BitAsset 3.0 Concerns

[merivercap]

....
The more points at which bitUSD is settled in basket of comparable value to a real USD, the tighter it will peg. The less emphasis we place on the feed, the less tightly it will peg. People must decide if they want a pegged currency or not, or just a plaything for people in Bitshares.

[Apologies merivercap, this is me criticising an ideology, nothing to do with you personally]

BTW You can use the average ratio in various markets when the dollar for bitUSD and dollar for BTS markets develop on the same exchanges and platforms.  Right now there aren't any direct bitUSD/BTS for dollar exchanges.

In the future, you can look at the dollar price for bitUSD and BTS in the real world at a LocalBTS.  You can look at the dollar price of bitUSD & BTS and ratio at various exchanges like CoinbaseBTS & BitfinexBTS.  Also the Euro price of BTS & bitUSD and ratio at KrakenBTS as well as the Yuan price of BTS & bitUSD at BTC38 and the ratio.   The pricing will all be different, but the ratios should be very similar.   You can compare all of those ratios to the internal bitUSD/BTS market and as Bytemaster mentions in his old intro video at 6:36 the market will manage supply and generally get the ratios to converge: https://www.youtube.com/watch?v=5BV55IrZi7g

[BunkerChainLabs-DataSecurityNode]

The least you could do is spell check it for me BunkerBoy

congrats again on the Delegate of the Month award!

I didn't get it media.bitscape did! I just added 10,000 Delegate Tip to their award. I went into detail on it here:

https://bitsharestalk.org/index.php/topic,14109.msg206200.html#msg206200

[BunkerChainLabs-DataSecurityNode]

It's OK if you have no clue as to what is going on:

Let's assume for a second that Bitassets 3.0 are implemented.
And I'm a new user interested in using them.

Can you ELI5 bitassets in 10 sentences? (more I would probably walk away)

We've all been there.  It's not easy to master the mechanics of the BitShares (political/economic) process.  But all we humbly ask of you is to ask for help. 

Opening your mouth when you have no idea what you are talking about and making it sould like you do does not help anybody learn.  graffenwalder asks politely for someone to ELI5, and here is the next response:

1) letting all the current shorters bleed to death is not nice at all (and that's what announcing 3.0 does, nobody want to shorts anymore)
2) Cohabitation will cause so much trouble. Nobody will ever have enough patience to understand the difference between bitUSD1 and bitUSD2.

What is bitUSD1 or bitUSD2 ?

There is only and will only be one "BitUSD" (and multiple ways (markets) to buy and sell it)

Buy some on Metaexchange and cover your short, but some on BTER and cover, buy some on the blockchain and cover your position.

You want ELI5?

I'll do you one better, here's the ELI4 (straight from the horse's mouth):

Will this peg "hold", yes it will.   Will it always be worth at least $1 yes.   Will the cost to buy it sometimes be far more than $1, YES.   

So we can now say that BitUSD has a FLOOR of $1 and can go up from there.   As a merchant / consumer that is all you care about (the floor). 

By structuring our economic monetary printing press to allow BitUSD redemptions at essentially $1 , we are effectively making BitUSD extremely simple to learn and intuitive to use.  What we give up in exchange for having a simple and intuitive learning curve for bitUSD "buyers" is a "complicated trafing structure for the shorts who create the BitUSD. 

This "simple for BitUSD buyers" and "complicated for bitUSD shorters" is how I vote to structure our BitAsset creation scheme, becasue as a BitShares shareholder, I want our products to me more easily understood by our customers, and I can handle responsibility of shorting the BitAssets into existance without crying when the market moves in the opposite direction.

Bytemaster obviously sees the merit in making BitAssets:


ELI4 = BitASsets - Always redeemable for face value even if it hurts the specualtive highest leveraged shorts

 

[merivercap]

I see. Thanks for providing the historical context. 

I think the $0.85 for the bitUSD doesn't concern me in an illiquid market.  I'm not sure you can guarantee anyone $1 because BTS will always fluctuate against USD  To me it's more about perspective.  Is the bitUSD flucutating between $0.85 and $1.10 or is BTS fluctuating against bitUSD?  It's just what people use as a reference point. If a person's viewpoint is from BTS as money, BTS is stable and all assets move against it including bitUSD.  If the person's viewpoint is from USD/bitUSD it's BTS that fluctuates around it.  If Gold or Bitcoin were deemed the only legal tender tomorrow, all other fiat currencies will seem worthless or volatile.   Bitcoin or Gold will seem stable.

Last I checked the price for Bitcoin was:
Local Bitcoins:  $248.6
Coinbase: $236.5
Bitfinex was $235.7   
http://bitcoincharts.com/markets/

From a Bitcoin perspective there are three different prices for one dollar.  The differences are entry/exit costs and counterparty risk.  From the dollar perspective there are three different prices for Bitcoin.

I think ultimately the social consensus that bitUSD pays for things with the same purchasing power as the dollar will be the consensus and that is what perspective the traders will take.  In the real world no one values cash (Federal Reserve Notes/base money) differently from checkbook money, or traveler's checks or credit card money. No one sweats the difference.  (Note: Right now the melt-value of a pre-1982 copper penny is worth 1.9 cents, but people trade it at 1 cent.)

Anyways if you take the perspective that people in the real world will treat bitUSD as a cash dollar in the real world and won't sweat the difference you'll have $1.00 per bitUSD in the real world.  A bitUSD at an exchange would be less valuable because of entry/exit costs & counterparty risk.  Hence you'll have something like $0.95 at CoinBaseBTS and $0.93 at BitFinexBTS.

