Subsidizing bitUSD, bitEUR, bitCNY yield to minimum 5%, has this been discussed?

[Rune]

I think many people are scared of the word subsidy because of the negative connotations it has relating to government use. It's important to remember that bitshares are not coins, they're shares in a company. A company subsidizing a product is vastly different from a government subsidizing an industry. If done intelligently, it is exactly what makes or breaks the market. The companies or blockchains that are not able to subsidize and thus direct their capital with intelligence, will simply have to burn it to subsidize the recording of its existence (like bitcoin).

I don't think the difference is as large as you are claiming.  It isn't "vastly different".  The subsidizing is a form of wealth redistribution in both situations.  In theory, they should work the same.  I can't really see a difference at the motivation level.  As a citizen, you vote and have interest in your country's currency.  As a stockholder, you vote and have interest in your company's value (shares).

You whole approach seems to repeating how great this new metaphor is and how great it will be to spend all this new found money.  yuck

Government subsidies are democratically decided, and thus are used to enrich individual humans and the gatekeepers of the democratic process.

Company subsidies are decided by the capital itself, and is thus used to seek as much profit as possible.

[Rune]

Are you trying to use moral arguments to decide our marketing strategy? Unless a majority of our targeted consumers consider that (morality)as an important feature, we will simply be outcompeted and swallowed up by a competitor that makes its marketing decisions based on profitability.

I know many people here are very idealistic, but we shouldn't forget that everyone aren't like us.

I absolutely believe that we should eventually resort to our human morality as the primary director of the companys decision making, it should also absolutely not be before we have established ourselves at a point significantly beyond any attack by any of those whose business we threaten. Think about how many they truly are - right now we should focus only on growth.

[tonyk]

I think many people are scared of the word subsidy because of the negative connotations it has relating to government use. It's important to remember that bitshares are not coins, they're shares in a company. A company subsidizing a product is vastly different from a government subsidizing an industry. If done intelligently, it is exactly what makes or breaks the market. The companies or blockchains that are not able to subsidize and thus direct their capital with intelligence, will simply have to burn it to subsidize the recording of its existence (like bitcoin).

A developer delegate is another example of the blockchain subsidizing a product, in this case it is subsidizing it's own development (instead of waiting for consumers to do it for free).

This is so obviously a short time artificial distortion of our product to anyone who scratches just slightly below the surface.  It might win over brief attention from those who don't get that deep, but to any potential serious users it just obfuscates the fact that we actually have a real sustainable product that's worthwhile.

Do not be so sure...his proposal is achieving a giant step in making this statement not so true....

[gamey]

I think many people are scared of the word subsidy because of the negative connotations it has relating to government use. It's important to remember that bitshares are not coins, they're shares in a company. A company subsidizing a product is vastly different from a government subsidizing an industry. If done intelligently, it is exactly what makes or breaks the market. The companies or blockchains that are not able to subsidize and thus direct their capital with intelligence, will simply have to burn it to subsidize the recording of its existence (like bitcoin).

I don't think the difference is as large as you are claiming.  It isn't "vastly different".  The subsidizing is a form of wealth redistribution in both situations.  In theory, they should work the same.  I can't really see a difference at the motivation level.  As a citizen, you vote and have interest in your country's currency.  As a stockholder, you vote and have interest in your company's value (shares).

You whole approach seems to repeating how great this new metaphor is and how great it will be to spend all this new found money.  yuck

[kisa]

@ Rune - I agree. 5% is better than nothing, and imo this should be subsidized by the shorts and also somehow BTS holders should have joint interest to share parts of their prospective return with bitAssets users. BTS holders would benefit enormously if bitUSD started to gain acceptance, bringing more value and acceptance to BTS itself. If they think that this happens without certain financial trade-off i think this is unlikely... Public bail-out for major bitAssets sounds interesting, to take the role of a bank deposit insurance scheme...

[sschechter]

Do we want people to understand how our system works or do we just want to throw returns in peoples faces?

You realise we are talking about marketing a product, right? No, we do not require people to understand how our company works on the back-end, yes we want to throw clearly digestible numbers in their faces when telling them about our products.

People don't need to know how BitShares works.  But they ABSOLUTELY need to know how it makes money if they are being asked to risk their own.  If you are unable to or unwilling to explain how you are able to offer them returns, the first word out of their mouths will likely be Ponzi. When I hear 5% interest guaranteed, I think to myself "whats the catch?"

