CPOS (cooperative proof of stake) discussion thread

[santaclause102]

Well bithaus was that one delulo... :/

Sadly, I know

[fuzzy]

Well bithaus was that one delulo... :/

[santaclause102]

It's deferentially a trade of and there is a risk involved but it will be a tough market that might not allow to exclude dilution as a tool to build the all important network effect. https://www.youtube.com/watch?v=y9ClKzMq3n0   16:45 and on

Interesting video

How can we generate an unstoppable network effect with Bitshares?

Heavy mainstream marketing along these lines http://www.coindesk.com/bitcoin-needs-got-milk/  <- focus on solutions for pains and not on the technology and not on the political revolution which happens by itself...
Point of sale service for BTS X (integration into bitpay or other third party or own solution)
....
your ideas
....

[fuzzy]

It's deferentially a trade of and there is a risk involved but it will be a tough market that might not allow to exclude dilution as a tool to build the all important network effect. https://www.youtube.com/watch?v=y9ClKzMq3n0   16:45 and on

Interesting video

How can we generate an unstoppable network effect with Bitshares?

Ill tell you how...DAC developers honoring pts/ags and at least one other projects "coin" share holders.  Focus kn altcoin holders whose alts have good name recognition but devs with little concern for building crypto-equity systems. 

For instance imagine blackcoin, darkcoin...and even better--litecoin holdrs getting a 10% initial stkae jn the total money supply for a DAC...and then u are seeing what I see.

[jae208]

It's deferentially a trade of and there is a risk involved but it will be a tough market that might not allow to exclude dilution as a tool to build the all important network effect. https://www.youtube.com/watch?v=y9ClKzMq3n0   16:45 and on

Interesting video

How can we generate an unstoppable network effect with Bitshares?

[jae208]

No offense luckybit, but you're not following the logic.  I want to make ROI as much as anyone else. I'm also not advocating that we delay bitshares X for this.

But keep in mind, companies do this because it works and it makes all the initial investors more money, you don't seem to be able to figure out why.

BTW: We can make you your very own copy of bitshares X that you own 100% and you can keep it all!!  Of course it will never be worth anything but rest assured you won't be diluted.

Anyway, I should probably stop because I don't know any other way to say this.  I suspect it will eventually be tried both ways and you can guess where my money will be going.

At best, companies do this because they (the management) hope it will work, and that it will make the initial investors more money.  You're acting like there's no risk involved, but of course there is.  The question is whether each should risk only his own stake, or the stake of others also.  I don't mind terribly if "freeloaders" also benefit from my contributions.  I invest for my own reasons, but I hope and expect that this technology will benefit a great many people whether they've invested or not.  Is it a punishment to contributors if non-contributors also benefit?  Don't the contributors also benefit?

As for how anyone could get taken advantage of, suppose the delegates determined that particular failing businesses based on use of the chain were in need of saving, and diluted the shares to revive them.  Suppose the delegates hired a shady marketing group in exchange for kickbacks.  A key part of the design is that even corrupted delegates could do little lasting damage to the system.  Even if they have access to all transaction fees for reinvestment, this is true, as loss of a few weeks profits before the delegate is caught and replaced is a relatively minor setback.  Dilution is permanent, and abuse would require consensus around a new fork to recover.  That's a major setback and terrible PR.

As long as the dilution of shares isn't abused this really isn't a bad idea. Agent is right that high growth companies dilute shares and it does benefit everyone in the middle to long term. They do is for the same reasons entrepreneurs take out loans or seek investment capital to start a business. Think about it, if Bytemaster chose to continue working his day job and save until he had enough money to to fund his company to create DACs by the time he has saved the money it is already too late, like years too late. Also, the net worth of the network will/should rise faster than the money lost through dilution of shares. Bitcoin has been diluted for 5 years but yet each bitcoin is worth more and more. Sure you have 12 percent dilution but you have 6,000 percent appreciation of every share.

[jae208]

Shareholders definitely want the design of the DAC to protect them from each other.  That's why transactions require signatures.  This isn't about protecting them from themselves, as they can still use their shares for whatever they want.  It's about protecting shareholders from tyranny of majority.  A DAC's source code is like a nation's constitution.  In theory, constitutions should define hard limits on the power of the various actors within the governmental system, but enforcement is a problem.  With DACs, you have a business with source code that enforces its own rules.  If you write those rules such that certain actors are overly dominant, you sacrifice much of that benefit.

Centralization and decentralization each have different merits for different applications.  We all knew III and AGS were centrally controlled when we started contributing.

Trog, I understand your fears but I think you haven't thought it through.  Take it step by step, how does anyone get taken advantage of?

There is no getting around the fact that a DAC that can't dilute all shareholders equally to fund growth is a DAC that rewards freeloaders and punishes contributors.

Sooo do shareholders have a say in who gets hired what their salary is when and if they get fired? (DAC employee/developer)

Have you heard of the 80/20 rule? Sometimes it is 90/10 or 99/1
 There will always be a small fraction of people that will deliver the majority of the results. You won't be able to have 100 percent active and equal contribution from everyone involved in the DAC. This isn't communism or socialism.

Not against dilution of shares per say just saying that there will always be people who will benefit from the labor of others and that things won't be so equal. Just look at the the banksters in the USA, such parasites. Hmm I think a better example of the 80/20 rule is the fact that the majority of America's wealth is generated by a handful of USA states. They are generally the states of the west and east coasts and in particular California. Which to me is kind of funny because the states that consider themselves to have great fiscal policy are those that you hear nothing about. Mostly the states in the middle of the USA. Sure their taxes may be lower than in California and their debt negligible in comparison but the fact of the matter is that they don't generate the innovation that California does so in effect they are pulling us freeloaders with them.


Anyways, at the end of the day the market will decide what it wants and the DACs that are flawed will simply vanish.
There is nothing stopping people from simply forking Bitshares and calling it something different like Dogeshares or something.
All someone has to do is live somewhere where they aren't to fond of intellectual property and voila they can legally clone Bitshares and nothing can be done to stop them.

[jae208]

I quickly skimmed through the last several posts. I think Mr. Agent said something about forking?
I agree the market will ultimately decide if they want to have their capital invested in a DAC that dilutes shareholders or not,
for whatever the reasons.

I personally would agree with the dilution of shares if it is for the benefit of the business. However, I don't
think that diluting shares so that more capital can go to marketing is such a great idea though. That seems too old school to me.
I don't think that the Bitcoin "DAC" ever had a marketing budget and it grew to a market cap of billions organically.

It may seem a bit counter intuitive but I believe that successful people and businesses are 'generous' and being a penny pincher is no way to increase net worth. When you dilute shares you are being generous and allow others to join you in the business journey. Sure your stake in the company will be diluted but in the long term that stake you have will be worth more. As you let others join the network effect grows.

just my 2 bitshares

[santaclause102]

It's deferentially a trade of and there is a risk involved but it will be a tough market that might not allow to exclude dilution as a tool to build the all important network effect. https://www.youtube.com/watch?v=y9ClKzMq3n0   16:45 and on

[Troglodactyl]

No offense luckybit, but you're not following the logic.  I want to make ROI as much as anyone else. I'm also not advocating that we delay bitshares X for this.

But keep in mind, companies do this because it works and it makes all the initial investors more money, you don't seem to be able to figure out why.

BTW: We can make you your very own copy of bitshares X that you own 100% and you can keep it all!!  Of course it will never be worth anything but rest assured you won't be diluted.

Anyway, I should probably stop because I don't know any other way to say this.  I suspect it will eventually be tried both ways and you can guess where my money will be going.

At best, companies do this because they (the management) hope it will work, and that it will make the initial investors more money.  You're acting like there's no risk involved, but of course there is.  The question is whether each should risk only his own stake, or the stake of others also.  I don't mind terribly if "freeloaders" also benefit from my contributions.  I invest for my own reasons, but I hope and expect that this technology will benefit a great many people whether they've invested or not.  Is it a punishment to contributors if non-contributors also benefit?  Don't the contributors also benefit?

As for how anyone could get taken advantage of, suppose the delegates determined that particular failing businesses based on use of the chain were in need of saving, and diluted the shares to revive them.  Suppose the delegates hired a shady marketing group in exchange for kickbacks.  A key part of the design is that even corrupted delegates could do little lasting damage to the system.  Even if they have access to all transaction fees for reinvestment, this is true, as loss of a few weeks profits before the delegate is caught and replaced is a relatively minor setback.  Dilution is permanent, and abuse would require consensus around a new fork to recover.  That's a major setback and terrible PR.

[Agent86]

No offense luckybit, but you're not following the logic.  I want to make ROI as much as anyone else. I'm also not advocating that we delay bitshares X for this.

But keep in mind, companies do this because it works and it makes all the initial investors more money, you don't seem to be able to figure out why.

BTW: We can make you your very own copy of bitshares X that you own 100% and you can keep it all!!  Of course it will never be worth anything but rest assured you won't be diluted.

Anyway, I should probably stop because I don't know any other way to say this.  I suspect it will eventually be tried both ways and you can guess where my money will be going.

[luckybit]

Shareholders definitely want the design of the DAC to protect them from each other.  That's why transactions require signatures.  This isn't about protecting them from themselves, as they can still use their shares for whatever they want.  It's about protecting shareholders from tyranny of majority.  A DAC's source code is like a nation's constitution.  In theory, constitutions should define hard limits on the power of the various actors within the governmental system, but enforcement is a problem.  With DACs, you have a business with source code that enforces its own rules.  If you write those rules such that certain actors are overly dominant, you sacrifice much of that benefit.

Centralization and decentralization each have different merits for different applications.  We all knew III and AGS were centrally controlled when we started contributing.

Trog, I understand your fears but I think you haven't thought it through.  Take it step by step, how does anyone get taken advantage of?

There is no getting around the fact that a DAC that can't dilute all shareholders equally to fund growth is a DAC that rewards freeloaders and punishes contributors.

How on earth do you jump to this conclusion? It's not a matter of if a DAC can it's a matter of if a DAC should. I think we should look for every possible means to accomplish the same thing without diluting.

If we are talking about inflation would we say the same thing about the dollar? Do we need inflation because it rewards contributors and punishes freeloaders?

Now if these were voting shares and it were a proven business model which is profitable then I could understand but I don't think this sort of business is the kind of business which you can easily make a case for dilution. The main selling point for people to buy Bitshares is the fact that it's not diluting and the whole business is based on getting a lot of people to buy/use Bitshares or BitAssets.

Asset appreciation is how people can make a profit if they have a lot of patience and with some luck. It's not like a brick and mortar bank or credit union.

The first Bitshares X DAC is such a risk just to invest in the new business model that asking people to dilute is asking for too much from investors. In the long term if we find this business model is immensely profitable then you can dilute to expand the business.

But right now it's a horrible idea to treat it like an ordinary startup because most startups are bad investments specifically for these sorts of reasons.

Bitshares X has to be a successful investment or no one is going to invest in future chains. The market is also crowded and success is probably going to be measured by the sharp rise of the price on coinmarketcap or something similar.

