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[BSIP 0007] More descriptive text to make it easier to read

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bsip-0007.md
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Stan Larimer <Stan@cryptonomex.com>
Fabian Schuh <Fabian@BitShares.org>
Status: Draft
Type: Protocol
Type: Informational
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).
Existing core features of the BitShares protocol are Market Pegged Assets (MPA)
and issuer backed User Issued Assets (UIA). In this proposal, we introduce
another type of asset: *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.
Feed backed assets allow to propose and fund *market based* innovation by
sharing a cut of future profits generated by this particular innovation with the
people that helped fund it. Think of it as a *Kickstarter* for features.
Hence, if people can profit from successful features in the form of fees then it
can help the BitShares ecosystem to become more adaptable over time as it
promotes innovation and can pay for its development.
# 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.
Let's assume a developer installs a new function into the BitShares protocol
that charges fees for its service. Where should those fees go? To the developer?
To the share holders? How should a decision be made? Why would share holders vote
to fund a feature if they can't profit from it?
She naturally starts out as the owner of those revenue producing assets.
The answer is to pay the profits from fees generated by the feature to holders
of a UIA that has been created for that purpose, specifically. In other words:
owners of that UIA own a portion of those revenue producing assets. This revenue
generating counterparty free asset is backed solely by the blockchain and its
user base and can be sold freely on the decentralized market.
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
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.)
For every new revenue generting innovation or feature in the whole ecosystem,
there can be a new fee backed asset. 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.
Let's assume we 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. Now we can resell or trade of 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
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-0008](bsip-0008.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.
In the case of the [Privacy Mode](bsip-0008.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. Every BitShares customer that
wants to gain advantages of that Privacy Mode needs to pay an increased fee for
its service. These fees are distributed among all owners of the `STEALTH` asset.
# 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.
purchasing shares of a FBA.
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
@ -88,23 +90,33 @@ 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
Once [BSIP-0008](bsip-0008.md) 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-0008](bsip-0008.md)), issue the FBA from an *unknown*
jurisdiction that is presumably not subject to securities concerns.
# Management Account
# Specifications
A FBA asset (such as the [STEALTH asset](bsip-0008.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.
Since every innovation on the blockchain level has to come with a protocol
upgrade (previsouly denoted as a *hard fork*), this upgrade can also come with a
so called *management account* that is specific for this specific innovation or
feature. An FBA's asset (such as the [STEALTH asset](bsip-0008.md)) can only be
issued by this "management account" and only for that particular feature.
All FBA require a protocol upgrade (read: hard fork) to create the management
account.
The initial share holders of the FBA asset have to be defined upon the hard fork
by the developers of the feature. It is left to the developers of the innovation
to derive a proper scheme to identify the initial share holders.
Most importantly, 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.
# Discussion
Daniel Larimer: I would say that far more than Worker Proposals or anything
else, the Fee Backed Assets is incentivizing entrepreneurs to come up with
ideas, come up with features and then go and fund them and make it happen.
# Copyright