Author Topic: Am I the only one that thinks referral system is Bitshares largest mistake ever?  (Read 6858 times)

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Offline r0ach

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I've seen lots of "hooray referral system" posts like it's the new cure for cancer.  I have the exact opposite thoughts about it.  Before any pro-referral people post in opposition, let's define exactly what the referral system is.  It's an artificial increase in transaction fees to subsidize the equivalent of a bunch of Avon ladies. 

Artificially increasing transaction fees is the last thing you would ever want to do in a cryptocurrency.  One of Bitcoin's main selling points was low transaction fees.  Now people are suddenly pretending like transaction fees don't matter.  Sure, you may now end up with some additional people trying to spread Bitshares, but most people view cryptocurrency as a zero sum game where the act of using it is just making someone else rich at their own expense.  This isn't far from the truth since any currency that exists whether it's fiat, gold, or crypto is all a pyramid scheme in nature.

Dan talks about how he doesn't like coercion, but the referral system obviously is where you're trying to swoop up people under your influence into a system to enrich yourself.  An example would be an employer forcing employees into Bitshares as a payment processor.  The employee now has to pay some arbitrary fee to become "a member" or pay large transaction fees instead.  Currency doesn't need any more pyramid scheme aspects than it already has.  Besides the fact that it's philosophically an abomination, it makes Bitshares less competitive in the free market vs other coins that will have lower fees.

Unless Bitshares became huge, it's not like many people are even going to pay the member fee anyway.  It just drives people to other coins due to big transaction fees.  If Bitshares became world reserve currency, probably everyone on earth would pay it, but the only function it serves then is an additional pyramid scheme aspect on top of the already pyramid nature of all currencies.   Whether you're trying to make a profitable business or a more "fair" world, it's probably bad on both fronts.

Offline topcandle

Your concerns have merit.  It goes both ways.  Either you cut costs or you bring something new to the table.  WIth Bitshares we can charge more right now because you offer greater financial services (dex exchange, hedging, hopefully bond markets).  The differences in fees have to be competitive.  A consumer is willing to pay more in fees because they gather more services from bitshares.  I don't think they will go to lesser transaction altcoins unless they offer the same quality in services.  This is the hypothesis at least. 

So the referral is not the flagship feature,  but a additive one  that brings more value when bitshares already has value to offer to begin with.  Simply put, referral system cannot work alone as a stand alone feature, but needs the other value additive features of bitshares to bring out the best of the two. 
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Offline mint chocolate chip

Network effect
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The classic example is the telephone. The more people who own telephones, the more valuable the telephone is to each owner. This creates a positive externality because a user may purchase a telephone without intending to create value for other users, but does so in any case. Online social networks work in the same way, with sites like Twitter and Facebook becoming more attractive as more users join. (Wikipedia)

Airbnb, Dropbox, Paypal, Uber, Evernote, Amazon Prime,  Amuze, Adventure Gear, DapperTime, Typeform, JottaCloud, Lyft, GetAround, Coinbase, EventBrite, iStockPhoto, Elance, World of Warcraft, Hulu Plus, Netflix, Dish, DirecTV, LastPass, Prezi, Google Apps...

jakub

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Our competition is not other crypto. It's legacy payment processors like PayPal and on-line usage of debit cards.

I think BM's approach makes a lot of sense:
Quote
A well-balanced business model must have a cost of user acquisition that is much lower than its ability to monetize its customers. In the case of BitShares, this means setting transaction fees that are high enough to cover all costs, including the cost of customer acquisition, while still being low enough to compete against real competitors. Most cryptocurrency networks barely charge enough in transaction fees to cover the cost of running the network. They attempt to attract users with low fees. While low fees are important, undervaluing the service provided is counter productive. For this reason, BitShares charges a price that is much higher than competing cryptocurrencies but much lower than traditional exchanges and payment networks like Dwolla or PayPal.

Xeldal

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I've seen lots of "hooray referral system" posts like it's the new cure for cancer.  I have the exact opposite thoughts about it.  Before any pro-referral people post in opposition, let's define exactly what the referral system is.  It's an artificial increase in transaction fees to subsidize the equivalent of a bunch of Avon ladies. 

Artificially increasing transaction fees is the last thing you would ever want to do in a cryptocurrency.  One of Bitcoin's main selling points was low transaction fees.  Now people are suddenly pretending like transaction fees don't matter.  Sure, you may now end up with some additional people trying to spread Bitshares, but most people view cryptocurrency as a zero sum game where the act of using it is just making someone else rich at their own expense.  This isn't far from the truth since any currency that exists whether it's fiat, gold, or crypto is all a pyramid scheme in nature.

