Bitcoin Forum

Proposal for Standardizing the Distribution Rate of Dev MSC via the MSC Protocol

I propose we formalize the distribution of "Dev MSC", to mirror the amount of Dev MSC generated each month. Further more that these Dev MSC be distributed in proportion to the amount of BTC won by participants in Mastercoin bounties that month. With the intension being, that this distribution process will be fully controlled by the Mastercoin community via the existing Bounty system and up coming Proof of Stake voting. 

It seems a simple and elegant distribution curve, and is awarded in proportion to the the BTC anyone earns or wins as part of working on the Mastercoin implementations, competitions and bounties. That way everyone can be confident in how this gets distributed and earning some of the Exodus funds comes with an automatic bonus of earning a proportional amount of Dev MSC.

Lets talk some simple math here.

Simple Dev MSC Distribution Equation:  A / B = C * D = E
(A) Amount of awards an individual earns in BTC during a 30 day period, divided by,
(B) the total amount of BTC awarded during that 30 day period, equals
(C) his or her individual award percentage, times
(D) the total Dev MSC generated during that 30 day period, equals
(E) the amount of Dev MSC awarded to the individual in addition to his BTC awards during the 30 day period.

Example #1 (using round numbers):
A (100 BTC) / B (1,000 BTC) = C (10%) * D (1,000 MSC) = E (100 MSC)

There are 56,316 Dev MSC that will ever be generated.
28,158 Dev MSC will be generated this year or 2,346 MSC each month.
So if a developer won 10% of the bounties this month he or she would earn 234.6 Dev MSC (worth 35.19 BTC / $24,633 USD at current MSC / BTC / USD prices).

The benefits of using this method should be obvious.

1. Market Confidence: Having a standard and predictable amount of Dev MSC coming onto the market each month removes any need to "guess" about the current amount of Mastercoins in circulation and removes any worries about a large number of Dev MSC being released into the market at unexpected times (the Fed watching / Ripple problem).

2. Simplicity: This mechanism removes the need for devising a complex system for how much Dev MSC should be vested and to whom, and any potential conflicts of interest that would come with developing such a complex system. We already have a bounty system rewarding those contributing value, they should also be vesting Dev MSC in proportion to the value they are contributing to the community via the existing bounty system.

3. Community Driven: The Exodus address BTC funds will be controlled by the community Bounty system and the Proof of Stake voting, so it seems logical that the Dev MSC should also be controlled by the community Bounty system and Proof of Stake voting and be vested to those adding value in proportion to their contributions.

4. Developer Confidence: A number of developers are spending more and more time contributing to the Mastercoin implementations and with a standard for the amount of Dev MSC to be distributed, they can have a strong level of confidence that investing their time, talents, and energy in Mastercoin will provide a predictable income stream for their work. Additionally as the value of MSC increases over time, (in conjunction with the increased demand for /utility of Mastercoin) the Dev MSC monthly rewards will increase in BTC / USD terms and thus attract more and more developers each month to participate in bounties and competitions. Already that monthly 2,346 Dev MSC is worth almost $250,000 USD at current MSC / BTC / USD prices. That's $3,000,000 worth of Dev MSC to vest with Developers this year (at current prices). 

I've discussed this proposal with the Mastercoin Foundation Board and I'm posting here to get feedback from the community on the best way to implement this as part of the Mastercoin Protocol Spec.
 
BACK GROUND FOR THOSE THAT HAVEN'T READ THE MASTERCOIN SPEC 1.2
There are two main types of Mastercoins. MSC and Dev MSC (there are also Test MSC, but I won't get into those here). All original Mastercoins (MSC) were generated between August 1st and August 31st by all those that sent funds to the "Exodus Address", these total 563,162. In addition the Mastercoin protocol generated 10% additional Dev MSC (originally termed Reward MSC) which total 56,316 Dev MSC. Combined you get all the Mastercoins that will ever exist 619,478.

Here is the reference from the Mastercoin Spec:  https://github.com/mastercoin-MSC/spec
"For every 10 Mastercoins sold, an additional “dev Mastercoin” was also created,"

The generation of these Dev MSC is controlled by an algorithm described in the spec.
"Which are being awarded to the Exodus Address slowly over the years following the fundraiser. These delayed Mastercoins will ensure that we (the Mastercoin Foundation) have funding to complete the features desired by users. The reward is be structured so that we receive 50% of the reward by one year after the initial sale, 75% by a year later, 87.5% by a year later, and so on". Here is a Google Doc that has been public since the beginning of the project simply calculates how many Dev MSC are available for Distribution each year. https://docs.google.com/spreadsheet/ccc?key=0AmR_eSvAkuXSdDI3Y1JnVjFvUDBXOWZiZl8zZ2Rkamc&usp=sharing

You can see the current total of the accumulating Dev MSC here: https://docs.google.com/a/bitangels.co/spreadsheet/ccc?key=0AtCyUJvk_IyNdGpVcnpBN2tOczFmbVRnck5TWjZuRFE#gid=1

8,080 MSC generated so far with 6,580 not yet Distributed via a bounty.

There isn't a description in the protocol on how the Dev MSC are to be distributed or at what rate.

I look forward to everyone's input.

David A. Johnston
Executive Director of BitAngels.co / Board Member of the Mastercoin Foundation

I'm not against formalising the distribution of Dev Mastercoin, it makes a lot of sense but was this the intended purpose? I was unaware that the dev coins would be attached to bounties. One big difference with the current implementation however is that we attach the generation to block generation and not on a monthly basis. This makes more sense since this gives us an easy point to validate transactions that are spending these coins. Would that also work for you?

Tachikoma,

Thanks for the quick reply and your insights. To your questions.

You: "I'm not against formalizing the distribution of Dev Mastercoin, it makes a lot of sense"

Me: Great to hear.

You: "but was this the intended purpose?"

