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621  Alternate cryptocurrencies / Announcements (Altcoins) / Re: [ANN] Litecoin - a lite version of Bitcoin. Launched! on: May 27, 2012, 04:08:02 PM
Where is Coblee? Just check his profile and you will see he is all over this forum, just not intersted in LTC apparently!  Sad Why don't you send him a PM? I did... And I have not seen him write anything to #litecoin on IRC for months, have you?

It's true that I'm not spending a lot of time developing Litecoin, but I'm still here. I'm trying to see if I can get the github.com/litecoin repository and refork the current bitcoin code and patch in the litecoin changes.
Fordy has been helping me a lot with submitting patches, but there's not much interest from developers in working on Litecoin. If you are interested in helping out, let me know. I definitely need help reforking, patching, and testing the new code.
622  Economy / Securities / Re: [GLBSE] MORE Pirate Pass Through Bonds! on: May 27, 2012, 01:06:50 AM
For a start, I have other demands on funds that have longer term uses other than BS&T.  I reached a point with my deposit some time ago (around 1 March) where I considered 4000 was a sufficient exposure to a single point of failure.
Second, I have a portfolio to manage.  If you were investing and choose to put 100% into one asset, that is simply poor risk management and you need to consider expected returns.
Third, I have several strategies in play, and one is maintaining an overall level of funds in BTC.  Lately I have been retaining additional coins to meet business needs (such as long term finance and other asset purchases), and checking my position I am currently 2715.78 BTC above my preferred position  and partly because I extended a loan to a good friend rather than converting into funds for some of my other hobbies.

What I'm trying to say is that the 960 insurance fund has the same risk exposure as your 4000 btc with Pirate directly. And without as much benefit at least for this round. Of course that is assuming you guys will pay up if Pirate defaults. So your 960 btc are lost the same way your 4000 btc are lost if Pirate defaults.

What you also fail to include in the strict math sense, is the fun aspect.  It's more interesting to me to be doing some other stuff.

That I can't argue with. Of course there's a fun aspect that's not captured by the math at all. It's why I sometimes play the lottery or play black jack or roulette. I know the odds are against me, but it's fun sometimes.

Quite why I would accept 1.038 for more bonds, I am not sure, but if you wish to forward 3114BTC to me and have me pay you 3840BTC in four weeks time having put them into my BS&T account, then feel free to do so (but I have no particular reason to offer 960 coins in the event of a Pirate default)

If there's no default insurance, then it's not the same deal anymore. Anyways, I was just trying to make my point and not really interested in spending 3114 btc. Smiley
623  Economy / Securities / Re: [GLBSE] MORE Pirate Pass Through Bonds! on: May 26, 2012, 10:48:53 PM
However, it is unlikely that I would have taken those coins and done that.  he others may have.  But we do have 4000 coins sitting idle earning no interest, so that is a cost (even if just an opportunity cost).

PatrickHarnett, I don't understand why it's unlikely that you would have taken those coins and invested with Pirate directly. For this round of PPT.A, your downside is exactly the same as if you deposited 846 btc with pirate and did compounding interest for 4 weeks. If pirate defaults, you lose 846 btc in both scenarios. But your upside is less with selling 3000 shares of PPT.A at 1.038. So no matter how you look at it, this round of PPT.A is strictly worse than just deposing most of the insurance fund with pirate.

If you don't agree with my analysis, then I'm willing to personally buy 3000 more shares of PPT.A at 1.038 from you. As long as you promise to give me 960 btc if pirate defaults. Smiley
You are effectively giving people a 33.7% interest rate, which is better than pirates 31% compounding rate.
624  Economy / Securities / Re: [GLBSE] MORE Pirate Pass Through Bonds! on: May 26, 2012, 06:40:48 PM
Can you show the math behind that break-even value?

1.28 / 1.07^4

Oh, we were discussing break-even in comparison to simply investing 960 BTC with Pirate, not general break-even for a non-default.

1.28 / 1.31 does not take into consideration the lost opportunity cost of 960 btc sitting there doing nothing. So that's not the true break even cost. Because PPT would earn more if they took the 960 btc and invested directly with Pirate since they are risking to lose that anyways if pirate defaults.

