Dynamic Burning

[Helikopterben]

The theory (at best) that value rises as supply is diminished does not necessarily work well in practice. 

When has it not worked to increase price?

I just showed you where it has not worked to increase price.  Look at the charts.

To increase "value" you just have to keep adding value to it.

Exactly.  That is why am am proposing adding more value by dynamic burning through the creation of bitassets instead of adding less value through direct burning.

Why wouldn't you want to burn BTS so that it takes less market cap to reach $1 per BTS?

That is exactly what I am advocating.  Either you didn't read what I wrote or you don't understand it.

Deflation is in the form of burning is even better than a stock buy back and also because Bitshares was was diluted, it is now owed to the community of loyal supporters and the network to return the loaned BTS back to parity and the only way to do it is to burn. Burning is the only way to reverse the dilution and bring Bitshares back into deflationary status.

Dynamic burning would be better.  You achieve the same result as burning bitshares or a stock buyback, but those bts remain useful on the network.

Burning is kind of like burying perfectly good gold in the ground and throwing away the treasure map in an attempt to make gold holders richer,

No, Bitshares is not like gold. BitGold is mapped to gold. Bitshares is like Bitshares and should not be compared to a precious metal. Bitshares is stake in the network and the only thing that should matter to you as a member is the percentage of stake you own.

What does this (bolded) even mean?  Bitshares is 3 things (and yes it can be all three of those things):
1)  a digital commodity
2)  a stake in a decentralized company/network
3) a currency

But you were here for the debates and saw the effect on the market the dilution had? The merger? The moment Bitshares became inflationary and stopped being deflationary, a lot of people started dumping, and it's now at bottom.

You don't understand markets.  Maybe you have never been an investor or trader.  Nobody knows exactly what effect the dilution combining of blockchains and restructuring had on price.  Look at ethereum.  There has been no material change in dilution (other than just talk) or their business plan, yet the price has declined 80% in 2 months.  Bitcoin prices rose several orders of magnitude during the worst inflation period it will ever see.  How can these two examples be polar opposites?  Because asset inflation on a relatively small scale doesn't have that much of an impact on price.  Human psycology, the herding instinct, and crowd behavior (among other things) are large drivers of price, probably more so than a little bit of inflation or deflation here and there.  Markets are more or less patterned after human behavior.  Look closely at the price charts of the best crypto projects.  You will notice similar patterns.   

Now that you don't have the 5% dividends the only thing you have to get people to hold BTS is the burning. There is no other reason to hold onto it. BTS isn't a currency, it's not Bitcoin, it's not supposed to be the cash for activists in the developing world. It's meant to be stake in a profitable decentralized exchange.

Thats the only thing, really?  As I said above, bitshares is 3 things, including a currency.  Perhaps you can give some insight as to why bts should not be used as a currency?  In fact, its is the reserve(backbone) currency of the bitshares system. 

while that gold still has perfectly good industrial uses.  Imagine if that gold could still be used in an industrial setting but not available to be sold on the open market.

No let's not imagine that. Bitshares is not gold and never was marketed as gold. BitGold was marketed as gold, but that is because it tracks the value of gold. If you want to hold the value of gold then hold BitGold. Bitshares is a stake, and you gain absolutely nothing from "industrial uses", it's just a stake which you use to vote and pay transaction fees with. It's more like fuel, to power the network, combined with share properties, to make you into a member/owner.

Now you are starting to agree with me even though you are contradicting yourself... and yes obviously bitshares in not gold but it is like gold in the fact that it is an asset with limited supply.

Ownership requires an entirely different way of thinking from the consumer like thinking you're doing. An owner wants to increase the price of whatever he or she owns.

How am I thinking?  I want the price to increase also. 

One example of an asset that does not necessarily add value when the asset is burned is gasoline.  Gasoline is an asset of limited supply that is burned, both literally and figuratively. 

Bitshares is meant to be more like fuel, like gas, not like gold. You're confusing Bitcoin which is maybe based off Bitgold, with Bitshares which was never trying to be a currency, or precious metal. Bitshares in the beginning was described as a DAC, it was always to be a share, and shares are supposed to APPRECIATE.

There you go contradicting yourself again... and gas is like gold in that it is an industrial commodity with limited supply.  Bitshares has the same properties.  It is useful as collateral to produce bitassets.  That why shares should be dynamically burned in order to retain that usefulness.

Bitcoin is gaining value while the price gets cheaper because miners keep inflating by adding new Bitcoins but this is because it was the only way to secure the network.

