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Offline starspirit

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Is dilution a coercive tax? - and voluntary alternatives
« on: October 31, 2014, 09:52:05 PM »

There are certainly times when dilution makes sense, but there are also times it does not. But it is always coercive, especially for the many smaller stakeholders whose vote counts for less than larger stakeholders. (Note the method of voting is fair, just not the consequence of this type of vote).

If one thinks of BTS as a share of the accumulated capital within the bitshares ecosystem, then it makes sense that if there is some sort of capital infusion into the ecosystem, such as the merger of another network, that dilution ensures everyone maintains a fair share of the new capital base. In such a case, I think dilution is warranted. That is similar to a situation under the gold standard where new notes are produced in the economy in exchange for new participants adding gold to the capital base, and destroyed when part of the capital base is redeemed.

However, even in the case of a capital infusion, where the value of that new capital may be evaluated differently by different stakeholders, a fixed dilution voted by stakeholders will be coercive upon all other stakeholders, and not voluntary. As a result for some people it will be a gift, for others theft. Might a theoretical alternative be for everybody in the system to publicly state the amount they are willing to dilute their own stake by, which is transparent in their community reputation going forward? A practical mechanism would be required to ensure nobody is diluted by more than this percentage. (I know this is practically difficult, but in principle).

Then we have the situation where people do work within the system, but for the benefit of the community at large rather than specific stakeholders (the latter is accommodated by simple payments). Rather than force everyone in the system to pay for this work whether they want to or not, what if we had a voluntary system where:

- delegates put up a proposal for value add
- donors can voluntarily contribute to the cause, proving funding and salary to the delegate to accomplish the goal
- if the delegate's production adds real value to the system, anybody within the system can donate to the delegate
- the delegate will reward their donors for their support from the contributions they receive
- reputations for donating, contributing etc affect how everyone is regarded in the system, keeping them fair and honest

In a way, each delegate is then like a mini-DAC. And this does not have to be restricted to delegates, but actually could be anybody (or any group of people?) in the system. It avoids dilution and coercion.

If we think of bitshares as a country, by allowing coercive dilution for these many circumstances we have set a precedent for the replication of traditional government structures (and a burgeoning "public sector") that coercively taxes the people. Whether that's voted upon is not the issue - one should not be able to vote to take wealth from other people. I would rather see if we can create an economy of voluntary human action.

BM and others - what do you think?

Edit 4 Nov 14: I improperly framed this discussion with misuse of the word coercive in the subject header, which is not true because there is no threat of violence. My mistake. But dilution is still involuntarily imposed on all individual participants whether they agree its to their benefit or not. My key point was to consider whether there are voluntary alternatives that could be considered instead of blanket dilution, at least in some situations. My view has evolved somewhat to the point that in principle voluntarism is better, but in practice its better to keep it simple but effective for now. When the system grows there will be better was of doing things as long as we don't lose sight of basic principles like the rights of individuals to choose what is best for them.
« Last Edit: November 04, 2014, 02:18:03 AM by starspirit »

Offline bytemaster

Re: Is dilution a coercive tax? - and voluntary alternatives
« Reply #1 on: October 31, 2014, 10:01:53 PM »
Coercive means something very specific to me... threat of violence and violation of property rights.

If the definition of "property" and "ownership" is the "ability to control, destroy, or restrict access to" then all shared ownership systems have the challenge that a minority player infringes on the majority by denying them ability to have full control.  Likewise a majority can harm the minority.  Unless there is unanimous consent then you have a problem.

So for the purpose of a DAC joining the DAC is voluntary and your property rights are not absolute and are subject to the right of the majority to use their property rights.   Because ownership is not forced nor compelled you cannot claim it is coercive.   It is voluntary and everyone who buys or sells a stake does so voluntarily under this "majority rule" system.

For those that want a system that does not allow someone or some group to make poor judgements and manipulate the value we have BitAssets tied to commodities.   This is how you free yourself from bad group dynamics.