Me: The current spec says "These delayed Mastercoins (Dev MSC) will ensure that we (the Mastercoin Foundation) have funding to complete the features desired by users." So yes, I interpreted that to mean that the Foundation later the distributed bounty system via Proof of Stake would use the Dev MSC to reward those developing "the features desired by users". This makes sense to me, as we want those contributing to the development of the Mastercoin implementation to be vested in the long term outcome of MSC and not just collecting BTC from bounties.    

You: "I was unaware that the dev coins would be attached to bounties."

Me: It was always discussed and intended this way, but the exact methods what never detailed, hence the back and forth when the handing out of the first 1,500 Dev MSC came about. We had to ask ourselves how they ought to be best distributed and to whom. A few of realizations came out of this. First if we set the distributions these are going to be REALLY big bonuses. Second, that was decided to be a very positive thing since it will attract more and more great developers to the cause of Mastercoin. Third, for me it indicated we needed a predictable and unbiassed way to distribute so much value.

You: One big difference with the current implementation however is that we attach the generation to block generation and not on a monthly basis. This makes more sense since this gives us an easy point to validate transactions that are spending these coins. Would that also work for you?

Me: The difference is I don't think we need to change anything about how you are currently "generating" the Dev MSC you can keep that block to block. I'm specifically talking about the "Distribution" of Dev MSC. So they are generated as tracked by J.R. here https://docs.google.com/a/bitangels.co/spreadsheet/ccc?key=0AtCyUJvk_IyNdGpVcnpBN2tOczFmbVRnck5TWjZuRFE#gid=1 and than at whatever interval makes sense to the community, we can distribute those Dev MSC to the winners of the bounties that month, in proportion to the contribution they made. I'm open to increasing or decreasing the time period here, a month just seemed long enough to make meaningful contributions and that many bounties would be completed within a one month period. I know it has been discussed to hold more and shorter bounties in the future.

We can translate a "Month" into a certain number of blocks if that would be helpful for the programming / implementation of this when the bounty system is finished. Though this may be difficult due to the variation in the time to complete blocks based on the difficulty.

I look forward to your additional thoughts on this.

The board isn't in complete agreement about this, which is why we're bringing this before the community. My own opinion is that we should use the plan described above, but keep 50% of the dev MSC in reserve for unexpected expenses, eventually turning the bulk of this money over to a distributed bounty system which will run on the MSC protocol using proof-of-stake voting without a central administrator.

I think we should also do these distributions every time we pay a major bounty, rather than once per month, since some major milestones last for more than a month and it may not be clear who should get what halfway through a major initiative.

Part of what we are trying to accomplish here is to get a couple devs to quit their day-jobs by overwheming them with money :) I'd love to hear from some of you what that would require.

J.R.,

Thanks for the notes on the subject.

Yes, the Mastercoin Foundation Board isn't in complete agreement on the specifics of the mechanism. Though there seems to be consensus that there ought to be such a mechanism. And also given its such an important decision we want to get as broad a set of input from the community as possible and to hash out the specifics in a very public way.

I'm glad to hear you like the proposal in general. To your specific variation I believe it would be helpful to run through some scenarios here.

So in your variation of the proposal instead of distributing 2,346 Dev MSC each month (worth 351.8 BTC / $246,320 at current MSC / BTC / USD prices) there would be a distribution of 1,173 Dev MSC (worth 175.9 BTC / $123,160 at current MSC / BTC / USD prices).

I certainly understand your reasoning wanting to have a rainy day fund for as you put it "unexpected expenses". Though I would make the point that the Mastercoin community has 4,500 BTC or so sitting in the Exodus Address, which at current BTC prices is more than $3,000,000 USD. I'm trying to think of a scenario where an "unexpected expense" would arise that would exceed our ability to offer a large bounty of BTC to address it and I can't think of one that big.

Lets say for example $1,500,000 USD in bounties are offered in BTC during the first year (next ten months) competitions and bounties. If we were to distribute 50% of the generated Dev MSC (during the same 10 months), which are worth at current prices a total of $1,231,600 USD. In this scenario we are offering a greater amount of vesting in BTC than we are in MSC. And thus it seems to be logical that we will be attracting as a result bounty participants more interested in BTC than MSC. And also less bounty participants during the most critical 10 month period of Mastercoin's development.

So I'm thinking that if the function of this Dev MSC is to attract the best possible developers and contributors to the MSC community than we ought to seek to vest them more heavily in the future of Mastercoin than in Bitcoin. If we do the 100% distribution of generated Dev MSC, than that will be $2,462,200 USD worth of MSC (over the same 10 month period). And thus twice as much vesting in MSC and nearly twice the BTC incentive heavily favoring those that value MSC.

I completely agree with your concept of handing what ever remains in the Dev MSC account (already 6,000 + waiting for use) over to a distributed bounty system which will run on the MSC protocol using proof of stake voting.

As for the timing, I'm open to playing with this variable maybe it should be two months / maybe two weeks. What I know is having the regular interval (shorter the better) goes back again to removing all doubt about when and how much Dev MSC will be distributed into the market. The more complex the formula becomes, the more guessing the market has to do about, "when" the distribution will be and "how large" it will be. By fixing the time frame we answer both questions as the Dev MSC generation is already tied to the block calculation. 

I think the better solution in future is to do bounties that break up major milestones and are much less than 30 days in length especially as we have more and more developers collaborating together on the bounties.

I also agree with your statement on the goal being to "get a couple devs to quit their day-jobs by overwhelming them with money". This would also indicate to me a 30 day or shorter time period is best for the Dev MSC, because anyone working on this full time is used to getting paid every two weeks or every four weeks. The pool of people willing to wait 60 or 90 days between paychecks (even big paychecks) is much smaller.

