A viable alternative to percentage-based transfer fees?

[abit]

Yes @jakub I understand your meaning as you have already explained earlier. I just feel it strange. It's one of the many ways of how crypto currencies change the financial world, isn't it?

[jakub]

I feel that charging a (high) percentage fee for transferring BTS (the core ASSET) is very strange. No other coin does this.

Our real competitors are payment processors like PayPal, bank transfers and debit cards, not the limited niche of "other coins".
People outside the crypto-world are used to percentage-based approach, it makes perfect sense to them.
To any rational person transferring 5k USD is more beneficial than transferring 5 USD.

Our current pricing policy is just plain stupid:
- we charge horrendous transfer fees for small amounts, so nobody can use it for tips and micro-payments
- we give away almost for free a service of transferring bigger amounts, whereas people (outside the crypto-world) are willing to pay much more for this kind of service

As a result, we disregard one segment of our customers and at the same time lose potential revenue in the other segment.
If I presented this "pricing strategy" in the corporate world, I'd be fired.
Rightly so. We need to grow up and face the real world.

[abit]

I still prefer my suggestion, your method can be applied to BitAssets.
this is not only a problem of small or big transfer.

if there's one way to help me to pay to a US bank account from China, then maybe 0.5% fee is OK.

but now transfers of BTS are not so useful yet, not so useful as BTC yet. transfer of BTS are mainly deposit/withdraw to/from exchange, user always compare the fee with other cryptocoins, is 30 BTS not expensive for a 50000 BTS transfer? I think everyone feel it is expensive, not because 30 BTS is too much, but because it is much higher than other coins. 

BitAssets is a little different, perhaps it can be used as payment tool for merchants, so higher fee can be accepted. and can give chance to referrers.

for UIA and privated smartcoin, I think the issuer need to decide how to develop the business, if they feel referrers can help, they can share fees with them, otherwise they can define low transfer fee to attract users. issuers need to have this kind of freedom. issuers always need to pay a lot to bootstrap the market but the high fee always plays a role to drive the users away, this is absurd.

referrers can also be issuers to make profits.

This is what I effectively propose:
- you need to pay 6 BTS for transferring 50 BTS (12% fee, instead of the current 60% fee)
- you need to pay 300 BTS for transferring 50,000 BTS (0.6% fee, instead of the current 0.06% fee)
If you say an increase from 0.06% to 0.6% (on bigger transfers) in exchange for a reduction from 60% to 12% (for smaller transfers) is a bad deal for you - indeed, we are not able to reach an agreement.

I feel that charging a (high) percentage fee for transferring BTS (the core ASSET) is very strange. No other coin does this.

[jakub]

I still prefer my suggestion, your method can be applied to BitAssets.
this is not only a problem of small or big transfer.

if there's one way to help me to pay to a US bank account from China, then maybe 0.5% fee is OK.

but now transfers of BTS are not so useful yet, not so useful as BTC yet. transfer of BTS are mainly deposit/withdraw to/from exchange, user always compare the fee with other cryptocoins, is 30 BTS not expensive for a 50000 BTS transfer? I think everyone feel it is expensive, not because 30 BTS is too much, but because it is much higher than other coins. 

BitAssets is a little different, perhaps it can be used as payment tool for merchants, so higher fee can be accepted. and can give chance to referrers.

for UIA and privated smartcoin, I think the issuer need to decide how to develop the business, if they feel referrers can help, they can share fees with them, otherwise they can define low transfer fee to attract users. issuers need to have this kind of freedom. issuers always need to pay a lot to bootstrap the market but the high fee always plays a role to drive the users away, this is absurd.

referrers can also be issuers to make profits.

This is what I effectively propose:
- you need to pay 6 BTS for transferring 50 BTS (12% fee, instead of the current 60% fee)
- you need to pay 300 BTS for transferring 50,000 BTS (0.6% fee, instead of the current 0.06% fee)
If you say an increase from 0.06% to 0.6% (on bigger transfers) in exchange for a reduction from 60% to 12% (for smaller transfers) is a bad deal for you - indeed, we are not able to reach an agreement.

