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Author Topic: [BTCT][BFMINES] - Mining Contracts Now Available - Bonus Divs First Months  (Read 24867 times)
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Deprived
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July 09, 2013, 10:10:02 PM
 #161

That's a lot of waffle to totally miss the point.

Either the changes DO alter what investors get or they don't.

They don't. The contract states (and will state, barring undeniably beneficial updates) that investors get the mining output from 1mhs of Bitcoin mining power.

If you're saying they get extra but it doesn't come from you then where is it coming from?  Or was there some cash that would be sent to a null address in the old contract?  The surplus is used to cover costs that YOU have responsibility for - so anything coming from that IS coming from you indirectly (as YOU have to cover the costs - so if less gos to that from the surplus then more has to go to it from you).

How the asset is backed isn't really relevant to what contract holders get. I could be growing pot in my back yard to get funds for all the contract is concerned (sans the transaction fees and luck, of course).

I included the backing as part of the contract as an added insurance to contract holders that I have taken steps to ensure an operating margin so that there won't be any nasty surprises. Like I said, I designed this with the attitude of protecting contract holders.

I'm surprised you don't ask what happens to the surplus funds if or when the contracts terminate, however. To be pro-active, I'll answer it in any case and say that I don't want to discuss the details of that at this point.

And it isn't legitimate to have a motion where the content of the motion is hosted elsewhere and so able to be amended during or even after the vote.  The contract to be voted on should be posted in the motion OR cryptographically signed and the hash posted in the motion.

Agreed, I'll post the proposed changes here, and ask someone to quote it for reference. I realize that because this is a self-moderated topic, I can delete those quotes, so feel free to post the quote below in other threads or elsewhere for the record if someone feels that is required.

The proposed new contract is as such (I'll remove the note on rebranding and the stricken out use of PMB from the BTCT contract if approved).
 
Quote

Contract


Overview
 
BFMines is a perpetual mining bond (PMB) mining contract backed by physical hardware. The contract pays a dividend equivalent to 1 megahashes per second (mh/s) of mining power.
 
Note: The initial term used for this type of asset was perpetual mining bond, but as the term is somewhat misleading, I have rebranded it as a mining contract.
 
Please read the following article to understand what mining contracts are:
 
http://coin.furuknap.net/understanding-mining-bonds/
 
In summary, however, please note the following:
 1.This is a mining contract, not a share in a company. You receive no voting rights and no other income than the stated dividend.
 2.The mining contract is 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 contract.
 3.The mining contract 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 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.
 
Changes to Contract
 
This contract may be updated at any time by the operator if it is to the reasonably undeniable benefit or of no consequence to contract holders. Changes that do not work in favor of existing contracts may be implemented only if the changes are accompanied by an offer to buy back contracts at the terms specified in this contract.
 
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 contracts for one of the following reasons:
 1.The operator becomes incapable of operating the contracts over an extended period
 2.The overhead of operating the contracts becomes greater than its profits
 3.Permanent and irreparable damage to hardware
 4.The operator must close the contract for other reasons
 
If the contract 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 contracts 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 contract 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 contract as explained above.
 
Pre-Release Terms:
 
Please note that these terms apply only until the mining hardware has been delivered. Upon delivery, these terms will be removed from the contract.

The contracts are 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 contract holders additional dividends for six months. The additional dividends is intended to compensate contract holders for not receiving dividends until the mining hardware has been delivered.
 
Expansion of Operation
 
This contract will always be backed by real mining hardware or equivalent mining assets. In case of expansion of the contracts, those contracts 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 contract decreases in value as Bitcoin mining difficulty climbs. The biggest return on investment will happen early in the contract’s existence and gradually decline as the Bitcoin mining climbs.
 
Mining contracts are not shares, they are effectively contracts where the mining operator mines bitcoin on your behalf, to be rewarded in dividends based on mining power. The price paid for a mining contract will under normal circumstances not be repaid so your sole income will be from the dividend paid daily.
 
Due to the buy-back clause of this contract, please be careful of paying too much for this mining contract, especially when there are sudden price spikes. The operator may choose to buy back contracts 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 contract does not pay dividends until the release date. To compensate for this, the first six months of operation will give approximately 20% higher dividends depending on the final performance of the miner. In case the hardware fails completely, the contracts will be repaid for 0.004BTC per bond.




