Problematic Market fee structure on the UIA/BTS Market

[BitShares News]

if audio helps you understand it better than text.

If text helps you understand it better than audio here is the Hangout Transcript : http://bitsharesnews.info/post/134988144993/bitshares-dev-hangout-bytemaster-12-11-15

[gn1]

Bump.

bytemaster is mentioning about this thread on this week's beyond Bitcoin hangout, between 24:14 - 26:50. You should definitely listen to it, if audio helps you understand it better than text.

https://soundcloud.com/beyond-bitcoin-hangouts/beyond-bitcoin-hangout-12-11-2015-s3

I am hoping that the BitShares community starts seeing the importance of changing the market fee structure of BTS, when considering the risks that UIA issuers are taking.

[gn1]

I really like crediting the fee pool of the issuer with the BTS market fees.  That is like giving "store credit", they can only cash it out by spending it with the blockchain. 

I also like the idea of allowing BTS to yield to UIA fee settings.

Great! I knew you will like the idea. I think this will encourage the UIA issuer to put in more effort and capital in their UIA to try to jumpstart their own asset.

The primary issue I have is that putting in "special cases" for BTS asset that don't apply to all assets makes the code more error prone and the system more complex to explain in general.  Currently most of the code is written in a manner that it doesn't care what the asset types involved are, they are treated equally.

I understand coding to some extent, but my brain operates more like a businessman/trader than a coder, so I don't see the magnitude of the change you need to make in the BitShares code to put in special cases for BTS asset.

Does this sound like a big-sized project?

[bytemaster]

The primary issue I have is that putting in "special cases" for BTS asset that don't apply to all assets makes the code more error prone and the system more complex to explain in general.  Currently most of the code is written in a manner that it doesn't care what the asset types involved are, they are treated equally.

On the flip side, no one wants to see, for example OKCOIN.BTS in order to get around the fee problem...

I agree

[monsterer]

The primary issue I have is that putting in "special cases" for BTS asset that don't apply to all assets makes the code more error prone and the system more complex to explain in general.  Currently most of the code is written in a manner that it doesn't care what the asset types involved are, they are treated equally.

On the flip side, no one wants to see, for example OKCOIN.BTS in order to get around the fee problem...

[bytemaster]

I really like crediting the fee pool of the issuer with the BTS market fees.  That is like giving "store credit", they can only cash it out by spending it with the blockchain. 

I also like the idea of allowing BTS to yield to UIA fee settings. 

The primary issue I have is that putting in "special cases" for BTS asset that don't apply to all assets makes the code more error prone and the system more complex to explain in general.  Currently most of the code is written in a manner that it doesn't care what the asset types involved are, they are treated equally.

[gn1]

#446 redistributes all trading fees from BTS to the referral program.

In my opinion, redistributing percentage-based BTS fees to the referral program should only be done for SmartCoin/BTS pairs but not for UIA/BTS pairs. For SmartCoin/BTS pairs, the committee account should have control over the market fee rate of BTS, and should be able to alter it when the consensus changes. For UIA/BTS pairs, the UIA issuer should have control over the market fee rate of BTS from the update assets page, not the commitee account. It should be designed so that the market fee made in BTS will flow directly into the UIA issuer's fee pool.

However, we have a new metric of referral (UIA creator).  I think my preferred solution is to create a parameter that determines the percent of BTS market fees that go to the issuer of the asset it is traded against, and the remaining can go to the referral program.

I think you need to consider who takes the most risk in the equation. I believe the biggest risk taker is the UIA issuer (who is also the market maker), so the percentage-based fee in BTS should not be split between the referral program and the UIA issuer. The BTS fee one makes in the UIA/BTS market should fully belong to the UIA issuer. Each market should be seen as its own mini business, right? Then, why split profit with the referral program? Do that with SmartCoin, not UIA. Network is already charging 10BTS from the fee pool anyways, so BitShares as a DAC should already be sustainable. Don't let the community become more greedy by milking profit from the UIA issuer.

This way future committee members can balance between UIA issuers and the referral program.

If you let the committee decide on the market fee, UIA issuer cannot do business as they desire. Let me give you an example.

