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Offline toast

Proto-DAC theory
« on: March 31, 2014, 06:05:20 PM »

I will iterate on this and eventually make a blog post when it is really polished. In the meantime, let's discuss.


Proto-DAC theory
----------------

This is a synthesis of several months of learning about different DAC bootstrapping philosophies. In this post I will propose a model for bitshares proto-DACs (XT, DNS, LOTTO(?)) to consider as a substitute for snapshots in some situations. This is inspired in part by adam levine's DACP paper[]. I will use the term proto-DAC in case I misrepresent part of his proposal.


To create a DAC you need enough development fuel to push it into "orbit", which is when the DAC can pay for it's maintainence from stakeholders paying for dev time to protect their dividend income. There are two goals: Raise enough funds, and distribute the initial tokens to the set of people that maximizes chance of succeess.

Let's look at some history:

* Bitcoin and other 1.0 cryptoequities distributed 100% of their shares to miners. This is equivalent to proof-of-burn while shares have already started circulating.

* Mastercoin had an "exodus address", and ??% of shares were allocated proportionally to donators. The other ??%% were premined as dev funds.

* Counterparty had a "burn address", and 100% of shares were allocated proportionally to burners. They had a separate donation address that did not earn shares.

* NXT had a MSC-style funding rund

* Ethereum has a mix of MSC-style (IPO) and mining rewards.

* Bitshares chains use AGS (variation on MSC style), PTS, and proto-DAC snapshots, and dev premine, in whichever combination suits that particular DAC

So Bitcoin totally bootstrapped, mastercoin double-fundraised, XCP anti-fundraised for extra leverage in speculation on XCP's success. NXT single-fundraised, Ethereum half-fundraised, and PTS/AGS is complicated.


If we view burned funds as dividends[] then you could generalize these models with a few parameters. The first is % of funds go to dividends and which % go to developers. The critical difference is that dividends immediately increase everyone's stake in the proto-DAC while dev funds puts slight downwards pressure on the DACP as devs sell it to pay for development. Suppose this parameter is called D and it ranges from 0 (MSC-style) to 1 (XCP-style). A higher D value is like taking a higher leverage bet that the DAC will grow faster than its proto-DAC.

Taking a snapshot of Protoshares for XT was morally equivalent to a 100% proof-of-burn round on the PTS blockchain, in terms of how value was split between the networks. Essentially february 28th PTS holders made a bet against XT holders with D=1 level leverage, and the price drop reflected a sentiment like "If anything works at all, then BTS X will be very profitable". Remember that this was in February, when other DACs were hardly mentioned at all.

Another parameter is set "off-chain" and it is what fraction of DAC shares will come from the proto-DAC share donators and what will come from other sources (like dev premine).

A proto-DAC should be defined as a DAC whose shares are used to speculate on the DACs that do fundraising/burn rounds on its blockchain.

You need:
Minimum % of Proto-DAC shares to start a round

On chain:
Specify which fraction of proto-DAC shares from this fundraising round will become dividends (burn). The rest go into dev escrow on the proto-DAC.

Off chain:
Specify how much of DAC share % will be dev premine and how much will go to donators from the fundraising period.

There's your allocation snapshot.

What this allows is for the exact same value transfer as with a PTS snapshot, with a custom AGS round, without extreme price swings. If I'm not mistaken this model would allow for a superset of the fundraising models we've seen so far.

Also note that the blockchain can do kickstarter-style all-or-nothing rounds.
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Offline CLains

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Re: Proto-DAC theory
« Reply #1 on: March 31, 2014, 07:45:13 PM »
I'm not sure I understand.

You launch a DAC,
either it is the final product, e.g. dnsDAC,
or it is a proto-DAC, e.g. proto-dnsDAC,

If it is a proto-dnsDAC, it can be POS/POW/Mixture;
In either case you can,
1. "premine,"
2. allocate to PTS/AGS
3. whatever

So now you got a proto-dnsDAC, and you want to launch the dnsDAC,

First, how many percent of the dnsDAC are allocated to proto-dnsDAC holders?
1. x percent to proto-dnsDAC holders.
2. y percent to development.
3. z percent to promotion and givaways,
.. etc.

Second, how do you allocate shares from the proto-dnsDAC to the dnsDAC?
1. Snapshot,
2. Proof of burn,
3. Angelfund,
4.
..

As you said, if the proof of burn is uniquely possible by burning proto-dnsDAC shares, then this is similar to doing a snapshot from the proto-dnsDAC. If you're doing proof of burn or angelfunding, then you can allow contributions only from burning or donating proto-dnsDAC shares.

Finally, just to mention the cool idea you introduced, if you hold a slice of the proto-dnsDAC it is possible to promise people payment in the shares you get when these proto-dnsDAC shares produce or can be redeemed for the dnsDAC shares.
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Offline CLains

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Re: Proto-DAC theory
« Reply #2 on: March 31, 2014, 07:50:09 PM »
Btw, the distinction between proto-DACs and DACs is likely to be fuzzy, as all DACs are potentially a proto-DAC.

