Maybe so, but they have an interest in the well-being of Bitcoin. This is true now with the supposed concentration in early adopters, and will remain true in the future - the only ones with a limited ability to mess up a PoS system are those with the least incentive to do so.

We don't know anything about miners other than their Bitcoin address and maybe IP address (which can be concealed with a proxy).

And, whatever you can know in a pure PoW system, you can know in a PoS system. In cunicula's method stakeholders are also miners, and they broadcast blocks just like in PoW. In my method, miners and stakeholders are separate, but stakeholders broadcast signatures just like miners broadcast blocks.

How well did you study the particular PoS proposals that you are criticizing?


If there is a move to PoS (or a different hash function for that matter), it will be gradual so as to not antagonize hashholders.

This isn't the first time we hear about Freicoin, of course. It can be traced as early as Feb 2011, though I haven't heard about it until April that year.

I don't believe in PoS either, or at least, not in that thing which you call PoS and has all these awful problems. Since getting 51% of all bitcoins is harder than getting 51% of all hashrate, it will be harder to perform an attack in any of the proposed PoS systems than in a pure PoW system. Not to mention they have some resilience even for 51% of bitcoins by one party.

I'd tell you about the prediction assets I intend to issue, but why spoil the mystery?

There are multiple ways you can handle it. But as a general rule, for someone to take a short position someone else must take a long position, there's no way around that.

Now that you mention it, thinking about your proposed contract terms, it's not really a prediction market at all, it's more like a bet of the kind you find at betsofbitco.in, where funds are distributed in a somewhat arbitrary way from losers to winners.

Right, that's what happens when I hijack the thread for 2 pages

For what you're doing I think putting a fixed USD or BTC value on the buyback price would be best.

As I explained, this is not fair for the issuer. The best would be a standard buyback price based on market value, but with lower and upper bounds based on extrapolated lifetime earnings. Though if you want it simpler, you can just make it based on extrapolated lifetime earnings, but it's difficult to do it without any distortion.

Right, that's what I said.

This can be tricky, but dividing by what the hashrate was at the beginning of the month would work in most cases. Or you can just go by the geometric mean of the prices, then scale is irrelevant.

In general, when the underlying event can be affected, prediction assets are at risk of manipulation. They are best suited for situations when the underlying cannot be feasibly affected, otherwise you want to directly entangle your instrument with the underlying and its negative.

You could try the following: Issue two bonds/futures, a short and a long, for a price roughly equal to the current index A. At the end of the month, where the index is now B, pay 2A-B for the short bond and B for the long bond. If you sell equal amounts of both bonds, your own position is neutral (you always pay 2A for a pair of bonds) and buying a short bond is equivalent to selling short the basket on margin.

Come on, 3 people in this thread had already explained why "notify" is a different feature than this...

But "100 bonds of each" is on an arbitrary scale.

Let's take this to the extreme. Suppose someone issued a 1 GH/s bond. Each bond would be traded for 200 BTC. Someone holding "100 bonds of each" would have 20,000 BTC worth of this bond, and a few dozen BTC of other bonds. Almost his entire portfolio will be this particular bond, and only the price of this bond would affect whether he wins or loses, without any weight given to the other bonds.

If instead you say "100 BTC worth of each bond" or "100 MH/s of each bond", you'll have a true average with each of the bonds having an effect on the index price.

Adjusting for volume isn't required, especially since you've included only the largest bonds, but consider this - if you included some bond where only 1 MH/s total were issued, its price could go up and down like crazy because there is no liquidity or depth, and this insignificant bond will be the major factor in the index trend. If you weight by volume you make sure only bonds that have a meaningful price will affect the index.

I think (not sure, correct me if I'm wrong) that Sukrim was suggesting your bond design is manipulable. That's not a good thing.

1 MH/s is the value of the bond. It's not zero, and I won't sell it for less than what 1 MH/s is worth for me.

Selling bonds takes time, people shouldn't be expected to put a bid in advance.

The equivalent BTC (or USD) value of the bond decays by its nature, why would I put a USD-denominated lower limit on the buyback price?

The bond's value is the prospect of getting coupons.

I can't buy them back for less than they're worth. If the mining conditions change and the bond value decreases, it means the investors have lost whether I buy them back or not.

Again, the USD value of the bond is changing. If it's 2 USD now doesn't mean it will be 2 USD forever.


I'm feeling we're going in circles, and this is off-topic for this thread anyway...

http://mtgox.com is the largest exchange and you should be able to purchase your bitcoins there.

With traditional bonds, what is called "the face value" isn't how much it was issued for, it's how much it is bought for at the end of the term. The face value doesn't change - if it's $1 then I'll get $1 for it at the end of the term, whether I buy it today or last year (that's why the face value is chosen as a round number). The traded price however constantly changes - the bond can be issued for $0.839, then traded at $0.927541 and then I can find someone on the street and sell it to him for $0.509172.

Same for mining bonds. Instead of "face value is 1 BTC, to be paid on January 12 2014", we have "face value is 1 MH/s to be paid to eternity". The issue price and traded price can vary (and there can be multiple issues at different prices), but the bond always has the same face value. As it happens, if there is a need for a buyback a Bitcoin price must be placed on it, and despite some shortcomings, relying on recently traded price fits the role.

Once again, if a mining bond is issued at 0.4 BTC, it does not still have a "face value" of 0.4 BTC 10 years afterwards.

But you're weighting them arbitrarily. Instead of a mix of all bonds, it basically is just the price of Gigamining.