Some of this reasoning is backwards. USD has a floating value. Checkbook money, travellers checks, credit cards share the same value precisely because they are settled in USD. It's not that USD is magically pegged to those things by some form of consensus.

The more points at which bitUSD is settled in basket of comparable value to a real USD, the tighter it will peg. The less emphasis we place on the feed, the less tightly it will peg. People must decide if they want a pegged currency or not, or just a plaything for people in Bitshares.

[Apologies merivercap, this is me criticising an ideology, nothing to do with you personally]

No problem.  It's not so much an ideology rather than just theories on the nature of money that generally makes sense to me. 

When you take into consideration the commodity nature of money, in a free market all various forms of money would have different value.  Just like redeemable gold certificates will have premiums or discounts based on the risks and costs of the issuer.  Hence if you view Bitcoin as money there are various prices based on risk and costs.  A MtGox bitcoin was worth much less than a Bitstamp bitcoin.  What is a BTC38 BitShare or BitUSD worth?  Should a BTC38 BitUSD be worth $1 or maybe 75 cents? 

In a free market, federal reserve notes (ie. cash or base money) would have a premium over checkbook money.  This was especially true when federal reserve notes were redeemable in gold.  Imagine having $1 million dollars in a checking account at a high-risk bank with $250k FDIC insurance compared to $1 million in federal reserve notes.  Your $1 million in checkbook money could be worth as little as $250k. The banks, government & people just collectivize all the counterparty and operational costs of the different forms of 'money' and deem them to be worth the same and settled as such. 

I think the first question to ask is:  What is a dollar worth and why?  Some may say it's a piece of paper with ink.  Would you beg to differ and if so what is a dollar to you and why?  Do you think that a dollar is worth the same to another person and why?  Is there an objective value you think everyone has of this dollar?  So why does a haircut cost around $10 and not $10,000?

von Mises asked himself similar questions about fiat money and theorized that people value a fiat currency for what it was worth the day before.  When you go back in time, the dollar or fiat first represented a certain amount of gold that was redeemable.  Hence people had a reference of gold to compare any good or service they could exchange for.  Gold's value was first determined in the free market of barter.  Nick Szabo may argue even before barter, beads, seashells and jewelry had collectible value.  Gold can fulfill the regression theorem because it was borne out of use, barter, or collectibility.   Since fiat currencies have very little intrinsic value in barter, von Mises suggests it could never become money on its own.   

If you were transported to some other alien planet with the same resources as Earth, but started with no memory of the past value of a dollar, will the new society use the dollar and will a haircut be worth around $10?  I would argue the dollar will neither be used for money nor will a piece of paper w/ ink that says $10 get you a haircut. 

In regards to the internal asset exchange market you can peg to whatever you want, but I believe the trade will be dicated by the real world exchange of bitUSD for a one dollar federal reserve note on the street.  The internal market engine may show it worth around $.97 due to exit/entry costs, +/- $0.95 for a trusted exchange like Coinbase,  +/-$0.85 at BTC38 & BTER ... hey I don't know how trusted these exchanges are so it's just a hypothetical.  Our current price feed is based on centralized exchanges with counterparty risk.   And remember I'm throwing out all these hypothetical numbers when the value of bitUSD vs BTS will be constantly changing every second and in flux! 

[starspirit]

I see. Thanks for providing the historical context. 

I think the $0.85 for the bitUSD doesn't concern me in an illiquid market.  I'm not sure you can guarantee anyone $1 because BTS will always fluctuate against USD  To me it's more about perspective.  Is the bitUSD flucutating between $0.85 and $1.10 or is BTS fluctuating against bitUSD?  It's just what people use as a reference point. If a person's viewpoint is from BTS as money, BTS is stable and all assets move against it including bitUSD.  If the person's viewpoint is from USD/bitUSD it's BTS that fluctuates around it.  If Gold or Bitcoin were deemed the only legal tender tomorrow, all other fiat currencies will seem worthless or volatile.   Bitcoin or Gold will seem stable.

Last I checked the price for Bitcoin was:
Local Bitcoins:  $248.6
Coinbase: $236.5
Bitfinex was $235.7   
http://bitcoincharts.com/markets/

From a Bitcoin perspective there are three different prices for one dollar.  The differences are entry/exit costs and counterparty risk.  From the dollar perspective there are three different prices for Bitcoin.

I think ultimately the social consensus that bitUSD pays for things with the same purchasing power as the dollar will be the consensus and that is what perspective the traders will take.  In the real world no one values cash (Federal Reserve Notes/base money) differently from checkbook money, or traveler's checks or credit card money. No one sweats the difference.  (Note: Right now the melt-value of a pre-1982 copper penny is worth 1.9 cents, but people trade it at 1 cent.)

Anyways if you take the perspective that people in the real world will treat bitUSD as a cash dollar in the real world and won't sweat the difference you'll have $1.00 per bitUSD in the real world.  A bitUSD at an exchange would be less valuable because of entry/exit costs & counterparty risk.  Hence you'll have something like $0.95 at CoinBaseBTS and $0.93 at BitFinexBTS.

Some of this reasoning is backwards. USD has a floating value. Checkbook money, travellers checks, credit cards share the same value precisely because they are settled in USD. It's not that USD is magically pegged to those things by some form of consensus.

The more points at which bitUSD is settled in basket of comparable value to a real USD, the tighter it will peg. The less emphasis we place on the feed, the less tightly it will peg. People must decide if they want a pegged currency or not, or just a plaything for people in Bitshares.

[Apologies merivercap, this is me criticising an ideology, nothing to do with you personally]

[Ander]

There was no mention of a limit of the amount of bitUSD that the bitUSD longs can force settlement on in the recent post.  Is there still a plan for a 1% daily limit?  5% daily limit? 

