Funny kenCode.  I heard of OT before, but I started getting curious again about OT after you posted the whole Monetas thread and I started looking at the underlying tech.  I came across the same video from our very own Max Wright when getting up-to-date on OT and before seeing this thread pop up.

I'm intrigued with the idea of using OT as a security layer & transaction platform for a crypto-exchange company and it would be interesting to see some kind of interoperability between it and the bitShares exchange.  I don't know about the technological interoperability.  There is some overlap, but bitShares has bitAssets on the blockchain and in OT you create tokens off-chain so it's these off-chain tokens you have to be careful of and that's why they have the voter pool/federated server model.  They do say it can integrate well with the traditional financial system which is good for fiat exchanges & gateways, but most of the security protocol is to handle cryptoassets.

Did you have your meeting with the Monetas people?
OT has been around since 2010 and I guess Monetas is the only company I see so far using it?  Why is that?  What are the major bottlenecks in adoption?  My guess would be that it seems difficult for companies to reach out to other competitors to form voting pools?  It's just more natural to start a system from scratch, although OT seems a lot more secure.  Does it have to use federated servers and  voting pools?  Is there another way to algorithmically audit cryptoassets and off-chain tokens?  Is there a way to use contracts with Ethereum or Codius to provide some of the same functionality without the same business-level complexities of voting pools.  Anyways I just started looking into this, but I'm trying to isolate the reason for lack of adoption.  Is there some misperception about the tech?  It should be really advocated strongly in the BTC ecosystem.  The bitShares decentralization and exchange is native to the blockchain so much of the OT advantages are already built-in.  However I can still see the potential of OT as an off-chain complement that can work with exchanges & gateways. 

Quote from: merivercap on April 02, 2015, 12:02:01 am

1) This recent ruling is very good especially for an economy that seems to be facing some headwinds.  I like the idea of giving opportunity to non-accredited investors.  However we'll see what limits the SEC puts on equity crowdfunding to non-accredited investors.  It may be around $1 million.

The SEC release said that their would be to tiers for non-accredited crowdfunding: $25 million with limited reporting, and $50 million with expanded reporting. Non-accredited investors can invest up to 10% of their annual salary.

Hmmm... yeah I'm not sure how they get the $1 million number I referenced from the article below.. it may be under Title III that is a different section yet to be determined.
http://www.xconomy.com/national/2015/04/01/equity-crowdfunding-backers-clash-over-fundraising-limits-in-states/

Anyways under Title IV, the Tier I Reg A rules of funding up to $25 million require Blue Sky laws so you need to register with each of the states so I doubt any company goes this route.  Tier 2 Reg A+ is slightly better because there are no state registrations and you can raise up to $50 million, but then you have to have 2 yrs audited financials, and an offering circular that will get the level of scrutiny of a Form S-1 (for IPOs).  The average man hours to get a Form S-1 together is about 1,000 hours.   So it will be $75k to $100k for all the reporting and a lot of time... then you'll have to start issuing a light version of a 10-K, 10-Q, 8-K etc. which is another burden.  This is all extremely disappointing and I actually doubt many small companies will use either methods and instead fundraise from accredited investors.   Poor people get screwed again. 

It seems better to stick to fundraising from accredited investors using Reg D  506(b) or 506(c) crowdfunding or just go the typical VC/angel route. 
http://www.crowdfundinsider.com/2015/03/65007-the-reg-a-bombshell-50m-unaccredited-equity-crowdfunding-title-iv-takes-center-stage/

This is a good idea, and I think things like this is where "legitimacy" can happen: using bitshares as the technology to build real business on top. https://blocktrades.us/ is an example of one of the interfaces businesses can access, so if a bitcoin payment processor can connect to their api, then suddenly bitusd is available everywhere.

Technically, it's not that hard - I think you just create UIA and distribute to accounts you control. There is no value in the UIA since the real assets are somewhere else. I don't know what the benefit over just running your own databases is, since the assets will have be custodied in a centralized location. Could you explain it a bit more? I think it's interesting.

Yeah I don't think it should be a problem for the most part technically because the main part of it is just remaking the UI for the exchange/wallet to trade & hold bitAssets.  You can add Tradingview and other Tech Analysis charting tools, display orderbooks in various ways as well as play around with various types of orders (market/limit/stop & advanced variations of those.)  You can add market making bots.  You can add different maker & taker fees. Not sure what kind of flexibility there is with other parts of the market engine. 

