[BTC-TC] Deprived Mining Speculation (DMS)

[ThickAsThieves]

Looks like the dividend payment on MINING is still stalled - will give it 10 more minutes then leave a message for burnside.

My TAT.VM payout took quite a while yesterday. Of course a pm to Burnside won't hurt either

[Deprived]

Looks like the dividend payment on MINING is still stalled - will give it 10 more minutes then leave a message for burnside.

My TAT.VM payout took quite a while yesterday. Of course a pm to Burnside won't hurt either

Nah it's a big OOPS on my end.

The dividend processed 2 hours ago - i.e. 2 hours early.  I'm assuming I must have set it for then in error - and noone (especially including myself) noticed it.  As I wasn't around then I didn't spot it running.  And when I saw it as processed and posted earlier I STILL didn't notice it had run 2 hours ago.  Only noticed eventually when I went to my own holdings and viewed my dividends

It doesn't do any great harm - but does mean the report is wrong (including calculation of new price).  It also means the single transfer I did in the interim meants one investor didn't receive a dividend at all - I'll manually send him his.  So if you're the person who traded in 20 PURCHASE 45 minutes before the official dividend time, you'll receive a transfer for 20 * MINING dividend from me.

[Deprived]

20 MINING dividends would have been just over .00322 BTC.  Have sent .01 from my personal account to the person who missed both dividends - so he's now been set right and the fund itself has .00322 BTC more than it otherwise would have.  Corrected report shortly.

[Deprived]

Sold   2301
Price   0.066163
Total   152.241063
Less Fee   151.9365809
Man Fee   4.558097426

Management fee of 4.558 has been transferred.

BTC Balance (BTC-TC)    506.93042319
10000 LTC-ATF.B1    100.00000000
TOTAL ASSETS    606.93042319
   
Outstanding MINING   9258
Outstanding SELLING   9258
Outstanding PURCHASE   336
Effective Units   9594
   
Block reward   25
Difficulty   15605633
Hashes per MINING   5000000
   
Daily Dividend    0.00016113
50 days (Min Liquid)    0.00805649
100 days (Forced Close)    0.01611298
365 days (Buyback)    0.05881238
405 days (IPO)    0.06525757
400 days (Post SELLING div)    0.06445192
410 days (Pre SELLING div)    0.06606322
   
NAV Post MINING Div    605.38454385
NAV/U Post MINING Div    0.06310033
Days Dividend Post Div   391.61
SELLING Dividend    -        
NAV Post SELLING Div    605.38454385
NAV/U Post Selling Div    0.06310033
PURCHASE selling price    0.06625534
PURCHASE buy-back price    0.06183832

[Deprived]

Corrected report has now been posted above - it's calculated as though all dividends were paid at the same time and the ending NAV of it accurately reflects the current holdings.

NAV/U (and selling price of PURCHASE) actually ROSE today.  That's because sales in the last 24 hours of PURCHASE were high (as a percentage of existing ones) so the effective 1.8% markup on new sales was a larger amount than the dividend paid to MINING+PURCHASE.  Don't expect that to happen often.

[Deprived]

Just to finally put that little cockup behind us, it occurs to me than anyone who bought a MINING in the 2 hours between the dividend actually being paid and when it should have been paid will have lost out.

Rather than waste a lot of time tracking those people down and compensating them, I've transferred 1.5 BTC from my personal wallet to the issuing wallet and made a 2nd payment to ALL MINING share (not PURCHASE as they all got theirs fine).  That's about 1/3 of my management fee for today - so seems a fair penalty for me to pay.  It also ensures that absolutely noone (with the possible exception of 2 shares sold just now - if the seller had missed both dividends) is worse off than they should have been - and the vast majority of MINING holders will have got a small bonus of 1 day's dividend.

[cusdog]

God Dammit, my selling-mining valuation spreadsheet failed to take into account management laziness/benevolence as a +EV event

[alexius89]

Just to finally put that little cockup behind us, it occurs to me than anyone who bought a MINING in the 2 hours between the dividend actually being paid and when it should have been paid will have lost out.

Rather than waste a lot of time tracking those people down and compensating them, I've transferred 1.5 BTC from my personal wallet to the issuing wallet and made a 2nd payment to ALL MINING share (not PURCHASE as they all got theirs fine).  That's about 1/3 of my management fee for today - so seems a fair penalty for me to pay.  It also ensures that absolutely noone (with the possible exception of 2 shares sold just now - if the seller had missed both dividends) is worse off than they should have been - and the vast majority of MINING holders will have got a small bonus of 1 day's dividend.

