds are not.

???

I agree with your concerns and have also pointed them out to mircea, but he seems set on these terms :) I guess we'll see. Perhaps it would help if we came up with two names for the contracts that aren't stocks and bonds, because these don't necessarily behave like the conventional meanings of the terms.

Interesting service. Seems fairly legitimate, and the guy has reputation. Not to mention it looks like he knows what he's doing- but why are you posting instead of him? Haven't heard of him and his service until today but he seems to be profitable. Either way it looks like he's pulling a lot of steam, so if the BTC community trusts him I guess that's good enough for me.

I think I'm going to have to keep an eye on this, seems like a very good investment.

He doesn't have a forum account and I thought it'd be good to get some discussion going on the forum. You should try convincing him to get on here!

This point seems to be addressed here:
http://polimedia.us/trilema/2012/sa-ne-jucam-de-a-investitiile-n-bitcoini/#comment-78897

Oh, I forgot to say:



Update:

The explanation above shows how the bonds are senior in terms of income, but not in terms of capital.

Maybe I don't understand the month by month accounting system. With the "stocks" having zero nominal value and holding no reserves, the emporium can effectively go bankrupt in any given month and then be recapitalised by the bond holders the next month, but the stock-holders still receive future income.

I have another question, but I'm on otc at the moment, so I'll ask MP directly.

I looked at this site when they first started, I thought it looked terrible (it did, and still does), I didn't know anything about the founder and just assumed it was a scam.

Is it really that popular?

It works. But as you say, it certainly lacks polish, and is slightly manual (must send emails, etc).

MPOE can not go bankrupt. Literally.

This may sound silly on the first read, but once you take into consideration how the capital requirements are calculated it becomes apparent that in order for 100% capital loss the price of BTC needs to go both to infinity and to zero simultaneously.

Otherwise let's see an imaginary example:

MPOE has on the book 1000 Calls @5.0, 1000 Puts @5.0. Allowing that the price minimum for the month was 5.0, the capital requirements for this book are then 2000 BTC. If the price moves to 50$/BTC in this month (+1000%, significantly more than what sunk LIB.X, for instance), then the total owed on the book is 45 / 50 * 1000 = 900 BTC, which comes to a 45% loss if these options contracts were given away for free. If the option contracts were sold on average for half a BTC each then MPOE actually turns a 100 BTC profit at the end of this month, of which 40 BTC goes to the bondholders and 60 BTC to the stock holders.

The entire system is deliberately designed for stability. Not claimed stability but actual, baked in, universally verifiable, mathematically provable stability. The aim is to provide a pillar on which other BTC financials can rest and be built up, and in fact by trading with MPOE you help stabilize the BTC.

There is significant risk involved in dealing with options even for the seasoned and well experienced trader. MPOE talks to the sophisticated investor with a solid understanding of what options are, how they work and what they are intended and useful for, not to the casual user inclined to "gamble" with complex financial instruments. The web interface reflects (at least in the owner's view) this general principle.

That said, it would be trivial for any interested third party to construct a prettier interface on top of the exposed functionality, and even charge users a fee for his services. It is, after all, what brokers do in everyday life. Mr. Popescu is a firm believer in community effort - the ugliness may well be deliberate.

As to your last point: there do seem to be a significant number of scammers floating about, so I can easily understand the "assume everyone's a scammer" attitude, I imagine it works well in a majority of cases. However Mircea Popescu is both well known and well respected in the bitcoin community and beyond, so this'd be one case of the minority.

The page is not terribly well known, moved a few hundred BTC last month (http://polimedia.us/trilema/2012/mpoe-rezultate-februarie-2012/) over ~7k contracts total. It is growing steadily however, and from what I understand that was and remains the plan.

Beauty comes from behind.

Are you saying Santorum is beautiful?

I think perhaps a more accurate way to put it, now that I am understanding it better: Each month, MPOE is very close to trading while insolvent, in that it has no capital reserves and no equity* to cover net losing positions, but it has very understanding bond holders to bail it out each month if things go pear-shaped.

* Assets=liabilities; no retained earnings; current losses borne by bond holders; profits distributed in full to stock holders.

Brendio,

There's nothing to keep bondholders from retaining any portion of their own earnings for the purpose of insuring their capital. They can do this either individually or even as part of a larger cooperative where they all pool a certain % of earnings and then distribute it to cover losses if and when they occur. There is really very little reason for MPOE to implement this forcibly however.

Bondholders in this context are a lot more like a bank dealing in spreads and default swaps than like a corner shop owner buying a 30 year Tbill. Not that there's anything wrong with either, but they're not the same.

I was talking more in accounting terms about MPOE's balance sheet. The NTA at the end of each month is always zero. What stock holders are buying is a right to future earning, but not backed by any hard assets apart from "goodwill".

Bond holders can do what they like, I agree. I am merely trying to understand the logic and functioning of the stocks and bonds with respect to the usual meaning and functioning of the terms. MPOE retaining no equity allows it to function as described and still leave bonds senior to stocks in respect of claims over capital of the company.

Stocks having no nominal value have correspondingly no claim on the capital of MPOE (not that MPOE actually has any capital to begin with).

The idea to retain capital would work in the direction of capital formation within MPOE, which in the traditional approach to companies is the way things go, but MPOE is established as a capital-free venture. It makes little sense to breach this absolute just in order to establish a sort of bond insurance pool, as this isn't the core mission or even close to it.

This.

This is what I have been saying, perhaps a little facetiously by couching it in terms of "bankruptcy" and "insolvency", terms which are not entirely accurate when MPOE does have agreements in place to meet any debt obligations that may arise.

Yeah, ok. The terminology will take a little to catch up with bitcoin transactions in general, I'm sure.
So basically the conclusion is, you have a valid point but it's not really as much related to MPOE itself, moreover it's something that investors (bondholders) will have to address either together or individually.

I think you may have misunderstood what I was meaning by retained earnings. It's an accounting term for a form of equity of an entity. I was not suggesting MPOE should retain equity. My threads have been to reconcile my previous comment:


with the structure of MPOE. If there is no equity in the entity, then there is nothing for the stock holders to lose, and so those next in line, in this case the bond holders, take a haircut should losses occur.

