DAC development incentive models

[bytemaster]

I think that having some hard-coded limits is in place.  Nothing stops the delegates from hard-forking to get around those limits, but it would take a far more concerted effort.  The difference between passing a new bill in congress and passing a constitutional amendment. 

Market always wins, so our goal is to move with the market not against it.

[Troglodactyl]

...

I at least am in agreement with you on that, but the time released shares your suggesting are still preallocated and limited, which is the key point for me.

Trog, not sure what you mean by "preallocated" but I think bytemaster was essentially saying the opposite:  time-release allows shareholders to make allocation decisions later as the picture on how to best allocate it becomes clear.  So the funds are not "preallocated"

By "preallocated" I meant that a finite predetermined quantity of shares is allocated to be distributed gradually through the delegates.  If the quantity has a hard upper limit, it makes no technical difference whether those shares are described as "new" diluting shares or as a preallocated delegate trust fund.  The preallocation is to "the delegates" generically, leaving the specifics of distribution to individual delegates more flexible.

[Agent86]

I think the #1 thing that everyone here is missing in the pre-allocation vs time-release allocation is that under the time-release the shareholders have an opportunity to change who receives the funds and how much after getting to observe performance.   With pre-allocation you are effectively stuck with one development team and a fixed fee.

So from my perspective an allocation of 20% AGS/PTS and 80% delegates over the life of the DAC is greatly preferable to 20%/80% preallocation.  It is certainly more flexible, keeps the majority of the pre-allocation off of the market  and gives AGS/PTS holders 100% control over the allocation of these funds without violating the social consensus of 10/10/80

In fact the only thing that I think needs to be decided is the release schedule for the 80%.

I agree that defined time-release schedule is better than preallocation.  I can also see how this is more "understandable and palatable" to many current market participants.  Maybe in the same way that we started with a mined proto-coin for share allocation; it made sense to the current market participants even though it was wasteful.  I mean people still love counterparty proof of burn …

I think this could be a compromise "transition system" while people get used to it and start to understand how this works better.  They'll start to like having a say in allocation and realize their fears of secret colluding majorities don't happen. 

In the long run a hard limit at 20% or defined rate of dilution has no real justification. I think we could probably skip the transition even if it means losing appeal to some people until they see the results.

Some people may disagree but I think the "industry" we are working on has multi-trillion dollar potential.  Lets keep that in mind when thinking how far we can predict the need for growth/development/re-investment.  The idea that we can pre-decide the right amount of dilution we need and when we'll need it to get this whole thing wrapped up in a neat bow is not convincing.  If we don't allow for it, dilution of your stake in the industry will just happen in other ways, such as the introduction of more new chains and competitors.

Do you honestly think if you got a 1% stake of the industry now and then just park it in a cold wallet that you will wake up 20 years from now with a 1% stake of a new multi-trillion dollar industry with all these people working their butts off to increase the value of your "non-dilutable" shares?  Sorry to pop your bubble but that's not how things work.

I at least am in agreement with you on that, but the time released shares your suggesting are still preallocated and limited, which is the key point for me.

Trog, not sure what you mean by "preallocated" but I think bytemaster was essentially saying the opposite:  time-release allows shareholders to make allocation decisions later as the picture on how to best allocate it becomes clear.  So the funds are not "preallocated"

[Troglodactyl]

I think the #1 thing that everyone here is missing in the pre-allocation vs time-release allocation is that under the time-release the shareholders have an opportunity to change who receives the funds and how much after getting to observe performance.   With pre-allocation you are effectively stuck with one development team and a fixed fee.

So from my perspective an allocation of 20% AGS/PTS and 80% delegates over the life of the DAC is greatly preferable to 20%/80% preallocation.  It is certainly more flexible, keeps the majority of the pre-allocation off of the market  and gives AGS/PTS holders 100% control over the allocation of these funds without violating the social consensus of 10/10/80

In fact the only thing that I think needs to be decided is the release schedule for the 80%.

I at least am in agreement with you on that, but the time released shares your suggesting are still preallocated and limited, which is the key point for me.

