[Havelock] Bitcoin Difficulty Derivative (BDD)

[twentyseventy]

Period 10, Day 7 Report - May 19, 2014

Balance Post Divs: BTC 466.46744883

Total Units: 8549

NAV/U: BTC 0.05456397

[twentyseventy]

Period 10, Day 8 Report - May 20, 2014

Balance Post Divs: BTC 463.98625866

Total Units: 8548

NAV/U: BTC 0.05428009

[junkonator]

Sell dividend is gonna be better this time around
https://bitcoinwisdom.com/bitcoin/difficulty: 20% and rising.

Could someone elaborate on the probability of both the exit scenarios a little? The more math the better!

[twentyseventy]

Sell dividend is gonna be better this time around
https://bitcoinwisdom.com/bitcoin/difficulty: 20% and rising.

Could someone elaborate on the probability of both the exit scenarios a little? The more math the better!

I saw that, it's getting up there! The probability of the end-game via decease versus the probability of end-game via increase, you mean?

[junkonator]

I saw that, it's getting up there! The probability of the end-game via decease versus the probability of end-game via increase, you mean?

Decease of Havelock? jk. Decrease vs. Increase, yes. Decrease seems highly unlikely right now but still what are the numbers? What if difficulty increases by, say, 16% everytime? What if it this increase decreases by 1% everytime and so on. Lively examples would be helpful!

[twentyseventy]

Period 10, Day 9 Report - May 21, 2014

Balance Post Divs: BTC 461.55854118

Total Units: 8548

NAV/U: BTC 0.05399608

To give everyone an advance heads-up, it looks like the difficulty will change on Saturday after Noon, meaning that the report and SELL dividend will be issued on Sunday. I have an engagement that I cannot miss for most of Sunday, so the dividend (both MINE and SELL) and the report will be tentatively scheduled for 9PM Eastern on Sunday.

I do apologize for the change in schedule, but life does indeed get in the way at times. I'll just hope (along with SELL holders) that the difficulty continues to increase and the change will instead happen Friday, leading to a div instead being issued Saturday.

[twentyseventy]

I saw that, it's getting up there! The probability of the end-game via decease versus the probability of end-game via increase, you mean?

Decease of Havelock? jk. Decrease vs. Increase, yes. Decrease seems highly unlikely right now but still what are the numbers? What if difficulty increases by, say, 16% everytime? What if it this increase decreases by 1% everytime and so on. Lively examples would be helpful!

Haha, slip of the tongue on my part. Well, I believe that I worked it out a while ago (quote below) - difficulty has to increase by at least 6.5% in order for a SELL Dividend to be paid. And, of course, the rise/fall of the difficulty depends on how much hashing power is being deployed.

In order to do even a guess at that (check the PETA thread for some fun predictions), you'd have to try and project out the deployment for AM's Gen 3, Cointerra, KNC, Bitmine, etc, etc. So, unfortuantely, anyone doing so would be doing a lot of guesswork and there are definitely others with better mining market knowledge than me.

I think this is a good time to remind everyone (or make aware to those that haven't done the math) that the Difficulty needs to increase around 6.5% in order for there to be a SELL dividend issued. I say 'around' since it will be somewhat less if there are significant sales of EXCH, which increase the NAV/U.

This is because the Period is started with 200 Days of Dividends and .5% is paid out each day in dividends to MINE (1 Day / 200 Days = .5%). So, at the end of a 10-Day Period, there are only 190 days of dividends remaining at that ending Period's Difficulty.

If there is a Difficulty increase of greater than about 6.5%, then the necessary Reserve of 200 day of dividends has decreased enough to make this a non-issue. If the Difficulty has increased at less than that approximate rate (or stayed the same, or decreased), then the required Reserve is higher than the actual Reserve and there will be no SELL dividend.

TL;DR It's possible that there could be a Difficulty Increase, but no dividends will be issued to SELL for that Period due to the paid Dividends outstripping the decrease brought on by the small Difficulty Increase. But you really should be reading the whole explanation.

[twentyseventy]

Period 10, Day 10 Report - May 22, 2014

Balance Post Divs: BTC 459.35824984

Total Units: 8552

NAV/U: BTC 0.05371354

Looks now like the difficulty will change Saturday before Noon, so it looks like SELL div will instead be paid Saturday; normal time.