I dont know if this is needed but if it is I think it should be at least 5%.

[bytemaster]

I see. Thanks for providing the historical context. 

I think the $0.85 for the bitUSD doesn't concern me in an illiquid market.  I'm not sure you can guarantee anyone $1 because BTS will always fluctuate against USD  To me it's more about perspective.  Is the bitUSD flucutating between $0.85 and $1.10 or is BTS fluctuating against bitUSD?  It's just what people use as a reference point. If a person's viewpoint is from BTS as money, BTS is stable and all assets move against it including bitUSD.  If the person's viewpoint is from USD/bitUSD it's BTS that fluctuates around it.  If Gold or Bitcoin were deemed the only legal tender tomorrow, all other fiat currencies will seem worthless or volatile.   Bitcoin or Gold will seem stable.

Last I checked the price for Bitcoin was:
Local Bitcoins:  $248.6
Coinbase: $236.5
Bitfinex was $235.7   
http://bitcoincharts.com/markets/

From a Bitcoin perspective there are three different prices for one dollar.  The differences are entry/exit costs and counterparty risk.  From the dollar perspective there are three different prices for Bitcoin.

I think ultimately the social consensus that bitUSD pays for things with the same purchasing power as the dollar will be the consensus and that is what perspective the traders will take.  In the real world no one values cash (Federal Reserve Notes/base money) differently from checkbook money, or traveler's checks or credit card money. No one sweats the difference.  (Note: Right now the melt-value of a pre-1982 copper penny is worth 1.9 cents, but people trade it at 1 cent.)

Anyways if you take the perspective that people in the real world will treat bitUSD as a cash dollar in the real world and won't sweat the difference you'll have $1.00 per bitUSD in the real world.  A bitUSD at an exchange would be less valuable because of entry/exit costs & counterparty risk.  Hence you'll have something like $0.95 at CoinBaseBTS and $0.93 at BitFinexBTS.

[merivercap]

I see. Thanks for providing the historical context. 

I think the $0.85 for the bitUSD doesn't concern me in an illiquid market.  I'm not sure you can guarantee anyone $1 because BTS will always fluctuate against USD  To me it's more about perspective.  Is the bitUSD flucutating between $0.85 and $1.10 or is BTS fluctuating against bitUSD?  It's just what people use as a reference point. If a person's viewpoint is from BTS as money, BTS is stable and all assets move against it including bitUSD.  If the person's viewpoint is from USD/bitUSD it's BTS that fluctuates around it.  If Gold or Bitcoin were deemed the only legal tender tomorrow, all other fiat currencies will seem worthless or volatile.   Bitcoin or Gold will seem stable.

Last I checked the price for Bitcoin was:
Local Bitcoins:  $248.6
Coinbase: $236.5
Bitfinex was $235.7   
http://bitcoincharts.com/markets/

From a Bitcoin perspective there are three different prices for one dollar.  The differences are entry/exit costs and counterparty risk.  From the dollar perspective there are three different prices for Bitcoin.

I think ultimately the social consensus that bitUSD pays for things with the same purchasing power as the dollar will be the consensus and that is what perspective the traders will take.  In the real world no one values cash (Federal Reserve Notes/base money) differently from checkbook money, or traveler's checks or credit card money. No one sweats the difference.  (Note: Right now the melt-value of a pre-1982 copper penny is worth 1.9 cents, but people trade it at 1 cent.)

Anyways if you take the perspective that people in the real world will treat bitUSD as a cash dollar in the real world and won't sweat the difference you'll have $1.00 per bitUSD in the real world.  A bitUSD at an exchange would be less valuable because of entry/exit costs & counterparty risk.  Hence you'll have something like $0.95 at CoinBaseBTS and $0.93 at BitFinexBTS. 

[bytemaster]

You cannot force USD holders to "settle"... which USD holder would you target?   It would make USD non-fungible.   If you don't have any forced settlement then it would be like the original BitAssets shorted to oblivion.

Well my main point was why force-settle at all on either side to create imbalance?  Is it necessary?  (Note: technically you can force-settle proportionally on all bitUSD holders to maintain fungibility, but that's besides the point.  Also what about fungibility of long BTS(short bitUSD) holders?)

I'm not familiar with what happened with the original BitAssets, but what is the thesis of why it was 'shorted to oblivion' and why forced settlement will fix it?   (Also what is the % confidence level of your thesis?  )

Original BitUSD slipped to $0.85 because no one was buying it and lots of people were selling it.   Forced settling merely keeps the peg closer than without it.   I don't think we need to have it balanced both ways.   If you go short you essentially sign a contract to "buy it back from the market" and that is your only exit route.   When you buy BitUSD you are buying a guarantee that you can sell it for about $1.  Without forced settlement then you don't have the guarantee.  Shorts don't need a "guarantee to buy at $1".   

So if you set your expectations right: 
  - shorts can sell at any price but may be forced to buy at $1 at any time.
  - longs can buy at any price, can sell at any price, and always have the option to sell for $1

So you can view a short position as a hybrid-contract:  half loan, half option.   When you short you are also SELLING AN OPTION.   When you lend you are also BUYING AN OPTION to settle.   What this means is that to increase the supply you must pay a high enough price to cover the cost of the OPTION.   

With this pricing model/view we can see that the market is balanced and that new USD will only be created when demand is high enough to cover the cost of the option contract.   All "Forced Settlement" is doing is "exercising an option".

Will this peg "hold", yes it will.   Will it always be worth at least $1 yes.   Will the cost to buy it sometimes be far more than $1, YES.   