Here's the algebra for calculating the true break-even with compounding:

Case 1 - Sell 1 share of PPT at 1+x (if sold at 1.038 then x=.038)
  no default: PPT makes x+.03 (.03 is the extra you get for compounding)
  default: PPT loses .32-x

Case 2 - Put .32-x btc with pirate
  no default: PPT makes (.32-x)*.31 = .0992-.31x
  default: PPT loses .32-x

So break-even is when the 2 "no default" cases are equal.

  x + .03 = .0992 - .31x
  1.31x = .0692
  x = .0692 / 1.31
  x = .05284427

For the compounding case, true break-even is 1.0528 btc per share.
Selling shares less than 1.0528 is a losing proposition for PPT.
625  Economy / Securities / Re: [GLBSE] MORE Pirate Pass Through Bonds! on: May 26, 2012, 09:32:42 AM
If doing compounding interest, the break-even value is 1.0528
In other words, if the average sale price of the bond is less than 1.0528, then PPT is losing money in that round.
626  Economy / Securities / Re: [GLBSE] MORE Pirate Pass Through Bonds! on: May 26, 2012, 09:22:17 AM
They don't need to, but it doesn't affect the numbers, because they have to pay it out if pirate defaults. You can strike out the line (which I did in the quote above) and just compare the 2 cases. Instead of selling 3000 shares at 1.038, they should instead invest 960 btc with pirate because the profit would be greater with the same loss if pirate defaults.

If what you are saying is that they should do case 1 AND case 2 at the same time, then that means if pirate defaults they will lose 1920 bitcoins. Then in that case, why not just put 1920 btc with pirate instead?

I agree putting 1920 BTC with Pirate is financially more profitable than this round of PPT bonds in all cases, but I'm not sure how that's relevant - no investment needed to be made initially by any of them other than the 960 BTC in the PPT fund. (PPT.A is simply being reused, no 8 BTC asset creation fee)

More importantly, we're ignoring a few key aspects of this.

Assuming the 113.95 BTC above the 3000 BTC is not invested with Pirate and not earning any interest (unlikely), if Pirate defaults, they will lose 960 - 113.95 BTC = 846.05 BTC - but only if he defaults before the first payment.
If he defaults after the first payment, they will lose 960 - 113.95 - (.07 * 3000) = 636.05 BTC.
After the second payment, 960 - 113.95 - (.14 * 3000) = 426.05 BTC.
After the third payment, 960 - 113.95 - (.21 * 3000) = 216.05 BTC.

If he does not default, they will make 3113.95 - 3000 = 113.95 BTC

An investment of 960 BTC into Pirate would lose 960 BTC if Pirate defaults before the first payment.
960 - (.07 * 960) = 892.8 BTC loss if Pirate defaults after the first payment.
960 - (.14 * 960) = 825.6 BTC loss if Pirate defaults after the second payment.
960 - (.21 * 960) = 758.4 BTC loss if Pirate defaults after the third payment.
And finally a .28 * 960 = 268.8 BTC profit if Pirate does not default.

Effectively, the first usage of 960 BTC is better if Pirate defaults before all 4 payments, the second if he does not default. I'm not necessarily arguing for PPT's choice here, but it seems to me to have a similar effect to a partial hedge. They make less if Pirate pays out, but lose less if he defaults.

Thanks for reminding me that if pirate defaults, PPT still earns the 113.95. I fixed it in my post above. Here it is again:

Quote
Case 1 - Sell 3000 shares of PPT.A at 1.038
  no default: PPT makes 3000 * .038 = 114
  default: PPT loses 960 - 114 = 846

Case 2 - Put 846 btc with pirate
  no default: PPT makes 846 * .28 = 237
  default: PPT loses 846

Difference is 237 - 114 = 123
So you are effectively losing 123 bitcoins for this round. Your loss for if pirate defaults is the same.

Yes, this only is true if pirate defaults within the first week. If pirate defaults after that, PPT will have made more money to cover their loses. In order to do a better apples to apples comparison, it's easier to use compounded interest in this scenario since then it doesn't matter when pirate defaults. 7% interest compounded for 4 weeks is about 31%.

If pirate doesn't default, pirate will payout 1.31 to PPT but PPT only pays 1.28 to bond holders, so PPT makes an addition .03 per share. That's only if no default.

