Altruist vs Rational self interest reflection & LB variant with trading fee reimbursed to bakers. Salty thread be warned

Philosophy and Economics
1

So altruism is the standard moral of good and rational self-interest is the standard moral of evil?

Altruism declares that any action taken for the benefit of others is good, and any action taken for one’s own benefit is evil. Thus, the beneficiary of an action is the only criterion of moral value—and so long as that beneficiary is anybody other than oneself, anything goes. To my view Altruist morality is evil, the basic principle of altruism is that man has no right to exist for his own sake, that service to others is the only justification of his existence, and that self-sacrifice is his highest moral duty, virtue and value.

Baker nodes are not run on altruism, on self-sacrifice, they are run on INCENTIVES, ON rational SELF-INTEREST. So stop spreading that moral fallacy idea that Selfishness is wrong and altruism is good, it doesn’t work like that. Nobody will run a baker node by pure altruist ideals, except irrational bakers that are okay with self-sacrifice. If you truly want to self-sacrifice, don’t drag bakers who do not wish to have the same altruist morality as you. And if you are a baker or simply a tez hodler that you want to do something for the “common good” you go and buy TEZ in the exchanges and send your TEZ to a burning address, YOU, YOU alone. Don’t force me to do it along with you via a governance proposal. Too funny that the bakers who names I will not mention, with such altruist morality, are charging 10%-15 fees to their delegators. When we, the “selfish bakers” are charging low fees. Such hypocrisy.

Now that I just debunk the irrational morality of the disciples of altruism in this brief introduction, I will continue to explain why LB is expropriating bakers block rewards.

BEFORE LB, BAKERS earned 100% of block rewards. Whether you believe or not that block rewards does not belong to bakers, that doesn’t change the fact that 100% of block rewards are going to bakers, and bakers are being right now the primary beneficiary of the TEZ printing machine. Bakers value their work, so they apply a distributional baking fee to their delegators from what they get from the block rewards (shhhh don’t say that, you are being selfish, therefore immoral :shushing_face:)

Now with LB, a 6% share subsidy from the TEZ printing machine will be used to fund liquidity providers, so 94% is what is going to be the remaining to fund bakers, that 6% is planned to be recovered by charging traders of XTZ/tzBTC a trading fee, but instead of that 6% burned, instead to be reimbursed to bakers, so bakers can earn 100% again of the TOTAL SHARE, it will be burned. For those that can’t grasp the concept of burning, burning is basically a redistribution of wealth to all hodlers, that is basically what it does. So what is being done is, that only 94% of the share of the TEZ printing machine is being given to bakers, so they can apply their custom baking fee only to that piece of cake, while the other 6% is being forced to all bakers to distribute it at a 0% baker fee.

What I propose? That the TEZ gathered by trading fee is retributed back to bakers, so bakers can apply the baker fee to the whole 100% of what the TEZ printing machine is printing. Like it was before LB.

Economic sophistry no 1

OH noo, but this will create “inflation” because the fresh minted tez will increase supply if is not burned.

False, net dilutive inflation would still be the same as it is right now. Yes, bakers and delegators will be rewarded with more coins as before, BUT those coins will go directly into their pockets, which will also offset any dilution from the ones who dump.

Economic sophistry no 2

Oh, but bakers will keep earning the same 40 TEZ block reward as before

Nobody is talking about absolute numbers, the argument is based on % share of the TEZ printing machine. Printing an additional 2.5 TEZ is 6% share. That 6% share is not going to pass through the baking distributional fee, which will still have an economic impact on baker incentives.

So there you go, I was told to create this threat, so I don’t “spam” the threads of the disciples of altruism. So this is my thread, and you are all welcome as long as you are not offended by “selfish bakers” and as long as you are not a hypocrite who tells me that I’m a selfish yet charging the double fee that I’m charging (which is okey, because IS NOT WRONG).

Screen Shot 2021-06-03 at 17.17.42

We want to attract MORE BAKERS, so MORE BAKERS LOCK their TEZ in bonds, so they are unable to dump, so the TEZ price can moonshot. How many times I had the opportunity to sell at 6$ at 7$ and at 8$, and I didn’t because I believe in TEZOS and because my TEZ were LOCKED in bonds? You think that by reducing incentives of bakers we will moon?

Cheers.

Special thanks for the Tezos therapy telegram group.

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2

I’m willing to hear out the possible downsides of the trading fee going to bakers instead of burned. I hear ya all.

@murbard @lyoungblood if the trading fee was reimbursed to bakers instead of burned, so bakers could apply a baking fee to that 6% of extra generated supply, this risk of bakers quitting their baking operation by chasing higher profits, would be mitigated. You can’t argue with this logic, because of that 2.5 TEZ minted tez, bakers could at least subtract from 1-15% with the baker fee. That would be at least 0.25 TEZ that bakers will keep while the rest will be distributed to delegators.

