Author Topic: Would you support 2% dilution to BitAsset Yield for a 6 month limited trial?  (Read 28602 times)

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Offline Empirical1.2

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I'm not sure I understand. Are you saying if I create bitusd and keep it I will get a 1% yeild on it?

You should get at least 4% yield p.a on your BitUSD for the 6 months of this trial. (However because you would have to be short BitUSD with half your stake if you wanted your original BTS stake to remain the same, then your effective yield would be at least 2% p.a overall for the duration of this trial. Which would at the very least compensate you for the 2% dilution.)

Explanation:
If we diluted  BTS at 2% a year, that would be $200 000 at the current $10 million CAP.
About $5 million BitUSD can be created at this CAP (because the other $5 million needs to be short BitUSD)

$200 000 on a maximum $5 million BitUSD is a minimum of 4% BitUSD yield per year.

So the dilution for yield is circular in that every shareholder can avoid being diluted by being long BitUSD and short BitUSD at the same time.  (Unless total BitUSD in circulation was > 1/2 the total value of BTS which is possible if millions of BitUSD were created and the BTS price declined. However we could create limits to avoid this & as many shareholders will not participate, the yield will more than likely over-compensate you.)

What this seems to create though is a higher premium on the BitAssets and shorts once again have less incentives? I guess people could "Go long and short the BitAsset, so your BTS position stays the same but you get the yield"? I'm not sure about this but it's what I've read a few times already about this.

Yes go long BitUSD with half your BTS position at 1-1 and short BitUSD with half your BTS stake at 1-1. Then your BTS stake would remain the same overall regardless whether BTS went up or down but provided total BitUSD in circulation is less than 1/2 the value of BTS in total then you would be receiving enough yield on the BitUSD to compensate you for the amount BTS was being diluted.

Regards the increased BitUSD premium. Yes, people would be attracted to become long only BitUSD thanks to yield, which is good as it would create demand for BTS. They would be buying $1 worth of BTS today to get a few cents yield  over the year so this should have a positive BTS price effect. (I would suggest though that we lower forced settlement so BitUSD doesn't trade too far above the peg and as tonyk suggests you could give some of the yield to the short side too to make it closer to 1-1 as opposed to new longs offering a large premium.)

I think that 2% is more than enough. I would suggest a 4-5% APR to whoever qualifies depending on what BM and the community say. I liked BM's proposal and I could go with it. If we suppose that they get 4-5% per year, with 25% of the bitshares are traded on the DEX and with 50% of the traders qualifying for the rewards (i.e based on BM's proposal), the dilution would be 0.5%-0.625% per year.
The numbers are a rough estimate, but let's be honest. Not more than 25% of the shares are going to be traded constantly and not more than half of them are going to qualify for the rewards. We would need 50% and 100% respectively to go above the 2-2.5% per year.

I haven't seen BM's proposal on this?

I'm not sure I understand. Are you saying if I create bitusd and keep it I will get a 1% yeild on it?
i'd also like to know this answer, though it looks like the proposal is something like a 4% yield for borrowing bitUSD short?
What exactly do we mean by dilution anyway? I thought the blockchain specks set BTS supply up front and that can't be changed? I'm uncomfortable with thinking that anyone can vote on changing the supply. Why not recycle fees from the USD-BTS market into some sort of yield instead of diluting?

BTS shareholders can currently vote for dilution up to 5BTS/sec under the current specs  https://bitshares.org/technology/stakeholder-approved-project-funding/

I'm personally against most forms of dilution however this one wouldn't effect me or you if you 'yield harvest', go long BitUSD with half your stake and short BitUSD with the other half. The yield you received on your BitUSD half would be equal too or overcompensate you for the amount BTS was being diluted. However the benefits of incentivizing all of us to remove our BTS from the centralized exchanges and become holders of BitUSD and use the DEX are very large as described in the OP. 