Gotcha.

The problem with capital in the bitcoin world is that...well... Let me explain by example. New mining company starts (https://bitcointalk.org/index.php?topic=8167.0). Some cash is poured in. Some dividends are paid, 3, 5, 10% of the cash. Then the company disappears, two, six, twelve months down the road. While 3, 5, 10% returns are great for a year or less, 9x% losses on capital aren't so great.

It makes sense then to retain as little capital as possible. With mining it's not really possible. With financials apparently it is.

Thank you brendio and MPOE-PR for clarifying the terms of the contracts. Might it pay to update the original announcement to address brendio's questions/points explicitly for the benefit of future readers?

I only have two outstanding questions, really:

For equity investors, the IPO is effectively impossible to price and any investment in it is by nature almost pure, uninformed speculation. I'm not saying that's necessarily a bad thing, but it's hard to justify throwing $500 worth of coins at the IPO knowing that someone else might throw $50000 at it (unlikely, but in principle could happen), ensuring that I only get a minute percentage of the company. As an investor in the IPO, all I really know is that I won't be getting more than 0.1% and won't ever get exactly 0%. I can try to model my expectation of other investors' behavior in the IPO (the $50000 is unlikely given the terms and the fact that others will have the same concerns as I do) to determine what might get me a reasonable chunk of shares for my money, and then evaluate whether I consider the shares I expect to get to be worth the money I throw at them, but that's a lot of unknowns :) I realize that it's hard for Mircea to pick a suitable price for the initial offering of shares, too, and that's why he did things this way, but I'd urge for him to try to make an educated (realistic) guess rather than force us to undergo a complex modeling task to evaluate the IPO.

On the bond front, I'm mostly concerned about the "penalty" of frozen funds if you demand a high interest rate. Mircea justifies this by saying that it creates an incentive for bond-holders to offer "reasonable" interest rates up front, because otherwise their funds are frozen for a month, but again it boils down to predicting other people's behavior. An early adopter might have 100k coins lying around (he might be holding them for the long term) and be willing to lend them all out at the last minute for 0.1% interest. Any of the rest of us offering even a 0.5% monthly rate (which is very low compared to most credit issued in the bitcoin community) would have our funds frozen for a month, and then at the end of the month we'd probably withdraw them and not deal with MPOE bonds again. Then MPOE has a cheap loan and all is well, but it's fully dependent on the whims of the early adopter, who might decide to lend all those coins to pirateat40 a couple of months later.

Again, I see why Mircea used this approach, to incentivize use to offer him reasonable rates, but I think the penalty for mis-priced interest is too high. MPOE might achieve similar incentives with fewer drawbacks by imposing a penalty fee for withdrawing unused bond money early.

Anyway, I'm interested to see how this develops. I would definitely like to get involved, but right now there are too many unknowns for me.

P.S: are there any plans to allow customers to write options, possibly with daily settlement or a similar arrangement? or is the site intended only as a market for Mircea's own options?

Doesn't seem anything has changed or would need updating, but maybe a reference by link might be useful. I'll bring it up with Mr. P.



Depends what assumptions you are working on. If you assume everyone else is an idiot then it makes no sense to invest anything at all. If you assume the other people are clever, well informed individuals then investing 500 into something that sees a hundred times that investment from someone else seems a good bet. Being the top dog in the round might be dubious, but being one of the people who put money in seems hardly a bad idea.

Obviously, it's high risk so not a good place to put your house (and I think Mr. Popescu has already indicated he believes this first round to be oversubscribed already) but it has over bonds the advantage that you only risk once. Think of it as little turtles coming out of their eggs: they rush to the sea. Some make it. Those that made it get to lay eggs someday.



More than hard, it would be plain impossible. How do you value an entity with no tangible capital that you own? You don't, only the market can and only the market should. Anything else is practically speaking fraud.


Two points of importance here: first, that you can see what money flows in and when by looking at the exchange bitcoin address (1JPvucRfu3ZzEvfBUQTJwsxMrZjeTqD6zR) on any of the blockchain explorers, so you can make educated guesses about what's going on. Second, that if in fact someone is willing to offer 100k BTC for 0.1% then in fact that's what the interest rates are, and you've lost at most 0.1% over your capital. In the end nothing prevents you from also offering your capital for 0.1% which has no practical downside (if the needs fill at say 1.7% then everyone gets 1.7% anyway), except of course in the case everyone ends up doing this. But then again, if everyone ends up doing this that's the fair price and so on.



The thing here is that MPOE has been operating and will continue to operate for the foreseeable future with or without investment in the form of bonds from third parties. Thus the only incentive it offers for investing is a purely financial one, there's no social relations being built in this sense you seem to be thinking of. It's a financial, not an emotional venture. If people find the benefits sufficiently attractive they invest, if they find them insufficient they divest. If they get upset on the fork for being too long or too short... well really, that's not a problem the fork can address, a shrink is in order.


There's no practical way to fairly price that fee.


I think that's the situation for most people. Luckily MPOE isn't going anywhere, and so all these unknowns can work themselves out in time I imagine.


There have been plans for this since the beginning, from what I understand. The problem is that it's quite unclear yet how would one go about allowing anonymous underwriting. It sounds like a contradiction in terms, doesn't it? What do you write in that underspot?

Basically it comes down to a clash between anonymity and completeness and so far the former seems to be winning out. This may change, but it's not at all clear how exactly, or when.

Short story: We'd love to, we don't know how.

Fraud? Really? Where did that come in?

I think there are different mechanisms for better allowing the market to price an entity with no tangible capital. It's not fraud for MP to say I'm selling the stocks for x BTC each. This has the problem that if the market thinks x is too high, it won't buy and if x is lower than its perception of value, it will buy. It's a blunt mechanism, but not fraud. Also, presumably, MP wants to ensure that all 0.1 % of stocks sell in each round. The problem with the current mechanism is that if I, as part of the market, somehow plug some assumptions in a model and come up with a valuation for MPOE—say, I think one share is worth 0.73 BTC. I'm willing to buy 80 shares for 0.73 BTC; if it's more than that, I'm not interested—there is no pricing mechanism to ensure that I buy shares if the price is less than 0.73 BTC and don't if it is more than that.

