Author Topic: Proposed Future DAC Delegate Pay Model  (Read 24737 times)

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Offline CLains

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Many have expressed the opinion that dilution should be avoided and that is the preferred solution.  It is always better to fund growth from profits rather than via dilution if you have enough profits to grow fast enough.

I am going to contend that dilution and spending from profits are the same thing.

1) Lets suppose that BTSX takes off and delegates are earning $10,000 per day
2) Lets suppose that the cost for running a node is $100 per day.

Under the no dilution argument $9900 per day should be paid to the shareholders rather than left to the discretion of the delegates because this will maximize shareholder value "today".   Spending this $9900 is diluting the shareholders by denying them a potential buyback. 

It all comes down to something fundamental that this analogy will explain:

If you are starting a road construction company and on day one you have enough money to hire a bunch of people with shovels then you can build 1 mile per day and earn $100.  It will require 4 years of operation to save enough to backhoes and bulldozers and once you have the backhoes and bulldozers you can build 100 miles per day and earn $20,000 per day. 

If the company had issued shares earlier to buy the bulldozers and backhoes in year 1 then the profits of the company would be significantly higher for the next 3 years. 

Companies that have a "no dilution clause" in the shareholders agreement cannot attract new capital to grow and thus the new capital flows to competitors which see the successful business model of the road building company with shovels and puts their money into a competitor.

So you can never stop dilution because if you don't dilute your own shares to raise capital the market will dilute your market share with competitors who issued shares in their own companies that are now competing with your company.

Take Bitcoin for example:  it is unable to fund more than a small team of developers paid for by DONATIONS which in turn centralize development decisions in the hands of those paying the bills.   In order to grow people have to build companies AROUND bitcoin but gain nothing from the value this adds to Bitcoin.   Thus as fast as the Bitcoin ecosystem appears to be growing it is very slow compared to what could be done if the money spent on mining were spent on providing payment infrastructure and adoption incentives.

Do you really think that BTSX can fund 10 years of development on a couple million dollars?   Here is what BTSX needs to grow to the Multi-Billion dollar network we all want to see:

1) A web development team of 10 people producing and maintain a web wallet.
2) A backend development team of 10 c++ developers producing countless tests, enhancing performance, and improving security.
3) A mobile app development team of 10 people focusing only on maximizing ease of use on mobile apps.
4) A legal team working around the clock to lay the ground work for companies like Overstock and help guide the development team
5) A massive referral network / marketing campaign similar to how PayPal got bootstrapped.
6) A dozen exchanges / gateways facilitating bringing money into/out of BTSX while following all regulatory issues. 
       - each of these exchanges/gateways needs a team of people to integrate their systems with BTSX

Total cost of maintaining that kind of infrastructure?  At least $10 million per year for 10 years or $100 million dollars.

Do you really think a project can raise enough funding prior to having a proven / working base system and expect that funding to last for 10 years?
Do you really want a foundation to be sitting on 10 years worth of funding in advance?
Do you really want it to be forever centralized in the original developers / foundation with the initial funding?
Do you really want developers to be developing at a slower pace despite having funds today so they don't run out of funds in the future?

These are all the issues people must grapple with.   

I am working on a plan to keep BTSX up to date with the best possible software for 10+ years without adding dilution to BTSX.   But for new systems AGS/PTS holders benefit greatly from a larger initial allocation + dilution under their control rather than a smaller initial allocation with no control over how the 80% dilution they could face would be allocated.

 +5% +5% +5%

Infinitely curious about dat plan now :D

Offline emski

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I just want to add, as BM himself said, if we do not include it in the toolkit the competitors will.

So, what is the reason to not include 2 kind of delegates (i.e. delegates and workers) in the toolkit, again?

"Business offer" is essentially a worker. It could be anything - Marketing, Infrastructure Builder, CEO, Strategic Deal, Partnership.
Delegates still only sign blocks and support the network. "Workers" have no responsibility other than doing their job.
I don't see a point where you should merge these 2 roles.

Offline tonyk

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I just want to add, as BM himself said, if we do not include it in the toolkit the competitors will.

So, what is the reason to not include 2 kind of delegates (i.e. delegates and workers) in the toolkit, again?
Lack of arbitrage is the problem, isn't it. And this 'should' solves it.

