Author Topic: Burning is Still Alive and Well  (Read 10018 times)

0 Members and 1 Guest are viewing this topic.

Offline bytemaster

My opinion...

We need to understand the two separate concepts of income (increases value of BTS) versus distribution (application of income earned).

Burning is not a source of income. It is a distribution of income. Burning is not the main goal of BTS to increase value.

Revenue is earned when money comes into the system from things such as transaction fees. It used to be that revenues and burning occurred simultaneously, thus the past confusion of the two concepts. That is, transaction fees were used to instantly buy BTS and burn any excess not payable to the delegates. This represented an instant distribution of income to all owners, because there was no way for the business to hold it as a reserve.

The new approach will change that, by holding the BTS in reserve instead of burning it. So when the fees are earned (in excess of pay to witnesses), that is earned revenue that goes into the pool, which is owned by BTS. From that expenses are paid to the workers. The remainder is the net profit of the business.

The choices from there are what to do with that profit. Do you distribute it - i.e. burn it? Or do you reinvest it - i.e. use it to fund other work or projects? Or do you even use if for strategic purposes - i.e. to fund acquisitions etc? The quality of the decisions made in these areas will ultimately determine what value the marketplace is willing to place upon BTS. So we need to ensure those are truly wise decisions. There is no point in burning for the sake of appearances as long as there exist better ways to reinvest that money, especially early in our growth cycle. At the point of saturation there is no point in reinvesting, and all profits should be burned. But its good to have both options.

There are other choices too. If we spend more on witnesses and workers than we earn in fees etc, then we are making a loss, which dilutes the business. This can make sense for a startup, but from an investors' perspective, only with a convincing plan to move it to state of future profit (or make a trade sale to another party, but I assume that's not the end goal). The notional amount of BTS to be initially allocated to the reserve pool (ie. 1.2 bn BTS) is a signal to the market as to how much we are willing to dilute the business before eventually turning a profit. From an investor's perspective, the bigger this pool, the longer the time I expect I'll have to wait before BTS is profitable. For example, if we believed we could be profitable in 3 years, there would be no need for 1.2bn BTS to exist as a dilutionary spending reserve. Of course maybe we are just being really conservative, and conservative management is not a bad thing either. I'm not sure what the right figure should be, but hopefully this gives you some idea of how investors might look at things.
This nicely explains the new bare bones of DPOS 2, just add crypto
 +5% More great insight from startspirit

+1 

I look at is as a flywheel that can smooth out ups and downs in the business cycle.   
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 Ander

  • Hero Member
  • *****
  • Posts: 3506
    • View Profile
  • BitShares: Ander

The new approach will change that, by holding the BTS in reserve instead of burning it. So when the fees are earned (in excess of pay to witnesses), that is earned revenue that goes into the pool, which is owned by BTS. From that expenses are paid to the workers. The remainder is the net profit of the business.

The choices from there are what to do with that profit. Do you distribute it - i.e. burn it? Or do you reinvest it - i.e. use it to fund other work or projects? Or do you even use if for strategic purposes - i.e. to fund acquisitions etc?

Well said.

This change allows us to allocate revenues however shareholders feel is best.  Either dividend (burning), paying for workers to build Bitshares, or by saving it for later (putting it in the reserve reserve fund).  Like a real business. :)

Its important that we have the possibility of burning so that we can pay dividends in the future.  (As the ultimate end goal of a business should be to eventually make profits and distribute them to shareholders).  As you said, in the current startup phase, operating at a loss is expected and is acceptable to fuel growth.
https://metaexchange.info | Bitcoin<->Altcoin exchange | Instant | Safe | Low spreads

Offline Permie

  • Hero Member
  • *****
  • Posts: 606
  • BitShares is the mycelium of the financial-earth
    • View Profile
  • BitShares: krimduss
My opinion...

We need to understand the two separate concepts of income (increases value of BTS) versus distribution (application of income earned).

Burning is not a source of income. It is a distribution of income. Burning is not the main goal of BTS to increase value.

Revenue is earned when money comes into the system from things such as transaction fees. It used to be that revenues and burning occurred simultaneously, thus the past confusion of the two concepts. That is, transaction fees were used to instantly buy BTS and burn any excess not payable to the delegates. This represented an instant distribution of income to all owners, because there was no way for the business to hold it as a reserve.

The new approach will change that, by holding the BTS in reserve instead of burning it. So when the fees are earned (in excess of pay to witnesses), that is earned revenue that goes into the pool, which is owned by BTS. From that expenses are paid to the workers. The remainder is the net profit of the business.

The choices from there are what to do with that profit. Do you distribute it - i.e. burn it? Or do you reinvest it - i.e. use it to fund other work or projects? Or do you even use if for strategic purposes - i.e. to fund acquisitions etc? The quality of the decisions made in these areas will ultimately determine what value the marketplace is willing to place upon BTS. So we need to ensure those are truly wise decisions. There is no point in burning for the sake of appearances as long as there exist better ways to reinvest that money, especially early in our growth cycle. At the point of saturation there is no point in reinvesting, and all profits should be burned. But its good to have both options.

