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Offline bytemaster

BitAsset 3.0 Concerns
« on: April 27, 2015, 01:20:46 PM »

There have been several concerns regarding the 3.0 proposal that I would like to acknowledge and address.

1.  The market is imbalanced in the sense that USD holders can demand settlement but USD lenders (shorts) cannot demand settlement easily.    This is a problem that can only be resolved via a strategy like BitAssets 2.0 where everyone settles once per year.  This would destroy the utility of BitUSD as a long-term currency and make it difficult to use in other smart contracts.   The only other way to "balance" this is to remove the option of forced settlement and have no expiration on shorts either.  This was the original design but has other issues.

2. Settlement at 1% of the feed price creates a "liquidity" imbalance where you can essentially sell a large volume of USD without bidding up the internal market.   Shorts must push the USD value down to acquire a large position, but longs are not forced to push it up to settle a large position. 

It is this second point that has some people very concerned and is something I would like to address.   Lets talk about the "terms" the parties are agreeing to.

1) Longs / Shorts are entering into a contract for difference based up a price feed.   Fundamentally a contract for difference depends upon an outside judge of value and the Contract for Difference should have NO IMPACT on the value of a dollar relative to BTS.    The longs/shorts are betting on this other "outside" market activity and their expected profits and losses are entirely derived from their ability to predict the future price feed.

2) If all shorts and longs were forced to settle on the same day at the feed then it is clearly observed that the market is "fair" even in the face of manipulation of the REAL MARKET which is part of the risk both longs and shorts take as it could be equally manipulated either way.

3) Allowing forced settlement with X day notice will merely convert some of the Short positions from infinite expiration to short term expiration.  For all intents and purposes a 1 year CFD is infinite.  If the "forced settlement" option had a 1 year delay then I suspect few would have any problems with "unfairness to the shorts" or worries about market manipulation.

It seems like the vast majority of concerns are around the 1% number and 24 hour number I suggested.    I am willing to concede that immediate settlement (0% and 0 hours) is a bad idea because the price feed lags.   I also feel that forcing USD holders to lock up their funds for too long while they wait for settlement is also a BAD idea.  Having a cost too far from the feed is also a problem that would break the peg.     

So without further ado I would like to suggest a compromise that should balance everything out nicely.

1) Limit the amount of USD that can be force-settled each day to 1% of the supply.  This would take it almost a year if there were constant redemptions to free the entire supply.
2) When a user requests redemption they are placed in a queue that is filled in the order of redemption with at least a 24 hour delay.     

The larger the request for redemption the longer the line will be and the higher the incentive to sell on the market rather than wait in line.  This should be enough to keep the shorts honest (not selling to low and not running out of collateral) and should give the longs some confidence in being able to get out at the price feed.    I think under this approach there should be no penalty when a forced settlement is requested. 

Once again any and all constants are subject to debate. 



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Offline lastagile

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Re: BitAsset 3.0 Concerns
« Reply #1 on: April 27, 2015, 01:53:36 PM »
Take a seat first.

Edit:
This is not good, as u did not consider the case that no one want short.

1. We need to enable interest rate range from positive to negative. If large demand of USD or no one want short, shorter can set the interest to negative, to hedge some risk. If people do not want USD, but some people still want to short, then they can set the interest to positive, to encourage people hold USD.

2. We need to enable the monthly reset collateral rate to 200%, for the short order that collateral no more than 200%. Shorter can chose add their collateral, or cover this short. Short order that with collateral rate more than 200% no need cover, the part of collateral more than 200% will be automatically return to shorter.

3. If we have 1 and 2, I agree with your force-settlement. But we shall only force settle the bitUSD that are listed in the sell side market. More than x day cheaper than feed price by 1%, then it will trigger force settlement. This will give potential  bitUSD buyer a chance to buy the bitUSD, this can reduce unnecessary settlement and reduce settle-attack. Force-settle will execute the short order that will the less collateral rate first, then the oldest order settle first.

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« Last Edit: April 28, 2015, 03:15:22 PM by lastagile »

Offline BTSdac

Re: BitAsset 3.0 Concerns
« Reply #2 on: April 27, 2015, 02:01:03 PM »
There have been several concerns regarding the 3.0 proposal that I would like to acknowledge and address.

