BSIP-019 Draft: "Introducing profit sharing/dividends to Bitshares"
Preface
I spoke during the 25th Bitshares Hangout regarding Bitshares improvement proposals (BSIPs), that we should be utilizing the reserve pool to fund workers and that we should all write up BSIPs after having a productive discussion on a great Bitshares idea.
A thread on Bitsharestalk was held back in April about profit-sharing within Bitshares DEX, the majority of the feedback was positive and a couple months later I've taken the initiative to write up an BSIP for this feature.
I have created a pull request on GitHub to get this BSIP officially added to the Bitshares BSIP repo.
I'd greatly appreciate input on the idea, especially the 'further research' area.
Thanks,
CM.
EDIT: Updated BSIP-019!
BSIP: #019
Title: Introducing profit sharing/dividends to Bitshares
Authors: Customminer
Status: Draft
Type: Protocol
Created: 2017-06-18
Primary Discussion: https://bitsharestalk.org/index.php/topic,23981.0.html, https://bitsharestalk.org/index.php/topic,23981.msg304489.html#msg304489
Similar Discussions: https://bitsharestalk.org/index.php/topic,23706.0.html , https://bitsharestalk.org/index.php/topic,21476.msg279498.html#msg279498 , https://bitsharestalk.org/index.php/topic,23707.0.html
Replaces: N/A
Superseded-By: N/A
Worker: None yet - propose bounty?
Abstract
The introduction of 'profit sharing / dividends' for [BTS|MPA|UIA] on the Bitshares DEX, either via redistribution of fees ([BTS|MPA|UIA]) or issuance (sharedrop) of additional tokens (UIA only) against asset holders (not simply collateral).
Motivation
One of the major selling points of BTSX back in 2014 was the 5% (really variable x%) on 'anything' marketing.
The idea that anyone could securely hold MPAs long term in their wallet and receive better 'interest' rates than that FIAT banks were offering was (and remains) a powerful message that had me (and a lot of other users) sold on Bitshares.
During the migration from BTSX (BTS 0.9x) to BTS 2.0 we removed 'socialized yield' due to 'yield harvesting', however I believe that its removal without an established replacement income stream for asset holders was a mistake (one that we can ammend).
The motivation of UIA dividends through sharedropping (additionally issued tokens) is to replicate the distribution mechanism of POS cryptocurrencies, plausibly enabling pos cryptos to migrate entirely to the BTS DEX.
The Bitshares DEX recently turned a profit!
We can reallocate fee redistribution without increasing fees by reducing referral fee allocation.
Peerplays has already implemented profit sharing in graphene.
Rational
- The potential for earning more interest on smartcoins than centralized banks offer for FIAT deposits (with near zero risk) could drive many new users to pick the BTS DEX over centralized banks for storing their savings.
- An increased demand for smartcoins leads to an increased supply and thus a reduction in the quantity of liquid BTS (since 200-300% BTS are locked up as collateral for each smartcoin).
- Providing dividend functionality to UIA issuers introduces potential for new UIA to be created with this functionality in mind.
- Other cryptocurrency platforms offer profit-sharing/dividends, such as Peerplays/NXT/CounterParty/DigixDAO/LBRY/Waves/Dash.
- New types of UIA could be made possible, driving fees to the reserve pool when registered.
- By incentivizing Bitshares users to hold their BTS on the DEX instead of on centralized exchanges we minimize the risk of said centralized exchanges having a massive voting weight with which they could disrupt BTS operations by voting maliciously.
Specifications
Creation of fee redistribution variables for committee/asset-issuer to set
The consensus regarding fee redistribution was that the values should be decided by the committee (or the asset issuer for UIA).
Committee fee redistribution values required: reserve-pool, referral, bitAsset holders, BTS holders, LTM members, Non-LTM members.
Implementation of peerplays profit sharing mechanism
The user 'Bunkerchain labs' posted "Implement our profit sharing code thanks to Peerplays development", a large portion of the work for this BSIP may be complete.
Discussion
A quote from the 'Socialized yield is broken' blog post:
"Under BitShares the BitAsset holders receive a yield simply by holding BitUSD. This yield was between 1% and 5% APR on average. Unfortunately, yield harvesting can happen at any time by someone shorting to themselves to gain a very low risk return and undermining goal of encouraging people to buy and hold BitUSD. The yield was funded from transaction fees and by interest paid by shorts."
The concept of "Collateralized Bonds" has yet to materialize within Bitshares 2.0, so in effect we cut asset holders out of fee redistribution (by removing 'socialized yield') without providing a replacement source of income for holding assets on the Bitshares DEX.
