Author Topic: The General Theory of Privately Funded Blockchain Features  (Read 14547 times)

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Offline Stan

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Redneck friends.
Hippies don't wear overalls.

Anything said on these forums does not constitute an intent to create a legal obligation or contract of any kind.   These are merely my opinions which I reserve the right to change at any time.

Offline tonyk

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That's just my INTJ opinion.

One too many INTJ at one place at a time... in my not so humble INTP opinion
Lack of arbitrage is the problem, isn't it. And this 'should' solves it.

Offline Stan

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I'm in favor of not having any one standardized way to fund new features.

But I think the one that will be the most successful will follow the crowd funding model (we won't get guys with a perspective like onceuponatime all that often).

Given that assumption, certain market forces take over.  To raise the necessary funds, the sweetest deal possible will have to be presented to the investors to get them to chip in.  That will drive it towards offering investors a lion's share of the new features' revenue in perpetuity.  (If not, a second proposal will pop up almost immediately offering those better terms and siphoning off investors from the weaker proposal).

That will leave the rest of the voters sitting around wondering if they should hold out for someone else to implement the feature in a way that pays more to the network.  They will probably wait a long time.

Eventually a lot of fully-funded proposals that have been sitting there for a long time waiting for voter approval and doing nothing for BTS network will start to get voted in.

So it will come down to an equilibrium between what investors are willing to fund and what bitshareholders are willing to vote for.  In this deal, I believe the investors will have the upper hand because the voters are going to want to see all that raised money get spent and will have no real way to negotiate with what will have become a take-it-or-leave it offer from the investors.  Time will run out on that money being returned to the investors with no real guarantee that it can be raised again with a lesser deal.

And so most voters will conclude that a bird in the hand is sufficient.

That's just my INTJ opinion.




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Offline Akado

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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.

If you read what I wrote in the context of this thread.. you will see I was just making an illustrated point.. based on a real life scenario I just happen to have instead of just  theories.

Nothing is set in stone.. they could decide to not just take my input and look around this forum for example.. get spooked by all the entitlement talk and other businesses attempting to do business with Bitshares get told how to do their own business.. and just decide to go the other way.

Threads like this one for example where people are talking about limiting their ROIs after they invest the money to do something just drives business opportunity away. It's like trying to plant seeds and tell them/forcing them to never  grow beyond 2" above ground.

They will just find another place to grow.

I wasn't saying what you've accomplish does not have value, I was criticizing how it was said but I understood it wasn't meant to be taken literally.

I agree on the second part. I don't understand what's there not to like, giving it will only bring BTS more income. It's plain nonsense. You're offered to make more profit, for free. Instead you refuse because whoever is offering you that might get more than you... Plain nonsense, but seems to be the thinking of some people, unfortunately.

I say implement all the features you want, as long as BTS profits from it.
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Offline rgcrypto

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If BTS want's to own all of the stealth transaction fees, then it needs to place a competing bid against NoMoreHeroes.  Otherwise let nomorepurchase the feature and get royalties... It's still a massive risk on his part.

There is always the possibility to buyout nomoreheroes if he is ever in the position to sell.

I don't often find myself agreeing with you @lil_jay890 , but on that one I do. If BTS holder want to get 100% of the future profits of this new feature, they need to start getting their head out of their butt and promote a worker proposal. It's always appreciated if onceuponatime wants to reduce his risk and sell UIA to us. But I don't think he should be obligated to do so. If we want to attract investors and devs, we need to make it IRRESISTABLE for them to want to build features, pay for them and get maximum rewards for it. Like I said, FREE features, no risk to us and more transaction fees if the feature is successful...

The people who oppose giving maximum return to investors for giving us is a new feature at no cost to us is "pound foolish". Yes, we provide the infrastructure but THAT IS THE REASON WE CHARGE TRANSACTION FEES. If the feature isn't successful there is no downside for BTS holders.


Offline lil_jay890

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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

This assumes you frame it as a "royalty" instead of a tenant business renting infrastructure on our "shopping mall" platform. 

When a business based on recruiting new customers (e.g. OpenLedger) moves onto our platform, the system gets 20% and the business gets 80% for life.

When a business based on adding a capital improvement (e.g. stealth transfers) moves onto our platform, should they get anything less?  (Keep in mind, we want that business to continue to be profitable so it can afford to grow that business with new features and promotions.)

If we want to encourage businesses of either type to flock to our platform (growing its network effect and generating fees and attracting users for every other member business) we can't make the rent they must pay too high and certainly not 100% after some period of time.

In the end, charging 20% of earnings for use of our platform seems reasonable and something most investors would view as fair. 

A flat 20% is what we have done for share drops.
A flat 20% is what we have done for referrals.
A flat 20% is probably the right answer for tenant businesses.

If you want to maximize the number of tenant businesses.

No mall is ever going to sign a LIFETIME lease, they would be shutting themselves out of possibilities for no reason. They might as well just sell the property outright. If that's what you're suggesting, fine, but are you sure you want to sell 20% of all stealth tx business for only 45k? We shouldn't consider this in terms of some unspoken tradition - let's keep it to a simple business calculation: lifetime 20% is just a BAD DEAL. Bad, one sided deals where one party is left unhappy only lead to future problems.

