Honestly, the answer is that you need some sort of model built which will show the likely returns from initial investment.  Then you just tweak that as things progress - and the output from that would give a pretty clear answer (hopefully) of what to do each month.

For #2 the question is how long, on average, do we think mining rigs will run nonstop before they pack in and have to be junked.  Because that's the period of time in which they need to have covered their costs for this to have any viability.  Not only is that the case - but there's also only a period of time before they become obsolete/innefectual.  i.e. if new motherboards/graphics cards come out with more GH/s than ours for similar power consumption then we become inefficient.

I'd make a guess at around 2 years covering both of these possibilities.  So, in two years we have:

24 months * 300BTC profit per month = 7200 total BTC profit.

Less the 3500 inital BTC investment (yes it was less but we have to use 3500 to get investors back their capital) and that's an overall profit of 3700 BTC over 2 years.

That's still a pretty good return.  BUT it relies on a few assumptions, mainly that the profitability of mining won't drop.  And that's the real big issue.

And there's also a second issue - which needs proper modelling to work out.  Our investment would be tied up in computers which have a fairly fixed value in US$ but a value in BTC which alters as BTC value varies.  So if BTC rise then the (BTC) value of our investment is falling whilst we'd have been making a gain (in US$) had we just left our BTC in wallets rather than investing.

That's why I'd like to see models for varying exchange rates and difficulties - as without such models it's really hard to work out quickly how, for example, investing in your project would compare to keeping funds sat in BTC if the exchange value of BTC rose over 2 years whilst difficulty rose at a similar rate (such as to produce a similar US$ profit per month - but a lower BTC profit per month).

EDITED to fix simple mathematical errors in number of shares.

Last post from me for now.  Going to do some quick math on profitability/return for investors.  Will be doing it as I type - so don't actually know the results yet

With 35,000 shares that equates to 3,500BTC in capital for the purposes of working out returns to investors.

We can treat all profit as actual profit for simplicity, so 342 BTC profit per month equates to a bit under 10% gross profit per month for investors.  Very nice!

However, that's not the whole story.  As there's two additional things which need to be taken into account:

1.  Equipment is going to fail and need replacing from time to time.
2.  There's only a certain period of time before the computers/cards will totally fail anyway.

Pretty hard to assess either of these - but let's try anyway.

For #1 let's assume 42BTC per month in repair costs - leaving a round 300 BTC profit per month.  You'd have 2,750 BTC worth of computer gear total - so that's only assuming a 1.52% failure-rate of equipment per month or that on average cards etc will last 5 years before breaking.  That's optimistic - but not totally unreasonable as it's not covering case 2.

(TBC - as have display issues editing long posts so wil ldo this in 2 parts).

As a (potential) investor I'm not sure of the logic in this.  In a nutshell if mining became more profitable I'd want ALL profit to go to expansion - whilst if mining became less profitable I'd be more inclined to want less investment and more dividends.  Pretty much the reverse of what you're saying.  Here's why:

The profit made as a % of capital investment is essentially fixed irrespective of scaling.

i.e. if X GH/s makes Y profit per month then 2X GH/s makes 2Y profit per month.

If Y gos on a downwards trend (either by increasing difficulty and/or decreasing BTC value) - and it's been on one for a while - then extrapolation of that graph would indicate that at a certain point it'll head into the area of making a loss at some point in the future (i.e. the cost of electricty + the cost of writing off hardware will exceed the value of produced BTC).

At the point at which new hardware won't be paid off before that point is likely reached then there becomes no point expanding - as it probably won't make a profit any more.  Where that point lies depends upon your cost of power.

Once the point of no profits is reached then doubling, trebling, or multiplying by 100 your hardware won't turn a loss into a profit - it'll just multiply the loss in proportion to the expansion.

And it kind of gets worse - as the real point at which further expansion ceases to be worthwhile is before that.  Specifically, if I have a target ROI% (R) that I want on money then it's reached where buying new hardware won't achieve R+(return of capital less resale value of hardware) before mining becomes unprofitable.

I don't have much info on the trend of mining returns - but I'd definitely want any mining pool proposal to show models based on existing trends and ones either side of the trend before I could seriously consider investing.

