The coming flash crash in AMC

[burnside]

Only Yes votes matter and you need 5 of them. You could have 3000 No votes; as long as you get 5 Yes votes, you win the election. It's not even half of the voters; according to your 20+ voter comment, 25% of the voters need to somehow be encouraged to vote favorably. If the rest scream their lungs out about real problems in the contract, who cares? You get listed if you can bribe, threaten, over-promise, or otherwise get 5 people to supprt you.

It's actually even worse because you can even buy one vote yourself and that seems somehow to be quite OK.

This does seem like a design flaw.

I kind of missed the boat on this part of the conversation but I should clarify the current voting setup.  It hasn't changed since it was first rolled out.  To get approved you must:

- have over 5 YES votes
- have a higher YES score than NO score
    (Where no votes count 2x)

I think our next step is to limit the voting timeframe to two weeks.  If we do not have at least 8 votes after two weeks we will refund 50% of the signup fee.  That will motivate voters I am pretty sure.

Step after that I think is to put together a team of 3-5 trusted community mods and somehow compensate them for reviewing contracts and voting according to some exchange determined guidelines.

Cheers

Edit/add: And even with this setup, issues will still fail and people will still lose bitcoins... But at least we will have done proper diligence on the initial business plans.

[1715116988]

1715116988

[1715116988]

1715116988

[furuknap]

I think our next step is to limit the voting timeframe to two weeks.  If we do not have at least 8 votes after two weeks we will refund 50% of the signup fee.  That will motivate voters I am pretty sure.

I don't think you'll get rid of the problem, you're just getting a different problem. Now voters will vote to get compensated (or rather to not be punished for not voting), which contradicts the purpose of having peers review anything.

Step after that I think is to put together a team of 3-5 trusted community mods and somehow compensate them for reviewing contracts and voting according to some exchange determined guidelines.

This sounds much better. In fact, you can even split the listings in two groups; a high-volume asset like ASICMiner or AMC, which will impact the community far more in case of scams or defaults, would require more careful review, more votes, or something like that. 10BTC for listing, 5 goes to reviewers, 5 go to exchange.

Smaller assets like mine (market cap <1KBTC for example) would require less of issuers. Listing fees could also be lower, but still require approval for example by the exchange itself (you or someone from your future team). 5BTC for listing, 2BTC goes to you, 3BTC goes to exchange.

Just examples, but a separation like this may make it easier to get listed for smaller issuers and earn more money for larger assets.

.b

[lysr]

YES 4 / 1 NO    (1 ABSTAINING -- Users with 10 or more shares of LTC-GLOBAL are allowed to vote.)

Anonymous voted NO with comment: Errors in calculating difficulty when making estimates of projected returns does not instill confidence.

Great, at least one of the moderators of BTCT is aware of how deceiving the contract is.
Hope its will be suspended or delisted entirely for the good of all investors.

[ryantw]

If you are an exchange: have a check and balance with separation when new assets apply. Example:

5 trusted mods review a potential asset in private. The asset pays BTC5 (non-refundable) to the exchange and in turn the exchange pays BTC1 to each mod reviewer. The exchange should not receive a fee in the beginning for this mod review process. This will ensure that the exchange won't waste time on assets that it feels aren't even worth a review.

Asset owner does not know who mods are. Any questions the mods may have are routed through exchange owner to asset owner, then then answer routed back to mods. This ensures separation.

If majority of mods approve the asset (minimum 3/5), then the asset proceeds to final veto stage. The exchange has veto-only power. It can decide to not list the asset even if the mods voted in favor. However, it cannot decide to list the asset if the mods did not vote in favor as it would defeat the purpose of having a mod review in the first place.

If the exchange waives its veto power, thus it agrees to list, then public investors will know that 5 trusted mods reviewed the asset, it was voted in favor by the mods and the exchange was given a chance to veto the listing as well. The exchange will earn fee's once the asset is being traded.

