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Offline bytemaster

BitAssets 2.0 (formally 3.0)
« on: May 03, 2015, 07:24:04 AM »

Note:  What we have been calling BitAssets 3.0 I am renaming to BitAssets 2.0 for this paper because otherwise everyone outside this forum would be confused if we started talking about 3.0 when 2.0 never existed.     

BitAssets 2.0
Stable Decentralized Digital Currencies

This paper introduces a practical approach to creating a stable digital currency.  There have been many proposed strategies for “price fixing” a digital currency to a national currency or other commodity.    Historically the goal is for the asset to have a market value within a very tight tolerance of an outside asset.    This paper would like to challenge that goal and instead propose a different goal: maintain a minimum value for the asset but do not attempt to control the maximum value.
   
For the purposes of this paper BitUSD will refer to any digital crypto-currency that is intended to be worth $1.00.  BitUSD is merely an example to facilitate discussion and in general could be substituted with any other commodity or currency.   For a crypto currency token we will assume BTS, but it could just as easily be any other crypto-currency. 
When two people get together to barter goods, it is often the case that neither party knows the *exact* value of the goods they are trading.   Instead, each party considers the “minimum value” each item may have to them and uses this minimum value to set their prices.    This principle holds true for almost all merchants that accept crypto-currencies as payment for goods and services.   These merchants set their prices based upon the risk of the crypto-currency falling in value between the time they accept payment and the time they convert the payment to a stable store of value.    A customer paying for something with Bitcoin often does so at an exchange rate that is lower than what they could theoretically get if they sold instantly at an exchange.   

Each and every day people trade pennies which have $0.02 worth of copper in them as if they were only worth $0.01.   The fact that somewhere there exists someone willing to pay $0.02 for the penny does not change the fact people use it at face value.   

Attempting to construct a crypto-currency that is “pegged” to the dollar means that every merchant accepting BitUSD is willing to do so at the same ratio as they would cash.   Conversely, every customer is willing to part with their BitUSD to buy a good without feeling they were overpaying.    This is a far looser definition of a pegged currency than many people attempt to construct, but it is also a far more useful one.

Creating BitUSD
All crypto-currencies are free floating assets with a value that is constantly changing with market perception.  This is the basic building block from which a stable currency must be forged.  The systems that have been proven to work are essentially variations on a *contract for difference* (CFD) where there is sufficient collateral tied up to honor the contract.   In a contract for difference one party agrees to pay the other party an amount equal to the change in price between two assets over time.     In this way the parties can gain opposite exposure to the price movements without ever having to own the asset they are speculating on.   

BitUSD is the long position of a CFD based on the exchange rate between BTS and a US Dollar and is collateralized with BTS.   All CFD contracts need a judge and this means either a trusted price feed, an arbitration agent, or voluntary settlement between the long and short side of the contract.    BitShares provides all three of these options.   Normally longs and shorts will choose to voluntarily settle at a fair price because it is the fastest and lowest risk option; however, at any time a long (BitUSD holder) may request to have their position settled at the median of a set of trusted price feeds with sufficient delay to ensure that neither party has access to information faster than the price feed can be updated.   

The magic of BitUSD is that it makes all long positions fungible and they can be used to settle any short position.   When a forced settlement is requested it is simply matched against the least collateralized of the short positions.    Thus we can say that any individual BitUSD is at least as valuable as the long position of the least collateralized CFD.  Its value takes into consideration the risk of the collateral becoming insufficient.     Based upon this construction we can clearly see that BitUSD will meet the necessary requirement to be accepted at face value by merchants. 

The precise exchange rate between BitUSD and the underlying crypto-currency is not relevant from the perspective of the users of BitUSD (merchants and consumers).  All merchants and consumers care about is knowing that if they pay $1.00 for a BitUSD they can sell it for $1.00 in the future.    In general merchants and consumers should need little if any knowledge about the underlying crypto currency (BTS) and therefore we should presume these users will never look at the BTS/BitUSD market.   The only people who care about the BTS/BitUSD market are crypto-currency speculators, market makers, and arbitrage bots.   