1.  The market is imbalanced in the sense that USD holders can demand settlement but USD lenders (shorts) cannot demand settlement easily.    This is a problem that can only be resolved via a strategy like BitAssets 2.0 where everyone settles once per year.  This would destroy the utility of BitUSD as a long-term currency and make it difficult to use in other smart contracts.   The only other way to "balance" this is to remove the option of forced settlement and have no expiration on shorts either.  This was the original design but has other issues.

only the BITUSD:BTS<0.98*USD:BTS(by feed) , enforce cover the short by order from least collateral ,   you know enforce cover short is that buy BITUSD use pledged BTS.  after all order that low than 0.99*USD:BTS(by feed)  was bargain by enforce cover , stop enforcing cover.
« Last Edit: April 27, 2015, 06:59:49 PM by BTSdac »
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Offline NewMine

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Re: BitAsset 3.0 Concerns
« Reply #3 on: April 27, 2015, 02:14:45 PM »
Dont "force" settle anything and dont put time constraints on anything unless you are creating a liquid options market where time is sacraficed for leverage.

On #2, dont forget the opposite side. The large USD holder was a buyer who would have to risk pushing USD up to get his position. He then should expect the opposite when he unwinds.

zerosum

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Re: BitAsset 3.0 Concerns
« Reply #4 on: April 27, 2015, 02:34:22 PM »
1) Limit the amount of USD that can be force-settled each day to 1% of the supply.  This would take it almost a year if there were constant redemptions to free the entire supply.
2) When a user requests redemption they are placed in a queue that is filled in the order of redemption with at least a 24 hour delay.     

The larger the request for redemption the longer the line will be and the higher the incentive to sell on the market rather than wait in line.  This should be enough to keep the shorts honest (not selling to low and not running out of collateral) and should give the longs some confidence in being able to get out at the price feed.    I think under this approach there should be no penalty when a forced settlement is requested. 

Once again any and all constants are subject to debate.

Do not create  a market on predicting when the rest of the longs will request settlement. The proposal will create just that - competition on who predicts correctly when the other longs want to exit so one can sit first in line...

Instead, make them (longs) compete on discount to settle:

-up to (say 1%) can settled daily ordered but the discount offered (starting from 100%*feed  i.e. no discount);
-the discount probably shoul take into account the time waited - so say long # one is offering 0.99 * feed and has waited 3 days already, a just placed new settlement request should offer settlement at price < 0.9703*feed in order to be placed before the other long in the queue.

[edit]] settlement request should probably be cancelable.
« Last Edit: April 27, 2015, 02:39:24 PM by tonyk2 »

Offline Bitcoinfan

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Re: BitAsset 3.0 Concerns
« Reply #5 on: April 27, 2015, 02:35:41 PM »


1) Limit the amount of USD that can be force-settled each day to 1% of the supply.  This would take it almost a year if there were constant redemptions to free the entire supply.
2) When a user requests redemption they are placed in a queue that is filled in the order of redemption with at least a 24 hour delay.     



Do you think 1% is too small?  Especially at current usd market cap of $400k.  It appears peg will track for traded volume up to daily redemption.  So only up to $4,000 will trade precisely to peg, and any other volume greater than redemption amount will be discounted to sell on internal market, depending on how long redemption takes.   So very large sell trade (the other $396k) would be heavily discounted in this outline.  Although I guess that would be the same as the old rule where 99% of full redemption for X days. 

What are the downsides of using 5%-- or even 10%?
« Last Edit: April 27, 2015, 02:40:33 PM by Bitcoinfan »

Offline joele

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Re: BitAsset 3.0 Concerns
« Reply #6 on: April 27, 2015, 05:50:42 PM »
1) Limit the amount of USD that can be force-settled each day to 1% of the supply.  This would take it almost a year if there were constant redemptions to free the entire supply.
2) When a user requests redemption they are placed in a queue that is filled in the order of redemption with at least a 24 hour delay.     

The larger the request for redemption the longer the line will be and the higher the incentive to sell on the market rather than wait in line.  This should be enough to keep the shorts honest (not selling to low and not running out of collateral) and should give the longs some confidence in being able to get out at the price feed.    I think under this approach there should be no penalty when a forced settlement is requested. 

Once again any and all constants are subject to debate.

Do not create  a market on predicting when the rest of the longs will request settlement. The proposal will create just that - competition on who predicts correctly when the other longs want to exit so one can sit first in line...

Instead, make them (longs) compete on discount to settle:

-up to (say 1%) can settled daily ordered but the discount offered (starting from 100%*feed  i.e. no discount);
-the discount probably shoul take into account the time waited - so say long # one is offering 0.99 * feed and has waited 3 days already, a just placed new settlement request should offer settlement at price < 0.9703*feed in order to be placed before the other long in the queue.

[edit]] settlement request should probably be cancelable.

