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.
It has an economic benefit too:
Joe and Mary decide to form a donut company and each put in 50 BTC of their own money.
They issue themselves 1 share per BTC so they each have 50 of the 100 shares, each worth 1 BTC and 1% of the company.
This buys them one donut making machine.
Sam joins them and adds another 100 BTC of his own money.
They issue him 100 new shares to represent his contribution.
This seems fair to everyone since they each got one share for each BTC they contributed.
They buy another donut machine and double their sales.
Now Joe and Mary still have 50 shares, but out of 200, or 1/2 % of the company. But each share is still worth 1 BTC.
Sure, their
percentage of the shares has been diluted by 50% but their
value remains unchanged.
If Sam hadn't joined them, they could not double their sales. So dilution was worth it and everybody gains.
Sam didn't dilute their wealth, he just diluted their percentage of a pie that he helped make twice as big.
If Joe and Mary had not diluted, it would have taken a long time to save up for that second machine.
Time for competitors to emerge and gain a foothold in their lucrative donut market.