Down the road success can be measured in user adoption. So the opinion is that depending on the business model it might make sense to dilute or not. I think for Bitshares it's a bad idea.

A better idea is to take something which is guaranteed to be profitable like the Bitshares Lotto DAC and dilute that to pay for development. Another way to do it is to take a group of DACs or chains and have some which dilute and some which don't. Bitshares X for example could never dilute but nothing stops Bitshares X from merging with Bitshares Y in such a way that the dilution from Bitshares Y pays for development of Bitshares X & Y.

So the answer is you can have some DACs which dilute and which send the money to a development fund for the entire ecosystem if you want to do it that way but the truth is I don't think you can create any new value by diluting/inflating. You're basically asking for credit on the back of the investors when you dilute. The investors have to hope that it's worth it because if its not then it's a loss. A lot of businesses during the dot com bubble have done stuff just like that.

[Agent86]

Shareholders definitely want the design of the DAC to protect them from each other.  That's why transactions require signatures.  This isn't about protecting them from themselves, as they can still use their shares for whatever they want.  It's about protecting shareholders from tyranny of majority.  A DAC's source code is like a nation's constitution.  In theory, constitutions should define hard limits on the power of the various actors within the governmental system, but enforcement is a problem.  With DACs, you have a business with source code that enforces its own rules.  If you write those rules such that certain actors are overly dominant, you sacrifice much of that benefit.

Centralization and decentralization each have different merits for different applications.  We all knew III and AGS were centrally controlled when we started contributing.

Trog, I understand your fears but I think you haven't thought it through.  Take it step by step, how does anyone get taken advantage of?

There is no getting around the fact that a DAC that can't dilute all shareholders equally to fund growth is a DAC that rewards freeloaders and punishes contributors.

[luckybit]

I think this is a great discussion and wanted to add my two cents.

1) I am neutral with respect to the moral aspect of issuing new shares to raise capital because for the time being the whole process appears voluntary by all parties assuming all parties knew the conditions under-which it may happen.

2) Property rights under shared-ownership are already stretched because obviously no one party is free to do with his fraction of the company as he chooses.  It can be said that while you may have 100% property rights in your shares, you have no property rights in the system because no-one has the ability to control the system.   I am using the 'control' == 'ownership' definition of property rights.  So all parties 'own' the data controlled by their private key, but they do not own the wider system. 

3) Under this premise we can say that if 99.999% of the shareholders want to dilute to raise capital and grow, then the other .001% is effectively getting a free ride (something for nothing) by refusing to be diluted.   Assumptions here are that this is a simple capital infusion for new shares and the value of the cash infusion is greater than the value of the shares issued.   Thus in the name of defending the property rights of the .001% the 99.999% have lost their property rights because they are no longer in control of the system they have invested in.   

4) Based upon this principle the argument against dilution is that no one is in control of the system.  This is indeed a goal of our decentralization effort and in the name of having a truly decentralized and corruption free system it is the ideal we should strive for.

5) While dilution can help you grow, it is not a sustainable model in the long run.  Eventually all systems must fund themselves from profits and not capital infusions. 

6) The proper way to do a dilution is to fork a new DAC, honor 90% of the old shareholders and give 10% to the new source of funding.   Then let the market sort out which DAC will survive.

http://www.reddit.com/r/Bitcoin/comments/2711t6/multibit_to_fund_development_by_charging_users/

This is relevant.

[Troglodactyl]

For there to be any dilution, the majority of stakeholders would have to want it.  To me it seems strange for us to say: "even if the majority of stake/shareholders want it, we know what's best for them better than they do, so we should protect them from themselves."  I don't think your co-owners want you to protect them from themselves, I think they want to be empowered and have their stake and voice respected.

A DAC that can issue shares attracts developers with fair compensation and customers with low fees.  A DAC that is waiting for the day they collect enough fees to start reinvesting in their growth would get SMOKED in comparison.  Or again, a DAC that is expecting volunteers/charity and creating all the wrong incentive structures is going to get SMOKED.  Not everyone with something to contribute has time to work for free; why would people volunteer to develop and promote this DAC when they can work for a reasonable DAC that is willing to compensate them for their time?

Taking a hard line against leveraged growth is like teaching your kid financial responsibility by making them work at Walmart until they've saved enough for college.

Do you think Zuckerberg could build Facebook into a company with 1000s of employees out of his dorm room by waiting for advertising revenue to come in to buy a couple more computers and maybe hire someone down the road? Not one chance in a million years.

The only companies paying dividends and not leveraging their market value are companies that are already peaking in their growth or have achieved market saturation or dominance.  Bitshares is a world away from this.

We talk about decentralization, empowerment, and creating the right incentives and then ignore it completely to trust that AGS funds controlled by a handful of people is enough to grow our "decentralized" businesses.

The devil is in the details and implementation. But rest assured someone will implement this and then watch out if they are HIRING while we are running on volunteer labor, transaction fees, and fumes.

Shareholders definitely want the design of the DAC to protect them from each other.  That's why transactions require signatures.  This isn't about protecting them from themselves, as they can still use their shares for whatever they want.  It's about protecting shareholders from tyranny of majority.  A DAC's source code is like a nation's constitution.  In theory, constitutions should define hard limits on the power of the various actors within the governmental system, but enforcement is a problem.  With DACs, you have a business with source code that enforces its own rules.  If you write those rules such that certain actors are overly dominant, you sacrifice much of that benefit.

Centralization and decentralization each have different merits for different applications.  We all knew III and AGS were centrally controlled when we started contributing.

[Agent86]

For there to be any dilution, the majority of stakeholders would have to want it.  To me it seems strange for us to say: "even if the majority of stake/shareholders want it, we know what's best for them better than they do, so we should protect them from themselves."  I don't think your co-owners want you to protect them from themselves, I think they want to be empowered and have their stake and voice respected.

A DAC that can issue shares attracts developers with fair compensation and customers with low fees.  A DAC that is waiting for the day they collect enough fees to start reinvesting in their growth would get SMOKED in comparison.  Or again, a DAC that is expecting volunteers/charity and creating all the wrong incentive structures is going to get SMOKED.  Not everyone with something to contribute has time to work for free; why would people volunteer to develop and promote this DAC when they can work for a reasonable DAC that is willing to compensate them for their time?

Taking a hard line against leveraged growth is like teaching your kid financial responsibility by making them work at Walmart until they've saved enough for college.

Do you think Zuckerberg could build Facebook into a company with 1000s of employees out of his dorm room by waiting for advertising revenue to come in to buy a couple more computers and maybe hire someone down the road? Not one chance in a million years.

The only companies paying dividends and not leveraging their market value are companies that are already peaking in their growth or have achieved market saturation or dominance.  Bitshares is a world away from this.

We talk about decentralization, empowerment, and creating the right incentives and then ignore it completely to trust that AGS funds controlled by a handful of people is enough to grow our "decentralized" businesses.

The devil is in the details and implementation. But rest assured someone will implement this and then watch out if they are HIRING while we are running on volunteer labor, transaction fees, and fumes.

[bytemaster]

I think this is a great discussion and wanted to add my two cents.

1) I am neutral with respect to the moral aspect of issuing new shares to raise capital because for the time being the whole process appears voluntary by all parties assuming all parties knew the conditions under-which it may happen.

2) Property rights under shared-ownership are already stretched because obviously no one party is free to do with his fraction of the company as he chooses.  It can be said that while you may have 100% property rights in your shares, you have no property rights in the system because no-one has the ability to control the system.   I am using the 'control' == 'ownership' definition of property rights.  So all parties 'own' the data controlled by their private key, but they do not own the wider system. 

3) Under this premise we can say that if 99.999% of the shareholders want to dilute to raise capital and grow, then the other .001% is effectively getting a free ride (something for nothing) by refusing to be diluted.   Assumptions here are that this is a simple capital infusion for new shares and the value of the cash infusion is greater than the value of the shares issued.   Thus in the name of defending the property rights of the .001% the 99.999% have lost their property rights because they are no longer in control of the system they have invested in.   

4) Based upon this principle the argument against dilution is that no one is in control of the system.  This is indeed a goal of our decentralization effort and in the name of having a truly decentralized and corruption free system it is the ideal we should strive for.

5) While dilution can help you grow, it is not a sustainable model in the long run.  Eventually all systems must fund themselves from profits and not capital infusions. 

6) The proper way to do a dilution is to fork a new DAC, honor 90% of the old shareholders and give 10% to the new source of funding.   Then let the market sort out which DAC will survive. 

[santaclause102]

If you owned 10% of the original business which was not much more than an idea and a few sales do you think you would be entitled to 10% of the new business that has $200k on the balance sheet and prominent new investor.  Of course not, you would get diluted right along with everyone else.

That depends on who the money from the sell of new shares go to. The entrepreneur can sell more of his 90% and take the money for himself or all shareholders sell new shares which makes the money from the sell of the new shares everyone's proportional to their stake... I just come up with that but it should be like that.. 

[luckybit]

I thought most of the "Shark Tank" deals were just equity being sold for cash.

You're wrong.  The Shark Tank deals are a dilution of equity.  The cash they give is not income of the original business owner and does not belong to him/her; the cash belongs to the business. If the shark got 51% stake they actually have more control over that cash and how it's spent than the original business owner does.

If you owned 10% of the original business which was not much more than an idea and a few sales do you think you would be entitled to 10% of the new business that has $200k on the balance sheet and prominent new investor.  Of course not, you would get diluted right along with everyone else.

If you want to do airdrops then designate some shares for that in advance.
There is no excuse to dilute shares and your cases are all weak. It's as if just because it's done like that in the corporate world that it should be done in our world too?

Maybe we shouldn't copy the mistakes of the corporate world considering we don't have the same limitations. We are capable of doing it in a better way but you keep pushing dilution and inflation, why is that your favored solution?

If you want to dilute shares then dilute your own. If you want to discuss how we can fund ourselves without dilution then that would be fine.

There are only two acceptable ways to do it in my opinion

1. Raise transaction fees and use that.
2. Designate in advance that x% of shares is for these purposes (the Mastercoin method).

But to say after people bought their shares that you now want to dilute their shares? It's never going to work without causing havoc. People who paid for shares with the expectation that they would never be diluted and that they'd even be deflationary are not going to want to hear that it's now becoming like Dogecoin.

The good thing about Bitshares is there will be plenty of chains in the future and an altchain can explore some of these ideas. Additionally you have all these other DACs which will be coming online which can explore any of these ideas. But in my opinion if you can avoid dilution and pay with your revenue then you should because that is what revenue is for.

[amencon]

I thought most of the "Shark Tank" deals were just equity being sold for cash.

You're wrong.  The Shark Tank deals are a dilution of equity.  The cash they give is not income of the original business owner and does not belong to him/her; the cash belongs to the business. If the shark got 51% stake they actually have more control over that cash and how it's spent than the original business owner does.

If you owned 10% of the original business which was not much more than an idea and a few sales do you think you would be entitled to 10% of the new business that has $200k on the balance sheet and prominent new investor.  Of course not, you would get diluted right along with everyone else.