Obviously this isn't a foolproof solution, but maybe a starting point. It will at least include separation of parties and place responsibility on the exchange for ensuring a thorough "vetting" process was followed. Kickbacks, bribes, etc. should not occur since the mods will agree to not contact the asset owner directly, and the asset owner will not know the mods during the review/voting process.

It will be a good thing for the public to know that a structured process is used when assets apply for listing on an exchange. It will also be a good thing for the exchange to have it's investors confidence and a good reputation.

[EskimoBob]

If you are an exchange: have a check and balance with separation when new assets apply. Example:

5 trusted mods review a potential asset in private. The asset pays BTC5 (non-refundable) to the exchange and in turn the exchange pays BTC1 to each mod reviewer. The exchange should not receive a fee in the beginning for this mod review process. This will ensure that the exchange won't waste time on assets that it feels aren't even worth a review.

Asset owner does not know who mods are. Any questions the mods may have are routed through exchange owner to asset owner, then then answer routed back to mods. This ensures separation.

If majority of mods approve the asset (minimum 3/5), then the asset proceeds to final veto stage. The exchange has veto-only power. It can decide to not list the asset even if the mods voted in favor. However, it cannot decide to list the asset if the mods did not vote in favor as it would defeat the purpose of having a mod review in the first place.

If the exchange waives its veto power, thus it agrees to list, then public investors will know that 5 trusted mods reviewed the asset, it was voted in favor by the mods and the exchange was given a chance to veto the listing as well. The exchange will earn fee's once the asset is being traded.

Obviously this isn't a foolproof solution, but maybe a starting point. It will at least include separation of parties and place responsibility on the exchange for ensuring a thorough "vetting" process was followed. Kickbacks, bribes, etc. should not occur since the mods will agree to not contact the asset owner directly, and the asset owner will not know the mods during the review/voting process.

It will be a good thing for the public to know that a structured process is used when assets apply for listing on an exchange. It will also be a good thing for the exchange to have it's investors confidence and a good reputation.

ryantw, good starting points. Can you please post this to https://bitcointalk.org/index.php?topic=125629.0  and http://forum.litecoin.net/index.php/topic,551.0.html ?

[Minor Miner]

Burnside;
I know it was not on your exchange but I do not see the other guy posting here so I will ask you if you could have seen this.
I pointed out early on that the market in AMC was getting "pumped" and how little money it was possibly costing the pumper to do this.   There were huge offers put up at 0.0008 and then bids at 0.00079999 basically pumping a completely illiquid and unheard of stock to new levels.   If any of the early IPO purchasers managed to get in the flip this would not cost that much (just like in a ponzi scheme) AND from the discourse on the AMC thread it would seem that this was the "reward" to certain people to spread crazy projections.
So, my question is, cannot the exchange see blatant manipulation like this (taking at 0.0005 IPO up 60% in minutes by someone trading with themselves)?

[lolstate]

Let's try to keep things constructive and informative here.

There are some really great comments on this thread, especially when compared to the spammed hell that is the official AMC thread. A hell, you helped create, Entropy before you deleted your posts to hide the evidence. Still, we all make mistakes we later regret, I guess.

My take on this thread is it shows a subset of posters talking their book, ie they are short AMC and long AM as suggested above. It doesn't take rocket science to conclude this is likely, just look at the order books and the behaviour of the trolls on the official thread.

I'm impressed with Burnside, he seems to be the most sensible person in this whole discussion. He is trying to be reasonable whereas many of the critics are simply over the top in their assessment of AMC's prospects, or are working to an agenda.

I'm in AMC for the long term. I suppose we can meet up in a few months to compare outcomes eg AMC vs AM price. I don't think I'll be disappointed with my investment, but I am hedged accordingly.

[DeathAndTaxes]

I wanted to thank you Megamouth,

You are the sole reason why I'm going to be sticking with AMC, nothing will make me more happy than to rub it in your face at the end of this.

I've actually purchased more shares simply because of you. If you do the complete opposite of what you post you can actually make some decent money.

