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

[misterbigg]

Avg. daily revenues: 4,798.63
Avg. profit per day: 91.17 btc (this is profit, not revenue)
...
Projected profit per year: 33,278 (again, this is profit, not revenue, and assumes ZERO growth)

Where's the standard deviation and variance for daily / weekly revenues?

What's the confidence level for the projected profit?

Where are the Poisson regressions!!!!

[Factory]

The site itself is simply a fancy front entrance.

True. However, the expectation of parabolic growth comes not from an increasing stream of gambling "tech nerds", but from the mainstream exposure generated through advertising.

Gah.... again, the site valuation is based on NOT assuming growth, but on current revenues/profits. If "parabolic growth" occurs, then great, but it's certainly not an assumption. The offering makes financial sense for an investor even with near zero growth.

How is growth not factored in to it? You have been shouting about it's growth potential for the first half of the thread.

[evoorhees]

Where can we audit the BTC cash reserves?

This thread is a good place to start - people have been auditing SatoshiDICE since it started
https://bitcointalk.org/index.php?topic=80312.0

But where's the running balance? Nothing in the prospectus talks about the size of the cash reserve, or discusses the probability that SatoshiDICE will "go bust" (which is unlikely but still a nonzero chance).

If the dividends are paid out every month what happens to the cash reserves? How often are the betting limits reduced on account of liquidity? What's the long term plan for raising the betting limits?

A lot of unanswered questions here! I think people are getting caught up in the glamour and hype and are forgetting basic due dilligence!!!!

1) Running balance of the wallet is not public (though I could make it such). It's held in a handful of online (hot) wallets and offline cold storage. The balance is thus the sum of these accounts... as of this second, it stands at 7,302 BTC

2) SatoshiDICE cannot go bust. It's algorithms change the max bet sizes in real time so that in a world where the site lost every bet forever, the cash reserves just fall toward zero asymptotically.  It can lose all the money in cash reserves, but never go into debt.

3) Dividends paid out come from new profits, and don't reduce cash reserve below the level it was at in the prior month. Betting limits rise and fall constantly based on statistical variance. Betting limits are very high right now, and I do not intend to raise them further - though if I wished to, I can at any time put in more capital for this purpose.

4) Are there a lot of unanswered questions? I think I've been quite good about answering them all, no? And yes, due diligence is extremely important. I'm hoping people at least read the full prospectus before posting here, because lots of questions are likely answered in that document.

[evoorhees]

All Casinos purchase specialty Casino Insurance, which is usually underwritten with cooperation from a bank using a letter of credit / credit line for the casino.

Who backstops SatoshiDICE's cash reserve? What happens if a series of lucky (or unlucky if you're a shareholder) rolls wipes out the cash reserve? With no backstop the betting limit would have to be lowered, and SatoshiDICE would enter a period of very slow growth. And it would be quite vulnerable to a well financed competitor with a larger cash reserve. Customers would leave SatoshiDICE if the limits stayed low for too long. Nowhere is this mentioned in the prospectus...

As mentioned, cash reserve can fall to zero, but can't go negative. In the extremely unlikely even that the statistical variance resulted in this (it's something less than 0.01% chance), it would mean I'd simply put more cash into it and then get it moving again. It's too profitable to just let it sit there.

Not mentioned in the prospectus because it seems obvious to me, but I probably should have discussed this.

[misterbigg]

1) Running balance of the wallet is not public (though I could make it such). It's held in a handful of online (hot) wallets and offline cold storage. The balance is thus the sum of these accounts... as of this second, it stands at 7,302 BTC

2) SatoshiDICE cannot go bust. It's algorithms change the max bet sizes in real time so that in a world where the site lost every bet forever, the cash reserves just fall toward zero asymptotically.  It can lose all the money in cash reserves, but never go into debt.

3) Dividends paid out come from new profits, and don't reduce cash reserve below the level it was at in the prior month. Betting limits rise and fall constantly based on statistical variance. Betting limits are very high right now, and I do not intend to raise them further - though if I wished to, I can at any time put in more capital for this purpose.

4) Are there a lot of unanswered questions? I think I've been quite good about answering them all, no? And yes, due diligence is extremely important. I'm hoping people at least read the full prospectus before posting here, because lots of questions are likely answered in that document.

Okay, this is more like it! What will happen when there's a string of bad luck (and there will be) which brings the cash reserves close to zero? How long will it take to recover to the previous point? Because the monthly dividends will be reduced in this scenario.