I think for completely new development with no live network, AGS was brilliant for providing time released dev funding, and allowing the community to watch development progress and fund more or less depending on promise, rather than going in blind.  Preallocated time-released shares can do the same thing for a network post launch, with the added benefit of being able to divert funds to competing groups.

There still may be some delegates who take the pork barrel spending approach, but the impact is more limited.  Before the network reaches near saturation the shareholder's interests should all be closer to aligned anyway.

[bytemaster]

I think the #1 thing that everyone here is missing in the pre-allocation vs time-release allocation is that under the time-release the shareholders have an opportunity to change who receives the funds and how much after getting to observe performance.   With pre-allocation you are effectively stuck with one development team and a fixed fee.

So from my perspective an allocation of 20% AGS/PTS and 80% delegates over the life of the DAC is greatly preferable to 20%/80% preallocation.  It is certainly more flexible, keeps the majority of the pre-allocation off of the market  and gives AGS/PTS holders 100% control over the allocation of these funds without violating the social consensus of 10/10/80

In fact the only thing that I think needs to be decided is the release schedule for the 80%.

[amatoB]

I have another idea of how to handle it... We can make a DAC that honors PTS/AGS 50/50 with no dilution, then a new DAC or version of this DAC is quickly proposed that allows dilution.  A delegate is created (or other stake voting mechanism) and announce that in 2 months there will be a snapshot and every stake/share that is approving this delegate at snapshot time will be honored in the new chain with dilution.  All others not approving can honor themselves in a separate chain without dilution.

My first impression is that this would be viewed as a coercive mechanism. It would certainly be divisive.

Regarding dilution, I do see that it might have some advantages over a one-time share allocation. Some people here argue that dilution could be good for fast-growing DACs with very uncertain future funding needs. But for these cases, a pre-arranged schedule of dilution (which is probably the only one that most shareholders would ever find palatable) doesn't seem to offer much additional flexibility anyways.

So, really, what can a pre-set schedule of dilution accomplish that a pre-allocation can't? It may be that dilution can be useful because it provides a "vesting" feature--not all of the funds are made available upfront, so there is less danger that a developer can walk away with 30% of the DAC. I think that is a valid point. However, pre-scheduled dilution has its own drawbacks. It is like paying someone in the hopes/expectations that they will do what's good for the network. I can see that there might be a lot of inefficient spending in such a system. At least with a pre-allocation, an honest group of developers or delegates can take a bounty-like approach where they can make sure they don't get much less than they paid for.

One thing that would make me a bit uncomfortable as a PTS/AGS investor is that the dilution rates that have been discussed here seem quite high to the point of disenfranchising early investors. For example, many investors probably bought into AGS, PTS thinking they would get a 35/35 allocation in some of the first round of DACs. By changing to a 35/35 allocation with dilution, they now are effectively getting 15-20%. Perhaps that will eventually go to 10%. Where is the original 30% pre-allocation to non-investors going to go? If high rates of dilution are being considered, then perhaps there should be fewer (or no) shares pre-allocated. So, maybe it's a question of magnitude. If the benefits from dilution greatly exceed the amount of value transferred, then that would be great. But, as some here have argued, the true benefits (above and beyond pre-allocation or additional fundraising) have yet to be proven.

The pro-dilution folks seem to ignore (or at least downplay in importance) that dilution can give a negative perception to shareholders. And that is perhaps the chief disadvantage of dilution. It makes the optics look bad and, rightly or wrongly, is easily misperceived by shareholders. The only way to get maximal acceptance and investor interest is to make sure everything is clear, transparent, and palatable to shareholders from the start. Perceptions are really important. There should be nothing to suggest that someone in power can game the system to extract or misuse wealth. I believe that misperceptions are one of the things that crippled Ripple early on. Many criticized Ripple heavily and labeled it a scam on account of the fact that they retained about 95% of the supply upfront, even though they promised to distribute 50% or so to grow the network. (Of course, Ripple was also closed-source initially, but most of the criticisms seemed to center around the initial and planned share distribution.) Rightly or wrongly, investors balked at what was perceived to be a grossly unfair system. A concern I have is that if shareholders in a DAC feel wronged and get sufficiently PO'ed, scrutiny and intervention by a regulator could become more likely, which is something that probably few people here want...

