[CLOSED] S.DICE - SatoshiDICE 100% Dividend-Paying Asset on MPEx

[StarenseN]

Erik,

Fix that cell or I won't sleep 

[usagi]

0.5/share values S.DICE at 50 million bitcoin - by my simplistic fundamental analysis that is impossible.

0.05/share values it at 5 million bitcoin - still way too high in my opinion.

I can see it reaching maybe 0.01/share but I think that is too risky too. I think the one of the risks is that if the last two months profits are due to a small number of whales then they won't be able to afford to keep losing ~20k btc per month for long and then profits will decline. I could be wrong, maybe the whales are more numerous than I imagine, maybe they are some high rollers playing by proxy from Macau or something.

Normally I charge for advice like this but I'm pretty stocked up on S.DICE now, so I'll take my fee as talking my own book.

Profits are up 100% since inception. If we conservatively assume profit of 100kBTC in 2013, then over 100,000,000 shares, that is a profit of 0.001 per share. If this represents an acceptable 1% a month in profit, at a 5x P/E (as per S.DICE financial statements) we are looking at a price of 0.5/share.

Now, why it is worth more. It is worth more because it is worth less now. This is a difficult concept for new or inexperienced investors to grasp, but how markets work is to buy up underpriced shares and then continue buying so that the average price represents what they feel the investment was originally worth, and then to start taking profits.

So conceivably S.DICE will hit around .8/share then fall back down to .5. That is what the gross price action will look like. My ETA on this is another 1-2 years.

[k]

If we conservatively assume profit of 100kBTC in 2013, then over 100,000,000 shares, that is a profit of 0.001 per share. If this represents an acceptable 1% a month in profit, at a 5x P/E (as per S.DICE financial statements) we are looking at a price of 0.5/share.

Now, why it is worth more. It is worth more because it is worth less now. This is a difficult concept for new or inexperienced investors to grasp, but how markets work is to buy up underpriced shares and then continue buying so that the average price represents what they feel the investment was originally worth, and then to start taking profits.

So conceivably S.DICE will hit around .8/share then fall back down to .5. That is what the gross price action will look like. My ETA on this is another 1-2 years.

0.001 profit/share at 5x P/E implies a share price of 0.005.  Less than it's currently trading at (~0.0072 on MPEX last I looked). 0.005 is actually around the price I think it is good value, although recent profitability does support a higher valuation based solely of profit but I think there are a lot of risks that should discount the value in my estimation.

Your 0.5/share is impossible as I've said already as it values the company more than 21 million bitcoin.

[Peter Lambert]

Your 0.5/share is impossible as I've said already as it values the company more than 21 million bitcoin.

Ignoring all the actual data about wether the price should be 0.5 or 0.005, you seem pretty sure that being more than 21 million bitcoin somehow is impossible. I wonder why you think that? Why cannot something be worth more than 21 million bitcoins?

[nimda]

Due to the block reward halving periodically (in fact this has happened once already: there are now 25 BTC generated per block rather than 50), and the cap on decimals at 8 decimal places, the block reward will be at 0.00000001 in ~140 years, and the halving after that will remove the block reward, capping the number of bitcoins at 21 million. Now, some have already been provably destroyed, and others lost, so the actual spendable total will be lower than that.

[k]

Your 0.5/share is impossible as I've said already as it values the company more than 21 million bitcoin.

Ignoring all the actual data about wether the price should be 0.5 or 0.005, you seem pretty sure that being more than 21 million bitcoin somehow is impossible. I wonder why you think that? Why cannot something be worth more than 21 million bitcoins?

Hmmm, you ask an interesting question and I need to think about more to fully wrap my mind about it.

I guess it's theoretically possibly that someone could pay more than 0.21 per share for S.Dice thus valuing it at more than 21 million in theory, but there will never be enough bitcoins to sell all the shares at that price. Textbook bubble?

[Deprived]

Your 0.5/share is impossible as I've said already as it values the company more than 21 million bitcoin.

Ignoring all the actual data about wether the price should be 0.5 or 0.005, you seem pretty sure that being more than 21 million bitcoin somehow is impossible. I wonder why you think that? Why cannot something be worth more than 21 million bitcoins?

