[Havelock] Bitcoin Difficulty Derivative (BDD)

[twentyseventy]

Just got confirmation from Havelock that the announcement will go out tomorrow, 1/29, to all Havelock members. Trading will begin on Thursday 1/30 at 12PM Eastern Time-

[twentyseventy]

Bitcoin Difficulty Derivative is officially open and trading on Havelock Investments!

Please do remember that the Issuer sells/issues only B.EXCH Shares. I have placed an ask of 10,000 Shares at 210 Days of Dividends + 1%. In the case that this ask is exhausted (unlikely for a while), a new ask will be placed at the same price. There is NO limit of how many B.EXCH shares can be issued or purchased.

Once you have purchased B.EXCH shares, send them to the Issuer at bitcoinderiv@gmail.com to receive your BDD Pair (one B.SELL and one B.MINE) so that you can sell one or both of them on the open market.


The Market will set the price for B.MINE and B.SELL, so I expect the next few days to be interesting as people decide what they think both are worth at this time.

Thanks for reading and enjoy the speculation!

EDIT: EXCH holders now only need wait for the exchange, they do not need to send them to me.

[mainline]

Oh well.  At least you still have your extensive secret pronXXXsite holdings.
How much did Hevlock charge you in fees?  I'm considering floating a few of my firms.

P.S:  What's happening with dat, BTW?  I noticed it's gone from your sig?

[twentyseventy]

Oh well.  At least you still have your extensive secret pronXXXsite holdings.
How much did Hevlock charge you in fees?  I'm considering floating a few of my firms.

P.S:  What's happening with dat, BTW?  I noticed it's gone from your sig?

I expect this to take a few weeks to really reach critical trading mass. Not expecting massive sales from the jump, as it takes time for people to notice and, later, understand the security.

Regarding my signature, I just have the most recent articles from the site listed there. Plus, XXXProfit is closed to new investors and ABI will be finalizing the last few shares at the end of the month.

[mainline]

oic.
*Lol, there's still 37 hours left to get in on the stealth pronz.  Deeply discounted.  BUY BUY BUY!!1!

[Bobsurplus]

Oh well.  At least you still have your extensive secret pronXXXsite holdings.
How much did Hevlock charge you in fees?  I'm considering floating a few of my firms.

P.S:  What's happening with dat, BTW?  I noticed it's gone from your sig?

I expect this to take a few weeks to really reach critical trading mass. Not expecting massive sales from the jump, as it takes time for people to notice and, later, understand the security.

Regarding my signature, I just have the most recent articles from the site listed there. Plus, XXXProfit is closed to new investors and ABI will be finalizing the last few shares at the end of the month.

Love the Mintspare review!

+10 BTC!

[twentyseventy]

Oh well.  At least you still have your extensive secret pronXXXsite holdings.
How much did Hevlock charge you in fees?  I'm considering floating a few of my firms.

P.S:  What's happening with dat, BTW?  I noticed it's gone from your sig?

I expect this to take a few weeks to really reach critical trading mass. Not expecting massive sales from the jump, as it takes time for people to notice and, later, understand the security.

Regarding my signature, I just have the most recent articles from the site listed there. Plus, XXXProfit is closed to new investors and ABI will be finalizing the last few shares at the end of the month.

Love the Mintspare review!

+10 BTC!

Thanks, I appreciate it!

[twentyseventy]

IMPORTANT Operational Change:

Buyers of B.EXCH will NOT need to send the shares to the Issuer.

As soon as the Issuer sees the purchase of the B.EXCH, he will buy back the EXCH from the purchaser and issue the BDD Pair to the user.

The issuer will check at least every 24 hours. I'm online nearly all day, so I will be checking constantly.

I believe that this will make it easier for users to receive their BDD Pair, instead of having to send the shares back to the issuer. As with any new venture, there will be adjustments made as needed and I thank you for your patience and understanding.