Whatever solution is chosen, I hope that developers always remember that every DAC is different and that public perceptions do matter--they matter a great deal. Let's learn from the experience of Ripple and others. Simply put, the optics have to look good from the start, otherwise a DAC will have a hard time gaining widespread acceptance and investor interest.

[Agent86]

So as long as some AGS holders have at least a little PTS, they can issue new shares to AGS holders only and take away most of the PTS based stake?

Trog, there's no secret illuminati AGS society that coordinates in secret without PTS holders knowing.  Where the hell do you get these ideas?
...

That was a quick example, and no secret societies are required.  The point is that in a direct democracy with unlimited power, you're very likely to end up with tyranny of majority and oppression of minorities as soon as a possible choice comes up that reveals that not everyone's interests are perfectly aligned.

Yes, they are required; you just haven't thought it through.  anyway I may be afk for a bit, I will see where this stands later.

[Troglodactyl]

So as long as some AGS holders have at least a little PTS, they can issue new shares to AGS holders only and take away most of the PTS based stake?

Trog, there's no secret illuminati AGS society that coordinates in secret without PTS holders knowing.  Where the hell do you get these ideas?
...

That was a quick example, and no secret societies are required.  The point is that in a direct democracy with unlimited power, you're very likely to end up with tyranny of majority and oppression of minorities as soon as a possible choice comes up that reveals that not everyone's interests are perfectly aligned.

[Troglodactyl]

I would only consider a 49/49/2 (pre dilution) allocation fraudulent if the initial allocation was advertised to investors, while the fact that this was not the final real allocation because of dilution was left out.  When you asked if I would prefer 10/10/80 without dilution or 49/49/2 with dilution, the final distribution was omitted.  Without stating the final distribution, or even the maximal rate of any additional distribution, the 49/49/2 initial distribution is completely meaningless.  It's all marketing and no substance, which is a good indication of fraud.

Actually I said with "49/49/2 with reasonable dilution".  I think we can reasonably agree what I meant by that without arguing details.  You're now insisting on final allocation.  Ok....  but I did at least address that the dilution wasn't just something fixed rate without bounds.  You've ignored that though or don't remember it.  I think this points out how much people lack objectivity when looking at these things.

Sorry, I was overly harsh there.  I agree that preallocated/limited dilution can be a good way of funding ongoing development and marketing in the early stages.

[Agent86]

So as long as some AGS holders have at least a little PTS, they can issue new shares to AGS holders only and take away most of the PTS based stake?

Trog, there's no secret illuminati AGS society that coordinates in secret without PTS holders knowing.  Where the hell do you get these ideas?

For the record, are you in favor of a fixed limit to the dilution rate, or completely discretionary dilution?

I wouldn't care that much if there was a cap that seemed reasonable.  In principle I don't believe in the need to babysit shareholders and have no problem with completely discretionary dilution.

[Troglodactyl]

I've added two more options to the poll, marked with "EDIT1".  None of the existing options were altered.

[gamey]

I would only consider a 49/49/2 (pre dilution) allocation fraudulent if the initial allocation was advertised to investors, while the fact that this was not the final real allocation because of dilution was left out.  When you asked if I would prefer 10/10/80 without dilution or 49/49/2 with dilution, the final distribution was omitted.  Without stating the final distribution, or even the maximal rate of any additional distribution, the 49/49/2 initial distribution is completely meaningless.  It's all marketing and no substance, which is a good indication of fraud.

Actually I said with "49/49/2 with reasonable dilution".  I think we can reasonably agree what I meant by that without arguing details.  You're now insisting on final allocation.  Ok....  but I did at least address that the dilution wasn't just something fixed rate without bounds.  You've ignored that though or don't remember it.  I think this points out how much people lack objectivity when looking at these things.

[Troglodactyl]

Meh, I don't even care to argue my points as I've said them elsewhere.

I can see how you can start to feel that way.  At some point it's not your job to convince everyone.
For everyone who is opposed to this concept after reading the many posts explaining it.  There is an easy solution:  when DACs that have this property are released PLEASE PLEASE PLEASE sell your shares.  Then we are both happy!!  I actually believe in empowering shareholders to make decisions and put their fate in their hands.  And for this reason, I am actually a little particular who my co-owners are.  I wouldn't want to run a business with co-owners that I have to constantly explain simple concepts to and who are going to make bad decisions that affect me, or who will vote to sit on their hands when we should be reinvesting in growth.

