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Author Topic: [BTCT][BFMINES] - Mining Contracts Now Available - Bonus Divs First Months  (Read 24878 times)
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furuknap
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June 17, 2013, 06:11:57 AM
 #1

BFMines is a mining contract backed by ASIC hardware. The contracts pay a dividend equivalent to 1 megahash per second (mh/s) of mining power.

This is not a PMB. This is a real mining operation.

Asset URL: https://btct.co/security/BFMINES

Latest Updates:
Expected delivery of first hardware is September (i.e. before October).
July 15: Changes to Contract (http://bfmines.com/2013/07/15/update-to-contract/)
July 3, 2013: Trading is now open


The listing price of each contract is 0.004BTC.

Please review the following articles to understand the asset and the risks involved:

http://coin.furuknap.net/bfmines-bitcoin-mining-contracts-ready-for-listing-heres-how-you-should-evaluate-investing/
http://coin.furuknap.net/comparing-bitcoin-mining-contracts-and-mining-bonds/
http://coin.furuknap.net/why-bfmines-is-a-better-mining-investment-than-a-pmb/

In summary, however, please note the following:
  • This is a mining contract, not a share in a company. You receive no voting rights and no income other than the stated dividend.
  • The contras are perpetual, which means it will continue to generate dividend until terminated following one of the below conditions. There is no defined termination date of the contracts.
  • The contracts pay the equivalent of income from 1 mh/s. Any excess payments not explicitly stated in this contract are solely at the discretion of the operator and should not be expected.
  • BFMines pays a guaranteed minimum dividend equivalent to the income form a perpetual mining bond, but BFMines is not a PMB. BFMines has significant benefits compared to a PMB, including on average higher payouts.

A total of 100,000 contracts will be issued backed by no less than 120 GH/s of mining power. The excess mining power will be held in reserve to account for operational cost, hardware failure, or other problems. Revenue from the excess mining power will not be paid out to contract holders.

Each contract pays exactly 100% of 1mh/s of BTC mining power. All expenses related to the operation will be carried by the operator.

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June 17, 2013, 06:13:04 AM
 #2

Asset operator details:

BFMines is operated by:
Bjørn Furuknap
Cariari, San Jose, Costa Rica
furuknap+bfmines@gmail.com

Bjørn Furuknap is a well-known author, SharePoint expert, and Bitcoin investor and commentator. He has previously run and operated several successful (and some unsuccessful) businesses across a wide range of disciplines. With over 20 books and journals published both in print and eBook formats, hundreds of articles in numerous online and offline publications, as well as a track record of provactive but accurate commentaries, Furuknap has gained a reputation for brutal honesty often in the face of popular opinion.

References and Web Presence:
Professional Services Website: http://furuknap.net/
Cyrptocoin blog: http://coin.furuknap.net/
SharePoint blog: http://blog.furuknap.net/
Assortment of books published: http://uspjournal.com/
Facebook Profile: http://facebook.com/furuknap
Twitter: http://twitter.com/furuknap

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June 17, 2013, 06:15:54 AM
 #3

Contract:
Overview
BFMines is a perpetual mining bond (PMB) backed by ASIC miners from Metabank. The bond pays a coupon/dividend equivalent to 1 megahashes per second (mh/s) of mining power.

Please read the following article to understand how perpetual mining bonds are:
http://coin.furuknap.net/understanding-mining-bonds/

In summary, however, please note the following:

  • The term bond is somewhat misleading because the debt never matures and it does not have a face value as such. It may be better to think of this as a mining contract but the term perpetual mining bond is understood in the mining community as having this particular behavior.
  • This is a perpetual mining bond, not a share in a company. You receive no voting rights and no other income than the stated coupon/dividend.
  • The mining bond is perpetual, which means it will continue to generate coupon/dividend until terminated following one of the below conditions. There is no defined repayment date of the bond.
  • The mining bond pays the equivalent of income from 1 mh/s. Any excess payments not explicitly stated in this contract is solely at the discretion of the operator and should not be expected.


A total of 100,000 bonds will be issued backed by no less than 120 GH/s of mining power. The excess mining power will be held in reserve to account for operational cost, hardware failure, or other problems. Revenue from the excess mining power will not be paid out to bond holders.

Each bond pays exactly 100% of 1mh/s of BTC mining power. All expenses related to the operation will be carried by the operator.

