BitShares Forum
Main => General Discussion => Topic started by: clout on October 17, 2015, 06:02:11 pm
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Over the past few days we have seen that the Bitshares DAC has become "profitable." That is, we have accrued more revenue than the cost of maintaining the network. I have seen bytemaster say that this profit has been burned, consequently reducing the supply of BTS by more than 500k units.
For all intents and purposes destroying BTS is a waste of resources. The idea behind this "profit" sharing through burning BTS is that it is infeasible to coordinate a dividend payment schedule to all holders of BTS an burning them should have the same effect. This is fundamentally not true. The supply has decreased and so has the price. What dividend through capital appreciation have bitshare holders received? None.
This profit, particularly at this precarious point in the life the bitshares network, needs to reinvested into the business rather than destroyed or even provided as a dividend if that were feasibly. No startup company has 100% dividend payment ratio and for good reason.
The most pressing concern for the functionality of the bitshares network is liquidity, both on the internal exchange and on other exchanges and gateways. This is where these 500k BTS (~$2,250) should have been allocated. If this profit is used to provide liquidity on the interna exchange there is no added sell pressure to drive down the price of BTS, which might be a concern if this capital were used for another endeavor such as marketing, or business development in other areas.
I don't know how to submit proposals or the logistics of changing our dividend payout ratio (i.e. burn rate) I just know that most important aspect of an exchange is liquidity, which we currently do not have.
To whom it may concern, can you please fix this so that we are not wasting resources that would otherwise allow us to provide a better service. Thanks
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I guess its only profitable if you are long BTS?
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Burning revenue at a greater rate than the expenses/dilution is what the whole system is supposed to do.
If you feel that funds have to be spent to bootstrap liquidity on the internal exchange then thats what a worker proposal would be for. If that brings in more users thereby making BitShares more deflationary in the long term then I would vote for it.
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Market making for liquidity is currently pointless if most people's BTS are tied up in old 0.9 accounts because the migration is too complicated & buggy.
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Over the past few days we have seen that the Bitshares DAC has become "profitable." That is, we have accrued more revenue than the cost of maintaining the network. I have seen bytemaster say that this profit has been burned, consequently reducing the supply of BTS by more than 500k units.
For all intents and purposes destroying BTS is a waste of resources. The idea behind this "profit" sharing through burning BTS is that it is infeasible to coordinate a dividend payment schedule to all holders of BTS an burning them should have the same effect. This is fundamentally not true. The supply has decreased and so has the price. What dividend through capital appreciation have bitshare holders received? None.
This profit, particularly at this precarious point in the life the bitshares network, needs to reinvested into the business rather than destroyed or even provided as a dividend if that were feasibly. No startup company has 100% dividend payment ratio and for good reason.
The most pressing concern for the functionality of the bitshares network is liquidity, both on the internal exchange and on other exchanges and gateways. This is where these 500k BTS (~$2,250) should have been allocated. If this profit is used to provide liquidity on the interna exchange there is no added sell pressure to drive down the price of BTS, which might be a concern if this capital were used for another endeavor such as marketing, or business development in other areas.
I don't know how to submit proposals or the logistics of changing our dividend payout ratio (i.e. burn rate) I just know that most important aspect of an exchange is liquidity, which we currently do not have.
To whom it may concern, can you please fix this so that we are not wasting resources that would otherwise allow us to provide a better service. Thanks
Very interesting take.
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I agree that the network will have to invest in itself. I don't know if worker proposals are implemented in any wallet yet. The blockchain supports it, so you can manually write your own proposal transactions. However, I don't know how much support wallets have for voting for workers. Feature parity was targeted first, now the new features (like workers) will probably be exposed in a controlled manner.
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For all intents and purposes destroying BTS is a waste of resources. The idea behind this "profit" sharing through burning BTS is that it is infeasible to coordinate a dividend payment schedule to all holders of BTS an burning them should have the same effect. This is fundamentally not true. The supply has decreased and so has the price. What dividend through capital appreciation have bitshare holders received? None.
I don't expect $2000 worth of BTS burning to be reflected in the short term volatile price of BTS, but if BTS is consistently profitable and consistently reducing supply, I expect it to have a significant effect. The first consistently profitable DAC should over time attract more investors too.
I would however support directing some revenue to BitAsset liquidity in particular.
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Is the revenue really burned or is it put to the reserve pool?
If I have understood this right, it should go to reserve pool, where it stays until it is used to pay for workers and witnesses. This means that DAC is saving money to make sure that it can pay for workers in the future.
