Author Topic: Traders and investors are the most important userbase, not merchants.  (Read 6154 times)

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Offline jcrubino

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Let people use NXT, Open Transactions, Counter-Party, or whatever if they want to issue assets. We can already see the disastrous history of user issued assets on Havelock. Almost every asset turns out to be a scam, including ASICMiner. I'm telling you, we don't want any of that crap on BitShares.

The reason for suggesting hyperledger or OT is to provide a ledger and token system that is matched to proveable reserves of third party blockchain assets and tokens just for Bitshares, providing and extension that can pay out the actual underlying asset for a crypto index.  An index based on derivatives is better and cleaner to work with.

« Last Edit: April 14, 2015, 08:25:07 pm by jcrubino »

Offline Volker

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Yes bitUSD is hard to obtain right now because it's a new asset.  I even have trouble getting it.  You can't expect it to take over the world overnight.  It takes work.   Why do you think payment startups like Stripe & Braintree & Dwolla exist if it is 'not much more useful than paypalUSD'?  Why would Square start Square Cash?  Why do you think Facebook, Google, Apple, Microsoft (who is getting MSB licenses in 50 states btw) are all getting into the payments space?   Why do you think Bitpay has raised the 2nd most VC funds after Coinbase who's also in the payments space.  Is this all for giggles?  It's nearly a $100B/yr market.  The big advantage with crypto compared to the other solutions is you bypass the banking system inefficiencies and fees.  (BTW we should really go after BitPay.  Once the bitShares platform is stable and has a strong level of merchant/user adoption they might consider supporting bitUSD.  Also there are other Bitcoin hedging solutions that are popping up they may lean towards.)

I think Paypal, Square, Bitpay, Coinbase, Circle, Stripe, Google wallet, Facebook wallet, etc. are all going to be competing very fiercely in the merchant/shopping arena, and I think that they have a lot more money than we do and a lot larger userbases than we do. These guys have giant warchests and if they're willing to burn money to get users like Google did with Gmail in the beginning, it's going to be really tough. BitShares can be much more competitive in the asset trading and lending arenas where competition (like Lendingclub, eTrade, BTC-E) is far weaker and where BitShares can break new ground and really shock the world with what it can do.

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Store of wealth and why?   What makes cryptoassets a store of anything?  Why is Bitcoin not worth zero?  I have my own answers, but it would be interesting to know your perspective. 

I have the standard Erik Voorhees answer on this one: it's scarce and useful.
So yes, the asset must be useful for something (e.g. merchant payments, trading, remittances), but once the asset has established itself as something that can store value, the store of value use case can potentially dwarf any other use case. This is true for gold even when including jewelry and coinage as industrial uses (which are borderline store of value uses). It was true of silver at various points in history, but it's not scarce enough anymore. But we don't need to worry about giant Peruvian BTS deposits being discovered. BTS is scarce by design. If BTS is useful, then it can become a great store of value.

Offline gamey

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IMO the main problem seems to be that all market making is pegged to BTS which is pretty much a wildcard. So to be more than a mere gambler, one has to understand both markets.  That just seems to be asking too much.

Huh? If you're trading bitUSD:bitBTC, then you don't need to know anything about the BTS markets. You can focus on any pair. If you don't understand BTS, you don't need to trade BTS.

To create bitUSD you need someone taking both long and short positions.  I call these people market makers.  It seems to me that the price of BTS is just as important as the other side of the pair.  So even if I feel like I can predict the price of gold, silver, etc I am not sure one can predict the price of BTS.  Without market makers there are no assets created.

I assume BTS can be removed from the equation but that is not readily available and adds even more complexity.

Also, I was not talking about the average user experience.  I'm talking about the guys who are shorting the assets into existence etc.  The whole system is dependent on these people.  My point has nothing to do with someone having a choice.  It has to do with the system requiring these people so the bitAssets are created while putting these people in a position that may not be economically sustainable.  (Does that make sense?)

I speak for myself and only myself.

Offline merivercap

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bitUSD is not much more useful than paypalUSD. From the  shopper's perspective, bitUSD is much slower and harder to obtain. Some merchants have a lot to gain, but these merchants are not offering big discounts for using bitUSD, so why would the customers bother obtaining bitUSD? Getting a 20% discount by using bitUSD would do a lot for adoption, but we can't force merchants to offer discounts.   

