Would you support 2% dilution to BitAsset Yield for a 6 month limited trial?

[Empirical1.2]

Work in progress...

I looked at the BSIP outline https://github.com/bitshares/bsips/blob/master/bsip-0001.md

Here is some stuff I have written for one, if anyone wants to turn it into a proper BSIP or suggest changes or create their own variation cool. My main goal is that BTS trials using some of the worker budget for SmartCoin yield in one form or another.

---------------------------

BitUSD Yield Promotion BSIP

100 000 BTS per day, 23% of BTS Worker Budget, for 6 months directed to a BitUSD yield promotion. (75% to going to BitUSD Yield and 25% going to BitUSD shorts)

Lower BitUSD forced settlement to 0.95

good cut at this experiment. i'd recommend flipping the split and making it 75% to shorts and 25% to yield on holding the asset. from my experience, those who borrow our smartcoins into existence are the real heroes. they're tying up a ton of collateral and our markets wouldn't exist without them. those who buy and hold the assets still do some good, but incentivizing buy-and-hold over shorting would likely reduce market liquidity by drying up the order book.

also, diverting 20% of worker funds for just bitUSD seems excessive. what happens if it is a success? we have no slack to start subsidizing other markets without changing the rules of the game for new investors/traders who bought in with those lavish conditions. personally, i think 20% of worker fund diversion for overall systemic trading support is great, but that'd include all subsidies to all smartcoins, not just one test case. we have to consider the impact of reducing dev/worker budget on our long term system health. personally, i'd start with something like 5%.

Regards the 20% of worker funds with 75% to longs, that's because it will be the equivalent of p.a. on 500 million BTS worth of BitUSD and tie up 1 Billion BTS. That's the kind of amount that will remove supply from the market, remove BTS from centralised exchanges & create BTS (For BitUSD demand) & so be extremely positive.

As it's just a 6 month promotion you can remove/curtail/mix it after among other SmartCoins without effecting the market too much.

Whereas using 5% with 75% going to Shorts would provide p.a interest on just 45 million BTS. This amount could easily be met with BTS already on the DEX. So it would have very low/no impact on removing supply, BTS from exchanges and generating new BTS (For BitUSD) demand.

@Empirical1.2, what about leaving it at 75/25% for longs vs. shorts, but use only 8-10% of worker funds?  This way it's more politically palatable and doesn't crowd out development, but still ties up upwards of half a Billion BTS.  Also, you are assuming 5% APR will be required, but isn't it very possible that it might require a lower APR to achieve the same effect, therefore fewer funds utilized may still tie up the desired amount of BTS?

Correct. It's possible a lower variable APR may also suck up a similar amount of BTS into BitUSD. 

The original poll though was for 2% dilution or 140 000 BTS per day, the BSIP outline already reduces that to 100 000. You could reduce it further still to make it more palpable. However as you can see from the example I gave cyclonmaker above, if it's too low it can achieve low/no positive results because it will only suck in BTS that is already active on the DEX. So my personal preference would be to keep it at the already reduced number which we can still be confident will very likely achieve the expected outcomes.

[tbone]

Work in progress...

I looked at the BSIP outline https://github.com/bitshares/bsips/blob/master/bsip-0001.md

Here is some stuff I have written for one, if anyone wants to turn it into a proper BSIP or suggest changes or create their own variation cool. My main goal is that BTS trials using some of the worker budget for SmartCoin yield in one form or another.

---------------------------

BitUSD Yield Promotion BSIP

100 000 BTS per day, 23% of BTS Worker Budget, for 6 months directed to a BitUSD yield promotion. (75% to going to BitUSD Yield and 25% going to BitUSD shorts)

Lower BitUSD forced settlement to 0.95

good cut at this experiment. i'd recommend flipping the split and making it 75% to shorts and 25% to yield on holding the asset. from my experience, those who borrow our smartcoins into existence are the real heroes. they're tying up a ton of collateral and our markets wouldn't exist without them. those who buy and hold the assets still do some good, but incentivizing buy-and-hold over shorting would likely reduce market liquidity by drying up the order book.

also, diverting 20% of worker funds for just bitUSD seems excessive. what happens if it is a success? we have no slack to start subsidizing other markets without changing the rules of the game for new investors/traders who bought in with those lavish conditions. personally, i think 20% of worker fund diversion for overall systemic trading support is great, but that'd include all subsidies to all smartcoins, not just one test case. we have to consider the impact of reducing dev/worker budget on our long term system health. personally, i'd start with something like 5%.