Your perception of what moves the market is clouded, most likely because you don't have enough experience in trading and investing.  You attribute the price decline over the past 2 years to inflation.  So why has the price risen over the past 6 years, much of which was during even worse inflation.  I agree that inflation on the scale of what fiat currencies experience has detrimental effects on an asset, but small amounts of inflation possilby have a negligible effect... and keep in mind, I am advocating deflation, not inflation.

Bitshares doesn't have mining at all and one of the ways Bytemaster made that case is specifically the fact that mining is inflation and Bitshares can be the first deflationary DAC.

Exactly, and I would like to keep it that way also.

When you hold a Bitasset you are holding Bitshares. Bitassets are made up of BTS. And if you trade then you're spending transaction fees.

Yes but when you are holding a bitasset, you are not holding the value of bitshares.  So why not have more bitassets in existence for users to trade?

This is bad economics. You're talking about treating Bitshares like the dollar and doing some sort of fed like QE propopsal to help the Bitshares economy?

Where did I advocate creating more bitshares?  QE is just a fancy term for inflating the money supply.  Either you don't understand QE or you don't understand my proposal, or both.

Why would people leaving their national currency choose to hold BTS if BTS is inflating too and even faster? This is why it has to be deflationary. If it is deflationary then it's a lot easier for people to hold it without feeling it is risky. The higher the deflation rate the less risk the long term BTS holder will feel they are taking.

Exactly.  That is why I am advocating deflation through dynamic burning... and why are you comparing bitshares to a national currency if bitshares is not a currency.

[luckybit]

The theory (at best) that value rises as supply is diminished does not necessarily work well in practice. 

When has it not worked to increase price? Scarcity is the only mechanism to increase price. Reduced supply with sustained demand results in an increase in price. It is possible that demand might increase very slowly, so having more scarcity would be potentially less risk for long term BTS holders in terms of opportunity cost.

To increase "value" you just have to keep adding value to it. For example Mastercoin never had as much value as Bitshares 2.0 has right now, but the price was higher because there was more scarcity.

The more tokens you have, the higher the market cap will have to be before you can have $1 per BTS. Why wouldn't you want to burn BTS so that it takes less market cap to reach $1 per BTS?

Deflation is in the form of burning is even better than a stock buy back and also because Bitshares was was diluted, it is now owed to the community of loyal supporters and the network to return the loaned BTS back to parity and the only way to do it is to burn. Burning is the only way to reverse the dilution and bring Bitshares back into deflationary status.

 Burning is kind of like burying perfectly good gold in the ground and throwing away the treasure map in an attempt to make gold holders richer,

No, Bitshares is not like gold. BitGold is mapped to gold. Bitshares is like Bitshares and should not be compared to a precious metal. Bitshares is stake in the network and the only thing that should matter to you as a member is the percentage of stake you own.

How do you lose if there are fewer tokens each year? I'm starting to see a bizarre trend lately where people seem to not want Bitshares to be profitable. Lower the fees? Reverse the burning and increase the dilution? But you were here for the debates and saw the effect on the market the dilution had? The merger? The moment Bitshares became inflationary and stopped being deflationary, a lot of people started dumping, and it's now at bottom.

Now that you don't have the 5% dividends the only thing you have to get people to hold BTS is the burning. There is no other reason to hold onto it. BTS isn't a currency, it's not Bitcoin, it's not supposed to be the cash for activists in the developing world. It's meant to be stake in a profitable decentralized exchange.

while that gold still has perfectly good industrial uses.  Imagine if that gold could still be used in an industrial setting but not available to be sold on the open market.

No let's not imagine that. Bitshares is not gold and never was marketed as gold. BitGold was marketed as gold, but that is because it tracks the value of gold. If you want to hold the value of gold then hold BitGold. Bitshares is a stake, and you gain absolutely nothing from "industrial uses", it's just a stake which you use to vote and pay transaction fees with. It's more like fuel, to power the network, combined with share properties, to make you into a member/owner.

Ownership requires an entirely different way of thinking from the consumer like thinking you're doing. An owner wants to increase the price of whatever he or she owns. If BTS is a digital asset then you want the price to rise along with the value. If the price rises we all win, all of us, including developers who could quit their full time jobs at Google, including the witnesses, including the early adopters who would now be able to become professional investors in the global blockchain industry.

One example of an asset that does not necessarily add value when the asset is burned is gasoline.  Gasoline is an asset of limited supply that is burned, both literally and figuratively. 

Bitshares is meant to be more like fuel, like gas, not like gold. You're confusing Bitcoin which is maybe based off Bitgold, with Bitshares which was never trying to be a currency, or precious metal. Bitshares in the beginning was described as a DAC, it was always to be a share, and shares are supposed to APPRECIATE.