Hmm OK thanks, interesting.

[Agent86]

I thought most of the "Shark Tank" deals were just equity being sold for cash.

You're wrong.  The Shark Tank deals are a dilution of equity.  The cash they give is not income of the original business owner and does not belong to him/her; the cash belongs to the business. If the shark got 51% stake they actually have more control over that cash and how it's spent than the original business owner does.

If you owned 10% of the original business which was not much more than an idea and a few sales do you think you would be entitled to 10% of the new business that has $200k on the balance sheet and prominent new investor.  Of course not, you would get diluted right along with everyone else.

[amencon]

Shares are commonly diluted to pay executives stock options or do acquisitions of other companies. Ever watch Shark Tank?  That's share dilution; the original business owners are being diluted to bring in new investors and capital.

I thought most of the "Shark Tank" deals were just equity being sold for cash.  So if you started a company and I helped and was given 10% of the business, and then you went and sold 30% more equity on Shark Tank that wouldn't be considered "share dilution" since it would be a sale out of your portion of the pie rather than increasing the whole pie.  My 10% would still be 10%.

The equivalent analogy in crypto would be the dev keeping x% of the shares at launch, and then selling some portion of them later on the open market to fund various tasks.  He's not diluting any shares that way since the same number of shares exist and so any percentage of shares you own don't change.

[Agent86]

I think we should at least acknowledge that share dilution is a fact of life in our current system, and a needed tool for many companies.  Most high growth companies would be f*cked without it.

The whole idea behind venture capital investment with multiple rounds is share dilution; each round of VC investment dilutes the previous shareholders. The whole idea behind a public offering (IPO) is share dilution; early investors are being diluted, they are not cashing out to dump their shares on the public.

Shares are commonly diluted to pay executives stock options or do acquisitions of other companies. Ever watch Shark Tank?  That's share dilution; the original business owners are being diluted to bring in new investors and capital.

Look up "shares outstanding" charts, it's not a stable thing.

No one should invest in a company that considers taxing the shareholders to cover expenses part of its long term business plan.

If by "taxing shareholders" you mean share dilution than this is horrible advice. (debatable if you are talking about some theoretical extremely long term)

Being philosophically opposed to share dilution would preclude you being an early investor in:
Facebook, Twitter, Google, Amazon, Berkshire Hathaway, Ebay etc.
BTW none of these companies have ever paid a dividend.

When was the last time Apple or Coca-Cola diluted their shares? AFAIK they only paid dividends and do buybacks out of their income...

Apple was diluting shareholders as recently as mid 2012 after which they became so cash flush that they issued their first dividend in over 15 years and started buying back shares.
http://ycharts.com/companies/AAPL/shares_outstanding

Coca-Cola is not exactly analogous to our high growth DACs and I think a well established DAC could pay dividends.  However, I'm sure Coke diluted shareholders at some point in their company history.

Coca-Cola currently spends $4.8 billion per year buying back stock, and $1.3 billion per year issuing stock as compensation.  The total dilution for shareholders due to issuing stock would amount to 0.7% per year (they are not diluted because of the buy back)

[gamey]

Realize that when a dev abandons a DAC after selling all their shares on the market and the thing breaks down due to some unforseen circumstance, you have effectively had your property rights screwed with.  I would suggest people look at these things more in terms of incentives and how the longterm will play out. If a dev is paid purely on the shares they allocate themselves, you will forever have the dev holding the DAC and the rest of the shareholders hostage to some degree.  (unless the source has been released, which may or may not be the case) 

DACs are a different beast.  You will have different problems.  Most corporations have more put into them than the labor of a single person which can then be cashed out once it becomes worth something.  Now in the real world a person can do something similar, but the corporation will continue with whatever management it has.  So in the physical regulated world you will never see the type of problem I am concerned with, so it never needs to be addressed.

I'm not a big fan of diluting shares to pay the dev.  I think other ways would be preferable in some ways.  I am mainly just looking at it in terms of longterm incentives to keep a DAC going.

@luckybit  I was talking about paying the dev(s) not paying the network.  2 different things.  I never suggested dilution to pay for network security, just as a way to prevent the dump and run strategy which people will undoubtedly see.

[santaclause102]

Therefore the hypothesis above that a corporation is by definition a joint venture which is less likely to succeed if everybody claimed his full individual (property) rights can be seen as confirmed.
Thoughts?

When was the last time Apple or Coca-Cola diluted their shares? AFAIK they only paid dividends and do buybacks out of their income...

https://bitsharestalk.org/index.php?topic=4713.msg60400#msg60400

Btw I am not proposing dilution... It all depends on the actual implementation details and the context / challenges.

[toast]

Therefore the hypothesis above that a corporation is by definition a joint venture which is less likely to succeed if everybody claimed his full individual (property) rights can be seen as confirmed.
Thoughts?

When was the last time Apple or Coca-Cola diluted their shares? AFAIK they only paid dividends and do buybacks out of their income...

[santaclause102]

When all expenses are paid from fees, the fees go directly into the expenses and no dilution is possible. What is possible is no deflation if all fees are used up but no inflation is possible (at least not to the degree that it is under the control of the delegates/shareholders*). The argument has a long tradition. It is about property rights.
We are lucky here because we only design a few DACs that everyone knowns the terms to and can by in and out by if he/she likes the model or not.

It is a philosophical question in the end. When becoming a shareholder in a company....
- You can assume that the individual stays completely by himself and the property rights are the highest good (there is always a conflict between different goods).
- Or you can assume that the individual commits him/herself to a "joint venture" willingly allows a majority vote to touch his property rights. This is how all corporations work today.
There is not right or wrong here. Depending on the culture people live in they might feel better in a corporation / society that is structured the one or the other way. 

*just a thought: Is a corporation not by definition a joint venture which would have to fail if everybody claimed his full individual (property) rights? In DPOS like in any company/joint effort you subordinate your shareholder vote to the vote of the majority. Why? Because the inflation/deflation issue has to include not only the money supply which is under the control of the shareholders but also the fact that the shares are traded on a market where there is competition "among shares" respectively among similar companies which have shares. Now not actively deciding for or against dilution (and having a mechanism for that in place) can be seen from this holistic standpoint that includes the potential dilution from the lack of interest on the market in the shares as highly risky in terms of long term dilution. Therefore the hypothesis above that a corporation is by definition a joint venture which is less likely to succeed if everybody claimed his full individual (property) rights can be seen as confirmed.
Thoughts? 

[luckybit]

My thing is that taking money from transactions fees is effectively the same as dilution.  Those transaction fees are profit that should go to shareholders (in a general sense).  So in the end, you're just decreasing the amount that shareholders receive to pay for expenses. Since dividends etc are paid in shares, it all seems like the same thing to me.  After reading Delulo's last response I thought "Oh, the user is paying the bill and thats why transaction fees are different than dilution".   Yet take it a bit further and it seems to end up being another form of dilution but just one that seems more appealing.

No its not the same. You get diluted whether or not you used the network which is completely unfair. Transaction fees are the most fair way to pay for the network. Raise transaction fees.

My thing is that taking money from transactions fees is effectively the same as dilution.  Those transaction fees are profit that should go to shareholders (in a general sense).  So in the end, you're just decreasing the amount that shareholders receive to pay for expenses. Since dividends etc are paid in shares, it all seems like the same thing to me.  After reading Delulo's last response I thought "Oh, the user is paying the bill and thats why transaction fees are different than dilution".   Yet take it a bit further and it seems to end up being another form of dilution but just one that seems more appealing.

Not at all the same thing. *I individually* can choose to not transact and thus not pay transaction fees. I buy, hold, then sell, and the cost to me is 1 tx fee.
I cannot choose not to have my share diluted. I buy, hold, then sell, and notice my share is smaller than before because people took some while I was gone.

I think the difference is a lot smaller than you guys believe, but your point about not actually being able to have less equity than when you started is a good one.  I was always implying the dilution would be known beforehand, so you *could* choose to not have your shares diluted by not purchasing shares in the DAC.

Anyway .... I am just trying to figure out why people despise certain methods of paying a dev to maintain a DAC over others.  To me there is also an incentive to keep the DAC going and not have some situation where the DAC dev just dumps shares and abandons it.

For DACs which by design are set up to have to pay for marketing, why not just create more initial shares to begin with and use that? I see no point to diluting. If you planned well you wouldn't be having to dilute and if you don't plan well then you use higher transaction fees.

Dilution offers no advantage that I can see and always is unpopular.

Why would we use a Bitshares DAC if we have to worry about our shares being diluted? If it's about marketing that's just bad.

I think if you want to market something like Bitshares the best form of marketing is to have a lot of people make a lot of money and be like "See? I told you Bitshares was the best investment but you didn't listen!". Non-buyers remorse is one of the main marketing mechanisms of Bitcoin. http://www.gq-magazine.co.uk/comment/articles/2013-11/28/bitcoin-value-breaks-1000-dollars

[gamey]

My thing is that taking money from transactions fees is effectively the same as dilution.  Those transaction fees are profit that should go to shareholders (in a general sense).  So in the end, you're just decreasing the amount that shareholders receive to pay for expenses. Since dividends etc are paid in shares, it all seems like the same thing to me.  After reading Delulo's last response I thought "Oh, the user is paying the bill and thats why transaction fees are different than dilution".   Yet take it a bit further and it seems to end up being another form of dilution but just one that seems more appealing.

Not at all the same thing. *I individually* can choose to not transact and thus not pay transaction fees. I buy, hold, then sell, and the cost to me is 1 tx fee.
I cannot choose not to have my share diluted. I buy, hold, then sell, and notice my share is smaller than before because people took some while I was gone.

I think the difference is a lot smaller than you guys believe, but your point about not actually being able to have less equity than when you started is a good one.  I was always implying the dilution would be known beforehand, so you *could* choose to not have your shares diluted by not purchasing shares in the DAC.

Anyway .... I am just trying to figure out why people despise certain methods of paying a dev to maintain a DAC over others.  To me there is also an incentive to keep the DAC going and not have some situation where the DAC dev just dumps shares and abandons it.

[toast]

My thing is that taking money from transactions fees is effectively the same as dilution.  Those transaction fees are profit that should go to shareholders (in a general sense).  So in the end, you're just decreasing the amount that shareholders receive to pay for expenses. Since dividends etc are paid in shares, it all seems like the same thing to me.  After reading Delulo's last response I thought "Oh, the user is paying the bill and thats why transaction fees are different than dilution".   Yet take it a bit further and it seems to end up being another form of dilution but just one that seems more appealing.

Not at all the same thing. *I individually* can choose to not transact and thus not pay transaction fees. I buy, hold, then sell, and the cost to me is 1 tx fee.
I cannot choose not to have my share diluted. I buy, hold, then sell, and notice my share is smaller than before because people took some while I was gone.