Zero interest rates are good enough in Japan,do not too greedy。
If you want to give Yield  ,you can donation 。
Interest come from business not from dilution .
Where do interest rates come from?
If BTS is money ,dilution will damage BTS.
If BTS is shares, dilution is bluff.

Imagine if you had $100 and I took $2 but said you could have it back if you clapped your hands.
Then you haven't been diluted you still have $100, all I have made you do is clap your hands.

Imagine if we taxed BTS holders 2BTS per 100 BTS per year but then gave it back to them if they clicked a button.
On your account you would see 100 BTS - 2BTS = 98 BTS but then when you clicked a button you would get your 2 BTS back.
This 2BTS came from a tax/dilution but it didn't cost you anything because you just have to click a button to get it back.

Imagine if we taxed BTS holders 2BTS per 100 BTS per year but then gave it back to them if they yield harvested BitCNY. (Went long and short)
Your BTS Stake would be diluted by 2BTS a year but the yield you received on your long BitCNY position would return it to you.
This 2% dilution came from a tax but it didn't cost you anything because you just have to yield harvest BitCNY.

does bank ‘s Yield  come from dilution???????????
NO!!!!!!!!!!!!!!
who lend the money  support the  Yield !!!!!!!!!

A bank can't give you yield on your dollars without finding new dollars or taking the dollars from new people coming in. This is bad  :'(

However if a bank had 10 million shares and then they created 200 000 shares but gave it back to shareholders. Then every shareholder
would have 1.02 per 1 share. Nobody would lose.

If a bank had 10 million shares and then they created 200 000 shares but gave it back to shareholders who opened an account at the bank then every shareholder who opened a bank account would have at least 1.02 per 1 share and only people who didn't open an account would lose. However the bank would have turned all their shareholders into account holders.

So in BTS the yield comes from BTS shareholders, but gets paid back to BTS shareholders if they 'yield harvest' (Go long and short at the same time.)  By getting you to do this we create a lot of BitCNY/BitUSD with a lot of users and help bootstrap Smartcoins.
The BTS shareholders that lose are those that keep their BTS on the centralized exchanges and don't 'yield harvest'

What about yield harvesting?
Every time I say I support a proposal like this, Stan comes
along and says remember what we learned about yield harvesting and everyone says "oh yeah" and the thread dies

In 1.0, I believe BM was right that yield harvesting was bad, because shorts would offer yield to entice longs which went into a large pool but then BTS shareholders would yield harvest, thereby reducing the average yield and discouraging genuine longs.

In this example where we send dilution to the yield, yield harvesting is a great thing because it means shareholders aren't diluted as long as they yield harvest. However it acts as a behaviour incentive to get BTS holders to remove their BTS from the centralized exchanges (which is a big positive) and support Smartcoins by creating BitUSD with half their stake (Which is a big positive).


« Last Edit: February 24, 2016, 04:27:46 am by Empirical1.2 »
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Offline sudo

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bitUSD still lack
you give bitUSD  bitasset?
are you  out of mind?????

Offline sudo

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does bank ‘s Yield  come from dilution???????????
NO!!!!!!!!!!!!!!
who lend the money  support the  Yield !!!!!!!!!

Offline sudo

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Zero interest rates are good enough in Japan,do not too greedy。
If you want to give Yield  ,you can donation 。
Interest come from business not from dilution .
Where do interest rates come from?

 +5% +5% +5% +5% +5% +5% +5% +5% +5%

Offline ebit

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Zero interest rates are good enough in Japan,do not too greedy。
If you want to give Yield  ,you can donation 。
Interest come from business not from dilution .
Where do interest rates come from?

If BTS is money ,dilution will damage BTS.
If BTS is shares, dilution is bluff.
« Last Edit: February 24, 2016, 02:30:54 am by ebit »
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Offline cylonmaker2053

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I'm not sure I understand.

