Diablo Mining Company

[BinaryMage]

Well, I imagine 1m BTC worth of people want to continue profitably mining when no one else can. If I'm wrong, this is going to be a waste of 8BTC.

Alright, if we assume that you receive 1m BTC in your IPO, what do you plan to do with it? There's not enough liquidity to sell it immediately for USD, it would take a while and undoubtedly lower the exchange rate. If we assume you manage to sell it for ~4 million USD, what are you planning to buy? (And why do you expect us to trust you with that much? GLBSE ID verification and reputation on these forums is one thing, but you're moving to a scale far beyond that. Most start-ups requesting VC request under $1 million, and have to go through extensive processes to get it. You're asking for $4 million.)

[DiabloD3]

Well, I imagine 1m BTC worth of people want to continue profitably mining when no one else can. If I'm wrong, this is going to be a waste of 8BTC.

Alright, if we assume that you receive 1m BTC in your IPO, what do you plan to do with it? There's not enough liquidity to sell it immediately for USD, it would take a while and undoubtedly lower the exchange rate. If we assume you manage to sell it for ~4 million USD, what are you planning to buy? (And why do you expect us to trust you with that much? GLBSE ID verification and reputation on these forums is one thing, but you're moving to a scale far beyond that. Most start-ups requesting VC request under $1 million, and have to go through extensive processes to get it. You're asking for $4 million.)

Yes, I'm aware it will take a LONG time to convert BTC into USD for much of my purpose. And yes, I'm aware how the VC process works (I know people who have gone the Silicon Valley startup route). I'm trying something new. I think it is going to be possible to crowd fund large scale business using Bitcoin without going through things like YC or Kickstarter.

What I'm planning on doing is building a small scale DC just to host mining hardware, but it is going to take quite some time to get there.

I'm willing to put the next 10 years of my life into this, I think Bitcoin has a future but it is going to take effort to get there.

[BinaryMage]

Yes, I'm aware it will take a LONG time to convert BTC into USD for much of my purpose. And yes, I'm aware how the VC process works (I know people who have gone the Silicon Valley startup route). I'm trying something new. I think it is going to be possible to crowd fund large scale business using Bitcoin without going through things like YC or Kickstarter.

What I'm planning on doing is building a small scale DC just to host mining hardware, but it is going to take quite some time to get there.

I'm willing to put the next 10 years of my life into this, I think Bitcoin has a future but it is going to take effort to get there.

Well, color me interested. Sorry for the cross-examining, just wanted to make sure you had some clue what you're doing, which you obviously do.

[theymos]

I think you'd be a good person to lead a long-term mining project, but I don't like how this is structured. The risk is much higher for early investors, since it isn't yet known whether your operation will be successful. Reasonable investors will wait until you start making profits and then buy shares at 1 BTC per share instead of buying them now at the same price. Even if you promised to increase the price later (maybe starting at a low price per share now), the price might still be too high given that each share will only get a millionth of the dividend eventually.

If I were you I'd get nanotube's advice on how to properly do something like this.

[DiabloD3]

So I want everyone's opinion on this. I'm generating 1 million shares no matter what.

Would you rather pay 1BTC for each now, and get 50% of mining output.... or pay market prices and get paid nothing for 10 years, 100% goes into growing the mining company, and I sell 1000 shares a month at market prices. After the 10 years, I pay 100% of the output minus expenses to run it?

[Stephen Gornick]

I'm generating 1 million shares no matter what.

Would you rather pay 1BTC for each now, and get 50% of mining output.... or pay market prices and get paid nothing for 10 years, 100% goes into growing the mining company, and I sell 1000 shares a month at market prices.

Did  I read that correctly?  10 1 million shares owned by you now, then sell 1K of those shares per month for 10 years, means you still have 856,000 shares after 10 years?

[DiabloD3]

I'm generating 1 million shares no matter what.

Would you rather pay 1BTC for each now, and get 50% of mining output.... or pay market prices and get paid nothing for 10 years, 100% goes into growing the mining company, and I sell 1000 shares a month at market prices.

Did  I read that correctly?  10 million shares owned by you now, then sell 1K of those shares per month for 10 years, means you still have 856,000 shares after 10 years?

No, I said 1 million, not 10. Although, yes, it'd take 83 years.

Pretend I said 5,000 shares a month, that seems more reasonable, it would take almost 17 years to sell them off if I did my math right.

[BinaryMage]

I'm generating 1 million shares no matter what.

Would you rather pay 1BTC for each now, and get 50% of mining output.... or pay market prices and get paid nothing for 10 years, 100% goes into growing the mining company, and I sell 1000 shares a month at market prices.

