bitcloud-decisions.org

Decision on the economic and business setup of Bitcloud.

We have three choices:

1. Block is “mined” by nodes every 10 minutes. 100 cloudcoins per block. There is no limit on the number of cloudcoins, so mining goes on forever. Block rewards are dispersed proportionally to all nodes who provided bandwidth to the network during the last 10 minute window. Nodes can do three things with their newly minted cloudcoins: sell them, hold them, or use them to purchase services on Bitcloud.
   1. If they decide to purchase something on Bitcloud, for example cloud storage, the transaction is sent into the blockchain and those cloudcoins are destroyed.
   2. If the node decides to purchase something on Bitcloud, for example cloud storage, those cloudcoins would be sent to a publisher. The publisher would then be holding the coins and decide what he wants to do with them.
      1. Proposed amendment to 1.ii: Ensure adequate incentive to early adopters (increasing cloudcoin value) by tapering off the number of coins in the block reward over time, and by giving a way for publishers to pay a fee to nodes that carry their content. These are similar to Bitcoins halving block reward every 4 years and transaction fee, respectively.
2. Don’t impose a limit per block, so for example 1 Tb generates always 1 Mediacoin

NOTE: Option 1 and 2 impose a limit per block. For example 100 coins per block even if there are millions of nodes connected. So the more nodes are connected, the more difficult is to earn money.

Option 1: destruction of money by ads

Advantages

There aren’t really any huge advantages to this system. The problem is that the mediacoins currency and network integrity is harmed with the other setup. - Kyle

Disadvantages

1. Publishers will not search for advertisers.
2. Because of (1) you must enforce a system that inserts ads even if publishers don’t want to or are not able to find advertisers.
3. Because of (2) users become molested by ads not in relation to the content.
4. Bad advertisers and spammers will insert ads which might be even illegal or annoying.
5. Moderators cannot avoid (1),(2),(3),(4) unless they insert fake ads and pay the system as if they were advertisers. This would kill the trust in the entire Bitcloud.
6. Because of (5) most people won’t want to be a moderator, as they won’t be able to find proper advertisers and don’t want to pay.
7. Because of (6) nodes won’t also become moderators, as they lose the money the earn by bandwidth sharing.
8. People will switch to alternative p2p protocols with real moderation or free of ads.

Responses from Kyle:

1. This is not necesarily a huge problem. An interface can be placed into the Bitcloud software so advertisers can bid on ad space in different channels/categories. I would also personally tell other people that they can advertise on WeTube/Bitcloud. I’m sure I wouldn’t be the only one as everyone who owns mediacoins would benefit from advertisers bidding higher prices for ad space. This isn’t really a problem that causes any systemic risk to the Bitcloud network.
   • Javier: you can’t control the interface. The day 2 there will be a version of the Wetube interface with an adblock like feature removing the bid thing.
     • Kyle: The interface I’m talking about doesn’t display ads. It’s the section of the interface strictly for advertisers who wish to purchase ad space. The actual ads are embedded in the videos.
2. This is true. Unless I am able to think of an alternative, all advertising decisions will be made by all of the Bitcloud nodes put together rather than individual moderators.
   • Javier: Every node is going to serve different things. There is no posible consensus on whom to admit as advertisers. Sex ads cannot be shown in non-sex content, for example, but you can apply this to every discipline.
3. As mentioned in part one, of this response, advertisers would be able to bid on ad space for particular channels, so the ads would still be related to the content.
   • Javier: forget about this. This is open source and that part can be very easily removed. You cannot force the interface to do this things.
4. I’ve thought of this issue as well and will need to find a solution.
6. Since nodes are moderating themselves, moderation still takes place. I’m not sure I understand this argument.
   • Javier: that makes things even worse, because now not only you prevent people for being moderators, but also to be nodes!
7. One solution to this could be default channels/categories in the protocol instead of nodes creating their own categories. I’d have to think about others if that solution was not preferred.
   • Javier: very bad idea, moderators should be able to create their own categories or the system will be very inflexible. For example, a news moderation should be able to create categories about news types.
8. An alternative protocol built in the form of Option 2 could still pop up, but obviously I think it would fail due to the same problems related to the value of the currency and network stability. It should also be noted that videos could be uploaded for free in option 1, but ads would need to be placed on the video once they received a certain number of views.

While a few of these disadvantages are legitimate, they still don’t compare to the disadvantage in option 2 where the entire network is unstable becaue the value of mediacoins is not tied to the number of users on the network.

Option 2: Advertisers pay publishers

Advantages

1. Publishers will search for advertisers to earn money.
2. Ads will be relevant to the content.
3. Publishers earn money that they can hold or exchange.
4. Free content is possible because paid content pays publishers for the rest. And anyway, nodes can select publishers, which means that they can select themselves if they are also publishers. This means that nodes can select paid only publishers, and choose if they want dedicate some of their space to free content or not.

