If we the split the platform the into business (which gets to keep all the fees) and currency, I can't see a reason for the currency part to have any value above zero.

The business vehicle has a value because it can be treated as equity in a DAC.
The currency vehicle has a value - because of what?

A thorny question! My view is a currency has value because of its potential reliability as a unit of account and in transactions. Its the same reason that fiat has any value, or bitcoin, or any other alternative crypto. All of these have non-zero value today because of trust in the system of account. So I expect a super-fast non-pegged non-backed currency with a trusted supply mechanism on the bitshares block-chain would also have non-zero value. Also, such a currency might have immediate transactional utility in bitShares because it would be used as the denomination for funding, reserving, and payments within the DAC, for collateral backing and other purposes.

While I think that having negligible dilution is a major source of value for an asset that is to be used as a unit of account and store of value, it is of very little value to a business, or DAC, that is trying to grow toward profitability. What I was trying to do with this OP is show that if want want BTS to be a profit-earning system, we should not constrain funding so much that we cannot afford to create it. That's why I was suggesting to set BTS free, and that is really the core proposition of the OP.

It was then only really a secondary consideration as to whether people may want a currency substitute, and what that currency would be worth. But there is certainly an element of "currency value" in BTS that would be lost if we made BTS an unbounded DAC. That may be potentially retained if we set up a currency with all the same properties as BTS except dilution and profit participation (a trivial step), that can clearly outcompete other cryptos on performance.



 

***Short version***

The community has a schizophrenic view on BTS as a result of its history. A currency demands very little or no dilution. That's why we had many leave the community when dilution to fund development was introduced. On the other hand, developing a financial platform is a business endeavour that requires a lot of funding in return for profit. That's why CNX has had to establish externally to bitShares, to give the development team other avenues of funding the business. That separation has also upset some of the community. The basic problem is that BTS cannot be both a currency and a development business. In answer to my question on whether bitShares might consider market loans to help fund development (a business need), bytemaster in the Hangout suggested the big problem is aversion to dilution (the currency need). I understand that answer completely.

What I'm suggesting here is a way to potentially meet both needs within the bitShares system. What if we split BTS into separate decentralised currency and business vehicles? It's not fully thought out, and I'm not certain this would be a good idea yet or not - this is just conceptual and posted for feedback.

***Long version***

The currency vehicle(s)

The primary purpose of a currency is as a reliable unit of account and store of value. We could feasibly have one or more stand-alone currencies within the system, that could compete directly against Bitcoin or other cryptos. Unlike market pegged currencies, these would stand alone as independent units of account, rather than being pegged to fiat. The core properties would be:

- Negligible dilution to cover only network cost, which is very low under DPoS, a competitive advantage against PoW.
- No participation in platform profits.
- Competitive advantage of using all the speed and capacity benefits of the bitShares platform.

Apart from these core properties, competitive variations could offer a range of different features around interest, stability, and the like, just like the alts market today, but on our platform.

The business vehicle

The primary purpose of the business is to earn profit through the development of the financial platform. Such a vehicle would be able to take advantage of various funding methods, and have full flexibility over its capital structure subject to the determination of its stakeholders. Some of these methods will result in dilution, much as company capital raising does in traditional markets, but on the prospect that future growth will more than compensate for these new investments.

So as an example, the business could raise equity or debt funds in currency, and use those for development. The business keeps all the common platform fees (except for privatised structures). There is a wide range of possible fund raising structures (via tokens offering different forms of participation) ranging between full equity and pure debt, such as preferred tokens (first cut of profits), convertibles (only dilute if the equity token price rises above certain levels) etc. Its only limited by imagination.

Transition

We'd have to decide whether the currency or business vehicle would be best to retain the BTS label. Then the token for the other vehicle would be 100% sharedropped on existing BTS holders.

Other considerations

This is not comprehensive, but some other considerations would be:
- How clear is the business model? To successfully raise funds requires a robust model and profit expectations.
- How clear is the currency model? Does a currency require a profit stream to underpin it or can it exist purely as a unit of account?
- How do we incorporate the possibility of multiple development teams in the future that could each be contributing to the platform in different ways? How are profits divided from common sources?

Quote from: starspirit on June 19, 2015, 01:44:28 am

2. Keys can get lost, accounts abandoned, or users forget or die. The problem is when we have counter-parties on the other side of their positions. Say for example, somebody owns a big % of bitUSD and disappears. The shorts could never fully exit their positions.

That's true, but we should also consider that the opposite can happen as well: shorts can take a short position, and then lose their wallet file. The short lives forever (under the Bitshares 2.0 rules), and the asset floats. Weird! 