4

The important point that your whole argument hangs on the fact that the percentage of created XTZ that get awarded to bakers change. This metric goes from 40/40 to 40/42.5 XTZ per block generated. Now I pay my bills in fiat and not in percentages. My landlord cant just increase my rent if I get a pay raise to keep it at the same percentage.

We are looking at the effects of LB so lets compare Scenario A with LB and B without LB.
There are 2 relevant factors: The number of XTZ awarded and if there is any additional inflationary pressure through LB.

Can we agree that bakers are not worse off if they get the same amount of XTZ and there is no additional inflation on those XTZ?

Looking at your post you do seem to agree with those two assumptions (if there are enough trading fees burned…) so I really dont see how you can say that bakers are worse off with LB.

Plus, the 6% are removed from the staked XTZ so the block rewards bakers get are shared with less holders ie higher. A way to look at it is that the LP takes a loan from the whole XTZ pool per inflation to pay LP providers and the traders pay it back by burning it. Now, why those traders do this and who pays in the end is fascinating and I have no idea.

5

You can’t argue with simple math. IF the 6% of extra generated supply, was instead processed by bakers, before being distributed, they would be able to apply a baker fee.

Minutes in a year= 525600 x 2 (30-second blocks) = 1051200

1051200 x 0.25 TEZ (block subsidy is 2.5, assuming 10% baker fee) = 262800 TEZ annual loss of rewards that could have gone to bakers, but instead were BURNED.

And also, LP’s could still be FUNDED, IF THE trading fee was NOT BURNED, that’s the worst of it, is that It wouldn’t affect the goal of funding LP’s if the trading fee was distributed back to bakers.

6

So your argument is: There it is, i want it, give it to me because then i have more and that is better.

Dont get me wrong, there is nothing wrong with that but its a far cry from, we poor bakers get taken advantage off.

But to keep the spirit of the thread, i am for burning since that I dont have to pay taxes for compared to higher staking rewards.

7

Okay, I respect that. The problem is, that due to that mentality, incentives to run a baker are reduced regardless, which will lead to centralization instead of decentralization. But, yes, more is better. 262800 TEZ annually for bakers, is better than none.

8

If that is the case, let’s burn 100% the block rewards so bakers can’t charge any baking fees to that, let’s also burn all the transaction fees so bakers can’t earn anything from that, and let’s put delegators in control so they are the ones who votes instead of bakers.

So baker will just lock their TEZ in bonds for purely altruistic motives. Let’s see how that works out for descentralization.

1 Like
9

Oh no, that would be a very bad idea.

Luckily that is not a problem here since LB does not change the incentives for bakers in any meaningful way compared to the current Status Quo. If you want to make the argument that the current incentives are not enough, sure.

But bakers are in competition, so why do you think that there would be more profit left with that change?
@tezoswakenbake has said that there are other bakers that charge higher fees and survive: " Too funny that the bakers who names I will not mention, with such altruist morality, are charging 10%-15 fees to their delegators."
Wouldnt going that way be a better, more sustainable way?

10

This is an economic fallacy or sophistry, you are dealing with absolute numbers instead of % share of the printing machine. There is NO WAY, incentives will stay the same when there is an additional 6% printing that is not passing through the baker fee filter. You keep raising up this fallacy like Arthur and Sophia, IS NOT TRUE. Before, Bakers had 100% of the printing machine from which they could apply the baking fee, now they will only have 94% of the printing machine from which they will be able to apply the baking fee.

Incentives are reduced, regardless of what the proponents of this LB proposal says, they are wrong. You just can’t grasp yet in your mind, the economic fallacy of this TAX with the purpose of redistributing wealth. Burning = redistribution.

262800 annual TEZ are now be distributed with a 0% baker fee, and that’s the whole truth, you believe Arthur or not. You can ignore reality, but you can’t ignore the consequences of ignoring reality.

11

Look at it this way, if the socialists wanted to distribute wealth more efficiently, assuming fiat was backed by real gold and not by a empty promise, they would just need to stop the printing machine of the FED (because the majority of the minted fiat is not even going to the pockets of participants like it is in Tezos) and they would just need to charge a redistribution of wealth tax, and burn that money. Boom, wealth is redistributed efficiently to all fiat hodlers. But socialist are just too stupid to figure that out.

12

Well, this is the way to madness, on we march.

Can we agree that this is a problem of facts that we should be able to come to an agreement about using basic logic and high school math?

We are talking about financial incentives, so shouldn’t we be able to say: If we assume… then the number financial incentive X > financial incentive Y so LB is good or bad for bakers.

If not, why not?

Yes, i am talking absolute numbers because i am paying my bills, goods in fiat of absolute numbers and a higher absolute number is a bigger incentive than a smaller absolute number.

