Author Topic: BitAssets 2.0 (formally 3.0)  (Read 11395 times)

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Offline xiahui135

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  1.  The further BitUSD gets from $1 the more incentive there is for for BitUSD holders to take profits and sell. 
  2.  The further BitUSD gets from $1 the less demand there is to buy BitUSD
  3.  The further BitUSD gets from $1 the more demand there is to short BitUSD


This will happen, only when there is at least one bridge, gateway or market maker do the 1:1 exchange.
Or the price will not follow effeciently.

Offline starspirit

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In my view, assuming we can achieve it, the ultimate control mechanism is a yield that works both ways. When demand is too high relative to supply, and bitUSD is priced at a premium, yield falls (also allowed to become negative if necessary), encouraging sellers (and new shorts) until parity is returned. Then you solve all the problems mentioned -

- consumers, merchants, market-makers and shorts can all have confidence that parity is the equilibrium level, enforced by changes in yield either way
- there is no need for scheduled black swans or anything similar
We can not count on the bitusd yield. Why you hold a money, because it is stable. But if there is negative yield, it hurts for bitusd holders. Let's assume that the credit changes everytime you check it, how do you feel?
And the yield will not help peg. If bitusd is lower than usd, so the bitusd holder will get yield to cover the lost, people need not to buy more. And it is not need to short, because the short can not earn something. The earning will be eayen by yield. Thus the bitusd will keep lower than realUsd.
When the bitusd is premium, it will similiarly keep premium.
A yield, if implemented, would be market driven and automatically adjust so that at the peg, all open shorts are prepared to pay at least that yield (taking into account their own views on BTS), and all bitUSD holders are happy to hold at that yield. If bitUSD is at a discount, the yield rises to attract buyers until that balance is a achieved, and visa versa at a premium. It works just the same way as interest rates are set competitively in the banking system between depositors and borrowers (except with the bank intermediary taking a spread). So the yield would take account of all market views.

It is a good question whether negative rates would be acceptable at all, and whether we actually need it. To a small degree this seems to be the case now for fiat in US and Europe, once you account for fees. I think yield would actually vary within a band around external interest rates, reflecting arbitrage costs, and possibly other risk factors. So its mainly an issue while external rates by comparison are also low or negative, made worse by crypto being in a bear market.


Offline xiahui135

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Edited:

And the yield control to the bitAsset and short holders will not help peg instantly. but yield control to new orders maybe will help. (why? check here https://bitsharestalk.org/index.php/topic,16378.msg209425.html#msg209425)

If yield control to the already orders:
If bitusd is lower than realusd, so the bitusd holder will get yield to cover the lost. people need not to buy cheap bitusd, because when bitusd become premium, the earning will be eaten up by yield.When the bitusd is premium, it will similiarly keep premium, because of the yield.
« Last Edit: May 17, 2015, 02:52:43 am by xiahui135 »

Offline xiahui135

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In my view, assuming we can achieve it, the ultimate control mechanism is a yield that works both ways. When demand is too high relative to supply, and bitUSD is priced at a premium, yield falls (also allowed to become negative if necessary), encouraging sellers (and new shorts) until parity is returned. Then you solve all the problems mentioned -

- consumers, merchants, market-makers and shorts can all have confidence that parity is the equilibrium level, enforced by changes in yield either way
- there is no need for scheduled black swans or anything similar
We can not count on the bitusd yield. Why you hold a money, because it is stable. But if there is negative yield, it hurts for bitusd holders. Let's assume that the credit changes everytime you check it, how do you feel?
The USD and CNY ratio is determined by the buy and sell walls on the currency market, we need to do the similiar. Market make is one solution, and supply control is another. But the yield should be won only when you lend the money to help others. Such as lend the money to the market make fund.
« Last Edit: May 17, 2015, 01:46:50 am by xiahui135 »

Offline starspirit

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In my view, assuming we can achieve it, the ultimate control mechanism is a yield that works both ways. When demand is too high relative to supply, and bitUSD is priced at a premium, yield falls (also allowed to become negative if necessary), encouraging sellers (and new shorts) until parity is returned. Then you solve all the problems mentioned -