Then holding let say bitUSD has no guarantee that can be liquidated at 99% its value? specially at bearish days.

zerosum

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Re: BitAsset 3.0 Concerns
« Reply #7 on: April 27, 2015, 05:57:35 PM »
1) Limit the amount of USD that can be force-settled each day to 1% of the supply.  This would take it almost a year if there were constant redemptions to free the entire supply.
2) When a user requests redemption they are placed in a queue that is filled in the order of redemption with at least a 24 hour delay.     

The larger the request for redemption the longer the line will be and the higher the incentive to sell on the market rather than wait in line.  This should be enough to keep the shorts honest (not selling to low and not running out of collateral) and should give the longs some confidence in being able to get out at the price feed.    I think under this approach there should be no penalty when a forced settlement is requested. 

Once again any and all constants are subject to debate.

Do not create  a market on predicting when the rest of the longs will request settlement. The proposal will create just that - competition on who predicts correctly when the other longs want to exit so one can sit first in line...

Instead, make them (longs) compete on discount to settle:

-up to (say 1%) can settled daily ordered but the discount offered (starting from 100%*feed  i.e. no discount);
-the discount probably shoul take into account the time waited - so say long # one is offering 0.99 * feed and has waited 3 days already, a just placed new settlement request should offer settlement at price < 0.9703*feed in order to be placed before the other long in the queue.

[edit]] settlement request should probably be cancelable.

Then holding let say bitUSD has no guarantee that can be liquidated at 99% its value? specially at bearish days.
Yes, but you can choose between 97% today or 99% in 3+ months...In the original proposal you HAVE to wait 100 days if you are too slow to be the first in line.

Offline bytemaster

Re: BitAsset 3.0 Concerns
« Reply #8 on: April 27, 2015, 05:58:43 PM »
1) Limit the amount of USD that can be force-settled each day to 1% of the supply.  This would take it almost a year if there were constant redemptions to free the entire supply.
2) When a user requests redemption they are placed in a queue that is filled in the order of redemption with at least a 24 hour delay.     

The larger the request for redemption the longer the line will be and the higher the incentive to sell on the market rather than wait in line.  This should be enough to keep the shorts honest (not selling to low and not running out of collateral) and should give the longs some confidence in being able to get out at the price feed.    I think under this approach there should be no penalty when a forced settlement is requested. 

Once again any and all constants are subject to debate.

Do not create  a market on predicting when the rest of the longs will request settlement. The proposal will create just that - competition on who predicts correctly when the other longs want to exit so one can sit first in line...

Instead, make them (longs) compete on discount to settle:

-up to (say 1%) can settled daily ordered but the discount offered (starting from 100%*feed  i.e. no discount);
-the discount probably should take into account the time waited - so say long # one is offering 0.99 * feed and has waited 3 days already, a just placed new settlement request should offer settlement at price < 0.9703*feed in order to be placed before the other long in the queue.

[edit]] settlement request should probably be cancelable.

People can always compete to settle NOW at what ever price the market will bare.   

Allowing people to enter/exit the line allows them to manipulate the market by sending fake signals.    The settlement line is meant as a LAST RESORT.  Its presence is only to guarantee USD holders a minimal level of liquidity at a fair price.  Everything else is set by the market. 

For the latest updates checkout my blog: http://bytemaster.bitshares.org
Anything said on these forums does not constitute an intent to create a legal obligation or contract between myself and anyone else.   These are merely my opinions and I reserve the right to change them at any time.

Offline bytemaster

Re: BitAsset 3.0 Concerns
« Reply #9 on: April 27, 2015, 06:05:13 PM »
BitAssets are only an approximation to the dollar with similar volatility and price.  It is not a magic IOU that is always convertible to exactly $0.9999 dollars.    Even if you could "force settle" 100% of all USD at the feed price which is updated every second, you would not get $1 per USD out of the deal.  You would have to sell your BTS on the market and depending upon how much you sold (dumping $200K worth of BTS received by selling 200K BitUSD) would probably result in you only receiving $150,000.   So BitUSD is ALWAYS subject to the general liquidity of BitUSD and BTS and anyone saying that you can dump it exactly for one $1 is only true in SMALL amounts.   

By limiting the daily forced settlement amount we can accurately reflect the amount of BitUSD that can be redeemed without moving the BTS price by a meaningful amount.    If you want to dump more than the daily limit in a very short period of time then you are forced to BID UP BTS which is exactly what would happen if you attempted to dump $200K real USD into BTS in a single day.   
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Anything said on these forums does not constitute an intent to create a legal obligation or contract between myself and anyone else.   These are merely my opinions and I reserve the right to change them at any time.

zerosum

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Re: BitAsset 3.0 Concerns
« Reply #10 on: April 27, 2015, 06:35:15 PM »
1) Limit the amount of USD that can be force-settled each day to 1% of the supply.  This would take it almost a year if there were constant redemptions to free the entire supply.
2) When a user requests redemption they are placed in a queue that is filled in the order of redemption with at least a 24 hour delay.     