Case 1 - Sell 3000 shares of PPT.A at 1.038
  no default: PPT makes 3000 * (.038 + .03) = 204
  default: PPT loses 960 - 114 = 846

Case 2 - Put 846 btc with pirate
  no default: PPT makes 846 * .31 = 262
  default: PPT loses 846

Difference is 262 - 204 = 58
So if you are do compounding interests, you only lose 58 bitcoins for this round.
627  Economy / Securities / Re: [GLBSE] MORE Pirate Pass Through Bonds! on: May 26, 2012, 05:54:12 AM
Here's some more info for you guys:

I just put these numbers in the spread sheet and saw that, you made 3113.95 from your sale.
The average price is 3113.95 / 3000 = 1.038
At that price, you are losing money for this round of PPT.A.

Case 1 - Sell 3000 shares of PPT.A at 1.038 with 960 btc tied in insurance money (tied up earning 0 interest)
  no default: PPT makes 113.95
  default: PPT loses 960

Case 2 - Put 960 btc with pirate
  no default: PPT makes 960 * .28 = 268.8
  default: PPT loses 960

Difference is 268.8 - 113.95 = 154.85
So you are effectively losing 155 bitcoins for this round. Your loss for if pirate defaults is the same.
Like I said, you may need to rethink the lowest price that you will sell bonds at.


Perhaps I am missing something, but nowhere can I find the statement that they must actually hold .32 BTC per bond in a wallet instead of in investments or in Pirate himself. All that is stated is that they will pay 0.32 BTC per bond if Pirate defaults.

They don't need to, but it doesn't affect the numbers, because they have to pay it out if pirate defaults. You can strike out the line (which I did in the quote above) and just compare the 2 cases. Instead of selling 3000 shares at 1.038, they should instead invest 960 btc with pirate because the profit would be greater with the same loss if pirate defaults.

If what you are saying is that they should do case 1 AND case 2 at the same time, then that means if pirate defaults they will lose 1920 bitcoins. Then in that case, why not just put 1920 btc with pirate instead?

628  Economy / Securities / Re: [GLBSE] MORE Pirate Pass Through Bonds! on: May 26, 2012, 05:45:41 AM
No sane person would purchase a bond above 1.28, ergo I concluded it was unnecessary to include that possibility in my calculations.

Technically you are certainly correct, but we could bring up any number of extremely improbable conditions and discuss this subject endlessly to no end whatsoever.

Fair enough. Let me respond to your original post again.

Effective interest rate is not really relevant in regards to PPT's profits.

If Pirate doesn't default, they make money. If he does, they lose money. This is true regardless of whether the bonds are bought at 1.0 or 1.25; the amounts change but the fact of it does not.

Effective interest rate affects how much PPT makes. So how is it "not really relevant in regards to PPT's profits"?

As for your second statement, I already showed that for this round of PPT.A even when pirate does not default, they effectively lose money. In other words, they don't make as much as they could have by not selling the bonds.
629  Economy / Securities / Re: [GLBSE] MORE Pirate Pass Through Bonds! on: May 26, 2012, 05:32:52 AM
Here's some more info for you guys:

All 3000 sold:

