Sharedrop Theory & BitUSD Yield - Increasing BTS value now and bootstrapping DEX

[Empirical1.2]

I started to think more about incentivizing fiat liquidity... In your OP you offered two choices: signup/deposit bonuses & subsidizing yield and exchange liquidity. I think we could do both of these to attract more users and create more liquidity in fiat/smartcoin markets.

- Signup bonuses to people who verify themselves in Openledger. It doesn't need to be a big one, because BTS price is so low that even low value sums seems big for newbies. 1000 BTS bonus for 100 first verified users would cost only 100 000 BTS.

- Deposit bonuses for users that make their first OPEN.USD/EUR/CNY deposit.

Personally I don't think Sign-Up bonuses are a good way for a DAC to attract users/bootstrap if they have to use shares to fund it. (For example, even though our Market CAP is $10 million dollars, a $100 000 promotion for example would cost much much more in terms of the sell pressure it creates. So it's incredibly hard to make up that high cost. It's also counter-productive to bootstrapping a DAC because a declining share price will lose you more existing supporters than a bonus paid in shares to new users attracts)

No need to do high cost project. 1000 BTS for verifying and for first deposit for 100 new users would cost 200 000 BTS which is about 800 USD. We could try this as a campaign and see how it works. If we see good results (more liquidity in fiat/smartcoin markets) we can do it again and stop when we have enough orders. Fiat liquidity is quite important and we won't see it without verified users. I'd like to see at least 5000 USD/EUR in 5 % from spot price.

This is not a sharedrop for random people but a thankyou-bonus for becoming a verified user. We need them because unverified users can't deposit and withdraw fiat currencies. Of course I'm open to other ideas as well, this is just a first one that popped to my mind today.

I think the cost is higher when you use BTS but yeah it seems relatively cheap to trial.

I don't know much about market making but wouldn't you be better of incentivising the liquidity directly?

NuBits for example on CCDEK has NBT/EUR, $5000 on the bid and ask side daily in a tight spread at a cost of $20 per day it seems http://cybnate.github.io/index-liquidbits.html

[Samupaha]

I started to think more about incentivizing fiat liquidity... In your OP you offered two choices: signup/deposit bonuses & subsidizing yield and exchange liquidity. I think we could do both of these to attract more users and create more liquidity in fiat/smartcoin markets.

- Signup bonuses to people who verify themselves in Openledger. It doesn't need to be a big one, because BTS price is so low that even low value sums seems big for newbies. 1000 BTS bonus for 100 first verified users would cost only 100 000 BTS.

- Deposit bonuses for users that make their first OPEN.USD/EUR/CNY deposit.

Personally I don't think Sign-Up bonuses are a good way for a DAC to attract users/bootstrap if they have to use shares to fund it. (For example, even though our Market CAP is $10 million dollars, a $100 000 promotion for example would cost much much more in terms of the sell pressure it creates. So it's incredibly hard to make up that high cost. It's also counter-productive to bootstrapping a DAC because a declining share price will lose you more existing supporters than a bonus paid in shares to new users attracts)

No need to do high cost project. 1000 BTS for verifying and for first deposit for 100 new users would cost 200 000 BTS which is about 800 USD. We could try this as a campaign and see how it works. If we see good results (more liquidity in fiat/smartcoin markets) we can do it again and stop when we have enough orders. Fiat liquidity is quite important and we won't see it without verified users. I'd like to see at least 5000 USD/EUR in 5 % from spot price.

This is not a sharedrop for random people but a thankyou-bonus for becoming a verified user. We need them because unverified users can't deposit and withdraw fiat currencies. Of course I'm open to other ideas as well, this is just a first one that popped to my mind today.

[cylonmaker2053]

i'm still a fan of the 2.0 concept of segregating yield from the smartcoin and enabling it in a bond market. Paying yield for simply holding smartcoins without the accompanying lending function is sort of a dead capital concept.

The concept outlined in the OP, doesn't preclude a bond market and may even help bootstrap BitAssets to the point where they could support a thriving bond market sooner.

All else being equal, would you rather hold a BitUSD that was earning yield or a BitUSD that wasn't?

Do you agree that new users receiving the BitUSD yield in future would first have to make a much larger BTS (For BitUSD) purchase today?