I also want to go on record as being in favor of dilution with no bound: dictated by business needs and shareholder vote;  no limit @ t=infinity.

If a DAC starts off 50/50 PTS/AGS but those original shares end up representing less than 20% in the long run that was a decision made by the shareholders.  We must allow our thinking to evolve with what is right and not box ourselves into corners because some people like to bitch about "pray we don't alter the deal" whenever a development in thinking happens.

So as long as some AGS holders have at least a little PTS, they can issue new shares to AGS holders only and take away most of the PTS based stake?

For the record, are you in favor of a fixed limit to the dilution rate, or completely discretionary dilution?

[clout]

Investing in a developer and his dream before there's a working product or any guarantee of value is not free riding.  If the funding is all in advance, the investors are trusting the developer to be honorable and see the project through, and they are taking considerable risk.

Exactly !  Considerable risk.  With dilution this risk is greatly reduced.

Not sure why you would think 49/49/2 with dilution means you'd being defrauded.  You are not looking at it objectively.

I also think a developer will put far more time into a DAC than random shareholders.  Expecting voluntary contributions to fund the thing just introduces freeriders which I despise.  That is a whole mess in itself. 

shareholders are not freeriders. whether they directly fund development or not. by holding their shares instead of selling them they give everyone else's shares more value.

Within the context of expecting continual development/marketing support to be paid by donations or volunteers there will be freeriders.  That seems to be the most popular alternative I am seeing - a voluntary donation towards development. 

We can come up with advanced voting systems and offices being elected etc that would likely be better than either.  Thats assuming the developer wants such a thing.

No they are not free riders... by holding shares they make sure the share price doesn't drop which means fewer shares buy more development support. This is one of the reasons why the argument can be made that bitcoin holders should receive a pre-allocation in dacs. If it had not been for the increase in the bitcoin price from the fall of 2013, I3 would not have raised as much money as it has for the development of the bitshares_toolkit.

[Agent86]

I have another idea of how to handle it... We can make a DAC that honors PTS/AGS 50/50 with no dilution, then a new DAC or version of this DAC is quickly proposed that allows dilution.  A delegate is created (or other stake voting mechanism) and announce that in 2 months there will be a snapshot and every stake/share that is approving this delegate at snapshot time will be honored in the new chain with dilution.  All others not approving can honor themselves in a separate chain without dilution.

[Troglodactyl]

Investing in a developer and his dream before there's a working product or any guarantee of value is not free riding.  If the funding is all in advance, the investors are trusting the developer to be honorable and see the project through, and they are taking considerable risk.

Exactly !  Considerable risk.  With dilution this risk is greatly reduced.

Not sure why you would think 49/49/2 with dilution means you'd being defrauded.  You are not looking at it objectively.

I also think a developer will put far more time into a DAC than random shareholders.  Expecting voluntary contributions to fund the thing just introduces freeriders which I despise.  That is a whole mess in itself.

I think AGS is a good example of this.  AGS "dilution" will be ongoing for almost two more weeks, but it was well advertised as a preallocation of shares to donors who contributed over the dilution period.  Clearly no fraud there.

I would only consider a 49/49/2 (pre dilution) allocation fraudulent if the initial allocation was advertised to investors, while the fact that this was not the final real allocation because of dilution was left out.  When you asked if I would prefer 10/10/80 without dilution or 49/49/2 with dilution, the final distribution was omitted.  Without stating the final distribution, or even the maximal rate of any additional distribution, the 49/49/2 initial distribution is completely meaningless.  It's all marketing and no substance, which is a good indication of fraud.

[gamey]

Investing in a developer and his dream before there's a working product or any guarantee of value is not free riding.  If the funding is all in advance, the investors are trusting the developer to be honorable and see the project through, and they are taking considerable risk.

Exactly !  Considerable risk.  With dilution this risk is greatly reduced.

Not sure why you would think 49/49/2 with dilution means you'd being defrauded.  You are not looking at it objectively.

