I replied to the main pirate thread, but I think this should also be posted here:


Your calculations are wrong. For case 1, if pirate defaults, you get 33.536 coins back because you had 104.8 bonds at .32 each.
By my calculation, break-even is 1.07 when your uninsured investment is non-compounding pirate rate of 28% return in 4 weeks.

Case 1:
107 coins to buy 100 PPT bonds at 1.07
  no default: 100 * 1.28 = 128
  default: 100 * .32 = 32

Case 2:
Keep 32 coins on the side and use 75 coins to invest in an uninsured 28% pirate program
  no default: 32 + 75 * 1.28 = 128
  default: 32 + 0 = 32

Your calculations are wrong. For case 1, if pirate defaults, you get 33.536 coins back because you had 104.8 bonds at .32 each.
By my calculation, break-even is 1.07 when your uninsured investment is non-compounding pirate rate of 28% return in 4 weeks.

Case 1:
107 coins to buy 100 PPT bonds at 1.07
  no default: 100 * 1.28 = 128
  default: 100 * .32 = 32

Case 2:
Keep 32 coins on the side and use 75 coins to invest in an uninsured 28% pirate program
  no default: 32 + 75 * 1.28 = 128
  default: 32 + 0 = 32

You are absolutely right. In my case, I have btc saved in an offline wallet that earns me absolutely 0 interest. I don't think anyone would have all their coins fully invested in different programs, so their opportunity costs are zero or close to zero.

I also didn't take into consideration the risk of PPT defaulting OR GLSBE getting hacked and losing their database (like bitcoinica!). So keeping the .32 bitcoins with PPT has an added risk when compared to just keeping it in your own wallet.

Disclosure: I've actually bought some PPT bonds. When it first came out, I was able to buy a few PPT.A for an effective interest rate better than pirate. I was the one that bought 64 shares at 1.068.
Effective cost = 1.068 - .32 = .748
Effective buyback = 1.28 - .32 = .96
Effective interest = (.96 - .748)/.748 = 28.34%
So it's better than the non-compounding pirate rate of 28% in 4 weeks.

I wouldn't say insurance is a joke, but mathematically speaking, it just increases the profit as oppose to reducing the risk. So because of the insurance, it may look like a less risky investment than a pure pirate investment. But it really is not. The risk is exactly the same, but your profit is actually more than what you thought it was.

I will give you an example. Lets say you purchased a PPT bond for 1.10, which will be bought back at 1.28. So your 4 week interest is (1.28 - 1.10)/1.10 or 16.4% with a .32 insurance if pirate defaults. But think of it another way. Since you always get paid back the .32 whether or not pirate defaults. It's as if you just set aside .32 bitcoins in a different wallet (or address) that you own, and at the end of the 4 weeks, you transfer those .32 bitcoins back to yourself. Then effectively, instead of the PPT bond costing 1.10, it now costs 1.10 - .32 or .78 btc. And instead of being bought back for 1.28, it now will be bought back for 1.28 - .32 = .96 btc. So your effective interest is (.96 - .78)/.78 or 23.1%. So mathematically, the 16.4% interest with a .32 "pirate default" insurance is the same as 23.1% interest with no insurance.

I think the insurance does more to muddy the actual risk and reward calculation for the bond. It makes it harder to do an apples to apples comparison with investing with pirate directly and with other pirate pass through bonds or deposit programs. But that's just what I think.

Are you talking about >$100,000 capital and you can make ~$10,000 for each deal? And could you do this week in and week out for the whole year? If you answer yes to both questions, then why are you not doing that as a full time job? (You'd make half a mil a year) If either of your answers is no, then this is not close to the same as what pirate claims to have.

Even without compound interest, 7% a week is ~360% a year.


If I had even one idea that can make 3.6x times my capital in a year, I sure as hell won't be too lazy to explore it. Let alone 33x if you consider compounding interest.

Normally when you say short sell, you are talking about selling at market price and buy back in the future hopefully at a lower price. He's not doing this. He's selling bitcoin at a higher than market price and try to buy the bitcoins back at a price around market price when he sold the bitcoins.  And he hedges bitcoin price rising.

So in normal short selling, you only make money if prie goes down. In his case, he should make money either way if his hedging is done correctly.

He's not shorting bitcoins. You should read this thread: https://bitcointalk.org/index.php?topic=82849.180

I'm really not sure what's so hard to understand. His business requires holding on to a ton of bitcoins. It's more bitcoins then he's comfortable risking in his own portfolio. So he would want to offload that risk to people and share the profits with them. So it's a win-win situation.

So why does he prefer to borrow btc at such a high rate versus borrowing usd at a lower rate? notme answered it pretty well. Borrowing btc means he returns btc and borrowing usd means he returns usd. So there's no currency risk involved in holding the capital. (They is still currency risk involved if bitcoin price shoots up when he's trying to exchange usd back to bitcoins.)

