1. "Equity dilution" - What if we gave up on the notion that BTS is like a currency? We could treat it more like a startup business. First we would need a clear profit model for our core products - that is, how will these be monetised and what could they be worth. Then, there would be no reason why we could not dilute $2m worth of shares in a year, if we thought that was the investment required for the project to deliver a revenue stream well in excess of this down the track. If the market embraces the direction of the business, capital gains should more than exceed the dilution.As tonyk says in his reply, dilution can support funding only if the investor and recipient of the diluted shares agrees not to sell his holdings until there is a real market to absorb the sales. The investor can bring either capital or sweat equity. In the first case, we can try to attract investors by auctioning OTC a large position at a price significantly lower than market price under condition that the investor commits not to sell for a specific amount of time. The second case can be implemented easily with a minor change to the delegate model: instead of simply specifying a pay rate, delegates would also specify a vesting schedule as a simple percent-per-day selling cap. For instance, a delegate specifying 0.1 percent-per-day vesting effectively agrees to let his position vest over a period of 1000 days, or ~ 3 years. Developers will therefore be voted in not only based on their profile but also on their willingness to accrue equity versus cash flow.
2. Investment Loans - What if we borrowed from the market for investment purposes, effectively leveraging the business? For example, we issue $2m USD loan tokens to the market, paying say 25% pa (or a market-determined rate), repayable in 2 or 3 years. Payment is made at expiry by the block-chain diluting the necessary value of BTS shares. If the business has invested well, the market cap should have risen by much more than $2m. If there is not sufficient equity for payment, loans may need to be rolled if the market is willing, or else default terms would kick in.
3. Project equity - Development projects could be privatised as far as possible, where there is a clear revenue stream possible. Developers can either take the risk themselves, share it with a group of backers, or take a salary and pass it all to the backers. At a granular level, it may even be possible that any modules accepted into the core protocol could receive a revenue stream from its direct use, or use by other modules.
2. Investment Loans - What if we borrowed from the market for investment purposes, effectively leveraging the business? For example, we issue $2m USD loan tokens to the market, paying say 25% pa (or a market-determined rate), repayable in 2 or 3 years. Payment is made at expiry by the block-chain diluting the necessary value of BTS shares. If the business has invested well, the market cap should have risen by much more than $2m. If there is not sufficient equity for payment, loans may need to be rolled if the market is willing, or else default terms would kick in.
This is also a great idea that only BitShares is capable of implementing at the moment and that would add a whole new dimension to BitShares: credit. The problem of credit is that it requires trust and that's a hard problem to crunch. But the specific case that you propose doesn't have this drawback because the borrower isn't a user but the network itself. Since the network can't run away or make misrepresentations and it's financial health can be readily evaluated at any moment it is a pretty good counterparty for a lender. The network could issue bonds like governments issue bonds. Bonds would be denominated in bitAssets or BTS depending on the use case, pay a coupon monthly and be traded on the market so that lenders wouldn't even need to be locked in a fixed term commitment but only accept the risk that they could suffer a loss if they sell before maturity at a time where the price is low.
2. Investment Loans - What if we borrowed from the market for investment purposes, effectively leveraging the business? For example, we issue $2m USD loan tokens to the market, paying say 25% pa (or a market-determined rate), repayable in 2 or 3 years. Payment is made at expiry by the block-chain diluting the necessary value of BTS shares. If the business has invested well, the market cap should have risen by much more than $2m. If there is not sufficient equity for payment, loans may need to be rolled if the market is willing, or else default terms would kick in.
This is also a great idea that only BitShares is capable of implementing at the moment and that would add a whole new dimension to BitShares: credit. The problem of credit is that it requires trust and that's a hard problem to crunch. But the specific case that you propose doesn't have this drawback because the borrower isn't a user but the network itself. Since the network can't run away or make misrepresentations and it's financial health can be readily evaluated at any moment it is a pretty good counterparty for a lender. The network could issue bonds like governments issue bonds. Bonds would be denominated in bitAssets or BTS depending on the use case, pay a coupon monthly and be traded on the market so that lenders wouldn't even need to be locked in a fixed term commitment but only accept the risk that they could suffer a loss if they sell before maturity at a time where the price is low.
This is genius. +5%
There is also the Bitcoin model - create a crypto, then create value for it. Cover costs by being among the first believes to dedicate mininga and development time.
I love DPOS and POS algos. But for distribution I prefer mining. There are really great algorithms now that allow for good distribution. It also has a viral effect.
I know BTS community is against mining, but if you think about ProtoShares (PTS) - believers in the ideas mined and did well overall.
If they are going to ultimately be sold to people who actually want them, you might as well sell them yourself and raise development funds in the process.
There is also the Bitcoin model - create a crypto, then create value for it. Cover costs by being among the first believes to dedicate mininga and development time.
I love DPOS and POS algos. But for distribution I prefer mining. There are really great algorithms now that allow for good distribution. It also has a viral effect.
I know BTS community is against mining, but if you think about ProtoShares (PTS) - believers in the ideas mined and did well overall.
My take on that is that there are 600 coin distributions out there already for every demographic imaginable.
Dog lovers, permaculture enthusiasts, mars colonizers, economically aware libertarians, you name it.