+1   Fair Player!

[FloatesMcgoates]

When do you expect capital investment to begin?

[Deprived]

When do you expect capital investment to begin?

Well we have 100 BTC already invested.  The rest depends entirely on SELLING.  I raised 3 suggestions earlier in the thread - only 2 of which I expect to go to a vote.  I've been waiting on feed-back (seeing as SELLING get to vote) - if none arrives then I'll put a vote up anyway tomorrow.  It'll only be a 24-hour vote (with the securities so new most investors are going to be active).  If the votes pass on any of them then we'll have more cash invested very shortly thereafter.

It is, of course, entirely possible that SELLING owners might decide that they'd rather take no risk - and not invest at all (other than in my bonds, where counter-party risk is already accepted).  They may also decide they don't want to lend - even with solid collateral.  It's entirely in the hand of SELLING share-holders which investments they believe are low enough risk - of the ones that I've already narrowed down to those I believe to be in the right risk area.

I'll make another post now about loans - and get the ball rolling on those too.

It sounds strange having investors decide whether we invest at all - but this isn't a typical security in ANY ways.  As issuer I don't decide how many get sold, I don't decide what price SELLING/MINING trade at, I don't decide dividends (they're defined by formula) and I don't even get to decide whether (and where) we invest.  I can effectively veto any investment - but I don't have the right to force it (exception being LTC-ATF.B1 - and even there if any SELLING investor(s) with a decent chunk of votes requests it, I'll put up a vote for it to no longer be invested in).

[Deprived]

Sold   1464
Price   0.066256
Total   96.998784
Less Fee   96.80478643
Man Fee   2.904143593

2.904 transferred as management fee.

BTC Balance (BTC-TC)    599.29356880
10000 LTC-ATF.B1    100.00000000
TOTAL ASSETS    699.29356880
   
Outstanding MINING   10758
Outstanding SELLING   10758
Outstanding PURCHASE   300
Effective Units   11058
   
Block reward   25
Difficulty   15605633
Hashes per MINING   5000000
   
Daily Dividend    0.00016113
50 days (Min Liquid)    0.00805649
100 days (Forced Close)    0.01611298
365 days (Buyback)    0.05881238
405 days (IPO)    0.06525757
400 days (Post SELLING div)    0.06445192
410 days (Pre SELLING div)    0.06606322
   
NAV Post MINING Div    697.51179543
NAV/U Post MINING Div    0.06307757
Days Dividend Post Div   391.47
SELLING Dividend    -         
NAV Post SELLING Div    697.51179543
NAV/U Post Selling Div    0.06307757
PURCHASE selling price    0.06623145
PURCHASE buy-back price    0.06181602

[cusdog]

Deprived, speaking of investing, have you considered in future offerings (i.e. when the current batch goes to zero) limiting the issuance size? I ask because if this becomes a popular instrument you might end up having cash drag become a problem for later iterations. And, as uncomfortable as this may be, the counter-party risk increases as the issuance grows. There is both increased incentive for your to take the money and run (Rude, I'm sorry) and for hackers and others to try and abscond with the money. The downside is that this would hurt your management fee and limit liquidity and increase miss-pricing of the pre-existing mining and selling (as there is no more ask wall on purchase).

[Deprived]

Deprived, speaking of investing, have you considered in future offerings (i.e. when the current batch goes to zero) limiting the issuance size? I ask because if this becomes a popular instrument you might end up having cash drag become a problem for later iterations. And, as uncomfortable as this may be, the counter-party risk increases as the issuance grows. There is both increased incentive for your to take the money and run (Rude, I'm sorry) and for hackers and others to try and abscond with the money. The downside is that this would hurt your management fee and limit liquidity and increase miss-pricing of the pre-existing mining and selling (as there is no more ask wall on purchase).

There's an effective cap on capital controlled anyway.

As time passes, sales of PURCHASE will become increasingly small when measured as a percentage of existing sales (that HAS to be the case unless sales of PURCHASE continually increase in volume).  At a certain point that percentage will fall below the percentage of capital which is given out as dividends each day.

Capital is kept below 410 days of MINING dividends.  So on any given day at least 0.24% of capital will be returned as dividends.  That immediately imposes the first cap - that capital will cease to increase once sales of PURCHASE fall below 0.24% of exisiting effective outstanding units.  In practice a cap would be reached far sooner than that if difficulty continues rising - as SELLING will also receive dividends (I can't calculate a percentage for them - as that requires knowing future difficulty : and if that were known that this fund couldn't even exist).

