The psychological aspect of fees and burning

[dexX7]

So I was thinking a bit about the send-to-owner transaction and then about transaction fees, and I realilzed something that is rather obvious, but has significant implications:

• losing something usually creates negative emotions
• gaining something usually creates positive emotions

While a fee model, and I'm not referring to STO fees, but fees in general, benefits all holders, if fees are burned, fees per se have certainly a negative taste, especially because the feedback/reward (gain of value due to increased scarcity over time) is disconnected from the initial action (trading, issuing, whatever-might-require-fees) of an individual participant.

In a recent blog post Convenient bugs and arbitrary features the author @ThePiachu (no name calling, but just a good example) gets the idea of burning as mechanism to increase the value of Mastercoin tokens, but immediently associates it with greediness. This behavior doesn't seem to be uncommon and it's somehow even intuitive.

In contrast, there was a very questionable altcoin exchange called mcxNOW, which introduced a concept that got my attention: it had a tradable asset called mcxFEE and holders of this asset frequently received a share of the trading fees collected by the exchange. Users seemed to love it, and they loved it so much that, at some point, some were appearingly willing to spend 11.000 BTC in a second "IPO" of mcxFEE shares, where the number of outstanding units was increased from 5.000 to 50.000.

I would actually love, if I'd receive a small share of fees. And let's get crazy: what if such a share is amplified by an "activity factor"? Say for example each action within the Mastercoin system, whether it's a send or something else, creates activity points, and fees are distributed to holders based on their stake where the final amount is further increased, if one is more active than average, or decreased, if less active than average? The more an individual participates, the higher the reward, and if such an amount modification is based to the global average activity, it might create an inceive "to be more active than the rest". A base goal of all participants is to increase adoption, because it increases the overall share, ...

--- I'm just thinking loud, this is not what I intended to focus on.

In a sligthly different context than burning, there is already a notable inceive, namely the liquidity bonus for the owners of existing sell orders which rewards users to put their tokens up for sale at a price where an offer does not get filled instantly, and as result increasing available liquidity on the exchange.

So in general, I was wondering, if there might be ways to make paying fees less "annoying" and more appealing, and to create more inceives to participate in general. While the burning model is sound, I see in particular two issues, which doesn't imply the burn model should be replaced, but potentially refined or enhanced:

1. the gain/reward is significantly delayed
2. there is no direct inceive for an individual to contribute ("burn") to reach the goal ("decrease of total supply") and one may tempted to think "I can get away with waiting while others burn, and in the end, I still get rewarded" (as of gain of value due to increased scarcity)

[ABISprotocol]

Well, how often have you had to stare down a scope?

[dexX7]

Well, how often have you had to stare down a scope?

Sorry, can you please rephrase? I'm unable to understand this question, and I believe it's not meant literally, but if so: I still don't get the meaning.

[ABISprotocol]

A scope is intended to mean here as a metal tube which can be adjusted for windage and suchlike. It magnifies the field of view. It may be designed to peek under to see iron sights and typically has caps which protect that glass which magnifies your view. Some scopes have red-dot mounted atop for more close-range business. One might spend some hours (or much longer) spending time looking generally mostly through a scope. Any gain or reward might be significantly delayed. I'm not sure I was being entirely literal... Mistakes bring ruination or are fatal. I'll just stop here.

Let's just say that in general you are better off setting up mutually beneficial arrangements. And in learning lessons from what nature has taught us. Thus, http://abis.io

[dacoinminster]

This is an interesting idea. The burning of OMNI actually DOES mean that
fees go to everyone holding the coin. Rather than mint new OMNI, we just
reduce the supply, but the economic effect is identical to sending the fees
to everyone holding OMNI.

I think that paying for activity could create perverse incentives (i.e.
getting paid to create spam). Still, if we had some way to distinguish real
activity from spam, paying for activity would be super awesome.

On Sun, Dec 21, 2014 at 5:58 AM, ABIS notifications@github.com wrote:

A scope is intended to mean here as a metal tube which can be adjusted for
windage and suchlike. It magnifies the field of view. It may be designed to
peek under to see iron sights and typically has caps which protect that
glass which magnifies your view. Some scopes have red-dot mounted atop for
more close-range business. One might spend some hours (or much longer)
spending time looking generally mostly through a scope. Any gain or reward
might be significantly delayed. I'm not sure I was being entirely
literal... I'll just stop here.

—
Reply to this email directly or view it on GitHub
#296 (comment).

[dexX7]

I think that paying for activity could create perverse incentives.

I fully agree: something like this could easily create perverse inceives. In general, and not limited to fees, promoting social and discouraging anti-social behavior should be a goal. I tagged it as "crazy idea" to prevent it's taken too serious, just wanted to share some thoughts to get this topic going.. ;)

What I had in mind was something like: there is a total amount of fees which gets frequently distributed to everyone, but the individual value is modified based on activity-compared-to-average-activity, within a sane range. Say for example: it's capped at +-10 % where a spammer would probably loose more to Bitcoin fees than he could gain from the extra percents.

As refinement to the above, it would probably be wise to change it further so that "everyone receives a share, but only more-than-average-activity gets rewarded with an extra of 10 %" to avoid explicit "punishment" of holders and alike.

The underlying reason why I initially started this thread and what might serve as potential context when thinking it through:

Let's jump into a possible future: everything is fully operational, and a voting mechanism of whatever kind became integral part of a dynamic and adaptive Mastercoin system. Frequently (...) there is a global vote where Mastercoin holders decide if, and how many fees are to be applied.

