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

[dust]

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. 

Mining bond dividend yields have been increasing % wise because the prices have been falling.

[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. 

Mining bond dividend yields have been increasing % wise because the prices have been falling.

No, the amount of money earned  per mhash is up in general. 100/mhash earns about 54 cents a day right now. It was below 30 cents earlier this year.

[P4man]

No, the amount of money earned  per mhash is up in general. 100/mhash earns about 54 cents a day right now. It was below 30 cents earlier this year.

You really have to keep bitcoin price out of it. Bonds are denominated in btc and pay out in btc. What btc does compared to fiat is irrelevant.  Otherwise I can offer you a negative interest rate on your BTC and you could still  "make money".
Difficulty is what matters:


People still buying bonds at current prices either have no clue, or they must expect the above trend to reverse pretty dramatically somehow, assume ASICs will never materialise and pretend reward halving will not happen.

[Sukrim]

No, the amount of money earned  per mhash is up in general. 100/mhash earns about 54 cents a day right now. It was below 30 cents earlier this year.

You really have to keep bitcoin price out of it. Bonds are denominated in btc and pay out in btc. What btc does compared to fiat is irrelevant.  Otherwise I can offer you a negative interest rate on your BTC and you could still  "make money".

Mining equipment, mining electricity and rent for the space where this is housed as well as internet connections etc. are all denominated in USD or other fiat currencies.

"Mining bond" issuers only sold their assets cheaper when the BTC price went up, so they would still be able to keep their end of the bargain.

Instead of offering me a negative interest rate on BTC, you could offer me 1% interest per week on USD, backed by BTC trades/mining if you dare going long on that...

[P4man]

Mining equipment, mining electricity and rent for the space where this is housed as well as internet connections etc. are all denominated in USD or other fiat currencies.

So what? You dont own shares in a mining company, you own bonds. Does it matter what gigavps pays for electricity or his hardware?  Does it matter whether he mines on GPUs, FPGAs, or a solar powered desktop calculator? Does it even matter how many GH he has? Not a damn thing.  Anyone could issue such bonds, even without any mining hardware backing it.  You seem to confuse owning shares in a mining company with owning fixed MH bonds.  All the bond issuer owes you is a perpetually diminishing coupon payment thats function of difficulty. Nothing else.

Now, lets do the math. Gigamining bonds currently sell for 1.11 BTC for 5MH (down from 1.5BTC IIRC).  Im not picking on gigavps btw,, its just the biggest one out there. Coupon payments on that would currently be 0.075 BTC per month. Even at constant difficulty, that means ~0.3 BTC until December when block reward halves .  From then on  it would be 0.038 BTC per month, or another 24 months or so before coupon payments would exceed the cost of the bond.  That is, if somehow difficulty wouldnt go up one tiny bit.  

Even if difficulty just followed Moore's law it would outpace your coupon payments with ease. In reality asics  will cause a  10 fold increase at the very least and your 24 months will become 240 months.  Small problem, in 24 months block reward will halve again. And again and again. Not in a 1000 years will these bond earn more in coupons than they costs.

"Mining bond" issuers only sold their assets cheaper when the BTC price went up, so they would still be able to keep their end of the bargain.

I have no doubt! At current prices I will gladly sell you perpetual mining bonds too.  The investor risk is not in the mining company going bust, its in the mining revenue per MH collapsing, and that is pretty much a given. Miners who sold you those bonds are not idiots, most of them saw precisely what was coming. Even without the looming shadow of ASICs,  moore's law applied to GPU and FPGAs alone made these things very risky investments from day 1.  And it didnt take a lot of genius to anticipate ASICs at some point in the future.

[rjk]

My turds don't always float, so it's an analogy that doesn't even work in the first place. 

[Sukrim]

Mining equipment, mining electricity and rent for the space where this is housed as well as internet connections etc. are all denominated in USD or other fiat currencies.