There are other choices too. If we spend more on witnesses and workers than we earn in fees etc, then we are making a loss, which dilutes the business. This can make sense for a startup, but from an investors' perspective, only with a convincing plan to move it to state of future profit (or make a trade sale to another party, but I assume that's not the end goal). The notional amount of BTS to be initially allocated to the reserve pool (ie. 1.2 bn BTS) is a signal to the market as to how much we are willing to dilute the business before eventually turning a profit. From an investor's perspective, the bigger this pool, the longer the time I expect I'll have to wait before BTS is profitable. For example, if we believed we could be profitable in 3 years, there would be no need for 1.2bn BTS to exist as a dilutionary spending reserve. Of course maybe we are just being really conservative, and conservative management is not a bad thing either. I'm not sure what the right figure should be, but hopefully this gives you some idea of how investors might look at things.
This nicely explains the new bare bones of DPOS 2, just add crypto
 +5% More great insight from startspirit
JonnyBitcoin votes for liquidity and simplicity. Make him your proxy?
BTSDEX.COM

Offline starspirit

  • Hero Member
  • *****
  • Posts: 948
  • Financial markets pro over 20 years
    • View Profile
  • BitShares: starspirit
My opinion...

We need to understand the two separate concepts of income (increases value of BTS) versus distribution (application of income earned).

Burning is not a source of income. It is a distribution of income. Burning is not the main goal of BTS to increase value.

Revenue is earned when money comes into the system from things such as transaction fees. It used to be that revenues and burning occurred simultaneously, thus the past confusion of the two concepts. That is, transaction fees were used to instantly buy BTS and burn any excess not payable to the delegates. This represented an instant distribution of income to all owners, because there was no way for the business to hold it as a reserve.

The new approach will change that, by holding the BTS in reserve instead of burning it. So when the fees are earned (in excess of pay to witnesses), that is earned revenue that goes into the pool, which is owned by BTS. From that expenses are paid to the workers. The remainder is the net profit of the business.

The choices from there are what to do with that profit. Do you distribute it - i.e. burn it? Or do you reinvest it - i.e. use it to fund other work or projects? Or do you even use if for strategic purposes - i.e. to fund acquisitions etc? The quality of the decisions made in these areas will ultimately determine what value the marketplace is willing to place upon BTS. So we need to ensure those are truly wise decisions. There is no point in burning for the sake of appearances as long as there exist better ways to reinvest that money, especially early in our growth cycle. At the point of saturation there is no point in reinvesting, and all profits should be burned. But its good to have both options.

There are other choices too. If we spend more on witnesses and workers than we earn in fees etc, then we are making a loss, which dilutes the business. This can make sense for a startup, but from an investors' perspective, only with a convincing plan to move it to state of future profit (or make a trade sale to another party, but I assume that's not the end goal). The notional amount of BTS to be initially allocated to the reserve pool (ie. 1.2 bn BTS) is a signal to the market as to how much we are willing to dilute the business before eventually turning a profit. From an investor's perspective, the bigger this pool, the longer the time I expect I'll have to wait before BTS is profitable. For example, if we believed we could be profitable in 3 years, there would be no need for 1.2bn BTS to exist as a dilutionary spending reserve. Of course maybe we are just being really conservative, and conservative management is not a bad thing either. I'm not sure what the right figure should be, but hopefully this gives you some idea of how investors might look at things.

Offline Ander

  • Hero Member
  • *****
  • Posts: 3506
    • View Profile
  • BitShares: Ander
In the 3 way split variant we can answer the question – ‘What is this burning thing actually do’ – by saying ‘We burn part of the income generated by the DAC as a dividend for the shareholders’, while with the worker-burner the answer is less powerful - 'We are reducing the theoretical maximum supply of BTS'.

Please, consider.

I think those two are the same thing.  Reducing theoretic max supply is a dividend.

We as a community should make sure to vote in some burn workers as well.


Right now paid delegates are at less than 40% of the max possible pay of 50BTS per 10 seconds.  That is, less than 2 BTS per second. I am hoping that we will set the inflation rate in new Bitshares 2.0 at less than 2 BTS per second as well, using burn workers.

In fact, we can probably remove some marketing workers, since marketing will be paid by referrals now, so we can probably get the pay under 1.5 BTS a second.


If we want to increase it to pay for something awesome, of course, then we could do that.  But I would like to see some BTS get burned.
https://metaexchange.info | Bitcoin<->Altcoin exchange | Instant | Safe | Low spreads

Offline Ander

  • Hero Member
  • *****
  • Posts: 3506
    • View Profile
  • BitShares: Ander
Awesome, this burn worker solves the problem entirely!  (I assume it will be implemented in a reasonable way).

All our devs are awesome, by the way. :)

I am very impressed by the whole 2.0 plan.
https://metaexchange.info | Bitcoin<->Altcoin exchange | Instant | Safe | Low spreads

Offline Frodo

  • Sr. Member
  • ****
  • Posts: 351
    • View Profile
  • BitShares: frodo
1. There is no more BTS burning. No more dividends

....Anyway this matter is easily fixable – by setting 3 way split instead of the proposed 2 way (80%/20% for referral program/ future spending’s fund), by just adding % to be burnt

Of course there is another way to do this, another way which allows actually even more aggressively  removing/burning of BTS

https://github.com/cryptonomex/graphene/issues/37

Thanks for listening to the feed back from the community BM!  +5%

 +5%

Yes  +5%. And this is why I love this project so much.