Yes bitUSD is hard to obtain right now because it's a new asset.  I even have trouble getting it.  You can't expect it to take over the world overnight.  It takes work.   Why do you think payment startups like Stripe & Braintree & Dwolla exist if it is 'not much more useful than paypalUSD'?  Why would Square start Square Cash?  Why do you think Facebook, Google, Apple, Microsoft (who is getting MSB licenses in 50 states btw) are all getting into the payments space?   Why do you think Bitpay has raised the 2nd most VC funds after Coinbase who's also in the payments space.  Is this all for giggles?  It's nearly a $100B/yr market.  The big advantage with crypto compared to the other solutions is you bypass the banking system inefficiencies and fees.  (BTW we should really go after BitPay.  Once the bitShares platform is stable and has a strong level of merchant/user adoption they might consider supporting bitUSD.  Also there are other Bitcoin hedging solutions that are popping up they may lean towards.)

If that's the core value proposition, then it looks like we're fucked. Large companies like amazon.com have negotiated much better deals than 3%. More like 1%.
I would hope that the core value proposition for cryptoassets would be as a stores of wealth, like gold. Transactional use is only helpful for establishing a baseline value. Bitcoin's transactional use couldn't support an even 1 billion dollar market cap. The velocity of money is too high.

Did I mention Amazon has Amazon Payments that is 'not much more useful than paypalUSD'?   Also people do shop at other places other than Amazon. 

Store of wealth and why?   What makes cryptoassets a store of anything?  Why is Bitcoin not worth zero?  I have my own answers, but it would be interesting to know your perspective. 

BitShares can do what other platforms can't:
A big advantage is that BitShares allows you to trade anything. I'm American. If I could, I'd trade some Chinese stocks with BitShares that are not available in America. Chinese people would like to trade some American stocks that are not available in China. Those are just two examples.

BitShares will be the best way to let everyone trade everything.

Counterparty risk: It's common for brokerage accounts to be locked, disabled, or seized for some legal reason. BitShares will never lock your account.

Good point about securities access.  That is another advantage.  I wrote about how people should be able to create exchanges on top of the Bitshares blockchain/market engine here: https://bitsharestalk.org/index.php/topic,15248.msg199016.html#msg199016
If people want to build an E*Trade/Think or Swim/Tradestation/Schwab/Interactive Brokers on top of the blockchain with various UI/UX I think that's a good model and one of the businesses I planned to help build anyways. 

Currently, trading on bitshares is not attractive because 20x-50x margin is not available. If I trade bitEUR:bitUSD, how much money can I make? Think about it.

Fair point about leverage in Forex.  I do think the 'legalized gambling' nature of trading and speculating is an attractive selling point.  A majority of speculators will lose money to trading costs, but the assets they trade will get more liquidity which is a positive to the ecosystem.  Most people are focused on opportunity and less on probability so the subjective value for speculating differs from any objective measure.   (I would expect 95%+ of speculators to lose money to trading costs over the long run in traditional brokerages compared to a buy/hold strategy.)  Anyways.
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Offline Volker

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Satoshidice was a centralized company. They didn't sue the Bitcoin blockchain.
Also Satoshidice had other issues surrounding it. There is no evidence of any US government agency attacking a blockchain or any technology.

If on the other hand you start a company where you take people's money for "stocks" on a virtual exchange and then you sell the company well then yeah. But that isn't what Bitshares did.

I agree that the devs aren't breaking the law and that BitShares isn't legally incorporated, but it markets itself as a company and had a crowdsale/IPO-like offering in the beginning. It calls its units "shares." When BitShares gets big, there will likely be investigations. I don't think anyone will get arrested and I don't think anyone is breaking the law. We agree on that. But I'm just a bit more paranoid.

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Also no one really lost even in the Satoshi Dice example. If you look at the math of it the risk is very low and the fine is manageable. I don't think Bitshares developers are in any trouble because we don't own any shares in Invictus Innovations.

True. Voorhees only had to pay a small sum compared to his profits from operating SD and selling it so you can say it worked out well in the end.