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Is the revenue really burned or is it put to the reserve pool?
If I have understood this right, it should go to reserve pool, where it stays until it is used to pay for workers and witnesses. This means that DAC is saving money to make sure that it can pay for workers in the future.
And I am in super secret talks to get our forum a total upgrade (we will be able to tip and share posts on our social media sites directly from our forums)...and a sharebot that spans reddit, twitter, slack, mumble, and facebook. If this is true, it looks like a good start for funding it. :)
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Burning is a good way to reduce supply. BTS are shares/stakes/votes, not currency. If you think about it as a currency then you'd care about revenue in BTS and might think burning currency makes no sense. BTS is not a currency, it's an asset, and to be an asset it has to appreciate over time or no one will ever hold it, and it will never be attractive.
BitUSD is a currency. Worker proposals should do their accounting in BitUSD or an even more stable currency, and let the BTS be deflationary. How much BTS there is should have no impact on how much BitUSD there is for worker proposals or upgrades.
BTS has to be held long term, and it has to be used as the backend for exchange. Burn as much as possible and you make what people do hold that much more valuable. If burning outpaces the dilution then you have deflation which is what was intended from the very beginning and which is why the initial 80 million dollar market cap was achieved in the beginning.
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These sorts of posts highlight why we need to move toward the percentages in the GUI. The only thing that should matter to a BTS holder is the percentage of stake they hold in Bitshares Coop over time. If the percentage of stake increases then that is what matters, not how many "BTS" they hold because it's not a currency, it's a stake.
BTS you hold is a percentage stake in the network, an access token, a membership token, but it represents a percent number ultimately, and if you want more influence and more risk but also more reward you would want to increase your stake. Burning excess tokens helps all stakeholders, it reverses the dilution and if you think of the dilution as a loan, the burning deflation is the loan being paid back.
The BTS price will not reflect it when its only 300,0000 tokens out of billions but if it's 3 million tokens that would have a big impact, and if its 30 million or 300 million tokens it will have a much bigger impact, so it depends on the rate over time (the GUI should estimate this number based on current rates and provide graphic projections). The burn rate per day if it surpasses the dilution rate, would mean the Bitshares network is deflationary, which means it is profitable.
Revenue is reflected in the scarcity of the token. Scarce tokens rise in price easier for the people who are long term holders. Short term speculators who don't use the exchange might never want to be long term holders but the long term holders were promised 5% interest and not dilution. The dilution was not in the plans, and anything we can do to reward long term holders for being loyal through the dilution is worth it in my opinion.
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Is the revenue really burned or is it put to the reserve pool?
If I have understood this right, it should go to reserve pool, where it stays until it is used to pay for workers and witnesses. This means that DAC is saving money to make sure that it can pay for workers in the future.
BTS Is not money, BTS is stake. So putting it into the reserve pool as BTS is in my opinion both inefficient and also quite fatuous.
Instead it should be put into the reserve pool as BitUSD or some other basket of assets and commodities. It's effective for Bitshares to have in it's reserve pool Trade.BTC, Trade.Ether, and stakes in it's competition, as long as it can be guaranteed legally that upon a vote these stakes can be put to use.
It would allow the reserve pool to grow off of something other than BTS which isn't a currency, and also diversify it's holdings which is smarter from a business risk perspective. It's not really that smart for a company to exclusively hold stock in itself as a reserve because if they have to sell it then it dilutes it's own company.
Microsoft purchased Apple stock. Rivals purchase each others stock and it's smart because it spreads the risk. Bitshares allows all of this so why not use the power?
I agree that the network will have to invest in itself. I don't know if worker proposals are implemented in any wallet yet. The blockchain supports it, so you can manually write your own proposal transactions. However, I don't know how much support wallets have for voting for workers. Feature parity was targeted first, now the new features (like workers) will probably be exposed in a controlled manner.
Of course but be smart about it and invest in the competition. Buying your own shares like that is just a share buy back, its not like BTS is money. Investing in your own company is called a buyback.
It's smarter to diversify and invest in other DACs. Bitshares in theory should be able to hold BTC, Ether, Storj, or whatever else, as long as you set up the mechanisms to do it, and by doing it that way you can turn Bitshares 2.0 into an investment bank and exchange rather than just an exchange which makes a profit and then buys its shares back only to sell them later.
