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| BSIP: #019 | ||
| Title: Introducing profit sharing/dividends to Bitshares | ||
| Title: Introducing profit-sharing/dividends to Bitshares (MPA only) | ||
| 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 | ||
| Primary Discussion: https://bitsharestalk.org/index.php/topic,23981.0.html | ||
| 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| Superseded-By: N/A | ||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? | ||
| Worker: No worker proposal yet - propose bounty? | ||
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| --- | ||
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| # Abstract | ||
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| 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). | ||
| The introduction of 'profit sharing / dividends' for [BTS|MPA] on the Bitshares DEX via the redistribution of fees. | ||
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| --- | ||
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| # Motivation | ||
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| One of the major selling points of BTSX back in 2014 was the 5% (really variable x%) on 'anything' marketing. I'm not proposing | ||
| One of the major selling points of BTSX (for myself) back in 2014 was the 5% (really variable x%) on 'anything' marketing. | ||
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| 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. | ||
| 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 which had myself (and a lot of other users) sold on Bitshares. | ||
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| During the migration from BTSX (BTS 0.9x) to BTS 2.0 we removed 'socialized yield' due to '[yield harvesting](https://bitshares.org/blog/2015/06/08/lessons-learned-from-bitshares-0.x/#socialized-yield-is-broken)', however I believe that its removal without an established replacement income stream for asset holders was a mistake (one that we can ammend). | ||
| During the migration from BTSX (BTS 0.9x) to BTS 2.0 we removed 'socialized yield' due to '[yield harvesting](https://bitshares.org/blog/2015/06/08/lessons-learned-from-bitshares-0.x/#socialized-yield-is-broken)'. I believe that its removal without an established replacement income stream for asset holders was a mistake (one that we can amend). | ||
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| 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 last monthly gathered fee estimate was approximately 1 million BTS per month which is approximately $330,000 (not an insignificant sum), of which 80% was distributed to the referral system (20% goes to the reserve pool). | ||
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| The Bitshares DEX [recently turned a profit](https://steemit.com/bitshares/@steempower/bitshares-state-of-the-network-13th-june-2017)! | ||
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| We can reallocate fee redistribution without increasing fees by reducing referral fee allocation. | ||
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| Peerplays has [already implemented profit sharing in graphene](https://github.com/BunkerChainLabsInc/peerplays-profitshare). | ||
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| --- | ||
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| # Rational | ||
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| * 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. | ||
| * The potential for profiting more by holding your assets on the BTS DEX than within a traditional FIAT bank (without taking on risk) could drive many new users to pick the BTS DEX over centralized banks for storing their savings in the future. | ||
| * An increased demand for MPA leads to an increased MPA supply and thus a reduction in the quantity of liquid BTS (since 200-300% BTS are locked up as collateral for each MPA token). | ||
| * An increase in MPA supply potentially encourages greater MPA liquidity on the BTS DEX. | ||
| * Other cryptocurrency platforms offer profit-sharing/dividends, such as [Peerplays](https://github.com/BunkerChainLabsInc/peerplays-profitshare)/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. | ||
| * We can reallocate fee redistribution without increasing fees by reducing referral fee allocation. | ||
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| --- | ||
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| # Specifications | ||
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| ## Creation of fee redistribution variables for committee/asset-issuer to set | ||
| ## Implementation of Peerplays profit sharing mechanism | ||
| The Peerplays developement team developed [profit-sharing code for the Graphene toolkit](https://github.com/BunkerChainLabsInc/peerplays-profitshare) approximately one year ago, they have repeatedley given permission for the BTS DEX to utilise their developed profit-sharing code ([case 1](https://bitsharestalk.org/index.php/topic,23981.75.html), [case 2](https://steemit.com/bitshares/@cm-steem/bsip-019-draft-introducing-profit-sharing-dividends-to-bitshares#@peerplays/re-cm-steem-bsip-019-draft-introducing-profit-sharing-dividends-to-bitshares-20170620t032010758z)). A large portion of the work required for this BSIP may already be complete. | ||
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| ## Fee redistribution variables | ||
| The fee redistribution values should be discussed thoroughly and either decided by the committee (smartcoins) or the MPA issuer (non-smartcoin assets such as Algorithm based Assets). | ||
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| The consensus regarding fee redistribution was that the values should be decided by the committee (or the asset issuer for UIA). | ||
| ### Potential fee redistribution variables: | ||
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| Committee fee redistribution values required: reserve-pool, referral, bitAsset holders, BTS holders, LTM members, Non-LTM members. | ||
| * #### Higher level fee redistribution groups | ||
| * Reserve pool : % | ||
