Author Topic: How to measure the PEG....  (Read 9499 times)

0 Members and 1 Guest are viewing this topic.

Offline kisa

  • Sr. Member
  • ****
  • Posts: 240
    • View Profile
The only way to measure it in a meaningful manner is to take into account size of order. If I was to convert $100k of BitUSD to BTSX at market and then back, how much would I lose? It's probably close to 10-20% at the moment.

As explained in another thread virtually zero!

You can buy bitUSD (100K is small enough amount, it will work for much bigger amounts say 15Mil bitUSD) and sell them back at the peg in reasonable amount of time (30 days or less) with 100% certainty!

You don't seem to understand the meaning of the word liquid. Hint: It's nowhere near 30 days.

If I buy/sell GLD on the stock market within seconds. How much would that cost me?

Also we were talking about measuring it. How about we actually do a graph and visualize the liquidity loss of 10K,100K,1M, etc.

You keep telling me it's not that bad, but anytime I looked at the chart I was like, why would anyone buy here if they don't have the ability to get out quickly?

Yes, I do believe I understand what liquid means... I also believe that for you liquid means instant gratification...

I also understand that you are very particular about how  things must be presented  to you, in order for you to get them or ... not. And that presentation  determines in a great extend the stuff you get ...and the one you do not... so no bit in your meat... so to speak but then again...  I am regressing to my former self.

zerosum, please cool down - there is no reason becoming personal here. i don't think there is 100% certainty anywhere... sometimes minsky moment ensures that things which appear certain become no longer so... bitUSD hasn't grown big enough yet in terms of liquidity, there is little demand yet at these early stages, and the PEG hasn't been sofar seriously attacked. it is worth examining potential defences before nasty things potentially happen (even if hopefully they don't) ;)

it doesn't look to me like bitmeat is seeking for instant gratification in trading bitUSD, rather the ability to get out quickly close to the peg is the essential value proposition of bitUSD. and we all know, it will take some time to establish such functionality, so patience is an important feature for all bitshares users and investors...
« Last Edit: October 16, 2014, 09:25:29 am by kisa0145 »

Offline JordanLee

  • Newbie
  • *
  • Posts: 13
    • View Profile
Assuming you're one of the Custodians,would you consider withdrawing the buy wall after selling some Nubits a crime or fraud ?

This question appears to presume a centralized structure that doesn't exist. Three weeks after release, there are 5 liquidity provider custodians elected by shareholders to manage buy walls independently. I expect this to grow to dozens of LPCs. As a result of this decentralization no one can remove the buy support wall, because there are many walls placed by independent people. The last three of these 5 LPCs will receive compensation after liquidity services are rendered, which I expect will be the practice going forward.

These individuals have no motive and nothing to gain from taking their own portion of the buy wall down. That would be a violation of their contract with shareholders, the penalty for which would be that they would not be compensated for their work and risk taken. The impact to the network and the peg would be quite modest as a result of the redundancy.

I'm quite proud to have designed a system that doesn't rely on threats of violence (arrest and imprisonment) for its functioning. Rather, it relies on decentralization, redundancy, positive incentives and self interest to function. Systems based on these attributes offer us more peaceful ways of interacting, which is of great importance to me.

zerosum

  • Guest
The only way to measure it in a meaningful manner is to take into account size of order. If I was to convert $100k of BitUSD to BTSX at market and then back, how much would I lose? It's probably close to 10-20% at the moment.

As explained in another thread virtually zero!

You can buy bitUSD (100K is small enough amount, it will work for much bigger amounts say 15Mil bitUSD) and sell them back at the peg in reasonable amount of time (30 days or less) with 100% certainty!

You don't seem to understand the meaning of the word liquid. Hint: It's nowhere near 30 days.

If I buy/sell GLD on the stock market within seconds. How much would that cost me?

Also we were talking about measuring it. How about we actually do a graph and visualize the liquidity loss of 10K,100K,1M, etc.

You keep telling me it's not that bad, but anytime I looked at the chart I was like, why would anyone buy here if they don't have the ability to get out quickly?

Yes, I do believe I understand what liquid means... I also believe that for you liquid means instant gratification...

I also understand that you are very particular about how  things must be presented  to you, in order for you to get them or ... not. And that presentation  determines in a great extend the stuff you get ...and the one you do not... so no bit in your meat... so to speak but then again...  I am regressing to my former self.
« Last Edit: October 16, 2014, 08:40:13 am by zerosum »

Offline bitmeat

  • Hero Member
  • *****
  • Posts: 1116
    • View Profile
The only way to measure it in a meaningful manner is to take into account size of order. If I was to convert $100k of BitUSD to BTSX at market and then back, how much would I lose? It's probably close to 10-20% at the moment.

