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Offline Volker

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Negative yield can motivate people to short new assets
« on: March 06, 2015, 07:47:32 AM »

I actually want to use BitShares to buy Tesla stock. This is not a hypothetical. I think TSLA can go up 10x-20x in the coming years. I've wondered "When will I be able to buy meaningful qualities of bitTSLA?" At this pace of bitAsset development, maybe it will take 10+ years. How can I motivate people to short TSLA stock faster than that? The answer is probably to pay them.

My idea is that there should be negative yield. Let bidders offer a yield to encourage people to short-sell assets into existence. So if I want to buy TSLA and there's no one selling TSLA, I put in a bid for 10 shares with -10% interest at the feed price. Some of my BTS is locked up as collateral to pay the interest. I pay an annualized 10% per year but I think TSLA is going to double this year I don't mind.

Without a negative yield, I need to wait for someone who is bearish on TSLA:BTS to come along. By offering 10% annualized interest (which is normal on Bitfinex and other lending platforms during times of low liquidity), I can attract many more people to offer TSLA.

You may be wondering "Why would someone pay 10% to own bitTSLA when they can buy TSLA from an online broker?" I can think of a few examples:

1) A Chinese investor cannot easily buy TSLA so he will pay 10% per year to easily access it through BTS for a short-term trade.
2) A TSLA insider knows of good news that will soon be released, but will get caught insider trading if he or any of his family/friends trades on that information. Trade it on BTS and the SEC won't know.
3) Avoid capital gains taxes.
« Last Edit: March 06, 2015, 07:56:40 AM by Volker »

Offline Markus

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Re: Negative yield can motivate people to short new assets
« Reply #1 on: March 06, 2015, 08:31:00 AM »
As shorting above the feed price is possible there is no need for negative interest rates.

With TSLA currently trading at 200 USD you could just post a buy-order at 220 USD. Somebody might see it and short some into existence for you. The shorter pays an instant 10% "negative interest". :)

The difference between the two scenarios is that in mine you alone pay the fee upfront, in your negative-interest case the fee is payed over time by everybody holding BitTSLA.

Online abit

Re: Negative yield can motivate people to short new assets
« Reply #2 on: March 06, 2015, 11:37:46 AM »
Buy BDR.TSLA asset.
Ah, there is no such asset. @James should create it.
« Last Edit: March 06, 2015, 11:41:59 AM by abit »
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Offline svk

Re: Negative yield can motivate people to short new assets
« Reply #3 on: March 06, 2015, 04:45:05 PM »
Buy BDR.TSLA asset.
Ah, there is no such asset. @James should create it.

Looks like he did, but what's the point?

http://bitsharesblocks.com/asset/info?asset=BDR.TSLA

For those assets to be interesting they need to be market assets, as long as they're just user assets whoever controls them can just "print" as many as they want and sell them.. This applies to BRD.AAPL, .GOOG etc..
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Offline starspirit

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Re: Negative yield can motivate people to short new assets
« Reply #4 on: March 07, 2015, 12:03:21 AM »
Could the decentralised exchange (DEX) potentially have more universal appeal if we allowed:

1) Trading assets against bitUSD (or other bit currencies).
2) Trading assets on margin.

I don't know if these things are technically feasible, but here's my rationale.

I think most people are familiar with trading assets against a base currency like USD. Currently its possible to trade bitAssets in such a way, but only outside the (DEX), at gateways and centralised exchanges. On the DEX, the assets must be traded against BTS. This is more complex for most people and involves switching to and from BTS (for which users may have no view) to switch between assets.

I think it could be attractive for users to hold a DEX account in their preferred base bitCurrency, and use that to fund positions in a portfolio of assets traded against that bitCurrency, rather than against BTS. Shorts may be more readily available, because its not limited to bulls in BTS. The concept of yield, spreads etc could be reconsidered for these assets to be something more like traditional CFD markets.