Quoting for a record of the proposed new contract.
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Deprived
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July 09, 2013, 10:17:07 PM
 #162

How the asset is backed isn't really relevant to what contract holders get. I could be growing pot in my back yard to get funds for all the contract is concerned (sans the transaction fees and luck, of course).

I included the backing as part of the contract as an added insurance to contract holders that I have taken steps to ensure an operating margin so that there won't be any nasty surprises. Like I said, I designed this with the attitude of protecting contract holders.

I'm surprised you don't ask what happens to the surplus funds if or when the contracts terminate, however. To be pro-active, I'll answer it in any case and say that I don't want to discuss the details of that at this point.

I didn't ask because it's already implicit in the contract that you get any surplus.  That's because, as you noted, above all investors are entitled to is the output of 1 MH/s.  Any payment above that (other, debatably, than the surplus for first 6 months) is effectively a gift from you to which they have no entitlement and in respect of which they should have no expectation.

I'd recommend investors vote YES to the change btw - now it's quoted and can't be changed.  There's a VERY significant benefit to them that hasn't been mentioned at all (and is pretty subtle).  As undoing it would very definitely be against the interest of investors that can't be done unilaterally.
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July 11, 2013, 04:21:32 AM
 #163

just curious, can someone explain the lack of capital inflows into this fund?

it will currently cost around 250 btc to fund this.

people pay more than that for preorders, although for more megahashes

but the restructuring away from the bond thing changes all of that I assume?
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July 11, 2013, 04:45:27 AM
 #164

just curious, can someone explain the lack of capital inflows into this fund?

it will currently cost around 250 btc to fund this.

people pay more than that for preorders, although for more megahashes

but the restructuring away from the bond thing changes all of that I assume?

Very simply. With expected difficulty increases through the remainder of July, August and part of September, this asset is not competitively priced with the best priced assets available.

As an example, DMS.MINING shares, which each represent 5MH, are selling for 0.016499 btc or 0.0032998 per MH. DMS.MINING is also paying daily divs TODAY. So DMS is selling for less and you will get at least six weeks of additional dividends before the expected date of hardware release for this asset.

Also, these types of assets aren't as popular as they once were.

TBH, I have no idea how any shares were sold considering the situation.

-helixone
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July 11, 2013, 04:57:23 PM
 #165

Very simply. With expected difficulty increases through the remainder of July, August and part of September, this asset is not competitively priced with the best priced assets available.

As an example, DMS.MINING shares, which each represent 5MH, are selling for 0.016499 btc or 0.0032998 per MH. DMS.MINING is also paying daily divs TODAY. So DMS is selling for less and you will get at least six weeks of additional dividends before the expected date of hardware release for this asset.

Also, these types of assets aren't as popular as they once were.

TBH, I have no idea how any shares were sold considering the situation.

-helixone

It's strange that you still haven't been unable to understand this asset, the information I've provded, or the comparisons given, but hey, I can't force you to understand.

.b

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July 11, 2013, 05:03:25 PM
 #166

just curious, can someone explain the lack of capital inflows into this fund?

it will currently cost around 250 btc to fund this.

people pay more than that for preorders, although for more megahashes

but the restructuring away from the bond thing changes all of that I assume?

Very simply. With expected difficulty increases through the remainder of July, August and part of September, this asset is not competitively priced with the best priced assets available.

As an example, DMS.MINING shares, which each represent 5MH, are selling for 0.016499 btc or 0.0032998 per MH. DMS.MINING is also paying daily divs TODAY. So DMS is selling for less and you will get at least six weeks of additional dividends before the expected date of hardware release for this asset.

Also, these types of assets aren't as popular as they once were.

TBH, I have no idea how any shares were sold considering the situation.

-helixone

MINING is taking a beating today (finally) due to the difficulty increase yesterday.

