#bytemaster

The STEALTH transaction history has to be handled in a slightly different way than the transaction history that we use for everything else. Primarily because it can't be indexed using the same way that we index all other transactions, because it's STEALTH.

So we suspect that we'll have a Beta of the new GUI with STEALTH transactions out within the next week for everyone to play with. We'll get some testing on the user interface and then assuming everything works as we would like we will roll it out officially for OpenLedger. I'm pretty pleased with the progress they've made there. I recognize that it's a week or so behind schedule from what we had originally intended, but it appears all of the pieces are in place to enable users to transact with STEALTH by the end of this month. So that's the update there.

The next thing I'd like to discuss is the Free Transactions as implemented by abit. He's done a great job taking the initiative to implement the feature. He implemented a version that should get us 90% there using coin days and Committee set parameters to specify a conversion between coin days and BTS for the purpose of paying fees only.

This means you can still pay fees the old way, if you haven't accumulated the coin days or if you accumulate the necessary coin days then you can pay some or all of your fee with the coin days you have accumulated. I believe his approach is ... the last 10% of his approach would be to automatically adjust that ratio. But for all practical purposes we can offer our users free transactions and let the Committee members adjust it periodically based upon price and demand changes in the system.

Because we support both fees and rate limit based approach it means no users will ever have a lack of service, it just means that if the fees aren't adjusted in a timely manner some people might have to wait longer or pay a fee for immediate service. Either way it's better than what we have today. So I'm very interested in merging his changes into the codebase as part of the next hardfork in the system. Which will probably be at least one month from now. Probably two months, we don't want to hardfork too often if it can be helped. So there is that status there.

[00:05:30] bytemaster: I'm very excited about what that can do for bringing new users to the system who will hold BTS for the purpose of transacting for free. It's really not free transactions, what we're really doing is rewarding people for buying and holding and rewarding people for taking their BitShares off the exchanges and move to local exchanges. It means anyone that wants to provide liquidity in our markets can do so for free so long as they maintain a reasonable size BitShares balance to compensate the network for their usage.

So if you're a whale you can transact in the marketplace for free. So I believe micropayments will be possible while the network's young. Eventually they will be rate limited severely if you don't have a large balance. But, for now it's a great way to get new users into the system to try it all out. So I think that's great.

The next person I would like to mention is Roadscape. He recently put a Worker Proposal up there for funding his block explorer CryptoFresh.com. I am a big fan of his work. I think his website provides the public face, it's what all the passive observers use to check out BitShares. It's what I use whenever I want to know what's going on with voting and it has all kinds of statistics that are not available in the wallet. Developers like him who have been working for us are invaluable to the longterm success, we should reward them. And so I fully support funding him and I encourage all proxies to also vote for him.

He did work first and ask for money later. abit did the same thing. That type of initiative needs to be rewarded. If we don't reward it then those developers will feel unappreciated and go somewhere else where their efforts are appreciated.

So please keep in mind that anytime someone brings resources, whether they're bringing time or money, they're boosting BitShares and all those resources, the whole is greater than the sum of parts. If we all work together the value of what we produce is greater than our individual contributions. So please support him.

So the next thing I would like to talk about and that people have requested is some feedback on tonyk's suggestion of making BitShares only tradable on the DEX and forcing exchanges and anyone else to go through either bitAssets or IOU assets. This is a way of saying, let's make BitShares the exclusive asset that can only trade on our own blockchain.

I think that it's an interesting idea in that it forces people to use the system and it gets the BitShares off the exchanges. And it adds more liquidity in the market because anyone in or out and speculate on BitShares will now be forced to do so through trading on the BitShares exchange itself.

I find the approach is simultaneously heavy-handed and would greatly disrupt a large number of users. A lot of the liquidity that BitShares has is from speculators who have money on the exchanges such as Poloniex and BTC38, but who are unwilling to provide the same liquidity outside of that environment for the same reason that people don't move to other exchanges.

Also they have bots that are programmed to use their API on Poloniex and they enjoy the instantaneous transfers of buying and selling between all of the assets on Poloniex and BTC38. So anything we do to restrict BitShares at this point in time is going to have massive short-term impacts on the liquidity of BitShares and liquidity is king. Liquidity of BitShares itself is king as far as providing value and collateral for the bitAssets we're creating.

