A viable alternative to percentage-based transfer fees?

[Thom]

The main point is to turn an asset into a joint enterprise between the issuer and the referrer (they take the risk and share the profits) and to remove the blockchain itself from the equation (the network just cares about covering its fixed costs).

I wonder what @bytemaster thinks of this.

  The crux of this idea is golden IMHO and I would love to hear BM's perspective, both on the concept and how much effort it would take to implement it. No doubt it will not be easy and it has definite GUI requirements. It doesn't strike me as a quick fix for the short term, but it does sound like a very promising idea to incentivize business and put more control into the hands of individuals, while at the same time normalizing the income stream for the network.

[Empirical1.2]

3. income referrers' income should be mainly from referrals' trading fees, not transfer fees.

This way we lose our big ally - online shops. They have no incentive to promote BitShares via the referral program.

High transfer fees is a big psychological hurdle for new comers to join and need to remove asap.

IMO, the problem is not the transfer fees being high.
The problem is that they are flat, i.e. completely detached from the perceived value of the service delivered.

If you transfer 10,000 CNY and pay 0.7 CNY for this (~ 0.007%) - would you really say it's such a bad deal?
But if you transfer 10 CNY and pay 0.7 CNY for this (~ 7%)  - I agree, it is expensive.

  Transfer fees should be more relatively sized.

Another problem is that BTS can offer a good deal to merchants once there is an offramp, however from the consumers perspective the prices may have increased, because the PayPal/credit card fee is often hidden. 

Unfortunately BTS would have a hard time distinguishing merchant from individual accounts & then charge the merchant accounts per transaction like PayPal and other payment processors do.

[jakub]

3. income referrers' income should be mainly from referrals' trading fees, not transfer fees.

This way we lose our big ally - online shops. They have no incentive to promote BitShares via the referral program.

High transfer fees is a big psychological hurdle for new comers to join and need to remove asap.

IMO, the problem is not the transfer fees being high.
The problem is that they are flat, i.e. completely detached from the perceived value of the service delivered.

If you transfer 10,000 CNY and pay 0.7 CNY for this (~ 0.007%) - would you really say it's such a bad deal?
But if you transfer 10 CNY and pay 0.7 CNY for this (~ 7%)  - I agree, it is expensive.

[bitcrab]

Percentage based transfer fees are completely untenable. Every single other coin in the world has a low, fixed fee for any amount sent, bitshares would lose out to the competition and it would be a PR nightmare. Percentage based trade fees on the other hand, are acceptable.

If the fee is charged by IOU/Smart coin issuers then would be OK (in addition to basic network fee). Best if the issuers are able to define several thresholds and % of the fee. Under this condition the committee can control fee of transferring BTS to be low or higher (as demand). Maybe the ones who benefit by the reference program won't agree though.

to me a good idea is like this:
1. for BTS and BitAsset(or at least BTS) transfer charge a minimum fixed fee.(5-10BTS?)
2. for UIA and privated smartcoin issuers can define the transfer fee(percentage, fixed or percentage with a cap).
3. income referrers' income should be mainly from referrals' trading fees, not transfer fees.

high transfer fees is a big psychological hurdle for new comers to join and need to remove asap.

[jakub]

The referral program plays a bad role in this scene.. transfer to myself & earn money from the issuers!

That's a good point.
To fix this vulnerability we would need to tie the referrer's income to the issuer's transfer fee income, not the blockchain's income as we have it now.

It would have to work like this:
- for each transfer made on the BitShares network the issuer pays 6 BTS (20% of 30 BTS) to the DAC and this is her/his fixed cost
- if the fee received for this transfer is less than 6 BTS, the issuer has to cover this loss and the referrer gets nothing
(EDIT: we could set the minimum transfer fee to 6 BTS so for payments below 2 bitUSD, which is the break-even point, the network can cover its costs but neither the issuer nor the referrer gets any income or loss - which I think is fine)
- if the fee received for this transfer is more than 6 BTS, the issuer gives 80% of the profit (i.e. the excess above 6 BTS) to the referrer and keeps the remaining 20%.

So if an issuer sets the CER wrongly and makes a loss in the long run, the referrer will get some compensation but it will probably be less than s/he has now.
But on the other hand, if the issuer makes a profit, 80% of it will be shared with the referrer.

EDIT: This will incentivize the referrer to attract users that usually make bigger transfers.