[gamey]

My thing is that taking money from transactions fees is effectively the same as dilution.  Those transaction fees are profit that should go to shareholders (in a general sense).  So in the end, you're just decreasing the amount that shareholders receive to pay for expenses. Since dividends etc are paid in shares, it all seems like the same thing to me.  After reading Delulo's last response I thought "Oh, the user is paying the bill and thats why transaction fees are different than dilution".   Yet take it a bit further and it seems to end up being another form of dilution but just one that seems more appealing. 

[santaclause102]

If the developer is payed by transaction fees, a new developer can still take over.  No one should invest in a company that considers taxing the shareholders to cover expenses part of its long term business plan.  After the capital investment raised by selling shares is consumed, the business should be sustainable on revenue from customers.  If it permanently draws value from shareholders through dilution, rather than rewarding them with dividends, it's a zombie.

I don't have a grasp on transaction fees and how many/when a DAC would pay..  I also don't understand why transaction fees are not being considered a "tax".  Yes, a company that permanently draws value from shareholders without ever paying dividends will likely die.  That is fairly obvious, but you could (depending on your definition of dilution) dilute while rewarding with dividends.

I see no reason why transaction fees are any better than a reasonable preplanned dilution.  Paying agents/employees all comes from the same place in the end, no matter how you calculate or name it.  Those transaction fees could belong to shareholders just as much as a developer.  Honestly.. I just do not understand these distinctions.  Is it nothing more than ideology and anything that appears like a tax gets the bad connotations that go along with taxes?  Is that whats going on?

It's fairly simple. For any company there are three ways of paying for expenses:
Money raised from initial sell of shares. This is limited and fixed compared to the other two and will be used up at some point.
Income = tx fees in our case which are paid by those using the service.
Dilution which is paid by all shareholders. Also see the bottom of https://bitsharestalk.org/index.php?topic=4713.msg60584#msg60584 for a more specific definition.
The income source is always preferable. The initially raised money tends to be something a development team plans with to hire people being able to assure them to be able to pay them for a year or so. The question is just whether it makes sense to dilute shareholders if an aggressive marketing/expansion strategy is considered effective and the income source and the initially raised money is not enough to cover that. 

[gamey]

If the developer is payed by transaction fees, a new developer can still take over.  No one should invest in a company that considers taxing the shareholders to cover expenses part of its long term business plan.  After the capital investment raised by selling shares is consumed, the business should be sustainable on revenue from customers.  If it permanently draws value from shareholders through dilution, rather than rewarding them with dividends, it's a zombie.

I don't have a grasp on transaction fees and how many/when a DAC would pay..  I also don't understand why transaction fees are not being considered a "tax".  Yes, a company that permanently draws value from shareholders without ever paying dividends will likely die.  That is fairly obvious, but you could (depending on your definition of dilution) dilute while rewarding with dividends.

I see no reason why transaction fees are any better than a reasonable preplanned dilution.  Paying agents/employees all comes from the same place in the end, no matter how you calculate or name it.  Those transaction fees could belong to shareholders just as much as a developer.  Honestly.. I just do not understand these distinctions.  Is it nothing more than ideology and anything that appears like a tax gets the bad connotations that go along with taxes?  Is that whats going on?

[gyhy]

 

[Troglodactyl]

The other useful thing about some form of dilution is that it allows a developer to sell off his job.  If he just has preallocated shares we run into the same problem again where the new developer can just give up once they are paid and sell their shares.  (Or worse, you don't get that far as the dev dumps his preallocated funds)  If they are paid a salary through some mechanism of dilution then that job can be passed/sold off without the shareholders risking as much.  Infact that becomes a lot more likely way for a dev to quit a DAC.  They pass off the job to someone else if they can find someone suitable to take on the role.

If the developer is payed by transaction fees, a new developer can still take over.  No one should invest in a company that considers taxing the shareholders to cover expenses part of its long term business plan.  After the capital investment raised by selling shares is consumed, the business should be sustainable on revenue from customers.  If it permanently draws value from shareholders through dilution, rather than rewarding them with dividends, it's a zombie.

[Troglodactyl]

From the Bitcointalk thread:

I introduced a new thought that is not in the whitepaper and that is that the block creation reward, in addition to funding infrastructure and developers, could also subsidize transactions to the extent of negative transaction fees, should the abuse problem be addressed. Imaging paying Amazon or any other global Internet retailer a week's worth of block creation rewards, i.e. $13 million to get them to accept bitcoins as payment. I call this notion paying for order flow.

Would negative tx fees allow anyone to send coins back and forth and make money this way? Would the increased demand for coins through this way of making money overcompensate Bitcoin holders (on the one site the price might increases and on the other side negative tx fees have to be paid through dilution by holders)?

Yes, paying for order flow invites abuse. Human organizations prevent this by audits of the paid organization by the paying organization. This could not be easily automated, but one can imagine in some possible world, a software agent that contracts with auditing companies to perform this role.

Do you mean that an auditing company would ban every address that abuses this. Can someone not write a script/program that generates a new address for every tx?

I would have an auditing company send humans to the payment processor site for a policy, procedures and software program audit to observe payments in action. Negative transaction fees are sufficiently high motivation for honest behavior.

Another issue is that an autonomous system may need to be a legal entity for the purpose of enforcing contracts. I suppose that you all have an alternative and I would like to know more about how an anonymous bitcoin network could negotiate contracts with human organizations.

Legally enforcing contracts is rather inefficient and unreliable.  Reducing dependence on this is a significant advantage of using a blockchain rather than a traditional ledger in the first place, so if there's a way to improve the design such that external enforcement is unnecessary, that's worth a lot.  Are you talking about limiting access to this network to large, publicly known organizations?  Using a new address for every receive is common practice, so if it's an open network then preventing fraud and having negative transaction fees is implausible, even if it would be desirable.

[StephenReed]

From the Bitcointalk thread:

I introduced a new thought that is not in the whitepaper and that is that the block creation reward, in addition to funding infrastructure and developers, could also subsidize transactions to the extent of negative transaction fees, should the abuse problem be addressed. Imaging paying Amazon or any other global Internet retailer a week's worth of block creation rewards, i.e. $13 million to get them to accept bitcoins as payment. I call this notion paying for order flow.

Would negative tx fees allow anyone to send coins back and forth and make money this way? Would the increased demand for coins through this way of making money overcompensate Bitcoin holders (on the one site the price might increases and on the other side negative tx fees have to be paid through dilution by holders)?

Yes, paying for order flow invites abuse. Human organizations prevent this by audits of the paid organization by the paying organization. This could not be easily automated, but one can imagine in some possible world, a software agent that contracts with auditing companies to perform this role.

Do you mean that an auditing company would ban every address that abuses this. Can someone not write a script/program that generates a new address for every tx?

I would have an auditing company send humans to the payment processor site for a policy, procedures and software program audit to observe payments in action. Negative transaction fees are sufficiently high motivation for honest behavior.

Another issue is that an autonomous system may need to be a legal entity for the purpose of enforcing contracts. I suppose that you all have an alternative and I would like to know more about how an anonymous bitcoin network could negotiate contracts with human organizations.

[gamey]

The other useful thing about some form of dilution is that it allows a developer to sell off his job.  If he just has preallocated shares we run into the same problem again where the new developer can just give up once they are paid and sell their shares.  (Or worse, you don't get that far as the dev dumps his preallocated funds)  If they are paid a salary through some mechanism of dilution then that job can be passed/sold off without the shareholders risking as much.  Infact that becomes a lot more likely way for a dev to quit a DAC.  They pass off the job to someone else if they can find someone suitable to take on the role.

[toast]

You don't need dilution at all. Pay salaries in a BitAsset like BitUSD. Do you have to create new Bitshares to create BitUSD? No you do not. So why would you have to create new Bitshares to pay salaries in BitUSD?

Free BitUSD?? Sign me up!
(you have to buy the bitusd...)

Mastercoin has developer funds without any dilution so I'm not buying the idea that you need inflation or dilution. Price all that in at the beginning.

And the dev MSC is what exactly?


If someone is getting a higher fraction of the total, someone else has to get a lower fraction of the total.

[gamey]

You don't need dilution at all. Pay salaries in a BitAsset like BitUSD. Do you have to create new Bitshares to create BitUSD? No you do not. So why would you have to create new Bitshares to pay salaries in BitUSD?

If it's really valuable to people then people will not need dilution/inflation to pay for it. If it's trash then of course you need inflation to pay for that because no one in their right mind would want to pay for it otherwise.

Bitcoin security was an exception because at the time there was no other known way to do it. In this case there are others ways to do it so you have to show that doing it through inflation is somehow the best way out of all other possible ways which don't involve inflation.

Let's find all the possible ways and then create a pro/con list?

Mastercoin has developer funds without any dilution so I'm not buying the idea that you need inflation or dilution. Price all that in at the beginning.

 I would suggest looking at Ripple for a high profile case of a dump.  It instantly lost 40% of its value.  When you allocate shares upfront, you have to allocate enough to pay for any costs down the road.  Those funds can also just be dumped at any time on the market.  Granted there may not be enough depth to sell much, but it should be quite possible.  When a dev pays himself upfront to upkeep a DAC, there aren't near as many incentives to keep the developer honest.  The developer might see bigger things on the horizon and just dump their allocated shares and move on.  Wheres that leave the DAC?

I really don't understand why someone would be against the idea of reallocation of shares either via dilution (adding shares) or direct redistribution if it is all decided and agreed to upfront.

I suppose predefined allocation with vesting might serve the same purpose, but it all seems about the same as dilution/inflation/reallocation and only ideological reasons make one more valid than the other.

[luckybit]

It seems that if you don't dilute then you just have to allocate the creator of the DAC a larger share upfront.  Isn't that how this is supposed to work ?  That has its own problem in that the DAC creator could just dump their shares and walk away.  Unlike currencies etc the DAC could still have existing value as it continues to run.    This continuation of the DAC network somewhat mitigates the effect of a dump, but if the DAC was worth dumping then it likely won't recover.

Alternatively you constantly dilute shares via inflation and at least you mitigate a lot of the problems and types of fraud people will see.  Instead I give myself .5% but then become paid chief via dilution and with a sliding scale of payment that decreases over time.  I can't just walk away and or I lose out on what I am being paid and I can't just dump and run for a big bag of loot.  (Most likely scam outcome).  I think for a healthy DAC you need dilution to pay salaries/marketing costs, or an alternative that is worse. I think a DAC structured like this SHOULD give investors/users confidence.

You don't need dilution at all. Pay salaries in a BitAsset like BitUSD. Do you have to create new Bitshares to create BitUSD? No you do not. So why would you have to create new Bitshares to pay salaries in BitUSD?

If it's really valuable to people then people will not need dilution/inflation to pay for it. If it's trash then of course you need inflation to pay for that because no one in their right mind would want to pay for it otherwise.

Bitcoin security was an exception because at the time there was no other known way to do it. In this case there are others ways to do it so you have to show that doing it through inflation is somehow the best way out of all other possible ways which don't involve inflation.

Let's find all the possible ways and then create a pro/con list?

Mastercoin has developer funds without any dilution so I'm not buying the idea that you need inflation or dilution. Price all that in at the beginning.

