Author Topic: Would you support 2% dilution to BitAsset Yield for a 6 month limited trial?  (Read 15682 times)

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Offline Empirical1.2

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Terms
2% BTS dilution to BitAsset Yield for 6 months.  (At the current BTS valuation that would translate to circa $100 000 total over 6 months)

Cost to Shareholders
Low cost to you, if you yield harvest.  (Go long and short the BitAsset, so your BTS position stays the same but you get the yield)

Expected Benefits
- BitUSD would go from having the lowest Crypto USD market share to being the Market Leader
- BitUSD will offer more variable yield than you could get on a USD based savings account virtually anywhere
- BTS would be removed from centralized exchanges (Polo & BTC38 currently hold >300 million BTS I believe)
- BitUSD liquidity incentive operations may be cheaper once millions of BitUSD have been created
- BTS shareholders would become users of the DEX and holders of the Smartcoin product we are trying to bootstrap.

Conclusion
The cost to shareholders if they yield harvest is very low but the benefits are possibly very large.
It will be a 6 month trial and can be discontinued if shareholders are unhappy with the results.

Optional Variations
- The BitAsset Yield trial can either be applied to BitUSD only or BitUSD and BitCNY.
- 1% dilution could be used instead, the impact would be lower but so would the cost.
- Up to half the dilution can go to BitAsset shorts so that we bring them closer to the peg.   
 
Considerations
-Due to forced settlement at 100%, BitUSD already trades above the peg. It may be a good idea to reduce forced settlement to a lower amount if this was implemented.
- There will be probably be a coding cost to implement yield

The thread discussing the concept in more detail is here https://bitsharestalk.org/index.php/topic,21547.0.html
« Last Edit: February 23, 2016, 10:21:54 am by Empirical1.2 »
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Offline tbone

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Anyone who cares about the future of Bitshares should strongly consider getting behind this proposal.  The cost is low, and the benefits are great.  And we need something like this ASAP.  I would be in favor of focusing this effort fairly equally on BitUSD and BitCNY, perhaps a little less than proportional to the exchange rate.  The current exchange rate is about 6.5 to 1, so I'm thinking something like ~4 to 1.  I would also be in favor of directing a small amount to BitEUR from the start.  So maybe a breakdown of 75% BitUSD, 20% BitCNY, and 5% BitEUR.  Any thoughts?

My main question at this point is, what would the development cost be to add yield?  I'm guessing not too costly.  [member=5]bytemaster[/member], can you please give a very rough estimate? 

Another question I have is, how does this proposal make it cheaper to incentivize liquidity?  Thanks in advance.

Offline JonnyB

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I'm not sure I understand.

Are you saying if I create bitusd and keep it I will get a 1% yeild on it?
I run the @bitshares twitter handle
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Offline Akado

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What this seems to create though is a higher premium on the BitAssets and shorts once again have less incentives? I guess people could "Go long and short the BitAsset, so your BTS position stays the same but you get the yield"? I'm not sure about this but it's what I've read a few times already about this.

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I think that 2% is more than enough. I would suggest a 4-5% APR to whoever qualifies depending on what BM and the community say. I liked BM's proposal and I could go with it. If we suppose that they get 4-5% per year, with 25% of the bitshares are traded on the DEX and with 50% of the traders qualifying for the rewards (i.e based on BM's proposal), the dilution would be 0.5%-0.625% per year.

The numbers are a rough estimate, but let's be honest. Not more than 25% of the shares are going to be traded constantly and not more than half of them are going to qualify for the rewards. We would need 50% and 100% respectively to go above the 2-2.5% per year.

Offline cylonmaker2053

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I'm not sure I understand.

Are you saying if I create bitusd and keep it I will get a 1% yeild on it?

i'd also like to know this answer, though it looks like the proposal is something like a 4% yield for borrowing bitUSD short?

What exactly do we mean by dilution anyway? I thought the blockchain specks set BTS supply up front and that can't be changed? I'm uncomfortable with thinking that anyone can vote on changing the supply. Why not recycle fees from the USD-BTS market into some sort of yield instead of diluting?

Offline ebit

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Zero interest rates are good enough in Japan,do not too greedy。
If you want to give Yield  ,you can donation 。
Interest come from business not from dilution .
Where do interest rates come from?

If BTS is money ,dilution will damage BTS.
If BTS is shares, dilution is bluff.
« Last Edit: February 24, 2016, 02:30:54 am by ebit »
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Offline sudo

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Zero interest rates are good enough in Japan,do not too greedy。
If you want to give Yield  ,you can donation 。
Interest come from business not from dilution .
Where do interest rates come from?