Code:
5/25/2012 22:00:30 450 1.00000002
5/25/2012 22:00:30 33 1.00000003
5/25/2012 22:00:30 42 1.000001
5/25/2012 22:00:29 1 1.015
5/25/2012 22:00:29 75 1.01111
5/25/2012 22:00:29 5 1.01010101
5/25/2012 22:00:29 5 1.01000001
5/25/2012 22:00:29 1 1.01
5/25/2012 22:00:29 5 1.01
5/25/2012 22:00:29 1 1.01
5/25/2012 22:00:29 1 1.005
5/25/2012 22:00:29 48 1.000001
5/25/2012 22:00:28 5 1.015
5/25/2012 22:00:28 100 1.02
5/25/2012 22:00:28 10 1.02
5/25/2012 22:00:28 1 1.02
5/25/2012 22:00:28 1 1.02
5/25/2012 22:00:28 100 1.02000001
5/25/2012 22:00:28 100 1.02100001
5/25/2012 22:00:28 100 1.02200001
5/25/2012 22:00:28 1 1.023
5/25/2012 22:00:28 1 1.025
5/25/2012 22:00:27 1 1.031
5/25/2012 22:00:27 101 1.0301
5/25/2012 22:00:27 1 1.03000002
5/25/2012 22:00:27 100 1.03000001
5/25/2012 22:00:27 1 1.03
5/25/2012 22:00:27 1 1.0251
5/25/2012 22:00:27 5 1.02500002
5/25/2012 22:00:27 100 1.02500001
5/25/2012 22:00:26 96 1.04
5/25/2012 22:00:26 1 1.031
5/25/2012 22:00:26 1 1.0311
5/25/2012 22:00:26 1 1.035
5/25/2012 22:00:26 1 1.035
5/25/2012 22:00:26 1 1.038
5/25/2012 22:00:26 8 1.04
5/25/2012 22:00:26 100 1.04
5/25/2012 22:00:25 10 1.041
5/25/2012 22:00:25 1 1.04
5/25/2012 22:00:25 1 1.045
5/25/2012 22:00:25 1 1.0451
5/25/2012 22:00:25 1 1.041
5/25/2012 22:00:25 1 1.048
5/25/2012 22:00:25 1 1.049
5/25/2012 22:00:25 5 1.05
5/25/2012 22:00:25 476 1.05
5/25/2012 22:00:25 17 1.05
5/25/2012 22:00:25 100 1.05
5/25/2012 22:00:24 1 1.0555
5/25/2012 22:00:24 1 1.0551
5/25/2012 22:00:24 15 1.055
5/25/2012 22:00:24 1 1.051
5/25/2012 22:00:24 100 1.0501
5/25/2012 22:00:24 5 1.05000001
5/25/2012 22:00:24 1 1.05
5/25/2012 22:00:24 1 1.058
5/25/2012 22:00:24 100 1.06
5/25/2012 22:00:23 100 1.0611
5/25/2012 22:00:23 1 1.061
5/25/2012 22:00:23 1 1.0691
5/25/2012 22:00:23 1 1.069
5/25/2012 22:00:23 27 1.0682
5/25/2012 22:00:23 1 1.068
5/25/2012 22:00:23 1 1.0666
5/25/2012 22:00:23 1 1.066
5/25/2012 22:00:23 1 1.0651
5/25/2012 22:00:23 3 1.065
5/25/2012 22:00:22 2 1.08
5/25/2012 22:00:22 2 1.07
5/25/2012 22:00:22 6 1.07
5/25/2012 22:00:22 100 1.07
5/25/2012 22:00:22 1 1.0701
5/25/2012 22:00:22 2 1.071
5/25/2012 22:00:22 1 1.071
5/25/2012 22:00:22 30 1.0726
5/25/2012 22:00:22 1 1.075
5/25/2012 22:00:22 1 1.078
5/25/2012 22:00:22 1 1.0781
5/25/2012 22:00:21 1 1.085
5/25/2012 22:00:21 33 1.0826
5/25/2012 22:00:21 1 1.081
5/25/2012 22:00:21 100 1.08
5/25/2012 22:00:21 1 1.088
5/25/2012 22:00:21 1 1.0888
5/25/2012 22:00:21 1 1.0891
5/25/2012 22:00:21 2 1.09
5/25/2012 22:00:21 6 1.09
5/25/2012 22:00:21 2 1.09
5/25/2012 22:00:21 1 1.087
5/25/2012 22:00:20 1 1.096
5/25/2012 22:00:20 1 1.095
5/25/2012 22:00:20 14 1.095
5/25/2012 22:00:20 1 1.0911
5/25/2012 22:00:20 1 1.091
5/25/2012 22:00:20 15 1.091
5/25/2012 22:00:20 15 1.101
5/25/2012 22:00:20 20 1.1
5/25/2012 22:00:20 1 1.1
5/25/2012 22:00:20 2 1.1
5/25/2012 22:00:20 1 1.098
5/25/2012 22:00:19 2 1.12
5/25/2012 22:00:19 15 1.13
5/25/2012 22:00:19 2 1.103
5/25/2012 22:00:19 2 1.11
5/25/2012 22:00:19 15 1.11
5/25/2012 22:00:19 15 1.12
                 3000


I just put these numbers in the spread sheet and saw that, you made 3113.95 from your sale.
The average price is 3113.95 / 3000 = 1.038
At that price, you are losing money for this round of PPT.A.

Case 1 - Sell 3000 shares of PPT.A at 1.038
  no default: PPT makes 3000 * .038 = 114
  default: PPT loses 960 - 114 = 846

Case 2 - Put 846 btc with pirate
  no default: PPT makes 846 * .28 = 237
  default: PPT loses 846

Difference is 237 - 114 = 123
So you are effectively losing 123 bitcoins for this round. Your loss for if pirate defaults is the same.
Like I said, you may need to rethink the lowest price that you will sell bonds at.