I believe that BFMINES' market value is going to tank pretty soon due to the fact that no one wants to pay .04/MH/S anymore; TAT.VM is about to break that mark and once it starts slipping under, you can bet that those 'investors' holding those 33K BFMINES shares are going to start dumping some. Also, it's a pretty shallow BID pool, so it wouldn't take much of a sell off to get pretty low pretty quickly.
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July 11, 2013, 05:46:02 PM
 #167

How the asset is backed isn't really relevant to what contract holders get. I could be growing pot in my back yard to get funds for all the contract is concerned (sans the transaction fees and luck, of course).

I included the backing as part of the contract as an added insurance to contract holders that I have taken steps to ensure an operating margin so that there won't be any nasty surprises. Like I said, I designed this with the attitude of protecting contract holders.

I'm surprised you don't ask what happens to the surplus funds if or when the contracts terminate, however. To be pro-active, I'll answer it in any case and say that I don't want to discuss the details of that at this point.

I didn't ask because it's already implicit in the contract that you get any surplus.  That's because, as you noted, above all investors are entitled to is the output of 1 MH/s.  Any payment above that (other, debatably, than the surplus for first 6 months) is effectively a gift from you to which they have no entitlement and in respect of which they should have no expectation.

Actually, this isn't implied, or at least shouldn't be. I've said this before; I do not expect any benefit that other contract holders get. I get my reward from the IPO, after that, I'm a contract holder like everyone else.

I'll elaborate a bit more on this in a response later.

I'd recommend investors vote YES to the change btw - now it's quoted and can't be changed.  There's a VERY significant benefit to them that hasn't been mentioned at all (and is pretty subtle).  As undoing it would very definitely be against the interest of investors that can't be done unilaterally.

I'm happy you approve. That really means a lot.

.b

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July 11, 2013, 05:51:12 PM
 #168

but the restructuring away from the bond thing changes all of that I assume?

There isn't really a restructuring, more a clarification. It has always been the intention (although that's difficulty to prove, as with any intention) to provide the changes I'm going to publish, but like I've responded to Deprived, I was more concerned with protecting contract holders than to open up for any improvements. I don't want to open up for speculation about the 'real' content of the contract by leaving in details that are not clearly defined, so I left in only things that were absolutely certain and left little room for ambiguity.

The result is that the contract really locked me in and prevents me from adding benefits like the announced guarantee with the potential upside of luck and transaction fees. It is actually in the contract already, but not clearly defined. 100% of 1mhs of mining is saying this, but apparently, a lot of people interpret this as 100% of the DMS.Mining and TAT.VM formula, which is clearly wrong if you just read what's said.

As for future improvements, I've already mentioned why I can't be clear on some of these aspects. Some factors simply cannot be determined until we've gotten the hardware up and running and have seen it in operation over some time.

I hate to open up the floor for speculation, but I've also said that I do not expect to get any benefits from the operation outside what other contract holders get. That is why my announcement about buying contracts myself meant something. I get only what everyone else gets after the IPO.

Let me give you an example. If I get no further benefits, that means any surplus capacity will go to the benefit of contract holders. I can't say what this will mean yet because I don't know the extent of the surplus, but lets say that, as a silly example, the surplus revenue goes towards investing in new hardware to increase hash power. This is a silly example because it would require a complete rewrite of the contract as contract holders would then be equity holders too. The contract change prevents such changes, at least unilaterally, because it would add extra risk.

If this was announced, however, speculators would immediately start to plan for increased hashrate, but because we don't know the operational costs exactly yet (I'm estimating 5%) nor the stability of the hardware (which can require all the remaining excess capacity to account for risk) we won't know how much.

If I announced that the excess capacity would be paid out once a month, for example (save a reasonable and responsible buffer for risk) it would have the same effect; expectations that possibly cannot be met, and disappointment in case of no additional output. It would also complicate things with reporting. I did leave an opening for such an option, though, but clearly stated that such additional payouts should not be expected.

I'm trying my best to avoid idle speculation and building up expectations that may leave people disappointed. That's why I'm comparing BFMines to 'plain' PMBs with none of the other benefits. That brings the competition into a better light and means that BFMines may look 'worse' when comparing price alone. I'm fine with sticking with this because it means I don't disappoint people when I give them exactly what they expect.

