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Offline Rune

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Couple of hype posts
« on: December 19, 2014, 05:49:46 PM »

I felt inspired by the change the community is undergoing as we prepare ourselves for 1.0 launch, so I wanted to hype a couple of things I'm excited about.

Bitshares beats ripple at ripples own game.

Ripple is such an amazing system because it's the first project in the post-bitcoin world to take blockchain tech and use it to create a focused and strong product, just like a business in any other industry. As we can see on the XRP price, this approach has paid off, even with horrible distribution and a semi-centralized tradeoff in their consensus model. But if you just look at the way ripple actually functions you'll see that it's a genius system regardless. Because transactions speeds are fast and every IOU (ripple user issued asset) is traded for XRP on ripples own decentralized exchange, it's possible to seamlessly get high liquidity for any trading pair by going IOU -> XRP -> IOU in one transaction. XRP thus functions as a kind of liquidity token, and is seeing a high amount of trading now as banks and users begin to actually use the system. Of course the more liquidity XRP trading has, the more attractive it is to use the ripple system as a whole, and thus liquidity attracts even more liquidity. A side effect of increasing liquidity is also a higher XRP price. However, as you will hear again and again from ripple supporters, the price of XRP doesn't actually matter to the systems usefulness, and it's not meant as a currency or store of value.

The reason why bitshares will eventually be more attractive to gateways and users for trading or remittance is because of what actually makes liquidity valuable: low spreads. The more a given IOU/XRP trading pair is being traded, the lower the spread will naturally become. This is also why liquidity attracts more liquidity, people will always prefer to exchange their money at the place with the lowest spreads. But spreads are not determined only by liquidity, they're also determined by volatility. And volatility is why bitshares will beat ripple, and almost certainly become the decentralized exchange of choice in the long run.

While ripples liquidity token XRP is free floating and can experience bubbles just like the one we're observing now, bitshares' liquidity token will most likely be bitUSD. So where on ripple you have to go EUR -> XRP -> JPY to exchange and send someone JPY, with bitshares you can go EUR -> bitUSD -> JPY. As bitUSD liquidity increases, its USD peg becomes stronger to the point where it is essentially 1:1, making the exchange look more like EUR -> USD -> JPY, two trading pairs that have orders of magnitude lower volatility than their XRP equivalents. Incidentally, this is also how all forex trading and transfers are done in the current financial system, since the US dollar in its capacity as world reserve currency also functions as the banking systems "liquidity token".

What this actually means is that even though ripple has a huge headstart against bitshares when it comes to liquidity, in the long run their system needs dramatically more liquidity to keep their spreads lower than bitshares, to account for the massive difference in the volatility of XRP compared to bitUSD. However I still think we're still a quite a while off before we can fully compete with ripple on convenience, because right now I don't think it's possible to do several market orders in a single bitshares transaction (and thus jump 2 pairs in one block, making our transaction speed competitive). There shouldn't be anything keeping us from implementing trading jumps in some form in the long run, and then gobble up ripples entire market. Nom.

Bitmail is a pretty big deal

So I honestly still don't fully understand how bitmail even works, but I won't let that stop me from claiming it's a big deal and probably the most overlooked thing in bitshares right now. The reason is pretty simple, secure communication is in high demand. There are many systems currently in existence but they all have one of two problems: either they are a traditional secure email service like lavabit that can interface with the existing email system but can never be provably secure. Or they're a new system like bitmessage that is fully secure but is isolated from the rest of the internet.

Bitmail is in the same category as bitmessage, but with the advantage that it has a pretty clear business model: it will be developed to perfection by well paid delegates since it is integral infrastructure for the bitshares system itself.

But Bitmail has the capability to also become fully integrated with the existing email infrastructure because there is an economic incentive for email "gateways" to be created (if nothing else they will be run by delegates). An email gateway would basically function as a remailer that receives a bitmail with an email address in it, and then sends the message on to that email. Or it receives an email with a bitshares key in it and sends the email to that key as a bitmail. To make it even more seamless, but at the cost of turning the system pseudonomous, bitmail senders could reveal their bitshares key to the mail gateway service when sending their first email, and the service would be able to instantly create a [email protected] email address for that specific bitshares key, meaning that email recipients of a bitmail would be able to simply click reply to directly respond to the emails they received. From their perspective it would be just like receiving any other email. This means that once the system is properly polished adopting bitmail will be no different than adopting gmail. The transition can be seamless and you can keep all your contacts when you begin to use the new system, with the added benefit that you can now also do secure communication inside the bitshares network.