That said, we need to encourage liquidity in our own markets and liquidity is something that is not free to provide, it's as valuable or probably more so, than any Worker Proposal that we are currently funding. Someone who risk their capital in our markets is getting a relatively small profit if they are successful in their market making, but they are taking large risks.

Anything we can do to subsidize liquidity has a leverage effect. We put $1 in, we get $100 liquidity. That's a huge, a very efficient way of amplifying the influence of our limited funds is to subsidize those who provide liquidity to BitShares.

So our transaction fees are the opposite of subsidizing liquidity, so that's why I think the first step in bootstrapping is to temporarily remove transaction fees and market fees. And then go to the other extreme and have Worker Proposals that subsidize market makers in particular markets and the BitShares stakeholders can vote on these workers to figure out which markets should be subsidized and with how much. So that's my proposal for improving the liquidity on BitShares.

First we make it the cheapest place to trade. Second we make it effectively negative fees. If you put your money in our order books and you leave them on our order books and it eventually gets filled, congratulations you've earned some money.

That should dramatically change the risk reward profile and encourage traders to adopt our platform. Because now in addition to the money they are making from trading they are also making money simply because they are trading on our platform and they are sharing in the long term success of our platform.

So doing something like this in the bitUSD, bitCNY, bitGold, bitSilver and bitBTC markets would have a dramatic impact on the liquidity, on the tightness of the peg and on the volume traded there. If we had significant volume on the bitBTC / BitShares market you better believe a lot of people who are currently trading on Poloniex would switch to trading on the internal exchange.

There's lots of people in this Mumble session and other participants in the Community are BitShares fans who don't trade on our own exchange because there's not enough liquidity. So think of the magnification impact of paying a little bit to incentivize people to move from Poloniex and BTC38 and other exchanges into the internal exchange.

So that is my proposal for short term roadmap. Liquidity is everything. If we don't get liquidity then it's going to be slow to grow. And we don't have forever to grow. I'd like some feedback on that approach and see what you all think.

[00:15:28] Roadscape: How can we prevent abuse?

bytemaster: The way we prevent abuse in the liquidity provision is require all orders to be on the books for at least a minimum period of time. That might be 1 minute, it might be 5 minutes, it might be an hour. And you only reward orders that get filled within 24 hours.

This means anyone who tries to trade with themselves is not guaranteed, they're taking the risk that someone else will take them up on their order. And anyone who tries to be too conservative by placing their order too far away from the current price is unlikely to get filled within 24 hours, which means they're not actually providing liquidity today. They're providing long term base support in the market, but they're not providing liquidity on any given day.

So if there's no one else trading in the market then those people can trade against themselves, but it's a competitive game. If someone puts a buy-wall up and hopes someone will match it and no one's trading then someone else will put something right in front of it and then they'll get the points for the liquidity instead of the other person.

So the impact here is to create a very tight market where the parties are constantly fighting to be at the front of the line so they can get the reward when there is a legitimate trade. And by giving time for participants to see the market and place orders that get in front of the liquidity providers it means that you can't trade it against yourself unless there is literally no activity in the market. If there's no activity in the market then we're effectively paying people who are self dealing interest on the money they leave on the books waiting for orders to show up.

But either way you're not going to be able to abuse the system. The network has fixed cost. There's a certain amount of money that will be distributed to the people who provide liquidity proportional to the amount of liquidity they provided. And with that system in place this works very much like mining.

Someone who's self dealing, well they're not going to make any more money, they're just going to increase the percent and everyone has equal opportunity to self deal. Which means it will actually create liquidity and it will create volume. Furthermore people are rate limited on the rate at which they can transact without having a large balance, so all these things come together to prevent abuse.

[00:19:13] Community: And then the trading pair would have to involve BTS?

bytemaster: The trading pairs would be selected based on Workers voting. So if you wanted to subsidize OPEN.USD / BTS we could. And at the same time OpenLedger could subsidize their own assets using the exact same logic. Any asset issuer would have the ability to subsidize liquidity in their market. We would just have Workers that would fund the subsidization of liquidity in certain markets.

If you subsidize liquidity in BitShares versus bitUSD that makes it much more appealing for shorts because they have a liquid market they can trade in. And at the end of the day the increase in people who have their money on the blockchain who are trading and who are willing to go short because there's a liquid market that they can easily cover in. Or if they do get margin called there's a lot of market depth to minimize the cost. It makes the whole system more secure and makes the pegs tighter which makes the whole system much more valuable.

