[BitFunder] TU.SILVER -- Interim Report April 12th, 2013

[🏰 TradeFortress 🏰]

Any large loan like this take out in BTC is almost certainly a scam, since the interest rate is meaningless due to the volatility in BTC.

Well, except loans that are for activities directly involving btc - btcQuick, selling bitcoins (except a lot of them are suspicious), and of course a short on BTC.

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[usagi]

Any large loan like this take out in BTC is almost certainly a scam, since the interest rate is meaningless due to the volatility in BTC.

Well, except loans that are for activities directly involving btc - btcQuick, selling bitcoins (except a lot of them are suspicious), and of course a short on BTC.

Right. My main worry is that if the loan is for investment, how will the person pay it back? I am very suspicious of direct investment loans. I've already seen one person take out a "rep loan" for the purpose of investing in other loans. When one person defaulted on him he couldn't make his payments and defaulted in-turn. That's essentially a scam because the person asking for money is taking a loan but pretending it's investment in a business. I wouldn't go so far as to say they have the full intent to default if their investment goes awry, but it's an unfortunate consequence that many will have to face soon. BTC has been going up recently and people who took out 30, 60 and 90 day rep loans will almost certainly not be able to pay them back.

The other issue is that people who take out BTC denominated loans for the purpose of investment invariably end up investing in something actually denominated in US dollars -- like a mining company, for example. There just aren't that many places you can invest in a pure BTC enterprise. I wonder what the market will be like once we hit the top. People will probably have to start issuing linked loans just to get funded :/

[Deprived]

Second point, this is a 100% secured loan with a real payment plan attached to it and it is something which will increase the strength of bitcoin.

Actually it's NOT a 100% secured loan (it's 100% backed right now - but not necessarily for the loan duration) - as the majority of the backing is BTC denominated (BTC-BOND).  If BTC falls vs USD then so does the value of BTC-BOND in USD and the security is no longer 100% covered.  To be genuinely 100% secured it would need to be backed by something that had a USD value not a BTC one.  The ESECURITY bonds, on the other hand, ARE valued in USD (though sold in BTC) so should retain the same level of backing regardless of any exchange-rate moves.

To be clear I have no doubt that you'll repay the loan - but your statement is, nonetheless, inaccurate.

[usagi]

Second point, this is a 100% secured loan with a real payment plan attached to it and it is something which will increase the strength of bitcoin.

Actually it's NOT a 100% secured loan (it's 100% backed right now - but not necessarily for the loan duration) - as the majority of the backing is BTC denominated (BTC-BOND).  If BTC falls vs USD then so does the value of BTC-BOND in USD and the security is no longer 100% covered.  To be genuinely 100% secured it would need to be backed by something that had a USD value not a BTC one.  The ESECURITY bonds, on the other hand, ARE valued in USD (though sold in BTC) so should retain the same level of backing regardless of any exchange-rate moves.

To be clear I have no doubt that you'll repay the loan - but your statement is, nonetheless, inaccurate.

Thanks for the vote of confidence.

Continuing on from your line of reasoning, there is no such thing as a secured loan because the value of the securities used to back a BTC loan can decline WRT the price of BTC.

Interesting.

Well for what it's worth I've been speculating a little on the mtgoxUSD price, you may enjoy this little gem I came up with recently: https://bitcointalk.org/index.php?topic=148358.0

I think we're in a speculative bubble. I may just redo the loan in BTC anyways. Could be to my advantage :>

[Deprived]

Second point, this is a 100% secured loan with a real payment plan attached to it and it is something which will increase the strength of bitcoin.

Actually it's NOT a 100% secured loan (it's 100% backed right now - but not necessarily for the loan duration) - as the majority of the backing is BTC denominated (BTC-BOND).  If BTC falls vs USD then so does the value of BTC-BOND in USD and the security is no longer 100% covered.  To be genuinely 100% secured it would need to be backed by something that had a USD value not a BTC one.  The ESECURITY bonds, on the other hand, ARE valued in USD (though sold in BTC) so should retain the same level of backing regardless of any exchange-rate moves.