However, if you really want to take the gloves off and speculate, here are some additional factors:

1. BFMines pays transaction fees. These must go up for Bitcoin to succeed. Friedcat estimates up to 100%. Even if it's just 10%, BFMines effectively pays 1.1mhs when compared to PMBs.
2. BFMines has 15-20% minimum excess capacity that will be to the benefit of contract holders (explicitly used to secure the stability and operation). If the hardware is stable, that excess capacity can be used to add additional output, bringing BFMines up to 1.265 mhs.
3. All ASIC hardware has vastly overperformed their specs. If Metabank hardware overperforms by 20%, the excess capacity reaches 34-39%, which, if paid out, brings BFMines up to 1.529mhs.
4. BFMines guarantees no bad luck in mining. If the variance of luck is 10% and only good luck counts, BFMines adds an additional 2.5% on average. If you feel lucky, that may be higher. However, bad luck would be taken from the above excess capacity, so I'm not adding that to the 'idle speculation', even though good luck would be paid out.

None of these things are part of the contract and cannot be at this stage. They are in no way guaranteed and may not even be likely. However, I'm somewhat confident that these factors are part of what people evaluate when they look at BFMines compared to straight-forward PMBs. I discourage this; it is very likely that these numbers won't be real. We're not guaranteed more than 120ghs from Metabank; we have no idea whether Bitcoin will rise again; we do not know whether even a cent of excess capacity can be paid out after hardware risk.

.b

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July 11, 2013, 06:38:17 PM
 #169

4. BFMines guarantees no bad luck in mining. If the variance of luck is 10% and only good luck counts, BFMines adds an additional 2.5% on average. If you feel lucky, that may be higher. However, bad luck would be taken from the above excess capacity, so I'm not adding that to the 'idle speculation', even though good luck would be paid out.

None of these things are part of the contract and cannot be at this stage. They are in no way guaranteed and may not even be likely. However, I'm somewhat confident that these factors are part of what people evaluate when they look at BFMines compared to straight-forward PMBs. I discourage this; it is very likely that these numbers won't be real. We're not guaranteed more than 120ghs from Metabank; we have no idea whether Bitcoin will rise again; we do not know whether even a cent of excess capacity can be paid out after hardware risk.

.b

This is where there's still a problem.

On the one hand you say "BFMines guarantees no bad luck in mining."
Then immeidately after you say "None of these things are part of the contract and cannot be at this stage. They are in no way guaranteed"

Guarantee should mean the same thing in both places.  Is no bad luck guaranteed or not?

I read it as an unfortunate misuse of guarantee in the first instance where it really should have said "BFMines intends not to pass bad luck on to investors but can't guarantee it."

I believe it's bad form in general to try to promote a security on the basis of benefits which investors have no contractual obligation to.  Investors should not be put in the position of needing to rely on an issuer delivering more than they're contractually obliged to.  I appreciate you hope or intend to put such commitments in the contract - but investors would definitely be advised to wait until they're actually in before investing (unless they're happy with what they'd get without them).
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July 11, 2013, 07:26:45 PM
 #170

4. BFMines guarantees no bad luck in mining. If the variance of luck is 10% and only good luck counts, BFMines adds an additional 2.5% on average. If you feel lucky, that may be higher. However, bad luck would be taken from the above excess capacity, so I'm not adding that to the 'idle speculation', even though good luck would be paid out.

None of these things are part of the contract and cannot be at this stage. They are in no way guaranteed and may not even be likely. However, I'm somewhat confident that these factors are part of what people evaluate when they look at BFMines compared to straight-forward PMBs. I discourage this; it is very likely that these numbers won't be real. We're not guaranteed more than 120ghs from Metabank; we have no idea whether Bitcoin will rise again; we do not know whether even a cent of excess capacity can be paid out after hardware risk.

.b

This is where there's still a problem.

On the one hand you say "BFMines guarantees no bad luck in mining."
Then immeidately after you say "None of these things are part of the contract and cannot be at this stage. They are in no way guaranteed"

Guarantee should mean the same thing in both places.  Is no bad luck guaranteed or not?

I read it as an unfortunate misuse of guarantee in the first instance where it really should have said "BFMines intends not to pass bad luck on to investors but can't guarantee it."

Ah, I see.

