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Offline Empirical1.2

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The DAC as a limited internal market maker
« on: February 18, 2015, 01:53:04 AM »

Wouldn't it be useful if the blockchain was a market maker on the internal markets? (But with a conservative daily limit and maximum total exposure limit to mitigate the risks we were worried about previously.)
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Offline speedy

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Re: The DAC as a limited internal market maker
« Reply #1 on: February 18, 2015, 02:31:09 AM »
This was discussed before, and the conclusion was if you can spot an opportunity in MM then you should take it and make some money yourself.

Dont worry MM bots are coming.

Offline yellowecho

Re: The DAC as a limited internal market maker
« Reply #2 on: February 18, 2015, 02:50:55 AM »
Doesn't Delegate-Alt have a marking making bot on the internal exchange?
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Offline xeroc

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Re: The DAC as a limited internal market maker
« Reply #3 on: February 18, 2015, 08:10:08 AM »
Doesn't Delegate-Alt have a marking making bot on the internal exchange?
yup .. he does .. it's called BTSBOT(S)
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Offline Empirical1.2

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Re: The DAC as a limited internal market maker
« Reply #4 on: February 18, 2015, 11:49:27 AM »
This was discussed before, and the conclusion was if you can spot an opportunity in MM then you should take it and make some money yourself.

Dont worry MM bots are coming.

Ok cool. I realised we'd dismissed it before but I thought it was because of the risk to the DAC and that MM would step in. I have yet to see many market makers and I think we can reduce the risk.

For example this last weekend I sold a resonable amount of BTS for BTC but would have been happy to pay a premium for the convenience of using the internal exchange and to avoid adding to BTS selling pressure that would push down the price of my other BTS.

However the Bit-Silver/Gold/BTC markets were dead and I also have no idea if I would be able to sell any of my position at a convenient time.

If people are confident the Bots are coming, great, because that will make a huge difference to BitAsset growth and our share price because we'll use the internal exchange instead of creating BTS selling pressure.
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Offline yellowecho

Re: The DAC as a limited internal market maker
« Reply #5 on: February 18, 2015, 05:37:55 PM »
Ok cool. I realised we'd dismissed it before but I thought it was because of the risk to the DAC and that MM would step in. I have yet to see many market makers and I think we can reduce the risk.

If people are confident the Bots are coming, great, because that will make a huge difference to BitAsset growth and our share price because we'll use the internal exchange instead of creating BTS selling pressure.

I agree and bots are already here (from Alt and Rune) and more are in the works.
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Offline Methodise

Re: The DAC as a limited internal market maker
« Reply #6 on: February 18, 2015, 07:16:07 PM »
I will be bringing liquidity as soon as possible.
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Offline Empirical1.2

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Re: The DAC as a limited internal market maker
« Reply #7 on: April 15, 2015, 07:18:53 PM »
2 months later and I don't really see the bots/any meaningful liquidity.  I would use BitAssets more if there was strong buy & sell walls either side.

Would BTS have lost money to date, acting as a market maker at 0.95 & 1.05 with a maximum daily limit?

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Offline monsterer

Re: The DAC as a limited internal market maker
« Reply #8 on: April 15, 2015, 07:30:08 PM »
Market making is extraordinarily hard to get right. Informed traders will pick off your badly placed orders and cause you to gain inventory on one side or the other, which is highly undesirable as it introduces price risk.
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Offline Empirical1.2

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Re: The DAC as a limited internal market maker
« Reply #9 on: April 15, 2015, 07:36:07 PM »
Market making is extraordinarily hard to get right. Informed traders will pick off your badly placed orders and cause you to gain inventory on one side or the other, which is highly undesirable as it introduces price risk.

Yeah. I mean I don't understand the ins and outs but basically you'll be buying when everyone wants to sell for a reason and vice versa, making you a long term loser unless your spread is very wide.

But there must be a spread that is wide enough to mitigate that risk (combined with a daily limit) right?

