Bitshares (BTS)

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Bitshares is a financial smart asset platform that has the ability to create ‘Smart Assets’ that are backed by the native currency of Bitshares. The main innovation behind Bitshares has been the development of market-pegged assets that allow, within certain parameters, for an asset issued on the Bitshares blockchain to track the real-world value of that asset, be it US Dollars or ounces of gold.

Bitshares was created by Daniel Larimer (aka Bytemaster) through a company Invictus Innovations, which was subsequently dissolved. Bitshares was the first cryptocurrency to introduce a Delegated Proof of Stake as the consensus mechanism, which allowed for block creation time to be 10 seconds.

Unique Attributes and Properties

Bitshares introduced the concept of a ‘BitAsset’ which was designed to track the value of real-world assets and currencies. Thus BitUSD is supposed to track the value of USD, BitBTC the value of BTC and so on. The peg is maintained through a Contract for Difference (CFD) style market where speculators and investors go long on or short assets depending on how out of sync the current price is, and their prediction on the future of that asset. All short positions in BitAssets are collateralized through the underlying Bitshares, so there is no default risk unless the market moves very sharply.

A price feed was later introduced that allowed the system to be more stable and less susceptible to manipulation by the bigger players. The price feed is provided by the elected delegates. The system also allows for the creation of User Defined Assets. This provides a good base for the creation of a decentralized exchange, where instead of real assets trading, it is the CFDs that trade, thus providing both the upside and downside exposure to the underlying asset.

Delegated Proof of Stake

Bitshares introduced Delegated Proof of Stake (DPOS) as its consensus algorithm. The DPOS adopted by Bitshares had a total of 101 delegates that determine what transactions go into the blockchain, and create and validate the blocks. The delegates are voted in by the stakeholders, and the votes are weighted by the number of Bitshares that are owned by a stakeholder.

Since only 101 people need to run the validation, the system is fairly centralized in scope, as opposed to the nodes in Bitcoin. However, this also gives an advantage where the delegates can run dedicated hardware and nodes on resource-intensive deployments, thus making the network more efficient, and having lower concern with issues like block sizes and latency.

The first version of Bitshares was created so that the delegates are paid only a percentage of the fees generated by the system. In the later versions, the delegates could run paid delegates, where they can get a maximum of 50 BTS per block produced.

The DPOS implementation is different in Bitshares 2.0, where there are delegates, witnesses and workers. The delegates are appointed to make system-critical parameter changes, the witnesses add transactions to the blockchain and the workers are paid for their contributions to the network, such as developers.

ICO and Launch

Bitshares ran two separate IPOs to fund their initial development, one through Protoshares and one through Angelshares. Protoshares was a separate cryptocurrency with a memory intensive proof of work created and sold as a promise to give the holders a percentage of every future product created by Invictus Innovations. However, this was later discontinued.

The second IPO was simple donations of Bitcoin and Protoshares to Invictus Innovations for a period of 60 days.

The price fluctuated quite a bit during the IPO period of Angelshares, and a total of anywhere from $7 million to $15 million was raised for development.

Inflation

The original Bitshares system was created to be deflationary. All the Bitshares tokens were given out to the stakeholders, and any fees generated by the system was burned, thus reducing the total supply of Bitshares and increasing the percentage stake of the existing holders.

In a controversial decision, the creators introduced inflation into the system in order to pay the creators, developers, and others working on the project, after the money raised in the IPO was exhausted. Delegates could run as paid delegates, or as unpaid, and could adjust what percentage of the maximum fees they will charge. Currently, the maximum inflation rate stands at 50 BTS per block, which translates to 432,000 BTS per day. This is scheduled to halve every 4 years, similar to Bitcoin’s reward halving schedule.

The positions of delegates and workers has been separated in Bitshares 2.0.