[Havelock] Bitcoin Difficulty Derivative (BDD)

[twentyseventy]

Round 2, Period 17, Day 1 Report - January 14, 2016

Balance Post Divs: BTC 18.99217160

Total Units: 3899

NAV/U: BTC 0.00487103

[junkonator]

I think it's time to introduce some changes to the BDD fee attribution for the new round. BDD is working because of its excellent management - 2070 can't be thanked enough! Does anyone here even remember deprived? - and because there is the possibility to always buy and sell on the market at a reasonable price and in reasonable volume. Big parts of this liquidity are provided daily by market makers and arbitrageurs.
To make BDD more dynamic I propose a simple change:

Accounts with huge volume should get a discount on the management fees of B.EXCH.

For everybody who isn't a market maker or arbitrageur this has the benefit of more liquidity because market prices will be closer to their actual valuation. Because the market makers will pass along their reduced fees, tighter valuations can then also be traded. Looking at the past few months I think there is a huge amount of trades that didn't happen because the bid and ask gap was too far apart. A 3% markup is a big variable for a valuation as tight as the one we're looking at. The higher traded volume in turn means higher profits for 2070, too.

The proposal in detail
Half of the management fees (1.5% of NAV/U - the current management fee is 3% of NAV/U) will be waived for trades done by accounts/traders with a volume of 10 BTC+ within a period of 1 month.
This way the amount of extra work for 2070 increases only by one check of account volumes per month (or other period) and it's completely transparent to outsiders.

The technical details
How and when to determine the volume and how to give a discount?

• Look at the trade volume of each account over a certain period of time and give a discount on the fee for the following period for high volume accounts - this is most probably difficult/impossible to do if havelock doesn't implement that technically.
• Look at the trade volume of each account over a certain period of time and reimburse parts of the management fee if the volume was high afterwards - probably the easiest way to handle this
• Depending on the data provided by havlock to the issuers a rolling average model could also be possible - this would most probably mean more work for 2070 though and therefore is not a preferable option

 I'm looking forward to discussions and hope to also hear from parties who are not 2070 or market makers

Thanks 2070 for your unique-in-BTC management!

[twentyseventy]

Round 2, Period 17, Day 2 Report - January 15, 2016

Balance Post Divs: BTC 17.26238025

Total Units: 3899

NAV/U: BTC 0.00442738

[Temo58]

gotta be careful with derivatives, both here and in the fiat markets.  they're a fast-paced game.

Edit: And yeah, that's part of it too is that you'll have to project out on the life of the asset as well.

[twentyseventy]

Round 2, Period 17, Day 3 Report - January 16, 2016

Balance Post Divs: BTC 15.53657210

Total Units: 3900

NAV/U: BTC 0.00398373

[twentyseventy]

Round 2, Period 17, Day 4 Report - January 17, 2016

Balance Post Divs: BTC 13.80633710

Total Units: 3900

NAV/U: BTC 0.00354008

Approximate days of MINE Dividends left: 7.97

[twentyseventy]

I think it's time to introduce some changes to the BDD fee attribution for the new round. BDD is working because of its excellent management - 2070 can't be thanked enough! Does anyone here even remember deprived? - and because there is the possibility to always buy and sell on the market at a reasonable price and in reasonable volume. Big parts of this liquidity are provided daily by market makers and arbitrageurs.
To make BDD more dynamic I propose a simple change:

Accounts with huge volume should get a discount on the management fees of B.EXCH.

For everybody who isn't a market maker or arbitrageur this has the benefit of more liquidity because market prices will be closer to their actual valuation. Because the market makers will pass along their reduced fees, tighter valuations can then also be traded. Looking at the past few months I think there is a huge amount of trades that didn't happen because the bid and ask gap was too far apart. A 3% markup is a big variable for a valuation as tight as the one we're looking at. The higher traded volume in turn means higher profits for 2070, too.

The proposal in detail
Half of the management fees (1.5% of NAV/U - the current management fee is 3% of NAV/U) will be waived for trades done by accounts/traders with a volume of 10 BTC+ within a period of 1 month.
This way the amount of extra work for 2070 increases only by one check of account volumes per month (or other period) and it's completely transparent to outsiders.

The technical details
How and when to determine the volume and how to give a discount?

• Look at the trade volume of each account over a certain period of time and give a discount on the fee for the following period for high volume accounts - this is most probably difficult/impossible to do if havelock doesn't implement that technically.
• Look at the trade volume of each account over a certain period of time and reimburse parts of the management fee if the volume was high afterwards - probably the easiest way to handle this
• Depending on the data provided by havlock to the issuers a rolling average model could also be possible - this would most probably mean more work for 2070 though and therefore is not a preferable option

 I'm looking forward to discussions and hope to also hear from parties who are not 2070 or market makers

Thanks 2070 for your unique-in-BTC management!

Hey junkonator, thanks for the message and the kind words. I haven't been ignoring you; have just been sick for the past four days or so.

I do recall you pitching this to me a number of months ago. I'm inclined to deny this change request (again) for the following reasons:

It's true that, by lowering the fees for some or all of the market, the spread will be smaller. However, this gives an advantage to whoever is getting the fee discount - small market players will not be able to perform any arbitrage if the larger players can trade at NAV/U + 1.5% (with their bots) while everyone else can trade at NAV/U + 3%.

I don't really think that this will really increase the trade volume by very much. In addition, the market makers in this market are performing arbitrage 90%+ of the time; normally market makers are putting up big orders on the market. If this were the case, I would be more inclined to accept this suggestion. Also, I don't have a reporting function that can tell me who traded X amount of MINE/EXCH/SELL - that's all on Havelock's side. I just get the excel databases with the unitholder lists.

