[BTC-TC] Deprived Mining Speculation (DMS)

[joele]

Deprived, if I transfer the PURCHASE, what will be the price of MINING and SELLING?
Split in half or based on the current Asks price?

[Deprived]

Deprived, if I transfer the PURCHASE, what will be the price of MINING and SELLING?
Split in half or based on the current Asks price?

Every PURCHASE sent to me receives 1 MINING and 1 SELLING in return.  Prices have no effect on that.

[Deprived]

Although from the contract MINING should receive the new lower dividend tomorrow it won't.

When I wrote the contract I decided to go with a flat calculation based on difficulty 16 hours earlier - meaning that, on average, MINING would be slightly better off (compared to a PMB) than if I calculated exactly based on the time difficulty changed.  Of course sod's law says that the first (and likely biggest in impact on dividend) drop would occur in the other 8 hours.

I also note that TAT.VM pays on 24 hours previously - so would be keeping the old dividend.  If we pay differently it may confuse those trying to compare - which obviously I wouldn't want.

I will therefore be paying at the old difficulty BUT the difference between the contractually obliged dividend and the one paid will be refunded from my own pocket.  I will do this on ALL future MINING dividends where the same issue arises (which should be about one third of the ones immediately after a difficulty change where difficulty rose).

In short : The report will be as though the new dividend rate was paid.  The old dividend rate will actually be paid.  The difference between the two will come from me - not from SELLING investors' dividend.  I'll report the amount refunded by me obviously.

[Birdy]

Deprived, if I transfer the PURCHASE, what will be the price of MINING and SELLING?
Split in half or based on the current Asks price?

Every PURCHASE sent to me receives 1 MINING and 1 SELLING in return.  Prices have no effect on that.

I think he means the price that is used as reference for portfolio calculations.

[Deprived]

Deprived, if I transfer the PURCHASE, what will be the price of MINING and SELLING?
Split in half or based on the current Asks price?

Every PURCHASE sent to me receives 1 MINING and 1 SELLING in return.  Prices have no effect on that.

I think he means the price that is used as reference for portfolio calculations.

Ah right - my misunderstanding.

The price used is whatever the system sets (I don't edit it).  I believe it uses the most recent 7-day average - but aren't honestly sure.  Looking at recent outgoing ones in my records it definitely looks more like its a 7 or 30 day average than a 24-hour one (as we haven't been going over 7 days the 7 and 30 day averaeges are the same - so can't tell which it is).

[FloatesMcgoates]

The current estimate is for a ~.01 dividend per share of DMS.SELLING? I must be understanding this wrong

[Rannasha]

The current estimate is for a ~.01 dividend per share of DMS.SELLING? I must be understanding this wrong

~.011 is a closer estimate, but yeah, that's right.

[Deprived]

The current estimate is for a ~.01 dividend per share of DMS.SELLING? I must be understanding this wrong

Yes that's the estimate.

When capital rises over 410 days of dividends for MINING, SELLING gets a dividend to reduce capital back to 400 days of cover.  That maintains over a year of cover at current difficulty for MINING (which will obviously last a LOT longer with difficulty rising) and returns unneeded backing cash to SELLING.

As difficulty rose massively this time, SELLING gets a pretty big dividend.  If difficulty rises by under about 3% on a change (exact percentage can vary slightly) then SELLING would get no dividend at all (in fact from memory think it's around 5% after a change where it got a dividend - as it has to make up not only the dividends to MINING but also the 400-410 day gap).

[Smidge]

What I don't get is that DMS MINING pays a dividend of roughly .5 percent, per day. As listed above, this should be about 180 percent return per year. Shouldn't this thing be going through the roof?

We need to develop reliable P/E ratios for all of these securities to have another common denominator.

[🏰 TradeFortress 🏰]

What I don't get is that DMS MINING pays a dividend of roughly .5 percent, per day. As listed above, this should be about 180 percent return per year. Shouldn't this thing be going through the roof?

We need to develop reliable P/E ratios for all of these securities to have another common denominator.

The dividend is going to keep going down over time as the network difficulty increases.

[odolvlobo]

What I don't get is that DMS MINING pays a dividend of roughly .5 percent, per day. As listed above, this should be about 180 percent return per year. Shouldn't this thing be going through the roof?

We need to develop reliable P/E ratios for all of these securities to have another common denominator.

180% per year is not correct because you don't get your original investment back, so really it is only 80%. But then, as TradeFortress stated, the dividend drops as the difficulty goes up. There is a possibility that you wont reach 100%, which would mean that you lose money on your investment.

Here is what will happen to the 2-week dividend over a year if the difficulty increases by 20% each period (a rather pessimistic prediction):



In this case the total revenue is about 40%, so you lose 60%.

If you assume a certain average rise in difficulty, you can compute the total amount of revenue you will receive. Here are some examples:

Difficulty Change	| Factor	| Total Revenue	| Total Return
20%	| 6	| 40.5%	| -59.5%
10%	| 11	| 74.2%	| -25.8%
5%	| 21	| 142%	| +42%
2% (Moore's Law)	| 51	| 344%	| +244%
1%	| 101	| 681%	| +581%

[Smidge]

OK, thanks a lot for the analysis guys, really appreciated.

So, to optimize ROI, we should calculate at which point it makes sense to switch to another security that pays more dividend. Unless DMS comes up with something that increases dividend. This is also why I mentioned P/E earlier.

[odolvlobo]

OK, thanks a lot for the analysis guys, really appreciated.