As far as CP risk is concerned, the market can take care of that itself.  Specifically, if potential investors believe the CP risk for me personally is being neared then they will presumably stop buying PURCHASE and hence impose an effective cap.  There's rather obviously no benefit to me in imposing an arbitrary limit below what the market is willing to accept.  If someone invests then subsequently sees market cap rise significantly - to above or near their personal tolerance - then that unexpected rise (and it would have to be unexpected or they rationally wouldn't have invested in the first place) will have massively increased liquidity allowing them to sell out at minimal loss.  In fact it will probably let them sell out with MORE profit than they anticipated - as the huge sales of PURCHASE that they didn't anticipate will have increased NAV/U a bit (or, more likely, slowed its fall relative to dividends distributed).

[Deprived]

Deprived, speaking of investing, have you considered in future offerings (i.e. when the current batch goes to zero) limiting the issuance size? I ask because if this becomes a popular instrument you might end up having cash drag become a problem for later iterations.

There's a secondary point here that I've meant to address in more detail for a while - the issue of how long this fund will run for.

I believe a lot of people are massively misunderstanding the fund - and incorrectly assume that it will close down in a matter of months with me then starting up a new iteration.  I don't believe that to be the case.  I fully expect that in a year's time this fund will still be running - just with much lower prices for the 3 assets.  There's three ways in which the fund can close - let me address them in order from least likely to most likely and then focus on the main one.

1.  I decide to stop running it.  I don't see any likely reason for this - but it's a theoretical possibility.
2.  Capital falls below 100 days dividends for MINING and there's a forced closure.  For that to happen in the next year difficulty would have to stop rising VERY soon - I don't believe anyone thinks that ASICs are suddenly going to stop being sold.
3.  SELLING votes to close the fund.

For 3 to happen, two things have to occur: I have to put up a vote for closure and SELLING investors have to pass it.  Now the contract says nothing about when I'll put such votes up.  There's nothing sinister in that - my policy is simply that I'll raise such a vote if the market tells me SELLING investors would want a vote.  How can I tell when SELLING investors want a vote?  Well that's actually VERY easy.  Let's do a bit of quick math.  We'll focus on the normal situation (where capital is in the 390-410 days range).  It'll never be above that - or SELLING would get the extra - and if it's below 365 then SELLING would never want closure (as they'd get zero back).

So let's say capital is at 400 days dividend - which is ALWAYS where it would be after a dividend to SELLING.  And SELLING's best place to end is always going to be immediately after a rise in difficulty.

If the fund were to close, 365 days of that would go to MINING and 35 to SELLING.  i.e. MINING would get over 91% of the remaining capital.

What does that tell me?  It tells me that unless MINING is trading at nearly 10 times SELLING there's no way SELLING would vote for closure.

Why?  Because any SELLING investor who WOULD vote YES to closure would be better of selling their SELLING on the market than voting YES and then receiving back less.

So there's a really easy way for me to tell whether there's any point in having a vote.  Now consider this question:

How long do you think it is going to take before SELLING trade at around 1/10th the price of MINING?

Because until then there's no likelihood of closure in the most common scenario.  And I don't see that point being reached this year at all.

And let's end by getting back to the other point - about limiting supply of PURCHASE.  The above is ONE of the reasons why it's undesirable to limit PURCHASE - without a supply of PURCHASE I couldn't rely on market prices to assess whether closure was worth discussing : as MINING+SELLING=PURCHASE would no longer be (approximately) imposed as fact on market prices.

[Lohoris]

Disclaimer: I'm not investing in DMS anything I can't afford to lose

Despite having read and re-read both the contract and many posts, I still don't grasp how exactly SELLING work, i.e. when exactly it would issue dividends.

I understand that an investor would be supposed to "buy SELLING if he thinks MINING is overpriced", but... why?

i.e., I guess that if PURCHASE is sold at 0.06, and MINING is sold at 0.03 and I think it should be priced 0.01 instead, then I would be supposed to buy SELLING up to 0.05, right? But, again, which would be the mechanism that makes me gain money if I buy SELLING in this case?

[cusdog]

Lohoris,

I believe this is what you are looking for;


"DIVIDENDS FOR DMS.SELLING

Whenever a DMS.MINING dividend is paid an assessment will be made of whether a DMS.SELLING dividend should also be paid.  This will be done as follows:

NAV/U post (DMS.MINING) dividend will be divided by the dividend just calculated for DMS.MINING.  This produces the number of days at current difficulty for which dividends could be paid from current capital.