To establish BitUSD as a viable USD alternative simply means minimizing the arbitrage opportunity between merchants accepting BitUSD at $1.00 and selling to speculators for slightly more than $1.00.    Most users do not want to go from BitUSD through a crypto-currency to get to USD nor do they want to go from USD through a crypto-currency to get BitUSD.   Instead BitUSD to USD becomes the market that matters and it should develop a very narrow spread as USD flows from users bank accounts to BitUSD to merchants which then sell the BitUSD back to other users.  The spreads in BitUSD to USD would be so insignificant that everyone would consider them equal. 

While the spreads between BitUSD and USD may be low, the spread between BitUSD and the backing crypto-currency could be much larger due to the high volatility of the crypto-currency.   It is economically unviable to have large buy and sell walls any where near the price feed for the same reason that selling a large quantity in any market results in slippage.  The value of a crypto-currency is far to “fuzzy” in the mind of the market for anyone to make money making the market with a very narrow spread.
The real underlying demand that drives BitUSD:USD to 1:1 is from arbitrage bots and speculators buying BitUSD first as a means to buy the BTS more cheaply than via alternative channels.    This means that buying 1 BitUSD for $1.00 should always be the most cost effective means to purchase the underlying crypto-currency, BTS.   This realization has many implications for the design goals of BitAssets 2.0.

First and foremost this means that BitUSD holders should always be able to force settle at a fair price in just about any quantity in a relatively short period of time.  A whale looking to buy BTS in bulk would get the best price possible by buying BitUSD with USD and then selling it for BTS on the internal exchange.  In a worst case they could force settle it in a large quantity and still end up buying the BTS cheaper than alternative means.

  This would put pressure on the BitUSD:USD price lifting it to $1.01 USD per BitUSD.   The USD : BitUSD market price combined with the BitUSD : BTS market price can and should be factored into the BTS : USD price feed.  Thus a whale buying up BitUSD and raising the price would also move the price feed and keep the market balanced.
If the most effective means for buying BTS is through BitUSD then it means that selling BTS for BitUSD should also be the least efficient means of cashing out.  Instead BTS should be sold for USD through other channels more efficiently than through BitUSD.   The ability to sell BTS for USD is the foundation of the value of the collateral behind BitUSD.   If the collateral received by forced settlement cannot be sold for USD of equal or greater value then the price feed was off.  If it ever becomes more efficient to cash out of BTS into USD though BitUSD then the market will sometimes push BitUSD down to $0.99 and break the floor that merchants and consumers are counting on.
From this we can conclude that it is far better for price feeds to error in the favor of BitUSD holders than in the favor of shorts.   We can also conclude that the spread on the internal market should not be of any concern so long as buying BitUSD for $1.00 remains the most cost effective means of buying BTS.

Impact on Shorts
As a result of this analysis it is clear that those shorting BitUSD into circulation must by necessity sell at price above the feed and that creating BitUSD will always cost more than $1.00.  After all if buying BitUSD with USD at 1:1 is always going to be the most efficient means of buying BTS then that means someone buying BitUSD with BTS is always going to pay more than $1.00.   Thus someone buying BitUSD from a short will have to pay more than $1.00 worth of BTS for it otherwise the BitUSD will fall to less than $1.00.

BitUSD will initially be created by individuals who want to stay in a crypto currency but wish to have a price floor.   They must sell their BTS and receive less BitUSD than they would have received by selling their BTS for real USD.    The difference will depend upon the demand from shorts looking for leverage.   For the sake of an example, lets assume that there is a bear market and thus shorts are conservative and asking for $1.05 worth of BTS per BitUSD.   This means that the first BitUSD had to pay this spread.   It also means that he could turn around and ask $1.04 worth of BTS to exit his position.  In all likely hood there would be offers to buy at 1.03.  In other words, the BitUSD / BTS market should never be expected to trade centered on the price feed, but above the feed by an amount proportional to how bearish the market is.   In other words the spread of BTS to BitUSD will depend upon willingness of shorts to borrow and ultimately the how bullish/bearish the market is.