[Auburn]

I have a few questions about BDD, being new to these derivatives:

1.  Does the difficulty reset every 10 days on average?

2.  At the posted BDD.EXCH price of 0.24310364, if this price includes the 1% fee, then is the NAV/U actually 0.24069666?

3.  If this 0.24310364 does in fact represent 210 days of daily dividends, then is this daily dividend = 0.00114617?

4.  Using the formula in the prospectus (5,000,000,000*25*86,400*65,535/2^48/2,514,532)  the daily dividend computes to 0.00000023.  Why the difference?  Does it imply 5,000 shares outstanding? (0.00114617/0.00000023)

5.  About how much time will each cycle (intro to end game) represent?  Do you intend to restart the derivative funds anew after the end game has concluded?

6.  Since you are not actually mining for BTC, where do the BTC you need to pay those daily dividends come from?  In other words, is there an independent source of income using cash flows not provided by your investors?

7.  I get the impression that the way you have designed the BDD pairs it's a zero sum game--if difficulty increases the BDD.Mine will get most of the 0.24 initial cash flow and if difficulty decreases then BDD.Sell will get the majority of the cash flow.  Is this inference accurate, and if not why not?

Thanks in advance for your help.  I am seriously considering investing in BDD but I need some answers to these questions before I commit BTC, and I can't find simple explanations in the Prospectus.

[twentyseventy]

Dividends should be going to to all B.MINE shares momentarily. Havelock went down right at Noon and took a few minutes to come back up - also, they have a date function set for Dividends, but no specific time function. I'll be working with them to get this sorted ASAP, these are just the few hiccups that happen with starting a funds of this sort.

Thanks to all of the shareholders for their patience; all will be taken care of.

EDIT: Dividends are still processing, so if you do sell any shares of B.MINE before the dividend is paid, you will not receive today's dividend. I figured that would be clear, but wanted to ensure that all interested parties understood. Will be holding any EXCH exchanges until the dividend is paid to minimize confusion. Working with Havelock to better schedule dividends in the future.

[MonkeyBear68]

BDD is an interesting set of funds. Definitely seems like a zero sum game in which you gamble on mining difficulty. There is nothing wrong with that and it makes for some fun. It almost seems like Baccarat except with BTC based securities instead of cards.

P.S. Those of you currently buying B.MINE shares at above the current price of B.EXCH (0.2431), you realize you could simply buy B.EXCH for cheaper, and get both a B.MINE and a B.SELL share and simply sell the B.SELL share. I believe you would be much further ahead by doing this, unless of course this in some way affects the dividend that will be paid.

[eltopo]

No, you are right. There are bids for SELL at 0.1, so you can get MINE for 0.1431.

I love those folks who notice the 167% annual yield and start buying without reading a single word... 

[twentyseventy]

Ding ding ding! Yes, there is definitely some price discovery going on at the moment. No one should be buying SELL or MINE above the EXCH price, as one EXCH shares equals one MINE and one SELL.

I expect this to continue for a bit as those who choose not to read the conrtact (despite my urging) or do not understand the mechanics will be buying too high or selling to low.

EDIT:
Again, please take the time to understand this asset before trading in it; I highly recommend picking a value at which you think the Difficulty will increase/decrease in the future and go from there.

Also, I want to make clear to everyone that I do plan on trading in this fund. As the Issuer, I have no advantage whatsoever over any other users (besides the fact that I can exchange the EXCH for a BDD Pair at will; other users have to wait until I see their order come in). The market sets the price for SELL and MINE; EXCH is set at an ask value that is available and calculable by anyone. I do have previous similar experience with this model, like anyone that traded in DMS would have (hi Rannasha and eltopo), but it is nothing that anyone new to the model wouldn't be able to understand.

Am also talking with Havelock about automatically exchanging EXCH for a BDD Pair when EXCH is purchased; I know this is a most-requested feature. Happy Speculating-

[eltopo]

I have a few questions about BDD, being new to these derivatives:

1.  Does the difficulty reset every 10 days on average?

Difficulty is not "resetting". Difficulty is just the current difficulty and it changes every 10-14 days on average. Have a look here for history: http://runeks.dk/bitcoin/diff.txt

2.  At the posted BDD.EXCH price of 0.24310364, if this price includes the 1% fee, then is the NAV/U actually 0.24069666?