If that number is greater than 410 then a dividend will be issued for DMS.SELLING (and any outstanding DMS.PURCHASE) such that it would reduce capital to exactly 400 days of dividends at current difficulty.  If the number is less than 410 then no dividend will be paid.

This serves to keep capital at around 1 year's dividends (the buy-back price) plus just over a month extra to allow for short-term variance in difficulty."

[Deprived]

Disclaimer: I'm not investing in DMS anything I can't afford to lose

Despite having read and re-read both the contract and many posts, I still don't grasp how exactly SELLING work, i.e. when exactly it would issue dividends.

I understand that an investor would be supposed to "buy SELLING if he thinks MINING is overpriced", but... why?

i.e., I guess that if PURCHASE is sold at 0.06, and MINING is sold at 0.03 and I think it should be priced 0.01 instead, then I would be supposed to buy SELLING up to 0.05, right? But, again, which would be the mechanism that makes me gain money if I buy SELLING in this case?

The mechanism is this (and you'll see it in practice on Monday by the looks of it):

If capital rises above 410 days of (MINING) dividends at current difficulty then a dividend is paid to SELLING so as to reduce capital down to 400 days of dividends.

Imagine mining was paying 0.1 dividend per day and there was 40 BTC per mining share of capital.  That means there's 400 days of dividends for MINING put aside so they can continue to be paid.

Now imagine difficulty rose so that the daily dividend to MINING fell to 0.095.  We still have the same capital but there's now a bit over 421 days of dividends at the new rate.  We only need 38 BTC to provide MINING with 400 days cover - so each SELLING share would get a 2 BTC dividend.

MINING gets its dividends every day. SELLING only gets one when difficulty rises so that there's enough capital to pay them a dividend and still keep 400 days to cover MINING's payments.  If difficulty falls, stays the same or only rises below a certain amount then SELLING will receive no dividend at all.  If difficulty rises fast then SELLING will receive a large dividend.

And it's more complicated in the long-term - as SELLING could receive huge dividends a few times, then difficulty stabilises and it never receives another.  Or SELLING could receive nothing for a while - then suddenly difficulty surges and it gets dividended a lot whilst MINING dividends drop to being tiny.

As with ALL mining investments, results depend almost entirely on future difficulty changes.  Payouts for MINING will mirror those from identical MH/S in PMBs and also those of shares in fixed mining capacity (those with no reinvestment).  Payouts for SELLING (assuming there are some) represent the return of capital once it becomes obvious that the capital isn't needed to continue paying out to MINING.

[Lohoris]

The mechanism is this (and you'll see it in practice on Monday by the looks of it):

If capital rises above 410 days of (MINING) dividends at current difficulty then a dividend is paid to SELLING so as to reduce capital down to 400 days of dividends.

Imagine mining was paying 0.1 dividend per day and there was 40 BTC per mining share of capital.  That means there's 400 days of dividends for MINING put aside so they can continue to be paid.

Now imagine difficulty rose so that the daily dividend to MINING fell to 0.095.  We still have the same capital but there's now a bit over 421 days of dividends at the new rate.  We only need 38 BTC to provide MINING with 400 days cover - so each SELLING share would get a 2 BTC dividend.

MINING gets its dividends every day. SELLING only gets one when difficulty rises so that there's enough capital to pay them a dividend and still keep 400 days to cover MINING's payments.  If difficulty falls, stays the same or only rises below a certain amount then SELLING will receive no dividend at all.  If difficulty rises fast then SELLING will receive a large dividend.

And it's more complicated in the long-term - as SELLING could receive huge dividends a few times, then difficulty stabilises and it never receives another.  Or SELLING could receive nothing for a while - then suddenly difficulty surges and it gets dividended a lot whilst MINING dividends drop to being tiny.

As with ALL mining investments, results depend almost entirely on future difficulty changes.  Payouts for MINING will mirror those from identical MH/S in PMBs and also those of shares in fixed mining capacity (those with no reinvestment).  Payouts for SELLING (assuming there are some) represent the return of capital once it becomes obvious that the capital isn't needed to continue paying out to MINING.

Ooh this is a great explanation, thank you!

(I'm not sure why all of the previous ones confused me)

You have definitely build a very interesting system, gg.

[Birdy]

Holding DMS.Selling only now, let's see how it does in the next days with the incoming difficulty increase.

[alexius89]

does anyone  understand the calculation for the SELLING dividend?

Days Dividend Post Div   391.47                                how to do math  to get 391.47  as the result?