Economic Abstraction and Network Fees

[R]

The pegging thing can be solved with a program all committee members run that adjusts the fees daily to peg to USD/CNY. Obviously there's hassle in running that program and key safety is a concern as well

After BSIP 40 (https://github.com/bitshares/bsips/blob/master/bsip-0040.md) is implemented, the committee members could potentially create a key for this purpose so as to not risk the rest of their committee account's permissions/functionality.

Such a program wouldn't require a powerful VPS, and perhaps it could be run by one committee member to propose the variable change operation & be manually approved by the committee at their discretion? It'd at least take half the effort out of proposing new fees.

[JohnR]

Thanks Armin.  Do you know of any such program running now are you saying hypothetically CMs could run a program like this?

[armin]

The pegging thing can be solved with a program all committee members run that adjusts the fees daily to peg to USD/CNY. Obviously there's hassle in running that program and key safety is a concern as well

[armin]

Nah it won't happen to Bitshares, in the current system most of the assets in circulation (by volume) are derivatives or depend on BTS

[JohnR]

I think fees should still be paid in BTS, however the fees should peg against USD|CNY to be a fixed FIAT value instead of being detached from their intended value when BTS price is volatile (until the committee manually adjusts them). If the committee could set the fee values once then forget about them (until economic policy changes are proposed) that'd be great.

This is what I'm saying in the last.  Although you may have articulated it more clearly!

Also it does seem like network fees should be determined in USD/CNY terms and then have a floating BTS rate.  I see more upside than downside to that.

[R]

I think fees should still be paid in BTS, however the fees should peg against USD|CNY to be a fixed FIAT value instead of being detached from their intended value when BTS price is volatile (until the committee manually adjusts them). If the committee could set the fee values once then forget about them (until economic policy changes are proposed) that'd be great.

[JohnR]

The discussion is what happens to Ether if dapps can leverage tokens to pay for transactions.  The fear is that Ether will lose it's main value proposition if that trend progresses.  On BitShares we do have some degree of economic abstraction because users can pay for fees in assets other than the core token (bitUSD/open.btc/bridge.ltc).  I'm still thinking about how much this will have an impact down the line because the abstracted assets retain a nexus to the core asset: smartcoins via collateral and UIAs via fee pool.  Maybe this undermines the threat of BTS devaluation if down the line BTS is still required.

Question is what about smartcoins that have UIAs as collateral?  Will the fees be paid in BTS through the collateral asset's fee pool?

Also it does seem like network fees should be determined in USD/CNY terms and then have a floating BTS rate.  I see more upside than downside to that.

[armin]

Can you also please explain how the ethereum situation applies to Bitshares? As I currently understand it, as long as BTS has utility it has value

[armin]

Having BTS as the core asset for paying fees is free marketing for the token

[JohnR]

Great link and thank you.  I know this conversation gets brought up from time to time.  I'm looking to open up the conversation on whether economic abstraction is a good or bad thing for BitShares.  The ethereum community takes this issue seriously enough for Vitalik to respond to the idea^1.  He says the dev community is considering going so far as to mandate ether payments over tokens at the protocol level.  This would be tantamount to BitShares saying you can no longer pay for network fees in open.btc. 

Personally I like affording users the ability to pay in whatever asset they choose.  Although I do see a lot of advantages to setting the fee schedule in USD/CNY denomination.  Even if the default fee pay is set in USD, users can still retain the option to manually toggle over to BTS (which would now be variable against the USD rather the the other way around).  Does this make sense?

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1- https://www.reddit.com/r/ethtrader/comments/9ch5ls/the_collapse_of_eth_is_inevitable_techcrunch_can/e5av470/?utm_source=reddit-android

[pc]

Also see discussion in https://github.com/bitshares/bsips/issues/48

[JohnR]

What is economic abstraction?
“Economic abstraction”, in the context of blockchain architecture, refers to the idea that a blockchain architecture can be modified to remove the existence of a single native blockchain token (or “coin”). Rather than the protocol requiring use of a particular token, the protocol would allow the use of any one of a potentially unbounded number of tokens. ^1

In order to use the BTS DEX, users pay network fees.  This is one of the value propositions for holding BTS long term - you will be able to use the BTS DEX so long as you retain them.  It is also a loose analogy to Gas (gwei) on the Ethereum Virtual Machine.  This article "The Collapse of ETH is inevitable" ^2 has caused a lot of controversy in that community.

I would like to open up a discussion for how we should handle this on BitShares.  At the moment, the network allows for economic abstraction with collateralized assets (bitUSD/bitCNY) and UIAs via the fee pool.  I think it's good to give users the flexibility to pay network fees with alternatives to BTS.  I also recognize the great effects that result from default settings. 

I submit that by default network fees should be denominated in bitassets (bitUSD/bitCNY) vs the core token: BTS.  This will provide a de facto demand for bitassets (and indirectly BTS) as well as make future fee changes more effective (and hopefully less necessary).  Of course, if a user does not have bitassets in their account then paying the fee in BTS should still be allowed.  In the past (and likely continuing in the future) network fee changes were demanded by holders as the price of BTS itself rapidly fluctuated, transaction fees could range from 0.004 USD to 0.02 USD within a short period of time.

Since the idea of the network fee is to offer a flat rate for transactions (vs. the marginal (%) rate of gateway and OMO assets) we can flatten the network fee even more by denominating the fee in fiat terms (bitUSD/bitCNY).  This may also make things simpler to understand for new users. 

Ultimately I believe economic abstraction via bitassets is clearly a good thing for BitShares.  We should be more cautious about UIAs but so long as the fee pool is maintained I don't see great cause for alarm on that front.

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1 - https://medium.com/@Vlad_Zamfir/against-economic-abstraction-e27f4cbba5a7
2 - https://techcrunch.com/2018/09/02/the-collapse-of-eth-is-inevitable/