[BTC-TC] Deprived Mining Speculation (DMS)

[drawingthesun]

This isn't a Ponzi scheme, as the dividends for MINING are paid on schedule out of the SELLING reserves. SELLING is NOT guaranteed to make a profit or to necessarily pay anything out. SELLING is paid a dividend only if the Difficulty increases significantly. 

So the flow is like this: funds from people buying SELLING become the MINING dividend which is paid out on schedule.

If the difficulty goes up a lot and the dividend required by MINING is smaller, then that difference is profit for SELLING and becomes a SELLING dividend.

Is this correct?

How does the situation change when you buy a SELLING share from someone whos selling one? Obviously the proceeds of that sale go to the seller instead of MINING dividends.

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[BitThink]

BitThink was estimating the next daily mining dividend probably ... but, yeah, next difficulty will be around 87M ... more than 30% increase.

Yes, I mean daily dividend. Mine is a very rough guess based on the curve of http://bitcoin.sipa.be/. I think yours are from http://bitcoindifficulty.com/? Highly likely it is more accurate than mine. indeed yours are correct.

[twentyseventy]

This isn't a Ponzi scheme, as the dividends for MINING are paid on schedule out of the SELLING reserves. SELLING is NOT guaranteed to make a profit or to necessarily pay anything out. SELLING is paid a dividend only if the Difficulty increases significantly. 

So the flow is like this: funds from people buying SELLING become the MINING dividend which is paid out on schedule.

If the difficulty goes up a lot and the dividend required by MINING is smaller, then that difference is profit for SELLING and becomes a SELLING dividend.

Is this correct?

How does the situation change when you buy a SELLING share from someone whos selling one? Obviously the proceeds of that sale go to the seller instead of MINING dividends.

Yes! When the Difficulty increases, the funds necessary to fund the MINING div decrease, and that difference is paid out to SELLING holders as a dividend. The real profit to be made from buying SELLING happens when the dividends paid exceed the amount paid for that share of SELLING.

There are always an equal number of SELLING and MINING, as they are sold in pairs via PURCHASE. When you purchase SELLING from someone else, you acquire it for a certain price. Ideally, that price should be less than what PURCHASE (a value that's known) less the value of MINING (a value you've calculated on your own).

So, if PURCHASE is valued at 20, and you buy SELLING for 15, that means that you value MINING at 5 or less (less, ideally).

You can buy SELLING on the market, but you can ALSO buy PURCHASE, exchange it for MINING And SELLING and then sell MINING on the market.

Which one is a better option depends on what people are Asking for SELLING and Bidding for MINING at any given moment.

[twentyseventy]

BitThink was estimating the next daily mining dividend probably ... but, yeah, next difficulty will be around 87M ... more than 30% increase.

Yes, I mean daily dividend. Mine is a very rough guess based on the curve of http://bitcoin.sipa.be/. I think yours are from http://bitcoindifficulty.com/? Highly likely it is more accurate than mine. indeed yours are correct.

I use Allchains.info as well, it's not pretty but it's a great resource!

[BitThink]

This isn't a Ponzi scheme, as the dividends for MINING are paid on schedule out of the SELLING reserves. SELLING is NOT guaranteed to make a profit or to necessarily pay anything out. SELLING is paid a dividend only if the Difficulty increases significantly.  

So the flow is like this: funds from people buying SELLING become the MINING dividend which is paid out on schedule.

If the difficulty goes up a lot and the dividend required by MINING is smaller, then that difference is profit for SELLING and becomes a SELLING dividend.

Is this correct?

How does the situation change when you buy a SELLING share from someone whos selling one? Obviously the proceeds of that sale go to the seller instead of MINING dividends.

Your understanding is correct. All MINING dividend are from SELLING holders. Changing holders of SELLING does not change anything. The new holder will continue supporting a MINING Contract. The price of SELLING and MINING does not matter since it will not change the contract. SELLING holders always pay the daily dividend to MINGING holders according to the mining difficulty.

[Deprived]

This isn't a Ponzi scheme, as the dividends for MINING are paid on schedule out of the SELLING reserves. SELLING is NOT guaranteed to make a profit or to necessarily pay anything out. SELLING is paid a dividend only if the Difficulty increases significantly. 

