Author Topic: BitAsset 2.0 Requirements & Implied Design  (Read 48495 times)

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Offline maqifrnswa

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I think this is fascinating how everyone approaches this from different points of view (and models) since this is really a multifaceted problem. There is demand side and supply side economics to think about here. Most are thinking of the demand side (how to set up a system that people want to use). I don't want to derail that, but here's my latest on the supply side thoughts. In theory, a simple system which properly manages supply will provide all the necessary features for a healthy and attractive investment.

Summary
Ideal system:
1) The system rewards market players for destroying BTA when there is an oversupply
2) The system rewards market players for creating BTA when there is an under supply

BTA2.0 Implementation of above:
Case (1) is handled by forced calls at 99% of the price feed.
Case (2) is unhandled, but the assumption is market players will do it with no explicit incentive because 1 BTA is supposed to equal the underlying asset.

New thoughts
To handle case (2), people have been offering the idea of yield for holding BTA - either positive or negative. However, I've been contesting that you can't peg a floating asset to itself, that is you need a mechanism by which there is market incentive to push towards the feed.
To do that how about the following:
A variable fee is charged on new shorts which is valued at X% of the difference between the feed and the short. This is a progressive "tax" paid by the parties (longs or shorts) pushing away from the feed and paid to the party that is pushing towards to feed. This fee is either in BTS or BTA depending on oversupply or undersupply and goes to a yield account paid out to all BTA shorts or for longs just like the current yield. It is market driven and leaves us with simple rules that are easy to explain.

The the market says that shorts need to be rewarded, there will be an auction for the size of the reward. The current market would be paying a yield to BTS shorters at one rate and longs at another. BOTH longs and shorts get a yield, and it is based on the fees that were collected when the asset was created.

Proposed, KISS, rules:
1) If a BTA is created (shorted) when there is an under supply, then the buyer would pay a fee in BTS based on how much the price was from the peg. That fee goes to a yield account. All shorts will be paid a fraction of that yield whenever they cover, and the yield is proportional to the fraction of the total BTA supply they are covering and how long they held the collateral (like the current system).
2) If a BTA is created when there is an over supply, the shorter pays a fee in BTA to a yield account which is paid out to longs similar to the current system.

Example:
Feed is 1 BTS per 1 Asset. I want to short at 1.10 BTS per 1 BTA, which means there is an under supply. Someone buys 1 BTA from me for 1.10 BTS. I put 1.10 in collateral so there is 2.20 in collateral, I owe 1 BTA, and the long is long 1 BTA. The buyer also pays a fee of some percentage of the 0.10 BTS they are from the peg, paid in BTS, to the short yield. Whenever any short covers, they are paid a yield proportional to the length of their short (capped at one year) and the percentage of their short. The is the contapositive of the current system.

If I want to short at .90 BTS per 1 BTA, that means there is an over supply of BTS. Someone buys 1 BTA from me for 0.9. I put 0.9 in collateral so there is now 1.90 BTS in collateral, I owe 1 BTA, and the long is long 1 BTA. I also pay a fee based on some percentage of the 0.1 BTS I am away from the peg, in BTA, to the long yield. It is paid out just like the long yield is paid out now. This is very similar to the current system.

Thoughts?
« Last Edit: May 21, 2015, 04:44:25 pm by maqifrnswa »
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Offline starspirit

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I believe an at-call yield, or possibly something very similar alongside cash  (e.g. deposit accounts or 1 day bills), is strongly desired to attract and retain currency users, especially if external or competitive interest rates are higher. However expectations of any fixed yield like 5% is not really sustainable. Markets will dictate what yield, if any, is possible, as arbitragers operate between the bit-Currency market and the real currency market.
Though it is difficult to explain to people why bitGold has a yield ..
It does sound fishy IMHO
I'm referring specifically to currencies when I talk about yield. But for any asset type, external yields will be a key driver of what is accepted by the market for the bit-version, primarily because of arbitrage if differences get too large. Yield would be particularly important for shares and indexes that earn dividends. However, if somebody owns real gold externally, they don't earn a yield - it actually costs them money for storage and insurance, although some big players can also earn fees from gold lending. So if bitGold earned zero yield, it would already be more attractive than real gold, and its possible a small negative yield would even be acceptable by the market. My guess is that traditional CFDs on gold and silver would have a net funding cost on long accounts for this very reason, and a bit-version would be no different in principle.

