Gigamining / Teramining

[BurtW]

"they are going to sell millions of ASIC chips"  Where?  To the millions of miners out there? 

[EskimoBob]

mhash: 5 bid: 1.310 ask: 1.375
bid/mh: 0.262 ask/mh: 0.275

Not a bad deal at all?
Yes, YABMC looks really nice at ask/mh: 0.265 but this is only because div payment has caused a small sell off.

[totaleclipseofthebank]

LOL at the price action on gigamining due to this thread

Mining bonds are an interesting investment, since you should expect the price of bonds to depreciate as mining capacity increases. But the annualized yield of something like gigamining is somewhere around 200%, so you are still making a lot of money in the dividends.

The idea is that depreciation of face value will be more than offset by your dividend payouts, which you can then reinvest into higher Mhash/BTC bonds as mining efficiency improves.

[Epoch]

Mining bonds are an interesting investment, since you should expect the price of bonds to depreciate as mining capacity increases. But the annualized yield of something like gigamining is somewhere around 200%, so you are still making a lot of money in the dividends.

Just curious: how to you get the annualized yield of a gigamining bond to be anywhere near 200%? A 5Mhps bond yields 0.10 BTC/month (http://www.alloscomp.com/bitcoin/calculator.php). That's 1.2 BTC/year at the current difficulty. But the bond cost you, say, 1.4 BTC.

So after a full year of dividends, you still haven't paid that bond off. Which indicates a yield closer to 85% (not 200%). And keep in mind that difficulty is, in general, increasing, so you'll likely find that a year of dividends will be LESS than 1.2 BTC.

Consider this: a BFL Single hashes at 830Mhps and costs 110 BTC. 830Mhps worth of gigamining bonds is 166 bonds. For a cost of 1.3 BTC/bond, you're paying 215 BTC for the equivalent of a device worth 110 BTC. You could buy TWO Singles for that price and get TWICE the income the bonds would give you.

EDIT: As sunnankar points out below, a more reasonable 'value' of a 5Mphs mining bond in the current mining environment is closer to 1.0-1.1 BTC/bond. I agree with that assessment.

[sunnankar]

LOL at the price action on gigamining due to this thread

Mining bonds are an interesting investment

Well, just looks like price discovery at work. Based on my analysis a 1 Mh/s bond from a strong credit risk counter-party, which I would consider both GIGAMINING and BITBOND to be, should be valued around .2-.22 BTC which would put the GIGAMINING bond at about 1-1.1 BTC plus a slight premium based on the NPV of the PPS bonus.

Perhaps most investors, or should we say gamblers, are just not able to do a very competent discounted future cash flow for their valuation or even rudimentary financial analysis for that matter.

What is worse are these people lending out their GIGAMINING and BITBOND shares to counter-parties of questionable financial capability posting minimal collateral.

For example, in this thread we see: 30 BITBOND with 1 BTC collateral, 100 GIGAMINING with 1 BTC collateral and 30 GIGAMINING with 1 BTC collateral. Based on 5 day trading volume for the underlyings that is about 184 BTC in the notional with 3 BTC collateral or 61.33x which means if the price rises by a mere 1.63% then the collateral is gone. There is a reason for the Regulation T initial margin requirement being about 50% and not 1.63%. Good luck collecting on a margin call.

But we are getting to see what is so often the case with investing: You make money when you buy not when you sell.

[totaleclipseofthebank]

Mining bonds are an interesting investment, since you should expect the price of bonds to depreciate as mining capacity increases. But the annualized yield of something like gigamining is somewhere around 200%, so you are still making a lot of money in the dividends.

Just curious: how to you get the annualized yield of a gigamining bond to be anywhere near 200%? A 5Mhps bond yields 0.10 BTC/month (http://www.alloscomp.com/bitcoin/calculator.php). That's 1.2 BTC/year at the current difficulty. But the bond cost you, say, 1.4 BTC.