Albeit I would prefer the three way split tonyk propsed if it can be realized with comparable resources.

Offline xeroc

  • Board Moderator
  • Hero Member
  • *****
  • Posts: 12922
  • ChainSquad GmbH
    • View Profile
    • ChainSquad GmbH
  • BitShares: xeroc
  • GitHub: xeroc
I like tony's proposal .. its jus another parameter that can be definrd by the delegates

Offline tonyk

  • Hero Member
  • *****
  • Posts: 3308
    • View Profile
1. There is no more BTS burning. No more dividends

....Anyway this matter is easily fixable – by setting 3 way split instead of the proposed 2 way (80%/20% for referral program/ future spending’s fund), by just adding % to be burnt

Of course there is another way to do this, another way which allows actually even more aggressively  removing/burning of BTS

https://github.com/cryptonomex/graphene/issues/37

Thanks for listening to the feed back from the community BM!  +5%

While this proposal will certainly achieve the main goal – actual burning of BTS. I still find burning % of the fees generated more straightforward (aka 3 way split of the fees between referral/burning/retuned to the fund) – because that way the DAC will be burning some of the actually generated income of the DAC as a dividend, as opposed to some arbitrary amount from the fund in this proposal.

In the 3 way split variant we can answer the question – ‘What is this burning thing actually do’ – by saying ‘We burn part of the income generated by the DAC as a dividend for the shareholders’, while with the worker-burner the answer is less powerful - 'We are reducing the theoretical maximum supply of BTS'.

Please, consider.
« Last Edit: June 10, 2015, 02:15:09 pm by tonyk »
Lack of arbitrage is the problem, isn't it. And this 'should' solves it.

Offline nomoreheroes7

  • Hero Member
  • *****
  • Posts: 756
  • King of all the land
    • View Profile
  • BitShares: nomoreheroes7
1. There is no more BTS burning. No more dividends

....Anyway this matter is easily fixable – by setting 3 way split instead of the proposed 2 way (80%/20% for referral program/ future spending’s fund), by just adding % to be burnt

Of course there is another way to do this, another way which allows actually even more aggressively  removing/burning of BTS

https://github.com/cryptonomex/graphene/issues/37

Thanks for listening to the feed back from the community BM!  +5%

 +5%

 +5% +5% +5%

Burn baby burn!

Offline fav

  • Hero Member
  • *****
  • Posts: 4278
  • No Pain, No Gain
    • View Profile
    • Follow Me!
  • BitShares: fav
1. There is no more BTS burning. No more dividends

....Anyway this matter is easily fixable – by setting 3 way split instead of the proposed 2 way (80%/20% for referral program/ future spending’s fund), by just adding % to be burnt

Of course there is another way to do this, another way which allows actually even more aggressively  removing/burning of BTS

https://github.com/cryptonomex/graphene/issues/37

Thanks for listening to the feed back from the community BM!  +5%

 +5%

Offline tonyk

  • Hero Member
  • *****
  • Posts: 3308
    • View Profile
1. There is no more BTS burning. No more dividends

....Anyway this matter is easily fixable – by setting 3 way split instead of the proposed 2 way (80%/20% for referral program/ future spending’s fund), by just adding % to be burnt

Of course there is another way to do this, another way which allows actually even more aggressively  removing/burning of BTS

https://github.com/cryptonomex/graphene/issues/37

Thanks for listening to the feed back from the community BM!  +5%
Lack of arbitrage is the problem, isn't it. And this 'should' solves it.

Offline infovortice2013

  • Board Moderator
  • Hero Member
  • *****
  • Posts: 521
    • View Profile
    • BitShares en español
  • BitShares: traderx
before the burned fees means that all comisions for tranfers and trades are going back to users pocket, now go to bitshares pocket. quite sutile.
New Keyoteeid: 5rUhuLCDWUA2FStkKVRTWYEqY1mZhwpfVdRmYEvMRFRD1bqYAL
new08/21 id 5Sjf3LMuYPSeNnjLYXmAoHj5Z6TPCmwmfXD6XwDmg27dwfQ

Offline btswildpig

  • Hero Member
  • *****
  • Posts: 1424
    • View Profile
So BTS are removed from the market if growth isn't occurring, but if it is those BTS get used to facilitate more growth?

Clever compromise.  +5%

I don't think that's the case .
Unless the standard for such operation is based on price feed in a period of time instead of so called shareholder votes , then the result of this operation can not always fits the actual market condition .
这个是私人账号,表达的一切言论均不代表任何团队和任何人。This is my personal account , anything I said with this account will be my opinion alone and has nothing to do with any group.

merockstar

  • Guest
So BTS are removed from the market if growth isn't occurring, but if it is those BTS get used to facilitate more growth?

Clever compromise.  +5%