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Main => General Discussion => Topic started by: bitmarket on October 04, 2014, 07:03:45 am

Title: interest on bitUSD held
Post by: bitmarket on October 04, 2014, 07:03:45 am
Can someone please help me understand how holders of bitUSD earn interest?  Is it because bitUSD transactions have fees and those fees are paid in bitUSD and a portion of those fees are burned?  Or is it another way?
Title: Re: interest on bitUSD held
Post by: .yoshi on October 04, 2014, 03:42:01 pm
i would like clarification on this as well pls  :)
Title: Re: interest on bitUSD held
Post by: oldman on October 04, 2014, 04:01:30 pm
Can someone please help me understand how holders of bitUSD earn interest?  Is it because bitUSD transactions have fees and those fees are paid in bitUSD and a portion of those fees are burned?  Or is it another way?

Short answer is yes, bitUSD transaction fees are flowed through to bitUSD holders as yield.
Title: Re: interest on bitUSD held
Post by: bitmarket on October 05, 2014, 02:24:15 am
So I am confused.   If bitusd's are destroyed by delegates, then how can the person who pledged 200% capital in btsx to create butUSD's buy all of their bitUSD's back to release their capital?
Title: Re: interest on bitUSD held
Post by: toast on October 05, 2014, 02:26:22 am
bitUSD is not destroyed. Collected field goes into yield pool which interest is drawn from.
Title: Re: interest on bitUSD held
Post by: tonyk on October 05, 2014, 02:39:15 am
bitUSD is not destroyed. Collected field goes into yield pool which interest is drawn from.

After this post, rivaled by only by MY spelling ability, let's shed some light on the issue.

In general bitUSDs collected by the system as fees, go into a 'fund'. From this fund the yield/interest is paid.
Depending on which market engine we are talking about (v1,v2, or upcoming v.3) different fees go into the yield fund.

[PS] And as toast explained, if anything is burned it is not bitAssets (bitUSD), but only BTSX.
Title: Re: interest on bitUSD held
Post by: bitmarket on October 05, 2014, 05:02:52 am
Excellent.  Thank you Toast and TonyK.  I think I get it now.    Presumably Delegates still get bitUSD fees for transactions in bitUSD, but instead of burning a portion they put a portion into an interest fund. Which is then divided among bitUSD holders.   I further assume that portoin is the same portion burned in btsx transactions.
Title: Re: interest on bitUSD held
Post by: arhag on October 05, 2014, 05:28:00 am
Presumably Delegates still get bitUSD fees for transactions in bitUSD, but instead of burning a portion they put a portion into an interest fund. Which is then divided among bitUSD holders.   I further assume that portoin is the same portion burned in btsx transactions.

Delegates don't get any control over the BitAsset fees collected by the DAC (and their pay rates also have no influence over it). The DAC automatically manages the collection and pay out as yield of all the BitAsset fees (BitAsset transfer fees, bid-ask overlap of BitAsset/BTSX exchange, and soon, with a yet-to-be-released new market engine, interest on BitAsset debt paid by shorts).
Title: Re: interest on bitUSD held
Post by: bitmarket on October 05, 2014, 06:42:57 am
Delegates don't get any control over the BitAsset fees collected by the DAC (and their pay rates also have no influence over it). The DAC automatically manages the collection and pay out as yield of all the BitAsset fees (BitAsset transfer fees, bid-ask overlap of BitAsset/BTSX exchange, and soon, with a yet-to-be-released new market engine, interest on BitAsset debt paid by shorts).

Thanks Arhag.  I really enjoy your posts by the way.
So delegates do not get any fees or they do get fees from bitUSD transactions?
When you say the "DAC automatically manages" You are saying the formula for distribution is hardcoded into the btsx protocol?  If so what is it? If not what is the mechanism? and what are the fees?

Thanks.

BTW, as a result of this thread and BM's "what is a customer worth" thread I have written my next bitshares promo/educational video.  It is being reviewed by a couple of other forum members.  Thanks for all the inspiration. The last one is at 10,000 views and I think directly led to a bump in client downloads (unless there was some other event that triggered it that I was unaware of.)
Title: Re: interest on bitUSD held
Post by: arhag on October 05, 2014, 02:22:20 pm
Thanks Arhag.  I really enjoy your posts by the way.

Thanks. I enjoy your contributions as well. Your videos have been really great.


So delegates do not get any fees or they do get fees from bitUSD transactions?
When you say the "DAC automatically manages" You are saying the formula for distribution is hardcoded into the btsx protocol?  If so what is it? If not what is the mechanism? and what are the fees?

So, the following is my understanding of how it all works. I make no guarantees that it is 100% accurate nor is it complete. Hopefully the devs or other members of the community will correct me if I got some details wrong.

The revenue of the DAC currently consists of: fees on transfers of BTSX, BitAssets, and user-issued assets; price overlap of bids and asks taken as a fee; 5% fee on remaining collateral in the case of a margin call on shorts; market order fees; user/delegate registration and update fees (registering as a delegate has a much larger fee); and delegate price feed update fees. Future fees that have not yet been implemented are the interest paid by the shorts and perhaps a 5% inactivity fee on BTSX and BitAssets that haven't been moved for a year (but from my understanding the latest decision was to not bother implementing these inactivity fees).