I also think a developer will put far more time into a DAC than random shareholders.  Expecting voluntary contributions to fund the thing just introduces freeriders which I despise.  That is a whole mess in itself. 

shareholders are not freeriders. whether they directly fund development or not. by holding their shares instead of selling them they give everyone else's shares more value.

Within the context of expecting continual development/marketing support to be paid by donations or volunteers there will be freeriders.  That seems to be the most popular alternative I am seeing - a voluntary donation towards development. 

We can come up with advanced voting systems and offices being elected etc that would likely be better than either.  Thats assuming the developer wants such a thing.

[Agent86]

Meh, I don't even care to argue my points as I've said them elsewhere.

I can see how you can start to feel that way.  At some point it's not your job to convince everyone.
For everyone who is opposed to this concept after reading the many posts explaining it.  There is an easy solution:  when DACs that have this property are released PLEASE PLEASE PLEASE sell your shares.  Then we are both happy!!  I actually believe in empowering shareholders to make decisions and put their fate in their hands.  And for this reason, I am actually a little particular who my co-owners are.  I wouldn't want to run a business with co-owners that I have to constantly explain simple concepts to and who are going to make bad decisions that affect me, or who will vote to sit on their hands when we should be reinvesting in growth.

I also want to go on record as being in favor of dilution with no bound: dictated by business needs and shareholder vote;  no limit @ t=infinity.

If a DAC starts off 50/50 PTS/AGS but those original shares end up representing less than 20% in the long run that was a decision made by the shareholders.  We must allow our thinking to evolve with what is right and not box ourselves into corners because some people like to bitch about "pray we don't alter the deal" whenever a development in thinking happens.

[clout]

Investing in a developer and his dream before there's a working product or any guarantee of value is not free riding.  If the funding is all in advance, the investors are trusting the developer to be honorable and see the project through, and they are taking considerable risk.

Exactly !  Considerable risk.  With dilution this risk is greatly reduced.

Not sure why you would think 49/49/2 with dilution means you'd being defrauded.  You are not looking at it objectively.

I also think a developer will put far more time into a DAC than random shareholders.  Expecting voluntary contributions to fund the thing just introduces freeriders which I despise.  That is a whole mess in itself. 

shareholders are not freeriders. whether they directly fund development or not. by holding their shares instead of selling them they give everyone else's shares more value.

[Troglodactyl]

Dilution systems take percentage stake (and thus motivation) away from all stakeholders and redistribute it to the developers, thus centralizing the share distribution and the motivation to contribute.

* to the delegates, which can burn it

10/10/80 (no dilution) and 49/49/2 (before dilution) might be equivalent depending on the dilution details.  If someone tries to sell me on a DAC by telling me it's 49/49/2, but dilution is involved and they're advertising 49/49/2 instead of the post maximal dilution ratios, I'll just assume they're trying to defraud me.

but if you as a shareholder control whether that 80% is burned or not would you still call it fraud?

If it was all properly public knowledge I wouldn't call it fraud regardless.  Infinite potential dilution would strongly deter me from investment, but I wouldn't consider it fraud if it were advertised as what it was.

What I would consider fraudulent is advertising a 49/49/2 allocation when in fact additional shares are preallocated to be distributed according to the dilution system.  The fact that they're preallocated to the majority, which may destroy them is beside the point, it's another part of the allocation that should be advertised along with the rest of the allocation numbers.

I as a shareholder don't control that, unless I happen to be the swing vote in the decision.  "The majority" is just another entity I may or may not trust being allocated shares.

[gamey]

Investing in a developer and his dream before there's a working product or any guarantee of value is not free riding.  If the funding is all in advance, the investors are trusting the developer to be honorable and see the project through, and they are taking considerable risk.

Exactly !  Considerable risk.  With dilution this risk is greatly reduced.

Not sure why you would think 49/49/2 with dilution means you'd being defrauded.  You are not looking at it objectively.

I also think a developer will put far more time into a DAC than random shareholders.  Expecting voluntary contributions to fund the thing just introduces freeriders which I despise.  That is a whole mess in itself. 

[toast]

Dilution systems take percentage stake (and thus motivation) away from all stakeholders and redistribute it to the developers, thus centralizing the share distribution and the motivation to contribute.

