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Author Topic: Who Pays What?  (Read 35061 times)
556j
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September 04, 2012, 03:30:36 PM
 #221

Or miners like I mentioned. That's going to change soon with the ASIC thing but it's forecasted well in advance. If bitcoin went up 50%+ in a matter of days (and stayed there) though I do think these lenders would have big problems. The use of "guaranteed" is probably a buzzword that means pretty much nothing. And the risk disclosure is not where it needs to be. I appreciate the insight you and Joel are offering here and elsewhere. I just think you are trying to apply traditional fiat "rules" to something much different.
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September 04, 2012, 03:35:52 PM
 #222

Also, there's still almost no such thing as dealing only in Bitcoin. Unless you buy and sell everything in Bitcoin (such as only earning money on Silk Road and paying your suppliers in Bitcoin)

A bitcoin lender deals only in bitcoin. It's the final borrower that is the one that would have to deal with exchange rates. Trading on glbse as well, though I'm not familiar with that to speak much further about it. Lending to miners cuts out fiat completely.

Um, let me rephrase what I said: Lending to borrowers exposes you to fiat risks taken on by those borrowers. If the BTC borrowers have to deal with fiat, since they are borrowers, any fiat risk they are exposed to (such as what I mentioned above) will directly impact the lenders.
Even if a BTC-only lender/HYIP lends only to other BTC-only lenders/HYIPs, eventually someone down the road will have to lend to someone who will be exposed to fiat risk, and that risk in turn will transfer up the entire chain of all the lenders (last fiat borrower defaults, his direct lender defaults, the next lender defaults,n and so on). I think the only way around this would be BTC-only lenders just lending to each other, but that would make high interest rates (or any above 0%) impossible.

Aren't there ways to make money (mining, etc) without being exposed to fiat?

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September 04, 2012, 04:28:10 PM
 #223

Aren't there ways to make money (mining, etc) without being exposed to fiat?

Well, let's check that.
Using info from https://en.bitcoin.it/wiki/Mining_hardware_comparison. Let's assume price of BTC is $10.50
For GPU mining, best card is AMD 5850. Lowest cost is $145 (Google shopping search). Hash/s 283. Wattage 92.25. Cost of electricity, 0.13 USD/KWh. Plug that into http://bitcoinx.com/profit/index.php and you get $27.46 USD profit in the first month. Divide by 4, that's $6.87 per week, or 4.7% profit a week. Sounds good, unless you include GPU depreciation, or extra cost of hardware.

Let's say the card you bought for $145 can only be resold for $120 after a month. Now your profit is $27.46 - ($145 - $120) = $2.46 a month, or $0.62 / 0.4% a week.

Or let's say there is no depreciation, but you ran out of PCI express ports, and need to buy another PC to stick your new GPU into. Let's be VERY  conservative and say a new PSU, MoBo, RAM, and CPU will cost you $150. Now your profit is $6.87 / ($145 + $150) =  2.3% per week.

Combine extra hardware with depreciation (and having a crappy, hard to resell PC), and you're even worse off. Since the large purchases are one-time costs, over a longer period of time they will pay off, of course. E.g. $2.46 / $145 = 1.7% profit per month. But also keep in mind that these components continue to depreciate, and even more importantly, the initial investment is now tied in hardware that may be difficult and time consuming to sell. This is why I think mining is OK for individuals (long time horizon, pay off GPUs over a few months, still have something to play games on), and is too risky to invest in. I definitely would not consider mining investments as something that can pay 2% to 3% a week though.

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September 04, 2012, 04:35:39 PM
 #224

BTW, ran the numbers for FPGAs, and with what's available now, they are even worse short term.

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September 04, 2012, 05:36:24 PM
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BTW, ran the numbers for FPGAs, and with what's available now, they are even worse short term.

did you try BFL singles?

The guys that bought them $630 each including shipping anytime up til now (now is too late) mine ~0.4btc/day for however many days. Resell for the $800+ they are going for now. Right now is the worst time to get into ming because of the ASIC uncertainty. Once that stuff settles down it may go back to the 6-10 month ROI then pure profit from then on.

But the idea was people that already have rigs and want to take loans, not people looking to buy mining as an investment. For example I want to speculate on the price drop due to pirate announcement, so I borrow what my rigs would produce in the next month to sell @ $15 before the drop. Or just to buy some drugs off SR. Any number of reasons, the point was USD/BTC exchange wouldn't effect my ability to pay back the loan.

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September 04, 2012, 07:40:07 PM
 #226

For information: I asked Maged to "un-sticky" the thread. 
Hrm... I am not sure that is a good idea.  Well it may be confrontational, still provides a very valuable service in my humble opinion.  I think that people just don't understand how the ratings come about, and need to better understand exactly what they're looking at, it is not an endorsement by PH.

Wasn't designed to be a confrontational move.   I certainly had not asked for this thread to be stickied, and after several months of relative inactivity, someone else is finally thinking about what might be involved in putting together a rating list or system.