So like I said the value added to the network is leveraged by 100:1 for every $1 we pay in to enhance liquidity we're adding $100 worth of value to the network. So the [inaudible] I think are much larger. It's like the butterfly, we flap a wing and we have a hurricane of liquidity and growth. That's my mindset there.

We want to encourage people to come to BitShares and trade. If they're not trading then we don't have a market. And we want to encourage traders and those who come to BitShares and trade provide more value than those who come to BitShares and hold. At least ... because that's what BitShares is.

[00:22:23] Thom: So the hardfork coming up this Tuesday is to get the backend changes in place in preperation for STEALTH and Fee Backed Assets, is that correct?

bytemaster: Correct.

Thom: Regarding Roadscape's CryptoFresh website, it is fantastic and I really appreciate his initiative as well. When I was reading his Worker Proposal I didn't get a firm commitment that the list of features that he was anticipating adding would be what he was putting forth for the actual proposition. In other words it was a little open ended. I still think he needs endorsement anyway even if it isn't really rock solid in terms of what he's going to deliver specifically. But I would have liked to seen that tightened up a little bit more.

bytemaster: Yeah I'm basically endorsing him because he's already done enough work in the past to justify the Worker Proposal even if he doesn't do anything new in the future.

Thom: I agree. It's fantastic work and he's done this all on his own initiative. I don't disagree whatsoever, he needs our endorsement for sure for this Worker Proposal. My only comment is really that if you put a Worker Proposal out there it should be something that is, "I've got this and you get that", type of thing to quid pro quo in terms of give and take. But it's a minor point because I believe his Worker Proposal needs to be approved anyway as you say bytemaster from the merits of what he's already done if nothing else.

Roadscape: It's a valid question. I guess the big thing is I plan to stay agile because things change quick or a feature comes out we want certain data. Without knowing what's going to come up, I would just say the top priorities are, if people are excited about the social network experiments I would really like to experiment with that. The API is a pretty high priority and then the upcoming features I listed are all kind of either nice to have or important to have. So I would just use my discretion along with Community feedback to figure out the priorities for those items.

Thom: Sounds fair to me.

BrindleSwan: I guess I'd like to say, I think the work of this Community over the last couple of months has been amazing or the last couple of years. I know I'm a zero of a presence in the forums and have just been showing up here since like September. I'd like to ask other people to speak up. I'd love to hear from the proxies. I'd also like to say that as much as I think traders are an important first niche market, I'd eventually would like to see this become a platform where people who are not interested in trading, but just want to earn a living selling the POS systems and getting referral fees and maybe winning some jackpots and just having fun with it. I see that as the really big breakthrough moment. And thank all of you guys, I think everything is really awesome.

bytemaster: A lot of the systems that we want to do depend upon having the liquidity and the strong market support and market confidence. So  liquidity builds confidence and confidence has as a very powerful impact on everyone else. So if traders have confidence then everyone else will have confidence. But it's kind of hard to go the other way around.

I agree with you at the end of the day, point of sale systems and other things on the blockchain, even the social networking stuff that Roadscape talked about, those types of things have huge impact. The prediction markets on the blockchain are also huge.

It's just we have to figure out how to incentivize things we want. I think that's the biggest thing that I'm coming to appreciate is you get what you pay for. If you don't pay for anything, you get nothing. If you pay for hash power you get tons of hash power. So if you want orders on the books, you need to pay to have orders on the books. The opposite of that is, anything you charge for you get less of. So eliminating the fees is the first step of incentivizing what we want. We want people to use the network to transact and the fees were preventing that.

So a lot of this stuff is actually critical when we're growing and as we get larger then we can use our network effect and monopoly if we are so fortunate and charge small fees for things to make money. Things we can sell that we could raise money for is the premium names and asset symbols. Charging slightly more for that could have a way of generating revenue. Those are assets that are not based on transaction volume or usage, it's like real estate. You buy it to hold it to do something with it.

So that's a reasonable thing that we can continue to charge fees on. But until we actually have liquidity on the order of Poloniex in our own internal markets, charging any fees is going to hurt it's friction. And if we can get negative friction then we can grow. And once we've got all the liquidity people will stay for the liquidity even if we're charging them fees. So that's my take there on where we should go.

This transcript is a work in progress.

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