3. ASIC mining proliferation will make Bitcoin much more resilient to 51% attacks and much more secure overall. A few years from now it likely that most governments will not be able to mount a successful computational attack on Bitcoin and before long even the most powerful nations will not have such capability either. Thanks to mass proliferation of various hardware incorporating Bitcoin mining ASIC's.
I agree with all your comments but this one. Now if the government wants to launch a 51% attack, they buy GPUs or FPGAs, and in the future they just buy ASICs. The difference lies between how much the government wants to spend and how much the rest of the miners want to. The technology is irrelevant. |
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Paying a multiple of the dividend makes it a bit.. unnatural. I want to be short most mining bonds, but I'd actually like to lend shares if I could get 2x the dividend.
Weekly or monthly interest plus the dividend seems good to me. I've made two deals with terms like that.
Main thread changed to include the choice of paying weekly interest plus the dividend. The weekly interest is below 1%, being less than the typical interest rate in the lending forum. |
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Update
As you could see, we have a very unconventional calculation of dividends, therefore we are still paying dividends when NAV decreases. However, in the current GLBSE open market, NAV is less meaningful than the real-world stock market, since it's market is very thin and none of the closing price, the 24h price and the 5d price is appropriate for calculating the accurate NAV. Therefore we will stick to our dividend calculation method for at least a while.
For anyone who is concerned about our NAV shrinking, we are now considering loaning shares which are losing value out for shorting and gain extra interests. Hopefully it will neutralize the bear market of mining bonds. We already raised a motion. Please vote.
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Weekly Financial Disclosure
Time: 12:17 PM, Beijing time
Date: June 13, 2012
Funds of Last Week: 334.171BTC
Number of Total Shares in Circulation: 5000
Assets:
BitBond
Original: 401shares 243.808BTC
Bought in: 0shares 0.000BTC
Average Holding Price: 0.608BTC
Sold: 401shares 244.971BTC
Average Selling Price: 0.611BTC
Holding: 401+0-401=0shares 0.000BTC
Net Gain: 244.971-243.808=1.163BTC
Dividends Paid: 1.609BTC
JLP-BMD
Original: 1539shares 386.289BTC
Bought in: 30shares 7.510BTC
Average Holding Price: (386.289+7.510)/(1539+30)=0.251BTC
Sold: 0shares 0.000BTC
Average Selling Price: N/A
Holding: 1539+30-0=1569shares 393.819BTC
Net Gain: 0.000BTC
Dividends Paid: 0.000BTC
YABMC
Original: 1105shares 314.925BTC
Bought in: 0shares 0.000BTC
Average Holding Price: 0.285BTC
Sold: 0shares 0.000BTC
Average Selling Price: N/A
Holding: 1105+0-0=1105shares 314.925BTC
Net Gain: 0.000BTC
Dividends Paid: 4.905BTC
PIMP
Original: 300shares 75.000BTC
Bought in: 500shares 110.000BTC
Average Holding Price: (75.000+110.000)/(300+500)=0.231BTC
Sold: 1shares 0.250BTC
Average Selling Price: 0.250BTC
Holding: 300+500-1=799shares 184.569BTC
Net Gain: (0.250-0.231)*1=0.019BTC
Dividends Paid: 1.329BTC
MOVETO.FUND
Original: 0shares 0.000BTC
Bought in: 150shares 150.000BTC
Average Holding Price: (0.000+150.000)/(0+150)=1.000BTC
Sold: 0shares 0.000BTC
Average Selling Price: N/A
Holding: 0+150-0=150shares 150.000BTC
Net Gain: 0.000BTC
Dividends Paid: 0.000BTC
GIGAMINING
Original: 0shares 0.000BTC
Bought in: 250shares 318.750BTC
Average Holding Price: (0.000+318.750)/(0+250)=1.275BTC
Sold: 250shares 337.751BTC
Average Selling Price: 1.351BTC
Holding: 0+250-250=0shares 0.000BTC
Net Gain: 337.751-318.750=19.001BTC
Dividends Paid: 0.000BTC
Holding Funds=
334.171-0.000+244.971+1.609-7.510+0.000+0.000-0.000+0.000+4.905-110.000+0.250+1.329-150.000+0.000+0.000-
318.750+337.751=338.726BTC
Total Net Gain=
1.163+1.609+0.000+0.000+0.000+4.905+0.019+1.329+0.000+0.000+19.001+0.000=28.026BTC
Calculated Dividends: 28.026*35%=9.809BTC
Usable Funds: 338.726-9.809=328.917BTC
Actual Dividends: 9.809BTC
NAV: 328.917+1569*0.248+1105*0.265+799*0.248+150*1.000=1359.006BTC
Weekly NAV Growth: (1359.006-1411.005)/1411.005=-3.685%
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3rd Payment
Calculation time: June 13, 04:18:48 forum time
Number of difficulty change: 1
Number of block reward change: 0
Time interval:
Starting from: June 6, 05:45:13
Ending at: June 7, 19:51:04
Total time: 137151s
Difficulty: 1,591,074.96
Starting from: June 7, 19:51:04
Ending at: June 13, 04:18:48
Total time: 462464s
Difficulty: 1,583,177.85
Hashrate of this week: 1.01788MH/s
coupon/share = (1.01788*10^6)/(2^32)*(137151*50/1591074.96+462464*50/1583177.85)=0.0044829
Number of Shares: 6109
Total Payment: 27.3860361
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Update
A motion has been raised to ask our shareholders if they allow us to make loans of mining bonds and provide the service for people who want to short mining bonds.