There is also a small group of bullies that are looking to pin liability on me for daring to link other threads and make an assessment of what they have published.  Moodys don't have this problem, and their system is completely black box, at least with S&P you get to discuss things with their rating committee.
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September 04, 2012, 08:00:46 PM
 #227

For information: I asked Maged to "un-sticky" the thread. 
Hrm... I am not sure that is a good idea.  Well it may be confrontational, still provides a very valuable service in my humble opinion.  I think that people just don't understand how the ratings come about, and need to better understand exactly what they're looking at, it is not an endorsement by PH.

Wasn't designed to be a confrontational move.   I certainly had not asked for this thread to be stickied, and after several months of relative inactivity, someone else is finally thinking about what might be involved in putting together a rating list or system.

There is also a small group of bullies that are looking to pin liability on me for daring to link other threads and make an assessment of what they have published.  Moodys don't have this problem, and their system is completely black box, at least with S&P you get to discuss things with their rating committee.

Definitely not trying to bully.  Just feels like in light of Pirate, we could probably make improvements and end up with something more friendly to the general public.

I'm not a Coinbase fan -- I placed a buy order, they took the funds out of my account, then a week later the price went up and they canceled the buy and closed my account.  You've been warned.  Use a different exchange.
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September 04, 2012, 09:44:58 PM
 #228

BTW, ran the numbers for FPGAs, and with what's available now, they are even worse short term.

did you try BFL singles?

FPGA = BFL singles

But the idea was people that already have rigs and want to take loans, not people looking to buy mining as an investment. For example I want to speculate on the price drop due to pirate announcement, so I borrow what my rigs would produce in the next month to sell @ $15 before the drop. Or just to buy some drugs off SR. Any number of reasons, the point was USD/BTC exchange wouldn't effect my ability to pay back the loan.

In that case you are speculating, or just gambling, on the hopes that you'll win and won't default. Not quite the same as earning money to pay back the loan. I hope the people who borrow from HYIPs aren't doing that  Tongue

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September 04, 2012, 10:39:37 PM
 #229

BTW, ran the numbers for FPGAs, and with what's available now, they are even worse short term.

did you try BFL singles?

FPGA = BFL singles

But the idea was people that already have rigs and want to take loans, not people looking to buy mining as an investment. For example I want to speculate on the price drop due to pirate announcement, so I borrow what my rigs would produce in the next month to sell @ $15 before the drop. Or just to buy some drugs off SR. Any number of reasons, the point was USD/BTC exchange wouldn't effect my ability to pay back the loan.

In that case you are speculating, or just gambling, on the hopes that you'll win and won't default. Not quite the same as earning money to pay back the loan. I hope the people who horror from HYIPs aren't doing that  Tongue

Mining is kind of an ugly business.  It's like farming in southern California.  There's a finite amount of water (bitcoins) and the more farmers (miners) try to farm, (mine) the worse off they all are until they're all just barely hanging on by a thread.  What looks like a 6 month payoff up front quickly turns into a 12 month payoff as difficulty increases, then 18 months later difficulty has increased beyond the point of covering the power bill and you do the math and you still haven't paid off the rig.  heh.  Only saving grace is that up until the FPGA/ASIC's, you could at least sell off the hardware.

I'm not a Coinbase fan -- I placed a buy order, they took the funds out of my account, then a week later the price went up and they canceled the buy and closed my account.  You've been warned.  Use a different exchange.
556j
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September 05, 2012, 01:53:47 PM
 #230



FPGA = BFL singles


I know that. I was asking because you said  they are worse off than gpu. But they are currently selling for more than they cost and mine in the meantime so it's not true.

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In that case you are speculating, or just gambling, on the hopes that you'll win and won't default. Not quite the same as earning money to pay back the loan. I hope the people who borrow from HYIPs aren't doing that  Tongue

You are still missing the point. Maybe I suck at explaining. But it doesn't matter if they lose all their coins. I even mentioned blowing it all on drugs. Because they have the equipment to produce more coins via electricity. It doesn't matter what the BTC/USD exchange rate is to their mining rigs (which was the original discussion) other than difficulty which may go up with the exchange rate. But it wouldn't be exponentially fast. End point is this: if I had mining equipment the exchange rate of bitcoin to USD does not effect my ability to repay the loan. If the price shot up a lot I would of course "lose" value. I might me more tempted to run off without paying back because I don't want to overpay. But that's morality and has no business in this discussion.
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September 05, 2012, 04:40:53 PM
 #231

Unless you already have a whole lot of mining equipment, and are just feeling generous and allowing people to buy into your profits, the way that USD may come into play is if someone invests in you and you have to spend that investment on purchasing mining hardware. I'm assuming an extra $1,000USD worth of Bitcoin invested will require an extra $1,000USD worth of profit generating... something. You're right, the hardware can be bought with Bitcoin. But then the investment is still tied up in hardware. Depreciating hardware that may only be reselable in USD.