So the flow is like this: funds from people buying SELLING become the MINING dividend which is paid out on schedule.

If the difficulty goes up a lot and the dividend required by MINING is smaller, then that difference is profit for SELLING and becomes a SELLING dividend.

Is this correct?

How does the situation change when you buy a SELLING share from someone whos selling one? Obviously the proceeds of that sale go to the seller instead of MINING dividends.

The situation doesn't change.

If you buy a SELLING from someone else then the funds YOU pay go the person you buy from.  But the funds THAT person paid are still held by me and available to pay dividends to the associated MINING share.

I hold a fixed amount of cash for each pair of MINING+SELLING (the NAV/U of a PURCHASE).  Mining gets paid dividends from that cash as though it held shares in a mining operation.  SELLING gets dividends if/when difficulty rises sufficiently that a dividend can be paid and still keep 400 days of dividend for MINING in reserve.

When you buy a SELLING from someone in effect what's happening is that by buying, indicating that you believe the likely future value of dividends makes holding the share at that price better than having the trading price.

This (DMS) isn't a traditional investment fund where the manager makes profit for you (a small amount is made from investments but not enough to justify investment on its own).  Your profit or loss is made based on the trades you make of MINING and SELLING with other investors.  You can make profit (or loss) in broadly three ways:

1.  By more accurately predicting future behaviour of difficulty then buying whichever of MINING/SELLING (if either) is currently underpriced.  At times NEITHER will be underpriced (so worth buying) based on your predictions.
2.  By predicting how the market will respond to difficulty changes and other news.  typically the market over-reacts which provides opportunities for profit.
3.  By arbitraging MINING/SELLING vs PURCHASE and/or trading the spreads on them.

I won't make much profit for you - you have to make it yourself.  My role in DMS is far more that of an escrow/administrator than an investment manager.

[drawingthesun]

Thanks twentyseventy, BitThink and Deprived.

Very interesting security.

So essentially its a game where I have to predict the correct difficulty increase and buy MINING if its undervalued or SELLING if I think MINING is overvalued.

[Progressive]

Thanks twentyseventy, BitThink and Deprived.

Very interesting security.

So essentially its a game where I have to predict the correct difficulty increase and buy MINING is its undervalued or SELLING if I think MINING is overvalued.

Exactly. This is a game for spreadsheet lovers ;-) In other words (from the OP):
DMS.MINING - Behaves like a 5 Mega-Hash/Second PMB (The things people call perpetual mining bonds).
DMS.SELLING - Is a bet that people will pay too much for DMS.MINING.

Also if you want to buy just one part (e.g. MINING), you should check what is cheaper - buying PURCHASE and selling SELLING, or buying MININIG straightforward from the market.

[Deprived]

Thanks twentyseventy, BitThink and Deprived.

Very interesting security.

So essentially its a game where I have to predict the correct difficulty increase and buy MINING is its undervalued or SELLING if I think MINING is overvalued.

Yes - for you to make a significant profit someone else has to make a loss (not necessarily the person you buy from - could be someone earlier in the chain or someone you later sell to).  It's ALMOST a zero-sum game (it's not quite zero-sum because I take a 3% management fee out and also because profits are made from investment).

[fuggedit]

This isn't a Ponzi scheme, as the dividends for MINING are paid on schedule out of the SELLING reserves. SELLING is NOT guaranteed to make a profit or to necessarily pay anything out. SELLING is paid a dividend only if the Difficulty increases significantly.  

So the flow is like this: funds from people buying SELLING become the MINING dividend which is paid out on schedule.

If the difficulty goes up a lot and the dividend required by MINING is smaller, then that difference is profit for SELLING and becomes a SELLING dividend.

Is this correct?

How does the situation change when you buy a SELLING share from someone whos selling one? Obviously the proceeds of that sale go to the seller instead of MINING dividends.