There's no reason why stocks cannot be priced in the same way as the bond interest is. I put in my bid of 80 at 0.73 BTC each. Mr C.O. Pumpkin is willing to pay only 0.3 BTC but has more to spend and puts in an order for 1500 at 0.3 BTC. This process continues and after closing, MP lists the orders in descending order of offer price and then rules a line under or through the lower offer price that completely sells out the offer.

"Here's this thing with no tangible assets that I own and believe you me that it's worth X dollars." What would you call something of that kind?

This for one edge of the problem. Now, on the softer approach, "I sell this, and will not take less than Y", the Y is arbitrary and thus almost certainly mistaken. How would you go about establishing it?


The thing is, if you want to go that way about it you're probably best served trying to get ahold of someone who bought on IPO and buy from them. In other words, you're a 2ndary market buyer, not an underwriter. Nothing wrong with that, but just because you're B rather than A doesn't really make a good case for A not existing.

The alternative process you describe would also work, for sure. It'd be a lot more like a traditional bookbuilding exercise. It'd also carry slightly higher administration costs. Between something like you describe with a minimum of 50-100 BTC buy-in + no guarantee of block fulfillment versus the system actually in place with a 0.1 BTC minimum buy-in + guaranteed block fulfillment MP preferred in the end the latter. Obviously everything is a trade-off, with strong and weak points.

Tangible assets aren't everything. You have IP and you have "brand recognition" within a relevant community, both of which are worth something :)

Indisputably it's worth something. In fact that's exactly what we're trying to find out: how much?

IP would be tangible, but since it's proprietary and like in all finance, a secret closer guarded than the king's crown it might as well be intangible (in fact, ideally it is intangible hehe). Brand recognition is outright an imponderable.

Overall, the discussion could be summarized something like this:
Step 1 : it's unfair that bonds are inferior to stocks in that they take risks when the stocks take no risks.
Step 2 : it's unfair that bonds are valued on a per-btc value whereas stocks are valued on a total pooled investment basis, so a bitcoin of bonds is a bitcoin of bonds but a bitcoin of stocks could be ten or ten million so there's a huge risk associated with stocks.

Well... which is it? Cause both can't be argued at the same time.

I don't know if anyone is saying it's unfair. The terms are set out up front. Buyers can take them or leave. I'm leaving them for now for some of the above stated reasons. That doesn't mean it's unfair, because MP doesn't have to sell anything to me or sell on my preferred terms. When parties fail to agree on terms, they walk away. It doesn't follow that one of the parties was necessarily unfair.

Unfair would be if one party were forced into a deal or if the terms were changed after purchase, which I don't think is going to happen, since MP seems like a trustworthy guy.

If anyone wants to sell their stocks to me for an agreed price, PM me.

What could be unfair with the IPO, and where it is open to abuse is if MP or an associate were to participate in the IPO themselves. The proceeds of sale of IPO shares go to MP, so MP could send a large sum to the purchase address, knowing that those funds are going to him anyway, and it would push the per share price up and mean that third-party buyer receive fewer shares each.

The results of the first round are out (http://polimedia.us/trilema/2012/mpoe-rezultatele-subscriptiei-publice-martie/).

This is true, at least in principle it could be done. Onefixt and others have pointed this out privately, as a theoretical possibility.

Mircea Popescu isn't buying his own stock however sadly there's no practical way to prove or verify this. Also as a theoretical possibility the owner could tomorrow grant himself another billion shares, or decide on a 50% retainment of funds (which would in effect dilute the shares, at least on the basis of dividend outflow) and so on and so forth. The fact that none of these are happening or will happen is in the end a matter of trust.

Ideally as the price of the stock stabilizes the point will lose its relevance. It seems in a sense a self-limiting problem, and possibly the reason why such a small fraction of MPOE opened the stock sales.

This is great.

Maybe I should also point out that we've been hacked a total of zero times since August 5, 2011.

In other news, I've been hit by a car zero times, since 1984 :)

But I don't doubt that MPOE security is good, since it involves manual confirmation of transactions and no wallets hosted on hosted boxes.

Hehehe, so you have splendid car security with a proven track record. Geddit? *track* record.

Anyway, add *no accounts* to that list  :)

An improved UI might attract more buyers (which in turn could attract more sellers).

It's not an exchange bitcoinBull. You get 100% liquidity at the quoted rates.

OK, I see now that you're the sole writer of the options.  And I also see that you're the only who sets the prices.

The spreads are way too large.  I'd prefer to make my own bid to a market, not buy from you at whatever price you set.


You call it an exchange on your site.  And its not 100% liquidity if you refuse orders that are "too large".

Good news: MPOE now allows short selling of options (calls or puts). Covered only.

bitcoinBull, I think it's called an Emporium there, but anyway. The ability of users to offer their own quotes on contracts is being worked upon and will probably be here by Monday. Maybe you give it a spin then.

Short of liquidity...

What do you mean finway?

^ like! But could you explain more? Do you mean writing options? For example, I have 100 bticoins and I write 100 call options at $5.5 and collect the premium, but potentially have to sell my 100 bitcoins if the price increases. How does this work with holding the bitcoins in escrow?

As far as I can tell, no. This means that you can sell options that you've bought from MPOE at prices other than the ones he's willing to buy them back for, and other people can buy yours at your price instead of his. Since he seems to give an infinite supply of options at his price, though, you don't have much flexibility in pricing :)

Well, that's not really short selling then, if you're only covering a long position.

That's exactly how it works, actually. Give this guide (https://bitcointalk.org/index.php?topic=67302.msg782987#msg782987) a look, 1b explains exactly what you're looking for. MPOE itself is the escrow if you're trading them with other participants.


That too, but what he says too.

I may look into this for funding some future software development at least partially.

I announced this a little while ago, I've made a fund on GLBSE for those who wish to invest in MPOE. https://bitcointalk.org/index.php?topic=67535.0

March 2012 Results (http://polimedia.us/trilema/2012/mpoe-rezultate-martie-2012/) :

*******************
Operational results
*******************

Overall 3`587 contracts, of which +1`893 -100 CALL ; +394 -1`200 PUT.