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It seems that the ASIC-related news and the flood of newly issued mining bonds make the demands for shorting mining bonds higher and higher. Here we provide some draft proposals as a broker. They are just very preliminary drafts, and are about to change.
Contract A: If you are a trustworthy forum member
We provide these mining bonds for borrowing (updated when our asset changes)
(to be filled)
Interest
Whenever the bond issuers of the corresponding bonds you borrow pay coupons, you should pay us 1.5x-2x (depending on specific contracts) of the coupons within 24 hours or 1x of the coupons within 24 hours plus 0.002BTC per MH/s per week.
Repaying
You just need to repay us the same amount of MH/s. You could choose the bonds below to repay us, they don't have to be exactly the same as what you have borrowed.
GIGAMINING
BITBOND
YABMC
(extending)
If one or several of the bond issuers call back the bonds, you could choose to repay us the BTC equal to the price they use to recall the corresponding amount of MH/s.
Transferring Fee of GLBSE
We cover it.
Contract B: If you are relatively new to the forum
1. If you want to short N MH/s of mining bonds, deposit 0.25*N BTC in the Bitcoin address we give you.
2. After t days, You could use N MH/s of real mining bonds to trade
0.5*N*(1-0.4%)^t BTC from us. The mining bonds should also be listed in the repaying section in Contract A.
3. We also cover the transferring fee of GLBSE.
To μ shareholders
We will raise a motion to request your allowance of us to do mining bonds shorting brokerage.
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And you can confirm that, if you have enough money (like a million dollars, or so) you can turn any FPGA application into a silicon - which takes what... about a month of time?
And then you can manufacture your chips in millions, for less than a dollar each...
Right?
Yes. ASIC consumes a lot of initial capital, but the cost of mass production is negligible. So the question is when will the Bitcoin economy be large enough for people to make a large commitment at once. What I want to add, is that it will still need time for the difficulty to rise as crazy after ASICs are mass produced. Because the producers of ASICs will not price them based on the cost, they will control the supply and find a optimal price to maximize their profits. And the replacement of hardware will make many old miners quit and hence lighten the increase of difficulty for a while. |
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And you can confirm that, if you have enough money (like a million dollars, or so) you can turn any FPGA application into a silicon - which takes what... about a month of time?
And then you can manufacture your chips in millions, for less than a dollar each...
Right?
Yes. ASIC consumes a lot of initial capital, but the cost of mass production is negligible. So the question is when will the Bitcoin economy be large enough for people to make a large commitment at once. |
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Anyone buying it are aware of this. They are all betting that the dropping of dividends will be slow enough to let the cover the initial price. You are just the one who bet on the opposite. If you are so confident about your bet, you could short the bonds.
How? Is GBLSE setup to allow for shorts? I don't see this working out for the little guy. You could manually and privately borrow shares from someone else. Or you can just bet that the difficulty will rise with someone else. |
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AFAIK, the butterfly labs hardware is based on ASICs.
Not yet. Their current Singles are FPGA-based. See here: https://bitcointalk.org/index.php?topic=79825.0Their Mini Rigs are probably made with the same kind of FPGA like bitfury's. And moreover, if anyone else is working on his own chip, he doesn't want to disclose this information.
There is a lot of money on stake here and turning an FPGA solution into a much cheaper ASIC chip is relatively easy nowadays.
This is possible. But turning FPGA to ASIC is not cheap (the initial capital cost), and I don't know if it's very profitable given the current tiny market cap of the whole Bitcoin economy. But it doesn't need to be like this.
As the business is growing, thus buying more efficient equipment, I see no reason why the promised 5MH could not grow along with it.
Otherwise new mining companies will appear, offering a better hashing power for a lower share price - while Gigaminig will end up dead.
I hate to advertise in other people's thread. So I will PM you about my business which is a little more similar to what you want. |
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Of course it will happen. ASICs are there already and they will be getting cheaper and faster - month by month...
As far as I know, ASICs for Bitcoins are still in the designing phase and no actual chips are mining now. Could you point URL to me to support "are there already" please?