In a BTS bull market then the premium to create BitUSD would be low, perhaps $1.01 or even $1.00.    In a BTS bear market then the premium to create BitUSD would be high, perhaps $1.10 or more.   Shorts have no way to force a BitUSD holder out of their position and thus must price in the risk of being unable to buy BitUSD cheaply to cover.    In either case the result is proper, in a bear market BitUSD becomes the cheapest way to buy BTS and thus causes new money to flow in through BitUSD and ultimately allows shorts to cover from this new money at a fair price.   

Conclusion
The rules of BitAssets need to guarantee a floor on the value of BitUSD of $1.00 and the cost of providing this floor is certainly greater than 0.   Therefore, the cost of buying BitUSD from a short and thus creating new BitUSD should always be more than $1.00.   When things are bullish for BTS then the cost of providing the floor is lower than when things are bearish.   In a bear market the BitUSD supply would contract as all new money flowing into BTS via BitUSD would be sucked up by shorts covering. 





« Last Edit: May 03, 2015, 07:32:37 AM by bytemaster »
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Offline mdj

Re: BitAssets 2.0 (formally 3.0)
« Reply #1 on: May 03, 2015, 09:12:49 AM »
BitAssets 2.0 (or 3.0/whatever) is an interesting proposition but I do have a couple of concerns.

The model seems to rely heavily on there being BitAsset to real asset gateways which we don't have yet. Even if we did have one, the initial monopoly would cause the spreads to lead to BTS:BitUSD still being a cheaper option that converting to real USD.

I like the idea of real dollars being cheaper than BitUSD when converting from BTS as it takes into account the fact that BitUSD is far more convenient thus must come at a premium.

I'm quite averse to this model being directly implemented as a hard fork and would first like to see how it fares with DevShares. How else can this be tested? Perhaps a staggered release of the new algorithm on an asset to asset basis?

julian1

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Re: BitAssets 2.0 (formally 3.0)
« Reply #2 on: May 03, 2015, 09:30:42 AM »
I'll confess to not really understanding what the problem is with the current bitUSD and bitAsset approach.

There is a terrible bug, that prevents shorts from covering (with their own collateral), but I believe it has been fixed in devel?

I also understand that nobody wants to short bitusd into existence, due to exposure to the falling bts price. However, the corollary is that there is (virtually) no real demand for bitusd as a currency, so the quantity of bitusd on issue isn't posing a genuine barrier to adoption. If there was fundamental demand for bitusd, then there would be corresponding demand for bts, which would result in more market-makers/speculators shorting.

Did the peg actually break?

At the moment, all the proposals for bitassets v2, 3 are sending the message that the Bitshares peg 'experiment' has failed. Yet I'm not convinced this has been clearly demonstrated. If it is actually broken, then remedial changes to the protocol, ought to be justified solely in terms of their ability to fix current problems.

As I see it, the problems Bitshares faces are marketing, the cost of end-user conversions / issues around bitcoin maximalism, bugs, and the fact that web support isn't a good fit with the c++ codebase, such that the creation of an integrated web-wallet has been delegated outside the core Bitshares dev team (moonstone).

Offline sittingduck

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Re: BitAssets 2.0 (formally 3.0)
« Reply #3 on: May 03, 2015, 12:29:14 PM »
The current system barely works even when there are no bugs.  This system is much simpler to explain.  I believe bytemaster is trying to say that a lack of shorts selling at the feed is ok.  I also agree that even without fiat ramps, the most cost effective way to buy bts should be by buying bitusd first.  This is the only way we can be sure bitusd is the most directly liquid. 


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Offline lastagile

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Re: BitAssets 2.0 (formally 3.0)
« Reply #4 on: May 03, 2015, 02:28:35 PM »
Do u mean we will go live the 3.0 without modification?

Make it simple, what are the changes?
« Last Edit: May 03, 2015, 02:56:26 PM by lastagile »

Offline triox

Re: BitAssets 2.0 (formally 3.0)
« Reply #5 on: May 03, 2015, 03:39:08 PM »
Does this system assume USD<>BitUSD gateways/markets?

