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Offline Thom

BitAssets and Market Pegs - What are Price Feeds?
« on: November 03, 2014, 04:57:56 PM »

Normally I'd post this in the newbie section but there isn't many eyes over there lately.

I'm trying to dig into the concept of BitAssets and really understand them. About the only thing about them I believe I do understand is the psychological basis for why a BitAsset like BitUSD trades near $1. I don't see how that holds true for other assets like gold, silver & oil where the consensus value is more volatile.

It doesn't help that my grasp on futures trading is not rock solid either. I can't seem to retain if a short is a contract you buy when you want the value to go down or if that's the "long" position. As I analyze that now my guess is that short is you want the value to go down to make a profit and long the value to rise to make a profit. So that is one basic question.

When I read the BitShares wiki entry for BitAssets the opening paragraph was enough to motivate me to write this post. Then under Initial Creation I read this:

Quote
BitAssets are created whenever a short is matched with a buyer at a price set by the median price feed which is provided by delegates.

And was further confused by not understanding what a price feed is, how the delegates set it, on what basis they do so and whether it's individually set by each delegate or some sort of cooperation or consensus is at play.

Other questions related to futures trading procedure are:
1) what do I buy BitUSD with, BTC coins, BTSX shares, or any of the above at bter btc38 or other exchanges where BitUSD is traded?
2) can I buy BitUSD in my BitShares client directly without using an exchange?
3) do I need to "put up" some bond or form of collateral to buy BitUSD, since it's value is based on trade speculation?
4) if no to #3, do I have to "put up" collateral to short or go long on BitUSD?

If you'd prefer to discuss this with me on mumble I'll be listening in backroom #3 (just drag your username from the conference hall to backroom 3), or you could respond here. I really need to get these things nailed down in my brain.

Thanks!
Injustice anywhere is a threat to justice everywhere - MLK |  Verbaltech2 Witness Reports: https://bitsharestalk.org/index.php/topic,23902.0.html

Offline bytemaster

Re: BitAssets and Market Pegs - What are Price Feeds?
« Reply #1 on: November 03, 2014, 05:13:53 PM »
Price Feed - median of feed prices provided by delegates and is updated as often as the community demands delegates update, usually after large price moves and at least once per day.

You can be guaranteed to sell your BitXYZ at the price feed within 30 days as all shorts must cover every 30 days.

Given this as long as you trust the delegates to publish an honest feed you can buy/hold BitXYZ and know that there will be liquidity within 30 days at the value of XYZ.

Because the market knows there exists future liquidity, if you want to sell "now" you can do so at a discount based upon the current supply/demand for BitXYZ.   
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Offline Thom

Re: BitAssets and Market Pegs - What are Price Feeds?
« Reply #2 on: November 03, 2014, 05:25:29 PM »
Thanks for your reply BM, but your definition for price feed is circular, you use "feed price" in your definition.

What is the source of the price info? Does each delegate rely on different sources? Does the source originate from distilling info from the blocks of transactions each delegate "publishes" to the blockchain?
Injustice anywhere is a threat to justice everywhere - MLK |  Verbaltech2 Witness Reports: https://bitsharestalk.org/index.php/topic,23902.0.html

Offline speedy

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Re: BitAssets and Market Pegs - What are Price Feeds?
« Reply #3 on: November 03, 2014, 05:27:42 PM »
Thanks for your reply BM, but your definition for price feed is circular, you use "feed price" in your definition.

What is the source of the price info? Does each delegate rely on different sources? Does the source originate from distilling info from the blocks of transactions each delegate "publishes" to the blockchain?

Delegates generally will run scripts to pull the information off the centralized exchanges and make the calculation.

Offline bytemaster

Re: BitAssets and Market Pegs - What are Price Feeds?
« Reply #4 on: November 03, 2014, 05:28:54 PM »
Thanks for your reply BM, but your definition for price feed is circular, you use "feed price" in your definition.

What is the source of the price info? Does each delegate rely on different sources? Does the source originate from distilling info from the blocks of transactions each delegate "publishes" to the blockchain?

Price is provided by delegates from what ever sources the delegate wants.  My definition wasn't circular.  In this case most delegates are using a weighted average of several exchanges.
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 kisa

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Re: BitAssets and Market Pegs - What are Price Feeds?
« Reply #5 on: November 03, 2014, 05:31:16 PM »
Let me try some of it... And if I am wrong in my explanations, than I am happy to learn from further corrections....

Normally I'd post this in the newbie section but there isn't many eyes over there lately.