So after a full year of dividends, you still haven't paid that bond off. Which indicates a yield closer to 85% (not 200%). And keep in mind that difficulty is, in general, increasing, so you'll likely find that a year of dividends will be LESS than 1.2 BTC.

gigamining: 1.38btc
dividend/wk: 0.022btc
weekly yield: 1.59%
annual yield: (1+0.0159)^52-1 = 127%

Its still really high. I'm assuming compounding returns.

[totaleclipseofthebank]

LOL at the price action on gigamining due to this thread

Mining bonds are an interesting investment

Well, just looks like price discovery at work. Based on my analysis a 1 Mh/s bond from a strong credit risk counter-party, which I would consider both GIGAMINING and BITBOND to be, should be valued around .2-.22 BTC which would put the GIGAMINING bond at about 1-1.1 BTC plus a slight premium based on the NPV of the PPS bonus.

Perhaps most investors, or should we say gamblers, are just not able to do a very competent discounted future cash flow for their valuation or even rudimentary financial analysis for that matter.

What is worse are these people lending out their GIGAMINING and BITBOND shares to counter-parties of questionable financial capability posting minimal collateral.

For example, in this thread we see: 30 BITBOND with 1 BTC collateral, 100 GIGAMINING with 1 BTC collateral and 30 GIGAMINING with 1 BTC collateral. Based on 5 day trading volume for the underlyings that is about 184 BTC in the notional with 3 BTC collateral or 61.33x which means if the price rises by a mere 1.63% then the collateral is gone. There is a reason for the Regulation T initial margin requirement being about 50% and not 1.63%. Good luck collecting on a margin call.

But we are getting to see what is so often the case with investing: You make money when you buy not when you sell.

Not to mention that whoever is "borrowing" your bonds is apparently going to deliver your dividends as well...hfgl w/ that

You are absolutely right about the price of the bonds being heavily discounted due to counter-party risk, but 100+% yield, where the mining math adds up, is good for even the junkiest of junk bonds.

GLBSE rating agency business opportunity, perhaps?

[Bitcoin Oz]

Its nuts to be buying a fixed mining bond that doesnt allow for growth in the difficulty. Take a look at something like MOORE which accounts for this at least.

[totaleclipseofthebank]

But its the annual rate of it being nuts that matters.

edit: and yes, I'll be investing/reinvesting some into MOORE--I like the idea

[Serge]

gigamining: 1.38btc
dividend/wk: 0.022btc
weekly yield: 1.59%
annual yield: (1+0.0159)^52-1 = 127%

Its still really high. I'm assuming compounding returns.

difficulty changes - more likely increasing with more fpgas coming on board and potential asics,
mining rewards halving in december
good luck making that 127% roi in a year

[Daily Anarchist]

Let me attempt to simplify this whole debate.

Let X = time

Let Y = Total dividends paid out per bond in BTC



Notice how over time X the bond will decrease its weekly payout. It's weekly payout will approach zero. But its total payout Y will approach some unknown amount of Bitcoin. Nobody really knows how many Bitcoins each bond will put out over its entire life. Right now the current price of a bond is something like 1.35 BTC.

Each individual has to ask themself "do I believe the total payout of this bond in its life will be less than or greater than 1.35 BTC?"

If you believe the total dividend paid per bond will be less than 1.35 BTC then do not purchase the bond. If you think it will be greater than 1.35, you then have to ask yourself by how much? That how much will determine whether or not you think it's a wise investment.

Nobody knows for sure.

If you're interested in MY two bitcents. I'm bullish on the bonds. I think they'll pay out far more than their current price. But I could be wrong. It is a gamble.

I do think, eventually, somebody will do a very thorough number crunching analysis of fixed bonds ROI, which will help to set the price of these sorts of bonds in the future. Then the only real differences in the price of bonds will be credit rating, also to be determined by reputable Bitcoin credit agencies.

Edit: And then there is also resale value to the bond which will shift the graph a certain amount. So that'll need to be factored in as well.

[totaleclipseofthebank]

I wouldn't think that 5mh/s will be worth as much in a year as it is now. I just think that over the next few months, the dividend payments will be greater than the asset depreciation--i.e. the mining difficulty will rise more slowly than the dividend yield.