In that case it would seem to me that Bitassets 1.0 is a more resilient system as it only assumes itself (Bitshares internal exchange) and a decentralized data feed.

Resiliency and independence from the outside world is the essence of cryptocurrency.
Without it we can just use the damn bank account.

zerosum

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Re: BitAssets 2.0 (formally 3.0)
« Reply #6 on: May 03, 2015, 05:07:58 PM »
BM -
1. I like the idea the bitUSD/BTS price to be included (fed back) in the price feed for USD:BTS.

2.Other than that, I honestly do not like your analyses. They are more like a wishful thinking more than anything else.[and I do like bitAssets 2.0 far more than the current model!]

What I mean is you are saying that "$1.00/bitUSD should be the floor, and fail in explaining why it will be the floor. [Actually I believe that about $0.99 will be the floor and that if you set the settlement at 0.99 and all (not only 5% or whatever % can settle in 24h]

Here is one of the main points where it all goes wrong.
The real underlying demand that drives BitUSD:USD to 1:1 is from arbitrage bots and speculators buying BitUSD first as a means to buy the BTS more cheaply than via alternative channels.    This means that buying 1 BitUSD for $1.00 should always be the most cost effective means to purchase the underlying crypto-currency, BTS.   This realization has many implications for the design goals of BitAssets 2.0.
Actually it does not mean that   buying 1 BitUSD for $1.00 should always be the most cost effective means to purchase the underlying crypto-currency, BTS.  That means that buying for as little as possible should be the best price for them! So buying for $0.95 will be better!

Now we come to the next point - is there gonna be conditions at which there will be sellers at $0.95?

The answer is generally 'Yes' - At bull market times it is feasible to short below 1:1 and still profit [*1]

The question then becomes how much below $1.00/bitUSD will such shorting  still be profitable?
In the proposed system "0.99*feed price settlement with no restriction on the % of bitUSD longs that can request a settlement" the answer is about 0.99 adjusted for 1day volatility.


So in other words the bitAsset 2.0 will effectively put the floor on bitUSD on a number directly proportional to the chosen settlement price compared to the feed price [other factors such as - margin requirements, % of all longs that can request settlement, as well as all other market rules that shift the risks for the short/longs - will also influence the exact floor of the bitUSD]





[*1] There is a very simple  explanation why it is so. Will try to explain if anybody interested.



Online Thom

Re: BitAssets 2.0 (formally 3.0)
« Reply #7 on: May 03, 2015, 05:37:17 PM »
I've been looking for a summary of the new BitAsset approach since the discussion began, and with the OP I now have it. There are a number of points brought up here worthy of highlighting:

  • Buying 1 BitUSD should always be the most cost effective means to purchase BTS
  • USD : BitUSD market price + BitUSD : BTS market price should be factored into the BTS : USD price feed
  • It is far better for price feeds to error in the favor of BitUSD holders than in the favor of shorts
  • Cashing out of BTS is done more efficiently (for USD through other channels) than using BitUSD
  • Creating BitUSD will always cost more than $1.00
  • BitUSD will initially be created by individuals who want to stay in a crypto currency but wish to have a price floor.

The last item tells me it's not likely BitAssets 2.0 is going to help in adoption or improving the marketcap in the short term.

Does this system assume USD<>BitUSD gateways/markets?

In that case it would seem to me that Bitassets 1.0 is a more resilient system as it only assumes itself (Bitshares internal exchange) and a decentralized data feed.

Resiliency and independence from the outside world is the essence of cryptocurrency.
Without it we can just use the damn bank account.

+5% for this post. Although I don't expect BM can say yay or nay to the question, it does cause me to ask if this was a factor in these new BitAsset changes. It also strikes to a core issue of autonomy from the corrupt FIAT banking system.

I'll confess to not really understanding what the problem is with the current bitUSD and bitAsset approach.
...
Did the peg actually break?

At the moment, all the proposals for bitassets v2, 3 are sending the message that the Bitshares peg 'experiment' has failed. Yet I'm not convinced this has been clearly demonstrated. If it is actually broken, then remedial changes to the protocol, ought to be justified solely in terms of their ability to fix current problems.