Recycling your own shares creates unnecessary volatility when you can use other networks shares. If Bitshares owned shares in other things, in other assets, then even if the BTS isn't gaining in value, if the Storjcoin or Safecoins are gaining in value then the reserve has more buying power for future investments in Bitshares. It would seem Bitshares is the only DAC capable of stuff like this which would mean first mover advantage.
I vote that we put forth a worker proposal to allow Bitshares to hold any digital asset in it's reserve. The reserve shouldn't just hold BitUSD, it should be able to hold Bitcoin or anything else. A group of people should be elected to manage the fund, and determine which assets to buy, and we could vote these people in, but they can only buy and not spend. Or we can just have a vote on what to buy and let the network automatically buy according to the percentage of votes it gets.
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@luckybit +5% +5% +5% as always!!
I also believe that the % ownership in the GUI is really important
I also believe that the BTS reserve should diversify and held should be put into the reserve pool as BitUSD or some other basket of assets and commodities. And it should be many assets bitbtc, bitusd, bitcny, bitgold, bitsilver
I wish someone actually starts listening here and do not ignore this community
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I agree that revenue should be stored as bitasset, preferably USD.
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I wouldn't go with usd to be honest...But because many people will never agree in one asset diversification in many would be best
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I agree that revenue should be stored as bitasset, preferably USD.
I think this could be a good idea.
Getting the BitAsset CAP up is positive. Being able to see revenue less expenses as USD would be more marketable.
Shareholders could possibly vote at the end of the year how much to burn as a dividend. (Perhaps by slowly buying BTS and burning it.) This should support the price because as the BTS CAP decreases the value of the dividend in % terms would increase. Haven't thought that through though.
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We don't need dividends. You pay dividends when you don't know how to reinvest profit. In start up there are too many places to reinvest profit. There shouldn't be a dividend payout or burning
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We don't need dividends. You pay dividends when you don't know how to reinvest profit. In start up there are too many places to reinvest profit. There shouldn't be a dividend payout or burning
Bitcoin got a lot of international exposure, publicity and free press for being the first crypto-currency which would have cost hundreds of millions if it was paid for. I think the first consistently profitable DAC is going to get a lot of exposure and recognition, the publicity, exposure and free press could be priceless, far in excess of the cost of the dividend/burning.
I also think it's been shown through the delegate system that a decentralised system is not very good yet at effective capital allocation. Besides core development, I can't think of a single initiative that has added value, but many that have lead to controversy and had a negative net effect on perception and price, because the decentralised allocation is not effectively managed. So while I agree burning/dividend payout is not the best use of profit for a most brick and mortar start-ups, I think it is fantastic for BTS.
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We could put it towards a bounty for the creation of a tool that has the old blockchain built in, and takes any old bts 0.x.x backup wallet, and converts it into something graphene can easily understand.
Disclosure: I'm somebody who hasn't been able to migrate yet.
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We don't need dividends. You pay dividends when you don't know how to reinvest profit. In start up there are too many places to reinvest profit. There shouldn't be a dividend payout or burning
BTS isn't how you can store profit. You have to store profit in either BitUSD (or a more stable currency) or you invest in other projects. I would like to see Bitshares own stakes in Ethereum and have revenue be used to increase it's stake. I would like to see Bitshares own stake in Bitcoin as well.
Central exchanges routinely capture stakes in all sorts of altcoins, and in Bitcoin, simply by saving a portion of their fee profit. Bitshares could do more than that but isn't even doing that.
BitBTC and BitUSD isn't diversifying because you'd still be all in BTS. Diversifying would be holding TradeBTC, TradeETH, TradeLTC, because you wouldn't have to rely on the success of the Bitshares network at all to gain from the success of these other networks.
We don't need dividends. You pay dividends when you don't know how to reinvest profit. In start up there are too many places to reinvest profit. There shouldn't be a dividend payout or burning
Bitshares needs to be profitable. If it's not profitable it's not going to attract people who want to hold BTS long term. Don't make the mistake of thinking the majority of the current community are being rational. Perhaps a rational person would just continue to stay in the stock market or somewhere of less risk unless the dividends exist.
You can get 5% and better dividends in the stock market, so if BTS doesn't offer some similar profit potential why would people gravitate to it? Some people might want to hold BTS and never even care about using the network, but it should still be valuable to have them because we need their liquidity. If there is burning then they lose less money, so they park their money longer, which means more liquidity.
To me it makes sense but I guess you have your own opinion.
