[Havelock] Bitcoin Difficulty Derivative (BDD)

[twentyseventy]

Just a note that I have updated the contract to remove some unclear verbiage - B.MINE, B.SELL, and B.EXCH are 'contracts' and not 'shares' - this isn't a stock/bond/or interest in a company.

Havelock Investments is the Issuer of the contracts on HavelockInvestments.com, I am the Fund Manager in charge of managing these contracts for Havelock Investments. With respect to these revisions, nothing operationally has changed - I just don't think that any of us can be too careful in light of the SEC's prosecution of E. Voorhees.

I have also added a Voting provision for B.SELL contract holders. I'll be updating this on Havelock in just a minute as well.

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[twentyseventy]

Period 11, Day 12 Report - June 5, 2014

Balance Post Divs: BTC 371.96144733

Total Units: 8242

NAV/U: BTC 0.04512999

Looks like the Difficulty will change tonight, so the SELL div will be issued tomorrow-

[twentyseventy]

Period 11 End Report - June 6, 2014


Previous Units              8552
EXCH Sold                   592
Less Buybacks              902
New Total Units            8242

Previous Balance          411.33415176
Price per EXCH             0.04954094
Gross Sales of EXCH      29.32823648

Less Fees                    0.11731286
Less Dividends              27.65081873
Less Buybacks              40.36560820
Less Mgmt Fee              0.56720112
Net Balance                  371.96144733

End of Period NAV/U     0.04512999

New Difficulty                  11,756,551,917
New Daily Dividend         0.00021388
New Reserve per Unit        0.04277600

NAV/U Less New Reserve = 0.04512999 - 0.04277600 = 0.00235399

SELL Dividend                 0.00235399

You'll notice that I calculate the new Dividend to eight digits and multiply that times 200 Days to get the new Reserve. Those of you that did your own calculations may come up with a slightly different number if you chose not to round or to round elsewhere.

New EXCH Sales Price          0.04405928

[usagi]

Period 11 End Report - June 6, 2014


Previous Units              8552
EXCH Sold                   592
Less Buybacks              902
New Total Units            8242

Previous Balance          411.33415176
Price per EXCH             0.04954094
Gross Sales of EXCH      29.32823648

Less Fees                    0.11731286
Less Dividends              27.65081873
Less Buybacks              40.36560820
Less Mgmt Fee              0.56720112
Net Balance                  371.96144733

End of Period NAV/U     0.04512999

New Difficulty                  11,756,551,917
New Daily Dividend         0.00021388
New Reserve per Unit        0.04277600

NAV/U Less New Reserve = 0.04512999 - 0.04277600 = 0.00235399

SELL Dividend                 0.00235399

You'll notice that I calculate the new Dividend to eight digits and multiply that times 200 Days to get the new Reserve. Those of you that did your own calculations may come up with a slightly different number if you chose not to round or to round elsewhere.

New EXCH Sales Price          0.04405928

Are you Deprived? You sound like him (and frankly, you act like him -- no offense).

[twentyseventy]

Period 12, Day 0 Report - June 6, 2014

Balance Post Divs: BTC 350.79706279

Total Units: 8242

NAV/U: BTC 0.04256212

[twentyseventy]

Are you Deprived? You sound like him (and frankly, you act like him -- no offense).

I'll take that as a compliment - no, I'm not Deprived, though. I appreciate the comparison, however, because I believe that Deprived is a highly intelligent person. Still, we're very different in a number of ways.

He was British, loved soccer (football), and a had a bad habit of getting drunk and telling everyone how he really felt. I'm an American, not a huge soccer fan (College Football (American) for me), and I try to stay off the forums if I've been throwing a few back.

I really respect the model the Deprived created and the intelligence and creativity that was needed to do so - I feel that I'm riding on his coattails a bit in this respect.

However, I can say that I've been a better Fund Manager that he was, in many ways. Less mistakes, less hostility to the fund's participants and newbies, and generally being less hostile over all. I've clearly got no issue with speaking my mind, but I try to do it in a much more clear, concise, and less offensive manner.