The reason we can offer lifetime to affiliates is that there can be unlimited number of them and they only make money by producing users.  A stealth tx monopolist has no incentive to bring users, he can sit back and let others do it.

If BTS want's to own all of the stealth transaction fees, then it needs to place a competing bid against NoMoreHeroes.  Otherwise let nomorepurchase the feature and get royalties... It's still a massive risk on his part.

There is always the possibility to buyout nomoreheroes if he is ever in the position to sell.

Offline Shentist

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as i see it "stealth transfer" is a wallet feature and so it is not a core feature for the blockchain

i think a UIA for the wallet is here a better solution

anyone can still do the same with a different UIA and take the profits for stealth transfer.

with a UIA we will have so much more to gain

1. a asset for the bitshares exchange - so more people are attracted to use bitshares
2. the risk that this feature will not be used are given to the UIA investors
3. and this for a lifetime of 20% of the transaction fee is a no brainer - because for a normal transaction the network gets only 20% and the rest goes to referral anyway, so the
BTS holders are loosing nothing at all.
4. this will set the path for many no UIA projects, so much, much more use of the exchange and if you are using bitshares anyway, just use the trading for altcoins and using the
trading with bitassets and using all the features in the future.

i believe we have one of the best core technic in place we need a way to attract faster more projects and they will give more people exposure to our product.

Offline triox

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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

This assumes you frame it as a "royalty" instead of a tenant business renting infrastructure on our "shopping mall" platform. 

When a business based on recruiting new customers (e.g. OpenLedger) moves onto our platform, the system gets 20% and the business gets 80% for life.

When a business based on adding a capital improvement (e.g. stealth transfers) moves onto our platform, should they get anything less?  (Keep in mind, we want that business to continue to be profitable so it can afford to grow that business with new features and promotions.)

If we want to encourage businesses of either type to flock to our platform (growing its network effect and generating fees and attracting users for every other member business) we can't make the rent they must pay too high and certainly not 100% after some period of time.

In the end, charging 20% of earnings for use of our platform seems reasonable and something most investors would view as fair. 

A flat 20% is what we have done for share drops.
A flat 20% is what we have done for referrals.
A flat 20% is probably the right answer for tenant businesses.

If you want to maximize the number of tenant businesses.

No mall is ever going to sign a LIFETIME lease, they would be shutting themselves out of possibilities for no reason. They might as well just sell the property outright. If that's what you're suggesting, fine, but are you sure you want to sell 20% of all stealth tx business for only 45k? We shouldn't consider this in terms of some unspoken tradition - let's keep it to a simple business calculation: lifetime 20% is just a BAD DEAL. Bad, one sided deals where one party is left unhappy only lead to future problems.

The reason we can offer lifetime to affiliates is that there can be unlimited number of them and they only make money by producing users.  A stealth tx monopolist has no incentive to bring users, he can sit back and let others do it.

Offline Samupaha

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Can we come up with a good name for the share-UIA? Here are some examples I've been thinking today:

Dappcoin
Dappshare   
Featureshare (IMO too difficult to pronounce for some non-english speakers)
Royaltycoin
Roicoin (ROI = return on investment)
Sharecoin
Featurecoin
Featcoin (my favourite so far, short to write and easy to pronounce, although might be misheard for "feetcoin" or "fitcoin")

Offline Samupaha

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Agreed, but I don't think it must be viewed as a "monopoly".  OpenLedger will have many exchanges using it and it makes our platform more robust, not necessarily more complicated.  Individual wallets and web sites can decide which of several alternative implementations they want to make available to their customers (hiding or automating choices if there are too many.)

How many versions of iouUSD will we have?  Let the best DAPPs win!  (And don't tax them to death.)  Business platforms never get the lion's share of a businesses revenue.  We need to be lightweight if we want to attract businesses.

Shopping malls don't usually limit how many shoe stores can move in.  In fact, stores of a feather often flock together.

Even Apple's outrageous rates for getting onto the iPhone don't go so far as to demand the lion's share and 100% after some period of time.  BitShares is not big enough (yet) to charge Apple's confiscatory rates.

As with everything, metaphor selection matters.

Yeah, I understand your point. I was mostly thinking private transfers now that the stealth transfer is the first example of privately funded feature. I don't think it would be very good user experience if there was ten different ways to make private transfers (too much hassle to find out what is the best and what others are using). Also wallet developers might get frustrated when there is always coming new features  that do not really add anything new. And wouldn't it also make the blockchain use more resources?

Offline santaclause102

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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

This assumes you frame it as a "royalty" instead of a tenant business renting infrastructure on our "shopping mall" platform. 

When a business based on recruiting new customers (e.g. OpenLedger) moves onto our platform, the system gets 20% and the business gets 80% for life.