That is some awesome investing insight you have.  Throw money into a project for emotional reasons.  What possibly could go wrong?  I don't know if AMC is a bad deal, good deal, or scam but your rational for investing is seriously the stupidest I have ever seen.

[oaxaca]

I officially nominate Bitcoin Megastore as the hardest working person in show business.  Move over James Brown.  Look at the posting times.  That guy only needs 5 hours of sleep a day, the rest of the time he is hard at work.

[Vbs]

AMC's F.A.Q.: https://bitcointalk.org/index.php?topic=158806.msg1687176#msg1687176

[AMC] Hardware discussion and F.A.Q.

So, what do shares represent? Ownership?
Shares do not represent ownership, they are "solely a distribution mechanism for rights to profits", and used as a means to liquidation.

1 share of AMC on BitFunder represents 1/100,000,000th of 100% of the monthly profits after all expenses. AMC shares offer no voting rights. Shares of AMC on BitFunder do not represent real world shares of the company. The shares are solely a distribution mechanism for rights to profits.

Should the Cooperative be sold or closed, the full amount of the purchase price, liquidated income, and any mining revenue not distributed will be evenly distributed to the 100,000,000 shares.

Wait a minute... I'm not "owning" a part of AMC, just a piece of the "profits"
Welcome to the bitcoin stock exchange game. Learn the risks, and stay, or get out. Please read https://bitcointalk.org/index.php?topic=245713.msg2616979#msg2616979

So, shares represent a part of profits then. How are they distributed?
Until at least May 2014, on the initial 40M, a minimum of 20M are retained for growth and expansion and a maximum of 20M can be sold to investors.
In May 2014, or when 0.0005 is payed by share, whichever happens later, an extra 60M are created, for the final total of 100M. On these remaining 60M, a minimum of 20M are retained for growth and expansion and a maximum of 40M can be sold to investors, with a 40M being retained by AMC/Ken.

20,000,000 shares will be retained by AMC to maintain a growth and expansion fund.
As of the time of this writing, up to 40,000,000 will be released over time to the public on a varying time scale as capital is required to complete the project. Any remaining shares not included in the IPO are owned/maintained/controlled by AMC. These shares will be used at the issuers discretion for any uses deemed fit. These uses are not limited to, but may include employment.

So, I heard I am earning a lot from AMC right now, by bagging the dividends from all the unsold shares out of the 40M?
Wrong. The contract specifies that all dividends from issued shares still on AMC's hands are retained by the growth and expansion fund (the contract was originally written using correct terminology, but BF considers all shares "issued").

Dividends paid on unissued shares after the early-adopter phase will be retained by AMC and added to AMC's growth and expansion fund above until the shares are issued.

The first time I get a piece of the pie will be after a year of work (May 2014), when the rest of the 60M are issued. At that time, more 20M can be sold to investors, and I retain the remaining 40M.

I've read a lot of announcements, but have yet to see real documents. Can you please provide some?
Engineering Firm quote for Avalon machines: http://axs.net/AMC/SB-Prototype-Quote.jpg
eASIC NDA: http://axs.net/AMC/eAsic-NDA0001.jpg and http://axs.net/AMC/eAsic-NDA0002.jpg


So, how will the division between AMC and VMC be implemented, in respect to chip/machine sales?
Roughy, AMC takes care of the chips, VMC takes care of the machines:
- AMC develops the chip, pays the chip's NRE and sells the chip in bulk to customers (using VMC as intermediary).
- VMC uses AMC's chip (or any other chips) and builds bitcoin miners, paying a royalty cost to AMC whenever its IP is used.

Chip sales: AMC holds IP rights on the Fast-Hash-ONE chips, so AMC contracts with VMC the following services: (a) the representation services to negotiate chip production with eASIC and (b) the re-selling of AMC's chips in bulk. AMC also guarantees chip exclusivity to VMC, so that AMC won't negotiate a chip supply contract to any other bitcoin systems manufacturer. AMC gets 70% back from the profits on the sale of bulk chips, while VMC gets 30%. All of VMC's expenses, including representation, chip stock management and re-shipping expenses to final customers are taken from their 30% profit.

