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Offline toast

When can we say the peg is working? One perspective
« on: November 19, 2014, 04:28:11 PM »

With the current rules:

The peg works if it is impossible for *you* to predict whether the number of dollars you are able to get for your BTS will be more or less than the number of bitUSD the price feed will say your BTS is worth before you intend to get rid of it.

This should be sufficient to cause there to naturally grow “perfect” walls on any liquid asset/bitasset exchange, even if all these bad things are happening:

* the spread on the internal BTS/bit* markets is almost always wide and "off-center"
* Occasionally all feeds give a price that is off by a factor of a few %, but it is reliably detected and corrected as soon as it is public information  (BTS holders might get burned by this though!)
* one entity has information that helps it predict feed values for a minority of delegates
* Exchanges independently manipulate external BTS markets

Anyone want to stop me from pursuing this thought?
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Offline bytemaster

Re: When can we say the peg is working? One perspective
« Reply #1 on: November 19, 2014, 05:39:19 PM »
Quote
The peg works if it is impossible for *you* to predict whether the number of dollars you are able to get for your BTS will be more or less than the number of bitUSD the price feed will say your BTS is worth before you intend to get rid of it.

I think that is awkward expression, could you clarify what you mean by it.
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Offline toast

Re: When can we say the peg is working? One perspective
« Reply #2 on: November 19, 2014, 05:48:50 PM »
"Nobody" (nobody with lots of BTS/bitUSD) can predict the price feed - real price delta after some small time in the future. This is sufficient for all external asset/bitAsset markets to have almost 0 spread. You do not need low spread on the internal BTS/bitasset exchanges.
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Offline sschechter

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Re: When can we say the peg is working? One perspective
« Reply #3 on: November 19, 2014, 06:11:40 PM »
I think he meant that the USD/bitUSD ratio oscillates around a ratio of 1:1.  However, this doesn't factor in the volatility.  If today you get 1.10:1 and tomorrow its .90:1, that's a huge spread. It also doesn't imply that the average ratio is 1:1 - you need to calculate the price over time so see where its average is.  Even though most of the us here know the difference between the peg vs the spread, its a tricky thing to explain to outsiders.  Going with what toast has started, I think you can measure the effectiveness of the peg as following:

1. USD/bitUSD ratio that oscillates around a 1:1 ratio
2. An average price of $1.00 over any given slice of time (within reasonable min & max bounds...that the traders holding period fits inside)

If these conditions are met, the variance of the 1:1 ratio can be attributed to the spread - the size of which is determined by the liquidity of the market. Then what toast said about market making is true.  I think he missed my bolded point.



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Offline monsterer

Re: When can we say the peg is working? One perspective
« Reply #4 on: November 19, 2014, 06:30:34 PM »
1. USD/bitUSD ratio that oscillates around a 1:1 ratio
2. An average price of $1.00 over any given slice of time (within reasonable min & max bounds...that the traders holding period fits inside)
3. USD/bitUSD ratio tends towards 1:1 in proportion to liquidity increases
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Offline toast

Re: When can we say the peg is working? One perspective
« Reply #5 on: November 19, 2014, 06:42:45 PM »
I think he meant that the USD/bitUSD ratio oscillates around a ratio of 1:1.  However, this doesn't factor in the volatility.  If today you get 1.10:1 and tomorrow its .90:1, that's a huge spread. It also doesn't imply that the average ratio is 1:1 - you need to calculate the price over time so see where its average is.  Even though most of the us here know the difference between the peg vs the spread, its a tricky thing to explain to outsiders.  Going with what toast has started, I think you can measure the effectiveness of the peg as following:

1. USD/bitUSD ratio that oscillates around a 1:1 ratio
2. An average price of $1.00 over any given slice of time (within reasonable min & max bounds...that the traders holding period fits inside)

If these conditions are met, the variance of the 1:1 ratio can be attributed to the spread - the size of which is determined by the liquidity of the market. Then what toast said about market making is true.  I think he missed my bolded point.