To be clear I have no doubt that you'll repay the loan - but your statement is, nonetheless, inaccurate.

Thanks for the vote of confidence.

Continuing on from your line of reasoning, there is no such thing as a secured loan because the value of the securities used to back a BTC loan can decline WRT the price of BTC.

Interesting.

Well for what it's worth I've been speculating a little on the mtgoxUSD price, you may enjoy this little gem I came up with recently: https://bitcointalk.org/index.php?topic=148358.0

I think we're in a speculative bubble. I may just redo the loan in BTC anyways. Could be to my advantage :>

Well I'd not go so far as to say there's no such thing as a secured loan - but for something to be 100% secured then whatever's backing it needs to hold a value higher than the loan throughout the entire loan duration.  That rules out pretty much any BTC security.  It can have 100% backing at the start - but can't really guarantee keeping that level of backing given the rate of default around here.

Although BTCJam's claims of 100% backing are inaccurate it definitely IS a step in the right direction.

I actually tend to agree that we're in a speculative bubble - but I don't think we're at (or even particulary close to) the top yet.  Definitly a classic Meow though

[miTgiB]

Hover over the MtGOX USD icon:

This listing has its amount linked to the bitcoin exchange rate for MtGoxUSD. The payment size in bitcoin will fluctuate over time following the exchange rate for MtGoxUSD.

Well it wasn't explain like that in https://bitcointalk.org/index.php?topic=145158.0 but I do see what you say when hovering over it.  I will just avoid that loan or any other linked loans.

So if BTC holds or drops, would you have been right to avoid linked loans?

It's just a loan, not intended as a play on currency.

Second point, this is a 100% secured loan with a real payment plan attached to it and it is something which will increase the strength of bitcoin.

It is not a rep loan. It is not a loan to invest in other loans. It's a real loan with a real purpose. You will not find many of these denominated in pure BTC. Any large loan like this take out in BTC is almost certainly a scam, since the interest rate is meaningless due to the volatility in BTC. Essentially EVERY loan becomes a currency play if you think like this.

That's why I like silver. Regardless of how many pieces of paper it takes to buy one, it's always the same amount of silver.

I do not disagree with your intended purpose of the loan, and if it was not linked to the dollar, I would add funding to it.   But with it linked to the dollar, I benefit from a falling BTC/USD and you benefit from a rising BTC/USD.  Security aside, I'll lend dollars for dollars, but when I lend BTC I expect BTC in return, so personally. I'll avoid loans linked to the dollar, or any national fiat. 

[odolvlobo]

Isn't taking a BTC-denominated loan to buy something (silver) valued in USD rather risky when BTC is rising fast?

I want to point out this popular misconception.

The price of silver is denominated in dollars in the U.S., but it is denominated in euros in the Europe, and pounds sterling in the U.K. In other words, it is denominated in the local currency, not just dollars.

More importantly, it doesn't matter what currency is used to buy the silver, because it can easily be converted from bitcoins. In other words, the denomination of the price is irrelevant when the conversion is trivial (and free).

While agree it would be risky to borrow BTC to buy silver, it has nothing to do with the value of the dollar.

[Deprived]

Isn't taking a BTC-denominated loan to buy something (silver) valued in USD rather risky when BTC is rising fast?

I want to point out this popular misconception.

The price of silver is denominated in dollars in the U.S., but it is denominated in euros in the Europe, and pounds sterling in the U.K. In other words, it is denominated in the local currency, not just dollars.

More importantly, it doesn't matter what currency is used to buy the silver, because it can easily be converted from bitcoins. In other words, the denomination of the price is irrelevant when the conversion is trivial (and free).

While agree it would be risky to borrow BTC to buy silver, it has nothing to do with the value of the dollar.

