Author Topic: Would you support 2% dilution to BitAsset Yield for a 6 month limited trial?  (Read 15683 times)

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Offline Empirical1.2

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i voted YES purely on the condition that this is a LIMITED TRIAL with perpetuation of the policy contingent on results.

I, too, am in favor of limiting this to a 6-month trial.  I propose targeting it 75% to BitUSD, 20% BitCNY and 5% BitEur, with a goal of creating the equivalent of at least $1M in total BitAssets.  Also, to receive yield, perhaps it should be required to lock up funds for a month at a time.  So yield would be paid every month starting 1 month after lock-up (on an account by account basis), and early withdrawal means yield is forfeited. 

So we get people to move funds onto the DEX, they become more frequent users of the DEX, and create BitAssets propelling us to worldwide fiat-pegged leaders, which will garner greater overall attention for Bitshares in general and our smartcoins in particular.  Not to mention new users that might be attracted by the yield to buy and hold smartcoins.

On the liquidity front, we can launch this in conjunction with liquidity pools that any of these new users and new BitAsset creators/holders can voluntarily participate in.  This can be incentivized by the Nasdaq-style market maker liquidity rewards program (to be developed separately, discussed on another thread), which of course any liquidity provider can participate in (and which UIA issuers can use with their own funds to incentivize liquidity in the markets for their own assets). 

If we require generation of more liquidity, the rewards can be increased as necessary.  Conversely, as liquidity grows, the rewards can be diminished and directed to other BitAsset  markets such as BitGOLD, BitSILVER, BitOIL, BitAAPL, etc. 

These are just some suggestions and starting points for further discussion, including how some of the pieces of the puzzle might fit together.  Thoughts [member=32211]Empirical1.2[/member], [member=36696]cylonmaker2053[/member]?  Anyone else with constructive input?

I think with the yield the goal is to trial it & guage it's efficacy. So I wouldn't necessarily suggest spreading it out over 3 assets but just trying it on 1. If we think we can accurately measure the impact on BitUSD with 75% then we might be better off trialling BitUSD at a lower cost and only rolling out the additional amount of CNY/EUR if shareholders feel the results are sufficiently positive.

Also regards the 1 month lock up, I don't know. On the one hand I imagine interest accrued at <1 month wouldn't be a very strong motivating factor, so it might not be worth the restriction. Then again without it many people might buy BitUSD whenever BTS was falling and vice versa, thus removing/putting pressure on buy/sell side liquidity at those key times and so actually incentivizing people to hold in those turns may help.

As for the liquidity front yeah that sounds good, it's not my area but given the spreads we clearly need to subsidize it in some way and I believe increasing BitAsset adoption is incredibly valuable to BTS so I think it's worth it. It also makes sense that yes you'd decrease the incentive when you had sufficient liquidity and/or move it around to other markets you wanted to bootstrap.
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Offline cylonmaker2053

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i voted YES purely on the condition that this is a LIMITED TRIAL with perpetuation of the policy contingent on results.

I, too, am in favor of limiting this to a 6-month trial.  I propose targeting it 75% to BitUSD, 20% BitCNY and 5% BitEur, with a goal of creating the equivalent of at least $1M in total BitAssets.  Also, to receive yield, perhaps it should be required to lock up funds for a month at a time.  So yield would be paid every month starting 1 month after lock-up (on an account by account basis), and early withdrawal means yield is forfeited. 

So we get people to move funds onto the DEX, they become more frequent users of the DEX, and create BitAssets propelling us to worldwide fiat-pegged leaders, which will garner greater overall attention for Bitshares in general and our smartcoins in particular.  Not to mention new users that might be attracted by the yield to buy and hold smartcoins.

On the liquidity front, we can launch this in conjunction with liquidity pools that any of these new users and new BitAsset creators/holders can voluntarily participate in.  This can be incentivized by the Nasdaq-style market maker liquidity rewards program (to be developed separately, discussed on another thread), which of course any liquidity provider can participate in (and which UIA issuers can use with their own funds to incentivize liquidity in the markets for their own assets). 

If we require generation of more liquidity, the rewards can be increased as necessary.  Conversely, as liquidity grows, the rewards can be diminished and directed to other BitAsset  markets such as BitGOLD, BitSILVER, BitOIL, BitAAPL, etc. 

These are just some suggestions and starting points for further discussion, including how some of the pieces of the puzzle might fit together.  Thoughts [member=32211]Empirical1.2[/member], [member=36696]cylonmaker2053[/member]?  Anyone else with constructive input?

all really good points. only other thing i'd add is that my gut tells me it'd be better to start with an experiment with one smartcoin, whichever has the highest 3-month moving average volume, or something like that.

Offline Empirical1.2

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Also, to receive yield, perhaps it should be required to lock up funds for a month at a time.  So yield would be paid every month starting 1 month after lock-up (on an account by account basis), and early withdrawal means yield is forfeited. 