No bad luck is guaranteed. Whether that actually means anything and of so how much is not guaranteed. IE I cannot guarantee that the protection against bad luck means you get a 2.5% increase. I cannot guarantee that transaction fees go up to 10%.

That's what I meant by 'not guaranteed'. I guarantee that you get transaction fees and no bad luck, not how much that will increase the output.

I believe it's bad form in general to try to promote a security on the basis of benefits which investors have no contractual obligation to.  Investors should not be put in the position of needing to rely on an issuer delivering more than they're contractually obliged to.  I appreciate you hope or intend to put such commitments in the contract - but investors would definitely be advised to wait until they're actually in before investing (unless they're happy with what they'd get without them).

I agree, which is why I don't :-)

.b

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July 12, 2013, 05:55:29 AM
 #171

Updated price comparison:



.b

Edit: Error in first chart

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July 13, 2013, 05:58:58 AM
 #172

A true graph to replace the falseness above, using furuknap own assumptions, PAJKA is now incorrect so BFmines wins against one. woo hoo

http://i.imgur.com/4O1PNGk.jpg

Receive $5 free of bitcoin in Australia by becoming verified on CoinJar.com, https://filler.coinjar.com/r/034375f5
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July 15, 2013, 10:49:48 PM
 #173

Contract Update
As per the previous announcement, BFMines has recently posted a motion to update the contract. In brief, this update includes the issuer’s ability to update the contract when those updates benefit contract holders only, it rebrands the asset as a mining contract rather than a mining bond, and also removes Metabank as the named hardware provider.
 
The motion has passed without a single No-vote (21251 Yes votes, 6 Abstain votes), and is thus to be updated on the BTCT site. The new contract will be effective as soon as BTCT updates it, which is a manual process.
 
The purpose behind the update is to make it possible to improve the terms of the contract. On writing, I was more concerned with protecting contract holders and in the process locked myself out from making the terms better.
 
I encourage contract holders, potential or existing, to review the discussion on the changes in the forum.
 
https://bitcointalk.org/index.php?topic=236310.msg2692532#msg2692532
 
This discussion also contains details about the upcoming intended changes, including:
  • Guarantee of minimum mining performance to cancel the effect of miner’s bad luck while retaining the chance to miner’s good luck
     This will have a positive impact on dividends of on average half the miner’s luck variance (5-10%)
  • Clarification on inclusion of transaction fees in the dividend payouts (whereas a PMB pays from a fixed forumla using the block reward only)
     This will have a positive impact on dividends of the transaction fees over time, currently around 1.1%
  • Clarification on the use of the excess mining power, which is to bo to the benefit of the contract holders, not the operator.
     Although not directly paid out, this will have a positive impact on the stability, security, and longevity of the contracts, and will in some form or another, go back to the contract holders.


I would also like to stress that any changes that are not, without a reasonable doubt, in the favor of contract holders will be accompanied by a buy-back offer as per the contract.
 
I have also published an article that better explains why BFMines is a better investment than traditional PMB assets.
 
http://coin.furuknap.net/why-bfmines-is-a-better-mining-investment-than-a-pmb/
 
.b

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July 16, 2013, 02:04:43 AM
 #174

Your new post says the following :

"One particular case where this becomes apparent is with DMS.Mining. DMS.Mining, although an interesting speculator’s tool, is designed to fail if mining is profitable. The dividends you get from DMS.Mining is the same funds you pay when you buy the shares.  If it turns out that mining difficulty does not grow indefinitely, DMS.Mining will close down because it won’t actually have more funds to pay out. "

That's not accurate.  The funds available are MORE than what you pay when you buy a DMS.Mining - depending on how you look at it, they're either ~400 days of current dividend OR the funds from the sale of one DMS.Purchase OR the funds you pay PLUS the funds someone buying (or holding) a DMS.Selling paid.  All three descriptions amount to the same thing - however you look at it, DMS.Mining share at any point in time are backed by significantly more than what they sell for and ALL of those funds are available to DMS.Mining investors if difficulty change is favourable.

Your paragraph pretty much states that all they can ever get back is what they paid for the share - that's a lie when expressed as a generality.  If difficulty immediately stopped rising now then DMS.Mining shares would receive back well over double the price they currently sell at and would probably receive it all within the next few months.  Conversely, if difficulty keeps rising rapidly for a long time then when difficulty finally levels off they WOULD receive a final payment but the dividends by then would be near irrelevant compared to what they receive now.