Dan talks about how he doesn't like coercion, but the referral system obviously is where you're trying to swoop up people under your influence into a system to enrich yourself.  An example would be an employer forcing employees into Bitshares as a payment processor.  The employee now has to pay some arbitrary fee to become "a member" or pay large transaction fees instead.  Currency doesn't need any more pyramid scheme aspects than it already has.  Besides the fact that it's philosophically an abomination, it makes Bitshares less competitive in the free market vs other coins that will have lower fees.

Unless Bitshares became huge, it's not like many people are even going to pay the member fee anyway.  It just drives people to other coins due to big transaction fees.  If Bitshares became world reserve currency, probably everyone on earth would pay it, but the only function it serves then is an additional pyramid scheme aspect on top of the already pyramid nature of all currencies.   Whether you're trying to make a profitable business or a more "fair" world, it's probably bad on both fronts.

There are absolutely zero elements of coercion here.  Coercion requires force with no option enforced by men with guns, like prison, death, or heavy fines etc, that you cannot avoid.  You can easily avoid every aspect of bitshares by simply not using it.  Its like saying McDonalds is coercing you to eat the beef they provide in their burgers because you can't get an free range ostrich burger like you prefer.  Eat somewhere else.

At first glance I had trouble seeing how the drastic increase in fees would be acceptable, but I think there are many solutions.

One that comes to mind is a wallet provider pays for lifetime membership and offers his customers reduced fees near or at zero profit so every user of that wallet provider essentially has the lowest possible fees, equivalent to a lifetime members fees without having to pay for the upgrade.  The fees at this point are on par with bitcoin, at about 3 or 4 cents per transaction.

If anyone can do this there will naturally be competition that drives a fee reduction down to near 80%.  Wallet providers can have other sources of income with the higher traffic, so they wouldn't necessarily need to keep any of the referral bonus for themselves, instead passing everything to their customers.

Offline lakerta06

Some random thoughts:

Avon ladies are the ones actually selling the product/making profit for the company. The reason avon can pay the ladies their cut is because their profit margin is large. When your cost is 1$ and sell it for 50$, there is much room for sharing the profit with the "referrer".

Look at Apple products, and their technical equivalents. They are also able to sell with a very large margin for profit.

Bitshares has, let me say, state of the art blockchain backend for the time being. What it needs is the apple product packaging and avon lady referral system. It has the avon lady framework ready to use, and is waiting for some enterpreneurs to build "apple" style wallets.

If you can market your product, and actually provide utility, people will pay you the extra bit.

I dont agree with your last sentence, that it is bad on both fronts. Then again, I am not that smart of a man. Dont take my word for investment advice :)

Offline MJK

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Your concerns have merit.  It goes both ways.  Either you cut costs or you bring something new to the table.  WIth Bitshares we can charge more right now because you offer greater financial services (dex exchange, hedging, hopefully bond markets).  The differences in fees have to be competitive.  A consumer is willing to pay more in fees because they gather more services from bitshares.  I don't think they will go to lesser transaction altcoins unless they offer the same quality in services.  This is the hypothesis at least. 

So the referral is not the flagship feature,  but a additive one  that brings more value when bitshares already has value to offer to begin with.  Simply put, referral system cannot work alone as a stand alone feature, but needs the other value additive features of bitshares to bring out the best of the two.

I agree with your analysis. However, its still comes back to ease of use. The front end has to look and run professionally without a problem. Personally, i think we need to copy something like cryptsi as a layout with our features.

Offline Empirical1.2

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Our competition is not other crypto. It's legacy payment processors like PayPal and on-line usage of debit cards.

I think BM's approach makes a lot of sense:
Quote
A well-balanced business model must have a cost of user acquisition that is much lower than its ability to monetize its customers. In the case of BitShares, this means setting transaction fees that are high enough to cover all costs, including the cost of customer acquisition, while still being low enough to compete against real competitors. Most cryptocurrency networks barely charge enough in transaction fees to cover the cost of running the network. They attempt to attract users with low fees. While low fees are important, undervaluing the service provided is counter productive. For this reason, BitShares charges a price that is much higher than competing cryptocurrencies but much lower than traditional exchanges and payment networks like Dwolla or PayPal.

 +5%

Artificially increasing transaction fees is the last thing you would ever want to do in a cryptocurrency.  One of Bitcoin's main selling points was low transaction fees. 

Unless Bitshares became huge, it's not like many people are even going to pay the member fee anyway.  It just drives people to other coins due to big transaction fees. 

Your argument that other users will use alternatives is not backed up by the facts. Most including BTS have had very low fees for nearly two years and new user growth is stagnant. One of the reasons new user growth is stagnant is because there's no incentive to market and promote it.

