[BTC-TC and BF] MININGCO.ETF - Closed

[Carnth]

https://btct.co/security/MININGCO.ETF

https://bitfunder.com/asset/MININGCO


Closed


MININGCO.ETF

Summary:
The purpose of this MiningCo.ETF (the fund) is to allow investors to instantly diversify among higher quality mining assets.
MININGCO.ETF is an Exchange Traded Fund that holds assets that are invested in mining Bitcoins where mining equipment is owned by the shareholders. Only assets with a proven track record of steady dividends and upholding their shareholder contracts will be considered. There is equal weight to all assets in the fund, no trading will occur outside of rebalancing the fund.
The Fund's portfolio will be public (where available) to show proof of ownership of underlying assets.

Transparency
The fund seeks maximum transparency by fully disclosing all assets held in the fund at any time. All dividends accrued and paid will be disclosed. All management fees will be disclosed.

Assets to be included
Only mining assets where equipment is owned by the shareholders will be included in the fund. Only assets with a proven track record of steady dividends and upholding their contracts will be considered. Assets on Bitcoin Trading Corp. with a total score of 6 or higher will be included in the fund.
When a new asset meets these criteria, it will be included in the fund, following balancing rules (see Balancing). When an asset no longer meet these criteria, it will be removed from the fund, following balancing rules.
A motion to add or remove assets from the fund can be requested by the shareholders.


Bitcoin Reserve
A portion of the fund will be held in Bitcoins. Not more than 20% of the entire fund’s value may be held in Bitcoins. The Bitcoin Reserve will be used to balance the fund and to offer share buybacks.

Balancing
All assets in the fund, except the Bitcoin Reserve, will be weighted equally based on Bitcoin value. Assets in the fund will be kept in equal weight less the Bitcoin Reserve by periodically rebalancing the fund. This occurs through the manager utilizing the Bitcoin Reserve, when necessary, to trade underlying assets. This can not be maintained all the times with 100% accuracy. Rebalancing will occur not less than once per month, and not more than once per week. Acceptable tolerance for balancing is a 10% margin of error of entire fund’s value for each asset. Balancing to a higher degree will incur unnecessary exchange fees and might depress low volume underlying assets. Exchange fees will be kept to a minimum by trying to perform direct transfers between asset issuers and the fund.

Dividends
Dividends will be paid only from dividends accrued from the underlying assets. Dividends will be paid weekly at most, no less than bi-weekly.

Share buybacks
Share buybacks will be offered on a very limited basis at 90% of the current Net Asset Value per share buy placing bids on the market.

Net Asset Value
The Net Asset Value (NAV) is the value of all assets in the fund plus the Bitcoin reserve.
The Net Asset Value per share is the value divided by number of shares outstanding. This is also known as NAV/U

Management Fees
Management will be compensated in with 6.9% of all dividends paid. 6.9% will be paid to management from all accrued dividends before being paid to shareholders.

Underlying Asset Motions
Underlying assets held by the fund may periodically raise motions to vote. This fund will vote on motions on underlying assets favoring the best interest of the fund. Shareholder may request a motion for proxy voting the fund’s shares of an underlying asset.


Risk to shareholders
Although research has been put into each underlying asset, Mining assets in the past have been unpredictable. The fund’s value relies on the the value of the underlying assets. If the underlying asset value decreases, the entire fund’s value will also decrease. Additional risks to Mining assets include the price of Bitcoin, the price of mining equipment, the difficulty mining Bitcoins the Bitcoin reward per block, mining equipment upgrades, as well as many other risks. This fund does not hedge against any of these risks. Each shareholder must understand these risks before investing.



Fund Closure
Management reserves the right to close this fund for any reason giving 30 days notice. All assets in the fund including unpaid dividends will be liquidated on the respective markets and paid to shareholders.

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[Carnth]

Asset spreadsheet: https://docs.google.com/spreadsheet/ccc?key=0AqLxDN0JzEUNdHdhandXeDQwTU13N2ZmbWxMMHNzeGc

Public Portfolio: https://btct.co/portfolio/gr83

Nasty Fans "seats" list. Username: MININGCO https://nastyfans.org/list.csv

Bitcoin wallet address: 1Mining6y9NFU1cWxBgExYykwgCCoqoW8X

[Carnth]

I'm trying to find a good share price.

BTC1 used to be the going rate, but that was awhile ago. I would like to stick with 1 some how. BTC0.1 seems to little, but may be more practical for smaller investors.
BTC.25 sounds about right to start, but I would still rather have tenths.