I'd propose we use the already 6,000 + Dev MSC sitting in the Exodus Address as the rainy day fund you want for the unexpected expenses. Also that we do the distributions every 30 days, at the 100% level of distribution (based on what is generated during that 30 days), and that we make the plan to divide major milestones into clearly sub 30 day blocks.

I look forward to your thoughts and everyone else's.   

I also agree that formalizing distribution of dev MSC is a good idea but I'll avoid speaking as to the specifics on the numbers being talked about here (as a participant that's impossible for me to do objectively).

I will say I do really appreciate the ongoing effort to both look after the current developers and attract new talent so we can move forward even faster.

Thanks! :)

I think the community should get involved in this discussion, they are the ones we are doing this for. Also like Zathras said we might not be the best people to make a unbiased contribution to this topic.

I would however also like to keep some funds as backup like J.R. suggested. No need to burn through all the funds all at once.

I think perhaps it is time to convert more of our BTC to MSC. I'd rather have MSC in a rainy day fund than BTC anyway. As you say, giving away BTC attacts people more interested in BTC, and I'd rather the foundation hold MSC than BTC.

Here's my crazy proposal:

1) Keep only the 1000 BTC we've already moved into offline wallets
2) Use the remainder of our BTC to purchase MSC over the next few months on the distributed exchange
3) Pay all future bounties exclusively in MSC
4) Keep half of our MSC money for a rainy day and/or future distributed bounty system
5) If our rainy day fund becomes excessive, we can always vote to lower the ratio later

I realize that this would potentially make all of our existing investors absurdly wealthy, but, well, the stated purpose of the Mastercoin Foundation is to serve the holders of Mastercoins, and I'm having a hard time seeing this course of action as anything but a huge positive for them, as long as we do it transparently and over a long enough period of time that nobody who wants to sell to us is left out.

Also, MSC prices would probably go up to the point where I'd sell 1% and quit my job to work on MSC, which I hope would also be in the best interests of our investors. :)

+1000

1001

1002

define absurdly wealthy  ;)

I'm totally for this if it makes dacoinmaster and the other devs to be 100% devoted to MSC (quitting their day job, etc.)

I approved

I approve. +1

Ouh that seems interesting. How many Mastercoin should I have so to be wealthy soon?

Brutal honesty: As an Exodus investor I love the idea, BUT.. it really gives me a weird feeling. Could this not be easily misrepresented as a huge pump and dump by outsiders and contrarian?

Possibly. The "dump" side could come if the devs who receive MSC bounties decide to sell all of what they received, or if a big investor decides to cash out. There's really no way to control that.

Companies do this all the time (buy back stock from investors), and I suppose they have a similar set of risks.

I expect that as long as we are completely transparent about what we are doing, the market will do a fine job of sorting out the liquidity and price. For instance, the knowledge that these MSC are being purchased only to be given away to others who might choose to sell them may prevent the price from going up as much as you might expect if we were buying them to sit on.

J.R.

Thanks for the modified proposal.

I'm open to the idea of converting a portion of the Bitcoins held by the Exodus Address to MSC in order to increase the MSC vesting / bounties primarily denominated in MSC.

Let me suggest that if we do take such an approach that we put in place a predictable, quantifiable, stable plan for such MSC purchases (both pricing mechanism and timing) in order to give the market confidence that there won't be any unpredictable purchases of MSC for BTC by the Exodus Address.

So let me respond to your proposal line by line.

1) Keep only the 1000 BTC we've already moved into offline wallets.

I think this is a reasonable about of BTC to keep for unexpected events. Agreed.

2) Use the remainder of our BTC to purchase MSC over the next few months on the distributed exchange.

I'd propose spreading out these purchases over the next 10 month period (year 1 of Dev MSC generation). Purchases once each month on the last day of the month. Buy orders set and then filled over time at the market price.

3) Pay all future bounties exclusively in MSC

Agreed. This will attract the most developers interested in MSC, if they sell the MSC it still ends up in the hands of the person that values it the most highly.

4) Keep half of our MSC money for a rainy day and/or future distributed bounty system.

Again, over the next 10 months, if we do mirror the Dev MSC generation rate, for our Dev MSC Distribution rate than only 50% of the MSC will be vested the first year. Thus we achieve your goal of having "half of our MSC" in reserve for use by the future distributed bounty system by the start of the second year (September 1st 2014). If we finish development of the bounty system before then even more MSC can be transferred to that system.

5) If our rainy day fund becomes excessive, we can always vote to lower the ratio later

Again I think it wisest if we set the numbers in stone in the protocol and have to agree a protocol change via consensus to alter the plan or rate of distribution. This can all be part of the future Distributed Bounty system and Proof of Stake system discussion.

Let me know what you think of these suggestions.

Maybe we could use the purchased MSC as our rainy-day fund, and give away the dev MSC in bounties as it vests? That would be nice and predictable :)

We could just move the purchased MSC straight into our offline storage wallets.

I'm working through my email overflow, I will post a more detailed response later.

However I just want to say this:

We need to maintain a healthy budget that is split between BTC and MSC.
This is not related to "attracting people interested in either BTC or MSC". Everyone can convert one to the other, and we can do it ourselves before paying.

This is related to making sure our budget and funds are balanced and hedged correctly.

Going 100% MSC right now is irresponsible IMO. We need to decide on some percentage that we strive for between these two currencies (and perhaps add a little bit USD into the mix as well).

I'll write a more detailed response later (in the meantime, please don't commit to any particular plan until I had a chance to review). Thanks.

J.R.,

When an investor or executive has a significant share of stocks, the way this is commonly handled is for the executive to contractually agree to a certain schedule for the sale of his stock to be executed by a third party trust.

With this mechanism in place there isn't any appearance of "conflict of interest", given the amount and timing of the sale are predetermined and publicly known and the actual sale is executed by a third party.

Its your personal funds, and there is no MSC company, and you aren't an executive in this non-company. Plus you were the biggest funder so its perfectly fair, but this type of mechanism might help again establish a predictability in the market about the amount of MSC that will be in the market at any given time.