I doubt that will last long.  If you placed a large sell wall at 95% people would chip away at it.

Sure, but my point is this is the correct metric we should track. As you say it may improve. But it is important to track it and also track it against competitive products.

Offline bitmeat

  • Hero Member
  • *****
  • Posts: 1116
    • View Profile
The only way to measure it in a meaningful manner is to take into account size of order. If I was to convert $100k of BitUSD to BTSX at market and then back, how much would I lose? It's probably close to 10-20% at the moment.

As explained in another thread virtually zero!

You can buy bitUSD (100K is small enough amount, it will work for much bigger amounts say 15Mil bitUSD) and sell them back at the peg in reasonable amount of time (30 days or less) with 100% certainty!

You don't seem to understand the meaning of the word liquid. Hint: It's nowhere near 30 days.

If I buy/sell GLD on the stock market within seconds. How much would that cost me?

Also we were talking about measuring it. How about we actually do a graph and visualize the liquidity loss of 10K,100K,1M, etc.

You keep telling me it's not that bad, but anytime I looked at the chart I was like, why would anyone buy here if they don't have the ability to get out quickly?

Offline JordanLee

  • Newbie
  • *
  • Posts: 13
    • View Profile
Only when the interest rate starts rising does the market know demand is less than supply and then at that point they have to question how much decentralised backing NuBits have, how much interest they can afford to pay and how long the custodians will pay it before giving up.

Edit: Shareholders not Custodians. Maybe I should read the thing properly first. I guess the same cycle still applies if the interest is backed by NuShares? As once demand for NuBits drops then NuShares will drop in value too. Anyway I probably got to read this more.
- Ok yeah 'think' I understand it better. Same thing as soon as interest rate gets too high (5-7%?) or if net demand is absent for a little too long (1 month?) then confidence is rapidly lost and market collapses.

With our design change allowing the exchange of currency for NuShares the amount of interest that can be paid is complex with many variables. However, there is considerable truth to the simple notion that it is equal to the total value of NuShares minus the value of currency issued.

Offline JordanLee

  • Newbie
  • *
  • Posts: 13
    • View Profile
First of all, I'd like bring everyone's attention to the fact that that our friendly competition will result in consumer needs being met more fully and at less cost than if we weren't both here. So, on behalf of the consumer, I thank you for your work.

What NuBits offers the consumer is quite simple to understand (crypto that is always worth $1), but how we do that is complex and difficult for the uninitiated to comprehend. I would like to take this opportunity to clarify some misunderstandings presented here.

In fact, they are so clever they hide the interest they charge you for using their NuBits in the spread...  100% guaranteed profit.  You buy NuBits for $1.00 and you can sell them back to them for $0.995   0.4% goes to the exchange, .1% goes to the market makers.   You are exposed to counter party risk and paying them for the privilege.  This might be their whole plan, to disguise a user issued asset as a decentralized trust-free crypto currency.   

Liquidity provider custodians use software called NuBot, which offers NuBits at $1.00 with a spread to cover the cost of transaction fees. On an exchange that has a 0.2% transaction fee, NuBits are sold for 1.002 and purchased at 0.998. Market makers do not profit from these trades, but they are offered separate compensation by shareholders. Purchasers of NuBits have no counterparty risk once they withdraw their NuBits from the exchange they purchase them at.

What if they take the real USD *off of the exchange* and spend it on something (to fund infrastructure).... now the "market makers" have to increase their spread to cover transaction costs *AND* NuBits has just gone fractional reserve.  It is the same old fractional reserve ponzi scheme... build confidence by maintaining redeem-ability for a long enough period of time to earn "trust" then slowly remove the backing.    My conclusion here is that NuBits will continue to hold with a much tighter spread simply because of how they were issued... "sold for USD" rather than "sold for crypto" the backers of NuBits will not spend much of the USD they received by selling NuBits. 

99% of NuBits have been sold for Bitcoin and Peercoin, while there is a trickle of volume on a USD trading pair. I can't see any circumstance where liquidity provider custodians would increase the spread on the liquidity they provide.

I struggled with the issue of backing assets when initially designing Nu. No one has figured out how to back assets without introducing counterparty risk. This is why Bitcoin is not backed by gold, like the failed E-Gold network. Even if backing consists of decentralized assets, the backing can fail if the backing assets lose value. Nu prioritizes reliability and the elimination of counterparty risk over backing.