No, the current price of BDD.EXCH is 210 days of dividends (will change to 200 days after next difficulty change), so NAV/U is 0.22923491

3.  If this 0.24310364 does in fact represent 210 days of daily dividends, then is this daily dividend = 0.00114617?

Correct.

4.  Using the formula in the prospectus (5,000,000,000*25*86,400*65,535/2^48/2,514,532)  the daily dividend computes to 0.00000023.  Why the difference?  Does it imply 5,000 shares outstanding? (0.00114617/0.00000023)

What is that 2,514,532? Difficulty is 2,193,847,870 right now.

5.  About how much time will each cycle (intro to end game) represent?  Do you intend to restart the derivative funds anew after the end game has concluded?

Depends on how much the difficulty will increase on average, about 2-5 months per cycle.

6.  Since you are not actually mining for BTC, where do the BTC you need to pay those daily dividends come from?  In other words, is there an independent source of income using cash flows not provided by your investors?

No, dividends come from the investors. It's part of the zero sum game.

7.  I get the impression that the way you have designed the BDD pairs it's a zero sum game--if difficulty increases the BDD.Mine will get most of the 0.24 initial cash flow and if difficulty decreases then BDD.Sell will get the majority of the cash flow.  Is this inference accurate, and if not why not?

You are right on the zero sum game, the invested coins are redistributed between MINE and SELL holders, depending on the difficulty changes.

For your second part: Higher difficulty increases (than expected) are bad for MINE holders, because it reduces prices and dividends. You are right when we reach the "endgame", as most of the investment thats left goes to MINE holders.

@twentyseventy: If I explained something wrong, please correct me.

[twentyseventy]

Hi Auburn, thanks for the questions. I must have missed your message yesterday when I posted my update, sorry about that.

Thanks, eltopo, for answering these in my stead. My responses are in bold:

I have a few questions about BDD, being new to these derivatives:

1.  Does the difficulty reset every 10 days on average?

Difficulty is not "resetting". Difficulty is just the current difficulty and it changes every 10-14 days on average. Have a look here for history: http://runeks.dk/bitcoin/diff.txt

The difficulty changes after 2016 blocks are issued. The network is set to try and have miners 'mine' a block on an average of every 10 minutes. At 10 minutes * 2016 Blocks = 14 Days exactly. If miners issued 2016 blocks in exactly 14 days, then the Difficulty would not change.

However, if the network hashrate increases, then the 2016 blocks will be issued sooner than the 14 days, as they are being released more quickly than an average of one block every 10 minutes. So, in the past 6-9 months, as difficulty has been increasing at a rapid pace, there have been about 10-12 days before each difficulty adjustment. However, the difficulty could stagnate or decrease, leading to longer periods before an adjustment in the difficulty. Check out more information about Difficulty here: https://en.bitcoin.it/wiki/Difficulty

2.  At the posted BDD.EXCH price of 0.24310364, if this price includes the 1% fee, then is the NAV/U actually 0.24069666?

No, the current price of BDD.EXCH is 210 days of dividends (will change to 200 days after next difficulty change), so NAV/U is 0.22923491


Actually, The price of .24310364 is for 210 days of dividends plus the fee of 1%. However, .4% of that fee goes to the exchange for the exchange fee and the remaining .6% does go to the fund.
So, 210 Days of Dividends is 0.22923491 and 1% of that is .0022923491

60% of that fee goes to the fund (0.00137540946) and the remainder of the fee goes to Havelock. So, the NAV/U would be .22923491 + .00137540946 = .23061032 (rounded).