The "value of the dollar" (whatever you mean by that) isn't the issue - it's changes in the BTC/Fiat (whichever fiat you like - I identified USD as that's what usagi's comments suggested was being used) exchange-rate that give the risk.  As it's highly likely changes in that exchange-rate will impact the BTC price/value of silver far more than any other factor.

Which of course, is all irrelevant, given that the loan is denominated in USD.

EDIT: It seems you're arguing that something can't be valued in USD if you can buy it with a different currency elsewhere.  That's ludicrous.  Usagi identified the savings to be made in USD - pretty clearly indicating that the silver being bought was priced in USD.

[usagi]

Isn't taking a BTC-denominated loan to buy something (silver) valued in USD rather risky when BTC is rising fast?

I want to point out this popular misconception.

The price of silver is denominated in dollars in the U.S., but it is denominated in euros in the Europe, and pounds sterling in the U.K. In other words, it is denominated in the local currency, not just dollars.

More importantly, it doesn't matter what currency is used to buy the silver, because it can easily be converted from bitcoins. In other words, the denomination of the price is irrelevant when the conversion is trivial (and free).

While agree it would be risky to borrow BTC to buy silver, it has nothing to do with the value of the dollar.

The "value of the dollar" (whatever you mean by that) isn't the issue - it's changes in the BTC/Fiat (whichever fiat you like - I identified USD as that's what usagi's comments suggested was being used) exchange-rate that give the risk.  As it's highly likely changes in that exchange-rate will impact the BTC price/value of silver far more than any other factor.

Which of course, is all irrelevant, given that the loan is denominated in USD.

EDIT: It seems you're arguing that something can't be valued in USD if you can buy it with a different currency elsewhere.  That's ludicrous.  Usagi identified the savings to be made in USD - pretty clearly indicating that the silver being bought was priced in USD.

Odolvlobo is a pretty smart cookie, and he has a point here, as does Deprived -- we do in fact seed our charts with the US dollar price of silver. So it is both true and not true. It is true so long as the US Dollar is the most liquid and stable currency in the world. When it is not true (someday) we will provide continuity by pricing silver in Euros or Yuan or some other currency. Actually one of my goals is to provide open market pricing in BTC, essentially backing BTC with silver. But that won't happen until we get another 100,000 ounces, right?

[odolvlobo]

Isn't taking a BTC-denominated loan to buy something (silver) valued in USD rather risky when BTC is rising fast?

I want to point out this popular misconception.

The price of silver is denominated in dollars in the U.S., but it is denominated in euros in the Europe, and pounds sterling in the U.K. In other words, it is denominated in the local currency, not just dollars.

More importantly, it doesn't matter what currency is used to buy the silver, because it can easily be converted from bitcoins. In other words, the denomination of the price is irrelevant when the conversion is trivial (and free).

While agree it would be risky to borrow BTC to buy silver, it has nothing to do with the value of the dollar.

The "value of the dollar" (whatever you mean by that) isn't the issue - it's changes in the BTC/Fiat (whichever fiat you like - I identified USD as that's what usagi's comments suggested was being used) exchange-rate that give the risk.  As it's highly likely changes in that exchange-rate will impact the BTC price/value of silver far more than any other factor.

Which of course, is all irrelevant, given that the loan is denominated in USD.

EDIT: It seems you're arguing that something can't be valued in USD if you can buy it with a different currency elsewhere.  That's ludicrous.  Usagi identified the savings to be made in USD - pretty clearly indicating that the silver being bought was priced in USD.

I'm saying that you can value something in any currency, regardless of the denomination of the price. If usagi were borrowing BTC (which turns out to be not the case) to buy silver priced in dollars, the important relationship is the price of silver in BTC. Dollars are irrelevant, except that they were used temporarily for the trade.

Think about someone with euros buying silver priced in dollars. They don't need to follow the value of silver in dollars. They just follow the price in euros. The issue of EUR/USD fluctuations is a completely separate story.

