So you are implying that pirate is lying when he claims that his operation is illegal, and uses that as an excuse to not reveal his identity, or do you have knowledge or evidence of other illegal activities?  Since you seems to know that much about pirate, can you please reveal some real information about pirates illegal business?

It is well known that pirate is a crook.  He even claims to be a crook himself.  I'm glad someone finally reveal some details about exactly what he does.  The claims have not been debunked.  Not in this thread.

Isn't this exactly what P2SH was invented to prevent?

Have a separate safety computer located somewhere else to automatically countersign all transactions which can be verified to be legitimate.  Normal transactions using bitcoind will not work without access to both wallets.

#bitcoin-otc on Freenode is a possibility.  In general noone there will accept PayPal from anyone without a good rating on the web of trust, but some users of the exchange offer very small amounts to beginners who want to establish a rating.  Not a good solution if you need 50 BTC now, but may be worthwile if you are in it for a longer term.  When you have an established rating (a few weeks old, some positive, no negative), you will start finding more people who are willing to trade with you using PayPal, and at better rates as well.

Remember to read the guide first.  Especially the part about GPG authentication.  Nobody will accept PayPal from unauthenticated users.  Expect some healthy scepticism for the first few trades.  It isn't about you, it is all the scammers who come there every day trying to convert the balance on their stolen PayPal accounts to BTC.  Often wasting a lot of our time trying to convince us to trade anyway.  An advice: Use the e-mail on your PayPal account when registering with GPG.  We are much less sceptical of payments coming from the same e-mail as you registered with.  Don't use PayPal if you want to trade anonymously.

For this argument you conveniently don't assume difficulty to remain constant any more.  You assume your added hashpower to add to the current 10 Thash/s, and not replace it as you argued earlier (otherwise the difficulty would increase, and all your profit calculations are wrong).

If you believe your hashpower will add to the current total hashpower, you must also assume the difficulty to change accordingly.  If you think your haspower will replace existing haspower, making difficulty and total hashpower constant, then 5 Thash/s is enough.

You are constantly changing your basic assumptions to make your numbers look better than they are.  Now I don't think you should start this business because you won't do realistic calculations.
If you assume difficulty to change that much, and still believe in increasing Bitcoin price, buying coins is clearly the best investment.
Speak for yourself.  I need heating all year.  I don't think anyone around here even have A/C.  Mean temperature in mid August is 14 °C.  Maximum temperature last year was 23.1 °C.  Mean temperature in mid February is about 0 °C, so the temperature variation from winter to summer is low for a northern climate.  There isn't much temperature variation during the day either.

And we are straight into another problem with your calculations.  You keep mixing USD and BTC at rates picked out of thin air.  Everything kan be made looking profitable with enough invented numbers.

To compare buying 1 share at 1 BTC to just keeping the BTC, you need to do all those calculations in BTC.  The price development of BTC will decide if both are profitable.  If you can deliver more BTC back than I pay for the share, your model will be more profitable than just keeping the money.

Continuing investment in new mining technology is a valid point, but it makes the constant difficulty assumption even less valid.  Even the valuation of BTC if you grow to much, because you could pull off a 51% attack.  Even if growth beyond your initial 1/3 of the hashrate would only be stupid unless difficulty increases, because at that point you mainly compete with yourself.  Your share of the blocks will increase slower and slower the higher percentage of the total hashrate you get, and you will push difficulty higher.  Many GPU miners, like me, don't need to mine for profit.  It is enough to get about 2/3 of my power costs back, and it is still the cheapest heating system around.  If price per block and difficulty remains constant, as you assume, GPU mining will never become unprofitable.

Green power isn't always profitable.  Especially in the US where coal is heavily subsidised.

After the block reward decrease in early December, you will produce 413910 coins a year assuming 1/3 of all GPU miners quit and no other new production than yours come online.  This is 0.4139 BTC per share, assuming 1M shares and full set of 4200 FPGAs.  Half of it will cover operating costs, leaving 0.2 coins for dividend.  At best, if you get this up really quick before block reward decreases, investors will have back what they paid for their shares after five years.  Then block reward halves again and profit, if any, will come really slowly.