Not sure if i'm saying anything useful here.
I'm mainly trying to understand your post ;)
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Offline toast

Re: Proto-DAC theory
« Reply #3 on: March 31, 2014, 10:47:00 PM »
I'm not sure I understand.

You launch a DAC,
either it is the final product, e.g. dnsDAC,
or it is a proto-DAC, e.g. proto-dnsDAC,

If it is a proto-dnsDAC, it can be POS/POW/Mixture;
In either case you can,
1. "premine,"
2. allocate to PTS/AGS
3. whatever

So now you got a proto-dnsDAC, and you want to launch the dnsDAC,

First, how many percent of the dnsDAC are allocated to proto-dnsDAC holders?
1. x percent to proto-dnsDAC holders.
2. y percent to development.
3. z percent to promotion and givaways,
.. etc.

Second, how do you allocate shares from the proto-dnsDAC to the dnsDAC?
1. Snapshot,
2. Proof of burn,
3. Angelfund,
4.
..

As you said, if the proof of burn is uniquely possible by burning proto-dnsDAC shares, then this is similar to doing a snapshot from the proto-dnsDAC. If you're doing proof of burn or angelfunding, then you can allow contributions only from burning or donating proto-dnsDAC shares.

Finally, just to mention the cool idea you introduced, if you hold a slice of the proto-dnsDAC it is possible to promise people payment in the shares you get when these proto-dnsDAC shares produce or can be redeemed for the dnsDAC shares.

The bolded section is the thesis, basically.
How the proto-DAC is initialized wasn't part of my concern, I'm trying to talk about how to allocate funds for a normal DAC given a proto-DAC.
You can do a burn round on the proto-DAC, or an AGS-like round, or a mix of both, and it will effectively be a DAC snapshot, without the price swing in the proto-DAC and with some freedom about how much leverage people who are long DAC over proto-DAC can get.
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Offline CLains

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Re: Proto-DAC theory
« Reply #4 on: March 31, 2014, 11:39:11 PM »
You can do a burn round on the proto-DAC, or an AGS-like round, or a mix of both, and it will effectively be a DAC snapshot, without the price swing in the proto-DAC and with some freedom about how much leverage people who are long DAC over proto-DAC can get.

Got it. Only disadvantage I see is that one has to actively participate burn/donate, to get the product, instead of simply collecting "dividends" when new DACs are released. I guess that's going to bee more complicated going forward anyway, as one has to claim shares in a DAC before that DAC in turn is used as the source of the next snapshot.
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Offline toast

Re: Proto-DAC theory
« Reply #5 on: March 31, 2014, 11:42:07 PM »
I think your 2nd point isn't true

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Offline biophil

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Re: Proto-DAC theory
« Reply #6 on: March 31, 2014, 11:47:47 PM »
You've just listed a number of things and claimed they're equivalent to PoB. I'm trying to see the equivalence but it's not quite clear to me. The XCP PoB was a committing move from one asset to another. If I wanted XCP, I had to destroy a certain number of BTC. That's not quite how a PTS snapshot works! The PTS snapshot does have the quality that I burn a little value in exchange for XTS, but I still have the PTS in my wallet (admittedly stripped of some of their value) available for future snapshots. For XCP, once the BTC has been burned, it's gone for good. Can you elaborate on why you think PoB is the same as a snapshot?

You're also saying (I think) that doing PoB instead of snapshots should alleviate the price swings that snapshots cause. I'm not sure that's true. While the burn period is open, wouldn't shares in the protoDAC increase in price as people buy them to burn? Then when the burn period closes, protoDAC shares would have a discontinuous loss of value, just like after a snapshot. The loss of value would be because while the burn period is open, shares would have a use: to be burned. Once they can't be burned, they lose real value because they're no longer useful for that purpose.

It could be that I've misunderstood you - I'm not at all sure I've read your post correctly. I like the generality of what you're saying, I'm just not quite sure it's correct. Damn, I wish I could afford to think about this stuff full-time. :)

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Offline toast

Re: Proto-DAC theory
« Reply #7 on: April 01, 2014, 12:51:43 AM »
To complete the comparison I think I have to claim some assumptions about how PTS selloff works, it is equivalent to pob in a particular value flow diagram. I will have to reason about this more carefully

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Offline puppies

Re: Proto-DAC theory
« Reply #8 on: April 01, 2014, 02:00:18 AM »
You've just listed a number of things and claimed they're equivalent to PoB. I'm trying to see the equivalence but it's not quite clear to me. The XCP PoB was a committing move from one asset to another. If I wanted XCP, I had to destroy a certain number of BTC. That's not quite how a PTS snapshot works! The PTS snapshot does have the quality that I burn a little value in exchange for XTS, but I still have the PTS in my wallet (admittedly stripped of some of their value) available for future snapshots. For XCP, once the BTC has been burned, it's gone for good. Can you elaborate on why you think PoB is the same as a snapshot?