Are you saying if I create bitusd and keep it I will get a 1% yeild on it?

i'd also like to know this answer, though it looks like the proposal is something like a 4% yield for borrowing bitUSD short?

What exactly do we mean by dilution anyway? I thought the blockchain specks set BTS supply up front and that can't be changed? I'm uncomfortable with thinking that anyone can vote on changing the supply. Why not recycle fees from the USD-BTS market into some sort of yield instead of diluting?

tarantulaz

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I think that 2% is more than enough. I would suggest a 4-5% APR to whoever qualifies depending on what BM and the community say. I liked BM's proposal and I could go with it. If we suppose that they get 4-5% per year, with 25% of the bitshares are traded on the DEX and with 50% of the traders qualifying for the rewards (i.e based on BM's proposal), the dilution would be 0.5%-0.625% per year.

The numbers are a rough estimate, but let's be honest. Not more than 25% of the shares are going to be traded constantly and not more than half of them are going to qualify for the rewards. We would need 50% and 100% respectively to go above the 2-2.5% per year.

Offline Akado

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What this seems to create though is a higher premium on the BitAssets and shorts once again have less incentives? I guess people could "Go long and short the BitAsset, so your BTS position stays the same but you get the yield"? I'm not sure about this but it's what I've read a few times already about this.

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Offline JonnyB

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I'm not sure I understand.

Are you saying if I create bitusd and keep it I will get a 1% yeild on it?
I run the @bitshares twitter handle
twitter.com/bitshares

Offline tbone

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Anyone who cares about the future of Bitshares should strongly consider getting behind this proposal.  The cost is low, and the benefits are great.  And we need something like this ASAP.  I would be in favor of focusing this effort fairly equally on BitUSD and BitCNY, perhaps a little less than proportional to the exchange rate.  The current exchange rate is about 6.5 to 1, so I'm thinking something like ~4 to 1.  I would also be in favor of directing a small amount to BitEUR from the start.  So maybe a breakdown of 75% BitUSD, 20% BitCNY, and 5% BitEUR.  Any thoughts?

My main question at this point is, what would the development cost be to add yield?  I'm guessing not too costly.  @bytemaster, can you please give a very rough estimate? 

Another question I have is, how does this proposal make it cheaper to incentivize liquidity?  Thanks in advance.

Offline Empirical1.2

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Terms
2% BTS dilution to BitAsset Yield for 6 months.  (At the current BTS valuation that would translate to circa $100 000 total over 6 months)

Cost to Shareholders
Low cost to you, if you yield harvest.  (Go long and short the BitAsset, so your BTS position stays the same but you get the yield)

Expected Benefits
- BitUSD would go from having the lowest Crypto USD market share to being the Market Leader
- BitUSD will offer more variable yield than you could get on a USD based savings account virtually anywhere
- BTS would be removed from centralized exchanges (Polo & BTC38 currently hold >300 million BTS I believe)
- BitUSD liquidity incentive operations may be cheaper once millions of BitUSD have been created
- BTS shareholders would become users of the DEX and holders of the Smartcoin product we are trying to bootstrap.

Conclusion
The cost to shareholders if they yield harvest is very low but the benefits are possibly very large.
It will be a 6 month trial and can be discontinued if shareholders are unhappy with the results.

Optional Variations
- The BitAsset Yield trial can either be applied to BitUSD only or BitUSD and BitCNY.
- 1% dilution could be used instead, the impact would be lower but so would the cost.
- Up to half the dilution can go to BitAsset shorts so that we bring them closer to the peg.   
 
Considerations
-Due to forced settlement at 100%, BitUSD already trades above the peg. It may be a good idea to reduce forced settlement to a lower amount if this was implemented.
- There will be probably be a coding cost to implement yield

The thread discussing the concept in more detail is here https://bitsharestalk.org/index.php/topic,21547.0.html
« Last Edit: February 23, 2016, 10:21:54 am by Empirical1.2 »
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