What if you want to set 0.2% market fee but the consensus says 0.4%? What if you want to hold a "no market fee campaign" for the next two month but the consensus says 0.2% market fee? Then, UIA issuer cannot do business here in BitShares!

Letting the committee have control over BTS market fee on "global level" is not feasible for business.

[GaltReport]

Please listen to this week's BeyondBitcoin hangout, bytemaster's comment from 14:21 to 17:55, because it's really really important.

https://soundcloud.com/beyond-bitcoin-hangouts/beyond-bitcoin-hangout-12-04-2015-s3

Some people might not see it, but I believe @bytemaster is talking about something really important here. The topic changed to another subject after bytemaster asked for feedback, but I think we need to keep coming back to this topic over and over again.

I'm a trader myself and also a market maker of my own UIA, so I exactly know what bytemaster is stating here.

As bytemaster states, each market should be seen as its own mini business, as a profit center. So, each asset needs promotion individually.

UIA issuer has to jumpstart their own asset by performing market making themselves in the beginning even at a loss, but if market makers cannot earn any percentage fee from both buy and a sell, you will not be calling that "incentivizing market makers." In fact, it's the exact opposite. Eventually, a small-sized UIA issuer will have a hard time keeping up with creating a buy wall if they cannot receive any percentage-based market fees in BTS.

Furthermore, if worker proposal #446 gets approved, this can kill the game for UIA issuer.

BTS is owned by the null-account, so UIA issuer can't do anything about it, even when the community makes a mistake. Have you thought from an UIA issuer's point of view? What if the community comes up with a "stupid" market fee value? That will affect the UIA issuer's game and UIA issuer has no control over it.

I think BTS should be detached from the null-account, and market fee for BTS should be configurable per UIA level by the UIA issuer, and it should allow percentage based market fee that flows directly (no vesting) into the UIA issuer's Fee pool. That's what it means to promote an asset individually and incentivize the market makers.

  and agree with BM's suggestion on splitting fee between referral program and UIA creator.

[bytemaster]

As bytemaster states, each market should be seen as its own mini business, as a profit center. So, each asset needs promotion individually.

Agreed, what was said in the last mumble was extremely important and I wish BM had a chance to talk about it a bit more extensively.

Furthermore, if worker proposal #446 gets approved, this can kill the game for UIA issuer.

But I don't understand what makes you think that worker proposal #446 can be a threat to businesses based on UIAs.
IMO #446 redistributes trading fees earned on bit-assets from the committee account to the Referral Program. How does this affect UIAs?

#446 redistributes all trading fees from BTS to the referral program.  However, we have a new metric of referral (UIA creator).  I think my preferred solution is to create a parameter that determines the percent of BTS market fees that go to the issuer of the asset it is traded against, and the remaining can go to the referral program.   This way future committee members can balance between UIA issuers and the referral program.  Both systems need rewards to grow and prosper and we should do an ALL or NOTHING with them.  The exact balance is something that can be tweaked over time.

[jakub]

As bytemaster states, each market should be seen as its own mini business, as a profit center. So, each asset needs promotion individually.

Agreed, what was said in the last mumble was extremely important and I wish BM had a chance to talk about it a bit more extensively.

Furthermore, if worker proposal #446 gets approved, this can kill the game for UIA issuer.

But I don't understand what makes you think that worker proposal #446 can be a threat to businesses based on UIAs.
IMO #446 redistributes trading fees earned on bit-assets from the committee account to the Referral Program. How does this affect UIAs?

[Chris4210]

Please listen to this week's BeyondBitcoin hangout, bytemaster's comment from 14:21 to 17:55, because it's really really important.

https://soundcloud.com/beyond-bitcoin-hangouts/beyond-bitcoin-hangout-12-04-2015-s3

Some people might not see it, but I believe @bytemaster is talking about something really important here. The topic changed to another subject after bytemaster asked for feedback, but I think we need to keep coming back to this topic over and over again.

I'm a trader myself and also a market maker of my own UIA, so I exactly know what bytemaster is stating here.

