[Havelock] Bitcoin Difficulty Derivative (BDD)

[pumawolf]

for the b exch bid sides , do the orders  actually get hit. how come the bids are so much lower than sell side. is there an reason for that or people just hoping to get lucky. by the way, thanks for the answers mr dub.

[jjdub7]

Think of MINE as a bond.  

A bond is essentially a loan contract that pays 'coupon' payments at a fixed, stated "yield" of the principal capital that is tied to some metric (in this case, the theoretical, cost-free mining output of 5 Gh/s at a given difficulty).  This bond's payout is on a daily structure, so your profits compound very quickly if you can reinvest, and since it only holds 200 days' worth of funds max, it acts as a relatively short-term bond, making it easier to evaluate how much the bond is really worth since you don't have to look too far ahead.

In the international world, the interest rates on bonds are set by the central bank to attract people to hold the currency, as well as mediate the banking/financial system's behavior.

SELL only gets paid if mining equipment depreciates - if the difficulty suddenly spikes, those holding hashing power will suddenly find it worth much less than they expected.  The "yield" on the bond will have dropped.  

For a long time, this bond had a negative yield growth rate: the yield dropped every 2 weeks, but people saw that would be the case, so most who followed the market priced the bonds accordingly.  I think the difficulty finally dropping, and reversing the falling yield trend, really shook up the market because I don't know that most were expecting this type of difficulty correction.

If MINE could have held more than 200 days worth of dividends, it could "build the pot" in a sense and overvalue compared to its theoretical yield, but these funds instead take that surplus and pay it off to SELL, which is what gives SELL an expected value.  So the market-clearing bid is the market's prediction of the bitcoin futures (i.e. mining) price.

As long as miners can make a profit, they usually mine.  From supply economics, you'll keep your hardware running as long as the marginal revenue from running it (paid in BTC) is greater than the marginal cost (electric cost, which isn't cheap for that type of computing), with demand for BTC setting a market-clearing, or equilibrium price.

Also for a long time, miners had good margins on hashing, making probably in the 1000's % return on variable costs, which allowed ASIC manufacturers to charge obscene prices for their SHA-256 ASIC chips.  But then global demand fell compared to the near-constant rate of supply growth (which is what we're betting on here with B.MINE, and with payouts in BTC), where mining margins have essentially hit zero, as shown by the very thin discounts on the expected value of MINE.

Now the price has show to have fallen sort-of below the marginal cost point that's been set before as the "pinnning" point for the market (the electric cost) at marginal cost = marginal revenue.  Those with smaller margins (older, less efficient equipment or higher electric costs) are getting pushed out, as evidenced by the falling network hashrate.  Difficulty falls - guess who's suddenly expected to make more money?  (Miners.)

It's the same thing that's going on with oil right now in world markets.  Replace "oil cartel" with "Bitcoin mining cartel", and you'd have had the state of the BTC market.

Finally, when the next halving hits, the BTC exchange rate is going to skyrocket.  Look up the Gartner adoption/hype cycle as an idea of how the price should behave in the coming years.

[pumawolf]

i learn more thr this forum than i ever did in school.  right on for the  free lessons.

[twentyseventy]

Period 27, Day 3 Report - December 20, 2014

Balance Post Divs: BTC 194.97845481

Total Units: 22032

NAV/U: BTC 0.00884978

[JasherEnoch]

I am surprised the trade activity for this is so low. With the decreasing price of bitcoin maintenance fees are rising. This security does not have maintenance fees so pays much better currently.

me 2  but , but at the same time i see so much more hype surrounding amhash, its clearly stealing   bdd's thunder.

to me bdd  is the real  pbmining.   this is how ur suppose to run a pbmining. maybe u guys should advertise ,"the real pbmining" ahahh.

As of Dec. 20, 2014 AmHash is the only mining fund I am making any money on. I am still making some with the mine fund, but it has an "End Game" and won't be around for the long term. So AmHash is the best option for longer term investments with good ROI as of this day.

[JasherEnoch]

Since the PBMining disaster, I've been looking for other mining solutions. So far BDD (B.Mine) seems the best for "right now".

Just looked at Amhash and can not believe anyone would invest in them. Their price is ~25% less than BDD as of this posting, but they charge a maintenance fee that's ~32.5% of payout. So to save ~25% on purchase price, you lose ~32.5% of what you mine daily.