System sales: AMC also allows VMC to buy chips directly from eASIC at the lowest cost, for the manufacturing of bitcoin mining systems. On every sale of these systems or parts of it that contain AMC chips or IP, AMC receives a 10% royalty fee from the total gross sales revenue. Example: if a customer purchases a system for ฿100, AMC receives ฿10, whatever the profit margins for VMC are.

[ChefBorjan]

I officially nominate Bitcoin Megastore as the hardest working person in show business.  Move over James Brown.  Look at the posting times.  That guy only needs 5 hours of sleep a day, the rest of the time he is hard at work.

I find this both hilarious and depressing at the same time.

[Entropy-uc]

An updated evaluation of profit sharing based on the FAQ:

VMC makes 1 BTC.

0.9 BTC is Kens

0.1 BTC goes to AMC and is further split up:

0.04 BTC to Ken
0.04 BTC to the reinvestment fund (for more free loans to VMC)
0.012 to the treasury fund
0.008 to shareholders

Summing it all up:

0.94 to Ken
0.052 to lend or buy more stuff from VMC
0.008 for the people who paid for, and risked everything.

Of course, as Deprived pointed out all of that depends on VMC making a profit, which is up to Ken's to use Hollywood accounting to skim the profits before they see the balance sheet.

[Birdy]

I can offer a better deal:
Selling Birdy Awesome investment shares now!
Only 1000 a 1 Btc aviable.
Send me your BTC, I will try to make more with them!
I will then give you 10% of all profit made with those Btc.

[Vbs]

An updated evaluation of profit sharing based on the FAQ:

VMC makes 1 BTC.

0.9 BTC is Kens

0.1 BTC goes to AMC and is further split up:

0.04 BTC to Ken
0.04 BTC to the reinvestment fund (for more free loans to VMC)
0.012 to the treasury fund
0.008 to shareholders

Summing it all up:

0.94 to Ken
0.052 to lend or buy more stuff from VMC
0.008 for the people who paid for, and risked everything.

Of course, as Deprived pointed out all of that depends on VMC making a profit, which is up to Ken's to use Hollywood accounting to skim the profits before they see the balance sheet.

Glad to see that you ignored the whole chip sales profits with 70% to AMC, and that you expect VMC to build machines with parts that materialize out of thin air and free leprecon workers. You should also learn the diference between 10% of the net income vs 10% of the gross revenue.

Treasury shares? Nice, get to read the first part too. Shares represent a split of profits, not ownership.

Are we in May 2014? Must be, since it's only at that time AMC has 100M shares.

[Diamondstarfall]

I officially nominate Bitcoin Megastore as the hardest working person in show business.  Move over James Brown.  Look at the posting times.  That guy only needs 5 hours of sleep a day, the rest of the time he is hard at work.

I find this both hilarious and depressing at the same time.

Wow a true addict right here.

[Deprived]

An updated evaluation of profit sharing based on the FAQ:

VMC makes 1 BTC.

0.9 BTC is Kens

0.1 BTC goes to AMC and is further split up:

0.04 BTC to Ken
0.04 BTC to the reinvestment fund (for more free loans to VMC)
0.012 to the treasury fund
0.008 to shareholders

Summing it all up:

0.94 to Ken
0.052 to lend or buy more stuff from VMC
0.008 for the people who paid for, and risked everything.

Of course, as Deprived pointed out all of that depends on VMC making a profit, which is up to Ken's to use Hollywood accounting to skim the profits before they see the balance sheet.

Actually looking at the new FAQ it appears he's not taking quite so much now.  AMC it getting 10% of gross not net.