I added the 1% fee on purchases of EXCH to pay Havelock's exchange fee and to give the fund just a little bit of cushion in the case of extra fees / if necessary (see withdraw fee below)

Calculating NAV/U (and many other values) will always have rounding, so using Excel or Wolfram will sometimes yield very slightly different results. I normally only round when needed (at/near the end of the calculations) and round down to ensure that the fund stays 'in the black'. The only other difference, besides rounding, in my values and users' values would be the Havelock withdrawal fee of 0.001 per withdrawal - I currently do have to withdraw funds from EXCH using the network to get them to MINE/SELL - I'm working on a plan with Havelock to hopefully eliminate this.

3.  If this 0.24310364 does in fact represent 210 days of daily dividends, then is this daily dividend = 0.00114617?

Correct.

Yep.

4.  Using the formula in the prospectus (5,000,000,000*25*86,400*65,535/2^48/2,514,532)  the daily dividend computes to 0.00000023.  Why the difference?  Does it imply 5,000 shares outstanding? (0.00114617/0.00000023)

What is that 2,514,532? Difficulty is 2,193,847,870 right now.

Yeah, double check your difficulty value. Bitcoindifficulty.com and Allchains.info are great resources

5.  About how much time will each cycle (intro to end game) represent?  Do you intend to restart the derivative funds anew after the end game has concluded?

Depends on how much the difficulty will increase on average, about 2-5 months per cycle.

eltopo said it well; it just depends on how the Difficulty changes - most likely a few months. I do intend to restart the funds after this Round has concluded - I would just change the MINE theoretical hashrate to something more appropriate. DMS had a 5MH/s value, BDD has a 5GH/s value - maybe the next round will be 5TH/s?

6.  Since you are not actually mining for BTC, where do the BTC you need to pay those daily dividends come from?  In other words, is there an independent source of income using cash flows not provided by your investors?

No, dividends come from the investors. It's part of the zero sum game.

eltopo is correct here as well - it's very important to understand this. The dividends are paid from the sales of EXCH. EXCH will be paid out totally to MINE and SELL - the whole point of this security is to figure out HOW (what proportion) it will be paid out. This is, of course, linked to how the Difficulty changes.

7.  I get the impression that the way you have designed the BDD pairs it's a zero sum game--if difficulty increases the BDD.Mine will get most of the 0.24 initial cash flow and if difficulty decreases then BDD.Sell will get the majority of the cash flow.  Is this inference accurate, and if not why not?

You are right on the zero sum game, the invested coins are redistributed between MINE and SELL holders (less Havelock fees), depending on the difficulty changes.

For your second part: Higher difficulty increases (than expected) are bad for MINE holders, because it reduces prices and dividends. You are right when we reach the "endgame", as most of the investment thats left goes to MINE holders.

The Zero-Sum part is correct, yes. However, your example is wrong - if difficulty increases as it has (15%, 20%, 30% increases), then SELL will receive most of the EXCH value / capital. If difficulty increases slowly, stagnates, or decreases, then MINE will receive most of the initial capital.

There will be an amount that MINE will receive, at the end-game, but right now that amount (.2mBTC or less) is very small compared to EXCH. This will change if difficulty continues to increase


@twentyseventy: If I explained something wrong, please correct me.

I'm always happy to answer questions, so please feel free to post here if there's anything else you'd like to know.



I've paid the second day of dividends; one person purchased a share right before the dividends were paid, so his EXCH was bought back by the fund for the value of the dividends that he should have received.

If possible, please do not purchase shares in the five minutes before dividends are set to be sent (1155 AM to 1200 PM Eastern), as it creates more work on my end.

Also, please be aware that users DO NOT need to send the EXCH shares to me - when I see that some have been purchased, I buy them back and issue the MINE and SELL shares. Sending them to me WILL NOT make it go any faster - really. I plan to update the Contract(s) to show this change soon.

Thanks!

[Auburn]

Hello Folks:

Many thanks for your considerate and informative responses to my 7 questions yesterday.  I just have a few additional questions and comments:

1.  Is it correct to assume that you will always value MINE at the stated 200 days of dividends, no matter where in the cycle we are?  For example, after a typical 14-day cycle will dividends be based on 200 days or on 186 days?