What is the plan for raising the betting limits? You said you do not intend to raise them further. Does this mean forever? If you do raise the limits will this always be done using new capital and not profits? If the limits are raised with profits, it would reduce the payout for that month. Although we would expect future months payouts to be larger on average.

I read the whole prospectus and nothing in there seems to address these. I feel that to properly evaluate S.DICE offering we need to understand the risks. There are two kinds:

Internal Risks

- Running low on cash reserves
- Taking a long time to rebuild cash reserves (small dividends during this period)
- Server hacked and private keys compromised

External Risks

- Domain name is seized
- Owner is seized
- Servers are confiscated
- MPEx disappears and there's no market for the equities
- Obstacles to trading the equities makes them illiquid
- Copycats with better advertising budget and larger payout, larger bets
- More mining pools start excluding SatoshiDICE transactions

[misterbigg]

In the extremely unlikely even that the statistical variance resulted in this (it's something less than 0.01% chance)...

Actually, over the course of a couple of years its almost guaranteed to happen at least once.

[Stephen Gornick]

Typically when the DOJ/Internet Police seize a website it is usually just the domain and not the servers. This is why bookies like 5dimes.com continue to operate at their .eu address.

True, but like I said, a considerable amount of corporate goodwill is going into the domain name. The expectation of growth is based on advertising the SatoshiDICE.com brand (and URL) and also in print media.

There's a silver lining in every cloud. How many people had no idea there was a Full Tilt Poker or Pokerstars until Black Friday 2011?

You can't buy publicity like that.

This service could be operated all from a laptop from some cyber cafe in some developing nation if need be.  So a takedown of the .com would cause not a single wager to be lost and would be a minor hiccup before its customer base resumes using a new domain.  [Update: This is for those who use learn to use the service using the website.  Again, wagering for existing users could continue without a domain name at all.  If the hosting were disrupted, even though wagers aren't stopped -- payouts would be delayed until failover to an alternate comes back online.]

That is what is so revolutionary about this -- the bitcoin blockchain is both the deposit funding and cash-out system as well as the accounting and compliance system and the source of a seed for each bet's random number generation as well.   The website is only informational and valuable primarily for marketing.

Now the biggest threat to SastoshiDICE investors is the one already mentioned -- the Groupon problem.  There's nothing to stop copycats that deliver something similar.  SatishiDICE has value because the existing alternatives to real money online gambling pay out 95%, or 92% etc.   SatoshDICE today pays out more than 98%.   That is provable by looking at the blockchain.  

However, if there is this much profit in it, there is incentive to build a competing site that offers 99% payout.  (BitLotto is another blockchain-based wagering service that offers 99% payouts now for its monthly lotto draw, for example).   And if that is profitable, there is no reason there won't be another competitor that offers 99.5% payout.

[misterbigg]

However, if there is this much profit in it, there is incentive to build a competing site that offers 99% payout.  (BitLotto offers this now for its monthly lotto draw).   And if that is profitable, there is no reason there won't be another competitor that offers 99.5% payout.

Could even go to 100% payout or >100% payout, by forcing users to gamble through a web interface and look at ads. The advertisers would cover the house advantage as a payment.

[misterbigg]

Now the biggest threat to SastoshiDICE investors is the one already mentioned -- the Groupon problem.

I updated my list to include this external risk.

[556j]

The exchange PR insulting potential investors and site operator using "LOL" and similar insults greatly discredit this. Learn some professionalism. Are you 19 or what? Good luck with your IPO. Your behavior has ensured I'll never use your site again. What trash.

[cedus]

Cedus, you're confusing yourself.

See figures here: https://docs.google.com/spreadsheet/ccc?key=0Aiec3-Eo_yO5dG5SQklHZG4wRm1GMW9DRWpMMW5UQkE#gid=0

Avg. daily revenues: 4,798.63
House edge: 0.019
Avg. profit per day: 91.17 btc (this is profit, not revenue)

Projected profit per year: 33,278 (again, this is profit, not revenue, and assumes ZERO growth)

IPO will raise capital at roughly 10x P/E ratio based on that above figure.

I stand corrected (partially). Correct P/E is 11, not 10 or 15. Didn't realise you're still suffering that massively from variance.