That he can change the terms at all (even in the favour of investors) shows just how bent the whole scheme is.  Things like the split of profits should have been subject to a signed contract before they were ever announced in the first place. He seems to have changed the split of cash and also changed it from AML lending the money to VMC to produce the chips to AML doing it itself (but, wierdly, VMC doing the negotiating with manufacturers - which makes little sense).  That change isn't necessarily a good thing - as it essentially protects VMC from taking any of the loss if things go wrong (I'd assume the change was made so AMC had no claim on VML if $1 million profit never arrived to repay the capital).

Unfortunately a LOT of the things wrong with this are pretty common ones in BTC land - such as giving a fixed block of shares to the issuer (beyond any for which actual assets existed) regardless of what does/doesn't sell at IPO.  That led to scenario where after 5 million shares had sold, Ken had 40 million with only 5 million beloning to those who put up most of the capital (all bar his few Avalons).  Even when 20 million have sold he'll still have 2/3 of the active shares.  He's not along in this sort of stupidity - nor in the pathetic use of shares to represent reinvestment : is it REALLY that hard if you want to reinvest 20% of profits to only dividend out 80% of profits?

Why is it in AMC's interest to give exclusive rights to VML?

"AMC also guarantees chip exclusivity to VMC, so that AMC won't negotiate a chip supply contract to any other bitcoin systems manufacturer. AMC gets 70% back from the profits on the sale of bulk chips, while VMC gets 30%."

If VML is going to sell them in bulk then clearly it has no objection in principle to others buying them.  So why do they need a 30% cut from sales?  If AMC is going to pay for the chipos up front then they should take a leaf from VML's book - and take cash for pre-orders from VML.  Somehow I don't think Ken would be quite so keen on preorders going in that direction ..  At a minimum there's no reason for AMC to pay VML upfront for preorders if AMC is fronting all the cost for the chips - the expensive part of NRE.

[auto2nr1]

An updated evaluation of profit sharing based on the FAQ:

VMC makes 1 BTC.

0.9 BTC is Kens

0.1 BTC goes to AMC and is further split up:

0.04 BTC to Ken
0.04 BTC to the reinvestment fund (for more free loans to VMC)
0.012 to the treasury fund
0.008 to shareholders

Summing it all up:

0.94 to Ken
0.052 to lend or buy more stuff from VMC
0.008 for the people who paid for, and risked everything.

Of course, as Deprived pointed out all of that depends on VMC making a profit, which is up to Ken's to use Hollywood accounting to skim the profits before they see the balance sheet.

Actually looking at the new FAQ it appears he's not taking quite so much now.  AMC it getting 10% of gross not net.

That he can change the terms at all (even in the favour of investors) shows just how bent the whole scheme is.  Things like the split of profits should have been subject to a signed contract before they were ever announced in the first place. He seems to have changed the split of cash and also changed it from AML lending the money to VMC to produce the chips to AML doing it itself (but, wierdly, VMC doing the negotiating with manufacturers - which makes little sense).  That change isn't necessarily a good thing - as it essentially protects VMC from taking any of the loss if things go wrong (I'd assume the change was made so AMC had no claim on VML if $1 million profit never arrived to repay the capital).

Unfortunately a LOT of the things wrong with this are pretty common ones in BTC land - such as giving a fixed block of shares to the issuer (beyond any for which actual assets existed) regardless of what does/doesn't sell at IPO.  That led to scenario where after 5 million shares had sold, Ken had 40 million with only 5 million beloning to those who put up most of the capital (all bar his few Avalons).  Even when 20 million have sold he'll still have 2/3 of the active shares.  He's not along in this sort of stupidity - nor in the pathetic use of shares to represent reinvestment : is it REALLY that hard if you want to reinvest 20% of profits to only dividend out 80% of profits?

Why is it in AMC's interest to give exclusive rights to VML?

"AMC also guarantees chip exclusivity to VMC, so that AMC won't negotiate a chip supply contract to any other bitcoin systems manufacturer. AMC gets 70% back from the profits on the sale of bulk chips, while VMC gets 30%."