Good idea.
However if 80% of fees goes to referrer without a cap, issuers may have not enough incentives to promote. Perhaps add a cap like this?
* If the fee received for a transfer is more than 36 BTS, the issuer give (36-6)*80%=24BTS to the referrer and keeps the remaining.

I agree, there could be some kind of cap (or anything similar as long as it's simple enough) to establish a good balance between the interests of issuers and referrers.

The main point is to turn an asset into a joint enterprise between the issuer and the referrer (they take the risk and share the profits) and to remove the blockchain itself from the equation (the network just cares about covering its fixed costs).

I wonder what @bytemaster thinks of this.

[abit]

The referral program plays a bad role in this scene.. transfer to myself & earn money from the issuers!

That's a good point.
To fix this vulnerability we would need to tie the referrer's income to the issuer's transfer fee income, not the blockchain's income as we have it now.

It would have to work like this:
- for each transfer made on the BitShares network the issuer pays 6 BTS (20% of 30 BTS) to the DAC and this is her/his fixed cost
- if the fee received for this transfer is less than 6 BTS, the issuer has to cover this loss and the referrer gets nothing
(EDIT: we could set the minimum transfer fee to 6 BTS so for payments below 2 bitUSD, which is the break-even point, the network can cover its costs but neither the issuer nor the referrer gets any income or loss - which I think is fine)
- if the fee received for this transfer is more than 6 BTS, the issuer gives 80% of the profit (i.e. the excess above 6 BTS) to the referrer and keeps the remaining 20%.

So if an issuer sets the CER wrongly and makes a loss in the long run, the referrer will get some compensation but it will probably be less than s/he has now.
But on the other hand, if the issuer makes a profit, 80% of it will be shared with the referrer.

EDIT: This will incentivize the referrer to attract users that usually make bigger transfers.

Good idea.
However if 80% of fees goes to referrer without a cap, issuers may have not enough incentives to promote. Perhaps add a cap like this?
* If the fee received for a transfer is more than 36 BTS, the issuer give (36-6)*80%=24BTS to the referrer and keeps the remaining.

[jakub]

The referral program plays a bad role in this scene.. transfer to myself & earn money from the issuers!

That's a good point.
To fix this vulnerability we would need to tie the referrer's income to the issuer's transfer fee income, not the blockchain's income as we have it now.

It would have to work like this:
- for each transfer made on the BitShares network the issuer pays 6 BTS (20% of 30 BTS) to the DAC and this is her/his fixed cost
- if the fee received for this transfer is less than 6 BTS, the issuer has to cover this loss and the referrer gets nothing
(EDIT: we could set the minimum transfer fee to 6 BTS so for payments below 2 bitUSD, which is the break-even point, the network can cover its costs but neither the issuer nor the referrer gets any income or loss - which I think is fine)
- if the fee received for this transfer is more than 6 BTS, the issuer gives 80% of the profit (i.e. the excess above 6 BTS) to the referrer and keeps the remaining 20%.

So if an issuer decides to forgo profits and instead promote cheap transfers, the referrer will get some compensation but it will probably be less than s/he has now.
But on the other hand, if the issuer makes a profit on transfer fees, 80% of this profit will be passed to the referrer.

EDIT: This will incentivize the referrer to attract users that usually make bigger transfers.

[abit]

I have another idea, possibly better than the tier-based system.
This idea assumes that each asset (be it SmartCoin, private bit-asset, UIA, FBA) is a financially independent business entity run by the asset's issuer and operating within the BitShares DAC.

An asset issuer has her/his costs and incomes:

The costs
The BitShares DAC charges the issuer 30 BTS per transfer. So the issuer has a fixed cost of 30 BTS s/he needs to pay to the DAC for each transfer made by a user.

The income
The transfer fee policy is entirely up to the issuer. S/he can charge the users whatever s/he finds suitable. And this is what we have now - an asset's issuer sets the actual transfer fee by adjusting the CER parameter (Core Exchange Rate).


But what if we went one step further and allowed the transfer fee to have a minimum and maximum value but generally be percentage-based?
This way the only concern of an issuer would be to set the CER in such a way that the average transfer fee is at least 30 BTS (so that the issuer can cover her/his costs in the long run).