Offline emski

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I have an alternative proposal:

Define a Business offer as follows:
1 Pay a fee in order to register "Business Offer". The amount of the fee is X * <requested income per block>
2 Delegates publish approved Business Offer slate which can be empty. When you approve a delegate your balance automatically approves the delegate's Business Offer slate.
3 "Business Offers" collected 50% + 1 of all voting balances are granted <requested income per block> each block.

Assumptions: We can determine the amount of all voting balances.

Side Feature Proposals/Requests: "Voting Transaction" defined as follows:
A transaction that changes a vote for a balance. It needs to be signed by the private key corresponding to the address holding the balance OR an "Active Voting Key".
"Active Voting Key" being a key assigned to an address that can sign only "Voting Transaction" but not spending transactions. (Similar to account active key)
This will resolve the issue with cold storage voting. Furthermore it should allow voting for BTSX held in collateral (we want that right? I think all BTSX balance should vote and none of the bitassets should vote).

Offline donkeypong

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I have spent the last couple of days following this thread and trying to understand the proposal better. It didn't taste good at first, but the more I've understood of this, I think I like it. Set a maximum dilution rate and the number of business delegates that this community can agree on. Start modest and be willing to expand those later. Then if delegates are essentially bringing in more business for us, that will more than justify a bit of dilution, since everyone ultimately profits. Those things don't worry me, because I think we'll get it right. And if we don't, there will be more fine-tuning until the tweaks hit the proper balance.

We're watching evolution take place here in fast motion; it's like watching a time-lapse video of natural selection in action.

The only thing that still bothers me about this is that we must take care not to make the voters' job too difficult. It has to be simple. And yet there needs to be some assurance that a cadre of delegates cannot easily take over the system by manipulating those simple voters.

I think this proposal will make BitShares more flexible to allow for growth, while funding development, which is essential. If we're greedy on the Social Consensus now, then someone will fork the shit out of these while we're arguing about allocations, and they won't look back because they'll have all the investment they need (and we won't). I continue to be amazed by Bytemaster's acumen. Ultimately, this proposal solves issues that could come up 6-24 months from now. I'd much rather deal with them now.

Offline muse-umum

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Here are my suggestions:

1. To have two kinds of delegates.  The normal delegates like the ones we have in BTSX, and the delegates who are going to launch projects (dilute, the so called business delegates).

2. The pay fee per block for the normal ones can’t be more than 2*average.

3. Only after getting at least X% ( X= 50 or 30...) of all the votes should a business delegate be able to produce blocks.  He should burn Y * pay fee per block (Y = 100 or 300…..) to register.

4. The total number of all the active delegates is 101. The number of active business delegates can’t be more than Z (Z= 10 or 5…).

5. Set upper bound for the inflation. Suppose initial supply of Notes is 2 billion, 35% are allocated to PTS holders, 35% are allocated to AGS holders, which means 700 million for each.  Then the upper bound of Notes that all the delegates can get paid together is 5 billion, which means P/A holders eventually are allocated by at least 10% of all the supply (2 + 5 = 7 billion). Each year at most A% (A = 5, or 10) of 5 billion Notes can be produced by delegates.

I also have them posted on cob's music launch model thread.

Offline bitcoinerS

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I promised myself not to post in this thread!

Now, go spank yourself.  :P
>>> approve bitcoiners

Offline bitcoinerS

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You cannot know what percent of shares are "apathetic" or "available for voting" because shares held as bids/asks/collateral/cold storage may not be voting. 

Shares should be voting while sitting in open orders or as collateral. I do not see why they would not.
>>> approve bitcoiners

Offline Riverhead


You will never see 51% approval due to apathy, lost stake, etc.

Motivation to avoid downtime helps the entire network... delegates should be doing that anyway.

51% is a pipe dream. Look at the current state of things. We have about six thousand delegates waiting in the wings and only about 15% - 18% of the shares voting. I suppose technically that's 25% - 30% since nearly half the shares are unclaimed as of yet.

Offline amencon

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Sorry if I missed the explanation reading through the thread but how does the increased delegate pay (shares added through dilution) get allocated for the benefit of the DAC?