- consumers, merchants, market-makers and shorts can all have confidence that parity is the equilibrium level, enforced by changes in yield either way
- there is no need for scheduled black swans or anything similar

Offline maqifrnswa

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All the solution mentioned by BM, is to make a fair trade market. This make the bitasset exist and be collateraled.
As to the bitusd price, we must do market make to finish the peg. 1 dollar is 1 dollar when many people will accept it as 1 . The money just be used like 1 dollar, so it is 1 dollar.
We need some people to accept 1 bitusd as 1 usd. If nobody do, we the community should be the first. (Such as establish the market make fund, the profit dividen to the fund share holders.)

the reason 1 dollar is 1 dollar is because we trust the federal reserve will control supply such that inflation is at a rate which allows sustainable economic development. Therefore, 1 dollar today is pretty much 1 dollar tomorrow - a stable store of value in the short term and the world has faith that supply will be controled to maintain a stable system.

We can't just declare a currency to be worth something just because we say it is, without a mechanism to give the market faith that supply will be controlled. If you create the money making system to externally enforce the peg, you will have to support that bot it with a constant influx of money. And merchants will start having two prices: bitUSD and realUSD, because 1 bitUSD is not 1 realUSD. It's like saying "If everyone sold products priced the saqme in both canadian dollars and us dollars, then US and Canadian dollars would be equal to each other."

Our supply control system is built into the blockchain: shorting and covering rules designed such that supply=demand at the peg.
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Offline xiahui135

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So what remains is the "deflation of BitUSD" caused by shorts backing further and further from the price feed as BitUSD holders HODL and never sell except at just below what Shorts are willing to sell at.   I think that this scenario ignores other market realities:

  1.  The further BitUSD gets from $1 the more incentive there is for for BitUSD holders to take profits and sell. 
  2.  The further BitUSD gets from $1 the less demand there is to buy BitUSD
  3.  The further BitUSD gets from $1 the more demand there is to short BitUSD

So what remains is a scenario where a larger player buys up BitUSD and holds it ransom for a high premium in a bear market and forcing shorts that want to stop their losses to pay a price.   This is a form of short-squeeze and is present in all markets that allow shorts.    This same whale that the shorts complain about when they want to cover is the whale that provided them liquidity when then wanted to enter their position.     

In other words, whenever the price is above $1 neither party is guaranteed liquidity at the price they entered the position at and the market is balanced.   

You cannot have BitUSD go to infinity without BTS going to 0 and the further BitUSD gets from real USD the more people will use real USD to buy BitUSD to sell for BTS.  All liquidity for using BTS to buy BitUSD will dry up very quickly once it gets too far from the feed.   BTS holders wanting USD would simply opt for the real thing.  Therefore we know that there exists a narrow range in which BitUSD will actually trade and it will have a floor of $1 and a likely ceiling of $1.10. 

The only other solution is to have scheduled "black swans" (aka global forced settlement) which is good for traders but bad for merchants and consumers.

I agree with the conclusion that the only solution seems to be scheduled black swans, but they are not the right mechanism

I see why one would want to sell bitUSD closer to the feed, based on 1 and 2 BM listed above. There will be demand for bitUSD so people can close out their positions. But I still ask, why would bitUSD be created in the first place? The reason why it would be created is only if you think BTS will increase in value faster than what I will be able to buy bitUSD for in the future.

The problem is bitUSD is impossible to price as a short. Even if BTS value will increase at a known rate compared to realUSD, there is no mechanism by which I can anticipate what bitUSD will be worth relative to realUSD at any time in the future. That means I can't price, and if I can't price there is no reason I should enter the market (since it is just as likely to be right as it is wrong). Now there is a short squeeze, which reinforces the belief that no one can properly price shorts. Then you get into the "discount" war between merchants where everyone starts offering larger and larger discounts for using bitUSD, also driving the value of bitUSD away from the peg.