Unfortunately in the real world, very few products succeed by word of mouth and nearly all require some form of marketing.

You can either pay a marketing team and give them a marketing budget, which is what the marketing delegate system tried to do.
(However this cost still has to be paid for and BitShares was operating at a loss via dilution. It's also hard to effectively manage in a decentralised fashion to ensure you are getting good value. )

Or you can pay marketers for the results they actually achieve in the form of new users. The referral programme does this and requires far less management from shareholders.

It is by far a superior marketing approach for decentralised companies imo.

Obviously Shareholders will have to make sure BTS stays competitive and if non BTC alt-coins were actually gaining adoption on the basis of low fees and no marketing (Which hasn't happened yet) BTS can adjust the programme.
« Last Edit: October 16, 2015, 02:05:21 pm by Empirical1.2 »
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Offline BunkerChainLabs-DataSecurityNode

I've seen lots of "hooray referral system" posts like it's the new cure for cancer.  I have the exact opposite thoughts about it.  Before any pro-referral people post in opposition, let's define exactly what the referral system is.  It's an artificial increase in transaction fees to subsidize the equivalent of a bunch of Avon ladies. 

Artificially increasing transaction fees is the last thing you would ever want to do in a cryptocurrency.  One of Bitcoin's main selling points was low transaction fees.  Now people are suddenly pretending like transaction fees don't matter.  Sure, you may now end up with some additional people trying to spread Bitshares, but most people view cryptocurrency as a zero sum game where the act of using it is just making someone else rich at their own expense.  This isn't far from the truth since any currency that exists whether it's fiat, gold, or crypto is all a pyramid scheme in nature.

Dan talks about how he doesn't like coercion, but the referral system obviously is where you're trying to swoop up people under your influence into a system to enrich yourself.  An example would be an employer forcing employees into Bitshares as a payment processor.  The employee now has to pay some arbitrary fee to become "a member" or pay large transaction fees instead.  Currency doesn't need any more pyramid scheme aspects than it already has.  Besides the fact that it's philosophically an abomination, it makes Bitshares less competitive in the free market vs other coins that will have lower fees.

Unless Bitshares became huge, it's not like many people are even going to pay the member fee anyway.  It just drives people to other coins due to big transaction fees.  If Bitshares became world reserve currency, probably everyone on earth would pay it, but the only function it serves then is an additional pyramid scheme aspect on top of the already pyramid nature of all currencies.   Whether you're trying to make a profitable business or a more "fair" world, it's probably bad on both fronts.

I take issue to being referred to as a Avon Lady.. I am at least an Amway Guy!

If your concerns and/or opinions hold true with the voting electorate than a committee proposal can change things and become enabled on the blockchain.

I think you have to consider that every successful enterprise needs a sales force.. and you need a method of compensation.. and there are plenty of companies, even fortune 500 that are performance based like what we are doing.

What is more important.. this will prompt for 3rd parties to develop and use the platform... adoption and utility are all that really matter.. the side effect from it is all the stuff people are crying about in regards to a better UI and other features being more usable.. that is all born out of a profit motive which did not exist in 1.0.. and you can see how that went. Lessons learned.

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Offline r0ach

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Your argument that other users will use alternatives is not backed up by the facts. Most including BTS have had very low fees for nearly two years and new user growth is stagnant. One of the reasons new user growth is stagnant is because there's no incentive to market and promote it.

Bitcoin is backed by the odds of the legacy financial system collapsing because systems tend towards homeostasis and people aren't going to change from one pyramid scheme they're familiar with to a new pyramid where risks are unknown.  Having low fees isn't a benefit when 500 other coins exist with low fees.  Having high fees when 500 other coins don't is a problem though.  Eventually there will be many PoS coins with deterministic node selection using things like the collateral bid system I proposed, or a Tendermint type solution, or transparent forging, or what Darkcoin is doing.  They will all have lower fees and high TPS and it will definitely be a problem.  You can't simply choose to not compete in the fee market.


Offline monsterer

Eventually there will be many PoS coins with deterministic node selection using things like the collateral bid system I proposed, or a Tendermint type solution, or transparent forging, or what Darkcoin is doing.  They will all have lower fees and high TPS and it will definitely be a problem.  You can't simply choose to not compete in the fee market.

Your analysis is based on the fallacy that the best technology always wins. Sadly, this is not the case - in order for something to become dominant, people must know about it first. Marketing is important, like it or not. Whether or not the referral system is the best way to achieve this is another question.
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Offline r0ach

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I think you have to consider that every successful enterprise needs a sales force.. and you need a method of compensation.. and there are plenty of companies, even fortune 500 that are performance based like what we are doing.