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We don't need dividends. You pay dividends when you don't know how to reinvest profit. In start up there are too many places to reinvest profit. There shouldn't be a dividend payout or burning
Of course there should be burning. That's precisely what allows for the funding of worker proposals (i.e. reinvesting). Without burning profits, worker proposals would cause continuous dilution until the reserve is depleted. This is one reason why some people are against lowering fees. Because that would mean less burning and therefore less reinvestment.
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I agree with burning. Deflation indicates a profitable network and it's what helped drive Bitshares-X to an 80 million market-cap.
In stock-market terms it's equivalent to a share-buy back - a way the board can signal to the market their confidence in the company's direction.
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There shouldn't be a dividend payout or burning
Yes we should.
A decreasing supply due to burning, and thus a profitable dac, is the only thing that will make people care about bitshares. Until we are makign a profit everyone will just continue to shit all over this project.
But if we become profitable then everyone will be interested. Inflation and dilution nearly killed Bitshares and only running as a deflationary, profitable DAC is going to save it.
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There shouldn't be a dividend payout or burning
Yes we should.
A decreasing supply due to burning, and thus a profitable dac, is the only thing that will make people care about bitshares. Until we are makign a profit everyone will just continue to shit all over this project.
But if we become profitable then everyone will be interested. Inflation and dilution nearly killed Bitshares and only running as a deflationary, profitable DAC is going to save it.
I honestly think we should be using those bts to be getting code built that incorporates bts in many common web utilities (like forums, blogs, social media...etc) and can be licensed out to partners who pay us or sharedrop on us.
THIS is how you drive demand...and make a movement viral.
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Is the revenue really burned or is it put to the reserve pool?
If I have understood this right, it should go to reserve pool, where it stays until it is used to pay for workers and witnesses. This means that DAC is saving money to make sure that it can pay for workers in the future.
BTS Is not money, BTS is stake. So putting it into the reserve pool as BTS is in my opinion both inefficient and also quite fatuous.
Instead it should be put into the reserve pool as BitUSD or some other basket of assets and commodities. It's effective for Bitshares to have in it's reserve pool Trade.BTC, Trade.Ether, and stakes in it's competition, as long as it can be guaranteed legally that upon a vote these stakes can be put to use.
It would allow the reserve pool to grow off of something other than BTS which isn't a currency, and also diversify it's holdings which is smarter from a business risk perspective. It's not really that smart for a company to exclusively hold stock in itself as a reserve because if they have to sell it then it dilutes it's own company.
BTS is the best option for the reserve asset because it is the only one that will exist always. Market Pegged Assets can have a black swan event and become worthless. User Issued Assets are even worse option because there is a counterparty risk.
It's smarter to diversify and invest in other DACs. Bitshares in theory should be able to hold BTC, Ether, Storj, or whatever else, as long as you set up the mechanisms to do it, and by doing it that way you can turn Bitshares 2.0 into an investment bank and exchange rather than just an exchange which makes a profit and then buys its shares back only to sell them later.
Recycling your own shares creates unnecessary volatility when you can use other networks shares. If Bitshares owned shares in other things, in other assets, then even if the BTS isn't gaining in value, if the Storjcoin or Safecoins are gaining in value then the reserve has more buying power for future investments in Bitshares. It would seem Bitshares is the only DAC capable of stuff like this which would mean first mover advantage.
I vote that we put forth a worker proposal to allow Bitshares to hold any digital asset in it's reserve. The reserve shouldn't just hold BitUSD, it should be able to hold Bitcoin or anything else. A group of people should be elected to manage the fund, and determine which assets to buy, and we could vote these people in, but they can only buy and not spend. Or we can just have a vote on what to buy and let the network automatically buy according to the percentage of votes it gets.
Traditional investing company is much more suitable for this kind of operation. It doesn't make any sense for a DAC to hire people to store cryptocurrencies (my understanding is that a blockchain cannot hold a secret, so it is impossible for it to hold private keys of other cryptos).
And why we even should buy bitcoins and other cryptos? I'm invested in BTS because it is the best one right now. Diversifying to other cryptos would be unnecessary risk without much potential upside, it would make Bitshares less valuable.
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BTS is the best option for the reserve asset because it is the only one that will exist always. Market Pegged Assets can have a black swan event and become worthless. User Issued Assets are even worse option because there is a counterparty risk.
You're thinking of it as if it's Bitshares 1.0. We have private BitAssets now, we have UIAs also, like TradeBTC, and in general people don't want to get paid in BTS because it's too volatile and is supposed to be volatile. People want to get paid in USD or even BTC, but not in BTS, so you will just pay people in BTS which they'll immediately cash out for fiat driving the price down.
