[Havelock] Bitcoin Difficulty Derivative (BDD)

[twentyseventy]

Shoots, I made a mistake.

I assumed the buy-back period NAV/U -2% for the buy-back price instead of the daily NAV/U -2%. So now I understand period NAV/U is just for the period's ask/sell price, not the buy-back basis.

So period's NAV/U+3% for SELL and daily's NAV/U-2% for BUY-BACK.

Well that changes EVERYTHING in my spreadsheet.

Okay a test then. If the daily NAV/U rises substantially above the period NAV/U, would you change the price of the B.EXCH to the higher NAV/U + 3%? Why wouldn't the sell price be based on the daily and not the period's as it is now?

Good questions! If the daily NAV/U rose substantially over the period NAV/U, I probably wouldn't change anything. Though I have my catch-all in the contract (everything will be done in the spirit of the contact, etc, etc.) there's technically no reason that I would have to change anything.

People would be free to purchase 'cheap' shares of B.EXCH and sell them back at the higher price, netting them a profit. They could do this until the B.EXCH price and the Daily NAV/U less 2% converged.

It would be similar to the times when the bids on MINE/SELL get too high - people buy EXCH and sell the market down until there's no profit to be made - it's a remarkably self-regulating system.

Regarding selling EXCH at the Period NAV/U instead of the Daily NAV/U - this is really just a matter of convenience and feasibility for me as the manager. I'm around most days to issue the report around Noon (something that I wasn't intending to do every day from the get-go, but I see why people want it). However, some days I'm out of the office / house and I wouldn't have a chance to change the EXCH price at Noon.

If I missed it, then there would be the issue of some people having paid too much for EXCH, etc. etc. In a perfect world, I prefer for it to change this way, but it's just not feasible within the bound of Havelock's system. Deprived, who ran DMS, did it this way (he also had to pay divs manually) and there were constantly issues because everyone just can't be at the computer at the same time every day.

[jjdub7]

Shoots, I made a mistake.

I assumed the buy-back period NAV/U -2% for the buy-back price instead of the daily NAV/U -2%. So now I understand period NAV/U is just for the period's ask/sell price, not the buy-back basis.

So period's NAV/U+3% for SELL and daily's NAV/U-2% for BUY-BACK.

Well that changes EVERYTHING in my spreadsheet.

Okay a test then. If the daily NAV/U rises substantially above the period NAV/U, would you change the price of the B.EXCH to the higher NAV/U + 3%? Why wouldn't the sell price be based on the daily and not the period's as it is now?

Good questions! If the daily NAV/U rose substantially over the period NAV/U, I probably wouldn't change anything. Though I have my catch-all in the contract (everything will be done in the spirit of the contact, etc, etc.) there's technically no reason that I would have to change anything.

People would be free to purchase 'cheap' shares of B.EXCH and sell them back at the higher price, netting them a profit. They could do this until the B.EXCH price and the Daily NAV/U less 2% converged.

It would be similar to the times when the bids on MINE/SELL get too high - people buy EXCH and sell the market down until there's no profit to be made - it's a remarkably self-regulating system.

Regarding selling EXCH at the Period NAV/U instead of the Daily NAV/U - this is really just a matter of convenience and feasibility for me as the manager. I'm around most days to issue the report around Noon (something that I wasn't intending to do every day from the get-go, but I see why people want it). However, some days I'm out of the office / house and I wouldn't have a chance to change the EXCH price at Noon.

If I missed it, then there would be the issue of some people having paid too much for EXCH, etc. etc. In a perfect world, I prefer for it to change this way, but it's just not feasible within the bound of Havelock's system. Deprived, who ran DMS, did it this way (he also had to pay divs manually) and there were constantly issues because everyone just can't be at the computer at the same time every day.

The last-round (Day 10+) B.EXCH buys are what really add to the NAV/U - this added value just gets paid to SELL holders at the end of every round though as the fund's excess capital is bled off though, correct?  So really, the issue is only an intra-round concern and not a round-to-round anomaly.  If people want to buy B.EXCH rather than purchase lower-priced MINE and SELL on the open market, why bother to regulate this?  SELL shareholders ultimately benefit as this type of action re-fills the fund to the 200 day required reserve - anything in excess less the 2% mgmt fee is just gravy for SELL holders.

[twentyseventy]

The last-round (Day 10+) B.EXCH buys are what really add to the NAV/U - this added value just gets paid to SELL holders at the end of every round though as the fund's excess capital is bled off though, correct?  So really, the issue is only an intra-round concern and not a round-to-round anomaly.  If people want to buy B.EXCH rather than purchase lower-priced MINE and SELL on the open market, why bother to regulate this?  SELL shareholders ultimately benefit as this type of action re-fills the fund to the 200 day required reserve - anything in excess less the 2% mgmt fee is just gravy for SELL holders.

Very true - this was something that I neglected to mention in one of the previous posts - not only is there the .6% of EXCH provided to the NAV/U, there is also the difference between the Period NAV/U and the Daily NAV/U that goes to the Fund.