Also, I'm still here, which obviously counts for a lot. As much respect I have for Deprived's intelligence, I really resent the fact that he's screwing over DMS holders - I don't own any DMS shares, but I had plenty of open bids for DMS products when BTCT closed. As many people do, I still have a lot of questions about DMS and Deprived's ties to Kate - the whole situation is still very strange.

I believe that DMS ran for right around four months, so I've actually been operating BDD for just as long / longer than Deprived managed DMS, which I think is pretty amusing.

Additionally, Deprived had been around in the BTC space before I even got started; I'm sure I own but a fraction of the BTC that Deprived and many other Senior / Hero Members around here own.

[Chellger]

I need some help!

Today i got out of Cryptostocks because, as you may know, their wallet has been offline twice and since they seem to have something to do with Vicurex, i just don't really trust them anymore.

Now I got my money into Havelock and B.Mine looked good to me. So i bought. THEN I did some research and I noticed that I have no Idea what is going on and I sold again. Stupid enough, but I actually made 0.03 BTC profit because the price jumped from 0.00213 to 0.00234 or something. Lucky me, I guess.

I've read the first page, explaining what BDD is, but I don't really get it. Can someone explain to me, if it is a good Idea to buy B.Mine that late into its lifetime? If I understand correctly, there are 200 Dividends in B.Mine, then the Issuer will force-buy it back at a rather small price. For me this looks like I can only make back 20 % of my original investment by now.

So if I want to go into B.Mine at this point - Is that a wise desicion, or the worst ever?

[ujka]

My modest english vocabulary doesn't allow me to explain in detail what this fund is about, but twentyseventy is always polite and trying to help newcomers.
You have to start with carefully reading first page. I see you read it  
Short: B.MINE is acting as a 5gh/s mining bond (as if it's a 5gh/s mining machine) - it pays a certain dividend per day based on the bitcoin difficulty. You have to decide, based on your speculation on how bitcoin network hashrate will increase in future, if this 5gh/s bond is worth buying at the current price.

'End of game' or forced buy-back is not in 200 days, but when the fund period reserve goes below 0.0002 btc. Now it's 350 0.04277600 btc, so still plenty to go.

[twentyseventy]

I need some help!

Today i got out of Cryptostocks because, as you may know, their wallet has been offline twice and since they seem to have something to do with Vicurex, i just don't really trust them anymore.

Now I got my money into Havelock and B.Mine looked good to me. So i bought. THEN I did some research and I noticed that I have no Idea what is going on and I sold again. Stupid enough, but I actually made 0.03 BTC profit because the price jumped from 0.00213 to 0.00234 or something. Lucky me, I guess.

I've read the first page, explaining what BDD is, but I don't really get it. Can someone explain to me, if it is a good Idea to buy B.Mine that late into its lifetime? If I understand correctly, there are 200 Dividends in B.Mine, then the Issuer will force-buy it back at a rather small price. For me this looks like I can only make back 20 % of my original investment by now.

So if I want to go into B.Mine at this point - Is that a wise desicion, or the worst ever?

Hi Chellger, I'll be happy to help. Quite busy at work at the minute, but to start you out - each share of B.MINE represents a theoretical 5GH/s miner.

If someone offered to sell you a 5GH/s miner, what would you pay for it? You'd probably head to a mining calculator, right? (https://bitcoinwisdom.com/bitcoin/calculator)

So, start there. There's no way to know the 'true value' to a 5GH/s miner right now - its value will depend on how much the difficulty increases/decreases in the future. It's purely an educated guess at the moment.

This will give you a good idea of the actual value of that B.MINE share that you hold. Regarding the End-Games - this just means that, once each daily MINE dividend has reached 100 Satoshis or less (currently it is 21388 Satoshis per day), then all MINE shares will be bought back for 200 days of dividends (which will be around 20000 Satoshis Total).

Basically, when the daily dividends get to be super small, we call the game and pay out 200 Days of Dividends to MINE. SELL receives the rest, if any. This assumes that the Difficulty continues to increase.