As I see it, the problems Bitshares faces are marketing, the cost of end-user conversions / issues around bitcoin maximalism, bugs, and the fact that web support isn't a good fit with the c++ codebase, such that the creation of an integrated web-wallet has been delegated outside the core Bitshares dev team (moonstone).

These too are excellent observations IMO, especially the last paragraph. I'm not convinced there is a plan or budget in the works for marketing of BitShares ecosystem beyond the existing community driven efforts which have largely dissipated. There certainly doesn't seem to be much marketing leadership or vision. IMO we should be focusing on what is lacking in performance and UX of the client software product.

I do not know how much of the performance issue resides on the server-network/blockchain side vs the client side. I DO know the poor UX (except performance related UX issues) is squarely on the client side. It is clear from watching the evolution of the client that we just don't have enough manpower with UI skills, or, there is no design vision for the UI that the community sees much value in. Contrast the core team's UI vision with that of the moonstone wallet and it's clear which is more popular and appealing. As a former UI developer I can attest to the difficulty of the task, and that it involves as much or more artistic talent than coding skills, not withstanding the need to be highly attuned to human factors such as user psychology / use case analysis.

Getting back to the topic of BitAssets 2.0, I think the current bear market has challenged BM to analyze BitAssets to assess if its original goals are still valid or could be improved. It is still not clear to me if the new approach should be adopted, or whether BitAssets 1.0 can co-exist with BitAssets 2.0. I see the new approach as being a new layer of economic analysis based on what has been learned to date from the BitAssets 1.0 experiment. As good as the OP is in explaining what the BitAsset 2.0 approach is, it doesn't provide a cost-benefit analysis for implementing it, including the opportunity costs such as what features will pushed further out. Even if coding time is not a major factor, design time and the thought required to write a position paper and think through the issues is bound to take away from other immediate development issues.

It's just not clear to me that there is much to gain from BitAssets 2.0 in the short term but it does have a negative short term impact by injecting something else to consider that takes away from the laser focus we need to produce a better user experience.
« Last Edit: May 03, 2015, 05:44:34 PM by Thom »
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Offline Agent86

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Re: BitAssets 2.0 (formally 3.0)
« Reply #8 on: May 03, 2015, 07:13:04 PM »
What I mean is you are saying that "$1.00/bitUSD should be the floor, and fail in explaining why it will be the floor. [Actually I believe that about $0.99 will be the floor and that if you set the settlement at 0.99 and all (not only 5% or whatever % can settle in 24h]

Here is one of the main points where it all goes wrong.
The real underlying demand that drives BitUSD:USD to 1:1 is from arbitrage bots and speculators buying BitUSD first as a means to buy the BTS more cheaply than via alternative channels.    This means that buying 1 BitUSD for $1.00 should always be the most cost effective means to purchase the underlying crypto-currency, BTS.   This realization has many implications for the design goals of BitAssets 2.0.
Actually it does not mean that   buying 1 BitUSD for $1.00 should always be the most cost effective means to purchase the underlying crypto-currency, BTS.  That means that buying for as little as possible should be the best price for them! So buying for $0.95 will be better!

Now we come to the next point - is there gonna be conditions at which there will be sellers at $0.95?

The answer is generally 'Yes' - At bull market times it is feasible to short below 1:1 and still profit [*1]

The question then becomes how much below $1.00/bitUSD will such shorting  still be profitable?
In the proposed system "0.99*feed price settlement with no restriction on the % of bitUSD longs that can request a settlement" the answer is about 0.99 adjusted for 1day volatility.


So in other words the bitAsset 2.0 will effectively put the floor on bitUSD on a number directly proportional to the chosen settlement price compared to the feed price [other factors such as - margin requirements, % of all longs that can request settlement, as well as all other market rules that shift the risks for the short/longs - will also influence the exact floor of the bitUSD]

[*1] There is a very simple  explanation why it is so. Will try to explain if anybody interested.
Yea, forced conversion at 99% seems random to me, may as well just make it convertible at 100% if you are going to do it, although I'm generally not a big fan of bitAssets 2.0 formally (formerly?) 3.0.