 +5% +5% +5% +5% +5% +5% +5% +5% +5%

Offline sudo

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does bank ‘s Yield  come from dilution???????????
NO!!!!!!!!!!!!!!
who lend the money  support the  Yield !!!!!!!!!

Offline sudo

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bitUSD still lack
you give bitUSD  bitasset?
are you  out of mind?????

Offline Empirical1.2

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I'm not sure I understand. Are you saying if I create bitusd and keep it I will get a 1% yeild on it?

You should get at least 4% yield p.a on your BitUSD for the 6 months of this trial. (However because you would have to be short BitUSD with half your stake if you wanted your original BTS stake to remain the same, then your effective yield would be at least 2% p.a overall for the duration of this trial. Which would at the very least compensate you for the 2% dilution.)

Explanation:
If we diluted  BTS at 2% a year, that would be $200 000 at the current $10 million CAP.
About $5 million BitUSD can be created at this CAP (because the other $5 million needs to be short BitUSD)

$200 000 on a maximum $5 million BitUSD is a minimum of 4% BitUSD yield per year.

So the dilution for yield is circular in that every shareholder can avoid being diluted by being long BitUSD and short BitUSD at the same time.  (Unless total BitUSD in circulation was > 1/2 the total value of BTS which is possible if millions of BitUSD were created and the BTS price declined. However we could create limits to avoid this & as many shareholders will not participate, the yield will more than likely over-compensate you.)

What this seems to create though is a higher premium on the BitAssets and shorts once again have less incentives? I guess people could "Go long and short the BitAsset, so your BTS position stays the same but you get the yield"? I'm not sure about this but it's what I've read a few times already about this.

Yes go long BitUSD with half your BTS position at 1-1 and short BitUSD with half your BTS stake at 1-1. Then your BTS stake would remain the same overall regardless whether BTS went up or down but provided total BitUSD in circulation is less than 1/2 the value of BTS in total then you would be receiving enough yield on the BitUSD to compensate you for the amount BTS was being diluted.

Regards the increased BitUSD premium. Yes, people would be attracted to become long only BitUSD thanks to yield, which is good as it would create demand for BTS. They would be buying $1 worth of BTS today to get a few cents yield  over the year so this should have a positive BTS price effect. (I would suggest though that we lower forced settlement so BitUSD doesn't trade too far above the peg and as tonyk suggests you could give some of the yield to the short side too to make it closer to 1-1 as opposed to new longs offering a large premium.)

I think that 2% is more than enough. I would suggest a 4-5% APR to whoever qualifies depending on what BM and the community say. I liked BM's proposal and I could go with it. If we suppose that they get 4-5% per year, with 25% of the bitshares are traded on the DEX and with 50% of the traders qualifying for the rewards (i.e based on BM's proposal), the dilution would be 0.5%-0.625% per year.
The numbers are a rough estimate, but let's be honest. Not more than 25% of the shares are going to be traded constantly and not more than half of them are going to qualify for the rewards. We would need 50% and 100% respectively to go above the 2-2.5% per year.

I haven't seen BM's proposal on this?

I'm not sure I understand. Are you saying if I create bitusd and keep it I will get a 1% yeild on it?
i'd also like to know this answer, though it looks like the proposal is something like a 4% yield for borrowing bitUSD short?
What exactly do we mean by dilution anyway? I thought the blockchain specks set BTS supply up front and that can't be changed? I'm uncomfortable with thinking that anyone can vote on changing the supply. Why not recycle fees from the USD-BTS market into some sort of yield instead of diluting?

BTS shareholders can currently vote for dilution up to 5BTS/sec under the current specs  https://bitshares.org/technology/stakeholder-approved-project-funding/

I'm personally against most forms of dilution however this one wouldn't effect me or you if you 'yield harvest', go long BitUSD with half your stake and short BitUSD with the other half. The yield you received on your BitUSD half would be equal too or overcompensate you for the amount BTS was being diluted. However the benefits of incentivizing all of us to remove our BTS from the centralized exchanges and become holders of BitUSD and use the DEX are very large as described in the OP. 

Zero interest rates are good enough in Japan,do not too greedy。
If you want to give Yield  ,you can donation 。
Interest come from business not from dilution .
Where do interest rates come from?
If BTS is money ,dilution will damage BTS.
If BTS is shares, dilution is bluff.

