Competitive Edge #2: Self-Funded Growth
Metaphors matter. If BitShares were a currency, we would want it to have a limited supply. If BitShares were a company, it would happily issue new shares to propel growth by attracting new infusions of cash, services, or intellectual capital. What should BitShares the community do? We think it should fairly recognize the contributions of all of its members – past, present, and future. Fast-growing companies recognize that, as long as the value infused from new sources exceeds the value of shares issued, the future value of everybody’s shares will increase. The BitShares community will therefore use the company metaphor, not the currency metaphor, to inform its growth policy decisions.
How will this work? Well, Bitcoin has for years issued 50 new bitcoin “shares” every block to incentivize its mining “employees” to do the work required to secure its network. This policy gradually increases the supply of its shares but does nothing to increase their value because the work done has no residual benefit. The net cost of this wasteful work is about a half billion dollars per year. If that new money didn’t have to be spent on outrageously expensive security, it could grant 101 small businesses an annual budget of 5 million dollars each to do something useful, something to promote Bitcoin’s growth.
BitShares is able to use its DPOS technology to do exactly that! It will also offer up to 50 BTS per block to incentivize 101 employees (delegates) to secure the network PLUS do something useful to grow stakeholder value. Since its DPOS security mechanism is so efficient, almost all of the BTS issued will go toward software, marketing, and infrastructure. Stakeholders must approve new issuances by explicitly approving any new-hires that they are convinced will add more value than they consume. They may choose to issue zero new shares; and, there is a hard-coded limit of 50 BTS per block (~6.3% annually). It will likely be half that – far below Bitcoins ~10% inflation.
BitShares is the first blockchain that can hire its own staff.
The BitShares community, viewed as a company, will soon have 101 job openings for people who can help grow the business. These will be highly competitive elected positions subject to approval of the stakeholders. Each of these openings is able to pay employees with stake in the enterprise, just like any successful startup would do. This is a huge competitive advantage; and, it is what will allow BitShares to fund the technology and user base growth needed to penetrate all sectors of the global economy. It is a true a game changer that will ultimately attract the best and brightest talent to join our community. This is the competitive advantage that may well propel BitShares beyond Bitcoin in the next few years.
I'm still trying to understand the economics of this concept of self-funded growth. In theory, if there were no dilution, and everybody agreed to pay existing BTS in proportion to their stake for the same expense, wouldn't the economic outcome be exactly the same as for dilution, except that the market cap of all shares would be spread over a different supply of shares?
If so, is the real benefit of dilution not an economic one, but a political/administrative one because it provides a more graceful mechanism for an expense to be shared without any enforcement of transactions?
I ask this not out of any negativity toward the power to dilute when appropriate (and I'm sure it has its place), but just wondering how dilution facilitates a higher level of growth.