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Offline FreeTrade

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Scope for bitassets with high return
« on: April 06, 2015, 07:19:00 AM »

I'm wondering if Bitshares has scope to support assets where the holder might expect a high return for holding.

For example the Russian rouble currently has a 14% interest rate - is there any mechanism that would support a 14% interest return on a holding of BitRub?
“People should be more sophisticated? How are you gonna get that done?” - Jerry Seinfeld reply to Bill Maher

Offline FreeTrade

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Re: Scope for bitassets with high return
« Reply #1 on: April 07, 2015, 04:34:05 AM »
I think I'm asking about bonds.

Say a BITRUB12-07-04-2015 bond . . . . the 12% denotes the interest rate, the 07-04-2015, the date of its issue.

If it is destroyed for bitshares on 07-05-2015, bitshares equivalent to 1.01 RUB must be produced (1 months interest)
If it is destroyed for bitshares on 07-04-2016, bitshares equivalent to 1.12 RUB must be produced (12 months interest)

Such an instrument possible in Bitshares?
“People should be more sophisticated? How are you gonna get that done?” - Jerry Seinfeld reply to Bill Maher

Offline starspirit

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Re: Scope for bitassets with high return
« Reply #2 on: April 07, 2015, 05:23:33 AM »
This is an interesting question. At least to the extent that such external investments are considered to have extremely low credit risk, in theory the bitCurrency yield should be linked at least partially to this external rate. If shorts failed to build it into their offers, there would be an arbitrage opportunity, because arbitragers could short the bitCurrency and go long the fiat Currency (from BTS), investing this into a bank deposit or short term bill, thus having a neutral position in which they earn the interest rate differential. Also there would be less demand as users would compare bitCurrency yield unfavourably against external alternatives. So in theory, arbitrage should ensure this is built into the bitAsset yield. In practice however, there may be significant cost of the arbitrage that hinders this process (e.g. not everyone can invest roubles into their local bank or bonds).

For longer holding periods, where the interest rate differential is likely to be higher and possibly outweigh the costs of arbitrage, the free market for the bitBond yield should reflect these external rates better. In principle, apart from cost, I think a free bond market should be able to handle this.


Offline starspirit

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Re: Scope for bitassets with high return
« Reply #3 on: April 07, 2015, 05:27:36 AM »
Yes, what is the current "return" on BitAssets (list by %?).

Who has received a return, and what was it?
See here for current yields...http://bitsharesblocks.com/assets/market

Offline FreeTrade

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Re: Scope for bitassets with high return
« Reply #4 on: April 09, 2015, 09:32:51 AM »
Yes, what is the current "return" on BitAssets (list by %?).

Who has received a return, and what was it?
See here for current yields...http://bitsharesblocks.com/assets/market

My understanding is that these yields are dividends based on transaction fees, rather than interest rates based on the strength or weakness of the tracked asset.

It's difficult to make a case to hold BitRub and forgoe a 14% interest rate rather than hold BitUSD and forgoe a 0.5% interest rate. One clearly dominates the other -  some levelling is required, and a yield based on the asset might be a good way to address that.

If I could short BitRub with BitShares, hold the Rubles earning 14%, and offer BitRub holders a 10% yield, it could be an interesting prospect for those who want to go long on the Ruble, but don't have easy access to a Ruble account. A cryptoasset offering a guaranteed 10% return might be an interesting marketing angle too.
“People should be more sophisticated? How are you gonna get that done?” - Jerry Seinfeld reply to Bill Maher

Offline luckybit

Re: Scope for bitassets with high return
« Reply #5 on: April 09, 2015, 12:37:03 PM »
I think I'm asking about bonds.

Say a BITRUB12-07-04-2015 bond . . . . the 12% denotes the interest rate, the 07-04-2015, the date of its issue.

If it is destroyed for bitshares on 07-05-2015, bitshares equivalent to 1.01 RUB must be produced (1 months interest)
If it is destroyed for bitshares on 07-04-2016, bitshares equivalent to 1.12 RUB must be produced (12 months interest)

Such an instrument possible in Bitshares?

It is definitely time for more exotic assets. It was originally promised that we would have bonds and interest.
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Offline speedy

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Re: Scope for bitassets with high return
« Reply #6 on: April 09, 2015, 02:38:49 PM »
For example the Russian rouble currently has a 14% interest rate - is there any mechanism that would support a 14% interest return on a holding of BitRub?

They can only offer that high interest rate because they can print more Rubles to pay the interest, i.e. like Nubits. BitAssets cant do that, it can only offer interest through services provided, i.e. a free exchange of value.
« Last Edit: April 09, 2015, 02:51:19 PM by speedy »

Offline FreeTrade

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Re: Scope for bitassets with high return
« Reply #7 on: April 09, 2015, 05:15:04 PM »
They can only offer that high interest rate because they can print more Rubles to pay the interest, i.e. like Nubits. BitAssets cant do that, it can only offer interest through services provided, i.e. a free exchange of value.

I guess the short would be providing the more Rubles.
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Offline starspirit

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Re: Scope for bitassets with high return
« Reply #8 on: April 09, 2015, 10:41:01 PM »

If I could short BitRub with BitShares, hold the Rubles earning 14%, and offer BitRub holders a 10% yield, it could be an interesting prospect for those who want to go long on the Ruble, but don't have easy access to a Ruble account. A cryptoasset offering a guaranteed 10% return might be an interesting marketing angle too.
Exactly. You (the arbitrager) would win, and everyone else would win by getting a rate that better reflects external opportunities. Its this type of free market opportunistic thinking that is all that is needed, rather than any forcing of the yield.

With regard to bond markets, that extends the same process into longer maturities. But a bond market should not be required to capture the short term external rate on roubles.

 

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