I personally like this idea more & could be in favour of it. This would make the advertisable variable yield higher. In terms of liquidity, you want to increase Makers at key times but also reduce liquidity takers at those key times. This may incentivise those who would probably be liquidity takers to not suck liquidity out of the market as much at key times. (Buying BitUSD when BTC/BTS is rapidly falling & selling BitUSD when BTC/BTS is rapidly rising) So besides all the other benefits of yield, this would be a way of using yield to improve liquidity imo.

Edit: At the same time once we have merchants accepting BitUSD this might be a negative in terms of getting the good liquidity in terms of people easily spending their BitUSD & creating the Pool to customer to merchant back to pool liquidity cycle.
« Last Edit: March 08, 2016, 09:19:15 am by Empirical1.2 »
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Offline Rune

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I would recommend against this. I actually proposed something similar myself more than a year ago, but I have since then learned a lot more about economics.

what about economics makes you recommend against this experiment? i'm personally about indifferent on this hypothesis, but usually ere on the side of experimentation.

This is in essence a bet against the market by a public agent. I don't think it can possibly be profitable in the long run.

I'm also just speculating, macroeconomics are  mostly guesswork. I don't think there's anything wrong with experimenting but I wouldn't do that on the main bitshares blockchain.
« Last Edit: March 08, 2016, 08:09:33 am by Rune »

Offline Erlich Bachman

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The short term goal is simply getting a critical mass of money into BTS so that we can charge a fee whenever the "depositors" choose to collect their accrued interest. Once we reach deflationary status (profitibility), then we can tweak economic incentives. Because currently, we are paying for a ton of unused bandwith (paying witnesses to watch 5 transactions per minute, when it costs us the same to process thousands).

The system is already costing us money to run, so we might as well offer a bunch of simple services (bank with us and we will give you interest like Masternodes) to get the fees rolling in.
« Last Edit: March 08, 2016, 09:45:46 am by Erlich Bachman »
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Offline abit

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Generally I'm against using worker to fund any marketing experiments without proper market research. Marketing guys should know how market works and how to do market researches. We've through out too much in 0.x days just because.
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Offline kokojie

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In the US, some credit cards will give you $500 if you use them for 3 months and spend over $6000 on it. Incentives like these are ok for marketing I think.

Offline cylonmaker2053

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Also, to receive yield, perhaps it should be required to lock up funds for a month at a time.  So yield would be paid every month starting 1 month after lock-up (on an account by account basis), and early withdrawal means yield is forfeited. 

I personally like this idea more & could be in favour of it. This would make the advertisable variable yield higher. In terms of liquidity, you want to increase Makers at key times but also reduce liquidity takers at those key times. This may incentivise those who would probably be liquidity takers to not suck liquidity out of the market as much at key times. (Buying BitUSD when BTC/BTS is rapidly falling & selling BitUSD when BTC/BTS is rapidly rising) So besides all the other benefits of yield, this would be a way of using yield to improve liquidity imo.

Edit: At the same time once we have merchants accepting BitUSD this might be a negative in terms of getting the good liquidity in terms of people easily spending their BitUSD & creating the Pool to customer to merchant back to pool liquidity cycle.

or a hybrid approach that pays out daily yield with a monthly holding bonus. fundamentally, i prefer we start with short-term instruments, but i appreciate the lock-in concept for stability.

Offline Samupaha

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I would recommend against this. I actually proposed something similar myself more than a year ago, but I have since then learned a lot more about economics.

what about economics makes you recommend against this experiment? i'm personally about indifferent on this hypothesis, but usually ere on the side of experimentation.

This is in essence a bet against the market by a public agent. I don't think it can possibly be profitable in the long run.

I'm also just speculating, macroeconomics are  mostly guesswork. I don't think there's anything wrong with experimenting but I wouldn't do that on the main bitshares blockchain.

I see this more like a kickstart project than a longterm solution. I'm also quite sure that this wouldn't be profitable in the long run, but this might be a good way to get liquid markets kickstarted. Although I'm still inclined to think that best way to pay yield is to pay it only for smartcoins that are in the orderbook.

Offline Empirical1.2

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I would recommend against this. I actually proposed something similar myself more than a year ago, but I have since then learned a lot more about economics.

what about economics makes you recommend against this experiment? i'm personally about indifferent on this hypothesis, but usually ere on the side of experimentation.

This is in essence a bet against the market by a public agent. I don't think it can possibly be profitable in the long run.

I'm also just speculating, macroeconomics are  mostly guesswork. I don't think there's anything wrong with experimenting but I wouldn't do that on the main bitshares blockchain.

I see this more like a kickstart project than a longterm solution. I'm also quite sure that this wouldn't be profitable in the long run, but this might be a good way to get liquid markets kickstarted. Although I'm still inclined to think that best way to pay yield is to pay it only for smartcoins that are in the orderbook.

+5% I agree that it's not profitable in the long, long run but I believe it is during the Smartcoin growth phase which could end up being as long as 5 years+ depending. Of course it can be removed or phased out if it's not creating more value than it's costing BTS shareholders at the time. https://bitsharestalk.org/index.php/topic,21541.msg283518.html#msg283518



I'm also in favour of paying yield to orders on the books within a useful range around the peg as a liquidity measure & think this can be done cost effectively. Personally I've been impressed with NBT level liquidity which uses a similar approach and while most of us disagree with how NBT are created/collateralised their separate liquidity operations are fairly cost effective.  https://bitsharestalk.org/index.php/topic,21800.0.html

However yield for orders off the books is important in attracting man in the street money (who never want to see the exchange) into holding value in BTS collateralised BitAssets imo.  As BM said back in the day...

