[Havelock] Bitcoin Difficulty Derivative (BDD)

[Tudouu]

be care full.
user twentyseventy is owner https://bitcointalk.org/index.php?topic=367560.0

HAHA notice OP both thread have same formating style.

I think this has been mentioned before in this thread.

Personally I'm not too worried. The only risk is that twentyseventy runs off with the money.
But if I understood correctly most of the money is held by havelock (can somebody confirm that?).
Also twentyseventy has an interest to let the derivative run as long as possible, because he gets a comission of 1%.

[BitHub]

Guys please becareful pretty sure this guy is working with the guy pulling off the xxxprofit scam or is him (pretty sure just working with him)

Just a reminder what can happen - http://www.sec.gov/News/PressRelease/Detail/PressRelease/1370539730583

Hope it was worth it bro.

[Korbman]

But if I understood correctly most of the money is held by havelock (can somebody confirm that?).
Also twentyseventy has an interest to let the derivative run as long as possible, because he gets a comission of 1%.

That's correct, Havelock current manually confirms all withdrawals from fund accounts. Since there shouldn't be any reason to withdraw coins from BDD, the likelihood of this being approved is fairly low.

And if I remember correctly, that 1% is actually 0.4% (Havelock fees) and 0.6% (his commission) [NAV increase].

EDIT: Ah, I was mistaken. Thanks for the clarification guys.

[Rannasha]

But if I understood correctly most of the money is held by havelock (can somebody confirm that?).
Also twentyseventy has an interest to let the derivative run as long as possible, because he gets a comission of 1%.

That's correct, Havelock current manually confirms all withdrawals from fund accounts. Since there shouldn't be any reason to withdraw coins from BDD, the likelihood of this being approved is fairly low.

And if I remember correctly, that 1% is actually 0.4% (Havelock fees) and 0.6% (his commission).

The 1% NAV/U premium that buyers of EXCH pay is not going to twentyseventys pocket. It is added to the funds NAV, very slightly increasing the value of B.SELL whenever EXCH is bought.

Twentyseventy apparently worked out a deal with Havelock for his income. We don't know what it is, but I suspect something like getting a part of all trade fees earned by Havelock on BDD-trades.

[twentyseventy]

But if I understood correctly most of the money is held by havelock (can somebody confirm that?).
Also twentyseventy has an interest to let the derivative run as long as possible, because he gets a comission of 1%.

That's correct, Havelock current manually confirms all withdrawals from fund accounts. Since there shouldn't be any reason to withdraw coins from BDD, the likelihood of this being approved is fairly low.

And if I remember correctly, that 1% is actually 0.4% (Havelock fees) and 0.6% (his commission).

The 1% NAV/U premium that buyers of EXCH pay is not going to twentyseventys pocket. It is added to the funds NAV, very slightly increasing the value of B.SELL whenever EXCH is bought.

Twentyseventy apparently worked out a deal with Havelock for his income. We don't know what it is, but I suspect something like getting a part of all trade fees earned by Havelock on BDD-trades.

The 1% fee on top of the Period Beginning NAV/U goes to Havelock (.4% for the exchange fee, like any share sale on the site) and to the fund's capital itself (.6%) adding to the Net Asset Value of the shareholders.

Regarding the funds: they are all kept on Havelock. Withdrawals from Havelock Fund Managers' accounts have to be approved by Havelock. I've actually got them doing manual transfers from EXCH to SELL/MINE, so there's no longer any reason for me to have to perform a withdrawal at all. This isn't to say that there is no counter-party risk to shareholders, but since I don't have direct control of the BTC nor withdrawal ability, it's greatly decreased. Rannasha is in the right ballpark when it comes to the benefit of my managing the fund.

[twentyseventy]

Period 2, Day 2 Report


Balance Post Divs: 152.17801838

Total Units: 800

NAV/U: 0.19022252


We did have our first buy-back today for 1 Unit, so the overall amount of units decreased from 801 to 800. Do remember that the fund will buy back equal pairs of MINE and SELL (a BDD Pair) for the NAV/U less .5% * the number of dividends paid for the period.

To perform a buy-back, you can either email me from the email address that you use on Havelock with the quantity that you'd like to sell back, or you can simply transfer an equal number of MINE and SELL to me and I'll perform the buy-back.

To buy-back, I'll buy-back the MINE/SELL at 0, issue you an EXCH, and buy that EXCH back for the calculated price, as it's easier on my accounting that way.