* to the delegates, which can burn it

10/10/80 (no dilution) and 49/49/2 (before dilution) might be equivalent depending on the dilution details.  If someone tries to sell me on a DAC by telling me it's 49/49/2, but dilution is involved and they're advertising 49/49/2 instead of the post maximal dilution ratios, I'll just assume they're trying to defraud me.

but if you as a shareholder control whether that 80% is burned or not would you still call it fraud?

[Troglodactyl]

...
Yep, the preallocation of shares is a dilution.  Instead of over a series of time it happens instantly at the beginning.  It then removes a lot of incentive for longterm motivation vs the dilution being suggested by some of us.

Ongoing dilution doesn't actually create additional longterm motivation, it just centralizes that motivation.  Centralized motivation certainly has significant benefits, especially early on, but I think ideally a mature DAC should have a self sustaining decentralized network.

I do not follow it "centralizes" or "decentralizes" anything.  In my concept of this - either way of funding the DAC has the funds being distributed to the person who created the DAC.  I think you are assuming a lot more complexity that may or may not be there.

With upfront dilution, the motivation may just as well be for the developer to try to just sell off his shares at the start and abandon the DAC to find a new DAC.  THere is no reason that I see this less plausible than the developer sticking around paying for things and letting everyone else freeride.

Thats the whole problem with donations.  You end up with freeriders.  Glad to hear you guys say you'd give up shares.

What would you rather have.
10/10 80 to the developer
49/49 2 to the developer with reasonable dilution ?

An individual's share value based motivation to increase the value of a DAC is proportional to that individual's percentage stake ownership in that DAC.  Most DACs use an initial stake distribution system designed to widely distribute shares because they recognize that network effect is essential for creating value, and that motivating a large number of people to create value for the DAC is desirable.  Dilution systems take percentage stake (and thus motivation) away from all stakeholders and redistribute it to the developers, thus centralizing the share distribution and the motivation to contribute.

Investing in a developer and his dream before there's a working product or any guarantee of value is not free riding.  If the funding is all in advance, the investors are trusting the developer to be honorable and see the project through, and they are taking considerable risk.

Dilution with a ceiling is just preallocation with escrow.

10/10/80 (no dilution) and 49/49/2 (before dilution) might be equivalent depending on the dilution details.  If someone tries to sell me on a DAC by telling me it's 49/49/2, but dilution is involved and they're advertising 49/49/2 instead of the post maximal dilution ratios, I'll just assume they're trying to defraud me.

[gamey]

...
Yep, the preallocation of shares is a dilution.  Instead of over a series of time it happens instantly at the beginning.  It then removes a lot of incentive for longterm motivation vs the dilution being suggested by some of us.

Ongoing dilution doesn't actually create additional longterm motivation, it just centralizes that motivation.  Centralized motivation certainly has significant benefits, especially early on, but I think ideally a mature DAC should have a self sustaining decentralized network.

I do not follow it "centralizes" or "decentralizes" anything.  In my concept of this - either way of funding the DAC has the funds being distributed to the person who created the DAC.  I think you are assuming a lot more complexity that may or may not be there.

With upfront dilution, the motivation may just as well be for the developer to try to just sell off his shares at the start and abandon the DAC to find a new DAC.  THere is no reason that I see this less plausible than the developer sticking around paying for things and letting everyone else freeride.

Thats the whole problem with donations.  You end up with freeriders.  Glad to hear you guys say you'd give up shares.

What would you rather have.
10/10 80 to the developer
49/49 2 to the developer with reasonable dilution ?

[luckybit]

ongoing funding through share dilution is the same thing as taxation

This is true in that it taxes the shareholders, but "taxation" has connotations of coercing universal participation within a set of geographic borders.  In a DAC participation and buy in should always be voluntary.

Its the same process in this system as it is with any government that imposes taxes or finances operations through debt and inflation. If the majority deem it appropriate they can violate the property rights of the minority. If 51% want to dilute shares why can they not donate the desired funds themselves? Dilution doesn't make any logical sense. Companies dilute stock when a capital expenditure is excessive to the point that it may not even get repaid. DACs don't need VCs to get started and they don't need costly R&D, which are to main scenarios for dilution. If I am an early investor and I see my investment increase by more than 100% do you really think I'm not going to want to donate funds to see my position appreciate more?