And all this changes for the worse if less than 1/3 of current miners quit or other new production comes online.

I can't see how this could possibly be profitable.  The only factor which make your calculations work out to the positive is your assumption of doubling exchange rate.  To take advantage of that it would be safer to just buy coins.

I didn't vote.  It is up to you to decide what you want to do.  I'm just not going to invest in it unless I did the math wrong.

You don't want to predict any difficulty increase, but price doubling is assumed?  In that case try another calculation.  Spend all the USD to buy BTC before the block reward halves, and sell afterwards when the price has doubled.  Much more profitable than this mining operation, and less risky because you don't depend on constant difficulty.  :-)

There are more errors.  Your calculations assume 50 BTC per block, and this is going to halve during the first year of operation.  If you get started after December 9th or thereabout, your block reward will start at 25 BTC.

The addition of 13 Thash/s will by itself more than double the difficulty.  Mining is a game of diminishing returns.  When your share of the total network get to large, you mostly compete with yourself.  You at least need to take your own hashrate into account when calculating the resulting difficulty, and don't assume all other innovation in mining will stop.

Yes, often.  I have a bank account in Germany with regular expenses, and it has been more than a year since the last time I transferred money to it from the bank.  I don't only save money, I usually sell the coins at 5% profit.

So it is not a problem to you then if people like me, who actually want Bitcoin to succeed, stop relaying blocks with no free transactions?  And when we become a majority, you are basically shut out of the network until you start behaving.  Interesting idea.  Because I don't want to support greedy miners who stop perfectly legitimate transactions just because they can run a denial of service attack against transaction processing and demand a ransom from users.  Initially I thought you opposed Revalin's idea, but I can see you actually support it wholeheartedly.  You just don't want to take part, but that's up to you.

Haha, now you take the value in USD into account.  Earlier your arguments have been about percentages of block reward.  Now you are basically admitting intellectual bankruptcy.  Well done.
If you want to adjust it for the price of Bitcoin, be prepared to increase it every week.  Transaction processing does not cost you a single cent.  You will notice the downward spiral in both price and the number of transactions as people stop trusting Bitcoin, because Bitcoin transactions are slow or expensive.  Users dependence on miners seems to be clear to you, but you don't grasp the fact that miners are dependant on users as well.  Short term profit sounds good to you, but you don't understand how bad your idea of unpredictable service is in the long term.
If you think this is a problem, please find a better algorithm.  Adjust it dynamically according to total network hashrate perhaps?

By artificially decreasing service to everyone, making transactions unpredictable and Bitcoin less useful and less valuable.  It's just a malicious activity, and I will support every means to stop it.  Transaction processing is essentially free, and the price should reflect that.  If block size becomes a bottleneck, or when the block reward approaches 0, fees may be necessary.  In a hundred years or so.

Cross border personal transfers cost 1%, which will make Bitcoin more expensive for any amount < current price at a fee of 0.01 BTC per transaction.  Double that for the transfer to your spending wallet (free in PayPal).  A quick check of my main spending wallet shows that 88 of 320 transactions are 2 BTC or less.  With your fee policy, PayPal would be cheaper for more than 1/4 of the transactions from my personal spending wallet!  Take away one of Bitcoin's most important advantages, and see what happens to the value of your mined coins.  Please try this experiment on one of the alternative chains first, and see how successful it is.
Currently all normal transactions (with the exception of spam and fast laundering) are free.  For transactions resembling spam there is a fee of 0.0005 BTC.  In very rare cases, like when a block is mined by a malicious miner, a free transaction have to wait a block.
This is an increase of 0.01 BTC for almost all normal transactions.  Currently 0.05 USD.  Less than a year ago it would be 0.31 USD per transaction, which is higher than even the normal payment PayPal fees.  And it comes in addition to the collective fee implied by inflation.
If MtGox had to pay fees, guess who would pay the fees.  Their customers.  This goes for all commerce.  Nothing comes for free.  If you want to pay 5 BTC for some service, you will have to buy 5.01 BTC.  Or 5.02 if you pass through your own wallet.  Only 10 US cents by the current value, but you know as well as everyone else that the current value is quite low compared to what it was.
Substitute "subsidy" with "inflation", and you have something there.  A tax on everyone who own bitcoins.  And "someday" is not in our lifetime.
Yes, and 25 BTC is still a very high block reward.  4% fees in addition to that is irrelevant.  Free transactions is a major advantage, and it will solve itself if it becomes a problem because free transactions will no longer run smoothly if transaction volume increase enough.  If you want those 25 BTC to be worth something, you need to mine a fair share of free transactions.  And follow the standard rules to make fee polices predictable for users.  Most of us don't do any adjustments to the fees.

