Author Topic: Does BTS burning represent a form of income for BTS?  (Read 4261 times)

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Offline starspirit

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I don't understand the analogy - is the version where we don't burn BTS and instead put it into a pot of spendable funds somehow analagous to the zero-fee economy?
Yes, assuming there were no costs to maintain the integrity of the network, for which we need a minimum fee in practice.

Ok, then why is there a 10% fee in the other scenario?
Only because somebody thought it might be a good idea to offer an income stream to money-holders, to attract investors to that economy. Apart from that, consider the two ecosystems equal. My question is, does the 10% income stream increase the value of the money in the T10 economy. Maybe that's not a fair comparison, because people will not participate in an economy where fees are unreasonable, but they will in one where the fees are seen to be reasonable. But still, even if the fees are reasonable, any income earned in saving years turns into a cost in consuming years. So I'm still unsure whether the fee stream increases the value of the total money supply.

Offline toast

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I don't understand the analogy - is the version where we don't burn BTS and instead put it into a pot of spendable funds somehow analagous to the zero-fee economy?
Yes, assuming there were no costs to maintain the integrity of the network, for which we need a minimum fee in practice.

Ok, then why is there a 10% fee in the other scenario?
Do not use this post as information for making any important decisions. The only agreements I ever make are informal and non-binding. Take the same precautions as when dealing with a compromised account, scammer, sockpuppet, etc.

Offline starspirit

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I don't understand the analogy - is the version where we don't burn BTS and instead put it into a pot of spendable funds somehow analagous to the zero-fee economy?
Yes, assuming there were no costs to maintain the integrity of the network, for which we need a minimum fee in practice.

Offline toast

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I don't understand the analogy - is the version where we don't burn BTS and instead put it into a pot of spendable funds somehow analagous to the zero-fee economy?
Do not use this post as information for making any important decisions. The only agreements I ever make are informal and non-binding. Take the same precautions as when dealing with a compromised account, scammer, sockpuppet, etc.

Offline starspirit

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Burning BTS is equivalent to income under the assumption that there will be demand for the DAC's services in the future.

First imagine that Apple immediately took any profit from the sale of a macbook and used it to buy back stock.
Now imagine that Apple first pre-sold coupons redeemable for macbooks and bought back stock from the presale.

The key is that someone had to buy the BTS in the first place for it to be redeemable for a service.

I'm happy to assume that the DAC does offer valuable services in the future, which gives the money some value today. I'm not sure that makes burning equate to income in the present however, because its simply an internal cost provided by some BTS owners to other BTS owners. This creates a paradox that the higher the fee income, the greater the burden on others, and the less efficient the economy.

Suppose you had a choice of participating in one of two economies, each using gold money. In economy T0, there are zero transaction fees. In economy T10, there are 10% transaction fees, and gold extracted as fees is destroyed in a nuclear furnace. Which economy would you rather participate in? In which economy would the total remaining supply of gold be valued more highly? Which economy would be more efficient?

Offline toast

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Burning BTS is equivalent to income under the assumption that there will be demand for the DAC's services in the future.

First imagine that Apple immediately took any profit from the sale of a macbook and used it to buy back stock.
Now imagine that Apple first pre-sold coupons redeemable for macbooks and bought back stock from the presale.

The key is that someone had to buy the BTS in the first place for it to be redeemable for a service.
Do not use this post as information for making any important decisions. The only agreements I ever make are informal and non-binding. Take the same precautions as when dealing with a compromised account, scammer, sockpuppet, etc.

Offline starspirit

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I was struggling with this conundrum, open to thoughts of others. My tentative conclusion is BTS does not earn income at all, at least in the traditional sense.

If a company earns income in USD, its underlying asset base rises due to the profit. It can then:

1) distribute this profit to share owners as cash (dividend)
2) use the cash to buy back and burn shares (effectively distributing cash while increasing the value of remaining shares) or
3) keep it retained in the business to increase the value per share.

In each case, there is a return to investors in aggregate as a result of the profit. Importantly its the profit that drives the return, not the form of distribution or re-allocation.

Without a profit, representing an accrual of value of assets held by the entity, no change to the share structure (e.g. burning shares) adds value to the group of owners as a whole. Therefore burning per se (a mere change in ownership structure after the fact of value-creation) cannot be considered income of the entity, and it does not lend any increase in valuation to the entity as a whole.

As BTS (and derivative bitAsset) transactions occur, and BTS are burned, the value per share rises, but the value of the entity does not. There has been no externally-derived value to the group as a whole that can be distributed. There has only been a transfer of value from those burning BTS through transactions to those not. Doesn't this mean that the BTS burning through transaction fees, which we often designate as "income", does not give any value to BTS at all?

This line of thinking has led me to wonder if any crypto-asset can theoretically earn profit, in the traditional sense of the word, unless shares in it represent ownership accrual in things that exist outside its own share ledger. For example, a company has a balance sheet made up of assets outside of its own shares. I think the only way this can be replicated in our ecosystem, or to create "profitable" DACs, is with a resource management system built around the required block-chain(s), that allows the use and improvement of other assets in order accrue more of them (an example is that Music is forced to manage assets (like music tracks) outside the Notes block-chain).

If there is no income, value accretion is driven solely by the increasing utility of the coin itself in use or exchange. This is also potentially a valid approach, but is not so different in approach to most other crypto-currencies in general.

Views?

End Brain-Dump.