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Offline tonyk

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The need for change
« on: August 02, 2014, 01:37:06 AM »



The History of BitShares
Part Three


Bytemaster recognized that Bitcoin could be viewed as an unprofitable company and its coins as stock in that company.  Stock value was generally rising because demand for its services (efficient private money transmission) exceeded supply.   But, meanwhile it was bleeding red ink.  100% of its transaction fees were going to pay its employees (the miners).  But that still wasn’t enough.  It had to print more money (up to 12% annual inflation) also to pay its employees.  So Bitcoin is a company with annual losses near 12%.  (And the employees were only getting to keep a few percent of the money being wasted on them.)

He decided that eliminating those employees was a key objective that would inevitably lead to a whole new generation of profitable crypto-businesses.  Assets based on destructive mining would go the way of the dinosaur, unable to compete with profitable business models of second generation assets that could afford to pay dividends and interest to their holders.  It was just a matter of time.



What is the reason for abandoning this core, imo, idea?



Lack of arbitrage is the problem, isn't it. And this 'should' solves it.

Offline Empirical1

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Re: The need for change
« Reply #1 on: August 02, 2014, 01:42:44 AM »
How have they abandoned it?

BitShares X has no inflation and has already burnt a few hundred thousand BTSX which acts as dividends for shareholders.

(Granted it's negligible, and personally I hope we'll get some quality re-investment options going via delegates vs. burning, but the business has just started.)

Offline santaclause102

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Re: The need for change
« Reply #2 on: August 02, 2014, 10:21:37 AM »
No need to. Inflation can be used to pay for radical market expansion (marketing) and further development.
There was a good discussion here https://bitsharestalk.org/index.php?topic=4713.0;all

Offline CLains

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Re: The need for change
« Reply #3 on: August 02, 2014, 03:27:37 PM »
We should approach this experimentally.

BitShares X is trying the deflate-for-dividends model while BitShares DNS is trying the inflate-for-delegates model. Both are likely better than burn-for-distribution/security model, but who knows?

The inflate-for-delegates is certainly the most interesting model right now, and if it works efficiently for the system, will be the most revolutionary.

Offline santaclause102

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Re: The need for change
« Reply #4 on: August 02, 2014, 03:31:07 PM »
We should approach this experimentally.

BitShares X is trying the deflate-for-dividends model while BitShares DNS is trying the inflate-for-delegates model.

Both are likely better than burn-for-distribution/security model, but who knows?

The inflate-for-delegates is certainly the most interesting category, and if it works efficiently for the system, will be the most revolutionary.
ceteris paribus not fulfilled for your test ;)


Offline santaclause102

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Re: The need for change
« Reply #6 on: August 02, 2014, 03:41:24 PM »
what do you mean by "work"?

Offline CLains

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Re: The need for change
« Reply #7 on: August 02, 2014, 04:59:13 PM »
it works if Delegates effectively work to increase the value of the DAC

at 100 million cap and a mere 10% inflation, we would have 101 full-time employees earning 100 000 $ a year working to effectively increase the value of the DAC

Offline luckybit

Re: The need for change
« Reply #8 on: August 02, 2014, 05:13:36 PM »
I don't like inflation. I think inflation breeds corruption and it has to come from somewhere. It's a tax.

So let's call it what it is, it's tax and spend.
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Offline Empirical1

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Re: The need for change
« Reply #9 on: August 02, 2014, 06:06:54 PM »
The problem with traditional funding models is that until the delegates are generating significant revenue it creates a centralised weak spot for a DAC & gives shareholders no control over business development.

IF the equity release rate is pre-determined and directed via shareholders to only the most trusted delegates, the results could be amazing.

It wouldn't be inflation in the traditional sense as shareholders can vote to have all those fees burned and therefore the inflation negated unless they agree those funds could generate higher returns
by being putting into a specific area of business development.

Of course we'll have to see how it plays out.. I haven't really looked at the breakdown for the 2 recently announced DAC's yet.

Offline Empirical1

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Re: The need for change
« Reply #10 on: August 02, 2014, 06:17:16 PM »
For example if there was equity release, I would vote to hire an additional enthusiastic marketing person who's passionate about this field, knows BitShares & competitor offerings inside out, interacts with the community daily, actively communicates & markets BitShares on other forums and builds effective, results visible, marketing/press/promotion relationships within this field too.

Unfortunately in the early stages of the business, fees barely cover a delegates running costs so the impact on change we as shareholders have is limited atm.

Offline santaclause102

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Re: The need for change
« Reply #11 on: August 02, 2014, 06:22:05 PM »
it works if Delegates effectively work to increase the value of the DAC

at 100 million cap and a mere 10% inflation, we would have 101 full-time employees earning 100 000 $ a year working to effectively increase the value of the DAC
but you know what I mean. If DNS is with inflation and X is not and both take of we don't know more than before because they might have taken of each for different reasons. You can't even say that inflation doesnt matter (if you just look at the empirical evidence).