Yes, of course that's one way to induce more BTS buying today, but it also blows our load prematurely IMO by allocating whatever funds we decide to subsidize that yield. It also changes course yet again, which has been a widespread criticism of our community, and would lead to another course change in the future if we set up a better bond market option and then stopped paying yield on smartcoins to direct it to bonds. Being flexible has merits and this community has exhibited it can make changes without falling apart, which is a positive attribute to our governance, but change still brings uncertainty that i think we can do without at the moment.

we had (or have) a roadmap for 2.0 that includes a bond market, so i'm just more a fan of continuing that course to meet expectations than to change (even if there's near term utility).

[Empirical1.2]

I started to think more about incentivizing fiat liquidity... In your OP you offered two choices: signup/deposit bonuses & subsidizing yield and exchange liquidity. I think we could do both of these to attract more users and create more liquidity in fiat/smartcoin markets.

- Signup bonuses to people who verify themselves in Openledger. It doesn't need to be a big one, because BTS price is so low that even low value sums seems big for newbies. 1000 BTS bonus for 100 first verified users would cost only 100 000 BTS.

- Deposit bonuses for users that make their first OPEN.USD/EUR/CNY deposit.

Personally I don't think Sign-Up bonuses are a good way for a DAC to attract users/bootstrap if they have to use shares to fund it. (For example, even though our Market CAP is $10 million dollars, a $100 000 promotion for example would cost much much more in terms of the sell pressure it creates. So it's incredibly hard to make up that high cost. It's also counter-productive to bootstrapping a DAC because a declining share price will lose you more existing supporters than a bonus paid in shares to new users attracts)

There's also very few examples of give-aways or sharedrops paid for in immediately tradeable shares being done successfully.
https://bitsharestalk.org/index.php/topic,21609.msg281549.html#msg281549
https://bitsharestalk.org/index.php/topic,4155.0.html

i'm still a fan of the 2.0 concept of segregating yield from the smartcoin and enabling it in a bond market. Paying yield for simply holding smartcoins without the accompanying lending function is sort of a dead capital concept.

The concept outlined in the OP, doesn't preclude a bond market and may even help bootstrap BitAssets to the point where they could support a thriving bond market sooner.

All else being equal, would you rather hold a BitUSD that was earning yield or a BitUSD that wasn't?

Do you agree that new users receiving the BitUSD yield in future would first have to make a much larger BTS (For BitUSD) purchase today?

Lets say the obligations amounted to 3% per year. For every $30 000 of BTS put up for sale to fund the obligation over the next 12 months ($2500 a month) there would have been $1 000 000 in new BTS demand (To purchase the BitUSD to be entitled to that obligation) So rather than the short term valuation loss experienced with Sharedrops/Bonuses, BTS would experience very large BTS demand growth & so the promotion would rapidly increase the value of BTS in the near term.
In fact until such time as annual new BTS demand attracted by that specific promotion was less than 3% of BitUSD currently in circulation it would be a net gain to BTS.

Unless there is a major flaw in that concept I don't know how we could not do it and remain competitive to be honest because if someone else applied it, they would be able to offer the same BitUSD product as us, except theirs would have a basic lucrative yield. (Which would be self-funding, increase the value of their DAC and bootstrap their BitUSD.)  That higher valuation would then allow them to afford more spending on other development & outcompete BTS in other areas too.

[sudo]

usd-bitUSD gateway is far more important than  what  BitUSD Yield

[Samupaha]

@bytemaster made a good point in the latest hangout. Why pay interest to all bitUSD? Wouldn't it be more effective if we paid only for bitUSD that is in the orderbook?

Of course this will still create yield harvesting. People will just put their orders so far from the spot price that they will never execute. But it's still way more better than people just creating bitusd only for themselves.

That sounds like it would be a liquidity measure but a poor one, if as you say you could place it on the orderbook in such a way as I wouldn't get filled anyway. (Especially if you still kept forced settlement?)

I meant this like a some kind of a compromise solution. It's almost like your proposal, but users have to do one more thing: put the bitUSD in the orderbook.