2.  I understand where the 1% fee goes much better now.  But I don't see how the Issuer of the fund makes any BTC.  If that fee is just enough to pay HL their fee and to provide a small buffer then how does the Issuer get rewarded for all of the quality time, energy, and ongoing management work necessary to bring this innovative concept to market and to make it a success?  The Issuer deserves compensation for all this work and hassle!

4.  I got the 2,514,532 Difficulty number from the IPO Prospectus on p. 4.  Many thanks for the link to the actual data--it really helps to clear up this issue.  Might I suggest that you include this link directly in future communications with investors, especially those of us who are kind of hazy on the nuts and bolts of how hashing & mining works?

 I assume that you set the penalty at 1/2 % per day for MINE transactions because it reflects the shorter remaining life of the fund, at 1 day less/ 200 days standard.  So in this way it's like the situation with ex-dividend valuation of shares of common stock, where the market price of the stock falls by the $ amount of the quarterly  dividend on the ex date.  Since you pay dividends each day this adjustment makes sense.

In sum, if I get your plan correctly now the 0.2431 BTC for EXCH is ultimately  divided between MINE and SELL holders depending on whether the difficulty increases rapidly (favoring SELL) or slowly/as expected (favoring MINE).  So it really IS a zero-sum game!  In  effect your derivative functions as a LEAP where the time frame is several months, MINE represents a call option for those bullish on mining investments, and SELL represents a put option for those bearish on mining investments.  I really like this concept!

[jimmothy]

Hello Folks:

Many thanks for your considerate and informative responses to my 7 questions yesterday.  I just have a few additional questions and comments:

1.  Is it correct to assume that you will always value MINE at the stated 200 days of dividends, no matter where in the cycle we are?  For example, after a typical 14-day cycle will dividends be based on 200 days or on 186 days?

2.  I understand where the 1% fee goes much better now.  But I don't see how the Issuer of the fund makes any BTC.  If that fee is just enough to pay HL their fee and to provide a small buffer then how does the Issuer get rewarded for all of the quality time, energy, and ongoing management work necessary to bring this innovative concept to market and to make it a success?  The Issuer deserves compensation for all this work and hassle!

4.  I got the 2,514,532 Difficulty number from the IPO Prospectus on p. 4.  Many thanks for the link to the actual data--it really helps to clear up this issue.  Might I suggest that you include this link directly in future communications with investors, especially those of us who are kind of hazy on the nuts and bolts of how hashing & mining works?

 I assume that you set the penalty at 1/2 % per day for MINE transactions because it reflects the shorter remaining life of the fund, at 1 day less/ 200 days standard.  So in this way it's like the situation with ex-dividend valuation of shares of common stock, where the market price of the stock falls by the $ amount of the quarterly  dividend on the ex date.  Since you pay dividends each day this adjustment makes sense.

In sum, if I get your plan correctly now the 0.2431 BTC for EXCH is ultimately  divided between MINE and SELL holders depending on whether the difficulty increases rapidly (favoring SELL) or slowly/as expected (favoring MINE).  So it really IS a zero-sum game!  In  effect your derivative functions as a LEAP where the time frame is several months, MINE represents a call option for those bullish on mining investments, and SELL represents a put option for those bearish on mining investments.  I really like this concept!

Ill try to answer these questions to the best of my knowledge.

1. MINE always pays out 5gh/s worth of dividends daily. This is a fixed rate that can be calculated mathematically. 180-200 days left of dividends is the target with those 20 days being a buffer zone (difficulty adjusts every 14 days so he left 6 days worth of dividends extra just in case or something)

2. Because naturally the value of Exchange should be equal to the sum of mine and sell combined (because dividends can only ever add up to neatly the cost of an exchange) this means the 1% markup is reasonable. I see about 100btc trading now so that means at most he will give out like 99btc and keep the 1% or 1btc.

3/4 info regarding bitcoin difficulty can be found all over the interwebs if you just google it.

You are right about it being a zero sum game but it is hugely different from options.