So NuBits can be viewed as a "basket of USD" held on multiple different exchanges where the issuers reserve the right to spend the depositors money and not redeem it.   As a NuBits holder you are now subject to the combined risk of all USD exchanges that the market makers are participating in PLUS the risk of NuShare holders spending the deposited funds.   There is never anything that returns value to NuBits except market maker spreads... only things that can suck value of of it.   It is a one way valve.   

I have no doubt that at some point a liquidity provider custodian will lose some quantity of funds as a result of an exchange default. While initial liquidity has been provided by shareholder creation of NuBits, the quantity of LPCs that have provided their own funds already exceeds the number that received their funds from shareholders and I expect we will complete this transition soon. If one of these LPCs experiences an exchange default, they bear the loss themselves and it has no systemic implications.

Indigoman proposed a protocol modification that permits shrinking the supply of NuBits down to zero if necessary by burning NuBits in exchange for NuShares. This change has broad shareholder support and its inclusion in the protocol is all but certain. I will be posting the contents of a motion to implement this shortly.

While my initial design provided no way to substantially reduce the supply of NuBits, the design has been improved to allow the elimination of as many NuBits as necessary, making them the liability of shareholders.

zerosum

  • Guest
The only way to measure it in a meaningful manner is to take into account size of order. If I was to convert $100k of BitUSD to BTSX at market and then back, how much would I lose? It's probably close to 10-20% at the moment.

As explained in another thread virtually zero!

You can buy bitUSD (100K is small enough amount, it will work for much bigger amounts say 15Mil bitUSD) and sell them back at the peg in reasonable amount of time (30 days or less) with 100% certainty!

Offline bytemaster

The only way to measure it in a meaningful manner is to take into account size of order. If I was to convert $100k of BitUSD to BTSX at market and then back, how much would I lose? It's probably close to 10-20% at the moment.

I doubt that will last long.  If you placed a large sell wall at 95% people would chip away at it.
For the latest updates checkout my blog: http://bytemaster.bitshares.org
Anything said on these forums does not constitute an intent to create a legal obligation or contract between myself and anyone else.   These are merely my opinions and I reserve the right to change them at any time.

Offline bitmeat

  • Hero Member
  • *****
  • Posts: 1116
    • View Profile
The only way to measure it in a meaningful manner is to take into account size of order. If I was to convert $100k of BitUSD to BTSX at market and then back, how much would I lose? It's probably close to 10-20% at the moment.

Offline bytemaster

using the reserve funds to pay the unbacked bitUSD was one proposal to mitigate .. i think BM proposed it himself already somewhere

I'm not trying to be negative in such a positive thread, but I feel this subject could use some thought and brainstorming from the community.

A reserve fund that generates about 1.5% APY doesn't seem like it would generate sufficient collateral as 1.5% APY is small compared to the possibly large percentage (50%+ ??) that would be needed to cover bitassets in the event of a black swan. I understand that the yield is dynamic and could change, but it is what it is currently and without mass adoption or changing the way it works it won't increase significantly. I understand shorts will soon be able to compete as to this, so that should help, but is it enough to cover? Disregarding the fact that 1.5% is rather large compared to what you can get with banks, it would not be enough to cover them... or is my understanding wrong of how it would work?

I suppose the "minimum price feed" should be  ALL USD / (ALL COLLATERAL) and that if the price feed is below this point then all shorts are immediately called and all BitUSD becomes redeemable at at this price ratio and a new BitUSD market is created.   

In other words, no amount of insurance fund is able to protect against all black swans.   The best we can do is give all BitUSD holders and all shorts a fair settlement.  The value of BitUSD is always <= the value of the collateral.       
For the latest updates checkout my blog: http://bytemaster.bitshares.org
Anything said on these forums does not constitute an intent to create a legal obligation or contract between myself and anyone else.   These are merely my opinions and I reserve the right to change them at any time.

Offline biophil

  • Hero Member
  • *****
  • Posts: 880
  • Professor of Computer Science
    • View Profile
    • My Academic Website
  • BitShares: biophil

I predict a reasonable rise in NuBit interest rates will actually lead to panic selling not parking.


This would make for an interesting Best Response analysis!

Let's say I hold NuBits, and I believe that the interest rate is positively correlated to the likelihood that NuBits is about to collapse. In other words, I believe there is a function t(r) that describes how many days before the NuBits collapse as a function of the interest rate r (to make the math easy, assume r is in %/day). Then if I have N NuBits, for any interest rate r, I have two options:

1) sell now and profit N.
2) park for a little less than t(r) days, sell right before the collapse, and make over N*(1+t(r)*r). (I'm not compounding interest; this is a lower bound)

Well look at that! Unless t(r)=0, option (2) always gives me a higher payoff than option (1)! So we should expect that even when the NuBits collapse is imminent, there will probably always be some risk-seeking individual(s) out there who are going to park for one more day in the hopes of making away with one more dollar. Of course, at some point the risk-averse people, who have been selling all along, will reach some critical mass of selling volume that the market-makers can't keep up with and the peg will break and the risk-seekers will lose all their money.