I assume you want clarification of what the issue I had was.  So here gos:

Simiplified explanation.

Assume there were 100 shares and you held 51 (51%) but were only entiteld to 20% of dividends (i.e. dividends on 20 shares) - which is what your initial suggestion proposed.

Now you have 10 BTC to give out in dividends.

Usually you'd do a dividend of 10BTC profit here and give 0.1 BTC dividend per share (10BTC profit/100 shares).  But you can't do that as that would short-change investors (as there's only 70 shares actually entitled to dividends - 50 of other people's + 20 of yours).

So you have to declare an amount being paid as dividends of 142.82857142 BTC so that investors get the right dividend each.  And if this is being done through that stock-exchange place then that means you likely have to actually deposit that amount there rather than the 100BTC actual profit to be distributed (depending on how they do dividend payments - e.g. whether you have to have the full payment there or just the amount less what would be due to shares in your own name).

And now records show a total dividend payment of 142.8etc being made - so you have to then edit your accounts to show the 42.etc excess payment to yourself being returned.

All because you allocated yourself shares on which no dividend was due.  Hope that explains it a bit.

You're misunderstanding so many things.  But let's just address this one.

The cost of your proposal is FAR more than the development cost of the bot.

There's two very immediate costs:

1.  The cost of getting all the US$ onto the various exchanges.
2.  The opportunity cost of having all that money sitting around generating no income.

There's some obvious risks as well (which are costs):

1.  The risk one or more exchanges will get hacked/scam your deposits there.  Having millions of US$ given to exchanges definitely has a risk.
2.  The risk that BTC will devalue below your lower threshold leaving you holding the can.

Then there's also another risk:

The risk that BTC will increase significantly in value - meaning you've just lost out on profit you could have had were you holding BTC rather than inactive US$ parked on an exchange.

In essence your scheme relies on a bot network that deliberately makes a loss to almost certainly achieve nothing.  That's because you achieve nothing if either:

1.  Your safeguards are never activated - i.,e. the cash just sits there unused until either it's taken back our or stolen/scamed.
2.  There's a move in BTC value such that it overwhelms your protection - meaning you just cause a tiny blip in the graph direction in return for absorbing a significant loss.

Put simply your proposal is probably unworkable and defiinitely has no real value.  For it to work as you intend BTC would end up as being a currency backed at a fiixed minimum exchange-price by US$.  For it to be meaningful that rate has to be somewhere near the current traded price - meaning a US$ sum of similalr proprortion to the value of all BTC in existence has to be tied up.  You really don't see any problem with that?  Isn't that just turning BTC iinto a US$ e-wallet but with slower transaction processing, a higher barrier to entry and no guarantee that at any point the rug may be pulled away from under it?  With I guess a possible speculative upside - subsidized by those tieing funds up in US$ for no real benefit.

It doesn't need 100% of lenders to claim for you to be out of business.  Just needs a percentage where the 50% refunds exceed your total refunds you have to give.

so if your average loan was 5BTC then you'd be repaying 2.5btc per claim.  With your fee being 0.25BTC that means you make a loss if more than 10% of loans end up in claims.

I'm really not getting the impression you've put too much thought into this.  E.g. things you haven't covered:

1. Your website has no rules on criteria borrowers must meet.
2. You appear to be charging a fixed fee of 0.25.  So if I loan someone 1000 BTC you'll give me back 500 if they steal for a fee of 0.25?  i.e. you're saying there's a 1/2000 chance you'd have to pay out?
3. You've given no statement about or proof of your liquidity.  i.e. if the FIRST loan you insure gets stolen do you even have the BTC to give the insurance payout?
4.  You've not indicated how you decide whether a loan has been stolen.  Do you pay out 1 week after they haven't repaid? 1 month? 1 year?

You seem to have just put up a web-form and then hoped people will send you 0.25BTC with no details provided.  The only people who will take you up on that are scammers.

Thanks for the answers.  But in the above instance I'm really not seeing what investigation you could do.  But let's assume you investigated and both sides had as much evidence as you could reasonably expect.  i.e.:

Buyer had a photograph of an empty box.
Seller had a series of photographs (or even a video) of the goods in the box and then the box with a label on it addressed to the buyer.