[twentyseventy]

Hello Folks:

Many thanks for your considerate and informative responses to my 7 questions yesterday.  I just have a few additional questions and comments:

1.  Is it correct to assume that you will always value MINE at the stated 200 days of dividends, no matter where in the cycle we are?  For example, after a typical 14-day cycle will dividends be based on 200 days or on 186 days?

2.  I understand where the 1% fee goes much better now.  But I don't see how the Issuer of the fund makes any BTC.  If that fee is just enough to pay HL their fee and to provide a small buffer then how does the Issuer get rewarded for all of the quality time, energy, and ongoing management work necessary to bring this innovative concept to market and to make it a success?  The Issuer deserves compensation for all this work and hassle!

4.  I got the 2,514,532 Difficulty number from the IPO Prospectus on p. 4.  Many thanks for the link to the actual data--it really helps to clear up this issue.  Might I suggest that you include this link directly in future communications with investors, especially those of us who are kind of hazy on the nuts and bolts of how hashing & mining works?

 I assume that you set the penalty at 1/2 % per day for MINE transactions because it reflects the shorter remaining life of the fund, at 1 day less/ 200 days standard.  So in this way it's like the situation with ex-dividend valuation of shares of common stock, where the market price of the stock falls by the $ amount of the quarterly  dividend on the ex date.  Since you pay dividends each day this adjustment makes sense.

In sum, if I get your plan correctly now the 0.2431 BTC for EXCH is ultimately  divided between MINE and SELL holders depending on whether the difficulty increases rapidly (favoring SELL) or slowly/as expected (favoring MINE).  So it really IS a zero-sum game!  In  effect your derivative functions as a LEAP where the time frame is several months, MINE represents a call option for those bullish on mining investments, and SELL represents a put option for those bearish on mining investments.  I really like this concept!

To answer your questions:
1. If you're talking about how a user would value MINE: they should look at what a 5GH/s miner would mine over the next 200 days and go from there. Some factors to consider here are (1) how will the difficulty change? and (2) how is this different from a real 5GH/s miner?. Obviously, no one knows if the Difficulty will go up, down, or sideways - predicting this is most of the point here. MINE will probably actually pay out less than a 5GH/s Miner because it's has a finite amount of capital to draw upon and because the dividends are paid once per day, so if the difficulty changes at Midnight, you'll be paid at Noon that next day at the new Difficulty rate, not half at the old Diff and half at the new Diff.

If you're talking about how BDD values MINE: BDD doesn't set a MINE value, it only sells EXCH per the formula.

2. Thank you for thinking of me! 
Yes, this is not a charity and it does take time and energy to run the fund. I have worked out an agreement with Havelock regarding my compensation for running the fund.

3. I think we missed #3?

4. Sorry for any confusion - that Difficulty amount was used in order to give me a nice round number (200BTC total reserve / 1BTC daily dividends) to use for that example calculation.

The values for the current dividend calculation are: 5000000000 * 25 * 86400 * ( ( 65535 / 2^48 ) / 2193847870)

Other questions:
--I set the .5% per day Buy-back penalty because it's actually how much has been paid out in dividends for that Period. The fund reserve is 200 Days of Dividends, so 1 day of dividends is .5%. I have to have that discount there because, otherwise, someone could buy EXCH, get MINE and SELL, hold on for a few days of dividends, and then sell back SELL and MINE to me for the original price, thereby netting free dividends.

Yes, it seems that you've got it! It can take a while for the whole thing to click for people (myself included), but when it does, everything seems to fall into place. All credit to Deprived for this concept; I'm merely reviving it on Havelock with some changes (improvements, I believe).

Your MINE/SELL call/put example is actually a great way to think about it. In any case, there IS a perfect number / right answer about how much MINE will pay out and how much SELL will pay out.

There will always be disagreement on this future value, plus some friction due to people not understanding the concept or willing to learn about it.

