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Offline bitmarket

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interest on bitUSD held
« on: October 04, 2014, 07:03:45 AM »

Can someone please help me understand how holders of bitUSD earn interest?  Is it because bitUSD transactions have fees and those fees are paid in bitUSD and a portion of those fees are burned?  Or is it another way?
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Offline .yoshi

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Re: interest on bitUSD held
« Reply #1 on: October 04, 2014, 03:42:01 PM »
i would like clarification on this as well pls  :)

Offline oldman

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Re: interest on bitUSD held
« Reply #2 on: October 04, 2014, 04:01:30 PM »
Can someone please help me understand how holders of bitUSD earn interest?  Is it because bitUSD transactions have fees and those fees are paid in bitUSD and a portion of those fees are burned?  Or is it another way?

Short answer is yes, bitUSD transaction fees are flowed through to bitUSD holders as yield.

Offline bitmarket

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Re: interest on bitUSD held
« Reply #3 on: October 05, 2014, 02:24:15 AM »
So I am confused.   If bitusd's are destroyed by delegates, then how can the person who pledged 200% capital in btsx to create butUSD's buy all of their bitUSD's back to release their capital?
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Offline toast

Re: interest on bitUSD held
« Reply #4 on: October 05, 2014, 02:26:22 AM »
bitUSD is not destroyed. Collected field goes into yield pool which interest is drawn from.
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 tonyk

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Re: interest on bitUSD held
« Reply #5 on: October 05, 2014, 02:39:15 AM »
bitUSD is not destroyed. Collected field goes into yield pool which interest is drawn from.

After this post, rivaled by only by MY spelling ability, let's shed some light on the issue.

In general bitUSDs collected by the system as fees, go into a 'fund'. From this fund the yield/interest is paid.
Depending on which market engine we are talking about (v1,v2, or upcoming v.3) different fees go into the yield fund.

[PS] And as toast explained, if anything is burned it is not bitAssets (bitUSD), but only BTSX.
« Last Edit: October 05, 2014, 02:49:26 AM by tonyk »
Lack of arbitrage is the problem, isn't it. And this 'should' solves it.

Offline bitmarket

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Re: interest on bitUSD held
« Reply #6 on: October 05, 2014, 05:02:52 AM »
Excellent.  Thank you Toast and TonyK.  I think I get it now.    Presumably Delegates still get bitUSD fees for transactions in bitUSD, but instead of burning a portion they put a portion into an interest fund. Which is then divided among bitUSD holders.   I further assume that portoin is the same portion burned in btsx transactions.
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Offline arhag

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Re: interest on bitUSD held
« Reply #7 on: October 05, 2014, 05:28:00 AM »
Presumably Delegates still get bitUSD fees for transactions in bitUSD, but instead of burning a portion they put a portion into an interest fund. Which is then divided among bitUSD holders.   I further assume that portoin is the same portion burned in btsx transactions.

Delegates don't get any control over the BitAsset fees collected by the DAC (and their pay rates also have no influence over it). The DAC automatically manages the collection and pay out as yield of all the BitAsset fees (BitAsset transfer fees, bid-ask overlap of BitAsset/BTSX exchange, and soon, with a yet-to-be-released new market engine, interest on BitAsset debt paid by shorts).

Offline bitmarket

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Re: interest on bitUSD held
« Reply #8 on: October 05, 2014, 06:42:57 AM »
Delegates don't get any control over the BitAsset fees collected by the DAC (and their pay rates also have no influence over it). The DAC automatically manages the collection and pay out as yield of all the BitAsset fees (BitAsset transfer fees, bid-ask overlap of BitAsset/BTSX exchange, and soon, with a yet-to-be-released new market engine, interest on BitAsset debt paid by shorts).

Thanks Arhag.  I really enjoy your posts by the way.
So delegates do not get any fees or they do get fees from bitUSD transactions?
When you say the "DAC automatically manages" You are saying the formula for distribution is hardcoded into the btsx protocol?  If so what is it? If not what is the mechanism? and what are the fees?

Thanks.

BTW, as a result of this thread and BM's "what is a customer worth" thread I have written my next bitshares promo/educational video.  It is being reviewed by a couple of other forum members.  Thanks for all the inspiration. The last one is at 10,000 views and I think directly led to a bump in client downloads (unless there was some other event that triggered it that I was unaware of.)
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Offline arhag

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Re: interest on bitUSD held
« Reply #9 on: October 05, 2014, 02:22:20 PM »
Thanks Arhag.  I really enjoy your posts by the way.

Thanks. I enjoy your contributions as well. Your videos have been really great.


So delegates do not get any fees or they do get fees from bitUSD transactions?
When you say the "DAC automatically manages" You are saying the formula for distribution is hardcoded into the btsx protocol?  If so what is it? If not what is the mechanism? and what are the fees?