Received : 2`504.45113888 BTC.

Expended : 1`891.81938897 BTC, of which :
     *owed to customers, 1`770.97441517 BTC
     *capital expenses : 50.84497380 BTC (1`893 BTC + 662.02380952 BTC) × 1.99%
     *advertising expenses : 70 BTC

Third parties covering shorts : +501.84210500 BTC (total 501.84210500 BTC).

Profit : 110.78964491 BTC

*******************
Shareholders table
*******************

Total shares : 1`000`000`000, of which :
     1. 12fmA1LuYpXqGzguWmDV7efRAHwrUcxxy8, 1`100
     2. 1LH8pRGWtgVWAw13Tqc8H3iys4mmKYygB3, 330`214
     3. 142Y7SccDv471NirBJoWpsDo9yLQgd92r5, 22`014
     4. 1CMeG8KzxzYRjRQS7BzfsMbW2b2FPf4RHw, 55`035
     5. 1MqrNNoRrtyJiv5HnBNEG2hb3itae7Pdt8, 165`107
     6. 1BvaoNBkNFkaHLUavJFAXRRrnxjqfdJYW6, 88`057
     7. 1GUpLZyMMBR7hig5zxnzfLabMXGay7JmXp, 55`035
     8. 17W4tjwJwPSJBDAA2uav2xuoj8cAocitxV, 110`071
     9. 1JdSigiyLRXiBingciXegfGWAjdzLW1AAH, 173`362
     10. Mircea Popescu, 999`000`005

Total dividends : 110.78964491 BTC (per 1 mn share block : 0.11078964 BTC).

******************
Bondholders table
******************

Total retained capital : 2`555.02380952 BTC, of which
     1. 1HLWcPokYJixh6BsJH9JWa8MzDaGSLGDds, 100.00000888 BTC @ 1.99%
     2. 1NcrEUkRzqQaAEGabZKPTZhArzhJvYNGWh, 100.00000888 BTC @ 1.99%
     3. 1CkEwsGgZ9saNRmr5FnbtYJjnLBdgGpS7J, 100.00000888 BTC @ 1.99%
     4. 1J9AN7LiDNDUfzAwk8D3uBLT5diWHFFCh5, 1000.00000888 BTC @ 1.99%
     5. 17KZZq1Q8dD3no2×9Ww2XqVVq6aw1JB69Q, 50.00000888 BTC @ 1.99%
     6. 1swAzHw1zTWqoi5184VinvUxLWnBskPVW, 1205.02376512 BTC @ 1.99%

To cover : 0 BTC
Loss per BTC : 0.0

Final bondholder list :

     1. 1HLWcPokYJixh6BsJH9JWa8MzDaGSLGDds, 100.00000888 BTC
     2. 1NcrEUkRzqQaAEGabZKPTZhArzhJvYNGWh, 100.00000888 BTC
     3. 1CkEwsGgZ9saNRmr5FnbtYJjnLBdgGpS7J, 100.00000888 BTC
     4. 1J9AN7LiDNDUfzAwk8D3uBLT5diWHFFCh5, 1000.00000888 BTC
     5. 17KZZq1Q8dD3no2×9Ww2XqVVq6aw1JB69Q, 50.00000888 BTC
     6. 1swAzHw1zTWqoi5184VinvUxLWnBskPVW, 2000.00000888 BTC @ 1.99%
     7. Mircea Popescu (creditor of last resort), 2%

**************
Miscellaneous
**************

 4`000`000 shares offered through public subscription through the 6th of April (more info (http://polimedia.us/trilema/2012/sa-ne-jucam-de-a-investitiile-n-bitcoini/#comment-78745)).

As you know, March IPO (1mn shares offered) closed 90.850079910 BTC total investment (http://polimedia.us/trilema/2012/mpoe-rezultatele-subscriptiei-publice-martie/).

April IPO (4mn shares offered) runs until April the 6th (~48 hours left). Currently 97.35175995 BTC subscribed, thus trading at ~73.3% discount so far.

Read all about MPOE and the IPOs (http://polimedia.us/trilema/2012/sa-ne-jucam-de-a-investitiile-n-bitcoini/#comment-78745) and get yours!

Ok, this is pretty huge.

The April results were published (English version here (http://polimedia.us/trilema/2012/mpoe-rezultate-aprilie-2012/#comment-82627)).

The highlights:
* 1500 BTC gross, 1100 BTC net profit this month.
* New limit for bonds, at 5% now. Possibly the best returns for the level of risk.
* MPEx - MPOE merger, delivering a windfall to current shareholders.

Various and sundry other points.

May 2012 Results (http://polimedia.us/trilema/2012/mpoe-rezultate-mai-2012/) :

*******************
Operational results, MPOE
*******************

Overall trade 5`976 contracts, of which +3`056 -0 CALL ; +120 - 2`800 PUT.

Revenue : 317.66278560 BTC, of which :
     *contract sales : 317.66278560 BTC

Expenditure : 473.16436150 BTC, of which :
     *contracts bought : 104.66612200 BTC
     *exercise : 227.05882352 BTC
     *capital expenses : 141.43941598 BTC (2`843.00333640i × 4.975%)

Profit : -155.50157590 BTC

Third parties covering shorts : + 0 BTC - 0 BTC (total 0 BTC).

*******************
Operational results, MPEx
*******************

Overall trade : 28`303.64909712 BTC
Revenue from sales fee : 56.60729819 BTC
Revenue from new accounts : 20 BTC

Profit : 76.60729819 BTC

*******************
Shareholders table
*******************

Total shares : 1`000`000`000, of which :
     1. Mircea Popescu : 983`714`137 shares,
     2. Third parties : 16`285`863 shares.

Total dividend : 76.60729819 BTC.