[jjdub7]

From what I've gotten out of this asset, it essentially forces mining power to depreciate on the market, however as people continue to buy/sell EXCH shares and the total number of MINE/SELL pairs fluctuates, it will increase payouts to the SELL side, as the 2% below/3% above margin for EXCH trades adds to the NAV/U even after 20-70's mgmt fee.

[twentyseventy]

From what I've gotten out of this asset, it essentially forces mining power to depreciate on the market, however as people continue to buy/sell EXCH shares and the total number of MINE/SELL pairs fluctuates, it will increase payouts to the SELL side, as the 2% below/3% above margin for EXCH trades adds to the NAV/U even after 20-70's mgmt fee.

Well, it essentially provides people a chance to hold mining power or to short it. Nowhere else can you short mining power.

It allows the market to accurately price (or attempt to accurately price) mining power. In a 'one-way' market like CEX.io, you can either buy mining power or choose not to buy it. There's no shorting it to allow the market to adjust. Unfortunately, most BTC-denominated stock exchanges operate this way as well.

[twentyseventy]

Period 12, Day 1 Report - June 7, 2014

Balance Post Divs: BTC 349.11989112

Total Units: 8244

NAV/U: BTC 0.04234836

[germanjew]

Hi, I am also very new here, however I would like to give Chellger my take on the BDD Fund, please correct me where I am wrong. I think my explanation below is oversimplified, but much better than saying B.SELL is shorting B.MINE:

While you get to essentially short B.MINE with B.SELL, I wouldn't call it shorting because their prices both derive from the bitcoin difficulty and not B.MINE. Also, when shorting a security you can potentially lose much more than what you spent on that security, whereas with B.SELL the maximum you can lose is the amount spent on the contract itself (i.e. the price at which you bought it). The nice thing that B.SELL provides is hedging your SHA256/BTC mining activities against difficulty increases.

Think of it this way, the sum of what B.SELL and B.MINE can payout (in total) is equal to the amount raised by the BDD fund from selling B.EXCH contracts. Buying the contracts at the correct prices is therefore your main concern as you can then get a bigger piece of the pie.

If you really want to delve in deep, consider learning more about derivative pricing models, as both B.MINE and B.SELL derive their value from mining difficulty.

[twentyseventy]

Hi, I am also very new here, however I would like to give Chellger my take on the BDD Fund, please correct me where I am wrong. I think my explanation below is oversimplified, but much better than saying B.SELL is shorting B.MINE:

While you get to essentially short B.MINE with B.SELL, I wouldn't call it shorting because their prices both derive from the bitcoin difficulty and not B.MINE. Also, when shorting a security you can potentially lose much more than what you spent on that security, whereas with B.SELL the maximum you can lose is the amount spent on the contract itself (i.e. the price at which you bought it). The nice thing that B.SELL provides is hedging your SHA256/BTC mining activities against difficulty increases.

Think of it this way, the sum of what B.SELL and B.MINE can payout (in total) is equal to the amount raised by the BDD fund from selling B.EXCH contracts. Buying the contracts at the correct prices is therefore your main concern as you can then get a bigger piece of the pie.

If you really want to delve in deep, consider learning more about derivative pricing models, as both B.MINE and B.SELL derive their value from mining difficulty.

That's very true, germanjew - the maximum downside is the total of the funds ventured. It's not a true short since you can only lose what you've put up.

You're correct that, at it's core, B.EXCH is purchased by someone and its parts (B.MINE and B.SELL) receive back nearly all of that value - determining how much each share will be paid out via dividends is the trick.

Determining the dividend payouts requires calculating how much a 5GH/s miner might expect to generate over its life. I advise everyone to read the overview and then read it again; it's a concept that takes more than one read-through to understand. If anyone has any specific questions about how the derivative works after that, I'm happy to help.

[twentyseventy]

Period 12, Day 2 Report - June 8, 2014

Balance Post Divs: BTC 368.33534942

Total Units: 8734

NAV/U: BTC 0.04217258

[usagi]

Are you Deprived? You sound like him (and frankly, you act like him -- no offense).