[bitcrab]

because private/public defined assets are different. 3 is to provide flexibility to private asset issuer to develop their business. 2 is for public assets, mainly consider how system and referrer can make profits. for example, for TCNY, maybe I can set that only fixed fee is charged, no issuer defined fee, but for BitCNY maybe this is not possible.

But this will deprive referrers of an income from private bit-assets, which will hurt for the Referral Program.

can I say that the referral program is now hurting the whole community?
because of the referral program, everyone need to bear the high fee, and we always feel difficult to invite a new players to join.
if you really think it hurt, it's ok that let the committee define the x%, issuer only define the fee, then issuer have to give part of the revenue to referrer but he can define whether he charge the fee from the user.

I understand your point. That's why what I proposed here is an attempt to reconcile the needs of referral businesses with the needs of micro-payments users.

The referral businesses do not aim to earn rewards on small transfers, as their customers usually don't do micro-payments. As a referral business I don't want an 80% cut in transfer fees when a small amount is involved and the fee is ridiculously high. Instead I want an 80% cut in bigger transfers where the transfer fee is a good deal both for me and the user.

So for small amounts the transfer fee can be really small, just enough to cover the network's cost. For bigger amounts users are willing to pay more and that's the area where referral businesses should make their profits.

If we just manage to differentiate between small payments and bigger ones, I think we can make everybody happy. The current problem is that we treat every transfer in one way and that's absolutely crazy from the business perspective. We've been doing this not because it makes sense but because of a technical difficulty: up till now BM has been saying that there is no easy way around it.

I still prefer my suggestion, your method can be applied to BitAssets.
this is not only a problem of small or big transfer.

if there's one way to help me to pay to a US bank account from China, then maybe 0.5% fee is OK.

but now transfers of BTS are not so useful yet, not so useful as BTC yet. transfer of BTS are mainly deposit/withdraw to/from exchange, user always compare the fee with other cryptocoins, is 30 BTS not expensive for a 50000 BTS transfer? I think everyone feel it is expensive, not because 30 BTS is too much, but because it is much higher than other coins. 

BitAssets is a little different, perhaps it can be used as payment tool for merchants, so higher fee can be accepted. and can give chance to referrers.

for UIA and privated smartcoin, I think the issuer need to decide how to develop the business, if they feel referrers can help, they can share fees with them, otherwise they can define low transfer fee to attract users. issuers need to have this kind of freedom. issuers always need to pay a lot to bootstrap the market but the high fee always plays a role to drive the users away, this is absurd.

referrers can also be issuers to make profits.



 

[jakub]

because private/public defined assets are different. 3 is to provide flexibility to private asset issuer to develop their business. 2 is for public assets, mainly consider how system and referrer can make profits. for example, for TCNY, maybe I can set that only fixed fee is charged, no issuer defined fee, but for BitCNY maybe this is not possible.

But this will deprive referrers of an income from private bit-assets, which will hurt for the Referral Program.

can I say that the referral program is now hurting the whole community?
because of the referral program, everyone need to bear the high fee, and we always feel difficult to invite a new players to join.
if you really think it hurt, it's ok that let the committee define the x%, issuer only define the fee, then issuer have to give part of the revenue to referrer but he can define whether he charge the fee from the user.

I understand your point. That's why what I proposed here is an attempt to reconcile the needs of referral businesses with the needs of micro-payments users.

The referral businesses do not aim to earn rewards on small transfers, as their customers usually don't do micro-payments. As a referral business I don't want an 80% cut in transfer fees when a small amount is involved and the fee is ridiculously high. Instead I want an 80% cut in bigger transfers where the transfer fee is a good deal both for me and the user.

So for small amounts the transfer fee can be really small, just enough to cover the network's cost. For bigger amounts users are willing to pay more and that's the area where referral businesses should make their profits.

