Is Diluting BTS 2.5% for +5% BitAsset Yield very low cost to Shareholders?

[Empirical1.2]

However, before we do yet another about face and re-implement this, let's have a thorough discussion about the pros and cons of yield / interest on BitAssets. CNX had their reasons for removing it, but were they valid? What data metrics can we isolate to help understand the value (or lack thereof) of this, now that we have some history of both yielding and non-yielding BitAssets.

I believe a key reason for removing it was yield harvesting which made BitAsset yield approach zero & with a lot people hoarding.

Providing yield on USD doesn't work because of yield harvesting, people would create USD and sit on it until the rate of return approached 0.

Using dilution to fund yield hopefully changes that though. While my maths may be bad/overly simplisitic here, but say we used 2.5% dilution to fund BitAsset yield and BTS had a $10 million CAP, at most $5 million BitUSD would be created as the other circa $5 million would need to be short BitUSD. 2.5% of $10 million is $250 000 which is  on $5 million BitUSD. So you're probably going to have yield that is equal to or higher than  at that CAP & not approach zero.

Also even if there's some hoarding, I would rather have the majority of BTS shareholders having a BitUSD account and have the highest USD CAP in crypto as opposed to the $98 000 CAP BitUSD has at the moment. It would also remove a lot of BTS from the centralized exchanges.

http://www.ofnumbers.com/2014/11/22/approximately-70-of-all-bitcoins-have-not-moved-in-6-or-more-months/
I've cited an article referencing how a high percentage of Bitcoin is hoarded but yet there is a reasonable amount of liquidity and high utility (accepted by over 100 000 merchants) because they are attracted to that potential market in terms of value and number of users and the benefits of Bitcoin, so I speculate it would be similar for BitUSD, especially as stable BitUSD is much better for merchants than volatile Bitcoin.

[Empirical1.2]

, great, good idea, i like it, just do it!

My man   

I have a few questions.

1. If we do this, and things seem to go sideways, wouldn't it be just a matter of the Committee adjusting the rate? We can put an end to the experiment going wrong. Or even more direct, shareholders can vote out the Worker, In which case, the risk is manageable on two fronts.

Yes, it could easily be adjusted/removed, but it might be a good idea to commit to a certain dilution rate experiment for a few months at least, so people know it's worth their while to make the effort.

2. Would this mean a much tighter peg to real USD? ie. a premium in the neighbourhood of 1% instead of 50%?

It would be a big incentive to new longs so besides yield harvesting, we would see a genuine increase in new demand on the buy side, we may even have to drop forced settlement to 98/99%, which I'm in favour of anyway to bring the longs closer to the 1-1 peg and not too far above. 

Lowering the forced settlement number is a positive for the shorts so we bring them slightly tighter with that, tonyk's suggestion of splitting the yield so some goes to shorts should incentivize them some more still. Currently though the market isn't excited about BTS future price (having been in a fairly long general downtrend) so if there's a gap in just applying this strategy it's that we may not get enough new demand on the short side and some may still be a little further from the longs than we'd like.


3. What will it cost us if we don't do this?

If we do it we likely rapidly become the Crypto USD market leader in CAP and users, if we don't our current market share of 2% may increase with liquidity measures but not as significantly or rapidly on those metrics. So it costs us market leader position at a time when there is a lot of competition, already 4/5 Crypto USD's on the market, rune's maker and presumably other Ethereum based price stable options coming on soon.

4. Can anybody think of a better way to utilize 50% of the reserve in the short term?

Some are fans of the liquidity specific measures. I like this because the definite benefits are higher imo but the cost is fairly low/neutral to shareholders if they make the effort to yield harvest.

[Thom]

This is a redistribution of future wealth to bitassets' holders.  It encourages bitasset hoarding.  How does it solve the liquidity problem when users are hoarding their bitassets eg bitUSD (ie shorters cannot close their position when users do not wish to sell their bitUSD) ?

it helps the liquidity problem by forcing savers to buy their assets on an illiquid market. the potential yield overcomes this cost and does promote hoarding of bitassets on the smartchain. giving people a great reason to buy the asset is step 1 (learning to walk). the longer the assets are held, the less impact the trading spread has overall.

i think we should take BM up on his offer to code his provision for liquidity incentive but code  in a provision for yield on assets simultaneously

half the money goes to yield and the other half toward this type of liquidity subsidy

chinese only hate dilution if they are not on the receiving end

give them a simple buy and hold option to gain yield and they will not complain about this dilution.

this is no different than any current staking POS mechanism therefore nobody could call it a ponzi without saying that ether is going to be a ponzi when Casper is implemented and all the whales begin harvesting their yield. in fact you could argue that this is the one component that is missing from our mechanism that the crypto community at large demands!

