Difference between revisions of "Burning Men"

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'''Burning Men''' is the name given to Bisq contributors who choose to burn BSQ in order to receive bitcoin in the form of trade fees and delayed payout transactions. The reason for the proposal was to increase Bisq's decentralization by replacing what was previously a sole '[[Donation Address Owner|burning man]]' (with a single point of failure and a requirement of trust) with multiple burning men without the need for trust.  
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'''Burning Men''' is the name given to Bisq contributors who choose to burn BSQ in order to receive bitcoin from Bisq trading activity: [[Trading_fees|Trade fees]] and Delayed payout transactions. It's an evolution of the previous '[[Donation Address Owner|burning man]]' role. The change, implemented since January 2023 in this [https://github.com/bisq-network/proposals/issues/390 proposal], aimed to increase Bisq's decentralization by distributing this role within many contributors. A single burning man could have gone missing, ran away with the BTC before trading them for BSQ and burning these BSQ, or could have been otherwise compromised.<br>
 +
As each burning men burns an undetermined amount of BSQ as a condition to receive a share of BTC from Trading fees and Delayed payout transactions, trust requirements and single points of failure are almost nonexistent.
 +
Please note: The burningmen protocol described here is entirely different from burns made in Bisq 2 for increasing reputation. Burns made in Bisq 2 do not affect the burningmen protocol.
  
 
__TOC__
 
__TOC__
  
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= Context =
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= Contributing as a Burningmen =
  
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For background discussion regarding the burning man protocol please see: https://github.com/bisq-network/proposals/issues/390
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== Eligibility ==
  
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The proposal was approved by a DAO vote in Cycle 41 (October 2022) with 100% approval.
+
There are two ways to contribute as a Burningmen. Since the system is not exempt of trust requirements, burningmen need to have provided value to Bisq in the past:
  
−
The proposal was implemented on 1st January 2023.  
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* Contributors who received compensation for their contributions within the last 24 cycles.
 +
* Contributors who received a BSQ from the DAO genesis transaction.
  
 +
After burning some BSQ (it does not matter if they were previously earned or bought in the BSQ market) they will get a share percentage in the distribution of BTC from Trading fees and Delayed payout transactions. The more value they've provided to Bisq, the bigger the portion of BSQ they are allowed to burn.
  
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= Overview =
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== Considerations before burning BSQ ==
  
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A simplified explanation of the burning men protocol is as follows...
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Burningmen seek profit from burning BSQ, otherwise they would keep their BSQ or sell them for BTC at the market. But profit, coming from estimating the amount of BSQ to burn now to receive a share of future Trading fees and Delayed payout transactions, is not granted. There are many sources of uncertainty:
 +
* Trading volume: affected by BTC trend, Bisq competitors, mining fees, etc.
 +
* Changes to trade protocol: traders could burn more or less BSQ directly, Delayed payout transactions could be reduced considerably.
 +
* BSQ/BTC price volatility.
 +
* BSQ burnt by competing Burningmen.  
  
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Traders using Bisq can choose to pay their trading fees in bitcoin. Previously these trade fees went to one individual called the [[Donation Address Owner|Burning Man]]. The Burning Man was responsible each cycle for using the bitcoin they received from traders to buy BSQ and burn it. This created a centralization risk for Bisq (what is they died, ran away with the bitcoin, got hacked etc).  
+
Since the launch of the Burningmen protocol up to the moment of this writing (Cycle 61), more bitcoin has been distributed to the Burningmen than the bitcoin equivalent amount of BSQ that has been burnt. This means that, historically, burning BSQ has been profitable for most contributors. <br>
 +
Although Bisq provides an estimation of BSQ to burn based in the past, each of the Burningmen should estimate their risk/reward scenarios based in their predictions. Becoming a Burningmen is optional. Depending on how they value the BSQ they have now, the BTC they can obtain on the future, or even if they just want to help Bisq grow, they will not burn BSQ at all, burn all the BSQ from their compensation requests or even buy more BSQ to burn up to their limit.  <br>
 +
The less competition between Burningmen there is, the more profitable it will be for each of them, and vice versa. The less profitable Burningmen role is, the better for the DAO, as more BSQ is burnt, reducing or containing BSQ supply and therefore pressuring its price up.
  