You're still no nearer knowing the truth.  And that's why (I'd guess) Paypal just rule in favour of the buyer.  Because in a real situation the seller's never really going to have any evidence beyond their word that they sent the goods.  They can prove they sent something - but not that they sent what was promised.

So you then only really have two options (that I can see):

1.  Rule consistently in favour of one side or the other - i.e. always rule for seller or always rule for buyer.
2.  Rule based on past reputation.

The first is how Paypal pretty much do it.  The second opens up scamming by one side or the other - specifically either:

1.  Sellers can always get away with defrauding buyers who don't have a long history,
2.  Buyers can scam any new seller with impunity.

WHilst it would be nice to assume that people won't try to scam the fact is that they will.  AFter all, if they wouldn't try to scam then there'd be no need for your product in the first place!

Before proposing a solution, maybe you should go back a step and define the following:

What is the problem you are trying to solve?

Then look at your solution and determine:

1.  Does it solve the problem?
2.  What's the cost of that solution?
3.  Is 2 worth the benefits of 1.?

Until you can answer those questions there's no real point looking at the details of implementing your solution as it may either:

1.  Not solve the problem.
2.  Solve a problem that isn't really a problem anyway.
3.  Cost so much to implement (in terms of opportunity cost and risk) that it's not worth doing anyway.

You appear to be proposing either setting a minimum price on BTC (in $) (what your solution would achieve) OR pegging the BTC vs the US$ in a narrow range (what you talk about wanting to achieve).  I'm not seeing how either of those is desirable.

I already discussed your apparent confusion between price and value in the newbie forum - so I'll ignore that for now.  But here's a few questions for you:

What is the benefit of artifically trying to peg the BTC to the US$?
Do you not accept that the BTC should have its own value (and price) rather than being pegged to the US$?
If the US$ falls dramatically vs other fiat currencies is it really your belief that people using those other fiat currencies should also see a fall in the value of their BTC (expressed in their local currency)?  And vice-versa of course.
Are you by any chance someone with a ton of early-mined BTC who would love a minimum sell price set so you could dump all your BTC at a fixed price?

I don't believe the instability of the exchange-value of the BTC is best addressed by trying to price-fix it.  The right solution is for non-speculative use of BTC to increase so that the majority of BTC use (and hence it's perceived value and price) is no longer driven by speculation/hoarding.

The first thing you need to answer is why anyone should trust you in the first place.

Unless there's some really good reason to trust you then anyone using your service (as a lender) is now taking on two risks:

That the borrower will steal their funds.
That YOU will steal their funds.

That's one more risk than they presently have to take.

Then you need to explain what restrictions you'll place on borrowers - after all, you don't want a situation where someone with 2 accounts here can lend from one to the other via you and keep the loaned money plus get a 50% refund from you.  i.e. your system won't work if the lenders can decide who to lend to - as it makes scamming massively easy.

For overdue debts I'd suggest gradually writing their value down - to represent that as the overdue period grows the likelihood of you ever receiving repayment decreases.

I imported the current loans data into Excel and knocked up a quick spreadsheet using the following valuation for overdue debts (just a guesstimate by me - there's not  enough data to be accurate).  I'd say I'm most likely over-valuing them if anything:

Debt 1-7 days overdue - valued at 80% of principal.
8-14 days overdue 60% of principal.
15-30 days overdue 50%
31-90 days overdue 30%
91-180 days overdue 15%
181+ days overdue written off (0% value)

Based on assessment at 28th August 2011 this gives the following:



If we look at how it would be if no more repayments were received by the end of September we get:



Note that in that one the single current loan (i.e. the last one which isn't overdue or settled) would now be in default.  I'm not suggesting that will be the case - just showing how the written down value of outstanding debts would change.

I'd seriously suggest using either a spreadsheet or a database to track loans - ideally store the date on which repayments are made as well (especially for ones repaid after they were due).  Then you can actually start calculating real repayment rates for different time periods once you have a decent sample size.  e.g. if you've had 20 loans that were overdue a week and 3 of them were paid back befre it went 2 weeks late then you know that a debt which is 14 days late is worth about 15% less than one which is a week late.

