BitShares Dev Hangout : Fee Proposals
Episode 118, November 13, 2015
On this weeks BitShares Developer Hangout, Dan Larimer of Cryptonomex once again discusses fee proposals, transaction fees, market fees and he answers Community questions.
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Transcript
bytemaster: Things are busy as always, but it’s been another good week. We’d like to give some quick updates. We had another release of the web wallet this past Wednesday. We intend to continue doing weekly releases with bug fix updates for the downloadable light-wallet as well as OpenLedger and the various other projects that depend upon it.
One of the biggest items discussed this week was the Worker Proposal as a combined effort between Bunkerchain Labs and Cryptonomex to help get BitShares where it needs to go. We identified several key proposals and had a great discussion on the forum where we filtered out, eliminated one of the proposals and got wide support for the others. I figured it would be a good opportunity to discuss those proposals and where they fit in the broader scheme of BitShares going forward.
I would like to thank the community and everyone who’s helped evaluate the proposals. We really want to make sure that things that are done are done with consensus and cooperation and feedback from everyone involved. Our intentions not to push anything down the BitShares communities throat. We want to give you guys options. Pick what you want built and then we’ll build it.
There’s been a lot of discussion on fees. Fees have been a very hot topic. There’s two main issues, one people don’t like to get nickel and dimed to death. And two we have many business partners that are depending upon the fees for their business model. I’d like to address that topic in a little bit greater detail because there are two sides to the fee debate. There’s the side of the consumer who doesn’t want to pay fees. And then there’s the side of the businesses that are only viable to the extent that there’s some kind of revenue stream that’s sizable enough for them.
The original idea behind raising fees to be enough to cover the cost of user acquisition, not just the the technological cost of bandwidth and memory was to support these businesses. These businesses in turn go out [and] seek venture capital money, build products and services and ultimately bring users to the network. So what’s good for the businesses is bad for the users, but on the other hand the businesses are in the job of selling the value proposition. Providing value to the user so that the user doesn’t mind paying the fee. That is the thing we always need to keep in mind is, what is the value that we are providing to the user and is it worth the fee they are paying.
People don’t mind paying fees for something if they’re getting some value from it. And from that if there is no value being provided by the service [we’re offering] then we’re probably not in the right market. What I mean by that is this, if BitShares is just another payment network and it’s not providing any value to the user that they couldn’t get with a credit card or a check or intra-bank transfer then we’re doing something wrong. We need to keep our eyes on the fact that the value we’re bringing to the table goes beyond just the value of a transfer. It goes beyond what all the other competitors are doing because it’s on a decentralized ledger, it’s on an open platform and in many cases it’s much faster than the alternatives. It’s also irreversible without chargebacks.
Those are qualities that a lot of the other options don’t have and which users would be willing to pay for. So to the extent that we can focus on what makes our value proposition different, we can also understand why we can charge a fee where someone else couldn’t. And therefore support the businesses that are being set up. There are several of them that have contacted us and have been on the forum saying, “hey don’t lower the transfer fees, our business depends on it”. Which really brings us home to the point of keeping some kind of stability and predictability.
Entrepreneurs cannot build businesses on a moving target. And if the target is constantly moving then we end up putting off a lot of the potential entrepreneurs. So that is a whole lot of information to get out there. Now back to the general fee discussion.
We want to minimize fees for things like account updates, voting updates, things like that. And charge higher fees for transfers and market orders being filled. The two business models of the market for traders and the transfers for payments and remittance. They’re two different businesses. Traders aren’t going to be put off by transfer fees and people doing payments are not going to be put off by market fees. I think we can charge on those two things, but try to minimize the other fees in the system.
The other place where we can charge high fees are reserving premium names and asset symbols. Those are limited supply. The people who are creating and using those assets have business plans to monetize them. So it’s also not something that’s available anywhere else.
The second worker proposal talks about adjusting the market fees. I’d like to address that a little bit. We have transaction fees and we have market fees. A transaction fee is paid on every operation and it’s denominated in BitShares and it always goes to the referrer or the network. So an order creation fee, the minimum order fee, that goes to the network and the referrers.
Then there is the market fee and that goes to the asset issuer and it’s a percentage of the trade volume. So if you create an asset like your an exchange and you create an asset and you put it on the exchange, you can set a percentage. That percentage goes 100% to you, it’s not divided among the referrers in the referral program. Primarily because it’s denominated in that user’s own asset.
So OPENBTC the market fee is paid in OPENBTC and it goes to OpenLedger. OPENBTC cannot be split among referral programs or any of those things. I want to make that very clear. The market fees don’t go to the referral program. However, there is one fee that we could send to the referral program that we are not currently sending and that is the market fee for BitShares.