So what? You dont own shares in a mining company, you own bonds. Does it matter what gigavps pays for electricity or his hardware?  Does it matter whether he mines on GPUs, FPGAs, or a solar powered desktop calculator? Does it even matter how many GH he has? Not a damn thing.

It does, because if he only has to pay 1 BTC to buy another GH/s he can issue a LOT of new shares and dump the current prices (the main concern of the OP is not the dividend return or a mining ponzi but that bonds loose value quicker on the market than they pay out dividends). Just look at what Obsi did as soon as BTC prices went up - completely crashing the market of his 1MHS "bonds", because he could.

Also I'd like to see your math skills on current bank book rates that are below inflation... Still people are investing billions of fiat money in these.

GIGAMINING has in total paid ~35 Bitcents or more (I just did quick estimates) to date, so the price is currently not too far away from "IPO_price - dividends" so far. Again I'd like to challenge you to release a script that calculates profits/losses individually from mining assets on GLBSE (both dividends and on paper) so you can really verify if you were trading at a loss so far or not.

If you really think it's such a good idea to sell mining bonds without backing (no mining hardware), then do so please! You can even undercut current assets, as you have 0 costs besides dividends. Actually a mining ponzi scheme is something that I still fear to happen and since a LOT of "miners" don't disclose anything, I think there are already a few on GLBSE right now... I see this as a much larger threat to people's money than losses on paper by not selling the mining "bonds" they have right now for cheaper prices than they bought.

[P4man]

It does, because if he only has to pay 1 BTC to buy another GH/s he can issue a LOT of new shares and dump the current prices (the main concern of the OP is not the dividend return or a mining ponzi but that bonds loose value quicker on the market than they pay out dividends).

They are NOT SHARES. Creating extra bonds should have virtually zero  impact on their price.  The only reason these bonds lose value is diminishing coupon payments caused by increasing difficulty. Well, that, and perhaps some people waking up and smelling the coffee, and selling to cut  their losses.

Also I'd like to see your math skills on current bank book rates that are below inflation... Still people are investing billions of fiat money in these.

And a better "investment" it is. Ill take a ~1% per year loss over a >30% per year loss any day .

GIGAMINING has in total paid ~35 Bitcents or more (I just did quick estimates) to date, so the price is currently not too far away from "IPO_price - dividends" so far.

Yes, I agree, they are currently still way overpriced. Now gigamining is a special cause  because it has an ASIC upgrade path. Its something giga didnt have to do, and he is offering one deal for free, which would boost the price, even though the upgrade will only add insult to injury IMO.

So lets look at a bond without freebee upgrade path, and keep in mind Ive warned for this months ago, but my stand is that they are still overpriced today, so even if they had made a profit so far, that wouldnt disprove my point, the bubble is still firmly inflated. You can call me out in 6 or 12 month if was wrong.

Bitbond. IPOd at 0.6 BTC,  currently valued at 0.36 after earning 0.15 in coupons. Close, but no cigar
YAMBC. IPO'd at 0.35 BTC, currently valued at 0.126 after earning 0.067 in coupons. Ouch.
Puremining, not sure what IPO price was, but seems like 0.5. Currently valued at 0.1501 after earning 0.084. Double ouch.
DMC. IPO at 1BTC, currently valued at 0.31 after yielding 0.026. Triple ouch.

Admittedly the latter doesnt really belong in the list as its supposedly a share, not a bond, even though DMC  only owns bonds and pays coupons as if its a bond.

Again I'd like to challenge you to release a script that calculates profits/losses individually from mining assets on GLBSE (both dividends and on paper) so you can really verify if you were trading at a loss so far or not.

Just copy paste the dividend payout table in oo calc and sum it.

If you really think it's such a good idea to sell mining bonds without backing (no mining hardware), then do so please! You can even undercut current assets, as you have 0 costs besides dividends.

I intended to:
https://bitcointalk.org/index.php?topic=88496.0

But Benitio and someone else promised me an easier solution, I havent seen it yet tho :/.

