[BTC-TC] Deprived Mining Speculation (DMS)

[Lohoris]

Then you wouldn't mind to tell us what the one-time dividend for SELLING will be after the difficulty has risen to e.g. 19,200,000  

I might easily have done something wrong:

Current MINING div 0.00016113
Difficulty change 19'402'467.47/15'605'632.68 = 1.24329899773
New MINING div 0.00016113/1.24329899773 = .000129599

Current assets 734.18617511
Current units 11630
Asset/unit 0.06312865

410 with new MINING div .000129599 * 410 = 0.05313559
400 with new MINING div .000129599 * 400 = 0.05183960
Excess asset/unit 0.06312865 - 0.05183960 = 0.01128905

Wanted to thank you for this explanation a while ago - very helpful!

You're welcome, I'm glad I could help someone, since it took a bit to figure it out myself

Here's a spreadsheet version : )

[Deprived]

INVESTMENTS

Sorry I've been so slow getting this sorted.

First let me clarify the criteria I use when determining which potential investments even get as far as a vote.  To be voted on an investment has to, in my view, meet ALL of the following criteria:

1.  Be denominated in BTC.
2.  Have no significant exposure to any currency (fiat OR crypto) other than BTC.
3.  Have a defined face value and allow redemption at that value (a reasonable admin fee is fine)
4.  Have little chance of any significant loss of capital/reduction of face value.
5.  Have an issuer with no significant blemishes on their record in terms of returning investment and honouring contracts promptly.  The promptly part is critical - we can't have a scenario where someone suddenly take an extra 6 months to repay because of problems.
6.  Give an ROI of at least 10% per year.
7.  They must be backed by assets capable of redeeming the investments.  Where such assets are non-BTC-denominated then they must significantly exceed the BTC-denominated investments accepted.

At present I'm proposing TWO investments for vote.  Votes for both will be put up shortly after I post this.  I will hold my own vote back until near the end - and then vote for whichever side is winning (so as to make sure my own vote isn't effectively the casting one).

At present I'll be following a policy of no more than 25% of capital being invested with ANY issuer (including myself).  If and when other suitable investments are approved I'd look to reduce that percentage.  Obviously if there are significant dividends for SELLING then existing investment MAY pass that limit - if so then I'd act to reduce it as soon as practicable (in practice I can predict dividends in advance and act pre-emptively).


PROPOSAL 1 : COINLENDERS

Coinlenders is a BTC-lending site operated by TradeFortress.  We'd be looking at taking 30-day CDs paying an annualised rate of 26% or so.  30 days is short enough that I can predict difficulty well enough not to run into cash-flow issues.  I'd stagger CDs anyway to further reduce such problems.

My view is that this meets all of the above criteria.  The capital is used to issue BTC-denominated loans, the majority of which are secured against provided collateral.


PROPOSAL 2 : JUST-DICE

This is a new - and potentially more controversial - proposal.

Investments in this are acting as the house bank for a dice gambling website.  The very tight BR management (max payout of 1% of bank - dynamically recalculated) makes significant loss of capital highly unlikely.  Cash-flow is no issue - as withdrawals can be made at any time.  The capital invested is ONLY used as the bank - and so is always 100% backed by actual BTC.

At present it's definitely paying well over 10% per year - but that would need to be regularly reviewed if capital deposited there increases significantly and/or betting activity declines.

I view it as a safe investment - with only a slim chance of small capital losses with any such capital loss being such that it would entirely be absorbed by SELLING.  That is important - as only SELLING can vote, so it would be entirely in appropriate to vote on any investment where there was a real chance of losses that could impact cover for MINING.

EDIT: Just to be absolutely clear I would NOT EVER be rolling the dice myself.  I've never played S.DICE and would never play JUST-DICE (I only ever bet on -EV things where it's a social activity).

Both votes will be placed up for just over a day - if there's no quorum obtained in that period then I'll relist the votes for longer and try again.  My hope (and expectation) is that sufficient SELLING investors are active to obtain a quorum in a short time-scale.

