I have written about this for almost a year now and guess what - idiots are still dumping money to perpetual mining turds (bonds? LOL!).
Brilliant!
They aren't turds... they are scat bonds. The buyers are asking to be shit upon. |
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I don't think anyone expects the difficulty to continue to grow at 10-20% every difficulty increase for the next 3 years. If it continues for even one year the difficulty will increase tenfold, which will already make all PMBs unprofitable at their current prices.
I think you underestimate the markets ability to price PMBs (or mining contracts as I prefer to call them; thei are neither perpetual nor bonds). Prices on mining contracts have dropped in response to the recent difficulty climb already. I'm in the process of IPOing a new mining contract at 0,004, which I believe is fairly priced. With a 10% monthly increase, that contract will return its IPO value in a year and over three years (with 10%/mnth growth) return 147% for a total of around 16% per year. If difficulty 'just' rose for one year and then flattened out, the return would be around 243% or just under 50% per year. I have no idea what scenario is most likely, but I don't think the pessimistic idea that mining will keep being so insanely profitable that everyone will get 50% on every dime they throw in will continue. A more modest but still profitable middle ground is more likely. The question is, however; from where is all this additional mining power going to come? We have a fairly good overview of who is building ASICs and we're fairly good at calculating future deployments. I don't see anyone who could reasonably come up with 9PH/s over the next three years, which would be the result of 'just' having 10% growth. Remember, we need new technology to go below 28nm, which is very expensive and takes a lot of time, and even Intel and the big boys (who sells hundreds of millions of chips) is struggling to go below 22nm. At 28nm, which is what KnC is currently researching, 9PH/s will cost $2 billion. Even if you get that at half price (and three years isn't really that far off), we're still talking about someone or the community combined willing to invest $1 billion to capture the mining market. That mining market, remember, halves in 2016. We're rapidly approaching a point where even ASIC mining won't be very profitable. My asset already sells for less than AM's Block Erupter blades (which are priced at 0,005/mh) so they are unprofitable already, if my asset is. Pretty quickly, investments won't make sense and thus difficulty growth will stop and difficulty may even go down. You're also assuming that the market cap of Bitcoin will stay the same by 2016; it is over $1 billion now and by 2016 there will be 3 million more coins which adds $300 million even if the price stays the same (which is unlikely given Bitcoin's history) and the cap would be $3 billion or more if it doubled or more in price which is certainly a possibility in 3 years.
I don't speculate in difficulty and I would never speculate in price, especially not with billions of dollars. Those that gambled, say $140 dollars for a Bitcoin just a few weeks ago has lost almost 30% of that already. You won't convince someone to invest a billion dollars in the hope that prices will go up by 8x in three years. .b Arguing that people might profit because bitcoin goes up makes no sense. A security has to offer a gain above the currency it is traded in to be worthwhile. Holding bitcoin would be more profitable than buying your bonds. I would note that buying bitcoin and holding it was also a better choice than buying mining hardware, unless you are one of the few dozen folks who bought Avalon round 1 machines and hit the jackpot. |
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It's quite clear that the majority of people buying mining bonds, haven't got a clue what they are actually buying, otherwise they wouldn't be paying such ridiculous sums.
Well, that is not limited on mining bonds, but includes pretty much everybody who bought USB Asics or other overpriced mining hardware in order to make profit... Not really. Avalon sold ASICs at $20/GH/s. Mining bonds are going for $700 / GH/s. |
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Your analysis is incorrect.
You fail to include a time value of money for the present value of the bonds. Even at negative difficulty growth, the value of the income stream from mining is finite.
Given the risks the discount rate for the time value of money needs to be very high - at least 30% in my opinion.
Risks taken by buying a mining bond include
Failure of bitcoin protocol
Exchange rate risk
default risk by operator
Anyone with basic understanding of the situation will realize that the only way a mining bond would be profitable is if it is priced lower than the cost of equivalent mining hardware. Ultimately, sellers of mining bonds are exploiting people ignorant of the economics of bitcoin. The result is a guaranteed loss for the buyers.
Worse, many of these buyers will project their experience onto bitcoin itself, and paint the entire concept as a scam.
Are... are you adding cash flows from different time periods? motherofgod.jpg
I purposefully left out present value and risk because it complicates an already complicated subject. If you want to explain it all in detail, please be my guest. You are spouting off that EskimoBob is wrong, but you don't want to consider present value or risk? It's is much better to be silent and assumed a fool, than to speak up and prove it. In the future, you should try to keep quiet. |
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Nobody knows what the difficulty is going to be, so lets make a table of possible values for a 1 Mh/s PMB at the current difficulty. | Expected Increase | | Total Dividends | | 30% | 0.00157759 | | 20% | 0.00218436 | | 10% | 0.00400466 | | 7% | 0.00556492 | | 2% (Moore's Law) | 0.01856706 | | 0% | infinite |
EskimoBob and others are wrong. You can see that it is possible to make money from a PMB if you buy it at the right price. So, figure out what you think the difficulty will rise by every 2 weeks over the next several months, and don't pay more than the dividends you will receive. Your analysis is incorrect. You fail to include a time value of money for the present value of the bonds. Even at negative difficulty growth, the value of the income stream from mining is finite. Given the risks the discount rate for the time value of money needs to be very high - at least 30% in my opinion. Risks taken by buying a mining bond include Failure of bitcoin protocol Exchange rate risk default risk by operator Anyone with basic understanding of the situation will realize that the only way a mining bond would be profitable is if it is priced lower than the cost of equivalent mining hardware. Ultimately, sellers of mining bonds are exploiting people ignorant of the economics of bitcoin. The result is a guaranteed loss for the buyers. Worse, many of these buyers will project their experience onto bitcoin itself, and paint the entire concept as a scam. |
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Is shit hitting the fan already?