So we can now say that BitUSD has a FLOOR of $1 and can go up from there.   As a merchant / consumer that is all you care about (the floor).  The presence of a floor means that people can trade USD for BitUSD and purchase things with BitUSD without having to think about whether it is worth $1.    The only people that actually have to think about whether to buy at $1.05 or not are traders... they take the risk that short demand will increase and push the price back down toward $1.00.  On the other hand, in a bear market short demand may decrease and push BitUSD up to $1.10.    Thus when you go short you are not just speculating on the value of USD vs BTS but on the future SHORT demand.   

All that we need for the system to be successful is a means of quantifying the trades and guaranteeing a floor. Once you have a floor it is effectively pegged for everyone who doesn't look at the markets or care to speculate in the markets.

ah ? Isn't 1.05USD for 1 BitUSD will also be the reality for the consumers ? In the end they need to buy 1 BitUSD somewhere , and that somewhere has 1 BitUSD with the cost of 1.05 USD , then the customer would have to buy it at 1.05 USD too unless that somewhere are willing to pay for the extra cost to please the customers .

There will be arb opportunities.   Bottom line the cost for increasing the USD supply will be 5% per USD in that event.    Many people that are only dealing in USD <--> BitUSD transactions will simple use parity.  This means that merchants will not change their prices and a customer that pays with BitUSD does so at an opportunity cost of 5%.  But that 5% cost is meaningless if they never wanted to own BTS in the first place.    It just means that the USD/BTS market is 5% arb opportunity.   Everyone else who simply wants to use it as a currency can SAFELY accept it at $1 and in most cases turn around and sell it for slightly more than $1.   

When there is heavy demand to sell BitUSD then USD holders may have to wait in line to get out at $1 or accept 0.99 or 0.98 to get out immediately.   On the other hand the GOAL is that people don't sell into BTS to EXIT their USD position, they sell BitUSD for USD and they will always find a healthy market at $1.   

[Ander]

#1 No explicit short sell price limit
#2 No pre-set expiration on short positions.
#3 Any time someone with USD is unhappy with the current internal market price, they can request settlement at the 99% of feed (a 1% fee) in X days, where X is more than 24 hours.
#4 On settlement day the least collateralized short position is forced to settle at 99% of feed (a 1% profit)
#5 At any time entire market can be settled at the feed price given 30 day notice to be executed only in the event that all USD holders are unwilling to sell anywhere near a fair price. (black swan protection), this settlement can be canceled if the market returns to normal voluntarily.
#6 200% collateral

In effect a short position is a "loan" that is callable based upon price or X day notice.

I think this is all excelelnt, but I dont understand the details of #5.    How would the black swan protection be triggered?  Would this be an automatic event based on some mathematical computation?  Or would it be triggered by some community or delegate vote or something.


A question on the 1% fee:  I think that how this will work is that the blockchain will take the bitUSD of the person demanding conversion, and take the BTS of the short, at the feed price, and then it will burn 1% of the BTS, and give 99% to the bitUSD holder.  The burned BTS would thus be deflationary and represent a profit for Bitshares.  Is this correct?  This sounds great, we need more ways to make bitshares profitable.

[btswildpig]

You cannot force USD holders to "settle"... which USD holder would you target?   It would make USD non-fungible.   If you don't have any forced settlement then it would be like the original BitAssets shorted to oblivion.

Well my main point was why force-settle at all on either side to create imbalance?  Is it necessary?  (Note: technically you can force-settle proportionally on all bitUSD holders to maintain fungibility, but that's besides the point.  Also what about fungibility of long BTS(short bitUSD) holders?)

I'm not familiar with what happened with the original BitAssets, but what is the thesis of why it was 'shorted to oblivion' and why forced settlement will fix it?   (Also what is the % confidence level of your thesis?  )

Original BitUSD slipped to $0.85 because no one was buying it and lots of people were selling it.   Forced settling merely keeps the peg closer than without it.   I don't think we need to have it balanced both ways.   If you go short you essentially sign a contract to "buy it back from the market" and that is your only exit route.   When you buy BitUSD you are buying a guarantee that you can sell it for about $1.  Without forced settlement then you don't have the guarantee.  Shorts don't need a "guarantee to buy at $1".   

So if you set your expectations right: 
  - shorts can sell at any price but may be forced to buy at $1 at any time.
  - longs can buy at any price, can sell at any price, and always have the option to sell for $1

So you can view a short position as a hybrid-contract:  half loan, half option.   When you short you are also SELLING AN OPTION.   When you lend you are also BUYING AN OPTION to settle.   What this means is that to increase the supply you must pay a high enough price to cover the cost of the OPTION.   

With this pricing model/view we can see that the market is balanced and that new USD will only be created when demand is high enough to cover the cost of the option contract.   All "Forced Settlement" is doing is "exercising an option".

Will this peg "hold", yes it will.   Will it always be worth at least $1 yes.   Will the cost to buy it sometimes be far more than $1, YES.   

So we can now say that BitUSD has a FLOOR of $1 and can go up from there.   As a merchant / consumer that is all you care about (the floor).  The presence of a floor means that people can trade USD for BitUSD and purchase things with BitUSD without having to think about whether it is worth $1.    The only people that actually have to think about whether to buy at $1.05 or not are traders... they take the risk that short demand will increase and push the price back down toward $1.00.  On the other hand, in a bear market short demand may decrease and push BitUSD up to $1.10.    Thus when you go short you are not just speculating on the value of USD vs BTS but on the future SHORT demand.   

All that we need for the system to be successful is a means of quantifying the trades and guaranteeing a floor. Once you have a floor it is effectively pegged for everyone who doesn't look at the markets or care to speculate in the markets.

ah ? Isn't 1.05USD for 1 BitUSD will also be the reality for the consumers ? In the end they need to buy 1 BitUSD somewhere , and that somewhere has 1 BitUSD with the cost of 1.05 USD , then the customer would have to buy it at 1.05 USD too unless that somewhere are willing to pay for the extra cost to please the customers .

