More compelling than selling

in LeoFinancelast month (edited)

Last night, @theycallmedan proposed an interesting variation of an older idea for taxing immediate powerdowns. While the original idea was that the tax would be burned, what was suggested was instead the tax being distributed to those still powered up instead as an incentive. There were a few other ideas inspired by DeFi platforms, like a staking tax as well, but I think I will focus here on the powerdown side and instead of the proposed 10%, use 5% instead.

5% doesn't sound like it would yield much for the HP holders, but I think it needs to be considered in various scenarios also. Currently, while there is ~380 million HIVE in the supply, there is only about 140 million Hive powered up, which is the stake that gets used for accessing the pool. If there were more powered up, each account would effectively have less draw percentage wise, but the scarcity on the market should have a positive impact on price.

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Looking long term, creating market scarcity is good for price, but I think that how that scarcity is created matters, with the most effective scarcity driver being compelling usecase so that people see the value of token usage in the community more valuable than holding and selling on the market. With DeFi being a talking point of late, one of the things it brings to the table is staking for yield, something that Hive has been doing all along.

So, imagine that the HIVE price pumps and people want to powerdown instantly in order to catch the market. Currently, they would be able to get 1/13 in seven days from now, which is far too slow for a speculator, which is why they have the HIVE on chain. But, if the market value is up say, 50% on where they bought their Hive, they might be willing to wear a 5% token loss in order to sell on the market today. Let's say I decide to do this and powerdown 10K HIVE to sell at a cost of 500 HIVE in tax. This 500 would then be distributed to all other holders based on their stake with perhaps, no recently powered down accounts getting any.

With 140M Hive powered up, lets say that at a moderate pump, 1/10th gets powered down to go to market, meaning that 14M HIVE gets powered down at a cost of 700,000 HIVE, which would then get distributed to the powered up accounts. Again, that doesn't sound like much, but it is effectively, 0.5% of the entire powered up supply and it would be distributed to at most (depending on rules), 90% of the powered-up stake. This would mean that an account with 12,600 HIVE would get a 70 HIVE bonus for staying poweredup. This would mean that if that same account was going to powerdown say, 1000 HIVE and pay 50 HIVE in tax to do so, they would have to consider if it is better to stay powered up and get the tax multiplier, or risk selling on the market in the hope for more than what they paid and would have received.

This makes it interesting. However, let's say that there was a spike to 2 dollars tonight, how many would be willing to pay the tax in order to sell? Instead of 10% instant powerdowns, it might be 30% instead. This would mean that 42 million Hive is powered down and 2.1 million in tax will get distributed to 98 million in stake. So, instead of a 0.5% bump in value, the powered up holders would get an immediate 2.14% gain, maening that the 12,600 HP account will get an additional 270 HIVE given to it in yield.

Remember, that this would be only on the instant powerdowns, not the normal powerdown schedules, but if you imagine that throughout the course of a year, there might be several large spikes (or crashes) that could send people looking for the instant PD button. This could amount to a very significant increase in yield for those who have powered up HP, on top of curation, interest and other aspects on the chain.

There is a massive amount of game in this, as what is likely is that there will be people who will keep their "play HIVE" liquid so as not to pay the tax, but this will also mean that they will not benefit from the tax yields. There will be people looking to collect a lot of HIVE from the yield, but they will be limited in when they can sell it by the normal powerdown period.

This would be controversial in various ways, but one thing that the sellers who brag about selling HIVE high don't seem to factor in, is that the high price they get is because of all of the holders who didn't dump on the market. However, the holders don't get much benefit (considering other DeFi platform yields) for underpinning the network and propping up the price by maintaining some level of market scarcity. If they did get greater benefits, it is acceptable to assume that more people would power up HIVE and not only create the scarcity that drives price, but incentivize the powerdown tax game even more, as price increases.

There would be various ways people would look to game this of course, with alt accounts being one where they have a liquidity account they are willing to powerdown and pay the tax on, while getting the benefits of other powerdown tax payers also, but this is not a bad thing, as long as the tax doesn't go back to the accounts that insta- powered down. Also in this regard, remember that delegated HP can't be powered down and that has a 5 day undelegation period, which means that the alt account can only trail or automate votes, not delegate to the main and still be able to take advantage of the tax "rebate".

When it comes to DeFi, Hive has a lot of benefits as the transactions are free on chain and very cheap on the exchanges, so paying a little in tax for additional privileges isn't much of an issue. Then, as there are more DeFi-type options added onto the chain overtime, there will be a growing amount of reasons for people to powerup, rather than powerdown and overtime, this could start to stabilize Hive on an upward trajectory, meaning that most people will choose not to instant powerdown, as they no longer need to catch a market spike to have gains, as the on-chain benefits are more compelling than selling.

