Quote from: fently on June 22, 2013, 12:16:15 AM

This, I think is the key distinction between DMS.MINING and TAT.VM. If difficulty levels off in the future, TAT.VM has no problem with it, but DMS.MINING could collapse.

You had it all pretty much correct - until you jumped to entirely the wrong conclusion.

If difficulty levels off then DMS.SELLING investors would almost certainly vote to close (as the pot would shrink until they got nothing if they did otherwise) and MINING investors would be bought off with a final payment of 365 days of dividends.

In the same scenario TAT.VM investors would face a buy-back at 200 days of dividend - as to continue would mean losses for TAT and is why that buy-back exists (all the time difficulty rises there's no danger of him buying back - as he makes profit by letting it continue to run so his buy-back falls faster than dividends are paid out). Your mistake is in assuming that if difficulty levelled out with no sign of rising TAT.VM would continue to operate as a charity rather than exercise the buy-back clause in the contract.

Neither offering would survive an extended period of difficulty not rising (or, more likely, rising but by less than a few percent per change) - as in both this would almost certainly trigger a buy-back (not guaranteed in either - but likely in both).

For collapse to occur on DMS-MINING (meaning a forced buy-back at ~100 days of dividend) there'd need to be 300+ days of average zero growth or a longer period of growth averaging under ~3%. It seems rather unlikely that's going to happen any time soon (Only needs one ASIC producer to continue to produce to exceed that) - but it's definitely possible in the long-term. But any slow-down in the long-term is essentially irrelevant when measured as a percentage of total output/dividends over the life of the bond. By the long-term when growth becomes static it's near enough a certainty that difficulty will be immensely higher than at present - so the possible down-side (compared to hardware backed PMBs NOT TAT.VM) is losing out on tiny dividends in the future in return for a lump-sum final payment.

You only have to look at current announced production runs to see that difficulty isn't likely to stop growing when its at the current order of magnitude - so any impact this has is trivial on expected returns in any reasonable time-frame. It IS certainly the case that if/when that scenario arrives, the fund will close-down (with a final lump-sum payment to MINING and any change given to SELLING) - and that any replacement fund would then use different parameters to allow speculation on both sides in the very different conditions prevailing then.

The current parameters were set based on what I considered a safe margin for current conditions in the short/mid term. If/when difficulty growth starts to decline I would sensibly expect the value of MNING to increase as a percentage of PURCHASE (with SELLING dropping value) until it hits the 9:1 ratio where a sell-back becomes in order. That's near optimal for investors in both - SELLING get out whilst they still get a final payment and MINING get a year at current dividend even though difficilty would still be rising (and so it would represent over a year of dividends had it continued).