I'm trying to dig into the concept of BitAssets and really understand them. About the only thing about them I believe I do understand is the psychological basis for why a BitAsset like BitUSD trades near $1. I don't see how that holds true for other assets like gold, silver & oil where the consensus value is more volatile.
The peg for bitAssets depends on the bitAsset price in terms of BTS. Because we know from exchanges, that BTS is now trading at, lets say 0.016$, this enables the delegates to publish feed -> 62,5 BTS per bitUSD. If the $ price of 1 Oz gold is known at any time on major world commodity exchanges, then the delegates also know of how much BTS per bitGLD. The challenge for publishing the feed arises when commodity exchanges are shut, such as weekends and holiday... At some point when enough traders are involved in bitGLD, then during weekends either the peg is held constant at Friday closing price at delegates choice, or perhaps the "market price" of bitGLD in BTSX would substitute the peg?

It doesn't help that my grasp on futures trading is not rock solid either. I can't seem to retain if a short is a contract you buy when you want the value to go down or if that's the "long" position. As I analyze that now my guess is that short is you want the value to go down to make a profit and long the value to rise to make a profit. So that is one basic question.
correct. just note that here we are dealing with shorts versus BTS, e.g. issuing bitUSD via short would make you some BTS profit if bitUSD value in BTS declines (= BTS value in USD increases), and buying bitUSD long would make you some BTS profit if bitUSD value in BTS increases (= BTS value in USD decreases)

When I read the BitShares wiki entry for BitAssets the opening paragraph was enough to motivate me to write this post. Then under Initial Creation I read this:

Quote
BitAssets are created whenever a short is matched with a buyer at a price set by the median price feed which is provided by delegates.

And was further confused by not understanding what a price feed is, how the delegates set it, on what basis they do so and whether it's individually set by each delegate or some sort of cooperation or consensus is at play.

Other questions related to futures trading procedure are:
1) what do I buy BitUSD with, BTC coins, BTSX shares, or any of the above at bter btc38 or other exchanges where BitUSD is traded?
you buy bitUSD for whatever token an external exchange is trading it, such as BTC
2) can I buy BitUSD in my BitShares client directly without using an exchange?
yes, for BTS
3) do I need to "put up" some bond or form of collateral to buy BitUSD, since it's value is based on trade speculation?
no collateral needed -you simply pay current market BTS price for it (speculative, if you want), then you own bitUSD and your asset can lose or increase the amount of BTS it is worth in the future
4) if no to #3, do I have to "put up" collateral to short or go long on BitUSD?
going long bitUSD is the same a buying bitUSD. For going short - yes you need to post collateral. Going short is like you issue bitUSD into the system that someone buys and pays you the price in BTS. (If there was no collateral requirement, then you could just spend those received BTS somewhere else and walk away from your obligation to cover the short at a loss, if the price of bitUSD in BTS has increased.) Therefore you are required to post 2xmarket value of bitUSD in BTS as collateral (and I heard that currently also BTS proceeds from the bitUSD issuance have to be posted as additional collateral?)

If you'd prefer to discuss this with me on mumble I'll be listening in backroom #3 (just drag your username from the conference hall to backroom 3), or you could respond here. I really need to get these things nailed down in my brain.

Thanks!
« Last Edit: November 03, 2014, 05:40:47 PM by kisa »

Offline Empirical1.1

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Re: BitAssets and Market Pegs - What are Price Feeds?
« Reply #6 on: November 03, 2014, 05:37:27 PM »
1. You can buy it with whatever the pair says. If bter lists BitUSD/BTSX then you can buy in with BTSX.

2. Yes that's the whole idea. You can store and trade value in BitAssets in a completely decentralised way. In the client click on markets go to BitUSD and you will be able to buy (& sell) BitUSD for BTSX.
Your BTSX user account will then show your BitUSD balance as well as your BTSX balance. Your BitUSD balance will also earn interest.

3. No you only have to part with some BTSX. If it currently takes 60 BTSX to make a dollar then a BitUSD will cost you 60 BTSX-ish. Then you've lost those BTSX but have a BitUSD which you can trade for however many BTSX it takes to make  a dollar in future.

4. Yes you have to put up collateral to go short. Shorting BitUSD means you think BTSX will rise relative to the dollar. The collateral is 200% I think so you have to put up 125 BTSX-ish to short 1 BitUSD based on current prices,  (You also have to enter an interest rate your willing to pay.) If someone wants to buy a BitUSD above the feed then one will be created by matching him with the short offering the highest interest. So now that guy has a BitUSD backed by a lot of collateral you provided that earns interest. (Edit: His BitUSD becomes backed by everybodies collateral and earns the average interest that all shorts are currently paying.)

