Author Topic: BSIP86: 1000:1 Core BTS Token Reverse Split  (Read 483 times)

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Offline litepresence

BSIP86: 1000:1 Core BTS Token Reverse Split
« on: December 30, 2019, 08:27:22 pm »
https://github.com/litepresence/bsips/blob/patch-1/bsip-0086.md

Code: [Select]
    BSIP: BSIP 86
    Title: 1000:1 Reverse Split of Core BTS Token
    Authors: litepresence finitestate@tutamail.com
    Status: Draft
    Type: Protocol
    Created: 2019-12-30
    Discussion: https://bitsharestalk.org/index.php?topic=31970.0


# Abstract

As we approach Jan 1, 2020, the current trading price for BTS core token vs. BTC has fallen below 200 satoshi.  It also fell below 200 satoshi in February 2018.  Since inception, the price of the core BTS token has spent about 50% of its time below 1000 satoshi vs. BTC.  Beneath 1000 satoshi, BTS has only had 3 significant figures to trade at centralized exchanges.  Significant figures of a number are the non-leading-zero digits, which carry meaning - contributing to its measurement resolution.

In stock markets, stock splits and reverse stock splits are routine actions performed by corporations, upon consent of shareholders.  We find in traditional stock markets, prices are maintained such that there are always between 4 and 5 significant figures vs. the national currency.   That is, most stock prices, in high volume markets, typically range from 10.00 to 999.99.   When they get outside of that range, a stock split; or reverse stock split is a routine consideration taken up among shareholders and initiated by corporate management.   

Exchanges do not tend to change their user interface or back-end to accommodate assets, which do not fit within their existing framework.  In Bitcoin markets, that framework allows for precision up to 8 digits; 0.00000000.  Likewise in USD and CNY markets, the precision offered is typically 0.00.   


# Motivation

The motivation of this split is to increase share price immediately; to prevent delisting risk, encourage listing acceptance at new exchanges, and more generally encourage higher trade volume at centralized exchanges, by removing the delisting threat.   


# Rational

Exchanges generally specify a minimum bid price for an asset to be listed.  If the asset falls below this bid price and remains lower than that threshold level over a certain period, it risks being delisted from the exchange.  In the cryptocurrency space this price threshold is often proprietary, though experience shows it is typically set between 200 and 500 satoshi.  Secondly, in fear of being stuck with a delisted asset, traders are hesitant to purchase a currency who's exchange price is approaching the delisting threshold.   Over time, this rational fear decreases trading volume, which has a cascading effect on the price of an already weakened asset.  Further, when a coin is delisted from exchange there is a typically a sharp, immediately negative effect on market price.   

Additionally, when an asset price is at the bottom end of 3 significant figures, such as is the current case of Bitshares at 200 satoshi; there is now 0.5% change in value for every up or down tick in price.  At 100 satoshi, that becomes one full percent change in value for every tick in tradable asset price vs BTC (the core currency BTS is traded against at most centralized exchanges).  The core properties of money are Durability, Portability, Divisibility and Intrinsic value.   When price is moving in ticks of half-a-percent measurment resolution at every trade, the properties of Divisibility and Intrinsic Value come into question. 

In traditional stock markets, upon a reverse stock split, there is an immediate and proportional change in market price to the split ratio.   Instead of trading at 0.00000200 in CEX markets, Bitshares would immediately trade at 0.00200000.   Markets are very reliable and resilient in this regard.   There would be no immediate effect on market cap or the vaule of individual holdings vs. USD, CNY, or BTC.  However, the delisting risk profile would immediately and permanently change. 

The BTS:USD price, likewise would move from $0.0149 (current) to $14.90 on markets.  This would open doors for the BTS:USD pairing, where exchanges specify price in cents, to be a rational consideration.


# Specifications

The specification for this change is simple:

- 1000:1 reverse split
- Core token asset precision changed from 5 to 8
- All open orders on DEX vs the core BTS token would be scaled accordingly
- All loans used to issue bitASSETs would also be scaled

Currently the chain supports 15 digits in format:

Code: [Select]
    X,XXX,XXX,XXX.XXXXX
   
After the split it still supports 15 digits in the new format:

Code: [Select]
    X,XXX,XXX.XXXXXXXX
Current maximum supply is:

Code: [Select]
    3,600,570,502.00000
   
After the split maximum supply is:

Code: [Select]
    3,600,570.00000000 (or if possible 3,600,570.50200000)
Put simply:

However many BTS are in existence is divided by 1000.  However many you have personally is divided by 1000. 

If there is rounding to be done, round down.

If it is technically less challenging to "air drop" a new token at 1000:1 ratio and rename it:

Code: [Select]
    newBTS, BTS3, bitBTS, coreBTS, BTS2020, etc.
Then lock trading / transfer of the original BTS core token, to initiate the reverse split; this would be acceptable as well, so long as all major exchanges are put on notice of the upcoming change and agree to distribute the air drop after the protocol upgrade.


# Discussion

https://bitsharestalk.org/index.php?topic=31970.0


# Summary for Shareholders


Significant figures in financial markets send key signals to both traders and exchange operators.   BTS has consistently traded at 3 significant figures vs BTC in satoshis; and less than 1 US Dollar (currently 1.5 cents).   Making this change to the core protocol, will eliminate delisting risk at centralized exchanges due to the very concrete issue of divisibility vs. the value of Bitcoin; while opening doors to USD markets which trade with 2 decimal precision.


# Copyright:

WTFPL - wtfpl.net


# See Also

Quote
The number one reason for a reverse stock split is because the stock exchanges—like the NYSE or Nasdaq—set minimum price requirements for shares that trade on their exchanges. And when a company’s shares decline to near - or below - that level, the easiest way to stay in compliance with the exchange is to reduce the number of outstanding shares so that the price of the individual shares - like magic - automatically rises. And when that happens, the company’s shares can remain trading on the exchange.

- https://cabotwealth.com/daily/how-to-invest/reverse-stock-splits-shareholders/

# Additional Resources

- https://www.investopedia.com/terms/r/reversesplit.asp
- https://www.investopedia.com/ask/answers/06/reversestocksplit.asp
- https://www.fool.com/knowledge-center/whats-a-reverse-stock-split-and-can-it-really-help.aspx
- https://www.wallstreetmojo.com/reverse-stock-split
- https://en.wikipedia.org/wiki/Reverse_stock_split
- https://www.upcounsel.com/reverse-stock-split
- https://www.stocksplithistory.com/reverse-stock-splits
- https://finance.zacks.com/reverse-stock-split-good-bad-2298.html
« Last Edit: December 31, 2019, 02:56:24 pm by litepresence »

Offline chigbolu

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Re: BSIP86: 1000:1 Core BTS Token Reverse Split
« Reply #1 on: December 31, 2019, 06:55:59 am »
Reverse stock split will not solve BTS problem, it might create more

Offline litepresence

Re: BSIP86: 1000:1 Core BTS Token Reverse Split
« Reply #2 on: December 31, 2019, 03:03:17 pm »
Reverse stock split will not solve BTS problem, it might create more
In traditional rhetoric this is called a Proof Surrogate. Please expand on your thoughts, else this is just a logical fallacy.
« Last Edit: December 31, 2019, 03:09:03 pm by litepresence »