Regards the 20% of worker funds with 75% to longs, that's because it will be the equivalent of p.a. on 500 million BTS worth of BitUSD and tie up 1 Billion BTS. That's the kind of amount that will remove supply from the market, remove BTS from centralised exchanges & create BTS (For BitUSD demand) & so be extremely positive.

As it's just a 6 month promotion you can remove/curtail/mix it after among other SmartCoins without effecting the market too much.

Whereas using 5% with 75% going to Shorts would provide p.a interest on just 45 million BTS. This amount could easily be met with BTS already on the DEX. So it would have very low/no impact on removing supply, BTS from exchanges and generating new BTS (For BitUSD) demand.

@Empirical1.2, what about leaving it at 75/25% for longs vs. shorts, but use only 8-10% of worker funds?  This way it's more politically palatable and doesn't crowd out development, but still ties up upwards of half a Billion BTS.  Also, you are assuming 5% APR will be required, but isn't it very possible that it might require a lower APR to achieve the same effect, therefore fewer funds utilized may still tie up the desired amount of BTS?

[Empirical1.2]

Work in progress...

I looked at the BSIP outline https://github.com/bitshares/bsips/blob/master/bsip-0001.md

Here is some stuff I have written for one, if anyone wants to turn it into a proper BSIP or suggest changes or create their own variation cool. My main goal is that BTS trials using some of the worker budget for SmartCoin yield in one form or another.

---------------------------

BitUSD Yield Promotion BSIP

100 000 BTS per day, 23% of BTS Worker Budget, for 6 months directed to a BitUSD yield promotion. (75% to going to BitUSD Yield and 25% going to BitUSD shorts)

Lower BitUSD forced settlement to 0.95

good cut at this experiment. i'd recommend flipping the split and making it 75% to shorts and 25% to yield on holding the asset. from my experience, those who borrow our smartcoins into existence are the real heroes. they're tying up a ton of collateral and our markets wouldn't exist without them. those who buy and hold the assets still do some good, but incentivizing buy-and-hold over shorting would likely reduce market liquidity by drying up the order book.

also, diverting 20% of worker funds for just bitUSD seems excessive. what happens if it is a success? we have no slack to start subsidizing other markets without changing the rules of the game for new investors/traders who bought in with those lavish conditions. personally, i think 20% of worker fund diversion for overall systemic trading support is great, but that'd include all subsidies to all smartcoins, not just one test case. we have to consider the impact of reducing dev/worker budget on our long term system health. personally, i'd start with something like 5%.

Regards the 20% of worker funds with 75% to longs, that's because it will be the equivalent of p.a. on 500 million BTS worth of BitUSD and tie up 1 Billion BTS. That's the kind of amount that will remove supply from the market, remove BTS from centralised exchanges & create BTS (For BitUSD demand) & so be extremely positive.

As it's just a 6 month promotion you can remove/curtail/mix it after among other SmartCoins without effecting the market too much.

Whereas using 5% with 75% going to Shorts would provide p.a interest on just 45 million BTS. This amount could easily be met with BTS already on the DEX. So it would have very low/no impact on removing supply, BTS from exchanges and generating new BTS (For BitUSD) demand.

[cylonmaker2053]

Work in progress...

I looked at the BSIP outline https://github.com/bitshares/bsips/blob/master/bsip-0001.md

Here is some stuff I have written for one, if anyone wants to turn it into a proper BSIP or suggest changes or create their own variation cool. My main goal is that BTS trials using some of the worker budget for SmartCoin yield in one form or another.