If we just manage to differentiate between small payments and bigger ones, I think we can make everybody happy. The current problem is that we treat every transfer in one way and that's absolutely crazy from the business perspective. We've been doing this not because it makes sense but because of a technical difficulty: up till now BM has been saying that there is no easy way around it.

[fav]

because private/public defined assets are different. 3 is to provide flexibility to private asset issuer to develop their business. 2 is for public assets, mainly consider how system and referrer can make profits. for example, for TCNY, maybe I can set that only fixed fee is charged, no issuer defined fee, but for BitCNY maybe this is not possible.

But this will deprive referrers of an income from private bit-assets, which will hurt for the Referral Program.

can I say that the referral program is now hurting the whole community?
because of the referral program, everyone need to bear the high fee, and we always feel difficult to invite a new players to join.
if you really think it hurt, it's ok that let the committee define the x%, issuer only define the fee, then issuer have to give part of the revenue to referrer but he can define whether he charge the fee from the user.

you may find it difficult to invite new people. do not talk for the majority

thanks

[bitcrab]

because private/public defined assets are different. 3 is to provide flexibility to private asset issuer to develop their business. 2 is for public assets, mainly consider how system and referrer can make profits. for example, for TCNY, maybe I can set that only fixed fee is charged, no issuer defined fee, but for BitCNY maybe this is not possible.

But this will deprive referrers of an income from private bit-assets, which will hurt for the Referral Program.

can I say that the referral program is now hurting the whole community?
because of the referral program, everyone need to bear the high fee, and we always feel difficult to invite a new players to join.
if you really think it hurt, it's ok that let the committee define the x%, issuer only define the fee, then issuer have to give part of the revenue to referrer but he can define whether he charge the fee from the user.

[jakub]

because private/public defined assets are different. 3 is to provide flexibility to private asset issuer to develop their business. 2 is for public assets, mainly consider how system and referrer can make profits. for example, for TCNY, maybe I can set that only fixed fee is charged, no issuer defined fee, but for BitCNY maybe this is not possible.

But this will deprive referrers of an income from private bit-assets, which will hurt for the Referral Program.

[bitcrab]

1. for BTS transfer a minimum fixed fee(1-5 BTS?) is charged.
2. for BitAssets transfer a tier fee structure is defined(10/30 BTS?)
3. for UIA and privated smartcoin transfer, there will be a fixed fee(1-10 BTS?) + issuer defined fee structure. and x% of the issuer defined fee will go to the referrer, x will be defined by the issuer. the fixed fee will go to the network.

What's the reason concept (3) cannot be applied to regular bit-assets?

because private/public defined assets are different. 3 is to provide flexibility to private asset issuer to develop their business. 2 is for public assets, mainly consider how system and referrer can make profits. for example, for TCNY, maybe I can set that only fixed fee is charged, no issuer defined fee, but for BitCNY maybe this is not possible.

[jakub]

Below is a detailed proposal for a percentage-based transfer fee solution.
The main idea is to derive the BTS value of an asset transfer from the Core Exchange Rate defined by the asset's issuer.

The problem
Having a flat transfer fee of 30 BTS, BitShares is not a competitive payment solution for transfers between the equivalent of $1 and $5, as for non-LTM users the current fee in this range is well above 2%.
The simplest way to solve it would be to lower the transfer fee but this would effectively kill the referral program. On the other hand, a simple percentage-based transfer fee is not doable as for most assets we do not have a way to determine their exact value at any given time.

The goals
There are two important goals I wanted to achieve:
- to allow users to pay lower transfer fees for smaller transfers (while charging them more on bigger transfers)
- to allow referrers to earn extra income associated with bigger transfers (while taking away from them the current income associated with smaller transfers).

The assumptions
The following description uses a fictional asset called BAX but this solution can be applied to all assets (i.e. SmartCoins, private bit-assets, UIAs and FBAs) and all non-stealth transfers.
Also, what I describe below refers to pay-as-you-go users. For LTMs exactly the same rules apply, except for the fact that in this case the referrer's income is redirected to the user's cash-back fund.
CER stands for Core Exchange Rate, an already existing parameter whose value is defined by the asset's issuer.

