Author Topic: BitShares X rebrands itself as BitShares; adopts greater scope [DRAFT]  (Read 18736 times)

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Offline xeroc

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However, we're going to see constant FUD about BTS being inflationary at a rate of 6.3% an annum.
Once the system is up and running .. people will see that the stakeholders CAN VOTE on the anual inflation rate and that the real inflation will be WELL BELOW the max of 6.3%

Offline FreeTrade

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This means that bitshares is now self funding.  It can pay for its continued development, for marketing, and to recruit more developers, once the original I3 funds are gone.  No matter what happens, bitshares can continue on and support itself.


The maximum possible inflation rate is 6.3% for next year.  (50 BTS a block, for every block for a year is 157,680,000 BTS a year.  157,680,000 / 2.5 billion is 6.3% inflation).


However, that is the MAXMIUM.   In order for that to occur, there must be 101 paid delegates all receiving max pay rate. 
Thats not going to happen.  What is actually going to happen is that voters are only actually going to vote for paid delegates for the dev team, marketing delegate, and a few others who are showing that they are adding value to bitshares.  So in reality, with maybe 20 or so paid delegates, inflation will be about 1-2% a year.

Thanks for the detailed explanation. I'm on-board - no-one believes more than me in the need for ongoing funding for dev, marketing, legal etc.

However, we're going to see constant FUD about BTS being inflationary at a rate of 6.3% an annum.

In effect, I think what we're seeing is a more like a decentralized 'central' bank that is setting an inflation rate. That might be an easier sell than 'dilution to fund devs'.
 
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Offline donkeypong

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Also, everyone should remember, if there is no company that is paying dev salaries, and everything is being paid for by the blockchain itself, then there is nothing that any government agency can attack!

Worst case, a government could go after some of the delegates, since that is the only institution left in BitShares. And they could lock down the banks even tighter. I think any prosecution would be so troublesome for a government that they'd probably give up. They'll be watching and learning, though, as this gets bigger. They'll follow certain addresses, transaction patterns, and websites. They'll gather information from the tax returns of people filing and those they choose to audit. And for anyone using regulated exchanges and banks, they'll have access to all the info they need on that side of things. A few people they're focused on may eventually make mistakes and they'll be ready.

For those interested in beating the government, the creation of a BitUSD (or BTS or any BitAsset) online economy would make the government's job very difficult indeed. If they can't track the money coming in OR out, then they're stuck with the blockchain.

To them I say, if you can't beat us, join us!

Offline Ander

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Also, everyone should remember, if there is no company that is paying dev salaries, and everything is being paid for by the blockchain itself, then there is nothing that any government agency can attack! 
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Offline starspirit

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The key here I think is that dilution eliminates the need for centralized cash on hand to pay salaries and business expenses.  With burnt fees and dilution to cover costs, the shareholders directly hold all the value of the network.  They directly lose value to cover expenses, and they directly gain value when fees are paid and when the network grows.


This point finally makes a lot of sense to me. I have been trying to work out how dilution offers any growth advantage over paying people already existing BTS (which is the big benefit I've commonly seen suggested), while I keep thinking they are economically equivalent in power. But what you are saying here is that the dilution mechanism simplifies the process considerably by forcing equal participation, removing the need for any stakes or payments to change hands.

Offline teenagecheese

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Shares in a company are, literally, issuing of company equity in order to grow.

Every single publically traded company in the world has issued stock in order to get money in order to grow.  Thats what stock is.
Tons of companies continually issue more stock every year in order to fuel growth.  Every company in the world that gives its employees stock options or stock is inflating its share supply in order to hire talent, in order to grow.

An increasing share supply is the *normal* state of companies.  Normal, every day companies that you see listed on the stock exchanges.



That said, yes, of course we would like for the supply of bitshares to eventually be shrinking!  Most companies would love to reach a state where they are able to buy back more shares than they issue, and reduce share counts overtime.  This is the goal once we become big, and the amount of dilution needed to grow is small because the market cap is big, and shares are being burned due to transaction fees, etc.  We want to reach that point eventually.  But for now, it is better to inflate a little to grow fast, than to not inflate and grow slowly or not be able to pay for developers.

Interesting, I was not aware companies regularly took share issuance to that extent. Either way, I feel good about this now after both your and Troglodactyl's comments. Thanks

Offline teenagecheese

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I suspect that fees will outpace dilution well before the end of the rapid growth phase.  There will be a lot of ecosystem growth from peripheral businesses that are self funding without dilution, like gateways.

Bitcoin doesn't have the feature set to reach a wide market, but looking at its growth dynamics with the businesses that have sprung up around it is encouraging.

Great point! Now we wait and see I guess.

Offline Ander

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I think what you're saying is only right during the growth phase of the company, while you are still attracting new users. It's sort of like a ponzi scheme; it doesn't work if you don't keep having new people (money) come. Once this is a steady-state ecosystem inflation will simply be draining people's money because the share price is not rising enough to counteract it. I can't help but thinking I'm right because no real company operates on an inflation model.

Shares in a company are, literally, issuing of company equity in order to grow.

Every single publically traded company in the world has issued stock in order to get money in order to grow.  Thats what stock is.
Tons of companies continually issue more stock every year in order to fuel growth.  Every company in the world that gives its employees stock options or stock is inflating its share supply in order to hire talent, in order to grow.

An increasing share supply is the *normal* state of companies.  Normal, every day companies that you see listed on the stock exchanges.