You can have UIA's represent tokens and have custody somewhere in the traditional broker-dealer model, but UIA's can also mimic the bitAsset model where you're just creating a derivative such as bitAAPL, bitGOOG etc.  You don't really need to custody securities or assets. Essentially bitAssets are Total Return Swap contracts or contracts-for-difference and are non-deliverable, but give you the same effect as holding an asset.  If you have scripting/contract language you should be able to create custom bitAssets of any kind with any terms and trade with anyone.   I just went to an Ethereum meetup last night and a guy demo'd a decentralized trading platform and enabled a swap contract trade of Brent Crude Oil between two people, but the same swap contract can be trading among many people. (His website here: http://www.spritzle.io/)  It was impressive.  You can do that with any asset.  I expect bitShares to port over Codius code from Ripple for smart contract capability so you can essentially do the same thing.   I figure as a custom 3rd party bitShares exchange, you can interoperate with Ethereum or use it for different functionality.

In terms of why I said it would be 'unregulated' is because just like bitAssets there is essentially no custodian for real assets, no central clearing house, & no money transmission.  You are essentially just allowing people to create swap contracts p2p.  There will be debate and a strong attempt to regulate, but legally governments will have weak grounds.   Enforcement will be difficult.  In the end regulating code or the blockchain will be futile..... the Blockchain has arrived , and it's a new world everybody.

Sounds good. There was a tribe that started a coin,  I think it was called mazacoin or maizecoin. They maybe open to it.

Yeah that would be a good one to start with.  I just sent a couple emails to the main person behind the project, but we'll see if I get any response.  It would be good to have real contacts with someone who lives on a reservation or who is connected high up to tribes. 

casinoUSD 

 

1) This recent ruling is very good especially for an economy that seems to be facing some headwinds.  I like the idea of giving opportunity to non-accredited investors.  However we'll see what limits the SEC puts on equity crowdfunding to non-accredited investors.  It may be around $1 million.   

Although this ruling gets publicity, the rulings under the JOBs act in late 2013 already opened up fundraising opportunities.  You could already raise funds from accredited investors using equity crowdfunding (up to $5 million from accredited investor crowdfunding sites) and up to $50 million under Reg D to a limited # of investors (w/o Blue Sky Laws) 

2) It's better to think of these rulings as a way to help build any startup (crypto or otherwise) without having to rely on VCs/angels or going through huge regulatory hurdles. 

3) As far as building a real SEC regulated exchange that trade bitAssets?  There might be some level of interest there, but you get the same costs of compliance, regulation, licensing as any other firm.  You may be able to cut down on trading costs.. sure it's $7-15 these days to trade using an online brokerage, but how much of total operating costs are regulation/compliance/licencing costs + profit?  Not sure how compelling the technology is for a traditional company to adopt .  A brokerage platform's technological costs may not be that significant relative to all the other costs and trades are instant. There are other unique capabilities such as security issuance/UIAs .. I can see some possibilities for some fintech companies to try a model like you mention.

4) I was thinking of starting a project for an unregulated customized exchange on top of the Bitshares blockchain/market engine.. just more like having a new interface UI/UX.  Hence it would be something where none of the assets are custodied with the exchange.  The more customized exchanges that compete, the better liquidity for the bitShares ecosystem.  It's just like having a 3rd party bitShares wallet.  This would be a 3rd party bitShares exchange.   What are the issues of this on the technical side?   If it's possible I'll be looking for developers.. I can help raise the money from VCs, Angels, or accredited investors.. (or now with the recent SEC ruling we can raise money from a buncha people off the streets )

Quote from: merivercap on March 30, 2015, 01:35:53 am

I think Bytemaster mentioned the current price feed is mainly in place because of the low liquidity, otherwise the system wouldn't have to rely on price feeds .  Ultimately you get enough volume on a platform and you become the price feed.  You also have to consider counterparty risk & entry/exit fees when evaluating price feeds on the various exchanges.

OK, so I'm trying to think through how this would work.
So if a bitUSD on external exchanges is trading for $0.80 real USD, do you set the feed price at 25% above the current bitUSD:BTS market price, so there is no more supply created until bitUSD pegs with real USD outside? In which case you still need a feed price...?

