tl; dr: Each Anti-Pirate bond has a face value that starts at 1 BTC and decays by 7% (multiplicatively) every week. If Pirate defaults, the bonds will be purchased back for twice their face value. Bondholders have the right to sell bonds for their face value at any time. The asset is currently inactive.
Asset page: https://glbse.com/asset/view/ANTI-PIRATEIntroduction. For the past several months, forum member
pirateat40 has offered the recently renamed
Bitcoin Savings and Trust program (
website), allowing investors to deposit funds and receive insanely high interest payments in return. The program is widely suspected to be a
HYIP scam, though it has still attracted much interest from investors who believe that, even if the program will eventually default, they will make back their investment by then.
No doubt there are other people who believe that default is imminent and wish to take the opposite side of the bet. So far there hasn't been an effective way to do this. One possibility that comes to mind is borrowing pass-through bonds such as
PPT and selling them, but there is no standard platform for this, and this is made cumbersome by the terms of the specific offerings.
The Anti-Pirate bonds offer a streamlined method to short BTCST, and are equivalent to depositing a negative amount in the program (where the payment for the bond acts as collateral, much like when selling on margin). If you believe that investment in BTCST has a net negative expected value, then an Anti-Pirate bond, bought at an appropriate price, will have a net positive expected value.
Method of operation. Bonds will have a face value which starts at 1 BTC and will be sold at a price which is somewhat higher than the face value. The face value of all Anti-Pirate bonds will decay by 7% per week (at 03:30 UTC on Tuesday), multiplicatively (after X weeks, the face value will be 0.93^X BTC). The bond represents a perpetual obligation by the issuer to be bought back, if the BTCST program defaults, at a price equal to the maturity value, which is twice its face value at the time of default. The faster Pirate defaults, the higher will be the return on investment; conversely, if Pirate never defaults or only after a very long time, the investment will be lost entirely.
The issuer is also obligated to buy back bonds at any time, at the request of a bondholder, for their face value at the time. Taking all this into account, buying Anti-Pirate bonds with total face value of 1 BTC is completely equivalent to the following:
1. Depositing (-1) BTC in Pirate's BTCST program at the 7% weekly interest tier;
2. Instead of receiving 1 available BTC, depositing 1 BTC as collateral;
3. Each week, withdrawing 7% of the balance (making the negative balance closer to 0), and correspondingly withdrawing 7% of the collateral;
4. Paying an advance, non-refundable fee for the service equal to the difference between the traded price and the face value. For bonds bought from the issuer, the fee represents a compensation for the risk in offering this bond.
This is because depositing 1 BTC creates a profit of 7% per week, where a default causes a loss of 1 BTC; while buying Anti-Pirate bonds causes a loss of 7% per week (represented as a depreciation in the face value of the owned bonds), a default would cause a gain equal to the negative balance, the scale of investment is reduced by 7% unless new bonds are purchased, and the position can be closed at any time allowing withdrawal of the collateral.
The pricing of any future bonds offered will take into consideration the reduced face value. The asset can be used indefinitely, but requiring ever growing quantities for a given value.
Details on the current face value of bonds is available at
http://bitcoinantipirate.com/. This website is informational only and is in no way binding.
Determining a default scenario. The contractual payment in the scenario of a BTCST default will require a community consensus that a default has taken place. A partial default will count as a default for this purpose; on the other hand, a single person claiming he is unable to withdraw funds is not sufficient evidence. The time of default for the purpose of determining the effective face value is the time that real evidence first comes to light, which in retrospect will lead to a conclusion of default. Any isolated incident will not count for the purpose of locking the face value.
The issuer can also choose at any time to buy back the bonds at the maturity value (equal to twice the face value), even if there is no default.
Timing. The issuer will keep as reserves, in either a local machine or a GLBSE balance, an amount of bitcoins equal to at least the face value of all outstanding bonds. Should any loss or theft of the reserves occur, the issuer will make a best effort to quickly replenish them.
The issuer will maintain bids on the GLBSE platform for the bonds, at a price equal to at least their face value, in a quantity which is expected to be sufficient for the demand to sell back bonds. If the bids are executed, the issuer will make a best effort to place new bids quickly, which will usually take no more than 2 days. Contacting the issuer can help expediting this.
The issuer is not obligated to keep in immediately available reserves the due payment for a case of BTCST default. However, the issuer has more than enough assets to be able to cover the obligation, and these will be liquidated as necessary to fulfill the obligation. Said liquidation is expected to take several days.
Trustworthiness. I, Meni Rosenfeld, am issuing the Anti-Pirate GLBSE asset, and committing to fulfilling the terms of the bond as described. I am a veteran of this forum and other Bitcoin communities, and own a Bitcoin business. I am using my real name which can be linked to my identity via my extensive online presence, and I have verified my identity with GLBSE.
The only way I can conceive not honoring the terms is if a malicious cracker hacks into my GLBSE account and issues new bonds on my behalf. The obligation thus created is arbitrarily high and there is no way to commit to it (of course, if the damage is within reason I will absorb the losses). I am using a strong password for GLBSE and keeping my computing environment reasonably secure, but cannot absolutely preclude this scenario. Do not buy newly issued shares unless I announce them on the forum, and in case of suspicious activity you would do well to verify via additional channels. Going forward I will look for robust ways to limit the plausibility of this scenario.