[gamey]

It seems that if you don't dilute then you just have to allocate the creator of the DAC a larger share upfront.  Isn't that how this is supposed to work ?  That has its own problem in that the DAC creator could just dump their shares and walk away.  Unlike currencies etc the DAC could still have existing value as it continues to run.    This continuation of the DAC network somewhat mitigates the effect of a dump, but if the DAC was worth dumping then it likely won't recover.

Alternatively you constantly dilute shares via inflation and at least you mitigate a lot of the problems and types of fraud people will see.  Instead I give myself .5% but then become paid chief via dilution and with a sliding scale of payment that decreases over time.  I can't just walk away and or I lose out on what I am being paid and I can't just dump and run for a big bag of loot.  (Most likely scam outcome).  I think for a healthy DAC you need dilution to pay salaries/marketing costs, or an alternative that is worse. I think a DAC structured like this SHOULD give investors/users confidence.

[santaclause102]

From the Bitcointalk thread:

I introduced a new thought that is not in the whitepaper and that is that the block creation reward, in addition to funding infrastructure and developers, could also subsidize transactions to the extent of negative transaction fees, should the abuse problem be addressed. Imaging paying Amazon or any other global Internet retailer a week's worth of block creation rewards, i.e. $13 million to get them to accept bitcoins as payment. I call this notion paying for order flow.

Would negative tx fees allow anyone to send coins back and forth and make money this way? Would the increased demand for coins through this way of making money overcompensate Bitcoin holders (on the one site the price might increases and on the other side negative tx fees have to be paid through dilution by holders)?

Yes, paying for order flow invites abuse. Human organizations prevent this by audits of the paid organization by the paying organization. This could not be easily automated, but one can imagine in some possible world, a software agent that contracts with auditing companies to perform this role.

Do you mean that an auditing company would ban every address that abuses this. Can someone not write a script/program that generates a new address for every tx?

[StephenReed]

From the Bitcointalk thread:

I introduced a new thought that is not in the whitepaper and that is that the block creation reward, in addition to funding infrastructure and developers, could also subsidize transactions to the extent of negative transaction fees, should the abuse problem be addressed. Imaging paying Amazon or any other global Internet retailer a week's worth of block creation rewards, i.e. $13 million to get them to accept bitcoins as payment. I call this notion paying for order flow.

Would negative tx fees allow anyone to send coins back and forth and make money this way? Would the increased demand for coins through this way of making money overcompensate Bitcoin holders (on the one site the price might increases and on the other side negative tx fees have to be paid through dilution by holders)?

Yes, paying for order flow invites abuse. Human organizations prevent this by audits of the paid organization by the paying organization. This could not be easily automated, but one can imagine in some possible world, a software agent that contracts with auditing companies to perform this role.

[Troglodactyl]

To be clear we will not be changing code to accommodate these ideas in the first release.


Sent from my iPhone using Tapatalk

Thanks for stating that directly.

[bytemaster]

To be clear we will not be changing code to accommodate these ideas in the first release.


Sent from my iPhone using Tapatalk

[luckybit]

I'm very conservative about the initial Bitshares X chain. I think for future chains we can test some of these ideas out but I don't see why it's necessary to do this right now when Bitshares X isn't even released yet to fulfill the social consensus to the current set of owners.

I see nothing wrong with having different chains with different BitAssets. Some of these different chains can try slightly different business models.

But the way I see it working is if there is a inflationary chain and a deflationary chain and we have shares in both then it's a lot easier to talk about experimenting. If we just have one chain and it's not even launched yet then it sounds like there could be another major change at the last minute and this kind of change is as major as switching to Proof of Stake.

Let's release Bitshares X first. After it is released then Bitshares X 2.0 can be based on a snapshot of Bitshares X 1.0 but with these newer features.

For marketing there are a lot of ways to do that so I don't think you really need to dilute shares for that. I do understand that somehow funding can run out, especially when you look at the funding of Mastercoin and potentially Ethereum. Why not just use Angelshares to fund marketing campaigns in the future? Why mess with the DAC?

I'm not against attempting it because Bitshares itself is an experiment in next generation capitalism. But I don't think it's wise to take the corporate model of capitalism complete with all it's corruption and flaws and import it all into the decentralized capitalism 2.0. If we are going to find a way to do it we have to up our standards to a level of efficiency beyond that of corporate crony capitalism.

Our model must be designed to be fault tolerant, error tolerant, collusion resistant, the incentives should be moved around until the perfect incentive model is found to optimize for maximum value increase of the shares. Bytemaster is right in that if you can increase the value of the shares enough to the point where that value increase goes beyond the dilution then you can get away with dilution.

But there is still a problem. When you dilute or inflate the shares you create a sort of black hole where corruption and collusion can form. Cartels and other groups might form around the creation process to corrupt it in such a way that once you start diluting the shares the social and political forces prevent you from ever cutting the flow of shares off.

These shares would have to be tracked, it would cause all sorts of potential problems. If we look at it as corporate bonuses then you have to actually measure the real world effect. Unfortunately the real world bankers give bonuses even when the effects as bad as a reward for what? So is it possible that this new bonus structure could be abused in the same sort of way if the delegates or the social engineering become too strong?

[santaclause102]

Also stop to consider the issue mathematically. For example, in a group of 100 people, you contribute 1% to the total if everyone works equally hard, which of course they won’t. If you do less than the others, you contribute even less than 1%, so your efforts are statistically meaningless; if you do more, your efforts are subsidizing the slackers – but you’ll still have to share the reward with them.

The quote above describes the common pool resource problem / tragedy of the commons. It is a similar problem among shareholders but there are some differences. If you differentiate shareholders functionally completely from the active operational functions they might have as well there is nothing one shareholder does more than another. Every shareholder gives his capital to the company exactly to the degree that he will profit from it later (through share price appreciation or dividends). There are two problems here: (1) The "group trap" here is between all shareholders and those the shareholders entrust the operational work with (delegates, dac dev team) - this is described as the "principle agent problem". (2) The problematic (but unavoidable (?) and before hand known) fact/problem that there is a majority vote over operational and delegate decisions (share dilution is an operational decision, see next paragraph).

I basically agree with troc that it can be a moral problem to dilute shareholders by majority vote. But this is not the same dilution like with fiat money. It has a different purpose. The goal of company share dilution is capital infusion and therefore growth for all. There might be a moral problem when the minority thinks that the share dilution will not have the desired effect (effect = value appreciation per share: Because the effect of the investment in marketing etc. is stronger than the dilution effect).

establishing an objective measure of the value of the capital infusion and who is responsible for that infusion

The only solution is the critical and foreseeing (and therefore never perfect) judgement of shareholders about the delegates policies and / or about the effectiveness of a share dilution.

The overall question that dominates is: What is the original motivation for capital owners to join capital efforts to form a company at all and therefore buy in to some unavoidable group traps / principle agent problems? There are reasons obviously and some degree (the least possible) of accepting group traps / principle agent problems might be necessary and justified because those problems are known before hand and are inherent to every company.
We could also say that by joining other shareholders you enter a group and by doing this you accept the majority vote of the group. Isn't it like this de facto with any company you invest in? 


I will define the words I used and are used here often with respect to our specific case (DACs). We might be at cross purposes here if we understand the words differently.
Share / shareholder dilution and capital infusion: Offering new shares to the market that can be bought by everyone. The revenue from this public share sale is the capital infusion.
Value of the capital infusion, as used by bm: I would rather say "efficiency of the share dilution". Value of the capital infusion could be understood as the monetary value of what you get from the sale of shares = monetary value of the capital infusion.

[bytemaster]

In the short term, it may seem that redistributing property in order to stimulate growth is catalytic and beneficial, but in the long run I think efficiency will win out, and forced redistribution is inherently inefficient and destabilizing.

You say that you know the rules going in, but the rules to which you're referring are the rules for changing the rules.  People should read the fine print and see this, but if they do, do you think they would still invest?  I would hate to see the "decentralized solutions to centralized problems" goal die here and the project become just another tool some people use to dominate others.

There are lots of philosophical and moral issues here, and to deny them I think would be shortsighted.  They're part of the product, and sacrificing them for apparent expediency could alienate potential customers and investors.

I am going to start off with the fundamental philosophical perspective: All shared ownership systems fall into the Group Trap...

Next is the Group Trap, which is the belief that you can accomplish more by acting in groups than you can by acting on your own. Harry didn’t believe that there’s anything inherently wrong with participating in groups; you may enjoy the social aspect or something else about it. But you should be consciously aware that, if you just want to accomplish something, you not only don’t have to go through a group, but it’s actually easier to act on your own.

.....


Also stop to consider the issue mathematically. For example, in a group of 100 people, you contribute 1% to the total if everyone works equally hard, which of course they won’t. If you do less than the others, you contribute even less than 1%, so your efforts are statistically meaningless; if you do more, your efforts are subsidizing the slackers – but you’ll still have to share the reward with them.

So attempting to accomplish something together via 'shares' is already very close to falling into this trap.   Those who work hard to market the DAC subsidize those who do not.   

The best you can do to mitigate the damage from the group trap is to avoid falling into the government trap.  In this case some people are put in authority over assets belonging to others.   This kind of situation introduces the moral hazard we hope to avoid with DACs.   

All of that said, the concept of diluting shareholders makes sense only when then the value-per-share increases (or stays the same) as a result of a capital infusion.  In this sense you can view the system like salt water where the salt is the value and the water is the shares.   If you add more salt than water then you don't actually dilute the shareholders. 

From this perspective it would be immoral to accept a capital infusion without issuing new shares because the person giving the infusion would be getting nothing (no shares) for something (capital infusion). 

And this is where the group trap and economic reality come to the foreground, there is no objective measure of the value of the capital infusion and thus each individual shareholder perceives the 'dilution' differently.   Some see it as a net gain, others a net loss and they are both right.

Now we have identified the crux of the matter:  establishing an objective measure of the value of the capital infusion and who is responsible for that infusion.   If it were possible to compensate the delegates proportional to the real rise in the value of the shares, then it would work like corporate bonuses for stock gains.  This works if the value increase can be directly tied to the actions of a set of delegates.   The problem is that the delegates themselves are in a group trap.  A lazy delegate can do nothing and reap huge rewards from the delegates that are actually doing something useful.   

With BitUSD DACs have an objective internal measure of their own value.  This means we have the potential to tie dilution rates to the rise in value of the DAC.    If you combine this dilution with a vesting period (say 3 years) then the delegates will have to work for long-term growth rather than short-term. 

As you can see this is a complex issue with many pitfalls.   

[Troglodactyl]

That's right, the majority doesn't have to open their wallets.  They can take no action.  They don't have any more right to force the minority to open their wallets than the minority has to force the majority to open their wallets.  The default state is that each is free to use his own resources as he sees fit, but none are free to use the resources of others without their consent.  If I choose to do something that I claim will also benefit you, that does not entitle me to use your money to pay for it unless you agree to contribute.

Snapshotting to split a network by strategy is an interesting idea, but it sacrifices network effect for purity.  It might be necessary if the main network is headed for collapse and can't be turned, but it's a sacrifice technique.