That said, yes, of course we would like for the supply of bitshares to eventually be shrinking!  Most companies would love to reach a state where they are able to buy back more shares than they issue, and reduce share counts overtime.  This is the goal once we become big, and the amount of dilution needed to grow is small because the market cap is big, and shares are being burned due to transaction fees, etc.  We want to reach that point eventually.  But for now, it is better to inflate a little to grow fast, than to not inflate and grow slowly or not be able to pay for developers.
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Offline Troglodactyl

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Edit: Troglodactyl, just read your post, I think we agree.

I think what you're saying is only right during the growth phase of the company, while you are still attracting new users. It's sort of like a ponzi scheme; it doesn't work if you don't keep having new people (money) come. Once this is a steady-state ecosystem inflation will simply be draining people's money because the share price is not rising enough to counteract it. I can't help but thinking I'm right because no real company operates on an inflation model. Investors want money from customers, not themselves. They want to maximize profit.

...With that said, I suppose at that steady-state point we don't need many marketers/devs/janitors etc., and we will be able to maintain the network with just transaction fees.

I suspect that fees will outpace dilution well before the end of the rapid growth phase.  There will be a lot of ecosystem growth from peripheral businesses that are self funding without dilution, like gateways.

Bitcoin doesn't have the feature set to reach a wide market, but looking at its growth dynamics with the businesses that have sprung up around it is encouraging.

Offline teenagecheese

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Edit: Troglodactyl, just read your post, I think we agree.

I think what you're saying is only right during the growth phase of the company, while you are still attracting new users. It's sort of like a ponzi scheme; it doesn't work if you don't keep having new people (money) come. Once this is a steady-state ecosystem inflation will simply be draining people's money because the share price is not rising enough to counteract it. I can't help but thinking I'm right because no real company operates on an inflation model. Investors want money from customers, not themselves. They want to maximize profit.

...With that said, I suppose at that steady-state point we don't need many marketers/devs/janitors etc., and we will be able to maintain the network with just transaction fees.
« Last Edit: November 09, 2014, 03:21:34 pm by teenagecheese »

Offline Troglodactyl

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All this is great, but I feel like for shares in a company, inflation (dilution) is only successful as a short term solution. Continuous inflation may be okay for a currency (which is a whole other conversation), but is it sustainable for a company?

I would hope that ultimately everything can be paid for via transaction fees or some other mechanism. That's what VISA and Mastercard do, right? How else do they make money? I wonder what transaction volume this would require.

I actually think this is the opposite.

When the company is small, inflation-pay is the *LEAST* effective. It takes much more inflation to pay a delegate a fair salary. When the company has a very large market cap with high liquidity, a 1% inflation-pay delegate could be earning $1 million per year. We would, of course, need much less than 1% of inflation in that case.

This is why I stress that we use AGS funds to grow our market cap as fast as possible, so we can sustain inflation reasonably and responsibly:

https://bitsharestalk.org/index.php?topic=10845#msg142799

Keep in mind that we only elect delegates that increase the value of the company many times more than the rate at which the dilution devaluing each share. This will only get easier the bigger we are.

The key here I think is that dilution eliminates the need for centralized cash on hand to pay salaries and business expenses.  With burnt fees and dilution to cover costs, the shareholders directly hold all the value of the network.  They directly lose value to cover expenses, and they directly gain value when fees are paid and when the network grows.

Once the Bitshares potential market is saturated (when everyone in the world is using it for everything, all the time...) the network will stop growing, and fees will need to exceed dilution or it will become unprofitable.  I don't expect this to be a major problem.

Offline fluxer555

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All this is great, but I feel like for shares in a company, inflation (dilution) is only successful as a short term solution. Continuous inflation may be okay for a currency (which is a whole other conversation), but is it sustainable for a company?

I would hope that ultimately everything can be paid for via transaction fees or some other mechanism. That's what VISA and Mastercard do, right? How else do they make money? I wonder what transaction volume this would require.

I actually think this is the opposite.

When the company is small, inflation-pay is the *LEAST* effective. It takes much more inflation to pay a delegate a fair salary. When the company has a very large market cap with high liquidity, a 1% inflation-pay delegate could be earning $1 million per year. We would, of course, need much less than 1% of inflation in that case.

This is why I stress that we use AGS funds to grow our market cap as fast as possible, so we can sustain inflation reasonably and responsibly:

https://bitsharestalk.org/index.php?topic=10845#msg142799

Keep in mind that we only elect delegates that increase the value of the company many times more than the rate at which the dilution devaluing each share. This will only get easier the bigger we are.
« Last Edit: November 09, 2014, 03:03:38 pm by fluxer555 »

Offline teenagecheese

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All this is great, but I feel like for shares in a company, inflation (dilution) is only successful as a short term solution. Continuous inflation may be okay for a currency (which is a whole other conversation), but is it sustainable for a company?

I would hope that ultimately everything can be paid for via transaction fees or some other mechanism. That's what VISA and Mastercard do, right? How else do they make money? I wonder what transaction volume this would require.

Offline Ander

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And its also worth noting that all transaction fees burn BTS, and thus help counteract the inflation.  As well as any future features which make a profit by burning shares also counteract inflation.
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Offline thisisausername

It's also worth noting that barring any hardforks (that allow for more delegates) the inflation is self-limiting, since the number of new coins per time period remains fixed while the supply approaches infinity.

e.g. If 101 delegates all took max pay for the first ten years, the maximum possible inflation would've dropped to 4%.
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