[twentyseventy]

Hello Folks:

Many thanks for your considerate and informative responses to my 7 questions yesterday.  I just have a few additional questions and comments:

1.  Is it correct to assume that you will always value MINE at the stated 200 days of dividends, no matter where in the cycle we are?  For example, after a typical 14-day cycle will dividends be based on 200 days or on 186 days?

2.  I understand where the 1% fee goes much better now.  But I don't see how the Issuer of the fund makes any BTC.  If that fee is just enough to pay HL their fee and to provide a small buffer then how does the Issuer get rewarded for all of the quality time, energy, and ongoing management work necessary to bring this innovative concept to market and to make it a success?  The Issuer deserves compensation for all this work and hassle!

4.  I got the 2,514,532 Difficulty number from the IPO Prospectus on p. 4.  Many thanks for the link to the actual data--it really helps to clear up this issue.  Might I suggest that you include this link directly in future communications with investors, especially those of us who are kind of hazy on the nuts and bolts of how hashing & mining works?

 I assume that you set the penalty at 1/2 % per day for MINE transactions because it reflects the shorter remaining life of the fund, at 1 day less/ 200 days standard.  So in this way it's like the situation with ex-dividend valuation of shares of common stock, where the market price of the stock falls by the $ amount of the quarterly  dividend on the ex date.  Since you pay dividends each day this adjustment makes sense.

In sum, if I get your plan correctly now the 0.2431 BTC for EXCH is ultimately  divided between MINE and SELL holders depending on whether the difficulty increases rapidly (favoring SELL) or slowly/as expected (favoring MINE).  So it really IS a zero-sum game!  In  effect your derivative functions as a LEAP where the time frame is several months, MINE represents a call option for those bullish on mining investments, and SELL represents a put option for those bearish on mining investments.  I really like this concept!

Ill try to answer these questions to the best of my knowledge.

1. MINE always pays out 5gh/s worth of dividends daily. This is a fixed rate that can be calculated mathematically. 180-200 days left of dividends is the target with those 20 days being a buffer zone (difficulty adjusts every 14 days so he left 6 days worth of dividends extra just in case or something)

2. Because naturally the value of Exchange should be equal to the sum of mine and sell combined (because dividends can only ever add up to neatly the cost of an exchange) this means the 1% markup is reasonable. I see about 100btc trading now so that means at most he will give out like 99btc and keep the 1% or 1btc.

3/4 info regarding bitcoin difficulty can be found all over the interwebs if you just google it.

You are right about it being a zero sum game but it is hugely different from options.

Hi jimmothy, just a few things I want to clarify:

1. MINE pays out the 5GH/s miner value based on that formula - as I've said before, it will pay out a little less (if difficulty increases) than a 5GH/s miner, per each Difficulty period, because divs are paid once per day and at whatever difficulty it is at 12PM ET. If the Diff changes at 8AM, a real miner would have paid you Old Diff until 8AM and New Diff from 8AM to 12PM. MINE will only pay you that day's dividends on the New Diff. This, of course, works the other way around with a Diff decrease.

Also, please be aware that there is a NEW target 200 Days of Dividends at each Difficulty Change. If the Difficulty increases, then there will be LESS capital needed to keep 200 Days of Current Dividends in the Reserve; this excess capital will be paid to SELL as a dividend.

2. I actually don't keep any of that 1% fee - .4% goes to Havelock and .6% goes back to the fund itself. Havelock and I have worked out a method of compensation; I'll leave that up to the imagination.

EDIT: Added more to #1

[Auburn]

Hello Again All:

Many thanks for your explanations and information.  I view these 3 funds as a package which should in fact behave as a set of interlocked derivatives, as your name implies.  One of the best things about derivatives in general is that they can represent excellent ways to manage risk in the underlying asset.  All Things Bitcoin is nothing if not risky!  You have given us a tool to help transfer risk from those who don't want it to those who do, for a price.  Unfortunately, derivatives have a well-deserved reputation for being complicated and difficult to understand.  Now that you have provided this additional info I think that you have reduced the confusion to its lowest realistic level.  Best Wishes to you and to BDD!