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Author Topic: [GLBSE] Suggestion: Proof of money when creating shares  (Read 1195 times)
Sukrim
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May 16, 2011, 07:45:49 PM
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Hi everyone,

My concern is that currently on GLBSE you really can become a bitcoin billionaire easily:
Create a billion +1 shares, sell the one share at 1 BTC --> poof, here you go!

What I would suggest is that when creating shares, you also yourself have to buy as many shares as you would like to keep. As the money goes right back to your account, and there are no fees, this would not harm any business. It would however stop individuals that abuse a share model to create a credit/speculation system, where they only fundraise from others - but solely based on a big bubble (as the suggestion in the beginning, which is not possible at all with less than 7 million bitcoin in circulation right now and 21 million BTC max.)

I would like to have a second kind of shares that is working like this.

Example:
I have 100 BTC I'd like to start a business with, however I need another 200 BTC to get going. With my proposed kind of shares, you would only be able/allowed in the beginning to own 1/3 of the shares. The ability to buy more shares gets frozen until all shares are sold or until I have more money in my GLBSE account than initial shares + currently sold shares are worth (and I would be able to buy shares only with that excess money of course). Once the remaining 2/3 are sold, I can buy them back at market price as I like or really start that business I want to do.
Should I hold 2 assets at once, of course these numbers would be cumulative (so I have to have enough money in my account for both assets + sold shares and can then buy additional shares back with the remaining money).

This would not allow for every kind of business, however it would be a more secure way to start something, as you need to give proof that you already have the money you claim to have and get also only the proportion of the shares that is equal to your own investment.
For the more risk-friendly investors they could still invest in the "classic" shares - for shared mining contracts (as a concrete example) however something like my suggestion might be more desirable.

Maybe something like this could even be done right now, by releasing all shares and immediately buying back your own part, but then the asset holder could also double-spend (and I'm not even sure if it might work in the first place for this very reason...).


Hope you like my idea (or even better: You don't like it and give constructive reasons why and how it could be made better!), looking forward to your input.

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BitterTea
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May 16, 2011, 08:18:39 PM
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Quote
My concern is that currently on GLBSE you really can become a bitcoin billionaire easily:
Create a billion +1 shares, sell the one share at 1 BTC --> poof, here you go!

I'm confused, can you lay out the steps necessary for someone to abuse the share issuing system?

If I create 1,000,000,001 shares and sell 1 of them at 1 BTC, I have only raised 1 BTC.
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May 16, 2011, 10:12:39 PM
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I don't think there is a problem here besides people confusing themselves by using mark-to-market accounting.

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Sukrim
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May 17, 2011, 12:07:18 AM
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Quote
My concern is that currently on GLBSE you really can become a bitcoin billionaire easily:
Create a billion +1 shares, sell the one share at 1 BTC --> poof, here you go!

I'm confused, can you lay out the steps necessary for someone to abuse the share issuing system?

If I create 1,000,000,001 shares and sell 1 of them at 1 BTC, I have only raised 1 BTC.

...but you are in possession of shares worth 1,000,000,000 BTC on the market.
Which is neither realistic nor good for (potential) investors.

I personally would like to know if such types of shares would at least be possible to create, as it would be great for my idea of selling mining contract shares and give a bit more credibility to the shares issuer.

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theboos
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May 17, 2011, 12:18:58 AM
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How are they worth 1,000,000,000 on the market? Unless you can find 1,000,000,000 more people to buy at 1 BTC each, they are worthless. If you do convince 1,000,000,000 people to buy shares, I would say you deserve to be a billionaire.

In other words, your selling shares at 1 BTC apiece does not make them worth 1 BTC each. Even if you sell one for 1 BTC, you still have to convince the rest of the economy that your shares are worth 1 BTC each, a hard sell since the entire Bitcoin economy could buy less than 1% of whatever the shares represented.
Nefario
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May 17, 2011, 12:31:23 AM
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No matter how I structure GLBSE, eventually the money they you pay for issued shares is going to be given to the issuer. Once they have it there is really nothing GLBSE can do to take it off them, NOTHING.