As Hive develops as a platform and more tokenized communities grow and add their own values to the chain, being a Hive holder is going to provide access to a range of value streams.

For example, Resource Credit (RCs) delegation and pooling is coming and at some point, they are going to be valuable. RCs are only created by powered up HIVE, so if they have a value, it is in addition to the value of the powered up HIVE, which could see for example the tax distribution on top of the curation gains and interest paid, as well as it acting as an oracle for airdrops of tokens that can add more value, as we have seen in the past.

When all of these little streams are pulled together and bound to an account, the percentage return on Hive Power is actually pretty good and will look very healthy, if price climbed, which it would if people realized how valuable Hive can be as a platform of multiple revenue streams. Once there is a decent interface to track all of these things, people would have a far better understanding of what their tokens are rally worth powered up and be able to evaluate it against market price and ask "is it worth selling" - For some it will be, for others - perhaps being powered up holds more worth.

There would have to be lots of things taken into consideration in regards to this idea and a lot more pros and cons that could be mentioned, but what I like about Hive is that the community can throw ideas out there, mull them over publicly and even affect their inclusion into the future. Of course, having powered-up HIVE helps in this regard also.

Taraz
[ Gen1: Hive ]

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Well said. The goal of the exit tax is to give a tax as a rebate to those that stayed powered up. I'm happy to see this has been received well by the community.

The 5% tax on power-up, where let's say half went immediately to those who are already powered up, is something that would add even more APY. The goal is to try and make as high a APY as possible to lure in investors. If you see, you can get a high APY and think, we'll I was going to hold this Hive for a little bit anyway. A 5% entry fee isn't much if the APY is, let's say 100%+ on top of being able to upvote your favorite authors.

But I did see a lot of pushback on the entry tax, so I'm happy to exclude it for the first iteration of this. Once people see how much the ROI raises when they power up with the exit fee, I think we'll see more support for various other fees that go back to the long term community.

The fee on rewards seems to be split, giving a exit fee to those that choose to get liquid rewards as appose to HP rewards. This obv will give much better rewards over time to the authors that at least keep some HP powered up at the expense of those dragging the price down the most. I'm 100% in favor of powering down rewards and selling them. That's a draw to the platform. I just think we can take a little from those that instantly get out to give to those that stick around. Seems reasonable to me.

I think the entry tax would be fine if the APR is very high as seen in some DeFi apps, but I am not sure it would be high enough on Hive toy not be painful. I agree that if there was a higher APR for buying, holding and participating, more people would be open to other fee structures - just got to get them in the door first :)

I think giving options for instant should come at a price that rewards holders as much as possible. The talk of burning/dao is fine, but I think keeping this simple and having a direct link between would see more community benefit for holders. DAO/burns benefit everyone, dumping only benefits the sellers. If the buyers have incentive to stake and hold, eventually the sellers have far less impact on price.

During extreme bull runs, even the mightiest of Hivers would be tempted to instantly cash out to catch a really big pump, with hopes of catching Hive cheaper. What usually happens is they sell too early and end up forming back in any way at a higher price. But some do pull the magical hat trick of buy low and sell high. I just feel everyone might be pleasantly surprised at how high the APY can get for Hiver power holders when lots of people are cashing out instantly, and all of that goes back to the hive power holders.

I got a better idea, a curve on the top instead of the bottom.

This idea only deters new accounts and takes Hive away from what it is, a blog site.

If it becomes just another speculation market would anyone be here? Probably not.

To break Hive is to break the entire block chain.

We don't need more "big investors" the game is already geared enough to the top end.

We need more actual bloggers and users.

But each day, Hive becomes more about speculation and attracting whales than an actual community.

Why would an investor come here?

Might as well change the entire code to remove staking completely and allow it to work without staking and keep it liquid.

I'd bet, this changes will prevent more people coming.

Those big stacks lose their value when no new money comes in.

There's a lot of interesting things that could be done with the power down tax. I don't feel a power up tax though is right at least not yet. We want people powering up so leave that option free in my opinion. Perhaps later on as the platform becomes better known and people better understand it then would be the time but we are already having growth issues.

That being said I'm curious if a 5% divided and 5% burn would be good? Or any ratio of the 10% 8% divide 2% burned. How would that play with the value. It seems like we need to curve the APR rates a bit as there's a lot of liquid hive floating around which keeps prices down.

It could in theory even be split up in 3 ways. Divided to community (should the be highest) a small burn and a small DAO fund to help continue development and fuel growth of the chain.

Lots and lots of options and cool things that could be done. I don't see them fitting in this upcoming Hard fork however still important to talk about now so we are ready for the next hard fork.