This expresses how I feel exactly. I believe the deal should be on the table and shouldn't be changed. If you do the math right and it's actually basic math then you'd set aside around 30% for development. Mastercoin did this, MaidSafe did this, it's essential that developers eat their own dog food and live within the means of the value of the same tokens that everyone else has.

So rather than let developers take from everyone else on the sneak I prefer it be up front. I prefer developers ask for a premine or for a founders fee, percentage or anything like that. I think higher transaction fees are more desirable than dilution because transaction fees as a tax too but at least it's a tax we expect to pay in this kind of business and not a dilution.

This kind of business is high risk. Dilution makes sense when you've got a proven track record of growth. These sorts of businesses we are dealing with aren't promised to grow x10 each year. It's something  we expect to happen, and work towards making it happen, but it's not a sure thing.

I like the donation idea and I think if we can provide an incentive for the people who donate such as points which they can trade in for discounts at certain businesses then you'll have the perfect system. Donate to the developers, receive points, these points give you discounts for products and services offered by affiliate DACs and businesses. Perhaps these points also put you on the Sharedrop list.

Since there is no mining there is no such thing as a premine. Instead of dilution just set aside a percentage of the shares for developers just like Mastercoin did. It is working best under the Mastercoin model. The dilution model is speculative and likely will upset investors while not accomplishing any more than the Mastercoin pre-allocation model,

Pre-allocate your shares for development costs in terms of a percentage or raise transaction fees. No dilutions no bullshit.

That is equivalent to dilution... dulution is just preallocation with an honest "total supply" label

Sent from my SCH-I535 using Tapatalk

Yep, the preallocation of shares is a dilution.  Instead of over a series of time it happens instantly at the beginning.  It then removes a lot of incentive for longterm motivation vs the dilution being suggested by some of us.

The difference is preallocation is planned and everyone knows about it before they buy their first share. Everyone knew the plan with Mastercoin for the development tokens. We purchased it knowing exactly how much a Mastercoin is worth and it reflects the real price in the market. There is less volatility because the price discovery happens immediately in the beginning and you don't have all these different mental models.

Also people don't have to keep buying Mastercoins to try to keep their position on the treadmill. The dev Mastercoins are earned through bounties of all kinds and the whole community is able to get involved from testing to documentation (it's not just programmers).

The problem with dilution is there isn't a very strong case that we the community need that dilution. If our shares are worth a lot of money we'd pay for new features. You could crowd fund it or use an innovation game to figure out what new features the community desires and how much they'll pledge.

So I'm not convinced there is a problem here. I know developers are expensive especially if they are highly skilled but I expect and hope that our shares will have enough value that developers will not need the dilution. I guess I'm naturally skeptical of any inflation scheme or tax scheme until it's proven necessary or beneficial.

[Troglodactyl]

Ah... btw none of the dilution strategies we're considering for ant dacs have potential infinite total supply, they all converge mu ch like btc. Otherwise you can't follow the 10/10 social consensus
...

Great, in that case it would just be preallocation effectively.  What I've been arguing against is allowing the majority discretionary dilution power without an eventual upper bound.  If no one else was arguing for this, I apologize for misunderstanding.

[Troglodactyl]

...
Yep, the preallocation of shares is a dilution.  Instead of over a series of time it happens instantly at the beginning.  It then removes a lot of incentive for longterm motivation vs the dilution being suggested by some of us.

Ongoing dilution doesn't actually create additional longterm motivation, it just centralizes that motivation.  Centralized motivation certainly has significant benefits, especially early on, but I think ideally a mature DAC should have a self sustaining decentralized network.

[toast]

Ah... btw none of the dilution strategies we're considering for ant dacs have potential infinite total supply, they all converge mu ch like btc. Otherwise you can't follow the 10/10 social consensus

Sent from my SCH-I535 using Tapatalk

[Troglodactyl]

...
That is equivalent to dilution... dulution is just preallocation with an honest "total supply" label
...