Let's say a DAC has been in existance for a couple years and shareholders decide some capital needs to be raised to develop a better web wallet (or whatever).  With this new proposal, would competing development individuals or companies all create delegates with a pay rate than they deem sufficient to compensate them for the work and compete to be voted in by shareholders?  Would that mean that every vendor "hired" by the DAC to do contract work would then need to introduce themselves as a delegate and "campaign" for a chance to be paid for the work they intend to do?

Thanks for any clarification.

Offline gamey

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Why are we trying combine a Board of Directors with normal employees?


Because this is primarily software development and this how software development is done.  You do things in stages and complexity is usually added in pieces.  We still have either late stage alpha or beta software, so adding levels of complexity is not really a good idea unless they are absolutely needed.
I speak for myself and only myself.

Offline Pheonike


Why are we trying combine a Board of Directors with normal employees? There is a reason why there is a separation. Delegates are the like someone said the IT department. Signing blocks are there primary job. If they want to be on the BoD then they should campaign separately and get paid independently for that work.

I think Delegates should just get paid on pure block performance with a flat fee per block. The shareholders can vote on how much that fee is. Then the only decision a delegate has to make is if he can afford to continue being a delegate. We should also put the lower third delegates(by votes) plus the 101 standbys on a rotating time or block limit. This will allow standbys a change to earn income to help pay for their resources. It also makes colluding a little harder. 

A Board members role to make sure all facets of the Bitshares eco-system are running smooth and find profitable ways to grow it. They are responsible for finding the best proposals and bringing them to shares holders to vote. They also responsible for overseeing those projects.  I'm not saying a delegate can't be a Board member, but board members shouldn't have to be delegates.

Offline Empirical1.1

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I even like having as little as 5 positions to focus on that can get access to a budget flow and be the accountable face of the DAC.

The 101 Delegates are like an IT role to me, while incredibly important it is separate and can't be followed all the time especially in multiple DAC's whereas the top 5 key people can.

I also still don't like inflation/dilution. I prefer setting aside 10% of the shares initially with a social consensus on how many will be released a year. (Like 25% of the remaining total a year).
So unless the business plan is flawed/there's a great opportunity/there's a great emergency, then there will be no need for inflation, only the distribution of shares that have been set aside in the business plan.

So you would say that only the top 5 delegates can receive more income than transaction fees.

If we were going to keep the existing system then yes, I would be happier if only the top 5 trusted delegates got more than transaction fees and allocated them as necessary. (They would be the most well known, trusted and it would be easier to track and hold 5 people's actions to account than 101.)

But I also don't mind if there ended up being up to 5 key separate positions, like some are suggesting, so Brian could campaign to be 'marketing director' & get access to the/a budget without running a delegate for example.

Offline theoretical

I propose 101 "technical delegates" as currently, plus up to 101 "business delegates"

This proposal was unexpectedly contentious.  The key words are up to -- I expect the number of business delegates at any one time to be very far below the limit.  I don't think there are anywhere near 101 organizations currently operating within the BitShares space whose models justify inflation.  I'm not sure that there will ever be anywhere near 101 organizations that we want to be funding directly from inflation.

The 101 number was intended to be more along the lines of a technical protocol-level limit.  Initially recipients of the inflation would likely be I3 and perhaps one to three other key partners.

But if we get a couple more solid partners, we don't want to be in a situation of "A quorum of shareholders agrees this fifth partner would really help us, but the code really can't support more than four, so to add them we have to kick somebody out, oh noes what do we do?"
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Offline bytemaster

I even like having as little as 5 positions to focus on that can get access to a budget flow and be the accountable face of the DAC.

The 101 Delegates are like an IT role to me, while incredibly important it is separate and can't be followed all the time especially in multiple DAC's whereas the top 5 key people can.

I also still don't like inflation/dilution. I prefer setting aside 10% of the shares initially with a social consensus on how many will be released a year. (Like 25% of the remaining total a year).
So unless the business plan is flawed/there's a great opportunity/there's a great emergency, then there will be no need for inflation, only the distribution of shares that have been set aside in the business plan.

So you would say that only the top 5 delegates can receive more income than transaction fees. 

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