[junkonator]

Rannasha is in the right ballpark when it comes to the benefit of my managing the fund.

The beauty of a thing like DMS, BDD, eltopos ET.DIFF etc. is that you don't have to trust the issuer because it's obvious he or she'll make more money doing this honestly than scamming people. Guess what that means or at least should mean for you concerning disclosing your source of income, especially if there's doubt about your previous ventures. You have "some kind of deal", undisclosed, doesn't quite cut it...

[twentyseventy]

Rannasha is in the right ballpark when it comes to the benefit of my managing the fund.

The beauty of a thing like DMS, BDD, eltopos ET.DIFF etc. is that you don't have to trust the issuer because it's obvious he or she'll make more money doing this honestly than scamming people. Guess what that means or at least should mean for you concerning disclosing your source of income, especially if there's doubt about your previous ventures. You have "some kind of deal", undisclosed, doesn't quite cut it...

I was hoping that this would be implicitly clear, but I suppose not. Yes, I receive a portion of the exchange fees generated by the three funds. I'm going to see how this works out for the first Round of the funds and if the compensation is worth the time commitment. Hopefully this allays some of the counter-party risk fears.

DMS took a flat 3% on all sales of EXCHANGE, so BDD is a better value to shareholders in that respect.

My goal here is to provide a great derivative product to the community, make a few m/BTC by managing the fund and communicating with shareholders, and possibly establish a brand in the future like TAT has done.

[redmetal]

Rannasha is in the right ballpark when it comes to the benefit of my managing the fund.

The beauty of a thing like DMS, BDD, eltopos ET.DIFF etc. is that you don't have to trust the issuer because it's obvious he or she'll make more money doing this honestly than scamming people. Guess what that means or at least should mean for you concerning disclosing your source of income, especially if there's doubt about your previous ventures. You have "some kind of deal", undisclosed, doesn't quite cut it...

I was hoping that this would be implicitly clear, but I suppose not. Yes, I receive a portion of the exchange fees generated by the three funds. I'm going to see how this works out for the first Round of the funds and if the compensation is worth the time commitment. Hopefully this allays some of the counter-party risk fears.

DMS took a flat 3% on all sales of EXCHANGE, so BDD is a better value to shareholders in that respect.

My goal here is to provide a great derivative product to the community, make a few m/BTC by managing the fund and communicating with shareholders, and possibly establish a brand in the future like TAT has done.

It probably won't be worth your time with the little amount of BTC being traded with these, but down the road I see this being a nice little earner for you if you keep up the hard work, and are happy with a smaller paycheck at first.

[eltopo]

Little amount? After 1 week, BDD is already No. 2 in volume behind AM, with roughly 1.5 btc generated in fees...

[twentyseventy]

Little amount? After 1 week, BDD is already No. 2 in volume behind AM, with roughly 1.5 btc generated in fees...

Yes, but I don't get all of the fees, of course 

eltopo did bring up an important matter that I seem to have glossed over when he asked about it last week:

If the Difficulty sees moderate increases (20-35%), then the end-game via increase will not be reached for a number of months (somewhere around 9-14 months). This doesn't change anything about the fundamentals of the fund, I just want to ensure that people don't expect a 'reset' (the Round being finished) any time soon.

[Rannasha]

Little amount? After 1 week, BDD is already No. 2 in volume behind AM, with roughly 1.5 btc generated in fees...

eltopo did bring up an important matter that I seem to have glossed over when he asked about it last week:

If the Difficulty sees moderate increases (20-35%), then the end-game via increase will not be reached for a number of months (somewhere around 9-14 months). This doesn't change anything about the fundamentals of the fund, I just want to ensure that people don't expect a 'reset' (the Round being finished) any time soon.

And I brought up an important point that eltopo seemed to have glossed over ...

Anyway, neither of the end-game scenarios should really be taken into account at this point. They're simply too far away. There is no reason for the difficulty to stop growing or even shrink except for a total failure of Bitcoin. So the end-game via difficulty decrease is very far away. The other end-game, via difficulty increase and the NAV/U crossing below 0.2 mBTC, that value is roughly 1000 times as low as the current NAV/U. It requires 10 difficulty-doublings to reach that. At a doubling per month (~25% increase per cycle), that's still almost a year away. And at that point, only 0.1% of the current NAV/U remains, all the rest will have been paid out through dividends.