Actually a mining ponzi scheme is something that I still fear to happen and since a LOT of "miners" don't disclose anything, I think there are already a few on GLBSE right now... I see this as a much larger threat to people's money than losses on paper by not selling the mining "bonds" they have right now for cheaper prices than they bought.

Meh. I dont see what the difference is between a mining ponzi and a miner just running off with your coins. Wether or not he has the hashrate to back up his bonds is of little importance.

[Meni Rosenfeld]

It does, because if he only has to pay 1 BTC to buy another GH/s he can issue a LOT of new shares and dump the current prices (the main concern of the OP is not the dividend return or a mining ponzi but that bonds loose value quicker on the market than they pay out dividends).

They are NOT SHARES. Creating extra bonds should have virtually zero  impact on their price.  The only reason these bonds lose value is diminishing coupon payments caused by increasing difficulty. Well, that, and perhaps some people waking up and smelling the coffee, and selling to cut  their losses.

Sukrim said "shares" because that's the term usually used for units on GLBSE, he knows they are not company shares.

Issuing new PDMIs (or traditional bonds for that matter) doesn't affect their returns, but that doesn't mean it doesn't affect their traded price. Increasing supply reduces price since there is only a limited number of people willing to pay the higher prices.

Puremining, not sure what IPO price was, but seems like 0.5.

Technically yes, but investors who bought at that price were compensated so the effective IPO price was 0.28 BTC, and the highest I ever offered it is 0.4 BTC (the highest it was ever traded is 0.7 BTW).

[cytokine]

GIGAMINING has in total paid ~35 Bitcents or more (I just did quick estimates) to date, so the price is currently not too far away from "IPO_price - dividends" so far. Again I'd like to challenge you to release a script that calculates profits/losses individually from mining assets on GLBSE (both dividends and on paper) so you can really verify if you were trading at a loss so far or not.

As of 8/2/2012, GIGAMINING had yielded exactly negative 0.4% per week compounded since approximately four months ago (and that's with reinvesting all your dividends). Investment research is a bummer, huh?

That said, I think the massive upgrade path that the issuer offers will turn it into a strongly positive investment, which is its saving grace and a good reason to buy it. It has a higher yield than most other ASIC-pending offerings, and the behavior of the issuer to take action to protect his investors is excellent, and lends immense trust to his future offerings.

You see, this is what you need as an investor: an offering in an actual company that looks out for its shareholders, not just a contract. Bonds and equities are great most of the time, but contracts are much more speculative and dangerous.

I believe it's not the issuer's fault here for the losses; rather it's up to each investor to do their due diligence and only buy mining companies and bitcoin denominated bonds, and stay away from fixed rate contracts. You want to invest with someone that has an incentive to keep you happy because you will reinvest with them, both in their current capacity and in their future endeavors.

For issuers that do not protect their investors, it is your job as an investor to simply filter out those assets from your buy list, and don't give them any capital: problem solved.

[DeathAndTaxes]

Mining equipment, mining electricity and rent for the space where this is housed as well as internet connections etc. are all denominated in USD or other fiat currencies.

Which means absolutely nothing for the bondholder.  Those fiat costs only determines the profitability or lack there of for the operator.

Technically a mining bond issuer doesn't even NEED any hashing power.  Given the limited due diligence I would hazard a guess that there is at least one naked issuer (issuing bonds on hashing power they don't actually have).   A mining bond is essentially a negative difficulty synthetic contract.   When difficulty rises you get paid less, when it falls you get paid more.

Someone issuing a bond is taking a wager that difficulty will rise significantly and someone buying the bond is taking the reverse side of that trade.

[jamesg]

When difficulty rises you get paid more less, when it falls you get paid less more.

FTFY

[DeathAndTaxes]

When difficulty rises you get paid more less, when it falls you get paid less more.

FTFY

DOH!  Fixed.