Offline xeroc

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I believe an at-call yield, or possibly something very similar alongside cash  (e.g. deposit accounts or 1 day bills), is strongly desired to attract and retain currency users, especially if external or competitive interest rates are higher. However expectations of any fixed yield like 5% is not really sustainable. Markets will dictate what yield, if any, is possible, as arbitragers operate between the bit-Currency market and the real currency market.
Though it is difficult to explain to people why bitGold has a yield ..
It does sound fishy IMHO

Offline starspirit

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I believe an at-call yield, or possibly something very similar alongside cash  (e.g. deposit accounts or 1 day bills), is strongly desired to attract and retain currency users, especially if external or competitive interest rates are higher. However expectations of any fixed yield like 5% is not really sustainable. Markets will dictate what yield, if any, is possible, as arbitragers operate between the bit-Currency market and the real currency market.


« Last Edit: May 20, 2015, 11:14:53 pm by starspirit »

Offline karnal

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they'd leave the BitShares space if that yield would no longer exist. A "bond market" where one can earn interest is not the same, it is too complicated for someone without a financial background to grasp, all the passive investors care about is a simple yield on bitUSD.

Fully agree. BitAssets providing interest is one of the most appealing features.

Also I'm with the others who say - KISS. All these rule changes, mad complex rules.. I would be surprised if someone who is not a core dev could properly explain in a simple way all the little rules and their interactions.

Offline karnal

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ventually BitAssets with yield will be a big draw for Bitshares, perhaps the biggest.

It is definitely what initially attracted me to BitShares. A mechanism that allows for storage of wealth in a currency/asset that I am sure(r) will be more stable than $speculatingcoin ? And it pays interest, even?

It still sounds too good to be true. But what do you know, so far it has actually worked..

Offline xiahui135

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We need businesses which need BTA.
People who use BTA to save their money for 5 % yield, can easily find other way to get that amount yield.

What kind of people we want attract? the people just hold BTA and not use it, or the people use it and spread it everywhere?
The businesses on bitshares are much precious than people doing saving. I do not know whether you think so too.

Why limit the amount of exposure you can get for bitshares? If you want to change how the current financial system works, you also need to account for the savers who are quite passive. No serious investment besides maybe stocks gives >= 5% p.a, at least not in Europa and the US. Those people investing into Money market deposit accounts are pretty security minded, and would not invest into a stockmarket as it might be considered too dangerous. Bitshares may be eventually be seen as a "low risk" investment because of the automated yield.

Bitshares already has changed too many things to begin with, and now one of the most original features over other crypto currencies will be removed? Do not limit the amount of exposure we might get with this, bytemaster. At least the BitShares 101 video series must be redone then, pretty much all material mentions this in a prominent form.
we need the savers, and need the buninesses more.
The old yield system just transfer blood from bts to BTA, and the market can not continue. This will drive both the savers and businesses away eventually.
If we have enough businesses built on Bitshares, it will be quite simple for BTA holder to get 5% yield if they lend the BTA. But it will not work inversely.
(In fact I am getting 30% more yield per year form the business in NXT system via investing to several market make fund. I hope there will be some businesses built on Bitshares)
« Last Edit: May 20, 2015, 03:38:35 pm by xiahui135 »

Offline mindphlux

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We need businesses which need BTA.
People who use BTA to save their money for 5 % yield, can easily find other way to get that amount yield.

What kind of people we want attract? the people just hold BTA and not use it, or the people use it and spread it everywhere?
The businesses on bitshares are much precious than people doing saving. I do not know whether you think so too.

Why limit the amount of exposure you can get for bitshares? If you want to change how the current financial system works, you also need to account for the savers who are quite passive. No serious investment besides maybe stocks gives >= 5% p.a, at least not in Europa and the US. Those people investing into Money market deposit accounts are pretty security minded, and would not invest into a stockmarket as it might be considered too dangerous. Bitshares may be eventually be seen as a "low risk" investment because of the automated yield.

Bitshares already has changed too many things to begin with, and now one of the most original features over other crypto currencies will be removed? Do not limit the amount of exposure we might get with this, bytemaster. At least the BitShares 101 video series must be redone then, pretty much all material mentions this in a prominent form.
Please consider voting for my witness mindphlux.witness and my committee user mindphlux. I will not vote for changes that affect witness pay.

Offline pc

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Side question: What was the date of the initial Bitshares launch?

Btw, http://wiki.bitshares.org/ is OFFLINE.