Both of these securities support 2FA - which would be used (as is the case on ALL accounts holding any funds managed by me).

[Lohoris]

just-dice is a really brililiant idea, but now it has a few uptime problems (down now, and was down yesterday too for several hours).
I'd wait until these are fixed and doesn't crash for a sensible amount of time.

[CtmanGer]

Voted NO: JUST-DICE
Reason behind it: just another DDoS attack against bitcoin like SatoshiDice

Coinlenders: YES

[Ac3Upz]

Voted NO
Reason behind it: just another DDoS attack against bitcoin like SatoshiDice

I think that just-dice is not spamming the blockchain. They use deposit/withdraw system, the bets are not in blockchain themselves. See: https://bitcointalk.org/?topic=238613 for more info.

[somestranger]

Coinlenders all the way. Voted no on dice.

[Deprived]

Voted NO: JUST-DICE
Reason behind it: just another DDoS attack against bitcoin like SatoshiDice

Coinlenders: YES

Just-Dice doesn't work like S.DICE.

Gamblers send cash once then use it from a balance - so there's only transactions when they deposit or withdraw, not for each bet.

[vandinn]

Voted NO: JUST-DICE (The vote evened after my cast.)
Reason behind it: the site is new and has no history of being secure. The possibility of 25% of capital being invested in such an activity is way, way too much. I would vote otherwise if it was, say, 5-10%.

I understand there are few safe investment opportunities with Bitcoin now, but 25% into one business is just something I cannot agree with.

[Deprived]

Voted NO: JUST-DICE (The vote evened after my cast.)
Reason behind it: the site is new and has no history of being secure. The possibility of 25% of capital being invested in such an activity is way, way too much. I would vote otherwise if it was, say, 5-10%.

I understand there are few safe investment opportunities with Bitcoin now, but 25% into one business is just something I cannot agree with.

I wouldn't initially be investing 25% into it - or into anything (other than my own bonds which have no significant CP risk that doesn't already exist and it's not possible or likely to be possible in the future for me to get 25% into my bonds anyway).  The 25% is a maximum not a target.

If the motions are approved then at present I'd be looking initially to put :

200 BTC into Coinlenders (the lowest amount to get the highest rate for a 30-day CD) - with the plan to do a second similar one in 2 weeks time if capital has grown sufficiently to support it.
100 BTC into Just-Dice - with the intention to review that weekly and increase/decrease it based on the return it generates, available capital and any other information that comes to light.

[Deprived]

Having considered my response above (and the post to which I replied) let me clarify the following:

No more than 20% of capital will be invested into Coinlenders without a new vote.
No more than 10% of capital will be invested into Just-Dice without a new vote.

All future proposals will have a stated maximum percentage which will require a new motion to be increased.

Where such maximums become exceeded due to unexpectedly large dividend payouts they will be promptly reduced back to within the approved maximums.

[eltopo]

Can you please explain how do you calculate the ROI per year of just-dice?

[Deprived]

Can you please explain how do you calculate the ROI per year of just-dice?

Look at the volume of bets.  Multiply that by 1% (house edge).  That gives the EXPECTED profit (which is what we have to work with).  Now divide that by the time-period in which it occurred - to give a profit/day.  Then divide it by the total capital invested there to give an ROI.  I haven't bothered doing the exact calculation as I can tell at a glance that at present it's well over 10% per year (I'm pretty good at that sort of calculation).

If you do the above calculation on current stats that bear in mind not all capital was even in there most of the time - so the real ROI is far higher than what you get.  If the motion is approved then I'd be doing more rigorous calculations and keeping records so as to be able to watch trends and work out what expected ROI was for specific growth in capital there etc.  I would NOT be posting those - as it generally isn't in my interest to provide detailed analysis for free to everyone on the forum.

EDIT: you actually need to multiply expected profit by 0.99 (to account for dooglus' own 1%) but that obviously has a trivial impact.

[Deprived]

Further to the above post let me explain how you can easily tell it's over 10% ROI per year.

