Author Topic: BitAsset 3.0 Concerns  (Read 12247 times)

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Offline BTSdac

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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
« Last Edit: April 28, 2015, 05:16:53 am by BTSdac »
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Offline 天籁

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 +5%

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.

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Offline 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

Offline merivercap

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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.
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Offline starspirit

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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.
« Last Edit: April 28, 2015, 01:16:50 am by starspirit »

Offline Ander

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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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Offline mf-tzo

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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 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.
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Offline Ander

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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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zerosum

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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 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.   
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Offline 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. 

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.

zerosum

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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 joele

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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.

Offline Bitcoinfan

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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 »