The benefit for the short is that if BTSX rises in value he makes money. He would have already made money that way just by holding BTSX. So going short lets him amplify/increase how much money he can make from the BTSX price rising relative to the BitAsset he shorted without buying more BTSX.
« Last Edit: November 03, 2014, 05:49:51 PM by Empirical1.1 »

Offline Thom

Re: BitAssets and Market Pegs - What are Price Feeds?
« Reply #7 on: November 03, 2014, 05:38:40 PM »
Thanks for your reply BM, but your definition for price feed is circular, you use "feed price" in your definition.

What is the source of the price info? Does each delegate rely on different sources? Does the source originate from distilling info from the blocks of transactions each delegate "publishes" to the blockchain?

My definition wasn't circular.

Thanks for your info, I understand what the feeds are now. Perhaps "circular" isn't the right term, but it's impossible to understand your 1st definition unless you know what a price feed is, as you said:

Quote
Price Feed - median of feed prices provided by delegates and is updated as often as the community demands delegates update, usually after large price moves and at least once per day.

Price Feed == feed prices -- See what I mean? nevertheless you & speedy explained what it means, thanks.
« Last Edit: November 03, 2014, 05:47:36 PM by Thom »
Injustice anywhere is a threat to justice everywhere - MLK |  Verbaltech2 Witness Reports: https://bitsharestalk.org/index.php/topic,23902.0.html

Offline Thom

Re: BitAssets and Market Pegs - What are Price Feeds?
« Reply #8 on: November 03, 2014, 05:50:12 PM »
Calculating...

Trying to get my head around the answers Kisa & Empirical provided, to which I'm grateful.
Injustice anywhere is a threat to justice everywhere - MLK |  Verbaltech2 Witness Reports: https://bitsharestalk.org/index.php/topic,23902.0.html

Offline JWF

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Re: BitAssets and Market Pegs - What are Price Feeds?
« Reply #9 on: November 03, 2014, 05:55:18 PM »
This has helped solidify the concepts a lot better for me. Still playing in the client trying to really understand how the market works... slow going, but I am slowly getting it.

Offline Thom

Re: BitAssets and Market Pegs - What are Price Feeds?
« Reply #10 on: November 03, 2014, 06:29:40 PM »
My followup questions in green below.

Let me try some of it... And if I am wrong in my explanations, than I am happy to learn from further corrections....

The challenge for publishing the feed arises when commodity exchanges are shut, such as weekends and holiday... At some point when enough traders are involved in bitGLD, then during weekends either the peg is held constant at Friday closing price at delegates choice, or perhaps the "market price" of bitGLD in BTSX would substitute the peg?
Right. That's important to truly become decentralized. The "feed" in this case would presumably need to be determined from info obtained directly from the blockchain so as to aggregate all offers on the broadest scale since the "official" exchanges closed.

correct. just note that here we are dealing with shorts versus BTS, e.g. issuing bitUSD via short would make you some BTS profit if bitUSD value in BTS declines (= BTS value in USD increases), and buying bitUSD long would make you some BTS profit if bitUSD value in BTS increases (= BTS value in USD decreases)
A bit confused here. Why involve BitUSD if I want to short BTSX? Can't one short BitUSD and BTSX independent of one another?

Quote
I was further confused by not understanding what a price feed is, how the delegates set it, on what basis they do so and whether it's individually set by each delegate or some sort of cooperation or consensus is at play.
The whole topic of price feeds is now clear in my mind. Thanks!

1) you buy bitUSD for whatever token an external exchange is trading it, such as BTC.
Thought so, got it.
2) yes, for BTS
Was hoping so. Will this change after new BTS client is released? i.e. could other tokens be used?
3) no collateral needed - you simply pay current market BTS price for it (speculative, if you want), then you own bitUSD and your asset can lose or increase the amount of BTS it is worth in the future
Kewl.
4) going long bitUSD is the same a buying bitUSD. For going short - yes you need to post (2xmarket value) collateral.
Might not understand details of how this is done, but I think good enough answer for now. Followup Q: Is BitUSD always involved for ALL "long" contracts done in the BitShares client? Will that change with new client?

« Last Edit: November 03, 2014, 06:40:57 PM by Thom »
Injustice anywhere is a threat to justice everywhere - MLK |  Verbaltech2 Witness Reports: https://bitsharestalk.org/index.php/topic,23902.0.html

Offline kisa

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Re: BitAssets and Market Pegs - What are Price Feeds?
« Reply #11 on: November 03, 2014, 07:55:20 PM »
My followup questions in green below.

Let me try some of it... And if I am wrong in my explanations, than I am happy to learn from further corrections....