No one buys a share in the hope that it will gain in "value" while the price gets cheaper. Bitcoin is gaining value while the price gets cheaper because miners keep inflating by adding new Bitcoins but this is because it was the only way to secure the network. Even still, Satoshi Nakamoto do slow the inflation down over time, until finally it's just transaction fees.

Bitshares doesn't have mining at all and one of the ways Bytemaster made that case is specifically the fact that mining is inflation and Bitshares can be the first deflationary DAC.

Many bitshares users will not choose to buy, hold, or use bts.  They will only want to trade bitassets.

When you hold a Bitasset you are holding Bitshares. Bitassets are made up of BTS. And if you trade then you're spending transaction fees.

Furthermore, many users who do decide to hold bts will not choose to short bitassets into existence.  Therefore, there may be a potential shortage of bitassets.  The network will need these bitassets for liquidity and the way I see it, more bitassets in the system adds to liquidity, which attracts more users. 

To add more bitasset liquidity, I propose that instead of burning bts, those bts be used to generate bitassets using a special transaction where the only redemption of those bts can occur through a liquidation event (margin call). 

This is bad economics. You're talking about treating Bitshares like the dollar and doing some sort of fed like QE propopsal to help the Bitshares economy? That kind of central planning is horrible for something like Bitshares and should be avoided. There is no reason to do it right now and if the network can grow naturally it should be allowed to.

If liquidity is necessary, the best way to get it is to do it the right way. Attract people to Bitshares exchange, attract people to hold BTS because BTS is appreciating in price over time, and show people that they can make money by participating. If you show people they can lose money, either by inflation, dilution, or some complex scheme they cannot understand, then they will not hold BTS.

Why would people leaving their national currency choose to hold BTS if BTS is inflating too and even faster? This is why it has to be deflationary. If it is deflationary then it's a lot easier for people to hold it without feeling it is risky. The higher the deflation rate the less risk the long term BTS holder will feel they are taking.

[Helikopterben]

Tldr:  Instead of directly burning bts, those bts designated for burning should be dynamically burned by using them  to create bitassets through a special transaction where the only redemption of those bts can occur through a liquidation event (margin call), providing liquidity to the network.  Over time as the value of bts increases, this will work to effectively burn those bts while still providing a benefit to the network.  This thread is intended to provoke thought and find out if there is a better way to manage burning that will be most productive for the network. 


The theory (at best) that value rises as supply is diminished does not necessarily work well in practice.  Burning is kind of like burying perfectly good gold in the ground and throwing away the treasure map in an attempt to make gold holders richer, while that gold still has perfectly good industrial uses.  Imagine if that gold could still be used in an industrial setting but not available to be sold on the open market.  Something similar to this may be possible with bts.  Just as gold is a physical commodity, I see bts as a digital commodity (among other things), useful as collateral to generate bitassets on the bitshares blockchain. 

One example of an asset that does not necessarily add value when the asset is burned is gasoline.  Gasoline is an asset of limited supply that is burned, both literally and figuratively.  To reduce the effects of fiat inflation, we can look at the price of US retail gasoline when priced in real money, gold.  As we can see, US retail gasoline is near a 100 year low when priced in gold even though it is constantly burned.  Obviously other factors are at play, such an advances in technology that make producing gasoline cheaper, but the real value of gasoline may not have been significantly affected by a reduction in supply. 


http://pricedingold.com/us-retail-gasoline/


Another example, Natural Gas:


http://pricedingold.com/natural-gas/


Many bitshares users will not choose to buy, hold, or use bts.  They will only want to trade bitassets.  Furthermore, many users who do decide to hold bts will not choose to short bitassets into existence.  Therefore, there may be a potential shortage of bitassets.  The network will need these bitassets for liquidity and the way I see it, more bitassets in the system adds to liquidity, which attracts more users. 

To add more bitasset liquidity, I propose that instead of burning bts, those bts be used to generate bitassets using a special transaction where the only redemption of those bts can occur through a liquidation event (margin call).  Once created, those bitassets can then be sold on the open market and freely traded by users of the system.  Also, bitassets can be generated for markets where there is high demand.  Over time, as the value of bts rises, many of those bts will be effectively burned, while still being useful as collateral for bitassets. 

For example, right now the bts/usd pair is trading at a rate of 247bts for 1usd.  To achieve a call price of 500bts/usd, a collateral level of 877bts can be used at a collateral ratio of 3.55 to create 1usd.  This would allow for a 50% decline in price until the position is margin called and those bts put back into circulation.  However, if the exchange rate rises to 1bts for 1usd, then the price will have to fall by 99.6% in order for that dollar to be liquidated, effectively burning those 877bts into a permanent 1usd on the blockchain, making those 877bts still useful to the network but not available to the sold for any other asset outside of the blockchain.