It appears that you are saying that (for example) if the silver had a price in euros instead of dollars, then it's subsequent value in BTC would be affected by BTC/EUR instead of BTC/USD. That is the misconception that I am referring to. The fact is that you end up with the same answer no matter which one you use (ignoring discrepancies in exchange rates).

EDIT: The fact that there is very little trade denominated in BTC means that we have to convert to established currencies as an extra step in order to obtain the most accurate information in practice, but in theory it is not necessary.

[usagi]

I'm saying that you can value something in any currency, regardless of the denomination of the price. If usagi were borrowing BTC (which turns out to be not the case) to buy silver priced in dollars, the important relationship is the price of silver in BTC. Dollars are irrelevant, except that they were used temporarily for the trade.

Yes, as I said, that is true -- however Deprived is actually more correct here because we fix the price of silver in BTC by looking at the price of silver in dollars. I mean, I know you're talking about "silver", and I and he are talking about "TU.SILVER", so I don't disagree. Just commenting on how we do things.

It appears that you are saying that (for example) if the silver had a price in euros instead of dollars, then it's subsequent value in BTC would be affected by BTC/EUR instead of BTC/USD. That is the misconception that I am referring to. I try to illustrate the misconception by pointing out that the price can be in any currency simply by converting.

It would be both a misconception and a truth. The markets are not perfectly efficient. So if most of our customers are using euros, that would be a better way to sell silver. Not just more efficient but more in line with public perception. The goal here is to move silver, odolvlobo, so we have to sell to our customers. Dollars, euros, BTC, is all just a red herring. If you traded in colored beads I would quote you a price in colored beads and find an exchange which allowed me to trade in colored beads.

What you are really looking at there is my supply chain. If I source silver in US dollars, I cut a price in US dollars to ensure I make a profit such that I can buy more silver with what I make. If I buy it in Euros, same. The real risk to me and my customers actually has nothing to do with currency of any kind including BTC, because silver is money. Once my customers get their hands on shares of TU.SILVER the price in BTC or fiat of any kind is irrelevant.

They have a guaranteed amount of silver.

That is what TU.SILVER is all about.

[usagi]

I am pleased to announce the March week 1 TU.SILVER report.

http://kongzi.ca/silver/TSR/20130303TSR.pdf

Comments are welcome, I stand by to answer any shareholder's questions about the company.

[usagi]

I am pleased to announce our Amagi Metals order has arrived. We now have twenty 2013 Canadian Maples IN STOCK!

Wow, are they ever good looking coins! They look good!



Please see our profile page on BitFunder for more images of the maples and our other silver inventory.

Oh, and don't forget to redeem your shares for your maples -- first come first served!

[usagi]

I am pleased to present this week's Tu.SILVER report.

http://kongzi.ca/silver/TSR/20130310TSR.pdf

Relevant quote:

During the preparation of February’s report, our financial advisor commented on how difficult our books were to understand. I responded by selling all our investments and moving entirely into JAH on BitFunder. This was at a price for JAH between 6.5 and 9 bitcents. Right after I did this, ASICMINER started paying dividends and JAH exploded to over 30 bitcents a share. I could not believe our luck!

As a result of this, TU.SILVER has about 30 bitcoins available to be invested somewhere. Thus I put it to you, the investors. What should TU.SILVER do with the money we've earned? We could advertise. Maybe we should invest in something (ASICMINER?) or maybe we should pay a special dividend. I'm not sure at this point. Sales have dried up due to the extreme volatility in the price of BTC. So perhaps we should throw it in something stable and tied to BTC like BTC-BOND or LTC-ATF.B1?

Please share your ideas on what TU.SILVER can do with the money. Should we buy S.DICE? What would you do if you had an extra 30 bitcoins?

[burnside]

I am pleased to present this week's Tu.SILVER report.

http://kongzi.ca/silver/TSR/20130310TSR.pdf

Relevant quote:

During the preparation of February’s report, our financial advisor commented on how difficult our books were to understand. I responded by selling all our investments and moving entirely into JAH on BitFunder. This was at a price for JAH between 6.5 and 9 bitcents. Right after I did this, ASICMINER started paying dividends and JAH exploded to over 30 bitcents a share. I could not believe our luck!