The expenses of the DAC currently consist of: paying the delegates and paying the BitAsset yields.

There are two classes of funds to consider: the accumulated BTSX fees fund and the yield funds of each BitAsset. I will use only BitUSD as an example to represent BitAssets in the rest of this post but keep in mind the same applies independently to all other BitAssets.

The following fees (all fees are collected as BTSX) go into the accumulated BTSX fees fund:
The money in this fund is used to pay out to the delegates. The exact formula (http://wiki.bitshares.org/index.php/Transaction_Fees) isn't too important, but it tries to smooth payments per block out so that the fund maintains on average 2 weeks worth of delegate income payments. The DAC decides, using a formula dependent on the amount of BTSX in the fund, what the maximum payment to the delegate producing the block should be. However, every delegate has set a pay rate (between 0% and 100%). The DAC will only pay the delegate the fraction of the maximum payment they specified and it will "burn" the rest, effectively treating it like a stock buyback or dividend to shareholders.

The following fees (all fees are collected as BitUSD) go into the BitUSD yield fund:
The money in this fund is used to pay yield on BitUSD. Again the exact details aren't too important (you can read this thread (https://bitsharestalk.org/index.php?topic=8520) and in particular this post (https://bitsharestalk.org/index.php?topic=8520.msg112027#msg112027) for details), but the idea is that every time you move your BitUSD balances (assuming they have been held for more than a day and ideally, but not necessarily, less than a year) you will automatically get your "fair share" (drltc and I actually argue that the current formula isn't very optimal or fair actually) of yield, pulled out from the yield fund, added on top of your existing balance.
Title: Re: interest on bitUSD held
Post by: speedy on October 05, 2014, 02:38:43 pm
Btw its best not to mention inactivity fees in your next video ;D It makes everyone worried and I think Bytemaster cancelled the idea anyway.
Title: Re: interest on bitUSD held
Post by: oco101 on October 05, 2014, 03:11:40 pm
Btw its best not to mention inactivity fees in your next video ;D It makes everyone worried and I think Bytemaster cancelled the idea anyway.

Really did he cancelled the inactivity fees ?? I did miss that
Title: Re: interest on bitUSD held
Post by: bytemaster on October 05, 2014, 03:16:49 pm

Btw its best not to mention inactivity fees in your next video ;D It makes everyone worried and I think Bytemaster cancelled the idea anyway.

+1
Title: Re: interest on bitUSD held
Post by: arhag on October 05, 2014, 03:22:26 pm

Btw its best not to mention inactivity fees in your next video ;D It makes everyone worried and I think Bytemaster cancelled the idea anyway.

+1

I still think inactivity fees on at least BTSX are REALLY important to have for more voter involvement and thus better DPOS security. I would hate to see them not implemented. BTSX holders are shareholders and they have certain important responsibilities. If they want to be lazy they should hoard BitAssets.

Edit: Or alternatively implement BTSX dividends the way you implement BitAsset yields. That way we can deny dividends to anyone who hasn't moved their funds for more than a year. Either way we need some economic motivation for people to update their votes.
Title: Re: interest on bitUSD held
Post by: oco101 on October 05, 2014, 03:25:24 pm

Btw its best not to mention inactivity fees in your next video ;D It makes everyone worried and I think Bytemaster cancelled the idea anyway.

+1

Ok .. I take that the inactivity fees are not longer to be implemented ...   I still think  the inactivity was a good idea . Why are no longer implemented it is explained somewhere ?
Title: Re: interest on bitUSD held
Post by: xeroc on October 05, 2014, 03:36:25 pm
Please search the forum for "fee flow" ... cass made a nice graphic for it ... we should promote it more clearly
Title: Re: interest on bitUSD held
Post by: bitmarket on October 07, 2014, 12:27:45 am
Got it. Thanks guys, you rock.
Title: Re: interest on bitUSD held
Post by: sschechter on October 07, 2014, 12:53:21 am

Btw its best not to mention inactivity fees in your next video ;D It makes everyone worried and I think Bytemaster cancelled the idea anyway.

+1

I still think inactivity fees on at least BTSX are REALLY important to have for more voter involvement and thus better DPOS security. I would hate to see them not implemented. BTSX holders are shareholders and they have certain important responsibilities. If they want to be lazy they should hoard BitAssets.

Edit: Or alternatively implement BTSX dividends the way you implement BitAsset yields. That way we can deny dividends to anyone who hasn't moved their funds for more than a year. Either way we need some economic motivation for people to update their votes.


Issuing yield encourages parking of funds and forgetting about it.

A BitShares Savings Account with a 5% fee isn't much of a savings account.

A 5% annual inactive fee is insane.  Are their any real life use cases for this (not including gift cards)? If Bank of America did this we'd call them the devil.

The inactivity fee is a good idea in theory, but its not practical.  Perhaps 5 years of inactivity will trigger a 5% annual fee.  1 year is just not enough.

If you're worried someone is not updating their vote on an inactive account, make their votes expire, not their shares.