Now, what to compare?
The question is: Are bakers worse off, if we enact the LB TZIP than if we not? Comparing LB burning to some different proposal and then declaring that as a loss is beyond the scope of this question. It is a different question.
If you think that this is not an adequate way to address this question, Why?

13

Then prepare to be diluted, now you will need more absolute TEZ numbers to pay your bills and goods in fiat absolute numbers.

Yes we are better off LB, unless is modified, so bakers recover the 6% extra printed TEZ, so they can apply the baking fee. Without mentioning the corruption risk due to TzBTC, but that is a risk I’m willing to take with tzbtc, but not without extra printed TEZ from block rewards been reimbursed back to us, so we can apply baker fee. Basically managed like a loan.

I tell you this, let’s do this instead

1051200 x 2.5 = 2,628,000 TEZ that will be printed annually for LP’s, before burning that out, extract a preselected 10% fee of 262,800 TEZ and distribute that to bakers. That will benefit bakers charging less than 10% fee, to the ones that charge 10% will be the same for them, and to the ones charging 15% will be diluting. But at least the ones charging 15% will get back some reward instead of none, deal?

14

You are arguing that LB is going to lead to dilutionary inflation:

The idea is that the LP trading fees are getting burned and so hopefully are able to offset the inflation of the additional generated 2.5 XTZ. Coincidentally this is also your own position a few lines down:

The scheme described in the last paragraph seems rather convoluted and not necessary, especially considering that you implied yourself, that you could just double your fee and still be competitive.

15

Or let’s do this, extract the preselected 10% baker fee = 262,800 TEZ and distribute that to bakers, then the rest 2,628,000 - 262,800 = 2,365,200, instead of burned, distribute 50% of that to bakers and 50% of that to delegators, it will exactly the same as burning the remaining 2,365,200.

16

Yes, that is going to end up happening. Bakers will raise up the fees of the 94% that they can apply fees. Any positive psychological effect of burning, will now be offset by bakers raising the fees. Delegators will see that a lot of bakers raised their fees, and the bakers who don’t because they are ignorant about this hidden tax, will keep their fees steady, as they were before, and they will be sacrificed. Either way, some bakers that cannot understand this economic fallacy that they need to raise fees to keep up with their baking expenses and operations, they will be sacrificed, and incentives will be reduced. This is why, hidden wealth redistribution taxes are bad, even if bakers can fix it by raising fees, the ignorant ones, will be sacrificed. Sorry, but I don’t want to raise the baking fee due to a tax.

It is about protecting bakers incentives, not fooling them into maintaining steady their baking fee.

1 Like
17

Yes. Exactly, same crap.

Okay, here’s another solution, Mint 2.5 TEZ, extract 10% pre-selected baker fee from it before going to LP’s, and just give LP’s 2.25 TEZ of subsidy. Then there will not be any problem either, just LP’s will be getting a little less, and the trader fee that gathers back that TEZ from traders trading TEZ/tzBTC will need to recollect less, it would need to recollect 2.25 TEZ instead of 2.5 TEZ. :wink:

18

This is definitely a TAX to redistributed wealth. I agree this should not be done to avoid bakers having to raise their baking fees. I can’t believe this is not a major scandal, it should be. Bakers are okey with losing 262K TEZ Annually? Really? tezoswakenbake the math you provided is sound, nobody can’t really argue with your math. @murbard you have no words? Why you are proposing bakers losing 262K TEZ a year? @sophia? Once this thing is implemented, it will not be stopped, not for 6 months, not for 12 months either, we will be stuck with this proposal for years. If is too complex to reimburse to bakers the trading fee, the pre-selected baker fee idea is good to avoid snowball baker loss of rewards.

1 Like
19

Thank you, I was looking for that word, I used retributed instead of reimbursed the whole thread.

20

No problem, you have a particular way of debating but i don’t believe you are trolling, you actually care about baker incentives, your math is right too. I hope Arthur is willing to say something.262,800 XTZ annually becomes 1 million XTZ in 4 years.

21

A few points:

  • As long as you delegate/stake or provide liquidity to the LP there can be no dilutionary inflation since everybody gets the same share of newly created XTZ. (assuming rational actors)

  • Assuming there is no trade, this is indeed somewhat negative for bakers since they now have to compete against the additional pseudobaker LP.

  • Assuming there is enough trade this is a net positive for bakers since the additional XTZ are removed from circulation as if they never existed in the first place and each baker gets a bigger share of the 40 XTZ block reward since all those LP provider are not delegating. The trading fees pay for the non dilution of the LP providers.

  • The real price paid is the lesser chain security/health because the staked ratio goes down a bit. But since the ratio is so high this does not seem relevant compared to the upsides.