I'd prefer that people pay as close to the NAV/U as possible, but yes, it's just more for SELL (assuming that Difficulty continues to rise). I haven't ignored your previous post, by the way, I'm just rolling it around in my head at the moment-

[junkonator]

Very true - this was something that I neglected to mention in one of the previous posts - not only is there the .6% of EXCH provided to the NAV/U, there is also the difference between the Period NAV/U and the Daily NAV/U that goes to the Fund.

I'd prefer that people pay as close to the NAV/U as possible, but yes, it's just more for SELL (assuming that Difficulty continues to rise). I haven't ignored your previous post, by the way, I'm just rolling it around in my head at the moment-

The fact that DMS and BDD are NOT just about betting on the increase, calculating a range of likely outcomes once and then executing that plan is what I anticipated and liked about DMS back then and BDD now. "Inefficienties" in the market like having to check wether buying at a certain price is really cheaper than buying EXCH and selling the other or wether buy-back conditions are true are added fun for me.

I didn't anticipate from the beginning that the effect of buybacks would be that huge! Or for example back when DMS was running Deprived put up a wrong EXCH price, and only very few lucky ones even noticed and arbitraged. knockonwood

I'm definitely in favour of keeping oddities like this as they are. For plot-twists and lulz!

[dyask]

I started trading B.Mine and B.Sell because I noticed that B.Exch was cheaper than the pair.   I was buy B.Exch, sell the parts and end up with a noticeable profit.   I did this for about 100 shares and then there wasn't any profit left.   At that point I started using the B.Exch to buy B.Mine cheaper than I could otherwise buy B.Mine.   Those opportunities don't last, but it got me started.   

[twentyseventy]

I started trading B.Mine and B.Sell because I noticed that B.Exch was cheaper than the pair.   I was buy B.Exch, sell the parts and end up with a noticeable profit.   I did this for about 100 shares and then there wasn't any profit left.   At that point I started using the B.Exch to buy B.Mine cheaper than I could otherwise buy B.Mine.   Those opportunities don't last, but it got me started.   

That means you get the arbitrage portion, then! 

[dyask]

I started trading B.Mine and B.Sell because I noticed that B.Exch was cheaper than the pair.   I was buy B.Exch, sell the parts and end up with a noticeable profit.   I did this for about 100 shares and then there wasn't any profit left.   At that point I started using the B.Exch to buy B.Mine cheaper than I could otherwise buy B.Mine.   Those opportunities don't last, but it got me started.   

That means you get the arbitrage portion, then! 

It was cool while it lasted.  I'm a bit fuzzy about going the other way, transferring equal amounts of B.Mine & B.Sell to bitcoinderiv@gmail.com and get back 2% less than the NAV.   However is that the period NAV or daily NAV.   Also I assume that is a manual exchange and may take a while.   So I haven't tried that yet.

[zlibz]

Could you please advise how the hash rate is calculated? Is it based on the daily average of found blocks calculated with the current difficulty? I am thinking in terms of short/medium/long term variance.

Thank you

[twentyseventy]

I started trading B.Mine and B.Sell because I noticed that B.Exch was cheaper than the pair.   I was buy B.Exch, sell the parts and end up with a noticeable profit.   I did this for about 100 shares and then there wasn't any profit left.   At that point I started using the B.Exch to buy B.Mine cheaper than I could otherwise buy B.Mine.   Those opportunities don't last, but it got me started.   

That means you get the arbitrage portion, then! 

It was cool while it lasted.  I'm a bit fuzzy about going the other way, transferring equal amounts of B.Mine & B.Sell to bitcoinderiv@gmail.com and get back 2% less than the NAV.   However is that the period NAV or daily NAV.   Also I assume that is a manual exchange and may take a while.   So I haven't tried that yet.

Buy-back is calculated as 98% of the last published Daily NAV/U, if that helps. It is a manual process, but I have them out within 24 hours.

Could you please advise how the hash rate is calculated? Is it based on the daily average of found blocks calculated with the current difficulty? I am thinking in terms of short/medium/long term variance.

Thank you

Hashrate is calculated using the following formula:

B.MINE Hash Rate * Block Reward * 86400 * ((65535 / 2^48 )/Difficulty)

B.MINE Hash Rate is the set hash rate, in H/s (hashes per second) of B.MINE. This is set at 5GH/s (5,000,000,000 H/s)

Block Reward is the Bitcoin Network Block Reward for the current Difficulty. This is currently at 25 BTC per Block and will remain so until about sometime during 2016. However, When the actual Bitcoin Network Block Reward halves, this value will halve as well.

86400 is the number of seconds in a day, which is relevant because Bitcoin mining computation power is measured in hashes per second (H/s)

65535 / 2^48 is the constant which is divided by Difficulty to produce the likelihood of producing a Block in a single hash

Difficulty is the Bitcoin Network Difficulty at 12:00 PM Eastern Time on the day that dividends are paid out

Here's the Wolfram Alpha link for this Period's Div Calculations: http://wolfr.am/1ubycKC

[twentyseventy]

Period 15, Day 9 Report - July 22, 2014

Balance Post Divs: BTC 332.80478654

Total Units: 12483

NAV/U: BTC 0.02666064

[twentyseventy]

Period 15, Day 10 Report - July 23, 2014

Balance Post Divs: BTC 331.86420748

Total Units: 12514

NAV/U: BTC 0.02651943

[+Bitcoin]

I would just like to say that I am receiving daily dividends on B.Mine and it all looks great.