Hmmm, you ask an interesting question and I need to think about more to fully wrap my mind about it.

I guess it's theoretically possibly that someone could pay more than 0.21 per share for S.Dice thus valuing it at more than 21 million in theory, but there will never be enough bitcoins to sell all the shares at that price. Textbook bubble?

The total number of bitcoins in existence is irrelevant to the value of something.

Are you saying that NOTHING can be worth more than 21 million bitcoins?  So if I were to put 10 billio dollars up for sale they couldn't be worth more than 21 million bitcoins?

There's no correlation between the value of something and the single largest transaction that can be made to purchase a portion of it.

IF something is worth more than 21 million bitcoins then it just means noone can buy ALL of that something with bitcoins in a single transaction.  It in no way, of itself, makes the valuation wrong.

[MPOE-PR]

0.005 is actually around the price I think it is good value, although recent profitability does support a higher valuation based solely of profit but I think there are a lot of risks that should discount the value in my estimation.

I think the prevailing market notion is that the risks are insignificant compared to the potential, and so therefore instead of a discount there has to be a premium. Fwiw.

Due to the block reward halving periodically (in fact this has happened once already: there are now 25 BTC generated per block rather than 50), and the cap on decimals at 8 decimal places, the block reward will be at 0.00000001 in ~140 years, and the halving after that will remove the block reward, capping the number of bitcoins at 21 million. Now, some have already been provably destroyed, and others lost, so the actual spendable total will be lower than that.

So?

If you count all the cash available in any given town, you will find that it comes to much less than all the combined stock in all shops, all the cars moving about, all the real estate and all the men and women inhabiting that real estate.

Hmmm, you ask an interesting question and I need to think about more to fully wrap my mind about it.

I guess it's theoretically possibly that someone could pay more than 0.21 per share for S.Dice thus valuing it at more than 21 million in theory, but there will never be enough bitcoins to sell all the shares at that price. Textbook bubble?

You might wish to consider MP's discussion of the topic.

[EskimoBob]

LOL. "Market capitalization" is a funny number and can confuse people easily. In sdice case, this is exactly what has happened. This  gets abused by pervert mircea and his confused muppet mpoe-bs.

In this particular case, calculating market cap from all outstanding shares, is utter bull shit.
Use "free float" and by free float I mean the shares held buy public investors and excluding shares held by one guy (90%!) that can not be traded.

For anyone to beat the "market cap" of sdice is easy
Invent a BS bitcoin Co with 10 693 900 000 000 shares and sell 1/10693900000000(add more zeros, I lost count) of that wonderful Co to the public for 10 BTC.
Now you can make yourself a paper medal, congratulate your self and issue PR BS statement: Your company now account for ~100% of Bitcoin in circulation, and you are the single largest sector of the Bitcoin economy.

The pie chart of this absurdity will look like this:



"single largest sector" ... hmmm

[herzmeister]

I guess a company can generally be worth more in USD than the current market gap of Bitcoin, Google is certainly more worth than that, and so can be SatoshiDICE.

So I'd say of course the SatoshiDICE shares value can exceed 21 million BTC, but given that all other factors remain constant, the shares value would drop if BTC price against USD rises.

[MPOE-PR]

I guess a company can generally be worth more in USD than the current market gap of Bitcoin, Google is certainly more worth than that, and so can be SatoshiDICE.

So I'd say of course the SatoshiDICE shares value can exceed 21 million BTC, but given that all other factors remain constant, the shares value would drop if BTC price against USD rises.

Only if wagered volume also drops I would guess.

[k]

The total number of bitcoins in existence is irrelevant to the value of something.

Are you saying that NOTHING can be worth more than 21 million bitcoins?  So if I were to put 10 billio dollars up for sale they couldn't be worth more than 21 million bitcoins?

There's no correlation between the value of something and the single largest transaction that can be made to purchase a portion of it.

IF something is worth more than 21 million bitcoins then it just means noone can buy ALL of that something with bitcoins in a single transaction.  It in no way, of itself, makes the valuation wrong.