Now think of it in reverse. If you had amazing business idea that can for sure make 10% a week on an almost unlimited amount of usd capital, would you want a usd loan that costs 5% a week? Or would you want a btc loan that costs 5% a month. Sure you would make a lot more with the btc loan. But what happens when btc prices shoots up to $30? You're left holding usd that you need to convert back to btc to return to your lenders. You would have to have increased your capital 6x in order to return that loan. Now that's a risky loan for the lenders!

So the smart thing for pirate to do is to take however many bitcoins he feels comfortable owning and put that into his business. As his business demands more bitcoins than he has, he should borrow the rest. It's true that he won't make as much from the bitcoins he borrows, but then he has no risk on them either.

I used to question why pirate would need to borrow so many bitcoins and not use his own. But now that I understand why, I believe that pirate's lending is legit and not a ponzi scheme. Well the only other thing is I think he may be paying too much (7% a week) to his lenders when most other people are only paying half as much. He could probably reduce it to 5% a week and still be able to get as many lenders as he needs. But maybe he is not greedy and want to share the wealth.

Yeah, I wonder if this may be one of the most expensive thing sold for bitcoins. Well in terms of number of bitcoins, nothing beats the 10,000 btc for 2 pizzas. 1 pizza = 1 slk

Here's my craigslist listing:
http://sfbay.craigslist.org/sby/cto/3033867282.html

The car has low mileage and has a really nice upgrade that I put in. I added a chip that allowed me to use the key remote to open/close the convertible top. So when I park, I can just walk out and have it close behind me. Or when I am close to the car, I can have it opened before I even get to the car. Normally, you need to be in the car with the engine on and hold onto a switch the whole time while the top opens or closes... and it's a real pain.

And the aftermarket navigation is an Eclipse AVN6620. It's very similar to Toyota's navigation since it's based on the same software: http://www.crutchfield.com/S-TKD5mklSCzL/p_099AVN6620/Eclipse-AVN6620.html

Let me know if you are seriously interested.

I'm trying to see if anyone is interested in buying a car for bitcoins. I'm in the SF bay area. Don't know the price yet, but we could talk about pricing if you are interested. It would likely be in the >5000 bitcoins range. I can post more info if anyone is interested.

My guess is having access to bitcoins instantly is important to his buyers, so he needs to have a large capital of bitcoins readily available. Here's my reasoning why he borrows instead of uses his own coins: https://bitcointalk.org/index.php?topic=82849.msg916286#msg916286

Well, he's said previously that he's selling coins locally to groups of buyers. So if you accept that, all he does is sell coins at a markup to people for cash, deposit that cash to mtgox, trade for btc, pay interest to depositors, and whatever is left is his profit.

To those that wonder why pirate still needs to borrow coins from people and not use his own coins, I think I know why. It's true that if he uses his own coins, he can earn the full 10.65% he makes each week, but then he had to take on the risk of bitcoin failing. For example, if a flaw is found in bitcoin and the value drops to 0, he would lose all the money he held in bitcoin. Even if bitcoin doesn't fail, he may not want to have so much of his wealth tied to such a risky currency.

So instead of holding 10,000 of his own bitcoins to use in this business and earn 1065 btc each week (10.65% of 10k), he can just borrow 25,000 bitcoins from us and earn 1168 btc each week. (10.65% - 5.98% of 25k). Another way to look at it is, would you rather make 10.65% a week but have some risk of losing your capital if bitcoin fails OR would rather make only 4.67% a week using someone else's capital and have pretty much no risk whatsoever. I think pirate would be stupid to risk his own money. If you don't agree, ask yourself this: if you had a way to make 3% a week on your bitcoins with absolutely zero risk on your capital, would you still invest in pirate's program and make 7% a week but risk losing it all if it turns out to be a ponzi scheme?

Before bitcoinica went down, you could have used bitcoinica to hedge your risk in case the value of bitcoin rises too much and wipe out your profit. What are you using now?

I assume your dividend payment is calculated after electricity cost, right? Your dividend payment for this week is equivalent to about 880 mhash/s per bfl single without even counting electricity cost. Are you using something like GPUMAX to get higher than PPS?

Can anyone tell me what's the best way to cool a BFL single with a fan?
I have one of these usb fans: http://www.amazon.com/Thermaltake-Mobile-External-Cooling-AF0007/dp/B002OJN250/ref=sr_1_2?ie=UTF8&qid=1337559123&sr=8-2
I currently have it sitting on top of the single and pulling air upwards. Is that the best way? Or maybe having it blow air in from the side? Or do I need to remove the case for a fan to be effective?

Received. Thanks!