So for people holding a position or getting in right now, the end-game scenario's are not relevant. 10 months from now, assuming difficulty has been steadily increasing, it could be a different story.

[twentyseventy]

Period 2, Day 3 Report


Balance Post Divs: 153.90702661

Total Units: 813

NAV/U: 0.1893075358

[dan_a]

Hi,
I'm trying to understand this properly, but I can't quite get my head around it.

If I have 1 MINE and 1 SELL, then common sense tells me that I'm not going to make money.
But, every day the MINE will pay dividends, and every difficulty change the SELL may (and probably will based on the past) pay dividends.

Am I right in thinking that the way I'm losing money by holding both is that the price of EXCH goes down every difficulty change and therefore the market value of MINE and SELL follows it down?

Thanks!

[twentyseventy]

Hi,
I'm trying to understand this properly, but I can't quite get my head around it.

If I have 1 MINE and 1 SELL, then common sense tells me that I'm not going to make money.
But, every day the MINE will pay dividends, and every difficulty change the SELL may (and probably will based on the past) pay dividends.

Am I right in thinking that the way I'm losing money by holding both is that the price of EXCH goes down every difficulty change and therefore the market value of MINE and SELL follows it down?

Thanks!

Your common sense is right - MINE and SELL will be paid out all of the fund's capital over time. Your job is to determine how much you think that MINE will receive and how much SELL will receive.

MINE gets daily dividends based on the current Difficulty. SELL gets dividends if the Difficulty increases overall. The value of EXCH is just the Period Start Net Asset Value per Unit plus 1% (fee). You've already paid that 1% fee when you bought EXCH, plus possibly a little premium depending on when you bought it during the period.

So, you've already paid a little bit of a premium (like everyone does) when buying EXCH - you can't lose any money now simply by holding your Pair.

If you hold MINE and SELL until the end-game, you'll receive right around the current NAV/U (plus a little more due to sales of new EXCH).

If Difficulty continues to increase, the values of all of the three securities will decrease for the following reasons:

1) EXCH will decrease because, as the Diff increases, the capital required to pay 200 Days of MINE Dividends at the current rate will decrease
2) MINE will (should) decrease because, as the Diff increases, a theoretical 5GH/s miner will pay out less as time goes on
3) SELL will decrease because the excess capital no longer needed for MINE's dividends is paid to SELL and the value of SELL, therefore, decreases. This can be hard to understand, but basically if I'm going to (for example) pay out .16 in dividends to SELL over its lifetime, and then I pay out .03 in dividends, you wouldn't expect SELL to still be worth .16, right? You'd expect it to be worth .13.

In this same vein, the market value of SELL decreases as dividends are paid out to it because the maximum theoretical dividends that could be paid out to it have decreased.

Overall, I suggest that you determine what you think the Diff will do - continue to rise? Start to fall (if so, when?)? Plateau (when?). These are the important questions. After you have this answer, run some models using mining calculators (or your own spreadsheet) and figure out what you think a fair price for MINE is.

Once you have that, subtract that value from the current NAV/U - now you've got your fair price for SELL. Which one you're going to sell/keep depends on what the market looks like at the moment. But, there's no penalty to holding onto SELL and MINE until you've found a good entry into the market.

Hope this helps.

[baloo_kiev]

Hello! Thank you for starting this!

Considering negative DMS experience, do you have any agreement with Havelock to sort things out if you fail to come online for some time?
I hold some DMS shares and just don't want to make the same mistake again

[twentyseventy]

Hello! Thank you for starting this!

Considering negative DMS experience, do you have any agreement with Havelock to sort things out if you fail to come online for some time?
I hold some DMS shares and just don't want to make the same mistake again

Hey there, that is a good point. While the funds would still be intact, there would still need to be some sort of succession plan in the case that I somehow became totally unavailable.

I will get with Havelock and work up something this week, thanks for the suggestion.

[twentyseventy]

Period 2, Day 4 Report


Balance Post Divs: 184.23606049

Total Units: 974

NAV/U: 0.1889600620

I missed one user when I was pushing MINE and SELL out this morning - this user missed their dividend paid at Noon, but I have made him whole with respect to the dividend that his MINE should have received and he now has his BDD Pair. Apologies to him for the delay-

[dan_a]

Thanks for the detailed explanation - that's really helpful.

[twentyseventy]

Period 2, Day 5 Report


Balance Post Divs: 201.54367757

Total Units: 1070

NAV/U: 0.1883585772