---------------------------

BitUSD Yield Promotion BSIP

100 000 BTS per day, 23% of BTS Worker Budget, for 6 months directed to a BitUSD yield promotion. (75% to going to BitUSD Yield and 25% going to BitUSD shorts)

Lower BitUSD forced settlement to 0.95

good cut at this experiment. i'd recommend flipping the split and making it 75% to shorts and 25% to yield on holding the asset. from my experience, those who borrow our smartcoins into existence are the real heroes. they're tying up a ton of collateral and our markets wouldn't exist without them. those who buy and hold the assets still do some good, but incentivizing buy-and-hold over shorting would likely reduce market liquidity by drying up the order book.

also, diverting 20% of worker funds for just bitUSD seems excessive. what happens if it is a success? we have no slack to start subsidizing other markets without changing the rules of the game for new investors/traders who bought in with those lavish conditions. personally, i think 20% of worker fund diversion for overall systemic trading support is great, but that'd include all subsidies to all smartcoins, not just one test case. we have to consider the impact of reducing dev/worker budget on our long term system health. personally, i'd start with something like 5%.

[Empirical1.2]

Work in progress...

I looked at the BSIP outline https://github.com/bitshares/bsips/blob/master/bsip-0001.md

Here is some stuff I have written for one, if anyone wants to turn it into a proper BSIP or suggest changes or create their own variation cool. My main goal is that BTS trials using some of the worker budget for SmartCoin yield in one form or another.

---------------------------

BitUSD Yield Promotion BSIP

100 000 BTS per day, 23% of BTS Worker Budget, for 6 months directed to a BitUSD yield promotion. (75% to going to BitUSD Yield and 25% going to BitUSD shorts)

Lower BitUSD forced settlement to 0.95

Motivation

SmartCoins are one of the great innovations & USP's of BitShares & bootstrapping SmartCoins is fundamental to BitShares future success.

However SmartCoins have struggled to gain traction or trade within a reasonable range around the peg. Attempts to offer yield by market participants in the past have failed because BTS shareholders engage in yield harvesting effectively driving the yield to zero.

Directing a small amount of BTS to SmartCoin rewards in a manner similar to POS minting offered by the majority of POS competitors solves this because yield harvesting becomes the method of receiving the reward whilst still incentivising additional SmartCoin adoption in a way that is able to offer lucrative yield.

Rationale

The promotion represents an increase in total BTS supply of 0.75% which is negligible when compared to others in the space & can be mitigated by yield harvesting. However this small, easy to mitigate cost is still the equivalent of BitUSD interest on 500 million BTS worth of BitUSD which will tie up 1 Billion worth of BTS in total collateral. So it should remove a lot of BTS from centralized exchanges and increase demand for BTS (For BitUSD). 

Specification

....................


Discussion

Positive Impacts

This promotion should rapidly propel BitUSD from it's current 2% market share to market leader status which will...

Attract Businesses

Encourage a plethora of real world and blockchain based businesses that could benefit from providing real world products and services for price stable crypto USD to integrate BTS or even base themselves on the BTS blockchain.

Attract new customers

Attract people looking for a Swiss 'Bank' with interest on the blockchain. Switzerland is currently charging negative rates for bank deposits and is also sharing customer information with other jurisdictions. A more private BitUSD that pays yield will be extremely attractive.  As Bytmaster said...

If the largest banks can achieve deposits of over $1 trillion dollars with no meaningful interest, how many deposits could BitShares attract and what would that mean for the value of the bank?

 

Increase BTS valuation

Attracting new businesses, users and rapidly becoming SmartCoin leader in a space where many players are attempting to establish themselves, (Uphold, Maker, Nubits, Tether to name a few)  will change the valuation investors place on BTS because our future potential becomes much greater.

The reward will either be going to existing BTS holders in the form of yield harvesting and so be fairly neutral or to new BitUSD holders who will create much more BTS demand (For BitUSD) than the BTS that will be used to fund the promotion.

Removing BTS from Centralized Exchanges

A large percentage of BTS remains on centralized exchanges thereby exposing BTS to centralized exchange failure risk which is counter-productive to the primary goal of the BTS Decentralized Exchange. This proposal will see many BTS holders move to the DEX.

Create long term BitUSD customers

BitUSD has a lot of great advantages and once people can be incentivized to join BitShares and try it many will become long term supporters regardless of the promotion especially given traditional 'banks' pay no interest and many are already charging negative interest.
 
UK research on short term bonuses also suggests a large number join to receive the bonus but then don't move once it ends...