The concept
The transfer fee can be paid either in BTS or BAX.
(1) If the user chooses to pay the fee in BTS:
- The transfer fee is equal to 1% of the BTS value of the BAX amount being transferred, adjusted by a floor (i.e. minimum fee) and a cap (i.e. maximum fee): 6 BTS and 300 BTS respectively. So effectively the transfer fee is 1% but it is never less than 6 BTS and never more than 300 BTS. Those values are just an example, the actual values will be determined be the committee.
- To establish the BTS value of the transfer, CER is used.
- The fee paid by the user is split as follows: 6 BTS goes to the network, any excess above 6 BTS goes to the referrer.
- The issuer does not earn anything.
(2) If the user chooses to pay the fee in BAX:
Let F be the transfer fee (expressed in BTS) which was calculated as described in (1).
- To establish the BAX equivalent of F, CER is used.
- The issuer receives the entire fee paid by the user in BAX.
- The following amounts are deducted from the asset fee pool: 6 BTS goes to the network, and (F - 6) BTS goes to the referrer.
- The issuer makes a profit or loss, depending on CER being above or below the actual BTS/BAX exchange rate.

The main issue
What happens when the issuer attempts to artificially lower transfer fees on his asset by pretending his asset is not worth much and deliberately keeping CER below the actual BTS/BAX exchange rate?
- for the user: it is cheaper for him to pay the fee in BTS rather than in BAX
- for the issuer: he makes a profit on all those transfers for which the user, for whatever reasons, decides to pay the more expensive fee in BAX (instead of the cheaper one in BTS)
- for the referrer: no matter if the user pays the fee in BAX or BTS, he is deprived of a large part of the referral reward, as due to the distorted CER transfers are interpreted by the system as involving smaller value than they actually are.

How is the issue solved?
By keeping CER artificially low the issuer will effectively discourage users from using his own asset because transfer fees will only be low when paid in BTS, so the process of transferring the asset will be dependent on users having BTS in their wallets to cover the fees. Furthermore, if the issuer distorts CER too much, he'll not be able to benefit from it himself as users will start avoiding paying the fees in BAX. Also, it will be bad PR for the issuer to value his own asset below the market rate. At least in case of SmartCoins and major private bit-assets issuers are not likely to be wiling to sabotage their own assets in this way.

But if it turns out that a large number of issuers try to game the system, we can do the following:
- To enable percentage-based transfer fees, the issuer will be obliged to keep an open ask order on the BTS:BAX market and thus allow anybody to buy BAX at e.g. 120% of CER. As a result, if CER is out of sync with the market rate by more than 20%, the issuer will incur a significant loss.
- If the issuer is not willing to comply with the above requirement, the default flat transfer fee of 30 BTS will be applied.

This is an opt-in feature
As the issuer is the only entity that actually controls CER, the percentage-based transfer fee is a an opt-in feature decided by the issuer.
IMO most issuers will find it beneficial for their assets because:
- assets which are worth something will benefit from having a reasonable pricing structure for transfers
- assets which are worth nothing or almost nothing (i.e. most UIAs) will be able to be transferred almost for free (for 6 BTS instead of the current 30 BTS).
But if an issuer for some reasons does not find the above features beneficial, he will be able to keep the existing flat fee structure.

Conclusion
Being voluntary for issuers, the above proposal is actually targeted to the referral businesses: do they perceive it as a beneficial change for the ecosystem and a fair deal for them?
They will need to forgo the referral income on transfers below the equivalent of $2 but will substantially increase their income on transfers above the equivalent of $10. In the range between $2 and $10 they will get on average half of the income they have now. However the main benefit will be indirect: it's much easier to sell a reasonably priced product.