[Meni Rosenfeld]

GIGAMINING has in total paid ~35 Bitcents or more (I just did quick estimates) to date, so the price is currently not too far away from "IPO_price - dividends" so far. Again I'd like to challenge you to release a script that calculates profits/losses individually from mining assets on GLBSE (both dividends and on paper) so you can really verify if you were trading at a loss so far or not.

As of 8/2/2012, GIGAMINING had yielded exactly negative 0.4% per week compounded since approximately four months ago (and that's with reinvesting all your dividends). Investment research is a bummer, huh?

That said, I think the massive upgrade path that the issuer offers will turn it into a strongly positive investment, which is its saving grace and a good reason to buy it. It has a higher yield than most other ASIC-pending offerings, and the behavior of the issuer to take action to protect his investors is excellent, and lends immense trust to his future offerings.

You see, this is what you need as an investor: an offering in an actual company that looks out for its shareholders, not just a contract. Bonds and equities are great most of the time, but contracts are much more speculative and dangerous.

I believe it's not the issuer's fault here for the losses; rather it's up to each investor to do their due diligence and only buy mining companies and bitcoin denominated bonds, and stay away from fixed rate contracts. You want to invest with someone that has an incentive to keep you happy because you will reinvest with them, both in their current capacity and in their future endeavors.

For issuers that do not protect their investors, it is your job as an investor to simply filter out those assets from your buy list, and don't give them any capital: problem solved.

There's something about this whole situation that people simply aren't getting. The upgrade path offered by Giga et al isn't allowed by sprinkling magic powder on his equipment. It is making use of BFL's upgrade offer which is a once in a lifetime event brought about by a very specific circumstance. In the "real world", mining companies can't upgrade their equipment for free. If the company bought X GH/s of equipment with its IPO funds it is stuck with X GH/s of equipment. If there is anything that negatively impacts mining profitability, the company's profits and dividends will shrink accordingly, just like with a deterministic instrument.

The same issuer that is "protecting his investors" could just as well screw over his investors. IMHO it is much less risky to invest in a deterministic asset where the issuer has no influence at all on the returns - the investor can focus on global parameters such as difficulty and price instead of playing guessing games what the issuer will or will not do. You're entitled to a different opinion but please stop the trash-talk saying deterministic assets should be "filtered out".

I respect Giga's decision but it's taking us one step further from a true commodity market for hashrate, which would be to the benefit of all.

[P4man]

You see, this is what you need as an investor: an offering in an actual company that looks out for its shareholders, not just a contract.

Who,  besides GigaVPS himself,  has shares in Gigamining?

[Brunic]

It's funny that, if wanted, the most "secure" asset could be easily use for a scam.

IPO some mining bond at a rate of X MHash/s. Give back dividend based on the X MHash/s. Since the difficulty is going up for a while, the more the time pass, the less you give dividend by bond. If you lack money or to make more profit, you can issue new bonds (hey guys, I bought new mining equipment!).

When ASIC comes by, difficulty would go to the stratosphere and crash the value of the mining bonds. Buy back these bonds for market value (or 0.000001 BTC) and magic! You just made profit without even having one single gpu mining.

Value of issued bond - dividend over a couple of months - buy back = Profit.

I think we could even build a ponzi pyramid with that. With the difficulty constantly going up, you pay less and less dividend each week and if you issue new bonds at a small but fixed rate (200 new bonds each week), I think it could go for a long time.

5 MHash cost 1 BTC.
5 MH gives 100 shares/day.
1 share is 0.00002454
0.002454/day

At the current difficulty rate, it takes 407 days to pay back the actual bond cost. In a ponzi/scam scheme, I know that right now, I have at least 1 year in front of me before I run out of cash for my scam. Since there's a good chance the difficulty goes up, it will take even longer than that. I can also issue new bonds in the next year, giving me even more time for my scam.

[FreeMoney]

They are NOT SHARES. Creating extra bonds should have virtually zero  impact on their price.  The only reason these bonds lose value is diminishing coupon payments caused by increasing difficulty. Well, that, and perhaps some people waking up and smelling the coffee, and selling to cut  their losses.