Preallocation is dilution with an honest fixed "total supply" label.  Ongoing dilution has a potentially infinite "total supply", with a potentially dynamic release rate.  This isn't dishonest or wrong, but it requires placing faith in the majority shareholders to use everyone's stake to serve everyone's interests, rather than using it only in the interest of the majority.

[gamey]

Since there is no mining there is no such thing as a premine. Instead of dilution just set aside a percentage of the shares for developers just like Mastercoin did. It is working best under the Mastercoin model. The dilution model is speculative and likely will upset investors while not accomplishing any more than the Mastercoin pre-allocation model,

Pre-allocate your shares for development costs in terms of a percentage or raise transaction fees. No dilutions no bullshit.

That is equivalent to dilution... dulution is just preallocation with an honest "total supply" label

Sent from my SCH-I535 using Tapatalk

Yep, the preallocation of shares is a dilution.  Instead of over a series of time it happens instantly at the beginning.  It then removes a lot of incentive for longterm motivation vs the dilution being suggested by some of us.

[toast]

Since there is no mining there is no such thing as a premine. Instead of dilution just set aside a percentage of the shares for developers just like Mastercoin did. It is working best under the Mastercoin model. The dilution model is speculative and likely will upset investors while not accomplishing any more than the Mastercoin pre-allocation model,

Pre-allocate your shares for development costs in terms of a percentage or raise transaction fees. No dilutions no bullshit.

That is equivalent to dilution... dulution is just preallocation with an honest "total supply" label

Sent from my SCH-I535 using Tapatalk

[Troglodactyl]

...If the majority deem it appropriate they can violate the property rights of the minority...

This would be true, except that by buying into a DAC that allows such dilution, you are voluntarily surrendering ultimate ownership of your property to the majority shareholders.  Personally I'm rather averse to doing that, but I don't think it's a violation of property rights unless force/fraud are involved in the buy in.

Since there is no mining there is no such thing as a premine. Instead of dilution just set aside a percentage of the shares for developers just like Mastercoin did. It is working best under the Mastercoin model. The dilution model is speculative and likely will upset investors while not accomplishing any more than the Mastercoin pre-allocation model,

Pre-allocate your shares for development costs in terms of a percentage or raise transaction fees. No dilutions no bullshit.

Or even preallocate shares to an AGS style fund, allowing ongoing contributions concurrent with development, which provides the benefit of a solid metric of current market approval and optimism.

[clout]

ongoing funding through share dilution is the same thing as taxation

This is true in that it taxes the shareholders, but "taxation" has connotations of coercing universal participation within a set of geographic borders.  In a DAC participation and buy in should always be voluntary.

Its the same process in this system as it is with any government that imposes taxes or finances operations through debt and inflation. If the majority deem it appropriate they can violate the property rights of the minority. If 51% want to dilute shares why can they not donate the desired funds themselves? Dilution doesn't make any logical sense. Companies dilute stock when a capital expenditure is excessive to the point that it may not even get repaid. DACs don't need VCs to get started and they don't need costly R&D, which are to main scenarios for dilution. If I am an early investor and I see my investment increase by more than 100% do you really think I'm not going to want to donate funds to see my position appreciate more?

[luckybit]

Since there is no mining there is no such thing as a premine. Instead of dilution just set aside a percentage of the shares for developers just like Mastercoin did. It is working best under the Mastercoin model. The dilution model is speculative and likely will upset investors while not accomplishing any more than the Mastercoin pre-allocation model,

Pre-allocate your shares for development costs in terms of a percentage or raise transaction fees. No dilutions no bullshit.

[gamey]

'I think any of funding models may have a place.  Anything you seriously consider will likely have an application given the right set of participants.  The thing about dilution is you're incentivizing people to stick around.  Meh, I don't even care to argue my points as I've said them elsewhere.

I think with some sort of partial closed source DAC you really really need dilution.  THere will not be the typical "lets fork" option. 

[Troglodactyl]

ongoing funding through share dilution is the same thing as taxation

This is true in that it taxes the shareholders, but "taxation" has connotations of coercing universal participation within a set of geographic borders.  In a DAC participation and buy in should always be voluntary.

[clout]

ongoing funding through share dilution is the same thing as taxation

[fuzzy]

Bump 

[Troglodactyl]

Many of these can coexist, so you can approve multiple options.