It may be the case that the only way your investors would ever make a profit is if difficulty stops rising soon (or alternatively if it stops rising middle of next year and they don't mind waiting a few decades and hope your hardware lasts that long).  But as there's little likelihood of it stopping rising soon, arguments based on the assumption that it will are pretty meaningless.  Yes it IS true that when difficulty stops rising (and I DO agree with you that it likely will - at least for a while) DMS.Mining ceases to behave like a PMB -  giving a lump-sum golden hand-shake rather than a daily pittance.  But that pittance that they don't get would realistically be at a tiny part of today's dividend - with the vast majority of all dividends they'd receive in, say, 3 or 5 years of operation having already been received.

And, of course, your own offering also will end and pay out a final amount as well - when depends more on the reliability of your hardware than difficulty changes : so it could be sooner or later than DMS.Mining (I'm not sure how the warranty/guarantee on the hardware is).  At which point they get a random final payment - depending on what market price is.

Most of the rest of your comments are pretty fair (some aren't clear - e.g. the benefits of luck depend on what pool/payout structure you will use which isn't disclosed.  Luck could have anything from zero effect if you mined on strict PPS to a massive impact if you solo mined) - or WILL be fair once the contract is updated to clearly reflect benefits you refer to.

And of course "better value" ALWAYS depends on the price.  If your contract adds in the extra things promised then, once you start mining (and ONLY then), you definitely WILL be better value per MH/s than DMS.Mining or TAT/VM - but that isn't the same thing as being better value at ANY price.  At present (with difficulty changes still some way off) I'd estimate the change in ending terms makes DMS.Mining at most about 5% less valuable than equivalent actual hashing - and that's IF you believe operator can/will pay indefinitely even when their hardware fails from old age (an unknown parameter for ASICs so far).  TAT.VM has a significantly worse final payment than DMS.Mining so the margin would be higher there.

Best advice to potential investors in BFMINEs is to hold on.  It looks unlikely to sell out soon, so there's no rush to buy - and no discount for buying now rather than later.  When the hardware looks likely to ship, see how much difficulty has changed, work out how many years that would take to return capital even with no further changes, compare to other available options and decide then.  As there's no way to sell back at or near buying price right now there's no incentive to gamble and buy without a clear delivery date when you can wait and see how difficulty changes and the prices of competitors (including any new ones that show up) rise/fall.
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July 16, 2013, 02:26:56 AM
 #175

Your new post says the following :

"One particular case where this becomes apparent is with DMS.Mining. DMS.Mining, although an interesting speculator’s tool, is designed to fail if mining is profitable. The dividends you get from DMS.Mining is the same funds you pay when you buy the shares.  If it turns out that mining difficulty does not grow indefinitely, DMS.Mining will close down because it won’t actually have more funds to pay out. "

That's not accurate.  The funds available are MORE than what you pay when you buy a DMS.Mining - depending on how you look at it, they're either ~400 days of current dividend OR the funds from the sale of one DMS.Purchase OR the funds you pay PLUS the funds someone buying (or holding) a DMS.Selling paid.  All three descriptions amount to the same thing - however you look at it, DMS.Mining share at any point in time are backed by significantly more than what they sell for and ALL of those funds are available to DMS.Mining investors if difficulty change is favourable.

Hm... This wasn't a complete description, but would be more accurate, in my opinion, if I changed the statement to
Quote
The dividends you get from DMS.Mining is the same funds you pay when you buy the shares plus what someone else (or you) have paid when acquiring the sister asset DMS.Selling.

I don't want to confuse people beyond making it clear that what they are buying isn't mining, and that the funds from which they receive dividends are the same funds used to buy shares (in any of the assets). As such, there is no way to bring more funds into the asset pools so if those funds run out, payments will stop. They will run out, and fairly quickly, if mining difficulty does not increase.

If mining difficulty does not increase, they can expect to get the exact same dividends from BFMines. The lump sum payment won't cover the rise in price, as any asset that consistently and over time will yield perhaps 100% will drastically rise in value and definitely much more than double overnight.