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Bisq approved a proposal to mitigate this risk by sending users trading fees to multiple contributors AND having contributors burn BSQ upfront to essentially give themselves a chance to receive some of the trading fees. This solution removed the centralization risk of where the trade fees where going and in doing so created the option for Bisq contributors to receive bitcoin fees by burning their BSQ.
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= Burning BSQ and receiving BTC =
  
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As well as burning men receiving bitcoin from trade fees they also receive bitcoin from when a user enters arbitration (as this publishes a delayed payout transaction that is shared by all the burning men).
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== Contributors ==
  
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= Basics =
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When doing their compensation request, a contributor should fill the "Burningman receiving address" with a BTC address to receive the funds to. Once the compensation request is approved, that address will be used for any burning men payouts they receive up until they ever change it in a subsequent approved compensation request. If that field is never completed, an address from Bisq wallet will be used as receiving address. <br>
 +
It is highly recommended to use an external wallet like electrum or sparrow, which are able to handle many UTXOs and can connect to a signing device for cold storage.
  
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== Who can be a burning man? ==
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To burn BSQ for the BSQ burning man role the current contributor will see their assigned name 'contributor_name' in the [[Burning_Men#Burning_Men_Protocol_UI|Burningmen Protocol UI]]. They can then choose to burn an amount of BSQ and press burn. <br>
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Any Bisq contributor that has contributed something within the last 24 cycle (approximately 2 years) can be be a Burning Man. Also anyone who contributed prior to the DAO being launched who received a payout from the DAO genesis transaction can also be a burning man.  
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Since ''Issuance share'' is capped depending on how many BTC were earned in the last 2 years (decaying linearly) it's important to make sure that the amount of BTC to burn will not exceed the cap. It would be prudent to begin with small amounts and never exceed the lower amount in the ''burn target'' column.
  
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== Why do some contributors choose to be burning men? ==
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== Receivers of the genesis distribution ==
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Burning Men burn BSQ, this helps the DAO and allows the contributor to receive bitcoin payments from trade fees and trades going to arbitration.
 
  
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== Burning Men Protocol goals ==
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If a contributor has funds from the genesis output(s) in their Bisq wallet they will see their assigned name 'Bisq co founder XX' in the [[Burning_Men#Burning_Men_Protocol_UI|Burningmen Protocol UI]]. They should chose the BTC address to receive funds and follow the instructions in the [https://github.com/bisq-network/proposals/issues/390#issuecomment-1306075295 github proposal].
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The main goal is to decentralize the burning man role.
 
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A secondary goal is to create better incentives for contributors to work on Bisq.
 
  
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== Burning Men Protocol UI ==
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Burning BSQ works as described in the second paragraph at [[Burning_Men#Contributors|contributors]] section.
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All the information about the current and past state of the burning men protocol can be found in the Bisq application: DAO > Proof of Burn > Burning Men
 
  
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= Risks of burning =
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= Burning Men Protocol UI =
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When burning BSQ the value of the BSQ is sacrificed immediately for the chance to get paid a percentage of the bitcoin trade fees and delayed payout transactions from trades entering arbitration. The risk is the future trade fees and delayed payout transaction amounts are unknown. When burning BSQ contributors have no
 
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guarantee of future bitcoin payments. Things that could negatively effect the bitcoin payments could be any of the following:
 
  
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== Decrease in trade volume ==
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The user interface to interact with the Burning Men User protocol user interface can be found at <code>DAO > Proof of Burn > Burning Men</code>.
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If the trade volume of Bisq decreases then payments with decrease proportionally. Trade volume can be affected by things such as market cycles, high bitcoin transaction fees, competition from other services, etc.
 