The vast majority of the gathered fees were from non-trading transactions (registering assets, accounts, etc).
Further research
- Should exchanges be exempt from receiving dividends?
- Should LTM users receive a separate bonus dividend?
- Should this BSIP be split in two? One for focusing on MPA's, the other on UIAs?
- Can we pay out dividends in MPA, or will we have to distribute BTS?
- Who can perform this work?
Summary for Shareholders
- No worker proposal has been created yet, input from coders regarding the cost is neccessary.
- This BSIP does not propose values for these fees, this is up to the discretion of the network & committee.
- The fees distributed towards the referral system will be reduced to make room for profit-sharing.
Copyright
Potentially peerplays for their profit-sharing functionality - MIT?
See Also
N/A
I'd like to see this working live in Peerplays first before it's added to Bitshares, but once it's proven in Peerplays its an easy win for us.
An exclude option would be nice too so that exchanges could be left out.
We can always try it out on the bitshares testnet to see if it works, it might be a few months before we see dividends take place on the peerplays network (since no games have been launched yet).
I really like the idea of dividend payments for a UIA. It would make it easier to distribute profits to asset holders.
This and improved sharedrop/sendmany functionality for UIA would be great, being able to distribute 'x' UIA against y Asset holders.
If its possible to recreate 'sendmany' functionality within the BTS DEX, I'd massively appreciate a tutorial on how to do so (Anyone reading).
I would support a share drop dividend model with some fixed reserve allocation. Ie. if the reserve exceeds 5% of BTS supply the excess is paid via sharedrop on BTS held in openledger wallets.
That's different from this BSIP though, we're proposing to move some of the fees that are currently going to the referral system to dividends, what you're proposing is to dip into the reserve pool to provide dividends which would inflate the circulating BTS, no?
Sorry, I missed the referral part! My thought was that as BTS becomes profitable the reserve pool is going to grow to excessively - I think it is already at ~ $300M - and there is really no point point in growing it larger. So at some point we say "There is more money in the reserve pool that can ever be used for maintenance/upgrades, let's start returning the value to shareholders".
Yeah, we can implement that through taxing the current reserve pool fee allocation.
The size of the reserve pool is substantial, consider the fact that it's ~$300m whilst at ~$1B, if/when BTS hits BTC levels it'll be stupid how much the reserve pool has at its disposal. We really aught to start seriously pushing for BSIPs and Worker proposals to be funded as the reserve pool becomes more powerful/ominous.
The code was created by Bunkerchain Labs Inc. and licensed MIT. So long as MIT parameters are met it can be used in Bitshares.
Great to hear, thank you very much for your contribution to Bitshares.
@svk is interested in seeing dividends work on peerplays prior to implementation on the BTS DEX, is there an estimate for when the first dividend will go out on the PPY network?
Will it be after some of the apps have launched?
Cheers
I think separating Market Pegged Assets and User Issued Assets would make for cleaner research.
I agree that splitting this into two BSIPs would probably make the BSIP simpler, both could reference one another..
I like the idea. How would this compete with hero?
It would compliment hero, as hero holders would potentially receive additional dividends.
I understand what you mean though, hero already provides interest on investment via modifying the price feed in a predictable manner vs MPAs providing 'interest' via profit-sharing.
I believe they will coexist.
I would not like to see exchanges receive dividends but technically they "own" bitshares stock and are therefore entitled to them if we do have any. Maybe this could be a good thing when people who hold BTS in exchanges realize they aren't getting their dividends it would disincentivise them from keeping the tokens there.
On one hand, excluding exchanges from distribution somewhat goes against the principles of decentralization, no? That we'd be controlling who was able to earn profit on bitshares.. on the other hand, you're entirely right that it would be a disincentive for users to hold their tokens on exchanges.
you are right. I would not like to see the exchanges earn dividends because they do not participate in the network. But this is not something you should try to control for as every owner of every coin is entitled to their share, and if people willingly give their share to exchanges - well that's that then.
Great work man!
Off topic:
Huh, I upvoted and the payout went from 240 to 239.85 ?!!
Could be that another user was voting elsewhere, reducing the reward that they had previously allocated to myself?
Yes could be the case. I remember in the early days posts going from 7000 to something much lower because other posts also became popular.
Great post, got me thinking about it and will try to do some more research. Thanks for sharing!
More incentives to hold BTS could promote reliability for other assets to develop and grow.