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I agree with not having the power up tax at this point. All incentive should go to those who stay powered up from this I think, as while the burn is attractive as is the dao, I reckon this would be more effective to attract powering up of stake, which could make a significant difference.

I don't think this would be considered for the next HF, as I am pretty sure they are close to locking now.

Instead of a direct power up tax, I think an indirect power up tax should be considered. For instance, newly powered up Hive does not collect from the tax pool for say 90 days, or some length of time that everyone agrees on or that is a witness setting. It benefits current Hive Power holders because the tax that would have went to the new Hive power will go to them instead, which is basically the power up tax in reverse. The pain is not felt at the power up though so it doesn't seem as bad to me.

This would be interesting too, but perhaps not very attractive for new investors?

I don't understand the point of burning tokens.

What about funding the pool for projects instead?

I think this does wonders for goodwill in the community. I'm going to sleep a lot more soundly, knowing that if the price spikes to $5 while I'm asleep, then back down again, I'm going to wake up to substantially more Hive than I had at bedtime.
We'd need a voluntary time-lock of some type, to keep the security benefits we'd lose.
Click here to opt in for instant powerdowns with 5% fee, on this account. Instant powerdowns will be available in 30 days.

When it comes to security, I would like to see an additional layer beyond the keys - some kind of Hive authenticator app or even an email verification or some activities, where changing the email will timelock etc. opt in stuff.

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Death and taxes! XD

I think it sounds like a reasonable use for a tax if there's going to be a tax.

Saw from a glance in the comments about a power up tax, when would that be reasonable to apply, when one is an orca+ or full on whale so people can't complain about how the rich are still avoiding taxes? o_O XD

A lot of the DeFi platforms have a 4% staking fee. Stake 1000 dollars worth, it will cost 40 dollars. 10 of billions are staked with these kinds of fees.

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Interesting points here, and I like them. The idea of alt account gamification is an interesting note. I could see alt account gamification if there was some sort of time based taxed system in place as opposed to your proposed flat tax, so I agree with you there.

I also think this specific type of gamification could get the more newbish people in this sphere more into the idea of ownership and voting on changes to the blockchain. Ask a newb "what APR should HBD and HP be set to" and I'm sure you'll get a high number, unfeasible in many ways that the newb doesn't get. (The newb in this case is me lol) But the idea that unstaking has a tax, but you get the tax if you stay staked, has a more direct "give and take" feel to everyone who uses HIVE in a way.

In short to me the concept feels easy to grasp, something that can/would probably fluctuates, and something that I could have more of an opinion on/vote on/witness on. So it makes me feel more involved in a way.

But the idea that unstaking has a tax, but you get the tax if you stay staked, has a more direct "give and take" feel to everyone who uses HIVE in a way.

It would be interesting to wake up missing a pump and end up with more HIVE for it :D

I think the people who would use this feature the most would be the speculator traders who have a decent understanding of the risk and reward of it. I think they wouldn't mind the fee.

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Not sure I am a fan of the word tax, makes me tune out to the logical argument that you make.

Fee is what would be used I think. Tax is what some platforms use. I used it as that is what Dan labelled it in his post. The label cam be changed, this was more for the idea.

Hmmm, not much better Fee sounds like a bank or credit card.

Be your own bank.

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I like the idea of a power down tax, but a power up tax would be negative in my opinion. If anything, I'd like to see more reward for those who remain powered up maybe a bonus for those who have never powered down any hive at all, that grows a little bit each week/month/year

Some great ideas though, it's great to see our distributed global community coming up with proposals and discussing their merit.

There is an interest on HP, which is currently about 3% - not too bad considering a bank offers 0.5% :D

Yes good point, the 3% is great and it's not even easy to find 0.5% with the bank!!

This is one of the most reasonable articles I've read lately on this topic. I for one believe in a tax for instant power down while incentivizing holders for not dumping on the market. Looks interesting because this has nothing to do with the existing inflation rate. I hope that this change is implemented because we have too long treated profit-taking as a sin in this community. Cheer!

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Profit taking is a good thing, as long as it doesn't take from the rest of the community. In my opinion, for too long the sellers have had an asymmetry in their advantage, as they can sell and buy back cheaper at no cost to themselves, while the holders prop them up. Will be interesting if ever implemented :)

Hi @tarazkp ,I consider myself a very active man, but you are not left behind, when reading I feel that they are motivated, well me too, and one more plus of this panel is so many interesting posts, that's why when I have time I try to take advantage of it in this panel

Have you tried yoga?

Hi @frot ,I have not tried it but I exercise daily, I prefer running, jogging, swimming if possible, I mean something more active, with more movement.
Greetings

Are you into yoga pants?

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Hi @frot ,if they look like this obviously

Sounds like you are a man with a plan

great idea of power down tax
helpful post..

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