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Author Topic: [GLBSE] PureMining: Infinite-term, deterministic mining bond  (Read 34876 times)
JWU42
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April 07, 2012, 01:44:45 PM
 #101

Missed it..  Angry

EDIT:  I am new to GLBSE but cannot clearly see how to short this...

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April 07, 2012, 08:29:51 PM
 #102

Missed it..  Angry
Don't worry, more bonds will be issued in the future. In any case it might be worth it to put up a bid at a reasonable price.

EDIT:  I am new to GLBSE but cannot clearly see how to short this...
GLBSE doesn't currently allow doing this. You can do it in a person-to-person way; find someone willing to lend some bonds to you, and agree to pay them back at a later time + all coupons in this time period + rental fee. Sell them, and hopefully buy at a lower price to pay back.

The possibility of calling the bonds makes this a bit more complicated, but the exact terms in the contingency can be negotiated with the lender.

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April 07, 2012, 09:33:04 PM
 #103

Meni,

Thanks - figured that a "manual short" was going to be how to handle - a bit cumbersome as you said with the call provision.

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April 11, 2012, 04:39:57 AM
 #104

It is VERY easy to let such a contract/bond run like a Ponzi scheme (selling bonds for a high price, pay the payouts from the IPO initially and after half a year or so "disappear", have "hardware errors", "a medical condition" or more or less anything else that could make people panic-sell. After 15 days pay 105% of the lower-than-IPO price + keep the remaining BTC.

It takes far more than 1 year until something like the above becomes unprofitable for you as the issuer...
I'm quoting something you wrote in another thread, because I still have a hard time grasping your suggested failure mode.

If I'm going to lie, cheat and steal, I can do this even if I proved that I control the hashrate.

If I "disappear" then I've already failed the contract. If I have hardware errors I will still pay on schedule. If I have a medical condition my family will pick up the handling of the bond. If I do anything that indicates I'm going to call the bond, if anything it will create a panic buy since this increases its value.

If I somehow do manage to create a panic sell, I'll need the panic to continue during the month it takes to affect the call price. During which there are 13 coupons payments. If I pay them then I don't see why people would continue panicking, if not then I may as well not pay the calling price at all.

Anything I would do along the lines you suggest would be a massive hit on my reputation. And again, I can do this even if I provably have the hardware.

tl; dr: If you trust that I will fulfill the contract, you should believe me when I say I have hardware, or at least trust that I will not pull any blatant dirty tricks.

All that said, I think that with the first batch of hardware I'll average about 1 block per week. This means that it will take months to demonstrate a given hashrate with any accuracy, during which my mining is suboptimal. Also, since I don't personally have physical access to the hardware, it may be harder to supply the desired proof. I can see what I can do, if I can be made to understand what good that will do, or at least see there is sufficient demand for this that understanding is not required.

PS The first batch of hardware hasn't arrived yet, but it should happen really soon.

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April 11, 2012, 04:50:18 AM
 #105

I really don't see why an issuer needs to prove they have the hardware, or even why they need to have the hardware, so they as they pay coupons according to the formula stated in the contract.

A cashed up bitcoiner who thinks mining is in a bubble and hence unprofitable could issue such a bond and pay out of his saving or with bitcoins purchased for fiat. It would be a way to be short mining, long bitcoin.

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April 11, 2012, 08:18:24 AM
 #106

Since it takes 1 year+ to make profits on such bonds as you (and others) sell them, there is still a lot of room for frauds, I guess we can agree on that at least.

Also, your bond already pays out quite often and has a longer averaging time for buybacks than other bonds which (as you correctly said) makes it harder for you to IPO and run.
Still it can be run like a ponzi scheme, if you add "new machines" every 2-3 months you can run this bond for quite some time and even let early adopters go into the profit zone until everything breaks down. If you still live at the same place 2 years later and are still known under the same name?! Who knows? Wink

I'm a very sceptical person and most likely there is everything fine and in order with all of the "mining bonds" that are currently popping up - but I'll just like to remind that for example other mining operations like SIN also started out with a "invest ~1 BTC now and in 1  year you'll break even and we'll all be RICH BABY!" and it went downhill after some difficulty increases. Especially with Vladimir's planned ASIC farm, mining botnets/mystery miners, the reward split and potential other ASICs/more FPGAs on the horizon betting now that the hashrate will stagnate is a ballsy move for any investor...