Operation and Buyback
The mine will operate perpetually and pay daily dividends, to be scheduled at or around the time of difficulty changes.

The term perpetual is unlikely for practical reasons, and as such, there exists provisions to close the bond for one of the following reasons:
  • The operator becomes incapable of operating the bond over an extended period
  • The overhead of operating the bond becomes greater than its profits
  • Permanent and irreparable damage to hardware
  • The operator must close the bond for other reasons

If the bond must close for any of the above reasons, the operator or a duly appointed representative, in case the operator is permanently unavailable, can buy back bonds at no less than 110% of the average trading price at BTCT over the previous 7 (seven) days.

Please note that this buy-back is a right of the operator, not a duty. Any buy-back is solely at the discretion of the operator.

In any case of permanent and irreparable damage to hardware, the operator will pursue any means available to replace hardware as quickly as possible at no cost to bond holders. However, if replacement hardware cannot be obtained at reasonable costs, the operator may choose to suspend operation and dividends and start liquidation of the bond as explained above.

Pre-Release Terms:
Please note that these terms apply only until the miner has been delivered. Upon delivery, these terms will be removed from the contract.

The bond is backed by miners that have yet to be released. The scheduled release is September 2013.

All funds received as part of the IPO process at BTC Trading Corporation (BTCT) will be held in escrow until said mining hardware is delivered and made operational (the release date). In case the mining hardware fails completely, all funds will be repaid fully at the listing price of 0.004BTC/bond.

No dividends will be paid until delivery. On the release date, the IPO funds will be released from escrow. Upon delivery, any excess capacity from the mining hardware will be used to pay bond holders additional dividends for six months. The additional dividends is intended to compensate bond holders for not receiving dividends until the mining hardware has been delivered.

Expansion of Bond
This bond will always be backed by real mining hardware or equivalent mining assets. In case of expansion of the bond, those bonds will be offered at a rate not lower than the lowest trading price at BTCT over the previous 30 days. Any expansion will be backed by mining hardware or mining assets.

Caveats
Please be aware of the following before investing:
A mining bond decreases in value as Bitcoin mining difficulty climbs. The biggest return on investment will happen early in the bonds existence and gradually decline as the Bitcoin mining climbs.

Perpetual mining bonds are not shares, they are effectively loans from you to the operator, to be rewarded in coupon/dividends based on mining power. The face value of a perpetual mining bond will under normal circumstances not be repaid so your sole income will be from the coupon/dividend paid daily.

Due to the buy-back clause of this contract, please be careful of paying too much for this bond, especially when there are sudden price spikes. The operator may choose to buy back bonds at 110% of trading price so if you pay more than this, you may theoretically lose anything you pay above that.

Pre-release only (will be removed once mining hardware is operational): This bond does not pay dividends until the release date. To compensate for this, the first months of operation will give approximately 20% higher coupons/dividends. In case the hardware fails completely, the bonds will be repaid for 0.004BTC per bond.

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June 17, 2013, 06:21:19 AM
 #4

Pretty competitive price, but I still wouldn't invest at this price through.
furuknap
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June 17, 2013, 06:26:28 AM
 #5

Thanks, tradefortress. The pricing is intended to be competitive. I want to have a reasonably priced PMB and this should be around 30% lower than current PMBs trade. Add to that a rougly 15-20% bonus dividend the first six months and I hope to see some interest.

On a price/mhs, BFMines will be the lowest priced PMB on the market.





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June 17, 2013, 06:28:05 AM
 #6

BTW, any way I can make this topic un-selfmoderated? I did it initially while I was adding the initial posts but can't find an option to remove it. I do not intend to moderate anyone.

Edit: I intend to moderate SOSLOVE who is an unstable individual who holds a personal grudge after I explained to him how assets like these worked and he freaked out.

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June 17, 2013, 06:47:17 AM
 #7

When do you anticipate seeing the first dividend from the bond?

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June 17, 2013, 06:50:58 AM
 #8

Didn't find bfmines in the list of "awaiting approval" on BTCT.

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June 17, 2013, 06:53:44 AM
 #9

When do you anticipate seeing the first dividend from the bond?

The first dividends comes out within a week of receiving and putting the miner to work. The contract with Metabank states no later than October, but the unofficial word is August 2013, so anywhere from six weeks (best case) to fifteen weeks (worst case) from now.