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September 06, 2012, 09:48:38 AM
 #232

I'm an eagle-eyed investor. Please change all ratings to FFF, for the sake of accuracy.

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PatrickHarnett
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September 06, 2012, 06:52:03 PM
 #233

I'm an eagle-eyed investor. Please change all ratings to FFF, for the sake of accuracy.

Thank you Mosrite.  However, you're also to stupid to understand the rating metrics and grades used in the real world, let alone the ones used as general guidance here.  When you can provide some reasons for your recommendation, then someone might take you more seriously.
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September 06, 2012, 07:03:14 PM
 #234

I'm an eagle-eyed investor. Please change all ratings to FFF, for the sake of accuracy.

Thank you Mosrite.  However, you're also to stupid to understand the rating metrics and grades used in the real world, let alone the ones used as general guidance here.  When you can provide some reasons for your recommendation, then someone might take you more seriously.

Let me give you some; AFAICT, you do zero verification of claims made by those lender. Most of them probably wouldnt let you, because then it would become quite clear what they are doing.  I do mean verify what they hold in their wallets, GLSBE portfolio, identity of their creditors  etc. Correct me if Im wrong, but you seem to give a rating based pretty much solely on what they  tell you.  Since most of them are scams, they will lie, and you are rating the lies, not the lenders. The  the only thing  that does is provide false credibility. If you can not verify their claims, an F is indeed what you should give. Its up to them to prove they are worthy of a better rating.

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September 06, 2012, 07:29:28 PM
 #235

Credit ratings show your history, not your future. Some people are gonna choose to be scumbags in the future and default. In the real world it works the same way. How many people have had 800+ credit scores then defaulted? Credit ratings are basically indicators of good history, so please give Patrick a break. This is bitcoin land where risk is much higher by default. A AAA rating in bitcoin land is much higher risk also, but less than the lower rated individuals.
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September 06, 2012, 07:59:35 PM
 #236

Credit ratings show your history, not your future.

Im not asking Patrick to predict the future, but to verify claims made. If he cant do that (because the issuer of the security wont let him), then there is no reason to give a positive rating. None. A good history proves nothing, a scammer is not going to be stupid enough to scam twice with the same identity. Of course they all have an impeccable history.  Case in point, no one had a higher rating on OTC than pirate.  But because no one was allowed to verify his assets, holdings, income, his super secret business model or even his true identity, it was a text book example of an almost certain ponzi. An F, not a AAA+ asset.

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This is bitcoin land where risk is much higher by default. A AAA rating in bitcoin land is much higher risk also, but less than the lower rated individuals.

There is no reason why this should be true. In bitcoin land its perfectly possible to open your books and  have someone verify your  claims, prove your identity, income and business model. Some things are even easier than outside bitcoin, we have a public blockchain after all. If what you said were true, it would be impossible for legitimate businesses to distinguish themselves from the scammers, except by not being able to promise similarly high returns. And if thats impossible, then what the point of having ratings at all?

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September 06, 2012, 08:13:29 PM
 #237

The whole point of bitcoin land is to stay anonymous, and for things to be decentralized. The standards are different here. Even in the real world though i can get tens of thousands of USD from banks with nothing more than my credit history.
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September 06, 2012, 08:15:02 PM
 #238

Let me give you some; AFAICT, you do zero verification of claims made by those lender. Most of them probably wouldnt let you, because then it would become quite clear what they are doing.  I do mean verify what they hold in their wallets, GLSBE portfolio, identity of their creditors  etc. Correct me if Im wrong, but you seem to give a rating based pretty much solely on what they  tell you.  Since most of them are scams, they will lie, and you are rating the lies, not the lenders. The  the only thing  that does is provide false credibility. If you can not verify their claims, an F is indeed what you should give. Its up to them to prove they are worthy of a better rating.

I'm really sick of the wanton calls of "Scam! Ponzi!" and the abrasive tone taken by many in that crowd.

That said, I have had many of the same questions raised in the above quote.

If someone claims to have BTC300 in reserves, do you, for instance, have them sign a message with a private key to prove control of the funds, or have them move a specified amount to demonstrate that they do control the coins? Things like that.
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September 06, 2012, 08:19:05 PM
 #239

The whole point of bitcoin land is to stay anonymous,

That may be the point for you, but its certainly not the case for many legitimate businesses.

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The standards are different here. Even in the real world though i can get tens of thousands of USD from banks with nothing more than my credit history.

Not without giving up your anonymity you dont.

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September 06, 2012, 08:35:31 PM
 #240

That's why i said the standards are different. The real world example was meant to show that large amounts can be had with virtually no real proof that i won't steal that money. In bitcoin land people rely on things like post count and transaction history. The risk is higher, but people can make up there own minds. It's not fair to call everyone a scam. Now when i see someone that guarantees no losses and they default then i'll call it a scam.
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