Responses from Kyle

1. As mentioned in my response to this as a disadvantage in option 1, this is not a serious issue. Advertisers can still bid up prices for ad space in the “Advertise on WeTube” tab on the WeTube software client.
2. This applies to both options.
3. I’m not sure how this is an advantage. I look at it as a disadvantage because a certain percentage of publishers will sell their mediacoins for some other currency. It hurts the growth of mediacoins as a currency because money will be going into the system and then back out of it instead of just staying in the system. It is similar to someone buying bitcoins in one country to send to a friend in another country. That friend sells the bitcoins when he receives them. Money went in, but then it went back out, so there is no increased value for bitcoins, the currency.
   • Javier: and what is the problem of that in bitcoin? Bitcoin is a way to pay, our system will to. NOTE: an advertiser has to buy money from nodes before they can pay to the publishers. When a buy happens, our coin raise in value. Yes, then the publisher may or may not sell the money. If it sells, price of our coin compensates because the money to pay publishers was increased before. If they hold, price increases.
4. Free content is still possible in option 1. Content can be uploaded by users for free, but ads will be added once a certain video or other files starts to require a lot of bandwidth. Allowing unlimited uploads for free without ads is a recipe for disaster because everyone would just choose that option. No current video host offers this option because they would go bankrupt.
   • Javier: it is absolutetly not a disaster because in this system publishers are REALLY motivated to find advertisers. AND, as I told you, a node can ALWAYS choose their publishers, so they can choose a publisher that inserts ads.

Disadvantages

I don’t see any, but Kyle insists that publishers are irrevocably going to sell their coins immediately after they have paid, making the system to crash. I need to see serious proof of this.

Response from Kyle:

In option 2, the value of the currency is not directly tied to the number of users who require bandwidth on the network. The problem with this is that the network will falter greatly when the price of mediacoins crashes due to speculation. For example, when the price of bitcoin crashes (which it has on many occasions), miners stop mining because it is no longer profitable for them to do so. The same is true of the Bitcloud network, but the problem is that the integrity of the network relies on nodes staying online. Since the price of mediacoins is not directly tied to the number of users on Bitcloud, speculators could crash the price (like what happens with Bitcoin), and then more nodes would go offline because it is no longer profitable for them to share bandwidth on the Bitcloud network. This means that there is much less bandwidth on the network as a whole, and users will notice a lot of lag on the network. If the price of mediacoins is not directly tied to the number of users on the network (like in option 1), then it is only a matter of time before this problem takes place. We can’t have nodes going offline because of a price crash because then the users will not trust Bitcloud to have content available at all times.

The real disadvantage of option 2 is that the network simply doesn’t work with this setup. There are a few extremely minor downsides of switching over the option 1, but it’s much better than having a network that is unstable.

Javier:

I think you are confusing terms. I’ll try to do my best to explain it clearly, point by point:

1. It is false that in option 2 the value of the currency is not directly tied to the number of users. You should explain why is that, as I haven’t heard a good analysis on why is that. The value of the currency is absolutely determined by the amount of users in the network, because of the following: Each generated block has a fixed amount of coins. For example, 100 coins per block. That means that if more users enter into the system, then more nodes must be run and more bandwidth must be shared. The more nodes there are, the less they can earn, so prices must go up for our currency. No node is going to sell below the price of real bandwidth.
   • Kyle: What you describe assumes that the nodes are the only ones selling mediacoins at any one time. That’s not how it works in reality. This is like saying that bitcoin miners control the price of bitcoin. Once there are a large number of mediacoins in circulation, the holders of those mediacoins control the market because there are many more of them than there are nodes. If the network runs for two years at 100 mediacoins per block, that means there will be over 10.5 million mediacoins in circulation. When there are those many coins out there, the nodes don’t have much say on what the market price is going to be for mediacoins.
2. You can never avoid speculation. Never, never, never. Your system doesn’t avoid speculation at all.People are free to buy and sell. What we can is control the speculation to make the system grow. How? By the intrinsic value of our network, and the services that provide our workers (mostly publishers). We have more intrinsic value than Bitcoin, because we provide a real service beyond just being a currency.
   • Kyle: Providing extra value during the mining process does not mean anything. If that were true, Primecoin and Peercoin would have more value than Bitcoin. What gives a coin value is its utility. This is why no one cares about Primecoin finding prime numbers or Peercoin saving energy costs. You can’t avoid speculation, but you can put a floor on the price.
3. Our system is going to be a mix between a currency and an stock market and there are good reasons to hold both. For example, when people hold Apple stocks is because they believe that Apple is doing well. Apple is not crashing because they are backed up by the products they sell. We are going to be backed up by the services we provide.
   • Kyle: This is false. A DAC needs to be a stock/commodity first. If it becomes a currency, that is something for the market to decide. Option 2 does not back up the mediacoins currency with the WeTube service because they are not directly connected because nodes won’t control the market price at a certain point as mentioned in the response to point 1.

   In addition to that, we are a currency too, a medium for people to interchange goods and services, and we can maintain even a better equilibrium than Bitcoin just because we are also backed up by the services we provide.