As a result of this, TU.SILVER has about 30 bitcoins available to be invested somewhere. Thus I put it to you, the investors. What should TU.SILVER do with the money we've earned? We could advertise. Maybe we should invest in something (ASICMINER?) or maybe we should pay a special dividend. I'm not sure at this point. Sales have dried up due to the extreme volatility in the price of BTC. So perhaps we should throw it in something stable and tied to BTC like BTC-BOND or LTC-ATF.B1?

Please share your ideas on what TU.SILVER can do with the money. Should we buy S.DICE? What would you do if you had an extra 30 bitcoins?

Buy more silver?   

[usagi]

I am pleased to present this week's Tu.SILVER report.

http://kongzi.ca/silver/TSR/20130310TSR.pdf

Relevant quote:

During the preparation of February’s report, our financial advisor commented on how difficult our books were to understand. I responded by selling all our investments and moving entirely into JAH on BitFunder. This was at a price for JAH between 6.5 and 9 bitcents. Right after I did this, ASICMINER started paying dividends and JAH exploded to over 30 bitcents a share. I could not believe our luck!

As a result of this, TU.SILVER has about 30 bitcoins available to be invested somewhere. Thus I put it to you, the investors. What should TU.SILVER do with the money we've earned? We could advertise. Maybe we should invest in something (ASICMINER?) or maybe we should pay a special dividend. I'm not sure at this point. Sales have dried up due to the extreme volatility in the price of BTC. So perhaps we should throw it in something stable and tied to BTC like BTC-BOND or LTC-ATF.B1?

Please share your ideas on what TU.SILVER can do with the money. Should we buy S.DICE? What would you do if you had an extra 30 bitcoins?

Buy more silver?   

The danger in buying more silver is that sales have dried up right now, probably due to the extreme volatility in the BTC price. So it would be tying up the money without meaningfully expanding the fund. I'm not sure that's the wisest thing to do right now.

I'm thinking, if I want to attract investors to the fund in a down market I am going to want to provide sustainability and dividend. Or I could provide added security. I could make the move to the vault now, or I could advertise. I'm leaning towards advertising right now but will make a final decision later. I'm basically looking for input. I'm pretty close to just dumping it in LTC-GLOBAL  or maybe, BTC-BOND, ATF.B1, etc.

[Monster Tent]

 Given your shitty investment history you probably should be avoiding securities. It cant hurt to simply hold BTC till you actually need it since you might be able to buy a lot more silver if the price shoots up much more.

[usagi]

Given your shitty investment history you probably should be avoiding securities. It cant hurt to simply hold BTC till you actually need it since you might be able to buy a lot more silver if the price shoots up much more.

Not sure what you are talking about but yes, throwing the money in the cash kitty is one of the ideas I was discussing with our financial advisor. i was looking for something a little more "active" though. Do you have any idea what a good investment might be?

[usagi]

I'm thinking of running a poll.

1. Reinvest the money into the business (essentially, advertise)

2. Search for acquisitions (i.e. takeover a copmany like LTC-SILVER)

3. Buy stock back (ongoing -- we just bought back 23 shares)

4. Invest in some other venture (i.e. ASICMINER, BTC-BOND, to be discussed)

5. Pay out a larger dividend

Thoughts welcome.

[Monster Tent]

Given your shitty investment history you probably should be avoiding securities. It cant hurt to simply hold BTC till you actually need it since you might be able to buy a lot more silver if the price shoots up much more.

Not sure what you are talking about but yes, throwing the money in the cash kitty is one of the ideas I was discussing with our financial advisor. i was looking for something a little more "active" though. Do you have any idea what a good investment might be?

The best option is investing in your own company. For instance buying back cheap shares. Or a bulk silver buy.