So, the following is my understanding of how it all works. I make no guarantees that it is 100% accurate nor is it complete. Hopefully the devs or other members of the community will correct me if I got some details wrong.

The revenue of the DAC currently consists of: fees on transfers of BTSX, BitAssets, and user-issued assets; price overlap of bids and asks taken as a fee; 5% fee on remaining collateral in the case of a margin call on shorts; market order fees; user/delegate registration and update fees (registering as a delegate has a much larger fee); and delegate price feed update fees. Future fees that have not yet been implemented are the interest paid by the shorts and perhaps a 5% inactivity fee on BTSX and BitAssets that haven't been moved for a year (but from my understanding the latest decision was to not bother implementing these inactivity fees).

The expenses of the DAC currently consist of: paying the delegates and paying the BitAsset yields.

There are two classes of funds to consider: the accumulated BTSX fees fund and the yield funds of each BitAsset. I will use only BitUSD as an example to represent BitAssets in the rest of this post but keep in mind the same applies independently to all other BitAssets.

The following fees (all fees are collected as BTSX) go into the accumulated BTSX fees fund:
  • fees on transfers of BTSX
  • fees on transfers of user-issued assets
  • 5% fee on remaining collateral in the case of a margin call on shorts
  • user/delegate registration and account update fees
  • delegate price feed update fees
  • market order fees when pushing or canceling an order where BTSX is used to buy or short BitAssets
  • 5% inactivity fee on BTSX (if ever implemented)
The money in this fund is used to pay out to the delegates. The exact formula isn't too important, but it tries to smooth payments per block out so that the fund maintains on average 2 weeks worth of delegate income payments. The DAC decides, using a formula dependent on the amount of BTSX in the fund, what the maximum payment to the delegate producing the block should be. However, every delegate has set a pay rate (between 0% and 100%). The DAC will only pay the delegate the fraction of the maximum payment they specified and it will "burn" the rest, effectively treating it like a stock buyback or dividend to shareholders.

The following fees (all fees are collected as BitUSD) go into the BitUSD yield fund:
  • fees on transfers of BitUSD
  • price overlap of bids and asks in the BitUSD/BTSX exchange
  • market order fees when pushing or canceling an order where BitUSD is used to buy BTSX (and I think also when covering a BitUSD short)
  • interest paid by the BitUSD shorts
  • 5% inactivity fee on BitUSD (if ever implemented)
The money in this fund is used to pay yield on BitUSD. Again the exact details aren't too important (you can read this thread and in particular this post for details), but the idea is that every time you move your BitUSD balances (assuming they have been held for more than a day and ideally, but not necessarily, less than a year) you will automatically get your "fair share" (drltc and I actually argue that the current formula isn't very optimal or fair actually) of yield, pulled out from the yield fund, added on top of your existing balance.

Offline speedy

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Re: interest on bitUSD held
« Reply #10 on: October 05, 2014, 02:38:43 PM »
Btw its best not to mention inactivity fees in your next video ;D It makes everyone worried and I think Bytemaster cancelled the idea anyway.

Offline oco101

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Re: interest on bitUSD held
« Reply #11 on: October 05, 2014, 03:11:40 PM »
Btw its best not to mention inactivity fees in your next video ;D It makes everyone worried and I think Bytemaster cancelled the idea anyway.

Really did he cancelled the inactivity fees ?? I did miss that

Offline bytemaster

Re: interest on bitUSD held
« Reply #12 on: October 05, 2014, 03:16:49 PM »

Btw its best not to mention inactivity fees in your next video ;D It makes everyone worried and I think Bytemaster cancelled the idea anyway.

+1
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Offline arhag

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Re: interest on bitUSD held
« Reply #13 on: October 05, 2014, 03:22:26 PM »

Btw its best not to mention inactivity fees in your next video ;D It makes everyone worried and I think Bytemaster cancelled the idea anyway.

+1

I still think inactivity fees on at least BTSX are REALLY important to have for more voter involvement and thus better DPOS security. I would hate to see them not implemented. BTSX holders are shareholders and they have certain important responsibilities. If they want to be lazy they should hoard BitAssets.

Edit: Or alternatively implement BTSX dividends the way you implement BitAsset yields. That way we can deny dividends to anyone who hasn't moved their funds for more than a year. Either way we need some economic motivation for people to update their votes.
« Last Edit: October 05, 2014, 03:25:01 PM by arhag »

Offline oco101

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Re: interest on bitUSD held
« Reply #14 on: October 05, 2014, 03:25:24 PM »

Btw its best not to mention inactivity fees in your next video ;D It makes everyone worried and I think Bytemaster cancelled the idea anyway.

+1

Ok .. I take that the inactivity fees are not longer to be implemented ...   I still think  the inactivity was a good idea . Why are no longer implemented it is explained somewhere ?

 

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