You're also saying (I think) that doing PoB instead of snapshots should alleviate the price swings that snapshots cause. I'm not sure that's true. While the burn period is open, wouldn't shares in the protoDAC increase in price as people buy them to burn? Then when the burn period closes, protoDAC shares would have a discontinuous loss of value, just like after a snapshot. The loss of value would be because while the burn period is open, shares would have a use: to be burned. Once they can't be burned, they lose real value because they're no longer useful for that purpose.

It could be that I've misunderstood you - I'm not at all sure I've read your post correctly. I like the generality of what you're saying, I'm just not quite sure it's correct. Damn, I wish I could afford to think about this stuff full-time. :)

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The deflation caused by the reduction of the total shares of the proto-dac should work to offset the reduction in value caused by the reduced utility of the shares.  Who can say to what level though.

This would lead to it becoming more and more difficult to invest in future dacs, as the total shares in existence would decline with the launch of each dac.  What would happen if all shares were burned?
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Offline toast

Re: Proto-DAC theory
« Reply #9 on: April 01, 2014, 02:05:02 AM »
You've just listed a number of things and claimed they're equivalent to PoB. I'm trying to see the equivalence but it's not quite clear to me. The XCP PoB was a committing move from one asset to another. If I wanted XCP, I had to destroy a certain number of BTC. That's not quite how a PTS snapshot works! The PTS snapshot does have the quality that I burn a little value in exchange for XTS, but I still have the PTS in my wallet (admittedly stripped of some of their value) available for future snapshots. For XCP, once the BTC has been burned, it's gone for good. Can you elaborate on why you think PoB is the same as a snapshot?

You're also saying (I think) that doing PoB instead of snapshots should alleviate the price swings that snapshots cause. I'm not sure that's true. While the burn period is open, wouldn't shares in the protoDAC increase in price as people buy them to burn? Then when the burn period closes, protoDAC shares would have a discontinuous loss of value, just like after a snapshot. The loss of value would be because while the burn period is open, shares would have a use: to be burned. Once they can't be burned, they lose real value because they're no longer useful for that purpose.

It could be that I've misunderstood you - I'm not at all sure I've read your post correctly. I like the generality of what you're saying, I'm just not quite sure it's correct. Damn, I wish I could afford to think about this stuff full-time. :)

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The deflation caused by the reduction of the total shares of the proto-dac should work to offset the reduction in value caused by the reduced utility of the shares.  Who can say to what level though.

This would lead to it becoming more and more difficult to invest in future dacs, as the total shares in existence would decline with the launch of each dac.  What would happen if all shares were burned?

Everything is done in BIPS. Burned shares are dividend payments. The proto-DAC's shares would drop in value over time as the industry it is a proto-DAC for becomes saturated, as most of the capital has bet on it's child DACs.
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Offline 天籁

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Re: Proto-DAC theory
« Reply #10 on: April 01, 2014, 02:33:40 AM »
Sorry to say that the content is seriously inconsistent with the subject.

Offline CLains

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Re: Proto-DAC theory
« Reply #11 on: April 01, 2014, 07:38:19 AM »
I think your 2nd point isn't true

I mean if Invictus releases Bitshares X, and then after that a Bitshares X-2 is created that honors Bitshares X from a particular snapshot, wouldn't I have to claim my Bitshares X from PTS/AGS before that new snapshot was taken? (e.g. in this case snapshot process is not entirely passive, by just holding PTS/AGS forever)
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Offline biophil

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Re: Proto-DAC theory
« Reply #12 on: April 01, 2014, 12:24:42 PM »
I think your 2nd point isn't true

I mean if Invictus releases Bitshares X, and then after that a Bitshares X-2 is created that honors Bitshares X from a particular snapshot, wouldn't I have to claim my Bitshares X from PTS/AGS before that new snapshot was taken? (e.g. in this case snapshot process is not entirely passive, by just holding PTS/AGS forever)

I'm pretty sure you wouldn't have to "claim" BitShares X to be eligible for BitShares X-2. Having PTS/AGS before the BitShares X snapshot gives you a BitShares X private key whether you ask for it or not; you'd use that private key to get your BitShares X-2. From the standpoint of investors, the snapshot process should be completely passive.

Offline toast

Re: Proto-DAC theory
« Reply #13 on: April 01, 2014, 02:06:28 PM »
I think your 2nd point isn't true

I mean if Invictus releases Bitshares X, and then after that a Bitshares X-2 is created that honors Bitshares X from a particular snapshot, wouldn't I have to claim my Bitshares X from PTS/AGS before that new snapshot was taken? (e.g. in this case snapshot process is not entirely passive, by just holding PTS/AGS forever)

Nope it's all the same private key

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Offline CLains

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Re: Proto-DAC theory
« Reply #14 on: April 01, 2014, 07:55:33 PM »
Nope it's all the same private key

Nice. :D

Hmm.. now that I think about it that makes much more sense.
« Last Edit: April 01, 2014, 07:57:44 PM by CLains »
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