Out of curiosity: Do you pay 0.01 BTC fee for your transactions?

Perhaps the mystery miner includes transactions which meets his fee requirements as well?  He's just set a high fee requirement.  Try a transaction with 50 BTC fee, and check if he includes it.

The point of the proposed change is to reward responsible miners who actually contribute to the network with more blocks.  Satoshi suggested a part of each block to be free, and miners who believe in Bitcoin as a currency include those free transactions.  If Bitcoin transactions get more expensive than PayPal transaction (which you actually suggest for small transactions later in this thread), then people will use PayPal instead, making Bitcoin less valuable for everyone.  It is not in the interest of most miners.

Forever is unlikely, but for the next 100 years it is very rational.  If we want Bitcoin usage to grow, we need to facilitate free or very cheap transactions.  Otherwise people will just use PayPal or whatever, which is bad for everyone who mine coins.  As long as the block reward is more than one can reasonably expect from fees, it is completely rational to keep fees as low as possible without encouraging spam.  Discouraging spam and laundering is the only reason to have fees now, and for a long time into the future.

The mystery miner's goal is clearly out to devaluate Bitcoin by making it less useful due to slower transactions.  I doubt fees would change anything.  Has any of the mystery miner's block rewards been spent yet, btw?

My waterblocks have paid for themselves by making the GPUs run colder and use less power.  Warm silicon leaks more.  Other than the water blocks, liquid cooling is almost free.  A pump don't have to cost more than 20 USD.  Tubes and stuff cost less than a replacement fan.  As a bonus you can place your miner anywhere and dump the heat anywhere.

Mining heats my house without making noise.  Here is an old post with outdated pictures of my setup.  The WAF of this setup is very high, and you get a nice excuse for buying more mining gear! :-)

There are some bots on mtgox continously executing microtrades (often less than 0.01 BTC).  Either buying or selling to make sure last price is either to the upside or to the downside of spread.  Those may manipulate the charts, depending on how you make them.  Will your charts be influenced by such bots, or do you take care to remove those microtrades before generating the charts?

Using a bot to manipulate technical analysis, and play mind games on people making trading decisions just from watching the charts, is a neat trick if it works. :-)

What's the chance of three > 95% CDF blocks in a row? :-(

I don't believe there is a bug.  I've mined solo for long enough to be calm in cases like this.  Between Christmas and New year 2010 my 5970 found 0 blocks at 700 Mhash/s, while a friend mining 1.8 Mhash/s on the CPU of a laptop found 2 blocks in 2 days.  A short time after I found four blocks in less than 24 hours.  Sometime around then I found two blocks with only one block between.  Randomness is terribly unpredictable.

My fanless HD 5450 does 15 Mhash/s..  Don't make fun of it -- when it found a block in May, it paid for itself many times!  Perhaps I should go back to mining solo on that one.  Luck may strike again!

Or offer your Ghashes to a suitable pool in exchange for BIP 16 support.  Most pools don't care to much about BIP 16 or not, or don't want to change anything that works, but they may care for a few percent increased hashing power.

Great!  My 2 Ghash/s which used to be lonesome cowboys looking for entire blocks, are now mining at BitMinter.