The bitCurrency account of the user could be used to support a higher exposure in the various asset derivatives. As per common practice, this would depend on the volatility of the assets, which can now be more easily measured against the bitCurrency, rather than being conflated with the volatility of BTS as part of a pair against BTS. These accounts could be frequently margined and adjusted as short positions are today. Despite the higher predictability of volatility against stable bitCurrencies, we would still need to consider what would happen in black-swan events where the pool on one side becomes insufficient to meet the other side.

The primary purpose of the BTS bulls is to support the creation of bitCurrencies, to be used to fund users' trading accounts. And users could effectively trade thousands of different assets in a way that is familiar to them from CFD markets.

[Afterthought: not only would this target a much larger potential market opportunity at this point, transaction fees/spreads would be charged on total exposures, not just margin amounts, and is earned around high trading activity, so this would start to become a much more meaningful income percentage for BTS.]

« Last Edit: March 07, 2015, 12:37:05 AM by starspirit »

Online abit

Re: Negative yield can motivate people to short new assets
« Reply #5 on: March 07, 2015, 12:10:12 AM »
Buy BDR.TSLA asset.
Ah, there is no such asset. @James should create it.

Looks like he did, but what's the point?

http://bitsharesblocks.com/asset/info?asset=BDR.TSLA

For those assets to be interesting they need to be market assets, as long as they're just user assets whoever controls them can just "print" as many as they want and sell them.. This applies to BRD.AAPL, .GOOG etc..
@svk See this https://bitsharestalk.org/index.php?topic=14733.0
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Online abit

Re: Negative yield can motivate people to short new assets
« Reply #6 on: March 07, 2015, 12:43:51 AM »
Could the decentralised exchange (DEX) potentially have more universal appeal if we allowed:

1) Trading assets against bitUSD (or other bit currencies).

There first one is possible and already there, but not so active as BTS pairs though.
In the wallet, click 'Exchange' tab, search for 'BTSBOTS:BitCNY'. The 'BTSBOTS' or 'BitCNY' could be any asset, as long as there are people be willing to trade on that pair.
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Offline starspirit

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Re: Negative yield can motivate people to short new assets
« Reply #7 on: March 07, 2015, 01:38:02 AM »
Could the decentralised exchange (DEX) potentially have more universal appeal if we allowed:

1) Trading assets against bitUSD (or other bit currencies).

There first one is possible and already there, but not so active as BTS pairs though.
In the wallet, click 'Exchange' tab, search for 'BTSBOTS:BitCNY'. The 'BTSBOTS' or 'BitCNY' could be any asset, as long as there are people be willing to trade on that pair.
Are you saying the functionality is already there to trade MPAs directly against bitUSD? I was not aware. Is there a live example of one set up? All I could find were UIAs traded in various bitCurrencies, but no MPAs. For example, can I trade bitBTC in BitUSD? If we get more of them, it would be convenient for traders to browse their tradeable assets according to a base bitCurrency.

I'd be interested if anyone has a firm idea on whether leveraged positions can be created. Happy to be pointed to any previous discussion on this. I expect there are a number of complications with it, but it would be an attractive feature for traders if it could be done IMO.

Offline xeroc

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Re: Negative yield can motivate people to short new assets
« Reply #8 on: March 07, 2015, 12:54:01 PM »
Are you saying the functionality is already there to trade MPAs directly against bitUSD? I was not aware. Is there a live example of one set up? All I could find were UIAs traded in various bitCurrencies, but no MPAs. For example, can I trade bitBTC in BitUSD?
Sure .. you can trade any asset with any asset .. no matter if they are UIA or MPA.

Quote
If we get more of them, it would be convenient for traders to browse their tradeable assets according to a base bitCurrency.
yup .. old story, we lack liquidity ..

Quote
I'd be interested if anyone has a firm idea on whether leveraged positions can be created. Happy to be pointed to any previous discussion on this. I expect there are a number of complications with it, but it would be an attractive feature for traders if it could be done IMO.
AFAIK BM already has some thoughts about lending on the blockchain ... I also think he spoke about it in one of the last three dev hangouts .. not sure though ..
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