The General Theory of Privately Funded Blockchain Features

[santaclause102]

But there has to be an end date so that bts share holders can make money from it in the future.

But that's the beauty of it -- BTS shareholders do profit from it, by getting exponentially improved features and a flood of new users who are drawn to BTS by the new features. So I'm also in the lifetime revenue camp; no end date necessary. It really does seem to be win-win-win all around, and I feel this could prove to be the most exciting BTS development in a long while.

On first sight I would be ok with life time royalties but at beter conditions. A 25% life long royalty seems a bit much to me and probably is far away from the standard royalty deals. Just a guess though

[santaclause102]

This is my theory:

In order to get a sense for whether this is a good deal for BTS holders , it would help to express the deal in known terms/concepts. I hope others can help to make the below more accurate:

The suggested deal offers a funding for a 75% royalty until the investment is recovered and a 25% life long royalty once the investment is recovered.

Does anyone know what (more or less) "standard" funding conditions for royalty deals are?

The royalty is basically a third option for compensation of the opportunity costs of capital besides interest (loans) or equity. Background: https://en.wikipedia.org/wiki/Revenue-based_financing

[Samupaha]

yes this would be good but the private investors should never get eternal royalties.

They should get royalties until they have made a good return on their investment for example doubled their money. But there has to be an end date so that bts share holders can make money from it in the future.

Why should BTS as a blockchain get eternal royalties but other investors in features can't?

Bitshares isn't getting any royalties, it is collecting fees for compensation for blockchain use.

I agree that it would be good thing to have some point when royalties end, but I would leave that to be decided when the UIA is created. If investors demand lifetime royalties, and BTS owners really want the feature, then there will be lifetime royalties. In Bitshares the shareowners are the highest authority on decisions – if they accept LTR, so be it.

But whether there is lifetime royalties or not, Bitshares has to get compensation for filling up the blockchain with transactions. Otherwise BTS owners will end up subsidizing usage of the feature (then it is only us who will pay for witnesses and keep the blockchain alive, not users or investors of the feature).

Edit: We actually have LTR already: referral income. There is no end date on how long you can get a share from payments from the account you referred (unless the account is updated to lifetime membership).

[Samupaha]

For me it's not clear how that lifetime thing would work. Are we selling a monopoly for a certain feature or is some competition possible? What if shareholders later want to abandon that particular code in favour of a different implementation? It just feels to me like this could cause a lot of political trouble. But maybe I'm wrong.

Important question!

Let's look the incentives.

Investor:
- does have incentives for marketing the feature and not charging too much fees (otherwise he doesn't get users and BTS owners might get angry)
- does have incentives for making the feature better over time (decreases the competition coming from similar features, makes users more satisfied)

BTS owner:
- does have incentives for giving monopoly for feature as long as it works reasonably well (otherwise other developers are less interested in offering new features)
- doesn't have incentives for implementing several features that give same service (makes whole system too complicated)

So yeah, this might get us in trouble, but I guess it will work most of the times. Developers and investors propably understand that "lifetime" means lifetime of the feature – it is very possible that the feature becomes obsolete some day in the future. And BTS owners understand that it is best to give some kind of monopoly even when there is no explicit contract.

[Akado]

What's the problem of lifetime royalties? You know that lifetime royalties != 100% fees right? They will only get a part of that? BitShares will get the rest? Meaning BTS also has a feature that will stay around forever plus make profit from it? Plus the priceless exposure and new costumers?

Wtf is wrong with you people. You prefer going down and drag others with you instead of benefiting from something, just because someone will make more money than you - in theory - from it, while that person clearly is taking the risk. What a joke.

Royalties are usually higher in the beginning till someone makes their money back because of the risk and that's obvious and then they start getting lower when that person starts seeing profit.

You're making it sound like a lifetime sentence where BitShares won't ever see a penny from fees ever again. That's ridiculous. It's a win-win situation, plus you're not the one taking the risk, what's there even to think about? Some people are just egoistic.

@BunkerChain Labs
eager to see when that's announced, if it ever is. Obviously I'm not buying the millions of users part, that would make Bitcoin as it is, insignificant. I only buy that in the sense that it might have the potential to do that in 20 years, only because the chances of that happening are already so low. Otherwise that statement was not written properly.

[complexring]

I'm fine with lifetime royalties as long as they're decreasing over time. So say it's 80% until they recoup their investment, then 20% and halving every four years until finally it stays at 1% forever. If BitShares is successful that's 1% of a multi billion $ activity.

