[bisq-network/proposals] Launch initiative to educate users about the DAO (#56)

[Chris Beams]

The plan here sounds great. I'm going to riff below on a topic I think will be important in the education effort. It'll require more discussion and thought than what I'm putting together here, but I'd like to get the ball rolling in any case. 

One thing that's missing from existing documentation, and that smart people will scrutinize, is why BSQ would ever have any value beyond its underlying BTC value. It's important that we avoid accidentally promoting (or believing ourselves) the fallacy that a utility token's value is somehow tied to the value of the project. Potential users of BSQ don't care about the value of the project per se. They care that the BSQ they buy today at a given price is going to be worth the same or more tomorrow, i.e. that it will have the same or better transaction fee purchasing power in the future. For it to do so, there has to be sufficient demand by other users to hold the token so as to keep its value at or above that level. Mere _transactional demand_ isn't enough; there also has to be sufficient _reserve demand,_ i.e. the desire or need to hold the token for longer than it takes just to pay the fees for the next trade. I see several sources of reserve demand in the BSQ economy as we've envisioned it so far:

 1. Bulk-buying and holding BSQ so as to have plenty available for trades over the next days or weeks, as opposed to buying just enough BSQ for the next trade;
 2. Putting up BSQ collateral for time-locked off-chain trading contracts as has been discussed elsewhere;
 3. Holding BSQ for speculative purposes, i.e. holding because one believes the price will increase in the future.

Of these three, I believe (2) is the most important because it involves potentially large amounts of BSQ being locked away for significant periods of time. The more users are doing this, the more BSQ there is tied up over time, creating potentially significant reserve demand. With that said, off-chain trading is something that will come online some time after the initial launch of the Bisq DAO, so it is only a potential future source of reservation demand, not one that we can count on in the beginning.

(1) could become significant as well, but users won't bulk buy in any significant amounts until they trust the token retains its value, so I don't think we should expect much from it in the beginning.

(3) will only become a significant source of reservation demand if users believe that (1) and (2) will generate reservation demand on their own. So it's nothing we have direct control over and I believe should basically be disregarded. We certainly don't want to 'pump' BSQ in any way, i.e. intentionally promote the idea that people should speculate on it. Some will do this on their own, assuming they believe in the project. Our job is to make a credible case for the core economics of BSQ, provide a sound implementation of the system and then let the market do the rest.

I did not include contributor bonding in the list above, because I don't see this as reservation demand in the classical sense. It does reduce the overall amount of BSQ in circulation, but it is not on its own a source of "demand" for BSQ. What's important is that real users—not just contributors—see BSQ as a valuable resource they want to hold and use.

I also have not included in the list above the idea of current BSQ stakeholders forcing a price floor on BSQ by refusing to sell it below a given price (e.g. $1 USD per BSQ). Ultimately, if the market does not see BSQ as being worth $1 per unit, they will bid it down and certain stakeholders will sell at that price, or BSQ will fail altogether because would-be buyers never find willing sellers. As a stakeholder, I think it's good to have a price in mind below which you would not sell, but I think it's also important to accept that we are ultimately at the mercy of our users, and that the process of discovering BSQ's price over time probably will not look like whatever pretty picture we have in our heads. I believe we should be humble as we roll this out, that we should listen closely to the market, and if we're finding the price to be lower than our expectations, to respond by adjusting incentives rather than just doggedly holding out and refusing to sell.

Again, this is just a quick summary of my thoughts on this important topic, and it bears further discussion (probably in some venue other than this proposal). I just want to get the conversation started here, so that as we put together these educational materials we're sure to include in them a coherent and hopefully compelling story about BSQ valuation.

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