The point of paying variable yield on all BitUSD is to attract non trader types who ideally won't even want to see the DEX but just purchase BitUSD  via a Bitcoin/Fiat bridge with the intention of holding it for 1-3 years & ultimately spend some of it on BitUSD products and services.  This would attract millions of dollars in new BitUSD (BTS) demand in a way that would increase the value of BTS shares until total BitUSD in circulation increased annually by less than the variable yield %.

(When it's a worker proposal going towards yield, yield harvesting by regular shareholders isn't a bad thing either imo as it allows shareholders to mitigate the cost in way that also converts our shareholders to Smartcoin holders (The product we are trying to bootstrap), gets BTS off the centralized exchanges and a bunch of other good stuff.)

I get your point and will probably vote yes if there is going to be a worker proposal. I'm just not 100 % sure if this is a best way to act right now. Six months is a long time when we are continuously developing new features and everything is volatile. I'd rather see short term tests to see if something works or not and then decide if it's profitable to continue.

I started to think more about incentivizing fiat liquidity... In your OP you offered two choices: signup/deposit bonuses & subsidizing yield and exchange liquidity. I think we could do both of these to attract more users and create more liquidity in fiat/smartcoin markets.

- Signup bonuses to people who verify themselves in Openledger. It doesn't need to be a big one, because BTS price is so low that even low value sums seems big for newbies. 1000 BTS bonus for 100 first verified users would cost only 100 000 BTS.

- Deposit bonuses for users that make their first OPEN.USD/EUR/CNY deposit.

- Smartcoin yield like I mentioned in the earlier message. It's paid for smartcoins that are in the orderbook. By actively telling people that bitUSD-EUR-CNY/OPEN.USD-EUR-CNY markets are a great trade pairs to use for yield harvesting (potential profits in addition to yield) we could get quite a lot smartcoin supply in there.

The goal of this is bootstrapping fiat/smartcoin markets. We could test this first with small amounts of BTS and see what happens. If we just get people do their first deposits and put their first orders in the exchange we'll create much better chances for network effect.

[yvv]

If you want to subsidize liquidity for a single pair, why not to try easy way first, like pooled market making? Create a dedicated market making worker, and lend him $150K worth of BTS (from reserve pool or crowd fund or both). This mm worker should issue 50K bitUSD and put a 50K wall on each side of USD:BTS book, then trade back and forth at low spread. Buy low, sell high. If the wall on either side is consumed, lend more funds and put it back.  At the end of proposal period, mm should return all funds to reserve/contributors. Any profit or loss should be shared.

[cylonmaker2053]

i'm still a fan of the 2.0 concept of segregating yield from the smartcoin and enabling it in a bond market. Yield is something that comes from lending money, at risk, to someone else doing something productive with it (the source of ability to repay). Paying yield for simply holding smartcoins without the accompanying lending function is sort of a dead capital concept. with 1.0 i was enamored with the idea and even thought of starting a business channeling savers into bitUSD simply to collect yield, but after a long time thinking about it and seeing lessons learned from 1.0, i think it better to stay on track with the 2.0 plan --pivoting from plans induces uncertainty, less trust in our network.

a bond market is much healthier than simply paying yield for holding smartcoins. both will help with liquidity by boosting demand for our products, but the former enables a lending at risk mechanism rewarded by yield. The borrowed funds can be used for economically productive activities. for instance, if we try my favorite idea of a Bitshares Treasury bill/bond (the system issuing these for our key markets, like USD-BTS), then we have our DAC basically borrowing funds from investors, paying yield with recycled fees from the exchanges (a source of real econ value from our core business), and the DAC can use the proceeds for valuable activities, like paying workers to improve network infrastructure.

That's just the first step. We should ultimately have the flexibility for UIBs in which anyone (ideally businesses) can borrow money by issuing bonds on our DEX.

The liquidity boosting mechanism comes from denominating the debt instruments in smartcoins.

A future business venture would naturally come from crypto banks that take bitUSD (or other) deposits and allocate them to productive activities  like UIA, UIB, or Bitshares Treasury offerings, the venture performing some sort of monitoring function for savers.

[CLains]

Brilliant post Empirical! Very clear and convincing. 

[Empirical1.2]

@bytemaster made a good point in the latest hangout. Why pay interest to all bitUSD? Wouldn't it be more effective if we paid only for bitUSD that is in the orderbook?