We all know ASIC hardware deliveries can be unpredictable, though, but Bitfury who is delivering the chips to Metabank is just a couple of weeks late for his target. 100TH, the other recipient of those chips, estimated a trial run for mining in late June, so somewhere in August is still feasible.

.b

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June 17, 2013, 06:54:08 AM
 #10

Didn't find bfmines in the list of "awaiting approval" on BTCT.

It's still pending unlocking by burnside. I've pinged him so you'll find it in Locked instead.

.b

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June 17, 2013, 08:41:47 AM
 #11

0.004 is competitive now, but definitely not in 2 or 3 months time.

If difficulty continues to increase at 20% every 12 days for the next 10 weeks then the current value of a PMB should decline by around 67%.

Taking DMS.MINING at your figure of .0052 BTC/MHs currently, the value at the time of your IPO should be down to .0017
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June 17, 2013, 11:40:42 AM
 #12

Hasn't the manufacturer of these miners already lost 100btc on a bet due to a missed milestone? I'm also reading that the rough initial testing of the chips didn't go well.

Even if they are luckier that most people before them, and don't miss anymore milestones, the mining difficulty is likely to be 3x-8x higher by the time these are delivered to you. This is compounded by the fact that when/if they do ship these, another large chunk of hashing will go online, increasing difficulty even further.

It's extremely likely that by the time these bonds are hashing, 1mh/s will be worth only 10-20% of what it is today.

Also, why would someone want to leave their coins dormant in escrow with you for 3 months? That is an opportunity cost, and one could easily out that coin into another stock or bond that pays 1%+ per month "guaranteed". Maybe you should have forgone the escrow and provided an interest rate?
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June 17, 2013, 12:21:53 PM
 #13

0.004 is competitive now, but definitely not in 2 or 3 months time.

If difficulty continues to increase at 20% every 12 days for the next 10 weeks then the current value of a PMB should decline by around 67%.

Taking DMS.MINING at your figure of .0052 BTC/MHs currently, the value at the time of your IPO should be down to .0017

Not sure your dates and calculations are correct, but you may be right that the price isn't competitive in a worst case scenario of perpetual 20% growth. However, there are many reasons why this isn't sustainable (keep in mind, a percentage increase is proportional, which will eventually mean the difficulty must rise by close to infinite per 10 days).

In a better case scenario, the price is already discounted enough from current options to make this highly competitive, and in a best case scenario, this pricing beats anything out of the water.

.b

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June 17, 2013, 12:40:17 PM
 #14

Thanks for reaching out, TAT, I was expecting the competition to rear its head :-)

Hasn't the manufacturer of these miners already lost 100btc on a bet due to a missed milestone? I'm also reading that the rough initial testing of the chips didn't go well.

Bitfury's chip has gone well so far but you are right in that the shipping delay of two weeks caused the bet to fail. However, he's already promised to reimburse the Yes-voters if the chip performs as expected and as his initial tests show. He was a bit optimistic and had expected the chips two weeks ago, but now they're here :-)

Keep in mind this is the first 24 hours, roughly, of a new chip design, but from what I'm reading in the thread at https://bitcointalk.org/index.php?topic=228677, it looks very promising.

In any case, this is not something investors need to fear as in case the chips do not work, their funds will be returned.

Even if they are luckier that most people before them, and don't miss anymore milestones, the mining difficulty is likely to be 3x-8x higher by the time these are delivered to you. This is compounded by the fact that when/if they do ship these, another large chunk of hashing will go online, increasing difficulty even further.
It's extremely likely that by the time these bonds are hashing, 1mh/s will be worth only 10-20% of what it is today.


...and then the beanstalk will grow so high it will reach Mars!

Like I've said, in a worst case scenario, this is not as luxurious as in a better or best case scenario, but regardless it is already priced at close to half of other *AHEMTAT.VMCOUGH* PMBs, so for those that do not subscribe to "OMG Bitcoin mining is dead in two months, the difficulty is killing us all!" they at least get 50% of their investment back if they sell those other assets and subscribe to this.

Also, why would someone want to leave their coins dormant in escrow with you for 3 months? That is an opportunity cost, and one could easily out that coin into another stock or bond that pays 1%+ per month "guaranteed". Maybe you should have forgone the escrow and provided an interest rate?