I know you have already publicly said the amount of MSC you want to sell and the price at which you are willing to sell them and so this is a similar public discussion mechanism, just less formal than how they typically work.


 

Interesting idea! I bet we could build something like this into the protocol - some way of locking up my MSC so that I CAN'T sell them quickly?

Of course, there are dozens of other huge investors in MSC, and I doubt they would agree to have their funds all locked up like this . . . or would they?

Actually (to answer my own question) this is already possible under the current spec. I could set up a savings address which is rate limited, and make the guardian address for removing the rate limitation something like 1fakeaddressblahblahblahnotreal

That would provide absolute confidence that those MSC would not be dumped (and it would be pretty good security, too)

This proposal gives me a horrible feeling. This is too large of a deal to leave up to the board members. I'd prefer to take is slowly and delay and decision until we can vote on it. Or vote on alternative proposals. I believe a balance between msc and btc holdings can be found and potentially "managed", ie actively balancing a 50/50 position between btc/msc.

Likewise.

Is the purpose of the Foundation really just to "serve the holders of Mastercoins", or is it something broader such as shepherding the protocol so that it gets developed and adopted?  This proposal might accomplish the former by bumping up the market price of Mastercoins in the short term, but I think it sacrifices the latter.  It seems shortsighted as a bounty structure moving forward. 

Right now in the main Mastercoin thread there is a parallel discussion about how devs with spouses/kids/mortages find BTC bounties scary enough.  Isn't shifting to pure MSC bounties -- an even more speculative form of remuneration -- counterproductive? 

Or, to put it another way: so many startups lack the kind of funding that the Foundation has acquired, by accident AND design, through its deep BTC reserves.  Trading away too much of those BTC reserves for MSC is sort of like putting the Foundation back into the position of the disadvantaged startups that have to say: "sorry, can't pay you a real salary right now, but if we make it big some day your stock options will make you rich!"

Whatever the actual motivations, the optics are just bad.   This smells like a decision motivated by greed.

That's a really good point (about the devs wanting something stable). However, they will be able to immediately sell their MSC for BTC and cash out to fiat if they desire, which is not true of startups paying stock options.

What it comes down to is that if the foundation is going to hold money in a wildly unstable crypto-currency, I'd rather it be MSC than BTC. If we want stability, it should be USD in our bank account, not BTC.

Why not have a vote where each msc holder determines where their portion and in what proportion of the boards holdings gets held?

If you wished a 50/50 split, you could split up your msc into 2 equal portions and vote accordingly......

I think the dev salary discussion is completely out of scope. This is a project built on top of Bitcoin, funded entirely by Bitcoin, and thus, salaries are paid in Bitcoin. If you don't like that, you can instantly cash out to USD as soon as you get paid. What currency you end using is not one of the Foundation's concern, and nor should it waste time accommodating for the desires of devs who don't believe in BTC ( ffs, am I still on Bitcointalk ?? ).

Also, I don't follow your reasoning on why we would rather hold funds in anything other than BTC. Everyone here knows BTC is the fastest appreciating currency of the three discussed (of all, for that matter..).

What would we gain by getting out BTC that will compensate for the (probable, given the btc rising trend) loss of total value ??

I can only think of a little stability as the answer for that, which brings me to what Ron said a couple posts ago: I agree when he says we need some kind of hedging, but still, given the current trendline I wouldn't go 50/50 MSC/BTC but maybe a bigger stake in BTC instead.

What an interesting suggestion! One general question raised to mind regarding governance: Did the Board discuss this suggestion among themselves beforehand, or was J.R.'s post the first time members of the Board heard about this?

Regarding the proposal itself, I might support it, if the facts show that the change would motivate highly-skilled devs to commit more time for developing Mastercoin. Hopefully the board will gather feedback from the lead developers before making any decisions?
The fact that this would enable dacoinminster work with MSC fulltime is a huge upside from my point of view.

Regarding voting, this should either be asked from people who verifiably own considerable amount of MSC, or decide it within the Board after collecting feedback. What I wouldn't like to see is that random +1 comments affect the decision. Naturally good comments and viewpoints need to be gathered from everyone.
Listing e.g. top 50-100 wallets (as the status is today, when the suggestion was published), and gathering votes to a public thread wouldn't be too difficult technically.

I'm very interested to see what group of people the Board decides should be part of making the decision.

Ah . . . wut? BTC is appreciating faster? I think you are extrapolating on way too short of a timeframe. MSC is WAY up against BTC since it launched.

I've been trying to get the board to agree to do this for awhile now. Now I'm trying to leverage a bit of community pressure :)

I believe the key to community support lies on explaning how this change would "motivate highly-skilled devs to commit more time for developing Mastercoin" and thereby speeding up the build of Mastercoin applications.

+1
Great Idea!

approved +1000

I do like the "eating your own dogfood" type ethos of this idea, but I share some of Kyune's well-stated concerns as well. This may make sense IF devs are willing to work for MSC (which I doubt, at least at this point, since it's so new and unstable, even compared to BTC).

On the up side, this action would definitely put the price of MSC way up...how much, depends on your buying strategy (e.g. constant, over X months, or managed/strategic where you buy on the dips to act sort of like a market maker of sorts and smooth out volatility, as well as get the best prices for the coins). Depending on the predictability of your acquisition strategy, the other risk is that other traders will front-run you (like exchange traders front run the fed QE/twist operations)...although I'm not sure of the impact in this case, as this is much more of a limited market than the stock market. (Maybe a more knowledgeable trader could comment.)