I'll take that as a compliment - no, I'm not Deprived, though. I appreciate the comparison, however, because I believe that Deprived is a highly intelligent person. Still, we're very different in a number of ways.

I took the liberty of using a textual analysis program and as it turns out your writing style uses some words Deprived also uses. For example, here is a snippet of five words from your OP and a series of Deprived's posts:

Frequency analysis (twentyseventy)
68 will (1.63%)
63 sell (1.51%)
29 fund (0.69%)
20 there (0.48%)
17 back (0.41%)

Frequency analysis (Deprived)
21 back (0.56%)
13 there (0.35%)
12 will (0.32%)
11 sell (0.29%)
10 fund (0.27%)

[twentyseventy]

Are you Deprived? You sound like him (and frankly, you act like him -- no offense).

I'll take that as a compliment - no, I'm not Deprived, though. I appreciate the comparison, however, because I believe that Deprived is a highly intelligent person. Still, we're very different in a number of ways.

I took the liberty of using a textual analysis program and as it turns out your writing style uses some words Deprived also uses. For example, here is a snippet of five words from your OP and a series of Deprived's posts:

Frequency analysis (twentyseventy)
68 will (1.63%)
63 sell (1.51%)
29 fund (0.69%)
20 there (0.48%)
17 back (0.41%)

Frequency analysis (Deprived)
21 back (0.56%)
13 there (0.35%)
12 will (0.32%)
11 sell (0.29%)
10 fund (0.27%)

I think this analysis would carry more weight if the words weren't:

1) Extremely common words
2) Very appropriate words for both BDD and DMS

Sell, fund, and back? One of my contracts is called SELL, so there's that. Fund is what I've taken to calling BDD at times, and back is probably used most frequently in the 'buy back' manner, which was also a feature of DMS.

You're welcome to continue trying to connect some dots, but read through my early history - I asked a lot of questions in the DMS thread and, I believe, even got some answers from Deprived himself.

Either:
1) I enjoyed DMS, saw an opportunity with Deprived gone to make a name for myself, start my own listing, and make a few BTC, or:
2) I really am Deprived and I spent a year cultivating a forum account to have less experience, less reputation, and less BTC to start a fund. Oh, plus, it's a very realistic forum account where the person seems to only know a little at the beginning and then grows to learn and love BTC and securities. Finally, the alt account is an American, so I have to disguise my spelling and not use all those 'ou' Brit words - like colourful

I believe Occam's Razor applies here. At this point, I'm not sure if you're overestimating me or Deprived.

Anyway, have fun with it.

[junkonator]

This is tin-foil hat fun. Continue plz!

[twentyseventy]

Period 12, Day 3 Report - June 9, 2014

Balance Post Divs: BTC 367.75173078

Total Units: 8764

NAV/U: BTC 0.04196163

[twentyseventy]

Hey all, I've had a few people mention it, so I want to reiterate that we are nowhere near the End Game via Increase.

End Game via Increase doesn't trigger until The Reserve (200 Days of Current Dividends) reaches .2mBTC, NOT the daily dividend. This period's Reserve was 0.04277600, far from the .0002 needed to trigger the End Game.

As I've said previously, it will likely be well into 2015 until this happens (if this is how the End Game is triggered).

Looking forward, for the next round, I will probably choose a higher Minimum Reserve to trigger the End Game next time. I think aiming for around a 12 Period Round would be a good target. However, I can't change this now, as it would unfairly cost SELL holders BTC.

For instance, imagine that you hold SELL and you expect the End Game to happen via Increase. You expect to pay out to MINE holders, at the end, .2mBTC. If it were decided now to raise the Minimum Reserve to 1mBTC, or 5mBTC, SELL holders would need to plan to take some of that out of their expected profit.

SELL holders would need to be willing to give up a bit of expected profit to raise the Minimum Reserve; my guess is that they would only do so if they thought that they would make more BTC trading a new Round with higher valued shares.

In addition, the SELL holdings are pretty consolidated, so a few large holders would likely decide the vote, if there were to be a vote on it.

Open to all comments and/or suggestions about it.