  
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== Change to trade protocol ==
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== Burning Men Candidates fields ==
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If there was to be a change to some of the trade protocol this could result in a reduction or cessation of payments being paid out to burning men. For example changes to the dispute process, trade fee model, trade limits, or multi-sig protocol could all result in less payouts going to the burning men.
 
  
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== Uncertainty around future BSQ/BTC price ==
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* Contributor name: Always use the same name as per github handle when doing compensation requests to avoid duplicated similar contributors with different names and shares.
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When burning a contributor is choosing to burn one asset, BSQ, to receive the change to be paid in another, BTC. The price of BSQ and BTC will change over this period. This variable creates an additional factor some contributors may wish to consider.
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* Burn target: Click the <code>?</code> icon to get more info. Take these numbers as broad estimates and do not use the  one on the right as your cap will be exceeded. Even using the left value could make you reach your cap. Do not make decisions based on what to burn on these numbers alone.
 +
* Receiver share: It informs about the % chance of receiving a trade fee and % amount of the delayed payout transactions you'll receive. It's updated every block and changes based on who burns BSQ '''and''' the decay over time of the burns made by the burningmen. Each BSQ burnt amount decays linearly to zero over 12 months. To protect the DAO from an attack from a malicious contributor who self trades sending their trades to arbitration, the maximum share each contributor can get is 11%, no matter how many BSQ they burn.
 +
* Issuance share: It's the amount of BSQ compensation each contributor has received over the last 24 cycles, decaying linearly. Recent contributions have a higher weight. It bears maximum receiver share. A burning man can get a receiver share of up to 10 times their issuance share amount, up to a maximum of 11%. A 0.7% percent issuance share will limit the receiver share to 7%.
 +
* Burned amount: Total amount of BSQ burned by contributor over time
 +
* Decayed burn amount: Total amount of BSQ burned by the contributor when taking into account the decay their burns have over time. It is essentially represented in percentage terms by the 'receiver share' value and changes every block.
 +
* Issued amount: Total amount of BSQ issued to a contributor over time.
 +
* Decayed issued amount: Total amount of BSQ issued to a contributor when taking into account the decay over time. It is essentially represented in percentage terms by the 'issuance share' value.
  
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== Unknown amount of future burns by other contributors ==
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== Profit fields==
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As a contributors receiver share is based both on what they burn and what others have burnt it is not possible to predict their receiver share over time. Generally the less competition there is the more profitable it will be, and the more competition there is the less profitable it will be.
 
  
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= Benefits of burning =
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When selecting a burningmen, individual profit stats are displayed. It can be filtered by burning, trading fee and/or DPT eventsand by month or individual events. Looking at monthly profits can be used as an indicator of how many BSQ to burn. Note that it's normal to have a negative profit at the beginning, since receiver shares decay linearly over 12 cycles. A burning man should not expect to regain in one month what will be distributed during a longer period. <br>
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Burning can be of benefit to both the DAO and the individual burning men.
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Scrolling down at the _Profit_ table, it's possible to export all burningman data from a contributor by clicking <code>export to CSV</code>.
  
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== Burning is a benefit to the DAO ==
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== DAO fields ==
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Burning BSQ is a benefit for the DAO. When contributors burn their BSQ they reduce the BSQ supply by the burnt amount. This benefits all BSQ holders (the DAO). BSQ holders do not benefit directly from trade fees or delayed payout transaction payouts. Instead they benefit from BSQ burnt in trade fees from traders and the BSQ burnt by contributors performing the role of Burning Men.
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It gives an overview of BSQ burning and bitcoin distribution across all DAO contributors.
  
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== Burning BSQ can be profitable for the individual contributor ==
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* Total amount of burned BSQ: All time amount of BSQ that has been burnt by all contributors acting as burning men.
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Since the launch of the burning men protocol more bitcoin has been distributed to the burning men than the bitcoin equivalent amount of BSQ that has been burnt. This means historically burning BSQ has been profitable for most contributors choosing to be Burning Men.
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* Total amount of distributed BTC/BSQ: All time amount of bitcoin that has been distributed to all contributors acting as burning men. For ease of comparison this figure is also given as a BSQ amount.
 +
* Export to CSV: To see the results by month rather than all time in a CSV file, getting a more granular data.
  