[bytemaster]

You cannot force USD holders to "settle"... which USD holder would you target?   It would make USD non-fungible.   If you don't have any forced settlement then it would be like the original BitAssets shorted to oblivion.

Well my main point was why force-settle at all on either side to create imbalance?  Is it necessary?  (Note: technically you can force-settle proportionally on all bitUSD holders to maintain fungibility, but that's besides the point.  Also what about fungibility of long BTS(short bitUSD) holders?)

I'm not familiar with what happened with the original BitAssets, but what is the thesis of why it was 'shorted to oblivion' and why forced settlement will fix it?   (Also what is the % confidence level of your thesis?  )

Original BitUSD slipped to $0.85 because no one was buying it and lots of people were selling it.   Forced settling merely keeps the peg closer than without it.   I don't think we need to have it balanced both ways.   If you go short you essentially sign a contract to "buy it back from the market" and that is your only exit route.   When you buy BitUSD you are buying a guarantee that you can sell it for about $1.  Without forced settlement then you don't have the guarantee.  Shorts don't need a "guarantee to buy at $1".   

So if you set your expectations right: 
  - shorts can sell at any price but may be forced to buy at $1 at any time.
  - longs can buy at any price, can sell at any price, and always have the option to sell for $1

So you can view a short position as a hybrid-contract:  half loan, half option.   When you short you are also SELLING AN OPTION.   When you lend you are also BUYING AN OPTION to settle.   What this means is that to increase the supply you must pay a high enough price to cover the cost of the OPTION.   

With this pricing model/view we can see that the market is balanced and that new USD will only be created when demand is high enough to cover the cost of the option contract.   All "Forced Settlement" is doing is "exercising an option".

Will this peg "hold", yes it will.   Will it always be worth at least $1 yes.   Will the cost to buy it sometimes be far more than $1, YES.   

So we can now say that BitUSD has a FLOOR of $1 and can go up from there.   As a merchant / consumer that is all you care about (the floor).  The presence of a floor means that people can trade USD for BitUSD and purchase things with BitUSD without having to think about whether it is worth $1.    The only people that actually have to think about whether to buy at $1.05 or not are traders... they take the risk that short demand will increase and push the price back down toward $1.00.  On the other hand, in a bear market short demand may decrease and push BitUSD up to $1.10.    Thus when you go short you are not just speculating on the value of USD vs BTS but on the future SHORT demand.   

All that we need for the system to be successful is a means of quantifying the trades and guaranteeing a floor. Once you have a floor it is effectively pegged for everyone who doesn't look at the markets or care to speculate in the markets.   

[merivercap]

You cannot force USD holders to "settle"... which USD holder would you target?   It would make USD non-fungible.   If you don't have any forced settlement then it would be like the original BitAssets shorted to oblivion.

Well my main point was why force-settle at all on either side to create imbalance?  Is it necessary?  (Note: technically you can force-settle proportionally on all bitUSD holders to maintain fungibility, but that's besides the point.  Also what about fungibility of long BTS(short bitUSD) holders?)

I'm not familiar with what happened with the original BitAssets, but what is the thesis of why it was 'shorted to oblivion' and why forced settlement will fix it?   (Also what is the % confidence level of your thesis?  )

[bytemaster]

You cannot force USD holders to "settle"... which USD holder would you target?   It would make USD non-fungible.   If you don't have any forced settlement then it would be like the original BitAssets shorted to oblivion.

[merivercap]

#1 No explicit short sell price limit
#2 No pre-set expiration on short positions.
#3 Any time someone with USD is unhappy with the current internal market price, they can request settlement at the 99% of feed (a 1% fee) in X days, where X is more than 24 hours.
#4 On settlement day the least collateralized short position is forced to settle at 99% of feed (a 1% profit)
#5 At any time entire market can be settled at the feed price given 30 day notice to be executed only in the event that all USD holders are unwilling to sell anywhere near a fair price. (black swan protection), this settlement can be canceled if the market returns to normal voluntarily.
#6 200% collateral

In effect a short position is a "loan" that is callable based upon price or X day notice.

Expected Outcome:
1) The price feed should be irrelevant unless the current market price is below 99% the expected price feed in X days
2) No shorts would dare sell down the price much below the expected feed for long because longs can force settlement to call their bluff.
3) The market has a graceful escape valve where all parties have ample time to voluntarily settle to avoid being forced settled. 
4) Well collateralized shorts never have to cover
5) USD holders are guaranteed liquidity at 99% of the feed within X days (potentially as little as 24 hours).

All that is required is the threat of forced settlement to keep the market fair, by charging a fee for forced settlement longs that demand liquidity compensate the shorts who were forced out.  Over all the market rules are simpler, liquidity is much greater, and all parties are far more protected than they are today.

Thoughts?

I agree with:
#1 Great
#2 Great
#6 Awesome to have equal collateral (100%) on each side.

All the above balances the longs & shorts.  I think this will have a very positive effect.

I disagree with the rest:
#3 & #4 - Why are we allowing the bitUSD holder to force settlement & not vice versa?  It reintroduces imbalance.  Shorts & longs should be equal.  Is manipulation a concern if both sides are equal?
#5  - Force settling the entire market?   Is this necessary and what is the purpose?  It's probably unlikely, but it just seems ripe for a huge manipulation payday.

I don't trust the current price feeds.  Hypothetically, BTC38 and BTER can collude.  The exchanges can create a fake market.  They can buy/sell BTS they don't have.  In the future when there are more trusted and diverse sources of price feeds forced settlement of any kind probably won't be a problem, but why even risk it?