Talking about "they don't have a right" as if it's a moral question is missing the point.  By not allowing dilution on some kind of philosophical ground you are just limiting the options and tying the hands of the company.  I believe that a company that refuses under all circumstances to allow dilution would be out competed in the market by a company that can do this.

Virtually no large successful companies could ever have made it without being able to raise capital and/or bring in new stakeholders by issuing new shares.

These DACs can be quickly hiring developers/marketers/lawyers/executives making deals companies like Coinbase...  While you sit around waiting for enough transaction fees to come in so you can finally do something, and/or appealing to the charitable nature of some of the stakeholders while others profit more from inaction.

It's not a moral issue, you know the rules going in, if you don't like the way the rules are written you don't have to buy in to the DAC or you can sell your shares.  If you don't like to go along with what a majority want than don't buy shares of a company, because that's what you have to do.

Tying the hands of "the company"?  Who exactly do you mean by this?  The only hands we're tying are the ones otherwise headed for their neighbor's pockets.  Designing the company such that the majority stakeholders can confiscate the stake of the minority undermines trust in the company.  The more power you give the delegates to take from the shareholders, the more corruption you invite.

Dilution is just redistribution.  The only difference is opacity.  If delegates can collect seignorage in addition to transaction fees, the likelihood of long term social engineering attack vectors increases significantly.  There are certainly differences because it's a company with voluntary participation, but some lessons from central banking are still applicable.

In the short term, it may seem that redistributing property in order to stimulate growth is catalytic and beneficial, but in the long run I think efficiency will win out, and forced redistribution is inherently inefficient and destabilizing.

You say that you know the rules going in, but the rules to which you're referring are the rules for changing the rules.  People should read the fine print and see this, but if they do, do you think they would still invest?  I would hate to see the "decentralized solutions to centralized problems" goal die here and the project become just another tool some people use to dominate others.

There are lots of philosophical and moral issues here, and to deny them I think would be shortsighted.  They're part of the product, and sacrificing them for apparent expediency could alienate potential customers and investors.

[Agent86]

That's right, the majority doesn't have to open their wallets.  They can take no action.  They don't have any more right to force the minority to open their wallets than the minority has to force the majority to open their wallets.  The default state is that each is free to use his own resources as he sees fit, but none are free to use the resources of others without their consent.  If I choose to do something that I claim will also benefit you, that does not entitle me to use your money to pay for it unless you agree to contribute.

Snapshotting to split a network by strategy is an interesting idea, but it sacrifices network effect for purity.  It might be necessary if the main network is headed for collapse and can't be turned, but it's a sacrifice technique.

Talking about "they don't have a right" as if it's a moral question is missing the point.  By not allowing dilution on some kind of philosophical ground you are just limiting the options and tying the hands of the company.  I believe that a company that refuses under all circumstances to allow dilution would be out competed in the market by a company that can do this.

Virtually no large successful companies could ever have made it without being able to raise capital and/or bring in new stakeholders by issuing new shares.

These DACs can be quickly hiring developers/marketers/lawyers/executives making deals companies like Coinbase...  While you sit around waiting for enough transaction fees to come in so you can finally do something, and/or appealing to the charitable nature of some of the stakeholders while others profit more from inaction.

It's not a moral issue, you know the rules going in, if you don't like the way the rules are written you don't have to buy in to the DAC or you can sell your shares.  If you don't like to go along with what a majority want than don't buy shares of a company, because that's what you have to do.

[luckybit]

I don't think it would be a good idea to hard code a share dilution for a fixes amount of time. Would there be a possibility to do a temporary share dilution without hard forking? Would be helpful, especially at the beginning, in case tx fees are not enough and the gains from adoption would be the highest.   

Why not just let all delegates keep as much of the fee from their blocks as they want, and destroy the rest?  If they abuse that, they'll be voted out quickly, and the market will naturally regulate the dividend rate and strategies for reinvestment.

This is a good idea and would be necessary if delegates also make reinvestment decisions. My concern was that an entity with an interest to harm the network that has a lot of financial backup (like a state) can survive this low compensation better. But there is probably no way to prevent it and a harmful actor could obfuscate its identity anyway. Could it?

I thought about whether it is a problem that the max. amount of votes a delegate can get is 2% of all votes (pro - contra votes). But is should be no problem if it is not possible to vote for a delegate that would have more than 2% if you voted for him. Then the personal or team behind the delegate has to set up a new delegate...

If transaction fees are insufficient I'd suggest convincing shareholders to reinvest directly and voluntarily.  Allowing even a majority of stakeholders the discretion to dilute the stake of the minority without their consent is problematic.

The concern at surviving low compensation isn't solved by hard coding compensation, since any delegate can reduce his own compensation by destroying some of it manually, and can advertise these dividends to the shareholders.  If a state wants to run a delegate at low compensation, they're welcome to, but if they try to use it to exert power negatively, they should be voted out quickly just like anyone else would be.

How about offering something equivalent to a tax credit for those who go along with it voluntarily? It doesn't even have to come from the same DAC as long as another DAC can send value through cross chain transactions. I'm not exactly sure how atomic cross chain transactions will work but I don't see any reason why different blockchains couldn't give credits of some sort.

The problem is it would be overly complex. Maybe it also might not be something which is immediately necessary.

Allowing even a majority of stakeholders the discretion to dilute the stake of the minority without their consent is problematic.

I disagree with this.  Just because some small group decides they want to be "freeloaders" doesn't mean that the majority has to open their wallets and pay for them while they get all the growth benefits at no charge.  This would be like making taxes optional, no one will pay them.

It's not like majority can vote that the minority has to give them all the money or something, the minority still has representation.

My previous idea is everyone votes for an inflation rate and take the median, or some other way of giving the DAC flexibility toward growth or dividends.  0% inflation would be all fees are given to delegates with no dividend. 2% inflation would be creating new shares to fund growth.  -1% inflation would be destroying some percent of transaction fees for dividends (might be more appropriate for a long established DAC).

The way we take a snapshot now to honor a DAC, in the future, people might honor all shares of a DAC that vote for a particular group of delegates.  That way people who want to take the company in a different direction can fork it and bring the people who share that vision with them and then compete in the market.

Inflation is dangerous. First explain why we need inflation at all and what problem does it solve which wouldn't be solved without inflation?

1) Diluting shareholders as Bitcoin does now and spending this money / those coins on marketing ("paying Amazon to accept Bitcoin") instead of paying it to miners or shareholders - would this be an advantage to DPOS/bitshares?

I think it's debatable. No I don't think you should dilute shareholders because why get rid of mining saying its to prevent dilution of shares only to put the dilution back without any of the benefits of mining?

I don't think new shares need to be created to fund growth. Reward people who already have shares and who donate them to projects which fund growth.

Value isn't in the shares it's in the products and services. Any problem can be solved by crowd funding. Use Angelshares for this purpose because isn't that the whole point of Angelshares?

[luckybit]

Is it not obvious that inflation is a brilliant way to force everyone to continually donate a tiny amount? Does it not effectively solve the tragedy of the commons problem? Are we sure our idealist attitudes are not interfering with our judgement? What does it matter that voting etc. on how to spend this influx of money is flawed, when we know that it can solve at least one problem that individuals as individuals can not, namely the situation where each donating a tiny amount would be rational if they all did it, but they do not do it since they can not be sure everyone or even anyone else does. Pending a perfect solution, do we not already know that we require both types of spending for the whole system to be supra-rational?

I think of it more like shareholders agreeing to a dilution in exchange for a capital infusion.    I think it is indeed a good idea in the short run and works well for DPOS.   Early on in a networks life transaction fees are unlikely to be sufficient to motivate growth.  They will merely cover costs.   

So I have thought about it some and recognized that no company pays a dividend while in its growth phase.   Only after it has matured does it start paying dividends.   

So paying 100% of transaction fees to the delegates is a middle ground.   Have the percent paid to delegates decrees down to 10% over 10 years as the network matures.   

On the other hand, paying dividends is marketing in its own right and is effectively paying every shareholder to grow the network.   

I think that transaction fees will more than cover infrastructure growth as the network grows.

Why set it by years and not by something more measurable like activity of some sort?

[Troglodactyl]

...
The best solution might be to make the tx fees grandiose from the beginning and let the market / shareholders decide then.

I think each delegate should be free to set his own transaction fee, and if they set them too high they can be voted out.

Allowing even a majority of stakeholders the discretion to dilute the stake of the minority without their consent is problematic.

I disagree with this.  Just because some small group decides they want to be "freeloaders" doesn't mean that the majority has to open their wallets and pay for them while they get all the growth benefits at no charge.  This would be like making taxes optional, no one will pay them.

It's not like majority can vote that the minority has to give them all the money or something, the minority still has representation.

My previous idea is everyone votes for an inflation rate and take the median, or some other way of giving the DAC flexibility toward growth or dividends.  0% inflation would be all fees are given to delegates with no dividend. 2% inflation would be creating new shares to fund growth.  -1% inflation would be destroying some percent of transaction fees for dividends (might be more appropriate for a long established DAC).

The way we take a snapshot now to honor a DAC, in the future, people might honor all shares of a DAC that vote for a particular group of delegates.  That way people who want to take the company in a different direction can fork it and bring the people who share that vision with them and then compete in the market.

That's right, the majority doesn't have to open their wallets.  They can take no action.  They don't have any more right to force the minority to open their wallets than the minority has to force the majority to open their wallets.  The default state is that each is free to use his own resources as he sees fit, but none are free to use the resources of others without their consent.  If I choose to do something that I claim will also benefit you, that does not entitle me to use your money to pay for it unless you agree to contribute.

Snapshotting to split a network by strategy is an interesting idea, but it sacrifices network effect for purity.  It might be necessary if the main network is headed for collapse and can't be turned, but it's a sacrifice technique.

[Agent86]

Allowing even a majority of stakeholders the discretion to dilute the stake of the minority without their consent is problematic.

I disagree with this.  Just because some small group decides they want to be "freeloaders" doesn't mean that the majority has to open their wallets and pay for them while they get all the growth benefits at no charge.  This would be like making taxes optional, no one will pay them.

It's not like majority can vote that the minority has to give them all the money or something, the minority still has representation.

My previous idea is everyone votes for an inflation rate and take the median, or some other way of giving the DAC flexibility toward growth or dividends.  0% inflation would be all fees are given to delegates with no dividend. 2% inflation would be creating new shares to fund growth.  -1% inflation would be destroying some percent of transaction fees for dividends (might be more appropriate for a long established DAC).

The way we take a snapshot now to honor a DAC, in the future, people might honor all shares of a DAC that vote for a particular group of delegates.  That way people who want to take the company in a different direction can fork it and bring the people who share that vision with them and then compete in the market.

[santaclause102]

Sorry, I meant if transaction fees were insufficient, not share dilution.  What I typed originally didn't make much sense...

read it right anyway...

[Troglodactyl]

Sorry, I meant if transaction fees were insufficient, not share dilution.  What I typed originally didn't make much sense...