I also thought about including non BTCT.CO mining companies, but I don't want to evaluate these companies. With BTCT.CO assets, the moderators usually get it right, but other assets don't have this moderation. I want to stick with a formula for including assets that anyone can follow, not using my own arbitrary judgement.

Any thoughts? I would love to discuss.

[Deprived]

Are there 5 or more such companies on BTC.CO?

From BTC.CO Assets Issuers Terms of Service:

"Long-term investment securities are not to invest more than 20% of their portfolio into any other single security on BTC-TC. "

[Deprived]

One other request for clarification.  Contract says:

"A portion of the fund will be held in Bitcoins. Not more than 10% of the entire
fund?s value may be held in Bitcoins. Bitcoins will be used to balance the fund
and to offer share buybacks."

What's the fund's policy on liquidity/buying back shares?  Sounds like you have a policy (which is a big step up from many 'funds') - but at what % of current fund value do you do it?  Is it done via bids place by you, by filling asks placed by investors or on request?

Linked to this, contract says:

"Management Fees
Management will be compensated in with 5 shares of the fund being issued to the
manager?s personal account for every 100 shares sold. Shares issued as
compensation will be non voting shares (shares will abstain from all motions)."

If you buy back shares are a proportionate amount of management shares returned to the fund?  Sure you can see the problem if not - agressive rebuying and reselling could end up with management shares being a large chunk of equity.

Also on management shares, if the fund closes does management get to take a percentage of the proceeds?  If so, isn't that a little bit dubious given that management can close at any time for any reason - and could get 5% of fund value even if they'd never made a profit (or even got around to ever buying any investments).

On the other hand, if management can't vote with the shares and does NOT get assets on fund closing then why have management shares at all?  Why not just pay 5% of received dividends as a management fee - which manager can then use to buy shares that DO vote and own assets if he so chooses?

This giving shares that aren't actually shares thing seems to have got widespread without any real justification or purpose - and just opens up avenues of abuse and problems that don't need to be made possible.

[burnside]

Probably have to get some from off the exchange to start.  We don't have 5 yet and as Deprived pointed out, over 20% of any single one would not be allowed.

Are there any other good ones on BitFunder or CryptoStocks?  Or maybe you could mix in some Asicminer or something else not being traded?  Honestly, I think pulling in some off-exchange companies actually brings more value to the table for your fund investors.

Cheers.

[Deprived]

Probably have to get some from off the exchange to start.  We don't have 5 yet and as Deprived pointed out, over 20% of any single one would not be allowed.

Are there any other good ones on BitFunder or CryptoStocks?  Or maybe you could mix in some Asicminer or something else not being traded?  Honestly, I think pulling in some off-exchange companies actually brings more value to the table for your fund investors.

Cheers.

None on Bitfunder that meet his criteria - if there's any on Crypto they aren't traded at all.  GMP is nearest thing there - but not seeing a whole ton of transparency from it and the dividends don't look particularly appealing.

Problem with investing in less than a half dozen or so is that there's simply no diversity, so investors aren't really getting anything out of it.

Which isn't to say the fund can't be approved now then start selling shares once there's more offerings around.  Now would be a terrible time to start it anyway - ASICMINER's ASIC chips passed their tests yesterday, shuld be packaged today and they'll be hitting the network within the week hopefully.  At which stage expect a lot of tanking of prices of BTC mining securities in general - especially those with no ASIC upgrade path who were gambling ASICs wouldn't arrive (it shouldn't hit others TOO hard - but it will mean no early-starter bonus for any of them for being in first batch of ASICs plus depressed dividends until they get their own ASICS, which should mean lowered prices).

[Carnth]

Are there 5 or more such companies on BTC.CO?

From BTC.CO Assets Issuers Terms of Service:

"Long-term investment securities are not to invest more than 20% of their portfolio into any other single security on BTC-TC. "

We don't have 5 yet and as Deprived pointed out, over 20% of any single one would not be allowed.

This is what we call a snafu.

I admit, I got caught up and I wanted to start a new asset with the New Year. I may have jumped the gun getting this asset created, but there is more than one solution to this problem.

To keep things simple (as I originally planned) we can simply wait for additional companies to meet the criteria.
COGNITIVE and BASIC-MINING already meet the criteria. BTC-MINING, if and when namworld gets it going again would qualify after a few more YES votes. I urge any other mining company from GLBSE to move to btct.co and take advantage of the waived asset creation fee.

Deprived posted this while I was composing my response:

Which isn't to say the fund can't be approved now then start selling shares once there's more offerings around.  Now would be a terrible time to start it anyway

Are there any other good ones on BitFunder or CryptoStocks?  Or maybe you could mix in some Asicminer or something else not being traded?  Honestly, I think pulling in some off-exchange companies actually brings more value to the table for your fund investors.

