This is from my discussion with @CoinGame this morning:
Because people would write scripts to take advantage of it by sending their coins back and forth you would need to set the amount of payout to be lower than the cost of a NBT transaction
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So the reward-system must be “market-aware” and know the price of 1 NTX at each point in time.
EDIT: how does FLT deal with this?
That’s a very good question. If it were static then increased transactions would shorten the duration to reach the supply limit. To address @desrever’s concern with spam attacks and this one it could possibly be a randomized reward based on the number of transactions in the block.
I’m not sure what the most optimal formula would be, but for sake of discussion:
30 transactions in a block. Only reward 15 of those transactions with the asset, and adjust the rewards per transaction to meet a linear supply.
The announcement says that its back and forth spam proof, and they refer to their whitepaper which i can’t find !
Edit : these links works :
http://www.fluttercoin.us/wp-content/uploads/2014/06/Proof-of-Transaction.pdf
Additional Consideration of Proof-of-Transaction
One of the considerations in implementing something like proof-of-transaction is the fact that there are those who would seek to exploit this system for their gain. Measures were put in place to prevent such automated spamming of the blockchain for this purpose. They include parameters which as of this writing set a transaction value greater than 500 Fluttercoins, maximum transactions of 10 per block, and a maximum number outputs per transaction of 10. In the case of transaction outputs, if the limit of 10 is exceeded, only the first 5 outputs are considered. These measure and all future measures with regard to proof-of-transaction seek to eliminate the possibility of simply flooding a block with transactions sending to many addresses in the hopes of mining a proof-of-transaction reward.
http://www.fluttercoin.us/wp-content/uploads/2014/06/proof-of-transaction-v2-r.pdf
Automation Protection
Since the inception of proof-of-transaction, one of the hot topics is always “can I send coins back and forth constantly to generate rewards”.There has always been protections for this sort of thing, but with v2 of proof-of-transaction, the reward system is now mostly geared 99% towards small outputs (person to person, person to store, etc). Large outputs to many addresses are now given a higher PoT difficulty, effectively greatly decreasing ones chances of gaming the system. In addition, as was always the case, sending a large number of transactions will effectively disqualify these transaction from PoT consideration, incurring a loss of transaction fees for the attacker.
This is an interesting idea and I just spent quite a bit of time thinking about it.
It would seem that offering a third product as an asset would have advantages and disadvantages. I think you are correct that the most obvious advantage is that it would provide a product offering for crypto users who are still stuck in a “fixed-supply currencies are good” mindset to engage with Nu. It would be a ramp onto our brand.
The flip side of this however is that it dilutes what Nu stands for, somewhat. To me Nu represents a flexible digital currency that can evolve and adapt to changing market conditions. Bitcoin’s market cap is not driven by a core ideology that fixed-supply assets are somehow more useful (they aren’t); it is driven by speculation and the belief that a BTC will be worth more in the future with greater adoption. We should be careful in adopting a flawed design simply because it is popular at the moment.
Your idea sparked something in my mind though. The fundamental reason for introducing this asset, as I understand it from your description, is to incentivize a higher transaction volume and usage of NuBits. That is a worthy behavior to incentivize.
My idea:
What if we created a new fixed-supply PoT asset called “NuRewards” (or NuPoints, NuTokens, etc.)? Think of it as a merchant-targeted loyalty program that is reset each year. It would be similar to existing loyalty points programs like AirMiles. NuRewards would not be a core product like NuBits or NuShares, rather it would be a secondary benefit to engaging with the Nu brand.
If we wanted a continually evolving snapshot of merchant loyalty we could structure NuRewards like Freicoin, except with 100% demurrage after 12 months, and set the rate of asset expansion to counteract this for a constant supply of NuRewards. In this design the most recently earned NuRewards would be the most valuable, meaning that merchants would have an incentive to continually process NBT transactions.
At any given point in time the merchants with the most NuRewards in publicly-known addresses would be featured prominently on our website and in our marketing materials as “gold partners” or something similar. In this way, owning the asset would have a very real tangible benefit (marketing and promotion for a merchant), as opposed to just being a vehicle for speculation like Bitcoin. Secondary markets that traded NuRewards would become popular as well, as you could essentially purchase advertising on the NuBits website by owning enough of them at any given time.
It is very likely that the most active NBT addresses in the future will belong to merchants. This idea would incentivize them to continually maximize their NBT transaction volume in exchange for advertising and PR benefits on our highly visible website.
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Another interisting idea in the same topic ! wow.
Just minor detail: advertising on Nubits.com wouldn’t be enough in my opinion.
It would be GREAT if we could push ads for the 3-5 most richest NTX adresses to the Nu client’s overview tab, or at least push their Nubits adress on the Adress Book with their URL as a label.