I was trying to say the requirement is even weaker than this. The time average of the ratio does not have to be 1.0 (a more complex volume-weighted price does though), and USD/bitUSD oscillating around 1:1 is a side effect of the peg which does not require bitUSD/BTS to oscillate around $1 of BTS.
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zerosum

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Re: When can we say the peg is working? One perspective
« Reply #6 on: November 19, 2014, 07:08:34 PM »
The peg is working when someone going on a 15 year vacation to a place with no internet connection (do not ask me where is this place) does not see the need to move his bitUSD to his USD savings account....This is obviously different perspective.

Offline sschechter

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Re: When can we say the peg is working? One perspective
« Reply #7 on: November 19, 2014, 07:14:08 PM »
The peg is working when someone going on a 15 year vacation to a place with no internet connection (do not ask me where is this place) does not see the need to move his bitUSD to his USD savings account....This is obviously different perspective.

Whether or not the peg is working is a matter of personal perspective.  If you aren't planning a 15 year vacation and instead want to hold bitUSD for a week to hedge against crypto-volitility, you're criteria is different than mine.  Once number 2 in my original post is true for everybody, then we can say that the peg works for everybody.
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Offline bitmeat

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Re: When can we say the peg is working? One perspective
« Reply #8 on: November 19, 2014, 07:23:33 PM »
That's easy - when there's liquidity, the peg is working.

Offline luckybit

Re: When can we say the peg is working? One perspective
« Reply #9 on: November 19, 2014, 08:26:11 PM »
That's easy - when there's liquidity, the peg is working.

Why don't we add liquidity and find out?
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Offline Gentso1

Re: When can we say the peg is working? One perspective
« Reply #10 on: November 19, 2014, 09:00:37 PM »
That's easy - when there's liquidity, the peg is working.

Why don't we add liquidity and find out?

Great idea.

hmmm wait whos going to let us us 1-2 mill (hopefully more) to test this theory?

Seriously though I thought about pairing with someone to run a delegate at 100% pay(maybe more then one) and sure the pay as a market maker just to add liquidity.
Delegates are supposed to add value so why not elect 2-3 delegates at 100% pay and boom goes the dynamite  8) you add self funding liquidity that grows with the system as it grows itself.
« Last Edit: November 19, 2014, 09:04:07 PM by Gentso1 »

Offline Method-X

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Re: When can we say the peg is working? One perspective
« Reply #11 on: November 19, 2014, 10:10:22 PM »
That's easy - when there's liquidity, the peg is working.

Why don't we add liquidity and find out?

Great idea.

hmmm wait whos going to let us us 1-2 mill (hopefully more) to test this theory?

Seriously though I thought about pairing with someone to run a delegate at 100% pay(maybe more then one) and sure the pay as a market maker just to add liquidity.
Delegates are supposed to add value so why not elect 2-3 delegates at 100% pay and boom goes the dynamite  8) you add self funding liquidity that grows with the system as it grows itself.

 +5% Great idea. Start with one and scale accordingly.

Offline monsterer

Re: When can we say the peg is working? One perspective
« Reply #12 on: November 19, 2014, 10:16:23 PM »
Delegates are supposed to add value so why not elect 2-3 delegates at 100% pay and boom goes the dynamite  8) you add self funding liquidity that grows with the system as it grows itself.

So, you're going to take the money inflated as delegate pay and put it back into the system? I can't see how you'll get anything over 1:1 out of that?
« Last Edit: November 19, 2014, 10:22:57 PM by monsterer »
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Offline toast

Re: When can we say the peg is working? One perspective
« Reply #13 on: November 19, 2014, 10:17:23 PM »
We do not need dilution to make the market! We do not need to pay someone to help make 2-5% times their internal BTS hedge every few weeks. Any normal delegate can stick their float in a fund like this and then burn the profit.
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Offline CLains

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Re: When can we say the peg is working? One perspective
« Reply #14 on: November 20, 2014, 12:57:14 AM »
I like it. Have been looking for an easy way to characterize why bitUSD is already working.
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