Actually, I'd be happy to write an article to clarify what DMS does. I know a lot of people are confused, so perhaps an article can help clarify.

I'll also update the article to reflect the change, if you agree, and point to your response here. I can also include the first three paragraphs (as they speak mostly to DMS.Mining) as a quote on the page.

Quote
That's not accurate.  The funds available are MORE than what you pay when you buy a DMS.Mining - depending on how you look at it, they're either ~400 days of current dividend OR the funds from the sale of one DMS.Purchase OR the funds you pay PLUS the funds someone buying (or holding) a DMS.Selling paid.  All three descriptions amount to the same thing - however you look at it, DMS.Mining share at any point in time are backed by significantly more than what they sell for and ALL of those funds are available to DMS.Mining investors if difficulty change is favourable.
 
Your paragraph pretty much states that all they can ever get back if what they paid for the share - that's a lie when expressed as a generality.  If Difficulty immediately stopped rising now then DMS.Mining shares would receive back well over double the price they currently sell at and would probably receive it all within the next few months.  Conversely, if difficulty keeps rising rapidly for a long time then when difficulty finally levels off they WOULD receive a final payment but the dividends by then would be near irrelevant compared to what they receive now.
 
It may be the case that the only way your investors would ever make a profit is if difficulty stops rising soon (or alternatively if it stops rising middle of next year and they don't mind waiting a few decades and hope your hardware lasts that long).  But as there's little likelihood of it stopping rising soon, arguments based on the assumption that it will are pretty meaningless.  Yes it IS true that when difficulty stops rising (and I DO agree with you that it likely will - at least for a while) DMS.Mining ceases to behave like a PMB -  giving a lump-sum golden hand-shake rather than a daily pittance.  But that pittance that they don't get would realistically be at a tiny part of today's dividend - with the vast majority of all dividends they'd receive in, say, 3 or 5 years of operation having already been received.

Would that be OK and enough of a clarification to the article?

Best advice to potential investors in BFMINEs is to hold on.  It looks unlikely to sell out soon, so there's no rush to buy - and no discount for buying now rather than later.  When the hardware looks likely to ship, see how much difficulty has changed, work out how many years that would take to return capital even with no further changes, compare to other available options and decide then.  As there's no way to sell back at or near buying price right now there's no incentive to gamble and buy without a clear delivery date when you can wait and see how difficulty changes and the prices of competitors (including any new ones that show up) rise/fall.

I agree, potential contract holders should not be in any rush to acquire contracts but spend significant time researching the offering, review the (updated) contract, evaluate the mining landscape in general, and only then decide whether to invest and finally where.

The bonus was designed to ensure that there is no rush, and that unless there were dramatic rises in prices (from a flattening in difficulty or some other factor) a rational market would price the competing assets in such a way that makes it irrelevant when during the IPO phase they buy.

.b

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July 16, 2013, 02:49:43 AM
 #176

I don't want to confuse people beyond making it clear that what they are buying isn't mining, and that the funds from which they receive dividends are the same funds used to buy shares (in any of the assets). As such, there is no way to bring more funds into the asset pools so if those funds run out, payments will stop. They will run out, and fairly quickly, if mining difficulty does not increase.

If mining difficulty does not increase, they can expect to get the exact same dividends from BFMines. The lump sum payment won't cover the rise in price, as any asset that consistently and over time will yield perhaps 100% will drastically rise in value and definitely much more than double overnight.

Actually the asset pool DOES increase slowly due to investment though, to date, that's been at a slower rate than the payment of MINING dividends (haven't done the exact math but think on average profit covers over about 1/3 of dividends).  DMS.Mining is explicitly designed to allow speculation on the value of PMBs during periods of fast growth - where the residual payments once the difficulty rise stops are likely to be relatively small.  Current difficulty is pretty irrelevant to the value of PMBs - its where it'll be when it stops/slows right down that really matters.  And at some stage there's almost certainly going to be a period when DMS.Mining will be great value due to those buying DMS.Selling not realising the halt is about to happen (at which stage DMS/Mining ends up with 90%+ of all funds).  It won't give out the residual small payments PMB would - but it WILL give out a good sum in one payment immediately.  Once that point comes into sight DMS.Mining will cease to be comparable to PMBs - at present it still is (or nearly everyone believes it is) because there's so likelihood of difficulty ceasing to rise in the near future.