I think we've established that it's rising prices that attract press (at least with Bitcoin), not the other way around. In that event, it may very well kick off a virtuous cycle in Mastercoin's favor. However, we have to remember that most people are risk adverse, non-strategic momentum-chasers that will get in on a trend near its peak and cash out at the smallest sense of danger...mainstream media caters to that mania because it appeals to, well, the mainstream. This means that any raise may be short lived, similar to the earlier cycles bitcoin went though... Mastercoin will very well have a similar path of peaks and crashes along the way.

The other risk is that Mastercoin could be canned for manipulating their own market by some. Also, if the foundation favored MSC too much to BTC and the value of MSC plummeted in one of these fear-induced reactive sell-offs  (as JR said, it could randomly go down 90% on its way up, like bitcoin has), then the foundation would find itself in that "impotent startup" pickle that Kyune raised.

This is an interesting idea, and I applaud J.R. for his transparency and for sharing his ideas with all interested parties. I do, however, have some concerns:

1.) If it is perceived that the Mastercoin Foundation is artificially inflating the value of MSC it may discourage people from investing and thus have the opposite effect. This is the danger of unintended consequences: i.e., that people will perceive the price of MSCs as artificial and not reliable.  I think it would depend on how the MSCs were purchase by the Mastercoin Foundation - a small amount over a long period may mitigate this perception. (Keep in mind also: companies buy back stock in limited quantities when they perceive that it is undervalued.)

Similarly, people are attracted to MSC because of its development funds -- it is well funded in an established currency, BTC. If you take that away, MSC may be a less attractive investment for some.   

2) The Mastercoin Foundation already has (or will have) a massive amount of MSCs vesting over the next few years. Selling the majority of BTCs for MSCs makes absolutely no sense from a risk management standpoint. The Mastercoin Foundation has massive exposure to MSCs already.

3) If anything, the Mastercoin Foundation should be taking measures to control for the volatility of BTCs by, for example, proposing bounties such as BTCs or MSCs worth at least $50,000 USD. Or by announcing hybrid bounties: part USD/BTC/MSCs. Or by some other means. Whatever it is it should mitigate the risk of over or underpayment to the developers for work done.

My concerns are echoed in #2 as a good reason to consider the implications, but I'm not sure it's really material. Increasing exposure to MSCs may seem noble and aspirational, but it's not prudent financial risk management which may require increased flexibility in times of extreme volatility. However, if the securities are highly correlated (BTC with MSC), this point is pretty much moot and any issues related to MSC exposure will also be reflected in the value of your BTC holdings as well.

This, right here. I wouldn't even feel comfortable getting paid in BTC let alone a currency that's just a few months old.

I have a feeling that we sometimes forget how fragile MSC still is. There are so many things that will or could happen that will have a great influence on the perceived value of the coin itself. It would be seriously irresponsible to use most of the Bitcoins from Exodus to buy more Mastercoin.

J.R., if you want to leave your job, do you really need to sell Mastercoins to do this? I'm sure a part of the 3000 BTC currently sitting in Exodus could be exchanged for non-internet money so your family has the security that for the foreseeable future they don't have to worry about anything while you work on Mastercoin. Having you on board as a developer would solve a lot of problems and speed up the process. I'm currently often waiting on votes on the way how the spec should be interpreted before continuing on. Having you in the trenches would surely speed this up.   

I don't understand the discussion about the devs being worried about being exposed to the volatility of crypto.

First, this is what it is - it has enormous potential but also risks. No great fortune/opportunity comes without a risk.

Secondly, if a dev wants to reduce his exposure to crypto he can immediately sell his MSC for fiat, in the very moment he got paid. What's the problem?

Thirdly, the more I think it the more I'm with dacoinmeister. This is an "all-in" kind of project. Did Satoshi paid devs with fiat? Why is the board pushing to keep BTC and do not purchase MSC? It would look like they are very comfortable sitting on a pile of BTC and do not believe that much in MSC.

For me it's a no brainer, let's go 100‰ MSC, alluding to "instability of cryptos" to justify holding BTC against MSC is ludicrous.

The problem is that you're assuming MSC is more liquid than it is. If you want to sell your MSC, you need to find a buyer, which isn't always easy, and even if you do find a buyer, he may not want as many Mastercoins as you are selling, in which case you may have to lower your ask price.

Reversing your remark would be better: If a dev wants to increase his exposure to mastercoin he can sell his fiat for MSC. This is surely much easier than selling MSC for fiat.

I don't know how many times it needs to be proven that we're going "all in". If the goal is to attract good developers, irrespective of whether *they* are "all in" or not, they should be paid in fiat, or at least BTC.

They should at least be *offered* fiat (or bitcoins).

1) the most important thing IMO is that JR commits 100% of his time to MSC, he is the founder, brain and soul of this project. Half measures are counterproductive.

2) Devs should be offer only MSC, and maybe fiat. No worries about the liquidity of MSC, the foundation would be providing that in the solution proposed by JR.

3) "reducing the exposure to MSC" is not an option. It would look like that the board wants to sit on  a pile of BTC "in case MSC fails". That's bad because create many negative incentives.

Regarding (2): JR's solution is the following: "Use the remainder of our BTC to purchase MSC over the next few months on the distributed exchange". This is too vague to determine whether it will be successful. Unless it is specified at what prices the board is buying MSC, we're not even sure how many MSC we will have to pay developers! At least with Bitcoin, we know how many we can have and what we can offer. It is true that there ought to be a more cohesive list of future bounties, that way we can intelligently partition our Bitcoins, but if we convert BTC to MSC over the course of months we won't even be able to determine the number and size of the bounties.

Regarding (3): Not everything is about projecting an image. It's possible that MSC will hit a technical wall and the demand for it will go down, and we'll need to hire developers . It will be difficult to pay developers in a currency which is of little value at the time they receive it.

I think its better to pay developers in MSC and to have the foundation hold MSC. It's a lot easier to trust a foundation or company which uses it's own product than the foundation or company which uses some other product internally.