Yeah - speculation seems the most likely reason for the share price increase.  Which is a shame - as I was hoping there some reason more related to fundamentals.

On the startups not having websites operational yet, it wasn't my intent to suggest that they had scammed oranything: just that, as they aren't operating yet, they can't have generated any profit or demonstrable increase of the value of your investment in them.

Which leaves us with the point you didn't address.  If you made a loss in August (stolen loans being greater than all other profits combined), surely giving out a dividend reduces the asset value of IBB.  Is that wise?  Shouldn't you only be issuing dividends if you've actually made a proft?  Not if you've made a profit if you ignore your losses?

A few things seem strange about this - especially the share distribution.

First off here's what's dodgy about the current proposal:

1.  You don't appear to be gaining anything for your labour.
2.  You're way under-valuing your initial contribution.  Not only are you contributing your existing computer(s), you're also giving the infrastructure and a rent-free office.
3.  You could do a quick pump-and-dump on this and be entirely in accordance with your documented proposal.  i.e. collect investment, get computers, use your 51% to vote to close the company and then pocket 51% of the proceeds of selling assets.
4.  If the 51% is reflected in share allocation then all dividends payment etc will be somewhat opaque as you'd have to dividend off an amount larger than you actually intended to and then give back most of the dividend that went to yourself.

Here's how I think you SHOULD do it:

1.  Give yourself more shares to start with - to reflect you providing the initial infracture and to pay for your ongoing effort in running the business.
2.  You would then receive all dividends on all shares in your name.
3.  All votes would be based on actual holdings of shares.
4.  A vote of 80% in favour would be needed to end the company OR to change the voting rules.

I'd suggest something like you having 10k shares with 25k more sold.  That would mean you could veto any vote requiring an 80% majority.

If you actually want investment then, as a potential investor, I'd be wanting to see spreadsheets showing likely profits based on various difficulty ranges/BTC exchange rates.

Do you intend only to mine BTC or to mine whichever of BTC/forks gives the best return (and presumably convert the others into BTC immediately)?

Site seems down at the moment, so apologies if my question is answered there.

What's the process for dispute resolution?

e.g.

I'm the seller.
Buyer puts funds in your escrow.
I claim I shipped to him.
He says he didn't receive.

Now what?

How about if it's a physical item - I produce a postal receipt for sending it, he claims he received an empty package?
How about if it's for a service - e.g. a piece of artwork - and he says it wasn't of a usable quality?

What are the extra fees for such resolution by you?

As someone more likely to be a seller I'm not really keen if it's going to be like Paypal where essentially if a buyer claims dissatisfactiuon then it's always resolved in their favour.

Doubt IBB has the funds to do the actual arbitraging themselves.  To arbitrage you'd need to keep significant amounts of BTC AND US$ on ALL exchange sites you were intending to trade on.  The profit comes from trading high volumes at a low profit each - and you lose that profit + more if every time you want to do a trade you have to transfer funds between sites.  You even have to keep BTC on each site as well - as the opportunity may have gone if you have to wait to purchase for a BTC transfer to be confirmed.

I like the concept of IBB, but something's puzzling me in the August results.

You show a profit of ~6.5 BTC but have (at a quick count) 29 BTC in loans which are past their repayment date.

No doubt some of those have asked for an extension or explained why they'll be late repaying - but some of them have definitely stolen the money loaned to them.

Doesn't this mean that if you dividend out th 6.5BTC "profit" then in fact the asset value of IBB will have fallen?

So is there any rational reason why IBB shares are up very significantly?  Or is it just blind optimism?

One possibility could, of course, be that the joint ventures are doing well.  But looking at them, of the three:

One hasn't yet launched (but on twitter is saying they expect to shortly).
One has nothing at their listed web-page.
The last one has some kind of private content at their web-page - so presumably isn't operating.

In theory I'd be interesting in investing in IBB - but I can't see how to justify paying in excess of 1000% premium on shares in a venture which, on available evidence, appears to so far be running at a loss (the obviously stolen loans exceed the small declared profit).