Several reasons;

  • This is far better priced and has a discount compared to options available today.
  • Investors receive a bonus dividend of estimated 15-20% for six months after release.
  • For investors that wish to bet against the perpetual mining difficulty growth theory, this is their best price on the market.


For the record, I'll be traveling for the next couple of days and may need a few extra hours to get back with any further questions. In summary, however:

  • If you believe in the perpetual proportional mining growth theory, don't by this PMB (or any PMB or mining equipment for that matter)
  • If you think that mining difficulty at some pint must flatten out and you think mining will remain profitable long enough to reap a reward, this PMB is the most competitively priced asset on the market

.b

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June 17, 2013, 01:01:13 PM
 #15

Thanks for reaching out, TAT, I was expecting the competition to rear its head :-)
I have no problem with competition, it would be foolish for ANY mining asset to think they will be the last, or the most dominant one. I just think you have earned the same scrutiny you provide to everyone else Wink

Even if they are luckier that most people before them, and don't miss anymore milestones, the mining difficulty is likely to be 3x-8x higher by the time these are delivered to you. This is compounded by the fact that when/if they do ship these, another large chunk of hashing will go online, increasing difficulty even further.
It's extremely likely that by the time these bonds are hashing, 1mh/s will be worth only 10-20% of what it is today.
...and then the beanstalk will grow so high it will reach Mars!

Like I've said, in a worst case scenario, this is not as luxurious as in a better or best case scenario, but regardless it is already priced at close to half of other *AHEMTAT.VMCOUGH* PMBs, so for those that do not subscribe to "OMG Bitcoin mining is dead in two months, the difficulty is killing us all!" they at least get 50% of their investment back if they sell those other assets and subscribe to this.

Belittle the projections all you like, but you and I both know difficulty is poised to raise by the range I noted, this is accepted across the mining industry, not some bit of paranoia. You have preached to no end about the impending hash onslaught while claiming gloom and doom to ASICMINER shareholders. Now you are joining the fray, welcome!

Also you don't have to mask your comparisons in coughs. TAT.VM pays its holders, and has been for weeks, BFMINES is selling promises on a moving calendar. There is no comparison, until you are actually hashing at least...

This is far better priced and has a discount compared to options available today.

Untrue, there are other mining assets charging less for future hashes (AMC is a great example, and they even pay divs in the interim, using mining equipment they have already)

  • If you believe in the perpetual proportional mining growth theory, don't by this PMB (or any PMB or mining equipment for that matter)
  • If you think that mining difficulty at some pint must flatten out and you think mining will remain profitable long enough to reap a reward, this PMB is the most competitively priced asset on the market

So, what you're saying is, don't buy this asset unless you think difficulty will stop going up? Sound advice.

For those of you that don't know, Furuknap and myself have had some lively debates over IRC, it's mostly just sparring, and I hope I don't look too petty giving him a hard time here, but in the end what he is selling is not deceptive or unethical (just overpriced! bazinga!) It's also not lost on me that I also sell a PMB, but I created mine partially to make it harder for people to overcharge for PMBs, including ones that seem more inexpensive.
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June 17, 2013, 01:18:34 PM
 #16

Thanks for reaching out, TAT, I was expecting the competition to rear its head :-)
I have no problem with competition, it would be foolish for ANY mining asset to think they will be the last or dominant one. I just think you have earned the same scrutiny you provide to everyone else Wink

And I quite welcome it :-)

Belittle the projections all you like, but you and I both know difficulty is poised to raise by the range I noted, this is accepted across the mining industry, not some bit of paranoia. You have preached to no end about the impending hash onslaught while claiming gloom and doom to ASICMINER shareholders. Now you are joining the fray, welcome!

I'm not sure why you've understood that I've attacked ASICMiner on a perpetual proportinal growth theory. In fact, my estimates are far, far below what any 25% forever growth will mean, which I think I've made clear on numerous occasions.

Also you don't have to mask your comparisons in coughs. TAT.VM pays its holders, and has been for weeks, BFMINES is selling promises on a moving calendar. There is no comparison, until you are actually hashing at least...

Very true, which is why the bond is designed with a discount and a bonus dividend for investors, which will happen in the period when the bond is most profitable.

