Author Topic: DACs vs. Firms (Are DACs useless?)  (Read 29494 times)

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Offline Simeon II

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Everything unrelated to value-storage will be outsourced to firms. This leaves only a few niches (Bitcoin, Truthcoin, possibly .p2p domain 'real estate' storage).

My mountain climbing friend asked me to keep an eye if you ever gonna come with explanation why and how truthcoin will be so valuable. Seems like a good time to ask.
Care to elaborate?

‘Why/how is truthcoin one of the only few niches worth developing for?

Offline AsymmetricInformation

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@donkeypong: I, with complete honesty, look forward to seeing BitsharesX operate, and think its very exciting for commerce, just that people are trying new and crazy things. However, we actually do have a bit of a market test: This was promised to be working in March, and it is now mid-July. In contrast, a website can be started for $5 on digitalocean. This speaks to the cost of creating a DAC.

Produce a website that does what our DAC does for $5 and then lets talk.

I understood AsymmetricInformation to mean that all the time, effort, pain and innovation, and various and numerous costs, are what will give The DAC its value far above and beyond the $5. Not that you should be able to produce a DAC for $5.
Right. I didn't mean to imply that BitsharesX could be replicated for $5. In fact I'm nearly suggesting the reverse: that what you guys are doing is very, very, hard. So hard that I predict that like-minded entrepreneurs will actually decide that they don't want to try it anymore (except perhaps for the challenge, or for the public good), and will instead do the traditional thing, and set up shop and sell their labor.

It is also possible that some people will altruistically over-sacrifice (ie inefficiently over-invest) their efforts into creating a DAC, purely so that everyone else (ie, not them) can enjoy the longer-run benefits. However, a firm is more flexible (can change its service offering). I think a DAC runs the risk of fast-obsolescence...people always want new things.

Offline onceuponatime

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@donkeypong: I, with complete honesty, look forward to seeing BitsharesX operate, and think its very exciting for commerce, just that people are trying new and crazy things. However, we actually do have a bit of a market test: This was promised to be working in March, and it is now mid-July. In contrast, a website can be started for $5 on digitalocean. This speaks to the cost of creating a DAC.

Produce a website that does what our DAC does for $5 and then lets talk.

I understood AsymmetricInformation to mean that all the time, effort, pain and innovation, and various and numerous costs, are what will give The DAC its value far above and beyond the $5. Not that you should be able to produce a DAC for $5.

Offline bytemaster

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@donkeypong: I, with complete honesty, look forward to seeing BitsharesX operate, and think its very exciting for commerce, just that people are trying new and crazy things. However, we actually do have a bit of a market test: This was promised to be working in March, and it is now mid-July. In contrast, a website can be started for $5 on digitalocean. This speaks to the cost of creating a DAC.

Produce a website that does what our DAC does for $5 and then lets talk. 
For the latest updates checkout my blog: http://bytemaster.bitshares.org
Anything said on these forums does not constitute an intent to create a legal obligation or contract between myself and anyone else.   These are merely my opinions and I reserve the right to change them at any time.

Offline AsymmetricInformation

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As I said before, Bitcoin is useful. This is because (to repeat it yet again): a blockchain is required to store value.

To disagree, you need to propose a blockchain service that would "be economically profitable" but would not "store value". The comments you made referencing Bitcoin are therefore irrelevant.

Just because no one specifically labeled an account "Bitcoin dev fund" and announced that to the world, doesn't mean that the development of Bitcoin didn't consume scare time and energy. Voorhees estimated that the establishment of Bitcoin cost at least 1 billion dollars.

Delegates can go to jail.

Everything unrelated to value-storage will be outsourced to firms. This leaves only a few niches (Bitcoin, Truthcoin, possibly .p2p domain 'real estate' storage).

I was referring to customer's preferences, not price volatility. I mean that someday people may prefer to call a bank on the phone, the next day they may prefer online banking, then mobile banking. A firm can react quickly, but the blockchain's rules are far more permanent, introducing toxic inflexibility.

We'll see if that market cap lasts. I'm betting it won't.

Its been shown in theory and in practice, that if the accounting isn't transparent, the shareholders actually benefit. It is the business which suffers, as it cannot prove it's legitimacy, and must fund-raise under great suspicion. Shareholders always have the option to sell, or not-buy. This effect sometimes bundled with the famous "Market for Lemons" Nobel paper.

Delegates can certainly go to jail. They may for BtsX, they almost certainly would for BtsSilkRoad. It is irrelevant, my comments are about what the consumer wants, not what the producer wants. The producer always wants to retire, but no one makes a living by retiring immediately.