Ideally you want developers who really believe in what Mastercoin can become rather than speculators who just want a quick buck. I think it should be MSC or fiat for developers but not BTC, not LTC, or PTS.  Imagine how awkward it is if the Bitcoin foundation paid people in Litecoins.

Wow, there are a lot of varying opinions here (as far as the foundation buying up MSC, how to pay devs, JR working full-time, etc). I think any unilateral action on something this big by the mastercoin foundation could risk alienating the community.

For any big issue that requires voting, how about we do this:

* Open a voting period of 1-2 weeks. A thread is started where 3 or 4 voting options are given (along with a 2 paragraph "best justification" for each).
* Each voting option has a corresponding bitcoin address
* To vote, the top 50 or 100 Mastercoin holders will send some small fraction of a mastercoin or bitcoin from their MSC holding address to one of the voting addresses. Some one then tallies up the votes, after removing any duplicate votes, verifying MSC balance, etc.

This way, voting is semi-anonymous, and one can easily verify voter eligibility (as well as perform recounts, if desired, for verification). It also gives the community a voice in this matter.

If I may ask, regarding wealth generation, what's your personal goal.... i.e., pay your bills, and then beyond that, stock up on an asset that is risky, but has a huge upside, or, pay your basic bills, and save a much more moderate amount in something that's much more of a "sure thing"? If the latter...what interested you in Bitcoin?? :)

If you were given enough in fiat every month to pay your bills, and then MSC/BTC beyond that at a good level...would that help?

Personally, I'm used to spending my time on risky things, after putting up with insane risk for years...i.e. losing 6 figures in a blown up business, scraping by by a few K in the bank with a company that burns 70K/month and having to have my parents buy my groceries for a few months because I couldn't afford it, etc .... but I am a weird duck I guess...in my case it paid off, but, yes, those hard times lasted years and it took me awhile to adjust to that. Doesn't mean I like that much risk....just saying that because compared to crap like that, to me, this seems pretty safe, hahaha!  :D

If I didn't have this business that was growing so quick and taking 90% of my time, I'd be here coding for you guys in a heartbeat.

I like the idea of having the remaining asset partly in msc. But I would rather aim a msc ratio of 50% instead of 80%.
Also, if the foundation buys msc over the next months and then abruptly stops, the msc value will then suddenly drop, because of a sudden drop in demand. That's why I propose a 'smooth' way to get msc into the foundation wallet - to reach the desired ratio asymptotically over a long time. I worked out a formula that could be used for that purpose:

http://imageshack.com/a/img543/7554/xry2.png

m_buy(t): number of mastercoins to be bought on that day from the distributed exchange, by selling bitcoins.
m(t): number of owned mastercoins on that day
b(t): number of owned bitcoins on that day
x(t): price of one mastercoin in bitcoins on that day
c(t): average number of mastercoins spent per day (bounties, etc.)
T: Time in days, when the desired ratio should be reached (1/e)
r: Desired mastercoin ratio of the total value.

I this way, the desired ratio will be reached exponentially.

To get a feeling of how many msc would have to be bought per day: If we choose m(today) = 0, b(today) = 5000, x(today) = 0.15, c(today) = 50, T = 365 days, r = 0.5,

m_buy(today) = 95.7

So, the foundation would have to buy back about 96 mastercoins from the distributed exchange today. Of course this number will change, as soon as the msc asset goes up, or if the prices change significantly. Everything would be transparent, and bounties etc. could be paid in mastercoins.

What do you think?

Hmm...to better help folks understand how this may look, would it be possible for you to plot a few graphs of this formula for 3 of so different scenarios over the next 12-24 months, e.g.:
* Linear MSC price rise, Bounty amount in USD stays about the same
* Exponential MSC price rise, Bounty amount in USD increases linearly
* Whatever else may make sense?

I know there are a number of variables expressed here...if you don't think it would be useful due to this, that's fine.

Trying to catch up to the discussion. I propose that David and/or J.R. get it into a Google Doc so people can comment on specific parts of the proposal more easily. This discussion is really hard to follow and participate in.


My goal is to build the Mastercoin protocol as quickly and efficiently as I can, while maintain a high quality standard.
This is what I perceive would bring the most benefit to MSC holders.
I would like to accelerate the development and ecosystem and work at ever increasing speed.
I would also like us to burn away our customary budget for the Mastercoin Foundation as quickly as possible, and move that to community control ASAP, in order to remove ourselves as a point of failure.

This is the context in which you should read my reply.

About David's proposal

Now, in light of this, and given the project is super early stage and evolving rapidly, I would hate to see us "shackle ourselves" and commit to any specific long term budget. The Dev MSCs are generated at a predictable rate as set in Mastercoin's original 1.0 whitepaper. However, I do not feel there is a dire need to compel us to a specific burn rate. of our funds

We can do a slower burn rate when applicable.

However, if we believe at some point that we want to spend more cash because we have a great opportunity to increase our development momentum, we should be able to do that. The mechanism I suggested for this is Lending (https://trello.com/c/C3zc82Ob/43-lending-spec). I want us to be able to ask the market for loans, while keeping future unvested Dev MSC as collatoral for these loans. This is a way to get more funds ready right now, if that is what we all believe will speed up development and ultimately increase MSC value (this should move to a public Proof of Stake vote between MSC holders rather than a board vote ASAP).

Therefore I am against setting this spend limit in stone right now. Also, we need to formalize our decision processes before this anyway. What if we do decide, as David suggests, to "formalize the distribution of "Dev MSC", to mirror the amount of Dev MSC generated each month" ... but a month later decide via a majority or super-majority vote to change this? I don't see a value in shackling our future selves here.

Having a plan is ok, but I would rather see this as a tentative plan always up for changes, rather than a commitment.