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But then there is the danger: what if NTX becomes too valuable (from advert rewards), so merchants are incentivized to bloat the blockchain with dummy NBT transactions in order to pump their NuTX holdings?
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Then we profit 
Transaction fees are our profits and it doesn’t matter if it’s spam or not, so in another words Nu profitability is Directly proportioned with the Blockchain size, we have to address this challenge anyway!
I see the benefit here but I don’t know if engineering it into the blockchain would be the best way to approach such an idea. I’m having reservations about the original idea as well given some of the points you made.
Adding a deflationary asset doesn’t really solve anything. Some people who have interest in a deflationary asset might be interested but I doubt it would attract anyone already heavily invested in BTC or LTC. It would just be another altcoin that exists for no other reason than that it was possible to do so.
The idea of an integrated reward currency (loyalty points, etc.) makes me giddy for reasons I don’t fully yet understand. Must think more about this.
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I need to think about this aspect more. Intuitively to me it feels like this is a net positive for the Nu network - it would lead to more NuBits being purchased to offset the destruction of NBT from transaction fees (revenue for shareholders), and ultimately it would be another deflationary mechanism to decrease the supply of NuBits when needed.
NuRewards would actually serve as a way to monetize advertising on the Nu network, which could lead to lower transaction fees and higher competitiveness of our product. Similar to how using Facebook is free, but you put up with some ads on the sidebar as a compromise.
Are you talking about advertisements in the client and on our website? Basically it could be used to purchase space on any NuNet real estate? Why not just accept NuBits for the same purposes? I’m just having a hard time seeing how creating an asset to fulfill such a role works out in our favor. We’ve seen how upset Bitshares community members have become after the network decides to stop supporting poorly thought out assets that quickly become a burden the development team has lost interest in.
I just figured we could offer a product for people who aren’t interested in a stable currency coin. One that wouldn’t be susceptible to the impending mining centralization of Bitcoin or the need to hold and secure the network like Peercoin. The method of distribution may encourage usage of NuBits but was secondary to simply having a fair method of distributing this asset over time.
It’s a product with as economic model that appeals to many people involved in crypto. It’s not one that would require lots of maintenance or support. The asset exists in finite supply and it can be traded from client to client. Simple.
Creating some kind of rewards asset will require constant support over the course of its life. It would create a large base of clients who will want metrics that what they’re paying for is working. We’re talking google adsense level of support. I don’t think it’s a simple idea to engineer into the software or to support afterwards.
I dunno man. It just seems like more trouble than it’s worth.
This is a legitimate argument. Provably-burned NBT could be used just as well for “loyalty points” while avoiding the blockchain bloat.
Brainstorming…
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Now that warms my belly a bit.
@Ben just came up with a ridiculously good idea that builds off of @tomjoad’s idea. I think it’s a far better approach than this deflationary asset thing. I’ll let him make a post about it, but it’s really sweet. 
Stay tuned.
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My idea has the benefit of pure decentralization if structured properly. The website and client would display the top NUR addresses along with a piece of meta-data (possibly a DNS entry like Namecoin uses?) like a website URL for advertising purposes. It wouldn’t require a marketing manager to keep track of which addresses should be displayed on a website/client, and wouldn’t require anyone to keep track of burned NBT addresses.
The onus for evaluating whether it is worth it to participate in the NUR market would be on the merchant side. I don’t see this as a poorly thought out asset requiring constant maintenance actually. Once it is released it would operate freely without our intervention, because there are no requirements for voting or price feeds.
That being said, @Ben usually has great ideas so I’m looking forward to reading what he suggests.
Provably-burned NBT doesn’t need a central authority, either. Just generate a single public NBT key that nobody has the private key for, and hardcode as “loyalty points burn” all NBT sent to that address. It also wouldn’t be hard to add time-based weighting to the algorithm so that the most recent burns get the biggest benefits.
Also interested in @Ben’s ideas.
If for some reason ads are ever incorporated into the client, I think there should be a way for people to pay a fee so they don’t see them for a certain length of time. The collected fees could then be distributed to shareholders as network revenue. Not sure if this is possible, but I don’t like seeing ads and would probably pay a small fee to have them removed from view.
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Those who believe in the cap of bitcoin supply don’t realize that altcoins are just defacto, and working, surrogates of bitcoin to circumvent the cap, that bitcoin and altcoins are one and same in a grand scheme. These people won’t see the value of altcoins therefore are unlikely to be attracted by a capped product of Nu.
As for displaying ad in the wallet, since the wallet will be open source, it would take only a few minutes for an ad-free wallet fork to be made.
What happened to this?
Also, NuRewards sounds good. I’m curious how it would change with a volume-dependent fee like:
The burn rewards possibility is also a very nice concept. We could, in theory, do both I think.