Weekly loss of N% guaranteed - Enjoy perpetual loss with fixed Mh/s mining turds

[jamesg]

I am not commenting on the usefulness of the instruments, just the terminology.  They are not bonds.  Calling them such makes them sound much safer then they really are. 

What should we call them? I am not really excited about using EskimoBob's current terminology and it is quite offensive.

[imsaguy]

I am not commenting on the usefulness of the instruments, just the terminology.  They are not bonds.  Calling them such makes them sound much safer then they really are. 

What should we call them? I am not really excited about using EskimoBob's current terminology and it is quite offensive.

I think calling them perpetual mining contracts would probably be the most appropriate.

[Littleshop]

I am not commenting on the usefulness of the instruments, just the terminology.  They are not bonds.  Calling them such makes them sound much safer then they really are. 

What should we call them? I am not really excited about using EskimoBob's current terminology and it is quite offensive.

I think calling them perpetual mining contracts would probably be the most appropriate.

+1  Contract makes sense. 

[Willowbitcoin]

For someone such as myself who are semi active in the (non bit coin )stock markets and own hybrid bonds and other bonds in the past.
I have never heard of floating rates called turds before.

It elicited a laugh from me so for that i thank you

[cuz0882]

I am not commenting on the usefulness of the instruments, just the terminology.  They are not bonds.  Calling them such makes them sound much safer then they really are. 

What should we call them? I am not really excited about using EskimoBob's current terminology and it is quite offensive.

I think calling them perpetual mining contracts would probably be the most appropriate.

+1  Contract makes sense. 

Bonds are not required to have a fixed return rate or a maturity date. You can call them whatever you like. It won't change what they are. Even if we decided to call them something else, wording on glbse can't be changed.

[Bitcoin Oz]

All I will say is I wish you could buy mining bonds using usd 

[odolvlobo]

All I will say is I wish you could buy mining bonds using usd 

But you can. Take the USD you want to buy the bonds with, convert to BTC, and buy the bonds. Maybe you meant something else.

[Electricbees]

How much for these mining turds?

My German Shepard is interested in eating them...

[Meni Rosenfeld]

The OP is completely nonsensical.

Buying mining equipment has two components - choosing and operating hardware, and speculating on the future of price/difficulty ratio.

Having these two components as a bundle is inefficient.

Mining bonds allow each component to be carried out most efficiently - one side buys bonds thus investing in the concept of mining profitability without having to physically operate hardware, and the other side uses the money to buy equipment without taking speculative risk.

The OP is right.  You are making the mistake that he pointed out.  It looks like he has facts on his side.   These instruments may be efficient (for the seller??) but that does not make them BONDS.  A bond has a specific meaning, and no matter how many times it is used wrong, that does not make it right.  

I am not commenting on the usefulness of the instruments, just the terminology.  They are not bonds.  Calling them such makes them sound much safer then they really are.  

If you're commenting on terminology you should have quoted the part of my reply where I talked about terminology.

Are BTC-denominated bonds with a specified BTC face value and returns "safe"? No, because BTC itself is highly speculative, volatile, and could crash any minute. Mining bonds have a fixed face value and return denominated in MH/s, which is also speculative.

From Wikipedia:

In finance, a bond is a negotiable certificate that acknowledges the indebtedness of the bond issuer to the holder. It is negotiable because the ownership of the certificate can be transferred in the secondary market. It is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest (the coupon) to use and/or to repay the principal at a later date, termed maturity.

A mining bond fits the definition. It pays coupons which, according to the terms of the bond, are tied to mining.

Why are we doing this again? Bitcoin is not officially a currency, Bitcoin banks are not really banks, Bitcoin wallets are not really wallets, mining isn't really mining. We want to use familiar terminology and expand to an entirely new domain, it will have to take on meaning which steps slightly outside what we're used to.

I think calling them perpetual mining contracts would probably be the most appropriate.

+1  Contract makes sense. 

To me contract seems more descriptive of what Vladimir et al were offering, which was not publicly tradeable. A publicly tradeable debt instrument is a bond.

[P4man]

I can see the OP's point; however, the issue is not that mining bonds are fundamentally flawed. There is nothing wrong with offloading the mining difficulty risk to investors. Its just that whoever is buying doesnt seem to understand the mining market and are bidding these up to ridiculously high prices.

Part of the reason why they do that may be due to not understanding the instrument and confusing it with a more traditional bonds, staring themselves blind on the high yields. Ive seen investors ask questions like "why did coupon payments go down this month" while difficulty is skyrocketing. Part of it may be ignorance about the impact reward halving and ASICs will have. An ignorance thats still shared even by many miners Im afraid.

Anyway, I dont think it hurts to point out these issues like the OP does because clearly, investors didnt and dont really understand what they are buying. But I also dont think it makes sense to blame the issuers or the instrument itself for such investor myopy. If these bonds are "turds" right now, its only because they cost far too much.