And this is the other option. Changing the contract to allow for companies off of btct.co to be included in the fund. I originally did not want to do this. It makes things much more complicated. I also wanted to be able to prove ownership of underlying securities by making the fund's portfolio public. I wouldn't be able to do that as easily with assets from other exchanges (or proprietary platforms).

If we were to go the off-btct.co route:
NASTY looks like a good candidate. And I have also been offered a way to publicly display shares owned by the fund using their proprietary platform.
There may be a few others.

[Carnth]

One other request for clarification.  Contract says:
"Bitcoins will be used to balance the fund
and to offer share buybacks."

What's the fund's policy on liquidity/buying back shares?  Sounds like you have a policy (which is a big step up from many 'funds') - but at what % of current fund value do you do it?  Is it done via bids place by you, by filling asks placed by investors or on request?

The share buybacks will be offered on a very limited basis at 90% of the current Net Asset Value per share buy placing bids on the market.
Only a very limited portion of the Bitcoin Reserve will be available for buybacks. The Bitcoin Reserve's priority will be for balancing first, and then buybacks. I would rather have the fund's shares be traded on the open market, but I know that's not always possible. So, I hope a buyback policy will help in a very limited way with some investor's liquidity.
("Very limited" 3 times in one paragraph.)

Why not just pay 5% of received dividends as a management fee - which manager can then use to buy shares that DO vote and own assets if he so chooses?

Sounds good. It's a pay cut, but does keep things simpler.


The asset contract will be modified with the buyback policy and the management fee change when we can determine how to add underlying assets whilst keeping below 20% for each asset.

[creativex]

Cash + 3 or more mining assets and you'll be fine. BTC balance is obviously an asset that belongs to investors and is just as obviously not limited to 20%. It's a balancing act for any long term transparent fund, but with a properly designed spreadsheet it's a breeze.

[Carnth]

Cash + 3 or more mining assets and you'll be fine. BTC balance is obviously an asset that belongs to investors and is just as obviously not limited to 20%. It's a balancing act for any long term transparent fund, but with a properly designed spreadsheet it's a breeze.

I have thought about that. Holding 20% of a few assets + the rest in BTC would follow the btct.co terms. But I can't pay dividends on the BTC. I don't know how many people would be willing to buy into a fund that holds that much BTC. That's why I put a limit on how much BTC could be held in the fund.

But it certainly would allow me to start the fund much faster.

I would like to hear the thoughts of others. What about allowing the fund to hold up to 40% in BTC (cash)?
I would also like more opinions on adding "foreign" assets into the fund (Assets from other exchanges).

[creativex]

As mentioned Glari Mining Project on crypto is the best there. I believe he's got some FPGA to Avalon upgrades coming. Tempted to delve a little deeper and potentially invest a few BTC myself, though liquidity on cryptostocks is frequently a problem.

Edit: Another interesting aspect of adding GMP to your ETF is that you would then have a stake in all three shipping ASIC vendors. Truly a representation of the market.

[Deprived]

BTC-MINING, if and when namworld gets it going again would qualify after a few more YES votes.

Not sure if it would meet your criteria actually.  Although its contract says it's a mining company in fact its only asset (other than a few BTC) is a loan to BitBond.  So it doesn't own mining hardware - just passes through to an actual mining company.  If contract is being followed other than that (no idea if it is) then namworld will be taking a 10% cut for electricty/maintenance despite there not being any hardware needing electricity/maintenance.

Then go look at Bitbond and see that it stopped paying dividends against its contract and the issuer is now totally unresponsive and shortly to be reported for a scammer tag.

Pretty sure the BTC-Mining loan to it is part of the 85% that DID get old dividends (normal investors have had zero for the period since GLBSE went down).

But with the operator of the asset to which BTC-MINING is effectively a pass-through breaking his contract and BTC-MINING not being a mining company I don't think it fits the criteria of what you intend to invest in at all.

A 10% fee just to loan your money to someone else isn't exactly great value for money anyway.

Oh and Bitbond is a fixed-rate bond - so a pass-through to a fixed-rate bond (with a 10% haiir-cut on the way) is 100% not what you want to be investing in.

[Carnth]

BTC-MINING, if and when namworld gets it going again would qualify after a few more YES votes.

Not sure if it would meet your criteria actually.  Although its contract says it's a mining company in fact its only asset (other than a few BTC) is a loan to BitBond.  So it doesn't own mining hardware - just passes through to an actual mining company. 

Well, this is unsettling news.

It's looking more and more like "outside" assets will need to be used.

[BitcoinMint.US]

It's looking more and more like "outside" assets will need to be used.