Offline luckybit

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Mind you, I don't think the SEC could actually win a lawsuit, but I think that governments can and will harass people associated with BitShares by launching lawsuits and investigations. Devs should probably plan for that harassment. Moving to another jurisdiction and officially avoiding Americans would be one way to protect themselves. Try www.satoshidice.com from an American IP. It's what they do and it's a valid strategy.
Satoshidice was a centralized company. They didn't sue the Bitcoin blockchain.
Also Satoshidice had other issues surrounding it. There is no evidence of any US government agency attacking a blockchain or any technology.

If on the other hand you start a company where you take people's money for "stocks" on a virtual exchange and then you sell the company well then yeah. But that isn't what Bitshares did.
https://www.sec.gov/News/PressRelease/Detail/PressRelease/1370541972520
http://www.bloombergview.com/articles/2014-06-03/illegal-bitcoin-ipo-actually-worked-out-pretty-well-for-investors

Also no one really lost even in the Satoshi Dice example. If you look at the math of it the risk is very low and the fine is manageable. I don't think Bitshares developers are in any trouble because we don't own any shares in Invictus Innovations.
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Offline tsaishen

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There will be similar assets on every blockchain including Bitcoin so if they aren't arresting Counterparty developers why would you think they'd do it to Bitshares?

Mind you, I don't think the SEC could actually win a lawsuit, but I think that governments can and will harass people associated with BitShares by launching lawsuits and investigations. Devs should probably plan for that harassment. Moving to another jurisdiction and officially avoiding Americans would be one way to protect themselves. Try www.satoshidice.com from an American IP. It's what they do and it's a valid strategy.

Volker & Luckbit, PM me when you have a chance please.
Thanks!

You don't want to talk about hardforking bitshares and starting a new project, right? That's not what this thread is about. I want this vision to be realized on BitShares.

Quite to the contrary.  I find your comments here highly insightful, and would like your feedback on something semi-related.

Offline Volker

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There will be similar assets on every blockchain including Bitcoin so if they aren't arresting Counterparty developers why would you think they'd do it to Bitshares?

Mind you, I don't think the SEC could actually win a lawsuit, but I think that governments can and will harass people associated with BitShares by launching lawsuits and investigations. Devs should probably plan for that harassment. Moving to another jurisdiction and officially avoiding Americans would be one way to protect themselves. Try www.satoshidice.com from an American IP. It's what they do and it's a valid strategy.

Volker & Luckbit, PM me when you have a chance please.
Thanks!

You don't want to talk about hardforking bitshares and starting a new project, right? That's not what this thread is about. I want this vision to be realized on BitShares.
« Last Edit: April 13, 2015, 03:58:30 pm by Volker »

Xeldal

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IMO the main problem seems to be that all market making is pegged to BTS which is pretty much a wildcard. So to be more than a mere gambler, one has to understand both markets.  That just seems to be asking too much.

Huh? If you're trading bitUSD:bitBTC, then you don't need to know anything about the BTS markets. You can focus on any pair. If you don't understand BTS, you don't need to trade BTS.


And that is another problem. On the Bitshares internal exchange they didn't even have BitUSD:BitBTC available until myself and someone else asked. If you look now it still probably isn't a functioning market.

If you can't even trade BTC on the internal exchange then Bitshares internal exchange is useless. I don't know anyone who prefers to trade BitUSD:BTS. We need BitBTC:BitUSD at minimum.

I agree.  I had begun making this market the other day. https://bitsharestalk.org/index.php/topic,13500.msg201066.html#msg201066

The issues with bUSD:BTS  market have set me back a little.  No bUSD could be found anywhere without paying a 20% premium.  There should be liquidity here by the end of the day.  The next release hopefully will feature this market more prominently.   Its too difficult to access as it is,  most people are not even aware it exists.

Offline tsaishen

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Volker & Luckbit, PM me when you have a chance please.
Thanks!

Offline luckybit

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IMO the main problem seems to be that all market making is pegged to BTS which is pretty much a wildcard. So to be more than a mere gambler, one has to understand both markets.  That just seems to be asking too much.