If the 5MH/bond stays fixed forever, the dividends will get lower and lower and the bond price will eventually go down to zero - it's only a question of when.
Anyone buying it are aware of this. They are all betting that the dropping of dividends will be slow enough to let the cover the initial price. You are just the one who bet on the opposite. If you are so confident about your bet, you could short the bonds. |
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... as far as I can tell the payout's gonna get cut in half in 6 months.
The block reward will get cut in half in 6 months, but some miners will close their operations, making difficulty down, so the payout won't necessarily drop so much. Since the first chunk of the payout has to go to cover the power bill.
The essence of mining bond is that the coupon equals to exactly the declared MH/s will get, no more, no less, no electricity fee reduced from it. The issuer pays the electricity fee him/her-self. So what's the endgame? Everyone still gets 5Mh/s, dividend drops to nothing, shares drop to nothing, you buy them back?
It's basically the consideration between whether you long mining/short bitcoin or you long bitcoin/short mining. If you believe that the dropping speed will be very fast, you could short mining bonds or simply hold your bitcoins. If you believe the otherwise, just buy. |
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Would current investors accept the second 20 BTC dividend payment as a base for next week's dividend payment? Whatever additional income the rigs make over the extra payout will then be paid out next week.
So last week there's no additional income.  The payment of this week is supposed to be today. Hope you could already make a more regular weekly updates from the last update. And to AMD: where are our precious 7990s?  |
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There are two existing mechanisms. The first one is shorting mining assets. It is not implemented yet on GLBSE. You could do it privately, but it's not as handy and involves more trusting-related risks. The second one is to bet using HEDGE.x bonds or just on the http://betsofbitco.in/. The former is attracting less BTC than I originally expected, perhaps because all the current bets are too one-sided to be interesting. The latter suffers from the lack of strict and formal contracts on bets. My idea is that one can make financial derivatives directly from the mining difficulty. Here I throw out several random proposals, I myself will probably not implement them, at least not soon. When investors manage their portfolios, if they are afraid that the rising difficulty will drive the price of mining assets lower, they could buy some of the following derivatives to reduce or totally eliminate the risk from the difficulty aspect. 1. Difficulty Future BondThis bond has a face value of, for example, (future difficulty at the calling back time)/1,000,000. And is sold at (current difficulty)/1,000,000 in IPO. 2. Difficulty CapThis asset pre-defines a cap on the difficulty, any time the difficulty exceeds the cap, the buyer will be paid with some Bitcoins, it could be done weekly, or each time difficulty changes. If the difficulty remains lower than the cap, the buyer will not be paid. 3. Positive Difficulty Correlation Coupon BondThe coupon of this bond has a positive correlation to the difficulty level, instead of negative correlations like mining bonds do. To be succeed, all of them have to answer these questions: How to guarantee the fulfillment of contract?How do the issuers of these derivatives hedge their risk?Will there be other incentives than pure speculation and gambling for the issuers? |
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I guess it's someone transferring shares between accounts to avoid the transaction fee. |
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It is a great deal for Giga, that's for sure. Buy hashes at $.60/MH (mini-rig and GPU) and sell bonds against it at $1.00-1.50/MH. Makes for one hell of a profit margin. Easy to finance expansion this way as well.
It is a great deal for the buyers too. Because all mining bonds, including Giga's, still have a better return rate than most of the mining stocks. Of course, the shareholders of mining stocks "own" the hardware, but as far as I know only Inaba's BFLS allow the shareholders to trade the shares for the actual hardware, in other companies the concept of "ownership" makes sense only when bankrupting and liquidation. And consider the difference between liquidation of mining companies and calling back of mining bonds, you couldn't easily conclude that selling used hardware will always result in more Bitcoins than calling back at 105%-120% of the market price. Indeed, the rise of Bitcoin price will make the market price of mining bonds against BTC lower, but it will also make the BTC price of selling old hardware lower. Hardware improvement (GPU -> FPGA -> ASIC) will drive the difficulty up, lowering the yield and the price of mining bonds, but it will also make old hardware more useless, harder to sell, and cheaper. |
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How to decide the spread between the initial offering price and the face value is very interesting. It involves too many factors and I don't think any over-simplified pricing model will be useful. Starting small (200 POLY.10.1) and seeing what will happen is a good idea, but finally a reasonable pricing mechanism should be found, or it will always be highly speculative and risky for you.
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Someone has to play the bad guy. This time me then.
1% monthly return ( a realistic return)
The ~6% monthly return of typical mining bonds is no less "realistic" than yours. They are even more realistic because they have an open business model. While you don't, at least not on your main thread. Of course, difficulty may rise, and the monthly yield of mining bonds might become lower. But you didn't promise you will keep your rate forever either. |
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