For the latest updates checkout my blog: http://bytemaster.bitshares.org
Anything said on these forums does not constitute an intent to create a legal obligation or contract between myself and anyone else.   These are merely my opinions and I reserve the right to change them at any time.

Offline Troglodactyl

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Re: Is dilution a coercive tax? - and voluntary alternatives
« Reply #2 on: October 31, 2014, 10:06:21 PM »
No one is forcing you to hold BTS, or requiring you to have it in order to pay taxes in it.  Holding BTS is voluntarily investing in a collective effort, and accepting the consequences of both its successes and its failures.

If you think that the group is going down the wrong path, either divest completely or convert to bitAssets, depending on the seriousness of your disagreement.

Offline starspirit

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Re: Is dilution a coercive tax? - and voluntary alternatives
« Reply #3 on: October 31, 2014, 10:18:45 PM »
Viewed from the perspective of an investment, yes somebody can always opt out if they don't like the group dynamic. But viewed from the perspective of an economy that people can live and work in (someday in the future), somebody does not really want to opt out. They are willingly entangled in it.

Why would you not adopt a system of voluntary behaviour if you could?


Offline starspirit

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Re: Is dilution a coercive tax? - and voluntary alternatives
« Reply #4 on: October 31, 2014, 10:24:19 PM »
No one is forcing you to hold BTS, or requiring you to have it in order to pay taxes in it.  Holding BTS is voluntarily investing in a collective effort, and accepting the consequences of both its successes and its failures.

If you think that the group is going down the wrong path, either divest completely or convert to bitAssets, depending on the seriousness of your disagreement.
Trog, I'm not looking to opt out on the basis we are "going down the wrong path". I'm very positive on bitshares and thinking about it it a much bigger context. I'm trying to contribute thoughts to future directions we could take it.

Offline bytemaster

Re: Is dilution a coercive tax? - and voluntary alternatives
« Reply #5 on: October 31, 2014, 10:24:36 PM »
Viewed from the perspective of an investment, yes somebody can always opt out if they don't like the group dynamic. But viewed from the perspective of an economy that people can live and work in (someday in the future), somebody does not really want to opt out. They are willingly entangled in it.

Why would you not adopt a system of voluntary behaviour if you could?

I have you just have chosen a perspective that denies you a choice and then concluded it isn't voluntary.   Show me the gun.  Show me the threat of violence...   

I think the primary goal is that the currency of a society should not be subject to human printing presses or group decision making.   

The challenge is figuring out how to distribute said currency and who gets the value from it.   It seems like the only "fair" way to distribute a fixed supply currency is 1 unit per person, potentially awarded to them on their 18th birthday.   It is of course no longer fixed supply.... and why would people initially value it for trade when they could use BitGold instead? 

For the latest updates checkout my blog: http://bytemaster.bitshares.org
Anything said on these forums does not constitute an intent to create a legal obligation or contract between myself and anyone else.   These are merely my opinions and I reserve the right to change them at any time.

Offline Troglodactyl

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Re: Is dilution a coercive tax? - and voluntary alternatives
« Reply #6 on: October 31, 2014, 10:26:09 PM »
No one is forcing you to hold BTS, or requiring you to have it in order to pay taxes in it.  Holding BTS is voluntarily investing in a collective effort, and accepting the consequences of both its successes and its failures.

If you think that the group is going down the wrong path, either divest completely or convert to bitAssets, depending on the seriousness of your disagreement.
Trog, I'm not looking to opt out on the basis we are "going down the wrong path". I'm very positive on bitshares and thinking about it it a much bigger context. I'm trying to contribute thoughts to future directions we could take it.

Sorry that was unclear, I meant that those options will be available in the future to any who thought the system was making poor choices.