Anyways I like simple and balanced and I believe traders will too.  #3,#4,#5 create unnecessary complications.

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

Can you explain these other issues?

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.     

Why is this so bad?  Mainstream bitUSD holders and merchants will just use it like a currency and won't care about going in and out.  A lot of people may not even care to know what Bitshares or Bitcoin is and may not even know there is anything to settle in the first place.  Also once there is more liquidity from creating a balance of longs & shorts, bitUSD holders will have no problem going in and out. 

[inarizushi]

BitAssets 3.0 seem absolutely great. I want them. BUT :
1) letting all the current shorters bleed to death is not nice at all (and that's what announcing 3.0 does, nobody want to shorts anymore)
2) Cohabitation will cause so much trouble. Nobody will ever have enough patience to understand the difference between bitUSD1 and bitUSD2. Only bitAssets3.0 should be there, but the shorters and holders have to be rightly compensated. Can't we find a fair way to convert a current short into a bitAsset3.0 short ? That would be perfect.

The end of the road seems a great place to be. The path to there is still full of shit.

[graffenwalder]

Let's assume for a second that Bitassets 3.0 are implemented.
And I'm a new user interested in using them.

Can you ELI5 bitassets in 10 sentences? (more I would probably walk away)

[Ander]

A fiat <--> bitAsset gateway IS a big priority right now..

And having one would also be a big help to future merchant adoption once that becomes important.

[mf-tzo]

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..

 

---------------- Detour (only read if you want to detour from this topic a bit) ... ----------------

Are there any merchants accepting bitUSD?  If not, want one?

I'll get you one setup within 24 hrs, if people will actually use bitUSD to purchase.

I've helped them setup with various other coins, but none of the coins communities supported the effort (and used their coins to purchase).

I believe they're back down to only accepting BTC (outside of fiat) at this point. Say the word and I'll do my best!

P.S. If I do this, and once again there is no support from the community requesting it, I will shame your community publicly! =b
Seriously, it gets old having communities tell you they want merchants, then watch that community never use the merchants you bring them.
It also reflects poorly on me with the merchants. So please don't waste my time (or the merchants) unless you are serious. I went through this with Dogecoin and a few others.
Please excuse my lack of excitement. I'm trying really hard to keep the faith in this, "we need merchants", speech coins give. Restore my faith BTS!

---------- Back to your regulurly scheduled discussion ---------

I dont think merchant adoption of bitUSD is the priority right now, and I dont think you will get a lot of merchant use of bitUSD right now if you work on it.  So you'll end up publically shaming us.

The priority right now is TRADERS.  We want to be an EXCHANGE.  We want bitUSD to be a cash option on our internal exchange, used by traders who trade  between having price exposure to BTS, fiat (bitUSD/bitCNY/etc), gold, silver, oil, etc, etc.   

Merchant adoption of bitUSD/bitCNY would come after this is successfully established.  (Probably through a bitpay like gateway).  We would need a gateway that accepts and converts from real USD to bitUSD interchagably.  Then merchants could sign up with this gateway the way they currently sign up with bitpay to accept bitcoin. 

We need to make the internal BTS market work well for traders first, because that is our main function and target market right now.  And then work on merchant adoption later.


(Of course, if anyone 'official' wants to come out and say "no, bitUSD merchant adoption is the priority now, and here is why", then they could change my mind).

lol..Under no way I was implying that bitusd for merchants is a priority now. Of course we need to establish first as a decentralized exchange (although I always imagined Bitshares as a decentralized bitassets derivatives clearing house but anyway that is another story) to attract traders. But once we go to v1 the rules should not change for a couple of years at least so we shouldn't create unfavor conditions for these who want to exchange bitusd to usd instantly and without limits (gateways, merchants etc). Anyway apparently it was not important and I am sure I misunderstood the implied mechanics..

[xiahui135]

As long as the BTA is well backed, people can hold BTA with no worry.
The stable value of BTA comes from pegging--- a market make action (like Nubits) or merchant adoption.
So the primay purpose is to make BTA well backed, we need a strong BTS price. The market need to let the  shorter in advantage, not the BTA holder. At least the shorter need to be equal to the BTA holder.

Edit:
As for the interest, there is no need for the system to pay to BTA holder. It is like people do not get interest for the money in his hand, but for money in the bank. BTA holders need to invest their money to a investment fund to get interest. The bank pay interest because it uses the money to make more money.

The system interest need to pay the system shareholder: longterm BTS holder.That is a very important reason they hold the share----because the share generate value.
If not, then the shareholder must sell the shares to get profit. That is a pure price speculation, and overall the shareholder group as a hole will finally fail for just giving value to other groups(the 101 and BTA holders), but get little.

[Ander]

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..

 

---------------- Detour (only read if you want to detour from this topic a bit) ... ----------------

Are there any merchants accepting bitUSD?  If not, want one?

I'll get you one setup within 24 hrs, if people will actually use bitUSD to purchase.

I've helped them setup with various other coins, but none of the coins communities supported the effort (and used their coins to purchase).

I believe they're back down to only accepting BTC (outside of fiat) at this point. Say the word and I'll do my best!

P.S. If I do this, and once again there is no support from the community requesting it, I will shame your community publicly! =b
Seriously, it gets old having communities tell you they want merchants, then watch that community never use the merchants you bring them.
It also reflects poorly on me with the merchants. So please don't waste my time (or the merchants) unless you are serious. I went through this with Dogecoin and a few others.
Please excuse my lack of excitement. I'm trying really hard to keep the faith in this, "we need merchants", speech coins give. Restore my faith BTS!