******************
Bondholders table
******************

Total capital : 2`843.00333640 BTC, of which :
     1. 1HLWcPokYJixh6BsJH9JWa8MzDaGSLGDds, 100.00000888 BTC @ 4.975%
     2. 1NcrEUkRzqQaAEGabZKPTZhArzhJvYNGWh, 100.00000888 BTC @ 4.975%
     3. 1CkEwsGgZ9saNRmr5FnbtYJjnLBdgGpS7J, 100.00000888 BTC @ 4.975%
     4. 1J9AN7LiDNDUfzAwk8D3uBLT5diWHFFCh5, 1000.00000888 BTC @ 4.975%
     5. 17KZZq1Q8dD3no2×9Ww2XqVVq6aw1JB69Q, 50.00000888 BTC @ 4.975%
     6. 1swAzHw1zTWqoi5184VinvUxLWnBskPVW, 1`493.00329200 BTC @ 4.975%

To cover : 155.50157590 BTC
Loss per BTC : 0.05469623

MPBOR valid 25 May - 29 June : 4.975%.

Final bondholder list :

     1. 1HLWcPokYJixh6BsJH9JWa8MzDaGSLGDds, 94.53038499 BTC
     2. 1NcrEUkRzqQaAEGabZKPTZhArzhJvYNGWh, 94.53038499 BTC
     3. 1CkEwsGgZ9saNRmr5FnbtYJjnLBdgGpS7J, 94.53038499 BTC
     4. 1J9AN7LiDNDUfzAwk8D3uBLT5diWHFFCh5, 945.30377439 BTC
     5. 17KZZq1Q8dD3no2×9Ww2XqVVq6aw1JB69Q, 47.26519669 BTC (below minimum, returned to investor)
     6. 1swAzHw1zTWqoi5184VinvUxLWnBskPVW, 1918.33834257 BTC @ 4.975%
     7. Mircea Popescu (last recourse), 5%

******************
Miscellaneous
******************

-----BEGIN PGP SIGNED MESSAGE-----
 Hash: SHA1

Your dividend payment for S.MPOE in total sum of 7660729819 to a notional float of 500000000 has been issued on May 26, 2012, 12:30 am. Feel free to publish this receipt to your shareholders.
 -----BEGIN PGP SIGNATURE-----
 Version: GnuPG v1.4.5 (GNU/Linux)

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 =6OKD
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Just wondering why the dividend was paid on a notional float of 500000000, rather than the 1 billion issued shares?

June 2012 Results (http://polimedia.us/trilema/2012/mpoe-rezultate-iunie-2012/) :

*******************
Operational results, MPOE
*******************

Overall trade 11`109 contracts, of which 3`266 CALL ; 7`843 PUT.

Revenue : 3`036.517555240 BTC, of which :
     *contract sales : 3`035.28351269 BTC
     *contract exercise : 1.23404255 BTC

Expenditure : 1`451.82086411 BTC, of which :
     *contracts bought : 863.81253443 BTC
     *exercise : 409.37082068 BTC
     *capital expenses : 178.63750900 BTC (3`579.91 × 4.99%)

Profit : 1`584.69669113 BTC

*******************
Operational results, MPEx
*******************

Overall trade : 30`072.44838939 BTC
Revenue from sales fee : 60.14489677 BTC
Revenue from new accounts : 80 BTC

Profit : 140.14489677 BTC

*******************
Shareholders table
*******************

Total shares : 1`000`000`000, of which :
     1. Mircea Popescu : 981`651`945 shares,
     2. MPOE.ETF : 4`083`981 shares,
     3. Third parties : 14`264`074 shares.

Total dividend : 1`724.84158790 BTC.

******************
Bondholders table
******************

Total capital : 3`579.91 BTC, of which :
     1. 1HLWcPokYJixh6BsJH9JWa8MzDaGSLGDds, 94.53038499 BTC @ 4.99%
     2. 1NcrEUkRzqQaAEGabZKPTZhArzhJvYNGWh, 94.53038499 BTC @ 4.99%
     3. 1CkEwsGgZ9saNRmr5FnbtYJjnLBdgGpS7J, 94.53038499 BTC @ 4.99%
     4. 1J9AN7LiDNDUfzAwk8D3uBLT5diWHFFCh5, 945.30377439 BTC @ 4.99%
     5. 1swAzHw1zTWqoi5184VinvUxLWnBskPVW, 1918.33834257 BTC @ 4.99%
     6. 1A2hqHVSUERAT3t1yJ7ggYCQccvH6pZGZm, 432.67672807 BTC @ 4.99%

To cover : 0 BTC
Loss per BTC : 0.

MPBOR valid 29 July - 27 July : 4.99%.

Final bondholder list :

     1. 1HLWcPokYJixh6BsJH9JWa8MzDaGSLGDds, 94.53038499 BTC
     2. 1NcrEUkRzqQaAEGabZKPTZhArzhJvYNGWh, 94.53038499 BTC
     3. 1CkEwsGgZ9saNRmr5FnbtYJjnLBdgGpS7J, 94.53038499 BTC
     4. 1J9AN7LiDNDUfzAwk8D3uBLT5diWHFFCh5, 945.30377439 BTC
     5. 1swAzHw1zTWqoi5184VinvUxLWnBskPVW, 1918.33834257 BTC @ 4.975%
     6. 1A2hqHVSUERAT3t1yJ7ggYCQccvH6pZGZm, 432.67672807 BTC @ 4.99%
     7. Mircea Popescu (last recourse), 5%

******************
Miscellaneous
******************
-----BEGIN PGP SIGNED MESSAGE-----
 Hash: SHA1

Your dividend payment for S.MPOE in total sum of 158469669113 to a notional float of 500000000 has been issued on June 30, 2012, 1:11 am. Feel free to publish this receipt to your shareholders.
 -----BEGIN PGP SIGNATURE-----
 Version: GnuPG v1.4.5 (GNU/Linux)

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 =wfYf
 -----END PGP SIGNATURE-----

July 2012 (http://polimedia.us/trilema/2012/mpoe-rezultate-iulie-2012/) Results :

*******************
Operational results, MPOE
*******************

Overall trade 13`608 contracts, of which 5`455 CALL ; 8`153 PUT.