(Now... Don't forget that since I don't actually know how bitmail works there could be some technical detail that renders all my babbling wrong)
« Last Edit: December 19, 2014, 06:16:23 PM by Rune »

Offline Ander

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Re: Couple of hype posts
« Reply #1 on: December 19, 2014, 08:28:36 PM »
Regarding Bitshares Mail:

Look at this article from cointelegraph today:
http://cointelegraph.com/news/113147/student-uses-the-blockchain-to-develop-censorship-resistant-messaging-app


They report on how a student's school project could help people send messages through the blockchain.

Guess what else will do that?  Bitshares Mail.  But we get no press, ever. 
This is one of the problems we need to correct.


Practically every time I read one of these articles about how some coin has some feature, I think: 'Bitshares already can do that.  Why doesn't any reporter ever write about the fact that we can do that?'
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Offline lil_jay890

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Re: Couple of hype posts
« Reply #2 on: December 19, 2014, 08:41:56 PM »
Would you take investment advice from the wall street journal?  I'm guessing no... If reporters knew anything about what they were reporting about, they wouldn't be reporters...

Offline arhag

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Re: Couple of hype posts
« Reply #3 on: December 19, 2014, 09:04:27 PM »
However I still think we're still a quite a while off before we can fully compete with ripple on convenience, because right now I don't think it's possible to do several market orders in a single bitshares transaction (and thus jump 2 pairs in one block, making our transaction speed competitive).

According to this post, that is not true.

Offline Ander

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Re: Couple of hype posts
« Reply #4 on: December 19, 2014, 09:09:03 PM »
Would you take investment advice from the wall street journal?  I'm guessing no... If reporters knew anything about what they were reporting about, they wouldn't be reporters...

Its about getting awareness of bitshares out to the greater crypto community. 
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Offline lil_jay890

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Re: Couple of hype posts
« Reply #5 on: December 19, 2014, 09:16:06 PM »
Would you take investment advice from the wall street journal?  I'm guessing no... If reporters knew anything about what they were reporting about, they wouldn't be reporters...

Its about getting awareness of bitshares out to the greater crypto community.

Reporters just regurgitate whatever is sent to them and whatever will take them the least amount of time to put out there.  If you wan't coindesk to write a story about bitshares then you basically have to write it for them and let them tweak it and put their name on it.  They don't do much digging and that is why bitshares hasn't been featured...

Offline Ander

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Re: Couple of hype posts
« Reply #6 on: December 19, 2014, 09:34:33 PM »
Regarding messaging and voting, maybe someone from the Bitshares team should contact the author of this:

https://jesper.borgstrup.dk/master-thesis-report.pdf

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Offline matt608

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Re: Couple of hype posts
« Reply #7 on: December 19, 2014, 10:01:33 PM »
Interesting, you've educated me.  I wonder what Ripplers would make of your piece.

Offline Rune

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Re: Couple of hype posts
« Reply #8 on: December 20, 2014, 02:52:13 PM »
However I still think we're still a quite a while off before we can fully compete with ripple on convenience, because right now I don't think it's possible to do several market orders in a single bitshares transaction (and thus jump 2 pairs in one block, making our transaction speed competitive).

According to this post, that is not true.

Yes you can make several orders in a single transaction, but I don't think you can make an order with an asset that you don't own yet. e.g. if you only have a USD IOU, you can't buy bitUSD and then instantly buy a JPY IOU with that bitUSD in the same transaction (resulting in no bitUSD ever touching your wallet, you just used them as a liquidity token). There's also the issue of IOU's having their transaction fees in BTS. It needs to be possible to pay the transaction fee by automatically selling IOU for BTS in in the IOU transaction itself. I'm sure all these things will come within the next 6 months though.