Of course this will still create yield harvesting. People will just put their orders so far from the spot price that they will never execute. But it's still way more better than people just creating bitusd only for themselves.

That sounds like it would be a liquidity measure but a poor one, if as you say you could place it on the orderbook in such a way as I wouldn't get filled anyway. (Especially if you still kept forced settlement?)

In terms of paying interest for orders on the book, I would probably look to NuBits which I think incentivizes a tight range as well and achieves $50 000 of daily liquidity for circa $100. http://cybnate.github.io/index-liquidbits.html
However I think they've been discussing another measure which might be what you're referring to, if that does a good job for a reasonable cost too, great.

The point of paying variable yield on all BitUSD is to attract non trader types who ideally won't even want to see the DEX but just purchase BitUSD  via a Bitcoin/Fiat bridge with the intention of holding it for 1-3 years & ultimately spend some of it on BitUSD products and services.  This would attract millions of dollars in new BitUSD (BTS) demand in a way that would increase the value of BTS shares until total BitUSD in circulation increased annually by less than the variable yield %.

(When it's a worker proposal going towards yield, yield harvesting by regular shareholders isn't a bad thing either imo as it allows shareholders to mitigate the cost in way that also converts our shareholders to Smartcoin holders (The product we are trying to bootstrap), gets BTS off the centralized exchanges and a bunch of other good stuff.)

[chryspano]

People will just put their orders so far from the spot price that they will never execute.

That's why he also proposed some min-max limitations like 10mins 24h

Orders from traders that are geting filled too early(self trading) or too late(orders far from spot price) are not rewarded.

[Samupaha]

@bytemaster made a good point in the latest hangout. Why pay interest to all bitUSD? Wouldn't it be more effective if we paid only for bitUSD that is in the orderbook?

Of course this will still create yield harvesting. People will just put their orders so far from the spot price that they will never execute. But it's still way more better than people just creating bitusd only for themselves.

One possible benefit: increased liquidity in bitUSD/fiat-USD markets (right now we have only OPEN.USD but hopefully we get more gateways in the future). Easy way to make money would be setting orders to bitUSD/OPEN.USD market for 3-5 % profit. Relative price isn't moving to anywhere so it doesn't even need a bot. In the worst case user gets only the yield, in a good case he makes also money with trading.

We should also give yield for bitCNY and bitEUR to incentivize use of OPEN.CNY and OPEN.EUR. Liquid bitasset/fiat-markets could be really great for our exchange. I bet @ccedk will love this idea!

[Empirical1.2]

btc yield hardly ever falls below 40%*
we for sure will beat that with 2.5% interest on bitAssests....cause we are decentralized and we have proven this beats the hell out of centralized exchanges any time.

*Interesting enough if BTC  did not have that "no dilution, dilution thingy" , you know the same "hard cap total, the  BTS has,  and steady supply of new minted coins"... it will never have this ridiculous interest, but instead a much higher price.

But all we can do is copy the bad (like 5 years old bad, which in crypto terms is 50 or 75 years old bad)...

- Yes centralized exchanges have historically had a high failure rate which must be taken into account when considering yield.
(The BTC yield is derived from BTC lending. Speeding up BitAsset adoption to the point where we could realistically support an active bond market may help us compete in that market too?)

- Bitcoin is far more volatile than USD which is why USD based products can offer very small yield but attract lots of demand.

- BTC may attract a small part of their speculative portfolio while USD with Yield may attract a small part of their USD savings, currently kept in increasingly risky banks, which already charge negative yield/interest in some countries and soon possibly many more.

[Empirical1.2]

@Empirical, I asked @fuzzy (see link below) to put your idea on the agenda for today's mumble hangout.  Will you be on hand to discuss?

https://bitsharestalk.org/index.php/topic,21647.msg282162.html#msg282162

I won't unfortunately, but I'd definitely be interested to hear BM's take on it, if he's had a chance to look at it.

[tbone]

@Empirical, I asked @fuzzy (see link below) to put your idea on the agenda for today's mumble hangout.  Will you be on hand to discuss?

https://bitsharestalk.org/index.php/topic,21647.msg282162.html#msg282162