Huh? If you're trading bitUSD:bitBTC, then you don't need to know anything about the BTS markets. You can focus on any pair. If you don't understand BTS, you don't need to trade BTS.


And that is another problem. On the Bitshares internal exchange they didn't even have BitUSD:BitBTC available until myself and someone else asked. If you look now it still probably isn't a functioning market.

If you can't even trade BTC on the internal exchange then Bitshares internal exchange is useless. I don't know anyone who prefers to trade BitUSD:BTS. We need BitBTC:BitUSD at minimum.
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Offline luckybit

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bitUSD is not much more useful than paypalUSD. From the  shopper's perspective, bitUSD is much slower and harder to obtain. Some merchants have a lot to gain, but these merchants are not offering big discounts for using bitUSD, so why would the customers bother obtaining bitUSD? Getting a 20% discount by using bitUSD would do a lot for adoption, but we can't force merchants to offer discounts.   
I agree with you. There isn't really much of a demand for BitUSD right now. The demand might be there once Bitcoin is mainstream and people are looking for a place to park it or easier ways to spend it but currency isn't even enough of an app to make Bitcoin take off anymore.

People want to speculate before they think about spending BitUSD. I agree developers should implement margin trading ASAP.
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Offline luckybit

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Yes, but aren't bitUSD and bitCNY already CFDs? The Chinese government will not be happy with people freely trading bitCNY because the Chinese yuan is not supposed to be freely traded. The US does not want Americans trading any CFDs at all. The only reason why BitShares developers are not being prosecuted is because BitShares is small.
There isn't any mechanism from which the US can prosecute the developers of Bitshares because BitAssets aren't contracts. BitAssets are algorithms and are protected by the free speech clause of the US Constitution. If a case were made of it then it would probably reach the Supreme Court. https://en.wikipedia.org/wiki/First_Amendment_to_the_United_States_Constitution

So far the only companies that have been prosecuted have been centralized. As for China that is a completely different story. China might or might not accept free speech or the sovereignty of the blockchain. It seems China is banning Bitcoin so it seems China has limited to no understanding of this technology while the US government is learning the technology at a very rapid pace.

As a government learns more about the technology I think the chance of it being attacked decrease. I think only through misunderstanding would you see attempts at prosecution. I also think it could happen for political reasons but there doesn't seem to be any political mood in the United States to do that so Bitshares seems to be in the clear for now. To stay in the clear Bitshares should at least put on a friendly face toward and try to do the job of regulators better than they do it.

So instead of worrying about problems from regulators just do a good job providing algorithm based consumer protections and then the regulators would have no consumer protection basis from which to launch an attack. You have to basically remove all their moral justifications by your design.

The developers need to decide now what countries they want to live in and what risks they are prepared to take. When Americans are trading pre-IPO Whatsapp or Snapchat shares with 3x leverage, the SEC definitely won't like it.
The SEC can't do anything about it if Bitshares allows pre-IPO Whatsapp to comply with the SEC. If UIA's don't comply with the SEC then the SEC can do something about it but only if it's an actual contract, an actual company, with actual shares. BitAssets are safe because they aren't shares so there is nothing the SEC can do about that.

If actual shares are traded then the company issuing the UIA is responsible for compliance and not Bitshares developers.
Then make the official policy that Americans may not use some of the bitAssets. Redirect American IP addresses to a limited-feature client on the bitshares.org website.


This is considered pure FUD. The risk analysis simply does not support the amount of fear generated around the SEC. I suppose if they move overseas then the NSA will hack their computers and take down Bitshares right? I think you're sharing paranoia with that.

BitAssets cannot be touched by the SEC because they aren't stock. The SEC would have to waste a lot of money in pursuit of a fine. The smart thing for developers would be to pay the fine if it comes and then let anonymous developers from China take over.

I doubt the SEC will do that because it will make the developers and delegates go completely anonymous. This would only make Bitshares adapt to government attack by the rogue elements in the SEC but not in a way which the SEC or anyone would benefit. The same could be asked about Bitcoin right? Couldn't the DEA decide to just go and arrest all the core Bitcoin developers right now and that would take down Silk Road? But they aren't doing that because they have enough sense not to do that.

