Author Topic: The need for change  (Read 7921 times)

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Offline Empirical1

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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.
It is not predetermined that inflation to expand makes sense.
The question is: Can those that get the newly issued shares/coins/tokens (they are paid this way) increase the value of the network/coin/DAC/company more than shareholders/coinholders are diluted?  If the answer is yes, what reason is there not to do it.

Yes in theory, the way a business awards dividends if there aren't huge re-investment opportunities so too should the presence of inflation be moot, because shareholders should just choose to have it burned/paid back to themselves unless they can agree there is an opportunity to generate a greater return by doing something else with it.


Offline CLains

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There will be inefficiencies of course, but what this all means is that all the pressure is on voting. We need 1) that voting is efficient such that both delegate number and delegate max-income will be irrelevant as they will cooperate, review each other, and compete according to voter-interests, and 2) that voting-interests falls in line with the DAC's interests. If we have both of these elements going for us, there is no stopping BitShares.

Offline tonyk

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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).
Can you pls explain what do you mean in your double negative.
« Last Edit: August 02, 2014, 07:26:45 pm by tonyk »
Lack of arbitrage is the problem, isn't it. And this 'should' solves it.

Offline santaclause102

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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.
It is not predetermined that inflation to expand makes sense.
The question is: Can those that get the newly issued shares/coins/tokens (they are paid this way) increase the value of the network/coin/DAC/company more than shareholders/coinholders are diluted?  If the answer is yes, what reason is there not to do it.

Offline Empirical1

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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

Too much added inefficiency to achieve this goal, for my liking. I will think it over,... more.

Ok I read some of the original thread. Yeah it's interesting. I think re-directing the inflation % of Bitcoin through a DPOS system should work fine. But as you say in that thread usually all the money you need to run a business and then some should come through revenue.

However some businesses take a few years to be positive so it could be useful in that period. Also occasionally a business might have to borrow for expansion or to respond to a competitor so having some form of equity release/inflation available, that is mostly being 100% burnt, (ergo no inflation) available to be directed to funding the business when needed could be good.

Another problem we'll find is that shareholders of coca cola can be concerned with investment & electing a board of directors but people who drink coca cola couldn't really give a sh... With DAC's users/customers end up being shareholders at the moment, on the one hand it's a good thing as it creates demand for the stock in addition to revenue but as you say there will be a lot of people who own stock that won't be involved in this process. Which creates new problems.  Especially with a DAC that's specifically designed to be used a global crypto-currency. I will think about it more myself.

Offline tonyk

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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

Too much added inefficiency to achieve this goal, for my liking. I will think it over,... more.
Lack of arbitrage is the problem, isn't it. And this 'should' solves it.

Offline tonyk

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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.

The clearer, easier and more efficient model is:

To simply keep this stake for  the developer.


When centralization is needed the number is probably closer to 1, than to # of delegates.

It easer and cheaper for every stakeholder to follow; No spending by 2 delegates for the same issue;... the list goes on but you know what I mean.
Lack of arbitrage is the problem, isn't it. And this 'should' solves it.

Offline Empirical1

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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 »

Offline toast

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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".
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Offline tonyk

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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 santaclause102

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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 Empirical1

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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 Empirical1

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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 luckybit

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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 CLains

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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