I've seen some GDoc attempts at accounting for PTS expenditures, but what really is to prevent a "DAC" founder from pulling an Enron or running with the AGS funding?
The ultimate fraud is to take over the world.
I've been very excited about PTS from the beginning last year, but took some time away from the Alt market.
I met some of the team in person in Las Vegas Bitcoin conference last December and came away feeling very good about future of PTS.
However, I have a simple, but important concern I was not able to resolve with a few searches around the forum.
I've seen it happen dozens or even hundreds of times now in the bitcoin ecosystem (just look at Bitfunder, or any asset exchange) - most of the "listings" turn out to be scams or fraudulently run. All BTC are somehow lost or founder disappears.
I've seen some GDoc attempts at accounting for PTS expenditures, but what really is to prevent a "DAC" founder from pulling an Enron or running with the AGS funding?
I will say that the best and sole defense I've really seen against this (since there is no auditing in the bitcoin world) is to only create DACs for 100% decentralized businesses that are open-source (someone else can "right the ship") and pretty much run themselves, and require minimal "centralized" management towards development etc.. If this is the only way DAC funds will be used, I've answered my own question.
Examples would be centralized betting, poker, asset exchange, coin exchange, file sales (music, documents) etc.
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It is bad business to put the responsibility of funding growth/development onto the CUSTOMER/USER.
An analogy: if you have a restaurant and it is doing well so you want to open up 3 more locations and expand but you don't have the money... How do you do this? Where does the money come from? The right way to do it is to get a new investor that has the money and you work together and split the profit. The wrong way to do it is to try to charge the customers of your first restaurant 4 times the competitive price for their food.
We want to attract customers with LOW transaction fees to get a network affect going. We do not want to put the burden of funding our future growth and development onto the people who are actually using the system by overcharging them for transactions while the shareholders try to get a free ride and not get diluted. THIS IS NOT THE RIGHT WAY TO DO BUSINESS.
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Either the customers pay for the growth eventually, or you're talking your investors into a bad deal. The question is whether you should charge your customers absurd prices in an attempt to expand quickly (obviously a bad idea), save your reasonable profits patiently in order to expand as you can afford it, or accelerate that growth by attracting investors. The investors should not invest if they don't expect the profit (customers) to pay for that expansion eventually. It's just a question of whether the customers pay in advance, or after the fact.Trog, a lot of these businesses involve a network affect or an unmet need in the market. Most often you don't have the option to take your sweet time opening a new restaurant every 10 years after you've saved enough profit from the first one. (you're not going to be the next starbucks that way anyway). You'll also be disappointed to see someone has ripped off your idea and has used economies of scale to drive you out of the market.
Either the customers pay for the growth eventually, or you're talking your investors into a bad deal. The question is whether you should charge your customers absurd prices in an attempt to expand quickly (obviously a bad idea), save your reasonable profits patiently in order to expand as you can afford it, or accelerate that growth by attracting investors. The investors should not invest if they don't expect the profit (customers) to pay for that expansion eventually. It's just a question of whether the customers pay in advance, or after the fact.Trog, a lot of these businesses involve a network affect or an unmet need in the market. Most often you don't have the option to take your sweet time opening a new restaurant every 10 years after you've saved enough profit from the first one. (you're not going to be the next starbucks that way anyway). You'll also be disappointed to see someone has ripped off your idea and has used economies of scale to drive you out of the market.
You often have 2 options, and in our case I think this applies: Expand quickly, meet the unmet need, grab the network effect or let someone else beat you to it.
Once you have grown to meet the market need and hopefully got a network effect you can charge customers a competitive price for the service provided and the profit goes to the shareholders.
Apologies, I wasn't trying to say that accelerated growth was bad, or that saving up profits was the only appropriate path to expansion. The biggest problem I have here is that capital infusion based growth is not a sustainable permanent strategy. Eventually you should reach saturation, at which point further dilution serves to reclaim and centralize profits away from the shareholders the delegates or their associates, rather than to create additional value for all shareholders.I don't understand how in one breath you worry about the power of "those in control" (meaning a consensus majority of shareholders I guess) and in the same breath you advocate for the exact system that the OP is complaining about which is rife for abuse and fraud and puts huge sums of money in the hands of one individual who has proven nothing. If all funding for growth must be done up front then it is a perfect justification for people to collect obscene amounts of money for work they haven't done yet. They have "big plans" and will need this funding some day so they have to get if from you now.
The simplest way to handle this dichotomy is to use the IPO funds for accelerated growth (hopefully to the point of self sustenance) and then fall back on gradual profit funded growth. It's not the only way, but I am suspicious of any system that allows for permanent dilution, since growth cannot permanently outpace profit. The result seems likely to be a rotting phase following saturation, when those in control loot the minority through malinvested dilution.
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I don't understand how in one breath you worry about the power of "those in control" (meaning a consensus majority of shareholders I guess) and in the same breath you advocate for the exact system that the OP is complaining about which is rife for abuse and fraud and puts huge sums of money in the hands of one individual who has proven nothing. If all funding for growth must be done up front then it is a perfect justification for people to collect obscene amounts of money for work they haven't done yet. They have "big plans" and will need this funding some day so they have to get if from you now.