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= I am a Bisq contributor should I become a burning man? =
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If the amount of BSQ being distributed is greater than the amount being burnt then the burning men are generally in profit from their activities. If the amount of BSQ being distributed is less than the amount being burnt then the burning men are in a loss from their activities.
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Becoming a burning man is entirely optional. It is up to each contributor to weigh up the pros and cons of burning and for them to decide what is best for them.
 
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It is easy to try out burning some BSQ and then decide if you want to burn more or not. Burning BSQ generally suits contributors that are happy to push their remuneration into the future with the hope of gaining more value for their BSQ by burning it than by either holding it or selling it upon receipt.
 
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Questions that might be useful for contributors to ask themselves are:
 
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* Am I looking to increase the amount of BSQ I have?
 
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* Am I looking to increase the amount of bitcoin I have?
 
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* Would I prefer to be paid in bitcoin or BSQ?
 
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* Is it better for me to trade BSQ for bitcoin or to burn BSQ to hopefully receive more bitcoin in the future than I would get for trading it now?
 
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= I am a burning man should I buy BSQ to burn? =
 
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Once someone becomes a burning man they might at some point consider burning BSQ to burn. This helps the DAO, and potentially is profitable for the contributor but it does require additional speculation on some of the factors discussed above. It is mentioned here as an option for someone already burning to consider.
 
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= How to become a burning man =
 
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= Current Contributors =
 
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If a contributor wants
 
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= Receivers of the genesis distribution =
 
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If a contributor has funds from the genesis output(s) in their wallet they will see
 
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As genesis outputs are not assigned to a contributor we use "Co-founder-x" as name, where x is the output index. [5]
 
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= Terminology =
 
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The burningmen section contains a number of terms that is it helpful for someone interested in the protocol to understand.
 
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The burningmen section can be found in the Bisq application DAO > Proof of Burn > Burningmen
 
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== Contributor name ==
 
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Pretty obvious, but worth noting that founder contributors are given an extra level of pseudonymity by being referred to as 'Bisq co founder XX'.
 
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== Burn target ==
 
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You can click the ? to get more info. I take these numbers with a pinch of salt. Take these numbers as broad estimates. Do not make decisions based on what to burn on these numbers alone.
 
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== Receiver share ==
 
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This is an important number. It gives you the following information:
 
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- The percentage change you have of receiving a bitcoin trade fee.
 
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- The percentage amount of any delayed payout transaction you will receive.
 
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The receiver share percentage is updated every block. Your receiver share changes based on who burns BSQ AND the decay over time of the burns made by the burning men.
 
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The maximum a contributors receiver share can be is 11%. This is to protect the DAO from an attack from a malicious contributor that wants to self trade and send their trades to arbitration. Limiting the receiver share to 11% mitigates this attack.
 
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== Issuance share ==
 
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The issuance share is basically the amount of BSQ compensation each contributor has received over the last 24 cycles. More weight is given to compensation received recently. BSQ compensation received decays linearly over 24 cycles.
 
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The issuance share also has a bearing to what someone's maximum receiver share can be. A contributor can get a receiver share of up to 10 times their issuance share amount, up to a maximum of 11%.
 
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== Burned amount ==
 
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This is the total amount of BSQ burned by contributor over time.
 
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== Decayed burn amount ==
 
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This is the total amount of BSQ burned by the contributor when taking into account the decay their burns have over time. Each time you burn it decays linearly to zero over 12 cycles. Due to this decay the decayed burn reduces changes each block. The decayed burn amount is essentially represented in percentage terms by the 'issuance share' value.
 
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== Issued amount ==
 
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This is the total amount of BSQ issued to a contributor over time.
 