Until the SEC or any government agency actually arrests a developer you're talking about a black swan type event which has never happened in the history of open source projects. It hasn't happen to Freenet, Bittorrent, Darkcoin, Darkmarket or any of them. Yet you think Bitshares would be the one blockchain out of all of them that would be singled out by the SEC over BitUSD?

There will be similar assets on every blockchain including Bitcoin so if they aren't arresting Counterparty developers why would you think they'd do it to Bitshares?

« Last Edit: April 13, 2015, 03:22:56 pm by luckybit »
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Offline Volker

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1.  Stock trading is a great market to enter eventually and exchanges are extremely important for liquidity, but I think the core value proposition of bitAssets currently is its usefulness for mainstream users for payments. 

bitUSD is not much more useful than paypalUSD. From the  shopper's perspective, bitUSD is much slower and harder to obtain. Some merchants have a lot to gain, but these merchants are not offering big discounts for using bitUSD, so why would the customers bother obtaining bitUSD? Getting a 20% discount by using bitUSD would do a lot for adoption, but we can't force merchants to offer discounts.   

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The core value proposition of Bitcoin/altcoins as a payment system is to save the 3% credit card fees for merchants.

If that's the core value proposition, then it looks like we're fucked. Large companies like amazon.com have negotiated much better deals than 3%. More like 1%.
I would hope that the core value proposition for cryptoassets would be as a stores of wealth, like gold. Transactional use is only helpful for establishing a baseline value. Bitcoin's transactional use couldn't support an even 1 billion dollar market cap. The velocity of money is too high.


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3.  People go into crypto trading because they want to trade crypto and believe in the value proposition of Bitcoin and other altcoins.   I'm sure some people get addicted to trading and would want to trade other assets, but most of the volume in crypto-exchanges/gateways is between Bitcoin & local currencies.  Also bitAssets on exchanges may not be as compelling because you can already trade into local currency from Bitcoin on exchanges.   The main value proposition for using the bitShares exchange vs another exchange is because it's decentralized, not because it has pegged assets.
The compelling reason to trade everything on bitshares with bitassets would be because the platform is better in every way, not just better in one way (decentralized).


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4. Right now Bitcoin exchanges charge .2 - .5% per trade. (Competition will drive that lower)  Regular mainstream online brokerage accounts charge .5%-1% on an average trade of $1-$2k.   Settlement will be much faster using crypto.  Smaller and microtrades are compelling.  Not that many people worry about counterparty risk for securities.  There are advantages, but how compelling is it for investors or traders to switch? The biggest downside is there won't be much liquidity compared to regular brokerage accounts. 
The market size of retail online brokerage trading is maybe $10Billion/yr?  (Interactive brokers & E-Trade make about $1B rev per year)


Remember, BitAssets are created using BitShares. If there are 10 billion dollars worth of bitUSD being used to trade 10 billion worth of various bitassets.There must be more than 40 billion dollars worth of BitShares in existence. Then we start burning the fees.

BitShares can do what other platforms can't:
A big advantage is that BitShares allows you to trade anything. I'm American. If I could, I'd trade some Chinese stocks with BitShares that are not available in America. Chinese people would like to trade some American stocks that are not available in China. Those are just two examples.

BitShares will be the best way to let everyone trade everything.

Counterparty risk: It's common for brokerage accounts to be locked, disabled, or seized for some legal reason. BitShares will never lock your account.

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5. We technically have a Forex exchange using bitAssets already.  Is there a lot of Forex activity?  I don't think there is much of any.  Most people just trade between local currency and BTS.  (I think there will be a lot of Forex activity eventually, but only after there is a core value proposition to use BTS for payments in various local currencies)
Currently, trading on bitshares is not attractive because 20x-50x margin is not available. If I trade bitEUR:bitUSD, how much money can I make? Think about it.

Offline Volker

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IMO the main problem seems to be that all market making is pegged to BTS which is pretty much a wildcard. So to be more than a mere gambler, one has to understand both markets.  That just seems to be asking too much.

Huh? If you're trading bitUSD:bitBTC, then you don't need to know anything about the BTS markets. You can focus on any pair. If you don't understand BTS, you don't need to trade BTS.