| * [Referral system](http://docs.bitshares.eu//bitshares/user/referral-program.html) : % | ||
| * bitAsset (MPA) holders : % | ||
| * BTS holders : % | ||
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| ## Implementation of peerplays profit sharing mechanism | ||
| * #### Account types | ||
| * [LTM members](http://docs.bitshares.eu//bitshares/user/account-memberships.html#lifetime-members) : % | ||
| * Non-LTM members : % | ||
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| The user 'Bunkerchain labs' posted "[Implement our profit sharing code thanks to Peerplays development](https://bitsharestalk.org/index.php/topic,23981.75.html)", a large portion of the work for this BSIP may be complete. | ||
| * #### Dividend settings | ||
| * Dividend schedule (sharedrop timeframe) : Days/Blocks | ||
| * Max Coin-Age : Days/Blocks | ||
| * Bonus rate for age past max coin-age : % | ||
| * MPA dividends permissions : Enable/Disable | ||
| * MPA dividend prioritization : Equal split between all MPA (subsidizing less active MPA), or proportional to [trading volume|MPA supply]. | ||
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| ## Basis for distribution within sharedrop timeframe | ||
| * Dividends is paid on a scheduled basis as opposed to on user demand | ||
| * Dividends are paid based on MPA asset holdings | ||
| * 'Coin-age' of asset holdings | ||
| * Split of network fees between MPA tokens, either on an equal split or proportional basis. | ||
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| ## Whitelist/Blacklist options | ||
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| * Configured by the Committee or the MPA issuer. | ||
| * An optional whitelist could provide increased control over who is eligible to earn dividends on their MPA holdings. | ||
| * An optional blacklist could prevent exchanges/services from earning dividends/interest on MPA (incentivizing holding MPA on the BTS DEX over centralized exchanges). | ||
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| --- | ||
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| # Discussion | ||
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| ## Is BSIP19 vulnerable to 'yield-harvesting'? | ||
| A quote from the '[Socialized yield is broken](https://bitshares.org/blog/2015/06/08/lessons-learned-from-bitshares-0.x/#socialized-yield-is-broken)' blog post: | ||
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| > "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. | ||
| * Rather than paying profit to shorters on demand, this BSIP proposes scheduled dividends against BitAsset (MPA) holders via the redistribution of network fees. | ||
| * If we simply took a snapshot of user asset holdings at the immediate time of dividend issuance then users could create the asset immediately prior to the scheduled dividend after which they could settle the token back to BTS. To prevent this behaviour, we need to take the age of asset holdings into account. | ||
| * Thus BSIP19 is not vulnerable to the 'yield-harvesting' issue that was prevalent within 'Socialized Yield'. | ||
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| ## Collateralized Bonds | ||
| The concept of "[Collateralized Bonds](https://bitshares.org/blog/2015/06/08/lessons-learned-from-bitshares-0.x/#socialized-yield-is-broken)" 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. | ||
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| The vast majority of the gathered fees were from non-trading transactions (registering assets, accounts, etc). | ||
| ## Additional topics for discussion | ||
| * Should exchanges be exempt from receiving dividends? | ||
| * Should LTM users receive a separate bonus dividend? Specifically, BTS dividends for holding BTS | ||
| * Can we pay out dividends in MPA, or will we have to distribute BTS? | ||
| * Is there a better idea than 'coin-age' for fair dividend distribution? | ||
| * What's a fair max coin-age? The sharedrop timeframe? | ||
| * Should coin-age greater than the sharedrop timeframe receive a bonus modifier? | ||
| * Who can perform this work? | ||
| * How much should a worker proposal charge for this task? | ||
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| ## Further research | ||
| * Should exchanges be exempt from receiving dividends? (Beneficial to decentralization, detrimental because selecting individuals to exclude from profit-sharing could be a slippery slope) | ||
| * 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? | ||
| --- | ||
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| # Summary for Shareholders | ||
| * No worker proposal has been created yet, input from coders regarding the cost is neccessary. | ||
| * Provide redistributable fee variables for the committe to set. | ||
| * 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. | ||
| * No worker proposal has been created yet, input from coders regarding the cost is necessary. | ||
| * 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. | ||
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| --- | ||
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| # Copyright | ||
| Potentially peerplays for their [profit-sharing functionality]([Peerplays](https://github.com/BunkerChainLabsInc/peerplays-profitshare)) - MIT? | ||
| Peerplays created the [profit-sharing functionality](https://github.com/BunkerChainLabsInc/peerplays-profitshare) w/ MIT license: | ||
| * > "[The code was created by Bunkerchain Labs Inc. and licensed MIT. So long as MIT parameters are met it can be used in Bitshares.](https://steemit.com/bitshares/@cm-steem/bsip-019-draft-introducing-profit-sharing-dividends-to-bitshares#@peerplays/re-cm-steem-bsip-019-draft-introducing-profit-sharing-dividends-to-bitshares-20170620t032010758z)" - Peerplays (Steemit) | ||
| * > "[Implement our profit sharing code thanks to Peerplays development](https://bitsharestalk.org/index.php/topic,23981.75.html)" - BunkerChainLabs (Bitsharestalk) | ||
| # See Also | ||
| N/A | ||
| * [BSIP-19 Steemit thread](https://steemit.com/bitshares/@cm-steem/bsip-019-updated-draft-introducing-profit-sharing-dividends-to-bitshares-mpa-only) |
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