Offline Frodo

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Re: Is dilution a coercive tax? - and voluntary alternatives
« Reply #7 on: October 31, 2014, 10:26:54 PM »
I think dilution is already the fairest way to raise funds. Simple donations put donors at a disadvantage where as dilution adds or takes the same value per share for everybody. That means that every stakeholder, despite the amount he holds, is incentivized to vote in such a way that value per share is maximized. One can't harm others without harming oneself and oneself can't gain without letting others gain.

This is no guarantee for good decisions but as already stated you have always the possibility to hedge in- or outside the system.

Offline starspirit

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Re: Is dilution a coercive tax? - and voluntary alternatives
« Reply #8 on: October 31, 2014, 10:57:14 PM »
Viewed from the perspective of an investment, yes somebody can always opt out if they don't like the group dynamic. But viewed from the perspective of an economy that people can live and work in (someday in the future), somebody does not really want to opt out. They are willingly entangled in it.

Why would you not adopt a system of voluntary behaviour if you could?

I have you just have chosen a perspective that denies you a choice and then concluded it isn't voluntary.   Show me the gun.  Show me the threat of violence...   

I think the primary goal is that the currency of a society should not be subject to human printing presses or group decision making.   

The challenge is figuring out how to distribute said currency and who gets the value from it.   It seems like the only "fair" way to distribute a fixed supply currency is 1 unit per person, potentially awarded to them on their 18th birthday.   It is of course no longer fixed supply.... and why would people initially value it for trade when they could use BitGold instead?
OK agree, so coercive is not the right word, more like involuntary. To put it into more tempered terms, there will stakeholders who feel they have had value involuntarily taken away, and others that feel they have received a windfall, depending on their evaluation of the capital infusion.

It seems to me that how one feels about the fairness of this depends on our different views about what bitShares is and what it could be.

1. When viewed as "like shares in a company", dilution happens all the time, you can always vote a new board or opt to sell up if you don't like management decisions.

2. When viewed as "like an economy in which to grow and participate", with BTS as the money, its a tax, arguably with value attached, but an involuntary tax nonetheless, and it is subject to printing press and group decision making, which you have said we would want to avoid.

I believe if we move hopefully move toward 2., then a voluntary basis maximises freedom for all participants. I am probably way too early and optimistic on this view. For now a voting system is familiar and easiest, but it would be good to not lock this into anything like a constitution in my view, and give us ways to evolve the approach.

Offline Geneko

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Re: Is dilution a coercive tax? - and voluntary alternatives
« Reply #9 on: October 31, 2014, 11:47:50 PM »
What are the real reasons for this “turn around”?

The dilution thing based on voting is another means for efficient voluntary donations. There are no clear obligations attached to it so SEC couldn’t go after you. You are buying time. We need those in order to survive, period. 

Offline starspirit

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Re: Is dilution a coercive tax? - and voluntary alternatives
« Reply #10 on: November 01, 2014, 12:01:47 AM »
What are the real reasons for this “turn around”?

The dilution thing based on voting is another means for efficient voluntary donations. There are no clear obligations attached to it so SEC couldn’t go after you. You are buying time. We need those in order to survive, period.
It's not a turnaround. I am only representing my own personal opinion.
I agree that voting-based dilution makes it voluntary for the community, but it does not make it voluntary for individuals. Some individuals will want to dilute less than average, some will  be quite happy to dilute more and be recognised for this. I'm only suggesting why not give individuals the choice if we have the power and tools to do that. Then we still have all the same flexibility as a community, as well as preserving individual freedoms over what they choose to do with their wealth.
And in the case where we are diluting for work done within the community (as opposed to capital bought into the community), why dilute at all when there is the option of voluntary contributions?

Offline Empirical1.1

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Re: Is dilution a coercive tax? - and voluntary alternatives
« Reply #11 on: November 01, 2014, 12:22:09 AM »
What are the real reasons for this “turn around”?