   • Kyle: Saying the currency is backed up by our services and actually backing up the currency with the services are two different things. As I’ve explained many times, the currency is not backed up by the services because the nodes don’t have control over the price at a certain point.
4. You assume that publishers are going to sell. Why? You’re unable to give good answer except your biased opinion.
   • Kyle: You assume that publishers are going to hold. Why? You’re unable to give a good answer except your biased opinion.
5. Even if all publishers sell everything in the moment they are paid (a very improbable thing), our system still can run STABLE. Why? Because before a publisher can sell, he must first have received a payment. And who is the one who pays? The advertiser. And who is the one who sell our coins to advertisers? The nodes.
   • Kyle: As pointed out in other responses, this assumes nodes are the majority of the market, which they are not. They are at the beginning, but they lose their control of the market over time as more mediacoins are created. Just like with bitcoin miners.

   SO IT COMPENSATES Note that there is a buy and a sell. Advertisers buy, publishers sell, so there is an equilibrium. And meanwhile the prices increases because more users and nodes come to the system.

   • Kyle: Same answer as above. The price does not increase because nodes don’t control the price after a certain point in time

Option 3: No limit per block

In this option, there is not a limit in the amount of what can be earned per block. For example, 1 Tb of bandwidth equals to 1 mediacoin.

For original developers we can implement a kickstart reward, so they are compensated with a good amount of coins for the work of developing.

For early adopters we can do something like:

• For the first month, 1 Tb = 1000 coins.
• From there on, 1 TB = 1 coin

That way we propagate the system easily and ensure a good start.

Advantages

• It is always going to reflect the real price of bandwidth.
• Speculation is reduced to minimum because nodes are not going to sell below the real price of bandwidth.
• Nodes will have a constant incentive to be online.
• Publishers can be paid properly.

Disadvantages

• Highly inflationary system, which is not good for investors.
• We have to calculate very carefully the amount given to developers and early adopters.

Option 4: No blockchain

In this option, there is no blockchain! And we base our entire economy in a system of coupons or contracts. This transforms the BCL in an advanced escrow automatic system.

The following services can be sold:

• Paid guaranteed storage.
• Paid guaranteed bandwidth.
• Paid content (user pays to download).
• Advertising.
• Name registration and resolution.
• Paid moderation.
• Rent nodes.

There are also free versions of all the above, that is something traded between publishers and nodes. A publisher can physically setup nodes or rent them at will.

The system automatically judge, emit verdict and apply the escrow policies stated in the contract for reward or penalization, so we still need the laws of bandwidth, storage, service, etc.

That means that our economy is subsidiary of other blockchains. We can accept a variety of blockchains, for example Bitcoin, Litecoin, Primecoin and any other major cryptocurrencies.

In Wetube, we add the necessary interface to facilitate the easy process of selling contracts. We should accept two forms of selling: bids and fixed price. Any publisher is free to put a price and special conditions.

Advantages

• Each publisher put the prices.
• Each publisher is completely independent of the economic of a particular currency.
• No speculation affecting the entire Bitcloud.
• The system cannot crash economically, only individual publishers can.
• No need for exchange.
• Nodes and publishers have the incentive to search for customers.
• Instant access for the information-related industries.

Disadvantages

• No direct reward for developers is possible. Funding must be external.
• No reward for early adopters (because we are not a currency anymore).

Option 5: Hook to External Economy and use existing resources

In summary, we realize that there are several suitable external economies that already exist and we’re in the business of infrastructure, not economic theory.

Accordingly, the system is concerned with primarily delivering content from a provider to a consumer on a 1:1 basis and ensuring that those transactions can be accounted for, but without getting into the nitty-gritty details of handling payments.

Use the blockchain as a way to facilitate maintenance of the network (as per the example set by Namecoin).

Publishers act as escrow agents to facilitate transactions between the consumers of the content and the nodes.

Publishers have a toolset allowing them to automatically track whether content has been delivered, whether payment has been completed, and automatically notify both parties to a transaction that it has been completed successfully.

In this model, all content is encrypted both for transit and encrypted by a nonce key until payment is verified by the escrow agent; at which time, a key exchange mediated by the publisher occurs, the content is unlocked and the node receives payment.

See https://en.bitcoin.it/wiki/Contracts for how this type of escrow works with bitcoin and bitcoin-derived currencies.

Advantages

• The project’s scope becomes much narrower, allowing for faster implementation
• Content payment can be handled in the users’ choice of currencies
• We don’t need to facilitate payments directly and can ‘hook in’ to other currencies, expanding our reach
• Using bitcloud as a framework to facilitate transactions does not limit the types of transactions that can be made
• Also, this allows other developers to build their own clients to use bitcloud, attracting new innovations
• Keeping transactions out of the blockchain allows for a smaller blockchain & doesn’t require all users have it
• Cryptographic ‘key’ locking can allow for ‘stream’ transactions as well
• All traffic being encrypted means ‘private’ transactions do not stand out
• Infrastructure becomes more decentralized

Disadvantages

• We don’t get filthy rich from having invented yet another cryptocurrency
• Automated escrow agents will require quite a bit of work to implement
• Instead of one client, we need three clients: one for users, one for nodes, one for publishers