[santaclause102]

The concern at surviving low compensation isn't solved by hard coding compensation, since any delegate can reduce his own compensation by destroying some of it manually, and can advertise these dividends to the shareholders.  If a state wants to run a delegate at low compensation, they're welcome to, but if they try to use it to exert power negatively, they should be voted out quickly just like anyone else would be.

Agree. That is the best solution.

If share dilution is insufficient I'd suggest convincing shareholders to reinvest directly and voluntarily.  Allowing even a majority of stakeholders the discretion to dilute the stake of the minority without their consent is problematic.

It is problematic but it is a workable solution a vast majority could perceive as just. Voluntary donation without getting something back is the best ethical solution but the outcome if no one donates because everyone is a small fish by himself might be worse than if everyone was diluted and everyone benefits. It is likely that everyone sees this as justified if it is widely accepted that investment makes sense for all.
The best solution might be to make the tx fees grandiose from the beginning and let the market / shareholders decide then.
edit: After having thought about it a bit more making tx fees grandiose wouldn't work of course. It would be only one stream of capital that can be reinvested and it might not be enough, especially at the beginning.

[toast]

I don't think it would be a good idea to hard code a share dilution for a fixes amount of time. Would there be a possibility to do a temporary share dilution without hard forking? Would be helpful, especially at the beginning, in case tx fees are not enough and the gains from adoption would be the highest.   

Why not just let all delegates keep as much of the fee from their blocks as they want, and destroy the rest?  If they abuse that, they'll be voted out quickly, and the market will naturally regulate the dividend rate and strategies for reinvestment.

This is a good idea and would be necessary if delegates also make reinvestment decisions. My concern was that an entity with an interest to harm the network that has a lot of financial backup (like a state) can survive this low compensation better. But there is probably no way to prevent it and a harmful actor could obfuscate its identity anyway. Could it?

I thought about whether it is a problem that the max. amount of votes a delegate can get is 2% of all votes (pro - contra votes). But is should be no problem if it is not possible to vote for a delegate that would have more than 2% if you voted for him. Then the personal or team behind the delegate has to set up a new delegate...

If share dilution is insufficient I'd suggest convincing shareholders to reinvest directly and voluntarily.  Allowing even a majority of stakeholders the discretion to dilute the stake of the minority without their consent is problematic.

The concern at surviving low compensation isn't solved by hard coding compensation, since any delegate can reduce his own compensation by destroying some of it manually, and can advertise these dividends to the shareholders.  If a state wants to run a delegate at low compensation, they're welcome to, but if they try to use it to exert power negatively, they should be voted out quickly just like anyone else would be.

Bingo. Right at launch we would have "dev delegates" and "dividend delegates". The shareholders pick whatever they like.

[Troglodactyl]

I don't think it would be a good idea to hard code a share dilution for a fixes amount of time. Would there be a possibility to do a temporary share dilution without hard forking? Would be helpful, especially at the beginning, in case tx fees are not enough and the gains from adoption would be the highest.   

Why not just let all delegates keep as much of the fee from their blocks as they want, and destroy the rest?  If they abuse that, they'll be voted out quickly, and the market will naturally regulate the dividend rate and strategies for reinvestment.

This is a good idea and would be necessary if delegates also make reinvestment decisions. My concern was that an entity with an interest to harm the network that has a lot of financial backup (like a state) can survive this low compensation better. But there is probably no way to prevent it and a harmful actor could obfuscate its identity anyway. Could it?

I thought about whether it is a problem that the max. amount of votes a delegate can get is 2% of all votes (pro - contra votes). But is should be no problem if it is not possible to vote for a delegate that would have more than 2% if you voted for him. Then the personal or team behind the delegate has to set up a new delegate...

If transaction fees are insufficient I'd suggest convincing shareholders to reinvest directly and voluntarily.  Allowing even a majority of stakeholders the discretion to dilute the stake of the minority without their consent is problematic.

The concern at surviving low compensation isn't solved by hard coding compensation, since any delegate can reduce his own compensation by destroying some of it manually, and can advertise these dividends to the shareholders.  If a state wants to run a delegate at low compensation, they're welcome to, but if they try to use it to exert power negatively, they should be voted out quickly just like anyone else would be.

[santaclause102]

I don't think it would be a good idea to hard code a share dilution for a fixes amount of time. Would there be a possibility to do a temporary share dilution without hard forking? Would be helpful, especially at the beginning, in case tx fees are not enough and the gains from adoption would be the highest.   

Why not just let all delegates keep as much of the fee from their blocks as they want, and destroy the rest?  If they abuse that, they'll be voted out quickly, and the market will naturally regulate the dividend rate and strategies for reinvestment.

This is a good idea and would be necessary if delegates also make reinvestment decisions. My concern was that an entity with an interest to harm the network that has a lot of financial backup (like a state) can survive this low compensation better. But there is probably no way to prevent it and a harmful actor could obfuscate its identity anyway. Could it?

I thought about whether it is a problem that the max. amount of votes a delegate can get is 2% of all votes (pro - contra votes). But is should be no problem if it is not possible to vote for a delegate that would have more than 2% if you voted for him. Then the persona or team behind the delegate has to set up a new delegate with "votes free to be spent"...

Actually the max pro is 2% and the max against is 2%.

If a delegate gets +2% and -0.5% then the max. he can get is + 1.5% ? That would be a good additional incentive to make delegates try to avoid negative votes.

[bytemaster]

I don't think it would be a good idea to hard code a share dilution for a fixes amount of time. Would there be a possibility to do a temporary share dilution without hard forking? Would be helpful, especially at the beginning, in case tx fees are not enough and the gains from adoption would be the highest.   

Why not just let all delegates keep as much of the fee from their blocks as they want, and destroy the rest?  If they abuse that, they'll be voted out quickly, and the market will naturally regulate the dividend rate and strategies for reinvestment.

This is a good idea and would be necessary if delegates also make reinvestment decisions. My concern was that an entity with an interest to harm the network that has a lot of financial backup (like a state) can survive this low compensation better. But there is probably no way to prevent it and a harmful actor could obfuscate its identity anyway. Could it?

I thought about whether it is a problem that the max. amount of votes a delegate can get is 2% of all votes (pro - contra votes). But is should be no problem if it is not possible to vote for a delegate that would have more than 2% if you voted for him. Then the persona or team behind the delegate has to set up a new delegate with "votes free to be spent"...

Actually the max pro is 2% and the max against is 2%.   

[santaclause102]

I don't think it would be a good idea to hard code a share dilution for a fixes amount of time. Would there be a possibility to do a temporary share dilution without hard forking? Would be helpful, especially at the beginning, in case tx fees are not enough and the gains from adoption would be the highest.   

Why not just let all delegates keep as much of the fee from their blocks as they want, and destroy the rest?  If they abuse that, they'll be voted out quickly, and the market will naturally regulate the dividend rate and strategies for reinvestment.

This is a good idea and would be necessary if delegates also make reinvestment decisions. My concern was that an entity with an interest to harm the network that has a lot of financial backup (like a state) can survive this low compensation better. But there is probably no way to prevent it and a harmful actor could obfuscate its identity anyway. Could it?

I thought about whether it is a problem that the max. amount of votes a delegate can get is 2% of all votes (pro - contra votes). But is should be no problem if it is not possible to vote for a delegate that would have more than 2% if you voted for him. Then the persona or team behind the delegate has to set up a new delegate with "votes free to be spent"... 

[Agent86]

Why not just let all delegates keep as much of the fee from their blocks as they want, and destroy the rest?  If they abuse that, they'll be voted out quickly, and the market will naturally regulate the dividend rate and strategies for reinvestment.

I agree that there shouldn't be a fixed dividend rate that must be destroyed with each transaction.  If one delegate wants to advertise as being low cost and paying the network dividends by destroying transaction fees, he/she is free to do so.  If one delegate wants to sponsor a developer with their transaction fees, they can advertise that way.

[Troglodactyl]

The problem with this is that if you're reinvesting profits funneled through a small number of individuals, it isn't exactly a DAC anymore, and you start having more of the problems you have with traditional centralized structures. Funneling the profits through the delegates who are elected by stakeholders I think mostly solves this, but I don't see a need to artificially fix the percentage of transaction fees available to them for profit and reinvestment in the success of the network.

Why not just let all delegates keep as much of the fee from their blocks as they want, and destroy the rest?  If they abuse that, they'll be voted out quickly, and the market will naturally regulate the dividend rate and strategies for reinvestment.

Why not just let all delegates keep as much of the fee from their blocks as they want, and destroy the rest?  If they abuse that, they'll be voted out quickly, and the market will naturally regulate the dividend rate and strategies for reinvestment.

This might be good for political delegates (potentially not trustworthy?) and not sustainable for those delegates that only do it for profit.

The problem with this is that if you're reinvesting profits funneled through a small number of individuals, it isn't exactly a DAC anymore, and you start having more of the problems you have with traditional centralized structures.

Companies like DACs can hire other companies and outsource something that can not be done inhouse. This is the case anyway because there will de facto always be a developer (team) that maintains the DAC and thus performs such an outside service to it.

Funneling the profits through the delegates who are elected by stakeholders I think mostly solves this

Of course delegates have to be paid sufficiently. But that was not the point. The point was whether is makes sense to invest the companies revenues and / or shares into marketing so the price increase because of adoption increase can (by far) make good the expenses. 
Or do you mean that the delegates should decide how to invest the money? That could make a lot of sense. It would be like the CEOs of a company deciding what to do with the money from revenue and whether it makes sense to issue new shares and then reinvest it or pay dividends.

Yes, the point I'm making is that the shareholders should ultimately decide how their DAC should promote its growth.  They can do this directly by individually investing their time and resources in building the network and supporting developers.  They can also do this indirectly by voting for the delegates who they believe will best serve the network.  In my opinion there's no line between "political" delegates and "for profit" delegates.  Some delegates may be run by the developers, and some delegates may promise to donate a percentage of transaction fees to the developers, or to a particular marketing strategy.  Either way, it seems the market should be quite capable of selecting delegates with the desired dividend/reinvestment ratios, and I see no need to hard code it for the next ten years.  It seems unlikely that the developers can predict the needs of the network for the next ten years now more accurately than all of the shareholders will be able to perceive them in real time.

[santaclause102]

The problem with this is that if you're reinvesting profits funneled through a small number of individuals, it isn't exactly a DAC anymore, and you start having more of the problems you have with traditional centralized structures. Funneling the profits through the delegates who are elected by stakeholders I think mostly solves this, but I don't see a need to artificially fix the percentage of transaction fees available to them for profit and reinvestment in the success of the network.

Why not just let all delegates keep as much of the fee from their blocks as they want, and destroy the rest?  If they abuse that, they'll be voted out quickly, and the market will naturally regulate the dividend rate and strategies for reinvestment.

Why not just let all delegates keep as much of the fee from their blocks as they want, and destroy the rest?  If they abuse that, they'll be voted out quickly, and the market will naturally regulate the dividend rate and strategies for reinvestment.