You: "Hey want to try our financial product?  You'll get a 5% return on your investment"
Me: "5%, thats pretty good.  How does it work?"
You: "That's not that important."
Me: "Go fuck yourself"

[Troglodactyl]

I think many people are scared of the word subsidy because of the negative connotations it has relating to government use. It's important to remember that bitshares are not coins, they're shares in a company. A company subsidizing a product is vastly different from a government subsidizing an industry. If done intelligently, it is exactly what makes or breaks the market. The companies or blockchains that are not able to subsidize and thus direct their capital with intelligence, will simply have to burn it to subsidize the recording of its existence (like bitcoin).

A developer delegate is another example of the blockchain subsidizing a product, in this case it is subsidizing it's own development (instead of waiting for consumers to do it for free).

This is so obviously a short time artificial distortion of our product to anyone who scratches just slightly below the surface.  It might win over brief attention from those who don't get that deep, but to any potential serious users it just obfuscates the fact that we actually have a real sustainable product that's worthwhile.

[Rune]

I think it is enough to post something like "last year people earned X% on BitUSD"... not changing... true... past performance is no guarantee of future performance.

Totally true, but that still leaves us nothing to market in our first year, and is exactly why we need the subsidy in the beginning.

i don't think that 5% p.a. would be enough to attract investors seeking return into holding bitUSD for a while. feels like we are fooling ourselves with regards to how much a fair compensation should be for exposure to systemic BTS risk. Even without BTS price volatility, my guess is 100%+ yield p.a. at current, initial stage.

most Western banks USD deposits yielding 0% are insured. For Argentina, or Russia perhaps, there is significant risk of local currency depreciation versus USD, and USD deposits can be seized by governments. Thus people prefer to hold cash USD, or local banks pay them 10% p.a. return on USD deposits. bitUSD could be an alternative, but yield should be priced fairly compared with BTS expected return.

As BM stated before - not everyone is seeking return. Some want to diversify away from banks, some want to do business. ratailers holding small amounts of bitUSD would be a plus. Perhaps demand could be substantial in the remittance market due to fast and cheap transfers, bitUSD price stability versus USD, while the exposure to BTS systemic risk by each transacting party is very brief and comparably small (as opposed to investors seeking return). here the local gateways, perhaps even private brokers (localbitcoins idea), would be key.

However, anyone thinking about marketing BTS platform to professional FX traders, please go and visit an FX trading desk first and see at what speed and what high tech is employed by leading brokers and exchanges. 10 seconds is like eternity there - BTSX isn't likely to get traction in there in the near future imo... also not sure, why someone with trading account in a bank should trade bitGOOG or bitGold instead of highly liquid Google or Gold CFD at 10 USD per trade... I am not saying bitAssets won't get even more accurately priced, gain liquidity in the future, and allow for smaller market participants without proper banking access to do all things they want at low cost. just think that the status quo with professional traders and electronic trading via exchanges, platforms like bloomberg etc. is not yet to be doubted.

We are marketing to people. They want stuff that easily catches their attention.

Also BTS systemic risk will be low if we have a public bail-out policy for the major bitassets, and we are careful with importing upgrades from devshares

[Rune]

I think many people are scared of the word subsidy because of the negative connotations it has relating to government use. It's important to remember that bitshares are not coins, they're shares in a company. A company subsidizing a product is vastly different from a government subsidizing an industry. If done intelligently, it is exactly what makes or breaks the market. The companies or blockchains that are not able to subsidize and thus direct their capital with intelligence, will simply have to burn it to subsidize the recording of its existence (like bitcoin).

A developer delegate is another example of the blockchain subsidizing a product, in this case it is subsidizing it's own development (instead of waiting for consumers to do it for free).

[kisa]

I think it is enough to post something like "last year people earned X% on BitUSD"... not changing... true... past performance is no guarantee of future performance.

Totally true, but that still leaves us nothing to market in our first year, and is exactly why we need the subsidy in the beginning.

i don't think that 5% p.a. would be enough to attract investors seeking return into holding bitUSD for a while. feels like we are fooling ourselves with regards to how much a fair compensation should be for exposure to systemic BTS risk. Even without BTS price volatility, my guess is 100%+ yield p.a. at current, initial stage.

most Western banks USD deposits yielding 0% are insured. For Argentina, or Russia perhaps, there is significant risk of local currency depreciation versus USD, and USD deposits can be seized by governments. Thus people prefer to hold cash USD, or local banks pay them 10% p.a. return on USD deposits. bitUSD could be an alternative, but yield should be priced fairly compared with BTS expected return.

