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Siafunds need to be made divisible to create liquidity for Sia's earliest supporters #2225

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justpaulgmx opened this Issue Aug 11, 2017 · 18 comments

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@justpaulgmx

justpaulgmx commented Aug 11, 2017

While the vast majority of siafunds are held by Sia with no plans to ever sell them, early supporters of the Sia project were rewarded with siafunds too. At the current price of around 3 BTC (around US$10,000) the asset is available only to large investors, a restriction the crypto space is supposed to be freeing us from.

A simple change from non divisible 1SF to a divisible 1.0000SF would allow people to buy and sell as little as US$1 worth at current prices. Even a 10x or 100x increase would still make it accessible to the vast majority of project supporters while avoiding any confusion with siacoins. I'm sure many small buyers in the recent FileCoin ICO would have been far better served had siafunds been affordable to them as an alternative.

The issue is becoming more urgent as Bisq.io, the only exchange that trades siafunds, has stated that the current trade risk is problematic and getting worse due to unit price, and that divisibility is their preferred solution and one that at first glance doesn't appear to be technically complicated or time consuming.

Could this be implemented before or during the currently listed project, Blockchain Escrow for SC <-> SF Transactions?

For those wanting more background information on siafunds, check the wiki at https://siawiki.tech/wallet/siafund

@eXWoLL

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eXWoLL commented Aug 11, 2017

Was just thinking about this today

@justpaulgmx

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justpaulgmx commented Aug 12, 2017

Right? I would really like to take some profit while remaining invested in Sia but with a single siafund, currently I can't. Hopefully the Devs will hook us up.

@altonwells

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altonwells commented Aug 12, 2017

So there is no way to achieve liquidity currently with Sia?

@justpaulgmx

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justpaulgmx commented Aug 12, 2017

Sia? This is a discussion on siafunds so I'm assuming that is the basis of your question. If not, check out the wiki link in the original post.

It's not impossible but having to spend US$8-10k for a whole siafund kind of limits the number of buyers compared to being able to buy siafund in roughly US$1 increments by buying a fraction of a coin like regular coins. How many people would have started using Bitcoin if they had to buy a whole coin for their wallet to work? It would be nice if it just worked the same way as other cryptocurrencies like siacoin :-) so we know they can do it!

@justpaulgmx

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justpaulgmx commented Aug 12, 2017

The devs may think the timing is bad with regulators becoming interested in ICO's but it's only going to get worse. Now is the time to tidy up a small detail. It would also increase the market cap for siafunds and Nebulous.

@hakkane84

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hakkane84 commented Aug 12, 2017

I answered with my opinions on the Slack, but as there is debate here too I will share my thoughts here too.

At a first moment I found your idea appealing, but after some thinking, personally I disagree with it for 4 reasons:

  1. SFs were created with two goals: fundraising the project and giving the dev team an incentive to make Sia a success. Your idea would only benefit speculators or new "investors". That was not their goal and will not further benefit the project.

  2. I dislike the idea of adding a new layer of speculation on Sia. We already have enough of it.

  3. Technical reason: the bandwidth of the blockchain is limited, and should be devoted to file contracts, proofs of storage and so. Allowing the divisibility of SF we add unnecessary operations of trading in the network that limit the real purpose of it. Moreover, every time an owner claims the "dividends" it is another operation. So increasing the number of owners adds a lot of useless operations in the blockchain

  4. Another technical problem. I am totally sure it would need a Hard Fork. Right now, of the 70 peers connected to my client, 0 are running version 1.3. One of them is still running 0.6.0. With this impressive energy and momenetum in the community for update and improve the network, how could such a HF be a success?

@justpaulgmx

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justpaulgmx commented Aug 12, 2017

@@aerrejon Thanks for your thoughts, I'll stick to your numbering.

  1. My idea would not only benefit speculators, it would mostly benefit those who were early supporters of a project that may not currently exist without their support back then.
  2. It's not adding a layer of speculation, there is plenty of siafund speculation already.
  3. The smaller investors wouldn't consider the operations useless, they would like to use the blockchain to own siafund too. I think it will mostly be hodl'ers, not speculators.
  4. I'm not asking for a hardfork specifically for this change but it could be included in the next one. Also, if you click on the projects tab on github, the top item is siafund changes so I don't think this is a moon shot.