Yield won't fix this, unless the yield is based on the PEG value and not bitUSD value. I think that might be prefered to forced settlement, which is horrible for merchants.
All the solution mentioned by BM, is to make a fair trade market. This make the bitasset exist and be collateraled.
As to the bitusd price, we must do market make to finish the peg. 1 dollar is 1 dollar when many people will accept it as 1 . The money just be used like 1 dollar, so it is 1 dollar.
We need some people to accept 1 bitusd as 1 usd. If nobody do, we the community should be the first. (Such as establish the market make fund, the profit dividen to the fund share holders.)

Offline maqifrnswa

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So what remains is the "deflation of BitUSD" caused by shorts backing further and further from the price feed as BitUSD holders HODL and never sell except at just below what Shorts are willing to sell at.   I think that this scenario ignores other market realities:

  1.  The further BitUSD gets from $1 the more incentive there is for for BitUSD holders to take profits and sell. 
  2.  The further BitUSD gets from $1 the less demand there is to buy BitUSD
  3.  The further BitUSD gets from $1 the more demand there is to short BitUSD

So what remains is a scenario where a larger player buys up BitUSD and holds it ransom for a high premium in a bear market and forcing shorts that want to stop their losses to pay a price.   This is a form of short-squeeze and is present in all markets that allow shorts.    This same whale that the shorts complain about when they want to cover is the whale that provided them liquidity when then wanted to enter their position.     

In other words, whenever the price is above $1 neither party is guaranteed liquidity at the price they entered the position at and the market is balanced.   

You cannot have BitUSD go to infinity without BTS going to 0 and the further BitUSD gets from real USD the more people will use real USD to buy BitUSD to sell for BTS.  All liquidity for using BTS to buy BitUSD will dry up very quickly once it gets too far from the feed.   BTS holders wanting USD would simply opt for the real thing.  Therefore we know that there exists a narrow range in which BitUSD will actually trade and it will have a floor of $1 and a likely ceiling of $1.10. 

The only other solution is to have scheduled "black swans" (aka global forced settlement) which is good for traders but bad for merchants and consumers.

I agree with the conclusion that the only solution seems to be scheduled black swans, but they are not the right mechanism

I see why one would want to sell bitUSD closer to the feed, based on 1 and 2 BM listed above. There will be demand for bitUSD so people can close out their positions. But I still ask, why would bitUSD be created in the first place? The reason why it would be created is only if you think BTS will increase in value faster than what I will be able to buy bitUSD for in the future.

The problem is bitUSD is impossible to price as a short. Even if BTS value will increase at a known rate compared to realUSD, there is no mechanism by which I can anticipate what bitUSD will be worth relative to realUSD at any time in the future. That means I can't price, and if I can't price there is no reason I should enter the market (since it is just as likely to be right as it is wrong). Now there is a short squeeze, which reinforces the belief that no one can properly price shorts. Then you get into the "discount" war between merchants where everyone starts offering larger and larger discounts for using bitUSD, also driving the value of bitUSD away from the peg.

Yield won't fix this, unless the yield is based on the PEG value and not bitUSD value. I think that might be prefered to forced settlement, which is horrible for merchants.
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Offline liondani

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Quote

Conclusion
I don't see the incentive for short sellers (BTA creators) to profit from creating BTA to keep supply=demand. Yes, short sellers will need to sell at a premium, thus driving the price away from the peg. What market force is driving it back towards the peg?

Similar thoughts crossed my mind... the hope i guess is that the demand for bitUSD is organic ( for the product as a payment) so the increased demand for the product will soon lead to increased company share price -BTS... but if the demand is for hedging the bts price we might be for some trouble...

I think it would help if delegates get paid only via bitAsset's  ;)

Offline wuyanren

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I think. wallets Without a good user experience, that is again good, are false

Offline bytemaster



Quote

Conclusion
I don't see the incentive for short sellers (BTA creators) to profit from creating BTA to keep supply=demand. Yes, short sellers will need to sell at a premium, thus driving the price away from the peg. What market force is driving it back towards the peg?

Similar thoughts crossed my mind... the hope i guess is that the demand for bitUSD is organic ( for the product as a payment) so the increased demand for the product will soon lead to increased company share price -BTS... but if the demand is for hedging the bts price we might be for some trouble...

There are only three places from which money can come:  Longs, Shorts, and Innocent 3rd Parties.

