Well, perhaps I'll end up being one of the lone dissenting voices on this, but it seems to me that it might be worthwhile to think twice about exclusive reliance on 3).
I really worry that 3) could be a significant drag on the value of BTSX and on buy-in into the network. It all goes back to the question of how BTSX holders and investors would feel about potentially open-ended debasement. In a real, live network with 3), how often would short positions get blown out, and how much dilution would need to occur to withstand multiple disruptions over time?
I have the same concerns. We probably should not call it debasement. We should also avoid words like dilution because it causes massive communication hurdles. It functions more like a stock buyback vs dilution. You cannot debase a stock but you can dilute it. It probably will not affect us very much in the long term though if handled right.
What if there is not just one BitAsset, but several correlated BitAssets, e.g., BitBTC, BitGold, BitCNY, etc., which could potentially increase rapidly in value and cause blown shorts? Would all of these need to be supported by BTSX holders under something like 3), and would that compound the potential problems?
I suspect not many people here have a good idea about how often and how large the triggering disruptions would be--I certainly don't. There seem to be significant unknowns here. But I feel pretty sure about one thing: in general, significant uncertainty + potentially large, open-ended future dilution = anathema to buy-and-hold investors.
The way to do think about and frame it is that the DAC provides a loan to itself in order to solve short term disruptions to it's operations. This is very reasonable and a better way to think about it.
But that loan must be paid back and there is a limit to how much of a loan it can be. The cap of 2 billion XTS should never be changed. The XTS burned on the other hand can be recreated again up to 2 billion XTS in the case of an emergency but there should never ever be more XTS than when we all bought into it which means the earlier you buy into it the safer you are.
The other point is that if you get in significantly later you're probably safe too because disruptions will not be as severe. For example if in a year we have 1 billion XTS left then it would take an extreme disruption to cause the creation of 50% more XTS once the market cap is in a high enough amount.
Suppose for sake of argument we do have a creation of 100 million of XTS in an event. As long as the burn rate, transaction fees and other mechanisms adjust to pay off the loan then the best time to buy would be immediately after these events because the burn rate will be at it's highest as the network seeks to rebalance and pay off the debt. The debt would be considered paid off once the amount of XTS reaches a lower place than it was at prior to the loan due to burning / buyback functions.
BM et al. deserve props for thinking proactively about this issue, and I hate to complain, but I really do hope a better, more investor-friendly solution comes along. What about some mixture of (1), (2), and/or (3)? Are these three really the only alternatives?
BM is offering us a solution which could work. But we should definitely refine this solution in any way we possibly can and even think up a better solution.
I recognize that the XTS supply needs to be dynamic. I also recognize there has to be a deflationary incentive for people to want XTS in the first place.
So we started at 2 billion and now we've burned through a few hundred thousand XTS.
As long as the burn rate is faster than the rate of creating new XTS we all win.
So we can create new XTS just as long as we increase the burn rate in response to eventually balance things out. The whole thing should seek equilibrium and balance so that overall the burn rate is always greater in the long term than the creation rate.
So basically the company burns and this functions like the company buying it's own stock. All of our stock appreciates in value when this happens and it's generally good for us in the long term.
But when a short term problem is faced the algorithm must seek to solve the short term problem in the most efficient manner. Efficiency should include maintaining the burn rate so that whatever increase we experience in XTS is temporary. Transaction fees could increase in response or the burn rate could increase temporarily as a way to try to balance the concerns.
So really instead of thinking of it as taking one for the team, or "debasement" which is a word we should never use in this context. We should think about it as the network providing a loan to itself and the way to pay that loan back is with an increase in fees. Think of fees as taxes which are used to pay back the loan in the form of an accelerated buy back. If this doesn't happen very often then it's not going to be a big deal just as long as we frame it as a loan, a buy back, but avoid toxic words like "debasement", "dilution", "inflation", because no one likes these concepts.
If someone cannot pay their debt we can bail them out but that has to be accounted for.