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General Discussion / Re: Are there other funding models to pay for development?
« on: June 16, 2015, 08:08:35 am »
A lot of good ideas in this thread
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.
That's also a possibility. Although the development of the core can't be privatized due to operational risk and infrastructure ownership considerations, everything that isn't strictly required as core functionality could be externalized to private companies: bidges, wallet programs, trading tools, charting and reporting websites, community websites etc. Although this doesn't solve the problem of funding the core development, it could help alleviating it by getting rid of developments that need not be developped by the core development team. For instance, it would be relatively easy to prune the current wallet out of the codebase.
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.
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.
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.
That's also a possibility. Although the development of the core can't be privatized due to operational risk and infrastructure ownership considerations, everything that isn't strictly required as core functionality could be externalized to private companies: bidges, wallet programs, trading tools, charting and reporting websites, community websites etc. Although this doesn't solve the problem of funding the core development, it could help alleviating it by getting rid of developments that need not be developped by the core development team. For instance, it would be relatively easy to prune the current wallet out of the codebase.