The larger the request for redemption the longer the line will be and the higher the incentive to sell on the market rather than wait in line.  This should be enough to keep the shorts honest (not selling to low and not running out of collateral) and should give the longs some confidence in being able to get out at the price feed.    I think under this approach there should be no penalty when a forced settlement is requested. 

Once again any and all constants are subject to debate.

Do not create  a market on predicting when the rest of the longs will request settlement. The proposal will create just that - competition on who predicts correctly when the other longs want to exit so one can sit first in line...

Instead, make them (longs) compete on discount to settle:

-up to (say 1%) can settled daily ordered but the discount offered (starting from 100%*feed  i.e. no discount);
-the discount probably should take into account the time waited - so say long # one is offering 0.99 * feed and has waited 3 days already, a just placed new settlement request should offer settlement at price < 0.9703*feed in order to be placed before the other long in the queue.

[edit]] settlement request should probably be cancelable.

People can always compete to settle NOW at what ever price the market will bare.   

Allowing people to enter/exit the line allows them to manipulate the market by sending fake signals.    The settlement line is meant as a LAST RESORT.  Its presence is only to guarantee USD holders a minimal level of liquidity at a fair price.  Everything else is set by the market.

OK the last resort can be way to slow for most (100 days?). How about modification to my suggestion:
-they can not cancel the request to settle. They can however decrease (but not increase) the desired amount from 100*feed down in order to get better placement in the wait line.

Offline Ander

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Re: BitAsset 3.0 Concerns
« Reply #11 on: April 27, 2015, 06:40:09 PM »
I think the max 1% of supply being converted per day is too slow.  We should raise this some (3%? 5%?), or as tonyk suggests, consider having converters compete.  For example, if they want to wait in the 1% per day queue, they pay a 1% fee (get .99 per bitUSD).  If they want to way in the 2% a day queue they pay 2%, and so on.  Or something else.


Note that at least right now we do not have a problem of bitAsset holders being unable to convert (unless there is an order matching bug).  The bitAssets are being valued at more than $1, or 1 CNY, or whatever!  Holders of bitAssets could presumably cash out into BTS at fair value or more.  So the new system definitely needs to be nicer to shorts, because the current system was clearly being unfair to them.
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Offline bytemaster

Re: BitAsset 3.0 Concerns
« Reply #12 on: April 27, 2015, 06:42:49 PM »
I think the max 1% of supply being converted per day is too slow.  We should raise this some (3%? 5%?), or as tonyk suggests, consider having converters compete.  For example, if they want to wait in the 1% per day queue, they pay a 1% fee (get .99 per bitUSD).  If they want to way in the 2% a day queue they pay 2%, and so on.  Or something else.


Note that at least right now we do not have a problem of bitAsset holders being unable to convert (unless there is an order matching bug).  The bitAssets are being valued at more than $1, or 1 CNY, or whatever!  Holders of bitAssets could presumably cash out into BTS at fair value or more.  So the new system definitely needs to be nicer to shorts, because the current system was clearly being unfair to them.

The % per day would need to be dynamic and proportional to general liquidity.   Currently we are at 1/30 per day so 5% per day is probably reasonable.
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Offline mf-tzo

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Re: BitAsset 3.0 Concerns
« Reply #13 on: April 27, 2015, 06:52:44 PM »
I am not sure I fully understand. But looking ahead, if I am a merchant accepting bitusd and I want to convert my bitusd in usd there shouldn't be any limit of how much I can convert imho..

Secondly, the new proposal as Ander said should be more fair to the shorters of bitassets because those of us who believe in the future of BTS and short bitassets, we have been f..If we lose the incentives to short, there won't be any bitassets right?

Offline Ander

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Re: BitAsset 3.0 Concerns
« Reply #14 on: April 27, 2015, 06:58:21 PM »
I think we could just do 5% a day, yes. 

If everyone wants to cash out, 5% a day lets a little over half of the bitAsset holders cash out within 15 days.  (.95^15 ~= .46, which means 54% of people have been able to cash out in 15 days).

Half of the bitAsset being able to be cashed out in 15 days is similar to 100% being cashed out in 30 days.
(Note, with the 5% system, about 80% can cash out in 1 month, if everyone only wants to cash out). 

1% penalty for everyone is probably good, because then we can say "you are guaranteed to get at least 99 cents worth back for a bitUSD", which sounds better than having a 5% penalty and saying you are only guaranteed back 95 cents.
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