I am very very fresh to any of this kind of simulation trading/speculation, but from what I gather and observe, he is essentially correct, minus the note that you are right in your own added respect. It seems like his presumption is inherently correct but doesn't incorporate the relative "unknown" rise (or fall) of the difficulty exponential (which we all must realize will likely be somewhere around a +20 to +50% increase). So basically the speculation in this PBM-modeled trading is based on the difficulty factor which is the hitherto driver of the action that provides the incentives for the buyers/sellers to buy/sell the .DPM-Mining and the DPM-Selling instruments each week based on that speculation.  Am I missing something? Is the overarching message here something grander than what I initially preconceived--that these PBMs are all essentially gussied up ponzies with an extremely slight element of chance based on the infinitesimally small fluctuations of the difficulty factor each week? Sorry if I worded the post like a giant pretzel of fuzzy words, it's just easier for me to wrap my head around when I use abstractions with big words

[SoftLayer]

This idea needs to be turned into a Bitcoin game.

[twentyseventy]

This isn't a Ponzi scheme, as the dividends for MINING are paid on schedule out of the SELLING reserves. SELLING is NOT guaranteed to make a profit or to necessarily pay anything out. SELLING is paid a dividend only if the Difficulty increases significantly.  

So the flow is like this: funds from people buying SELLING become the MINING dividend which is paid out on schedule.

If the difficulty goes up a lot and the dividend required by MINING is smaller, then that difference is profit for SELLING and becomes a SELLING dividend.

Is this correct?

How does the situation change when you buy a SELLING share from someone whos selling one? Obviously the proceeds of that sale go to the seller instead of MINING dividends.

I am very very fresh to any of this kind of simulation trading/speculation, but from what I gather and observe, he is essentially correct, minus the note that you are right in your own added respect. It seems like his presumption is inherently correct but doesn't incorporate the relative "unknown" rise (or fall) of the difficulty exponential (which we all must realize will likely be somewhere around a +20 to +50% increase). So basically the speculation in this PBM-modeled trading is based on the difficulty factor which is the hitherto driver of the action that provides the incentives for the buyers/sellers to buy/sell the .DPM-Mining and the DPM-Selling instruments each week based on that speculation.  Am I missing something? Is the overarching message here something grander than what I initially preconceived--that these PBMs are all essentially gussied up ponzies with an extremely slight element of chance based on the infinitesimally small fluctuations of the difficulty factor each week? Sorry if I worded the post like a giant pretzel of fuzzy words, it's just easier for me to wrap my head around when I use abstractions with big words

The changes to the Difficulty actually need to be quite significant.

[eltopo]

Significant for what? To get a dividend or to be profitable? To get a (small) dividend for SELLING, the diff jump only needs to be around 5-6%

[twentyseventy]

Significant for what? To get a dividend or to be profitable? To get a (small) dividend for SELLING, the diff jump only needs to be around 5-6%

I was just picking out this part:

that these PBMs are all essentially gussied up ponzies with an extremely slight element of chance based on the infinitesimally small fluctuations of the difficulty factor each week? Sorry if I worded the post like a giant pretzel of fuzzy words, it's just easier for me to wrap my head around when I use abstractions with big words

'Infinitesimally small' changes won't do much to the values here. I agree that 5-6% isn't a huge amount, I was just saying 'significant' compared to 'infinitesimally small'

[Deprived]

Sold   1782
Swapped   0
Total   1782
Price   0.01578
Total   28.11996
Less Fee   28.06372008
Man Fee   0.841911602

BTC Balance (BTC-TC)   2172.666829
9071 LTC-ATF.B1    90.71000000
Coinlenders CD 27/9   200.9078086
Coinlenders CD 12/9   101.452737
Coinlenders Cash   3.94376483
Just-Dice Balance    245.15000000
TOTAL ASSETS    2,814.83113903
   
Outstanding MINING   176908
Outstanding SELLING   176908
Outstanding PURCHASE   10371
Effective Units   187279
   
Block reward   25
Difficulty   65,750,060
Hashes per MINING   5000000
   
Daily Dividend    0.00003824
50 days (Min Liquid)    0.00191219
100 days (Forced Close)    0.00382438
365 days (Buyback)    0.01395899
405 days (IPO)    0.01548874
400 days (Post SELLING div)    0.01529752
410 days (Pre SELLING div)    0.01567996
   
NAV Post MINING Div    2,807.66887716
NAV/U Post MINING Div    0.01499190
Days Dividend Post Div   392.01
SELLING Dividend    -         
NAV Post SELLING Div    2,807.66887716
NAV/U Post Selling Div    0.01499190
PURCHASE selling price    0.01574
PURCHASE buy-back price    0.01469
   
J-D House profit at report   5753

[Deprived]

NOT CURRENT REPORT - ESTIMATE FOR TOMORROW

This is an estimate for tomorrow ignoring all investment profit and any growth from sales/redemptions.