So, to optimize ROI, we should calculate at which point it makes sense to switch to another security that pays more dividend. Unless DMS comes up with something that increases dividend. This is also why I mentioned P/E earlier.

In theory, switching won't help because as as the dividend drops, so will the price of the share. The dividend can rise if the difficulty drops.

[nar9000]

Great job Deprived! You bring much education and competition to the people.

The MINING/SELLING pair you brought forward is a great solution and more then likely a wake up call to the rest of the bond market.

One personal question:  You noted earlier that holding DMS.PURCHASE long term wasn't wise.  Without running a simulation I was thinking the remainder of the 5% of the markup after your 3% fee would bring enough new value to the fund to make holding it provide a positive return.  However this may only be the case if there is a much accelerated rate of new shares issued if I understand correctly now?

The only flaw I can see with the fund is that the option to purchase shares with valued assets.  This brings unneeded risk and is an open for exploitation to an otherwise very well crafted fund for those who enjoy the process of trading regularly.

[Rannasha]

What I don't get is that DMS MINING pays a dividend of roughly .5 percent, per day. As listed above, this should be about 180 percent return per year. Shouldn't this thing be going through the roof?

We need to develop reliable P/E ratios for all of these securities to have another common denominator.

180% per year is not correct because you don't get your original investment back, so really it is only 80%. But then, as TradeFortress stated, the dividend drops as the difficulty goes up. There is a possibility that you wont reach 100%, which would mean that you lose money on your investment.

Here is what will happen to the 2-week dividend over a year if the difficulty increases by 20% each period (a rather pessimistic prediction):



In this case the total revenue is about 40%, so you lose 60%.

If you assume a certain average rise in difficulty, you can compute the total amount of revenue you will receive. Here are some examples:

Difficulty Change	| Factor	| Total Revenue	| Total Return
20%	| 6	| 40.5%	| -59.5%
10%	| 11	| 74.2%	| -25.8%
5%	| 21	| 142%	| +42%
2% (Moore's Law)	| 51	| 344%	| +244%
1%	| 101	| 681%	| +581%

Your calculations assume a certain price for MINING (because how else can you express returns in percentages). While the point of this security is, among other things, to find what the right price for these type of securities should be. The price of MINING has fluctuated both upward and downward (most recently primarily downward) It would therefore be better to express returns as absolute values, so bitcoins per share.

[eltopo]

https://bitcointalk.org/index.php?topic=236310.0

 

[Deprived]

Great job Deprived! You bring much education and competition to the people.

The MINING/SELLING pair you brought forward is a great solution and more then likely a wake up call to the rest of the bond market.

One personal question:  You noted earlier that holding DMS.PURCHASE long term wasn't wise.  Without running a simulation I was thinking the remainder of the 5% of the markup after your 3% fee would bring enough new value to the fund to make holding it provide a positive return.  However this may only be the case if there is a much accelerated rate of new shares issued if I understand correctly now?

The only flaw I can see with the fund is that the option to purchase shares with valued assets.  This brings unneeded risk and is an open for exploitation to an otherwise very well crafted fund for those who enjoy the process of trading regularly.

Holding DMS.PURCHASE long-term would make a profit from three sources:

1.  The markup on sales of PURCHASE after you bought yours.
2.  Any revenue from investment.
3.  The discount on repurchases - if someone sells back PURCHASE or MINING+SELLING then a bit extra is left in the fund.

That has to overcome the 3% management fee + trading fees.  If the fund runs long enough (and I can't see it being likely that SELLING will vote for closure this year) then you'd make a profit yes.  But that profit would be pretty small and likely not justify the CP risk.  Just holding PURCHASE gives CP exposure to me and to BTC-TC.  Nobody except me can assign a 0% CP risk to me - and noone except burnside can assign a 0% CP risk to him.

If investment takes off that could change - but right now with high difficulty changes I have to keep the capital very liquid anyway.

I'm not sure what your point is with trade-ins.  The ONLY assets that would be accepted in exchange for PURCHASE are ones which SELLING investors have voted to accept us investing in.  And I still don't have to accept them  - I'd only take them if I were considering investing in them anyway.  Taking them in trade-in saves us the exchange fee on buying them AND the exchange fee on selling PURCHASE.  Remember that I won't touch anything unless it has a fixed face value with redemption at (or near) that price - so there's no real room for any exploitation by someone waiting for a dip in the price.  Things that have dips in their price aren't things that we'd take anyway.

If you could give an example of what sort of problem you see I may be able to explain better - I think (but can't be sure) you're concerned about problems which, if they were real, would mean the security would never get touched by us anyway.  Bonds and loans are pretty much all we'll touch - and those only if SELLING investors approve it.

[twentyseventy]

Deprived, how long is the normal wait time from transfer of PURCHASE to you before receiving back SELLING/MINING?

[Deprived]

Deprived, how long is the normal wait time from transfer of PURCHASE to you before receiving back SELLING/MINING?

5 minutes if I'm actively checking.
An hour if I'm around but not checking a lot.
8 hours if you send just after I go to bed.

Whenever I check I catch up with all transfers in. I try to check at least once an hour when I'm around a computer - which is most of the time

[twentyseventy]

Deprived, how long is the normal wait time from transfer of PURCHASE to you before receiving back SELLING/MINING?

5 minutes if I'm actively checking.
An hour if I'm around but not checking a lot.
8 hours if you send just after I go to bed.

Whenever I check I catch up with all transfers in. I try to check at least once an hour when I'm around a computer - which is most of the time

Thanks for the quick response, I appreciate it. Is the SELLING div issued around midnight ET tonight, like MINING's divs, or just sometime today?