As bytemaster states, each market should be seen as its own mini business, as a profit center. So, each asset needs promotion individually.

UIA issuer has to jumpstart their own asset by performing market making themselves in the beginning even at a loss, but if market makers cannot earn any percentage fee from both buy and a sell, you will not be calling that "incentivizing market makers." In fact, it's the exact opposite. Eventually, a small-sized UIA issuer will have a hard time keeping up with creating a buy wall if they cannot receive any percentage-based market fees in BTS.

Furthermore, if worker proposal #446 gets approved, this can kill the game for UIA issuer.

BTS is owned by the null-account, so UIA issuer can't do anything about it, even when the community makes a mistake. Have you thought from an UIA issuer's point of view? What if the community comes up with a "stupid" market fee value? That will affect the UIA issuer's game and UIA issuer has no control over it.

I think BTS should be detached from the null-account, and market fee for BTS should be configurable per UIA level by the UIA issuer, and it should allow percentage based market fee that flows directly (no vesting) into the UIA issuer's Fee pool. That's what it means to promote an asset individually and incentivize the market makers.

  Good point.

[gn1]

Please listen to this week's BeyondBitcoin hangout, bytemaster's comment from 14:21 to 17:55, because it's really really important.

https://soundcloud.com/beyond-bitcoin-hangouts/beyond-bitcoin-hangout-12-04-2015-s3

Some people might not see it, but I believe @bytemaster is talking about something really important here. The topic changed to another subject after bytemaster asked for feedback, but I think we need to keep coming back to this topic over and over again.

I'm a trader myself and also a market maker of my own UIA, so I exactly know what bytemaster is stating here.

As bytemaster states, each market should be seen as its own mini business, as a profit center. So, each asset needs promotion individually.

UIA issuer has to jumpstart their own asset by performing market making themselves in the beginning even at a loss, but if market makers cannot earn any percentage fee from both buy and a sell, you will not be calling that "incentivizing market makers." In fact, it's the exact opposite. Eventually, a small-sized UIA issuer will have a hard time keeping up with creating a buy wall if they cannot receive any percentage-based market fees in BTS.

Furthermore, if worker proposal #446 gets approved, this can kill the game for UIA issuer.

BTS is owned by the null-account, so UIA issuer can't do anything about it, even when the community makes a mistake. Have you thought from an UIA issuer's point of view? What if the community comes up with a "stupid" market fee value? That will affect the UIA issuer's game and UIA issuer has no control over it.

I think BTS should be detached from the null-account, and market fee for BTS should be configurable per UIA level by the UIA issuer, and it should allow percentage based market fee that flows directly (no vesting) into the UIA issuer's Fee pool. That's what it means to promote an asset individually and incentivize the market makers.

[liondani]

For every seller there is a buyer which means you get your fee.

Well, central exchange gets to charge market fee from "both counterparty per trade", but what you are saying is that BitShares exchange will only allow to charge market fee from the buyer, which is only one side. So, yes. You will get your fee on a sell too, but it only adds up to half compared to centralized exchanges.

...except you charge "double" the price compared to the centralized exchange...   

[monsterer]

That's interesting.  You haven't demonstrated that the exchange would have higher costs and lower revenue if they joined OpenLedger.  You simply argued that they would not collect any of the BTS fees.  Which is false.

Higher costs:

* maintaining the UIAs (core exchange rate and so on)
* managing support requests for bitshares related systems (requiring specialists)

Lower revenue:

* no / lower than 100% trade fee collected for BTS side of each trade

[tbone]

In your example, OKCoin would get up to 80% of the BTS fees IF they are responsible for registering and referring the account that placed the trade which generated those BTS fees.  In the case of an account that OKCoin did not register or refer, why should they collect fees on both sides of the trade when someone else referred/registered the account that generated the BTS fees?  Am I missing something?

The only thing you are missing is why okcoin has no incentive to join the BTS network. If they join bitshares, they have more costs and less revenue than if they just opened their own BTS/CNY market.

That's interesting.  You haven't demonstrated that the exchange would have higher costs and lower revenue if they joined OpenLedger.  You simply argued that they would not collect any of the BTS fees.  Which is false.