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Offline clayop

What is "profit" of the current model?
« on: May 10, 2015, 03:07:20 AM »

In the first model, all burned fees were considered as a profit.
In the first dilution model, transaction fees, UIA registration fees, etc. were burned and can be considered as a profit.
But now, I cannot find any profit model for shareholders. Company should earn profits. So what kind of profits is our DAC earning now?

Edit: I found one... burned fees when not-100% delegates generate blocks. But this will disappear when all delegates are 100%.
« Last Edit: May 10, 2015, 03:09:58 AM by clayop »
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Offline starspirit

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Re: What is "profit" of the current model?
« Reply #1 on: May 10, 2015, 04:46:32 AM »
In the first model, all burned fees were considered as a profit.
In the first dilution model, transaction fees, UIA registration fees, etc. were burned and can be considered as a profit.
But now, I cannot find any profit model for shareholders. Company should earn profits. So what kind of profits is our DAC earning now?

Edit: I found one... burned fees when not-100% delegates generate blocks. But this will disappear when all delegates are 100%.
Burning is not strictly a source of DAC income, it's a source of capital re-distribution. Imagine a company that spends from its capital reserves or from debt raising to buy back and redeem shares - the remaining shares each represent greater ownership in the company, but the net assets of the company have been reduced by the same amount. There is no change to the underlying capital claim of shareholders unless the payment made for the shares is from an external party that is required to burn the shares. That's why I've previously argued that not all burns are equal. See https://bitsharestalk.org/index.php/topic,13214.msg173054.html#msg173054

There are only two ways that a company or DAC can earn profit for its owners. First, like a traditional company, it could accumulate net assets on its balance sheet through the provision of external products or services. This is only possible for a DAC if there are capital management and trust mechanisms in place such that owners are comfortable to delegate the management of those accumulated resources. Although I would like to see such protocols built in time, currently we do not have that, which leaves only option 2. This is for customers of the DAC to make payment by buying and burning BTS, instead of directly to the accounts of the DAC.

Note however that such payment must be from an external source to qualify as income. Payments made between BTS holders, such as transaction fees on BTS transfers, are simply internal transfers and not a source of DAC income.

A disclaimer I would add is that these are my current views, that may still evolve over time.
« Last Edit: May 10, 2015, 04:51:12 AM by starspirit »

Offline Ander

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Re: What is "profit" of the current model?
« Reply #2 on: May 10, 2015, 04:55:13 AM »
Burned fees is revenue.

Burned fees exceeding delegate pay is profit.
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Offline kenCode

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Re: What is "profit" of the current model?
« Reply #3 on: May 10, 2015, 05:59:18 PM »
Burned fees is revenue.
Burned fees exceeding delegate pay is profit.

*plop*
There's one more for my rebuttal book, thanx Ander :)
 
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Offline clayop

Re: What is "profit" of the current model?
« Reply #4 on: May 10, 2015, 06:12:57 PM »
Burned fees is revenue.

Burned fees exceeding delegate pay is profit.

Yes that's my understanding.
IMHO we should burn all fees rather than include them into delegate's payment.
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Offline speedy

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Re: What is "profit" of the current model?
« Reply #5 on: May 10, 2015, 08:14:15 PM »
Users holding BitUSD is also a form of revenue, as it takes BTS out of circulation. It supports BitShares instead of supporting Janet Yellen like BitStamp USD does.
« Last Edit: May 10, 2015, 09:10:50 PM by speedy »

Offline clayop

Re: What is "profit" of the current model?
« Reply #6 on: May 10, 2015, 09:54:52 PM »
I'm introducing Bitshares to stock investment community now. But it is very hard to explain the profit model of this DAC. Until we clarify our profit model, we will experience hard time to persuade true investors, instead of speculators, IMHO.
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Offline Empirical1.2

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Re: What is "profit" of the current model?
« Reply #7 on: May 10, 2015, 11:08:52 PM »
Current income model

1. BitAssets and associated transaction fees
2. UIA issuance and associated fees.

To date BTS has averaged >1 million BTS in fees per month. A stable and popular wallet could do even more.

The real driver though will be demand for BitAssets  which requires BTS to purchase, thereby increasing demand for BTS and temporarily removing BTS from circulation which also has a positive price effect.

Other potential areas

1. Prediction market and fees
2. Bond Market fees
3. Blockchain based gambling fees/house edge.

At this stage of development BTS would be mainly focused on expanding its user base and not on maximising income/profit. 
 
« Last Edit: May 11, 2015, 06:44:15 PM by Empirical1.2 »
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Re: What is "profit" of the current model?
« Reply #8 on: May 11, 2015, 04:28:35 PM »
Income


- Fees 1.Total fees collected 2.of any kind - transaction, issuance , account/asset registration etc.
- Direct burn of BTS
- Increase of BTS amount held in collateral



Expenses

- Newly issued BTS (delegate pay by new BTS; other - like the newly issued vested BTS from the merger)
- Fees paid to delegates
- Decrease of BTS amount held in collateral  - as a positive number!


NOTES:
* It must be obvious from the above that the fees collected increase the profit ONLY when they are not distributed to delegates. If they are collected and distributed we have increase of income offset with the same increase in expenses.
** It is very important to observe that the   "Increase of BTS amount held in collateral" is not only current profit but additionally a simultaneous buy back of the same amount of shares in the DAC. and "Decrease of BTS amount held in collateral" -is exactly the opposite - a loss and simultaneous sell of BTS.

Offline starspirit

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Re: What is "profit" of the current model?
« Reply #9 on: May 11, 2015, 11:29:34 PM »
Income is a nebulous concept and everyone has slightly different twists in their views. I think form is more important than label. Here are my justifications.

Burning is not a separate source of income, it is a method of immediately distributing income from fees earned. I explained this in my previous post above.

Though one might theoretically claim transaction fees from BTS transfers as income to non-transacting BTS owners, it has no impact on valuation because it is not from an external source. It is only a transfer of value between owners. This is clear if you consider what happens if the BTS transaction fee were increased 10x. The net impact on BTS owners is that shareholders activity costs are now ludicrously high, offset by the increased benefit of periods of passive ownership. This is unlikely to make owning BTS more attractive for owners in general.

Increases in bitAsset supply, or increases in BTS collateral, are not forms of income, because they come attached with an offsetting obligation. Let me reiterate a case study I've raised previously. Suppose a company earns a fee from facilitating transactions between lenders and borrowers, where the sole purpose of the borrowing is to buy shares in the same company, and all lending/borrowing is collateralised also by the shares. Now while the company can claim fees as income, and growth in this business places a bid on the shares, the company has no claim on the collateralised shares. Those shares still belong to the borrowers and lenders, and there is a hard-coded obligation for their return should the business decline. They could no more claim this as income than companies in general could claim the funds raised via debt as income (or that brokers could claim their client's segregated funds as income). Yet, this product structure is effectively what a bitAsset is.

So taking into account some of the other points raised by others, I would say:

Income (distributed in the form of burns)
All transaction fees, except those charged against BTS exchanges
Any other fees related to UIAs or other businesses that might be established

Expenses (paid for by inflation/dilution)
Delegate pay

I expect there will be strong differences of opinion, but that's at least the way I see it.

« Last Edit: May 11, 2015, 11:33:31 PM by starspirit »

 

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