---------- Back to your regulurly scheduled discussion ---------

I dont think merchant adoption of bitUSD is the priority right now, and I dont think you will get a lot of merchant use of bitUSD right now if you work on it.  So you'll end up publically shaming us.

The priority right now is TRADERS.  We want to be an EXCHANGE.  We want bitUSD to be a cash option on our internal exchange, used by traders who trade  between having price exposure to BTS, fiat (bitUSD/bitCNY/etc), gold, silver, oil, etc, etc.   

Merchant adoption of bitUSD/bitCNY would come after this is successfully established.  (Probably through a bitpay like gateway).  We would need a gateway that accepts and converts from real USD to bitUSD interchagably.  Then merchants could sign up with this gateway the way they currently sign up with bitpay to accept bitcoin. 

We need to make the internal BTS market work well for traders first, because that is our main function and target market right now.  And then work on merchant adoption later.


(Of course, if anyone 'official' wants to come out and say "no, bitUSD merchant adoption is the priority now, and here is why", then they could change my mind). 

[Helikopterben]

While any forced transaction will limit the free market, we have to remember why BTA have any value at all. They have value since supply=demand at a price where BTA value=peg of some external market. Since demand is external to the system, supply must be controlled by the system so BTA will have any value at all. There is no way to avoid forced transactions. The question is how to set it up fairly.

This may be true now, but may not necessarily be true at higher levels of adoption.  Legacy futures and paper markets largely influence prices on external physical markets.  I agree that true prices are prices in which buyer and seller agree on the exchange of the physical good in question, however, derivatives markets do influence prices because there are use cases such as 'store of value' that is more efficient when done in a digital format.  Bitshares could one day become large enough to influence physical market prices.

[maqifrnswa]

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..

 

There is no limit in how much they can convert in bitshares 3.0 - just exchange it on the market instantly. The limits BM mentioned only apply to forced calls to reduce excess BTA supply, not to converting to/from BTA and BTS.

[maqifrnswa]

Bottom line:  Any time you force someone into a transaction they do not agree to, you are limiting the free market.  Obviously, some forced transactions such as margin calls are necessary to protect the integrity of the system.

While any forced transaction will limit the free market, we have to remember why BTA have any value at all. They have value since supply=demand at a price where BTA value=peg of some external market. Since demand is external to the system, supply must be controlled by the system so BTA will have any value at all. There is no way to avoid forced transactions. The question is how to set it up fairly.

Currently: BTA supply increases when someone is willing to generate them at or below a price that an external market says is allowed (limiting free market), and BTA are destroyed when someone closes out their short position. If these transactions don't occur close enough to the peg, the system automatically forces margin calls to reduce supply.

The new system: BTA supply increases whenever someone wants to short BTS and is decreased whenever someone wants to close their position (both creation and destruction are free). However, if supply deviates from demand enough that the BTA value is not = peg, then the system will allow for forced transactions to reduce supply.

[Tuck Fheman]

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..

 

---------------- Detour (only read if you want to detour from this topic a bit) ... ----------------

Are there any merchants accepting bitUSD?  If not, want one?

I'll get you one setup within 24 hrs, if people will actually use bitUSD to purchase.

I've helped them setup with various other coins, but none of the coins communities supported the effort (and used their coins to purchase).

I believe they're back down to only accepting BTC (outside of fiat) at this point. Say the word and I'll do my best!

P.S. If I do this, and once again there is no support from the community requesting it, I will shame your community publicly! =b
Seriously, it gets old having communities tell you they want merchants, then watch that community never use the merchants you bring them.
It also reflects poorly on me with the merchants. So please don't waste my time (or the merchants) unless you are serious. I went through this with Dogecoin and a few others.
Please excuse my lack of excitement. I'm trying really hard to keep the faith in this, "we need merchants", speech coins give. Restore my faith BTS!

---------- Back to your regulurly scheduled discussion ---------

[Helikopterben]

Bottom line:  Any time you force someone into a transaction they do not agree to, you are limiting the free market.  Obviously, some forced transactions such as margin calls are necessary to protect the integrity of the system.

I never really saw the problem with the original design.  I know liquidity was a concern, but liquidity entering the system is a function of time.  In other words, people will gradually move assets into the system over time as they become comfortable with the reliability, usability, and security of the system.

If you must guarantee liquidity to USD holders, then I believe the current 3.0 proposal is a good one.  Perhaps allow 5% of supply to be redeemed per day instead of the 1% as someone else suggested.  Make forced liquidation an option that the user has to enable and make the user accept a warning that they will only recieve 99% of a dollar's value 24 hrs into the future, to deter users from exercising this function.  Hopefully this will be an option that rarely gets used if ever.  Once significant liquidity enters the system, the vast majority of users should have no problem redeeming well within 99% of the feed, except possibly on rare occations during extremely volatile times.

[xiahui135]

if we want to save BTS, we need the market is in balance, or even a little better for shorts.

Though there will be a little more BTA in the market, the BTA will be well backed. And we need not to worry about the BTA amount, as long as it can be pegged by money changer.

[merivercap]

Can someone tell me what the current price feed is or price feeds are? 

Is it the average of the USD->BTC->BTS chain at various exchanges?

Just looking for a link..thx.

This is currently the most popular tool set that includes a python feed script: https://github.com/bitsuperlab/operation_tools

Thanks Riverhead. I'm not a coder, but digging in it seems BTC38, BTER, Yunbi are the exchanges and the script pulls USD->CNY info from Yahoo?  I assume the price feed is then: USD->CNY->BTS using the following exchanges: BTC38/BTER/Yunbi for CNY->BTS

Thx.