Last paragraph doesn't really apply.  The point at which DMS/Mining would (or might) close is when growth slowed to around 3% per change - not if it ever reached total stagnation.  Total stagnation (zero growth) is unlikely for some years and probably unlikely ever for any significant period.  To get stagnation requires that the price of hardware doesn't fall AND the exchange-rate of BTC doesn't rise.  Hardware is almost certain to drop heavily in price - and long-term BTC price must rise if it doesn't fail/stagnate itself.

There IS one scenario where DMS.Mining is horribly worse value than any actual mining operation - the collapse of BTC, where BTC loses (nearly) all value for whatever reason.  I don't rate that as massively relevant but it DOES exist - if that happened (and network hash-rate dropped massively - which it would) then DMS.Mining would just get all the capital  back whilst actualy mining operations would get the large sums of BTC actually mined.  It's not that relevant as having a lot of worthless tokens rather than a few matters not at all (we're not talking about BTC dropping to $10 for a while, we're talking about it dropping to the point where it becomes near or actually worthless) and if anyone believes there to be a significant chance of that then they shouldn't invest in ANY BTC investments.
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July 16, 2013, 02:59:39 AM
 #177

I don't want to confuse people beyond making it clear that what they are buying isn't mining, and that the funds from which they receive dividends are the same funds used to buy shares (in any of the assets). As such, there is no way to bring more funds into the asset pools so if those funds run out, payments will stop. They will run out, and fairly quickly, if mining difficulty does not increase.

If mining difficulty does not increase, they can expect to get the exact same dividends from BFMines. The lump sum payment won't cover the rise in price, as any asset that consistently and over time will yield perhaps 100% will drastically rise in value and definitely much more than double overnight.

Actually the asset pool DOES increase slowly due to investment though, to date, that's been at a slower rate than the payment of MINING dividends (haven't done the exact math but think on average profit covers over about 1/3 of dividends).

That is only true as long as you have a positive ROI on your .Selling investments, which may or may not be true (if Dooglus or TradeFortress drove into a concrete wall tomorrow, those funds would likely be worthless and cause a loss).

Like I said, I'd be happy to write a more comprehensive article on DMS, but I want to clarify the article on BFMines so you don't feel I'm doing you or your investors injustice.

Would you be OK with the clarification, the link to your post here, and the two paragraphs quote in the article?

.b

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July 16, 2013, 03:01:41 AM
 #178

I don't want to confuse people beyond making it clear that what they are buying isn't mining, and that the funds from which they receive dividends are the same funds used to buy shares (in any of the assets). As such, there is no way to bring more funds into the asset pools so if those funds run out, payments will stop. They will run out, and fairly quickly, if mining difficulty does not increase.

If mining difficulty does not increase, they can expect to get the exact same dividends from BFMines. The lump sum payment won't cover the rise in price, as any asset that consistently and over time will yield perhaps 100% will drastically rise in value and definitely much more than double overnight.

Actually the asset pool DOES increase slowly due to investment though, to date, that's been at a slower rate than the payment of MINING dividends (haven't done the exact math but think on average profit covers over about 1/3 of dividends).

That is only true as long as you have a positive ROI on your .Selling investments, which may or may not be true (if Dooglus or TradeFortress drove into a concrete wall tomorrow, those funds would likely be worthless and cause a loss).

Like I said, I'd be happy to write a more comprehensive article on DMS, but I want to clarify the article on BFMines so you don't feel I'm doing you or your investors injustice.

Would you be OK with the clarification, the link to your post here, and the two paragraphs quote in the article?

.b

Yeah sounds reasonable.
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July 16, 2013, 03:08:03 AM
 #179

Would you be OK with the clarification, the link to your post here, and the two paragraphs quote in the article?

.b

Yeah sounds reasonable.

Updated:

http://coin.furuknap.net/why-bfmines-is-a-better-mining-investment-than-a-pmb/

.b

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July 19, 2013, 02:26:55 AM
 #180

when is Metabank supposed to deliver again? I lose track
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