ETH
DASH
PPC all offer it. so why dont we!!

the market is speakig but are we listening?

The elimination of yield on bitUSD is one of the major changes 2.0 ushered in. All the promotion of how the BitShares DEX was able to replace your bank account WENT OUT THE WINDOW with 2.0. Now you want to bring it back? Hey, I was never on board with eliminating it in the first place, but this is yet another example of a unilateral, centralized decision.

However, before we do yet another about face and re-implement this, let's have a thorough discussion about the pros and cons of yield / interest on BitAssets. CNX had their reasons for removing it, but were they valid? What data metrics can we isolate to help understand the value (or lack thereof) of this, now that we have some history of both yielding and non-yielding BitAssets.

[BunkerChainLabs-DataSecurityNode]

, great, good idea, i like it, just do it!

My man   

I have a few questions.

1. If we do this, and things seem to go sideways, wouldn't it be just a matter of the Committee adjusting the rate? We can put an end to the experiment going wrong. Or even more direct, shareholders can vote out the Worker, In which case, the risk is manageable on two fronts.

2. Would this mean a much tighter peg to real USD? ie. a premium in the neighbourhood of 1% instead of 50%?

3. What will it cost us if we don't do this?

4. Can anybody think of a better way to utilize 50% of the reserve in the short term?


As I see it.. traders will go where they see market depth.. and as already noted in other places on the forum, this would make ours by orders of magnitude deeper than others.

If we are talking about a USD market where people can buy at reasonable premium then it will become adoptable by merchants and we then have a settlement vehicle without counterparty risk that merchants can use without having to each create their own UIAs and keeping the wealth outside the DEX. Of course this depends on if my question on #2 is indeed the case.

If we go ahead with this.. I would like to see a nicely coordinated marketing effort both before and after.

[Empirical1.2]

What happens if the price falls and we can't dilute anymore or offer the same yield? People will dump everything. This would be fine as long as the price increases but there's not much backing that up. People will only hoard. At least with subsidized liquidity we are stimulating the use of the DEX.

If the BTS price drops a lot it's more likely people will sell because they're worried about collateral. The presence of yield, even if it's variable, actually provides some incentive to keep holding in that scenario.

At a future date you could even remove/drastically reduce the yield but you would be left with thousands of BitUSD holders that are now familiar with the DEX and it's other advantages and a lot of BTS that has been removed from the centralized exchanges.

I've already referenced how the majority of Bitcoin is hoarded, 70%+ doesn't move for 6 months+, in that old study but it's still gains liquidity and utility the more people that adopt it and the higher it's capitalization.

Also when you have an interest bearing savings account at a bank you may still use it to make and receive payments as well as buy various products and services. This would be getting people to start using BitUSD in the same way. When businesses see thousands of potential customers with lots of price stable BitUSD in their account they can buy anything with in a few seconds then they will be attracted by that potential market and utility will increase.

The potential exploit for the liquidity measure you are more in favour of is self-trading and it's also not a fairly circular/neutral cost like this. So you could spend a lot of money and increase perceived liquidity for a while but not see a significant increase in BitAsset CAP, users, adoption or utility.

[Akado]

What happens if the price falls and we can't dilute anymore or offer the same yield? People will dump everything. This would be fine as long as the price increases but there's not much backing that up. People will only hoard. At least with subsidized liquidity we are stimulating the use of the DEX.

[sudo]

Diluting  at low price   bts die
bts die   bitAsset die
all die

[Zapply]

I wouldn't call it a redistribution of future wealth but of current wealth which can be mitigated by yield harvesting. So it's fairly neutral in cost but with the benefits of removing BTS from centralized exchanges, creating the Crypto USD market leader by CAP and number of holders.