Overall, from my point of view, the trade volume stays about the same; I have to request custom monthly reports from Havelock (which I'm not sure they would agree to provide); a handful of large traders monopolize the arbitrage opportunity; and I lose ~50% of my management fee. While I might benefit (slightly) from increased trade volume, I'm not sure that this would increase trade volume at all and, also, I make 90% of my earnings from the management fee versus ~10% from the volume share with Havelock.

I'm open to other opinions but, save a rousing argument to the contrary, I'm going to stick to the current structure.

Best,
2070

[twentyseventy]

Round 2, Period 17, Day 5 Report - January 18, 2016

Balance Post Divs: BTC 12.10087014

Total Units: 3908

NAV/U: BTC 0.00309643

Approximate days of MINE Dividends left: 6.97

[twentyseventy]

Round 2, Period 17, Day 6 Report - January 19, 2016

Balance Post Divs: BTC 10.38034798

Total Units: 3913

NAV/U: BTC 0.00265278

Approximate days of MINE Dividends left: 5.97

[twentyseventy]

Round 2, Period 17, Day 7 Report - January 20, 2016

Balance Post Divs: BTC 8.64434553

Total Units: 3913

NAV/U: BTC 0.00220913

Approximate days of MINE Dividends left: 4.97

[felente]

Can anybody tell me what's going on with withdrawal on havelock website? I'm waiting my withdrawal for more than 48hrs now. It's status remains as "pending". Awful situation cause I have no idea when its done.

0~3 days is ok at havelock, you'll get your bitcoins

[twentyseventy]

Round 2, Period 17, Day 8 Report - January 21, 2016

Balance Post Divs: BTC 6.95600388

Total Units: 3940

NAV/U: BTC 0.00176548

Approximate days of MINE Dividends left: 3.97

[twentyseventy]

Round 2, Period 17, Day 9 Report - January 22, 2016

Balance Post Divs: BTC 5.34943601

Total Units: 4047

NAV/U: BTC 0.00132182

Approximate days of MINE Dividends left: 3.97

Have asked Havelock to make a transfer from EXCH to MINE so that divs will pay on Sunday (there's enough for Sat but not Sun right now). If they make the transfer, Sat/Sun will pay normally.

If not, the Sun dividend will be paid as soon as they do.

[twentyseventy]

Round 2, Period 17, Day 10 Report - January 23, 2016

Balance Post Divs: BTC 3.68305210

Total Units: 4194

NAV/U: BTC 0.00087817

[twentyseventy]

Round 2, Period 17, Day 11 Report - January 24, 2016

Balance Post Divs: BTC 1.84410473

Total Units: 4244

NAV/U: BTC 0.00043452

The last full dividend was paid to day! Tomorrow I'll ask Havelock to stop trade of MINE/SELL/EXCH and they will they repurchase SELL for 0 and MINE for the above NAV/U. This will conclude Round 2 of BDD. Thanks for everyone for participating.

[twentyseventy]

Hi All,
I'm back from break - BDD is planning to return on Monday February 22nd on Havelock - An updated Contract will be available early next week.

Thanks!

[twentyseventy]

BDD Round 2 Stats

Here are a few Stats for Round 2, in case anyone is interested.

Round 2 ran for 8 Months, 23 Days (6/3/15 - 1/26/16)

Round 2 began at at difficulty of 47,589,591,154 and ended at a difficulty of 113,354,299,801 (increase of 138%!)

Round 2 began at a Bitcoin price of $225 and ended with a price of $387 (increase of 72%)

The new contract will be posted tomorrow and the announcement will go out via Havelock email as well. Thanks!

[twentyseventy]

Hi All,
The new contract for Round 3 has been listed in the OP.

The only change is that MINE now pays out at a rate of 250GH/s instead of 100GH/s.

While the difficulty increased 138% during the last Round (and more in the month since then), the BTC price has also increased 72%; I've tried to strike a balance between a favorable hashrate and a decent initial EXCH entry price with this hashrate. The last two Rounds have ended by difficulty stagnation - last Round did see increases but they were mostly near the end of the Round and, therefore, have less of an effect.

If this Round ends the same way I may consider changing the format to something that better allows SELL to benefit from smaller increases in the difficulty.

The difficulty will change in about 24 hours; after it does the following amounts will be updated.

Edit: See Updated Amounts Below

The announcement will go out soon; EXCH sales will begin around Noon ET on Havelock.

Best,
-2070

[twentyseventy]

Updated MINE Dividend and EXCH sales price numbers. My estimates above were generated incorrectly (used old diff, not new diff); I've updated here.

Daily Beginning Dividend for MINE: 0.00076901BTC (.76901 mBTC)

Reserve for BDD per Unit (180 Days of Dividends): 0.13842180

Starting EXCH Price ((Reserve + 10 Days MINE Dividend Buffer) + Management/Havelock Fees): 0.151079705

EXCH sales will begin around Noon ET on Havelock on Monday, February 22.

Thanks!

[twentyseventy]

Still waiting on Havelock to reenable trading on MINE/SELL; also waiting on them to transfer the EXCH funds to MINE so that I can pay the dividends.

Once this is taken care of, I'll put the EXCH ask back up, pay MINE dividends, and we'll be on the way!

Round 3, Period 1, Day 0 Report - February, 23, 2016
Balance Post Divs: BTC 17.22648484

Total Units: 119

NAV/U: BTC 0.14476037

This report is post-dividend; dividends, however, are yet to be paid.