You make some sound arguments but none that to me warrant maintaining an accidental crypto "qualified investor" type situation rather than upholding the basic principle of cryptocurrencies as an equal playing field for everyone. I think diversified worldwide ownership is an improvement over ownership by a few, mostly US individuals and it's worth the effort to do. Sia would be more distributed and resilient as a result.

@altonwells

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altonwells commented Aug 12, 2017

Taking a stab here boys: @justpaulgmx @aerrejon

My thoughts:

  1. SiaFunds from my understanding are a form of privately marketed security with an authorized 10,000 'funds' and with from my research, roughly 1000 sold. As I have neither purchased, mined, nor utilize the Sia application my perspective comes from 3rd party observation and personal analysis. That being said, while the logic of creating a more divisible currency is enticing from a more free markets perspective I see where @aerrejon argument comes into play. If the goal is to build a great platform, making it speculative for the sake of liquidity and trade could inherently damage the development of the business and the platform. While I would personally like to purchase coin as its current market value, one can rationalize that in the event of a bubble burst scenario Sia could be negatively affected.

  2. I would say it is a new layer of speculation whether good or bad is up to the internal roadmap of the team, the desires of the purchaser (of coin), & the market.

  3. If I'm being honest... With current market conditions if Sia were to offer smaller purchase amounts I would day trade the crap out of it. Yes, I would hold a significant proportion of the coin as I have come to believe in the team and the platform but as someone who has traded in ForEx, Equities, Etc. Current market conditions are extremely volatile and a trader with a good eye can extract cash profit if they know what they're doing. Now that being said there is a lot that goes into it but if you look at https://coinmarketcap.com/ the daily volume is very impressive and it would be almost impossible to say Sia wouldn't get caught up in the Hype bubble.

  4. Hardfork or not. Making it a more easily purchasable security would have its pros and cons for every player in the ecosystem. Personally, I wouldn't have a stance or care how it got implemented.

My Final Consensus:

  • Sia coin is positioned to be a highly valuable security that from a net market perspective is very very very well priced. As a trader, economist, and market dude i'd love to buy in smaller capital amounts.

  • There are pros and cons. It's really up to the morals and lorals of the platform team. They're not the only ones doing a platform like this (theres a bunch) and they need to be objective & rational around what it takes to achieve market dominance. Whether that is through large capital reserves for quick development & marketing or strategic holding to perfect a relatively complex piece of software while the volatile aspect of the space cool down.

If I were them:

-I'd do it but I'd be smart about it and limit the number of purchasers to a predefined capital amount and a controlled liquidity process. The value is obvious and the risk can be brought into manageable conditions if they use their brains.

@justpaulgmx

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justpaulgmx commented Aug 12, 2017

@Mr-Rubicon In the event of a bubble burst scenario Sia couldn't be negatively affected as they do not plan on selling their siafunds. The siacoin income stream is the same regardless of the price of siafunds. The bigger fear should be a perception in the marketplace that Sia and a few wealthy individuals are keeping the best crptocurrency for themselves while letting the regular investor only invest in a cryptocurrency that is an appcoin for purchasing storage that has an unpredictable supply. Fair distribution is something people consider as part of a cryptocurrency purchase decision and at US$8-10k each they are beginning to look like Dash Super Nodes and that is NOT a good thing!

Again, it's not a new layer, it will simply increase existing activity but it's a cryptocurrency that needs to be hodl'd for 5-10 years for a payoff so will draw mostly hodl'ers that will do nothing but create a large new globally distributed group of people evangelizing Sia adoption due to a financial motivation. Notice how Sia is focused on increasing the volume of data stored like a laser beam? It's paying off but we need lots more, and siafund divisibility would deliver that in spades.

@altonwells

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altonwells commented Aug 12, 2017

@justpaulgmx Ah, that makes more sense. I was operating under the assumption that it was possible for SiaFunds to be marketed.

As I've only recently had Sia brought onto my radar I am unfamiliar with the interests & focus of the development team. It is good to hear that the focus is around increasing storage capacity & number of operating nodes.