As BM stated before - not everyone is seeking return. Some want to diversify away from banks, some want to do business. ratailers holding small amounts of bitUSD would be a plus. Perhaps demand could be substantial in the remittance market due to fast and cheap transfers, bitUSD price stability versus USD, while the exposure to BTS systemic risk by each transacting party is very brief and comparably small (as opposed to investors seeking return). here the local gateways, perhaps even private brokers (localbitcoins idea), would be key.

However, anyone thinking about marketing BTS platform to professional FX traders, please go and visit an FX trading desk first and see at what speed and what high tech is employed by leading brokers and exchanges. 10 seconds is like eternity there - BTSX isn't likely to get traction in there in the near future imo... also not sure, why someone with trading account in a bank should trade bitGOOG or bitGold instead of highly liquid Google or Gold CFD at 10 USD per trade... I am not saying bitAssets won't get even more accurately priced, gain liquidity in the future, and allow for smaller market participants without proper banking access to do all things they want at low cost. just think that the status quo with professional traders and electronic trading via exchanges, platforms like bloomberg etc. is not yet to be doubted.

[xeroc]

Maybe we should remind ourselves that we are not a classical business ... and also need not necessarily take the same strategies .. as classical businesses ..

[Rune]

Do we want people to understand how our system works or do we just want to throw returns in peoples faces?

You realise we are talking about marketing a product, right? No, we do not require people to understand how our company works on the back-end, yes we want to throw clearly digestible numbers in their faces when telling them about our products.

[starspirit]

I've always been hesitant about the idea of promoting the yield on BitAssets at all. The only reason a yield can be delivered is because the shorts cannot provide an absolute guarantee that longs will be made whole in the event of a BTS collapse. For the privilege of a leveraged exposure to BTS, without recourse to any personal assets outside of the the BTS contributed as collateral, shorts are willing to pay interest to the longs. This is akin to the incentives on each side of margin lending.

In an ideal design, if possible at all, it would be better for mainstream adoption to have an iron-clad guarantee on the security of BitUSD being made whole, and give up on the interest.

That implies that you can create an iron-clad guarantee that BTS will have value... not possible.   Not even possible in traditional banks.

Near certainty is enough. A public bail-out policy on the main bitassets would be such a gargantuan advantage. In the event of a price collapse of BTS, bitasset owners will wait a lot longer to panic and begin pulling out their own funds (that would only happen if they think that the price is literally going to 0 and the network will cease to exist). This will give a market-wide increase in confidence and will help prevent a crash from happening in the first place.

To BMs comment, I am merely drawing the economic link between interest and collateral risk. If we promote interest to draw in the masses, from my personal moral standpoint they also need to be made aware of the collateral risk that allows them to earn it, even though from a marketing perspective this is admittedly a drag (not everyone will agree with this statement).

But also it allows us to recognise that we do have a lever to trade off between the two - improving the collateral security (e.g. increasing collateral contribution from shorts) lowers the interest rate they are prepared to pay. We can set that dial where we see fit.

Even though it may never be 'iron-clad', there may be other ways to increase the collateral security, and I don't think we should immediately dismiss the potential of finding better solutions here it we really put our collective mind to it.  I really think this will be the burning question for sizeable mainstream adoption. This does not discount that there will be growing adoption in a wide range of niche areas who don't mind the risk for collecting their interest. To not subvert this thread any further, I will look to take this up again at some point in a new post.

[sschechter]

In your ad campaign, would you be willing to clearly disclose where the  is coming from?

[sschechter]

And what if the promotional period ends without increasing the volume enough to get us to 5% interest? What happens when rates drop to 2-3%?  Print more shares? Apologize to those who thought they were always getting 5%?  Why can't we just advertise *1.5% variable APR, with an asterisk that explains how interest is generated, and expected returns based on volume?  Do we want people to understand how our system works or do we just want to throw returns in peoples faces? Is offering 5% interest on an investment that people don't understand enticing enough to get people to invest in something they don't understand? If you promised me 5% interest, I would want to know what your selling and how you earn a cut. If I found out a company was cannibalizing their share price in the hopes that they can keep me as a user, I may stick around long enough for my free lunch, but not much longer.  Sorry, this seems like a desperate 4th quarter hail mary pass.  If it doesn't work, the system may not survive the damage to its credibility.