[twentyseventy]

Period 10, Day 11 Report - May 23, 2014

Balance Post Divs: BTC 456.92939632

Total Units: 8552

NAV/U: BTC 0.05342953

[twentyseventy]

The Difficulty changed overnight, so the report will be issued today at Noon. I'll be taking down the EXCH ask done like normal at 11; all buy backs must be sent by 11 as well, or they will be returned.

[twentyseventy]

Period 10 End Report - May 24, 2014


Previous Units              8556
EXCH Sold                   164
Less Buybacks              168
New Total Units            8552

Previous Balance          485.99794097
Price per EXCH             0.05850606
Gross Sales of EXCH      9.60046516

Less Fees                    0.03837932
Less Dividends              29.32886067
Less Buybacks              9.11620546
Less Mgmt Fee              0.18556436
Net Balance                  456.92939632

End of Period NAV/U     0.05342953

New Difficulty                  10,455,720,138
New Daily Dividend         0.00024049
New Reserve per Unit        0.04809800

NAV/U Less New Reserve = 0.05342953 - 0.04809800 = 0.00533153

SELL Dividend                 0.00533153

You'll notice that I calculate the new Dividend to eight digits and multiply that times 200 Days to get the new Reserve. Those of you that did your own calculations may come up with a slightly different number if you chose not to round or to round elsewhere.

New EXCH Sales Price          0.04954094

[twentyseventy]

Period 11, Day 0 Report - May 24, 2014

Balance Post Divs: BTC 409.27748128

Total Units: 8552

NAV/U: BTC 0.04785751

[xe99]

are we getting close to the end of this round/reset if difficulty goes above 12,000,000,000? if i read and understood the way this fund works...if we go much above 12,000,000,000 difficulty the dividend payout will be at or under 0.0002 which would make dividend payments (if i understood correctly) not worth paying out.

[twentyseventy]

are we getting close to the end of this round/reset if difficulty goes above 12,000,000,000? if i read and understood the way this fund works...if we go much above 12,000,000,000 difficulty the dividend payout will be at or under 0.0002 which would make dividend payments (if i understood correctly) not worth paying out.

No, we're actually quite a bit away. It's not the daily dividend that needs to be below .2mBTC, but the Reserve that needs to be less than .2mBTC (Reserve = 200 Days of Dividends).

The last published Reserve is 0.04809800 BTC. Since the dividends are made off-blockchain, there's no fee to pay them, but they are getting smaller.

In hindsight, I probably would have chosen a higher Final Reserve / Minimum Reserve, as this Round is currently scheduled to last well into next year. Functionally, everything would operate exactly as-is even if the last published Reserve was ten times less than it is now, but, so far it seems that exchange volume tends to wane with a decreasing NAV/U / Reserve / Daily Div.

DMS, the model upon which BDD is based, had no minimum - holders of SELL had to vote if/when to close the fund. I do think that it was a good idea to build-in a Minimum Reserve, but a .2mBTC Reserve means a daily dividend of 100 satoshi, which the market may tire of.

[twentyseventy]

As stated a few posts ago, I'll be out for the day today. Will post the report this evening

[xe99]

are we getting close to the end of this round/reset if difficulty goes above 12,000,000,000? if i read and understood the way this fund works...if we go much above 12,000,000,000 difficulty the dividend payout will be at or under 0.0002 which would make dividend payments (if i understood correctly) not worth paying out.

No, we're actually quite a bit away. It's not the daily dividend that needs to be below .2mBTC, but the Reserve that needs to be less than .2mBTC (Reserve = 200 Days of Dividends).

The last published Reserve is 0.04809800 BTC. Since the dividends are made off-blockchain, there's no fee to pay them, but they are getting smaller.

In hindsight, I probably would have chosen a higher Final Reserve / Minimum Reserve, as this Round is currently scheduled to last well into next year. Functionally, everything would operate exactly as-is even if the last published Reserve was ten times less than it is now, but, so far it seems that exchange volume tends to wane with a decreasing NAV/U / Reserve / Daily Div.

DMS, the model upon which BDD is based, had no minimum - holders of SELL had to vote if/when to close the fund. I do think that it was a good idea to build-in a Minimum Reserve, but a .2mBTC Reserve means a daily dividend of 100 satoshi, which the market may tire of.

Ah...ok i didn't get that...thanks for the clarification. I need to re-read the first few pages again.