Edit: To be clear, your actual revenue per day is 72.35 btc, expenses 4.69 btc and profit 67.66 btc. Then, the projected daily/annual profit (based on zero growth in revenue/expenses and statistical house edge) is 86.48/31,566 btc (not the 91.17/33,278 mentioned above, which is indeed revenue, not profit - the difference is expenses).

[misterbigg]

The exchange PR insulting potential investors and site operator using "LOL" and similar insults greatly discredit this.

Can you please provide links?

[boonies4u]

Guys, watch the double posting. You've been doing it throughout the entire thread.

[makomk]

Maybe I would invest into this but being on MPEX is risky as hell and I don't want to support spamming of the blockchain with huge amounts transactions either (my SSD drive has only 128 GB).

SatoshiDICE pays for every transaction it makes. To date, it is the largest supporter of miners in the bitcoin economy. The majority of all mining fees ever have been paid by SatoshiDICE.

Interestingly, it apparently turns out that the fees paid by SatoshiDICE aren't enough to compensate for the amount pools lose by including the transactions in their own blocks due to more of their blocks getting orphaned, which is why some of the big pools have stopped including SatoshiDICE transactions. That's not even taking into account the cost to the rest of the network of forwarding and storing them.

[MPOE-PR]

Would you be willing to let me short your stock?  Thanks.

Yes, stock is available to borrow for shorting, with the restrictions that a. to those traders that already have margined accounts with MPEx and b. after the last IPO date. This has actually always been the case on MPEx.

I can only hope other exchanges would implement the same leeway, you would be a lot less able to manipulate the "market" value of your junk bonds if that were the case.

While a P/E of 10 for a growth company is attractive as a normal investment, a 10 P/E ratio just isn't attractive at all in the world of bitcoin finance.

This is nonsense. Finance is finance. If you decide that you will only take Ponzi-level "interest" then you decide you will only put your money into Ponzi schemes. That's a fact. Bitcoin has to come to terms with financial sanity.

That aside, obviously everyone is entitled to his own choices.

This is worth preserving against future edits.

Unlike pretty much anyone on this forum, I haven't substantially altered any post I've made. Just saying.

Here is the problem:
S.DICE is pricing themselves like a "real-world" IPO, and being potentially optimistic about their growth potential
Kids with nothing better to do hanging out on a forum expect 1-7%/week return and don't care about the underlying business.

Fify.

(Oops Rassah beat me to it).

And once again, MPEX PR put people off taking them seriously as an alternative to GLBSE. I was actually interested in the idea of owning shares in SD, but the price is way off.

I have nothing to do with pricing anything, sorry.

2-When you're selling a stock based on a perceived similarity to Facebook/Groupon... Well... Let's just say I have absolute faith that this asset will perform just as well as those two have

The fact is most bitcoin transactions ever made were made to or from SatoshiDICE!

Think about it. If there existed a website that could claim "the majority of internet connections are made either to us or from us" how poorly would you think that'd fare? A fact's a fact, SD has a good position, why argue with it?

There are real concerns here:
-A fully audited financial statement.

This keeps being repeated. Then it is pointed out that the entire transaction set is public and has in fact been audited by independent people all over the forum. Then it gets repeated again. Why?

-An easily replicated business model.

All business models are easily replicated. That is what humans do: they figure things out. Once a human figured it out, any other human can do it too. This is the main explanation to our success as a species. Still, the fact that in theory anyone could make an iphone does not mean the iphone clones are iphones. This has also been pointed out before. It still gets repeated. Why?

-Massive risk regarding BTC on a whole (as much as I am a proponent of BTC, we have to acknowledge it is very risky.)

Then it's a moot point. If you don't like BTC get out. If you are comfortable with BTC this adds no extra risk. This has also been said before, yet here it is repeated. Why?

In my mind, as of right now, this IPO appears to be very unattractive.

Bolded out for convenience.

Well there is middle ground.  Our company (Tangible Cryptography) recently funded notes (debt not equity offering) at 29.6% APR and had more capital offered than we were willing to take on.

Very nice how that worked out btw, props to you. Do you take more btw?

When you compare this to something like Bitcoin Savings & Trust...yeah, it's less risky.  However, when you compare it to all your investment options out there, it's incredibly risky.  I'm not limiting myself to the Bitcoin investment market.

Which is fine. But this is a BTC asset.

An astute observer may realize that by offering shares, it becomes an interesting bet to simply buy shares of SatoshiDICE instead of build it all over again and hope to outdo its marketing and brand exposure and business relationships.