The "bets" mentioned above could be done for example like this btw.:
"I am certain that mining for the next 15 000 blocks with 10 MH/s will yield less than 5 Bitcents - there is a certain chance however (if the network grows slower/shrinks) that this does yield more than 5 Bitcents. I create MININGBET.10MHIN15KBLKS and pay out pure PPS of the next 15k blocks after the current block (#123456). These shares get sold for 5 bitcents each. If I have to pay out less than 5 bitcents per share during the runtime, I win - if not, they win." (numbers are completely guessed and probably off by magnitudes!)

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April 11, 2012, 08:58:39 AM
 #107

Since it takes 1 year+ to make profits on such bonds as you (and others) sell them, there is still a lot of room for frauds, I guess we can agree on that at least.

Also, your bond already pays out quite often and has a longer averaging time for buybacks than other bonds which (as you correctly said) makes it harder for you to IPO and run.
Still it can be run like a ponzi scheme, if you add "new machines" every 2-3 months you can run this bond for quite some time and even let early adopters go into the profit zone until everything breaks down. If you still live at the same place 2 years later and are still known under the same name?! Who knows? Wink
Sure. But for the current purpose I would like to know in what way can blockchain verification make less room for fraud.

Everything won't "break down" without malicious intent on my part, and if I had such intention I could exercise it even with a demonstration of hashing power. I can understand that it can show that I have less incentive to run, but this doesn't seem like a strong enough case to me.

I'm a very sceptical person and most likely there is everything fine and in order with all of the "mining bonds" that are currently popping up - but I'll just like to remind that for example other mining operations like SIN also started out with a "invest ~1 BTC now and in 1  year you'll break even and we'll all be RICH BABY!" and it went downhill after some difficulty increases. Especially with Vladimir's planned ASIC farm, mining botnets/mystery miners, the reward split and potential other ASICs/more FPGAs on the horizon betting now that the hashrate will stagnate is a ballsy move for any investor...
A difficulty increase would be beneficial to a hypothetical naked issuer and make it easier for him to fulfill his obligations.

It would of course be detrimental to investors. It's no secret that there is a very real risk that such a bond will not pay out as well as hoped. I want potential investors to have the power to decide for themselves how good is the bond for them. I also have put a lot of thought and effort into issuing this and there are many risks involved, and would like to profit from it. If there's demand, I'll offer at a higher price than what I would have been willing to pay myself.

The "bets" mentioned above could be done for example like this btw.:
"I am certain that mining for the next 15 000 blocks with 10 MH/s will yield less than 5 Bitcents - there is a certain chance however (if the network grows slower/shrinks) that this does yield more than 5 Bitcents. I create MININGBET.10MHIN15KBLKS and pay out pure PPS of the next 15k blocks after the current block (#123456). These shares get sold for 5 bitcents each. If I have to pay out less than 5 bitcents per share during the runtime, I win - if not, they win." (numbers are completely guessed and probably off by magnitudes!)
We're going to have a Bitcoin prediction market, either in GLBSE or elsewhere, with all kinds of bets on difficulty, block timestamps and so on (a prediction market on the time of block 210000 would be cool). I planned to experiment with making a prediction asset on top of the current GLBSE platform, but was talked out of it.

But none of these has the same purity and alignment with real-world conditions as a perpetual asset tied to a given hashrate, which I believe will be the main form in which mining-related speculation and hedging will be done.

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April 11, 2012, 11:12:56 AM
 #108

Looking forward to the prediction market, I went ahead and created a bet on betsofbitco.in for a block difficulty (http://betsofbitco.in/item?id=333 as soon as it is approved) in may - but a more automated way of doing these kinds of bets is really needed and would be an easy way to get money in.

About proving hash rate as insurance against fraud - my reasoning was that it raises the entry hurdle for fraudsters significantly by making them take risks too (besides being called out/tagged "scammer" etc.) as they will have to buy/rent that hardware they claim to have, get them to an operational state and contribute to the bitcoin network. Yes, they can still be frauds - but at least they will have helped the network, left traces in the blockchain that can be linked to them... If you have to show proof that oyu own the claimed hash rate, this might be too high a hurdle to make the scamming worthwile compared to other possibilities, as you have to invest more than just some time to get mining hardware.

About "only 1 block per week": that's why I suggested Eligius + P2Pool, as these pools pay out via coinbase transactions, so you could even prove that you own a single GH/s quite well, as these pools solve blocks much faster.

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April 11, 2012, 12:08:44 PM
 #109

I will have a period of unavailability between Apr 12 around 14:00 UTC to Apr 14 around 18:00 UTC. Because of this, it is likely that the coupon payment for block 175391 will be delayed.