The fact that Bitshares has inflation through delegates means transaction fees should be subsidized to be lower.  Havinig inflation + high fees at the same time is an abomination. Yes, I'm aware of all the burning/stock buy back examples to claim there is no inflation.  It's just a lot of arbitrary stuff going on which I'm really not into.  If there's inflation, I want to see it going directly towards subsidizing fees aka security and be explainable as such, instead of having to involve it in obscure stock buy back examples that may or may not occur at some given point of adoption/market cap.

If you want marketing, explain the witness stock price feeds function and make a T-shirt that says, "Bitshares - First decentralized bucket shop"
« Last Edit: October 16, 2015, 02:50:55 pm by r0ach »

Offline BTSdac

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I've seen lots of "hooray referral system" posts like it's the new cure for cancer.  I have the exact opposite thoughts about it.  Before any pro-referral people post in opposition, let's define exactly what the referral system is.  It's an artificial increase in transaction fees to subsidize the equivalent of a bunch of Avon ladies. 

Artificially increasing transaction fees is the last thing you would ever want to do in a cryptocurrency.  One of Bitcoin's main selling points was low transaction fees.  Now people are suddenly pretending like transaction fees don't matter.  Sure, you may now end up with some additional people trying to spread Bitshares, but most people view cryptocurrency as a zero sum game where the act of using it is just making someone else rich at their own expense.  This isn't far from the truth since any currency that exists whether it's fiat, gold, or crypto is all a pyramid scheme in nature.

Dan talks about how he doesn't like coercion, but the referral system obviously is where you're trying to swoop up people under your influence into a system to enrich yourself.  An example would be an employer forcing employees into Bitshares as a payment processor.  The employee now has to pay some arbitrary fee to become "a member" or pay large transaction fees instead.  Currency doesn't need any more pyramid scheme aspects than it already has.  Besides the fact that it's philosophically an abomination, it makes Bitshares less competitive in the free market vs other coins that will have lower fees.

Unless Bitshares became huge, it's not like many people are even going to pay the member fee anyway.  It just drives people to other coins due to big transaction fees.  If Bitshares became world reserve currency, probably everyone on earth would pay it, but the only function it serves then is an additional pyramid scheme aspect on top of the already pyramid nature of all currencies.   Whether you're trying to make a profitable business or a more "fair" world, it's probably bad on both fronts.
I think  referral system is not bad , but  the translation fee should decrease , it is too difficult to understand  send fee is 20 bts , but exhcang fee is only 5BTS,
I think the fee should  send fee < exchange fee 
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Offline Empirical1.2

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Your argument that other users will use alternatives is not backed up by the facts. Most including BTS have had very low fees for nearly two years and new user growth is stagnant. One of the reasons new user growth is stagnant is because there's no incentive to market and promote it.

Bitcoin is backed by the odds of the legacy financial system collapsing because systems tend towards homeostasis and people aren't going to change from one pyramid scheme they're familiar with to a new pyramid where risks are unknown.  Having low fees isn't a benefit when 500 other coins exist with low fees.  Having high fees when 500 other coins don't is a problem though.  Eventually there will be many PoS coins with deterministic node selection using things like the collateral bid system I proposed, or a Tendermint type solution, or transparent forging, or what Darkcoin is doing.  They will all have lower fees and high TPS and it will definitely be a problem.  You can't simply choose to not compete in the fee market.

Bitcoin is slightly different as it was the first mover & already has 90% market share which is why I excluded it in my response. 

if non BTC alt-coins were actually gaining adoption on the basis of low fees and no marketing (Which hasn't happened yet) BTS can adjust the programme.

Unfortunately if you're not the first mover, you need a lot of marketing to gain market share and that costs money.

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Having high fees when 500 other coins don't is a problem though.

I'm surprised you can't see the answer lies in your own statement.

500+ coins are out there have already tried low fees. Many of these 500 coins improve considerably on Bitcoin and offer a range of services. None of those 500 coins with low fees & limited/no marketing and no third party incentives have made consistent inroads into Bitcoin's market share or experienced strong growth or user adoption.

A new product or services requires marketing and incentives for middleman to promote it. At least give what's been proven to work for hundred of years a chance instead of hanging onto the idea that the cheapest wins when clearly we have enough evidence from the alt-coin market that it's not the case.



« Last Edit: October 16, 2015, 03:52:36 pm by Empirical1.2 »
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Offline xiahui135

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I think the fee for placing/cancel of an order and transaction should be very cheap. But the fee for trade success should be more, such as 0.0005 of the    liquild.
People are willing to pay when trade success, because both seller and buyer feel earn something at the moment they trade.