Should we let people who are force settling at the feed place a limit on what price feed they would accept at the time of settlement?  i.e.  Some news is announced and someone with bitUSD decides BTS is cheap and they request force settlement but by the time 24hrs is over the price has moved so much they don't want to settle at that price.  Or maybe just preventing someone from being completely screwed by a momentary price feed error like a script goes awry.

zerosum

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Re: BitAssets 2.0 (formally 3.0)
« Reply #9 on: May 03, 2015, 07:34:56 PM »
continued from here: https://bitsharestalk.org/index.php/topic,16127.msg206546.html#msg206546

Quote
BitUSD will initially be created by individuals who want to stay in a crypto currency but wish to have a price floor.   They must sell their BTS and receive less BitUSD than they would have received by selling their BTS for real USD.    The difference will depend upon the demand from shorts looking for leverage.   For the sake of an example, lets assume that there is a bear market and thus shorts are conservative and asking for $1.05 worth of BTS per BitUSD.   This means that the first BitUSD had to pay this spread.   It also means that he could turn around and ask $1.04 worth of BTS to exit his position.  In all likely hood there would be offers to buy at 1.03.  In other words, the BitUSD / BTS market should never be expected to trade centered on the price feed, but above the feed by an amount proportional to how bearish the market is.   In other words the spread of BTS to BitUSD will depend upon willingness of shorts to borrow and ultimately the how bullish/bearish the market is.

The above is somewhat correct [very broadly speaking] analyses in a bear market scenario only!

The  problem/analyses are very straight forward if we use synthetic positions.

a long BTS position =  long call BTS option + short put BTS option [both options at the same strike]

short bitUSD - is in reality leveraged long  BTS position; so in the current design if one shorts bitUSD he/she can be long up to about 150% BTS he owns.


So without going into too much details lets assume:
price of BTS - 100 BTS/USD;

There are call and put options with strike of  100 BTS/USD;

and
a) we are in bear market [as in expected bear market]
b) we are in bull market


The question is:
Is the price of the put  gonna be "more than the call price", "< of the call price" or "about the same" - in scenario  a) (i.e. bear market)?
Same question for case b) (bull market)?


assuming you all reached the correct and intuitive answer even without the math to prove it... It is the correct one though

......


So the above max short bitUSD position is (long) 1.5*BTS  = 1.5*( -call price   +put price) 
In other words in order to get the synthetic position one must buy the call and pay for it (so money outflow and minus) and can/should offset the total with the money received by selling the put, i.e. plus the amount received from the put sell!

In other words - When one is shorting he goes from 1.00*BTS to 1.5*BTS [assuming current collateral numbers and max recklessness of the shorter]; If we express this in its equivalent  synthetic position:
 This results in cash outflow (selling below the peg in a bull market) and cash inflow in a bear market (selling above the peg).
 Because 0.5*( +put price - call price) and (put price > call price in a bear market; put price < call price for options with the same strike in a bull market)



« Last Edit: May 03, 2015, 07:42:19 PM by tonyk2 »

Offline Troglodactyl

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Re: BitAssets 2.0 (formally 3.0)
« Reply #10 on: May 03, 2015, 07:40:34 PM »
What I mean is you are saying that "$1.00/bitUSD should be the floor, and fail in explaining why it will be the floor. [Actually I believe that about $0.99 will be the floor and that if you set the settlement at 0.99 and all (not only 5% or whatever % can settle in 24h]

Here is one of the main points where it all goes wrong.
The real underlying demand that drives BitUSD:USD to 1:1 is from arbitrage bots and speculators buying BitUSD first as a means to buy the BTS more cheaply than via alternative channels.    This means that buying 1 BitUSD for $1.00 should always be the most cost effective means to purchase the underlying crypto-currency, BTS.   This realization has many implications for the design goals of BitAssets 2.0.
Actually it does not mean that   buying 1 BitUSD for $1.00 should always be the most cost effective means to purchase the underlying crypto-currency, BTS.  That means that buying for as little as possible should be the best price for them! So buying for $0.95 will be better!

