[bisq-network/compensation] BSQ rate for Cycle 22 is 1.21 USD per 1 BSQ (#782)

[chimp1984]

Sure volatility cannot be avoided and there will always be a winner and a loser when volatility is involved, but the risk increases with longer time periods. We use a short term adjustment period for the BSQ rate (users would not accept a long term historical price anyway) and a long term rate for the issuance. 

So the balance of what we issue and what we burn gets out of balance. 

It will also create a secondary "mental" price where voters will consider the real current market price and might reject contributions as they feel its too expensive. This is a risk for the DAO as request would get rejected due a different price model the 2 parties have in mind.

Example: 
I worked for about 1 week on the new charts (see sreenshots below). Lets assume I will 4000 USD for that, with current rate that is 3300 BSQ. If I sell the 3300 BSQ with current market price of 2.6 USD/BSQ I will get 8580 USD. So beside to getting heavily overpaid I have the incentive to sell quickly to "cash out" the premium (that might be actual a good counter pressure to bring the price down again). A voter might consider the added value of the charts worth about 4000 USD but not 8500 USD and might reject my request. If that becomes more a trend in voting contributors will reduce their requested USD value to reduce the risk for rejection and by that balancing it again, but it will invalidates the USD as stable price metric and it gets more complicated how to findt to the "real price". E.g. I might consider the current market rate and request only 2500 USD but how to explain that to new contributors that they should reduce their USD rate by some "whatever" factor to get to a more acceptable BSQ price... I think we will see that teh "commitee price" is not the accepted price by the market (conttributos  and voters). I guess similar happens in countries where governments try to "tune" the official price and people use a secondary price when doing real business.

Another way to see it is to calculate the required trade volume to burn BSQ for the requested compensation [1].

I just checked with the live app the fee rate: 
Maker fee for a 2 BTC offer: 15 BSQ (48 USD)
Taker fee: 105 BSQ (333 USD)
So a 2 BTC trade generates 120 BSQ (381 USD) or 60 BSQ/1 BTC (with 44560 USD/BTC price and 2.6 BSQ/USD 30 day average). 
BSQ fee rate is 0.4275% of trade volume

So if I request 3300 BSQ it will require 55 BTC of trade volume to generate the BSQ fees funding my compensation request. With current volumes in the past weeks (about 100 BTC/week) that is roughly half a week of total trade volume. Or in other words we can fund about 24000 BSQ per month to be neutral with issuance.

<img width="1321" alt="Screen Shot 2021-02-10 at 17 28 45" src="https://user-images.githubusercontent.com/54558767/107581014-79230680-6bc5-11eb-81e4-5de95e283429.png">

We have issued 276k BSQ in 5 months for compensation requests (55200 BSQ per month), so that would require 920 BTC trade volume per month. Real trade volume is about 400 BTC per month (2012 BTC in 5 months). So we issue 2.3 times more than we earn.

<img width="1311" alt="Screen Shot 2021-02-10 at 17 05 13" src="https://user-images.githubusercontent.com/54558767/107578883-52170580-6bc2-11eb-81f9-45350f57b812.png">

In USD terms:
43M USD in 5 months (Sept-Jan) with a 0.4275% rate is 183825 USD or 36765 USD/month. I dont have the USD numbers of the past cycles but seems its in the same range as above in BSQ.  

<img width="1337" alt="Screen Shot 2021-02-10 at 17 03 27" src="https://user-images.githubusercontent.com/54558767/107578600-f2205f00-6bc1-11eb-82ce-5257320ef0d6.png">

An even bigger risk with a wrong aligned price is the large amounts of reimbursement costs (200K in last 2 months). Also those got overpaid heavily and depending on the details how the burningman deals with it it might cause quite another loss to the DAO. But thats a topic for another discussion...

I think that plays into the same area like https://github.com/bisq-network/bisq/discussions/5171 and also how to deal with reimbursements. Don't want to derail that issue too much by getting deeper in to the economics (and lack of data) of the DAO but I think we have to take care to be on the right track and fix issues as soon we discover them.

[1] In my model I ignore low volume trades which have a higher fee rate and BTC fees as well the fact that 50% of BTC fees go to the victims. Also further the conversion costs of the BTC to BSQ (burningman) and the other big factor of reimbursement requests and burned BSQ from delayed payout transactions.








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