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Offline starspirit

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Is it feasible to make a bitBTC backed by BTC?
« on: April 25, 2015, 12:41:31 PM »

This is just a thought-provoker. Currently we make bitBTC backed by BTS. I wonder what the broader crypto-community would think of a bitBTC backed by a reserve of BTC, where the transfer operations of the reserve are largely automatic and maybe subject to decentralised control by bitBTC owners? One that had zero financial risk associated with BitShares except as the designer and owner of the system? The bitBTC would then have:

- fast, guaranteed exchangeability with real BTC
- 10 second block times
- no feed price
- no collateral volatility

Even though we might argue that counterparty risk is introduced (and the goal should be to minimise that as far as possible), I think if people accept the security is still very high they may find it more understandable and attractive than one backed by BTS, at least at this early stage in BitShares' growth.

For BTS owners, a spread could be earned on transfers in and out of the reserve, and transaction fees from exchange markets, and this would not be limited by the market cap of BTS. For example, there's no reason why there could not be $100m of bitUSD earning $2m a year for BTS, even if the BTS valuation were lower than this.

There's been a lot of talk recently about ACCT, escrow functions, multi-sig, etc, some of which could be used. So I wondered, does this concept seem technically and legally feasible?

Just throwing this one out there.

Offline mdj

Re: Is it feasible to make a bitBTC backed by BTC?
« Reply #1 on: April 25, 2015, 01:11:27 PM »
With atomic cross chain trading I guess it's feasible

Offline joele

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Re: Is it feasible to make a bitBTC backed by BTC?
« Reply #2 on: April 25, 2015, 01:12:24 PM »
I think that is a good idea for a new DAC
All crypto coins that can be created as new bitAsset that is backed by its own coin.
Trading on a decentralized market.
and can earn interest. Nice!

Offline Troglodactyl

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Re: Is it feasible to make a bitBTC backed by BTC?
« Reply #3 on: April 25, 2015, 01:14:50 PM »
This can be done, but there's no point in having it officially managed by the chain since it will be an IOU anyway with counterparty risk.  Our chain is an efficient host for such businesses though.  Anyone can issue redeemable BTC tokens as UIAs and I think there's certainly a market for this.

It would be great if some of the well known exchanges offered such tokens, since they have the most established reputation for that sort of counterparty risk.
« Last Edit: April 25, 2015, 01:17:39 PM by Troglodactyl »

Offline CLains

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Re: Is it feasible to make a bitBTC backed by BTC?
« Reply #4 on: April 25, 2015, 01:30:43 PM »
How about a bit-bitBTC backed by bitBTC, bitBTC^2  8)
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Offline toast

Re: Is it feasible to make a bitBTC backed by BTC?
« Reply #5 on: April 26, 2015, 12:00:38 AM »
If you can control BTC as collateral (for example with spv sidechain) you might as well just use it directly as sidechain BTC
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Offline starspirit

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Re: Is it feasible to make a bitBTC backed by BTC?
« Reply #6 on: April 26, 2015, 12:09:41 AM »
If you can control BTC as collateral (for example with spv sidechain) you might as well just use it directly as sidechain BTC
I only know a little about side chains. Would that enable a solution where bitUSD could be issued onto the BitShares block chain? And could counterparty risk be minimised in the design?

Offline starspirit

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Re: Is it feasible to make a bitBTC backed by BTC?
« Reply #7 on: April 26, 2015, 10:44:50 PM »
Let me take the thought provocation a step further, and suggest something else we could do with a bitBTC backed by real BTC. We could create a class of bitAssets that are underpinned by BTC collateral (using bitBTC) rather than BTS collateral.

For a start, using this new bitBTC as collateral, there would be no concerns about users being able to manipulate the feed price through manipulations in the BTC market. BTC remains the most liquid market in the crypto space. With manipulation concerns allayed, it would be possible to implement bitCurrencies (bitUSD, butEUR, bitCNY) with the maximum level of pegging and liquidity, such as described in the draft whitepaper here... https://bitsharestalk.org/index.php/topic,15880.msg203776.html#msg203776

Secondly, the market for these bitCurrencies could be orders of magnitude greater. Users in the crypto space are far more likely to accept BTC-backed pegged currencies than BTS-backed pegged currencies at this stage, as BTC remains the strongest form of digital collateral available. And on the short side, there is probably far greater demand to get margin lending on BTC than there is on BTS, as $20m odd in loans at Bitfinex will attest to.

There is no reason why bitAssets must use BTS as collateral. This is an example where we can take the technologies that have been built, and re-target them at where the current market demand is.

Again, just throwing it out there.