I'm not saying nothing can be worth more than 21 million bitcoins. I'm saying S.DICE can't be worth more than 21 million bitcoins on an intrinsic value basis. S.DICE earns bitcoins and is denominated in bitcoins. If it earned dollars maybe it could be worth more than 21 million bitcoins but I think that should have the effect to increase the value of bitcoin relative to the dollar to balance the system out again as buying pressure from S.DICE to convert dollars to bitcoins to pay the dividend would increase bitcoin demand.

To me the intrinsic value is equal to the sum of the future income discounted to the present value. Can an asset that only earns bitcoins be intrisiclly worth more than all the bitcoins that will ever be in existence? (Intrinsic value now, not market cap based on what someone is paying for a share which of course could value the company higher than 21 million bitcoins).
I'm trying to wrap my head around it, maybe in theory the earnings could come in and be paid out so quickly that they could be recycled through the bitcoin economy many times a year and allow a company to have bitcoin earnings that would justify a value more than the total number of bitcoins but it seems something like a perpetual motion machine to me. Whatever about theory in practice I'm pretty sure no company with revenues only in bitcoin could have incomes that would justify an intrinsic value more than the total number of bitcoins there will ever be.

[wachtwoord]

To me the intrinsic value is equal to the sum of the future income discounted to the present value. Can an asset that only earns bitcoins be intrisiclly worth more than all the bitcoins that will ever be in existence? (Intrinsic value now, not market cap based on what someone is paying for a share which of course could value the company higher than 21 million bitcoins).

Theoretically yes, as long as it doesn't retain all earnings in Bitcoins. Realistically? Unlikely.

[Peter Lambert]

The total number of bitcoins in existence is irrelevant to the value of something.

Are you saying that NOTHING can be worth more than 21 million bitcoins?  So if I were to put 10 billio dollars up for sale they couldn't be worth more than 21 million bitcoins?

There's no correlation between the value of something and the single largest transaction that can be made to purchase a portion of it.

IF something is worth more than 21 million bitcoins then it just means noone can buy ALL of that something with bitcoins in a single transaction.  It in no way, of itself, makes the valuation wrong.

I'm not saying nothing can be worth more than 21 million bitcoins. I'm saying S.DICE can't be worth more than 21 million bitcoins on an intrinsic value basis. S.DICE earns bitcoins and is denominated in bitcoins. If it earned dollars maybe it could be worth more than 21 million bitcoins but I think that should have the effect to increase the value of bitcoin relative to the dollar to balance the system out again as buying pressure from S.DICE to convert dollars to bitcoins to pay the dividend would increase bitcoin demand.

To me the intrinsic value is equal to the sum of the future income discounted to the present value. Can an asset that only earns bitcoins be intrisiclly worth more than all the bitcoins that will ever be in existence? (Intrinsic value now, not market cap based on what someone is paying for a share which of course could value the company higher than 21 million bitcoins).
I'm trying to wrap my head around it, maybe in theory the earnings could come in and be paid out so quickly that they could be recycled through the bitcoin economy many times a year and allow a company to have bitcoin earnings that would justify a value more than the total number of bitcoins but it seems something like a perpetual motion machine to me. Whatever about theory in practice I'm pretty sure no company with revenues only in bitcoin could have incomes that would justify an intrinsic value more than the total number of bitcoins there will ever be.

Bullshit. You clearly do not understand velocity of money.

Extreme example: If there are 100 btc total in existance, and a company earns 50 btc per month in profit, what is the company worth?

SatoshiDice making all its earnings in bitcoin does not limit it to only earning some value based on the limit of coins. If the profits rose a few orders of magnitude, the company might have to increase the frequency of dividends.

[k]

Hmmm, you ask an interesting question and I need to think about more to fully wrap my mind about it.

I guess it's theoretically possibly that someone could pay more than 0.21 per share for S.Dice thus valuing it at more than 21 million in theory, but there will never be enough bitcoins to sell all the shares at that price. Textbook bubble?

You might wish to consider MP's discussion of the topic.