Revenue : 1`990.45529666 BTC, of which :
     *contract sales : 1`965.34657637 BTC
     *contract exercise : 25.10872029 BTC

Expenditure : 1`120.59435595 BTC, of which :
     *contracts bought : 14.74171324 BTC
     *exercise : 975.32207521 BTC
     *capital expenses : 130.53056750 BTC (2`623.73 × 4.975%)

Profit : 869.86094071 BTC

*******************
Operational results, MPEx
*******************

Overall trade : 19`332.34289238 BTC
Revenue from sales fee : 38.66468578 BTC
Revenue from new accounts : 20 BTC

Profit : 58.66468578 BTC
June Report : 140.14489677 BTC

*******************
Shareholders table
*******************

Total shares : 1`000`000`000, of which :
     1. Mircea Popescu : 981`865`443 shares,
     2. MPOE.ETF : 4`073`981 shares,
     3. Third parties : 14`060`576 shares.

Total dividend : 1`068.67052326 BTC.

******************
Bondholders table
******************

Total capital : 2`623.73 BTC, of which :
     1. 1HLWcPokYJixh6BsJH9JWa8MzDaGSLGDds, 94.53038499 BTC @ 4.975%
     2. 1NcrEUkRzqQaAEGabZKPTZhArzhJvYNGWh, 94.53038499 BTC @ 4.975%
     3. 1CkEwsGgZ9saNRmr5FnbtYJjnLBdgGpS7J, 94.53038499 BTC @ 4.975%
     4. 1J9AN7LiDNDUfzAwk8D3uBLT5diWHFFCh5, 945.30377439 BTC @ 4.975%
     5. 1swAzHw1zTWqoi5184VinvUxLWnBskPVW, 1394.83507064 BTC @ 4.975%

To cover : 0 BTC
Loss per BTC : 0.

MPBOR valid 27 July - 31 August : 4.975%.

Final bondholder list :

     1. 1HLWcPokYJixh6BsJH9JWa8MzDaGSLGDds, 94.53038499 BTC
     2. 1NcrEUkRzqQaAEGabZKPTZhArzhJvYNGWh, 94.53038499 BTC
     3. 1CkEwsGgZ9saNRmr5FnbtYJjnLBdgGpS7J, 94.53038499 BTC
     4. 1J9AN7LiDNDUfzAwk8D3uBLT5diWHFFCh5, 945.30377439 BTC
     5. 1swAzHw1zTWqoi5184VinvUxLWnBskPVW, 1918.33834257 BTC @ 4.975%
     6. 1A2hqHVSUERAT3t1yJ7ggYCQccvH6pZGZm, 432.67672807 BTC @ 4.99%
     7. Mircea Popescu (last recourse), 5%

******************
Miscellaneous
******************
I.

-----BEGIN PGP SIGNED MESSAGE-----
 Hash: SHA1

Your dividend payment for S.MPOE in total sum of 53433526163 to a notional float of 500000000 has been issued on July 28, 2012, 1:01 am. Feel free to publish this receipt to your shareholders.
 -----BEGIN PGP SIGNATURE-----
 Version: GnuPG v1.4.5 (GNU/Linux)

iD8DBQFQEzoBkhT8a/G2mSERAt/IAJ4vL+JNQ2XaU+SHEH4Zz+4CZ8txhwCgoxIu
 IoNcfnpt4TxvkWM6hTsxeGc=
 =sj/6
 -----END PGP SIGNATURE-----

II. Beginning this month MPEx no longer pays interest on user deposits.

III. Options were upgraded from 1-10 by .5 to 1-20 by a full dollar. The few owners of fractional options now discontinued were upgraded to the most appropriate denomination (for instance, C055T was reissued as C050 and P055T likewise to P060T).

August 2012 Results (http://polimedia.us/trilema/2012/mpoe-rezultate-august-2012/#comment-88317) :

*******************
Operational results, MPOE
*******************

Overall trade 75`648 contracts, of which -12`312 +7`100 CALL ; -32`472 +23`764 PUT.¹

Revenue : 10`110.90263456 BTC, of which :
     *contract sales : 10`016.30636953 BTC
     *contract exercise : 94.59626503 BTC

Expenditure : 14`651.324164215 BTC, of which :
     *contracts bought : 11`562.32029052 BTC
     *exercise : 2`622.33420727 BTC
     *capital expenses : 466.66966642 BTC (9`333.58 × 4.9999%)

Loss : -4`540.42152965 BTC

*******************
Operational results, MPEx
*******************

Overall trade : 155`832.72262277 BTC, of which :
     *Revenue from sales fee : 309.03038447 BTC (154`515.19223830 BTC total trade volume)
     *Revenue from new accounts : 940 BTC²
     *Revenue from consultancy and other services : 68.50 BTC

Expenditure (CSR) : 10 BTC³

Profit : 1`307.53038447 BTC

*******************
Shareholders table
*******************

Total shares : 1`000`000`000, of which :

1. Mircea Popescu : 980`770`396 shares,
     2. MPOE.ETF : 4`077`552 shares,
     3. Others : 15`152`052 shares.

Total dividend : 1`239.03038447 BTC.

******************
Bondholders table
******************

Total capital : 9`333.58 BTC, of which :
     1. 1HLWcPokYJixh6BsJH9JWa8MzDaGSLGDds, 94.53038499 BTC @ 4.9999%
     2. 1NcrEUkRzqQaAEGabZKPTZhArzhJvYNGWh, 94.53038499 BTC @ 4.9999%
     3. 1CkEwsGgZ9saNRmr5FnbtYJjnLBdgGpS7J, 94.53038499 BTC @ 4.9999%
     4. 1J9AN7LiDNDUfzAwk8D3uBLT5diWHFFCh5, 945.30377439 BTC @ 4.9999%
     5. 1swAzHw1zTWqoi5184VinvUxLWnBskPVW, 1918.33834257 BTC @ 4.9999%
     6. 1Efr7txsbxMu2U5oTnFu4tDHVbVPvRAyBT, 1400.00000888 BTC @ 4.9999%
     7. 1A2hqHVSUERAT3t1yJ7ggYCQccvH6pZGZm, 2900.00000888 BTC @ 4.9999%
     8. 1D7YtrxnyK3ug3Rvp9jX66T8kVzWww9Jr8, 1886.34671031 BTC @ 4.9999%

To cover : 4`540.42152965 BTC
Loss per BTC : 0.48646087.