[sunnankar]

I do think, eventually, somebody will do a very thorough number crunching analysis of fixed bonds ROI, which will help to set the price of these sorts of bonds in the future. Then the only real differences in the price of bonds will be credit rating, also to be determined by reputable Bitcoin credit agencies.

Oh, there has been some thorough number crunching analysis which has been done. They are largely depleting assets and somewhat like an oil well.

The three main variables are (1) BTC:USD exchange rate, (2) network difficulity and (3) counter-party risk.

I had lunch with a couple attorneys last week and we discussed securitizing bonds. Just goes to show that there are all types of interesting opportunities available with this nascent economy.

[Daily Anarchist]

I do think, eventually, somebody will do a very thorough number crunching analysis of fixed bonds ROI, which will help to set the price of these sorts of bonds in the future. Then the only real differences in the price of bonds will be credit rating, also to be determined by reputable Bitcoin credit agencies.

Oh, there has been some thorough number crunching analysis which has been done. They are largely depleting assets and somewhat like an oil well.

The three main variables are (1) BTC:USD exchange rate, (2) network difficulity and (3) counter-party risk.

I had lunch with a couple attorneys last week and we discussed securitizing bonds. Just goes to show that there are all types of interesting opportunities available with this nascent economy.

Where can these numbers be found? Also, you're bullish on them?

[PatrickHarnett]

Where can these numbers be found? Also, you're bullish on them?

1 and 2 easy, it's the third one that's hard - hence my starting a credit rating discussion to actually collect those ideas.

[sunnankar]

Where can these numbers be found? Also, you're bullish on them?

Trade secrets. Information asymmetry is just a fact of the universe.

Prefer not to say although I would like to see GLBSE introduce both the ability to use securities as collateral, for example lines of credit or margin to buy other securities, and the ability to short.

1 and 2 easy, it's the third one that's hard - hence my starting a credit rating discussion to actually collect those ideas.

No, 1 & 2 are not easy as there are currently no reputable sufficiently liquid instruments, that I am aware of, to hedge in either direction the volatility of either.

I do think the credit rating idea has a tremendous market need and not just for bonds but for developing the BitCoin economy's credit markets in general. Perhaps something like Prosper and a credit score. But no need to threadjack GIGAMINING's to discuss that.

[FreeMoney]

I do think, eventually, somebody will do a very thorough number crunching analysis of fixed bonds ROI, which will help to set the price of these sorts of bonds in the future. Then the only real differences in the price of bonds will be credit rating, also to be determined by reputable Bitcoin credit agencies.

Oh, there has been some thorough number crunching analysis which has been done. They are largely depleting assets and somewhat like an oil well.

The three main variables are (1) BTC:USD exchange rate, (2) network difficulity and (3) counter-party risk.

I had lunch with a couple attorneys last week and we discussed securitizing bonds. Just goes to show that there are all types of interesting opportunities available with this nascent economy.

Why does (1) matter except for it's potential effects on (2)?

[PatrickHarnett]

1 and 2 easy, it's the third one that's hard - hence my starting a credit rating discussion to actually collect those ideas.

No, 1 & 2 are not easy as there are currently no reputable sufficiently liquid instruments, that I am aware of, to hedge in either direction the volatility of either.

I do think the credit rating idea has a tremendous market need and not just for bonds but for developing the BitCoin economy's credit markets in general. Perhaps something like Prosper and a credit score. But no need to threadjack GIGAMINING's to discuss that.

The current numbers are easy, but your post wasn't about future rates or even hedging instruments.  Anyone can look up the BTC/USD cross rate and difficulty.

However, knowing the forward curve for them would be much more challenging - possibly too illiquid a market to have futures on them yet.

[sunnankar]

The current numbers are easy, but your post wasn't about future rates or even hedging instruments.  Anyone can look up the BTC/USD cross rate and difficulty.

Well, obviously. I assumed we were talking about doing a NPV from the DFCF of the bond in which case the current numbers are almost irrelevant.

[sunnankar]

Why does (1) matter except for it's potential effects on (2)?

Want to buy a Zimbabwean govt bond?

The issue is your numeraire.