

BitsharesX Catapults to No. 3, Leaves Ripple Behind - tinkerrr
http://www.coinsetter.com/bitcoin-news/2014/08/25/bitsharesx-catapults-3-leaves-ripple-behind-1416

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philrapo
I actually think this calculation methodology for "market cap" is flawed. The
whole notion of market capitalization comes from the equity markets. It's
calculated based on the total number of shares issued by the corporate
treasury -- not the public float of an equity. (Public float means the number
of shares that are released into public markets).

When a public company does a secondary offering and releases more shares, that
clearly doesn't result in an increased market cap. The market already knew
that those shares existed, even if they weren't publicly traded yet, and
things are priced accordingly.

The convention for BTC and cryptocurrency in general seems to be to calculate
market cap based on the total number of BTC that have been mined so far
(~13mm). That's like the float. I'd argue that we should be using 21mm to
calculate BTC market cap, since that's effectively what the "bitcoin treasury"
has authorized. (To follow the anology, I think of BTC as doing a small
secondary offering every 10 minutes.... but the market already knows this
information and prices things accordingly. It should not result in an
increasing market cap every time a new block is mined).

Accordingly, I'd argue that this is a more accurate representation of market
cap (view by total supply): [http://coinmarketcap.com/currencies/views/market-
cap-by-tota...](http://coinmarketcap.com/currencies/views/market-cap-by-total-
supply/)

You can find a lot of stocks in the market with a very low float. For example,
Pandora and LinkedIn only IPO'ed ~9% of the total shares.[1] i.e. The float is
~9% but the market cap is calculated based on the full 100% shares that are
authorized by the treasury, even if they are held by the company and not
publicly traded. The market still knows that those shares exist and can be
released to the market at a future date.

[1]
[http://online.wsj.com/news/articles/SB1000142405270230393670...](http://online.wsj.com/news/articles/SB10001424052702303936704576399821664370538)

disclaimer: i work on the ripple project

~~~
goodside
And what about altcoins that issue an unlimited number of coins at a fixed
annual inflation rate? If we price them as you describe, their value is
infinite.

The correct strategy is somewhere in the middle. Shares with pre-programmed
future distribution (as happens in traditional mining-based coins) should
contribute less to the calculated market cap as they recede further into the
future, using some discount function that produces a finite, reasonable
present value for coins with unlimited exponential growth of the coin supply.

For coins with a central authority issuing distribution, the function has to
be weighted by the credibility of the authority's plans. If some coin authors
convince you that some portion of their coin will never enter circulation
(e.g., if they publicly destroy them by sending to a vanity address so
improbable that they could not possibly have a corresponding private key), you
should drop those coins from your calculation of the cap entirely. If they
merely promise to only release the coins slowly over many years, as with
Ripple, your estimate of the market cap varies substantially based on how much
you trust Ripple.

~~~
philrapo
>And what about altcoins that issue an unlimited number of coins at a fixed
annual inflation rate?

good point. A company also can always issue more shares to dilute existing
holders. But no company (to my knowledge) has ever promised to do so at a
fixed annual rate.

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coinburgers
Here's a good analysis of the (highly-questionable) economics of BitShares:
[http://prestonbyrne.com/2014/08/17/dont-walk-away-
run/](http://prestonbyrne.com/2014/08/17/dont-walk-away-run/)

~~~
jabgrabdthrow
Check out the discussion in the comments here. The article you linked has
effectively only one argument: that BitUSD will not maintain the peg in the
event of a flash crash in BTSX value. The author and the lead developer of
BTSX have a back-and-forth which clarifies the whole situation.

[http://prestonbyrne.com/2014/08/24/what-goes-
up/](http://prestonbyrne.com/2014/08/24/what-goes-up/)

~~~
querybitnap
Do you really need any more an argument than that?

~~~
notahacker
If you did, Bitshare founder's Daniel Larimer's comments at the bottom provide
a couple more

Namely (i) As he points out governments tend to like to be involved in
investment and money transmission schemes... and the likelihood of the SEC
taking a dim view of the trade and marketing of unregulated "shares" is
probably a tad higher than the likelihood of your USD deposit account being
frozen or haircut. (ii) he appears to imply the only thing that went wrong
with MtGox and "other otherwise trustworthy institutions" is government
intervention. Whether that selective blindness to MtGox's problems was purely
rhetorical or not, it's a remarkable attitude coming from the founder of a
crypto exchange...

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ghshephard
The 10 second confirmation time seems to solve a major problem with Bitcoins
for casual transactions - the need to wait 30 minutes before you are certain
that you've actually been paid.

Another win is the emphasis on Transaction fees as the mechanism to
incentivize people to ensure the integrity of the block chain, and note
transactions.

~~~
tinkerrr
True. That's a big part towards the move to proof of stake systems. Some
people argue that the 'delegates' can collude to destroy the system, but this
is more of a problem in Bitcoin, where just two major mining pools can collude
to double-spend. In addition, since delegates are 'voted' by the people
holding the currency, if anything funny is noticed people will immediately
withdraw their votes (they have an economic incentive to do so), and thus the
delegate ceases to be a delegate anymore and cannot extend the blockchain.

~~~
brighton36
Of the many problems with Proof of Stake, "Centralization" and the trivial-
ness of a rollback are probably the two largest. (Though the "nothing is at
stake" argument is very compelling) It's likely that Stake-chains are a
wonderful way to run a company. It's probable that Stake-chains won't secure
enough trust to maintain 'platforms' amongst anonymous and antagonistic
holders. IMO

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JamesArgo
I never took Bitshares seriously. I thought their licensing strategy was
insane so I dismissed them. Then I read their delegated proof of stake paper.
It's one or the more rational, practicable alternatives to POW I've seen
proposed.

~~~
tinkerrr
What's their licensing strategy? Are you talking about the fundraising
(Angelshares/Protoshares)? If you are, it sounds fair to me that the people
who funded the development and project early on, before a final product was
ever released, should be rewarded. Besides, the "licensing" is just a social
consensus, not a legal one. The project is all open source.

Agree with the Delegated Proof of Stake paper. It's well written and well
implemented as well. Going forward, I am sure quite a few other projects in
this space will adopt the idea.

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legohead
remember when aurora coin skyrocketed to the top of the list?

~~~
oco101
It is true but BitshareX it is not a coin it is a virtual vault it is so much
more then any coin out there it is a DAC. You have a business model you have
dividends, delegates etc. The mechanism behind it brilliant it the peg it is
working this will be huge.