I think having outside assets makes a lot of sense.  Otherwise, people using BTCT.CO could easily invest in the same companies as the fund and cut out the middleman.  Having exposure to outside assets brings something new to the exchange, that users otherwise wouldn't have exposure to.

[burnside]

It's looking more and more like "outside" assets will need to be used.

I think having outside assets makes a lot of sense.  Otherwise, people using BTCT.CO could easily invest in the same companies as the fund and cut out the middleman.  Having exposure to outside assets brings something new to the exchange, that users otherwise wouldn't have exposure to.

I know it's more of a PITA, but I agree that the fund will have more value to investors on BTC-TC if it includes assets from other exchanges/sources.  Applying the moderation score requirement gets a lot harder, but maybe you can come up with an alternate list of requirements?  (must have been mining for X months? must release personal contact info? etc, etc.)

Cheers.

[Carnth]

It's looking more and more like "outside" assets will need to be used.

I think having outside assets makes a lot of sense. 

I agree that the fund will have more value to investors on BTC-TC if it includes assets from other exchanges/sources.

Thanks for this valuable input. I will change the asset contract to include assets from outside of the btct.co exchange.
Although this introduces extra risk, I think it's the only way we can move forward with the fund.

I want this fund to be transparent, that is why I originally wanted to use only btct.co assets. Burnside made it easy for the fund's portfolio to be examined by the public.

After looking at how Bitfunder works, it's easy to show what assets the fund owns by publishing the public BTC address tied to the fund.
After speaking with OgNasty, the proprietary platform for NASTY "Fanclub" now also supports publishing shares held by a BTC address to the public.
As for other platforms, I don't know if publishing assets held will be possible.

Another change to get moving forward will be to increase the maximum amount of BTC that can be held in the fund to 20%. I don't plan on ever keeping this much BTC in the fund, but this will be required in order to balance assets across multiple exchanges/platforms.

The management fee will be increased to a total of 7.5% of dividends paid because of the added complexity of accessing multiple exchanges and proprietary platforms to keep the underlying assets in balance.

Motions will be allowed to be requested by shareholders to include new assets or remove existing assets from the fund.


I want this fund to be successful and fair for everyone involved. Let know what you think about the proposed contract changes.

[Carnth]

Asset contract updated in first post. Let me know what you think.

[laSeek]

The limited number of possible assets will make things difficult at first.  Holding coin in reserve means it's not working for your investors - which will reduce dividends early on which in turn might negatively effect your asset price.

I'm not sure about your stance on "Underlying Asset Motions" and abstaining. As an investment manager and holding assets - your role is to ensure any assets you hold maximise their potential - which you influence through your vote.  While it may be politic to withhold/abstain - with your responsibility to your fund - positive action would be better in my mind.

All in all I think it looks good though.  You've a solid head and you look before you leap - so I've no doubt about your ability to manage the fund well.

[Carnth]

I have made a couple of more changes to the asset contract. I am still trying to address all concerns while still keeping it fair for everybody.

First, the fund received an Abstain vote stating:

Anonymous voted ABSTAIN with comment: A management fee of 7.5 is excessive for a weighted fund, in my opinion.

This is great feedback. I would love to discuss it further in this topic.
To immediately address this concern, I have reduced the management to a total of 6.9% of dividends.

The management fee was originally lower because the fund was going to only accept underlying assets on btct.co. Keeping everything on a single exchange would obviously make things easier to manage.
Now that the fund is going to spread across different exchanges and use proprietary trading formats, managing the fund becomes more difficult. I don't mind more work, but I want to be compensated fairly for it. I am open to anyone's thoughts on this issue.

I'm not sure about your stance on "Underlying Asset Motions" and abstaining. As an investment manager and holding assets - your role is to ensure any assets you hold maximise their potential - which you influence through your vote.  While it may be politic to withhold/abstain - with your responsibility to your fund - positive action would be better in my mind.

I have thought about this point and voting in the best interest of the fund seems a better course of action than abstaining. I have changed the contract to reflect this, as well as offering a Proxy vote if shareholders request it.



These two changes have been implemented in the contract (as seen in the first post and on btct.co)



The fund would have started trading very soon, but the entire ASIC drama has been a huge ? for just about everyone involved with mining.

With BFL at CES showing off an.. um.. incomplete product, and now with bASIC showing more signs of uncertainty, it would be irresponsible to start a fund with such a huge potential to almost immediately lose value.
There is even an ask for a short on creativex's BASIC-MINING asset.

I could start the fund now, but speculation is not something that I want to bring to this fund. Good solid results, with steady paying dividends is my intended main feature.

I am also interested on anyone's thoughts on the ASIC drama.