Imagine if you had $100 and I took $2 but said you could have it back if you clapped your hands.
Then you haven't been diluted you still have $100, all I have made you do is clap your hands.

Imagine if we taxed BTS holders 2BTS per 100 BTS per year but then gave it back to them if they clicked a button.
On your account you would see 100 BTS - 2BTS = 98 BTS but then when you clicked a button you would get your 2 BTS back.
This 2BTS came from a tax/dilution but it didn't cost you anything because you just have to click a button to get it back.

Imagine if we taxed BTS holders 2BTS per 100 BTS per year but then gave it back to them if they yield harvested BitCNY. (Went long and short)
Your BTS Stake would be diluted by 2BTS a year but the yield you received on your long BitCNY position would return it to you.
This 2% dilution came from a tax but it didn't cost you anything because you just have to yield harvest BitCNY.

does bank ‘s Yield  come from dilution???????????
NO!!!!!!!!!!!!!!
who lend the money  support the  Yield !!!!!!!!!

A bank can't give you yield on your dollars without finding new dollars or taking the dollars from new people coming in. This is bad  :'(

However if a bank had 10 million shares and then they created 200 000 shares but gave it back to shareholders. Then every shareholder
would have 1.02 per 1 share. Nobody would lose.

If a bank had 10 million shares and then they created 200 000 shares but gave it back to shareholders who opened an account at the bank then every shareholder who opened a bank account would have at least 1.02 per 1 share and only people who didn't open an account would lose. However the bank would have turned all their shareholders into account holders.

So in BTS the yield comes from BTS shareholders, but gets paid back to BTS shareholders if they 'yield harvest' (Go long and short at the same time.)  By getting you to do this we create a lot of BitCNY/BitUSD with a lot of users and help bootstrap Smartcoins.
The BTS shareholders that lose are those that keep their BTS on the centralized exchanges and don't 'yield harvest'

What about yield harvesting?
Every time I say I support a proposal like this, Stan comes
along and says remember what we learned about yield harvesting and everyone says "oh yeah" and the thread dies

In 1.0, I believe BM was right that yield harvesting was bad, because shorts would offer yield to entice longs which went into a large pool but then BTS shareholders would yield harvest, thereby reducing the average yield and discouraging genuine longs.

In this example where we send dilution to the yield, yield harvesting is a great thing because it means shareholders aren't diluted as long as they yield harvest. However it acts as a behaviour incentive to get BTS holders to remove their BTS from the centralized exchanges (which is a big positive) and support Smartcoins by creating BitUSD with half their stake (Which is a big positive).


« Last Edit: February 24, 2016, 04:27:46 am by Empirical1.2 »
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Offline Brekyrself

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Who exactly is the target of this proposal?

At a high level people with BTS on exchanges want to trade BTS along with other crypto.  One minute they hold BTS, the next something else they think will rise.  A few % may not be enough for them to be motivated to move their bts onto the internal exchange.

What would stop 3rd party exchanges from taking advantage of this?

Offline Empirical1.2

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Who exactly is the target of this proposal?

At a high level people with BTS on exchanges want to trade BTS along with other crypto.  One minute they hold BTS, the next something else they think will rise.  A few % may not be enough for them to be motivated to move their bts onto the internal exchange.

What would stop 3rd party exchanges from taking advantage of this?

We claim to be a DEX that is not exposed to a Mt. GOX but with so much BTS on both Poloniex and BTC38 we are very exposed to a hack/default/voting/other of those particular exchanges. So incentivizing BTS off them will be a big positive. (Incentivizing that BTS to then create Smartcoins will be a further positive still.)

Quote
Who exactly is the target of this proposal?

- BTS shareholders who keep their BTS on the DEX but don't learn to use it or participate in SmartCoin creation as it's not worth the hassle.
- BTS shareholders who keep too much of their BTS on centralized exchanges as it's not worth the hassle to either move some of it to the DEX or participate in SmartCoin creation. (However yes there are % of crypto-speculators who will still find greater value in keeping most of their BTS on centralized exchanges even though they have an extremely high long term failure rate. In this blog BM lists some of the benefits of rewarding helpful investors over speculators http://bytemaster.github.io/article/2016/01/04/The-Benefits-of-Proof-of-Work/ )
- Potential BitUSD customers who might recognise the benefits of fully collateralized USD on a DEX but need the additional USP of yield to say hell yeah, this is better than NuBits/Uphold or even my regular bank and worth the effort.

