Author Topic: Bitmeat's proposal deserves consideration; Providing liquidity to Bitassets  (Read 4500 times)

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Offline CoinHoarder

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My understanding is that price feeds are necessary, and not temporary anymore as originally planned.
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Offline jsidhu

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thats what a trustless prediction market is.. with a price feed you need to trust the feed is correct and relatively responsive.

trustless means you dont have to depend om externals to commit a tx
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Offline Rune

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well imagine the case where we do away with price feeds and go trustless? Would the idea still work? I think price feeds are only meant to be temporary unless I'm misunderstanding.

Removing price feeds would achieve the opposite of going trustless, it would mean we would have to trust the majority of users in being honest and targeting a 1:1 peg.

When being a delegate becomes a real business then the feeds will require very little trust because stand by delegates will have enormous incentives to constantly monitor the feeds and blocks of incumbent delegates and call out any mischief.

Offline jsidhu

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well imagine the case where we do away with price feeds and go trustless? Would the idea still work? I think price feeds are only meant to be temporary unless I'm misunderstanding.
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Offline Rune

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So essentially this is a complete remake of the idea of a bitAsset, to one that is basically a blockchain command that destroys x btsx to create 1 bitUSD or destroys 1 bitUSD to create x btsx, where x is provided by the delegate price feeds.

I like it but I think the price feed delay will mean that the system can be exploited by whales. Once the chicken and egg liquidity issue is solved with bitUSD the user experience will be like with nubits. The focus of the developers should be on marketing BTSX and bitUSD, getting a mobile wallet and enable non-Titan address generation so POS integration becomes possible.

Offline CoinHoarder

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Bitmeat's proposal is buried in two threads and I think it deserves more attention. Nubit's only advantage at the moment is that it has higher liquidity, and his proposal seems to solve that.. at least it provides liquidity on the decentralized exchange.

Would there be a way to make the spreads wide enough in his proposal and not dilute BTSX... that way market makers could provide liquidity on centralized exchanges then sell on the decentralized exchange at a slight profit? This would somewhat model Nubit's liquidity model of market makers on centralized exchanges, and there one and only benefit would go bye bye. ;)

I've said it before, and I'll say it again - having the block chain be a market maker and create/destroy BTSX when needed is the RIGHT way to go about this. However, all "stakeholders" screamed at my proposal with the fear of being "diluted". Well here is some news for you - you will get diluted anyways, if you don't solve this problem.

Good luck.

Can you give me a link to your proposal?

I don't have a whitepaper, if that's what you are asking for, but the idea is very simple. Bytemaster actually liked the idea for its simplicity. Some interesting issues were brought, but I think you can have the blockchain adjust the spread such that it is always profitable (i.e. avoid diluting stakeholders):

Well in my design BTSX would get destroyed when converted to BitUSD instead of used as a margin. So create/destroy all you want, but the block chain is the market maker and all the BTSX holders will gain from the conversions back and forth.

If you have a trusted source of prices and a trustable way of getting that price information into a DAC (median delegate feed) then I suppose you can get rid of the entire Bid/Ask system all together and simply have the DAC create / destroy XTS as necessary for people to convert into and out of USD.   

However, if you do not have a price source (all exchanges are shut down by government) then it becomes a bit more difficult to know the "true" price upon which to execute your automatic process.

Also by having the network automatically create/destroy XTS "on demand" for conversion to/from BitUSD you are forcing the shareholders to take the full risk of being short.

That said I really like the idea for its simplicity and clarity.   It would not have been possible prior to DPOS, but now is potentially viable.

But they could make the market maker algorithm adjust the spread such that it is always profitable for all shareholders. i.e. - never exceed the initial supply of BTSX.

In effect the DAC would operate like a true bank. I want to see that done just to prove my point, even if it is a hard fork of BTSX into a BTSY :)
« Last Edit: October 17, 2014, 09:42:02 pm by CoinHoarder »
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