The reserve also has to diversify for risk. You cannot diversify by holding stock in yourself, it makes no sense. Any programmer is going to think about it like it's one of those loops that are recursive, it will loop against itself, but just because you loop into yourself it doesn't change the overall structure. Basically it's making the network more fragile to have BTS backed by BTS.
BTS backed by an array of different assets is the only way to make the reserve fund function as it should. This would mean you'd accept the risk of a black swan along with the risk of someone not redeeming TradeBTC, along with the risk of someone not redeeming TradeETH, along with the risk of the UIAs not being redeemed, because the whole strategy is diversification of risk.
They aren't all going to fail at the same time, unless everyone colludes for the downfall of Bitshares. Whoever is offering TradeBTC, why shouldn't the reserve fund hold some TradeBTC from them and several others? When private assets get set up then there could be centralized exchanges like Coinbase offering CoinbaseBTC, or ShapeshiftBTC, or anything like that, so that Bitshares can hold BTC.
If Bitshares can hold BTC, it's far more stable as a store of value than holding BTS. If Bitshares holds a bit of BTC, ETH, Storj, Safecoin, Muse, Lottoshares, etc, then you have the most stable form of value you can get because then you have a diversified fund.
If we were talking about stocks everything I said would make sense but somehow when we talk about the cryptocurrency space people start to get irrational about it and think Bitshares is somehow different from every other stock. BTS is just like any other stock and you never want to have your whole portfolio as just one stock if you're managing a fund.
And people don't want to get paid in BTS either so even if you could somehow make some excuse for exclusively holding it, no one is going to want to get paid in it. I wouldn't want to get paid in BTS when I could get paid in BitUSD. I would accept the risk of the black swan because so far BitUSD under Bitshares 1.0 has held close enough to peg that it's more stable than Bitcoin was for the same time period. If a composite asset representing the fund itself which held an array of underlying assets were created then you'd have a basket currency similar the special drawing rights of the IMF.
Traditional investing company is much more suitable for this kind of operation. It doesn't make any sense for a DAC to hire people to store cryptocurrencies (my understanding is that a blockchain cannot hold a secret, so it is impossible for it to hold private keys of other cryptos).
If we can't use the power of Bitshares 2.0 why create it? What traditional investment companies? You mean Goldman Sachs? But if we can do the same thing decentralized but better, what reason is there not to? If Bitshares can be a decentralized "investment" bank and exchange why shouldn't it? Private assets are a feature of Bitshares 2.0, as are gateways, and I don't see why we can have TradeBTC for use in the gateways but we can't use it in the reserve fund. If we can have a reserve fund, if we can have TradeBTC, then why can't we store private assets in the reserve fund?
And why we even should buy bitcoins and other cryptos? I'm invested in BTS because it is the best one right now. Diversifying to other cryptos would be unnecessary risk without much potential upside, it would make Bitshares less valuable.
Because it's the rational thing to do. It might not feel emotionally right to you but it's smart to own stakes in other crypto. How many of us only own stake in Bitshares and nothing else? If Bitshares 2.0 has the power to be a stakeholder in other DACs then it's a unique advantage and Bitshares 2.0 can be first mover on it. If Bitshares 2.0 wont do it then I'm sure the folks over at Ethereum will have no problem with the idea.
Why let Ethereum do something which Bitshares pioneered?
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For argument sake, if you could get paid in TradeBTC or Coinbase USD directly from the Bitshares reserve fund what would be wrong with that? At the same time if the Bitshares reserve fund could be used to invest in other DACs in the industry, giving Bitshares an advantage, what are the drawbacks from this? Yes there would be risks of black swans and of exchanges going down but done right and if the exchanges are regulated the risks might not be high.
If BTS goes down while BTC goes up, the reserve fund would stay stable if the reserve fund had BTC in it. If the reserve fund is only BTS, then whatever happens to BTS also happens to the reserve fund too. What if the reserve fund had all sorts of different value stores in it?
Then if BTC and the crypto economy go into a recession then the reserve fund would be resilient or even stable. Otherwise the reserve fund will not be much of a reserve if BTS is spiraling in price while some other asset is rising in price. The only way for the reserve fund to be optimal is if it doesn't depend exclusively on BTS or the crypto economy, but can hold all sorts of different stable commodities, assets, indexes or whatever.