Write this down - ALL perpetual mining "bonds" that pay based on FIXED Mh are turds and are guaranteed to lose their value.
Buy "turds" ONLY if you believe that difficulty is going to drop.
All perpetual mining bonds are expected to lose their value in the long term, given the expectation that difficulty will continue to rise over the long term. But they are bets on how fast difficulty will rise, and it is possible to buy them for less than their future value. I would be fascinated to learn of the cases where someone has made a capital gain on Mining Bonds. Please do share the numerous examples that must exist. Issuing the bonds doesn't count! |
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I'll take 5 @ 2.95
You haven't responded to PMs for over a day. I have 16 buyers that are waiting on share transfers. If you cannot make arrangements for payment in the next 8 hours, I will cancel your order and proceed with transfer of the remaining shares. |
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So I put a thread up in the custom hardware section with his lovely quote and it was deleted. Did I do something wrong? How come it was deleted, anyone know?
It was deleted because the mod of the hardware forum is blatantly biased in support of BFL. He has hidden dozens of threads in 'OFF TOPIC' to conceal the history of lies going on for years now that BFL has spread. |
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Are there still shares available? If so I would like to get 5 shares
I am closing off sales for this round to make sure that all payments are completed, and the transfer done before next week's dividend. |
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He was free to file bankruptcy, as any person or company can when their liabilities exceed their obligations.
You do know what happens when a Limited Liability Corporation that has no money at all files for bankruptcy, right? I certainly do. I expect that the domain name, trademarks and software would have sold in liquidation for more than was recovered by waiting and hoping Roman would turn out to be a responsible adult. Someone competent could have stepped in and operated what was a promising contender to replace Mt.Gox. They might even have offered to transform the bitcoin debt into equity in the new company. Now, between the damage to goodwill that Roman has done to the trademark, and Fincen's position on regulation, the company is probably worthless. That is the problem with allowing an incompetent to continue operating a company; they actually reduce the value of the company over time instead of increasing it. |
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the price is up so quickly.
Yes, it moves fast. Maybe there will be another panic to get shares cheap. But I doubt it goes below 2.8 now. |
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The fact is he obviously learned this practice was acceptable via whatever means and now he has apologized for it offered damages an people are still crucifying him. I'm sure 99% of the people crucifying him have done something along the way the regret as well and wouldn't want a lifetime tag of it.
And now for the moral dilemma that outlines the hypocrisy here. You just described the reasoning behind me making a trolling bet, yet even though I also didn't intend to profit nor actually profit (in fact I paid much more than Garr will ever be able to pay in his lifetime probably) as a result of it, I'm still deemed a scammer or "untrustworthy". Why would that be? Because he's a few years younger than me? Matthew numerous people relied upon your pledge as a mechanism to offload the risk of holding Pirate debt. They made bets with you, and then purchased debts in the secondary market with the expectation that your bet would protect them in case of a failure. This strategy was openly discussed in dozens of posts in the days after pirate's default. By continuing to pretend you would honor a bet you couldn't possible pay, you caused many people to take actions that cost them real money. That is why you deserved to never be trusted in this community. I wasn't foolish enough to use that strategy but I have no doubts that 10s of thousands were lost by people relying on your good reputation at the time. Quit trying to whitewash yourself. |
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I received this notice from one of the buyers of my ASICMINER shares: Also, I received a PM from BitNit. It had the same address as the one you provided.
If you are still interested in ASICshares make me an offer, I have been debating posting an auction but I am worried about selling to low.
16Esrbw6SgJsNHoCiGNmRjmkx4ZobqaXqs
I can have friedcat confirm shares via PM or thread if needed. You can see if sold single shares for 2.95BTC but if you are looking for 25+ I can go 2.90BTC
As I own that address, this is clearly a scam. |
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Price is now 3.15
Bid at BTCT is now 3.194 BTC. I will honor 3.15 for 4 more hours. |
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Will you still honor all bids before at 2.95?
Yes, I have honored every purchase posted or PM'd to me, except for Ajay's open ended statement. I'm not sure why you are asking as the only thing I have from you is a low ball bid I rejected. Must have missed this message then: https://bitcointalk.org/index.php?topic=239191.msg2538929#msg2538929Anyway, I'm no longer interested. Good luck with the auction! I did! It probably wasn't a good idea to point it out since were planning to renege on the bid. People have been getting testy about failure to honor auction bids. I guess I'm asking you then to disregard my bid then, if we are both OK with it this doesn't have to be an issue. Agreed. |
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Will you still honor all bids before at 2.95?
Yes, I have honored every purchase posted or PM'd to me, except for Ajay's open ended statement. I'm not sure why you are asking as the only thing I have from you is a low ball bid I rejected. Must have missed this message then: https://bitcointalk.org/index.php?topic=239191.msg2538929#msg2538929Anyway, I'm no longer interested. Good luck with the auction! I did! It probably wasn't a good idea to point it out since were planning to renege on the bid. People have been getting testy about failure to honor auction bids. |
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Will you still honor all bids before at 2.95?
Yes, I have honored every purchase posted or PM'd to me, except for Ajay's open ended statement. I'm not sure why you are asking as the only thing I have from you is a low ball bid I rejected. |
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This offer is valid up until the Bid at BTCT.co exceeds 2.9 BTC
Party over? I will still honor the price for a while longer. I have to have Friiedcat transfer 1 share to Whirlpool, and I hate to bother him for such a small transfer... |
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