I see the "Dev MSCs" as just another part of our pool of funds, totally equivalent to BTC or MSC that we bought. Their rate of generation is arbitrary, and I do not think we should use that as any factor in the formula deciding how to compensate developers, but rather come up with an alternative formula depending on taking market compensation and subtracting some amount (because we assume developers are / will be MSC holders, and thus benefit anyway from MSC increase over time).


What I propose is this:

• We need to pay developers using some predictable formula, especially if we want to bribe them to quit their jobs. The choice of currency that they get paid here doesn't matter, as everything is interchangeable in the Mastercoin universe. Each developer chooses how to divide his bounties / salary among BTC and MSC.
  
• We can commit / preallocate a certain amount of BTC or MSC (or USD for that matter) for developers who want  predictability, for a certain period of time. This is always contingent on their continued performance. We as the nonprofit Mastercoin Foundation do not yet have experience with retaining full time employees, we need to define the process of how such positions are hired, evaluated, and for how long (David might want to lead this definition himself).

FYI one project that I would like to use a huge chunk of BTC/MSC for, is what I call "Mastercoin Ventures".
I would like us to find a trusted person, seasoned with investing, to smartly invest a big chunk of our money.
I consider this money well spent if it contributes to the Mastercoin ecosystem and thus increases MSC valuation.

This distributes some of the funds from our centralized decision-making process, and lets that 3rd party (whom we need to trust) have the proper incentive and time to find interesting unexpected initiatives that we as board of directors won't even see, because of our narrow vision.

We are managing too much money right now, the quicker we get it decentralized (in a smart way), the better. In the Mastercoin Ventures proposal, I don't mean we just send a huge chunk of money to a complete stranger to manage - but rather that pending on finding someone suitable (e.g. a seasoned VC) we allocate a chunk of money to them, but only send it when reaching specificic milestones (e.g. when they secure an investment in a 3rd party company that contributes to the Mastercoin economy). We would still approve any such investments, but the VC would take the role of finding the ventures to invest it and doing due diligence.


About J.R's proposal
The type of money we award isn't relevant, any person chooses what currency composition they prefer, we can always convert on the spot.

The trick to choosing our ratio of holding between BTC and MSC is risk management and portfolio diversification. J.R. I believe you are still 100% MSC in your personal portfolio, and I think this is not a sound decision from a risk perspective. For the foundation, I think we need to pick some monetary policy and consult with a professional CFO on how to pick this number. I have no personal experience with proper risk analysis, but I think somewhere along the lines of 50-75% MSC and 25-50% BTC might be appropriate. This is just a hunch, and I would really not like us doing any decision before very very carefuly analysis by experienced personnel. Note again that the type of currency our developers prefer to be paid in is simply not relevant to this discussion as we can always convert on the spot.

About quitting your day job - is there a specific market or other condition you are waiting for here? What MSC price would be suitable for you to liquidate 1% and quit your job? I suspect that without any deliberate action from us, MSC prices would reach 1 BTC in the next few weeks and months. I hope that would be a suitable price point for you, if not before, because you would then hold over 100,000 BTC worth ... these are your own personal financial choices, I just think we need to draw a firm line separating what works for J.R (or J.R's wife) from what works for the Foundation and MSC holders. And I just don't see us buying a huge amount of MSC as a sound move right now, certainly not unless we get a proper risk analysis by a seasoned CFO. In fact we need this analysis anyway ... not buying may also be the wrong and risky decision here. I am simply not qualified to make these kinds of decisions myself.

I don't understand why we even need to purchase more MSC. The Foundation owns about 9% of all MSCs. Isn't this a reasonable number for an ESOP? How much is usually reserved for ESOP? How much would be our target ... how much of all MSC do you believe the Foundation should own in order to operate efficiently?

I'll quote this message I just posted to the main thread, about hiring a few developers:

Sure, makes totally sense :)
Here are some plots:

no change in msc price:
http://imageshack.us/a/img706/4323/qpcj.jpg

linear increase of msc price:
http://imageshack.us/a/img17/1430/ucbq.jpg

exponential increase of msc price:
http://imageshack.us/a/img593/158/2t1u.jpg

exponential decrease of msc price:
http://imageshack.us/a/img42/4566/q6ix.jpg

In each case, I used the values
T = 182.5 days (1/2 year)
c = 7.5 BTC/day (daily expenses, chosen to be constant in BTC, but paid in MSC according to daily price)
r = 0.5

Each plot displays the dependence over the next 500 days (x-axis).

JR,
As an investor of Mastercoin and as someone who cares about this project I just don't agree to this approach.
Let's be honest with ourselves: the reason that MSC currently worth money is mainly (or practically only) because of the BTC invested in it. The intellectual property of MSC is still very low. We have nice ideas which are not yet implemented and there are only few experimental websites and few experimental wallets and that's it. The number of developers that are currently working on the project is still very low.
The echo system of MSC is very close to zero.
This is why I think that selling the foundation BTC will kill the project.

BTC has value that attracts people. It can be converted to any fiat currency, it's price is rising. Investors are looking at this and understand that the foundation has the ability to make this ambitious project happen - this is the reason that MSC worth money at the moment IMHO.

Like everyone else in the world - I love easy money, but this idea just confuses me.
This idea reminds me of USD - printing money out of air.

If the foundation is going to be left without BTC - why we even raised it just few months ago?


B.T.W
I think that we need to have at least 1 million USD as fiat money, to reduce BTC risk

Hi there everyone! 

I don't have much to contribute to the discussion; I will be quite happy with whatever the board ends up deciding.  I have confidence you guys will steer us in the right direction :)

That being said, I highly support anything that gets more people (especially the big names!) working on this project full time.  I've been so busy this last week that I've barely had any time to develop my own little local chapter.  I've often wished to myself over the last few days that I had more time to work on things...

If buying back a bunch of MSC will allow others to do just that, I'm all for it.  Keep up the good work!  Can't wait for the distributed exchange...