EDIT: Fixed some numbers thanks to BinaryMage.
630  Economy / Securities / Re: [GLBSE] MORE Pirate Pass Through Bonds! on: May 26, 2012, 05:21:40 AM
That's wrong. If you paid 1.32 for a bond, PPT only puts 1 btc with pirate to make the 1.28 btc needed at the end of 4 weeks. They pocket the .32 if pirate doesn't default. If pirate does default, they don't lose money because they pay your the .32 they pocketed.

What?

No one has paid 1.32, and we have 0.32BTC per bond in a secure wallet earning zero to cover the event of default. 

We "pocket" the difference between the 1.00 and average price and that compensates for having 4k BTC tied up and goes to the PPT.DIV payouts.

I didn't say anyone paid 1.32. I was responding BinaryMage saying that no matter at what price the bond is sold, PPT will lose money if pirate defaults. I was just showing that if the bond was sold above 1.32, PPT makes money either way.
631  Economy / Securities / Re: [GLBSE] MORE Pirate Pass Through Bonds! on: May 26, 2012, 05:19:21 AM
I replied to the main pirate thread, but I think this should also be posted here:

etc


Thanks for looking and thinking about this.  The point you've demonstrated is that there is a benefit, and it's materially above 1.02.

BTW I used 1.07^4 to make the comparison more realistic.

also, as a question, how did you get 41% return for someone investing at 1.00 and receiving 1.28?

At 1 btc per bond, it's as if they put .32 on the side and paid .68 for the bond.
.96 return (1.28 - .32) on a .68 investment is 41%.
.96 / .68 = 1.41

Their gain equals your loss. Because instead of selling the share at 1 btc, you could have instead invested .32 of your PPT.DIV capital with pirate directly. Here's the math assuming no compounding interest:

Case 1 - Selling a bond at 1 btc
  no default: PPT makes nothing.
  default: PPT loses .32

Case 2 - Investing PPT.DIV's .32 with pirate
  no default: PPT makes .32 * .28 = .0896
  default: PPT loses .32

So if pirate defaults, your loss is the same. If pirate does not default you are effectively losing .0896 per share because that's the money you otherwise would have made if you put the insurance money with pirate.
And your effective loss is the exact same as what the buyer of your bond gained. Here's that math:

Case 1 - Buyer buys PPT at 1 btc
  no default: buyer makes .28
  default: buyer loses .68

Case 2 - Buyer invests .68 directly with pirate
  no default: buyer makes .68 * .28 = .1904
  default: buyer loses .68

The effective gain of the buyer is .28 - .1904 = .0896
See how that's the same as what you (the PPT bond sellers) effectively lost? The math works out beautifully.
Bottom line, if you sell shares for less than 1.07, it is a losing proposition. (assuming no compound interest)
With compound interest, the break-even value is a bit lower than that.

P.S. I went to MIT
632  Economy / Securities / Re: [GLBSE] MORE Pirate Pass Through Bonds! on: May 26, 2012, 04:56:25 AM
Wow, I overpayed. Looks like they went down to almost 1.0 with this issue. Someone got a good deal.

Yes, Did 3000 bonds sell or just everything above 1 BTC?

Thanks

Wow, at 1, the effective interest rate is 41.2%
You guys are losing money this way. Even doing compounding, you can only make 31.1% interest from pirate. You may need to rethink how low you are willing to buy your bonds at.

Effective interest rate is not really relevant in regards to PPT's profits.

If Pirate doesn't default, they make money. If he does, they lose money. This is true regardless of whether the bonds are bought at 1.0 or 1.25; the amounts change but the fact of it does not.

That's wrong. If you paid 1.32 for a bond, PPT only puts 1 btc with pirate to make the 1.28 btc needed at the end of 4 weeks. They pocket the .32 if pirate doesn't default. If pirate does default, they don't lose money because they pay your the .32 they pocketed.
633  Economy / Securities / Re: [GLBSE] MORE Pirate Pass Through Bonds! on: May 26, 2012, 04:37:35 AM
Wow, I overpayed. Looks like they went down to almost 1.0 with this issue. Someone got a good deal.

Yes, Did 3000 bonds sell or just everything above 1 BTC?