Offline arhag

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Re: Couple of hype posts
« Reply #9 on: December 20, 2014, 03:41:13 PM »
However I still think we're still a quite a while off before we can fully compete with ripple on convenience, because right now I don't think it's possible to do several market orders in a single bitshares transaction (and thus jump 2 pairs in one block, making our transaction speed competitive).

According to this post, that is not true.

Yes you can make several orders in a single transaction, but I don't think you can make an order with an asset that you don't own yet. e.g. if you only have a USD IOU, you can't buy bitUSD and then instantly buy a JPY IOU with that bitUSD in the same transaction (resulting in no bitUSD ever touching your wallet, you just used them as a liquidity token).

Oh, I see. You are talking about Ripple's path finding algorithm.

You don't want to just atomically place asks and bids in different markets, you want to ensure the order is atomically matched so that you are never left holding the intermediate asset (in this case BitUSD). And it would be even better if you could simply place an order that provides a source amount (balance and asset type) and the destination asset type (and possibility a limit price on source to destination conversion), and let the blockchain find the most efficient path to get there.

Of course that creates some of the order types of typical exchanges that BitShares currently doesn't have. Without the price limit restriction, the previous system could be used to do market orders. With the price limit, the previous system could be used to do limit orders. In either case, this allows for front running, which is why BitShares has the "you only get the price you ask for" order types. It also reduces market fee revenue for the DAC because overlaps would disappear, but that is less of an issue to me.

I wonder whether or not the "you only get the price you ask for" model is the best way to fight against front running. Why not just have exchange orders (other than cancelling existing orders or covering shorts) be a two stage transaction? The first stage requires submitting a commitment of your order to the blockchain which expires in 50 seconds but requires you to wait 30 seconds before the second stage is valid. The second stage requires submitting the actual order within the appropriate time interval. By the time someone sees the actual order, submits a new commitment, and gets the second stage of their front running order accepted into the blockchain, the original order has either already been accepted (and potentially matched) or it has not and has in fact become invalid. If it did become invalid, the original order submitter then has the ability to reevaluate the order book and decide whether to resubmit the order or modify it. In that case, the person attempting to front run will not necessarily get guaranteed profits.


There's also the issue of IOU's having their transaction fees in BTS. It needs to be possible to pay the transaction fee by automatically selling IOU for BTS in in the IOU transaction itself. I'm sure all these things will come within the next 6 months though.

Yes, that is annoying. It would be nice to at least be able to pay the IOU transfer fees with BitUSD. This would require the blockchain to be able to convert between the various assets it collects by placing its own orders on the exchanges. But that would provide so many advantages. People could pay transaction fees in any asset they want (the blockchain would automatically deduct the necessary amount of the asset to fulfill a market order to convert into the necessary amount of the desired fee asset type, whether that is BTS or better yet BitUSD). The blockchain could also pay delegates and workers in BitUSD (or other BitCurrencies) and it can could convert diluted BTS into BitUSD through the exchanges as necessary to meet the delegate/worker salary liabilities (within the dilution cap limits of course).

I do hope that all of these enhancements will eventually come to BitShares, but I suspect it won't be in the next 6 months.
« Last Edit: December 20, 2014, 03:45:03 PM by arhag »

Offline bytemaster

Re: Couple of hype posts
« Reply #10 on: December 20, 2014, 03:50:17 PM »
You can pay trx fees in bitusd even for IOU assets
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Offline arhag

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Re: Couple of hype posts
« Reply #11 on: December 20, 2014, 03:53:09 PM »
You can pay trx fees in bitusd even for IOU assets

Oh, great. That is good.

Unfortunately, that revenue gets distributed to BitUSD holders rather than BTS holders, but I realize that is a much more difficult change.

Offline Rune

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Re: Couple of hype posts
« Reply #12 on: December 20, 2014, 11:43:22 PM »
@Arhag do you know how ripple deals with frontrunning?

Interesting post... I didn't realize it was this complicated. So yeah, I guess it's probably gonna be more than 6 months then. :P

Regarding the bitUSD fee, I think it's actually a bonus it will go to support bitUSD yield. It's like a temporary subsidy of the yield to make our flagship product more attractive. In the long run all fees have to be in BTS anyway, even those for bitUSD trade and transactions, in order to keep the system long term sustainable. It will probably come by the time we have a ripple-style pathfinding algorithm ready.

 

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