[twentyseventy]

Period 15, Day 11 Report - July 24, 2014

Balance Post Divs: BTC 330.04917692

Total Units: 12514

NAV/U: BTC 0.02637439

[twentyseventy]

Period 15, Day 12 Report - July 25, 2014

Balance Post Divs: BTC 328.26220943

Total Units: 12515

NAV/U: BTC 0.02622950

[pabad812]

Expected next Bitcoin difficulty change is currently at +7.61% in about 6.5 hours. Will there be a B.SELL dividend issued tomorrow?

[Lohoris]

Remember I created this spreadsheet for DMS, it should be easy to tune it to work with BDD.

[twentyseventy]

Expected next Bitcoin difficulty change is currently at +7.61% in about 6.5 hours. Will there be a B.SELL dividend issued tomorrow?

I highly recommend creating your own excel sheet or modifying Lohoris' to suit BDD. If you do, make sure that you don't take into account the extra 10 day buffer than DMS had (BDD does not have this).

Remember I created this spreadsheet for DMS, it should be easy to tune it to work with BDD.

A quick and easy way to check to see if there will be a SELL Dividend issued is to perform the Div Calculation with the Next Difficulty (or expected Next Difficulty) and then multiply it by 200 Days.

The expected next Difficulty is 18,700,088,224, which will provide a pretty good estimate since there are only ~25 blocks until the change. Plug that into the Div Formula (Hint Hint: http://wolfr.am/1riNM1w)

This gives us a new daily div of about 0.00013446

0.00013446 * 200 = 0.026892

So, we know that the new Reserve is 0.026892. In order for a Dividend to be issued to SELL, the NAV/U has to be higher than the new Reserve.

We don't know the exact NAV/U for tomorrow, as more EXCH could be sold or MINE/SELL pairs bought back. But, we know today's NAV/U, which is 0.02622950

So, is the NAV/U (0.02622950) > The Reserve (0.026892)?

Nope. So, there is no excess capital on hand and, therefore, no SELL dividend will be issued tomorrow (barring something unlikely happening, of course - and these are estimates, but most likely very close to where we will be tomorrow).

I realize that this is a long answer to a short question, but I'm trying to teach you to fish here. 

TL;DR Read it, it's not even that long.

[pabad812]

Expected next Bitcoin difficulty change is currently at +7.61% in about 6.5 hours. Will there be a B.SELL dividend issued tomorrow?

I highly recommend creating your own excel sheet or modifying Lohoris' to suit BDD. If you do, make sure that you don't take into account the extra 10 day buffer than DMS had (BDD does not have this).

Remember I created this spreadsheet for DMS, it should be easy to tune it to work with BDD.

A quick and easy way to check to see if there will be a SELL Dividend issued is to perform the Div Calculation with the Next Difficulty (or expected Next Difficulty) and then multiply it by 200 Days.

The expected next Difficulty is 18,700,088,224, which will provide a pretty good estimate since there are only ~25 blocks until the change. Plug that into the Div Formula (Hint Hint: http://wolfr.am/1riNM1w)

This gives us a new daily div of about 0.00013446

0.00013446 * 200 = 0.026892

So, we know that the new Reserve is 0.026892. In order for a Dividend to be issued to SELL, the NAV/U has to be higher than the new Reserve.

We don't know the exact NAV/U for tomorrow, as more EXCH could be sold or MINE/SELL pairs bought back. But, we know today's NAV/U, which is 0.02622950

So, is the NAV/U (0.02622950) > The Reserve (0.026892)?

Nope. So, there is no excess capital on hand and, therefore, no SELL dividend will be issued tomorrow (barring something unlikely happening, of course - and these are estimates, but most likely very close to where we will be tomorrow).

I realize that this is a long answer to a short question, but I'm trying to teach you to fish here. 

TL;DR Read it, it's not even that long.

Great explanation. Thank you very much! One more question: I know you post the daily Balance Post Divs. How is the daily Balance calculated?

[twentyseventy]

Great explanation. Thank you very much! One more question: I know you post the daily Balance Post Divs. How is the daily Balance calculated?

You're welcome! The Balance Post Divs is just the total of the EXCH+MINE+SELL accounts (total account balance) less the current management fee.

The NAV/U is simply the total net asset value (all balances, less management fee) divided by the total number of outstanding MINE/SELL pairs.

[dyask]

Difficulty of 18,736,441,558 means daily div is 0.0001342 BTC.   

0.0001342 * 200 = .02684 

Using yesterdays NAV/U of 0.02622950 ... look like we are still 2.3% short (~4.5 days) of having a Dividend for B.Sell. 

Wow!