Thanks

Wow, at 1, the effective interest rate is 41.2%
You guys are losing money this way. Even doing compounding, you can only make 31.1% interest from pirate. You may need to rethink how low you are willing to buy your bonds at.
634  Economy / Securities / Re: [GLBSE] MORE Pirate Pass Through Bonds! on: May 26, 2012, 04:23:22 AM
I replied to the main pirate thread, but I think this should also be posted here:


I was looking at this earlier today


From https://bitcointalk.org/index.php?topic=76594.msg922493#msg922493
Quote
Case 1, invest 110 coins in PPT at a buy in price of 1.05 (104.8 bonds)
Payout is either 134 coins for a profit of 24 coins, or in the event of a default, you receive 32 coins for a net loss of 88.

Case 2, Also starting with 110 coins, reserve 32 coins as self insurance, and put 88 coins into an uninsured scheme.
Position is either 32 + 78 * 1.28 = 134 (also a profit of 24) including weekly compounding, or you retain the 32 coins you started with.

Depends on the price you pay.  Call it what you will, but buyers below 1.05 will be better off "mathematically".

For those that do not have access to 2000 coins and a 7%/week account, you'll also be better off.

This is OT for this thread.

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
635  Economy / Long-term offers / Re: Bitcoin Savings and Trust on: May 26, 2012, 04:12:44 AM

I was looking at this earlier today


From https://bitcointalk.org/index.php?topic=76594.msg922493#msg922493
Quote
Case 1, invest 110 coins in PPT at a buy in price of 1.05 (104.8 bonds)
Payout is either 134 coins for a profit of 24 coins, or in the event of a default, you receive 32 coins for a net loss of 88.

Case 2, Also starting with 110 coins, reserve 32 coins as self insurance, and put 88 coins into an uninsured scheme.
Position is either 32 + 78 * 1.28 = 134 (also a profit of 24) including weekly compounding, or you retain the 32 coins you started with.

Depends on the price you pay.  Call it what you will, but buyers below 1.05 will be better off "mathematically".

For those that do not have access to 2000 coins and a 7%/week account, you'll also be better off.

This is OT for this thread.

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
636  Economy / Long-term offers / Re: Bitcoin Savings and Trust on: May 26, 2012, 04:04:21 AM
Insurance is a joke?  If pirate defaults, people get .32 btc per bond.  There's no gimmick to it and its better than getting nothing.

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.

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. Smiley

Your calculations are correct if you consider the opportunity cost to be zero.

Otherwise, you could put the 0.78 BTC in pirate and the 0.32 BTC in another ("lower risk"?) investment and earn some interest on it too.

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.
637  Economy / Long-term offers / Re: Bitcoin Savings and Trust on: May 26, 2012, 03:51:35 AM
Insurance is a joke?  If pirate defaults, people get .32 btc per bond.  There's no gimmick to it and its better than getting nothing.

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.

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. Smiley
638  Economy / Long-term offers / Re: Bitcoin Savings and Trust on: May 26, 2012, 03:42:37 AM
Insurance is a joke?  If pirate defaults, people get .32 btc per bond.  There's no gimmick to it and its better than getting nothing.

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.
639  Bitcoin / Bitcoin Discussion / Re: A day in the life of a pirate. on: May 25, 2012, 07:31:31 AM
OK so you dared me to throw down. Here's an easy idea I was personally aware of due to my friendship with my boss. He ran an outbound call center for a few years. One of his really good money makers was political campaign polling.

Problem was he couldn't predict how much calling he was going to do in time to go live before the evening news. He couldn't hire employees to match demand either because he tended to overshoot. This required him to hire temps. The pay always seemed to be out of sync with the pollster companies.

He had to pay his temps when he let them go so it left him short changed. In comes the bailout. You cover the payroll and take a cut. I was privy to several double digit percentage gains. The time frames for these deals ranged between 1 to 2 weeks. Do the math.

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.
640  Bitcoin / Bitcoin Discussion / Re: A day in the life of a pirate. on: May 24, 2012, 09:37:42 PM
P.S. Or is it by any chance you just have no idea how to calculate compound interest?

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

Nevertheless, I personally know of at least a half-dozen ways to make the kind of returns Pirate does, and they're relatively simple too (I'm busy and lazy), and I only spent about a week or two thinking about it (surfing the net helps).

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.
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