The Longs want a product that has as its core feature something that is always worth at least $1 (with a ton of liquidity) and which cannot be called/converted into something else except in extreme market events which the longs equate to "never".

The Shorts want leverage, with minimal margin requirements.   They never want to be called, yet want the liquidity to cover at any point in time.

If the longs can never be called (to keep BitUSD fungible and usable as a currency) then how can the Shorts be guaranteed liquidity?   The easy answer is to say "they are not guaranteed liquidity".    In which case every short is taking a speculative bet about the liquidity (ability to buy USD) in the future. 

Depending upon his assessment of the future ability to buy USD the short will charge different premiums.   There are two sources to buy BitUSD, from USD holders wanting liquidity and from future shorts.    A short can always trust that eventually USD holders will want liquidity, especially since everyone looking to buy BTS should be buying BitUSD which they will sell for BTS providing liquidity to the shorts.   

So what remains is the "deflation of BitUSD" caused by shorts backing further and further from the price feed as BitUSD holders HODL and never sell except at just below what Shorts are willing to sell at.   I think that this scenario ignores other market realities:

  1.  The further BitUSD gets from $1 the more incentive there is for for BitUSD holders to take profits and sell. 
  2.  The further BitUSD gets from $1 the less demand there is to buy BitUSD
  3.  The further BitUSD gets from $1 the more demand there is to short BitUSD

So what remains is a scenario where a larger player buys up BitUSD and holds it ransom for a high premium in a bear market and forcing shorts that want to stop their losses to pay a price.   This is a form of short-squeeze and is present in all markets that allow shorts.    This same whale that the shorts complain about when they want to cover is the whale that provided them liquidity when then wanted to enter their position.     

In other words, whenever the price is above $1 neither party is guaranteed liquidity at the price they entered the position at and the market is balanced.   

You cannot have BitUSD go to infinity without BTS going to 0 and the further BitUSD gets from real USD the more people will use real USD to buy BitUSD to sell for BTS.  All liquidity for using BTS to buy BitUSD will dry up very quickly once it gets too far from the feed.   BTS holders wanting USD would simply opt for the real thing.  Therefore we know that there exists a narrow range in which BitUSD will actually trade and it will have a floor of $1 and a likely ceiling of $1.10. 

The only other solution is to have scheduled "black swans" (aka global forced settlement) which is good for traders but bad for merchants and consumers. 





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Offline bytemaster

HOW to guarantee that each bitUSD could be changed back to one-USD-worth of BTS in a black swan event, especially when there is a daily % set?

In black swan there are no limits, everyone is settled all at once.
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Offline starspirit

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This system will sometimes trade below 99% of the peg when there are risk concerns with bitUSD, and will often trade above the peg when there is a lack of collateral supply.
When there are large flows in bitUSD, this will expand spreads, as arbitragers between the internal and external markets are constrained by the liquidity in the internal market.
I believe a tighter peg in both directions can be obtained by using a floating market yield between longs and shorts. Why is yield no longer being considered as a regulating mechanism?
If the external market is offering a high yield, how much will this affect use of a no-yield substitute? What is the thought on combining BTA 2.0 with an interest-bearing at-call deposit market to provide at-call parking of funds for transactional purposes?
How much does it matter if USD-based returns earned in the bond market are affected by the continuous movement of bitUSD from its peg before expiry?
Does introducing a settlement process for longs legally bring bitAssets under derivative regulations?
« Last Edit: May 11, 2015, 04:51:09 am by starspirit »

Offline abit

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HOW to guarantee that each bitUSD could be changed back to one-USD-worth of BTS in a black swan event, especially when there is a daily % set?
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Quote

Conclusion
I don't see the incentive for short sellers (BTA creators) to profit from creating BTA to keep supply=demand. Yes, short sellers will need to sell at a premium, thus driving the price away from the peg. What market force is driving it back towards the peg?

Similar thoughts crossed my mind... the hope i guess is that the demand for bitUSD is organic ( for the product as a payment) so the increased demand for the product will soon lead to increased company share price -BTS... but if the demand is for hedging the bts price we might be for some trouble...