This might be good for political delegates (potentially not trustworthy?) and not sustainable for those delegates that only do it for profit.

The problem with this is that if you're reinvesting profits funneled through a small number of individuals, it isn't exactly a DAC anymore, and you start having more of the problems you have with traditional centralized structures.

Companies like DACs can hire other companies and outsource something that can not be done inhouse. This is the case anyway because there will de facto always be a developer (team) that maintains the DAC and thus performs such an outside service to it.

Funneling the profits through the delegates who are elected by stakeholders I think mostly solves this

Of course delegates have to be paid sufficiently. But that was not the point. The point was whether is makes sense to invest the companies revenues and / or shares into marketing so the price increase because of adoption increase can (by far) make good the expenses. 
Or do you mean that the delegates should decide how to invest the money? That could make a lot of sense. It would be like the CEOs of a company deciding what to do with the money from revenue and whether it makes sense to issue new shares and then reinvest it or pay dividends.

[Troglodactyl]

The problem with this is that if you're reinvesting profits funneled through a small number of individuals, it isn't exactly a DAC anymore, and you start having more of the problems you have with traditional centralized structures.  Funneling the profits through the delegates who are elected by stakeholders I think mostly solves this, but I don't see a need to artificially fix the percentage of transaction fees available to them for profit and reinvestment in the success of the network.

Why not just let all delegates keep as much of the fee from their blocks as they want, and destroy the rest?  If they abuse that, they'll be voted out quickly, and the market will naturally regulate the dividend rate and strategies for reinvestment.

[santaclause102]

You can justify dividends better if there was dilution to foster adoption which costs the most for those who later get high dividends...
If the DAC analogy applies it can't be that wrong for DACs what has evolved over decades for brick and mortar companies.

Yep...

I'm sorry, I'm a little slow today. Couldn't catch the meaning here. Would you kindly extrapolate a bit?

So POS is more efficient than POW, meaning higher security and less costs for the network to provide the security. This leaves room to take the tx fees and either pay dividends or use them to grow the network (pay amazon to accept your tokens or other marketing efforts). You can cover marketing expenses by diluting shareholders = issue new shares (bitcoin issues 25 new coins / 10 minutes and dilutes shareholders by 10% per year this way). Now you can first dilute shareholders to pay for marketing which hurts those the most that have the biggest stake (in absolute terms). In absolute terms those that have the most also get the highest dividends when later marketing is not necessary any more because everyone understands how to use crypto currencies and sees the benefits etc...   

*If the "Bitcoin is a company" analogy applies it can't be that wrong for Bitcoin (and any other crypto service) what has evolved over decades for brick and mortar companies (the above; in the brick and mortar world: In reality companies only pay dividends when they think that they can not invest the revenue anymore profitably and can't grow anymore (e.g. coka cola))

Got it. Thank you.

You're welcome.

[onceuponatime]

You can justify dividends better if there was dilution to foster adoption which costs the most for those who later get high dividends...
If the DAC analogy applies it can't be that wrong for DACs what has evolved over decades for brick and mortar companies.

Yep...

I'm sorry, I'm a little slow today. Couldn't catch the meaning here. Would you kindly extrapolate a bit?

So POS is more efficient than POW, meaning higher security and less costs for the network to provide the security. This leaves room to take the tx fees and either pay dividends or use them to grow the network (pay amazon to accept your tokens or other marketing efforts). You can cover marketing expenses by diluting shareholders = issue new shares (bitcoin issues 25 new coins / 10 minutes and dilutes shareholders by 10% per year this way). Now you can first dilute shareholders to pay for marketing which hurts those the most that have the biggest stake (in absolute terms). In absolute terms those that have the most also get the highest dividends when later marketing is not necessary any more because everyone understands how to use crypto currencies and sees the benefits etc...   

*If the "Bitcoin is a company" analogy applies it can't be that wrong for Bitcoin (and any other crypto service) what has evolved over decades for brick and mortar companies (the above; in the brick and mortar world: In reality companies only pay dividends when they think that they can not invest the revenue anymore profitably and can't grow anymore (e.g. coka cola))

Got it. Thank you.

[santaclause102]

You can justify dividends better if there was dilution to foster adoption which costs the most for those who later get high dividends...
If the DAC analogy applies it can't be that wrong for DACs what has evolved over decades for brick and mortar companies.

Yep...

I'm sorry, I'm a little slow today. Couldn't catch the meaning here. Would you kindly extrapolate a bit?

So POS is more efficient than POW, meaning higher security and less costs for the network to provide the security. This leaves room to take the tx fees and either pay dividends or use them to grow the network (pay amazon to accept your tokens or other marketing efforts). You can cover marketing expenses by diluting shareholders = issue new shares (bitcoin issues 25 new coins / 10 minutes and dilutes shareholders by 10% per year this way). Now you can first dilute shareholders to pay for marketing which hurts those the most that have the biggest stake (in absolute terms). In absolute terms those that have the most also get the highest dividends when later marketing is not necessary any more because everyone understands how to use crypto currencies and sees the benefits etc...   

*If the "Bitcoin is a company" analogy applies it can't be that wrong for Bitcoin (and any other crypto service) what has evolved over decades for brick and mortar companies (the above; in the brick and mortar world: In reality companies only pay dividends when they think that they can not invest the revenue anymore profitably and can't grow anymore (e.g. coka cola))

[onceuponatime]

You can justify dividends better if there was dilution to foster adoption which costs the most for those who later get high dividends...
If the DAC analogy applies it can't be that wrong for DACs what has evolved over decades for brick and mortar companies.

Yep...

I'm sorry, I'm a little slow today. Couldn't catch the meaning here. Would you kindly extrapolate a bit?

[bytemaster]

You can justify dividends better if there was dilution to foster adoption which costs the most for those who later get high dividends...
If the DAC analogy applies it can't be that wrong for DACs what has evolved over decades for brick and mortar companies.

Yep...

[santaclause102]

You can justify dividends better if there was dilution to foster adoption which costs the most for those who later get high dividends...
If the DAC analogy applies it can't be that wrong for DACs what has evolved over decades for brick and mortar companies.

[Agent86]

I think DACs that can hire employees could easily outcompete ones that can't.  We could poach active members of other communities.  Why do volunteer work for NXT and donate your money to the community marketing fund while someone with a bigger stake doesn't do anything when you can work for BitShares X?

As far as guaranteed dividends, there's something that doesn't sit right with me the idea that someone can have a big stake of a DAC in a cold wallet somewhere and not do much of anything and be guaranteed that their proportional ownership goes up over time.

I totally agree with Claims that there are many situations where everyone would agree to give money to something as long as everyone has to give.  You can be in favor of taxes for roads that everyone must pay but still know you wouldn't pay the tax if it was just optional for each person.

[santaclause102]

So I have thought about it some and recognized that no company pays a dividend while in its growth phase.   Only after it has matured does it start paying dividends.   

In reality companies only pay dividends when they think that they can not invest the revenue anymore profitably and can't grow anymore (e.g. coka cola)

On the other hand, paying dividends is marketing in its own right and is effectively paying every shareholder to grow the network.   

The reality of the crypto market is: 5% per year is a nothing against the potential of mainstream adoption and shareholders might appreciate it if a specialized group does the marketing for them.

[bytemaster]

Is it not obvious that inflation is a brilliant way to force everyone to continually donate a tiny amount? Does it not effectively solve the tragedy of the commons problem? Are we sure our idealist attitudes are not interfering with our judgement? What does it matter that voting etc. on how to spend this influx of money is flawed, when we know that it can solve at least one problem that individuals as individuals can not, namely the situation where each donating a tiny amount would be rational if they all did it, but they do not do it since they can not be sure everyone or even anyone else does. Pending a perfect solution, do we not already know that we require both types of spending for the whole system to be supra-rational?

I think of it more like shareholders agreeing to a dilution in exchange for a capital infusion.    I think it is indeed a good idea in the short run and works well for DPOS.   Early on in a networks life transaction fees are unlikely to be sufficient to motivate growth.  They will merely cover costs.   

So I have thought about it some and recognized that no company pays a dividend while in its growth phase.   Only after it has matured does it start paying dividends.   

So paying 100% of transaction fees to the delegates is a middle ground.   Have the percent paid to delegates decrees down to 10% over 10 years as the network matures.   

On the other hand, paying dividends is marketing in its own right and is effectively paying every shareholder to grow the network.   

I think that transaction fees will more than cover infrastructure growth as the network grows. 

[CLains]

Is it not obvious that inflation is a brilliant way to force everyone to continually donate a tiny amount? Does it not effectively solve the tragedy of the commons problem? Are we sure our idealist attitudes are not interfering with our judgement? What does it matter that voting etc. on how to spend this influx of money is flawed, when we know that it can solve at least one problem that individuals as individuals can not, namely the situation where each donating a tiny amount would be "rational" if they all did it, but they do not do it since they can not be sure everyone or even anyone else does. Pending a perfect solution, do we not already know that we require both types of spending for the whole system to be supra-rational?

I have never read a book on economy in my life so feel free to point of where I go wrong here.

[santaclause102]

From the Bitcointalk thread:

I introduced a new thought that is not in the whitepaper and that is that the block creation reward, in addition to funding infrastructure and developers, could also subsidize transactions to the extent of negative transaction fees, should the abuse problem be addressed. Imaging paying Amazon or any other global Internet retailer a week's worth of block creation rewards, i.e. $13 million to get them to accept bitcoins as payment. I call this notion paying for order flow.

Would negative tx fees allow anyone to send coins back and forth and make money this way? Would the increased demand for coins through this way of making money overcompensate Bitcoin holders (on the one site the price might increases and on the other side negative tx fees have to be paid through dilution by holders)? 

[StephenReed]

Thanks for inviting me. It was enjoyable and will help me polish the presentation of my ideas. I plan to listen when I can to the progress of the bitshares project and learn what I can.

I linked to here from my bitcointalk forum project thread.

[santaclause102]

Thanks Stephen for presenting and discussing your approach on mumble.

You can find his white paper here: https://docs.google.com/document/d/1C4m-MFnxw0JjDorzrKs_IRQRqD9ila79o0IDt6KsbcE/edit?pli=1
Here is a relevant thread on BTT: https://bitcointalk.org/index.php?topic=584719.0;topicseen

This thread is for discussing CPOS by itself and in comparison with DPOS.

To me Stephen brought up a few new concepts.
1) Diluting shareholders as Bitcoin does now and spending this money / those coins on marketing ("paying Amazon to accept Bitcoin") instead of paying it to miners or shareholders - would this be an advantage to DPOS/bitshares? Also see Agent86's suggestion here https://bitsharestalk.org/index.php?topic=4660.0
2) Autonomous agents (instances in the standard software everyone runs) select, testify and fire nodes and super nodes - where are the limits and the advantages of this approach?
3) Increasing scalability by establishing two layers of nodes (super nodes and full nodes) - would this be applicable and helpful for DPOS?

What other new concepts did you spot?

What is not yet clear to you?

Happy discussing!