Are there any white papers on the economics of deploying a server and hosting a Sia? Ergo number of coins & internal projections on USD cash value of coin?

I'd run a machine for funzies if someone could sell me on the concept & cash return.

@CodersBrothers

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CodersBrothers commented Aug 12, 2017

This debate is like windows / linux.

The only fact is that: With money you can do marketing and dosn't matters how bad is your product.

STORJ have a lot of money.
Filecoin have a lot lot lot money.
Sia dosn't have money, only if people donate something.

Is only time that the motivation of sia team will be replaced by hungry, the people need eat something every day.

Storj and Filecoin have worst products, but they can do like all brands in this world, a lot of marketing, a lot of events, a lot of team working, a lot of partnerships,... and all this will be in a lot of more marketing.

I don't have the solution, but for the normal people and the media press the only thing that seems to have importance is the price, and how this go up. It's sad but is true. In this case the only thing that put the price fairly up is releasing news like partnerships / others news and software updates, and with money there are more things to create as new. And if the price go up, the marketing is higher, and then this marketing get more partnerships, because the partnerships need serious projects, and (for they) the serious projects are those that are very week in the media doing things with updates.

Is all like a snow ball.

@altonwells

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altonwells commented Aug 13, 2017

If they stay dedicated to building a great product, decreasing the cost of storage, and increasing the number of users in all ecosystem positions they can do well.

Agreed snowball and agreed windows / linux.

If they can prove the business case years end and they think they have a real product opportunity then they can take market share and hold it.

@petabytestorage

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petabytestorage commented Oct 7, 2017

@tbenz9 i suggest we close this issue as it's been discussed at length in Discord and the general consensus seems to be no reason to pollute the blockchain and lower efficiency with divisible SF ideas.

@lukechampine

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lukechampine commented Oct 17, 2017

None of the core devs have weighed in on this issue. If we're going to close it, I'd like to do so after a dev has explained the decision in a post here. This is @DavidVorick's domain, so such a post would fall to him.
Personally, I can see why having such a limited supply of coins harms the market around them. It wouldn't make sense for a company to issue only 10000 units of stock, so if you believe that Siafunds bear any resemblance to company stock, it can't make any sense for there to be only 10000 in existence. I'm not persuaded by objections regarding blockchain bloat; I highly doubt that increasing Siafund liquidity would double the combined Siacoin+Siafund trade volume. Even then, a 2x multiplier (or a 1/2 multiplier, for that matter) does not fundamentally alter the problem of blockchain bloat, it just alters the timeline.

I'll tag this as a Feature Request and leave it open for now.

@petabytestorage

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petabytestorage commented Oct 17, 2017

I thought the idea that SF should not be divisible came from David. I also thought it was brought up twice: in Discord and in Slack. I don't believe I ever originated that opinion. I wasn't able to find it in a few minutes of searching so for the record I would think making SF divisible would be good for liquidity and I would support it as long as there are actually no serious bad tech ramifications of course.

@kevinmcse

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kevinmcse commented Feb 25, 2018

They might want to reward the sia host (the guys in the trenches) for continuing to support the network. If the host go away, there will be no dividends for the SF holders. I think this might a reason for fractioning Siafund shares

@lukechampine

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lukechampine commented Feb 25, 2018

Hosts already have a strong incentive to support the network: they get paid directly by renters. The Siafund dividend is a tax on host payments, so giving hosts siafunds would mean that every host would receive a portion of every other host's income. I don't think revenue-sharing among hosts would be good for the network; we want hosts to compete with each other.

@tbenz9

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tbenz9 commented Feb 25, 2018

@kevinmcse

They might want to reward the sia host (the guys in the trenches) for continuing to support the network.

Sia hosts are rewarded in Siacoin when they create/complete a storage contract. Are you suggesting the hosts need additional compensation?

If the host go away, there will be no dividends for the SF holders.

The Siafunds are paid from successful contracts, Renters form contracts with the hosts. Both hosts and renters are required for Siafund dividends (and I would argue that the number of renters is more important for Siafunds than the number of hosts right now, but this is debatable).

I think this might a reason for fractioning Siafund shares

Can you elaborate on how you think the Siafund holders should reward the hosts? (I'm genuinely curious)

Edit: Ninja'd by Luke... :)

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