Did  I read that correctly?  10 million shares owned by you now, then sell 1K of those shares per month for 10 years, means you still have 856,000 shares after 10 years?

No, I said 1 million, not 10. Although, yes, it'd take 83 years.

Pretend I said 5,000 shares a month, that seems more reasonable, it would take almost 17 years to sell them off if I did my math right.

I'm a full proponent of online currencies, but the probability of Bitcoin still existing in 83 (or even 17) years is quite frankly abysmal.

[Namworld]

Share contract:
The revenue will be split in two parts:
     
1) 50% of all mining revenue will be distributed to shareholders in the form of dividends (henceforth referred to as "dividends"). These dividends will be paid monthly, split evenly among all shares regardless of class or issuing date.
     
2) 50% will be used to invest in additional hardware, decrease the cost of mining, and/or pay for operating costs of the company (henceforth referred to as the "growth fund").
     
Each share represents 0% of the ownership in the company assets. In the event of liquidation, 100% of the revenue from sales of the assets and 100% of the growth fund, minus any expenses incurred from the operation or liquidation of the company will be paid to shareholders.
     
The operator of the company retains three special rights, regardless of the number of shares held by the operator: 1) the right to raise a motion, 2) the right to end operations and liquidate assets without motion, 3) to quash any motion to control or direct the use of the growth fund.

Hmm, that sounds a lot like my offer. At least in general structure. Except instead of 50% for buying equipment and fees, it's 40% buying equipment and 10% fees. Otherwise same thing for buying equipment, selling assets and for dividends. Members actually do have right to 100% of the equipment and vote for selecting which kind to buy. I would simply manage the equipment for a fee.

Sounds like good rates overall. You've even had lot of talk. Although it seems like bad publicity. I suppose the 1 million shares IPO and lack of information didn't help. Care to give us more detailed information like planned equipment you'll purchase, how much do you actually expect your fees to actually take up, etc.?
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I'm generating 1 million shares no matter what.

Would you rather pay 1BTC for each now, and get 50% of mining output.... or pay market prices and get paid nothing for 10 years, 100% goes into growing the mining company, and I sell 1000 shares a month at market prices.

Did  I read that correctly?  10 million shares owned by you now, then sell 1K of those shares per month for 10 years, means you still have 856,000 shares after 10 years?

No, I said 1 million, not 10. Although, yes, it'd take 83 years.

Pretend I said 5,000 shares a month, that seems more reasonable, it would take almost 17 years to sell them off if I did my math right.

I'm a full proponent of online currencies, but the probability of Bitcoin still existing in 83 (or even 17) years is quite frankly abysmal.

I'm sorry, but they'll stay around as long as people value them and are willing to trade with them. I'm pretty sure it could live on more than 20 years, even if that means a large devaluation. It has become a convenient payment method for many people online (still low compared to other payment processor, but for such an odd concept, I still find the adoption impressive). It's possible they'll be gone by then, but I don't think their chance of surviving that long is even close to as grim as abysmal.
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I don't approve of Facebook, but it seems to be doing alright. How are these two similar?

Overblown IPO. If Facebook manages to pull a 100 billion IPO off (and it looks like it) they could pay every one of their users more than 100 USD(!).

The difference is, however, that facebook will sell out quickly. 1 million shares @1BTC each probably won't, especially not with these terms. I might risk 8 coins too however and also start a trolling IPO and then (as I'm allowed in my contract) "sell" everything, take the money and laugh.

Well, that seems a bit unfair to say. His contract DOES include a clause that 100% of sales are returned to members, in case equipment must be liquidated.

[BinaryMage]

I'm a full proponent of online currencies, but the probability of Bitcoin still existing in 83 (or even 17) years is quite frankly abysmal.

I'm sorry, but they'll stay around as long as people value them and are willing to trade with them. I'm pretty sure it could live on more than 20 years, even if that means a large devaluation. It has become a convenient payment method for many people online (still low compared to other payment processor, but for such an odd concept, I still find the adoption impressive). It's possible they'll be gone by then, but I don't think their chance of surviving that long is even close to as grim as abysmal.

I never stated that online currencies had an abysmal chance of survival, I said that Bitcoin did. Lot of difference between the two.

You're sorry? I think Bitcoin is a wonderful idea; if I didn't I wouldn't be here. But I also think that, due in most part to exponential technological advances, Bitcoin's model, most specifically the method of transaction verification, is unlikely to remain secure for 83 years. Surely you don't disagree with that?

[Namworld]

by "they", I referred to bitcoins.

However, I don't disagree with the fact that the verification method could be compromised by technological advances, but that is yet to see and I sure hope it does not happen.