3.78 million savers over the past five years had money in accounts paying attractive short-term bonuses, but failed to move their cash once the deal ended.

Negative impact

If the demand for new BTS is less than the BTS sold to fund the promotion, it will be price negative.

It may create demand for BitUSD above the peg, lowering forced settlement to 0.95 and giving 25% of the yield to shorts should encourage trading closer to the peg. (This promotion should also increase the price of BTS thereby encouraging more people to short.) 

It's even possible that this may create healthy demand on both sides of the peg and thereby significantly reduce the need for other liquidity subsidies.

Summary for Shareholders

The proposal would direct 23% of the worker budget to BitUSD yield for a 6 month promotion in order to help bootstrap SmartCoins. This should increase BitUSD demand,  make BitUSD the Crypto Market leader, remove BTS from centralized exchanges and hopefully be price positive as a result for BTS. You can participate in the yield in a fairly low risk way by yield harvesting with your current BTS stake.

[Empirical1.2]

The immediate overnight impact of a temporary yield promotion would be a rapid expansion of the BitUSD supply. Becoming the crypto USD, Smartcoin market leader will significantly impact the perception of the DEX and it's future potential at a time when we have received a lot of positive momentum and attention.

What we've seen though is the amount of BTS on Polo increasing, if we want all those people who are suddenly interested in BTS to move their BTS off the exchanges, learn about Smartcoins and participate in the DEX then we need to give them a reason/incentive and the yield promotion is a great way to do that.

Now is definitely the time to do this.  Why don't you write up a draft proposal and start getting final inputs before putting it to a vote?

https://github.com/bitshares/bsips

I looked at a BSIP outline here but I won't have time to do one this weekend but if someone wants to give it a go I would definitely support it otherwise I will try get one done next week.

[chono]

The immediate overnight impact of a temporary yield promotion would be a rapid expansion of the BitUSD supply. Becoming the crypto USD, Smartcoin market leader will significantly impact the perception of the DEX and it's future potential at a time when we have received a lot of positive momentum and attention.

What we've seen though is the amount of BTS on Polo increasing, if we want all those people who are suddenly interested in BTS to move their BTS off the exchanges, learn about Smartcoins and participate in the DEX then we need to give them a reason/incentive and the yield promotion is a great way to do that.

Now is definitely the time to do this.  Why don't you write up a draft proposal and start getting final inputs before putting it to a vote?

[tbone]

The immediate overnight impact of a temporary yield promotion would be a rapid expansion of the BitUSD supply. Becoming the crypto USD, Smartcoin market leader will significantly impact the perception of the DEX and it's future potential at a time when we have received a lot of positive momentum and attention.

What we've seen though is the amount of BTS on Polo increasing, if we want all those people who are suddenly interested in BTS to move their BTS off the exchanges, learn about Smartcoins and participate in the DEX then we need to give them a reason/incentive and the yield promotion is a great way to do that.

Now is definitely the time to do this.  Why don't you write up a draft proposal and start getting final inputs before putting it to a vote?

[chono]

The immediate overnight impact of a temporary yield promotion would be a rapid expansion of the BitUSD supply. Becoming the crypto USD, Smartcoin market leader will significantly impact the perception of the DEX and it's future potential at a time when we have received a lot of positive momentum and attention.

What we've seen though is the amount of BTS on Polo increasing, if we want all those people who are suddenly interested in BTS to move their BTS off the exchanges, learn about Smartcoins and participate in the DEX then we need to give them a reason/incentive and the yield promotion is a great way to do that.

[Empirical1.2]

The immediate overnight impact of a temporary yield promotion would be a rapid expansion of the BitUSD supply. Becoming the crypto USD, Smartcoin market leader will significantly impact the perception of the DEX and it's future potential at a time when we have received a lot of positive momentum and attention.

What we've seen though is the amount of BTS on Polo increasing, if we want all those people who are suddenly interested in BTS to move their BTS off the exchanges, learn about Smartcoins and participate in the DEX then we need to give them a reason/incentive and the yield promotion is a great way to do that.