If the largest banks can achieve deposits of over $1 trillion dollars with no meaningful interest, how many deposits could BitShares attract and what would that mean for the value of the bank?

(Once the yield promotion is over in 6 months to 5 years+, banks will likely be in NIRP territory so at that point no yield will actually be the equivalent of yield - we cost less than banks.) The yield promotion described in this thread can also be mitigated by shareholders via yield harvesting, which also has a lot of positive side effects of it's own.
« Last Edit: March 09, 2016, 10:56:34 am by Empirical1.2 »
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Offline Erlich Bachman

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Yes, it does appear that this "yield harvesting" is no different than what  DASH has successfully done with its "Masternode" incentive to lock up value on the blockchain creating scarcity on the open market and raising its share price. 

And since DASH has an enviable market cap from our perspective (one that would speed up our development funding), then I am on board.  Because after all, the one thing we need in order to achieve our dreams here is dev funding.  Imagine what we could do, and how fast we could do it if our market cap was around 30 million like DASH.
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Offline Empirical1.2

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Yes, it does appear that this "yield harvesting" is no different than what  DASH has successfully done with its "Masternode" incentive to lock up value on the blockchain creating scarcity on the open market and raising its share price. 

And since DASH has an enviable market cap from our perspective (one that would speed up our development funding), then I am on board.  Because after all, the one thing we need in order to achieve our dreams here is dev funding.  Imagine what we could do, and how fast we could do it if our market cap was around 30 million like DASH.

 +5% The higher the BTS valuation the more we potentially have in $ terms to spend on development.   

Offerings like DASH have to offer much higher POS rewards because the currency they're offering it on is very volatile. Whereas with BTS a very low amount directed to BitUSD will make it very attractive, due to USD's low volatility. So I believe thanks to Smartcoins we can attract higher BTS demand for a much lower cost. (However in both cases you can mitigate the individual cost by participating in the reward yourself.)

Decred is also interesting. (I own some but I'm generally not a fan as they have 150%+ year 1 inflation so their upside/ability to maintain a very high valuation is limited.) However in order to participate in their lock up POS rewards you need to buy a ticket which are limited to circa 40 000. (So these DCR tickets are a good proxy for a very limited BTS) While currently overvalued imo, you can see the DCR POS ticket price has increased over 1400% in 14 days (from 2-29) as demand for that limited gateway token increases to participate in their POS rewards. https://dcrstats.com/

Similarly we could expect demand for BitUSD rewards flowing through a very limited BTS to have a strong positive price effect on BTS. (& because BitUSD has low volatility, variable BitUSD yield will create constant new BTS demand unlike DCR who will see demand for their POS rewards fluctuate considerably.) 
« Last Edit: March 09, 2016, 01:03:28 pm by Empirical1.2 »
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Offline Akado

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What happens when the trial ends? Won't people be disappointed? However, if we keep it going, what if there's a point where we can't dilute any more? People won't care about it any more
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Offline Empirical1.2

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What happens when the trial ends? Won't people be disappointed? However, if we keep it going, what if there's a point where we can't dilute any more? People won't care about it any more

If you advertise it as a yield promotion then the market won't expect it to continue beyond the end date/indefinitely.

But yes there is a point where the cost of the reward in terms of BTS sell pressure it creates is more than the amount of corresponding new demand for BTS it brings in. So even if it did work well and was continued at some point in the future it would be phased out/removed. (In that growth stage of Smartcoins though, which could last many years you would have attracted BTS (For BitAsset) Demand at a much higher pace than the cost and so BTS value would grow in that time in the process bootstrapping SmartCoins.)

By becoming the Smartcoin market leader by CAP and number of holders we will be the most attractive to merchants and other services because of the size of our potential market much the same way 100 000+ offer products and services for BTC instead of a much smaller market/offering like BTS. This utility will add value & liquidity to BitAssets and so make them more attractive than competitors even without yield.

There are also expectations of widespread negative interest rates in the coming years well below -1%. http://www.zerohedge.com/news/2016-02-10/something-very-disturbing-spotted-morgan-stanley-presentation-slide
So once BitAssets are bootstrapped most people may still rather keep them in BitUSD at 0% where they are also private, unseizable and free from capital controls etc. 

This other post discussing it may be of interest https://bitsharestalk.org/index.php?topic=21641.0


« Last Edit: March 09, 2016, 03:48:50 pm by Empirical1.2 »
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Offline cylonmaker2053

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What happens when the trial ends? Won't people be disappointed? However, if we keep it going, what if there's a point where we can't dilute any more? People won't care about it any more

it'd be an experiment with the expectation of continuing if successful. i agree with [member=32211]Empirical1.2[/member] in that it shouldn't be advertised as a yield promotion event, but rather as a trial permanent feature. those who want it to remain a fixed feature have more incentive to participate up front.