It's easy to just say "new paradigm". Much harder to use logic to back up that claim. Many things were fads in the 90's, like Beanie Babies. What sorts a paradigm-shift from a fad are the economic fundamentals.

@donkeypong: I, with complete honesty, look forward to seeing BitsharesX operate, and think its very exciting for commerce, just that people are trying new and crazy things. However, we actually do have a bit of a market test: This was promised to be working in March, and it is now mid-July. In contrast, a website can be started for $5 on digitalocean. This speaks to the cost of creating a DAC.

Offline Empirical1

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DAC's vs. Firms. DACs win! They can have nearly all the advantages with none of the disadvantages -
You have it backwards. Any entrepreneur can copy any DAC. DACs are expensive to create, debug, run, and maintain. DACs are impersonal and inflexible.

Privacy, accounting trust, tax, freedom from confiscation/seizure are the advantages DAC's provide to shareholders as well as some customers who store value via DACs. I don't see how I have those advantages backwards.

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Any entrepreneur can copy any DAC

An entrepeneur can easily copy the template for any online business, pirate content or even make copies of real world products. This is a revenue stealer and potential significant threat for DAC's or firms. Network effect + re-investment of profits in marketing & development, make it just as difficult for a DAC copy to usurp the orignal/market leader as it is to displace an online business created by a firm. (Not that Bitcoin is a true DAC, but it takes no effort to fork Bitcoin and even improve on it. But all the POW forks added together don't even equal 7% of Bitcoin's CAP.) 

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DACs are expensive to create, debug, run, and maintain.

The underlying Bitcoin software has been debugged, run and maintained for over 5 years without specifically setting aside any funds for that. I know of very few firms that have been maintained so cheaply and achieved $8 Billion valuations.

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DACs are impersonal and inflexible.

With our slow equity release via delegates that BM is proposing for future DAC's. DAC's will be very personal, flexible and responsive. Shareholders will be deciding on who best to represent them and how to best spend funds in real time.

I concede that the best DAC's will via delegates choose to outsource some areas to 'firms'. (Such as customer service or perhaps via delegates hiring an ad agency. But this is what I mean by having the best of both worlds.)


Price - DAC's have the potential to undercut the market considerably in many areas. Lotteries - twice the odds of winning vs. conventional,  Finance - 1/10th the price?
Once they exist, yes. Consumer demand is volatile, however. Building a DAC is too expensive.

Bitcoin, which can be viewed as an early form of a DAC, found a significant market and while volatile, as mentioned the POW forks don't even equal 7% of Bitcoin CAP. 

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Building a DAC is too expensive

BitShares is developing the foundation for DAC's in a range of groundbreaking areas such as banking, gaming, DNS & music. All of this from scratch, including building a toolkit for the entire industry and a market beating base blockchain. This will have been done in under a year from when they first started receiving donations and for under $5 million. (The market is already valuing just their one BitShares X DAC which hasn't been released at $20 Million. https://bter.com/trade/btsx_btc)

Also the legal requirements & approval often required with firms, that wish to operate for any length of time, means they often have the additional burden of legal costs and the disadvantage of time delays, often with an uncertain outcome that they'll even be allowed to trade at all.   


Trust - Does Fort Knox have the gold? Is Lehman Brothers really solvent? Are Madoff investment securities accounting statements correct? Are those Cdft stock certificates real? (The main benefit of decentralised ledger technology for me is  Accounting Trust.)
Matters for a bank (value-storage). Doesn't matter for a DAC (no "storage", sale is nearly-instantaneous).

No. Accounting trust matters to the shareholders of every single business in the world today. Even with independent auditors - misreporting, fraud/embezzlement/theft is a major concern.

Also many customers will be storing value in some form too -

Lottery DAC- they will need accounting trust that the funds will be there to pay out the winners.
Insurance DAC - Will obviously require accounting trust that the funds are there
Music DAC - Investing in songs and their future revenue requires accounting trust for period of investment.   

DACs also provide tax, confiscation & privacy benefits & have the advantage of being border/'jurisdiction-less'
Wrong again. SilkRoad was a firm, not a DAC.
I never said SilkRoad was a DAC? If you're under the illusion firms offer the same advantages, maybe you missed the part where SilkRoad was shut down and the owner arrested?
You missed the part where dozens of replacement firms appeared near-instantly. There is still no SilkRoad DAC. If DACs are so good, where are they?

I will try reply to the rest of your comments when I come back but at first glance they look pretty weak.
Your comments actually are weak, unlike mine, and I actually have responded to them, unlike you. You didn't even read where I posted them the first time.

So what if dozens of firms replaced them near-instantly? The owner of the original is in jail.
That is what proves the point that firms don't offer owners & shareholders the same advantages DAC's do. 

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If DACs are so good, where are they?