As an example: If you purchased 250 ghashes from Amhash and after the maintenance fee, in effect you would only have the mining power of 167.5 ghashes. Where with BDD, if you purchase 50 units your mining power (even though its not true mining) is 250 ghashes. That's 82.5 less ghashes!!! At today's difficulty that's a lost of 0.03200507 BTC a month.

I guess most people only look at the purchase price, and I agree 0.0012/gh looks better than 0.00161/gh. But, you have to look at the total cost involved.

Has anyone found anything better than BDD?

BDD has an "End Game"; go to page one and read it for yourself. Once the bitcoins runs out the BDD fund manager will buy back all units at no cost and BDD will NO LONGER exist. I admit it is a great short term investment....but short term only. So you can complain about AmHash all you want; but as of Dec 20, 2014 it is the only mining fund that is actually paying good ROI. Peta sure sucks; even though they switched to Slushpool instead of Ghash they still suck. And Scrypt will soon be deleted and converted to AmHash3 units; and then will no longer exist.

So for a longer term investment I suggest AmHash as of Dec 20, 2014. Just remember anything and everything in bitcoin eventually changes; so what is best today may not be best 6 or 9 months from now.

[twentyseventy]

Period 27, Day 4 Report - December 21, 2014

Balance Post Divs: BTC 193.57457577

Total Units: 22032

NAV/U: BTC 0.00878606

[twentyseventy]

Period 27, Day 5 Report - December 22, 2014

Balance Post Divs: BTC 192.17069673

Total Units: 22032

NAV/U: BTC 0.00872234

[galdur]

So, this will expire once the balance gets to zero ?

[twentyseventy]

Period 27, Day 6 Report - December 23, 2014

Balance Post Divs: BTC 191.36607260

Total Units: 22101

NAV/U: BTC 0.00865870

So, this will expire once the balance gets to zero ?

Yes, per the contract, the fund will be closed and pay out all of its funds once the NAV/U reaches 0.0002 BTC (.2mBTC). The contract cannot pay out (much) more than the NAV/U, so MINE holders can only receive a maximum of the NAV/U and no more. SELL holders will receive some of this amount if the Difficulty significantly increases and outpaces the resulting decline MINE payouts.

[galdur]

Got it, thanks.

[twentyseventy]

Period 27, Day 7 Report - December 24, 2014

Balance Post Divs: BTC 192.17876914

Total Units: 22357

NAV/U: BTC 0.00859591

[twentyseventy]

Period 27, Day 8 Report - December 25, 2014

Balance Post Divs: BTC 190.90823830

Total Units: 22375

NAV/U: BTC 0.00853221

[twentyseventy]

Period 27, Day 9 Report - December 26, 2014

Balance Post Divs: BTC 189.48250330

Total Units: 22375

NAV/U: BTC 0.00846849

[JasherEnoch]

I have a question for twentyseventy. After the "End Game" does occur, are you going to do it again with BDD, the same or similar setup? I have enjoyed it greatly, and I strongly encourage you to do it again. I have had fun with it, as I hope you have and many others as well. Plus i hope it has been profitable for everyone. 

[twentyseventy]

Period 27, Day 10 Report - December 27, 2014

Balance Post Divs: BTC 188.15786146

Total Units: 22387

NAV/U: BTC 0.00840478

[twentyseventy]

I have a question for twentyseventy. After the "End Game" does occur, are you going to do it again with BDD, the same or similar setup? I have enjoyed it greatly, and I strongly encourage you to do it again. I have had fun with it, as I hope you have and many others as well. Plus i hope it has been profitable for everyone. 

Thanks, I'm glad you've found it helpful/useful/fun and I appreciate the comments. To be honest, I haven't decided yet - I know that some are looking for a more easily understood contract these days (with the prevalence of cloud mining, CEX GHS, etc). Depending on the difficulty, this could run for another few months or really for another full year. I'll begin nailing down my next steps, if any, when that time starts to come closer. Cheers 

[twentyseventy]

Period 27, Day 11 Report - December 28, 2014

Balance Post Divs: BTC 186.87346604

Total Units: 22404

NAV/U: BTC 0.00834107

[twentyseventy]

Period 27, Day 12 Report - December 29, 2014

Balance Post Divs: BTC 185.54547308

Total Units: 22416

NAV/U: BTC 0.00827736

[twentyseventy]

Period 27, Day 13 Report - December 30, 2014

Balance Post Divs: BTC 185.80404523

Total Units: 22621

NAV/U: BTC 0.00821378