The dilution thing based on voting is another means for efficient voluntary donations. There are no clear obligations attached to it so SEC couldn’t go after you. You are buying time. We need those in order to survive, period.
It's not a turnaround. I am only representing my own personal opinion.
I agree that voting-based dilution makes it voluntary for the community, but it does not make it voluntary for individuals. Some individuals will want to dilute less than average, some will  be quite happy to dilute more and be recognised for this. I'm only suggesting why not give individuals the choice if we have the power and tools to do that. Then we still have all the same flexibility as a community, as well as preserving individual freedoms over what they choose to do with their wealth.
And in the case where we are diluting for work done within the community (as opposed to capital bought into the community), why dilute at all when there is the option of voluntary contributions?

I disagree with your position. In a system with dilution, non dilutionists would unfairly receive the benefits others paid for.

I like a system of defined dilution, because I believe humans on average and almost always when acting as a group are an inferior, short term focused organism that I want to be protected from. I don't want to have to leave when they change the rules, I prefer to settle in a system where the amount of damage they can do to me is limited. I think all systems should exist though, including yours, but I'll choose the one with reasonable limits as I'm confident it is the winner but that's a personal opinion.

Offline starspirit

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Re: Is dilution a coercive tax? - and voluntary alternatives
« Reply #12 on: November 01, 2014, 03:26:52 AM »
What are the real reasons for this “turn around”?

The dilution thing based on voting is another means for efficient voluntary donations. There are no clear obligations attached to it so SEC couldn’t go after you. You are buying time. We need those in order to survive, period.
It's not a turnaround. I am only representing my own personal opinion.
I agree that voting-based dilution makes it voluntary for the community, but it does not make it voluntary for individuals. Some individuals will want to dilute less than average, some will  be quite happy to dilute more and be recognised for this. I'm only suggesting why not give individuals the choice if we have the power and tools to do that. Then we still have all the same flexibility as a community, as well as preserving individual freedoms over what they choose to do with their wealth.
And in the case where we are diluting for work done within the community (as opposed to capital bought into the community), why dilute at all when there is the option of voluntary contributions?

I disagree with your position. In a system with dilution, non dilutionists would unfairly receive the benefits others paid for.

I like a system of defined dilution, because I believe humans on average and almost always when acting as a group are an inferior, short term focused organism that I want to be protected from. I don't want to have to leave when they change the rules, I prefer to settle in a system where the amount of damage they can do to me is limited. I think all systems should exist though, including yours, but I'll choose the one with reasonable limits as I'm confident it is the winner but that's a personal opinion.
Thank you Empirical for giving it due consideration.
I totally empathise with the need to protect one's rights against group-think. That's indeed exactly why I was proposing voluntary levels of participation in dilution rather than mandated by a group vote. But I've got to concede I've lost this ideological battle for now. The company metaphor is where the current mindset is at, and perhaps most appropriately for now. One day when bitShares is hugely successful as an economic system and people begin thinking of BTS as a currency, I will dust this off.  ;)

Offline Felix

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Re: Is dilution a coercive tax? - and voluntary alternatives
« Reply #13 on: November 01, 2014, 03:54:20 AM »
I think dilution is already the fairest way to raise funds. Simple donations put donors at a disadvantage where as dilution adds or takes the same value per share for everybody. That means that every stakeholder, despite the amount he holds, is incentivized to vote in such a way that value per share is maximized. One can't harm others without harming oneself and oneself can't gain without letting others gain.

This is no guarantee for good decisions but as already stated you have always the possibility to hedge in- or outside the system.

Nope! dilution for raising funds? dilution for delegates!!! At least, the benefit from dilution shall not be  only for delegates!
« Last Edit: November 01, 2014, 04:07:21 AM by Felix »

Offline jsidhu

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Re: Is dilution a coercive tax? - and voluntary alternatives
« Reply #14 on: November 01, 2014, 04:26:20 AM »
I think funds should be raised based on donations from bts and then dilution only happens within a merge.. bts are burned on donation.. thus creating deflation pressure to inflate the economy with "good" dacs only. As it stands I think every idea that seems good will be diluted to even if they dont come to fruition
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