E.g. for bitUSD the issuer (i.e. the committee account) could do the following:
- set the minimum transfer fee to $0.01 (~ 3 BTS)
- set the maximum transfer fee to $1 (~ 300 BTS)
- set a percentage-based transfer fee expressed in bitUSD and defined as 1% of the amount being transferred (the BTS value of the transfer is irrelevant, all that counts is the bitUSD amount)

This way the issuer is happy as long as the average transfer fee paid by the users is equal or above $0.1 (~ 30 BTS) because this is the actual cost s/he has to pay to the DAC.
The blockchain itself is happy because it receives a fixed income.
The user is happy because the transfer fee is related to the perceived value of the service received.

The referral program plays a bad role in this scene.. transfer to myself & earn money from the issuers!

[jakub]

I have another idea, possibly better than the tier-based system.
This idea assumes that each asset (be it SmartCoin, private bit-asset, UIA, FBA) is a financially independent business entity run by the asset's issuer and operating within the BitShares DAC.

An asset issuer has her/his costs and incomes:

The costs
The BitShares DAC charges the issuer 30 BTS per transfer. So the issuer has a fixed cost of 30 BTS s/he needs to pay to the DAC for each transfer made by a user.

The income
The transfer fee policy is entirely up to the issuer. S/he can charge the users whatever s/he finds suitable. And this is what we have now - an asset's issuer sets the actual transfer fee by adjusting the CER parameter (Core Exchange Rate).


But what if we went one step further and allowed the transfer fee to have a minimum and maximum value but generally be percentage-based?
This way the only concern of an issuer would be to set the CER in such a way that the average transfer fee is at least 30 BTS (so that the issuer can cover her/his costs in the long run).

E.g. for bitUSD the issuer (i.e. the committee account) could do the following:
- set the minimum transfer fee to $0.01 (~ 3 BTS)
- set the maximum transfer fee to $1 (~ 300 BTS)
- set a percentage-based transfer fee expressed in bitUSD and defined as 1% of the amount being transferred (the BTS value of the transfer is irrelevant, all that counts is the bitUSD amount)

This way the issuer is happy as long as the average transfer fee paid by the users is equal or above $0.1 (~ 30 BTS) because this is the actual cost s/he has to pay to the DAC.
The blockchain itself is happy because it receives a fixed income.
The user is happy because the transfer fee is related to the perceived value of the service received.

[Empirical1.2]

We have a fixed cost of maintaining the network regardless of the number of transactions that go through it.

Oh contrair Pe'are.

Sure there is a minimal expense for 1 to N TPS, but your assertion isn't true. At some point it will take higher end hardware to support an increased volume of transactions. You could even argue the existing capacity of the system did not come at zero cost either, it took time to develop and it's still in development if you look at it in terms of what we now have is apparently not acceptable to the market to gain adoption and thus increase our marketcap.

I do agree with your point regarding the untapped profit potential in some form of tiered pricing structure, but that assumes there is a demand for it. It can be seen as a chicken / egg problem of marketing too. Will in fact dropping the price of BItAssets significantly increase their adoption and improve liquidity? What hard empirical data can you show? We think it will, but that is just our speculation.

There is no real point in continuing this line of discussion, I'm merely playing devil's advocate and pointing out issues in your blanket statements.

To be fair, his statement obviously meant that we have a fixed cost for maintaining the network at it's current capacity so not too make better use of current capacity is waste.

I'm not saying we should emulate the following but regards whether reducing fees improve BitAsset adoption. A centralized BitAsset competitor that started after BTS BitAssets, Uphold (formerly BitReserve) is supposedly the fastest growing money platform in the world & their BitAsset TX fee is free. https://uphold.com


Personally I've always been a fan of the referral programme, but I was under the impression BitAssets 2.0 would be more liquid by design. Without that liquidity you don't have a strong product & one referrers can easily sell. So personally, I'm in favour of lower fees where possible and liquidity incentives till that's achieved at which point you'll have a product that can be monetised more.

[jakub]

At some point it will take higher end hardware to support an increased volume of transactions.

Yes, but we are quite far from this point right now.
And when we get there it will be a good opportunity to raise the fees and compensate the witnesses for the extra hardware investment.
But I think we agree anyway 

[Thom]

We have a fixed cost of maintaining the network regardless of the number of transactions that go through it.

Oh contrair Pe'are.