BTC Balance (BTC-TC)   2165.504
9071 LTC-ATF.B1    90.71000000
Coinlenders CD 27/9   200.9078086
Coinlenders CD 12/9   101.452737
Coinlenders Cash   3.94376483
Just-Dice Balance    245.15000000
TOTAL ASSETS    2,807.66831046
   
Outstanding MINING   176908
Outstanding SELLING   176908
Outstanding PURCHASE   10371
Effective Units   187279
   
Block reward   25
Difficulty   86,933,018
Hashes per MINING   5000000
   
Daily Dividend    0.00002892
50 days (Min Liquid)    0.00144625
100 days (Forced Close)    0.00289249
365 days (Buyback)    0.01055760
405 days (IPO)    0.01171460
400 days (Post SELLING div)    0.01156998
410 days (Pre SELLING div)    0.01185923
   
NAV Post MINING Div    2,802.25127607
NAV/U Post MINING Div    0.01496298
Days Dividend Post Div   517.30
SELLING Dividend    0.00339300
NAV Post SELLING Div    2,166.81375786
NAV/U Post Selling Div    0.01156998
PURCHASE selling price    0.01215
PURCHASE buy-back price    0.01134

[Deprived]

Motion for approval of an investment.  Motion is set to run for 3 days (as it isn't a change to contract - but rather a vote specifically detailed in the contract - it doesn't require a minimum of 7 days).

A motion has been raised on BTC-TC to allow investment in bonds issued by CIPHERMINE.  At present the bonds in question aren't approved for trade - and some minor changes to the contract are likely.  I'm raising the motion now so, if the motion passes, I have the option to invest when they launch - rather than THEN having to raise a motion and potentially miss out (as was the case with X-BOND which I'd have considered us investing in were there enough notice prior to IPO to pass a motion).

For our purposes it isn't particularly important whether or not our investors believe CIPHERMINE will be profitable, is a good investment and/or its shares are trading at a fair price.  All that matters to us is whether the bonds have sufficient backing and meet the conditions necessary for DMS to invest.

My belief is that they WILL meet our criteria - subject to Kate clarifying the extent to which all assets of CIPHERMINE back the bonds.

Although the bond has a face value in BTC it pays dividends based upon the EUR exchange-rate at the time they are issued.  Initially that will mean the interest rate will be 22% whatever it is measured in - but as the exchange-rate moves that could rise or fall when expressed in BTC.  So although it would definitely meet our minimum return criteria initially that could later change - if it changed unfavourably then obviously I would then need to cease buying more and divest.

Buy-back at face value is guaranteed (though with a 3 month waiting period if within first 12 months).  In practice I'd expect us to divest via the market if/when we need to.

My recommendation is to vote YES to this - but, as usual, I'll vote with my own shares in line with the majority view (i.e. I won't tip the vote to YES if the majority of others who vote choose NO).

The vote is to be allowed to invest up to 25% of capital in this - the actual amount invested would be determined by me based on the circumstances at the time.  This would effectively replace Coinlenders for us - offering similar rate of interest with faster liquidity (if via market) and slower liquidity (if via redemption with issuer).

[Progressive]

Good idea, I'm supporting it with my shares.

[pheaonix]

Good idea, I'm supporting it with my shares.

agreed

this doesn't need to be a complete zero sum game, we can take water from the other pools

[junkonator]

Price swings can be fast, just look at the last days 86€ -> 100€ in a matter of days if not hours. If luck is against us we could possibly lose a lot of money if Deprived is not there for a day or two to adequately react. That's not exactly the safest investment. To me this looks like possible infinite losses and a max of 50% gain.

This is the link to Kate's thread CIPHERBOND btw. Deprived could have linked it