So basically what we are saying is that the level of dilution that is considered acceptable for a currency (in competition with Bitcoin etc) is not sufficient to fund the level of development we are aspiring to. And as a result the cost of that development needs to be defrayed across multiple networks through CNX licensing out that technology.
But have we exhausted all the ways in which the development could be internally funded?
Below I've just brainstormed a bit on internal funding approaches to open what might be an interesting and curly discussion about these and other ideas people might have. They are not mutually exclusive, and they do not necessarily preclude the CNX/license approach either - possibly some of these could be complementary.
I'm not recommending any of these approaches right now, as they come loaded with enormous philosophical arguments about what bitShares really is
or might be
(e.g. startup business, currency, something else...). I can guarantee the community would be up in arms on just about any of these approaches! So nobody get their knickers in a knot
1. "Equity dilution"
- What if we gave up on the notion that BTS is like a currency? We could treat it more like a startup business. First we would need a clear profit model for our core products - that is, how will these be monetised and what could they be worth. Then, there would be no reason why we could not dilute $2m worth of shares in a year, if we thought that was the investment required for the project to deliver a revenue stream well in excess of this down the track. If the market embraces the direction of the business, capital gains should more than exceed the dilution.
2. Investment Loans
- What if we borrowed from the market for investment purposes, effectively leveraging the business? For example, we issue $2m USD loan tokens to the market, paying say 25% pa (or a market-determined rate), repayable in 2 or 3 years. Payment is made at expiry by the block-chain diluting the necessary value of BTS shares. If the business has invested well, the market cap should have risen by much more than $2m. If there is not sufficient equity for payment, loans may need to be rolled if the market is willing, or else default terms would kick in.
[A side point on approaches 1. and 2. which treat bitShares as a start-up business. Eventually when the business revenue exceeds the need for investment, the business would no longer need dilution (from equity or loans), and would be self-funding through profit. And ultimately when the business builds a decreasingly risky utility-like income stream, it could be bid up to the point where the yield is quite low and the main utility of BTS is as a currency. This could be an alternative path to eventual currency status.]
3. Project equity
- Development projects could be privatised as far as possible, where there is a clear revenue stream possible. Developers can either take the risk themselves, share it with a group of backers, or take a salary and pass it all to the backers. At a granular level, it may even be possible that any modules accepted into the core protocol could receive a revenue stream from its direct use, or use by other modules.
- there may simply be people that would like to donate to the cause and evolution of bitShares. This could be for their own philosophical reasons, or perhaps they may hope to get network advertising or other benefits from it.