At present the site's been going under a week but volume of bets is larger than invested capital.  That means, without doing any math, that you know ROI for investment is over 1% per week and so over 52% per year (ignoring compounding).

That figure will likely drop (a lot) - but right now the ROI is plainly very large without any need to do any math at all beyond noticing that volume of bets exceeds invested capital.

[Mabsark]

With regards to the investments, if they do bad, SELLING gets lower dividends. If they do good then, does SELLING get higher dividends?

This asset was already confusing enough. Please provide some example maths to show how these investments effect dividends.

[Rannasha]

With regards to the investments, if they do bad, SELLING gets lower dividends. If they do good then, does SELLING get higher dividends?

This asset was already confusing enough. Please provide some example maths to show how these investments effect dividends.

The capital of the fund is used to pay MINING regular daily dividends, according to the 5 MHash/s per share it is equivalent to. The fund aims to keep enough capital to pay for 400 days of MINING dividends at the current difficulty. If the capital exceeds 410 days of MINING dividends, SELLING is paid dividends to reduce capital back down to 400 days.

This doesn't change when the capital is invested into something. Right now, it is invested partially in LTC.ATF.1 bonds, which give a constant weekly coupon. The income from this is simply added to the total capital used in the calculations.

How strongly the return on investments affects the SELLING dividends, depends strongly on how much capital there is in the fund and how much the difficulty changes. Suppose there is for 390 days of MINING dividend left and a 5% profit is obtained from investments. This boosts the capital to 409.5 days of MINING dividend. If a difficulty change follows that where the difficulty remains constant or goes down, SELLING gets nothing.

On the other hand, if there are 390 days of MINING dividend left, a 5% profit is obtained and the difficulty is increased by 20%, the capital increases to 491.4 dividend days, so 91.4 dividend days worth of capital is paid out to SELLING (almost 20% of the full capital). Without the investment, this payout would be only 68 days of MINING dividend.

Under the right circumstances, even small investment returns can leverage into great profits for SELLING. On the other hand, these returns may also fall below the payout threshold and SELLING doesn't see any of it. Once again, it depends on the difficulty. One thing is for sure, MINING dividends remain unchanged, regardless of how much is made from investments.

[🏰 TradeFortress 🏰]

With regards to the investments, if they do bad, SELLING gets lower dividends. If they do good then, does SELLING get higher dividends?

Rannasha has already posted an explanation, but if you're confused here's another. If they do good, SELLING gets more capital. SELLING pays the capital above a limit determined by the difficulty as dividends. As selling will have more capital, dividends will increase.

[Deprived]

With regards to the investments, if they do bad, SELLING gets lower dividends. If they do good then, does SELLING get higher dividends?

This asset was already confusing enough. Please provide some example maths to show how these investments effect dividends.

In simple terms all profit from investments gos to SELLING so long as SELLING is actually receiving dividends.

The only time it gos to MINING is if SELLING never receives another dividend - but SELLING should have voted to close the fund before that happens (once it becomes obvvious difficulty has stopped rising).

[Deprived]

In practice any losses from investment will also all go to SELLING.

The market prices of MINING and SELLING reflect the market's belief of how the two are entitled to capital.

Present prices of (using round figures) .021 Mining, .033 Selling indicate that the market believes that about 61% of all capital will end up going to SELLING.  If the market is correct then we'd have to lose over 61% of capital before the losses would pass on to MINING.  That's impossible with current and proposed investments so unless the market is significantly wrong there's no way any losses could be passed on to MINING (though capital cover in terms of number of days COULD drop - but the market suggests any such drop would be replaced when difficulty rose).

That's why only SELLING gets to vote - as they're the ones who will get the profit and stand to lose from any loss.

[elefter]

Sorry if this already answered but to exchange DMS.PURCHASE to selling and mining i just send them to Deprived on BTC-TC?

[Deprived]

Sorry if this already answered but to exchange DMS.PURCHASE to selling and mining i just send them to Deprived on BTC-TC?

To DeprivedMining.

If you sent to Deprived by mistake let me know and I can fix it (that's the account I used there for LTC-ATF).