Interestingly, the custodians (aka the fat cats who make NuBits possible) will also have a choice to make:

1) Keep buying excess NuBits, trying to maintain the peg
2) Abandon their responsibility to buy excess NuBits because the collapse is imminent and the longer they wait the more they lose.

Clearly, some custodians will abandon earlier than others; the ones who hold out longer will lose more money. So notice here that in a collapse scenario, the custodians have a strong incentive to abandon the holders of NuBits!
Support our research efforts to improve BitAsset price-pegging! Vote for worker 1.14.204 "201907-uccs-research-project."

Offline CoinHoarder

  • Hero Member
  • *****
  • Posts: 660
  • In Cryptocoins I Trust
    • View Profile
Does anyone know how much Nushares are selling for?
It looks like it's currently $0.002 per share, which would give a market cap of $2 million if all shares were worth this amount. However, they still appear to be screening applicants to buy shares. See http://discuss.nubits.com/t/undistributed-nushares/125 and see also http://discuss.nubits.com/t/nushare-price-increase/334

I just find it hard to believe they are doing $100,000 plus in volume per 24 hours on a consistent basis like coinmarketcap reports.
Based on my analysis, I think the recent 24-hour volume is due to the fact that they are putting buy/sell walls on NuBits-to-BTC currency pairs. See https://bter.com/trade/NBT_BTC. When their walls get a little off due to a jump in BTC price, I suspect that arbitrage traders are stepping in with huge orders to take advantage of this, creating a lot of volume. That's not necessarily long-term demand, but it is volume. Also, because of these walls, if traders expect a crash in BTC, they might be dumping high volume into NuBits (and out again) as a temporary hedge.

Yeah there is probably a more reasonable explanation for it and what you describe could be plausible, but what I stated is a possibility... truth is no one really knows for sure. Conspiracy theories are more fun than your explanation. :p
https://www.decentralized.tech/ -> Market Data, Portfolios, Information, Links, Reviews, Forums, Blogs, Etc.
https://www.cryptohun.ch/ -> Tradable Blockchain Asset PvP Card Game

Offline CoinHoarder

  • Hero Member
  • *****
  • Posts: 660
  • In Cryptocoins I Trust
    • View Profile
using the reserve funds to pay the unbacked bitUSD was one proposal to mitigate .. i think BM proposed it himself already somewhere

I'm not trying to be negative in such a positive thread, but I feel this subject could use some thought and brainstorming from the community.

A reserve fund that generates about 1.5% APY doesn't seem like it would generate sufficient collateral as 1.5% APY is small compared to the possibly large percentage (50%+ ??) that would be needed to cover bitassets in the event of a black swan. I understand that the yield is dynamic and could change, but it is what it is currently and without mass adoption or changing the way it works it won't increase significantly. I understand shorts will soon be able to compete as to this, so that should help, but is it enough to cover? Disregarding the fact that 1.5% is rather large compared to what you can get with banks, it would not be enough to cover them... or is my understanding wrong of how it would work?
« Last Edit: October 15, 2014, 05:46:19 pm by CoinHoarder »
https://www.decentralized.tech/ -> Market Data, Portfolios, Information, Links, Reviews, Forums, Blogs, Etc.
https://www.cryptohun.ch/ -> Tradable Blockchain Asset PvP Card Game

Offline Chronos

Does anyone know how much Nushares are selling for?
It looks like it's currently $0.002 per share, which would give a market cap of $2 million if all shares were worth this amount. However, they still appear to be screening applicants to buy shares. See http://discuss.nubits.com/t/undistributed-nushares/125 and see also http://discuss.nubits.com/t/nushare-price-increase/334

I just find it hard to believe they are doing $100,000 plus in volume per 24 hours on a consistent basis like coinmarketcap reports.
Based on my analysis, I think the recent 24-hour volume is due to the fact that they are putting buy/sell walls on NuBits-to-BTC currency pairs. See https://bter.com/trade/NBT_BTC. When their walls get a little off due to a jump in BTC price, I suspect that arbitrage traders are stepping in with huge orders to take advantage of this, creating a lot of volume. That's not necessarily long-term demand, but it is volume. Also, because of these walls, if traders expect a crash in BTC, they might be dumping high volume into NuBits (and out again) as a temporary hedge.