When a business based on adding a capital improvement (e.g. stealth transfers) moves onto our platform, should they get anything less?  (Keep in mind, we want that business to continue to be profitable so it can afford to grow that business with new features and promotions.)

If we want to encourage businesses of either type to flock to our platform (growing its network effect and generating fees and attracting users for every other member business) we can't make the rent they must pay too high and certainly not 100% after some period of time.

In the end, charging 20% of earnings for use of our platform seems reasonable and something most investors would view as fair. 

A flat 20% is what we have done for share drops.
A flat 20% is what we have done for referrals.
A flat 20% is probably the right answer for tenant businesses.

If you want to maximize the number of tenant businesses.
Isn't the difference between something like Open ledger and the feature investor that open ledger can easily be replaced by something that does better marketing because it has a better wallet etc. (-> OL is on the business layer) and the feature is hard coded into bitshares and guarentees to generate profit from EVERYONE that uses that feature (no need to innovate more like OL has to to keep the profits coming).
BUT if, like Samupaha pointed out just above this post, that the feature we are talking about here can easily be replaced with a better feature (ring signature or so) then it's a totally different picture.
That would have WIDER implications. Maybe this is even a way to bring competition among those that produce features (this is an advantage that Ethereum has: Competition for the best app / specific feature /solution). Thinking thinking.... :)
« Last Edit: November 24, 2015, 05:22:51 pm by delulo »

Offline BunkerChainLabs-DataSecurityNode

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.

If you read what I wrote in the context of this thread.. you will see I was just making an illustrated point.. based on a real life scenario I just happen to have instead of just  theories.

Nothing is set in stone.. they could decide to not just take my input and look around this forum for example.. get spooked by all the entitlement talk and other businesses attempting to do business with Bitshares get told how to do their own business.. and just decide to go the other way.

Threads like this one for example where people are talking about limiting their ROIs after they invest the money to do something just drives business opportunity away. It's like trying to plant seeds and tell them/forcing them to never  grow beyond 2" above ground.

They will just find another place to grow.
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Offline Stan

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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.

Agreed, but I don't think it must be viewed as a "monopoly".  OpenLedger will have many exchanges using it and it makes our platform more robust, not necessarily more complicated.  Individual wallets and web sites can decide which of several alternative implementations they want to make available to their customers (hiding or automating choices if there are too many.)

How many versions of iouUSD will we have?  Let the best DAPPs win!  (And don't tax them to death.)  Business platforms never get the lion's share of a businesses revenue.  We need to be lightweight if we want to attract businesses.

Shopping malls don't usually limit how many shoe stores can move in.  In fact, stores of a feather often flock together.

Even Apple's outrageous rates for getting onto the iPhone don't go so far as to demand the lion's share and 100% after some period of time.  BitShares is not big enough (yet) to charge Apple's confiscatory rates.

As with everything, metaphor selection matters.
Anything said on these forums does not constitute an intent to create a legal obligation or contract of any kind.   These are merely my opinions which I reserve the right to change at any time.

Offline Samupaha

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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

When Bitshares and the investor are making the deal, we should discuss what kind of lifetime there is to be expected. For example, stealth transfers might get replaced by ring signature transfers in some point if our users demand it. So it is entirely possible that sometimes the investor do not get back all of his investment because the feature becomes obsolete earlier than he has anticipated.

And there might be cases when it's difficult to estimate what the total investment has been. Somebody could make the feature on their free time just for fun and then offer it for Bitshares in exchange for share-UIA.

From Bitshares' point of view, we should always examine every case individually and accept it only if we see that it will generate benefits for us. Developers and investors can make their own calculations, I don't think we should care that much when they get their whole investment back and start to generate profit.

Bitshares should be mainly interested in whether the feature will bring us more users and transaction fees or not and what is the price we have to pay for it. Only price we care is defined in the parameters of the share-UIA. If we think it's too expensive, we can decline and wait for somebody else to make cheaper offer, or fund the feature ourselves from the reserve pool.

Offline Stan

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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

This assumes you frame it as a "royalty" instead of a tenant business renting infrastructure on our "shopping mall" platform. 

When a business based on recruiting new customers (e.g. OpenLedger) moves onto our platform, the system gets 20% and the business gets 80% for life.

When a business based on adding a capital improvement (e.g. stealth transfers) moves onto our platform, should they get anything less?  (Keep in mind, we want that business to continue to be profitable so it can afford to grow that business with new features and promotions.)

If we want to encourage businesses of either type to flock to our platform (growing its network effect and generating fees and attracting users for every other member business) we can't make the rent they must pay too high and certainly not 100% after some period of time.

In the end, charging 20% of earnings for use of our platform seems reasonable and something most investors would view as fair. 

A flat 20% is what we have done for share drops.
A flat 20% is what we have done for referrals.
A flat 20% is probably the right answer for tenant businesses.

If you want to maximize the number of tenant businesses.
« Last Edit: November 24, 2015, 04:58:18 pm by Stan »
Anything said on these forums does not constitute an intent to create a legal obligation or contract of any kind.   These are merely my opinions which I reserve the right to change at any time.