The Tezos “Donuts Bakery Inc” case study
As I stated in my earlier post last week, the wild “fauna” of bakers has been developing to fill a gap in delegation services. But I want to bring another point here in regards to facilitating its development. The part of text below is a screenshot of the google doc for the upcoming Intro book on Tezos (among the possible names are “The Essential Tezos” and “Tezos: The Last Blockchain”) scheduled for Chapter 7:

I am currently writing the Chapter 2 but this concept occurred to me and decided to put it up in writing right away in Chapter 7 with the intention of revisiting it later. But you might realize there is quite more to discuss in regards to it.

Take the case of Donuts Bakery, Inc. with 600,000 tezs in the bond pool all owned by the company itself and over 6 million tezs in the staking balance where the owners desire to sell. When comes another organization with the desire to purchase it, such tool or method describe above would be handy. However, there are actually multiple varying conditions to consider. For example, how the buyer and seller should organize this transfer of ownership in order to deal with varying factors such as:

Frozen bond held in deposits

The nodes that must be kept running with an active bond pool so it can perform the actual baking activity (future baking rights requiring more bonds in deposits, baking and endorsement of blocks, …)

And most importantly, the payment transfer to delegators.

If the transfer of ownership of Donuts Bakery is completed on a certain specific date, how do you account for this with the Tezos baking process involved over multiple cycles? Ideally, this redirection process would transfer the bond automatically to the new address.

Also, the new organization might actually be another existing baker. Imagine it has say 1 million tezs in the bond pool with a staking balance of only 2 million tezs, hence capable of 8 million tezs more can be accepted for delegation. They could either create a separate baking node with its own tz1 address for baking or they could merge the 5,400,000 delegated tezs from Donuts Bakery (6 million — 600,000 in the bond pool) into their existing tz1 address via some form of redirection.

There is another aspect to cover which is the case the new organization do not have any tezs at all and desire to acquire the tezs in the bond pool of Donuts Bakery. Rather than acquiring 600,000 tezs and moving them to a new tz1 address, and then setting up the delegation redirect, they could have the actual 600,000 tezs in the original tz1 address of Donuts Bakery moved as part of the same event. The Tezos network would recognized that any existing frozen tezs in bond deposits would then be now associated with the new tz1 address. This case might actually be simpler and perhaps the only way that this new feature should be handled.

In such case, the purchase contract will established the value of Donuts Bakery Inc. based on the following assets:

It has 600,000 tezs in bond pool with some still frozen in bond deposit

It has 5,400,000 tezs delegated by over 100 different KT1 addresses (likely 100 different investors)

It has a baking node infrastructure such as servers, firewalls, … (whether or not the new owners wants to start fresh or re-use is part of that contract)

It has a brand, website, possibly portal and other details.

It is obvious the price of Donuts Bakery is at least 600,000 tezs, but considering everything else, it might be say north of 1,000,000 tezs which the buyer might pay in tezs or in bitcoin or even possibly a currency created and imposed through violence by one of these organized crime syndicates we see across the world. (Yes you know me, I just couldn’t resist, I guess I can’t help it)

Comment below if you think there was other points that were worth mentioning. It’s very interesting to already discuss about features that are targeted very specifically to the Tezos network to facilitate its overall operation. But of course, Tezos smart contracts are the next major milestone where financial instruments could be constructed with way less fear of flaws considering the benefits that brings functional programming. And that will be juicy my friend.

Phil Champagne

Author http://BookOfSatoshi.com

VP Investor Relations, Hayek Lab, Inc.

https://www.hayeklab.com/
['Phil Champagne']
['Blockchain', 'Delegation', 'Proof Of Stake', 'Tezos', 'Hayek Lab']