There could be increased liquidity benefits due to number of holders and people moving in and out of their overall BTS/USD positions. As you can see from an old Bitcoin study, 70% of it was hoarded and hadn't moved for 6 months+, http://www.ofnumbers.com/2014/11/22/approximately-70-of-all-bitcoins-have-not-moved-in-6-or-more-months/ yet Bitcoin was still fairly liquid despite the hoarding and had a large amount of utility (100 000+ merchants) because third parties were attracted to the potential market (based on CAP and number of holders.)

As I said though as this is a fairly net neutral cost redistribution, you still have room to make a separate more purely liquidity focused play as well if you choose....

The key is take something will grow value in time backed something Asset will lost value in time
Can't imagine people believe in the other way round you can ignore me you can not ignore the true

[Empirical1.2]

This is a redistribution of future wealth to bitassets' holders.  It encourages bitasset hoarding.  How does it solve the liquidity problem when users are hoarding their bitassets eg bitUSD (ie shorters cannot close their position when users do not wish to sell their bitUSD) ?

I wouldn't call it a redistribution of future wealth but of current wealth which can be mitigated by yield harvesting. So it's fairly neutral in cost but with the benefits of removing BTS from centralized exchanges, creating the Crypto USD market leader by CAP and number of holders.

There could be increased liquidity benefits due to number of holders and people moving in and out of their overall BTS/USD positions. As you can see from an old Bitcoin study, 70% of it was hoarded and hadn't moved for 6 months+, http://www.ofnumbers.com/2014/11/22/approximately-70-of-all-bitcoins-have-not-moved-in-6-or-more-months/ yet Bitcoin was still fairly liquid despite the hoarding and had a large amount of utility (100 000+ merchants) because third parties were attracted to the potential market (based on CAP and number of holders.)

As I said though as this is a fairly net neutral cost redistribution, you still have room to make a separate more purely liquidity focused play as well if you choose....

That's not to say other liquidity centric measures couldn't be adopted if shareholders agree the cost of diluting for yield is fairly low considering it can be mitigated by yield harvesting?

[cube]

This is a redistribution of future wealth to bitassets' holders.  It encourages bitasset hoarding.  How does it solve the liquidity problem when users are hoarding their bitassets eg bitUSD (ie shorters cannot close their position when users do not wish to sell their bitUSD) ?

[fav]

Yield was the only reason I bought usd... So I'd support your idea!

[Empirical1.2]

Isn't that counterproductive?

Offering yield on BitAssets by diluting BTS would drive the BitAsset price up (which is trading 5% above the peg anyway) and BTS price further down. I'd always thought we want BTS to go up, relative to the BitAssets.

Not that tonyk is a fan of the idea but his suggestion of giving 1/2 the dilution to the shorts should bring some of them closer to the peg.
If we reduce forced settlement to 98/99% that will help bring it closer to 1-1.

This wouldn't bring the BTS price down if the majority of it is yield harvesting imo. We're mostly diluting and paying ourselves back the amount we diluted but in the process forcing people to take their BTS off the exchanges onto the DEX and into BitAssets, making us holders of the product we are trying to bootstrap. (In the process making us the Crypto USD market leader by CAP and number of holders)

New BitAsset only holders attracted by the yield would have to buy $1 worth of BTS in order to gain circa $0.05 yield per year... So it should pull more money into BTS than it costs until the initiative reaches a saturation point which could take many years.

[pc]

Isn't that counterproductive?

Offering yield on BitAssets by diluting BTS would drive the BitAsset price up (which is trading 5% above the peg anyway) and BTS price further down. I'd always thought we want BTS to go up, relative to the BitAssets.

[Zapply]

You don't think getting all that BTS off the centralized exchanges and onto the DEX has a lot of value?
Not actually right BTS can be anywhere as long BTS not creating BitAssets BTS is useless in DAC.
You don't think BitUSD having a higher CAP and number of holders than all our Crypto USD competitors combined has value?
BitAssets yield farming is not good for BTS example BitAssets and BTS both have yield which one will you use as saving?
You don't think attracting new users + money into BTS who will learn about The DEX and BitAssets has value?
Yes I believe Bitshares need more new users to grow BTS value to beat BTS inflation give yield to BitAssets hurt BTS value.

[Musewhale]

, great, good idea, i like it, just do it!