If the bonus dividend is at 16% for six months, that effectively means the bond pays dividends for 1.16mh/s in those first critical months. In fact, and for the sake of an example only, if the difficulty remains steady for the next six weeks and Metabank delivers in a best-case scenario, this means the yield is almost 1% per day (based on TAT.VMs current divs at 0.00003223 per day multiplied by 1.16 and a price of 0.004).

You're right, though, we both (and investors too) know that this isn't going to be the case, but it is the other extreme from the scenario where everything grows proportionally forever.

This is far better priced and has a discount compared to options available today.
Untrue, there are other mining assets charging less for future hashes (AMC is a great example, and they even pay divs in the interim, using mining equipment they have already)

AMC is a company so it's not really comparable. I don't compare this to AM either. 100TH is technically the closest and best option today, but due to recent events, I'm not considering it a reasonable asset anymore, despite it being one of my previous favorites.

Honestly, I think PAJKA is the most competitively priced asset outside this, with TAT.VM as a second.

  • If you believe in the perpetual proportional mining growth theory, don't by this PMB (or any PMB or mining equipment for that matter)
  • If you think that mining difficulty at some pint must flatten out and you think mining will remain profitable long enough to reap a reward, this PMB is the most competitively priced asset on the market
So, what you're saying is, don't buy this asset unless you think difficulty will stop going up? Sound advice.

What I'm saying is eactly what I wrote. It doesn't make change to change that statement when you're quoting it :-)

For those of you that don't know, Furuknap and myself have had some lively debates over IRC, it's mostly just sparring, and I hope I don't look too petty giving him a hard time here, but in the end what he is selling is not deceptive or unethical (just overpriced! bazinga!) It's also not lost on me that I also sell a PMB, but I created mine partially to make it harder for people to overcharge for PMBs, including ones that seem more inexpensive..

I concur; do not hold TATs arguing against him as petty squabble from a competitor. TAT is a great guy with good arguments and we've been discussing this both public and in private. I welcome his debate because it allows me to argue my case for why I believe this is a much better priced PMB than anything else on the market. I value his opinions and it has greatly influenced how I designed this asset, especially the pre-release terms.

However, now I really must go. I'm in the process also (as you would expect) of writing an article to present the various sides of the issue. If you'd like to read my current articles on PMBs, feel free to pick up your free complimentary copy right here:

http://coin.furuknap.net/understanding-mining-bonds/

http://coin.furuknap.net/are-perpetual-mining-bonds-scams-not-really/

.b

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June 17, 2013, 01:43:05 PM
 #17

This will be profitable, I hope it get accepted asap.
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June 17, 2013, 01:57:40 PM
 #18

This will be profitable, I hope it get accepted asap.
You would put your hope to better use if you hoped that mining would begin ASAP. Wink
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June 17, 2013, 01:59:48 PM
 #19

You may want to consider NOT calling it a bond - if you call it a bond it'll definitely make it harder for you to get moderator approval.

That's because it is NOT a bond - nowhere is there mention of returning capital at the end.  A few moderators will vote NO on anything that isn't a bond but calls itself one - as it gives the misleading impression that capital is secure and will be returned ('real' bonds have a face vaue that doesn't change - and which in nearly all cases eventually gets repaid).  Yeah I've heard the arguments that it IS a bond but is denominated in hashes - which fails the smell test immediately when the selling price isn't defined in hashes.

I'm staying out of the argument on price as, right now, I have no interest in defining, determining or arguing over what a fair price for PMBs is.  I AM pretty satisfied that furuknap isn't intending to scam.

Maybe a prediction of what you believe difficulty (and hence dividend) will be at expected delivery date would help make the value of this obvious?
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June 17, 2013, 02:34:10 PM
 #20

Thanks, tradefortress. The pricing is intended to be competitive. I want to have a reasonably priced PMB and this should be around 30% lower than current PMBs trade. Add to that a rougly 15-20% bonus dividend the first six months and I hope to see some interest.

On a price/mhs, BFMines will be the lowest priced PMB on the market.






If you're going to do comparisons you need to do them based on what they'd be charging when your hardware arrives.

Either that - or compare your price to their price minus the dividends they'd have paid whilst you waited for delivery.

Also this needs clarification :

" To compensate for this, the first months of operation will give approximately 20% higher coupons/dividends."

How many months?
Replace approximately with an exact definition.  It's a contract not a vague statement of general intent.
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