Offline tonyk

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Re: The need for change
« Reply #12 on: August 02, 2014, 06:36:49 PM »
No need to. Inflation can be used to pay for radical market expansion (marketing) and further development.
There was a good discussion here https://bitsharestalk.org/index.php?topic=4713.0;all

Read the threads. Here are my thoughts:

The investor are always paying for the amount of salt they are buying. Even more precisely they are always paying for the amount of salt they expect to have when the time to sell the salt comes.


All is well and good. Maybe that is the best or only way to do things in a DAC.(highly doubtful)
First observation: The capital is highly unappreciated/de-incentivized in the system. Such people are considered more or less ‘freeloaders’, if they do not put extra work, in addition to providing money.

Let’s look at the things from the investor’s perspective. She basically has 2 choices:
-Risk her money early, for which she is usually rewarded with corresponding bigger returns (for the risks taken). Instead of that, she is burdened with at least 2.5 years of constant monitoring what the employees are doing – how much salt and how much water they add to the system.(fixing the max amount of water to be added, on a pre-determined schedule is another separate issue or (solution), but let’s not go there  now)
- Or not-invest at that early stages (sell the shares that she got as dividend/distribution) at the beginning. Measuring the salt at discrete moments is always cheaper than constantly monitoring the system and trying to improve it to your likings. After 2.5 years when the guaranteed furious dilution of the shares of the DAC is sufficiently subsided, a new measurement can be taken and decision made on the appropriate action – buying back or staying put.

Making the usual assumption that all markets behave logically – when she tries to sell those shares she will find buyers offering not much above the max delusion expected/predetermined in the system. That is because they now are getting in the same boat our investors is trying to get out of.

Faced with those facts our investor have two new choice – sell at those prices (the better choice when better returns can be found in other investments), or holding for those 2.5 years without caring what the employees do. The risk of 2.5 years of adding nothing but water in the system is taken into account. Voting for ‘who is the faucet adding the water’ is highly de-incentivized, for all stockholders for which the constant monitoring the process is more expensive than the several ounces of salt they may or may not end up adding if they are more involved.[On a side note: I do not know if this is a desired or undesired consequence of the system design but this results also in encouraging/promoting big stake holders probably more than ‘active’ shareholders]

Aside for the voting effect mentioned above, it seems some believe do exists that the gradual delusion will lead to the prices of the newly issued shares somehow reflecting the current state of dilution as of this point, not the total max dilution build in the system. The previously described process explains why it is likely the prices to be much closer to the max dilution expected.



All the above worries me because it actually achieves nothing as a real economic benefit (compared to inflation-less) system, other than trying to incorporate much or less, some economic fallacies, such as: by increasing the supply of ‘money’ one can actually stimulate growth, and growing economic systems depend on constant increase in such supply.


Lack of arbitrage is the problem, isn't it. And this 'should' solves it.

Offline toast

Re: The need for change
« Reply #13 on: August 02, 2014, 06:48:18 PM »
Quote
All the above worries me because it actually achieves nothing as a real economic benefit (compared to inflation-less) system, other than trying to incorporate much or less, some economic fallacies, such as: by increasing the supply of ‘money’ one can actually stimulate growth, and growing economic systems depend on constant increase in such supply.

What it achieves is that we can hire people instead of just coaxing them to buy in so that they'll want to do work to improve the system.

The same result would be achieved without inflation if you could convince all shareholders to pool some of their funds to be able to hire critical infrastructure.

Calling it a tax isn't too far off, it is essentially me saying "no, trust me, we really need to pay for shit, otherwise your stake will be worthless".
Do not use this post as information for making any important decisions. The only agreements I ever make are informal and non-binding. Take the same precautions as when dealing with a compromised account, scammer, sockpuppet, etc.

Offline Empirical1

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Re: The need for change
« Reply #14 on: August 02, 2014, 06:49:21 PM »

All the above worries me because it actually achieves nothing as a real economic benefit (compared to inflation-less) system, other than trying to incorporate much or less, some economic fallacies, such as: by increasing the supply of ‘money’ one can actually stimulate growth, and growing economic systems depend on constant increase in such supply.

I agree with your bolded statement. Unless the guys in this thread are talking about some other inflation business model then I think you/I have misunderstood the equity release model.

For example Alice & Bob start a business. They raise funds to start the business from investors and award people shares based on how much they contribute. They use those funds to develop and grow the business. If you want to shut down the business all you have to do is get to Alice & Bob or the funds. Applying it to a DAC, you've created a decentralised system with a centralised weak spot.

If you take the same model but have that equity released via delegates, the large active shareholders would probably still release most of it to Alice & Bob & not think much else about it,  but if they were targeted you would just re-direct the equity release elsewhere.

Edit: Maybe I should read your link first...  :P

« Last Edit: August 02, 2014, 06:52:47 PM by Empirical1 »

 

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