You're only protection is investigate who the issuer is, and if it's someone you would trust to NOT run off with your bitcoin then fine.

What we did with BitcoinGlobal was we found a forum member who we considered to be trusted, had a history of being trustworthy and a good reputation on the forum(so he has something to lose by ripping us off) to act as our company treasurer. He's the one with all the money. But at the end of the day he'll give it to me to cover expenses.

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cschmitz
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May 17, 2011, 12:53:23 AM
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No matter how I structure GLBSE, eventually the money they you pay for issued shares is going to be given to the issuer. Once they have it there is really nothing GLBSE can do to take it off them, NOTHING.

You're only protection is investigate who the issuer is, and if it's someone you would trust to NOT run off with your bitcoin then fine.

What we did with BitcoinGlobal was we found a forum member who we considered to be trusted, had a history of being trustworthy and a good reputation on the forum(so he has something to lose by ripping us off) to act as our company treasurer. He's the one with all the money. But at the end of the day he'll give it to me to cover expenses.

I think GLBSE can try to actively warn users to be cautious and selective due to the crypto nature of btc. After all if too many cases of scam exist GLBSE will suffer.

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Nefario
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May 17, 2011, 01:27:14 AM
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No matter how I structure GLBSE, eventually the money they you pay for issued shares is going to be given to the issuer. Once they have it there is really nothing GLBSE can do to take it off them, NOTHING.

You're only protection is investigate who the issuer is, and if it's someone you would trust to NOT run off with your bitcoin then fine.

What we did with BitcoinGlobal was we found a forum member who we considered to be trusted, had a history of being trustworthy and a good reputation on the forum(so he has something to lose by ripping us off) to act as our company treasurer. He's the one with all the money. But at the end of the day he'll give it to me to cover expenses.

I think GLBSE can try to actively warn users to be cautious and selective due to the crypto nature of btc. After all if too many cases of scam exist GLBSE will suffer.

I agree, but I've not exactly been hiding the terms and conditions, see http://glbse.com/terms.html

Anyone who asks I tell them what the dangers are.

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cschmitz
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May 17, 2011, 02:05:21 AM
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I agree, but I've not exactly been hiding the terms and conditions, see http://glbse.com/terms.html

Anyone who asks I tell them what the dangers are.

Yeah, thing is that noone reads that, i was thinking more of a double confirmation red letter thing in the investment process Wink

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theboos
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May 17, 2011, 02:17:40 AM
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Yeah, while you're at it, you should make a quiz! Then people have to study the terms carefully before signing up! Maybe even ban their IP for a week if they get a question wrong! (in the name of complete liability release).

Seriously though, if you don't read terms and conditions now I don't think a "double confirmation red letter thing" would be effective in inducing you to do so. If we held exchanges liable for losses, nobody would run them.
FreeMoney
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May 17, 2011, 02:23:09 AM
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No matter how I structure GLBSE, eventually the money they you pay for issued shares is going to be given to the issuer. Once they have it there is really nothing GLBSE can do to take it off them, NOTHING.

You're only protection is investigate who the issuer is, and if it's someone you would trust to NOT run off with your bitcoin then fine.

What we did with BitcoinGlobal was we found a forum member who we considered to be trusted, had a history of being trustworthy and a good reputation on the forum(so he has something to lose by ripping us off) to act as our company treasurer. He's the one with all the money. But at the end of the day he'll give it to me to cover expenses.

That's not what he's talking about at all.

He thinks "I make a billion shares. I sell one for 1BTC. Now I has one billion BTC worth of shares." The problem only exists for people who think that way. Reality is you have a billion shares that no one is buying and 1BTC.

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BitterTea
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May 17, 2011, 02:59:55 AM
 #12

That's not what he's talking about at all.

He thinks "I make a billion shares. I sell one for 1BTC. Now I has one billion BTC worth of shares." The problem only exists for people who think that way. Reality is you have a billion shares that no one is buying and 1BTC.

Oh. Duh. Yeah, the shares are only worth what other people are willing to pay for them. For the same reason, you cannot calculate the value of a large amount of bitcoin based on the current exchange rate, because the act of selling that large amount would change the exchange rate.
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