[BinaryMage]

by "they", I referred to bitcoins.

However, I don't disagree with the fact that the verification method could be compromised by technological advances, but that is yet to see and I sure hope it does not happen.

I see. "Bitcoin" in the singular is usually used to refer to the currency, and you used the singular at points throughout your post, so I assumed the plural was in reference to online currencies in general. Sorry for my misinterpretation.

I certainly hope so also, but hoping unfortunately doesn't make business plans viable.

[Namworld]

Indeed. However, I don't think overcoming either encryption or 50% of network power will be achieved in the next few years. How long will it last? Well if there's enough adoption to get enough transaction fees to make mining continuously profitable (and hashing power high enough), that should at least make the 50% part improbable.

There's also the argument fact that if you own 50% of the hashing power, with the revenue potential, why destroy bitcoins to start with? Although some people are indeed... not too sane and/or prone to extreme grudge against various things.

[BinaryMage]

Indeed. However, I don't think overcoming either encryption or 50% of network power will be achieved in the next few years. How long will it last? Well if there's enough adoption to get enough transaction fees to make mining continuously profitable (and hashing power high enough), that should at least make the 50% part improbable.

There's also the argument fact that if you own 50% of the hashing power, with the revenue potential, why destroy bitcoins to start with? Although some people are indeed... not too sane and/or prone to extreme grudge against various things.

Oh, I agree. The question is whether it will last long enough for this particular venture to be a viable investment. A 51% attack is improbable, yes, but only as long as no breakthrough/flaw is made/found in SHA256.

I won't postulate that your second argument isn't valid, but I personally would rather not bet my assets on the sanity of an unknown personage.

In any case, I think we agree at this point. Thanks for the excellent discussion!

[DiabloD3]

There's also the argument fact that if you own 50% of the hashing power, with the revenue potential, why destroy bitcoins to start with? Although some people are indeed... not too sane and/or prone to extreme grudge against various things.

Which is partly why I wish to start this mining company. I simply don't trust one of the other mining companies not to become big enough that they're a security risk.

[DiabloD3]

So, Ive been thinking, that second plan where these are essentially 10 year bonds makes no sense financially. Basically, I take all the risk and get none of the reward.

In fact, where I was originally going to be paying operating costs out of the growth fund, this is still making the risk all mine while I get none of the reward.

So I think I'm going to change the contract before the IPO issues shares to something along the lines of operating costs come out of both sides. Since a lot of people are absolutely convinced I can't raise the 1 million BTC (which says more about their lack of faith in the Bitcoin community than anything), then there is no way I can keep operating costs low enough early on.

Both I and all the investors should split the risk and reward so it is fair for both of us. I am willing to invest a lot of time into this, and, in the long run, my money. The only reason investors exist is because they either can't invest their time or they won't, but they still want some of the action, but entrepreneurs are willing to cut them in on the action in exchange for capital.

[BinaryMage]

Keep in mind 1 million bitcoins is 4.7% of all bitcoins ever to be mined. Yes, I understand you wont hold these all at once but its still just a massive percent of the whole economy.

Just for comparision, 4.7% of all USD in existence is ~2 trillion dollars. Apple's market cap is just about 600 billion.

[DiabloD3]

Keep in mind 1 million bitcoins is 4.7% of all bitcoins ever to be mined. Yes, I understand you wont hold these all at once but its still just a massive percent of the whole economy.

Just for comparision, 4.7% of all USD in existence is ~2 trillion dollars. Apple's market cap is just about 600 billion.

Uh, no. All USD in existence is measured in the quadrillions. Our annual Federal budget is more than 2 trillion. The war in Iraq cost more than 2 trillion.

The difference here is, Wall Street valuation is not based on reality, and USD is inflationary. Your comparison is rather pointless.

[DiabloD3]

I've emailed GLBSE to see if I can get the 8BTC back.

Potential investors and I are just not seeing eye to eye on this, and its a waste of time and money to try to continue. I want to make sure no one can get a stranglehold on the Bitcoin economy, but no one really seems to either think that can happen (stealth privately owned mining companies, etc), or they don't see its worth plunking the money down as a sort of insurance.

[theymos]

Potential investors and I are just not seeing eye to eye on this, and its a waste of time and money to try to continue. I want to make sure no one can get a stranglehold on the Bitcoin economy, but no one really seems to either think that can happen (stealth privately owned mining companies, etc), or they don't see its worth plunking the money down as a sort of insurance.

I think it's possible for a big, long-term mining operation like this to get funding and succeed, but this isn't a good way to issue shares. You should partner with someone who knows more about finance/business.