Quote
What would stop 3rd party exchanges from taking advantage of this?

Nothing. AFAIK DASH offers Masternode rewards, PPC offers minting and other POS alts offer various fairly circular rewards to incentivise network beneficial behaviour but I'm not sure how many exchanges participate in these as it's not part of their business model. If exchanges chose to participate with BTS that couldn't be incentivised to be removed anyway, they would at least be helping to rapidly propel BitUSD to Crypto USD market leader.

Uphold  $2 million
Tether   $1.4 million
Nubits   $0.78 Million
BitUSD  $0.098 Million 

The other thing BTS is trying to do is encourage BitAsset liquidity however incentivising the creation of new BitUSD via a long meeting a short may be harder & more expensive than incentivising some of the millions of BitUSD that will have already been created via this initiative to participate in market making operations. https://bitsharestalk.org/index.php/topic,21547.msg281099.html#msg281099


« Last Edit: February 24, 2016, 07:30:40 am by Empirical1.2 »
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Offline Samupaha

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I'm not sure I understand. Are you saying if I create bitusd and keep it I will get a 1% yeild on it?
i'd also like to know this answer, though it looks like the proposal is something like a 4% yield for borrowing bitUSD short?
What exactly do we mean by dilution anyway? I thought the blockchain specks set BTS supply up front and that can't be changed? I'm uncomfortable with thinking that anyone can vote on changing the supply. Why not recycle fees from the USD-BTS market into some sort of yield instead of diluting?

BTS shareholders can currently vote for dilution up to 5BTS/sec under the current specs  https://bitshares.org/technology/stakeholder-approved-project-funding/

I'm personally against most forms of dilution however this one wouldn't effect me or you if you 'yield harvest', go long BitUSD with half your stake and short BitUSD with the other half. The yield you received on your BitUSD half would be equal too or overcompensate you for the amount BTS was being diluted. However the benefits of incentivizing all of us to remove our BTS from the centralized exchanges and become holders of BitUSD and use the DEX are very large as described in the OP. 

I'd really really really like to people stop talking about dilution. If I understand your proposal right, you essentially mean that there would be a worker that distributes BTS for bitUSD-owners.

So the question isn't that should we dilute or not dilute, because we have 5 BTS/s to be used for workers anyway. The real question is about prioritizing. Is this proposal good when compared to other worker proposals? Is this really a profitable way of using development funds (aka reserve pool)?

Offline tbone

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If a bank had 10 million shares and then they created 200 000 shares but gave it back to shareholders who opened an account at the bank then every shareholder who opened a bank account would have at least 1.02 per 1 share and only people who didn't open an account would lose. However the bank would have turned all their shareholders into account holders.

This is an excellent analogy and really helps demonstrate the basic mechanics of your proposal.  Like the bank shareholders in your example, all BTS holders have to do is move their BTS to the DEX and short BitAssets to themselves, and there will be zero cost to them. 

By the way, you mentioned the only people that "lose" are the bank shareholders that don't open an account, or in our case the BTS holders that don't participate in yield harvesting.  Although I would argue that it could easily be a net wash (or better) for them since this whole effort will ultimately add value to the entire network, which would accrue to all shareholders, even those with BTS on the exchanges.  Of course, they just wouldn't benefit as much as those who are yield harvesting.

The more I think about this idea, the more I like it.  And so far no one has poked any holes in it as far as I've seen.  I also love that this would position us to have a voluntary liquidity pool, which I assume could be plugged into the market maker rewards program being discussed on another thread.  In that case, I imagine such a liquidity pool could be used to provide liquidity not just for BitAssets, but for ANY asset.  Just imagine what it would mean to have such market making operations in terms of supporting/bootstrapping markets for promising new coins that aren't trading elsewhere.  The most recent one was Decred, which still isn't trading on Poloniex.  That could have been a good opportunity for us to gain attention and users, and may actually still be.  Also, there is another very promising ICO coming up and just imagine what it would mean if we could become the dominant exchange for that coin?

C'mon people, let's get behind this proposal.  It's low cost and we stand to bootstrap the heck out of our BitAssets product.  That alone will gain us a lot of attention.  But more importantly, it is INCREDIBLY crucial to jump start BitAssets ASAP, especially considering [member=30868]kenCode[/member]'s POS system will soon be ready and we should be in position to use that as a very powerful network effect generator.  Without bootstrapping BitAssets, we totally lose out on that and much more, and in that case we might as well just give up.  Seriously.     

So what are we waiting for?