Code: [Select]
>>> blockchain_get_block 1
{
  "previous": "0000000000000000000000000000000000000000",
  "block_num": 1,
  "timestamp": "2014-07-19T03:18:50",
...
Bitcoin - Perspektive oder Risiko? ISBN 978-3-8442-6568-2 http://bitcoin.quisquis.de

Offline xiahui135

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To make a wise choice on the yield vs no-yield option for BTA 2.0, it is important to consider what will give bitShares the best ongoing advantage in the pegged currency space.

The key is to remember that we are always in competition with others. It's not a good enough argument to say yield can be provided in the bond market, so no yield is required in BTA 2.0, if it turns out that a competitor can create a yield-earning equivalent and also have a bond market, a combination that may be superior to our own.

Imagine if a bank, in the face of competition against other banks that were offering interest on their at-call accounts, took the stance that they did not need to offer interest because customers could get interest in their term deposits instead. How do you think that bank might fare?

It is valid to compare the yield and no-yield options, and decide on one as being a better product than the other. Because then we are saying that if a competitor develops the yield option, then we are comfortable we still have a better product. We have to imagine that anything we could build could be built by others, and we need to believe we have the best product available.

This is a fair point.

Do also keep in mind that bitAssets are advertised pretty much everywhere  to give the average joe investor/merchant a yield. Even the forum-own "5%" meme refers to the yield on bitAssets, if I remember correctly.

I have bought in a few investors who deposited into bitUSD instead of their savings bank account just because of the advertised yield. I'm pretty sure they'd leave the BitShares space if that yield would no longer exist. A "bond market" where one can earn interest is not the same, it is too complicated for someone without a financial background to grasp, all the passive investors care about is a simple yield on bitUSD.

My two bitshares.

We need businesses which need BTA.
People who use BTA to save their money for 5 % yield, can easily find other way to get that amount yield.

What kind of people we want attract? the people just hold BTA and not use it, or the people use it and spread it everywhere?
The businesses on bitshares are much precious than people doing saving. I do not know whether you think so too.

Offline mindphlux

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To make a wise choice on the yield vs no-yield option for BTA 2.0, it is important to consider what will give bitShares the best ongoing advantage in the pegged currency space.

The key is to remember that we are always in competition with others. It's not a good enough argument to say yield can be provided in the bond market, so no yield is required in BTA 2.0, if it turns out that a competitor can create a yield-earning equivalent and also have a bond market, a combination that may be superior to our own.

Imagine if a bank, in the face of competition against other banks that were offering interest on their at-call accounts, took the stance that they did not need to offer interest because customers could get interest in their term deposits instead. How do you think that bank might fare?

It is valid to compare the yield and no-yield options, and decide on one as being a better product than the other. Because then we are saying that if a competitor develops the yield option, then we are comfortable we still have a better product. We have to imagine that anything we could build could be built by others, and we need to believe we have the best product available.

This is a fair point.

Do also keep in mind that bitAssets are advertised pretty much everywhere  to give the average joe investor/merchant a yield. Even the forum-own "5%" meme refers to the yield on bitAssets, if I remember correctly.

I have bought in a few investors who deposited into bitUSD instead of their savings bank account just because of the advertised yield. I'm pretty sure they'd leave the BitShares space if that yield would no longer exist. A "bond market" where one can earn interest is not the same, it is too complicated for someone without a financial background to grasp, all the passive investors care about is a simple yield on bitUSD.

My two bitshares.
Please consider voting for my witness mindphlux.witness and my committee user mindphlux. I will not vote for changes that affect witness pay.

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This is too complicated. Just keep delegates for block producing (like original), and then have a set of employees visible on a page in GUI with their projects listed where you can allot the coins (like a game).

Offline xeroc

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Side question: What was the date of the initial Bitshares launch?

Btw, http://wiki.bitshares.org/ is OFFLINE.
IIRC 15. or 17. of July

Offline brainbug

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Side question: What was the date of the initial Bitshares launch?

Btw, http://wiki.bitshares.org/ is OFFLINE.

Offline merivercap

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Make a simple rules ,discard suplus part.
It is only way to resolve issues.
Don't fear liquidity not enough. don't fear BTS's price volatility,Please let BTS adjust by itself。
Most people like me just fear the complex rules, so not like trade in BTS.
Make rules simple , Will bring more people trade in it.
Yes, this should be basic rules!

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