This.

People keep asking, "oh, why the stock offering"? Well, a good reason could be: once people who would finance a competitor have the option of buying into the genuine article, they might regard investing in trying to reinvent the wheel for what it actually is: trying to reinvent the wheel.

The model may be replicable or not, but the point of fact is: intelligent people solve new problems. That's what they do. Solving this problem would have been good in March. We're at the end of August, the world moves on. What's next, Bitcoin has no value because it's easily replicable and as such that guy with truecoin or realcoin or whatever it was is going to take all the market over?

If that was how the world worked people would cease to innovate

See above. Reimplementing something is no innovation. It's quite the contrary of innovation.

And I can't see how the company would keep it's value when bitcoin rallies against the other currencies

How would it not ? It has nothing to do with any other currency. It's all BTC.

However, A company dealing purely in BTC is ultra-risky compared to traditional investments. Therefor, a P/E of 10 seems unwarranted.
[...]
You are still comparing BTC-based valution to the evaluations of established companies trading on major world exchanges..... Yes your company is large and high growth, but you seem to be completely ignoring the fact that you are dealing solely in one of the most volatile currencies.

The only reason this argument can even be brought is because this is only the second large company to ever be listed in BTC world. You will get used to it, and then you will possibly see quite the reverse: 10 P/E is HUGE in a currency that is fundamentally deflationary. 1% in dollars means nothing because of HeliBen. 1% in BTC means a lot. A HUGE LOT.

BTC is a good thing. It compares favourably to any fiat. If this point is contentious to you I guess BTC investments aren't yet something you can do.

If you keep significant assets in the exchange, and the exchange's domain is seized, you are screwed.

But if you have your BTC assets in a brain wallet, then the closure of an exchange's domain will just mean some short term volatility, while exchanges re-gear to host their sites on Tor.

On the other hand, SatoshiDICE equities have no such protections. If you buy shares in the IPO and the US government simply comes in and seizes the domain later, there is little to no change of recouping your initial investment.

Domains are no part of this discussion. Should the domain be seized, MPEx will simply move to another one. Possibly something TOR based, or namecoin based or whatever.

Enough with the FUD, seriously.

It's if the server is seized (don't even think there is much of a server for this) then it's a different story.

Either a lot more than there is for GLBSE or else there's some magic afoot, seeing how I've not yet heard of 10 second page loads. Just saying.

Lol, MPEX. Since MPEX is so much better than GLBSE, I wonder why GLBSE has more volume (by many orders of magnitude)

GLBSE has had ~200k volume since its launch (January). Sadly they don't provide per-month figures. MPEx has had ~100k volume this month alone. Do your math (without skipping degrees of magnitude like others in the thread, please).

Strike 1: MPEx has negligible market share

Just because you're not on IRC doesn't mean the world outside doesn't exist. Step out of your bubble. It's small and it doesn't smell too good.

Anyway, reading through these pages has been an interesting exercise in sociology.

[ciuciu]

The porn star is speaking, everybody please go quiet and prepare your bitcoins!

[boonies4u]

-snip-

If you consider MPEx to be "The BTC Stock Exchange", what do you consider GLBSE to be?

[Shadow383]

The exchange PR insulting potential investors and site operator using "LOL" and similar insults greatly discredit this.

Can you please provide links?

They handily dropped by, no need 

Frankly, meh, if anyone wants to buy into SD at a >$3 million valuation on an exchange that shares its domain name with a porn/gore site, let them.

I wish them the best of luck finding buyers at that rate. I just don't think it's terribly likely that this IPO will be successful 

[misterbigg]

Can you please provide links?

They handily dropped by, no need 

Yep, I see what you mean. Completely unprofessional. Of course, if I stood to make two hundred bucks a head I would probably be quite a vocal defender.

What I don't understand is why S.DICE is going to IPO on this penny-ante exchange instead of GLBSE. I think that Mr. E.V.'s ideological fetishes might be putting the business sensibilities in the back seat. Which is dangerous for investors.

[evoorhees]

The exchange PR insulting potential investors and site operator using "LOL" and similar insults greatly discredit this. Learn some professionalism. Are you 19 or what? Good luck with your IPO. Your behavior has ensured I'll never use your site again. What trash.

LOL.... well... one of us is using our real world identity to conduct business, at least   Who are you, again?

And LOL is a highly professional term, expressing humor across the web of space that divides us.