As a referral business myself, I find this very valuable. Actually, I cannot imagine building a viable business without percentage-based transfer fees because with the current flat fees I'm not able to offer my customers a reasonably priced payment solution for transfers in the most important range, i.e. between the equivalent of $1 and $5, as the current flat fee in this range is well above levels offered by the legacy systems.

EDIT: There is a separate thread dedicated to the above proposal.
https://bitsharestalk.org/index.php/topic,20789.0.html

[jakub]

1. for BTS transfer a minimum fixed fee(1-5 BTS?) is charged.
2. for BitAssets transfer a tier fee structure is defined(10/30 BTS?)
3. for UIA and privated smartcoin transfer, there will be a fixed fee(1-10 BTS?) + issuer defined fee structure. and x% of the issuer defined fee will go to the referrer, x will be defined by the issuer. the fixed fee will go to the network.

What's the reason concept (3) cannot be applied to regular bit-assets?

[bitcrab]

The main point is to turn an asset into a joint enterprise between the issuer and the referrer (they take the risk and share the profits) and to remove the blockchain itself from the equation (the network just cares about covering its fixed costs).

I wonder what @bytemaster thinks of this.

  The crux of this idea is golden IMHO and I would love to hear BM's perspective, both on the concept and how much effort it would take to implement it. No doubt it will not be easy and it has definite GUI requirements. It doesn't strike me as a quick fix for the short term, but it does sound like a very promising idea to incentivize business and put more control into the hands of individuals, while at the same time normalizing the income stream for the network.

the point is good, IMHO BTS itself should just play as a platform, not to define business model, currently all the things are around referral program, not flexible enough.

if an asset-dependent fee can be realized, then I now would like to suggest as below, only for transfer fee:

1. for BTS transfer a minimum fixed fee(1-5 BTS?) is charged.
2. for BitAssets transfer a tier fee structure is defined(10/30 BTS?)
3, for UIA and privated smartcoin transfer, there will be a fixed fee(1-10 BTS?) + issuer defined fee structure. and x% of the issuer defined fee will go to the referrer, x will be defined by the issuer. the fixed fee will go to the network.

the base idea of this suggestion is to avoid conflict of different business models:

BTS is the system token, rudecing its transfer fee to minimum will attract investors/traders.

some partners like to issue UIA/privated smartcoin, so they need to be flexible to define the fee, they may define 0 fee to attract user, or define some high fee to make profit when there product are attractive enough, they can also cooperate with referrers by set the x%.

BitAssets are used mainly for payment, so a tier fee structure is defined, referrers can focus on this area.

 

 

[abit]

Percentage based transfer fees are completely untenable. Every single other coin in the world has a low, fixed fee for any amount sent, bitshares would lose out to the competition and it would be a PR nightmare. Percentage based trade fees on the other hand, are acceptable.

If the fee is charged by IOU/Smart coin issuers then would be OK (in addition to basic network fee). Best if the issuers are able to define several thresholds and % of the fee. Under this condition the committee can control fee of transferring BTS to be low or higher (as demand). Maybe the ones who benefit by the reference program won't agree though.

to me a good idea is like this:
1. for BTS and BitAsset(or at least BTS) transfer charge a minimum fixed fee.(5-10BTS?)
2. for UIA and privated smartcoin issuers can define the transfer fee(percentage, fixed or percentage with a cap).
3. income referrers' income should be mainly from referrals' trading fees, not transfer fees.

high transfer fees is a big psychological hurdle for new comers to join and need to remove asap.

I remember someone else in this forum dislike that "trading fees go to referrals" thing very much. She/He is also an IOU issuer, but in different business.

[jakub]

No doubt it will not be easy and it has definite GUI requirements.

The only GUI requirement I can think of is adding three or four new parameters to the asset configuration panel:
- minimum & maximum transfer fee
- percentage-based transfer fee
- the referrer's share in the issuer's transfer fee profits (I think 80% should be the minimum here but there might also be a cap needed as abit suggested)

The rest is back-end stuff IMO, but it's hard for me judge how complex it would be.