Interesting question.  I think Total Return Swaps & CFDs in general use an agreed upon price feed, but it may not be necessary in the current system.  Whatever is going on it seems to be working right?

I'm not sure about how the current price feed mechanism works, but we can try looking at your question from a different perspective.  Using your example, if it was a riskless exchange, people who wanted to buy BTS cheap would purchase the bitUSD for $0.80 per and sell it for BTS and push the bitUSD price up naturally.  If  the bitUSD at $0.80 was  at a risky exchange, the cheap prices would be the risk discount. 

We can step back and just think about what creates the market & price for bitUSD in the first place.   If you generate an order to create bitUSD you might offer it at 200BTS.   If someone buys that new bitUSD from you, the contract-for-difference (CFD) price will be set at '$.005' for each BTS. (Usually a CFD has an agreed upon price feed, but this CFD can be based on the market price of existing or new bitUSD at any point in time.) A month later a second bitUSD can be created by someone else at '$.01' for each BTS (or 100BTS for 1bitUSD).  The price of BTS doubles vs bitUSD.  All these orders to create bitUSD automatically generates pricing of what bitUSD is worth in BTS.  With high liquidity, the bitUSD creation/destruction process itself can generate USD/BTS pricing. 

Now there are two ways to invest in BTS.  You can just buy more BTS directly (ie. via US dollars converted to BTC from Coinbase then using Metaexchange)  or you can leverage your existing BTS positions and create bitUSD.  Both prices should generally converge based on the demand for BTS.  As an investor you just ask what is the cheapest way to get exposure to BTS?  Short bitUSD or buy BTS directly?  Your decision to do either based on the cheapest price will naturally balance the two markets.   When BTS is cheap relative to bitUSD you short.  When BTS is expensive relative to bitUSD you buy BTS directly.

Furthermore if you used price feeds there are potentially many, each with various counterparty risks and entry/exist friction:
US dollars (via checkbook money) -> BTC (via Coinbase) -> BTS (via Metaexchange)
US dollars (federal reserve notes) -> BTC (via LocalBitcoins) -> BTS (via Metaexchange)
US dollars (via checkbook money) -> BTC (via Coinbase) -> CNY (via BTC38) -> BTS (via BTC38)
US dollars (federal reserve notes) -> BTC (via LocalBitcoins) -> BTS (via Poloniex)
US dollars (federal reserve notes/Moneygram) -> BTC (via LocalBitcoins) -> BTS (via BTER)

If 90% of the volume was in trading & creating bitUSD and 10% of the volume was in investing in BTS directly, the bitUSD market would probably be a better indicator of USD/BTS pricing.... prices are always changing, always subjective... differs in time & place & mood etc.. so there is never really ever a true objective price or 'price feed' for anything.

Anyways those are just some thoughts... it may be good for me to experiment before theorizing too much and analyze the actual markets, but I'm waiting for trading on the web wallet to test.  I guess I can download a light client for Windows too...

One obstacle with referral systems is identity verification to prevent fake accounts.  I would use Facebook and start referral programs in developed nations to test and create some kind of real person detection algorithm that checks identity and stores info in a secure DB to ensure privacy and keep track of referrals.  There should be a way of detecting fake accounts without any manual intervention right?   You can make the algorithm strict and any false-positive fake would require verification from another network like LinkedIn (have to be the same name) and Google+.  Facebook would be the main one.   

Maybe you can cap referrals to a certain # per month per person and track transactions over time to see referral quality and those with good activity from referred accounts could have their referral caps increased and any fake accounts detected would have a certain magnitude of negative impact (let's say 5x)?  So for every bad account detected you would need 5 new accounts to make up for it.  The cost for a fake account just has to be greater than the ease of creating one.  You can use transaction fees as part of the residual referral income. 

You can also punish a branch of a bad referral tree to prevent someone from trying to pyramind off a fake account.  Anyways just some thoughts.

Bitmarket.  Glad you brought up the topic because I wanted to understand what the consensus was about transaction fees in general. Stepping back a bit, transaction fees are the source of revenue and delegate pay are expenses to run the system.  Any net profit goes to shareholders.