[tbone]

What happens when the trial ends? Won't people be disappointed? However, if we keep it going, what if there's a point where we can't dilute any more? People won't care about it any more

it'd be an experiment with the expectation of continuing if successful. i agree with @Empirical1.2 in that it shouldn't be advertised as a yield promotion event, but rather as a trial permanent feature. those who want it to remain a fixed feature have more incentive to participate up front.

Definitely agree that we should continue if the experiment is successful.  But I think what @Empircal1.2 was saying is that it SHOULD be advertised as a promotion.  That way it will be expected if/when it's discontinued.  Or if we continue it, people will be pleasantly surprised.  I agree it should be communicated as a promotion for these reasons.

[cylonmaker2053]

What happens when the trial ends? Won't people be disappointed? However, if we keep it going, what if there's a point where we can't dilute any more? People won't care about it any more

it'd be an experiment with the expectation of continuing if successful. i agree with @Empirical1.2 in that it shouldn't be advertised as a yield promotion event, but rather as a trial permanent feature. those who want it to remain a fixed feature have more incentive to participate up front.

[Empirical1.2]

What happens when the trial ends? Won't people be disappointed? However, if we keep it going, what if there's a point where we can't dilute any more? People won't care about it any more

If you advertise it as a yield promotion then the market won't expect it to continue beyond the end date/indefinitely.

But yes there is a point where the cost of the reward in terms of BTS sell pressure it creates is more than the amount of corresponding new demand for BTS it brings in. So even if it did work well and was continued at some point in the future it would be phased out/removed. (In that growth stage of Smartcoins though, which could last many years you would have attracted BTS (For BitAsset) Demand at a much higher pace than the cost and so BTS value would grow in that time in the process bootstrapping SmartCoins.)

By becoming the Smartcoin market leader by CAP and number of holders we will be the most attractive to merchants and other services because of the size of our potential market much the same way 100 000+ offer products and services for BTC instead of a much smaller market/offering like BTS. This utility will add value & liquidity to BitAssets and so make them more attractive than competitors even without yield.

There are also expectations of widespread negative interest rates in the coming years well below -1%. http://www.zerohedge.com/news/2016-02-10/something-very-disturbing-spotted-morgan-stanley-presentation-slide
So once BitAssets are bootstrapped most people may still rather keep them in BitUSD at 0% where they are also private, unseizable and free from capital controls etc. 

This other post discussing it may be of interest https://bitsharestalk.org/index.php?topic=21641.0

[Akado]

What happens when the trial ends? Won't people be disappointed? However, if we keep it going, what if there's a point where we can't dilute any more? People won't care about it any more

[Empirical1.2]

Yes, it does appear that this "yield harvesting" is no different than what  DASH has successfully done with its "Masternode" incentive to lock up value on the blockchain creating scarcity on the open market and raising its share price. 

And since DASH has an enviable market cap from our perspective (one that would speed up our development funding), then I am on board.  Because after all, the one thing we need in order to achieve our dreams here is dev funding.  Imagine what we could do, and how fast we could do it if our market cap was around 30 million like DASH.

  The higher the BTS valuation the more we potentially have in $ terms to spend on development.   

Offerings like DASH have to offer much higher POS rewards because the currency they're offering it on is very volatile. Whereas with BTS a very low amount directed to BitUSD will make it very attractive, due to USD's low volatility. So I believe thanks to Smartcoins we can attract higher BTS demand for a much lower cost. (However in both cases you can mitigate the individual cost by participating in the reward yourself.)

Decred is also interesting. (I own some but I'm generally not a fan as they have 150%+ year 1 inflation so their upside/ability to maintain a very high valuation is limited.) However in order to participate in their lock up POS rewards you need to buy a ticket which are limited to circa 40 000. (So these DCR tickets are a good proxy for a very limited BTS) While currently overvalued imo, you can see the DCR POS ticket price has increased over 1400% in 14 days (from 2-29) as demand for that limited gateway token increases to participate in their POS rewards. https://dcrstats.com/

Similarly we could expect demand for BitUSD rewards flowing through a very limited BTS to have a strong positive price effect on BTS. (& because BitUSD has low volatility, variable BitUSD yield will create constant new BTS demand unlike DCR who will see demand for their POS rewards fluctuate considerably.)