Incorporating TF BTC into XTZ rewards

The Tezos Foundation (“TF”) has a significant sum of BTC. A certain level of trust is required for the Tezos network to entrust the TF to deploy the BTC efficiently. 99% of startups fail - the TF is investing in startups (I am not opposed to any of this - experimentation is great!)

While I have great respect for the TF and its entities, incorporating a certain amount of the TF BTC through staking rewards would likely

  1. de-risk XTZ significantly;
  2. create a significant demand mechanism; and
  3. provide greater security.

As Nic Carter recently mentioned in a medium piece “cash flows” in BTC sats would be earned by bakers in addition to XTZ as opposed to just XTZ for validating and authenticating the network.

Legally speaking, I do not believe this causes significant issues, if anything actually helps as the BTC is no longer in control of just one entity but is being distributed to the network for providing security and authentication services - literally being paid for services contributed.

To do: community, economic and technical analysis (all of which are very do-able)

Update: tfBTC stake reward should be proportional against TF investments (not grants). This decreases marginal VaR to the network.

example: TF invests 200 BTC into startup exchange. 200 BTC then allocated to bakers over [x] period of time.


What is Marginal VaR

Marginal VaR is the additional amount of risk that a new investment position adds to a portfolio. Marginal VaR (value at risk) allows risk managers to study the effects of adding or subtracting positions from an investment portfolio. Since value at risk is affected by the correlation of investment positions, it is not enough to consider an individual investment’s VaR level in isolation. Rather, it must be compared with the total portfolio to determine what contribution it makes to the portfolio’s VaR amount.

BREAKING DOWN Marginal VaR

An investment may have a high VaR individually, but if it is negatively correlated to the portfolio, it may contribute a much lower amount of VaR to the portfolio than its individual VaR. For example, consider a portfolio with only two investments. Investment X has a value at risk of $500, and investment Y has a value at risk of $500. Depending on the correlation of investments X and Y, putting both investments together as a portfolio might result in a portfolio value at risk of only $750. This means that the marginal value at risk of adding either investment to the portfolio was $250.

When measuring the effects of changing positions on portfolio risk, individual VARs are not adequate, because volatility measures the uncertainty in the return of an asset in isolation. As part of a portfolio, what matters is the asset’s contribution to portfolio risk. Marginal VaR helps isolate added security-specific risk from adding an additional dollar of exposure.

source: https://www.investopedia.com/terms/m/marginal-var.asp

Update 2: Does the TF have their BCH, BSV, BCD, BCG? If so, the above can be experimented using these forks as opposed to BTC itself.

The markets for these forks are liquid and could help support security and development of the network.