#1)  If you compete with Paypal their volume is $64B per quarter or running at $240B+ per year and roughly 3% avg transaction fee generates: $7.2B in revenue.  Paypal's operating income is $1.8B (according to Ebay 10-K, pg F-19).  They spend $5.4B in operating costs (SG&A).  Margin is roughly 25%.  Interestingly if you look at pg. 60 in the 10-K, Paypal's cost of net revenue is roughly 40% (bank fees, credit card interchange & assessment fees, interest expense etc.) Most of these fees crypto-companies don't need to incur. 

$7.2B revenue
$3.1B (cost of revenue -bank/credit card interchange fees etc)
---------------------------------
$4.1B net revenue
$1.8B income

The inferred SG&A is $2.3B for Paypal which is 56% of revenues.

Using the parent company Ebay for the allocation of SG&A we have:
48% Sales & Marketing
27% Product Development
25% General & Admin

The above is one example allocation for a business.  Keep in mind early on for a growing company you shouldn't distribute earnings back to shareholders.  That's not a good use of profit.  It's better to put profits to fuel growth.  Most growth companies do not have earnings because you get higher ROI putting profits back in the business than returning it to shareholders.  When a company stabilizes at the end of an S-curve, that's when as a shareholder should demand dividends & profit so profits are not put into wasteful low return investments.  Apple is a tricky one to evaluate because they are mature, but they always innovate.  As a shareholder I would request dividends at their stage of the company because innovation stalls, opportunities become more limited, and that much cash is probably not needed anyways.  Anyways, if you are going for n^2 network effect, all eyes should be on growth. 

BTW it's interesting because Icahn and other are encouraging a spin-off and putting valuations on Paypal so it would be nice to see some analysis.  If you just put a 20-25x multiple on Paypal's operating income you get a $36B - $45B valuation for Paypal and those are the valuation #'s being thrown around.

#2) If you compete against crypto-companies, all companies essentially converge towards zero or negligible revenue (transaction fees).  The technology allows roughly free transactions so you shouldn't expect much profit.  Just like the Internet disrupted the media industry and created a world of negligible profits for information & knowledge dissemination, the finance industry will realize the same fate.  Value and wealth is created with all technology, so all the people benefit.  It's just that work & jobs have to be remade and reallocated.  Those in the finance industry will have to evolve and reshape their services much like those in the media industry had to....it will be the same with the legal profession...and governments are next... .. but in the end it's just the natural progression.. well after the Bitcoin/blockchain Cambrian explosion that is..

#3) In the meantime I think we go after the traditional system and make money competing with the existing industry.  Also it's not like fees are the only thing that matters.  UI/UX and ease is incredibly important and Bitcoin has real disadvantages as a common payment network.  (I still see Bitcoin as having potential as a future store of value/collectible/digital Gold because of its unique properties, but who knows for sure).  Even if you charge 2.0-2.5% against Paypal and make the UX great you can still do well... and bitAssets is the key to that.  You just have to expect cryptocurrencies to put pressure to keep lowering transaction fees from 2 - 2.5% down to something much smaller ...and that will happen sooner than later, but who knows.  Just create a great UX and you can maintain fees for much longer.  Also in the long run if BTS captures mass market share, I would assume early shareholders would sell off their shares and the most active users (businesses that transact a lot) may end up being the largest stakeholders and all transaction fees they generate would essentially go back to themselves.  Or a better way to put it is the shareholders will own an amount proportional to their use.

4) So Paypal spends 56% of it's net revenue for operations but it's much more mature.  I would say spend 100% of revenue early on.  Ebay's allocation is 48% Sales & Marketing, 27% Product Dev, 25% General & Admin.  I'd say start with 33% for Sales & Marketing, 33% for Product Dev, 33% for Business & General and go up and down from there.

5) There are two groups you have to consider.  Consumers & traders/speculators.  For the former, you can charge higher fees.  For the latter to get liquidity you can't.  I would use Paypal as a comparison for the former (3% fees), and current crypto exchange platforms for the latter.  Bitfinex fees are: (0 - 0.1% for makers/ 0.2% for takers). 

Competition for the wallet with lowest fees doesn't happen until there's a large user base that's in for the long haul.  Even then, many users will just use the setup they're used to unless the fees are ridiculous.

Adding it at the protocol level is just unnecessary, and adds significant long term privacy concerns.

This is a solved problem. The model used by the light and web wallet developers will also function for referrals.

Yeah I prefer it outside the protocol level as well for the reasons you mention.