As BM said in the other thread: the feature needs to be able to fund it's own development and upgrades.
With time the original code developed with the original investment will get less and less relevant so it only makes sense that it'll receive decreasing share in profit.

This is much more reasonable than 25% lifetime after initial investment has been recoup'ed.

Although, I like the idea of community crowdfunding for features via UIA as opposed to investors with pre-existing capital -- although not generally opposed. 

Something like a 50/50 partnership with investors and the community would be a good compromise as well.  This allows for investors with larger capital to provide the bulk of the funds necessary to develop a feature AND allows the community to support, and also profit, from a feature being implemented as well.

The point is that there's no reason not to allow private investors to develop a feature, allow them to take the risks and, potentially, the rewards.  But, it'd be nice to allow others to get in on the action who do not have the same type of capital reserves.  Otherwise, we're building a system that is still inherently an oligarchy in design that benefits those with pre-existing capital. 

I understand that all bts owners benefit when such a feature is implemented, but why can't some of us benefit more, if we are willing to pony up the dough?

tl;dr

25% lifetime is too much.  1% is nice.  Allow for potential public / private, i.e. community / private, initiatives to fund features. 

[rgcrypto]

I don't get the entitlement of shareholders on any featured paid by a third party. First, we get the feature for free. Second, if the investor brings in new users, the shareholders of BTS get the transaction fees. That's the only cut we are entitled with are transaction fees unless they do a crowd funding on the platform with User issued assets. Unlimited upside is what's going to attract investors...and we have only gained.

[Empirical1.2]

Unless you are putting your own money up, you have no say in how this feature gets coded.

Shareholders in BTS do have a say in how/what gets coded on BTS.

[triox]

I'm fine with lifetime royalties as long as they're decreasing over time. So say it's 80% until they recoup their investment, then 20% and halving every four years until finally it stays at 1% forever. If BitShares is successful that's 1% of a multi billion $ activity.

As BM said in the other thread: the feature needs to be able to fund it's own development and upgrades.
With time the original code developed with the original investment will get less and less relevant so it only makes sense that it'll receive decreasing share in profit.

[Empirical1.2]

I am hearing some people complaining about ongoing fees or % etc going to those that invested to make them.. but the fact is if the company is going to be operating something that is going to bring tens of millions of users (not kidding), think of all the other transactions and activity this is going to bring Bitshares.

I just hope the community will see past being pound foolish as @Stan put it earlier when we bring proposals like this to create new decentralized businesses that will build on BitShares and bring their entire user base to it.

Omg, 'tens of millons of users (not kidding)' hype and 'pennywise pound foolish' metaphors, you were certainly right to reference the master of hype there

when the choice under discussion is whether to decline to spend 3% to fund development and marketing targeting several orders of magnitude (10 x 10 x 10...) growth, we have a proposition that falls pretty clearly in to the category of "penny wise and pound foolish" 

I hope it's an exciting prospect though, just color me skeptical on the tens of millions of users part for the time being.

yes this would be good but the private investors should never get eternal royalties.

They should get royalties until they have made a good return on their investment for example doubled their money. But there has to be an end date so that bts share holders can make money from it in the future.

Why should BTS as a blockchain get eternal royalties but other investors in features can't?

Yeah what Ethereum has going for it is that third parties can easily build onto the platform and keep a lot of the profits they make. This means a third party would rather fund an Ethereum app than BTS blockchain addition without some lifetime profits. Given that BTS can't afford to pay a lot via dilution, funding some features in this way is a good solution if it doesn't want to be ruthlessly outpaced.

BTS should be allowed to support multiple implementations of that feature, provided they are sufficiently different so survival of the fittest can occur and so we're not tied into only supporting an outdated privacy feature for example  when technology evolves.

The privacy feature is a borderline case as it might delay other needed development if it's prioritised first by CNX. It also doesn't require a lot of external help once it's implemented.

A prediction market though for example is something that would cost more and probably needs to be separately managed and so needs a seperate group interested in specifically developing, marketing and making it a success long term. So that is an example of a feature that would highly benefit from a revenue sharing model.

[cube]

yes this would be good but the private investors should never get eternal royalties.

They should get royalties until they have made a good return on their investment for example doubled their money. But there has to be an end date so that bts share holders can make money from it in the future.

Why should BTS as a blockchain get eternal royalties but other investors in features can't?

It is not the BTS the blockchain getting eternal royalties.  It is the BTS SHAREHOLDERS who should be getting eternal royalties.  BTS shareholders are the ones who sponsored the development of bitshares foundation platform, without which there will not be any privatised features to be built upon.  BTS shareholders have been holding on to their bts unwavering despite the long downturn in bts price. 