Forcing someone to vote isn't going to force them to do their research. They will likely just vote for the leaders.
Title: Re: interest on bitUSD held
Post by: liondani on October 07, 2014, 01:16:14 am

Btw its best not to mention inactivity fees in your next video ;D It makes everyone worried and I think Bytemaster cancelled the idea anyway.

+1

I still think inactivity fees on at least BTSX are REALLY important to have for more voter involvement and thus better DPOS security. I would hate to see them not implemented. BTSX holders are shareholders and they have certain important responsibilities. If they want to be lazy they should hoard BitAssets.

Edit: Or alternatively implement BTSX dividends the way you implement BitAsset yields. That way we can deny dividends to anyone who hasn't moved their funds for more than a year. Either way we need some economic motivation for people to update their votes.


Issuing yield encourages parking of funds and forgetting about it.

A BitShares Savings Account with a 5% fee isn't much of a savings account.

A 5% annual inactive fee is insane.  Are their any real life use cases for this (not including gift cards)? If Bank of America did this we'd call them the devil.

The inactivity fee is a good idea in theory, but its not practical.  Perhaps 5 years of inactivity will trigger a 5% annual fee.  1 year is just not enough.

If you're worried someone is not updating their vote on an inactive account, make their votes expire, not their shares.

Forcing someone to vote isn't going to force them to do their research. They will likely just vote for the leaders.

You are right!
But bytemaster already mentionned that they will "remove" the 5% inactivity fee  ;)
Title: Re: interest on bitUSD held
Post by: arhag on October 07, 2014, 03:20:01 am
I still think inactivity fees on at least BTSX are REALLY important to have for more voter involvement and thus better DPOS security. I would hate to see them not implemented. BTSX holders are shareholders and they have certain important responsibilities. If they want to be lazy they should hoard BitAssets.

Edit: Or alternatively implement BTSX dividends the way you implement BitAsset yields. That way we can deny dividends to anyone who hasn't moved their funds for more than a year. Either way we need some economic motivation for people to update their votes.


Issuing yield encourages parking of funds and forgetting about it.

A BitShares Savings Account with a 5% fee isn't much of a savings account.

A 5% annual inactive fee is insane.  Are their any real life use cases for this (not including gift cards)? If Bank of America did this we'd call them the devil.

The inactivity fee is a good idea in theory, but its not practical.  Perhaps 5 years of inactivity will trigger a 5% annual fee.  1 year is just not enough.

If you're worried someone is not updating their vote on an inactive account, make their votes expire, not their shares.

Forcing someone to vote isn't going to force them to do their research. They will likely just vote for the leaders.

First of all, I don't see holding BTSX as morally equivalent to holding BitGLD for example. BTSX holders are shareholders of the DAC and they have certain responsibilities. If they refuse to fulfill their responsibilities (which are well specified in advance before even buying the BTSX) then I see no problem with the DAC reducing their potential financial gain. If they want to hold and forget, then they can buy BitBTSX (a BitAsset defined to have the value of BTSX but with the price decreasing at a rate of 0.01% per year) instead for convenience. Actually, now that I think about it this may not work. What happens if all the shorts want to exit, but all the hoarders don't want to put in sell orders for their BitBTSX. I think the market would freeze. That possibility may kill any desire for the shorts to participate for only a 0.01% gain.

Perhaps the best way of aligning incentives and reducing voter apathy is the following. Decouple the BTSX voting power from the stake itself. This allows people to put the private keys that allow spending their BTSX into cold storage, but keep the private keys allowing them to change its votes (and claim yield) in the hot client. Pay BTSX dividends using something similar to the BitAsset yield mechanism (but with a smarter payout, still linear interest though). Put a cap of one year on the yield payments. This way people have a reason to update their transactions at least once a year (unless they have a really small balance) to get the yield payments which can easily offset the cost of the transaction fee to update their vote. In fact, due to compounding, larger stake will want to update their votes more frequently within the year (there is of course still an optimal update frequency as determined by the yield rates, principal, and transaction fee cost). The reason for the financial incentive is that although people may change their votes in the client multiple times because it is so easy, they may not bother to propagate their vote changes to the blockchain because doing so requires paying transaction fees. But if propagating those changes to the blockchain can actually be profitable to them, then they are more likely to do it.
Title: Re: interest on bitUSD held
Post by: Rune on October 07, 2014, 08:01:04 pm
@Arhag, I think decoupling voting and shares would damage security as it would allow for easy vote trading. Like it has already been said then forcing people to vote doesnt really help, as they will just vote randomly or for the incumbents. The best way to encourage voting, in my opinion, is to have foster a strong voting culture in the community. I have some specific ideas for how this can be achieved from a socialogical viewpoint, that I will post here one day.

Btw, returning to the original topic, it would be cool if people could check out my proposal for what I think is a superior yield distribution system that I describe here:

https://bitsharestalk.org/index.php?topic=9786.0

The main idea is to use deflationary supply tokens as the network "back end" token, and then burn them when shorts pay interest, and use a variable called the yield accumulator to adjust all bitUSD amounts to the post-yield value, which can be calculated locally in the client.