That's like popping up in 1993 and saying - 'If impersonal 'online stores' are so good. Where are they?'
« Last Edit: July 11, 2014, 07:17:54 pm by Empirical1 »

Offline Empirical1

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What's scarce is the stock of a particular company. A Microsoft share has value depending on the profitability and perceived future profitabilty of Microsoft. Similarly a DAC share will have a value depending on its current and perceived future profitability.
I agree in general. But it takes no effort to fork a DAC. Forking microsoft and making it work like the original is difficult. This lowers the value of a DAC. On the other side network effect might be more important than with pretty much all firms except with microsoft :)

Yip. Network effect plus re-investing profits into marketing and development.  It takes no effort to fork the templates of many online businesses. Good luck to anyone that wants to fork Facebook's template and compete with the original.

Not that Bitcoin is a full DAC, but it takes no effort to fork Bitcoin and even improve on it. But all the POW forks added together don't even add up to 7% of Bitcoin's CAP. 

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DAC's vs. Firms. DACs win! They can have nearly all the advantages with none of the disadvantages -
Basically a DAC is only a decentralized ledger plus X. X can be data feeds, prediction markets or (other) centralized add ons. There is a fluent transition between pure DACs (as toast would say) and Firms which make use of decentralized ledgers.
So comparing the two that directly is not that easy.
DACs (especially the pures ones) are limited to simple services.
There are disadvantages: e.g. a decentralized bookkeeping in itself is always more expensive than on a centralized server.

Firms are also legal entities or at least ones where the owners & shareholders can be traced & targeted under the law.
It is my understanding that a true DAC does not have this weakness. That is another major advantage.

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Price - DAC's have the potential to undercut the market considerably in many areas. Lotteries - twice the odds of winning vs. conventional,  Finance - 1/10th the price?
Don't believe it will be that extreme. Lottery: ATM maybe 7 (?) out of 10 USD (10 USD is the turnover of the lottery company) is paid out. So the odds on average are 70% -> double it -> 140%. Not profitable....
"Twice as profitable" would make sense -> 85% Odds

I only researched the UK & Euro lottery when looking into our lottery DAC early in the year. They only pay 50% to winners, so if we were able to offer the same service for 1% we would effectively be doubling their odds of winning. (1.98...)

0.5%--in profit to Camelot
4.5%--in operating costs
5%-----in commission to the retailers.
12%---to the UK Government (Lottery Duty)
28%---for the "Good Causes"
50%---to winners

http://en.wikipedia.org/wiki/EuroMillions#Prize_structure

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Trust - Does Fort Knox have the gold?
How would you suggest for Fort Knox to proof that they have it using blockchain techn.? AFAIK you can only be proven that someone else has something or sent you something for sure if that something is the token that defines the tx ledger.

Yes not the best example perhaps. But my rebuttal is this - While initially more risky as a new platform, with BitGold you should be able to verify via the rules of the system that your long position is backed up by a short position's collateral, whereas storing gold or making a trade with a centralised firm requires you to trust that they have all the gold/collateral that they say they do.   

« Last Edit: July 11, 2014, 05:15:44 pm by Empirical1 »

Offline donkeypong

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Was the iPod useless? A lot of people would have said so before it became popular. Ultimately, the market showed that it filled a niche, the existence of which may not have been crystal clear before. Professor Sztorc, you can offer up all the definitions and theories you want, but they lack the practical element of a market test. We will soon see if there is demand for DACs and their products/services.

Offline Empirical1

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DACs also provide tax, confiscation & privacy benefits & have the advantage of being border/'jurisdiction-less'
Wrong again. SilkRoad was a firm, not a DAC.
I never said SilkRoad was a DAC? If you're under the illusion firms offer the same advantages, maybe you missed the part where SilkRoad was shut down and the owner arrested?
You missed the part where dozens of replacement firms appeared near-instantly. There is still no SilkRoad DAC. If DACs are so good, where are they?

I will try reply to the rest of your comments when I come back but at first glance they look pretty weak.
Your comments actually are weak, unlike mine, and I actually have responded to them, unlike you. You didn't even read where I posted them the first time.

So what if dozens of firms replaced them near-instantly? The owner of the original is in jail.
That is what proves the point that firms don't offer owners & shareholders the same advantages DAC's do. 


Offline AsymmetricInformation

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DACs also provide tax, confiscation & privacy benefits & have the advantage of being border/'jurisdiction-less'
Wrong again. SilkRoad was a firm, not a DAC.
I never said SilkRoad was a DAC? If you're under the illusion firms offer the same advantages, maybe you missed the part where SilkRoad was shut down and the owner arrested?
You missed the part where dozens of replacement firms appeared near-instantly. There is still no SilkRoad DAC. If DACs are so good, where are they?