Ive said this months ago, and Im saying it now. I wish I could easily short these bonds.

[EskimoBob]

I agree, a new name, that will not give investors a false sense of security, stability and hints low risk, is a right step in right direction.

I am not commenting on the usefulness of the instruments, just the terminology.  They are not bonds.  Calling them such makes them sound much safer then they really are. 

What should we call them? I am not really excited about using EskimoBob's current terminology and it is quite offensive.

I think calling them perpetual mining contracts would probably be the most appropriate.

+1


 
 

[Sukrim]

Isn't a contract something that is negotiated and signed between 2 (or maybe even more) parties? Mining shares/bonds/contracts/floaters/... on GLBSE though can be transferred and sold on a secondary market at will.

"Solar power bonds" also do exist, though from a quick google search I only found some that are paying fixed interest rates as opposed to a portion of the real earnings. This could be done as well here, but I doubt many ppl. would be interested in a "mining bond" that pays <10% per year fixed rate but for 5 years or so. Might be interesting to try out though!

Shorting the current issues on GLBSE is also possible, as ciuciu demonstrated, though you need a partner who trusts you with their shares. Alternatively I'm sure there's a way to create "anti-mining" contracts, there seems to be already some demand for it.

[Bitcoin Oz]

Isn't a contract something that is negotiated and signed between 2 (or maybe even more) parties? Mining shares/bonds/contracts/floaters/... on GLBSE though can be transferred and sold on a secondary market at will.

"Solar power bonds" also do exist, though from a quick google search I only found some that are paying fixed interest rates as opposed to a portion of the real earnings. This could be done as well here, but I doubt many ppl. would be interested in a "mining bond" that pays <10% per year fixed rate but for 5 years or so. Might be interesting to try out though!

Shorting the current issues on GLBSE is also possible, as ciuciu demonstrated, though you need a partner who trusts you with their shares. Alternatively I'm sure there's a way to create "anti-mining" contracts, there seems to be already some demand for it.

An anti mining contract would just hold BTC.

[cuz0882]

The OP is completely nonsensical.

Buying mining equipment has two components - choosing and operating hardware, and speculating on the future of price/difficulty ratio.

Having these two components as a bundle is inefficient.

Mining bonds allow each component to be carried out most efficiently - one side buys bonds thus investing in the concept of mining profitability without having to physically operate hardware, and the other side uses the money to buy equipment without taking speculative risk.

The OP is right.  You are making the mistake that he pointed out.  It looks like he has facts on his side.   These instruments may be efficient (for the seller??) but that does not make them BONDS.  A bond has a specific meaning, and no matter how many times it is used wrong, that does not make it right.  

I am not commenting on the usefulness of the instruments, just the terminology.  They are not bonds.  Calling them such makes them sound much safer then they really are.  

If you're commenting on terminology you should have quoted the part of my reply where I talked about terminology.

Are BTC-denominated bonds with a specified BTC face value and returns "safe"? No, because BTC itself is highly speculative, volatile, and could crash any minute. Mining bonds have a fixed face value and return denominated in MH/s, which is also speculative.

From Wikipedia:

In finance, a bond is a negotiable certificate that acknowledges the indebtedness of the bond issuer to the holder. It is negotiable because the ownership of the certificate can be transferred in the secondary market. It is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest (the coupon) to use and/or to repay the principal at a later date, termed maturity.

A mining bond fits the definition. It pays coupons which, according to the terms of the bond, are tied to mining.

Why are we doing this again? Bitcoin is not officially a currency, Bitcoin banks are not really banks, Bitcoin wallets are not really wallets, mining isn't really mining. We want to use familiar terminology and expand to an entirely new domain, it will have to take on meaning which steps slightly outside what we're used to.

I think calling them perpetual mining contracts would probably be the most appropriate.

+1  Contract makes sense. 

To me contract seems more descriptive of what Vladimir et al were offering, which was not publicly tradeable. A publicly tradeable debt instrument is a bond.

Sorry Meni, I don't think logic is going to work on bob.

[EskimoBob]

Isn't a contract something that is negotiated and signed between 2 (or maybe even more) parties? Mining shares/bonds/contracts/floaters/... on GLBSE though can be transferred and sold on a secondary market at will.

I like the "contract" because it sets no specific characteristics for the issue and issuer can write it up as he likes.

"10 Mh/s mining contract" actually makes sense and it's up to issuer to define the details - risk, reward, coupon, etc.

cuz0882, Rosenfelds post in this matter only makes sens to you because you have no idea what bonds really are, how they work and are used/issued in the real world. Hes last rant here is a good example of demagoguery.