A large issue should drop prices since it indicates that more power is coming online and difficulty will be rising. The issue itself is information.

Besides that 'real' (but probably tiny) effect, there could be a temporary dip if it takes new money a while to arrive. Also if people consider GLBSE to have counter-party risk then a mining bond there is more similar to another mining bond there than an equivalent amount of power on the outside and in the same way a new GIGA is more like a GIGA than some other mining companies GLBSE bond so it competes even more closely and should drop the price extra.

Am I thinking right? There is a smaller market for GLBSE mining bonds than there is for 'all mining' and a smaller market for (example) GIGA than for all 'GLBSE mining' and the demand curves must all be at least slightly downward sloping. The more narrow the market and the less perfect the substitute the larger effect an increase in supply will have.

[FreeMoney]

It's funny that, if wanted, the most "secure" asset could be easily use for a scam.

IPO some mining bond at a rate of X MHash/s. Give back dividend based on the X MHash/s. Since the difficulty is going up for a while, the more the time pass, the less you give dividend by bond. If you lack money or to make more profit, you can issue new bonds (hey guys, I bought new mining equipment!).

When ASIC comes by, difficulty would go to the stratosphere and crash the value of the mining bonds. Buy back these bonds for market value (or 0.000001 BTC) and magic! You just made profit without even having one single gpu mining.

Value of issued bond - dividend over a couple of months - buy back = Profit.

I think we could even build a ponzi pyramid with that. With the difficulty constantly going up, you pay less and less dividend each week and if you issue new bonds at a small but fixed rate (200 new bonds each week), I think it could go for a long time.

If you always pay and don't claim to have equipment that's not even a scam, it's just a way to bet that the value of mining power is going down faster than it earns.

[cytokine]

You're entitled to a different opinion but please stop the trash-talk saying deterministic assets should be "filtered out".

In the end, the market is always the judge, not my opinion, nor yours. There are good mining-related investments, and bad ones, and I know which is which because I have the hard numbers on all mining assets from my research. When I filter something out, I always do it because it has a negative expectation, not because I have a certain "gut feeling" about it. From what I can see, at the present time most (but not all) non-upgradable fixed-rate mining bonds have a negative expectation relative to holding bitcoins directly, although there are some notable exceptions to this guideline.

It's not personal, so don't take it that way. It's business.

[P4man]

It's funny that, if wanted, the most "secure" asset could be easily use for a scam.

IPO some mining bond at a rate of X MHash/s. Give back dividend based on the X MHash/s. Since the difficulty is going up for a while, the more the time pass, the less you give dividend by bond. If you lack money or to make more profit, you can issue new bonds (hey guys, I bought new mining equipment!).

When ASIC comes by, difficulty would go to the stratosphere and crash the value of the mining bonds. Buy back these bonds for market value (or 0.000001 BTC) and magic! You just made profit without even having one single gpu mining.

Value of issued bond - dividend over a couple of months - buy back = Profit.

I think we could even build a ponzi pyramid with that. With the difficulty constantly going up, you pay less and less dividend each week and if you issue new bonds at a small but fixed rate (200 new bonds each week), I think it could go for a long time.

5 MHash cost 1 BTC.
5 MH gives 100 shares/day.
1 share is 0.00002454
0.002454/day

At the current difficulty rate, it takes 407 days to pay back the actual bond cost. In a ponzi/scam scheme, I know that right now, I have at least 1 year in front of me before I run out of cash for my scam. Since there's a good chance the difficulty goes up, it will take even longer than that. I can also issue new bonds in the next year, giving me even more time for my scam.

You call it scam, but in essence, you just described  a perpetual mining bond (even if its one thats not backed by any mining power, but thats largely irrelevant. I think Meni does it like this? ).  As long as you meet your obligations, its not a scam, its just making an almost certain profit off clueless investors that dont understand mining market dynamics.