Now we come to the next point - is there gonna be conditions at which there will be sellers at $0.95?

The answer is generally 'Yes' - At bull market times it is feasible to short below 1:1 and still profit [*1]

The question then becomes how much below $1.00/bitUSD will such shorting  still be profitable?
In the proposed system "0.99*feed price settlement with no restriction on the % of bitUSD longs that can request a settlement" the answer is about 0.99 adjusted for 1day volatility.


So in other words the bitAsset 2.0 will effectively put the floor on bitUSD on a number directly proportional to the chosen settlement price compared to the feed price [other factors such as - margin requirements, % of all longs that can request settlement, as well as all other market rules that shift the risks for the short/longs - will also influence the exact floor of the bitUSD]

[*1] There is a very simple  explanation why it is so. Will try to explain if anybody interested.
Yea, forced conversion at 99% seems random to me, may as well just make it convertible at 100% if you are going to do it, although I'm generally not a big fan of bitAssets 2.0 formally (formerly?) 3.0.

Should we let people who are force settling at the feed place a limit on what price feed they would accept at the time of settlement?  i.e.  Some news is announced and someone with bitUSD decides BTS is cheap and they request force settlement but by the time 24hrs is over the price has moved so much they don't want to settle at that price.  Or maybe just preventing someone from being completely screwed by a momentary price feed error like a script goes awry.

The main floor on the value of BitAssets is formed by the value to shorters of freeing their collateral.  Forced settling by either expiration or other systems forms another floor at the value in BTS at which the longs expect to be able to force settlement.  With sufficient liquidity, this secondary floor should be unnecessary, but if it is considered necessary it should be at the targeted peg value, not an offset from that.

If the longs are able to cancel settlement, that defeats the purpose of the 24 hour delay I think.  In that case they might as well constantly request settlement and constantly cancel unless settlement is going to occur on a spike in their favour.  If price feed volatility is an issue, they could trigger 24 hour delayed settlement at the average feed price over those 24 hours.  Again, I think forced settling is less than ideal anyway.  The real floor should be the value that BitAssets have to shorters who need them in order to recover their collateral.

Offline Agent86

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Re: BitAssets 2.0 (formally 3.0)
« Reply #11 on: May 03, 2015, 07:50:02 PM »
Yea, forced conversion at 99% seems random to me, may as well just make it convertible at 100% if you are going to do it, although I'm generally not a big fan of bitAssets 2.0 formally (formerly?) 3.0.

Should we let people who are force settling at the feed place a limit on what price feed they would accept at the time of settlement?  i.e.  Some news is announced and someone with bitUSD decides BTS is cheap and they request force settlement but by the time 24hrs is over the price has moved so much they don't want to settle at that price.  Or maybe just preventing someone from being completely screwed by a momentary price feed error like a script goes awry.

The main floor on the value of BitAssets is formed by the value to shorters of freeing their collateral.  Forced settling by either expiration or other systems forms another floor at the value in BTS at which the longs expect to be able to force settlement.  With sufficient liquidity, this secondary floor should be unnecessary, but if it is considered necessary it should be at the targeted peg value, not an offset from that.

If the longs are able to cancel settlement, that defeats the purpose of the 24 hour delay I think.  In that case they might as well constantly request settlement and constantly cancel unless settlement is going to occur on a spike in their favour.  If price feed volatility is an issue, they could trigger 24 hour delayed settlement at the average feed price over those 24 hours.  Again, I think forced settling is less than ideal anyway.  The real floor should be the value that BitAssets have to shorters who need them in order to recover their collateral.
Sure, but Dan is essentially doing away with the main floor on the value of BitAssets by doing away with the rule: no shorting below the feed.  So the only floor left in bitAssets 3.0 is the forced settling.  I also wasn't suggesting allowing longs to cancel settlement; only allow them to specify a floor to the settlement up front at the time they request settlement.  Anyway, I think I'm generally on the same page as you here and I didn't say this is my preferred way of doing things.

