bsips/bsip-0008.md

    BSIP: 0008
    Title: Fee Backed Assets
    Authors: Danial Larimer <Dan@cryptonomex.com>
             Stan Larimer <Stan@cryptonomex.com>
             Fabian Schuh <Fabian@BitShares.org>
    Status: Draft
    Type: Protocol
    Created: 2015-12-16
    Discussion: <https://bitsharestalk.org/index.php/topic,20286.0.html>
    Worker: not applicable

# Abstract

We're all familiar with counterparty free Market Pegged Assets (MPA) and issuer
backed User Issued Assets (UIA). Theoretically, there could be a third type: Fee
Backed Assets (FBA).

Hence we propose to develop a feature for *Market based innovation*: if people
can profit from successful features in the form of fees then it definitely helps
BitShares become more adaptable over time. More importantly it promotes
innovation.

# Motivation

A developer installs a new function that charges fees for its service and pays
those fees to holders of a UIA she creates for that purpose.

She naturally starts out as the owner of those revenue producing assets.

She is free to sell them since each one is a revenue generating counterparty
free asset backed solely by the blockchain.

Since they have no counterparty, they are not a security. They are simply
capital equipment, like selling a mining machine.

This new kind of digital asset trades like any of the others but has fascinating
new properties.

There could be a new asset for every new revenue generating feature in the whole
ecosystem. Developers recoup their costs by selling (or pre-selling) these
revenue generating software devices (or keeping them to earn the revenue they
produce.)

# Examples

## Taxi Rental

Build 100 robotic software taxi cabs that deliver private packages for hire.
Program them via blockchain logic to take turns delivering packages. Sell the
cabs to the network in exchange for a set of tickets good for rental minutes on
a cab. Resell/trade those tickets on the open market. This way, anyone can
rent time on any of the limited supply of "cabs" and earn fees for performing
delivery services.

The TAXI FPA could represent all available minutes on a network-owned fleet of
robotic taxi cabs. Buy up as many minutes of their time as you want and you have
your own revenue generating business with no counter parties.

## Project/Feature Funding

In the case of [BSIP-0007](bsip-0007.md), the project development can be funded
by a PRIVACY FPA that gets their owners a cut of fees produced by transactions
using that feature in the future.

# Regulatory issues

Much consultation with Cryptonomex and with several prominent and trusted
members of the BitShares community has lead me to some preliminary conclusions
as to how a "Privacy Mode" feature could best be implemented and  used in a
safe and timely fashion and at no risk to the BitShares Community.

One of the first and thorniest problems we tackled is the nasty fact of
*Regulatory Risk*. There exists a vocal contingent of people who want very much
that an FBA (fee based asset) be created to fund this feature upgrade to the
BitShares blockchain. They want that everyone be thus enabled an opportunity to
participate in the fee stream originating from future use of the feature by
purchasing shares of a `STEALTH` asset.

The conundrum is that whoever creates the FBA and offers it to the public as a
means of participation in a fee-based income stream faces a risk of coming under
regulatory scrutiny if the project is a success (e.g. Satoshi Dice) or even if
it is not a success (through some disgruntled investor complaining to a
regulatory authority). For a more in depth look in to Regulatory Risk please see
[1,2].

If something falls within the definition of a *security* under applicable law,
it will be governed by extensive rules and regulations that can be quite complex
and expensive to comply with. And subject the issuer to a large fine/other
penalties if not complied with!

Once the "Privacy Mode" feature has been implemented and is available on the
blockchain (but not before), it will be possible for future investor and
entrepreneurs to create FBAs and crowd fund new features by having a *Private
Mode account* ([BSIP-0007](bsip-0007.md)), issue the FBA from an *unknown*
jurisdiction that is presumably not subject to securities concerns.

# Management Account

A FBA asset (such as the [STEALTH asset](bsip-0007.md)) will be issued by a
"management account" for that particular feature as part of a hard fork. The
initial share holders of the FBA asset have to be defined upon the hard fork.
The management account will have a Multi-Signature authority assigned to the `X`
largest share holders of that account weighted proportional to stake and will
have the power to set the fee.

# Copyright

This document is placed in the public domain.

# See Also

* [1] https://bitsharestalk.org/index.php/topic,20499.msg264752.html#msg264752
* [2] http://www.cuttingedgecapital.com/what-is-a-security-and-why-does-it-matter/