MPBOR valid 1 through 28 September : 4.9999%.

Final bondholder list :
     1. 1HLWcPokYJixh6BsJH9JWa8MzDaGSLGDds, 48.54505081 BTC
     2. 1NcrEUkRzqQaAEGabZKPTZhArzhJvYNGWh, 48.54505081 BTC
     3. 1CkEwsGgZ9saNRmr5FnbtYJjnLBdgGpS7J, 48.54505081 BTC
     4. 1J9AN7LiDNDUfzAwk8D3uBLT5diWHFFCh5, 485.45046937 BTC
     5. 1swAzHw1zTWqoi5184VinvUxLWnBskPVW, 985.14178622 BTC @ 4.975%
     6. 1A2hqHVSUERAT3t1yJ7ggYCQccvH6pZGZm, 432.67672807 BTC @ 4.99%
     7. 1Efr7txsbxMu2U5oTnFu4tDHVbVPvRAyBT, 718.95477396 BTC @ 4.9999%
     8. 1A2hqHVSUERAT3t1yJ7ggYCQccvH6pZGZm, 1489.26345546 BTC @ 4.9999%
     9. 1D7YtrxnyK3ug3Rvp9jX66T8kVzWww9Jr8, 968.71283151 BTC @ 4.9999%
     10. Mircea Popescu (creditor of last resort)

*******************
Miscellaneous
*******************

I. MPOE suffered what might very well be insider trading.

A good amount of CALLs were bought in July (over 1k), added to which a good amount bought since (over 2k) as well as a good amount of in the money PUTs were sold short (P180T, P190T, P200T, in total over 5k). The CALLs were executed shortly before the closure announcement of Bitcoin Savings and Trust. The PUTs were rebought on the market soon after the announcement, purchases continuing to the reversal of the position (the bot went from +5k to -5k on its book on those three MPSICs). The total losses resulting from these operations are roughly 4`500 BTC, which pretty much cover the month’s poor results.

It’s unclear to me what would be the appropiate steps, either to establish the truth on the matter (the suspicion might in fact be unwarranted) or to guard against similar occurences in the future. It seems to me improbable that the preventing of market manipulation can be accomplished by one Mircea Popescu, or even by any one entity in a market made out of pseudonymous or anonymous participants. There’s the possibly reasonable hope that as the market matures such movements become impossible, especially as the various amateurs with pretention of “knowing finance” who are capable of throwing hundreds of thousands of BTCs into pyramid schemes smarten up or go bankrupt.

While painful, the current month is also replete with records, and rather plainly demonstrates the are the limits of exposure for MPOE financing bonds. In July, a month during which BTC went pretty much linearly from ~6.5 to ~9.5 (+46%) MPOE stayed above water, realising net profits of ~870 BTC. In August, during which BTC went from ~9.5 to ~15.5 (+63%) and then back to ~10.5 (-32%) MPOE suffered losses equal to approximately half its trading capital (as computed by the new rules, introduced back in April), thus confirming the evaluations made at the begining of the year with regards to the worst case scenario.

II. MPEx proved its value this month - it is the first time since it was acquired that it generates larger revenue than MPOE. A significant group of newly registered users (especially significant with regards to their activity, this metric nearly doubling the current month) as well as the sales volume increase brought significant sums to investors.

Considering that the main competitor managed a total volume since its launch (in January) of approximately 250`000 BTC (roughly 30k a month) while MPEx has had transactions well in excess of 150`000 BTC this month alone we can conclude that MPEx currently holds a large majority of the BTC denominated financial instruments market.

It’s to be expected we find ourselves at a point of inflection. The low transaction costs, the significant volume, notable security, speed and availability advantages, various other strong points (free transfers, margin etc) are likely to convince pretty much all investors to open accounts in the coming months. As such we expect increasing revenue for the future.

III. F.PURE.SYNTH is withdrawn due to lack of interest shown by investors. All outstanding shares were rebought, the current float being 0.

IV. In April MPEx announced that it was looking for a market-maker for either options or futures based on difficulty. The third party selected to fulfill this role has offered options according to the specifications laid out then, without interruption until today.

Unfortunately, a string of losing transactions in the current month put that third party in the position of not being able to continue offering these options in the future. All holders have received their due BTC, but starting with September O.HASH will no longer be available on MPEx.

We are open to bringing this or a similar product back to the market, with the caveat that the correct valuation thereof has proven in practice to be more difficult than it seemed in theory.

V. To allow for a fairer pricing of risk, starting in September the limit on bonds interest is lifted (it was 2% at launch and then 5% starting in May).

Mircea Popescu will continue to supplement any capital shortfall, at an interest equal to the last bond but not less than the MPBOR for the previous month.

Due to this modification, all investors are given a two day grace period (until 23:59:59 GMT on the 2nd of September), during which they can withdraw or add new sums which will be considered for the current month (September).

---------

1) Contracts traded between third parties without MPOE's participation reached significant volume this month for the first time (10`628 O.BTCUSD.P190T and 17300 O.BTCUSD.P200N). This means the total number of traded contracts on MPEx during August was a record 103`576.

2) About a third of new registrations this month took place after the announcement of the S.DICE IPO.

3) 5 BTC to the Open Transactions project, 5 BTC to Azelphur to encourage quote stream bot development.
[/list]

Are you sure you are not trading with yourself, porno Mircea?

How can you lose? Aren't you hedging your positions? Spreads are one kilometer wide...

lol

Andrew Vorobyov: http://polimedia.us/trilema/2012/sa-ne-jucam-de-a-investitiile-n-bitcoini/#comment-78745 here's how the thing works.

I did not understand how you manage your option positions from this post... anyway you should look at these pages

http://www.theoptionsguide.com/options-arbitrage.aspx

http://www.probabilityofsuccesstrading.com/?page_id=1235

http://www.probabilityofsuccesstrading.com/?page_id=1230

Could you describe what that breakdown is?

Does that refer to how many MPOE had to be the counterparty for versus both sides being private parties?  Or ... ended in the money, or?