BTS shareholders have every rights to determine how these private investors are to be compensated for the capital they put up in building new the privatised features.  The shareholders need to be mindful of how the new development will impact/delay the current development schedule.

Edit: I just discover the mysterious invester is 'onceuponatime' - a long-time bts investor and supporter.  He has my full respect and support.

[BunkerChainLabs-DataSecurityNode]

Here is a real life scenario without going into a lot of details.

Someone recently contacted me to consult on a project. They have the option to either create their own private chain or build their business on BitShares.

One way would mean they own it all top to bottom.

The other would be to attempt to navigate the bitshares community, and introduce various new features to the Bitshares network in order for his business to be able to run with it. It would require a Worker proposal to fork the new features.

They are looking at investing well over $100k to do this. I recommended that they should have control over the fee structure of these features and even suggested to them that we could potentially license or allow others to use these features in their own operations.

I am hearing some people complaining about ongoing fees or % etc going to those that invested to make them.. but the fact is if the company is going to be operating something that is going to bring tens of millions of users (not kidding), think of all the other transactions and activity this is going to bring Bitshares.

I just hope the community will see past being pound foolish as @Stan put it earlier when we bring proposals like this to create new decentralized businesses that will build on BitShares and bring their entire user base to it.

[luckybit]

We should try to separate two independent issues:

1.  If an entrepreneur develops a new DAPP and offers it to BitShares with a revenue sharing model, are we going to vote to install it? 

     (The first time we turn down such an offer will probably be the last time we get one.)

2.  What are all the insanely great ideas for funding such upgrades to BitShares?

We should care about any upgrade's safety, use of resources, and impact on BitShares reputation, etc..  We should not care about how the developer raised funds to develop it or speculate on her motivations for doing so.    Most especially, it is none of our business what method they use to raise their development funds.  Encourage them to innovate.

We should go forth and tell the world about all the ways there are for investors and developers to make money using the BitShares platform.  This should build interest in BitShares more than anything I can think of.  What's the  best thing about Ethereum?  Its attractive to developers.  What's most attractive to developers?  A way to profit from their efforts.

Folks who want to confiscate their profits or cap their upside are being penny wise and pound foolish.

In general, the more a developer/investor can earn from starting a new business on our blockchain, the more they are likely to reinvest in that business to make it more profitable.  That means more features, more polish, and more promotion effort from the developer/investor.  As long as BitShares is getting a cut to cover network costs and earn a profit for its own investors, everybody wins.

The more profitable businesses that are motivated to build on our platform, the more customers will use it, and the more attractive it will be for other businesses.

A virtuous cycle.

I'm sure no one really cares how they raise their funds... The biggest contention here is using funds from a worker proposal and then selling that feature to other chains.  If a company (say cnx) were to create a worker proposal for prediction markets, bts should have a right to profits from the selling that feature to any of the other chains (muse, identabit, etc) since bts is an investor.

The social consensus, it means a sharedrop onto BTS.

[luckybit]

But there has to be an end date so that bts share holders can make money from it in the future.

But that's the beauty of it -- BTS shareholders do profit from it, by getting exponentially improved features and a flood of new users who are drawn to BTS by the new features. So I'm also in the lifetime revenue camp; no end date necessary. It really does seem to be win-win-win all around, and I feel this could prove to be the most exciting BTS development in a long while.

I'm in the eternal revenue camp. If the Bitshares community is willing to fund a worker proposal then after the initial ROI is made by the private feature then the Bitshares community can do their own implementation funded by dilution.

I don't see why people who didn't put any money up should have a profit share. Why?

On the other hand if its just a GUI feature then it's not eternal, there can be other GUIs. Multiple implementations, but until you are ready to pay for those implementations via dilution you should let them have eternal royalties.

I really like the idea of people buying shares in features and getting dividends through lifetime fees. If we were to automate the creation of shares for a proposal like this one, the person/people investing the money or work-hours would own all of them, and if they'd like, they could go public to make some of their money back by selling shares. I think the ability to trade the ownership of the fees could help us with the centralization issue here, as well as give us a way to measure the profitability of different features. I guess it could be argued this could be done with the existing framework but I still like the idea of having it right on the blockchain.

Someone called it "Featureshares". Not a bad idea for marketing purposes.

[luckybit]

yes this would be good but the private investors should never get eternal royalties.

They should get royalties until they have made a good return on their investment for example doubled their money. But there has to be an end date so that bts share holders can make money from it in the future.

Why should BTS as a blockchain get eternal royalties but other investors in features can't?