Author Topic: Interest on BitUSD - A Proposal for Review  (Read 43071 times)

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Offline oldman

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"dividends" and "interest" are difficult words to legally market.

ah got it, that trumps all!

Yep, loud and clear.




Offline Shentist

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SO THIS WHAT THE  +5% IS ABOUT! I just got it. You guys were originally positioning the 5% to BTSX holders, not BitAsset holders.

Moving the 5% incentive to BitAsset holders is strategically much better. People who invest in crypto are growth investors, they don't care much about stability or 5% interest. Moving the 5% incentive to BitAsset holders attracts an entirely new demographic.

As demand for BitAssets grow, the value of BTSX will grow as well. It's a perfect win-win.

This is genius!

+5% was ALWAYS for BitAsset holders... we just didn't quite know how to implement the rewards :)

don't call it rewards.

why not interestfees or shareinterest and short interest?

Offline bytemaster

SO THIS WHAT THE  +5% IS ABOUT! I just got it. You guys were originally positioning the 5% to BTSX holders, not BitAsset holders.

Moving the 5% incentive to BitAsset holders is strategically much better. People who invest in crypto are growth investors, they don't care much about stability or 5% interest. Moving the 5% incentive to BitAsset holders attracts an entirely new demographic.

As demand for BitAssets grow, the value of BTSX will grow as well. It's a perfect win-win.

This is genius!

+5% was ALWAYS for BitAsset holders... we just didn't quite know how to implement the rewards :)
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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 Method-X

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SO THIS WHAT THE  +5% IS ABOUT! I just got it. You guys were originally positioning the 5% to BTSX holders, not BitAsset holders.

Moving the 5% incentive to BitAsset holders is strategically much better. People who invest in crypto are growth investors, they don't care much about stability or 5% interest. Moving the 5% incentive to BitAsset holders attracts an entirely new demographic.

As demand for BitAssets grow, the value of BTSX will grow as well. It's a perfect win-win.

This is genius!
« Last Edit: September 05, 2014, 08:15:03 pm by MeTHoDx »

Offline James212

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BitUSD is incredibly useful as a trading instrument but the "sales pitch" for the average Joe is something like this:

1) Buy BitUSD today and you will be able to sell it back for 98% of what you paid for it (due to the spread)
2) Once you have BitUSD you get all of the benefits of Bitcoin, instant transfers, privacy, security.
3) As a merchant the "cost" of accepting BitUSD (at parity) is currently equal to the cost of a credit card (a few percent)

Initially demand from traders will to hedge against BTSX volatility will help the market grow, but what we *REALLY WANT* is for people to store their wealth in the system, not just their trading account.  To do this BitUSD needs to offer a return that is explicit.  IE: it shouldn't be done via the value deviating from the peg.

Right now the network earns USD via the market and via transaction fees (yes transaction fees can be paid in USD).  This income is saved for a "rainy day" which we don't actually expect to happen, but could.  The value as an insurance system could be better used to pay interest to USD holders.   If BitUSD were an interest bearing asset, then the interest would compensate for the risk of black swans in the same way that the insurance fund does today.

So far BitUSD has earned $1800 on $485,000 issuance in just 2 weeks of light trading.  This is about .4% yield every 2 weeks or about 10% per year.   I have no idea how this will play out over time, but I suspect that it will result in a significant yield for BitUSD holders.   The more people hold BitUSD the more BTSX is worth.   So it is in the best interest (No pun intended) of BTSX holders to pay interest on BitUSD from the fees collected.

I would like to implement it as follows:
1) If you hold a balance for less than 1 month, you earn nothing.
2) If you hold a balance for one year or more then you earn (YOURUSD / TOTAL_USD) * COLLECTED_FEES_BALANCE
3) If you hold a balance for less than one year then you earn a pro-rated amount.     (YOURUSD / TOTAL_USD) * COLLECTED_FEES_BALANCE * FRACTION_OF_YEAR_HELD^2

The result is that long-term holders of BitUSD earn much higher yields than short-term holders.  The yield should more than cover the cost of the spread and thus your pitch to the average Joe is much stronger:

1) Buy BitUSD and earn more (much more) on your dollars than you do at your bank.
2) Enjoy all the other benefits of crypto.

This feature would have a greater impact on adoption than just about anything else being discussed.

Discuss.

If implemented/marketed successfully this could bring a tsunami of wealth into the system.

 +5% +5%

A few suggestions:

- While technically revenue sharing the payout should be marketed as interest. This aligns with industry norms and investor expectations when holding low risk assets like USD etc. Investors will suspect a scam/ponzi if someone is marketing payment of dividends for holding USD etc.

 +5% +5%

- Interest paid should be capped at 5% and additional revenue diverted to a liquidity fund; no one can complain about getting paid up to 5% interest to hold low risk assets like USD. That is a better risk/yield ratio than any investment in the world. The Eurozone is now offering negative interest on deposits. We cannot fathom the wealth that would pour into bitUSD5.

- The interest mechanism should be implemented on all currencies by default, including gold and silver, but not on other assets like equities and commodities (bitOSTK, bitOIL, etc.). Revenues from assets other than currency and gold/silver should be diverted to the liquidity fund or burned or some combination of the two

- Consideration should be given to using the liquidity fund or some percentage thereof as capital for automated lending, see this post https://bitsharestalk.org/index.php?topic=7208.msg96159#msg96159. The revenue potential is staggering
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Offline James212

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But isn't is usual that the interest is NOT fixed? at least in germany that is the case :)

No I am also searching for workaround because we do not actually know how much fees will be collected, so promising 5 or 10% is kind of misleading. And I want to be able to tell them 'our interest is higher than the one in the bank'.



