Author Topic: DAC development incentive models  (Read 7381 times)

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Offline Troglodactyl

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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.

Offline gamey

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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.
« Last Edit: July 05, 2014, 10:07:28 pm by gamey »
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Offline Agent86

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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.

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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.


Offline Troglodactyl

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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


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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.

Offline gamey

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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. 
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Offline toast

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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


Quote
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?
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Offline Troglodactyl

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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.

Offline gamey

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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 ?
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Offline luckybit

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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?
+5% +5%

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

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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.
« Last Edit: July 05, 2014, 07:08:08 pm by luckybit »
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Offline Troglodactyl

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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.

Offline Troglodactyl

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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.

Offline toast

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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

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Offline Troglodactyl

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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.

Offline gamey

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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

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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.
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