Looking forward to the prediction market, I went ahead and created a bet on betsofbitco.in for a block difficulty (http://betsofbitco.in/item?id=333 as soon as it is approved) in may - but a more automated way of doing these kinds of bets is really needed and would be an easy way to get money in.
Automation is not the problem with betsofbitcoin, it's that it's not a market, it just distributes funds in an arbitrary way. Even someone who knows exactly the probability of an event when the market doesn't can't reliably make a bet with a positive expectation.

About "only 1 block per week": that's why I suggested Eligius + P2Pool, as these pools pay out via coinbase transactions, so you could even prove that you own a single GH/s quite well, as these pools solve blocks much faster.
I'm not going anywhere near Eligius, I'll think about P2Pool.

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April 15, 2012, 03:42:23 PM
 #110

I will issue 2000 new bonds later this week.

I've also updated the asset details, and poked Nefario wrt identification.

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April 16, 2012, 06:38:40 PM
 #111

I have issued 2000 new bonds (a total of 4000) at 0.4 BTC each.

Nefario has also finished verifying my account.

About "only 1 block per week": that's why I suggested Eligius + P2Pool, as these pools pay out via coinbase transactions, so you could even prove that you own a single GH/s quite well, as these pools solve blocks much faster.
I'm not going anywhere near Eligius, I'll think about P2Pool.
I have been reminded that BFL singles don't work with P2Pool because of the frequent LP, so that's off the table.

I'll proceed with my original plan - which is to use whatever combination I see fit of physically operating hardware, colocation, mining contracts, mining company investments or hedging on available markets, which I deem will provide me with the best combination of profit and risk. I will divulge information on my course of action for the sake of transparency, but this is irrelevant to my unconditional obligation to fulfill the deterministic terms, and I will not go out of my way to prove that I have the stated backing.

As a reminder, in the short term there are 13 BFL single units on the way to be colocated with Inaba (which may be absorbed into his BFLS offering), who will operate them utilizing GPUmax and the last fortress of hoppability, Deepbit. I'm also waiting for news from Largecoin, I have the deposit money ready.

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April 16, 2012, 07:55:43 PM
 #112

I can confirm that Meni has an order of 13 singles that will be delivered to me/my facilities to begin slave labor in the BTC mines that are within my domain/fiefdom.  Any stray singles or lumbering MiniRigs wandering onto my territory will be similarly conscripted into slave labor until death or sale, whichever comes first.




If you're searching these lines for a point, you've probably missed it.  There was never anything there in the first place.
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April 16, 2012, 08:13:49 PM
 #113

I can confirm that Meni has an order of 13 singles that will be delivered to me/my facilities to begin slave labor in the BTC mines that are within my domain/fiefdom.  Any stray singles or lumbering MiniRigs wandering onto my territory will be similarly conscripted into slave labor until death or sale, whichever comes first.

Muahahahaha

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April 16, 2012, 08:52:49 PM
 #114



Death awaits you all with big pointy nasty teeth...

Sorry Meni -- back OT now  Grin

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April 17, 2012, 10:00:25 AM
 #115

I have been contacted (by one who also happens to be a Bitcoil customer) to make a presale of 5500 bonds, and I agreed. Because of this, and to stay with round numbers, I will issue 6000 new bonds (total of 10000 so far), of which 500 will be publicly offered at 0.4 BTC.

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April 17, 2012, 10:37:34 AM
 #116

That presale was done @0.4 too?

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April 17, 2012, 10:38:27 AM
 #117

That presale was done @0.4 too?
Essentially yes, though there was a token discount.

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April 17, 2012, 11:30:20 AM
 #118

Congratulations Meni on your continued success with Puremining!

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April 17, 2012, 11:42:13 AM
 #119

Congratulations Meni on your continued success with Puremining!
Thank you, I'm glad to offer a valuable service.

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April 19, 2012, 05:54:05 PM
 #120

Ok, that was weird.

The customer who recently purchased bonds directly from me has had second thoughts. He requested to sell (most of) them back to me, at a lower price of course. I agreed to this as well.

Since I now possess more unsold bonds than I intended, and I made some net profit out of these two trades, I am offering >5000 bonds for sale at the lower price of 0.37 BTC each.

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Bitcoil - Exchange bitcoins for ILS (thread)   |   Israel Bitcoin community homepage (thread)
Analysis of Bitcoin Pooled Mining Reward Systems (thread, summary)  |   PureMining - Infinite-term, deterministic mining bond
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