(Edit: The DAC could also stop if a total inventory limit was reached but in the process of getting to that may have provided enough liquidity to get the markets going.)
« Last Edit: April 15, 2015, 07:46:13 PM by Empirical1.2 »
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Offline monsterer

Re: The DAC as a limited internal market maker
« Reply #10 on: April 16, 2015, 10:00:22 AM »
(Edit: The DAC could also stop if a total inventory limit was reached but in the process of getting to that may have provided enough liquidity to get the markets going.)

There is a better way of saying what you mean, which is: the DAC market maker must perform optimally - that is, make the right pricing and inventory choices under all market conditions and participants, informed or not.
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Offline Empirical1.2

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Re: The DAC as a limited internal market maker
« Reply #11 on: April 16, 2015, 10:14:44 AM »
(Edit: The DAC could also stop if a total inventory limit was reached but in the process of getting to that may have provided enough liquidity to get the markets going.)

There is a better way of saying what you mean, which is: the DAC market maker must perform optimally - that is, make the right pricing and inventory choices under all market conditions and participants, informed or not.

I'm not hot on this stuff, but I think I'm saying the DAC market maker doesn't have to perform optimally at all.

It can just have a very wide spread, one that would have proved profitable to date.  Even if it loses money or has to stop once it reaches a certain inventory limit, it could be a net value gain for the DAC if it provides confidence to BitAsset users that there is liquidity. (Imagine if some of the value the DAC is leaking on the merger was directed to subsidising BitAsset liquidity for 20 months instead.)
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Offline monsterer

Re: The DAC as a limited internal market maker
« Reply #12 on: April 16, 2015, 10:30:57 AM »
It can just have a very wide spread, one that would have proved profitable to date.  Even if it loses money or has to stop once it reaches a certain inventory limit, it could be a net value gain for the DAC if it provides confidence to BitAsset users that there is liquidity. (Imagine if some of the value the DAC is leaking on the merger was directed to subsidising BitAsset liquidity for 20 months instead.)

It doesn't work like unfortunately. If you have a very wide spread, your orders don't get filled and you end up taking on more inventory risk. If the DAC looses too much money, it could also be drained completely by exploiting any weakness (where it doesn't perform optimally).
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Offline Empirical1.2

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Re: The DAC as a limited internal market maker
« Reply #13 on: April 16, 2015, 10:46:12 AM »
It can just have a very wide spread, one that would have proved profitable to date.  Even if it loses money or has to stop once it reaches a certain inventory limit, it could be a net value gain for the DAC if it provides confidence to BitAsset users that there is liquidity. (Imagine if some of the value the DAC is leaking on the merger was directed to subsidising BitAsset liquidity for 20 months instead.)

It doesn't work like unfortunately. If you have a very wide spread, your orders don't get filled and you end up taking on more inventory risk. If the DAC looses too much money, it could also be drained completely by exploiting any weakness (where it doesn't perform optimally).

Thanks for the replies. I was thinking that there would be daily limits, so we could intervene if it was being exploited. That said I don't know much about this stuff other than I think liquidity may have to be artificially provided/incentivised/subsidised at the early stages in some manner.

https://changemoney.org/ for BitReserve their success is all about measuring BitAsset growth and adoption and I think the market is judging BTS by the growth and popularity of BitAssets too. We already have enough users to have much higher BitAsset CAP's and therefore a much higher valuation but we need to make them more attractive so I'm open to any mechanisms that do that even if it's at the expense of BTS holders via dilution. (Though I'm not a fan of using dilution for the merger or for most marketing initiatives at this stage, other than minebitshares.)
« Last Edit: April 16, 2015, 10:51:09 AM by Empirical1.2 »
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Offline monsterer

Re: The DAC as a limited internal market maker
« Reply #14 on: April 16, 2015, 10:50:37 AM »
https://changemoney.org/ for BitReserve their success is all about measuring BitAsset growth and adoption and I think the market is judging BTS by the growth and popularity of BitAssets too. We already have enough users to have much higher BitAsset CAP's and therefore a much higher valuation but we need to make them more attractive so I'm open to any mechanisms that do that even if it's at the expense of BTS holders via dilution.

Having a market maker inside the DAC is not a bad idea, but it does need to perform optimally, or it will be exploited. This needs an expert in the field to look at the problem, really.
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