Couldn't you put it to shareholder vote then and possibly change the reserve to a higher minimum that would cause the fund to reset sooner if your right and traders do in fact tire of the fund if the payout would be so low? I for one wouldn't be against it so long as I had at least a month or two to exit the position I have now.

[twentyseventy]

Period 11, Day 1 Report - May 25, 2014

Balance Post Divs: BTC 423.54168656

Total Units: 8891

NAV/U: BTC 0.04763712

A user with multiple buys after Noon yesterday bought a number of shares but was credited one less pair of MINE/SELL than he had bought. It seems that the unit is 'stuck' in the system (the reason that the EXCH outstanding is 1), but I can't see it to buy it back.

I have manually pushed a pair to this user, along with the missed dividend for today. I will raise the issue with HL this week.

[twentyseventy]

are we getting close to the end of this round/reset if difficulty goes above 12,000,000,000? if i read and understood the way this fund works...if we go much above 12,000,000,000 difficulty the dividend payout will be at or under 0.0002 which would make dividend payments (if i understood correctly) not worth paying out.

No, we're actually quite a bit away. It's not the daily dividend that needs to be below .2mBTC, but the Reserve that needs to be less than .2mBTC (Reserve = 200 Days of Dividends).

The last published Reserve is 0.04809800 BTC. Since the dividends are made off-blockchain, there's no fee to pay them, but they are getting smaller.

In hindsight, I probably would have chosen a higher Final Reserve / Minimum Reserve, as this Round is currently scheduled to last well into next year. Functionally, everything would operate exactly as-is even if the last published Reserve was ten times less than it is now, but, so far it seems that exchange volume tends to wane with a decreasing NAV/U / Reserve / Daily Div.

DMS, the model upon which BDD is based, had no minimum - holders of SELL had to vote if/when to close the fund. I do think that it was a good idea to build-in a Minimum Reserve, but a .2mBTC Reserve means a daily dividend of 100 satoshi, which the market may tire of.

Ah...ok i didn't get that...thanks for the clarification. I need to re-read the first few pages again.

Couldn't you put it to shareholder vote then and possibly change the reserve to a higher minimum that would cause the fund to reset sooner if your right and traders do in fact tire of the fund if the payout would be so low? I for one wouldn't be against it so long as I had at least a month or two to exit the position I have now.

This is something that I could do, but it is complicated to do so for two reasons:

First, HL does not have a shareholder vote option. We could get around this by either sending a survey link to all holders, and having them tie their votes to their email address; or, they could email me directly. So, the voting could be a little complicated.

Second, SELL holders that believe that the difficulty will increase well into next year would (correctly or otherwise) would be giving up expected profit by doing this.

For instance, the Minimum Reserve (that's what I'm calling it now) is .2mBTC. So, holders of SELL, in the case of continuously increasing Difficulty, can reasonably expect to give up .2mBTC as a final 200 Days of Dividends payout to MINE holders. In practice, it could be a bit less than this, but the amount is so small that it wouldn't matter much.

So, let's say that I proposed a new Minimum Reserve of 2 mBTC. Holders of sell, in the case of continuously increasing Difficulty, would then need to plan to give up about 1.8 mBTC more than they would have if they had waited until the Minimum Reserve had more significantly decreased.

I would assume that some traders could/would make more profit by entering a new Round with high-share prices instead of trading in a very low-share-price environment, but I can't be sure that they would see it the same way.

TL;DR - Holders of SELL, in the case of continuously increasing Difficulty, would essentially be 'giving up' the new Minimum Reserve amount (less .2 mBTC) to holder of Mine. Holders of Sell would need to decide if they would stand to make more profit in a new Round vs. this amount 'given up' to holders of Mine.

For now, I'm going to let the fund run as-is, but I would like to hear from holders of SELL. MINE doesn't get a say, since they only stand to benefit from this change. If the subject is repeatedly broached, I'll consider putting it to a vote. There's currently no mechanism in the contract for voting, which may need to be rectified for issues like this.

[jjdub7]

So...possible reasons the MINE shares are still so highly valued given last period's payout and this period's projections?

It can't just be substitution out of more expensive mining service like Ghash, can it?

[jimmothy]

So...possible reasons the MINE shares are still so highly valued given last period's payout and this period's projections?

It can't just be substitution out of more expensive mining service like Ghash, can it?

Thats my guess. Its only a matter of time before all the noobs from cex.io and cloudmining figure out they are getting ripped off.