Oh - and in the thread you linked re: point 3 you seem to have a fundamental misunderstanding.  You're talking about "price" - whereas I was referring to "value".

To quote your thread:

"As an example, let's say you wanted to stabilize the price (ratio) at 1$:1BTC for all eternity - they would simply place a $21,000,000 bid at 1$ on MtGox.  As a result the price cannot go below 1$."

Your conclusion (price cannot go below $1) is correct - but totally meaningless.  It's VALUE that matters.

And your earlier point that it would stabilize the price at $1:1BTC is just plain wrong.  It would keep the price at or above $1:1.

If everyone else in the world believed bitcoins were worth less than $1 then yes - they'd never trade below $1.  But you'd end up owning every accessible bitcoin with noone willing to buy them back from you: as value requires both a buyer AND a seller (whereas price just needs a seller).  So ultimately you'd achieve the "goal" of bitcoins never falling below $1 - at the cost of you ending up out of pockey by (up to) $21m and holding a wallet full of bitcoins that noone would buy (unless .you dropped your price - but if you did that then you'd not have achieved anything at all).

Value != Price

1.  We're talking about mainstream acceptance.  That's not gonna come if everyone has to:
a) Have an always on computer running VNC or similar on a permanent connection.
b) Have that computer solely used by them - leaving an unencrypted wallet on a running machine used by others wouldn't be smart.
c) Either carry around another device with VNC installed AND internet connectivity or somehow be able to use VNC on other people's machines.

I'm not knocking it as a work-around for some of us - but it's not a mainstream solution.  There ARE mainstream solutions -but what you propose isn't one.

2.  We're in agreement this is an issue - but not one which can be overcome.  To an extent this issue is actually the result of other ones.

3.  Read your thread.  Seems to be suggesting tieing up about 15% of the value of all BTC in existence with zero return - with them only ever being used if BTC totally crashes at which point that US$ could well be significantly devalued.

Plus my point was about stablity - your thread is about guaranteeing some minimum value which would do nothing to encourage stability at higher exchange rates.  Fundamentally you can only prop up a currency's value by taking a loss - I'm gonna go out on a limb here and guess you weren't actually offering to tie up $21m of your own.  Artificial manipulation of bitcoin value by (what would be in effect) some central reserve bank is totally against the whole principles seperating bitcoin from fiat currencies.  The correct way for stability to arrive is by increasing bitcoin trade such that speculation and scams are no longer the main drivers in the market.

4.  I agree in theory.  Right now there's few reasons associated with legitimate businesses to want bitcoins rather than US$ (speculation, trading and Silkroad spring to mind as amongst those few).  For bitcoins to go mainstream there need to be reasons why buying with them is better than with fiat.  There's no real incentive whilst many merchant who take bitcoins are just selling at a prive that's higher than fiat (by the margin they pay to get the BTC straight back into fiat on MtGox).

5.  I agree this isn't much of an issue to you or me - but to the mainstream it's not so obvious why bitcoins can have value when anyone can just make their own similar currency up overnight.

Think he's asking about ixcoin (the money-grabbing fork with pre-mined coins) and you're answering about bitcoin.

Bunch of reasons why it'll struggle for mainstream acceptance (which isn't necessarily to say it'll never get there):

1.  Lack of accessibility.  Any time you want to use it you have to install software and download the whole block-chain.  Thin clients/online wallets may ease this - but going the wallet route just makes it a bit like an amateurish Paypal where you don't get seller protection AND there's a decent chance of the wallet stealing your money.

2.  A (somewhat deserved) reputation for most services being scammers or amateur.  Not a show-stopper and, as more reliable services become available, this will become less of an issue.

3.  Lack of stability in value.  The mainstream doesn't want a currency which has 20%+ swings in value in a day.  This is a bit of a chicken and egg situation - as it becomes more mainstream it'll become more stable.

4.  Difficult to transfer to/from fiat currency without paying hefty margins and/or having lengthy delays.

5.  The perception that anyone can make a currency like bit-coin (see ixcoin etc).  This is a false perception imo (anyone can make a currency but getting it used and having value is nothing like so simple).

Just a few quick thoughts on it.