It's not trivial to find out how many bonds are outstanding. Going by volume is more meaningful, but you have to normalize.

As an alternative to normalizing each bond, multiply the bond values (or take the geometric mean) rather than adding them, that's scale-invariant.

By simply summing the prices, you are giving bonds disproportionate weight.

Some of the bonds represent an amount different than 1 MH/s. The price per MH/s of a 5 MH/s will arbitrarily have 5 times as much weight in affecting the index. So you need to normalize each bond by the hashrate represented.

In addition, you can also consider weighting bonds by their volume.

1. Take a short position on BTC.
2. Destroy Bitcoin with a 51% attack.
3. Profit.

He isn't profiting from the buyback clause. He's profiting from his successful short position on mining, buyback or no buyback.

Despite being completely far-fetched, this is a good point, and I guess in this situation the relevant price would be the last traded price.

But the face value of a mining bond is 1 MH/s. Nobody can place a fixed BTC price on it, this is determined by the market and is constantly changing - if I buyback the bonds 10 years from now I don't want it to be based on the original issue price, but rather on their value at the time.

All that said, I agree it would be best to introduce a deterministic "extrapolated lifetime earnings" metric (which I introduced elsewhere but called it "projected") and assume that the bond value is roughly a constant multiple of it, and base the buyback price on it (with or without consideration to the market price). I'll probably do that if I create a new bond series.

By definition someone should buy. If nobody buys (or purchases an upgrade), the difficulty increase you speak of will not happen, meaning buying would be profitable after all. There's an equilibrium.

Because the determinism of the bond is important. When someone invest in an abstract commodity it shouldn't be affected by the specifics of the issuer's hardware choices or the quality of his mail service.

An upgrade plan would also be manipulable. I can say that I'll upgrade when the equipment arrives, but then keep it a secret for a few days collecting the profits. The first few days are critical.

I want people to buy bonds the next time on the grounds that I do exactly what I stated in the contract, not on the grounds that I offer bonuses on a whim.

Wonderful, I've been waiting for ages for this.

But before I can use it I have to wonder: The watch list starts out empty, right? Is there a way to mark all threads I've posted in as watched? This way I can start using the watchlist instead of "new replies", and add and remove from it as I see fit.

A list of all watched topics would also be good, but not critical.

In case this is what you mean and you're unaware: When replying there's a "Watch this topic" checkbox in additional options, and it can be set to checked by default in the profile settings.

Right. This is exactly the decision faced by someone wanting to purchase mining equipment - he wants his revenue from mining to cover the cost before his equipment depreciates. There's no magical way around it. If he believes it will cover it he invests, if not not. If everyone is afraid to buy equipment the difficulty will drop, increasing the profit for those who do invest. Mining bonds allow to make the same investment, but without the physical hardware purchase and operation. Meanwhile it allows the issuer to do the physical operation, without the risk of the investment. The raised funds go directly towards hardware purchase.

As said this is purely a function of the bond price. The price is determined by the market and it's ok to argue that they're overvalued. If you think they are, you shouldn't invest in them and should consider shorting them.

I think your numbers are a bit off, PureMining is currently the most expensive bond per MH/s.

Not much, and the same applies to anyone who invests in hardware. The one exception is BFL's trade-in program, which is an anomaly not accounted for in the design. It also should be a once in a lifetime event.

The same applies to mining companies too - they raise funds and use it to buy hardware. If the hardware devalues, so does the company.

There is no way for the issuer to profit from the buyback clause. If the price declines to the point where the buyback is cheaper than the original issue, it means the normal obligation of the bond has already decreased. Also, the money was already spent on purchasing hardware to back up the obligation, the issuer doesn't profit from the decrease in mining profitability, the whole point was that he's indifferent to it. The buyback exists only to deal with emergencies, and there must be such a clause - "forever" is a long time.

Then nobody should buy mining hardware. They can go ahead, I'll enjoy mining 7000 BTC per day on my CPU.

And they will use magic to increase the hashrate of their hardware?

The issuer's obligations are to bondholders, not shorters. He has the right to do better than stated in the contract.


Fixed hashrate bonds emulate hardware purchase. An increasing hashrate bond doesn't emulate anything and can't be backed by anything, it's a purely speculative investment not only for investors, but also for the issuer.

Care to explain? If you read the thread were mining bonds were invented (OP and preferably some of the comments), you'll find that a lot of thought has been put into the concept. The real goal is a perpetual hashrate market, but for now bonds are a superior model to companies.

In a nutshell, it allows investors to focus on the value of hashrate, without bothering with the particular technical details of how to obtain it, while shifting risks to those in the best position to evaluate them.

Whether it's "better" for investors or issuers is mostly a matter of the price, and that is determined by the market.

In case you're unaware, any deposit/bond you see with >4% weekly interest rate is a pirate pass through, "Pirate" being pirateat40's Bitcoin Savings and Trust program. They explicitly state that they forward all funds to the program, and do not offer any guarantee in case he defaults. By calling them "legitimate" I mean that they will live up to their end of the deal - pay interest, and return principal on demand, as long as Pirate doesn't default.

What Pirate is doing with the funds is anyone's guess. And trust me, many people have guessed.

As for deposits unrelated to Pirate - they are used for mining, Bitcoin businesses, short-term loans, market arbitrage, and so on. Most are very open about what they're doing.

A GOLD security caters to a specific market - those who think the value of gold is going to increase. A fixed-interest bond needs to compete with others in the same category.