So you can roll you own "fair mix"by sharedropping on custom tailored mix of chains to exactly the kind of supporters you want to attract.
If you use mining, you just get a demographic of geeks who know how to set up a mining rig.
Worse, you get a demographic of big mining pools who will suck up your "fair distribution" and resell them at their true market value.
If they are going to ultimately be sold to people who actually want them, you might as well sell them yourself and raise development funds in the process.
If they are going to ultimately be sold to people who actually want them, you might as well sell them yourself and raise development funds in the process.
Yes.
But according to bitcointalk, this makes you a "scam". As does making any amount of money, ever.
There is also the Bitcoin model - create a crypto, then create value for it. Cover costs by being among the first believes to dedicate mininga and development time.
I love DPOS and POS algos. But for distribution I prefer mining. There are really great algorithms now that allow for good distribution. It also has a viral effect.
I know BTS community is against mining, but if you think about ProtoShares (PTS) - believers in the ideas mined and did well overall.
My take on that is that there are 600 coin distributions out there already for every demographic imaginable.
Dog lovers, permaculture enthusiasts, mars colonizers, economically aware libertarians, you name it.
So you can roll you own "fair mix"by sharedropping on custom tailored mix of chains to exactly the kind of supporters you want to attract.
If you use mining, you just get a demographic of geeks who know how to set up a mining rig.
Worse, you get a demographic of big mining pools who will suck up your "fair distribution" and resell them at their true market value.
If they are going to ultimately be sold to people who actually want them, you might as well sell them yourself and raise development funds in the process.
Stan, my point was, I'd like to see your "SmartCoins" allow to define custom distribution including mining. That's all. :)
EDIT: also better in terms of regulation.
Thanks for your comment Stan.bytemaster,
What is your view on bitShares borrowing from the market to help fund development? Depending on the size of such loans, the possibility of dilution may not sit well with those who think of BTS as a currency, but if we think of BTS as a growing business in need of development capital, giving bitShares more flexible options in its own capital structure could increase our ability to manage for growth while still doing it all on the block-chain. Clearly this is partly a question of philosophy.
[BM, if you want more colour on it beforehand, see discussion here... https://bitsharestalk.org/index.php/topic,16973.msg217478.html#msg217478]
I'm not Bytemaster, but I'm happy to answer since I'm not technically required to know what I'm talking about.
(After all, this is not rocket science.)
But the question is not where to obtain BitShares, it's the fact that you intend to liquidate them that matters.
Whether you borrow or print or "earn" them doesn't matter if you intend to HODL until 2099.
Now if you issue a vesting asset that someone can use as collateral to borrow against outside BitShares, then you've got something.
They will be spending other assets while the BTS stay locked up until a time far, far away when BTS will be the global reserve currency and no one will care if you sell them into a deeply liquid market.
That said, viewed as a business, that is exactly what Silicon Valley startups do. They issue equity for work, which the workers are happy to take with the hope it will result in higher value than a paycheck if the company is successful. But if you get into a situation where the workers must immediately liquidate their shares to buy food, then you are hurting your share price.
This is fine in normal startups where investors understand that they will not be able to sell for many moons.
It is not so fine if investors can sell now and buy back later when all the hard work is complete.
Disclaimer: I am not an economist, I only play one late at night to amuse myself.
:)
The main purpose of the loans would be to have a deeper pool of development funds than currently available through delegate pay alone, so that bitShares can directly pay for all the developers it needs, and pay them a competitive rate. It doesn't directly tackle the questions you raise about how those payments should be packaged to align the interests of the developers with the stakeholders, as well as ensure they are not unduly pressuring the price of BTS through sales. But now you raised it, I'll add some thoughts on these issues, which are also important.
I suspect whether you pay the developers in BTS, bitUSD or something else doesn't really matter from their perspective, as long as they are free to convert one to the other at market prices. And it doesn't matter from the perspective of BTS owners, because whatever currency you pay them in is the same currency that has to be extracted from the market in the first place to lend to the bitShares development pool (just to be clear, lent funds must be taken from the market - they are not produced by dilution). There is only a timing difference in the end, although if such loans were spread over time, a lot of the timing differences would smooth out anyway. What the market will be concerned with is any potential dilution to make maturity payments should the reserve pool be insufficient.
As far as alignment goes, some developers will want the security of a competitive income stream, and then they can decide after the fact if they want to save some of this in the form of BTS or not. This is like a typical employee wage. Others will be happy to get paid at a higher rate, by sacrificing secure wages now in order to be paid in equity that only vests after some period (say 3 years). bitShares should also be happy to pay these people at a higher rate, because the interests of both parties are aligned by future share performance. This is like startup equity. And there may be other developers whose risk tolerance sits somewhere in the middle.
I doubt there is any easy way to meet your suggestion for a developer to get vested equity, and be able to borrow against that to cover daily expenses. If they could do this, they would be building a risky leveraged position for themselves. Their only realistic choice is somewhere on the spectrum of secure income to vesting equity. And that may come down to each individual.
I hope this helps and I have not gone on a completely different tack. I'll copy these comments to the original discussion thread so that we don't steal fuzzy's thread here.