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Author Topic: Why some pools pay 115% that much?  (Read 1436 times)
finway
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February 04, 2012, 05:53:02 PM
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Sure it's not for merge mining, What's that extra 15% for ? Huh

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February 04, 2012, 06:06:57 PM
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Two legit (see below -- misspoke) reasons have been given -- can't say pools do either of these (and these are just the ones I've heard of).

1) Pool op sells mining contracts. Pool op sells hashing power @ >115% value, collects arbitrage profit, lures miners with better rates.
2) Pool op is unable to purchase Bitcoins using his native currency, but either wants BTC, or has people lining up to buy the BTC. Because others are also unable to buy BTC in their native currency, they pay a significant (>115% market value) premium.

ETA: @ #1, mining contracts are sold over price they'd normally earn. Very similar to GLBSE mining ops. Would be cheaper for leasee to do the mining himself, but with an up-front cost of whatever the leasee would like to pay for IPO shares. Mining op owner/operator buys the equipment, does the mining himself, then distributes profits AFTER taking a percent for himself. GLBSE ops have the added benefit (for the leasee) of the "mining contract" lasting "forever."

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February 04, 2012, 06:38:49 PM
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Two legit reasons have been given -- can't say pools do either or these (and these are just the ones I've heard of).

1) Pool op sells mining contracts. Pool op sells hashing power @ >115% value, collects arbitrage profit, lures miners with better rates.

Dont understand what you are saying here. Why would a pool operator sell his hashing power >115%? I can imagine pool ops buying hash rate above market value to test software, or help kickstart a new pool, but those would be really really small markets. Ive seen Dr Haribo rent some hashing power to test the new backend of bitminter, but it only takes an hour or so to get results.
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2) Pool op is unable to purchase Bitcoins using his native currency, but either wants BTC, or has people lining up to buy the BTC. Because others are also unable to buy BTC in their native currency, they pay a significant (>115% market value) premium.

This makes no sense. Its what the SA guy (clipse?) claims, but think about. He is paying miners with bitcoins.  Not only that, he is paying them more bitcoins that the hashrate can normally provide. How does that help obtain bitcoins? It doesnt, he has to buy or otherwise obtain more bitcoins to pay his miners, so its a net bitcoin loss. If he has problems buying bitcoins, buying hashrate this way only makes the problem bigger.

As for actual uses: pool hopping proportional pools like Deepbit is one likely candidate. Deepbit delays stats by an hour, but since they are so big, Im sure just looking at the blockchain would let you guess with reasonable confidence when they mined a block. I wouldnt be surprised if you could hop it.

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February 04, 2012, 07:13:34 PM
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Two legit reasons have been given -- can't say pools do either or these (and these are just the ones I've heard of).

1) Pool op sells mining contracts. Pool op sells hashing power @ >115% value, collects arbitrage profit, lures miners with better rates.
2) Pool op is unable to purchase Bitcoins using his native currency, but either wants BTC, or has people lining up to buy the BTC. Because others are also unable to buy BTC in their native currency, they pay a significant (>115% market value) premium.

It’s not how the pools are making money.  Item 1 just describes EBay. That’s not the problem. Who’s buying it is and for what purpose. For item 2 wouldn’t it be cheaper and quicker to buy USD then exchange it directly for BTC? Or better still, the shill could just buy BTC and sell it to the marks.
(@P4 - edited original reply to clarify what I meant by #1) -- GPUMax is a good example of miners leasing hashing power, and an operator (who brings the leasers and leasees together) collecting arbitrage. https://bitcointalk.org/index.php?topic=55819.0;topicseen

Dunno if SA guy is fraudulent or not -- didn't read it well. Read Paypal doesn't deal in SA's ZAR currency, but IIRC from someone else, all major banks hold USD reserves. Maybe it'd cost quite a bit to do a transfer. Idunno. *shrug* Sounds potentially reasonable to me.

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February 04, 2012, 09:30:30 PM
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Dunno if SA guy is fraudulent or not -- didn't read it well.

Im not saying he is going to screw his miners and steal their coins, only that he is lying about his goals.

Quote
Read Paypal doesn't deal in SA's ZAR currency, but IIRC from someone else, all major banks hold USD reserves. Maybe it'd cost quite a bit to do a transfer. Idunno. *shrug* Sounds potentially reasonable to me.

Irrelevant. Did you read what I wrote? assume its plain impossible in SA to buy bitcoins with fiat money. How then he is going to get the bitcoins to pay the 15% bonus? He is paying that in bitcoins. If he were paying for the hashrate with paypal, then maybe it might make some sense (and be HUGELY dangerous for the miners), but he isnt. He is paying for bitcoins with 15% more bitcoins. That means he needs to convert more fiat in to bitcoins than he would otherwise. IE, makes no sense for his stated reason.