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== Decayed issued amount ==
 
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This is the total amount of BSQ issued to a contributor when taking into account the decay over time. Each compensation request decays linearly to zero over 24 cycles. The decayed issued amount is essentially represented in percentage terms by the 'receiver share' value.
 
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== Balance for DAO ==
 
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This section gives an overview of all the BSQ burning and bitcoin that has taken place.
 
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=== Total amount of burned BSQ ===
 
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This is the all time amount of BSQ that has been burnt by all contributors acting as burning men.
 
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=== Total amount of distributed BTC/BSQ ===
 
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This is the all time amount of bitcoin that has been distributed to all contributors acting as burning men. For ease of comparison this figure is also given as a BSQ amount.
 
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Generally if the amount of BSQ being distributed is greater than the amount being burnt then the burning men are in profit from their activities.
 
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=== Export to CSV ===
 
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If someone wants to see the results by month rather than all time then they can choose to export to csv to get more granular data.
 

Latest revision as of 17:52, 29 October 2024

Burning Men is the name given to Bisq contributors who choose to burn BSQ in order to receive bitcoin from Bisq trading activity: Trade fees and Delayed payout transactions. It's an evolution of the previous 'burning man' role. The change, implemented since January 2023 in this proposal, aimed to increase Bisq's decentralization by distributing this role within many contributors. A single burning man could have gone missing, ran away with the BTC before trading them for BSQ and burning these BSQ, or could have been otherwise compromised.
As each burning men burns an undetermined amount of BSQ as a condition to receive a share of BTC from Trading fees and Delayed payout transactions, trust requirements and single points of failure are almost nonexistent. Please note: The burningmen protocol described here is entirely different from burns made in Bisq 2 for increasing reputation. Burns made in Bisq 2 do not affect the burningmen protocol.

Contributing as a Burningmen

Eligibility

There are two ways to contribute as a Burningmen. Since the system is not exempt of trust requirements, burningmen need to have provided value to Bisq in the past:

  • Contributors who received compensation for their contributions within the last 24 cycles.
  • Contributors who received a BSQ from the DAO genesis transaction.

After burning some BSQ (it does not matter if they were previously earned or bought in the BSQ market) they will get a share percentage in the distribution of BTC from Trading fees and Delayed payout transactions. The more value they've provided to Bisq, the bigger the portion of BSQ they are allowed to burn.

Considerations before burning BSQ

Burningmen seek profit from burning BSQ, otherwise they would keep their BSQ or sell them for BTC at the market. But profit, coming from estimating the amount of BSQ to burn now to receive a share of future Trading fees and Delayed payout transactions, is not granted. There are many sources of uncertainty:

  • Trading volume: affected by BTC trend, Bisq competitors, mining fees, etc.
  • Changes to trade protocol: traders could burn more or less BSQ directly, Delayed payout transactions could be reduced considerably.
  • BSQ/BTC price volatility.
  • BSQ burnt by competing Burningmen.

Since the launch of the Burningmen protocol up to the moment of this writing (Cycle 61), more bitcoin has been distributed to the Burningmen than the bitcoin equivalent amount of BSQ that has been burnt. This means that, historically, burning BSQ has been profitable for most contributors.
Although Bisq provides an estimation of BSQ to burn based in the past, each of the Burningmen should estimate their risk/reward scenarios based in their predictions. Becoming a Burningmen is optional. Depending on how they value the BSQ they have now, the BTC they can obtain on the future, or even if they just want to help Bisq grow, they will not burn BSQ at all, burn all the BSQ from their compensation requests or even buy more BSQ to burn up to their limit.
The less competition between Burningmen there is, the more profitable it will be for each of them, and vice versa. The less profitable Burningmen role is, the better for the DAO, as more BSQ is burnt, reducing or containing BSQ supply and therefore pressuring its price up.