[Edit: Just to be clear, I'm not suggesting a replacement of current bitAssets. This could be a new product class that acts as a bridge for the market until BTS is stronger.]
« Last Edit: April 27, 2015, 03:25:24 AM by starspirit »

Offline starspirit

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Re: Is it feasible to make a bitBTC backed by BTC?
« Reply #8 on: April 29, 2015, 03:39:49 AM »
Guys, its not heresy to talk about currencies being backed by something other than BTS is it??  ;D

Offline xeroc

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Re: Is it feasible to make a bitBTC backed by BTC?
« Reply #9 on: April 29, 2015, 06:52:29 AM »
Guys, its not heresy to talk about currencies being backed by something other than BTS is it??  ;D

Let me cite BM from the other thread:

Another reason is that normally in finance someone who wants to go short GOLD means they want to profit when GOLD falls versus the USD. But in BitShares shorting the bitGOLD(i.e. GOLD/BTS) and does not give the same kind of exposure. It would be good if there was a way to establish an asset whose "Last Price" was a formula instead of a direct price feed. For example: bitGOLDUSD = GOLD/USD. This is the asset that the wider market really wants. At the moment shorting bitAssets means you increase your long exposure to BTS. So if the market trend for BTS is down nobody wants to short.
Soon you will be able to have BitGOLD backed by BitUSD.
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Offline starspirit

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Re: Is it feasible to make a bitBTC backed by BTC?
« Reply #10 on: April 29, 2015, 08:29:08 AM »
Guys, its not heresy to talk about currencies being backed by something other than BTS is it??  ;D

Let me cite BM from the other thread:

Another reason is that normally in finance someone who wants to go short GOLD means they want to profit when GOLD falls versus the USD. But in BitShares shorting the bitGOLD(i.e. GOLD/BTS) and does not give the same kind of exposure. It would be good if there was a way to establish an asset whose "Last Price" was a formula instead of a direct price feed. For example: bitGOLDUSD = GOLD/USD. This is the asset that the wider market really wants. At the moment shorting bitAssets means you increase your long exposure to BTS. So if the market trend for BTS is down nobody wants to short.
Soon you will be able to have BitGOLD backed by BitUSD.
Yeah, but that's less controversial. That's just bitAsset backed by bitUSD backed by BTS. That's a good idea that I've also promoted for some time.
I'm suggesting the possibility of another class altogether: bitUSD backed by bitBTC backed by BTC.
I don't know if it technically can be done, just floating the idea, because I think the more immediate market potential might be far greater.

Offline monsterer

Re: Is it feasible to make a bitBTC backed by BTC?
« Reply #11 on: April 29, 2015, 08:34:15 AM »
Yeah, but that's less controversial. That's just bitAsset backed by bitUSD backed by BTS. That's a good idea that I've also promoted for some time.
I'm suggesting the possibility of another class altogether: bitUSD backed by bitBTC backed by BTC.
I don't know if it technically can be done, just floating the idea, because I think the more immediate market potential might be far greater.

The difficult part is the bitBTC backed by BTC - that requires trust, unless you believe in the fairytale of atomic cross chain transactions :)
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Offline xeroc

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Re: Is it feasible to make a bitBTC backed by BTC?
« Reply #12 on: April 29, 2015, 08:40:26 AM »
Yeah, but that's less controversial. That's just bitAsset backed by bitUSD backed by BTS. That's a good idea that I've also promoted for some time.
I'm suggesting the possibility of another class altogether: bitUSD backed by bitBTC backed by BTC.
I don't know if it technically can be done, just floating the idea, because I think the more immediate market potential might be far greater.

The difficult part is the bitBTC backed by BTC - that requires trust, unless you believe in the fairytale of atomic cross chain transactions :)
ACCT are just not working with btc the way it is required ..
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Offline bitmarley

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Re: Is it feasible to make a bitBTC backed by BTC?
« Reply #13 on: April 29, 2015, 09:42:19 AM »
Its not a fairytale. BitShares is capable of it:
https://bitsharestalk.org/index.php/topic,13274.0.html

 :)

Offline starspirit

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Re: Is it feasible to make a bitBTC backed by BTC?
« Reply #14 on: April 29, 2015, 12:46:33 PM »
Its not a fairytale. BitShares is capable of it:
https://bitsharestalk.org/index.php/topic,13274.0.html

 :)
bitmarley, looking through your linked thread, such a decentralised market for real BTC:BTS, with enough liquidity, could be used as a substitute source for price feeds for other bitAssets such as bitUSD. All you require for this is one internal asset against one external asset. That would still not prevent manipulation of the feed by large players, but it would reduce reliance on centralised exchanges.

Yeah, but that's less controversial. That's just bitAsset backed by bitUSD backed by BTS. That's a good idea that I've also promoted for some time.
I'm suggesting the possibility of another class altogether: bitUSD backed by bitBTC backed by BTC.
I don't know if it technically can be done, just floating the idea, because I think the more immediate market potential might be far greater.

The difficult part is the bitBTC backed by BTC - that requires trust, unless you believe in the fairytale of atomic cross chain transactions :)
ACCT are just not working with btc the way it is required ..

monsterer, xeroc, are you saying we can't do this yet, or that the ideal way of doing it (ACCT) is not available yet? To get commercial product to market, there are always trade-offs to be made. A company can go broke waiting to achieve the ideal.

 

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