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Offline cryptosile

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are bitAssets 2x or 3x backed by BTS?
« on: December 18, 2014, 03:38:15 PM »

I've seen a lot of stuff written and mentioned on Lets Talk Bitcoin, that bitAssets are 2x backed by BTS.  However, when walking through the process myself it appears to me to be 3x collateralized.

I put up 2x BTS for the initial 1x bitUSD.  That bitUSD is immediately sold and the proceeds give to me.  However, the original 2x collateral and the proceeds from the sale are marked as "add collateral" and neither hit my available balance.  It seems like the whole 3x balance is available for the system to use in a forced cover.  Seems like 3x to me.  Also, confusing is the language that says if I have to use 150% of my collateral to cover it will force me to cover.  But this value seems to be based on a 2x cover.  Example, if the short price was 50, you would be forced to cover at 75.

Also, from a practical point of view if you want to avoid a forced cover you actually need additional funds to manually buy the asset before you can actually cover.  So, if you plan to short and cover manually you need to have ~3x the funds yourself.  Maybe in the future you could put out a special buy order where it allows you to use your collateral to buy the asset and the asset is immediately used to cover that particular short so you would not need that additional capital to use shorts.

which actually brings up another question around short expiration.  I understand the forced cover, but if the short just expires how is that process handled?  Same as a forced cover I assume except maybe you don't have to pay the 5% penalty?
« Last Edit: December 18, 2014, 03:39:57 PM by cryptosile »

Offline toast

Re: are bitAssets 2x or 3x backed by BTS?
« Reply #1 on: December 18, 2014, 03:39:07 PM »
You have it all right. It was changed from 2x to 3x at one point.
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Offline cryptosile

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Re: are bitAssets 2x or 3x backed by BTS?
« Reply #2 on: December 18, 2014, 03:43:35 PM »
Damn, that was a fast reply.

So, is it correct then we now require a forced cover when we need 50% of the available collateral?

Am i correct around how the expiration is handled?  No 5% fee automatic cover for short expiration?

Offline Markus

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Re: are bitAssets 2x or 3x backed by BTS?
« Reply #3 on: December 19, 2014, 07:24:55 AM »
The threshold for forced cover is 150% (or 66.67% inverse).

As you mentioned you start with 300%. Margin call is executed when collateral value drops to 150% of shorted asset, i.e. 50% of the original value.

You're right about the 30 day expiration: No 5% penalty.

Offline cryptosile

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Re: are bitAssets 2x or 3x backed by BTS?
« Reply #4 on: December 23, 2014, 09:57:09 PM »
So, I took all these terms around the % of this and that and applied them to both the old and new ways of 2x and then 3x collateral.  Some of the confusion is that 150% number pops up in two different language ways to describe the call price.  So, i was getting those two confused thinking the 150% couldn't be correct for both 2x and 3x collateral. So, typed it all out as follows.


Example:
Price/Feed = 50 BTS = 1bitUSD
Short 1 bitUSD

Old Way  2x Collateral      
Collateral   100 BTS   
Collateral %   200%   
Actual Call Price   75 BTS   
Actual Min Collateral    % 133   (or 75% , 1.33*value = collateral, or .75* collateral = value , same thing)
150% of orignal price   75 BTS   
%75 of Collarteral   75 BTS   
Collateral drops to 150% of short requirement a.k.a requires 66% of collateral to cover   67%   (Wrong)
      
New Way 3x Collateral      
Collateral   150 BTS   
Collateral %   300%   
Actual Call Price   100 BTS   
Actual Min Collateral   150%   (or 66% , 1.5*value = collateral, or .66 * collateral = value , same thing)
150% of orignal price   75 BTS   (Wrong)
%75 of Collarteral   75 BTS   (Wrong)

Collateral drops to 150% of short requirement a.k.a requires 66% of collateral to cover   100 BTS   

As a summary, the collateral amount went from 2x -> 3x and the forced cover happens sooner going from 75% -> 66% of total collateral is now the threshold for a forced cover.

Also, the most recent bitshares client in the help section has an incorrect example about the margin call price.  It's an example that is using the old 2x collateral method.


This example needs to be updated.
« Last Edit: December 24, 2014, 06:29:47 PM by cryptosile »

 

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