The link is interesting. Thanks

0.005 is actually around the price I think it is good value, although recent profitability does support a higher valuation based solely of profit but I think there are a lot of risks that should discount the value in my estimation.

I think the prevailing market notion is that the risks are insignificant compared to the potential, and so therefore instead of a discount there has to be a premium. Fwiw.

Yeah the market values S.DICE more than me and that's fine.

I've been surprised by the level of betting activity on SatoshiDice over the last 2 months. If that's sustainable then the higher value is justified.

A big question I think is are most of the profits from the last 2 months from a single whale who is perhaps an early adopter with a big stash, if that's the case how long can they continue to lose ~15k bitcoin/month. If they stop how much will the total activity/profit decline. If the whales are some rich dudes buying bitcoin to then bet on SatoshiDice then it's far more sustainable.

Other risks I can think of off the top of my head:

- Something could happen to MPEX (dont know how risky this is as haven't looked into it closely).
- if you own on a passthrough then there are risks of the passthrough operator and platform.
- bitcoin value could rise strongly and wagered volume on SatoshiDice drops.
- US authorities could put pressure on Erik for running an illegal gambling service. Not saying it is or not or if they did that they could shut it down but they could try to make Erik shut it down.
- something more compelling my come along and take customers from SatoshiDice. A simple clone with slightly better odds or something is not going to work but maybe something not thought of yet.

[k]

The total number of bitcoins in existence is irrelevant to the value of something.

Are you saying that NOTHING can be worth more than 21 million bitcoins?  So if I were to put 10 billio dollars up for sale they couldn't be worth more than 21 million bitcoins?

There's no correlation between the value of something and the single largest transaction that can be made to purchase a portion of it.

IF something is worth more than 21 million bitcoins then it just means noone can buy ALL of that something with bitcoins in a single transaction.  It in no way, of itself, makes the valuation wrong.

I'm not saying nothing can be worth more than 21 million bitcoins. I'm saying S.DICE can't be worth more than 21 million bitcoins on an intrinsic value basis. S.DICE earns bitcoins and is denominated in bitcoins. If it earned dollars maybe it could be worth more than 21 million bitcoins but I think that should have the effect to increase the value of bitcoin relative to the dollar to balance the system out again as buying pressure from S.DICE to convert dollars to bitcoins to pay the dividend would increase bitcoin demand.

To me the intrinsic value is equal to the sum of the future income discounted to the present value. Can an asset that only earns bitcoins be intrisiclly worth more than all the bitcoins that will ever be in existence? (Intrinsic value now, not market cap based on what someone is paying for a share which of course could value the company higher than 21 million bitcoins).
I'm trying to wrap my head around it, maybe in theory the earnings could come in and be paid out so quickly that they could be recycled through the bitcoin economy many times a year and allow a company to have bitcoin earnings that would justify a value more than the total number of bitcoins but it seems something like a perpetual motion machine to me. Whatever about theory in practice I'm pretty sure no company with revenues only in bitcoin could have incomes that would justify an intrinsic value more than the total number of bitcoins there will ever be.

Bullshit. You clearly do not understand velocity of money.

Extreme example: If there are 100 btc total in existance, and a company earns 50 btc per month in profit, what is the company worth?

SatoshiDice making all its earnings in bitcoin does not limit it to only earning some value based on the limit of coins. If the profits rose a few orders of magnitude, the company might have to increase the frequency of dividends.

I understand, that's why I said the earnings could be recycled through the bitcoin economy many times a year but practically I think it's impossible.

[EskimoBob]

The total number of bitcoins in existence is irrelevant to the value of something.

Are you saying that NOTHING can be worth more than 21 million bitcoins?  So if I were to put 10 billio dollars up for sale they couldn't be worth more than 21 million bitcoins?

There's no correlation between the value of something and the single largest transaction that can be made to purchase a portion of it.

IF something is worth more than 21 million bitcoins then it just means noone can buy ALL of that something with bitcoins in a single transaction.  It in no way, of itself, makes the valuation wrong.