Very roughly, and for the sake of an example, it might not be limited to "setting the fee" as result of such a vote, there could be the following categories of users:

• Very short term oriented: instead of "taxing" transactions, they decide that no fees are to be paid, and in the contrary, senders of "fee taxed" transactions receive tokens, and let's go into the extreme, where the money for "negative fees" is taken from the balance of anyone who voted for something different. If they win, it would very likely wreck the whole system, but since their goal is very short term oriented, this might not even matter.
• Mid term oriented: this group might decide for zero fees, which doesn't seem harmful or anti-social, and appears to be appealing, because it saves costs.
• Long term oriented: they probably vote for some fees, because in theory, and in the long run, it increases valuation due to the reduced supply. This is basically the current model as outlined in the spec which is based on similar assumptions.

Now first of all, if anything like this ever happens, it would probably be ground breaking, and I'd be really thrilled to see how it would turn out. :)

Back to reality, I have no idea how it would turn out, and there are so-much-more factors playing a role that are not even touched here, it can be assumed that the "key mission" of Mastercoin is to build a healthy, growing and sustainable ecosystem, and I believe optimizing inceives to promote and support this goal should be aimed for.

The burning of OMNI actually DOES mean that fees go to everyone holding the coin.

I know. My point was that the reward (higher valuation based on lower supply) and action (transacting and generating fees) isn't well connected. I'm not 100 % sure, if "burning" has similar consequences than "redistribution", and it would be interesting to discuss this further, but I think the later could be preceived as more appealing.

Let's just say that in general you are better off setting up mutually beneficial arrangements. And in learning lessons from what nature has taught us. Thus, http://abis.io

Thanks for the input. I'm going to take a look at your website, but on the first glimpse, and as the headline suggests, I assume your goal is the promotion of good (social) values and pushing decentralization, and so is mine. I've read your comments as if you don't agree with what I published, and it could be the case that I wasn't able communicate my intend as intended, but it would be interesting for me to know specifics, and in general, if you believe there is something else that should be aimed for, further input is very welcomed.

[dacoinminster]

Yeah, we already slashed a lot of proposed fees in order to make sure there
is no barrier to entry. Definitely could make some further tweaks if we get
general agreement that another approach is clearly better

On Mon, Dec 22, 2014 at 1:47 PM, dexX7 notifications@github.com wrote:

I think that paying for activity could create perverse incentives.

I fully agree: something like this could easily create perverse inceives.
In general, and not limited to fees, promoting social and discouraging
anti-social behavior should be a goal. I tagged it as "crazy idea" to
prevent it's taken too serious, just wanted to share some thoughts to get
this topic going.. ;)

What I had in mind was something like: there is a total amount of fees
which gets frequently distributed to everyone, but the individual value
is modified based on activity-compared-to-average-activity, within a sane
range. Say for example: it's capped at +-10 % where a spammer would
probably loose more to Bitcoin fees than he could gain from the extra
percents.

As refinement to the above, it would probably be wise to change it further
so that "everyone receives a share, but only more-than-average-activity
gets rewarded with an extra of 10 %" to avoid explicit "punishment" of
holders and alike.

The underlying reason why I initially started this thread and what might
serve as potential context when thinking it through:

Let's jump into a possible future: everything is fully operational, and a
voting mechanism of whatever kind became integral part of a dynamic and
adaptive Mastercoin system. Frequently (...) there is a global vote where
Mastercoin holders decide if, and how many fees are to be applied.

Very roughly, and for the sake of an example, it might not be limited to
"setting the fee" as result of such a vote, there could be the following
categories of users:

• Very short term oriented: instead of "taxing" transactions, they
  decide that no fees are to be paid, and in the contrary, senders of "fee
  taxed" transactions receive tokens, and let's go into the extreme, where
  the money for "negative fees" is taken from the balance of anyone who voted
  for something different. If they win, it would very likely wreck the whole
  system, but since their goal is very short term oriented, it might not even
  matter.
• Mid term oriented: this group might decide for zero fees, which
  doesn't seem harmful or anti-social, and appears to be appealing, because
  it saves money.
• Long term oriented: they probably vote for some fees, because in
  theory, and in the long run, it increases valuation of due to the reduced
  supply. This is basically the current model as outlined in the spec which
  is based on similar assumptions.

Now first of all, if anything like this ever happens, it would probably be
ground breaking, and I'd be really thrilled to see how it would turn out. :)

Back to reality, I have no idea how it would turn out, and there are
so-much-more factors playing a role that are not even touched here, it can
be assumed that the "key mission" of Mastercoin is to build a healthy,
growing and sustainable ecosystem, and I believe optimizing inceives to
promote and support this goal should be aimed for.

The burning of OMNI actually DOES mean that fees go to everyone holding
the coin.

I know. My point was that the reward (higher valuation based on lower
supply) and action (transacting and generating fees) isn't well connected.
I'm not 100 % sure, if "burning" has similar consequences than
"redistribution", and it would be interesting to discuss this further, but
I think the later could be preceived as more appealing.

Let's just say that in general you are better off setting up mutually
beneficial arrangements. And in learning lessons from what nature has
taught us. Thus, http://abis.io

Thanks for the input. I'm going to take a look at your website, but on the
first glimpse, and as the headline suggests, I assume your goal is the
promotion of good (social) values and pushing decentralization, and so is
mine. I've read your comments as if you don't agree with what I published,
and it could be the case that I wasn't able communicate my intend as
intended, but it would be interesting for me to know specifics, and in
general, if you believe there is something else that should be aimed for,
further input is very welcomed.

—
Reply to this email directly or view it on GitHub
#296 (comment).