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February 04, 2012, 09:51:36 PM
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Dunno if SA guy is fraudulent or not -- didn't read it well.

Im not saying he is going to screw his miners and steal their coins, only that he is lying about his goals.

Quote
Read Paypal doesn't deal in SA's ZAR currency, but IIRC from someone else, all major banks hold USD reserves. Maybe it'd cost quite a bit to do a transfer. Idunno. *shrug* Sounds potentially reasonable to me.

Irrelevant. Did you read what I wrote? assume its plain impossible in SA to buy bitcoins with fiat money. How then he is going to get the bitcoins to pay the 15% bonus? He is paying that in bitcoins. If he were paying for the hashrate with paypal, then maybe it might make some sense (and be HUGELY dangerous for the miners), but he isnt. He is paying for bitcoins with 15% more bitcoins. That means he needs to convert more fiat in to bitcoins than he would otherwise. IE, makes no sense for his stated reason.
What I gathered is he would use his pool to pay out quickly to miners, and then use the cash from BTC sales to get more BTC on the usual exchanges - reason being that the exchange route could take a lot longer than jut paying miners. Probably because he needs to exchange SA dollars to USD or whatever other fiat, and then transfer to an exchange, and then trade and withdraw. I can imagine that such a concept would take days or weeks to complete, and he is simply using the additional miners to fill the buffer in the mean time.

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February 04, 2012, 10:05:09 PM
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What I gathered is he would use his pool to pay out quickly to miners,

So he is paying for bitcoins with more bitcoins.

Quote
and then use the cash from BTC sales to get more BTC on the usual exchanges - reason being that the exchange route could take a lot longer than jut paying miners. Probably because he needs to exchange SA dollars to USD or whatever other fiat, and then transfer to an exchange, and then trade and withdraw. I can imagine that such a concept would take days or weeks to complete, and he is simply using the additional miners to fill the buffer in the mean time.

And you think that makes any sense? What you describe is basically that he is lending bitcoins from miners. That by itself, sounds plausible.  Until you do the math and realize he is paying 15% interest per day. You can get a loan from the bank for less than that per year, and put that money on your MtGox account and buy bitcoins as needed. He needs to do that anyway, the only difference is that he can get away with a smaller initial amount at MtGox (and a bigger one ultimately since he needs more bitcoins than he would without loaning).  Thats assuming hed need a loan, that thought would frighten me, if he cant afford to put a few 100 dollar on his mt gox account.

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February 05, 2012, 03:03:32 AM
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I agree with p4man.... I don't understand why anyone would want to give someone 1.15 bitcoins and get in return 1 bitcoin.  the only way he could be profiting is selling these for over 115% but this still contradicts what hes saying because once he sells them how is he gna convert the ZAR back into bitcoins to pay the miners their extra 15%?

he does mention he has his own rigs though so i guess this could work out he could convert the ZAR to btc by paying for power for his rigs....

however if this is how hes doing it hes limited to how much his rigs produce he said his rigs are running at 50Gh/s

thats around 984.3 btc a month
1 Gh/s a month is around 20 BTC

984.3 / .15 = 6562
6562 / 20 = 328.1

so the total Gh/s he could purchase is 328.1 anything over that and he wont be able to pay the extra 15%

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February 05, 2012, 04:41:40 PM
 #9

Sure it's not for merge mining, What's that extra 15% for ? Huh

1) buyer is an ultra-geek that enjoys being able to throw around 50+ GHash.  doesn't matter that he's losing money doing it... ITS FUN !!!!!!

2) buyer is running his own server, and is gambling that he'll beat the odds and find a 50 BTC block before he actually spends 50 BTC in rented hash power.

3) buyer is using rented hash power to hop pools.  (profitable at 115%, not profitable at the GPUMAX premiums)

4) answering a question with a question:  Why in hades would someone pay 1.7 MILLION US DOLLARS for a PENNY  !!!!    http://lunaticg.blogspot.com/2010/10/worlds-most-expensive-penny-lincoln.html

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February 05, 2012, 05:09:51 PM
 #10

Sure it's not for merge mining, What's that extra 15% for ? Huh

1) buyer is an ultra-geek that enjoys being able to throw around 50+ GHash.  doesn't matter that he's losing money doing it... ITS FUN !!!!!!

2) buyer is running his own server, and is gambling that he'll beat the odds and find a 50 BTC block before he actually spends 50 BTC in rented hash power.

3) buyer is using rented hash power to hop pools.  (profitable at 115%, not profitable at the GPUMAX premiums)

4) answering a question with a question:  Why in hades would someone pay 1.7 MILLION US DOLLARS for a PENNY  !!!!    http://lunaticg.blogspot.com/2010/10/worlds-most-expensive-penny-lincoln.html

Sigg

Better yet, why would anybody enter into a penny auction which could theoretically surpass 1.7M USD? http://en.wikipedia.org/wiki/Bidding_fee_auction

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