If VML is going to sell them in bulk then clearly it has no objection in principle to others buying them.  So why do they need a 30% cut from sales?  If AMC is going to pay for the chipos up front then they should take a leaf from VML's book - and take cash for pre-orders from VML.  Somehow I don't think Ken would be quite so keen on preorders going in that direction ..  At a minimum there's no reason for AMC to pay VML upfront for preorders if AMC is fronting all the cost for the chips - the expensive part of NRE.

I wonder how AMC can  pledge exclusivity to VMC for chip orders?

That is clearly not in AMC's best interests, as they should be free to seek the best prices.  That sort of conflict of interest is why the separate company charade is not allowed in the real world.
Also AMC has already broken the deal.  Chips were bought from Avalon.  Unless VMC owns the chips, and AMC merely paid for them.  There is no paperwork showing that loan to VMC that I have seen.  That would reduce AMC's valuation even further.

Until I see contracts that change the terms to gross from net, I am sticking by my analysis. 

+1 - I support the change of terms. This is why we need to flip the table and have things benefit AMC investors as we are risking and funding VMC. Ken can keep his VMC and do what he wants with it. AMC should put up the funds for NRE and use the chips to build AMC machines to hash with. VMC can get funding elsewhere and be it's seperate entity with no affiliation with AMC. AMC bought chips from avalon and AMC should continue buying chips from from other vendors if pricing is cheap or just develop AMC's chip and make hardware.

[keepinithamsta]

+1 - I support the change of terms. This is why we need to flip the table and have things benefit AMC investors as we are risking and funding VMC. Ken can keep his VMC and do what he wants with it. AMC should put up the funds for NRE and use the chips to build AMC machines to hash with. VMC can get funding elsewhere and be it's seperate entity with no affiliation with AMC. AMC bought chips from avalon and AMC should continue buying chips from from other vendors if pricing is cheap or just develop AMC's chip and make hardware.

So what happens when he changes the terms and just misrepresents the profit going back to AMC and just keeps what his original share would have been regardless?

[auto2nr1]

+1 - I support the change of terms. This is why we need to flip the table and have things benefit AMC investors as we are risking and funding VMC. Ken can keep his VMC and do what he wants with it. AMC should put up the funds for NRE and use the chips to build AMC machines to hash with. VMC can get funding elsewhere and be it's seperate entity with no affiliation with AMC. AMC bought chips from avalon and AMC should continue buying chips from from other vendors if pricing is cheap or just develop AMC's chip and make hardware.

So what happens when he changes the terms and just misrepresents the profit going back to AMC and just keeps what his original share would have been regardless?

I guess we can only wait and hope for the best. With investments there is no thing at a 100% guarantee. But we can try our best to minimize risks as much as possible given the situation.

=(

[burnside]

Burnside;
I know it was not on your exchange but I do not see the other guy posting here so I will ask you if you could have seen this.
I pointed out early on that the market in AMC was getting "pumped" and how little money it was possibly costing the pumper to do this.   There were huge offers put up at 0.0008 and then bids at 0.00079999 basically pumping a completely illiquid and unheard of stock to new levels.   If any of the early IPO purchasers managed to get in the flip this would not cost that much (just like in a ponzi scheme) AND from the discourse on the AMC thread it would seem that this was the "reward" to certain people to spread crazy projections.
So, my question is, cannot the exchange see blatant manipulation like this (taking at 0.0005 IPO up 60% in minutes by someone trading with themselves)?

Was this on BitFunder or on BTC-TC?  I thought most of the volume on BTC-TC was around the 0.0025 "IPO"?

That's a good point though, both BitFunder and BTC-TC have low enough volume that the price is easy to manipulate up or down.  That's not really new info.  I think that people are learning a hard lesson here.  When making a decision to buy or sell and at what price you need to do some of your own math.  With the underlying info that is available, what's it worth to you?  Guys like Warren Buffet make their money by learning everything they can about a business before making a very educated decision to buy in.

It's a different game for day traders.  I'd hate to be those guys on something volatile like this, but for those guys they're essentially in a battlefield, trying to outsmart each other.