Sure there is a minimal expense for 1 to N TPS, but your assertion isn't true. At some point it will take higher end hardware to support an increased volume of transactions. You could even argue the existing capacity of the system did not come at zero cost either, it took time to develop and it's still in development if you look at it in terms of what we now have is apparently not acceptable to the market to gain adoption and thus increase our marketcap.

I do agree with your point regarding the untapped profit potential in some form of tiered pricing structure, but that assumes there is a demand for it. It can be seen as a chicken / egg problem of marketing too. Will in fact dropping the price of BItAssets significantly increase their adoption and improve liquidity? What hard empirical data can you show? We think it will, but that is just our speculation.

There is no real point in continuing this line of discussion, I'm merely playing devil's advocate and pointing out issues in your blanket statements. In general we agree that a simple 2 tiered fee schedule for BItAssets is worth a try assuming the cost to implement the chages required are not too high. I might not fully agree with your rationale on all points, but I'm belaboring the issue now.

Your idea has merit and "seems" like a good idea to me.

[jakub]

I agree with your second point, but I can't agree with any of the above. The analogy is not good. Anybody can easily and intuitively understand the cost of travel (moving physical stuff around) is proportional to the distance traveled. Energy is not free and it takes more energy to travel farther. However, that is not true of pushing electrons around the planet. Sure the rule of physics is basically the same, but the difference in the amount of energy required to transfer the number 1 vs. the number 1,000,000 is not even close to proportional to the value of the number.

People outside the cryptoworld are used to the fact that transferring $10,000 needs to cost more than transferring $10. This is true in the legacy systems: the bigger the amount the more risk is involved in terms of fraud.
And this is also consistent with the perceived utility - if I ask you to transfer safely $10,000 for me, you would do me a much bigger favor than transferring $10.

So my point is - if we aim to be a profitable business why don't we take advantage of this? Just because other crypto-currrencies don't do that?
Let's lower our transfer fees for small amounts and make them a bit higher for bigger amounts. This is what non-crypto people are used to and it makes perfect sense to them.

Perhaps "micropayments" can become sustainable, perhaps not. Without a detailed analysis of costs and benefits I think it's a rather big gamble.

What does it cost us to transfer a micropayment? Nothing.
We have a fixed cost of maintaining the network regardless of the number of transactions that go through it.
IMO the "detailed analysis" is dead simple: up to some point we should process as many payments as we possibly can to maximize our revenue.

[Thom]

Saying it's absurd is a bit strong, don't you think?

It's absurd because we got stuck in the crypto mentality instead of taking a healthy business approach:
(1) From the user perspective - it's similar to having the same train ticket price no matter if you travel just a few miles or several hundred

I agree with your second point, but I can't agree with any of the above. The analogy is not good. Anybody can easily and intuitively understand the cost of travel (moving physical stuff around) is proportional to the distance traveled. Energy is not free and it takes more energy to travel farther. However, that is not true of pushing electrons around the planet. Sure the rule of physics is basically the same, but the difference in the amount of energy required to transfer the number 1 vs. the number 1,000,000 is not even close to proportional to the value of the number.

Labeling are marketing mistakes as a "crypto mentality" clouds the issue. I have argued before that  micropayments without taking into account the network costs to support them is not a healthy business approach. it's the cost of providing a crypto service that inspired BM to come up with a better model to pay for security than Bitcoin. PoW is terribly inefficient. If you can't sell an item at more than it costs to provide it you don't have a sustainable business.

That is the simple truth. Now factor in marketing and strategies to capture a market (i.e. subsidize some of the costs in the short term to get a sustainable market working) and it becomes a matter of risk evaluation and speculation. Perhaps "micropayments" can become sustainable, perhaps not. Without a detailed analysis of costs and benefits I think it's a rather big gamble.

[jakub]

Saying it's absurd is a bit strong, don't you think?

It's absurd because we got stuck in the crypto mentality instead of taking a healthy business approach:
(1) From the user perspective - it's similar to having the same train ticket price no matter if you travel just a few miles or several hundred miles.
(2) From the business perspective - in most cases we are either overpricing or forgoing the revenue customers would be willing to pay.
The customer does not care about our production costs - all s/he cares for is how useful a given service is.

I thinks it's best to try this out on bitAssets first before implementing it elsewhere.

I fully agree. We should just apply it to bitAssets controlled by the committee.
My point is - let us not try to solve 100% of the problem. Let's just solve most of it, especially if we can do it so easily.