The challenge for publishing the feed arises when commodity exchanges are shut, such as weekends and holiday... At some point when enough traders are involved in bitGLD, then during weekends either the peg is held constant at Friday closing price at delegates choice, or perhaps the "market price" of bitGLD in BTSX would substitute the peg?
Right. That's important to truly become decentralized. The "feed" in this case would presumably need to be determined from info obtained directly from the blockchain so as to aggregate all offers on the broadest scale since the "official" exchanges closed. - or maybe delegates can find gold prices in jewelry online shops on weekends :D - with regards to blockchain its rather your tech expertise that is required

correct. just note that here we are dealing with shorts versus BTS, e.g. issuing bitUSD via short would make you some BTS profit if bitUSD value in BTS declines (= BTS value in USD increases), and buying bitUSD long would make you some BTS profit if bitUSD value in BTS increases (= BTS value in USD decreases)
A bit confused here. Why involve BitUSD if I want to short BTSX? Can't one short BitUSD and BTSX independent of one another? you want to short BTSX versus what? buying an asset (long) involves paying the price in some other asset, e.g. if you are long 1 Oz Gold, you have to pay 1170$. Now, shorting Gold means selling 1 Oz Gold that you don't own (but perhaps borrowed with the promise to return next month) for 1170$. You need some currency to short/sell Gold for :D So in BitShares, if you want to short bitUSD then against BTS. if you want to short BTS - then against bitUSD - this is actually performed by buying bitUSD with your existing BTS. If, however, you want to short bitUSD versus bitCNY, this might be possible directly one day. But for now, you would have to short bitUSD versus BTS, and then buy bitCNY with BTS proceeds you received

Quote
I was further confused by not understanding what a price feed is, how the delegates set it, on what basis they do so and whether it's individually set by each delegate or some sort of cooperation or consensus is at play.
The whole topic of price feeds is now clear in my mind. Thanks!

1) you buy bitUSD for whatever token an external exchange is trading it, such as BTC.
Thought so, got it.
2) yes, for BTS
Was hoping so. Will this change after new BTS client is released? i.e. could other tokens be used? you mean like buying bitGLD for bitUSD within Bitshares? not sure really what the plan is...
3) no collateral needed - you simply pay current market BTS price for it (speculative, if you want), then you own bitUSD and your asset can lose or increase the amount of BTS it is worth in the future
Kewl.
4) going long bitUSD is the same a buying bitUSD. For going short - yes you need to post (2xmarket value) collateral.
Might not understand details of how this is done, but I think good enough answer for now. Followup Q: Is BitUSD always involved for ALL "long" contracts done in the BitShares client? Will that change with new client?

not sure I understand your question. in BitShares client you can have some amount of BTS (long BTS), and you can buy whatever bitAssets are available on the market (long bitAssets), or you can create more/new bitAssets (short bitAssets), whereby BitShares freezes your required BTS collateral. The buyer of bitUSD can do with it whatever they want - nothing, paying for something, selling for BTC on bter, selling for BTS on Bitshares etc.). The seller has to cover their short position within 30 days (meaning he has to buy the amount of bitUSD he shorted from someone else -maybe a new issuer - on BitShares for BTS within 30 days).
« Last Edit: November 03, 2014, 08:51:56 PM by kisa »

Offline bitmarket

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Re: BitAssets and Market Pegs - What are Price Feeds?
« Reply #12 on: November 14, 2014, 12:21:57 AM »
Price Feed - median of feed prices provided by delegates and is updated as often as the community demands delegates update, usually after large price moves and at least once per day.


So if 101 delegates update price once a day, that is on average one data point every 15 minutes or so.  But you say it is the median.  Meaning you have to have a number of them.  So how often is the median taken?  What is that formula?

I am trying to assertain in what time period, would the price of bts have to crash by 66% in order for my bitUSD to be uncovered.  Thanks.
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Offline bytemaster

Re: BitAssets and Market Pegs - What are Price Feeds?
« Reply #13 on: November 14, 2014, 12:50:29 AM »
Price Feed - median of feed prices provided by delegates and is updated as often as the community demands delegates update, usually after large price moves and at least once per day.


So if 101 delegates update price once a day, that is on average one data point every 15 minutes or so.  But you say it is the median.  Meaning you have to have a number of them.  So how often is the median taken?  What is that formula?

I am trying to assertain in what time period, would the price of bts have to crash by 66% in order for my bitUSD to be uncovered.  Thanks.

It would take 51 delegates to update their feed.  Assuming they were perfectly distributed it would be 15 * 51 minutes or about 12 hours... but that isn't how it actually happens.  The delegates all update their feeds any time the price moves by more than a few percent which means that in the event of a major move the price would update within minutes.
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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 bitmarket

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Re: BitAssets and Market Pegs - What are Price Feeds?
« Reply #14 on: November 14, 2014, 01:07:18 AM »
Your a rockstar. Thankyou.
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