The problem is that you think bakers have a license to collect a tax on any created tez.
So, when a bug creates and burns 10^9 tez you would just send an invoice when it comes to light. (to whom tough?)
The modified LB above would be required to keep track of all tez creation so the correct tax burden could be calculated.
The principle is rather similar to paying taxes on staking rewards.
In both cases the rewards are just offsetting a loss, but the tax collector does not care.
And yes, you have proven that if you had those tax powers your revenue would be higher than if you dont, congratulation.
No, it would not be higher if reimbursed, our revenue will be the SAME revenue as we have today. Not higher. With the burning of the trading fee, it will be LOWER as it is today. If you want to reduce even more the incentive, then BURN 100% of what the machine prints, see how that works out. You are having a really hard time understanding the simple fact that the incentive is maintained, not increased, if we regain the control of the 100% TEZ printing machine. 94% for bakers, while 6% burned, is a decrease.
No, bakers are not taxing anyone, don’t be so naive. A TAX can only be applied with coercive action, when you apply a tax is at the code level through governance. It was clear from the beginning that ALL revenue sources were going to be exclusively for bakers, since they are the ones that put their TEZ in bonds to secure and decentralize the network. Bakers are NOT taxing delegators, the baker fee is a voluntary agreement between both parties. Delegators a free to choose which bakers pay them more, Delegators are the workforce that provide bakers the opportunity to find more blocks with revenue in less time, delegators are paid by bakers, not the other way around. Delegators are free to reject or approve the voluntary agreement, the is no coercion. The only TAX here is the one that is imposed at CODE level with governmental coercion though this new Tax Reform to TAX bakers revenue source with the purpose to redistribute income, is the one that Arthur and Sophia hid there.
What you and Sophia are doing, are simply turning the blame on bakers, that “we are the tax collector” when bakers only work with delegators on voluntary agreements, so the fallacy of you and Sophia that we are the taxers is totally bullshit and shows how ignorant you both are.
On a more general note, your stubbornness to frame LB in anything other than these flawed Tax abstractions is quite interresting, can you, in good faith, make an argument for LB, assuming that if you really want to take down such arguments for good, you might want to start by going against the best possible argument in favour of it?
I was of course comparing paying taxes on staking rewards to your national government. The staking rewards just offset inflation but you have to pay nevertheless. In the same way that you want a cut on every newly minted tez even if they go straight to null.
IF reimbursed, we ARE STILL using block subsidies (inflation) to take collective action to fund something, that doesn’t change the fact that if the finality of the subsidy doesn’t work for a reason, or if the trading fee doesn’t collect anything, everyone will still feel the repercussions for the failure of the collective action or the benefits. That doesn’t change. The only thing that change if the trading fee is burned is baker’s incentives. The reduction of incentives is a reality from which you cannot escape, you can ignore the mathematical evidence all you want, and believe based on pure faith that this is not true, it won’t change the objective reality that is affecting incentives. You are just denying reality, collective action would still be taken if the trading fee was reimbursed.
I’m in favor of liquidity, I think it is a good collective action to achieve increased liquidity, I’m NOT against the finality of the collective action, I’m against the means to achieve that end, the end does not justify the means.
The revenue sources are the rewards of bakers for locking their TEZ in bonds. Delegators can gain access without middleman to the block rewards, as long as they put their TEZ in bonds and lock it there. What is being done, when the TEZ is burned, is distributing the TEZ for FREE at 0% baker fee to people that is not even locking TEZ in bonds.
No, they get distributed to everyone for free, that can’t have a null effect on baker incentives, you are denying reality.
No one is ignoring or denying anything, this was brought up before, to quote Sophia:
So modulo the 1% fee and psychological effects, we expect ~6.875% of total rolls to be LPs for the liquidity baking CPMM, which is far from enough to affect network security.
Asumming trade fees can offset subsidies, does that not mean that bakers get a bigger piece of the pie since those 6.8% are removed from staking/ block reward recipients?
To be more precise: Bakers will always have to share their piece with less stakers regardless of trade but inflation might eat that unless there is enough trade.
No! Because the subsidy will stay little time inside the LP contract to be meaningful, once it is earned by LP’s they will stake it, or dump it into the markets, the people that buy that TEZ in the markets, will stake it. Either way, it ends up staked.
The question that she was responding to, a guy asking if LB becomes too attractive, how it will affect network security by bakers seeking profitability and actually closing their baking operations to go to be liquidity providers. That’s another issue. It could happen, but if enough people join the LP party, the profitability of the subsidy reward reduces, and it becomes less attractive, but still, it could happen that bakers close their business and instead join the LP party.
For this exact same reason, the trading fee should be REIMBURSED to bakers instead of burned, so they can apply the baker fee to that amount, so their incentives are not reduced and this security risk of bakers becoming LP’s is mitigated.
There are many reasons why Bakers must keep applying the baker fee to the 100% of what comes out of the TEZ printing machine, and it all reduces to maintaining the incentives.
Yes, and in my naive and probably wrong interpretation that means:
Current staking ratio ~78% - LP rolls 6.875% = 71.125%
Difference in mean block rewards for bakers per roll: 78/71.124 = 1.097 = ~ +10%
Now you just need to assume that all those LPs’s rolls will staked after they earn them. It will not lower the current staking ratio. You are assuming they will keep all those TEZ without staking them, or that when they dump them in the market, the buyers would also not stake, your logic is flawed.
We are not talking about the earned subsidies, we are talking about nearly 7% of all tez in existence being long term invested in the LP that are now (mostly) staked.
Where do you think that massive liquidity boost is supposed to come from?
My doubts come from 50% of the LP is in “wrapped” BC, so is it really 7% or maybe 3.5%, tez should take a 3.5% one time inflation hit from the value transfer. I also think ppl might want a higher risk premium for IL risk so it might balance lower.
Oh sorry, i get you now, but why you assuming that 7% of the whole tez supply will be there long term investing by providing liquidity. Why not 1%? How you can predict that?
Is pure speculation. There is a lot of dilutive risks for lps, including not being able to stake and impermanent loss. How do we know that 7% of rolls will be locked up there, how they calculated that?
And if the 7% figure of locked up rolls in the LP contract is achieved, and bakers are attracted to quit their baking operation to become lp’s, reimbursing them trading fee would still mitigate this risk of security loss.
So from one side, if 7% of all the rolls end up in the LP contract, we lose security due to bakers closing their bakeries to become LP’s, but the remaining bakers will keep being incentivized due to fewer people staking and bigger block reward pie than before. On the other side, If only 1% of the rolls ends up in the LP contract, we don’t lose as much security, but our block rewards pie reduces, because more people staking and less block reward pie.
Why not mitigate these risks of security and fewer rewards by reimbursing the trading fee to bakers? Letting bakers process the 100% of block rewards like they are doing today.
i thought a natural consequence of LB would be that at existing status quo, bakers that charged very low fees (like nearly all of us bakers) would likely feel they were getting screwed a bit due to this “tax” you discuss, but that a more fair equilibrium could be very easily obtained by simply raising fees a bit.