I will try reply to the rest of your comments when I come back but at first glance they look pretty weak.
Your comments actually are weak, unlike mine, and I actually have responded to them, unlike you. You didn't even read where I posted them the first time.

Offline Empirical1

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DACs also provide tax, confiscation & privacy benefits & have the advantage of being border/'jurisdiction-less'
Wrong again. SilkRoad was a firm, not a DAC.

I never said SilkRoad was a DAC? If you're under the illusion firms offer the same advantages, maybe you missed the part where SilkRoad was shut down and the owner arrested?

I will try reply to the rest of your comments when I come back but at first glance they look pretty weak.


Offline AsymmetricInformation

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I haven't read this whole thread or the article but I'll ignorantly comment anyway
I admire your honesty.

DAC's vs. Firms. DACs win! They can have nearly all the advantages with none of the disadvantages -
You have it backwards. Any entrepreneur can copy any DAC. DACs are expensive to create, debug, run, and maintain. DACs are impersonal and inflexible.

Price - DAC's have the potential to undercut the market considerably in many areas. Lotteries - twice the odds of winning vs. conventional,  Finance - 1/10th the price?
Once they exist, yes. Consumer demand is volatile, however. Building a DAC is too expensive.

Trust - Does Fort Knox have the gold? Is Lehman Brothers really solvent? Are Madoff investment securities accounting statements correct? Are those Cdft stock certificates real? (The main benefit of decentralised ledger technology for me is  Accounting Trust.)
Matters for a bank (value-storage). Doesn't matter for a DAC (no "storage", sale is nearly-instantaneous).

DACs also provide tax, confiscation & privacy benefits & have the advantage of being border/'jurisdiction-less'
Wrong again. SilkRoad was a firm, not a DAC.


At least you were wise enough to predict your own ignorance.

Offline santaclause102

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What's scarce is the stock of a particular company. A Microsoft share has value depending on the profitability and perceived future profitabilty of Microsoft. Similarly a DAC share will have a value depending on its current and perceived future profitability.
I agree in general. But it takes no effort to fork a DAC. Forking microsoft and making it work like the original is difficult. This lowers the value of a DAC. On the other side network effect might be more important than with pretty much all firms except with microsoft :)

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DAC's vs. Firms. DACs win! They can have nearly all the advantages with none of the disadvantages -
Basically a DAC is only a decentralized ledger plus X. X can be data feeds, prediction markets or (other) centralized add ons. There is a fluent transition between pure DACs (as toast would say) and Firms which make use of decentralized ledgers.
So comparing the two that directly is not that easy.
DACs (especially the pures ones) are limited to simple services.
There are disadvantages: e.g. a decentralized bookkeeping in itself is always more expensive than on a centralized server.

Quote
Price - DAC's have the potential to undercut the market considerably in many areas. Lotteries - twice the odds of winning vs. conventional,  Finance - 1/10th the price?
Don't believe it will be that extreme. Lottery: ATM maybe 7 (?) out of 10 USD (10 USD is the turnover of the lottery company) is paid out. So the odds on average are 70% -> double it -> 140%. Not profitable....
"Twice as profitable" would make sense -> 85% Odds

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Trust - Does Fort Knox have the gold?
How would you suggest for Fort Knox to proof that they have it using blockchain techn.? AFAIK you can only be proven that someone else has something or sent you something for sure if that something is the token that defines the tx ledger.
 
« Last Edit: July 10, 2014, 01:35:27 am by delulo »

Offline xeroc

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Wow .. thx for that nice overview

Offline Empirical1

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I haven't read this whole thread or the article but I'll ignorantly comment anyway

Scarcity

What's scarce is the stock of a particular company. A Microsoft share has value depending on the profitability and perceived future profitabilty of Microsoft. Similarly a DAC share will have a value depending on its current and perceived future profitability.

DAC's vs. Firms. DACs win! They can have nearly all the advantages with none of the disadvantages -

Price - DAC's have the potential to undercut the market considerably in many areas. Lotteries - twice the odds of winning vs. conventional,  Finance - 1/10th the price?

Trust - Does Fort Knox have the gold? Is Lehman Brothers really solvent? Are Madoff investment securities accounting statements correct? Are those Cdft stock certificates real? (The main benefit of decentralised ledger technology for me is  Accounting Trust.)

DACs also provide tax, confiscation & privacy benefits & have the advantage of being border/'jurisdiction-less'

Other:

I think you think Firms can offer a lot of centralised services we can't, but using slow equity release via delegates, shareholders can vote for a centralised firm to handle things like customer service or marketing on their behalf while still maintaining the advantages listed above.