The longs can force settlement if they like, as long as that option exists. If that option didn't exist, and margin calls were not an issue, then you could end up with the same issue on both sides.

A question and concern regarding black swan settlement price

It may be I have misunderstood the approach. If I have, please correct my understanding.

My interpretation is that if the least collateralised short has say only enough collateral to cover 95% of their debt, whatever that amount is, then all the debts will be set to 95% of the current value, and any excess collateral of shorts returned based on that price. Is that a correct interpretation?

If it is correct, my concern is as follows.

Somebody needs to bear the burden of the amount of shortfall of the under-collateralised (<100% debt coverage) shorts. Its fine for the longs to bear this, but they should not have to bear any more than this amount. My issue with the proposed approach is that most of the other shorts may well still have enough collateral to cover their full debt, but they are getting a windfall gain because there were one or more shorts who triggered a black swan. This windfall gain of course, comes at the expense of the longs. It may even be the case that the under-collateralised short is very very small, but triggers a very large and unnecessary cross transfer between the longs and shorts.

I think a more equitable method is to settle all shorts at the feed price, and base the settlement price for shorts on the ratio of the remaining collateral to token supply.

Again, that's just based on my (possibly incorrect) interpretation of the proposed process.

It might be nice, but this is an aesthetic change that would not rank up there for me.
Now what I would like to see down the track is some industrial grade app that could operate like a collaborative workbench like a true decentralised business would want to use, where users could form project networks, securely share working files, host decentralised meetings, etc etc.

Quote from: starspirit on June 19, 2015, 01:44:28 am

1. How does global settlement on a Smartcoin get enforced? For example, how to you forcibly remove the long holding from a users' account? Or would each Smartcoin (or series of Smartcoin) have a unique identifier that would remove its ability to settle at any future date, thereby devaluing its market value?

https://github.com/cryptonomex/graphene/issues/41
https://github.com/cryptonomex/graphene/issues/33

My understanding of that is that you don't need to actively take any longs from anywhere. The blockchain just notes the relevant information at the time of the force settlement and freezes all operations that could affect settlement (meaning the asset is effectively dead). However, people can still trade the longs (which at that point represent fractional ownership in some pooled amount of the collateral asset) and can be used to redeem that fractional amount of the collateral at the owner's leisure.

I wonder if the block-chain could just send the collateral out to all the long accounts (which I assume are always identifiable). If all token series had unique identifiers apart from their name (maybe they already do), then even if the token name gets re-used at some point the protocol will no longer allow any form of transaction or operation on the old tokens, apart from sending them to a burn address. It would be neat to just be able to completely wrap up the old market, and allow the market to be resurrected and re-used in future. Probably harder than it sounds though.

There could be unlimited ideas for different parameter variations on privatised Smartcoins.

Is there a hosting cost to the network irrespective of the number of transactions?
What key factors determine how much total "network capacity" each market will draw?
How would this be economically rationed, and would there be a limit on the number of Smartcoins?
Where particular markets fail to find material use, or outright fail to perform as expected, could there be a pruning process, and how could this operate cleanly without raising legal issues around control etc?

From https://bitshares.org/technology/delegated-proof-of-stake-consensus/

Delegates are elected in a manner similar to witnesses. A delegate becomes a co-signer on a special account that has the privilege of proposing changes to the network parameters. This account is known as the genesis account. These parameters include everything from transaction fees, to block sizes, witness pay, and block intervals. After the majority of delegates have approved a proposed change, the stakeholders are granted a 2 week review period during which they may vote out delegates and nullify the proposed changes.

This design was chosen to ensure that delegates technically have no direct power and that all changes to the network parameters are ultimately approved by the stakeholders. This is done to protect the delegates against regulations that may apply to managers or administrators of cryptocurrencies. Under DPOS, we can truly say that the administrative authority rests in the hands of the users, rather than either the delegates or witnesses.


I was wondering how similar principles might apply to Smartcoins, or if that's even possible. Ideally we would want failing Smartcoin markets to be able to be closed or modified by the users, rather than keep indefinitely expanding the number of copies and variations that exist, with a string of zombie markets in our wake. It may be for example, that a poor parameter set was chosen, an inadvertent effect is created that eventually compromises the market, or the market just never gets much momentum or interest.

But this raises some of the following questions, just as a starting point:

- If nobody has ultimate power over a particular Smartcoin market, would anybody apart from shorts (via global settlement) ever be able to shut it down if it is failing?
- What if the shorts are not incentivised to shut a failing market if they are a beneficiary of it?
- Could the provider make proposals for changes to the parameters or operation of a market? If so, how could a consensus be found between longs and shorts, who may have conflicting interests, or even be missing?

Just a starting point.