I understand, you do not like me because I asked some questions and/or pointed out some of the flaws in a typical "mining contract".
Put your personal feelings aside and move on. You have learned something, you did not know last week.
And for fuck sake, stop trolling.

[Sukrim]

An anti mining contract would just hold BTC.

No, that would be 100% going long on BTC - mining is a combination of going short (by buying stuff in USD) and a little bit long (by generating + paying out BTC). Anti-mining would need to go long (by holding BTC) and a bit short (maybe selling an amount equal to mining output on an exchange?).

Maybe one could put it like this:
Sell shares for 1000 BTC. Then on dividend day, calculate how many USD these would be and pay out 0.1 USD (converted to BTC) per share or so from the raised capital. I don't really see how this model can be in any way attractive though, since you could just invest into a non-mining fund (e.g. lending operations) etc. or just hold BTC yourself.

[Meni Rosenfeld]

Anyway, I dont think it hurts to point out these issues like the OP does because clearly, investors didnt and dont really understand what they are buying.

That would have been great if that's what the OP was doing. But he's too focused on his witchhunt on the concept of perpetual deterministic mining instruments (or PDMIs) to discuss in any reasonable way the factors that go into their valuation.

But I also dont think it makes sense to blame the issuers or the instrument itself for such investor myopy.

FWIW I think I have clarified in every possible way in the PureMining OP that it does not have a fixed BTC-denominated face value, it does not have fixed BTC-denominated returns, it is affected by block reward halving and hardware advances, and that the investor should consider this.

Sorry Meni, I don't think logic is going to work on bob.

Right but I was replying to littleshop.

An anti mining contract would just hold BTC.

No, that would be 100% going long on BTC - mining is a combination of going short (by buying stuff in USD) and a little bit long (by generating + paying out BTC). Anti-mining would need to go long (by holding BTC) and a bit short (maybe selling an amount equal to mining output on an exchange?).

Maybe one could put it like this:
Sell shares for 1000 BTC. Then on dividend day, calculate how many USD these would be and pay out 0.1 USD (converted to BTC) per share or so from the raised capital. I don't really see how this model can be in any way attractive though, since you could just invest into a non-mining fund (e.g. lending operations) etc. or just hold BTC yourself.

A PDMI is going long on mining profitability. It correlates with changes in BTC price because of the lag between price and difficulty, so in a way it is longer on BTC than USD but not as long as BTC. But mining profitability is its own thing, affected by hardware developments and such so it can't be equivocated with holding either USD or BTC.

I've spent some thought on how to do an anti-PDMI, and I don't think there's a very elegant solution. If it doesn't have to be elegant it's easy to do.

[cuz0882]

I like the "contract" because it sets no specific characteristics for the issue and issuer can write it up as he likes.

"10 Mh/s mining contract" actually makes sense and it's up to issuer to define the details - risk, reward, coupon, etc.

cuz0882, Rosenfelds post in this matter only makes sens to you because you have no idea what bonds really are, how they work and are used/issued in the real world. Hes last rant here is a good example of demagoguery.

I understand, you do not like me because I asked some questions and/or pointed out some of the flaws in a typical "mining contract".
Put your personal feelings aside and move on. You have learned something, you did not know last week.
And for fuck sake, stop trolling.

You have not pointed out any flaws. You basically claim mining bonds are garbage because they are worth less in btc when the bitcoin prices increases. Some how, equipment is suppose to be worth more in dollars when the bitcoin price rises. That's just not practical. Unless you hold your investment in bitcoins its not going to increase with the value of bitcoins.

When it comes to calling them bonds, shares or contracts its just a matter of opinion. All the properties in mining bonds are used in real world bonds as well. No one is doing anything misleading by calling them bonds. There is no reason to assume it's safer because its a bond. A lot of unsafe bonds like High Yield Bonds are around. If someone is purchasing bonds on glbse without reading the contracts that is their own negligence.

[P4man]

You have not pointed out any flaws. You basically claim mining bonds are garbage because they are worth less in btc when the bitcoin prices increases.

Ahm. No.
Bitcoin price has very little to do with it. Mining difficulty has everything to do with it at its been going up by almost 10% per month, and thats before the ASICs and before reward halving.  It doesnt take a lot of genius to predict what will happen with those bond yields, and therefore, their value.

[cuz0882]

You have not pointed out any flaws. You basically claim mining bonds are garbage because they are worth less in btc when the bitcoin prices increases.

Ahm. No.
Bitcoin price has very little to do with it. Mining difficulty has everything to do with it at its been going up by almost 10% per month, and thats before the ASICs and before reward halving.  It doesn't take a lot of genius to predict what will happen with those bond yields, and therefore, their value.

That's pretty much what I said. I don't think its all that clear what earnings will be though. They could drop a especially if there is no ASIC upgrade plan. Although this year bond returns have been increasing despite increases in difficulty.