Tuck Fheman

  • Guest
Re: BitAssets 2.0 (formally 3.0)
« Reply #12 on: May 03, 2015, 07:56:58 PM »
Note:  What we have been calling BitAssets 3.0 I am renaming to BitAssets 2.0 for this paper because otherwise everyone outside this forum would be confused if we started talking about 3.0 when 2.0 never existed.     

hah! this totally screws up Buck Fankers's comic strip, although I'm not sure anyone caught the "BitAssets 2.0" jab or not.

maintain a minimum value for the asset but do not attempt to control the maximum value.
+5%

The model seems to rely heavily on there being BitAsset to real asset gateways which we don't have yet.

 +5%

BM,

Merchants can settle into USD in 24hrs for less than 3% with other digital currencies (credit cards/paypal/etc) and there are an endless supply of gateways begging for their business.

Since you already know this, I'm going to assume (due to the above mention of bitUSD to USD conversion being very key) that you already have a third party lined up to be this bitUSD/USD gateway, is that correct?
(please don't say bter is the solution).

Otherwise, this entire proposal is merely speculation for many years down the road while someone is located that is willing to handle that business, get all KYC'd up, regulated and more. It seems highly illogical, that you would be making this proposal on the "hope" that someone would come along one day and be that gateway, correct? 
(yes, it's the same question rephrased =b )

« Last Edit: May 03, 2015, 09:02:50 PM by Tuck Fheman »

zerosum

  • Guest
Re: BitAssets 2.0 (formally 3.0)
« Reply #13 on: May 03, 2015, 08:07:35 PM »
  • Buying 1 BitUSD should always be the most cost effective means to purchase BTS
  • USD : BitUSD market price + BitUSD : BTS market price should be factored into the BTS : USD price feed
  • It is far better for price feeds to error in the favor of BitUSD holders than in the favor of shorts
  • Cashing out of BTS is done more efficiently (for USD through other channels) than using BitUSD
  • Creating BitUSD will always cost more than $1.00
  • BitUSD will initially be created by individuals who want to stay in a crypto currency but wish to have a price floor.


I have no idea how did you come up with those.... but this a collection of doubtful, purposeless, nonsensical, controversial and... straight wrong statements!





The main floor on the value of BitAssets is formed by the value to shorters of freeing their collateral.  Forced settling by either expiration or other systems forms another floor at the value in BTS at which the longs expect to be able to force settlement.  With sufficient liquidity, this secondary floor should be unnecessary, but if it is considered necessary it should be at the targeted peg value, not an offset from that.

If the longs are able to cancel settlement, that defeats the purpose of the 24 hour delay I think.  In that case they might as well constantly request settlement and constantly cancel unless settlement is going to occur on a spike in their favour.  If price feed volatility is an issue, they could trigger 24 hour delayed settlement at the average feed price over those 24 hours.  Again, I think forced settling is less than ideal anyway.  The real floor should be the value that BitAssets have to shorters who need them in order to recover their collateral.

While your main point might be correct you are just declaring how this should be rather than suggesting way to do it so!

That and I have no Idea what you  mean by:
"The main floor on the value of BitAssets is formed by the value to shorters of freeing their collateral."
Clarification would be appreciated!
Let me point why I ask - The value of recovering the collateral for 'Would be shorter" is 0, so in this regard the value of the bitAsset is also 0?
« Last Edit: May 04, 2015, 12:23:19 PM by bytemaster »

Online Thom

Re: BitAssets 2.0 (formally 3.0)
« Reply #14 on: May 03, 2015, 08:50:26 PM »
Right back at ya TonyK, i.e. the part about "a collection of doubtful, purposeless, nonsensical, controversial and... straight wrong statements!" you have made, so very typical of you dude!

These were pulled straight out of the OP, so apparently you didn't read it very carefully. Sure I paraphrased it a bit, but the meaning is preserved.
Injustice anywhere is a threat to justice everywhere - MLK |  Verbaltech2 Witness Reports: https://bitsharestalk.org/index.php/topic,23902.0.html

 

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