I'm not saying nothing can be worth more than 21 million bitcoins. I'm saying S.DICE can't be worth more than 21 million bitcoins on an intrinsic value basis. S.DICE earns bitcoins and is denominated in bitcoins. If it earned dollars maybe it could be worth more than 21 million bitcoins but I think that should have the effect to increase the value of bitcoin relative to the dollar to balance the system out again as buying pressure from S.DICE to convert dollars to bitcoins to pay the dividend would increase bitcoin demand.

To me the intrinsic value is equal to the sum of the future income discounted to the present value. Can an asset that only earns bitcoins be intrisiclly worth more than all the bitcoins that will ever be in existence? (Intrinsic value now, not market cap based on what someone is paying for a share which of course could value the company higher than 21 million bitcoins).
I'm trying to wrap my head around it, maybe in theory the earnings could come in and be paid out so quickly that they could be recycled through the bitcoin economy many times a year and allow a company to have bitcoin earnings that would justify a value more than the total number of bitcoins but it seems something like a perpetual motion machine to me. Whatever about theory in practice I'm pretty sure no company with revenues only in bitcoin could have incomes that would justify an intrinsic value more than the total number of bitcoins there will ever be.

Bullshit. You clearly do not understand velocity of money.

Extreme example: If there are 100 btc total in existance, and a company earns 50 btc per month in profit, what is the company worth?

SatoshiDice making all its earnings in bitcoin does not limit it to only earning some value based on the limit of coins. If the profits rose a few orders of magnitude, the company might have to increase the frequency of dividends.

Lets make it even more extreme:
1) There is 2 guys in that world of yours
2) "A" is owner or this Co and "B" is not working for "A"

Pufff...

... on third day, one of those characters discovers fractional reserve banking or there is a good chance, that "B" realized, he has no need for "A" and its service. http://wumocomicstrip.com/strip/2009/04/15/

[herzmeister]

also, Monetary base. The 21 million are M0, the value from shares like SatoshiDICE would belong to M2 or M3.

[Deprived]

I'm not saying nothing can be worth more than 21 million bitcoins. I'm saying S.DICE can't be worth more than 21 million bitcoins on an intrinsic value basis. S.DICE earns bitcoins and is denominated in bitcoins. If it earned dollars maybe it could be worth more than 21 million bitcoins but I think that should have the effect to increase the value of bitcoin relative to the dollar to balance the system out again as buying pressure from S.DICE to convert dollars to bitcoins to pay the dividend would increase bitcoin demand.

To me the intrinsic value is equal to the sum of the future income discounted to the present value. Can an asset that only earns bitcoins be intrisiclly worth more than all the bitcoins that will ever be in existence? (Intrinsic value now, not market cap based on what someone is paying for a share which of course could value the company higher than 21 million bitcoins).

I don't see how you believe 21 million bitcoins is a limit on its value.

If it made 1 million BTC profit per month that would give it an intrinsic value well over 21 million BTC by any reasonable means of calculation and be entirely possible with only 21 million BTC in circulation.

Are you really saying that if it accepted USD rather than BTC it could be worth more than 21 million - but can't even if it were to make exactly the same profits but denominated in BTC?

How about if it accepted USD for bets - but converted profits to BTC - could it then be worth more than 21 million?

Or how about if it accepted BTC for bets but immediately converted winnings to USD?

If it makes X BTC = Y USD profit/month then it should have an identical intrinsic value irrespective of which currency the profits are retained in and wagers are transacted in.

[MPOE-PR]

I'm not saying nothing can be worth more than 21 million bitcoins. I'm saying S.DICE can't be worth more than 21 million bitcoins on an intrinsic value basis. S.DICE earns bitcoins and is denominated in bitcoins. If it earned dollars maybe it could be worth more than 21 million bitcoins but I think that should have the effect to increase the value of bitcoin relative to the dollar to balance the system out again as buying pressure from S.DICE to convert dollars to bitcoins to pay the dividend would increase bitcoin demand.

I guess velocity is also a part of that equation. Depends how fast those 21 mn move (and btw, there's not much more than 10mn atm).

I've been surprised by the level of betting activity on SatoshiDice over the last 2 months.

I think it's safe to say pretty much everyone has.