+1..I feel the same.  And though we'd all love dedicated devs on the project yesterday, thanks to the existing devs for everything they have done to get us this far.  I can empathize with the need to prioritize your families etc first and don't fault you at all if dropping everything else to focus solely on this project is not feasible at this stage.  Anything you CAN do to keep the progress moving forward is hugely appreciated and I am optimistic that whatever mixture of MSC/BTC/USD is decided will be one that will further accelerate things.

Thank you everyone for your thoughts on this topic. I'm just getting caught up after spending the weekend working with a team of developers on one of the first Applications that will operate on top of the Mastercoin user currency / smart property feature. That is APIEngine.co / APIcoin. This was part of the Global Startup Battle / Startup Weekend 72 hour hackathon and I'm happy to report our model went over well enough with the judges that we won 1st place for Austin, Texas : )

More on that fun later. Lets get back into the discussion.

Lots of different thoughts on lots of different topics seem to have led the conversation here into multiple directions. There is the original proposal regarding Dev MSC, discussion of if its wise to convert some or all BTC into MSC, how to hire developers full time, and so forth.

I think the wisest suggestion put forth was to poll the Mastercoin / Bitcointalk.org community on at least the original proposal and see where the numbers land. I'd like to focus back on the original proposal only and set aside these other discussions for the future.

I'd propose to put forward the poll question this way:

Poll Question:
Do think that the Dev MSC "Distribution Rate" should be fixed by the MSC protocol, in order to mirror the Dev MSC "Generation Rate"?

A. Yes, full speed ahead! Lets distribute 100% of Dev MSC generated each month, proportionately to each developer's contributions. That's what they are for! When the Distributed bounty system is launched it should be set at this same predictable Distribution Rate.

B. Yes, however things are early and we should be conservative. Lets distribute 50% of Dev MSC generated each month, proportionately to each developer's contributions. Save up the other 50% of Dev MSC for the hand over to the distributed bounty system when its launched in the future.

C. No, the Dev MSC are just part of the Mastercoin open source project development funding budget, along with the BTC from the Exodus address. And we should not tie the funding budget to any set rate, but should instead alter it daily, weekly, monthly based on project needs.

I think these three options to answering the question roughly capture the three proposals in this thread.

We can word smith these a bit, but I'd like to post this fairly soon and leave it up for a week or two and see where we are before the Christmas holiday kicks in and folks disappear for a while until mid January. I believe this is a very important decision.

That's right.  If they want stability, they should get a job at IBM and buy that stock.  MSC project is only for high risk - high reward personalities.

It's all or nothing - baby.  Never, ever 'maybe'.  Gotta be all in. 

Yeah. I think a poll would be a good idea. We have discussed the options enough and if more discussion is needed we can do it in the topic that includes the voting.

David,

One question before the poll - how do you propose the MSC protocol can be modified to code what you proposed?
Or do you assume Proof of Staking voting as the means to directly control these MSC at the protocol level?

If this is your proposal ("instead of Exodus controlling Dev MSC, let 100% of them be controlled by Proof of Stake voting"), then I fully agree (but we need a spec for Voting before this change can be codified).

I would like 100% of Dev MSC (and Exodus BTC for that matter) to be controlled by the Proof of Stake voting ASAP.

I doubt there would even be a need for a poll for this proposal - it makes sense so much (but you can put the poll up nonetheless).

Is it mentioned somewhere how much  MSC each member of the Board have?

No.

Except J.R. I don't even know how much MSC board members have.

Ron agreed. That is my intension. 100% of Dev MSC and Exodus Funds controlled by the Proof of Stake system in combination with the Distributed Bounty system.

I've posted the poll at this link: https://bitcointalk.org/index.php?topic=348028.0

I'd make an edit to clarify that point.

+100 to this. The BTC is the rocket fuel that will propel MSC forward. The MSC market is still VERY thin, and I personally don't give much credence to the current MSC valuation given this. Keep the vast majority of your BTC, as ofer said. That is the nest egg that, if properly managed and spent, will make this project successful.

Has it come up when talking about PoS voting that perhaps it should be made public? It's a common practice with public companies and would be in line with the goal of full transparency to show how much voting power the Board has combined.

Regarding voting in general, I invested in Mastercoin because I highly trust the vision and skills of J.R. and other Board members. You wrote that: "I would like 100% of Dev MSC (and Exodus BTC for that matter) to be controlled by the Proof of Stake voting ASAP." Aren't you concerned that like in any company, a lot of the stakeholders simple are not skilled/informed enough to make decisions about the strategy? Shouldn't the board have pretty tight grip on how the money is spent at least until we have matured products ready?

Even if a company pays its employees in stock options, it doesn't pay its employees exclusively in stock options...

I have not seen anyone take issue with JR's decision to keep his full-time job until he is able to make a certain profit on his Mastercoin, presumably because he has a family to support. If we are looking to hire developers full-time, then we ought to allow for the possibility that they too have families to support, and I can't understand how we could hold them to a more rigorous standard of commitment to the Mastercoin project, than the creator of Mastercoin.

Regardless of whether one is for or against exchanging the majority of the fund's Bitcoins for Mastercoins, I think it can be agreed that this is a less urgent debate than whether we should hire full-time developers. I urge the board to hire full-time developers as soon as possible; contact a head-hunting agency, and, for a relatively small fee, they will find us potential future Mastercoin developers.

Hire full-time developers now!

Three months ago, this was a real concern.  JR couldn't quit his job for security.  Now, his resume is very much improved with the advent of Mastercoin.  His next job is going to be real easy to find. 

Does anyone know what is happening with this coin launch. Seem to me they got some 5Milllion in funding and they went quite after that. If you have changed your mind's' please let us know, some of us had a coin or two for this.

Working hard, building the team, and launching.

You're more than welcome to follow our blog (http://blog.mastercoin.org) for weekly updates, and our Facebook group (https://www.facebook.com/groups/mastercoin).