Currently we charge a 0% fee for trading BitShares against anything else. But we could charge a .1% fee and then distribute that percentage to referrers and otherwise. Which means that there would be a lot more profit and a lot more value for referring someone to trade BitShares against other assets on the BitShares exchange versus on various centralized exchanges.
So currently the Committee account could increase the market fee and enable that for those assets. But if it did so the funds from that would be in the control of Committee members and not divided. So the second worker proposal is make trading fees in BitShares payable to referrers, just like all other fees. And also to refund the majority of the order creation fee if the order is cancelled without being filled. That allows market bots and liquidity providers to do things on the network without being charged for creating and cancelling orders, beyond what it actually cost the network in terms of memory and bandwidth. But it would be low enough that it should not be a factor to their business model like it is today.
The other thing we wanted to do is the third worker proposal we presented is a hosted wallet service. The idea being that the keys and other information that’s currently in your wallet, and saved in your wallet backup, can be encrypted and stored on the server to be fetched by your account whenever you need it. Your password and the other information used to decrypt it never goes to the server, it’s only decoded locally.
The reason for this particular feature is that we’ve already had at least one user clear their browser cache and lose 80,000 BitShares. Users want to migrate between devices. They want to have one account that they can use from the computer and their phone and otherwise. And asking people to backup constantly causes people to have fear that they won’t do something right, that something will go wrong. It introduces a lot of extra complexities that make the whole service harder to use and it impacts the user experience. So that’s something that we put a worker proposal together and it’s generally been accepted. We haven’t actually created these proposals on the network but we will put them on there soon.
The next worker proposal was improved market statistics and API. The goal of that proposal is to expose a web API very similar to current exchanges. Which means if you’ve got tools for Poloniex you should be able to point them at BitShares and use them to generate quality charts and all of your trading. Whatever it is you need, we want to standardize that. So there’s that one.
And the last one is the USD deposit/withdrawal KYC management. This is actually a broader subject. We want the exchanges and on and off ramps such as OpenLedger, I think Bunker’s doing one, Banx, anyone who is going to get serious and have a lot of volume is going to want to have compliance with the laws. If they don’t have compliance with the laws they won’t be able to get big without getting shut down.
So all of these different services need KYC tools. This means verifying that a particular account belongs to a known individual with copies of drivers licenses and passports and utility bills, all that information. They need to have a means of managing those properties and collecting that information. They also need for fiat deposit/withdrawal, features to track all the information especially with banks and routing information. There’s like a form with like 20 fields that users need to provide in order to get a withdrawal via wire transfer.
Those types of things should be integrated into the wallet just as seamlessly as they are any other centralized exchange so that users can come to the wallet and have a very familiar experience. They don’t have to use the wallet, then use some other site and piece it altogether, it’s just right there in front of them. They can look at their account, say I want to withdraw, they click withdraw, “Oh OK here’s where I enter my bank account routing information. OK here’s where I do the customer validation”, so on and so forth.
So along with the various features in KYC management is also the GUI features for asset management. This means if you’re an asset issuer, being able to whitelist and blacklist people in the GUI. Being able to update the flags on your asset, being able to update the market fees on your asset. Being able to do prediction markets and do global settling of that. All the asset management features for which you currently have to use the backend, the command line tools. Those things need to be developed and it’s a lot of work to do that. We’re talking lots of screens on the web wallet and each one of those forms and user interactions is a lot of work to do. That’s the last proposal we put together.
All of these proposals have been done with Bunkerchain Labs being the person who receives the worker pay. They don’t pay Cryptonomex until we’ve delivered something that meets the specs of the proposal as validated by them. The prices are denominated in fiat terms and any surplus BitShares are returned to the network. So I really think working with Bunkerchain Labs to provide this accountability factor means that both BitShares and Cryptonomex benefit by having this arrangement. The last thing we want to do is be seen as voting in a bunch of work for ourselves and getting paid without delivering. So we certainly want to delivery products before Cryptonomex is paid for anything.
The last component of all of this is perhaps the biggest one. And that is the intellectual property associated with the Graphene wallet. This is the wallet everyone uses. It’s currently open source for individual use, but if you’re a business and you want to create something like OpenLedger you have to license it for that particular use case. And what we’ve discussed doing is making the web wallet open source in the same way that the Graphene backend is. Namely you can use it for anything BitShares related, but not for non-BitShares blockchains.
And if we’re going to do that we want to be compensated for the work we’ve done to create it thus far and to also help support and upgrade it. The idea here is we want entrepreneurs like OpenLedger and various other parties to be free to innovate and grow and build their own things on it and to do so without fear of being held captive by us. We don’t want Cryptonomex to hold BitShares back. So that’s something that we’re considering doing. I think that there’s been a lot of positive support for that. And I think that would really help contribute to the overall openness of the BitShares network.
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