Incidentally, monthly results summarized here:

 - https://docs.google.com/spreadsheet/ccc?key=0AmcTCtjBoRWUdFBCN29xMEtJbEdMOXEyN2pWTllId2c

MPOE bought 7,100 CALL contracts. MPOE sold 12,312 CALL contracts. MPOE bought 23,764 PUT contracts. MPOE sold 32,472 PUT contracts.

Nice spreadsheet thing.

So in the case where I have a CALL that I offer to sell and that gets purchased by another individual trader, does that volume appear in your +/- (bought/sold) numbers?

No, it does not. Of the > 100k contracts traded last month, the MPOE bot was a counterparty for about 75k.

September 2012 Results (http://polimedia.us/trilema/2012/mpoe-rezultate-septembrie-2012/)


*******************
Operational results, MPOE
*******************


Overall trade 83`975 contracts, of which -22`380 +27`041 CALL, -17`973 +16`581 PUT.

Revenue : 17`307.84070878 BTC, of which :
     *contract sales : 11`832.38122042 BTC
     *contract exercise : 5`475.45948836 BTC

Expenditure : 13`022.03561971 BTC, of which :
     *contracts bought : 12`159.78700969 BTC
     *exercise : 356.05882002 BTC
     *capital expenses : 506.18979000 BTC (9`925.29 × 5.1%)

Profit : 4`285.80508907 BTC

*******************
Operational results, MPEx
*******************

Revenue :
     *Revenue from sales fee : 178.76035049 BTC (89`380.17524822 BTC total trade volume)
     *Revenue from new accounts : 330 BTC
     *Revenue from consultancy and other services : 19.39947205 BTC

Expenditure :
CSR : 10 BTCⁱ

Profit : 518.15982254 BTC

*******************
Shareholders table
*******************

Total shares : 1`000`000`000, of which :
     1. Mircea Popescu, 980`693`871 shares,
     2. MPOE.ETF, 1`655`816 shares,
     3. Others, 17`650`313 shares.

Dividend total : 4`872.46491161ⁱⁱ BTC.

******************
Bondholders table
******************

Total capital : 9`925.29 BTC, of which :
     1. 1swAzHw1zTWqoi5184VinvUxLWnBskPVW 4294.81049389 BTC @5.1%
     2. MPCD.x 500 BTC @5.1%
     3. 1D7YtrxnyK3ug3Rvp9jX66T8kVzWww9Jr8 5130.47950611 BTC @5.1%

To cover : 0 BTC
Loss per BTC : 0.

MPBOR valid 29 September through 26 October : 5.1%.

Final bondholder list :
     1. 1swAzHw1zTWqoi5184VinvUxLWnBskPVW 4294.81049389 BTC
     2. MPCD.x 500 BTC
     3. 1D7YtrxnyK3ug3Rvp9jX66T8kVzWww9Jr8 5130.47950611 BTC
     4. Mircea Popescu (creditor of last resort)

i. C Bitcoin client. (https://github.com/MatthewLM/cbitcoin)
ii. 68.5 BTC retained since August.

https://i.imgur.com/F7KMy.png


Chart (Same URL but chart will be updated after each month's results):
 - https://docs.google.com/spreadsheet/oimg?key=0AmcTCtjBoRWUdFBCN29xMEtJbEdMOXEyN2pWTllId2c&oid=2&zx=svkcdxnybxi

Data:
 - https://docs.google.com/spreadsheet/ccc?key=0AmcTCtjBoRWUdFBCN29xMEtJbEdMOXEyN2pWTllId2c

Very nice!

October Results (http://polimedia.us/trilema/2012/mpoe-october-2012-statement/)

Second highest month for CALL options but a slower month for PUTs:

https://i.imgur.com/QowXw.png


Interestingly though, less than twelve hours into this next month (November, 2012 expiration) there were 20,000 PUTS sold:
 - http://polimedia.us/bitcoin/mpex.php


[Edit:

This is good reading for anyone looking at trading CALL and PUT options on MPOE:

Using MPOE - A beginner's guide.
 - http://bitcointalk.org/index.php?topic=67302.0 ]

Part of the problem with this is that mixing together long and short positions results in some ambiguity. The practical difference between someone going long CALL or short PUT is not much, both are long plays on BTC. Conversely short CALL / long PUT are both short plays on BTC.

This isn't the first time better graphs of historical options use were discussed, let me see if I can come up with something. (edit: voila! (http://polimedia.us/trilema/2012/options-consumption-graphs/))

It's not so clear, because you can not see my full position. I can be long BTC at 9 and sell CALL @ 12.

That's for sure.

Wow, so Mircea Popescu made ~$50,000 that month? Not bad!

Mad propz.

I don't think he's selling BTC, but yeah some cool k's there.

Please don't take it as a "troll" comment or anything. I'm TRULY impressed.

November results (http://polimedia.us/trilema/2012/mpoe-november-2012-statement/).

Upon explaining  that mpoe loss  (http://bitcointalk.org/index.php?topic=124441.msg1382601#msg1382601) ... Maybe there's indeed some room for improvement, looks like nothing is going to stop bondholders to increase requested interest and thus they prevent any MPOE profit (to be paid to shareholders). The competition on interest rate is ineffective, as bondholders seems to calculate that they won't get whole interest anyway.
Maybe bondholder with lower asked interest should be rewarded by lower risk (allocate lesser part of loss to him)?

The bond auction actually works as a disaster of commons, because everyone receives the same interest as the highest rate accepted, but each bondholder's chances of making the cut are an inverse function of the interest asked. Thus the selfish play is to ask for 0% and make sure you're always going to be on the top of the list, receiving whatever % the tail manages to negotiate.

heh, i bet MP wouldn't mind too many people playing that strategy.

As a major shareholder I'm sure he wouldn't. But otherwise, I do think the bond system he came up with is a thing of beauty, one of those gems that make me happy to be working for him.

BitFunder launched "retail" passthrough to MPOE bonds: https://bitcointalk.org/index.php?topic=131270.0

May results (http://polimedia.us/trilema/2013/mpoe-may-2013-statement/).

MPOE-PR is a scammer.

Who are you and what are you talking about.