Will the FBA's be "paid out" on the actual PeerPlays website or through the Bitshares network which is attached to the asset? I haven't seen an asset pay out dividends yet through Bitshares(or know of one).
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The first milestone mentioned in the document above is called "profit sharing distribution code". We are developing the technology to accomplish the profit share distribution mechanism that Peerplays specs. So to answer your question specifically, yes, this will all be in the blockchain.