Burning BSQ and receiving BTC

Contributors

When doing their compensation request, a contributor should fill the "Burningman receiving address" with a BTC address to receive the funds to. Once the compensation request is approved, that address will be used for any burning men payouts they receive up until they ever change it in a subsequent approved compensation request. If that field is never completed, an address from Bisq wallet will be used as receiving address.
It is highly recommended to use an external wallet like electrum or sparrow, which are able to handle many UTXOs and can connect to a signing device for cold storage.

To burn BSQ for the BSQ burning man role the current contributor will see their assigned name 'contributor_name' in the Burningmen Protocol UI. They can then choose to burn an amount of BSQ and press burn.
Since Issuance share is capped depending on how many BTC were earned in the last 2 years (decaying linearly) it's important to make sure that the amount of BTC to burn will not exceed the cap. It would be prudent to begin with small amounts and never exceed the lower amount in the burn target column.

Receivers of the genesis distribution

If a contributor has funds from the genesis output(s) in their Bisq wallet they will see their assigned name 'Bisq co founder XX' in the Burningmen Protocol UI. They should chose the BTC address to receive funds and follow the instructions in the github proposal.

Burning BSQ works as described in the second paragraph at contributors section.

Burning Men Protocol UI

The user interface to interact with the Burning Men User protocol user interface can be found at DAO > Proof of Burn > Burning Men.

Burning Men Candidates fields

  • Contributor name: Always use the same name as per github handle when doing compensation requests to avoid duplicated similar contributors with different names and shares.
  • Burn target: Click the ? icon to get more info. Take these numbers as broad estimates and do not use the one on the right as your cap will be exceeded. Even using the left value could make you reach your cap. Do not make decisions based on what to burn on these numbers alone.
  • Receiver share: It informs about the % chance of receiving a trade fee and % amount of the delayed payout transactions you'll receive. It's updated every block and changes based on who burns BSQ and the decay over time of the burns made by the burningmen. Each BSQ burnt amount decays linearly to zero over 12 months. To protect the DAO from an attack from a malicious contributor who self trades sending their trades to arbitration, the maximum share each contributor can get is 11%, no matter how many BSQ they burn.
  • Issuance share: It's the amount of BSQ compensation each contributor has received over the last 24 cycles, decaying linearly. Recent contributions have a higher weight. It bears maximum receiver share. A burning man can get a receiver share of up to 10 times their issuance share amount, up to a maximum of 11%. A 0.7% percent issuance share will limit the receiver share to 7%.
  • Burned amount: Total amount of BSQ burned by contributor over time
  • Decayed burn amount: Total amount of BSQ burned by the contributor when taking into account the decay their burns have over time. It is essentially represented in percentage terms by the 'receiver share' value and changes every block.
  • Issued amount: Total amount of BSQ issued to a contributor over time.
  • Decayed issued amount: Total amount of BSQ issued to a contributor when taking into account the decay over time. It is essentially represented in percentage terms by the 'issuance share' value.

Profit fields

When selecting a burningmen, individual profit stats are displayed. It can be filtered by burning, trading fee and/or DPT eventsand by month or individual events. Looking at monthly profits can be used as an indicator of how many BSQ to burn. Note that it's normal to have a negative profit at the beginning, since receiver shares decay linearly over 12 cycles. A burning man should not expect to regain in one month what will be distributed during a longer period.
Scrolling down at the _Profit_ table, it's possible to export all burningman data from a contributor by clicking export to CSV.

DAO fields

It gives an overview of BSQ burning and bitcoin distribution across all DAO contributors.

  • Total amount of burned BSQ: All time amount of BSQ that has been burnt by all contributors acting as burning men.
  • Total amount of distributed BTC/BSQ: All time amount of bitcoin that has been distributed to all contributors acting as burning men. For ease of comparison this figure is also given as a BSQ amount.
  • Export to CSV: To see the results by month rather than all time in a CSV file, getting a more granular data.

If the amount of BSQ being distributed is greater than the amount being burnt then the burning men are generally in profit from their activities. If the amount of BSQ being distributed is less than the amount being burnt then the burning men are in a loss from their activities.

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