Why not represent it as a revenue sharing plan? The market makes money off YOUR bitUSD and gives you a cut. The more money the market makes off your bitUSD the more you make. Nice and simple once we get away from referring to it as Interest. Interest to me is someone paying you a fixed, agreed upon, rate to use your money. That's not what's going on here.

True, but as explained above, telling the people it is higher than in the bank is a powerful selling point, imo.

 +5% +5%
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Offline James212

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Just so we're clear: This is not interest it is a dividend. The holders of bitUSD are participating in a revenue sharing plan. Also, paying out half the revenue as a dividend and retaining the other half as the insurance fund sounds good. The theory that people will look at their dividends as insurance if something bad happens I don't think will fly. The dividend is earned revenue and they'll be upset if they find one day that it needs to be used to bail out the market.


Other than those points I LOVE this idea. It makes a truly compelling case to hold bitUSD.

It has a lot of the elements of a dividend, I agree. I am thinking how to represent it to the people. 'The interest is not truly fixed, but for the last mo/3 mo/ etc it was X%' I do not know, do not like that way too much neither.


Why not represent it as a revenue sharing plan? The market makes money off YOUR bitUSD and gives you a cut. The more money the market makes off your bitUSD the more you make. Nice and simple once we get away from referring to it as Interest. Interest to me is someone paying you a fixed, agreed upon, rate to use your money. That's not what's going on here.

the mechanics being as they may, IF it is possible to position this as interest, IMHO it would be better from a marketing perspective.  The average joe (vast majority) understand interest and are exposed to it every day.  Not everyone is exposed to investing or profit sharing.  Thus the "interest" concept would have the broadest appeal.  This concept could be a major, major, major game changer for BitShareX!
BTS: theangelwaveproject

Offline bytemaster

Does this impact/conflict with the inactivity fee of btsx? Or does this not matter since we are dealing with BitUSD?

In active BitUSD is charged 5% and is given to the others as rewards.
Wait...rewards for holding bitUSD...but fines for holding bitUSD?

Collect your USD interest annually and you will have no fines.
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 Riverhead

Does this impact/conflict with the inactivity fee of btsx? Or does this not matter since we are dealing with BitUSD?

In active BitUSD is charged 5% and is given to the others as rewards.
Wait...rewards for holding bitUSD...but fines for holding bitUSD?

Offline bytemaster

Does this impact/conflict with the inactivity fee of btsx? Or does this not matter since we are dealing with BitUSD?

In active BitUSD is charged 5% and is given to the others as rewards.
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 patrickb323

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Does this impact/conflict with the inactivity fee of btsx? Or does this not matter since we are dealing with BitUSD? 

Offline Shentist

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you call it bitUSD and here is no problem?

then call it bit%  - bitinterest - btsinterest - bitUSD%

"If you hold bitUSD for a long time the collected fees from the market transaction will be paid back as an (insentive, reward, interest, dividend) to the bitUSD holders. This will slowly increase the holders bitUSD amount. The future will tell how much of gain you will get from holding bitUSD but we expect something between 2-5% every year".

Offline Method-X

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"dividends" and "interest" are difficult words to legally market.

Other exchanges are doing it and they seem to be okay, and those are centralized exchanges.

Why would the law matter to a decentralized exchange?

If you can't use the word "interest" then don't do official marketing. Let someone else do that but at least in the client itself it should be called "interest" because otherwise no one is going to understand what is going on.

 +5%

Decentralized marketing.

Offline luckybit

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Accuracy isn't actually important for marketing. If you want to be accurate then Bitcoin mining isn't really mining, it's minting. Because you don't mine coins from the ground do you?

Maybe accurate isn't the right word - I'm actually talking about marketing.

When I hear "rewards" I think of a marketing gimmick. When I hear "dividends" or "interest" I think of banking. The better marketing decision may be to not use a "marketing" word.

I own a marketing firm here in Ontario, I've spent my entire adult life as a marketer...

Go with whichever has the most "perceived value". For me, it's unquestionably "interest". I put my wealth into something that has a high interest rate. I choose a credit card that gives me "rewards". The underlying incentives are totally different for each. BitUSD early adopters will park their wealth for the interest, not rewards.

Ultimately we're discussing semantics / psychology. The words we choose to describe our product are very important. If we use the wrong ones, someone else will use the right ones.

It's possible that Invictus Innovations cannot promise Interest? But they already have promised it in their marketing documents (and previous websites). The title of this thread has interest in it.

Why change now that everyone has accepted interest for BitUSD as a goal? If it's that legally touchy then market it officially as "percentage points" but let the client have "interest". Then the community can figure out what it means.

Considering the client is made by DACSUNLIMITED they aren't really concerned about the legal situation when designing the GUI.
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Offline luckybit

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"dividends" and "interest" are difficult words to legally market.

Other exchanges are doing it and they seem to be okay, and those are centralized exchanges.

Why would the law matter to a decentralized exchange?

If you can't use the word "interest" then don't do official marketing. Let someone else do that but at least in the client itself it should be called "interest" because otherwise no one is going to understand what is going on.
https://metaexchange.info | Bitcoin<->Altcoin exchange | Instant | Safe | Low spreads