[xiahui135]

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. This will give potential  bitUSD buyer a chance to buy the bitUSD, this can reduce unnecessary settlement and reduce settle-attack. Force-settle will force the short order that will the less collateral rate first, and the oldest order settle first.

从我的 iPhone 发送，使用 Tapatalk

Start sounds better than you original proposal now.
I think the second and third sounds reasonable. The first one need specify how to do that.

[xiahui135]

it is hard to fix all the problem, but we can concern on the main and most important problem. Make discisions on this, and we then consider how to solve other problem under the structure.

[BTSdac]

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.

Hi BM , I don`t know why you did not comment my suggestion , maybe I did not describe it clearly .

if the (BITUSD:BTS)/(USD:BTS)<(1-X)  can enforce cover short order whose collateral lower than (x/100+1)*100% by order from low collateral  to high 
I mean assume now the usd:bts (by feed ) =100,  sell bitusd at price  bitusd:bts <99 can enforce all short order whose collateral <200% , bitusd:bts  <98 can enforce all order whose collateral <300%.

eg. usd:bts( by feed)=100, if there is only one short order whose collateral <200%.
there are bitusd sell orders whose price < usd:bts (by feed)  ,one`s price is 98.8 and other is 98.9.
the sell order whose price is 98.8 exchange with enforced short order ,
so the bitusd holder cannot sell his bitusd at a fix price .he have join market squad. and also short order with high collateral cannot been enforced cover .

1) most of  bitusd holder can settle his bitusd at 0.99 feed price .
2) all bitusd holder cannot settle his bitusd at a fix price compare with feed price .
3) all bitusd holder settle his bitusd in a marketing sell squad
4)all short order have a risk of enforced cover  by bts holder ,  but the higher collateral smaller risk.
5) all short order have to back some bitusd to make his collateral larger than 150% , there is no expiration for   short order with enough  collateral

[天籁]

 

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. This will give potential  bitUSD buyer a chance to buy the bitUSD, this can reduce unnecessary settlement and reduce settle-attack. Force-settle will force the short order that will the less collateral rate first, and the oldest order settle first.

从我的 iPhone 发送，使用 Tapatalk

[Riverhead]

Can someone tell me what the current price feed is or price feeds are? 

Is it the average of the USD->BTC->BTS chain at various exchanges?

Just looking for a link..thx.

This is currently the most popular tool set that includes a python feed script: https://github.com/bitsuperlab/operation_tools

[merivercap]

Can someone tell me what the current price feed is or price feeds are? 

Is it the average of the USD->BTC->BTS chain at various exchanges?

Just looking for a link..thx.

[starspirit]

i) Is it possible to solve the problem of lagged price feeds as follows?

Settlement/trade is effective instantly, but the settlement value at that timestamp is determined in a verifiable manner after the fact according to a prescribed algorithm/formula. So for instance, it could be based on a formula using a specified weighted average of mid-prices from a given set of exchanges. The "formula" could be voted in by delegates, and changed in future if necessary according to another vote. [Edit] Instantaneous price feeds by delegates would be merely indicative - the true settlement value is deterministic afterward but still requires way to form a consensus on value at past timestamps. [end edit].

Such an approach is similar to how many derivatives are traditionally settled.

The advantage of this approach is it removes the need for a 24 hour delay before becoming effective, it merely requires some delay before a value transfer occurs in line with the calculated settlement.

This does not remove the need for queuing discussed further below.

ii) Creation and cancellation can both occur at the price feed

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. 

In principle, if there is comfort with the settlement procedure, there is no reason why new currency creation cannot also be forced to occur at the price feed, just like currency cancellation. Where there are offsetting requests for creation and cancellation, these help fulfil the needs of both sides more quickly.

You can consider this to be a creation/cancellation market. A completely free market in bitUSD versus BTS and other assets would exist outside it, and allow for more urgent exchange when the creation/cancellation market is subject to queues.

In fact the Currency Creation Market described in my whitepaper gives the most generalised form of this, inviting any parties that wish to transact at the price feed.

iii) Queuing is probably a reasonable idea, but results from insufficient liquidity in the collateral

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.     

There needs to be a way to deal with potential manipulation of the BTS price. My initial feeling is that the approach of queuing is a workable solution, although the 1% should be faster and vary with liquidity in the external BTS market. Having said that, I do think we need to consider the wider ramifications it might have on the design of a bond market, so we see the big picture before implementing it.

The implication is that the price of the bitUSD will float away from the peg in external markets, reflecting the cost of time in the queues. However as BM mentioned, such spreads would probably occur anyway because of the uncertainty in converting large settlement parcels of BTS into real USD.

The root problem is that we are using a form of financial collateral (BTS) that is not very liquid, unlike say government bonds, a key form of collateral in the traditional financial world. We don't have any other option right now, although for those curious I have suggested elsewhere that it might be possible to create a bitBTC collateral backed by real BTC, that might be more liquid and less easily manipulated, which could improve market confidence.

iv) We should explore how to incentivise shorts when they are unwilling to take positions

I think we need to consider this further. Although BitAsset 3.0 does not require shorts to pay yield, it is just as restrained at the zero interest bound as any yield based approach would be. It may be possible for example to have a completely flexible yield not subject to the zero interest bound if we create an enforceable payment mechanism from longs to shorts. I've considered this separately in the form of deposit accounts, but it needs more work.

[Ander]

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.

[mf-tzo]

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?

[bytemaster]

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.

[Ander]

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.

[zerosum]

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.

[bytemaster]

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.   

[bytemaster]

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. 

[zerosum]

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.

[joele]

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.

[Bitcoinfan]

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%?

[zerosum]

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.

[NewMine]

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.

[BTSdac]

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.

[lastagile]

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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[bytemaster]

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.